UK Unilateral: Post-Brexit Liberalization Potential

Abstract

This study assesses the potential gains from unilateral trade liberalization for the UK, against the background of a hard Brexit in which a hard border and tariff wall is erected between the UK and the European Union. Unilateral trade liberalization would allow the UK to expeditiously offset at least some of the trade costs incurred in leaving the EU Single Market without a deal as it does not depend on negotiation with third parties, and hence is not limited by trade negotiating capacity in the UK or its prospective free trade partners. At the same time, unilateral liberalization faces the political economy challenge of removing protection in the most sensitive sectors, which is where most of the liberalization gains come from, while also giving up leverage to conclude future trade agreements. A highly ambitious unilateral liberalization scenario represents, in terms of trade structure and costs, a substantial gain but falls short of offsetting a hard Brexit (when both the unilateral scenario and the hard Brexit scenario are modelled on a common set of modelling assumptions and protocols). Based on the modelling results, the main political economy challenge to unilateral liberalization for the UK in a post-EU trade policy context would be the deep negative impacts on UK agriculture.