Reciprocal trade agreements in gravity models: a meta-analysis

Over the time a large number of reciprocal preferential trade agreements (RTAs) have been concluded among countries. Recently many studies have used gravity equations in order to estimate the effect of RTAs on trade flows between partners. These studies report very different estimates, since they differ greatly in data sets, sample sizes, and independent variables used in the analysis. So, what is the “true” impact of RTAs? This paper combines, explains, and summarizes a large number of results (1460 estimates included in 75 papers), using a meta-analysis (MA) approach. Notwithstanding quite an high variability, studies consistently find a positive RTAs impact on bilateral trade: the hypothesis that there is no effect of trade agreements on trade is easily and robustly rejected at standard significance levels. We provide pooled estimates, obtained from fixed and random effects models, of the increase in bilateral trade due to RTAs. Finally, information collected on each estimate allows us to test the sensitivity of the results to alternative specifications and differences in the control variables considered.Free Trade Agreements; Gravity equation; Meta-regression analysis; Publication bias.

EU Trade Policies: Benchmarking Protection in a General Equilibrium Framework

This paper deals with the EU’s trade policy with two objectives: on the one hand, we study the performance of EU's preferential agreements in granting their partners improved market access; on the other hand, we assess the extent to which domestic sectors are effectively protected. As far as the first objective is concerned, we construct bilateral indicators of protection based on the applied tariffs faced by each exporter. In order to do this, an index of trade policy restrictiveness is computed, using the Mercantilistic Trade Restrictiveness Index as the tariff aggregator. We also analyze the protection granted to each sector by the existing tariff structure. In this respect, we compute effective rates of protection that overcome the well-known theoretical shortcomings of the traditional definition (Output Effective Rate of Protection). The analysis is based on a comparative static applied general equilibrium model (Global Trade Analysis Project) and on the most recent version (release 6) of the related database. Results are obtained with reference to the situation existing in 2001, but the assessment of protection is carried out for the enlarged EU. Overall, it appears that notwithstanding the rhetoric about preferential access, several developing countries are the ones facing the highest hurdles in getting into the EU markets. Both bilateral protection and effective protection rates are broadly consistent with the evolution of the WTO negotiations: the strongest demands from developing countries in terms of market access in the EU have less to do with the overall applied MFN tariffs on industrial products than the reduction of distortions affecting trade in agriculture.Protection, Commercial policy, GTAP model, International trade.

Agricultural trade restrictiveness in the European Union and the United States

The paper provides a summary measure of the Uruguay Round tariff reduction commitments in the European Union and the United States, using the Mercantilistic Trade Restrictiveness Index (MTRI) as the tariff aggregator. We compute the index for agricultural commodity aggregates assuming a specific (Constant Elasticity of Substitution) functional form for import demand. The levels of the MTRI under the actual commitments of the Uruguay Round are computed and compared with two hypothetical cases, the Swiss Formula leading to a 36 percent average decrease in tariffs and a uniform 36 percent reduction of each tariff. This makes it possible to infer how reducing tariff dispersion would help improve market access in future trade agreements. Classification-international agricultural trade; protection, tariffs and tariff factors

WTO Negotiations on Market Access in Agriculture: A Comparison of Alternative Tariff Cut Scenarios for the EU and the US

This paper provides a summary measure of the possible new commitments in the area of market access undertaken by the European Union and the United States, using the Trade Restrictiveness Index (TRI) as the tariff aggregator. Indicators such as the TRI, based on welfare theory, integrate economic behavioural assumptions within a balance of trade framework. We take the 2000 bound tariffs as the starting point and attempt to assess how much liberalisation in agriculture could be achieved in the European Union and the United States as a result of the present negotiations. We compute the index for agricultural commodity aggregates assuming a specific (Constant Elasticity of Substitution) functional form for import demand. The present levels of the TRI under the actual commitments of the Uruguay Round are computed and compared with three hypothetical cases: a repetition of the same set of commitments of the Uruguay Round, a uniform 36 percent reduction of each tariff, an harmonization formula based on the "sliding scale" scheme. This makes it possible to infer how reducing tariff dispersion would help improve market access in future trade agreements.international agricultural trade, agricultural price, income, policy analysis, International Relations/Trade,

Assessing Market Access: Do Developing Countries Really Get a Preferential Treatment?

