TITLE:
Impact of the Association Agreement with the EU on Imports into Tunisia an Estimation of the Gravity Model
AUTHORS:
Jihene Yemmen, Mohamed Miras Marzouki
KEYWORDS:
Tunisia-EU Integration, Association Agreement 1995, Trade Creation, Trade Diversion, Effects of Integration, Gravity Model, Panel Data
JOURNAL NAME:
Modern Economy,
Vol.15 No.2,
February
28,
2024
ABSTRACT: The paper aims to provide a rational and objective assessment of the
impact of trade integration between Tunisia and the European Union on imports
of industrial products, following the 1995 Association Agreement. In this
study, we adopt a multi-step approach. After an analysis of the stylized facts,
a gravity model is applied and estimated in several variants to assess the
determinants of trade. The results obtained are used to calculate creation and
diversion of trade between Tunisia and the European Union. We achieved the following
main results: coefficients of the traditional variables of the gravity model
have generally expected signs; customs tariffs, transport costs which are measured by distance, good governance, tend to
influence the development of bilateral trade flows. The free zone-trade
between Tunisia and the EU has not been favorable for Tunisia and has a
negative impact on the Tunisian economy because the effects of trade diversion
are more important than trade creation
effects. The findings from of this study may prompt policymakers to open
up to other markets and consider diversifying them. They may also lead to the
establishment of a stand-by arrangement, the revision of the 1995 Association
Agreement and above all, the use of the WTO safeguard clause as an emergency measure to cope with this rapid
increase in imports, particularly from certain trading partners, and to
avoid traffic detour to the benefit of European products and to the detriment
of products from the rest of the world. This article presents for the first
time a quantification of the creation value and trade detour at constant price
in Tunisia using an in-depth empirical analysis, and thus contributes to the
existing literature studying the impact of the Association Agreement between
Tunisia and the EU.