The Static Effects of the Singie Market Programme on Greek Manufacture

The paper analyses the effect on the structure of trade and specialisation of Greek manufacture due to the implementation of the Singie Market Programme (SMP). The period examined was from 1981 to 1992. First, it was found that in most sectors double trade creation (internal and external) has occurred: the consumption share of both intra- and extra- EU imports increased. This is in accordance with other empirical studies which reinforce the view that economic integration creates rather than diverts trade. Second, the effect of the implementation of the SMP on the competitive position of the majority of Greek manufacturing sectors is found to be minimal. Third, it is found that during the SMP period Greece has become marginally more specialised relative to the period before the SMP. This partly confirms Krugman’s argument that the 1992 programme is likely to increase specialisation in the EU, particularly in sectors operating under increasing returns to scale. Additionally, specialisation may have been increased, because due to economic integration, the full extent of comparative advantage (disadvantage) is revealed by the abolition of the export subsidies and other trade impediments. Finally, it is found that the effects of the implementation of the SMP on intra-industry trade (ITT) in Greek manufacture has been minimal and is confined to a limited number of sectors. About half of the sectors that have experienced an increase in ITT belong to the food or textile sectors which are important sectors for the Greek economy.