TRADE LIBERALISATION AND ADJUSTMENT COSTS TO THE EUROPEAN MARKET: CASE OF CROATIA

An increase in trade agreements and integration processes that are becoming more intensive have contributed to a stronger process of liberalisation and trade between countries, but we must not neglect the costs of adjustment that are unavoidable in such a process. Undoubtedly, some industries are disappearing while new ones are appearing, one production programme is being changed into another one, causing different adjustment costs (differences in rates considering import and export flows). Economic theory implies that it is more favourable for a national economy to have its trade model orientated to intra-industry trade, in particular with the countries-trade partners within the integration whose member a particular national economy tends to become. Each transformation of trade model, including this one that is resulted from the adjustment process, is closely related to certain costs affecting some sectors of industry and the entire national economy, as well. Using a certain number of parameters, this paper analyses whether positive and negative effects of the Croatian approaching to the EU exist or not, i.e. whether the liberalisation process has had an impact on increase or decrease in the above-stated costs. The results point to an extremely dominant model of the inter-industry trade between Croatia and the EU members, especially to an obvious shift from a particular part of the intra-industry trade to the inter-industry one after 2000, taken as a starting point of a more serious approaching of Croatia to the EU. It is indicated that Croatia should expect high costs due to the evident dominance of inter-industry trade model, particularly at the labour market, because of the prevailing intensive (in terms of labour) productions.