The impact of trade agreements on international business expansion, trade and investment in the European Union

Abstract

The present research analyses the impact of EU trade agreements on international business expansion and foreign direct investment (FDI). The study examines five main agreements: CETA, EPA, EVFTA, EUSFTA and the EU–UK TCA, using a combination of descriptive analysis, OLS regression and Difference-in-Differences (DiD). Comparative Advantage Theory, New Trade Theory and Institutional Theory are the main theories that explain how to study both economic and institutional aspects. Although trade volumes increased under most agreements, the regression analysis did not show clear significance, probably because the yearly changes were not wide and the sample was small. Trade benefits were confirmed by DiD analysis for CETA, EPA and EUSFTA, but there was a decrease under TCA. The qualitative results point out problems with institutions, barriers faced by SMEs and uneven enforcement. The study provides specific suggestions for improving how regulations are applied, including SMEs, digital trade and sustainability in future EU trade deals. Thus, the findings showed that trade agreements help the economy grow, but their benefits for firms depend on strong institutions, similar regulations and inclusive ways of implementing mechanisms.