Abstract
The paper first analyses the consequences of the entry of the two countries to the E.U. in 1986. We find that both now trade relatively more with each other but that, while Spain's trade with the E.U. and Portugal's import from the E.U. soared, Portugal's export to the E.U. stagnated in relative terms. We try to explain this phenomenon. We also find quite a lot of trade diversion as a consequence of the entries - from Northern as well as from Southern countries. We finally try to find evidence for theories of trade: there is little to say for intra-industry trade while comparative cost theories are sometimes vindicated in their static guise.
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