Blackwell Publishing Journal Backfiles 1879-2005
This paper employs several methods to estimate the trade creation and diversion effects of EC enlargement. Treating the original EEC and EFTA each as one country it compares total and external imports and the ratios of these imports to consumption between 1970/71 and 1977/78. The comparable figures for U. S., Canada and Japan are used as a ‘normalizer’. Based on several approaches, 1978 trade creation is estimated at $28 billion and diversion at $5 billion, with an implied substitution elasticity between European and non-European sources of 3.2. The results are consistent with independent estimates constructed for the period 1959/60 to 1977/78; namely, the two stages of integration combined.
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