Modelling the effects of free trade agreements between the EU and Canada, USA and Moldova/Georgia/Armenia on the Austrian economy - model simulations for trade policy analysis (project)

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Modelling the effects of free trade agreements between the EU and Canada, USA and Moldova/Georgia/Armenia on the Austrian economy - model simulations for trade policy analysis

Client/Funding Institution

Austrian Ministry of Economy, Family and Youth

Abstract

This study examines the economic impact on Austria of three possible new EU free trade agreements: (1) an EU-US agreement; (2) an EU-Canada agreement; and (3) an EU-Georgia/Moldova agreement. This is done with a computational model of the global economy. The trade agreements are modelled as a mix of preferential tariff reductions and reductions in non-tariff measures that affect both goods and services. The primary impact follows from NTM reduction rather than tariff reductions. Of the three agreements, a potential agreement with the US is by far the most important. This follows from the size of the US economy. The US accounts for roughly one-quarter of extra-EU Austrian exports. Overall, the combined impact of the FTAs studied is positive. Most of the impact follows from investment response. Productivity gains from NTM reduction mean a combination of increased national income, higher wages, and employment, and increased capital stocks for the Austrian economy.