EU Enlargement and Trade Integration: Lessons from a Gravity Model

Abstract

The authors estimate gravity models using a large panel of bilateral trade flows across 61 countries between 1980 and 2003, which are applied as a benchmark for the integration of Central and South Eastern European countries with the euro area. They show that a careful examination of the fixed effects of the model is crucial for the proper interpretation of the results. The results suggest that trade integration between most new EU member states and the euro area is already relatively advanced, while the remaining Central and Eastern European countries have significant scope to strengthen trade links with the euro area. Copyright � 2008 The Authors. Journal compilation � 2008 Blackwell Publishing Ltd.

Does Corruption Hinder Trade for the New EU Members?

“…In the last fifteen years researchers have also been concerned with the use of gravity models in empirical studies looking at the process of economic integration and the role that RTAs have played in encouraging trade among members. There exists a large body of work examining the main changes in the geographical pattern of trade and analyzing the effects of regional trade arrangements (RTA) and free trade agreements (FTA) as well as currency unions on trade flows (see inter alia, Gros and Gonciarz 1996, Baldwin et al 1997, Brenton and Di Mauro 1999, Frankel and Rose 2000, Nilsson 2000, Laaser and Schrader 2002, Brenton and Manzocchi 2002, Damijan and Masten 2002, De Benedictis et al 2005, Bussiere et al 2008and Hornok 2010. The majority of these studies find that the RTAs created to prepare transition countries for EU accession, have generated considerable growth intra EU-CEECs trade flows, with the coefficients of regional dummies being positive and statistically significant.…”

Which commercial partners are important for the most recently admitted EU countries?

“…For this reason, a relevant part of the literature discusses the degree of trade integration among Western and Eastern Europe during the 1990s. Many studies con…rm that there was an important trade integration process among these European areas during the 1990s (Gros and Steinherr, 1995;Brenton and Gros, 1997;Abraham and Konings, 1999;Fontagné et al, 1999;Bussière et al, 2008). Others argue, however, that this integration was far from complete (Faucompret et al 1999;Paas, 2003).…”

“…They thus con…rm that in some CEECs there was trade reorientation from the former COMECON partners toward the Western countries, particularly the ones belonging to the EU. Bussière et al (2008) show that Russia and Ukraine remained important trading partners for CEECs at the end of the 1990s. Conversely, Faucompret et al (1999) consider that the trade reorientation during the 1990s was incomplete because the EU followed overly restrictive measures for goods imported from non-EU countries.…”

“…Nevertheless, during the 1990s, the EU10 and some post-Soviet states continued their strong commercial relationships (Bussière et al, 2008). In this respect, we also investigate how the …fth EU enlargement a¤ected the nature of trade ‡ows between the EU10 and countries of the former Soviet Union (henceforth the FSU).…”

Trade regimes and bilateral trade in the EU enlargement process: Focus on the Western Balkans

“…Micco et al 2003;Faruqee 2004;Papazoglou et al 2006;Baier -Bergstrand 2007;Bussiere et al 2008). Usually, authors have distinguished two levels of trade integrations: free trade areas and customs unions, as a higher level of integration.…”