Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316318 
Year of Publication: 
2025
Series/Report no.: 
IOS Working Papers No. 407
Publisher: 
Leibniz-Institut für Ost- und Südosteuropaforschung (IOS), Regensburg
Abstract: 
Empirical models of trade agreements implicitly assume that withdrawal from a trade agreement has an equal and opposite trade effect as accession, i.e., symmetry. With increasing opposition to international economic cooperation, it becomes urgent to test this assumption. We analyze a quasi-natural experiment to explicitly test the symmetry assumption in the context of FTA termination using the gravity model. In 2004, Estonia joined the European Union, which mandated that it withdraws from its FTA with Ukraine. Carefully controlling for possible confounding effects of EU enlargement using a variety of methods, we isolate the FTA withdrawal effect and find strong support in favour of symmetry. Moreover, while import tariffs are part of the impact, the bulk of the effect comes from non-tariff effects of an FTA. General equilibrium estimates suggest that the FTA withdrawal led to a noticeable loss in members' welfare.
Subjects: 
free trade agreement
withdrawal
gravity
welfare analysis
European Union
Estonia
Ukraine
JEL: 
F13
F14
F15
F17
Document Type: 
Working Paper

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