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How have EU's trade agreements impacted consumers?

Author

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  • Holger Breinlich
  • Swati Dhingra
  • Gianmarco I. P. Ottaviano
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.

Suggested Citation

  • Holger Breinlich & Swati Dhingra & Gianmarco I. P. Ottaviano, 2016. "How have EU's trade agreements impacted consumers?," CEP Discussion Papers dp1417, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1417
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    References listed on IDEAS

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    Cited by:

    1. Dorn, David & Davenport, Alex & Levell, Peter, 2021. "Import Competition and Public Attitudes towards Trade," CEPR Discussion Papers 16339, C.E.P.R. Discussion Papers.
    2. International Monetary Fund, 2016. "United Kingdom: Selected Issues," IMF Staff Country Reports 2016/169, International Monetary Fund.
    3. Philipp Imhof, 2021. "Switzerland's system of free trade agreements: Assessing the impact on imported goods," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 71(01), pages 35-72, December.
    4. DeStefano, Timothy & Timmis, Jonathan, 2024. "Robots and export quality," Journal of Development Economics, Elsevier, vol. 168(C).
    5. Stiebale, Joel & Vencappa, Dev, 2018. "Acquisitions, markups, efficiency, and product quality: Evidence from India," Journal of International Economics, Elsevier, vol. 112(C), pages 70-87.
    6. Dela-Dem Doe Fiankor & Daniele Curzi & Alessandro Olper, 2021. "Trade, price and quality upgrading effects of agri-food standards [Endogenous Trade Policy with Heterogeneous Firms]," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 48(4), pages 835-877.
    7. Cernat, Lucian & Gerard, Daphne & Guinea, Oscar & Isella, Lorenzo, 2018. "Consumer benefits from EU trade liberalisation: How much did we save since the Uruguay Round?," DG TRADE Chief Economist Notes 2018-1, Directorate General for Trade, European Commission.
    8. Ali, Nesma & Stiebale, Joel, 2021. "Foreign direct investment, prices and efficiency: Evidence from India," DICE Discussion Papers 363, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    trade agreements; EU; consumers;
    All these keywords.

    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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