Free trade agreements are treaties that regulate the tariffs, taxes and tariffs that countries collect for their imports and exports. The most well-known regional trade agreement in the United States is the North American Free Trade Agreement. The Transatlantic Trade and Investment Partnership would remove existing barriers to trade between the United States and the European Union. This would be the largest agreement ever reached by the North American Free Trade Agreement. Negotiations were suspended after President Trump took office. Although the EU is made up of many Member States, it can negotiate as a unit. The TTIP thus becomes a bilateral trade agreement. We have experimented with many variations of this approach, but the results are still very similar: trade agreements increase quality, but they do not have a significant impact on prices and diversity. Our baseline results indicate that EU trade agreements have increased the quality of products imported by trading partners by around 7% in five years. Our approach does not allow us to identify the exact sources of these quality improvements, but we discuss possible mechanisms. One explanation that is consistent with growing literature using data at the enterprise level is that foreign exporters are improving the quality to serve the EU market after the implementation of trade agreements (2008, Iacovone and Javorcik 2012).
With the measures relating to the prices, diversity and quality of EU12 imports, we will see 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 monitoring group of countries that have not done so. We start with the development of price scales, quality and varieties. Prices and the number of countries of origin for each product (our variety level) are easily observed in international trade data. Bilateral agreements strengthen trade between the two countries. They open markets to successful sectors. If companies take advantage of it, they create jobs. Over the past two decades, the number of trade agreements has increased. Economists have studied in detail the economic consequences of these agreements, focusing on their impact on variables such as trade flows, productivity, exit and entry, employment and wages (e.g. B Pavcnik 2002, Trefler 2004, Baier and Bergstrand 2007, Topalova and Khandelwal 2012). First, compare the total cost to the overall benefits. With respect to this measure, I think almost all economists would agree that the benefits outweigh the costs (although they would undoubtedly argue over the exact numbers).