This paper provides an assessment of the existing preferences on the products currently exported in a few key developed countries’ markets: EU, Japan and US. The analysis is undertaken drawing on the trade preferences database provided by the most recent version (release 6) of the GTAP database. This includes a presentation of the structure of tariff regimes in these key developed countries and identification of countries and sectors that are most reliant on tariff preferences. The paper computes theoretically consistent protection indexes using a comparative static applied general equilibrium model (Global Trade Analysis Project – GTAP) featuring imperfect competition. We construct bilateral indicators of protection focused on the applied tariffs faced by the exports of each country, using an index of trade policy restrictiveness, the Mercantilistic Trade Restrictiveness Index (MTRI), as the tariff aggregator. Our results provide a picture which is quite different from the one yielded by traditional indexes, such as the trade-weighted tariff average, or market access measures based on bound tariffs.Commercial Policy; Protection; Computable General Equilibrium Models; Agriculture in International Trade.

THE TRADE RESTRICTIVENESS INDEX: THE POTENTIAL CONTRIBUTION TO AGRICULTURAL POLICY ANALYSIS

In the policy arena, there is a demand for "trade distortion indicators", but many of the traditional indices are difficult to compute and interpret. Recent developments in the literature have led to a new indicator: the Trade Restrictiveness Index (TRI). This paper analyzes some problems related to the TRI's computation and interpretation. We argue that the index is theoretically well grounded and offers potential for measuring the relative importance of agricultural policy distortions. However, the name of "trade restrictiveness" index is seriously misleading, since the TRI does not provide a measure of trade flows restrictions.Agricultural and Food Policy, International Relations/Trade,

Cooperative and non-cooperative solutions to carbon leakage

A modified version of the CGE GTAP-E model is developed for assessing the economic and carbon emissions effects related to alternative policy measures implemented with the aim of reducing carbon leakage. We explore a set of scenarios, comparing solutions where Annex I countries introduce exogenously or endogenously determined carbon border taxes in order to solve the carbon leakage problem unilaterally. Results provide evidence on the scarce effectiveness of carbon tariffs in reducing carbon leakage and enhancing economic competitiveness, while they have large negative welfare effects not only on the Non-Annex countries, but also on certain Annex I countriesCarbon Leakage, Carbon Border Tax, GTAP-E model

Agricultural Expenditure in the Future European Union Budget

Agricultural and Food Policy, Agricultural Finance,

Bargaining Coalitions in the Agricultural Negotiations of the Doha Round: Similarity of Interests or Strategic Choices? An Empirical Assessment

The paper aims at understanding the structural features of the bargaining coalitions in the Doha Round of the WTO. We provide an empirical assessment of the preferences of each negotiating actor looking at general economics indicators, development levels, structure of the agricultural sectors, and trade policies for agricultural products. Bargaining coalitions are analyzed by grouping countries through a cluster analysis procedure. The clusters are compared with existing coalitions, in order to assess their degree of internal homogeneity as well as their common interests. Such a comparison allows the detection of possible “defectors”, i.e. countries that according to their economic conditions and policies seem to be relatively less committed to the positions of the coalition they join.Agricultural trade negotiations, Bargaining coalitions, WTO, Cluster analysis

Regionalism vs. Multilateralism: Assessing the Impact of Free Trade Agreements between EU and Asian Countries

In 2006 the EU decided to abandon its moratorium on negotiating new free trade agreements. Since then, numerous negotiations have been started. In particular, the EU joined in the scramble for preferential market access in Asia, starting bilateral negotiations both with individual countries, as in the case of India and South Korea, and with regional sub-groupings, such as the Association of Southeast Asian Nations (ASEAN). In this paper, we use a computable general equilibrium (CGE) model to assess the effects of the possible agreements between the EU and the Asian countries. We want to evaluate the impact of the free trade agreements by themselves, their mutual compatibility as well as their relations with the larger agenda of multilateral trade liberalization. As a matter of fact, regional trade agreements are controversial in economics, not simply because of the classic (so-called ¿Vinerian¿) view that they can sometimes reduce trade by diverting it, rather than creating it, but also because of the unresolved disagreements over when a regional trade agreement is likely to precede, rather than preclude, more global agreements.JRC.J.5-Agriculture and Life Sciences in the Econom