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Economic Impact of a Potential Free Trade Agreement (FTA) Between the European Union and the Commonwealth of Independent States

Author

Listed:
  • Joseph Francois

    () (Johannes Kepler University Linz)

  • Miriam Manchin

    () (University College London)

Abstract

We evaluate the effects of potential measures to liberalize trade between the EU and the CIS using a computable general equilibrium (CGE) model. We look at the CIS as an aggregate and we also present results for individual CIS countries. Our CGE model takes different underlying industry specific market structures and elasticities into account. Furthermore, the model incorporates estimated non-tariff trade barriers to trade in services. The results are compared to a baseline that incorporates recent developments in the trade policy environment, i.e. the phase out of ATC, enlargement of the EU and CIS accessions to the WTO. The analysis takes agricultural liberalization, liberalization in industrial tariffs, and liberalization in services trade as well as trade facilitation measures into account. While there is important heterogeneity in the impact of FTAs on individual countries, the results indicate that the CIS as a whole would experience a negative income effect if the FTA would be limited only to trade in goods. This is due to strong trade diversion effects. The CIS states have high tariffs, and these would remain against third countries under an FTA. This implies that the CIS would most likely to benefit from an FTA with the EU if it would incorporate deeper forms of integration not being limited to liberalization of tariffs in goods, or if it is accompanied by a general reduction in CIS tariffs against third countries.

Suggested Citation

  • Joseph Francois & Miriam Manchin, 2009. "Economic Impact of a Potential Free Trade Agreement (FTA) Between the European Union and the Commonwealth of Independent States," IIDE Discussion Papers 20090805, Institue for International and Development Economics.
  • Handle: RePEc:lnz:wpaper:20090805
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    References listed on IDEAS

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    Cited by:

    1. Miriam Frey & Zoryana Olekseyuk, 2011. "The EU-Ukraine trade liberalization: How much do the costs of tariff elimination matter?," Working Papers 308, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies), revised Feb 2013.
    2. Miriam Frey & Zoryana Olekseyuk, 2012. "The EU-Ukraine trade liberalization: How much do the costs of tariff elimination matter?," EcoMod2012 4362, EcoMod.
    3. Miriam Frey & Zoryana Olekseyuk, 2014. "A general equilibrium evaluation of the fiscal costs of trade liberalization in Ukraine," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(3), pages 505-540, August.
    4. Miriam Frey, 2016. "Income Inequality Effects of Ukraine’s Trade Liberalization with the EU. Are there 'two Ukraines'?," EcoMod2016 9664, EcoMod.

    More about this item

    Keywords

    CGE; EU-CIS Free Trade Area; Russia; Ukraine; CIS;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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