ABSTRACT
This chapter considers the impact of the completion of the European Internal Market Program (IMP) on the geographical distribution of economic activity within the European Community (EC).1 More particularly, it assesses the empirical validity of a number of hypotheses, drawn from FDI theory on the likely affect of the removal of tariff barriers on intra-EC and extra-EC trade and FDI flows, and the relationship between the two. The evidence strongly suggest that the twin forces of regionalization and localization, identified in Chapter 1, have been accelerated as a result of recent European integration; and that the balance between the two is strongly determined by the knowledge intensity and mobility of the economic activities involved.
