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EU Trade Policies: Benchmarking Protection in a General Equilibrium Framework

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  • Antimiani, Alessandro
  • Salvatici, Luca

Abstract

This paper deals with the EU's trade policy with two objectives: on the one hand, we study the performance of EU's preferential agreements in granting their partners improved market access; on the other hand, we assess the extent to which domestic sectors are effectively protected. As far as the first objective is concerned, we construct bilateral indicators of protection based on the applied tariffs faced by each exporter. In order to do this, an index of trade policy restrictiveness is computed, using the Mercantilistic Trade Restrictiveness Index as the tariff aggregator. We also analyze the protection granted to each sector by the existing tariff structure. In this report, we compute effective rates of protection that overcome the well-known theoretical shortcomings of the traditional definition (Output Effective Rate of Protection). The analysis is based on a comparative static applied general equilibrium model (Global Trade Analysis Project) and on the most recent version (release 6) of the related database. Results are obtained with reference to the situation existing in 2001, but the assessment of protection is carried out for the enlarged EU. Overall, it appears that notwithstanding the rhetoric about preferential access, several developing countries are the ones facing the highest hurdles in getting into the EU markets. Both bilateral protection and effective protection rates are broadly consistent with the evolution of the WTO negotiations: the strongest demands from developing countries in terms of market access in the EU have less to do with the overall applied MFN tariffs on industrial products than the reduction of distortions affecting trade in agriculture.

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Bibliographic Info

Paper provided by TRADEAG - Agricultural Trade Agreements in its series Working Papers with number 18856.

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Date of creation: 2005
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Handle: RePEc:ags:tragwp:18856

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Web page: http://tradeag.vitamib.com/

Related research

Keywords: Protection; Commercial policy; GTAP model; International trade; International Relations/Trade; F13; Q17; F17;

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  1. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, 05.
  2. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, 01.
  3. Anderson, James & Naya, Seiji, 1969. "Substitution and Two Concepts of Effective Rate of Protection," American Economic Review, American Economic Association, vol. 59(4), pages 607-12, Part I Se.
  4. Bach, Christian F. & Martin, Will, 2001. "Would the right tariff aggregator for policy analysis please stand up?," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 621-635, August.
  5. Jean-Christophe Bureau & Luca Salvatici, 2005. "Agricultural trade restrictiveness in the European Union and the United States," The Institute for International Integration Studies Discussion Paper Series iiisdp059, IIIS.
  6. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, vol. 94(1), pages 98-114, March.
  7. Bhagwati, Jagdish N. & Srinivasan, T. N., 1973. "The general equilibrium theory of effective protection and resource allocation," Journal of International Economics, Elsevier, vol. 3(3), pages 259-281, August.
  8. Anderson, James E., 1998. "Effective protection redux1," Journal of International Economics, Elsevier, vol. 44(1), pages 21-44, February.
  9. Bureau, Jean-Christophe & Jean, Sebastien & Matthews, Alan, 2006. "The Consequences of Agricultural Trade Liberalization for Developing Countries," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25471, International Association of Agricultural Economists.
  10. Wilfred J. Ethier, 1977. "The Theory of Effective Protection in General Equilibrium: Effective-Rate Analogues of Nominal Rates," Canadian Journal of Economics, Canadian Economics Association, vol. 10(2), pages 233-45, May.
  11. Anderson, James E, 1970. "General Equilibrium and the Effective Rate of Protection," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 717-24, Part I, J.
  12. Anderson, James E & Neary, J Peter, 1992. "A New Approach to Evaluating Trade Policy," CEPR Discussion Papers 683, C.E.P.R. Discussion Papers.
  13. Jean-Christophe Bureau & S├ębastien Jean, Alan Matthews, 2005. "The consequences of agricultural trade liberalization for developing countries: distinguishing between genuine benefits and false hopes," The Institute for International Integration Studies Discussion Paper Series iiisdp073, IIIS.
  14. Manchin, Miriam, 2005. "Preference utilization and tariff reduction in European Union imports from African, Caribbean, and Pacific countries," Policy Research Working Paper Series 3688, The World Bank.
  15. Davis, Graham A, 1998. "The Substitution Problem in the Theory of Effective Protection," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 307-20, May.
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Cited by:
  1. Antimiani, Alessandro & Conforti, Piero & Salvatici, Luca, 2006. "Assessing Market Access: Do Developing Countries Really Get a Preferential Treatment?," Working Papers 18870, TRADEAG - Agricultural Trade Agreements.
  2. Joelle Latina & Roberta Piermartini & Michele Ruta, 2011. "Natural resources and non-cooperative trade policy," International Economics and Economic Policy, Springer, vol. 8(2), pages 177-196, June.
  3. Cipollina, Maria & Salvatici, Luca, 2007. "EU and developing countries: an analysis of preferential margins on agricultural trade flows," Working Papers 7219, TRADEAG - Agricultural Trade Agreements.
  4. Alessandro Antimiani & Piero Conforti & Luca Salvatici, 2008. "Measuring Restrictiveness of Bilateral Trade Policies: A Comparison between Developed and Developing Countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 144(2), pages 207-224, July.

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