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Giovanni Stamato

21 March 2024
ECONOMIC BULLETIN - BOX
How geopolitics is changing trade
Economic Bulletin Issue 2, 2024
English
Details
Abstract
Rising trade tensions and a spate of policies aiming to bring national security concerns to bear in trade relations have sparked growing concern about the potential implications of global trade fragmentation. Yet, empirical evidence that geopolitical concerns are already materially affecting trade patterns is scant. This box addresses the issue using a structural gravity model augmented with a geopolitical distance measure based on UN General Assembly voting to investigate the role played by geopolitical factors for trade in manufacturing goods over the period 2012-22. It provides evidence that the degree of geopolitical alignment is playing an increasing role in determining bilateral trade flows. The impact of geopolitical distance on trade is heterogeneous: in particular, geopolitical considerations mostly affect European trade in strategic products.
JEL Code
F10 : International Economics→Trade→General
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade
F15 : International Economics→Trade→Economic Integration
24 May 2023
WORKING PAPER SERIES - No. 2822
Are preferential agreements beneficial to EU trade? New evidence from the EU-South Korea treaty
English
Details
Abstract
This paper empirically investigates the effect of the EU-South Korea free trade agreement (FTA) on manufacturing trade flows. By applying a state-of-the-art structural gravity model with intranational (i.e., domestic) trade and using disaggregated data, we quantify both the trade impact and the observed heterogeneity in the FTA estimates. In line with literature, we find that the FTA exerted asymmetric effects in bilateral exports across directions of trade. Compared to previous studies, our findings suggest a different explanation for the poor performances of Korean exports to the EU in the post-FTA period, namely offshoring patterns in electronics and a broad-based decline in the shipbuilding industry. When we drop these two export categories from the analysis, we show that the FTA exerted a large effect on trade in both directions, increasing bilateral exports by about 30 percent. We then investigate heterogeneity in pair-industry-specific estimates of the FTA. The main source of variation is represented by asymmetries in ex ante trade barriers across sectors, with a prominent role for non-tariff instruments. Stronger pre-FTA regulatory intensity is associated to a high liberalization potential, favouring larger FTA estimates.
JEL Code
F10 : International Economics→Trade→General
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F14 : International Economics→Trade→Empirical Studies of Trade