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The “deeper” and the “wider” EU strategies of trade integration.An empirical evaluation of EU Common Commercial Policy effects

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Author Info
Roberta De Santis (ISAE - Institute for Studies and Economic Analyses)
Claudio Vicarelli (ISAE - Institute for Studies and Economic Analyses)

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Abstract

Since the post war period, the EU Common Commercial Policy (CCP) has moved in two directions mainly through of Preferential Trade agreements (PTAs): a “deeper” (internal) trade integration process intended to reinforce trade relations among European countries (i.e. Custom Union, Single Market, European Monetary Union, Enlargement Process), and a “wider” (external) integration process intended to reinforce trade relations with third countries.Surprisingly, there are very few empirical studies in the literature which specifically quantify the effects of “all” EU PTAs on the European countries’ trade flows. This paper seeks to fill this gap by conducting an empirical investigation on whether and how the CCP has had a significant impact on European countries’ imports. It adopts an extended version of the gravity model. In line with recent studies, it also controls for heterogeneity and bilateral trends, and includes a set of variables to proxy for the “multilateral resistance index”. According to our results, the EU “free trade area” has been a successful experiment in trade liberalisation. However, the positive and significant coefficient of PTAs signed by EU with third countries may somehow have limited the occurrence of trade diversion effects. Indeed the coefficient of trade diversion dummy is small and significant.

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Publisher Info
Paper provided by ISAE - Institute for Studies and Economic Analyses - (Rome, ITALY) in its series ISAE Working Papers with number 79.

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Length: 30 pages
Date of creation: Mar 2007
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Handle: RePEc:isa:wpaper:79

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Related research
Keywords: trade flows; regional integration; gravity model; panel data;

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F15 - International Economics - - Trade - - - Economic Integration
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data

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References listed on IDEAS
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  1. Greenaway, David & Milner, Chris, 2002. "Regionalism and Gravity," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 574-85, December. [Downloadable!] (restricted)
  2. Luca De Benedictis & Roberta De Santis & Claudio Vicarelli, 2005. "Hub-and-Spoke or else? Free trade agreements in the 'enlarged' European Union," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 245-260, December. [Downloadable!]
    Other versions:
  3. Ritschl, Albrecht & Wolf, Nikolaus, 2003. "Endogeneity of Currency Areas and Trade Blocs: Evidence from the Inter-war Period," CEPR Discussion Papers 4112, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Soloaga, Isidro & Winters, L. Alan, 1999. "Regionalism in the Nineties: What Effect on Trade?," CEPR Discussion Papers 2183, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  5. Hausman, Jerry A. & Taylor, William E., 1981. "Panel data and unobservable individual effects," Journal of Econometrics, Elsevier, vol. 16(1), pages 155-155, May. [Downloadable!] (restricted)
  6. Hausman, Jerry A & Taylor, William E, 1981. "Panel Data and Unobservable Individual Effects," Econometrica, Econometric Society, vol. 49(6), pages 1377-98, November. [Downloadable!] (restricted)
  7. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc. [Downloadable!]
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  8. Peter Egger, 2002. "An Econometric View on the Estimation of Gravity Models and the Calculation of Trade Potentials," The World Economy, Blackwell Publishing, vol. 25(2), pages 297-312, 02. [Downloadable!] (restricted)
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