Free Trade Agreement Quality
Although economists have attempted to quantify the overall gains from openness (p.. B e.g. Costinot and Rodriguez-Clare, 2014), there is not much evidence of actual trade agreements, and little is known about the relative importance of the channels through which trade agreements affect well-being. Given recent public and political opposition to new agreements (such as the EU-Canada Comprehensive Economic and Trade Agreement or the Transatlantic Trade and Investment Partnership, the proposed EU-US agreement), it is important to understand how previous trade agreements have affected consumers. This view was first popularized in 1817 by the economist David Ricardo in his book On the Principles of Political Economy and Taxation. He argued that free trade expands diversity and lowers the prices of goods available in a country while making better use of its resources, knowledge and specialized skills. Verhoogen, E (2008), “Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector,” Quarterly Journal of Economics 123 (2): 489-530. The United States currently has a number of free trade agreements in place. These include multinational agreements such as the North American Free Trade Agreement (NAFTA), which covers the United States, Canada and Mexico, and the Central American Free Trade Agreement (CAFTA), which covers most Central American countries. There are also separate trade agreements with countries ranging from Australia to Peru. Few issues divide economists and the general public as much as free trade.
Research suggests that economists at U.S. universities are seven times more likely to support free trade policies than the general public. In fact, the American economist Milton Friedman said, “The economic profession was almost unanimous on the question of the desirability of free trade.” Suppose we find in our data that 21-inch LCD TVs imported into the EU12 from Korea have the same price as those from Japan, but japan`s market share is 20% and Korea`s is 10%. Then the quality estimate for Japan will be higher. If the price of Japanese LCD TVs is higher, we should control the price difference, which would reduce the quality estimate for Japan. Measuring quality is more difficult and we are following new approaches in the literature (e.B. Khandelwal et al. 2013), which have a broad view of quality as well as all product characteristics that increase demand while keeping the price constant. In this way, quality can be measured by measuring differences in market share between products once price differences have been controlled. We appreciate the diversity, quality and price effects of EU feeds, drawing on recent developments in the quality literature and using detailed data on import prices and expenditure.
On average, the EU`s trade agreements over the past two decades have increased the quality of UK imports from its FTA partners by 26% and reduced the quality-adjusted import price by 19%. We note that consumer prices for UK consumers have fallen by 0.5% due to free trade agreements with trading partners that are not members of the European Community. Price reductions for UK consumers are stronger than for EU-12 consumers, whose prices have fallen by 0.3% compared to non-EU free trade agreements. The benefits of trade agreements for consumers: lessons learned from EU trade policy Over the past two decades, the number of trade agreements has skyrocketed. Economists have studied in detail the economic consequences of these agreements, focusing on their impact on variables such as trade flows, productivity, firm exit and market entry, employment and wages (e.B. Pavcnik 2002, Trefler 2004, Baier and Bergstrand 2007, Topalova and Khandelwal 2012). The free trade policy was not so popular with the general public. Among the main problems are unfair competition from countries where lower labour costs allow for price reductions and the loss of well-paying jobs to manufacturers abroad. Not surprisingly, financial markets see the other side of the coin. Free trade is an opportunity to open up another part of the world to domestic producers.
With measures on the prices, diversity and quality of EU12 imports, we will then assess how they have changed with the implementation of trade agreements. We compare the evolution of the three variables for the group of countries that have signed trade agreements with the EU with a control group of countries that have not signed them. Today, the European Union is a remarkable example of free trade. Member States form an essentially borderless unit for trade purposes, and the introduction of the euro by most of these countries continues to lead the way. It should be noted that this system is regulated by a Brussels-based bureaucracy, which has to deal with the many trade-related issues that arise between representatives of the Member States. We calculate the overall impact of EU trade agreements on the CPI by comparing the current situation to a counterfactual scenario in which the EU has not signed trade agreements. A comparison of the CPI in both scenarios allows us to answer the question of how poor EU12 consumers really would have been without agreement-based trade liberalisation over the past two decades. Although NAFTA did not deliver on everything its supporters had promised, it remained in force. In fact, the 2004 Central American Free Trade Agreement (CAFTA) extended NAFTA to five Central American countries (El Salvador, Guatemala, Honduras, Costa Rica and Nicaragua). .