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EU Trade Policies: Benchmarking Protection in a General Equilibrium Framework

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  • Antimiani, Alessandro
  • Salvatici, Luca

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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 respect, 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 University of Molise, Dept. EGSeI in its series Economics & Statistics Discussion Papers with number esdp07034.

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Length: 27 pages
Date of creation: 25 Apr 2007
Date of revision:
Handle: RePEc:mol:ecsdps:esdp07034

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Keywords: Protection; Commercial policy; GTAP model; International trade.;

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References

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  1. Jean-Christophe Bureau & Luca Salvatici, 2004. "Agricultural trade restrictiveness in the European Union and the United States," Working Papers, INRA, Economie Publique 2004/03, INRA, Economie Publique.
  2. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, 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, American Economic Association, vol. 59(4), pages 607-12, Part I Se.
  4. James E. Anderson & J. Peter Neary, 1998. "The Mercantilist Index of Trade Policy," Boston College Working Papers in Economics, Boston College Department of Economics 416, Boston College Department of Economics.
  5. Andrew K. Rose, 2002. "Do We Really Know that the WTO Increases Trade?," NBER Working Papers 9273, National Bureau of Economic Research, Inc.
  6. Anderson, James E., 1998. "Effective protection redux1," Journal of International Economics, Elsevier, Elsevier, vol. 44(1), pages 21-44, February.
  7. Anderson, James E & Neary, J Peter, 1992. "A New Approach to Evaluating Trade Policy," CEPR Discussion Papers, C.E.P.R. Discussion Papers 683, C.E.P.R. Discussion Papers.
  8. Bhagwati, Jagdish N. & Srinivasan, T. N., 1973. "The general equilibrium theory of effective protection and resource allocation," Journal of International Economics, Elsevier, Elsevier, vol. 3(3), pages 259-281, August.
  9. Bureau, Jean-Christophe & Jean, S Bastien & Matthews, Alan, 2006. "The consequences of agricultural trade liberalization for developing countries: distinguishing between genuine benefits and false hopes," World Trade Review, Cambridge University Press, Cambridge University Press, vol. 5(02), pages 225-249, July.
  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, 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, University of Chicago Press, vol. 78(4), pages 717-24, Part I, J.
  12. Davis, Graham A, 1998. "The Substitution Problem in the Theory of Effective Protection," Review of International Economics, Wiley Blackwell, Wiley Blackwell, vol. 6(2), pages 307-20, May.
  13. 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, International Association of Agricultural Economists 25471, International Association of Agricultural Economists.
  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. Bach, Christian F. & Martin, Will, 2001. "Would the right tariff aggregator for policy analysis please stand up?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 23(6), pages 621-635, August.
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Citations

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Cited by:
  1. Antimiani, Alessandro & Conforti, Piero & Salvatici, Luca, 2007. "Assessing Market Access: Do Developing Countries Really Get a Preferential Treatment?," Economics & Statistics Discussion Papers, University of Molise, Dept. EGSeI esdp07036, University of Molise, Dept. EGSeI.
  2. Cipollina, Maria & Salvatici, Luca, 2007. "EU and developing countries: an analysis of preferential margins on agricultural trade flows," Working Papers, TRADEAG - Agricultural Trade Agreements 7219, TRADEAG - Agricultural Trade Agreements.
  3. 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, Springer, vol. 144(2), pages 207-224, July.
  4. Joelle Latina & Roberta Piermartini & Michele Ruta, 2011. "Natural resources and non-cooperative trade policy," International Economics and Economic Policy, Springer, Springer, vol. 8(2), pages 177-196, June.

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