@TechReport{dp-681,
  author   = {Gnutzmann, Hinnerk, Gnutzmann-Mkrtchyan, Arevik and Korn, Tobias},
  astring  = {Hinnerk Gnutzmann and Arevik Gnutzmann-Mkrtchyan and Tobias Korn},
  title    = {Consequences of FTA Withdrawal: Evidence from 'Uxit'},
  month    = {January},
  year     = {2021},
  pages    = {49},
  size     = {670},
  number   = {681},
  language = {en},
  keywords = {free trade agreement, withdrawal, gravity, European Union, Estonia, Ukraine},
  jelclass = {F14, F14, F15, F17},
  abstract = {We use a unique case study to estimate the effect of withdrawing from a free trade agreement on international trade. Lately, the political opposition to international economic cooperation has been on the rise, but little is known about how the withdrawal from a trade agreement affects trade. We analyze a quasi-natural experiment to provide first empirical evidence. In 2004, Estonia joined the European Union, which mandated that it withdraws from its FTA with Ukraine (``Uxit''). Based on the gravity model of international trade, we provide evidence from triple difference--in--differences as well as PPML panel estimations that trade volumes between Estonia and Ukraine fell by more than 20%. We find that withdrawing an FTA revokes all benefits and that no institutional memory is left behind. General equilibrium estimates suggest that FTA withdrawal led to a noticeable loss in welfare of members.}
}