who’s affected by brexit? how might different trade ... agnes...agnes norris keiller, ifs who’s...
TRANSCRIPT
Agnes Norris Keiller, IFS
Who’s affected by Brexit? How might different trade arrangements impact and different UK industries, regions and workers?
The IFS Green Budget is produced in association with Citi and ICAEW, and with funding from the Nuffield Foundation.
Exposure to potential trade barriers between the UK and the EU Agnes Norris Keiller [email protected]
© Institute for Fiscal Studies Who's affected by Brexit?
EU is UK’s most important trade partner
© Institute for Fiscal Studies Who's affected by Brexit?
0%
5%
10%
15%
20%
25%
30%
35%
Exports Imports
Per c
ent o
f nat
iona
l inc
ome
EU28 EFTA US China Rest of the world
Source: Figure 1.1 of The exposure of workers to potential trade barriers between the UK and the EU
£274 bn 13% of GNI
£341 bn 17% of GNI
This presentation
Potential changes in trade barriers between the UK and the EU
Impacts of new trade barriers on industries
Exposure to negative impacts across
1. Workers
2. Regions Focus on one particular aspect of Brexit: trade with the EU • Examine impacts and mechanisms behind them in more detail • Emphasis on relative impacts and how (un)certain they are • Not providing “economic impact of Brexit” estimate
© Institute for Fiscal Studies Who's affected by Brexit?
UK ̵ EU trade barriers
Two broad categories of trade barriers 1. Tariff barriers: taxes levied on imports of goods 2. Non-tariff barriers: non-tax policy impediments to trade
‒ Regulatory differences ‒ Bureaucratic costs ‒ Customs checks
© Institute for Fiscal Studies Who's affected by Brexit?
UK ̵ EU trade barriers: the status quo
Two broad categories of trade barriers 1. Tariff barriers: taxes levied on imports of goods 2. Non-tariff barriers: non-tax policy impediments to trade The EU Customs Union • No tariffs or customs checks on goods trade between member states • Members apply common tariffs and checks to non-EU imports The Single Market • Rules to reduce non-tariff barriers • e.g. Harmonisation of product standards
© Institute for Fiscal Studies Who's affected by Brexit?
UK ̵ EU trade barriers: government proposals
Intend to leave both the Customs Union and Single Market ‘The Chequers plan’: • UK ̵ EU trade to remain tariff-free • UK sets own tariffs non-EU imports • ‘Facilitated Customs Arrangement’ to avoid customs checks at borders • ‘Common rulebook’ for manufactured goods and agri-food products
EU appears unwilling to accept current proposal
© Institute for Fiscal Studies Who's affected by Brexit?
UK ̵ EU trade barriers: potential changes
Consider three ‘trade policy scenarios’ 1. ‘WTO rules’: Default in absence of trade deal
‒ UK and EU apply EU’s World Trade Organisation MFN tariffs
‒ Government’s estimates of WTO non-tariff barriers
2. Free-trade agreement (FTA): e.g. ‘Canada option’ ‒ Zero tariffs
‒ Government’s estimates of FTA non-tariff barriers
3. European Economic Area (EEA): e.g. ‘Norway option’ ‒ Zero tariffs
‒ Government’s estimates of EEA non-tariff barriers
Hard to quantify likely magnitudes of non-tariff barriers • Cost of non-tariff barriers for finance sector a key area of uncertainty
© Institute for Fiscal Studies Who's affected by Brexit?
Estimated cost of trade barriers: ‘WTO rules’
© Institute for Fiscal Studies Who's affected by Brexit?
0% 10% 20% 30% 40% 50%
Construction Business services
Real estate Mining
Other services Technical and scientific services
Computers and electronics Machinery and equipment
IT services and media Transport services
Finance Arts and recreation
Accomodation and catering Utilities
Repair and installation services Wood, paper and printing
Chemicals, pharma and refining Metals and metal products
Other manufacturing Health and care
Public administration Education
Transport equipment Wholesale and retail Clothing and textiles
Agriculture and fishing Food and drink
All
Tariff equivalent (%)
Non-tariff barriers Tariffs
Source: Figure 1.5 of The exposure of workers to potential trade barriers between the UK and the EU
11% 2%
Estimated cost of trade barriers: ‘WTO rules’
© Institute for Fiscal Studies Who's affected by Brexit?
