Informal barriers, agricultural trade, and the Euro Area

The EU enlargement revives the debate around the participation to the EMU. The accession to a monetary union can affect trade through several channels. In this paper we study the link between the membership to a monetary union and informal barriers to trade. The question we ask is whether the participation to the Euro Area reduces the impact of informal barriers on new members' agricultural trade. In particular, we compare institutional and informational costs on Greek agricultural imports before and after the introduction of the Euro using a gravity model. A first result we find is that the country's accession to the Euro zone has reduced the effect of information flows on its imports of agricultural products from EMU partners. Lower trade costs due to the use of a common currency compensate for the imperfect and incomplete information on foreign markets and partners available to economic agents. Secondly, institutional aspects have become a less important determinant of Greek imports from all countries. Still, this outcome concerns first of all non-EMU suppliers, who – despite their great diversity – are viewed by Greek partners as more homogeneous in terms of institutions' quality after 2001.