The EU-Korea FTA: anticipation, trade policy uncertainty and impact

Lakatos, Csilla; Nilsson, Lars

doi:10.1007/s10290-016-0261-1

Cited by 39 publications

(32 citation statements)

References 7 publications

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“…The reduction in this measure of uncertainty is found to lead to greater trade in services. Handley and Limão (2015) and Lakatos and Nilsson (2015) provide confirmatory evidence from alternative natural experiments: the expansion of Portugal's trade with EU Member States upon accession and the expansion of EU-South Korea trade anticipating the coming into force of the EU-South Korea FTA. Conversely, new uncertainty about future market access generated by renegotiation of a trade agreement reduces firm entry into trade and increases firm exit from trade (Crowley et al, 2018).…”

Section: Introductionmentioning

confidence: 79%

The Effect of Binding Commitments on Services Trade

2019

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It has long been established in theory that uncertainty impacts on firm behaviour. However, the empirical basis for quantifying the uncertainty-reducing effects of trade agreements has not been firmly established. In this paper, we develop estimates of the effect of reducing uncertainty regarding regulation of foreign services markets by making commitments that are bound under a trade agreement. Specifically, we identify the effect on services trade of services trade restrictions, as measured by the OECD's Services Trade Restrictiveness Index (STRI), and the separate effect of ‘water’ in binding commitments, as assessed by the difference between countries’ commitments under the General Agreement on Trade in Services (GATS) or free trade agreements (FTAs) and applied levels of market access, as captured by STRI scores. Using a gravity model, we find that services trade responds positively but inelastically to reductions in services trade barriers, as measured by the STRI and, in our preferred regression, the response to actual restrictions is more than twice – specifically 2.4 times – as strong as the response to comparable reductions in uncertainty, as measured by water. Moving from GATS commitments to FTA commitments leads to a 4.7% increase in services trade because of the reduction in uncertainty.

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Section: Introductionmentioning

confidence: 79%

The Effect of Binding Commitments on Services Trade

2019

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“…The importance of uncertainty has been emphasised by Büge (2013) and Handley and Limao (2017). In the FTA context, Lakatos and Nilsson (2017) show that once the EU-Korea FTA (KOREU) had been agreed, the effect on bilateral trade began years before the FTA was formally implemented. This was because the FTA credibly promised to 'enhance predictability and stability of the trade policy environment in the two markets' (Lakatos & Nilsson 2017).…”

Section: Infrastructure and Trade Costsmentioning

confidence: 99%

“…In the FTA context, Lakatos and Nilsson (2017) show that once the EU-Korea FTA (KOREU) had been agreed, the effect on bilateral trade began years before the FTA was formally implemented. This was because the FTA credibly promised to 'enhance predictability and stability of the trade policy environment in the two markets' (Lakatos & Nilsson 2017). They relate this predictability not just to traditional trade policy instruments, but also to 'provisions on issues ranging from services and investments; competition and Source: Pomfret and Sourdin (2016 p. 24).…”

Section: Infrastructure and Trade Costsmentioning

confidence: 99%

What Difference does Brexit Make?

Winters

2018

Potential Benefits of an Australia-Eu Free Trade Agreement: Key Issues and Options

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“…Their results point to sound projections against observed data at the aggregate level and in the largest sectors, such as machinery, as opposed to trade in less important sectors. 21 In a recent econometric ex-post analysis of the EU-Korea FTA, Lakatos and Nilsson (2017) find positive impact of the agreement on exports at the extensive margin of both the EU and Korea. 22 Attempts to incorporate the extensive margin (in terms of new entry of firms) into CGE models have been faced with problems related to model instability due to the standard CES cost function, see Hertel et al (2013).…”

Section: Default Model Datamentioning

confidence: 99%

“…Similarly, Haskel et al (2007) estimate a positive impact on a UK plant's total factor productivity and the share of a foreign affiliate in the industry of that plant. Lakatos and Nilsson (2017) argue that the increase in predictability of the Korean trade policy regime played an important role in explaining the increase in EU exports to Korea following the conclusion of the EU Korea FTA. Moreover, Handley (2014) shows that binding trade policy commitments also at the level of the WTO make a difference even if applied tariff levels do not change.…”

Section: Common Criticisms and Drawbacks Of Cge Models And Cge Modellmentioning

confidence: 99%