The resilience of the EU single market

The “Coronavirus pandemic” has challenged both domestic economies and data show a significant decrease in the value of traded goods and services. The pandemic influences countries’ trade policies. For instance, more open and pro-integration trade policies are contrasted with calls for re-shoring and export restrictions on certain goods. The objective of this paper is to provide a quantitative economic assessment of the value of the EU single market during a trade crisis using CGE simulations. Specifically, we aim to quantify the benefits of the Single Market in terms of adaptation and resilience of the EU economy. We will use the latest available GTAP database version, the 10a. Since such database refers to 2014, we will update it to 2020 with macro shocks (GDP, Population, and labour force) and EU trade policies (new FTAs entered into force between 2014 and 2020). To assess the contribution to adaptation, a trade shock is applied worldwide to all countries of the world with respect to two different baselines: a “business as usual” baseline and a baseline under which the EU’s single market collapses into a much less integrated trade relationship. These simulations are performed with the static GTAP-MRIO model. We want to evaluate the value of the EU single market in reducing the impact of a possible trade crisis. In other words, we use the model to compare the actual EU market with a counterfactual and significantly less integrated scenario. These two baseline trade regimes are exposed to a global shock to global supply chains leading to a significant increase in the cost of trading across regions. Results are expected to show the extent to which the contraction of GDP and renationalisation of GVCs would have been (more) harmful in the absence of the Single Market.