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GTAP Resource #3925

"Assessing the impact of the EU-Chile FTA on international trade"
by Jean, Sebastien

Chile and the European Union (EU) signed an Association Agreement on November 18, 2002. While the Agreement came fully into force on March 1, 2005, the provisions regarding trade in goods were enforced on a provisional basis as of February 1, 2003. This paper presents an ex-post assessment of the trade impact of the trade pillar of the Agreement.
The comparison across products suggests that a significant positive impact on EU imports from Chile has taken place in specific sectors. As for Chilean imports, the EU’s market shares tended to decline since the Agreement was enforced, but this was a period where EU exports were outpaced by a large margin by exports from other regions, and several agreements were being phased-in by Chile.
To assess econometrically the role played by the EU-Chile FTA in these trends, we rely here on a transformed version of the gravity equation. The method followed is adapted from Romalis’ (REStat, 2007) analysis of NAFTA and CUSFTA. Extensions are considered to take into account recent development about estimation techniques (using negative binomial estimations), and to analyse the role of the extensive and intensive margins. The specification used, based on CES specifications, is fully consistent with the modelling of international trade typically used in modern CGE models.
Trade impacts are identified out of comparisons across products of import changes, in relation to tariff cuts. Proper estimation requires controlling for several potential competing effects, such as the trends in Chile and the EU’s supply and demand, product by product. This is achieved by studying the difference-in-differences of imports, expressed in logarithms. For instance, instead of considering EU imports from Chile properly speaking, econometric estimates are based upon changes in these imports, beyond what could be expected given trends in Chile’s exports to other markets, and trends in EU imports from other providers. Simulations are the carried out to...

Resource Details (Export Citation) GTAP Keywords
Category: 2012 Conference Paper
Status: Published
By/In: Presented at the 15th Annual Conference on Global Economic Analysis, Geneva, Switzerland
Date: 2012
Created: Jean, S. (4/30/2012)
Updated: Jean, S. (12/18/2012)
Visits: 2,446
- Preferential trading arrangements
- Calibration and parameter estimation
- European Union
- South America

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