Myopic or farsighted : bilateral trade agreements among three symmetric countries

We examine network formation via bilateral trade agreement (BTA) among three symmetric countries. Each government decides whether to form a link or not via a BTA depending on the differential of ex-post and ex-ante sum of real wages in the country. We model the governmental decision in two forms, myopic and farsighted and analyze the effects on the BTA network formation. First, we find that both myopic and farsighted games never induce the formation of star networks nor empty networks. Second, the networks resulting from myopic game coincides with those resulting from farsighted games.

Chapter 8 Location Choice of Japanese Multinationals: Country Characteristics or Region Characteristics?

In the present global era in which firms choose the location of their plants beyond national borders, location characteristics are important for attracting multinational enterprises (MNEs). The better access to countries with large market is clearly attractive for MNEs. For example, special treatments on tariffs such as the Generalized System of Preferences (GSP) are beneficial for MNEs whose home country does not have such treatments. Not only such country characteristics but also region characteristics (i.e. province-level or city-level ones) matter, particularly in the case that location characteristics differ widely between a nation's regions. The existence of industrial concentration, that is, agglomeration, is a typical regional characteristic. It is with consideration of these country-level and region-level characteristics that MNEs decide their location abroad. A large number of academic studies have investigated in what kinds of countries MNEs locate, i.e. location choice analysis. Employing the usual new economic geography model (i.e. constant elasticity of substitution (CES) utility function, Dixit-Stiglitz monopolistic competition, and ice-berg trade costs), the literature derives the profit function, of which coefficients are estimated using maximum likelihood procedures. Recent studies are as follows: Head, Rise, and Swenson (1999) for Japanese MNEs in the US; Belderbos and Carree (2002) for Japanese MNEs in China; Head and Mayer (2004) for Japanese MNEs in Europe; Disdier and Mayer (2004) for French MNEs in Europe; Castellani and Zanfei (2004) for large MNEs worldwide; Mayer, Mejean, and Nefussi (2007) for French MNEs worldwide; Crozet, Mayer, and Mucchielli (2004) for MNEs in France; and Basile, Castellani, and Zanfei (2008) for MNEs in Europe. At the present time, three main topics can be found in this literature. The first introduces various location elements as independent variables. The above-mentioned new economic geography model usually yields the profit function, which is a function of market size, productive factor prices, price of intermediate goods, and trade costs. As a proxy for the price of intermediate goods, the measure of agglomeration is often used, particularly the number of manufacturing firms. Some studies employ more disaggregated numbers of manufacturing firms, such as the number of manufacturing firms with the same nationality as the firms choosing the location (e.g., Head et al., 1999; Crozet et al., 2004) or the number of firms belonging to the same firm group (e.g., Belderbos and Carree, 2002). As part of trade costs, some investment climate measures have been examined: free trade zones in the US (Head et al., 1999), special economic zones and opening coastal cities in China (Belderbos and Carree, 2002), and Objective 1 structural funds and cohesion funds in Europe (Basile et al., 2008). Second, the validity of proxy variables for location elements is further examined. Head and Mayer (2004) examine the validity of market potential on location choice. They propose the use of two measures: the Harris market potential index (Harris, 1954) and the Krugman-type index used in Redding and Venables (2004). The Harris-type index is simply the sum of distance-weighted real GDP. They employ the Krugman-type market potential index, which is directly derived from the new economic geography model, as it takes into account the extent of competition (i.e. price index) and is constructed using estimators of importing country dummy variables in the well-known gravity equation, as in Redding and Venables (2004). They find that "theory does not pay", in the sense that the Harris market potential outperforms Krugman's market potential in both the magnitude of its coefficient and the fit of the model to be estimated. The third topic explores the substitution of location by examining inclusive values in the nested-logit model. For example, using firm-level data on French investments both in France and abroad over the 1992-2002 period, Mayer et al. (2007) investigate the determinants of location choice and assess empirically whether the domestic economy has been losing attractiveness over the