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The dynamics of trade diversion: Observations on West Germany's integration into the Little European Common Market 1958-1972

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  • Schmieding, Holger

Abstract

In the postwar history of Western Europe, the period from 1958 to 1972 stands out as the time of the economic division of this part of the world into two trading blocs: the European Economic Community (EEC), established in 1958, and the European Free Trade Association (EFTA), formed two years later. Before 1958, institutions dealing with the entire region had helped to shape trade policy in Europe; after 1972, the two trading blocs fused into one as all EFTA countries either joined the EEC or concluded free-trade agreements with the Community. This paper investigates some of the causes and consequences of the EEC-EFTA rift in the 1960s, focusing on the role played by Germany, i.e., the country which, of all EEC members, had the closest trade links to countries across the divide. Therefore, we will sketch out some arguments of the theory of regional liberalisation (Chapter II), discuss the major determinants of the actual German trade policy in the 1950s and 1960s (Chapter III), assess the impact of the economic division of Western Europe on Germany's foreign trade (Chapter IV). The concluding remarks (Chapter V) will take up the question whether Germany's integration into a little Europe and the parallel economic division of Western Europe were a necessary stage on the way towards freer trade in this part of the world or a costly detour.

Suggested Citation

  • Schmieding, Holger, 1988. "The dynamics of trade diversion: Observations on West Germany's integration into the Little European Common Market 1958-1972," Kiel Working Papers 334, Kiel Institute for the World Economy (IfW Kiel).
  • Handle: RePEc:zbw:ifwkwp:334
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    References listed on IDEAS

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    1. Pieter Dankert, 1982. "The European Community — Past, Present and Future," Journal of Common Market Studies, Wiley Blackwell, vol. 21(1), pages 1-18, September.
    2. Kreinin, Mordechai E, 1972. "Effects of the EEC on Imports of Manufactures," Economic Journal, Royal Economic Society, vol. 82(327), pages 897-920, September.
    3. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    4. Klepper, Gernot, 1986. "The next GATT round: Bilateralism versus multilateralism?," Open Access Publications from Kiel Institute for the World Economy 1335, Kiel Institute for the World Economy (IfW Kiel).
    5. Klepper, Gernot, 1986. "The next GATT round: Bilateralism versus multilateralism?," Intereconomics – Review of European Economic Policy (1966 - 1988), ZBW - Leibniz Information Centre for Economics, vol. 21(5), pages 232-238.
    6. Balassa, Bela, 1974. "Trade Creation and Trade Diversion in the European Common Market: An Appraisal of the Evidence," The Manchester School of Economic & Social Studies, University of Manchester, vol. 42(2), pages 93-135, June.
    7. Herbert Giersch, 1985. "Perspectives on the World Economy *1," South African Journal of Economics, Economic Society of South Africa, vol. 53(4), pages 215-225, December.
    8. Schmieding, Holger, 1987. "How to fill a dollar gap? Observations on the liberalisation of West Germany's external trade and payments 1947-1958," Kiel Working Papers 291, Kiel Institute for the World Economy (IfW Kiel).
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    Cited by:

    1. Schmieding, Holger, 1989. "Between Perestroika and Internal Market 1992: A new role for EFTA," Kiel Working Papers 370, Kiel Institute for the World Economy (IfW Kiel).
    2. Schmieding, Holger, 1992. "Maastricht: A dead end of European integration?," Kiel Discussion Papers 192, Kiel Institute for the World Economy (IfW Kiel).

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