Suppose that upon entering the European Union, it is discovered that the cost of auto- mobile production

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Suppose that upon entering the European Union, it is discovered that the cost of auto- mobile production in Poland is 14,000 while it is 20,000 in Germany. Suppose that the EU, which has a customs union, has a X percent tariff on automobiles and that the costs of production are equal to Y (valued in euros) in Japan. Comment on whether the addition of Poland to the European Union would result in trade creation or trade diversion under the following scenarios:

a. X 50% and Y = 10,000

b. X=100% and Y = 10,000

c. X=100% and Y = 8,000

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