recent period or not. The estimated coefficient for inclusive value is strongly significant and near unity, indicating that the national economy is not different from the rest of the world in terms of substitution patterns. Similarly, Disdier and Mayer (2004) investigate whether French MNEs consider Western and Eastern Europe as two distinct groups of potential host countries by examining the coefficient for the inclusive value in nested-logit estimation. They confirm the relevance of an East-West structure in the country location decision and furthermore show that this relevance decreases over time. The purpose of this paper is to investigate the location choice of Japanese MNEs in Thailand, Cambodia, Laos, Myanmar, and Vietnam, and is closely related to the third topic mentioned above. By examining region-level location choice with the nested-logit model, I investigate the relative importance of not only country characteristics but also region characteristics. Such investigation is invaluable particularly in the case of location choice in those five countries: industrialization remains immature in those countries which have not yet succeeded in attracting enough MNEs, and as a result, it is expected that there are not yet crucial regional variations for MNEs within such a nation, meaning the country characteristics are still relatively important to attract MNEs. To illustrate, in the case of Cambodia and Laos, one of the crucial elements for Japanese MNEs would be that LDC preferential tariff schemes are available for exports from Cambodia and Laos. On the other hand, in the case of Thailand and Vietnam, which have accepted a relatively large number of MNEs and thus raised the extent of regional inequality, regional characteristics such as the existence of agglomeration would become important elements in location choice. Our sample countries seem, therefore, to offer rich variations for analyzing the relative importance between country characteristics and region characteristics. Our empirical strategy has a further advantage. As in the third topic in the location choice literature, the use of the nested-logit model enables us to examine substitution patterns between country-based and region-based location decisions by MNEs in the concerned countries. For example, it is possible to investigate empirically whether Japanese multinational firms consider Thailand/Vietnam and the other three countries as two distinct groups of potential host countries, by examining the inclusive value parameters in nested-logit estimation. In particular, our sample countries all experienced dramatic changes in, for example, economic growth or trade costs reduction during the sample period. Thus, we will find the dramatic dynamics of such substitution patterns. Our rigorous analysis of the relative importance between country characteristics and region characteristics is invaluable from the viewpoint of policy implications. First, while the former characteristics should be improved mainly by central government in each country, there is sometimes room for the improvement of the latter characteristics by even local governments or smaller institutions such as private agencies. Consequently, it becomes important for these smaller institutions to know just how crucial the improvement of region characteristics is for attracting foreign companies. Second, as economies grow, country characteristics become similar among countries. For example, the LCD preferential tariff schemes are available only when a country is less developed. Therefore, it is important particularly for the least developed countries to know what kinds of regional characteristics become important following economic growth; in other words, after their country characteristics become similar to those of the more developed countries. I also incorporate one important characteristic of MNEs, namely, productivity. The well-known Helpman-Melitz-Yeaple model indicates that only firms with higher productivity can afford overseas entry (Helpman et al., 2004). Beyond this argument, there may be some differences in MNEs' productivity among our sample countries and regions. Such differences are important from the viewpoint of "spillover effects" from MNEs, which are one of the most important results for host countries in accepting their entry. The spillover effects are that the presence of inward foreign direct investment (FDI) aises domestic firms' productivity through various channels such as imitation. Such positive effects might be larger in areas with more productive MNEs. Therefore, it becomes important for host countries to know how much productive firms are likely to invest in them. The rest of this paper is organized as follows. Section 2 takes a brief look at the worldwide distribution of Japanese overseas affiliates. Section 3 provides an empirical model to examine their location choice, and lastly, we discuss future works to estimate our model.

