Dr Oleksandr Shepotylo

Senior Lecturer, Economics, Finance and Entrepreneurship Aston University

Birmingham

Dr Shepotylo seeks to answer the question of how do firms, industries, and countries grow by integrating into global markets.

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Spotlight

Sep 17, 2024

3 min

EU-UK Trade Deal continues to stifle trade with 27% drop in exports since 2021

New report shows persistent stifling effects of the impact of the Trade and Cooperation Agreement on UK-EU trade relations Monthly data show a 27% drop in UK exports and a 32% reduction in imports to and from the EU between 2021 and 2023 Recommendations for policy interventions include to negotiate sector-specific deals, engage with individual EU countries, and work on reducing non-tariff barriers A comprehensive analysis by researchers at the Centre for Business Prosperity at Aston University reveals that negative impacts of the UK-EU Trade and Cooperation Agreement (TCA) have intensified over time. The new report, Unbound: UK Trade Post Brexit, also shows a 33% reduction in the variety of goods exported, with the agricultural, textiles, clothing and materials sectors most affected. To assess the impact of the UK-EU TCA, the authors analysed monthly import and export between the UK and the EU, from January 2017 to December 2023 and separated into preand post-January 2021 when the agreement came into force. The monthly data shows a 27% drop in UK exports and a 32% decline in imports from the EU. Lead author, Professor Jun Du of Aston University says: “The Trade and Cooperation Agreement introduced substantial barriers and there are ongoing and marked declines in the value and variety of UK exports and imports. Without urgent policy interventions, the UK’s economic position and place in the global market will continue to weaken.” The UK-EU TCA redefined trade and investment rules and market access between the UK and the EU. Since it came into force, the UK government has negotiated several trade agreements, but the EU remains the UK’s largest trade partner. Exports for most sectors have decreased since January 2021, although the impact is varied. Agrifood, textile and clothing and material-based manufacturing have been among the hardest hit, with substantial declines in both export value and the variety of products exported. At the same time, some sectors such as tobacco, railway and aircraft manufacturing have seen modest increases in varieties of products exported. On the import side, most sectors have shrunk in both value and variety, particularly agrifood products, optical, textile and material-based manufacturing. A few sectors, for example, ships and furniture, have demonstrated noticeable increases in import product variety. The large variations across different goods categories and EU trade partners underscore the uneven effects of Brexit and the TCA on UK-EU trade dynamics, highlighting the need to understand the nuances and come up with tailored strategies that address the unique challenges of each sector within the new regulatory environment. The researchers make recommendations, outlining how sector-specific negotiations, streamlining customs procedures with digital technologies and reducing regulatory divergence could mitigate some of the impacts. Dr Oleksandr Shepotylo, the report’s co-author says: “Our findings indicate a decoupling of the UK from key EU final goods markets, accompanied by a shift in UK supply chains toward geographically closer EU trading partners for exports and smaller countries for imports. “This shift raises concerns and underscores the urgent need for a strategic reconfiguration of UK supply chains to maintain competitiveness.” Professor Du continues: “The TCA has introduced considerable barriers to UK-EU trade, particularly through increased Non-tariff measures (NTMs). “Addressing these issues through targeted improvements to the TCA is crucial to ensuring that UK businesses remain competitive in the European market. A structured, multi-faceted approach is necessary.” To find out more about these findings, click here.

Apr 26, 2024

4 min

Veterinary deal would increase UK agrifood exports to EU by more than a fifth, research shows

