The Trade Impact of the Integration of the Central and Eastern European Countries on the European Union

Abstract

This paper analyses the determinants of trade patterns between the CEECs and the OECD countries since the latter began their processes of transition and opening-up within the framework of the Association Agreements with the EU, with the ultimate aim of helping to anticipate the trade impact of their accession to the EU. To this end, we estimate an empirical model for a set of countries formed by the EU states, the CEECs and-by way of a control area-the other members of the OECD. Thus, we obtain new evidence about the determinants of the trade shares of the countries analysed. In addition, by using the corresponding dummies, we confirm that the Association Agreements have led to a preferential expansion of the exchanges between the EU and CEECs.

Trade effects of the Europe agreements: A theory-based gravity approach

“…Early cross-sectional studies that specifically point to the geographical restructuring of trade flows arising from the implementation of the EAs report insignificant or even negative coefficients for East-West integration (Laaser and Schrader 2002;Paas 2003). Studies relying on panel data, however, find significant positive estimates in the range of 11 to 130% (Martı´n and Turrio´n 2001;Adam, Kosma and McHugh 2003;De Benedictis, De Santis and Vicarelli 2005;Herderschee and Qiao 2007). With the exception of the study by De Benedictis, De Santis and Vicarelli (2005), a major shortcoming of all of these studies is that they suffer from an omitted variable bias.…”

“…This is especially true for FTAs that imply a gradual rather than an all-at-once liberalisation process. In a panel data study, Martı´n and Turrio´n (2001) estimate a coefficient of 0.83 for intra-group and 1.99 on extra-group export shares. De Benedictis, De Santis and Vicarelli (2005) appropriately account for multilateral trade resistance by including a country pair specific time trend.…”

“…Nevertheless, most studies formally assessing the impact of any kind of integration arrangement implement different sets of dummy variables into a gravity equation to measure the effects of preferential liberalisation on intra-and extra-group trade (see for example Bayoumi and Eichengreen 1995;Frankel and Wei 1998;Soloaga and Winters 2001 or for a more recent study Carre`re 2006). 5 Martı´n and Turrio´n (2001) provide the first study that directly calculates the impact of integration efforts on East-West trade by estimating a gravity equation via a two-step fixed effects panel estimator. Although the authors conclude that the EU has strengthened its trade relations with the CEECs more than with other OECD countries, the result does not seem to hold for these regions' exports to the EU (coefficients of 0.83 and 1.99, respectively).…”

Consequences of European Union Enlargement for Spain

“…Furthermore, since the tariff levels of the candidates are apparently higher than the Common External Tariffs (Heijdra, Keuschnigg and Kholer, 2002), Spanish exports could be expected to increase more than imports. Even so, it does not seem reasonable to expect this share to increase much more, since, as shown in Hoekman and Djankov (1997) and in Martín and Turrión (2003a), geography (measured by distance) and other idiosyncratic variables (such as language, cultural proximity, etc.) seem to affect trade levels.…”

“…Everything seems to indicate that the driving forces behind these major changes were the strategies of multinational companies, which have set up in a number of the candidate countries to capitalising on their advantageous labour costs and geographical locations to use as production centres and export platforms for the entire European market (Lankes and Venables, 1997;Landesmann, 2000;EBRD, 2000 and2001;and Martín and Turrión 2003a). The case of motor vehicles, though not unique, is typical of the application of this type of strategy, which is permitting the transformation of the structure of comparative advantages of the future members in such a short space of time.…”