0% 10% 20% 30% 40% 50%
Construction Business services
Real estate Mining
Other services Technical and scientific services
Computers and electronics Machinery and equipment
IT services and media Transport services
Finance Arts and recreation
Accomodation and catering Utilities
Repair and installation services Wood, paper and printing
Chemicals, pharma and refining Metals and metal products
Other manufacturing Health and care
Public administration Education
Transport equipment Wholesale and retail Clothing and textiles
Agriculture and fishing Food and drink
All
Tariff equivalent (%)
Non-tariff barriers Tariffs
11% 2%
Source: Figure 1.5 of The exposure of workers to potential trade barriers between the UK and the EU
Estimated cost of trade barriers: ‘WTO rules’
© Institute for Fiscal Studies Who's affected by Brexit?
0% 10% 20% 30% 40% 50%
Construction Business services
Real estate Mining
Other services Technical and scientific services
Computers and electronics Machinery and equipment
IT services and media Transport services
Finance Arts and recreation
Accomodation and catering Utilities
Repair and installation services Wood, paper and printing
Chemicals, pharma and refining Metals and metal products
Other manufacturing Health and care
Public administration Education
Transport equipment Wholesale and retail
All
Tariff equivalent (%)
Non-tariff barriers Tariffs
11% 2%
Food and drink Agriculture and fishing
Clothing and textiles
Source: Figure 1.5 of The exposure of workers to potential trade barriers between the UK and the EU
Estimated cost of trade barriers: ‘WTO rules’
© Institute for Fiscal Studies Who's affected by Brexit?
0% 10% 20% 30% 40% 50%
Business services Real estate
Mining Other services
Technical and scientific services Computers and electronics Machinery and equipment
IT services and media Transport services
Finance Arts and recreation
Accomodation and catering Utilities
Repair and installation services Wood, paper and printing
Chemicals, pharma and refining Metals and metal products
Other manufacturing Health and care
Public administration Education
Transport equipment Wholesale and retail Clothing and textiles
Agriculture and fishing Food and drink
All
Tariff equivalent (%)
Non-tariff barriers Tariffs
11% 2%
Source: Figure 1.5 of The exposure of workers to potential trade barriers between the UK and the EU
Construction
Estimated cost of trade barriers: ‘WTO rules’
© Institute for Fiscal Studies Who's affected by Brexit?
0% 10% 20% 30% 40% 50%
Construction Business services
Real estate Mining
Other services Technical and scientific services
Computers and electronics Machinery and equipment
IT services and media Transport services
Finance Arts and recreation
Accomodation and catering Utilities
Repair and installation services Wood, paper and printing
Chemicals, pharma and refining Metals and metal products
Other manufacturing Health and care
Public administration Education
Transport equipment Wholesale and retail Clothing and textiles
Agriculture and fishing Food and drink
All
Tariff equivalent (%)
Non-tariff barriers Tariffs
11% 2%
Source: Figure 1.5 of The exposure of workers to potential trade barriers between the UK and the EU
Estimated cost of trade barriers: FTA
© Institute for Fiscal Studies Who's affected by Brexit?
0% 10% 20% 30% 40% 50%
Construction Business services
Real estate Mining
Other services Technical and scientific services
Computers and electronics Machinery and equipment
IT services and media Transport services
Finance Arts and recreation
Accomodation and catering Utilities
Repair and installation services Wood, paper and printing
Chemicals, pharma and refining Metals and metal products
Other manufacturing Health and care
Public administration Education
Transport equipment Wholesale and retail Clothing and textiles
Agriculture and fishing Food and drink
All
Tariff equivalent (%)
Non-tariff barriers Tariffs
7% 0%
Source: Table Y.1 of The exposure of workers to potential trade barriers between the UK and the EU
Estimated cost of trade barriers: EEA
© Institute for Fiscal Studies Who's affected by Brexit?
