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5 J. Common Mkt. Stud. 1 (1966-1967)

handle is hein.journals/jcmks5 and id is 1 raw text is: 


                        By P. G. ELKAN

  It is well known that the main advantage which most  countries
seek in joining a customs union or free-trade area is an extension of
the market over which their manufactured output can be sold, making
possible a fuller exploitation of the economies of large-scale produc-
tion; and that the principal reason for the reluctance of many less
developed, small or geographically outlying countries to join is the
fear that if they merged their market into a larger whole, industrial
development would  tend to be concentrated in regions outside their
own  territory. This problem has a growing literatures and in his cited
paper the present author has suggested an institutional solution to it.
The  proposal was aimed at the promotion, between two  or more
countries, of 'competitive' or 'horizontal' specialization in production
and trade, that is (broadly speaking) of a widening exchange of manu-
factured goods against other manufactures and of primary products
against other primary products, in such a way that at the same time
'complementary' or 'vertical' specialization (the exchange of products
with widely different sectoral origins) should be kept within agreed
limits and approximate balance in the value of mutual trade should be
assured. During  1965 the original version of this proposal was
examined by an interdepartmental working party of the New Zealand
public service with a view to its possible application between Australia
and New  Zealand, and two major shortcomings were identified in it.'
The author is grateful for the comments received, and on the following
pages puts forward a revised version of the proposal designed to
eliminate the grounds of criticism. The revision has also made the
scheme, and especially its description, simpler. It is hoped that its
presentation in this improved form, without the theoretical argument
which  originally accompanied it and in a journal oriented towards
economic  policy rather than theory, might become a step towards
its practical application.

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