The Impact of EC-92 on Trade in Developing Countries.

How is the attempt of the European Community (EC) to create a single market going to affect the developing countries? This article argues that the net direct effects of EC-92 may be rather small: the trade creation and trade diversion effects brought about by the program may cancel each other out, with few repercussions for the developing countries as a group. The expected changes in trade flows arising from relatively small changes in nominal prices and aggregate incomes, the changes in market structure, the removal of internal barriers, and a predicted 5 percent increase in EC output may be important to European policymakers but they are rather remote from the developing countries. The threat of EC-92 to the developing countries lies elsewhere: from diversion of investment from those countries to the EC and from the resurrection of protectionism by the EC, especially in the form of nontariff barriers, toward the outside world. Copyright 1994 by Oxford University Press.