Effects of the EU-Turkish Customs Union on the Intra-EU Trade Flows

Sammanfattning: The increased possibilities for geographical separation of the production process have given rise to a growing interest for trade in intermediate goods in the international trade literature. Thanks to trade in parts and components, but also in services and other immaterial products, developing countries have been able to enter the global trade scene to a greater extent than before. This paper analyzes the trade effects of the customs union between the European Union and Turkey, implemented in 1996. Specifically, a set of gravity equations are used in order to analyze how the intra-EU export flows of intermediate- vis-à-vis other goods have been affected. That is, how the integration of Turkey into the EU market has affected the trade flows between a selection of Southern- and Northern EU member countries. The results reveal that the intra-EU exports of the Southern EU have experienced a greater reduction in its exports compared to the Northern EU, especially in exports of other than intermediate goods.