Working Paper: CEPR ID: DP828
Authors: Jan I. Haaland
Abstract: In this paper production, trade and welfare effects of European integration are discussed, with particular emphasis on the effects for the EC and EFTA. Insight from previous partial and general equilibrium analyses of the internal market are reviewed, and new model simulations are presented. In addition to the `standard' experiments of `1992' as reduced trade costs and as full market integration for the EC alone, and for the European Economic Area (EEA), an intermediate case, with full integration in the EC but only lower trade costs between the EC and EFTA, is analysed. All cases show that EFTA will benefit significantly from freer trade and closer integration with the EC. With regard to non-European regions, the simulations of European integration show some degree of trade diversion, but stylized model experiments indicate that a successful outcome of the Uruguay Round may more than offset the trade-diverting effects of `1992'.
Keywords: economic integration; EC; EFTA; European Economic Area; GATT
JEL Codes: F12; F13; F15; F17
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduced trade costs (F19) | Welfare outcomes for EFTA countries (I38) |
| Closer integration with the EC (F15) | Welfare outcomes for EFTA countries (I38) |
| 1992 programme for internal market (F15) | Production for EC and EFTA countries (O52) |
| Trade diversion effects from European integration (F15) | Offset by successful outcome of the Uruguay Round (F69) |
| Integration process (F15) | Changes in trade flows for EC and EFTA countries (F19) |
| Integration process (F15) | Changes in welfare dynamics for EC and EFTA countries (O52) |