Hub-and-Spoke or Else? Free Trade Agreements in the 'Enlarged' European Union

ISAE Working Paper No. 52

The European Journal of Comparative Economics, Vol. 2, No. 2, pp. 245-260, 2005

16 Pages Posted: 26 May 2005

See all articles by Roberta de Santis

Roberta de Santis

Italian National Institute of Statistics

Luca De Benedictis

University of Macerata; Luiss University

Claudio Vicarelli

ISTAT - Italian National Institute of Statistics

Date Written: June 2005

Abstract

The object of this paper is to estimate the effect of European Union eastwards enlargement process on trade patterns in the Union. In particular, we intend to investigate whether and how the EU Free Trade agreements with CEECs have exerted a different impact on centre-periphery and intra-periphery trade relationships.

This paper analyses bilateral trade flows between eight CEECs and EU-23. We estimate a gravity equation using a system GMM dynamic panel data approach. Results support the assumptions that gravity forces and persistence effects matter. With respect to the effect of free trade agreements, evidence is found that Free trade agreements between EU countries and CEECs matter. However there is also evidence that the presence of intra-periphery agreements helped expand intra-periphery trade and limit the emergence of a hub-and-spoke relationship between CEECs and EU.

This results have important policy implications for the trade strategy of future EU members of the Southeastern European Countries as well as of the Southern Mediterranean Countries. According to the empirical results these countries should move towards a regional free-trade area as exemplified by the CEFTA and the BAFTA to avoid hub-and-spoke effects.

Keywords: Trade flows, regional integration, EU eastward enlargement, gravity model, dynamic panel data

JEL Classification: F13, F15, C13, C23

Suggested Citation

de Santis, Roberta and De Benedictis, Luca and Vicarelli, Claudio, Hub-and-Spoke or Else? Free Trade Agreements in the 'Enlarged' European Union (June 2005). ISAE Working Paper No. 52, The European Journal of Comparative Economics, Vol. 2, No. 2, pp. 245-260, 2005, Available at SSRN: https://ssrn.com/abstract=728409 or http://dx.doi.org/10.2139/ssrn.728409

Roberta De Santis (Contact Author)

Italian National Institute of Statistics ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

Luca De Benedictis

University of Macerata ( email )

Via Crescimbeni 20
Macerata, MC 62100
Italy

HOME PAGE: http://docenti.unimc.it/luca.debenedictis

Luiss University ( email )

Viale Romania 32
Rome, 00198
Italy

Claudio Vicarelli

ISTAT - Italian National Institute of Statistics ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

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