Toward an inclusive and a little bit ethical world trading system : listening to the voices of the people in LDCs

Many specialists in international trade have started saying that the era of a mega FTA is approaching. If the three poles of the global economy, namely East Asia, EU and the United States, form mega FTAs, most of the volume of global trade will be covered. That may be fine, but there will be many countries left out of the mega FTA, most of which will be the least developed countries (LDCs). Since the inception of the Doha Development Agenda (DDA) negotiations in 2001, the WTO and its member countries have tried to include LDCs in the world trading system through various means, including DFQF and AfT. Although these means have some positive impact on the economic development of LDCs, most of the LDCs will never feel comfortable with the current world trading system. To overcome the stalemate in the DDA and to create an inclusive world trading system, we need more commitment from both LDCs and non-LDCs. To surmount the prolonged stalemate in the DDA, we should understand how ordinary people in LDCs feel and think about the current world trading system. Those voices have seldom been listened to, even by the decision makers of their own countries. So as to understand the situation of the people in LDCs, IDE-JETRO carried out several research projects using macro, meso and micro approaches. For the micro level, we collected and analyzed statements from ordinary people concerning their opinions about the world trading system. The interviewees are ordinary people such as street vendors, farmers and factory workers. We asked about where they buy and sell daily necessities, their perception of imported goods, export promotion and free trade at large, etc. These ‘voices of the people’ surveys were conducted in Madagascar and Cambodia during 2013. Based on this research, and especially the findings from the ‘voices of the people’ surveys, we propose a ‘DDA-MDGs hybrid’ strategy to conclude DDA negotiations and develop a more inclusive and a little bit more ethical world trading system. Our proposal may be summarized in the following three points. (1) Aid for Trade (AfT) ver. 2 Currently AfT is mainly focused on coordinating several aid projects related to LDCs’ capacity building. However, this is inadequate; for the proposed ‘DDA-MDGs hybrid’, a super AfT is needed. The WTO, other development agencies and LDC governments will not only coordinate but also plan together aid projects for trade capacity building. AfT ver. 2 includes infrastructure projects either gran aid, ODA loans and private investment. This is in accordance with the post-MDGs argument which emphasizes the role of the private sector. (2) Ethical Attitude Reciprocity is a principle of multilateral agreement, and it has been a core promise since GATT. However, for designing an inclusive system, special and differential treatment (S&D) is still needed for disadvantaged members. To compromise full reciprocity and less than full reciprocity, an ethical attitude on the part of every member is needed in which every member refrains from insisting on the full rights and demands of its own country. As used herein, the term ‘ethical’ implies more consideration for LDCs, and it is almost identical to S&D but with a more positive attitude from developed countries (super S&D). (3) Collect Voices of the People In order to grasp the real situation of the people, the voices of the people on free trade will continue to be collected in other LDCs, and the findings and leanings will be fed back to the WTO negotiation space.

Environmental provisions in Japanese regional trade agreements with developing countries

With the growing interest in environmental issues in the global community, recently concluded regional trade agreements (RTAs) have introduced environmental provisions. These RTAs will help achieve sustainable development at the intersection of trade liberalization and ever-increasing environmental concerns. However, environmental provisions are not incorporated into all RTAs. For example, Japanese RTAs often incorporate environmental issues only in the preamble or relevant articles. As the first step in examining the environmental provisions in RTAs, this paper focuses on the RTAs that Japan has concluded with developing countries. The main characteristic of environmental provisions in Japanese RTAs is that there are very few relevant provisions. All Japanese RTAs has neither environmental chapters nor side agreements. However, the attitude toward the environment in Japanese RTAs has gradually changed since the signing of the Japan-Chile EPA in 2007, in which a joint environmental statement was adopted. Although Japanese RTAs have environmental provisions, environmental problems originating from the RTAs may occur. One of the possible causes is a lack of environmental impact assessment. Japanese RTAs need to incorporate an environmental impact assessment system in order to identify environmental problems resulting from its RTAs, and to enable the country to take appropriate measures at the appropriate time.

Service liberalization in Lao PDR

Service liberalization is emerging as a high-priority issue in various parts of the world for mega free trade agreements as well as national policy. Lao PDR is no exception. To examine the level of service liberalization in Lao PDR, we first compare the Hoekman Indices of Lao PDR, Cambodia, and Vietnam on the ASEAN Framework Agreement on Services (AFAS 8). Lao PDR has lower commitment in many subsectors. In particular, we list the sectors in which Lao PDR made a lower commitment than Cambodia and Vietnam in Mode 3 (supply of services through commercial establishments abroad). Second, a simulation analysis using the Geographical Simulation Model (IDE-GSM) from the Institute of Developing Economies at the Japan External Trade Organization (IDE-JETRO) reveals how service liberalization benefits the economic development of Lao PDR. The two analyses clearly reveal that it is essential for Lao PDR to promote further service liberalization since such liberalization will contribute to the country's development.

Accession clause of TPP : Is it really open?

One of the most important policy questions relating to the future impact of the Trans-Pacific Partnership on the global and regional economy is whether other countries in the region, particularly China, will join the partnership. While several commentators have made some observations regarding the future prospects of TPP expansion, little scholarly analysis has been conducted. To go beyond the speculation of a certain country's accession to TPP, we first attempt to generalize the issue before moving on to a specific question. We conduct a comparative analysis of a large number of regional trade agreements for a better understanding of the parameters of RTAs that are critical for membership expansion. This general framework enables us to conduct a systematic examination of specific membership expansion cases, such as China's membership in TPP. The paper also proposes a necessary "accession practice" that truly facilitates new members' participation.

