1. AEMC meeting Brussels October 26th 2018
A Framework to Assess Brexit and its Macroeconomic Consequences
Francesco Papadia

2. My four points Borders are bad for the economy
Reducing the economic negative effect of borders, and in the extreme eliminating them, is a long and complex endeavour that has engaged the EU, including the UK, over decades
Brexit is tantamount to reinstating the border between the UK and the 27 EU Members, with the height of the reinstated wall depending on the actual arrangement that will follow exit
The relative damage for the UK and for the rest of the EU will approximately follow the economic size of the UK relative to that of EU 27.
My four points

3. Borders are bad for the economy
The underlying economic rational of the three fundamental Treaty freedoms:
Everything equal, trade over borders is less than trade within borders (comparative advantage is lost)
Optimal allocation of capital requires no borders
Free movement of labour has efficiency and risk sharing advantages.
Borders are bad for the economy

4. Just remember the relevant names:
Common Market
European Economic Community
Abolition of capital controls
Customs Union (External tariffs)
Single Market (Trade without borders)
Banking Union
Capital Market Union
Monetary Union.
Reducing the negative effect of borders was a long and complex endeavour engaging the EU for decades

5. European Economic Area (Single market-Norway)
Customs Union (Turkey)
Free Trade Deal (Canada)
No deal (WTO).
Brexit reinstates a wall between the UK and the 27, its height depends on the actual arrangement following exit

6. In GDP Terms the EU 27 is about 6 times the size of the UK
In trade terms (export+imports) the EU 27 is about 8 times the size of the UK
So, the damage for the UK should be some 6 to 8 times larger than for the EU 27
The relative damage for the UK and for the EU 27 will follow the economic size of the UK relative to that of EU 27

7. Thank you! Bruegel link: http://bruegel.org/ My Blog:
…and some publicity
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Money matters? Perspectives on Monetary Policy
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