The Trade Potential of Infrastructure Partnerships: The Case of EU Global Gateway

Central European Economic Journal

Volume 11 (2024): Issue 58 (January 2024)

By:

André Wolf

and Eleonora Poli

Open Access

|Nov 2024

Figures & Tables

Steps of the analysisSource: own illustration

Shares of Global Gateway countries in EU imports by world regionSource: UN Comtrade (2024); own calculations.

Averages of infrastructure indices for Global Gateway countries by world regionSources: World Bank (2019;2024a,b); IRF (2023); WEF (2020); own calculations. Transport index: No values for Melanesia.

Effects of Global Gateway scenarios on EU imports – Scenario: general strengtheningSource: own calculations

Effects of Global Gateway scenarios on EU imports – Scenario: development focusSource: own calculations

Spatial concentration of external EU suppliersSource: own calculations.

List of variables and data sources

Variable name	Description	Data source
Trade flow measures
trade_{p=base materials}	Bilateral trade volumes in HS chapters inorganic chemicals (HS-Code: 28), iron and steel (72), articles of iron or steel (73), copper articles (74), nickel articles (75), aluminium articles (76), lead articles (78), zinc articles (79), tin articles (80), other base metals (81)	UN Comtrade (2024)
trade_{p=mechanical machinery}	Bilateral trade volumes in HS chapter 84	UN Comtrade (2024)
trade_{p=electric equipment}	Bilateral trade volumes in HS chapter 85	UN Comtrade (2024)
trade_p=vehicles	Bilateral trade volumes in HS chapters 87.88. and 89	UN Comtrade (2024)
Trade partner size measures
mass_i	Exporter supply potential: value added in medium- and high-tech manufacturing + total imports of base materials, mechanical machinery, electric equipment, vehicles	World Bank (2024a); UN Comtrade (2024)
mass_j	Importer demand potential: GDP + total imports of base materials, mechanical machinery, electric equipment, vehicles	World Bank (2024a); UN Comtrade (2024)
pop	Population size	World Bank (2024a)
area	Land area	World Bank (2024a)
Bilateral trade cost measures
dist	Great-circle distance (see Mayer & Zignago, 2011)	CEPII (2024)
bord	Existence of common border (dummy)	CEPII (2024)
lang	Existence of common official language (dummy)	CEPII (2024)
col	Existence of former colonial relation (dummy)	CEPII (2024)
tariff	Weighted average of (product-group) specific tariffs	UNCTAD (2024)
rta	Existence of joint trade agreement (dummy)	Larch (2024)
*Infrastructure measures: transport (trans)*
quality of trade-infrastructure	Perceived quality of transport- and trade related infrastructure (Pillar from Logistics Performance Index)	World Bank (2024a)
road quality	Perceived quality of roads (survey)	WEF (2020)
road network density	Relation of road length to land area	IRF (2024)
share of paved roads	Relation of length of paved roads to total road length	IRF (2024)
access to electricity	Share of population with access to electricity	World Bank (2024a)
*Infrastructure measures: ict (ict)*
broadband subscriptions	Share of population with broadband subscriptions	World Bank (2024a)
telephone subscriptions	Share of population with telephone subscriptions	World Bank (2024a)
internet users	Share of population using the internet	World Bank (2024a)
mobile subscriptions	Share of population with mobile subscriptions	World Bank (2024a)
secure internet servers	Number of secure internet servers per 1 million people	World Bank (2024a)
*Infrastructure measures: political-legal institutions (pol)*
political stability	Perceived protection against political instability and/or politically-motivated violence, including terrorism	World Bank (2024b)
government effectiveness	Perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies	World Bank (2024b)
regulatory quality	Perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development	World Bank (2024b)
control of corruption	Perceived protection against the risk that public power is exercised for private gain, including both petty and grand forms of corruption, as well as “capture” of the state by elites and private interests	World Bank (2024b)
rule of law	Perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence	World Bank (2024b)
*Infrastructure measures: administrative burden – trade (tradeburd)*
time to export: border compliance	Time associated with compliance with the economy’s customs regulations and with regulations relating to other inspections related to the export process	World Bank (2019)
time to export: documentary compliance	Time associated with compliance with the documentary requirements related to the export process	World Bank (2019)
time to import: border compliance	Time associated with compliance with the economy’s customs regulations and with regulations relating to other inspections related to the import process	World Bank (2019)
time to import: documentary compliance	Time associated with compliance with the documentary requirements related to the import process	World Bank (2019)
*Infrastructure measures: administrative burden - business formation (entry)*
business formation: costs	Cost of business start-up procedures	World Bank (2019)
business formation: procedures	Start-up procedures to register a business	World Bank (2019)
business formation: time	Time required to start a business	World Bank (2019)

Estimation results gravity model – alternative specifications (outcome equations)

