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Abstract
Regional Trade Agreements (RTAs) have widely spread in recent
years. The World Trade Organisation (WTO) notes that 546 RTAs were notified
by January 2013, whereas only 380 were notified by 2007. RTAs have been
considered as a stumbling block for the slow progress of the WTO Doha Round,
and multilateral liberalisation is said to cause erosion of preferences enjoyed
under bilateralism. That is, third country exporters that benefit from multilateral
trade liberalization increase their exports, whereas the preferential suppliers
in bilateral trade agreements face a decrease of their exports, given the
substitutability between export products from different countries. Preference
erosion also occurs when countries take up new bilateral trade agreements that
can result in “old” trade partner countries losing their preferential treatment. The
European Union (EU) has granted preferential market access to a large number
of countries and is by far the main trading partner of its neighbouring countries,
including Mediterranean partner countries (MED countries). Following the
Association Agreements with the EU, there have been efforts of enhanced
engagement and co-operation, especially after the Arab spring developments, but
negotiations for so called free and comprehensive trade agreements (DCFTAs)
are also under way with other partner countries. The objective of this paper is to
look into possible preference erosion effects from the perspective of MED
countries by depicting recent EU trade agreements as well as multilateral trade
liberalisation in a simulation analysis. We apply the MAGNET (Modular
Applied General Equilibrium Tool) model that builds upon the GTAP (Global
Trade Analysis Project) model in a recursive dynamic general equilibrium
framework, with a reference scenario that reflects the economic and population
growth paths via most recent projections taken from the literature.