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Time Dependent Efficiency of Free Trade Agreements - The Case of Slovenia and the CEFTA Agreement

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  • Jože P. Damijan

    (University of Ljubljana and Institute for Economic Research, Ljubljana)

  • Igor Masten

    (European University Institute, Florence)

Abstract

In international trade literature there is a common feature that the abolishment of barriers to trade leads to direct expansion of trade flows. Many empirical studies that simulate welfare effects of trade liberalisation explicitly make use of this direct tariff reduction – trade expansion mechanism. On the contrary, this paper explores panel data to analyse the timedependent efficiency of Free Trade Agreements (FTAs). It is shown that trade liberalisation per se needs time to become effective, and that immediately after the enforcement of the FTA the autonomous factors (such as domestic demand for particular import goods) are of great importance. Using an illustrative case of rapid expansion of Slovenian imports from other CEECs in the period 1993–1998, the paper demonstrates that the tariff reductions become effective in the second to third year after enforcement of the FTA. In addition, the relation between tariff reductions and trade expansions is non-linear, which reflects the time needed for new business connections to be established.

Suggested Citation

  • Jože P. Damijan & Igor Masten, 2002. "Time Dependent Efficiency of Free Trade Agreements - The Case of Slovenia and the CEFTA Agreement," The Economic and Social Review, Economic and Social Studies, vol. 33(1), pages 147-160.
    • Handle: RePEc:eso:journl:v:33:y:2002:i:1:p:147-160
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    References listed on IDEAS

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    3. Milica Uvalic, 2006. "Trade in Southeast Europe : recent trends and some policy implications," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 3(2), pages 171-195, December.
    4. Marjan Petreski, 2013. "Southeastern European Trade Analysis: A Role for Endogenous CEFTA-2006?," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 49(5), pages 26-44, September.
    5. Luca De Benedictis & Roberta De Santis & Claudio Vicarelli, 2005. "Hub-and-Spoke or else? Free trade agreements in the 'enlarged' European Union," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 2(2), pages 245-260, December.
    6. Roberta De Santis & Claudio Vicarelli, 2007. "The “deeper” and the “wider” EU strategies of trade integration.An empirical evaluation of EU Common Commercial Policy effects," ISAE Working Papers 79, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    7. Darja Majkovic & Stefan Bojnec & Jernej Turk, 2007. "Development of New Members' EU Trade: Evidence from the Slovenian Agri-Food Sector," Post-Communist Economies, Taylor & Francis Journals, vol. 19(2), pages 209-223.

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