A veterinary deal would increase agri-food exports from the UK to the EU by at least 22.5%, say researchers Agri-food exports overall are worth £25 billion to the UK economy, but the two years since the new trading rules were put in place have seen a fall of 5% in exports to the EU from 2019 levels, during a period where the sector has otherwise grown. Team from Aston University and University of Bristol have analysed trade deals and export figures worldwide to estimate impact of a new veterinary deal on UK–EU exports A veterinary deal with the European Union could increase UK agricultural and food exports by over a fifth, according to new research. The team, from Aston University’s Centre for Business Prosperity and the University of Bristol, analysed the agricultural and veterinary aspects of trade deals around the world to estimate their impact on exports. They then modelled the potential impact of different types of agreement on UK exports to the EU. Veterinary Agreements specifically focus on regulations and standards related to animal health and welfare, as well as to the safety of animal-derived products such as meat, dairy, and seafood. They aim to align, harmonise, or recognise veterinary requirements and certifications, and reduce the number of inspections between countries to facilitate the safe and efficient trade of live animals and animal products. The EU–UK Trade and Cooperation Agreement (TCA), implemented in January 2021, eliminates tariffs and quotas but does not remove non-tariff barriers to trade. These can be particularly burdensome for agricultural and animal-derived food (agri-food) exports, involving complex rules and requirements, production of extensive documentation and veterinary checks. The UK agri-food sector is a cornerstone of the UK economy, with exports worth £25 billion and employing 4.2million people. Although the sector is growing overall, exports to the EU shrank in 2022 by 5% compared to 2019, in part due to the new trade arrangements. This has led to calls for an EU–UK veterinary agreement from business and agri-food organisations, including the Confederation of British Industry, British Chambers of Commerce, UK Food and Drink Federation, Chartered Institute of Environmental Health and British Veterinary Association. Analysing data from the World Bank on 279 trade agreements and export statistics from over 200 countries, the researchers found that shallow agreements, that went little further than provisions already covered by World Trade Organisation (WTO) rules, had significant negative impacts on agri-food exports. However, where trade agreements went beyond WTO provisions to include more commitments on sanitary and phytosanitary (SPS) measures (which aim to protect countries against risks relating to pests, diseases and food safety) and were legally enforceable, they had a robust, positive impact on exports, particularly exports of animal products and food. Applying this to the UK–EU relationship, the team estimate that a veterinary agreement that went beyond the existing TCA provisions would increase agri-food exports from the UK to the EU by at least 22.5%. Imports from the EU would also increase by 5.6%. In the 203 countries studied for the research, positive effects of deep trade deals that included provisions on agriculture took between 10 and 15 years to manifest. But the UK might not have to wait so long, according to report co-author Professor Jun Du, Director of Aston University’s Centre for Business Prosperity. “There is no blueprint out there that mirrors the UK–EU relationship. Most veterinary agreements are agreed as part of a trade deal between countries that haven’t previously had close alignment and it takes a while for the benefits to take effect. “Until recently, the UK had frictionless agri-food exports to the EU, so it’s possible that a supplementary veterinary agreement to reduce some of the frictions created by Brexit could allow trade that previously existed to pick up again quite quickly.” However clear the economic arguments, the legal and political barriers to a veterinary agreement still remain. The researchers address these in their report, suggesting that the best format for the additional measures would be as a supplementary agreement to the TCA. The key question for the UK government in negotiating such an agreement would be what the EU demanded in return. “The closest model is the EU-Swiss relationship, which sees Switzerland largely follow EU law,” said report co-author from the University of Bristol, Dr Greg Messenger. “That’s unlikely to be an option for the UK. As we wouldn’t expect to eliminate all paperwork, we could both agree that our rules meet each other’s standard for phytosanitary protection. As most of our rules are still essentially the same as the EU, that wouldn’t require any major change, though we’d have to agree a greater level of coordination in relation to the development of new rules.” The report was written jointly by Professor Du, Dr Messenger and Dr Oleksandr Shepotylo, senior lecturer in economics, finance and entrepreneurship at the Centre for Business Prosperity, Aston Business School.

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Biography

Dr Shepotylo is an applied economist focusing on International Trade and Productivity. The central question of his research is: how do firms, industries, and countries grow by integrating into the global markets?

Dr Shepotylo advances research on the effect of trade policy and globalization on economic performance on three levels: looking at firms within a partial equilibrium model of an industry, analyzing bilateral trade flows within a general equilibrium model, and studying global spatial spillovers.

