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.

Italy and China Agri-Food Trade: Integration, Similarity and Competition

The paper looks at the increasing integration of China into the world market, with a specific focus on agricultural and food trade and on the Italian market. Agricultural trade among Italy and China has been limited to secondary products, especially originated in the livestock sector. However, in the last decade exchanges have been constantly increasing and the set of products changing deeply. Specifically, Italian exports to China have been specialising towards the typical "Made in Italy" processed products, showing a potential market for Italian agricultural and food products. In order to test the opportunity and the risks of the integration of China into the world agro-food markets, some similarity indices have been calculated, with refer to two different markets: the EU-15 and the Chinese market. In the first case the similarity of Chinese exports with those of some EU partners on the EU-15 market was considered; in the second the similarity of exports of some EU Member States to China was calculated. Taking into account the different level of quality of agro-food products, the main result of the analysis is that Chinese products entering EU are more complementary than similar to the EU products; at the same time, China is a great potential market for EU products, and Italy will compete with other EU countries in the gain of quotas on the Chinese agro-food market.International trade, similarity index, agri-food trade, International Relations/Trade, F1, Q17,

Trade performances and technology in the enlarged European Union

We analyse the role of the enlargement process of the European Union as a factor fostering international competitiveness of EU Member States. We argue that the economic integration process has partially reduced the technological gap between old and new EU Member States, and this pattern of technological innovation can partially explain the strong impulse on the export dynamics of European countries. We have built an augmented gravity model by including the role of technological innovation, proxied by the stock of knowledge at the sector level. By using a dynamic panel data estimator we find three main empirical evidences. First, the enlargement process has produced an overall larger positive impact on export flows for new members than for old ones, and more importantly that sectors with the higher technological content have received the strongest impulse. Second, the augmented gravity model allows shaping the crucial role of technological innovation in fostering export competitiveness. Third, this impact seems to be stronger for old EU member states than for new ones. The policy implication we derive is that the more the new EU members catch up technologically as a result of the integration process, the more they will benefit in terms of economic development.EU enlargement, gravity model, international trade, economic integration, technological innovation

Old and new partners: similarity and competition in the EU foreign trade

The paper analyses the trade relationships among EU- 15 members and some emerging partners: the NMS, Turkey and China. The EU enlargement to 10 countries has modified quite remarkably the features of agri-food trade in Europe. Some of the NMS, such as Poland, Hungary and the Check Republic, contribute to a large extent to the international agri-food trade and, since the beginning of the process of EU accession, have modified dramatically the exchanges with the EU- 15. More recently, other countries are facing new relationships with the EU: Turkey and China. Turkey is a large Mediterranean country and, as a candidate to the EU accession, enjoys a differential treatment in the agri- food trade relationships with the EU. China can be considered as a new international competitor, growing at faster pace after having joined the WTO and increasing its agri-food trade exchanges with the EU. The analysis will focus on the measurement of the similarity of agri-food exports of Italy and other EU-15 member States with the new partners to the EU- 15 market. It will be carried out with the support of three different indicators: the export structure similarity index (ES), the product similarity index (PSI) and the quality similarity index (QSI), using the Eurostat database with an eight "digit" merchandise disaggregation and with reference only to agri-food exchanges. It can be concluded that the similarity is quite low, especially if compared to that of the exports of the EU- 15 countries to the EU market. Moreover, looking at the level of quality of export products, it is highlighted how quality remains a crucial factor for Italian and European agri- food products to compete with external products. Keywords : International Competitiveness, Export Similarity, EU Agri- Food Market, EU Enlargement.International Relations/Trade, F1, Q17.,

Different Roads to Liberalisation: Scenarios for a Moroccan Case Study of the Euro-Mediterranean Association Agreements. CEPS ENARPRI Working Papers No. 9, 1 October 2004

Although the Euro-Mediterranean Partnership (EMP) in spirit aims at fostering economic growth and stability at the southern periphery of the EU, the contents of the trade agreements reflect the more narrow economic interests of specific, southern EU member states (dell’Aquila & Kuiper, 2003). Key characteristics of the Euro-Mediterranean Association Agreements (EMAAs) are an asymmetric focus on liberalising trade in the manufactured goods of the MPCs, while maintaining trade barriers on agricultural products. Several studies have quantified the expected impact of the proposed Mediterranean free trade area. A review of recent studies indicated that several characteristic features of the MPCs and the EMAAs are missing in existing analyses (Kuiper, 2004). This paper therefore focuses on identifying scenarios for further research that reflect key policy and research issues identified in an earlier study (dell’Aquila and Kuiper, 2003), while accounting for the gaps in existing analyses as identified in Kuiper (2004). Although limited to analysing the specific case of Morocco, the scenarios defined in this paper refer to issues that are relevant for all Mediterranean partner countries

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.

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

Agri-food exports and the enlarged european union

This paper explores agri-food export dynamics in New Member States (NMS) and Old Member States (OMS) of the European Union during the enlargement process. A quality-oriented survey is conducted by developing an original analytical framework which combines information from trade similarity analysis with elements from the sophistication literature. Country and sector specific features seem to emerge, revealing a more complex picture than that produced by aggregated trade analysis. While for some NMS agri-food exports, patterns converge towards OMS with regard to size, competitiveness and quality improvement process, for other NMS, a low-quality trap seems to prevail.Agri-food sector, export dynamics, EU enlargement, quality upgrading

The impact of the reform of the milk quota regime on the Italian dairy sector

This paper analyses the impact of the milk quota regime reform, actually under discussion, on the European countries with a detailed focus on the Italian milk and dairy sector. The dismantling of the milk quota regime is already on the EU agenda, but how and when to do it is still matter of debate. A possibility is to enlarge gradually the size of the national quotas, up to the full dismantling in 2015 (“soft landing”). Meanwhile, the discussion on Health Check of the CAP is under way. In this work we analyse the possible impacts of the reform of the milk quota regime on the basis of a Computable General Equilibrium (CGE) approach, using two models in sequence: the Global Trade Analysis Project (GTAP) model is used to evaluate the impacts of different scenarios of milk quota reform on the EU market and to compute the price changes outside Italy; these, in turn, are used as inputs for the MEG-D model, that focuses on the Italian milk and dairy market. The two models were run together with two specific objectives: the first was to avoid, in evaluating the impacts of reform of the milk sector regime in Italy, running the model with rough price estimates taken for secondary sources; the second, to have more specific results on the outcome at the national level. Particularly, the model takes in account the particular relevance of quality products (GDO) in Italian diary sector. In order to evaluate the impact of the “soft landing” reform scenario, we run a “comparison” scenario where the milk quotas are fully abolished in the 2009.Milk and dairy sector, Quota production, EU Agri-Food Market, PAC, Agricultural and Food Policy, Livestock Production/Industries,

Primi passi con GTAP

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