EU free trade agreements (FTAs) can in fact increase trade, but an impact on trade does not always occur. In the most comprehensive and ambitious FTAs, tariff liberalization has doubled the value of trade. In other cases, no measurable impact can be found from FTAs. This is the case, when tariffs are low to begin with and/or liberalization is shallow and slow.

Around year 2000, the European Union concluded six large free trade agreements. With Tunisia in 1998 and with South Africa in 1999. Mexico and Morocco followed in 2000 and Jordan and Chile were added in 2002 and 2003 respectively. By 2011 these agreements have been in place for around 10 years – long enough to start looking at their impact.

For the first time, ex-post assessments using state-of-the-art economics, have been used to evaluate whether these agreements actually resulted in more trade. The study has been conducted by Copenhagen Economics in cooperation with Professor Jeffrey Bergstrand, University of Notre Dame, and Associate Professor Scott Baier, Clemson University for European Commission, DG Trade.

The study examines the ex-post impact and finds strong evidence that EU exports to Chile, South Africa, Tunisia, and Morocco increased as a result of the FTAs. No significant FTA related impact was found on EU exports to Mexico and on EU imports from South Africa, Tunisia, and Morocco. The evidence shows a strong impact on trade for FTAs where initial tariffs were high and where these tariffs were removed quickly and substantially.

The study uses two approaches i.e. gravity-approach (parametric approach) and matching-approach (non-parametric approach) to test whether the FTAs have a measurable and statistically significant impact on trade flows.

Read the report here

For more information please contact partner Martin Hvidt Thelle