International transatlantic trade liberalization: zooming in on regional impacts

ABSTRACT

The current study analyses the impact on a Portuguese small island regional economy of the Transatlantic Trade and Investment Partnership (T-TIP) between the EU and the USA. A dynamic Computational General Equilibrium (CGE) model detailing six household categories, 45 sectors, and four trading partners is used. Previous studies used aggregate variables and, largely, were based on the structure of the national economy. For a small, integrated economy, foreign trade statistics comprise an underestimation, given that most of the trade occurs through national logistics centres. Taking into account the national integration effects, gross domestic value was estimated to be higher than in other studies. Using equivalent variation, the estimated welfare impact is positive for all six household categories. Value-added suffers mixed impacts depending on the sector. It is negative for fisheries, ambiguous for agriculture and positive for tourism and transportation. The contribution of the current study is to highlight the importance of looking beneath the trade block and national conclusions particularly when regional economic policy is relevant as is the case in Europe. Better knowledge of welfare, regional and sector impacts allows for improved development and mitigation policies.

KEYWORDS:

• Transatlantic trade and investment partnership
• computational general equilibrium model
• Azores
• trade impacts on regions

JEL CLASSIFICATION:

• F40
• F49

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ α, β, γ, and φ are equal to 0.039, 0.0048, 0.02, and 0.4, respectively. Values are collected from a CGE model of Luxembourg.

² σI_s are set to 1.2.

Additional information

Funding

This paper/research is financed by portuguese national funds through FCT – Fundação para a Ciência e a Tecnologia, I.P., project number UID/ECO/00685/2016.