International trade in the European Union

Abstract

The European Union stands as a remarkable example of regional economic and political integration, fostering trade relationships among its member states through committing to joint laws and policies. Despite all the EU’s successes, it faces constant challenges. This thesis combines three chapters and reflects upon various dimensions of international trade within the EU. By applying theory consistent structural gravity estimations this thesis sheds light on the influence of converging and diverging political preferences, environmental policies, and infrastructure investments on trade flows at both country and regional levels. The first chapter of this thesis examines the interdependence of the political and economic integration process by raising the question of how changes in the similarity in political preferences affect intra-EU trade integration. The findings of this chapter suggest that member states converging to the EU’s political mainstream experience a reduction in domestic trade and an increase in trade with other EU member states. Building on the results of chapter one, the second chapter delves into the question of whether differences in environmental policy preferences within the EU have given rise to “pollution havens”. This chapter provides evidence for binding multilateral environmental agreements successfully eliminating comparative advantages for emission-intensive industries. The third chapter of this thesis shifts the focus of revealed policy preferences to the effect of cohesion policy in the form of infrastructure investment. The results of this chapter reveal that improved infrastructure helps facilitate trade and promotes economic linkages of NUTS-2 regions thereby reducing persistent trade costs in the EU Single Market. The three chapters of this thesis thereby deepen the understanding of factors determining and promoting trade integration in the EU Single Market.