Future EU-UK Research Articles

Brexit and the Services Trade—A Longitudinal Analysis

This study investigates the impact of Brexit uncertainty on the UK's services sector trade from 2016 to 2019 revealing a statistically significant negative impact that varied across sectors and destinations. Using the OECD-WTO Balanced Trade in Services dataset and synthetic difference in differences methodology, the findings indicate an annual shortfall of US$23.7/£18.5 billion in UK services exports compared to a scenario where the UK remained in the EU, translating to a 5.65 percent reduction. The bilateral data suggests an 8.5 percent average decline, with larger exports to countries like Germany and the US being less affected than smaller bilateral exports. The UK bilateral exports to the EU declined by 6.21 percent, while Ireland’s exports expanded by 21.4 percent. The study highlights that small firms were disproportionately impacted, leading to a decline in trade openness and export activities. Methodological sensitivity is underscored, with various approaches estimating Brexit’s impact differently. Sectoral analysis shows significant declines in Travel, Insurance, Finance, Telecom, Business and Cultural Services. Ireland notably benefited post-Brexit, experiencing a 14.75 percent annual increase in services exports due to business relocations. The study emphasizes the critical yet underexplored consequences of economic disintegration on international trade in services, providing essential evidence for future UK-EU trade relations post-Brexit.

Die wirtschaftlichen Folgen des Brexits

Abstract The United Kingdom’s exit from the European Union (Brexit) has negatively affected its economic performance in the years after the 2016 referendum. A growing literature on the short-run effects of Brexit has documented that UK economic activity has been affected through a mix of uncertainty and anticipation effects. This literature has shown that UK GDP and investment have been negatively affected and inflation has increased as a consequence of the outcome of the referendum. Comparatively little is known about the effects of the UK’s subsequent exit from the single market and customs union in January 2021, but existing research has documented negative effects on UK trade, in particular UK imports from the European Union. But whether this will lead to subsequent further declines in UK GDP remains to be seen and will also depend on future EU-UK efforts to reduce the trade barriers created by the trade and cooperation agreement (TCA) of 2020.

Expecting Brexit

The Brexit vote precipitated the unraveling of the United Kingdom's membership in the world's deepest economic integration agreement. This article reviews evidence on the realized economic effects of Brexit. The 2016 Brexit referendum changed expectations about future UK–EU relations. Studying its consequences provides new insights regarding the economic impacts of news and uncertainty shocks. Voting for Brexit had large negative effects on the UK economy between 2016 and 2019, leading to higher import and consumer prices, lower investment, and slower real wage and GDP growth. However, at the aggregate level, there was little or no trade diversion away from the European Union, implying that many of the anticipated long-run effects of Brexit did not materialize before the new UK–EU trade relationship came into force in 2021.

The Future EU-UK Relationship: The EU Ambitions for a Comprehensive Partnership

The purpose of this article is to examine the objectives pursued by the European Union (EU) in crafting its future relationship with the United Kingdom (UK) after Brexit. As the article argues, the withdrawal of the UK from the EU created an unprecedented situation – namely that of a former Member State. In response to this unique state of affairs, the EU has deliberately and consistently endeavoured to develop with the UK as a new third country an ambitious partnership, going beyond trade to encompass many other areas of cooperation, spanning from internal and external security to sectoral themes such as the fight against climate change and health. As the article suggests, the EU’s approach vis-à-vis the UK emerges already in the negotiating guidelines, adopted in the aftermath of the UK notification of its intention to leave the EU; is codified in the non-binding Political Declaration outlining the framework of future EU-UK relations, attached to the Withdrawal Agreement; and is ultimately reflected to some extent in the EU-UK Trade and Cooperation Agreement reached between the parties on Christmas Eve 2020. Although this thin deal does not fully achieve the objectives of the EU, as some areas are not covered by the new EU-UK treaty, its scope, which goes beyond trade, confirms the ambition of the EU to lock-in relationship with a close, special neighbour like the UK. Brexit, Future Partnership, EU, UK, Negotiation Guidelines, Political Declaration, Trade and Cooperation Agreement

Northern Ireland and Brexit: where sovereignty and stability collide?