	Dependent variables
	ln(trade_{base materials})				ln(trade_{mechanical machinery})
	Specification 1		Specification 2		Specification 1		Specification 2
	Estimate	t-value	Estimate	t-value	Estimate	t-value	Estimate	t-value
ln(trans_it-1)	1.970	14.096***			1.498	14.885***
ln(ict_it-1)	1.446	14.690***			0.801	11.310***
ln(pol_it-1)	1.125	7.706***			2.448	23.398***
ln(tradeburd_it-1)	−0.156	−14.363***			−0.180	−23.585***
ln(trans_it-2)			2.022	12.463***			1.535	12.922***
ln(ict_it-2)			1.367	12.193***			0.761	9.391***
ln(pol_it-2)			0.817	4.909***			2.331	19.480***
ln(tradeburd_it-2)			−0.137	−10.767***			−0.173	−19.561***
adj. R²	0.589		0.591		0.736		0.734
no. observations	19,699		14,381		19,699		14,381

Simulated impact of a 50 % drop in Chinese exports on EU imports

	Scenario
	Situation 2022		General strengthening		Development focus
Product group	Direct effects	Indirect effects	Direct effects	Indirect effects	Direct effects	Indirect effects
Base materials	−2.82 %	−3.59 %	−2.83 %	−4.15 %	−2.80 %	−4.09 %
Electric equipment	−15.46 %	−5.92 %	−15.56 %	−6.59 %	−15.38 %	−6.29 %
Mechanical machinery	−9.36 %	−4.63 %	−9.41 %	−5.17 %	−9.31 %	−5.01 %
Vehicles	−3.04 %	−3.22 %	−3.06 %	−3.64 %	−3.04 %	−3.46 %

List of Global Gateway countries

Country code	World region	Country code	World region
AGO	Middle Africa	MAR	Northern Africa
ALB	Southern Europe	MAR	Northern Africa
ARG	South America	MDA	Eastern Europe
ARM	Western Asia	MDG	Eastern Africa
BDI	Eastern Africa	MEX	Central America
BEN	Western Africa	MKD	Southern Europe
BGD	Southern Asia	MNG	Eastern Asia
BRA	South America	MOZ	Eastern Africa
BRB	Caribbean	MRT	Western Africa
CHL	South America	MWI	Eastern Africa
CIV	Western Africa	MYS	Southeastern Asia
CMR	Middle Africa	NAM	Southern Africa
COD	Middle Africa	NER	Western Africa
COG	Middle Africa	NGA	Western Africa
COL	South America	PAK	Southern Asia
CPV	Western Africa	PAN	Central America
CRI	Central America	PER	South America
DJI	Eastern Africa	PHL	Southeastern Asia
DOM	Caribbean	PNG	Melanesia
ECU	South America	RWA	Eastern Africa
EGY	Northern Africa	SEN	Western Africa
ETH	Eastern Africa	SOM	Eastern Africa
GEO	Western Asia	TCD	Middle Africa
GHA	Western Africa	THA	Southeastern Asia
GMB	Western Africa	TJK	Central Asia
GNB	Western Africa	TUN	Northern Africa
IDN	Southeastern Asia	TZA	Eastern Africa
IND	Southern Asia	UGA	Eastern Africa
IRQ	Western Asia	UKR	Eastern Europe
ISR	Western Asia	URY	South America
JAM	Caribbean	VNM	Southeastern Asia
JOR	Western Asia	ZAF	Southern Africa
JPN	Eastern Asia	ZMB	Eastern Africa
KAZ	Central Asia	ZWE	Eastern Africa
KEN	Eastern Africa

Estimation results gravity model

	Dependent variables
	ln(trade_{base materials})				ln(trade_{mechanical machinery})
	Selection		Outcome		Selection		Outcome
	Estimate	t-value	Estimate	t-value	Estimate	t-value	Estimate	t-value
*Regressors*
intercept	−17.845	−39.283***	−36.027	−47.214***	−17.494	−29.609***	−42.256	−82.056***
ln(mass_i)	0.199	9.456***	0.474	13.386***	0.320	11.702***	1.009	39.767***
ln(mass_j)	0.503	40.708***	1.287	66.437***	0.400	26.038***	1.062	87.586***
ln(pop_i)	0.380	14.536***	0.779	18.166***	0.185	5.746***	0.503	16.590***
ln(pop_j)	−0.052	−3.670***	−0.020	−0.926	0.026	1.431	0.098	6.337***
ln(area_i)	0.047	4.119***	0.190	11.012***	0.023	1.568	0.027	2.226*
ln(area_j)	−0.051	−5.963***	−0.038	−3.039**	−0.024	−2.228*	−0.016	−1.709
ln(dist_ij)	−0.512	−23.583***	−1.431	−50.460***	−0.309	−11.371***	−0.909	−45.667***
bord_ij	3.014	0.091	1.096	5.756***	3.026	0.057	1.543	10.545***
lang_ij	0.187	3.229**	0.492	5.532***	0.421	5.116***	0.537	8.412***
col_ij	0.407	2.735**	1.428	11.366***	0.866	2.557*	0.917	9.677***
ln(1+tariff_ijpt)	−1.257	−4.171***	−3.932	−8.148***	−1.189	−3.327***	−0.134	−0.382
rta_ijt	0.129	5.096***	0.612	15.613***	0.106	3.249**	0.281	9.797***
ln(trans_it)	0.592	8.004***	1.864	14.892***	0.750	8.301***	1.448	16.022***
ln(ict_it)	0.378	7.089***	1.395	15.623***	0.261	3.989***	0.788	12.325***
ln(pol_it)	0.985	11.786***	1.302	9.928***	0.869	8.697***	2.640	28.121***
ln(tradeburd_it)	−0.100	−14.328***	−0.171	−17.487***	−0.032	−3.313***	−0.187	−27.177***
ln(entry_it)	−0.089	−2.879**	-	-	−0.073	−1.862	-	-
year 2016	0.005	0.144	−0.101	−1.824	−0.015	−0.337	−0.065	−1.622
year 2017	−0.075	−2.055*	−0.221	−3.945***	−0.076	−1.654	−0.117	−2.884**
year 2018	−0.061	−1.656	−0.108	−1.920	−0.060	−1.287	−0.142	−3.469***
year 2019	0.005	0.126	−0.213	−3.804***	0.004	0.077	−0.164	−4.006***
mr_ijpt	-	-	0.753	7.064***	-	-	0.937	8.586***
adj. R²	0.586				0.737
no. observations	25,626				25,626

