COVID-19 CHALLENGES FOR EU EXTRA AND INTRA-REGIONAL TRADE

Abstract

The current COVID-19 crisis will take a severe toll upon the world and the EU economy. Exports and imports between member-states account for around 30.6% of EU GDP (average value for the period 2007-2018) and some EU economies are particularly exposed to the crisis due to their strong trade and value chain linkages. The trade with the rest of the world also decreased by mid-March 2020, and Rotterdam’s traffic from China fell for 20% compared to the same period in 2019. This paper estimates the different impact of the intra- EU trade and extra-EU trade on EU GDP growth. By separating extra-EU trade flows from intra-EU trade flows and using cross-section fixed method, panel least squares for the period 2008-2018, we obtained results that confirm that trade exchange within EU has significantly higher effect on per capita economic growth in comparison with trade exchange with countries outside the EU (taking in consideration the sample of EU-27 countries, excluding Great Britain).The findings prove that the current measures proposed by the EU institutions are essential for sustaining the function of the Internal Market and for EU growth prospects. Despite all efforts to remain united against the rising global challenges under the COVID-19 crisis, the Union is growing further apart. The member-states are imposing restrains on the internal trade flows thus jeopardizing the achieved positive effects of trade liberalization. It is certain that the financial crisis from 2008 caused increased Euro scepticism. Therefore differences in national views and priorities must be taken into account in order to reach a democratic compromise within the EU that is going to be both effective and legitimate in order to confront the consequences of the COVID-19 pandemics. The solidarity among member-states is challenged once again.