Metodología para medir los efectos de la aplicación de estándares sobre la industria de los medios de pagos en el mercado chileno

Cada vez juegan un rol más relevante en nuestra vida las tecnologías de información, desde nuestros hogares hasta las empresas y gobiernos acceden a grandes volúmenes de datos e información, las comunicaciones ya no tienen impedimentos de distancias, un comprador y un vendedor puede estar en cualquier lugar, un producto que es adquirido en un comercio en Santiago a través de un medio de pago (tarjeta de crédito) en menos de un segundo la transacción va desde Chile a solicitar autorización en Singapur para ser aprobada. En la sociedad tanto oferentes como demandantes cuentan con información disponible en línea para la toma de decisiones. Existe una mayor apertura e integración económica iniciada con las redes comerciales, donde existen enfoques regionales y multilateral, que han impulsado la apertura del comercio y la integración económica. Son múltiples los tratados de libre comercio que apoyan al desarrollo económico, donde las crisis mundiales han afectado tanto las economías como el transporte, considerando que en el comercio internacional cerca del 90% se desarrolla a través de los puertos, es importante identificar relaciones entre el desarrollo de los medios de pago y el comercio electrónico a través de los puertos. Nuestra investigación busca integrar tanto aspectos de investigación científica como como investigación aplicada, de modo que sea un aporte al día a día de empresas en el sector de los medios de pago en Chile y quienes diseñan y definen la aplicación de normas y estándares. Esta tesis plantea una metodológica para analizar las relaciones entre la aplicación de estándares y sus efectos en la industria de los medios de pago en Chile. Este trabajo de investigación nos permitirá identificar entorno, variables que intervienen y evolución del mercado de los medios de pago, a través de un relevamiento del estado del arte de los medios de Pago en la industria Bancaria chilena. Buscaremos en el mercado de los medios de pago en la industria Chilena - sector Bancario, relaciones entre la aplicación de estándares y sus efectos en los volúmenes transaccionales, analizaremos las tendencias de los medios de pago y el desarrollo comercial del Puerto de Valparaíso. Se busca a través de esta metodológica poder mejorar la toma de decisiones en la industria de los medios de pago en Chile con una mejor gestión y uso de recursos. Every day information technology plays a greater role in our lives, from our homes to businesses, to how governments access large volumes of data and information. Communication is no longer hindered by distances, as a buyer and seller can be anywhere. A product that is purchased in a shop in Santiago through a payment option (credit card) in less than a second, a transaction will request authorization from Chile to Singapore to be approved. In this society both buyers and sellers have access to online information that is available for decision making. There is greater openness and economic integration that has begun within the commercial networks, in which there are regional and multilateral approaches that has helped expand trade and economic integration. Likewise, there are numerous free trade agreements that support economic development; however, the global crisis has affected economies like transportation. In regards to international commerce about 90% is developed through the ports, considering that the former is important to identify the relationships between the development of the payment options and e-commerce at the ports. Our research aims to integrate both the scientific research and applied research aspects, so that this will be a contribution to the day to day business for the payment options in Chile, and for those who design and define the application of norms and standards. This thesis offers a methodology to analyze the relationships between the application of standards and its affects in the industry of payment options in Chile. This research will allow us to identify the environmental variables that intervene and evolve the market of the payment options, through the analysis of the state of the art in the payment options in the Chilean Banking industry. In the market of the payment industry options we have looked specifically at the Chilean Banking industry and the relationship between the application of standards and their impact on transaction volumes. In addition, there has been an analysis of the activity of the payment options and wire transfers in the maritime industry in Valparaíso in order to define the feasibility of a model that allows us to relate these effects in these markets and the application of standards. We have searched the Chilean banking industry for the relationships between the application of standards and its effect on transaction volumes, in order to analyze the trends in the payment options and the commercial development at the Port of Valparaiso. Therefore, through the use of this methodology we look to be able to make better decisions in the payment options industry in Chile, with better management and use of the resources.