Areas of Expertise

Spatial Economics

Productivity

International Trade

HB Economic Theory

Trade Policy

Firms

Education

University of Maryland

PhD

Economics

2006

New Economic School

Economics

2000

Moscow Power Engineering University

Electrical Engineering

1994

Affiliations

Royal Economic Society
American Economic Association

Media Appearances

Brexit: UK services are losing out to EU rivals – but Asia could be big winner

The Conversation online

2021-07-28

It seems to confirm that the UK’s services offering has been made less competitive by the EU-UK Trade and Cooperation Agreement hardly covering such business. This has left EU members free to decide whether to allow different UK providers into their markets. But as we shall see, other services exporting countries outside the EU may also benefit as a result.

More than 40% of British exports have disappeared from European shelves since Brexit

The Independent online

2022-11-29

More than 40 per cent of British products previously exported to the EU have disappeared from European shelves since Brexit, new figures show.

Trade economists trying to assess the effects of Brexit warned in research published on Monday that new bureaucracy was putting off exporters.

China-US trade talks cancelled: why negotiations will still happen eventually

The Conversation online

2020-08-14

Senior trade negotiators from the US and China had been due to have a virtual call on August 15 to check the progress of the “phase one” deal reached by the two nations in January, aimed at overcoming the trade war that has dragged on for the past several years. But it has since been announced that the talks have been postponed, with no new date set. The two sides cited scheduling conflicts and the need to allow China more time to make good on its commitments under the deal.

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Articles

UK trade in the time of COVID‐19: A review

The World Economy

2022

This paper offers a detailed review of the UK’s trade performance during the COVID-19 crisis and reflects on how this may be revived. During 2020, UK goods exports contracted more sharply than those of its international peers. Statistics suggest that UK had a deeper decline and slower recovery than Germany, Italy, Spain and the US. Further, the trends from 2017 to 2019 show a weakening in the UK’s global competitiveness, suggesting a more persistent development against the backdrop of productivity slowdown and Brexit uncertainty. We analyse the confluence of internal and external factors that impact on UK trade and emphasise the importance of boosting productivity in the recovery from the COVID crisis and Brexit.

Non‐tariff measures and productivity of Ukrainian food‐processing firms

Journal of Agricultural Economics

2022

Using detailed data on veterinary, ecological, sanitary, phytosanitary and mandatory certification measures, this paper studies the effect of non-tariff measures (NTMs) on firm productivity in the food-processing industry through forward and backward linkages. Using quantity and value of output at product level, we calculate and compare quantity- and revenue-based measures of total factor productivity (TFP). Exploiting the episode of NTM liberalisation in Ukraine in 2008–2012, we find that NTMs on intermediate inputs have a negative effect on quantity-based TFP. Other trade policy variables, including input tariffs and output NTMs also negatively influence productivity. The effect on the revenue-based TFP is weaker due to price and quality adjustments. Interacting changes in input NTMs with import intensity prior to trade liberalisation, we find that firms that used imported inputs more intensively tend to have lower long-run TFP growth.

Belt and road: The China dream?

China Economic Review

2021

This paper explores the impact of the Belt and Road Initiative (BRI), in terms of changes in trade costs on trade and consumer welfare in China, the EU, and the rest of the World. We employ a general equilibrium structural gravity approach and conduct a counterfactual analysis. Our key findings are as follows: (i) China and the EU are expected to make substantial gains from the BRI due to reductions in transport costs; (ii) signing and implementing a deep FTA between China and the EU is equivalent to transport cost reductions of 15–20%; (iii) the joint policy of the BRI and FTA is super-additive, magnifying the gains from the separate policies; and (iv) where transport cost reductions are 20% or more, the potential negative effect of the China-US trade war on China is more than compensated for by the BRI initiative. Our results provide evidence that the BRI has the potential to deliver significant welfare gains, particularly if combined with other trade integration schemes, and to counterbalance aggressive trade policies.