How have EU’s trade agreements impacted consumers?

Breinlich, Holger, Dhingra, Swati ORCID: 0000-0001-5468-3415 and Ottaviano, Gianmarco I. P. (2016) How have EU’s trade agreements impacted consumers? CEP Discussion Paper (1417). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

Over the past two decades, the European Commission has negotiated a number of Free Trade Agreements (FTAs) which contain both traditional elements of bilateral tariff reductions, as well as additional liberalisation measures like non-tariff barriers. According to economic theory, FTAs lower trade barriers on imported goods, leading to consumer welfare gains from increase in product variety, better quality products and lower prices for existing products. We estimate the variety, quality and price effects of EU FTAs, drawing on recent developments in the quality literature and using detailed import price and expenditure data. On average, trade agreements the EU has entered into over the past two decades increased the quality of UK imports from its FTA partners by 26 per cent and lowered the quality-adjusted price of imports by 19 per cent. We find that consumer prices fell by 0.5 per cent for UK consumers as a result of FTAs with trade partners that are not members of the European Community. Price reductions for UK consumers are greater than those for EU12 consumers, whose prices fell by 0.3 per cent from non-EC FTAs. Using the set of non-EC FTA estimates to predict the effects of future FTAs, we find a projected decline in consumer prices for UK consumers of 0.4 per cent from an FTA with the United States (TTIP) and 0.2 per cent an FTA with Japan (EPA). For EU12 consumers, the TTIP and EPA are predicted to reduce consumer prices by 0.3 per cent and 0.1 per cent.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk/
Additional Information:	© 2016 The Authors
Divisions:	Economics Centre for Economic Performance
Subjects:	H Social Sciences > HB Economic Theory
Date Deposited:	10 May 2016 08:10
Last Modified:	01 Nov 2024 04:55
Funders:	Economic and Social Research Council, Economic and Social Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/66434

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