In collaboration with IFC and the World Bank, NEM is developing a framework to assess and quantify the effects of bilateral and multilateral Free Trade Agreements and, more in general, regional integration projects, in terms of trade opportunity and in the development of new industrial sectors in member states.

The global need for an analytical framework to assess the effects of agreements and infrastructural investments for regional integration is becoming increasingly strategic, in particular in view of ongoing integration projects of unprecedented scale, such as China’s One Belt One Road (OBOR) initiative. On the other hand, the same approach can be used to quantify the drawbacks of regional separation scenarios, such as Brexit.

This new set of tools leverages all the specific technologies that NEM currently uses for country analytics. The focus is in 3 main areas:

1) Regional Import Substitution: we quantify an Opportunity Index for each of the member states to competitively substitute extra-regional import in each sector and gain regional market share. Our methodology allows for testing scenarios with different target market shares and levels of regional integration.

2) Coordinated Development: we design scenarios of optimal coordinated regional development. This tool can be used to test different scenarios of cooperation between countries in the region, to maximise regional diversity and optimise regional competition at the industry level.

3) Spillovers (under development): we quantify the likelihood of industrial spillovers among countries connected by trade agreements. This allows to forecast the increase in likelihood of developing new specific sectors for each of the partners in the agreement, as well as to suggest optimal focus for a regional industrial policy.

These tools are currently being developed and tested on the ground in specific international
integration projects