| Summary/Abstract |
On their summit in May 2011, Japan and the EU decided to negotiate on a Preferential Trade Agreement (PTA). Against this background, the study at hand analyzes PTAs between the EU and third countries by estimating gravity equations on a sector basis consisting of 1-digit SITC groups. On the one hand, it concludes that—except for trade in agricultural goods—PTAs increase bilateral trade above its normal level. On the other hand, that trade between the EU and Japan is undoubtedly too low with regard to distance and size. Therefore, a free trade agreement between the EU and Japan should have a considerable potential to prompt trade-creating effects that increase welfare in both countries. A necessary condition to exploit these gains is, however, not only to abolish tariffs but, more importantly, to reduce nontariff measures to trade.
|