DOES TRADE LIBERALISATION MATTER?: An Analysis of Intra-Industry Trade for Turkey and the EU

Abstract

In assessing the implications oftrade liberalisation, examination ofwhether any expansion in trade was primarily inter-industry or intra-industry in nature is crucial as it can provide some insight into the potential consequences offurther trade liberalisation (e.g. Turkey's accession to the EU). As a consequence of Turkey's trade liberalisation attempts with the EU, one can expect that as trade barriers between Turkey and the EU are removed Turkey can further exploit its comparative advantage and therefore that inter-industry trade will develop between the two areas. Among countries with similar factor endowments, one can also expect that scale economies will be further exhausted and hence that intra-industry trade will increase. Therefore, it is o f interest to examine the trend o f intra-industry trade between Turkey and the EU over pre- and post liberalisation periods as this can shed some light on nature o f trade expansion between the two areas which be very useful for studying effects offurther economic integration of Turkey into the EU.