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EU Integration and Trade: a Look from the Outside of the EU Eastern Border?

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  • Oleksandr Shepotylo

    () (Kyiv School of Economics and Kyiv Economics Institute)

Abstract

This paper develops a methodology for trade policy analysis of costs and benefits of alternative regional integration scenarios, based on the disaggregated gravity equation, and applies it to calculate the impact of the EU enlargement on integration strategies of non-member countries. In particular, the paper measures the impact of the 2004 EU enlargement from the standpoint of Ukraine – a country that has been lost in transition; Ukraine moves away from CIS, but does not get closer to EU. This angle allows estimating the costs of non-integration that occurred due to trade and investment diversion, and forgone opportunity to carry our structural changes in the Ukrainian economy. According to the results, EU accession would have had a small positive effect on total export volumes but would have dramatically changed the composition of Ukrainian exports by almost doubling exports of manufactured goods by 2007. The costs of non-integration accumulate towards the end of the investigated period. Projecting the results into the future clearly indicates that the benefits of EU accession for Ukraine would have been unambiguously positive and would overweight benefits of CIS integration.

Suggested Citation

  • Oleksandr Shepotylo, 2009. "EU Integration and Trade: a Look from the Outside of the EU Eastern Border?," Discussion Papers 22, Kyiv School of Economics.
  • Handle: RePEc:kse:dpaper:22
    Note: Under review in the Economics of Transition
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    File URL: http://repec.kse.org.ua/pdf/KSE_dp22.pdf
    File Function: November 2009
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    References listed on IDEAS

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    More about this item

    Keywords

    Gravity model; EU enlargement; Ukraine; CIS; heterogeneous firms; trade policy;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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