Dec 12, 2017
Whether Brexit is judged to be success or not will depend to some degree on its economic impact. Much of the debate in the UK around Brexit has been focused on a 'hard' or 'soft Brexit', which relates to whether the UK should leave the Single Market and the Customs Union. However, there are a range of different trade opportunities and arrangements that could happen between the UK and European Union (EU), and other countries, such as the U.S., post-Brexit.
The chosen trade arrangement will largely depend on the UK's negotiations with the EU. This will involve a complex set of talks between both parties involving multiple issues. The Brexit negotiations appear to be particularly challenging for the UK, as it attempts to disentangle its current ties with the EU, while also negotiating arrangements for a future UK–EU trading relationship.
RAND explored eight plausible post-Brexit trade scenarios involving the UK, EU and U.S. after Brexit. Game theory insights were also used to create a better understanding of how a variety of factors might affect the outcome of Brexit negotiations.
The UK is likely to be economically worse-off outside of the EU under most plausible scenarios, particularly if the UK leaves the EU with no trade deal. It is in the UK's best interests to achieve some sort of open trading and investment relationship post-Brexit. The most beneficial trade scenario would be a trilateral UK-EU-US agreement, but this is seen as very unlikely in the current political environment.
Background to Brexit
Issues for negotiation
Examining Brexit negotiations: priorities of the various parties
Examining Brexit negotiations: implications from game theory
Estimating the economic effects of Brexit
EU27 country groupings
Game theory examples
Non-tariff costs over time
Changes in trade flows
Free trade agreements and foreign direct investment
The effect of Brexit on FDI
Foreign direct investment and economic growth