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Deep Integration and Its Impacts on Nonmembers: EU Enlargement and East Asia

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Author Info

  • Hiro Lee

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan)

  • Dominique van der Mensbrugghe

    (The World Bank)

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    Abstract

    Ten countries-most completing their transition from socialist-based economies to market economies-became the EU members in 2004, two additional countries are slated to join the Union in 2007, and a few others are expected to become members at some future dates. Despite a relatively small economic size of the new member, acceding and candidate countries, this type of deep integration can have non-negligible effects on countries outside of the preferential zone as the reduction in barriers across partners leads to a re-orientation of trade. In this study, we evaluate the extent of trade adjustments and the economic impacts it will have on the East Asian economies using a dynamic computable general equilibrium (CGE) model. The overall macroeconomic effects on East Asia are small. There is some trade diversion, but there may be an opportunity to increase market penetration in some sectors of the expanding EU for which East Asia has a marked comparative advantage. This paper also assesses the relative importance of linking trade openness to productivity and lowering trade costs between the new member, acceding and candidate countries and the EU-15.

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    File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp184.pdf
    File Function: First version, 2006
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    Bibliographic Info

    Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 184.

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    Length: 27 pages
    Date of creation: Feb 2006
    Date of revision:
    Handle: RePEc:kob:dpaper:184

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    Keywords: EU enlargement; East Asia; CGE model;

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