The EU-Turkey Customs Union and Greece: Who is the Loser?

The purpose of this paper is to first apply the theory of trade in vertically differentiated products in a Customs Union context and second to find out the effects of the Customs Union between the European Union and Turkey. This is done both at a theoretical and at an empirical level. Based on these assumptions, the theoretical analysis indicates that the benefits of admitting Turkey into the Customs Union will be unevenly spread between Germany and Greece. In particular, Germany will definitely benefit, whereas Greece may suffer losses. In the empirical part of the paper, it is examined whether the predictions emanating from the theoretical analysis find any empirical support. For this purpose, the behavior of Greek and Turkish exports to the European Union is examined using desegregated data. The evidence is supportive of the theoretical predictions. (JEL F15, O50); Int'l Advances in Econ. Res. 3(4): pp. 275-34, Nov. 02. ©All Rights Reserved. [ABSTRACT FROM AUTHOR]