Exports in a Tariff-Free Environment: What Structural Reforms Matter? Evidence from the European Union Single Market
IMF Working Papers, August 3, 2015
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- Exports in a Tariff-Free Environment: What Structural Reforms Matter? Evidence from the European Union Single Market
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Bibliographic details
- Authors: Jesmin Rahman, Ara Stepanyan, Jessie Yang, Li Zeng
- Published: August 3, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513552170.001
Summary findings
- Investigation focuses on export performance of new member states in the European Union single market, which serves as a natural control for a barrier-free environment.
- Structural reforms are highlighted as key drivers of export performance, particularly:
- higher education,
- skills upgrade,
- wage structure’s ability to provide incentives to work,
- foreign investment environment.
- Establishing links with supply chains is important and depends additionally on:
- better institutions,
- better infrastructure.
- New member states are at varying levels of quality and integration, implying the need for country-specific policy priorities.
- Services trade in the EU market faces significant non-tariff barriers even after the implementation of the Services Directive, indicating considerable room for growth given comparative advantages of some new member states.
Policy implications and recommendations
- Prioritize structural reforms in:
- higher education systems to improve human capital,
- skills upgrading to match export sector needs,
- wage-setting mechanisms to strengthen work incentives,
- improving the foreign investment environment to attract FDI.
- Strengthen institutions and infrastructure to facilitate integration into supply chains.
- Design country-specific reform agendas reflecting differing levels of export quality and integration across new member states.
- Address non-tariff barriers in services to unlock service export potential, acknowledging remaining impediments despite the Services Directive.
Additional analysis highlights
- The single market environment provides a controlled context to isolate the role of structural reforms on exports in largely tariff-free settings.
- Comparative advantage in services for some new member states suggests targeting services-sector reforms could yield export gains.