Conquering the EU market with new comprehensive trade agreements –simulating DCFTAs between the EU and neighbour countries

The EU has undertaken considerable efforts of establishing Deep and Comprehensive Trade Agreements (DCFTAs). The EU DCFTAs go beyond tariff liberalisation, specifically targeting “behind the border” measures, commonly referred to non-tariff measures (NTMs). While offering benefits, the contents and implementation of the DCFTAs has been controversially discussed, and this paper investigates whether DCFTAs will actually help partner countries to sell their products on the EU market. For the analysis, the general equilibrium model MAGNET (Modular Applied General Equilibrium Tool) is applied in a recursive dynamic general equilibrium framework. In the simulation, DCFTAs are depicted in terms of a tariff liberalisation and the elimination of NTMs between the EU and DCFTA partners. The latter represents the regulatory orientation towards the EU, whereby the standard “ice-berg costs” approach is implemented in the simulation. The simulation results show that the DCFTA partner countries will not equally benefit from increased trade with the EU. In particular small DCFTA partners do not seem to be able to tap into the potential of the improved trading relations without the DCFTA. Other DCFTA partners however will be able to considerably increase their export to the EU, and in this sense they will conquer the EU market.