The effect of free trade agreements (FTAs) should not be measured solely by their content, according to Lucian Cernat of the think-tank ECIPE, which published a report on the placebo and nocebo effect of agreements on Thursday 27 June. In his view, if the stakeholders are convinced of the benefits of an agreement, positive effects can be generated in terms of trade volumes, attitudes towards the partner country, etc.
The placebo effect is defined in the document as a policy intervention with no direct effect on the conditions of trade as such. The non-binding provisions in the agreements are a good illustration of this.
The author uses the example of access to public procurement in certain agreements. Some FTAs contain binding provisions on this subject, while other agreements include paragraphs that are not binding on either party. When the first type of agreement brings tangible gains in terms of access to public procurement for companies, this can lead to an increase in positive expectations for the second type of agreement, in which access is not guaranteed, explains Lucian Cernat.
This kind of placebo effect can encourage companies to bid for public procurement in partner countries, and contracting authorities to award contracts to companies based in the partner country, he explains.
Conversely, trade can be affected by the nocebo effect, according toECIPE. The rejection of the EU/Canada Comprehensive Economic and Trade Agreement (CETA) by the French Senate is the result of a ‘nocebo’ effect generated by strong media criticism of the agreement, according to Mr Cernat.
See the report: https://aeur.eu/f/cvd (Original version in French by Léa Marchal)