M.H. Kuiper

EU Agricultural Trade Relations with Asian countries

This report investigates the possible effects of a Free Trade Area between the European Union and its three main trading partners: India, South Korea and the Association of South East Asian Nations (ASEAN) countries, focusing on the agricultural sector. The report includes an analysis of the ongoing bilateral negotiations and bilateral trade flows based on trade policy (at tariff line level), comparative advantages assessment and a modeling analysis of the implications of preferential liberalization in both, a CGE (LEITAP, modified version of the GTAP model) and a partial equilibrium context (PEATSim model). Results show that the overall level of agri-food production in Asian countries is driven by income and population growth, main determinants of increase in demand particularly in India. Different degrees of liberalization in bilateral agricultural and food trade do not significantly affect the total amount of agricultural production in Asian countries and the EU, however, it leads to trade creation and trade diversion effects. Bilateral trade between EU and the Asian countries tend to increase (trade creation) whilst Asian exports to third countries tend to diminish (trade diversion). The implementation of the different policy options (partial and full liberalization) determines a decline in EU overall imports due to the prevailing effect of trade diversion over trade creation. ASEAN imports and export from/to the EU grow considerably under the liberalization scenarios determining a positive net trade of 22 billion euro for the agri-food sector. Under full liberalization scenario Indian agri-food exports to the EU grow by 4 billion reaching almost 6.3 billion . Indian agri-food imports grow even faster from 0.2 up to 19 billion . The value of South Korean agri-food exports to the EU grows from 46 million in the baseline to 4.9 billion under the full liberalization. Total European agri-food exports expand by almost 11% from partial to the full liberalisation scenario.