The Indirect Effects of Brexit on African, Caribbean, and Pacific Trade with the UK and EU

Abstract

We analyse the ‘indirect effects’ of Brexit on African, Caribbean, and Pacific (ACP) countries’ exports that use the UK as a platform to access the EU market and vice versa. First, we use the EORA26 multi-region input–output database for 186 countries and 26 sectors to characterize the ACP domestic content embedded in bilateral trade between the UK and the EU. Second, we apply the GTAP-VA module to carry out a simulation of how the EU–UK Trade and Cooperation Agreement will impinge on 121 countries and 65 products. The results suggest that while ‘indirect effects’ on ACP countries’ exports may exist, their economic magnitude is small in aggregate because ACP countries supply only small amounts of inputs used in UK–EU bilateral trade. Our simulations also show that these effects may be offset by the likely increase in ACP domestic content in exports because of TCA friction, mainly towards the UK.