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If Britain leaves the free trade market why would they lose comparative advantage in services? can...

If Britain leaves the free trade market why would they lose comparative advantage in services? can you use examples/diagrams please

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Answer #1

Currently Britain can export and import to various other members of European Union without any import duties or taxes. Almost 44% off the exports done by United Kingdom are diverted towards European Union members. London is considered to be the financial hub of the European Union and most of the financial services hover around it. If Brexit happens then it would imply that Britain have to leave European Union and would no longer be trading with the members of European Union freely. It will therefore lose its comparative advantage in services. According to an estimate for every one percent loss in the exports to European Union members there will be a half percentage loss in the GDP. It is in this sense that if Britain decides to leave European Union then its own GDP growth rate when fall even when its currency is depreciating and it may be able to sign new deals with other countries.

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