ABSTRACT Having been issues which stimulated little discussion beyond Northern Ireland before the Brexit referendum, the ‘Irish issue’ dominated and complicated the subsequent EU–UK withdrawal negotiations. The ‘taking back control’ narrative bears the hallmarks of Prime Minister Boris Johnson’s notion of a ‘recaptured sovereignty’. This conception of sovereignty, however, clashes with the post-sovereign character and content of the 1998 Belfast/Good Friday Agreement. The institutions created by the Agreement move beyond the old frameworks for political order by creating a series of interlocking territorial, cross-territorial, and cross-national institutions based on shared sovereignty. This prompts critical questions about the resilience and sustainability of the Agreement against the backdrop of a shift in sovereignty which appears incompatible with the key tenets of Northern Ireland’s peace agreement. This article examines how Northern Ireland’s approach to and experience of the EU referendum differed from the rest of the UK. It queries how the referendum result, subsequent political and electoral developments, and difficulties in agreeing a withdrawal formula and future UK–EU relationship, expose the gap between the UK’s commitments to a post-sovereign arrangement for Northern Ireland and the preference for a return to an older conception of sovereignty as implied by the Brexit vote.

Police cooperation and exchange of information under the EU–UK Trade and Cooperation Agreement

Brexit has led to a realignment of police cooperation and information exchange between the EU and the UK. This has been affected by Titles II-V and IX of Part III of the Trade and Cooperation Agreement. The terms governing the exchange of DNA, fingerprint and vehicle registration data, the transfer and processing of passenger name record data, cooperation on operational information, membership of Europol and the exchange of criminal record information are henceforth governed by that instrument. This article describes the changes and comments upon how future EU-UK police cooperation may be impacted.

Do or die? The UK, the EU, and internal/external security cooperation after Brexit

The European Union (EU) integration project is under attack from a reassertion of national sovereignty following Brexit and the Covid-19 crisis. Our analysis examines the impact that traditional forms of sovereignty and national interests will have on the conduct of EU foreign and security policy post-Brexit. We focus on the Brexit challenge to the EU mode of regulation and diplomacy in internal/external policies in Common Foreign and Security Policy, Common Security and Defence Policy, and Justice and Home Affairs. The article also considers key scenarios for future UK-EU security cooperation to inform analysis of likely policy outcomes for the UK and the EU. The article concludes that the EU will have a greater impact through its laws and regulations on the post-Brexit UK than vice versa and that Brexit is not an immediate threat to the EU's regulatory mode of security governance. The new realities of internal/external security governance in Europe post-Brexit will mean weakened EU–UK security arrangements, which will impact the scope and quality of European security cooperation beyond traditional defence. This is both undesirable and potentially dangerous for European security cooperation and for Europe's position in the wider world.

Unity over diversity? The politics of differentiated integration after Brexit

ABSTRACT There is now a significant literature on the effects of Brexit on the differentiated forms of integration that have become an increasingly familiar feature of the EU’s political landscape. While the significance of British withdrawal for questions of differentiation is not difficult to establish, there is little agreement in the literature on whether Brexit will lead to a more or less differentiated EU, which aspects of withdrawal are most relevant, and how the specified causal mechanisms operate. This article takes stock of the debate, discussing four distinct causal pathways: (1) the removal of the UK’s opt-outs; (2) the lessons of the British experience; (3) Brexit as a catalyst for reform; and (4) the future UK-EU relationship. The article suggests a more starkly differentiated EU post-Brexit is likely precluded by the political context of disintegration, which downplays negative lessons, reinforces EU unity, and disincentives a ‘British model’ of external differentiation.

The Future EU-UK Relationship: The EU Ambitions for a Comprehensive Partnership

The purpose of this paper is to examine the objectives pursued by the European Union (EU) in crafting its future relationship with the United Kingdom (UK) after Brexit. As the paper argues, the withdrawal of the UK from the EU created an unprecedented situation – namely that of a former member state. In response to this unique state of affairs, the EU has deliberately and consistently endeavored to develop with the UK as a new third country an ambitious partnership, going beyond trade to encompass many other areas of cooperation, spanning from internal and external security to sectoral themes such as the fight against climate change and health. As the paper suggests, the EU’s approach vis-a-vis the UK emerges already in the negotiating guidelines, adopted in the aftermath of the UK notification of its intention to leave the EU; is codified in the non-binding Political Declaration outlining the framework of future EU-UK relations, attached to the Withdrawal Agreement; and is ultimately reflected to a large extent in the EU-UK Trade and Cooperation Agreement reached between the parties on Christmas’ Eve 2020. Although this deal does not fully achieve the objectives of the EU, as some areas are not covered by the new EU-UK treaty, the wide-ranging partnership confirms the ambition of the EU to lock-in relationship with a close, special neighbor like the UK.

