Suppose that upon Poland’s entering the European Union, it is discovered that the cost of automobile production in Poland is €20,000 while it is €30,000 in Germany. Suppose that the EU, which has a customs union, has an X percent tariff on automobiles and that the costs of production are equal to Y (valued in euros) in Japan. Comment on whether the addition of Poland to the European Union would result in trade creation or trade diversion under the following scenarios:
a. X = 50% and Y = €18,000
b. X = 100% and Y = €18,000
c. X = 100% and Y = €12,000