Looking at what would happen to the industry if Portugal were to leave the EU, Santos found that "a 25% increase in trade costs is expected to reduce innovation by half and productivity by 4% for an export-oriented industry composed of small companies, as in the Portuguese moulds industry." "The reason for this decline is the fall in market access and a very competitive environment. Since innovation is subject to large ‘sunk costs’, the reduced market access generates a reduction in the gains from innovation. This reduction is larger for industries in more competitive markets," the paper's summary argues. "Trade liberalisation allows the best firms to exploit the economies of scale and innovate," Santos writes in the paper.
Royal Economic Society paper on the impact of leaving a trading area - Business Insider
Over the past 10 days David Davis’s Brexit department has published seven so-called partnership papers: important documents covering a wide range of subjects, from customs and Northern Ireland to civil justice and, most recently, disputes mechanisms, including the role of the European Court of Justice. According to the introductory blurb inside each, these papers are all about forming a bespoke post-Brexit partnership with the EU. Yet, by intention or accident, they do something very different. Together they make a case for sticking with the existing partnership as it stands, or at least with its key arrangements, such as the single market and customs union.