Assessing the Trade Impact of the European Neighborhood Policy on EU-MED Free Trade Area

Abstract

The goal of this paper is to provide an "ex ante" assessment of the long-run "treatment" effect of ENP on EU-MED Free Trade Area. Supplementary objectives are the presentation of new up-to-date "in-sample" estimates of the actual trade potential in the Pan-European Common Market as well as more robust estimates of the trade enhancing impact of EU deep integration policy. The novel aspect of this work is twofold: i) to present nonparametric matching estimators along with gravity estimates; ii) to assume, as a counter-factual (i.e., the hypothetical situation of ENP full implementation), the ex-post long-run average treatment effect of the Europe Agreements, which are the unique experience to date of "full partnership without membership". Our empirical outcomes show a likely strong and robust impact on EU-MED trade integration of the new "deep integration" efforts made by the EU. This is confirmed by both the applied dummy strategy and the non parametric matching technique. This result seems to be linked to other factors than simply trade preferences alone. Our empirical evidence is relevant both to policymaking, since it provides an "ex ante" assessment of the efficacy of deep integration under the EU-MED regional cooperation framework, and to the methodological point of view, since it contributes to improvements in empirical estimates of the "policy impact" of EU preferential agreements.