Upon Polands entering the European Union, suppose it is discovered that the cost of automobile production in
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Upon Poland’s entering the European Union, suppose it is discovered that the cost of automobile production in Poland is €20,000 while it is €30,000 in Germany.
Suppose the EU, which has a customs union, has an X percent tariff on automobiles and 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 = :18,000
b. X = 100, and Y = :18,000
c. X = 100, and Y = :12,000
LO.1
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International Trade Theory And Policy
ISBN: 978-1292417233
12th Global Edition
Authors: Paul Krugman ,Maurice Obstfeld ,Marc Melitz
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