Trade Creation and Trade Diversion in the European Union: An Alternative Approach

This paper analyzes empirically the existing trade relationships between the trading partners which include Greece, the other European Union Countries (EU), the rest of the world countries (ROW), and Turkey. It also investigates whether Greece's accession to the EU caused a structural break in the allocation of total supplies of agricultural and manufactured products over domestic and foreign supplies. Finally, it predicts the possible trade effects of the accession of Turkey to the European Union. We estimate an expenditure or complete-import model via the Almost Ideal Demand System. The model includes home-produced commodities and imports from three trading regions: EU, ROW and Turkey, and specify the relationships between the shares in total supplies and total real demand and relative prices.