Assessing the Impact of Trade Agreements on Trade
National Institute Economic Review, 2016, vol. 238, issue 1, R31-R42
One of the key issues facing the UK in the wake of the advisory referendum result to leave the European Union is the precise nature of its relationship with the European Union. At one extreme would be continued membership in the European Economic Area, including membership in the single market. Other options would be either no free trade agreement (FTA) with the EU at all or a less comprehensive FTA which stops short of single market membership. This paper compares the ability of EEA membership and less comprehensive FTAs to generate trade in goods and services. We investigate this question using empirical gravity model methodology and the most recent available data from 42 countries. We use recently developed econometric methods to deal with observations of zero trade flows and issues connected with endogeneity. The main finding is that while EEA membership is associated with substantial and statistically significant increases in bilateral services trade flows, membership in less comprehensive FTAs is not associated with any significant increase in bilateral services trade. For goods, EEA membership is associated with larger bilateral trade flows than are less comprehensive FTAs. These results suggest that it might be difficult to replace, on an exit from a European Union, lost trade flows with the EU by means of shallower FTAs with the EU or with third countries.
Keywords: gravity models of trade; benefits of economic integration; free trade agreements; single market (search for similar items in EconPapers)
JEL-codes: F11 F13 F15 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sae:niesru:v:238:y:2016:i:1:p:r31-r42
Access Statistics for this article
More articles in National Institute Economic Review from National Institute of Economic and Social Research Contact information at EDIRC.
Bibliographic data for series maintained by SAGE Publications ().