GRM 2010 GRM 2011

Abstract Details

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Title of Paper:
Impact of Brexit on EU-GCC Trade Relations
Paper Proposal Text :
This paper examines the impact of Brexit on EU-GCC trade relations. It argues that Britain is a major trading partner with the GCC countries and its exist from the EU is expected to affect the dynamics and patterns of trade between the two region. While no trade agreements have yet signed between the EU and GCC, the initial discussions between the UK and GCC leaders during the GCC Summit in December 2016 to negotiate an ambitious free trade agreement may create a trade rivalry between the UK and the EU. The paper seeks to develop an understanding of how Brexit will shape UK trade ties with the EU post-Brexit in terms of participation, or the lack of it, in the single market and the customs union and the extent to which such departure will affect trade creation and trade diversion in the European markets. Such analysis will help us to determine the economic sectors and industries that are most likely to be affected by the imposition of EU external tariffs and non-tariff barriers against UK goods and services, and whether such impact could unlock significantly more trade and investment between the UK and GCC countries.
The paper anticipates that the current efforts by the UK Government to seek the possibilities for ambitious new trade agreements with GCC countries after leaving the EU could trigger political tension over commercial interests; hence forcing the EU to resume its negotiations for the long-awaited EU-GCC FTA, which were suspended in 2009. The current pre-occupation of the EU in negotiating FTAs with the USA, Latin American and Asia Pacific countries may not help to engage in FTA negotiations with the GCC any sooner, but it is apparent that the EU will seek various means to enhance EU competitive advantages vis-à-vis those of the UK for greater market shares in GCC. The study is also expected to examine the effect of trade competition between UK and EU on the patterns and volumes of trade, GCC business environment, Inward investment flows and the conclusion of FTAs.
The study will adopt an interdisciplinary approach that enables the researcher to use a combination of theoretical underpinnings from various disciplines such as international trade and regional integration theories. Key assumptions of free trade will be used to explain how a free trade agreement could affect the trade ties between the UK, the EU and GCC and consequently affect the dynamics of their internal markets. Free trade theory will be used to explain how trade liberalisation due to the formation of a free trade area affects the business environment through policy adjustment and changes in the legal and regulatory frameworks in the GCC countries as a result of the agreement. International business theory will help in examining how the dynamic changes in the business environment affect the strategies and operations of the companies, as well as identifying the channels and mechanisms through which spillover effects from trade and investment enhance the productivity and competitiveness of domestic firms in the GCC markets.
The Global Trade Analysis Project (GTAP), a widely used Computable General Equilibrium (CGE) model, will be used to quantify the various expected impacts of Brexit on EU-GCC trade relations. This model will be useful in producing a simulation of a full UK-EU-GCC trade, determining not only the impact of a total and reciprocal elimination by all countries on inter-regional trade but also the impact of free trade agreement on the real GDP and welfare of the GCC, as well as the welfare distributional effects on each member state. The simulation model will provide policy makers with evidence-based research to determine both the impact of the potential free trade agreement on the growth of inward investment, and whether the scope of trade creation and expansion will be larger than trade diversion, or vice versa. This study will also use semi-structured interviews to collect valid and reliable data from academic experts, industry practitioners and relevant stakeholders concerned with the UK-EU-GGC free trade agreements.

Keywords: Brexit, FTAs, trade, investment, GCC, EU, UK,