A Brexit would have a “severe” impact on the Dutch economy, because it is linked to the U.K. more than to the rest of the EU, according to a report by a Dutch public think-tank published Thursday.
In total, the Netherlands stands to lose up to €10 billion if Brits vote to leave the EU at the June 23 referendum, or 1.2 percent of the Dutch GDP by 2030, said the Netherlands Bureau for Economic Policy Analysis (CPB).
Losses for the Netherlands would be highest if the U.K. and the EU do not strike a free trade agreement, but decide to trade within the frame of the World Trade Organization, according to the report.
“When we also account for the potential impact of trade‐induced innovation, the costs for the Netherlands, in the WTO scenario, will increase to 2% of GDP or around 1000 euros per person,” the report states.
Other countries that will suffer highest GDP losses include Ireland, Belgium and Luxembourg, the report says: “There is a relatively large amount of trade between these countries and the UK, and they will be hit the hardest by the trade restrictions that would follow a Brexit.”
Since the Dutch economy is deeply intertwined with the British one, the Netherlands would have an interest in negotiating a free trade agreement with the U.K. to reduce trade barriers and lower the cost of Britain’s break up with the Union.
On the other end, countries in Southern and Eastern Europe will have less interest in safeguarding trade with the U.K., because their economies are less dependent on exchanges with Britain. They could fear that striking a separate trade agreement with Britain would set a precedent for other countries that would want to “pick and choose from the different benefits and costs of EU membership.”
“Compared with the Netherlands, Ireland or Belgium, these countries would benefit the least from a new free trade agreement,” the report states, adding: “It is conceivable that countries with a large economic interest in such a new agreement with the U.K. will not be able to muster the support of all EU member states.”
But should the 27 remaining EU members set high trade barriers to punish the U.K. for leaving the EU and warn others not to follow Britain’s departure, the Dutch economy would be among the first to suffer, according to the report.