O uso de medidas antidumping como mecanismo de barreira à entrada no mercado brasileiro

As medidas antidumping são uma exceção ao livre comércio e como tal deveriam ser usadas com restrição. No entanto, desde o GATT 1947 há preocupação com o uso abusivo de tais medidas, podendo ser o mecanismo utilizado não apenas para possibilitar a recuperação da indústria doméstica prejudicada pelas importações objeto de dumping, objetivo do Acordo Antidumping (AAD), mas com o fim de proteger a indústria nacional da concorrência estrangeira. Desta forma, o objetivo do presente trabalho é apresentar as principais características do AAD firmado ao final da Rodada Uruguai que culminou na constituição da Organização Mundial do Comércio (OMC), incluindo seus antecedentes históricos e a possibilidade de aplicação discricionária, demonstrando como uma norma surgida no plano internacional em decorrência de um acordo multilateral vem sendo utilizada pelo Brasil, com a finalidade de se demonstrar a possibilidade de uso das medidas antidumping como barreira à entrada no mercado brasileiro. Confirmada a possibilidade de uso abusivo desse instrumento de defesa comercial, ainda que no plano teórico, uma vez que não é possível analisar os efeitos reais das medidas aplicadas, serão apresentadas as formas de contrabalanço ao protecionismo atualmente existentes no próprio AAD e sua incorporação e utilização pelo Brasil bem como a possibilidade de questionamento de tais medidas como práticas anticompetitivas com fundamento na legislação antitruste perante as autoridades de defesa da concorrência. Serão ainda analisadas outras possibilidades de contrabalanço ao uso exacerbado das medidas antidumping em debate e viabilidade das mesmas no cenário atual em que se verifica, de um lado, o aumento de uso de tais medidas pelos países Membros da OMC, destacando-se o Brasil e, de outro lado, impasse nas negociações multilaterais, cabendo aos Membros tomarem decisões unilaterais sobre a aplicação de tais medidas, seu grau de intensidade e forma de aplicação a depender da proteção que se pretende garantir à indústria nacional.

The Judicial Dimension of the European Neighbourhood Policy. EU Diplomacy Paper 08/2013, November 2013

In this paper, the expression “neighbourhood policy” of the European Union (EU) is understood in a broad way which includes the members of the European Free Trade Association (EFTA) contracting parties to the European Economic Area (EEA), the EFTA State Switzerland, candidate states, the countries of the European Neighbour-hood Policy (ENP), and Russia. The European Court of Justice (ECJ) is the centre of gravity in the judicial dimension of this policy. The innermost circle of integration after the EU itself comprises the EFTA States who are party to the European Economic Area. With the EFTA Court, they have their own common court. The existence of two courts – the ECJ and the EFTA Court – raises the question of homogeneity of the case law. The EEA homogeneity rules resemble the ones of the Lugano Convention. The EFTA Court is basically obliged to follow or take into account relevant ECJ case law. But even if the ECJ has gone first, there may be constellations where the EFTA Court comes to the conclusion that it must go its own way. Such constellations may be given if there is new scientific evidence, if the ECJ has left certain questions open, where there is relevant case law of the European Court of Human Rights or where, in light of the specific circumstances of the case, there is room for “creative homogeneity”. However, in the majority of its cases the EFTA Court is faced with novel legal questions. In such cases, the ECJ, its Advocates General and the Court of First Instance make reference to the EFTA Court’s case law. The question may be posed whether the EEA could serve as a model for other regional associations. For the ENP states, candidate States and Russia this is hard to imagine. Their courts will to varying degrees look to the ECJ when giving interpretation to the relevant agreements. The Swiss Government is – at least for the time being – unwilling to make a second attempt to join the EEA. The European Commission has therefore proposed to the Swiss to dock their sectoral agreements with the EU to the institutions of the EFTA pillar, the EFTA Surveillance Authority (ESA) and the EFTA Court. Switzerland would then negotiate the right to nominate a member of the ESA College and of the EFTA Court. The Swiss Government has, however, opted for another model. Swiss courts would continue to look to the ECJ, as they did in the past, and conflicts should also in the future be resolved by diplomatic means. But the ECJ would play a decisive role in dispute settlement. It would, upon unilateral request of one side, give an “authoritative” interpretation of EU law as incorporated into the relevant bilateral agreement. In a “Non-Paper” which was drafted by the chief negotiators, the interpretations of the ECJ are even characterised as binding. The decision-making power would, however, remain with the Joint Committees where Switzerland could say no. The Swiss Government assumes that after a negative decision by the ECJ it would be able to negotiate a compromise solution with the Commission without the ECJ being able to express itself on the outcome. The Government has therefore not tried to emphasise that the ECJ would not be a foreign court. Whether the ECJ would accept its intended role, is an open question. And if it would, the Swiss Government would have to explain to its voters that Switzerland retains the freedom to disregard such a binding decision and that for this reason the ECJ is not only no foreign court, but no adjudicating court at all.

