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A Macroeconomic Model of CETA's Impact on Austria

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  • Fritz Breuss

Abstract

The Comprehensive Economic and Trade Agreement (CETA) between the European Union and Canada is the most ambitious (new generation) free trade agreement the EU has ever negotiated. It is a "mixed" agreement with EU and member countries competences. Most elements of the agreement for which the EU has "exclusive competence", including the chapter on tariffs and non-tariff barriers (the dismantling of all barriers to trade in goods and services and market access to foreign direct investment) can – after the European Parliament gave its consent on 15 February 2017 – be applied provisionally in spring 2017. With a specifically constructed macroeconomic trade and growth model for Austria, we simulate the impact of CETA on Austria. CETA will add 0.3 percent to Austria's real GDP in the medium run and will stimulate bilateral trade and FDI. Our model is a small prototype model and can easily be applied to other foreign trade agreements the EU is planning. A comparison shows that TTIP – which is "politically" dead now – would have the biggest impact (real GDP +1.7 percent).The almost finished negotiated EU-Japan foreign trade agreement would result in an increase of Austria's real GDP by 0.4 percent in the medium run.

Suggested Citation

  • Fritz Breuss, 2017. "A Macroeconomic Model of CETA's Impact on Austria," WIFO Working Papers 532, WIFO.
    • Handle: RePEc:wfo:wpaper:y:2017:i:532
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    References listed on IDEAS

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    1. Joseph Francois & Olga Pindyuk, 2013. "Modeling the Effects of Free Trade Agreements between the EU and Canada, USA and Moldova/Georgia/Armenia on the Austrian Economy: Model Simulations for Trade Policy Analysis," FIW Research Reports series IV-003, FIW.
    2. Rahel Aichele & Gabriel Felbermayr, 2014. "CETA: What Are the Effects on Germany of the Free Trade Agreement between the EU and Canada?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 67(24), pages 20-30, December.
    3. Gabriel Felbermayr & Fukunari Kimura & Toshihiro Okubo & Marina Steininger & Erdal Yalcin, 2017. "On the economics of an EU-Japan Free Trade Agreement," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 86, October.
    4. Pierre Kohler & Servaas Storm, 2016. "CETA without Blinders: How Cutting “Trade Costs and More” Will Cause Unemployment, Inequality, and Welfare Losses," International Journal of Political Economy, Taylor & Francis Journals, vol. 45(4), pages 257-293, October.
    5. Pierre Kohler & Servaas Storm, 2016. "CETA Without Blinders: How Cutting ‘Trade Costs and More’ Will Cause Unemployment, Inequality and Welfare Losses," GDAE Working Papers 16-03, GDAE, Tufts University.
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    Keywords

    Free trade agreement; European Union; open-economy macroeconomics;
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