EU Preferential Trade Arrangements

Text IV.

Econometric studies using the gravity model.

Text III.

The gravity model provides a useful framework for assessing the impact of policy variables on the behavior of bilateral flows between countries. Its name is derived from its passing similarity to Newtonian physics, in that flows between two countries increase in proportion to their economic mass (as measured by GDP) and are constrained by the friction between them (due to trade and other costs, which is proxied by distance). It is also common to use so-called dummy variables to capture geographical effects (such as whether the two countries share a border, or if a country has access to the sea), cultural and historical similarities (such as if two countries share a language or were linked by past colonial ties), and regional integration (such as belonging to a free trade agreement or sharing a common currency).

A disadvantage of using dummy variables is that they may capture the impact of a range of other effects that occurred during the same time period as the RTA (Regional Trade Agreements). For example, most applications do not distinguish the extent of multilateral trade liberalization. Ideally, specific trade policy variables would be included in the estimating equations, such the level of multilateral and preferential tariffs. However, the complexity of preferential trade arrangements precludes such an approach. A notable exception is the study done by Estevadeordal and Robertson (2004), who included a measure of preferential tariffs in their analysis of the impacts of RTAs on regional trade in Latin America.

Although widely used because of its empirical success, the gravity model had lacked rigorous theoretical underpinnings and was long criticized for being an ad hoc model. Recent theoretically grounded gravity equations are derived from models with strong constraints on preferences and technology, which undermines a straightforward interpretation of some of the estimated coefficients.

Another weakness of many applications of the gravity model is the proxying of trade costs by distance, and the implicit assumption that cargoes traveling 1,000 miles in Africa face exactly the same trade costs as similar cargoes traveling 1000 miles in, say, Europe.

During the 1990s, the EU was an active sponsor of bilateral arrangements with individual countries and groups of countries. Prior to the recent accession of 10 new members, the EU had bilateral or regional agreements with 111 countries. Trade agreements became an integral instrument of European foreign policy, particularly in the aftermath of the collapse of the Soviet Union.

Some types of agreements were intended to stabilize the region after 1989. Europe Agreements were intended to prepare bordering Eastern European countries for eventual accession into the EU. They involved bilateral agreements between each other and with the EU to reduce tariffs, develop uniform rules of origin, EU-consistent regulatory approaches to services, and common treatment of standards as well as transition rules in sectors such as agriculture. These efforts culminated with the full admission of 10 new countries into the EU in 2004 – which is why the number of RTAs registered with the WTO fell for the first time ever.

Euro-Mediterranean Agreements were intended to build bilateral trade relations between neighbors, with the objective of forming a NAFTA-like free trade area by 2010. To date, bilateral agreements have been signed with Tunisia (1995), Israel (1995), Morocco (1996), Jordan (1997), the Palestinian Authority (1997), Algeria (2001), Egypt (2001), and Lebanon (2002).

Partnership and Cooperation Agreements (PCAs) with the Western Balkans, Russia, and the CIS were designed to help promote stability on the border of the EU, and in the case of Russia, expand trade. The EU has been providing technical assistance to these governments to help implement the institutional reforms that are part of the PCAs. Two new agreements have been added to this list since 2000.

Free Trade Agreements with South Africa (2000), Mexico (2000), and Chile (2003) are designed to open markets and secure trade. Agreements with the Gulf Cooperation Council (GCC) and the Common Market for the South (MERCOSUR) are under active negotiation. These embody free trade provisions for a range of products as well as provisions to liberalize at least some services.

The EU agreements govern services trade in addition to trade in goods. The agreements with Mexico and Chile provide for specific liberalization commitments in the financial sector over and above those included in GATS, with the Chilean agreement adding telecommunications and maritime services. The South African agreement alludes to possible services liberalization, but without commitment. The EU agreements differ in important respects from the U.S. agreements in that they are generally less comprehensive, provide less market access in agriculture, and do not provide for investor-state dispute resolution.

Дата добавления: 2017-01-14