Shocking times for European economic integration

Over time, European economic integration has become ever more comprehensive and complex, with a growing body of common regulations that is not easily translated into economic metrics. This project has therefore aimed to develop further the scientific approaches to measuring the scale and scope of economic integration. European integration has recently also been hit by various shocks such as Brexit, Trump’s trade wars, the COVID-19 pandemic, the competition from China, the green transition, and from 2022 also the Ukraine war. In the project, we examine such shocks and exploit information about them to generate new knowledge about the impact of economic integration, e.g. Brexit is a natural experiment of (partial) disintegration that generates new evidence. In the project, the trade impact of integration is analysed with state-of-the-art empirical methods and new data, showing the uneven impact of integration across countries and regions. While previous research on economic integration has largely focused on trade in goods, trade in services and to some extent international investment have also been important in the project. In the project, a variety of data sources have been used to shed light on the impact of economic integration or dis-integration, including firm-level micro-data for five different countries. The project was implemented from October 2021 until end 2024, and established an important new cooperation between NUPI (Norwegian Institute of International Affairs), Kiel Institute for the World Economy, University of Groningen and LSE (London School of Economics and Political Science). By its completion in 2024, the project has contributed 14 scientific articles published or submitted for publication, plus more in the making and eight popular science or other publications. There has been extensive dissemination from the project, with more than 50 contributions, of which about half were scientific presentations at seminars or conferences, domestic and international. In addition, there was dissemination to government, industry and the public in all the four countries involved, plus teaching and media attention. The final conference of the project near Oslo in June 2024 included 15 high-quality selected papers, in addition to prominent keynote speakers. Three articles from the project examine the economic consequences of Brexit, e.g. confirming that Brexit has reduced the UK’s trade with the EU, and that trade integration with non-EU countries is not sufficient to compensate for the negative impact of Brexit. Some articles analyse the impact of sanctions and “securitisation” of trade policy. Sanctions and countersanctions related to Russia changed firm behaviour and led to a reduction in firm-level trade; but only the most exposed firms were seriously affected. The sanctions from 2014 improved the electoral support for Putin’s party in Russia, mainly at the expense of the communist party. Analysis of EU export controls for dual-use goods indicate that such controls potentially affect a sizeable share of trade and promote trade with allies and technologically advanced countries. Four articles in the project analyse the EEA (European Economic Area) agreement. The EEA led to a significant growth in Norway’s exports of services to the EU. Over time, the EEA has contributed to economic convergence between east and west in Europe, increased trade and created important welfare gains. EFTA still has the freedom of entering into trade agreements with non-EU countries, but in recent years the EEA has interfered more with third-country trade relations, and geopolitical tensions drive EFTA towards increased coordination with the EU. European integration is also affected by global developments, including the growth of Asia, and long-term analysis of trade and demography in the project suggests a growing role for China until a peak is reached around 2060. In the long run, new world regions will grow in importance, including Africa.

Through several publications, the project has succeeded in providing new and relevant knowledge on a number of issues related to European integration and disintegration. Brexit was a known shock before the project started, and its impact has been analysed in three articles, using new data. The aim of using Brexit as a “natural experiment” to shed light on the role of non-tariff barriers has been followed up. During the project period, trade integration was also increasingly affected by security concerns, and the project has analysed sanctions and export controls in several publications, also using new data sets. The project period had fast change in international trade and relations, and it has been an objective to use up-to-date new data in order to deliver results timely and not several years after. An objective in the project was also to search for new ways to measure complex integration. This has been followed up in several publications, e.g. by detailed coding of trade measures in the EU-UK trade and cooperation agreement, by using detailed data on trade policy measures from the EU TARIQ database, or scraping Russian electoral results from the web. Firm-level data for five different countries were used to capture firm-level responses to trade policy change. The analysis of the EEA (European Economic Area) used in some articles a broader historical approach to capture the increased complexity of modern deep trade agreements, and the fast change and shocks in several policy areas, such as security concerns, the green transition or new subsidy competition. This added an inter-disciplinary political economy component to the quantitative economic analysis undertaken in the project. The project has resulted in new international research cooperation between four important institutions in four European countries, adding a comparative perspective and using partly similar data and methods in parallel for different countries. The results have also been widely disseminated in all four countries and internationally, and have engaged users such as ministries and business in all the four countries. The final conference also created a meeting place for high-quality research on European integration from Europe and beyond. By addressing key issues in European integration and disintegration, the project has contributed knowledge to important discourses with great relevance for policy decisions. E.g. the research on Brexit, EEA and the internal market, and the "securitisation" of trade contributes to the knowledge base for decisions on further economic integration or disintegration for the countries involved, and beyond. The project has strengthened the knowledge base on trade policy in the institutions and countries involved, and interacted with users. E.g. in Norway the project had interaction with ministries, industry and trade unions, and in 2025, the competence is used in the analysis of trade policy challenges from President Trump or other shocks.

This project establishes new cooperation between four important research institutions in Germany, UK, Netherlands and Norway, focusing on European economic integration. International economic integration has become more complex and comprehensive over time, but research lags behind and there is uncertainty about measurement and economic impact. Recently, the shocks of Brexit, Trump and Covid-19 have created new challenges and knowledge needs that the project aims to address, also exploiting new data created by these disruptions. The project aims to improve measurement and methods in the analysis of international economic integration. Organised in three works packages, WP1 will collate, compare and evaluate existing metrics on trade agreements, and deliver improved measures to be used in the project. Using disintegration to characterise the nature of integration, WP1 will also map changes in integration due to Brexit. WP2 analyses the impact of economic integration for countries and regions, using state of the art structural gravity and large-scale numerical models in tandem with empirical analysis to shed light on the economic impact of economic integration and the recent steps towards disintegration. WP2 will also shed light on the uneven impact of international economic integration across domestic regions; along with updated evidence on regional disparities in Europe. WP3 uses unique firm-level data for the four countries to examine the interaction between trade in goods, trade in services and international investment, thereby filling important knowledge gaps in research on integration. The results will provide evidence on the impact of Brexit and other trade policy changes, as well as the transition of European value chains for goods and services. Aiming for publications in high-quality journals and wide dissemination of results, the project aims to present novel and independent research guiding policy and research on important issues for the future of Europe.