Number of Global Gateway flagship projects launched by thematic area

Thematic area	Projects launched
	Year 2023	Year 2024
Energy & Climate	49	61
Transport	17	32
Digital sector	11	18
Health	7	14
Education & Research	3	14
Total	87	138

Results of Principal Component Analyses

*Index: Transport (trans)*
	Eigenvectors
Variables	Vector 1	Vector 2	Vector 3	Vector 4	Vector 5
quality of trade infrastructure	0.470	−0.174	0.279	−0.215	−0.791
access to electricity	0.466	−0.211	0.127	0.838	0.141
road quality	0.467	−0.189	0.416	−0.470	0.593
road network density	0.361	0.932	0.031	0.027	0.013
share of paved roads	0.462	−0.146	−0.856	−0.173	0.052
	Contributions
eigenvalue	2.100	0.701	0.255	0.158	0.099
proportion of variance	0.882	0.098	0.013	0.005	0.002
cumulative proportion	0.882	0.980	0.993	0.998	1.000
*Index: ICT (ict)*
	Eigenvectors
Variables	Vector 1	Vector 2	Vector 3	Vector 4	Vector 5
broadband subscriptions	0.484	−0.060	0.315	0.650	−0.490
telephone subscriptions	0.465	−0.214	0.623	−0.580	0.117
internet users	0.486	−0.139	−0.254	0.321	0.760
mobile subscriptions	0.465	−0.210	−0.669	−0.351	−0.411
secure internet servers	0.312	0.942	−0.026	−0.121	0.016
	Contributions
eigenvalue	2.016	0.825	0.430	0.225	0.132
proportion of variance	0.813	0.136	0.037	0.010	0.003
cumulative proportion	0.813	0.949	0.986	0.997	1.000
Index: Political-legal institutions (pol)
	Eigenvectors
Variables	Vector 1	Vector 2	Vector 3	Vector 4	Vector 5
control of corruption	0.453	−0.202	−0.732	0.313	−0.346
government effectiveness	0.460	−0.189	0.151	−0.791	−0.322
political stability	0.404	0.912	0.035	0.041	−0.041
regulatory quality	0.453	−0.257	0.655	0.520	−0.172
rule of law	0.463	−0.159	−0.105	−0.064	0.864
	Contributions
eigenvalue	2.133	0.554	0.292	0.182	0.153
proportion of variance	0.910	0.061	0.017	0.007	0.005
cumulative proportion	0.910	0.972	0.989	0.995	1.000
*Index: Administrative burden – trade (tradeburd)*
	Eigenvectors
Variables	Vector 1	Vector 2	Vector 3	Vector 4
time to export: border compliance	0.503	−0.462	0.484	0.547
time to export: documentary compliance	0.505	0.424	0.506	−0.555
time to import: border compliance	0.497	−0.531	−0.530	−0.436
time to import: documentary compliance	0.494	0.570	−0.478	0.449
	Contributions
eigenvalue	1.809	0.620	0.461	0.364
proportion of variance	0.818	0.096	0.053	0.033
cumulative proportion	0.818	0.914	0.967	1.000
*Index: Administrative burden – business formation (entry)*
	Eigenvectors
Variables	Vector 1	Vector 2	Vector 3
business formation: costs	0.537	0.823	−0.186
business formation: procedures	0.584	−0.522	−0.622
business formation: time	0.609	−0.225	0.761
	Contributions
eigenvalue	1.509	0.704	0.476
proportion of variance	0.759	0.165	0.075
cumulative proportion	0.759	0.925	1