Friday, April 19, 2013

How to choose your trading partner

An interesting piece in Vox Eu on how EU should choose its Preferential Trade Agreement partners is found here titled "The much needed EU-pivot to East Asia". A good ready reckoner for the present status of EU and PTAs is found here. The Vox Eu piece essentially highlights the following pre-requisites that the EU should be looking for in its PTA partner:
They should be big enough to generate economies of scale and scope capable of having a substantial impact on the EU’s relative prices – changes in relative prices are the source of welfare gains.  

They should also be well regulated because modern economies are intensive in norms and dominated by services, the efficiency of which depend largely on the quality of the regulatory schemes in place.  

Finally, they should have a wide network of good-quality preferential trade agreements, capable of offering EU firms opportunities to access the economies already covered by those preferential trade agreements (the ‘hub’ quality) without waiting for longish negotiations with the EU.
Lessons for other countries to choose their PTA/FTA trading partners? 

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