European perspectives on NTM and tariff liberalization

The individual Members of the European Union trade inside a web of preferential trade agreements. At the core of these agreements is the EU itself. More recently, the EU has been engaged in negotiations with countries as far ranging as Central America, South East Asia, East Asia, and North America. The ambition and scope of the more recent set of preferential negotiations is not limited to tariffs. The stated goal of the EU is to ease access for investment, reduce tariffs, reduce trade costs linked to regulations, and reduce policy uncertainty. In other words, while tariffs are part of the mix, the interests of the EU also include investment regulation (which impacts market access for services), regulatory barriers to trade, and commitments to policy stability as it impacts on EU firms. The existence of these agreements, and especially the multi-pronged effort of the EU to negotiate more agreements, means that the impact of the agreements is a collective affair. In particular, with the prospective combination of recent and possible new agreements with a range of middle-and high-income G20 Members, the impact of these agreements collectively may be different from impact of comparable individual agreements. This paper compares and contrasts the impact of a range of new preferential trade agreements (PTAs) when viewed individually or collectively. This is done with a computable general equilibrium model of the world economy. The collective impact is far greater than the sum of the parts. This follows from induced investment effects. The investment impacts lead to positive gains for third countries. The comparison of NTMs and tariffs also highlights the potential importance of regulatory and administrative barriers to trade. Overall, estimated impact from reduction in NTMs is much larger than reduction in tariffs. This may explain the shift in emphasis in recent agreements from tariffs to deeper modes of integration, as these are more likely to address the impact of non-tariff measures on European exporters.