Analysing the EU Canola Oil Trade with Developing Countries: A Gravity Model Approach

Introduction The international biodiesel production increased steadily and exponentially from 2000 to 2007 (WBGU, 2008). More than half of this increase can be attributed to biodiesel production in the European Union (EU). The production of biodiesel in Europe depends mostly on canola oil (e.g. Ho, 2006). As a result, Europe naturally had an increase in the demand for canola oil. In fact, the increase in world canola oil imports is even almost only due to the increase in European canola oil imports (FAOSTAT, 2001). Accordingly, our analysis of canola oil trade focuses on European import and its drivers. Two main influences on the European import pull are taken into account: Firstly, the trade integration. It is by definition set up to increase trade among member states. So, the question is whether the integration in the EU promotes trade among EU member countries. Secondly, we include green policy measures of the EU in our analysis. Here the question arises, whether and to what extent green policies like quotas and subsidies foster import of canola oil into the EU.