From Constitutional Adjudication to Trade Arbitration Enforcing Mobility Rights Post-Brexit

This article addresses the termination of the CJEU’s jurisdiction post-Brexit and its replacement with a much more restricted dispute resolution provision, more reminiscent of that found in free trade agreements, focusing in particular on the enforcement of mobility rights. It begins by addressing the root causes for Britain’s antagonism towards the Court. It argues that the Court’s expansive interpretation of the Treaties, masked by a legalist approach to European integration, has allowed the Court largely to avoid scrutiny by most Member States. Nevertheless, the Court’s judicial activism was ultimately rejected by the UK leading to the Court’s curia non grata status post-Brexit. It then analyses the key features of the post-Brexit dispute settlement system proposed by the UK and the EU .We argue that while the Court has been criticized for its judicial activism, EU law did provide significant avenues for an individual’s access to courts. This fundamental feature is missing from the dispute resolution mechanism under the proposed UK-EU free trade agreement (FTA), leaving an important gap in the system of justice in the future UK-EU relationship.We argue that under the new dispute settlement regime mobility rights will be adjudicated as trade disputes. This has serious implications for the protection of rights of individuals wishing to exercise any future mobility rights. Court of Justice, free trade agreement, integration, free movement of person, mobility, dispute resolution

Brexit: What economic impacts does the literature anticipate?

The results of the June 2016 referendum in favour of the UK leaving the EU opened a period of huge economic and political uncertainty in the UK, and in the EU27. A large number of official and academic analyses have been published that address the economic impact of different modalities of Brexit. Section 1 analyses possible models for the future UK-EU relationship, from remaining in the single market and in the customs union, to a Free Trade Agreement (FTA) or world trade organization (WTO) rules. Section 1 also discusses the future of UK trade regulations (tariff and non-tariff barriers, trade agreements) and the various channels through which Brexit could have an impact on the UK economy (trade, foreign direct investment (FDI), migration, productivity, fiscal policy). The UK must make a trade-off between ensuring access to the EU market and increasing its regulatory autonomy. Section 2 surveys studies released on the impacts of Brexit, over short- and long-term horizons, under different scenarios, from a soft Brexit to a hard Brexit and a no deal scenario. These studies provide very different results depending on the methods they use and the assumptions they adopt on the future relationship between the UK and the EU27, mainly on how they view the effects of trade openness and regulations on productivity, in level as in growth rate. Studies using gravity models and computable general equilibrium models generally find negative but small effects on UK GDP. Some studies increase these effects by adding the negative impact of a less open UK economy on labour productivity growth, even if Brexiteers want to open the UK to non-EU economies. Others believe that a liberalisation shock could boost output growth, but the UK is already a very liberal economy. The impact of Brexit on the GDP of the EU27 countries is on average 4 to 5 times smaller than on UK GDP, although some countries (Ireland in particular) are more affected. In the shorter term, uncertainty about Brexit has a negative effect on investment and exports, which is partly offset by lower interest rates and exchange rates.JEL codes: F10

Managing differentiated disintegration: Insights from comparative federalism on post-Brexit EU–UK relations

This article applies insights from comparative federalism to analyse different models for managing future EU–UK relations. The argument is that the stability of the EU–UK relationship before as well as after Brexit is best understood by examining the presence of federal safeguards. Drawing on Kelemen, four types of safeguards are identified as the means for balancing centrifugal and centripetal forces. During the United Kingdom’s European Union membership, the strong glue provided by structural and judicial safeguards was undone by the weakness of partisan and socio-cultural ones. However, each post-Brexit scenario is characterised by weaker structural and judicial safeguards. The most stable outcome is an indeterminate Brexit that limits the incentive to politicise sovereignty and identity concerns by ending free movement of people and reducing the saliency of European Union rules. Such stability is nevertheless relative in that, from a comparative perspective, federal-type safeguards were stronger when the United Kingdom was still in the European Union.

Investor-State Dispute Settlement under review; current challenges, lack of regulation in the EU-MERCOSUR agreement and basis for the EU-UK and UK-MERCOSUR FTAs

Investment treaties aim to protect the rights of foreign investors and provide legal certainty, generally including an Investor-state dispute settlement (ISDS) system. The increase of criticism towards ISDS -which reached its highest point during the EU-US TTIP negotiations- brought up different concerns. As a result, the Investment Court System (ICS) was developed and incorporated for the first time in the CETA between Canada and the EU, and then in other Free-Trade Agreements (FTA) signed by the EU. However, in the EU-MERCOSUR FTA there is no regulation of a dispute settlement mechanism between investors and States parties.Currently, the United Kingdom (UK) is leaving the EU and negotiations of a new deal with the EU are being developed. In the next stages, the UK will most likely reach different agreements with sovereign states and others commercial blocks. In this sense, there is a possibility that a future EU-UK and UK-MERCOSUR agreement will need to consider whether the ISDS or the ICS will be adopted. Also, MERCOSUR will need to analyse which system it will be willing to adopt in the future in case a dispute settlement between investors and States is adopted, and could even explore a system that includes aspects of both the ISDS and the ICS.

