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Hub-and-Spoke or else? Free trade agreements in the “enlarged” European Union

  • Luca De Benedictis

    (DIEF – Dipartimento di Istituzioni Economiche e Finanziarie, University of Macerata, Italy)

  • Roberta De Santis

    (ISAE - Institute for Studies and Economic Analyses)

  • Claudio Vicarelli

    (ISAE - Institute for Studies and Economic Analyses)

The object of this paper is to estimate the effect of European Union eastwards enlargement process on trade patterns in the Union. In particular, we intend to investigate whether and how the EU Free trade agreements with CEECs have exerted a different impact on centre-periphery and intra-periphery trade relationships. This paper analyses bilateral trade flows between eight CEECs and EU- 23. We estimate a gravity equation using a “system GMM” dynamic panel data approach. Results support the assumptions that gravity forces and “persistence effects” matter. With respect to the effect of free trade agreements, evidence is found that Free trade agreements between EU countries and CEECs matter. However there is also evidence that the presence of intra-periphery agreements helped expand intra-periphery trade and limit the emergence of a “hub-andspoke” relationship between CEECs and EU. This results have important policy implications for the trade strategy of “future” EU members of the Southeastern European Countries as well as of the Southern Mediterranean Countries. According to the empirical results these countries should move towards a regional free-trade area as exemplified by the CEFTA and the BAFTA to avoid “hub-and-spoke” effects.

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Paper provided by ISTAT - Italian National Institute of Statistics - (Rome, ITALY) in its series ISAE Working Papers with number 52.

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Length: 30 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:isa:wpaper:52
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