Trade policy issues in the Wider Europe – that led to war and not yet to peace. CEPS Working Document No. 398, July 2014

This paper looks at the trade policy landscape of the EU and the wider Europe, with a focus on issues arising from the signature on 27 June 2014 of Deep and Comprehensive Free Trade Agreements (DCFTAs) between the EU and three East European countries (Georgia, Moldova and Ukraine), and actual or prospective issues relating to the customs union of Belarus, Russia and Kazakhstan (BRK), and the Eurasian Economic Union whose founding treaty was signed on 29 May 2014. The huge expansion of intercontinental free trade area negotiations currently underway, in which the EU is an active participant alongside much of the Americas and Asia, stands in contrast with Russia’s choice to restrict itself to the Eurasian Economic Union, which is only a marginal extension of its own economy. Alone among the major economies in the world, Russia does not seek to integrate economically with any major economic bloc, which should be a matter of serious concern for Moscow. Within the wider Europe, the EU’s DCFTAs with Ukraine, Moldova and Georgia are a major new development, but Russia now threatens trade sanctions against Ukraine in particular, the economic case for which seems unfounded and whose unilateral application would also impair the customs union. The Belarus-Russia-Kazakhstan customs union itself poses several issues of compatibility with the rules of the WTO, which in turn are viewed by the EU as an impediment to discussing possible free trade scenarios with the customs union, although currently there are far more fundamental political impediments to any consideration of such ideas. Nonetheless, this paper looks at various long-term scenarios, if only as a reminder that there could be much better alternatives to the present context of conflict around Ukraine.

The Impact of TTIP: The underlying economic model and comparisons. CEPS Special Report No. 93/13 October 2014. [TTIP Series No. 1]

What are the economic and other impacts of the Transatlantic Trade and Investment Partnership? At the request of the European Parliament, CEPS has provided an appraisal of the TTIP Impact Assessment carried out by the European Commission, with special elaboration of the underlying economic model. The methodology applied by the Centre for Economic Policy Research (CEPR) for this economic modelling is analysed in depth, together with the assumptions used to make TTIP amenable to an economic appraisal. The research paper also compares the IA on TTIP with selected previous empirical economic assessments of EU trade agreements and with a set of alternative studies on TTIP itself. In reading our findings, two central caveats should be kept in mind that affect any analysis of the CGE model included in the European Commission’s Impact Assessment. First, TTIP is a rather unusual bilateral trade agreement; and second, TTIP is so wide-ranging that an alternative approach, such as the so-called ‘partial’ (equilibrium) approach – already a second-best solution – would be totally inappropriate to the case under examination.

Transnistria – Where to? EPC Policy Brief, 13 March 2014

At the Vilnius summit of the Eastern Partnership in November 2013, Moldova initialled its Association Agreement with the EU, including a Deep and Comprehensive Free Trade Area (DCFTA) agreement, and is expected to sign the documents before the end of August 2014. Meanwhile, Russia has increased its presence and pressure in the region, as a consequence of which Armenia declined the AA and DCFTA with the EU and Ukraine, after months of protests and political paralysis, now has part of its territory occupied by Russia. Moldova is no exception to Russian pressure. As the country gets closer to upgrading relations with the EU, Russia has increased its activities in Moldova, including in the autonomous region of Gagauzia and in the breakaway region of Transnistria. Even though the “5+2” negotiations for the settlement of the Transnistria conflict continue, the number of incidents in and around this region have increased. The window of opportunity created by the involvement of Germany in the settlement of the conflict and the restart of the “5+2” negotiations in late 2011 seems to have closed. Given the recent events in the region and in Moldova/Transnistria, including the potential impact of DCFTA and visa liberalisation, Chisinau finds it increasingly difficult to manage the juggling act between its EU commitment and dialogue with Tiraspol. This Policy Brief presents the background, state of play and prospects of the Transnistria conflict while also focusing on the potential impact of Moldova’s Association Agreement with the EU on the settlement of the conflict.

