Rodrik, Piketty, Milanovic and European federalism

The costs and benefits of secession for a relatively rich region like Catalonia cannot be disentangled from the the issue of European federalism. By such federalism, I mean democratic (and not technocratic) common decisions applied to a selection of key policies for countries in the Eurozone, along the lines of the proposal for a budget commission by Thomas Piketty. That would imply the de facto elimination of national borders on these issues.
An article by the economist Rodriguez Mora and co-authors illustrates the ‘border effect’ in international trade. If Catalonia were to secede and a new border was created, exchange with the rest of Spain would decline to a level similar to that between Portugal and Spain. The article calculates that the cost of this decline in trade would reach 9 per cent of GDP, which is more than the fiscal deficit that Catalonia would save relative to the rest of Spain. The authors also find that the border effect is in general substantial between pairs of European countries, even in the context of the single market and the currency union.
Critics have said that the reduction in trade between Catalonia and the rest of Spain would take time, and even in the long run it is hard to imagine that Spaniards would lose the ability to interact with Catalans (who speak Spanish and do not have any personal reason not to trade with Spaniards), and that any decline would be compensated for by increased trade with other (presumably European) countries.
But trade is not something that just happens without institutional pre-conditions. If the gradual reduction in trade with the rest of Spain is compensated for by an increase in trade with the rest of the EU, it would mean (unless one thinks that trade does not need supporting mechanisms) that relations with the rest of the EU would have to include institutions that facilitate the volume of trade that Catalonia has built with Spain over centuries.
(See the whole article here, in EUROPP)