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Journal of Economic Integration 2017 March;32(1) :193-243.
DOI: https://doi.org/10.11130/jei.2017.32.1.193
Dissecting the Trade Effects of Europe’s Economic Integration Agreements
Sophie Soete and 
Jan Van Hove 
University of Leuven, Leuven, Belgium
University of Leuven, Leuven, Belgium/KBC Group, Chief Economist Research Department, Belgium
Corresponding Author: Sophie Soete ,Tel: +3216326826, Fax: +3216326796, Email: sophie.soete@kuleuven.be
Copyright ©2017 Journal of Economic Integration
ABSTRACT
This paper systematically studies the trade effects of Economic Integration Agreements involving the European Union. We thoroughly disentangle the ex post effects of these agreements by analyzing various sources of heterogeneity and controlling for potential endogeneity and multilateral resistance. Our results confirm the general trade-enhancing impact, but point to an asymmetric effect on European exports and imports. While free trade agreements strongly increase import competition in the European Union market, their effect on European exports is much more complex. Economic Integration Agreements enhance trade by more product differentiation (the extensive margin), but reduce the trade intensity (the intensive margin) simultaneously. Nevertheless, the cumulative effect over time is positive for imports, as well as exports. Moreover, the trade effects differ across European Union member states and across agreements. In particular, the integration depth and the economic rationale matter.

JEL Classification
F13: Trade Policy; International Trade Organizations
F14: Empirical Studies of Trade
F15: Economic Integration
Keywords: Trade Agreements | European Union | Gravity Model | Panel Data | Margins of Trade
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