1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The potential economic impact of Brexit on the Netherlands

This paper provides estimates of the potential trade effects of an exit of the United Kingdom (UK) from the European Union (EU) on exports and production at the sectoral level as well as GDP in the Netherlands. Owing to the high uncertainty regarding the final trade agreement between the negotiating parties, the choice has been made to assume a worst case outcome where trade relations between the United Kingdom and EU are governed by World Trade Organization (WTO) most favoured nation (MFN) rules. In doing so, it provides an upper bound estimate of the potential negative economic impact stemming from disruptions in trade. Any final trade agreement that would result in closer relationships between the United Kingdom and the EU could reduce this negative impact.

Simulations using the METRO model suggest that from an increase in tariff and non-tariff measures (NTM’s) Dutch exports to the UK would fall by 17% and GDP declines by 0.7% in the medium term compared to baseline. This effect is from the trade channel absent any change in foreign direct investment (FDI) or productivity. The Dutch agri-food sector would experience a 22% fall in its UK exports. There are some sectors that gain from the export opportunities provided by Brexit, notably financial services and transport.

English

Keywords: computable general equilibrium model, METRO model, international trade, Brexit, sectoral economic effects, European Union, Netherlands
JEL: B17: History of Economic Thought, Methodology, and Heterodox Approaches / History of Economic Thought through 1925 / International Trade and Finance; C68: Mathematical and Quantitative Methods / Mathematical Methods; Programming Models; Mathematical and Simulation Modeling / Computable General Equilibrium Models; F13: International Economics / Trade / Trade Policy; International Trade Organizations; C10: Mathematical and Quantitative Methods / Econometric and Statistical Methods and Methodology: General / Econometric and Statistical Methods and Methodology: General; F14: International Economics / Trade / Empirical Studies of Trade
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