The Effects of European Integration on the Stability of International Trade: A Duration Perspective

I examine the effects European integration has had on intra-EU trade relationships between 1962 and 2005. I find that the stability of intra-EU trade relationships as reflected by their duration has been negatively affected by the persistent integration with duration decreasing and the hazard of trade ceasing increasing. The 1986 and 1995 expansions as well as the creation of the economic union in 1999 reduced the hazard, but not by a large enough magnitude to offset the increased hazard due to earlier integration actions. On the whole, intra-EU relationships have become shorter. This is largely due to the reduction in trade costs brought about by integration, which has enabled a plethora of short and previously cost-prohibitive relationships. This conclusion is supported by the tremendous growth of new relationships under the various incarnations of the European Union