0% 10% 20% 30% 40% 50%
Construction Business services
Real estate Mining
Other services Technical and scientific services
Computers and electronics Machinery and equipment
IT services and media Transport services
Finance Arts and recreation
Accomodation and catering Utilities
Repair and installation services Wood, paper and printing
Chemicals, pharma and refining Metals and metal products
Other manufacturing Health and care
Public administration Education
Transport equipment Wholesale and retail Clothing and textiles
Agriculture and fishing Food and drink
All
Tariff equivalent (%)
Non-tariff barriers Tariffs
4% 0%
Source: Table Y.1 of The exposure of workers to potential trade barriers between the UK and the EU
Estimating impacts on industries
Increases in trade barriers will cause changes in demand Calculate impact of these changes on industry value added
• Accounts for changes in cost of inputs and output price
Hypothetical scenario indicates which industries likely to be most affected
• Results are not predictions of actual changes in value added
© Institute for Fiscal Studies Who's affected by Brexit?
Estimated impact of ‘WTO rules’ trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.6 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated percentage change in value added
Estimated impact of ‘WTO rules’ trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.6 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated percentage change in value added
Estimated impact of ‘WTO rules’ trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.6 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated percentage change in value added
Causes of impacts in specific industries
Transport equipment; Chemicals, pharmaceuticals & refining; Clothing and textiles
• Around 25-30% of intermediate inputs imported from EU • Around 25-40% of output exported to EU • Face relatively high trade barriers Agriculture & fishing; Wood, paper & printing • UK market important source of demand • Benefit from UK consumers substituting away from EU imports • Positive impacts come at cost to consumers
© Institute for Fiscal Studies Who's affected by Brexit?
Estimated impact of ‘WTO rules’ trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.6 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated percentage change in value added Gross value added (% of UK total)
Estimated impact of ‘WTO rules’ trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.6 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated percentage change in value added Gross value added (% of UK total)
Causes of impacts in specific industries
Wholesale and retail • Driven by impact on wholesale trade services • Faces highest non-tariff trade barriers (20%) Finance • Exports to EU higher than in other service industries (12% of output)
• Non-tariff barrier costs highly uncertain – impact could be more negative
© Institute for Fiscal Studies Who's affected by Brexit?
Estimated impact of ‘WTO rules’ trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.6 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated percentage change in value added
Estimated impact of FTA trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Table Y.1 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated impact of EEA trade barriers
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Table Y.1 of The exposure of workers to potential trade barriers between the UK and the EU
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Estimated percentage change in value added
Exposure of workers to negative impacts
Focus on which types of workers most exposed to negative impacts • Proxy worker exposure based on industry of main employment • Worker impacts likely to be closely related to employer value added Impacts on workers will depend on firm and worker responses
‒ Job losses; wage cuts; reduced profits ‒ Ability to move to less negatively affected industries
Do not model impacts directly
© Institute for Fiscal Studies Who's affected by Brexit?
Exposure of workers to negative impacts
Large variation in exposure to negative impacts across employees
© Institute for Fiscal Studies Who's affected by Brexit?
Exposure under ‘WTO rules’ among UK employees
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.8 of The exposure of workers to potential trade barriers between the UK and the EU
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Esti
mat
ed ch
ange
in e
mpl
oyer
val
ue a
dded
Percentile of worker exposure Most negatively exposed Least negatively exposed
Exposure under ‘WTO rules’ among UK employees
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.8 of The exposure of workers to potential trade barriers between the UK and the EU
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Esti
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in e
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val
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Percentile of worker exposure Most negatively exposed Least negatively exposed
More than 5%
3% to 5% 1% to 3% Less than 1%
Very high exposure
High exposure Mid exposure Low exposure
Estimated fall in employer value added
Exposure under ‘WTO rules’ among UK employees
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Figure 1.8 of The exposure of workers to potential trade barriers between the UK and the EU
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95
Esti
mat
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in e
mpl
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val
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dded
Percentile of worker exposure Most negatively exposed Least negatively exposed
14% 19% 22% 45%
Very high exposure
High exposure Mid exposure Low exposure
Exposure of workers to negative impacts
Large variation in exposure to negative impacts across employees • Severe negative impacts concentrated on relatively small group • Majority of workers exposed to modest negative impact Substantial differences across worker types
© Institute for Fiscal Studies Who's affected by Brexit?
