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Journal of Economic Integration 2016 December;31(4) :740-773.
DOI: https://doi.org/10.11130/jei.2016.31.4.740
Brexit and India–EU Free Trade Agreement
Amrita Roy and 
Somesh K. Mathur 
Indian Institute of Technology Kanpur, India
Corresponding Author: Somesh K. Mathur ,Tel: +91-5122597155(office), Email: skmathur@iitk.ac.in
Copyright ©2016 Journal of Economic Integration
ABSTRACT
India and the European Union are in the negotiation process for a Free Trade Agreement. However, as the result of a vote on June 23, 2016, the United Kingdom decided to exit from the European Union, i.e., Brexit. Consequently, bilateral trade costs between the United Kingdom and the European Union will increase both from the newly applicable tariff and non-tariff barriers, which will have a direct impact on trade flows between these two trading partners and an indirect impact on their income growth and on their trading partners. The United Kingdom has been is the most important trading partner for India in the EU, thus the trade deal would not be as beneficial for India as it would have been were the United Kingdom still a member of the European Union. This study attempts to analyze the effects of trade liberalization on the bilateral trade structure between India and the European Union, and the welfare effects both considering the United Kingdom as a member of the European Union and the situation when the United Kingdom exits the European Union. The study found that when United Kingdom is a member of the European Union, both India and the European Union gain more than the situation when the United Kingdom exits the European Union; due to Brexit, India would experience the decline of GDP growth rate from 1.1 to 0.5 percent while the European Union, from 0.1 to -0.5 percent.

JEL Classification
F13: Trade Policy; International Trade Organizations
F14: Empirical Studies of Trade
Keywords: Free Trade Agreement | GTAP | Brexit | Trade Policy
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