Moldova – Heading into a hot autumn. EPC Policy Brief, 6 October 2014

After four years of negotiations, Moldova signed an Association Agreement (AA) including a Deep and Comprehensive Free Trade Area (DCFTA) Agreement with the European Union (EU) on 27 June 2014. Ratified in the Moldovan Parliament on 2 July it came into provisional application on 1 September. While this development represents an important milestone in Moldova’s relations with the EU, the journey has not been easy. Russia has increased its presence and pressure in the region, as the country gets closer to bettering relations with the EU, Russia has increased its activities in Moldova, including in the autonomous region of Gagauzia and in the breakaway region of Transnistria. Alongside pressure from Russia, the next few months will be very politically challenging for Moldova, with internal and external developments continuing to shape Moldova’s future. Not only will Chisinau need to move ahead with the difficult and expensive implementation of the DCFTA, the ruling coalition simultaneously needs to campaign for the elections with very importantly, a united front. In this Policy Brief, Amanda Paul presents the state of play and the prospects of Moldova since signing the Association Agreement with the EU and explores the effects of Russian bans on exports and services, access to energy and trade as well as the role of the EU

Helping Moldova stay on the EU course. Proposals for a real 'more for more' approach. EPC Policy Brief, 11 December 2013

At the Vilnius Eastern Partnership (EaP) Summit in November, Moldova initialled its Association Agreement including a Deep and Comprehensive Free Trade Area (DCFTA) with the EU and became the first EaP country to meet all the requirements of their Visa Liberalisation Action Plan. 2014 may prove to be a make or break year for Moldova, with Chisinau facing a number of serious challenges. From the EU’s point of view, it could also prove to be a make or break year for the Eastern Partnership. The period following Vilnius should be a soul-searching time for the EU. Of the three pillars (AA, DCFTA, visa regime) of the Eastern Partnership, two are now being openly challenged by Russia. While the EU should not engage in a populist competition with Russia, it does need to adapt its actions to the realities on the ground. In this Policy Brief, Cristian Ghinea, Amanda Paul and Victor Chirila argue that the EU should work for greater visibility, better public diplomacy and deliver visible, tangible benefits to the Moldovan population as rapidly as possible. Not only will this help counter Russian activities, but it will also help shore up support for pro-EU reformers in the country.

Russia goes on the offensive ahead of the Eastern Partnership summit in Vilnius. OSW Commentary No. 115, 30.09.2013

In recent weeks, Russia has stepped up its efforts to prevent a group of former Soviet republics from tightening their relations with the European Union. The intensification of these efforts comes ahead of the upcoming Eastern Partnership summit, scheduled to take place in Vilnius on 28-29 November. It is expected that during the summit Kiev will sign the EU-Ukraine Association Agreement (AA) initialled in March 2012, including an agreement for a Deep and Comprehensive Free Trade Area (DCFTA). Meanwhile, Moldova, Armenia and Georgia are expected to initial similar documents, effectively accepting their terms and conditions, and paving the way for their official signing in the near future. Moscow has always viewed the relations between the EU and the post-Soviet states as a threat to its own influence in the region. Consequently, any attempts to tighten these relations have been actively opposed by Russia. The EU’s Eastern Partnership programme, launched in 2009, has posed a particular challenge to Moscow’s policies in the region.. Russia responded by rolling out a Eurasian integration project, which began in 2010 with the establishment of the Customs Union of Russia, Kazakhstan and Belarus, and is expected to culminate in the establishment of the Eurasian Economic Union by 2015. Moscow’s overarching objective has been to persuade the countries in the region, especially Ukraine, to adopt an unambiguously pro-Russian geopolitical stance and to join the integration project proposed by the Kremlin. The Russian government hopes that this would permanently place these states in Moscow’s sphere of influence and at the same time prevent them from developing closer relations with Brussels. Russia has regularly taken actions aimed at showcasing the benefits of integration with the Customs Union (particularly, by promising preferential pricing of Russian energy resources) and at the same time it has adopted measures highlighting the pitfalls of retaining a pro-European orientation (mainly by imposing occasional trade sanctions). The upcoming summit in Vilnius, during which Ukraine, Moldova, Armenia and Georgia could lock themselves on to a pro-European course, has spurred Moscow to intensify its efforts to torpedo a successful outcome of the Vilnius meeting, with a view to slowing down or even blocking the possibility of closer cooperation between the EU and the former Soviet republics.