23 standards have been adopted, allowing<sup>for free circulation in the</sup> Community for approved products. This is very important for Hunlgary's food and machinery sectors,<sup>which may be able to achieve</sup> some economies of scale, thanks<sup>to the dismantling of the EC's</sup> internal technical barriers.

2) A reduction in the number of<sup>tests and inspectiGns to be overcome</sup> for some types of products in<sup>order to sell in different EC member</sup> countries; obtaining a certificate<sup>from one of the EC-approved</sup> laboratories will be enough. The main beneficiaries in Hungary would be food, chemical, pharmaceutical<sup>and equipment industries.</sup> 3) Although there is considerable<sup>debate in the EC itself about the</sup> specific impact that the complezion<sup>of the EC's Internal Market will</sup> have on growth rates,' there<sup>is consensus that there will be a</sup> significant and positive impact<sup>on the present level of the EC's</sup> GDP.<sup>35</sup> The exact effect this increased<sup>demand will have on Hungary's</sup> exports to the EC will depend<sup>on the success of Hungary'BpreBent</sup> adjustment efforts. Nevertheless,<sup>the most positive impact could be</sup> expected on industries producing<sup>goods or services with high income</sup> elasticities of final demand<sup>in the EC--</sup> such as tourism -- but for most other Hungarian exports,<sup>pr'lary products (including food),</sup> clothing or machinery, income elasuLicities are<sup>low or verylow.36</sup> Among the measures of the EC-92<sup>program there is one likely to have a</sup> detrimental effect on Hungary's<sup>exports of agricultural exports: the doubling of</sup> the EC structural funds until<sup>1992. This may reduce export opportunities from</sup> Hungary's producers of fruit,<sup>vegetables, and spices since one of the guiding</sup> principles of the fund is to<sup>promote the diversification of production in</sup> Southern EuroPe away from products<sup>where the degree of EC self-sufficiency is</sup> already high.

One logistical problem that EC-1992<sup>presents for Hungary is that its firms</sup> are not well represented in the<sup>EC and that there is little time in the</sup><sup>**less**than</sup> 1000 days available in which<sup>to establish viable subsidiaries or branches in</sup> order to overcome potential<sup>discrimination between established and non-</sup> established firms deriving from<sup>"1992" or -re-empt reciprocity requests by the</sup> '4 See estimates in Commission<sup>(1988), i.e., the Cecchini Report, Centre for</sup> Business Strategy (1989), The<sup>Economist, November 18, 1989. The Checchini Report</sup> estimated that the EC's GDP<sup>would increase by a minimum of 4.5% after a period</sup> of five years.

35 Another expected source of<sup>growth is now German reunification which</sup> according to some estimations<sup>would add .5% to the EC growth rate. See Financial</sup> Times, March 31, 1990; Agence<sup>Europe, April 21, 1990.</sup> `6 Income elasticities of demand<sup>for primary products range from .3 for raw</sup> materials to .7 for nonferrous<sup>metals, with the exception of fuels(1.9). See</sup> Balassa, B. (1987). In the case<sup>of the EC, however, the income elasticity of</sup> demand for fuels is considerably<sup>lower, ranging from .5 to .8.</sup> 3 Yannopoulos, G.(1988), pp.103-12.<sup>Much of the GDR's territory would be</sup> classified as regions which<sup>are the focus of the reorganized funds. The</sup> Commission has already stressed<sup>that no aid will be granted to the detriment of</sup> the current beneficiary regions,<sup>which means an additional impact on outsiders</sup> such as Hungary.