Europe's New Approach to Trade Policy

Based on simulations with the KITE model, three scenarios are analysed:

1. a sectoral trade agreement with the USA,
2. the deepening of existing free trade agreements and
3. the conclusion of new free trade agreements with partners such as India, Australia, or Mercosur.

It can be seen that while an agreement limited to the USA has hardly any macroeconomic effects, both scenario 2 and scenario 3 lead to robust GDP and export growth – particularly in knowledge-intensive sectors. The strongest effects, however, arise from a combination of both strategies, although the effect for Austria would be somewhat smaller because Austria's economic structure is more oriented towards existing EU trading partners and traditional markets. Trade diversification is thus not a technical detail, but a central instrument of European resilience policy.