SLOVENIA AND THE EU - A Study on Integration, Trade and Specialization

Abstract: Numerous economists have emphasized the crucial role that economic integration and the abolishment of trade barriers play for the economic development of individual countries and regions as a whole. The focus of this thesis is Slovenia’s integration with the European Union and the static welfare effects in terms of trade creation and trade diversion that have come from the expanded economic cooperation. Moreover, the form of specialization in Slovenia’s trade patterns, that is to say, Slovenia’s specialization in inter- or intra-industry is analyzed. Theoretical studies of relevant forms of economic integration as well as empirical statistical examinations are carried out in order to depict the development of Slovenia’s trade during and after the accession period. The results have shown clear signs of trade creation and less significant trade diversion effects related to integration with the European Union. The manufacture industry sector SITC7 Machinery and transport equipment represents the greatest increase in exports during this period. Moreover, specialization in intra-industry trade is clearly noticeable. Also here, the highest levels of specialization can be seen in the motor vehicle industry. All this indicates exceedingly positive effects from integration with the European Union.