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Hub-and-Spoke or Else? Free Trade Agreements in the Enlarged EU – A Gravity Model Estimate. CEPS ENEPRI Working Papers No. 37, 1 June 2005

De Benedictis, Luca and De Santis, Roberta and Vicarelli, Claudio. (2005) Hub-and-Spoke or Else? Free Trade Agreements in the Enlarged EU – A Gravity Model Estimate. CEPS ENEPRI Working Papers No. 37, 1 June 2005. [Working Paper]

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    Abstract

    The aim of this paper is to estimate the effect of the EU’s eastern enlargement on the trade patterns of the Central and Eastern European countries (CEECs) that joined the Union in May 2004. In particular, the paper investigates whether and how the EU’s free trade agreements (FTAs) with the CEECs have affected centre-periphery and intra-periphery trade flows. It also evaluates whether the EU-membership factor has had the added positive effects on exports from the CEECs as anticipated. The analysis focuses on bilateral trade flows between eight CEECs and the EU-23, for which a gravity equation is estimated using a system GMM dynamic panel data approach. The results support the assumptions that gravity forces and ‘persistence effects’ do indeed matter. With respect to the effect of FTAs, evidence is found that FTAs between EU countries and CEECs matter. Yet there is also evidence that the presence of intra-periphery agreements have helped to expand intra-periphery trade and limit the emergence of a hub-and-spoke relationship between the EU and the CEECs. These results have important policy implications for the trade strategy of EU candidate countries in south-eastern Europe as well as in the southern Mediterranean. According to the empirical results, these countries should move towards a regional free trade area as exemplified by the Central European Free Trade Agreement and the Baltic Free Trade Agreement to avoid hub-and-spoke effects.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > External relations > EU-South-Eastern Europe (Balkans)
    EU policies and themes > External relations > EU-Central and Eastern Europe
    EU policies and themes > External relations > EU-Mediterranean/Union for the Mediterranean
    EU policies and themes > Policies & related activities > economic and financial affairs > trade policy
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > ENEPRI Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 31 Mar 2007
    Page Range: p. 20
    Last Modified: 15 Feb 2011 17:44
    URI: http://aei.pitt.edu/id/eprint/6742

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