The economic impact of EU’s free trade agreements on Finland

The economic impact of EU’s free trade agreements on Finland

The aim of the project is to evaluate the economic impacts of the EU’s FTAs on Finland. Trade agreements have a central role in ensuring economic growth and employment. The main purpose of the analysis is to study the impact FTAs might have on trade, GDP, employment and FDI in Finland.

We estimate the economic impact of the EU’s FTAs in three stages.

First, we use a so-called ‘gravity model’ to assess both ex-post and ex-ante impact of the EU’s FTAs on bilateral trade, trade between third countries, and real GDP.

Second, we use the estimated effects of FTAs from gravity approach and the WIOD dataset to assess the impact of trade agreements on the value-added content of trade.

Third, using the estimated gross export effects as inputs we employ ETLA’s macroeconomic model to simulate the effects of the FTAs on the Finnish economy.

We also examine the effect of FTAs on bilateral inward and outward foreign direct investment (FDI) between Finland and the countries that have closed an FTA deal with EU in 2005-2015.

We will focus on the evaluation of the economic impact of the existing trade agreements, and the following FTAs that are not yet in force: the agreements with Japan, Singapore, Vietnam and Mexico. In Mexico, an existing FTA is already in place and the newly envisaged FTA is therefore an improvement in terms of coverage of the existing FTA.

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