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EU Trade Policies: Benchmarking Protection in a General Equilibrium Framework

  • Antimiani, Alessandro
  • Salvatici, Luca

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 report, 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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File URL: http://purl.umn.edu/18856
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Paper provided by TRADEAG - Agricultural Trade Agreements in its series Working Papers with number 18856.

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Date of creation: 2005
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Handle: RePEc:ags:tragwp:18856
Contact details of provider: Web page: http://tradeag.vitamib.com/

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  1. Jean-Christophe Bureau & Luca Salvatici, 2005. "Agricultural trade restrictiveness in the European Union and the United States," The Institute for International Integration Studies Discussion Paper Series iiisdp059, IIIS.
  2. Davis, Graham A, 1998. "The Substitution Problem in the Theory of Effective Protection," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 307-20, May.
  3. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, 01.
  4. Anderson, James & Naya, Seiji, 1969. "Substitution and Two Concepts of Effective Rate of Protection," American Economic Review, American Economic Association, vol. 59(4), pages 607-12, Part I Se.
  5. Bach, Christian F. & Martin, Will, 2001. "Would the right tariff aggregator for policy analysis please stand up?," Journal of Policy Modeling, Elsevier, vol. 23(6), pages 621-635, August.
  6. Anderson, James E. & Neary, J. Peter, 1992. "A new approach to evaluating trade policy," Policy Research Working Paper Series 1022, The World Bank.
  7. 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 25471, International Association of Agricultural Economists.
  8. Anderson, J.E., 1998. "The Mercantilist Index of Trade Policy," Papers 98/13, College Dublin, Department of Political Economy-.
  9. Rose, Andrew K, 2002. "Do We Really Know that the WTO Increases Trade?," CEPR Discussion Papers 3538, C.E.P.R. Discussion Papers.
  10. Anderson, James E, 1970. "General Equilibrium and the Effective Rate of Protection," Journal of Political Economy, University of Chicago Press, vol. 78(4), pages 717-24, Part I, J.
  11. 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, vol. 5(02), pages 225-249, July.
  12. Anderson, James E., 1998. "Effective protection redux1," Journal of International Economics, Elsevier, vol. 44(1), pages 21-44, February.
  13. 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, vol. 10(2), pages 233-45, May.
  14. J. Bhagwati & T. N. Srinivasan, 1972. "The General Equilibrium Theory of Effective Protection and Resource Allocation," Working papers 91, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. 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.
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