UK and EU agree draft deal to scrap Brexit red tape over food exports
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Tariffs and protectionism, Balance of payments, Exchange rates
What happened
The UK and the EU have agreed a draft deal to cut post-Brexit red tape on food exports; it is the most significant part of the so-called Brexit reset agreed so far, ahead of a UK-EU summit later this month.
The economics
Post-Brexit border checks and paperwork act like non-tariff barriers that raise the cost of trading food and reduce trade volumes. Removing them lowers trade costs, making it easier for UK food to reach the EU market, which affects UK exports, the current account and the demand for sterling.
Evaluation
Cutting non-tariff barriers can boost trade, but the effect depends on the deal being finalised and firms adapting to new rules; trade may not rise immediately, and gains may be concentrated in the food-exporting sector.
Practice question
Using this deal, analyse the likely effect of reducing non-tariff trade barriers on the UK's current account of the balance of payments.
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Where it fits in the syllabus
- Tariffs and protectionism: Tariffs, quotas and similar barriers that shield domestic producers, at the cost of higher prices and possible retaliation.
- Balance of payments: A record of a country's transactions with the rest of the world, including the trade balance and capital flows.
- Exchange rates: The price of one currency in another; appreciation or depreciation changes exports, imports and inflation.
- IB Economics: International Trade, Exchange Rates and Balance of Payments
- A-Level Economics: International Economics
- AP Macroeconomics: Open Economy: International Trade and Finance
- IGCSE Economics: International Trade and Globalisation