In Discussion Paper No. 1238, Carmela Martin studies the impact on Spanish and EU trade of the liberalization of economic transactions between the EU and the Central and Eastern European countries (CEECs) arising from the Europe Agreements. The work is done using the econometric estimation of a gravity model which does not allow for the possibility of substitution processes between countries in their exports to international markets. This means that Spanish trade might not benefit as fully from the effects of the Agreements: some Spanish exports to the EU might be substituted by exports from the CEECs, leading to less favourable expectations about the impact of the Agreements on Spanish trade.

The results of projecting the estimated gravity model for different scenarios suggest that it is the likely expansion of bilateral flows at a higher rate in Spain than in the average of the other EU countries, which is consistent with its lower starting point. The forecasts for the trade balance are more favourable for the other EU countries on average than for Spain. The author also provides a complementary analysis of the underlying factor content in trade between Spain and the CEECs and trade with the other EU countries, which suggests that a substitution effect in Spain's intra-EU exports is likely. It is also possible to predict the likely sectoral composition of the expected trade adjustments in relation to bilateral trade with the CEECs.

The impact of EU Trade Agreements with Central and East European Countries: The Case of Spain
Carmela Martín

Discussion Paper No. 1238, September 1995 (IT)