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Hub-and-Spoke or else? Free trade agreements in the 'enlarged' European Union

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Author Info

  • Luca De Benedictis
  • Roberta De Santis
  • Claudio Vicarelli

Abstract

The object of this paper is to estimate if and how the Central European Free Trade Agreement (CEFTA) and the Baltic Free Trade Agreement (BFTA) exerted a significant impact on intra-European trade, effectively reducing the influence of the European Association Agreements (EAs) in shaping the European trade structure as a hub-and-spoke system - with the EU15 being the hub and the CEECs the spoke. This paper analyses bilateral trade flows between eight CEECs and EU-23. We estimate a gravity equation using a system GMM dynamic panel data approach. Results support the assumptions that gravity forces and "persistence effects" matter. With respect to the effect of free trade agreements, evidence is found that Free trade agreements between CEECs matter: There is evidence that the presence of intra-periphery agreements helped expand intra-periphery trade and limited the emergence of a "hub-and-spoke" relationship between CEECs and EU. This results have important policy implications for the trade strategy of "future" EU members of the Southeastern European Countries as well as of the Southern Mediterranean Countries. According to the empirical results, these countries should move towards a regional free-trade area as exemplified by the CEFTA and the BFTA to avoid "hub-and-spoke" effects.

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Bibliographic Info

Article provided by Cattaneo University (LIUC) in its journal The European Journal of Comparative Economics.

Volume (Year): 2 (2005)
Issue (Month): 2 (December)
Pages: 245-260

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Handle: RePEc:liu:liucej:v:2:y:2005:i:2:p:245-260

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Keywords: Trade flows; regional integration; EU eastward enlargement; gravity model; dynamic panel data;

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References

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Citations

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Cited by:
  1. Cecília Hornok, 2012. "Gravity or Dummies? The Limits of Identification in Gravity Estimations," CEU Working Papers 2012_11, Department of Economics, Central European University, revised 20 May 2012.
  2. Johan Fourie & Maria Santana-Gallego, 2011. "The Determinants of African Tourism," Working Papers 260, Economic Research Southern Africa.
  3. Jérôme Trotignon, 2009. "L'intégration régionale favorise-t-elle la multilatéralisation des échanges ?," Post-Print halshs-00335633, HAL.
  4. Cristobal, Adolfo, 2007. "Trade and migration: a U-shaped transition in Eastern Europe," MPRA Paper 3446, University Library of Munich, Germany.
  5. Andrzej Cieślik & Jan Hagemejer, 2011. "The Effectiveness of Preferential Trade Liberalization in Central and Eastern Europe," Working Papers 2011-21, Faculty of Economic Sciences, University of Warsaw.
  6. Roberta De Santis, 2012. "Impact of Environmental Regulations on Trade in the Main EU Countries: Conflict or Synergy?," The World Economy, Wiley Blackwell, vol. 35(7), pages 799-815, 07.
  7. Vicarelli, Claudio & De Santis, Roberta & De Nardis, Sergio, 2008. "The Single Currency's Effects on Eurozone Sectoral Trade: Winners and Losers?," Economics Discussion Papers 2008-1, Kiel Institute for the World Economy.
  8. Martínez-Zarzoso, Inmaculada & Nowak-Lehmann D., Felicitas & Klasen, Stephan, 2010. "The Economic Benefits of giving Aid in terms of Donors Exports," Proceedings of the German Development Economics Conference, Hannover 2010 28, Verein für Socialpolitik, Research Committee Development Economics.
  9. Deltas, George & Desmet, Klaus & Facchini, Giovanni, 2006. "Hub-and-Spoke Free Trade Areas," CEPR Discussion Papers 5960, C.E.P.R. Discussion Papers.
  10. Cecília Hornok, 2010. "Trade-Enhancing EU Enlargement and the Resurgence of East-East Trade," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 79–94, August.
  11. Julia Spies & Helena Marques, 2006. "Trade Effects of the Europe Agreements," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 274/2006, Department of Economics, University of Hohenheim, Germany.
  12. Trotignon, Jérôme, 2010. "Does Regional Integration Promote the Multilateralization of Trade Flows?: a Gravity Model Using Panel Data," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 223-251.
  13. Roberta De Santis & Claudio Vicarelli, 2007. "The “deeper” and the “wider” EU strategies of trade integration.An empirical evaluation of EU Common Commercial Policy effects," ISAE Working Papers 79, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  14. Hur, Jung & Alba, Joseph D. & Park, Donghyun, 2010. "Effects of Hub-and-Spoke Free Trade Agreements on Trade: A Panel Data Analysis," World Development, Elsevier, vol. 38(8), pages 1105-1113, August.
  15. Cardamone, Paola, 2007. "A Survey of the Assessments of the Effectiveness of Preferential Trade Agreements using Gravity Models," Economia Internazionale / International Economics, Camera di Commercio di Genova, vol. 60(4), pages 421-473.

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