| Abstract: | How is the attempt of the European Community (EC) to createa single market going to affect the developing countries? Thisarticle argues that the net direct effects of EC-92 may be rathersmall: the trade creation and trade diversion effects broughtabout by the program may cancel each other out, with few repercussionsfor the developing countries as a group. The expected changesin trade flows arising from relatively small changes in nominalprices and aggregate incomes, the changes in market structure,the removal of internal barriers, and a predicted 5 percentincrease 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 ECand from the resurrection of protectionism by the EC, especiallyin the form of nontariff barriers, toward the outside world. |
