Quantifying non-tariff barriers: Brexit, input sourcing and firm performance

How successful is European integration in removing non-tariff trade barriers? We study how Brexit affected UK firms' input sourcing and sales. The post-Brexit Trade and Cooperation Agreement (TCA) reduced sales and input expenditure at firms with higher pre-Brexit EU trade exposure. It also caused firms to switch towards domestic and non-EU inputs. Through the lens of a trade model, the switch in input sourcing implies the TCA increased trade costs on EU imports by 21% and raised unit production costs by 3:1% for the average UK importer. Our results indicate EU membership secures large reductions in trade costs.