SOCIAL RIGHTS OF THE POLES IN THE UNITED KINGDOM AFTER BREXIT

Withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union (Brexit) has definitely been bringing various consequences in the field of social security. It is therefore worthwhile to analyse it from the point of view of the social rights of Poles residing in the United Kingdom (as well as, in a comparative and auxiliary manner, of the British residing in Poland), following the formal conclusion of the withdrawal. The article therefore synthetically presents this current, post-Brexit situation, taking into account the ongoing transition period as well as the perspective of negotiations on the possible agreement(s) on future EU-UK relations. Notably, the rights in question have been preserved in the transition period, but their status afterwards remains open.

Will the Future EU-UK Free Trade Agreement Affect Foreign Direct Investment?

This article aims to provide new insight on how Brexit will affect foreign direct investment (FDI) into the UK. By estimating an augmented gravity equation which accounts for the depth of free trade agreements (FTAs) as well as for EU and euro area membership, the article gauges the potential impact that different EU-UK trade scenarios might have on FDI flows and stocks. Results show that under a no-deal scenario, FDI flows from the EU into the UK would plunge by 25.9% – 40.6%, and inward FDI stocks would decrease by 49.2% – 53.9%. However, the depth of the future FTA can mitigate this negative outcome. More generally, the article shows that the FDI costs of leaving the EU would be significantly higher for the euro area countries.

Negotiating Brexit: A clash of approaches?

On 31 January 2020, the UK left the European Union after 47 years of membership. This paper uses the conceptual distinction between integrative and distributive bargaining to compare the EU’s and the UK’s approaches in the negotiations that led to the Withdrawal Agreement, setting out the terms of the UK’s exit, and the Political Declaration on the framework for the future EU–UK relationship. While it would be rational to expect both parties to adopt integrative approaches given the nature of the issues, the long history of cooperation, and the parties’ mutual interest in maintaining a close relationship in the future, the comparison demonstrates that it was mainly the EU that leaned towards the integrative end of the negotiating spectrum, with extensive internal consultations, a willingness to engage in open and interest-based discussions aimed at problem-solving, and high levels of transparency, whereas the UK leaned further to the distributive end, reflecting less engagement and consultation with domestic constituents, a focus on pre-determined positions that need defending, and lower levels of transparency.

So long, farewell, auf wiedersehen, goodbye: The UK’S withdrawal package

The United Kingdom left the European Union at midnight CET on 31 January 2020. This article provides a critical analysis of the Withdrawal Package concluded by the Union and the UK. As regards theWithdrawal Agreement designed to facilitate an orderly departure, we analyse the provisions on: governance arrangements; the transition period; citizens’ rights; and the Ireland / Northern Ireland border. We then discuss the prospects for future EU-UK relations as expressed in their joint Political Declaration and developed in their respective post-withdrawal negotiating positions.

The Looming Threat of Tariff Hikes: Entry into Exporting under Trade Agreement Renegotiation

We examine how the looming threat of tariff hikes under a trade agreement renegotiation impacts firm entry into a trading partner's market by exploiting uncertainty over the future UK-EU trade relationship brought about by the June 2016 Brexit referendum. Using the universe of UK export transactions at the firm and product level, we find that uncertainty over future market access to the EU deterred entry modestly in the months immediately after the Brexit vote, but the deterrent effect increased over time.

Uncharted waters: The social and equality impacts of Brexit

This research provides an overview of the potential social impacts of Brexit on individuals and communities in Scotland. It complements economic analyses of Brexit, which tend to focus on impacts on businesses, the economy and GDP. The paper begins by discussing the impacts of the Brexit referendum on people in Scotland since June 2016 to the present day, which include slower economic growth and immigration uncertainty. The research then explores the potential impacts of Brexit going forward under three scenarios: a hard Brexit, a softer Brexit and a no-trade deal Brexit. People's legal rights, access to funding and public services, and employment, housing and consumer spending prospects are then analysed from the perspective of different equalities groups. An in-depth analysis of potential impacts is also provided through a case study on women. The key findings are that the potential socioeconomic effects of any type of Brexit will likely to be widespread across equalities groups; and equalities groups are also likely to feel the shared loss of EU funding, European citizenship and other EU social rights and protections that are not transposed into domestic law or which will likely come to an end (i.e. European Health Insurance Card). However, the likelihood of these impacts happening depends on several variables, as yet unknown, including the closeness of the future UK-EU relationship, trade agreements with other countries, and the UK Government's post-Brexit policy agenda.

Commission

This overview highlights the Commission’s draft legal agreement for the future EU-UK partnership, the adopted State aid temporary framework, the paper on the cash accounting scheme, the report on excise duty on tobacco products and surveys on the VAT data reporting obligation by payment service providers, as well as on tax policies within the European Union.