Hub-and-Spoke or Else? Free Trade Agreements in the Enlarged EU - A Gravity Model Estimate

Luca De Benedictis (), Roberta de Santis () and Claudio Vicarelli

No 37, Economics Working Papers from European Network of Economic Policy Research Institutes

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.

Keywords: trade flows; regional integration; EU enlargement; gravity model; dynamic panel data (search for similar items in EconPapers)
JEL-codes: C13 C23 F13 F15 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2005-06
New Economics Papers: this item is included in nep-eec, nep-int and nep-tra
References: Add references at CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
http://www.enepri.org/Publications/WP037.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:epr:enepwp:037

Ordering information: This working paper can be ordered from
ENEPRI c/o CEPS Place du Congrès 1 1000 Brussels Belgium
http://www.enepri.org

Access Statistics for this paper

More papers in Economics Working Papers from European Network of Economic Policy Research Institutes ENEPRI c/o CEPS Place du Congrès 1 1000 Brussels Belgium. Contact information at EDIRC.
Bibliographic data for series maintained by CEPS ( this e-mail address is bad, please contact ).