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Brexit costs the Netherlands billions through reduced trade

Published: 9 June 2016

If the United Kingdom (UK) withdraws from the European Union it will affect the Netherlands more severely than other EU countries because of the strong trade relations between the Netherlands and the UK. A reduction in trade could amount to a GDP loss for the Netherlands of 1.2%, or 10 billion euros, by 2030. Less trade may also induce less innovation, which could amplify the GDP loss of 10 billion euros by another 65%. This is one of the conclusions of CPB Netherlands Bureau for Economic Policy Analysis in their study on the costs of Brexit.

If the UK were to withdraw from the EU, this would be followed by a period of uncertainty which would lead to direct economic losses. However, the more substantial losses for both the UK and the EU occur in the long term, because their economies will gradually have to adapt to changing trade patterns. First of all, trade costs will increase due to import tariffs. Next, trade barriers will arise from differences in technical specifications or the environmental standards goods have to comply with before being allowed to be sold either within the EU or the UK.

Brexit-related costs will be sector specific. For the Netherlands, the ‘other transport’ and ‘transport equipment’ sectors will hardly be affected, as the connection through trade with the UK in these sectors is only limited. However, this does not apply to certain other sectors, such as ‘chemicals, plastics and rubber’, ‘electronic equipment’, ‘motor vehicles and parts’, ‘the food processing industry’ and ‘metals and minerals’, which together account for 12% of Dutch GDP. These sectors will suffer production losses of around 5%.

If the EU succeeds in agreeing a new free trade agreement with the UK, this will substantially reduce GDP losses. For the Netherlands, the GDP losses could be reduced by around 20%. Such an agreement would circumvent trade tariffs and set standards and regulations with which both the UK and the EU would need to comply, although this will not fully restore access to the internal market.

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