CROATIAN TRADE IN MANUFACTURED GOODS WITH EU MEMBER STATES

Croatia's economy is highly dependent on international trade. The estimated ratio of trade in goods and services to gross domestic product (GDP) is between 80-90%. Croatia reoriented trade towards the European Union (EU) member states after disintegration of Yugoslavia, which now accounts for about two-thirds of total Croatia's trade. Manufactured goods, led by machinery and transport equipment, represent about 70 % of total merchandise exports and imports. The subject of this paper is an empirical investigation of the Croatian trade in manufactured goods with EU member states with using the gravity model of international trade. In other words, if Croatia traded with EU member states in accordance with the Linder theory of international trade based on the high level of intra-industry trade or the Heckscher-Ohlin theory of international trade based on the high level on inter-industry trade. Motivation for this research is the accession of Croatia to the European Union on the 1' July 2013. Although the Croatian commodity structure of the trade in manufactured goods shows a significant shift towards the intra-industry trade, the empirical analysis confirmed the dominance of the inter-industry trade in 2000-2012 periods.