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Brexit and Indirect Impact Routes through Global Value Chains

Author

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  • Ali-Yrkkö, Jyrki
  • Kuusi, Tero

Abstract

In this study, we analyze the trade linkages between the United Kingdom (UK), Finland, and the European Union (EU). We calculate the value-added content of trade through complex global value chains (GVCs), which may involve numerous production stages and third countries. Our results show that the importance of the UK as a trading partner for Finland has decreased during the last 15 years, and the tendency has been stronger than that between the UK and other EU countries, on average. We compare the importance of the UK to that of other countries by extracting the total amount of the Finnish value added that is generated in the value chains involving individual countries. Through this comparison, we find that the UK ranks as the sixth most important country. We further decompose the total value added into components that quantify the value added that is generated through direct trade with the UK and the indirect trade that is channeled through third countries. We find that roughly one third of the total value added is generated through indirect trade and two thirds through direct trade. Our analysis also suggests that one fifth of both the Finnish and EU value-added trade to the UK passes through the UK to other countries. The main destination countries are the United States (US), Germany, and France.

Suggested Citation

  • Ali-Yrkkö, Jyrki & Kuusi, Tero, 2019. "Brexit and Indirect Impact Routes through Global Value Chains," ETLA Reports 89, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:report:89
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    Cited by:

    1. Tero Kuusi & Martti Kulvik & Juha-Matti Junnonen, 2022. "Productivity Growth in Construction Value Chains," International Productivity Monitor, Centre for the Study of Living Standards, vol. 42, pages 3-32, Spring.
    2. Emily Blanchard & Amelia U. Santos-Paulino & Claudia Trentini & Emanuel Milet, . "Implications of rising trade tensions for FDI projects," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.

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    More about this item

    Keywords

    Global value chain; Brexit; United Kingdom; Gross domestic product; Impact; Indirect; Route; Value added;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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