EFFECTS OF THE EASTERN EU-ENLARGEMENT ON CROATIA – A TRADE ANALYSIS

Starting from the theory of customs union and recent contributions to it, the paper tries to apply the theoretical inferences about welfare effects of trade integration within the EU on Croatia and its business sector. The analysis focuses on static and dynamic effects which follow from increasing export possibilities and advantages from economies of scale. Taking into account the pace of trade liberalization, the paper estimates the effects of Croatian non-participation in the EU and the potential adjustment costs arising from increased competition from the new EU-member countries and the changing pattern of specialization. In doing so, the export similarity index and the methodology of intra-industry trade (IIT) have been applied. Implications on the business sector and management practice have also been included