Turkey has been deeply integrated with the EU, its largest trading partner, particularly following the Customs Union agreement
in 1996. However, the free trade agreements (FTAs) signed by the EU with third party countries may create some unfair competitive
pressures, market share and welfare losses for Turkey. This study investigates the impact of the FTA signed by Algeria and
the EU in 2005 on Turkey's trade flows. Covering 181 countries, a difference-in-differences analysis embedded in an extended
gravity framework is employed to quantify the trade effects of the EU-Algeria FTA for the period of 1996–2013. Our findings
suggest that bilateral trade between Turkey and Algeria is affected adversely due to the FTA. The counterfactual analysis
shows that Turkish exports and imports to/from Algeria could have been 12 and 17 percent higher, respectively, had there been
no FTA between the EU and Algeria.
JEL-Codes:F14 F15 F41
Keywords:FTA, Turkey, Customs union, Gravity model
Forschungsbereich:Industrie-, Innovations- und internationale Ökonomie