Level Playing Fields and Rebalancing: A Comment

The most contentious and problematic issue negotiated in the Brexit deal was the so-called “level playing field”, which was to be preserved by the parties through “rebalancing” provisions. This note takes up the issue of the meaning of a “level playing field” in light of fundamental features of international trade: firm-level heterogeneity within industries; economic geography; policy heterogeneity in taxation and the provision of public goods; the principle of comparative advantage; and fluctuating national currencies. Based on this, it comments on the meaning in economic terms and practicality of “rebalancing”.