‘WTO rules’ exposure by gender and education
© Institute for Fiscal Studies Who's affected by Brexit?
Source: Table 1.1 of The exposure of workers to potential trade barriers between the UK and the EU
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All
Fraction of employees
Very high
‘WTO rules’ exposure by gender and education
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Source: Table 1.1 of The exposure of workers to potential trade barriers between the UK and the EU
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Men
Women
All
Fraction of employees
Very high
‘WTO rules’ exposure by gender and education
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Source: Table 1.1 of The exposure of workers to potential trade barriers between the UK and the EU
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Men: GCSEs
Men: A-levels
Men: Degree
Women: GCSEs
Women: A-levels
Women: Degree
Men
Women
All
Fraction of employees
Very high
‘WTO rules’ exposure by occupation
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Source: Figure 1.9 of The exposure of workers to potential trade barriers between the UK and the EU
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Caring, Leisure & Other Service
Professional
Sales & Customer Service
Elementary
Admin & Secretarial
Skilled Trades
Managers, Directors & Senior Officials
Associate Professional & Technical
Process, Plant & Machine Operatives
All
Fraction employed
Very high
‘WTO rules’ exposure by occupation
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Source: Figure 1.9 of The exposure of workers to potential trade barriers between the UK and the EU
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Caring, Leisure & Other Service
Professional
Sales & Customer Service
Elementary
Admin & Secretarial
Skilled Trades
Managers, Directors & Senior Officials
Associate Professional & Technical
Process, Plant & Machine Operatives
All
Fraction employed
Very high
Exposure of workers to negative impacts
Large variation in exposure to negative impacts across employees • Severe negative impacts concentrated on relatively small group • Majority of workers exposed to modest negative impact Substantial differences across worker types • Men with low ed. qualifications more exposed • Process, plant & machine operatives most exposed occupation Most exposed workers likely to find adjustment harder • Harder to find equally well paid jobs in less exposed industries • Less likely to move into less exposed occupations
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Exposure of regions to negative impacts
Regional employment composition simple measure of exposure 1. Regional differences in exposure smaller than across worker types 2. Relative exposure of regions sensitive to non-tariff barrier estimates 3. Finance key driver of impact on London and inter-regional inequality
Regional impacts a key area of uncertainty • Previous studies reach different conclusions Very highly exposed workers have fewer ‘re-employment’ options in
some regions than others
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Employment in v. highly exposed industries: GCSEs or below
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0% 5% 10% 15% 20% 25% 30%
UK
Employment in v highly exposed industries (‘WTO rules’, % total group employment)
Women Men
Source: Table 1.3 of The exposure of workers to potential trade barriers between the UK and the EU
Employment in v. highly exposed industries: GCSEs or below
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0% 5% 10% 15% 20% 25% 30%
London Scotland
North East South East
East of England North West South West
East Midlands Wales
Yorkshire and Humber West Midlands
Northern Ireland
UK
Employment in v highly exposed industries (‘WTO rules’, % total group employment)
Women Men
Source: Table 1.3 of The exposure of workers to potential trade barriers between the UK and the EU
Summary
Changes in trade policy cause economic disruption Large variation in likely impact of trade barriers across industries • Transport equipment; clothing & textiles; chemicals, pharma. & refining most
exposed to negative impacts
• Agriculture may stand to gain (at cost to consumers)
• Relative impacts the same across scenarios we consider
Impacts on finance and regional exposure key areas of uncertainty Very highly exposed workers likely to find adjustment harder • Men with low educational qualifications and process, plant & machine
operatives most exposed
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