One of the key arguments advanced in support of entry into the EMU byhesitant countries is the expected increase in trade volumes. Previous work onmeasuring the impact of EMU membership on trade has usually captured theeffect using the Gravity Model of trade and dummies representingmembership status. Results obtained vary widely from a 5% trade effect toalmost 200% in the original contribution. This paper adopts a new approachby analyzing the effect on trade due to increased investment flows in the wakeof actual or expected membership. The final impacts on trade thus traced areclose to the estimates on the higher side in the previous studies. Thecoefficients for country and partner GDP product, FDI product andgeographical distance are all highly significant, and FDI inflows are seen tohave a strong impact, with an elasticity of 0.42, on bilateral trade.