In 2004 the European Union is due to incorporate 10 new members, mostly from theCentral and Eastern European Countries (CECs). Trade between the EU and CECs currently falls well short of that between EU countries, and if we assume this pattern reflects both tariffs and a resource cost due to regulatory differences, then 1997 trade patterns would imply such costs are 7-15% on trade between the EU and CECs. Elimination/harmonisation of remaining tariffs is likely to bring small welfare gains to new entrants. By contrast entry to the Single Market looks far more significant: after both tariff union and entry to the Single Market total trade volumes between the EU and CECs could rise by 50-100% (much more in some commodities), while welfare gains in the CECs could be of the order of 11.5-20%, larger than the previous two studies have suggested. Welfare gains within the EU are around 0.4% of GDP, with all regions gaining but Germany gaining most. Gains are greater where capital is fully mobile.
Keywords: European Union, Computable General Equilibrium, Transition, Trade
JEL Classifications: F12, F15, F17
Address for correspondence:
T H Edwards
CSGR, University of Warwick
Coventry, CV4 7AL, UK