The Dynamics of Trade in Central and Eastern European Countries

We describe the evolving pattern of Central European countries’ trade using recently developed empirical procedures based around the classic Balassa index. Despite significant changes in Central European economies during transition to a market economy, the distribution of the indices did not change radically over the 1990s. Our results suggest that the trade pattern converged in Czech Republic, Hungary, Poland and Slovenia, while it polarised in Estonia Latvia, Lithuania and Slovakia over the period. For particular product groups, the indices display greater variation. They are stable for product groups with comparative disadvantage, but product groups with weak to strong comparative advantage show significant variation. At the product level different development can be observed in the changes of trade specialization. The comparative advantages are still based largely on primary and natural resource intensive product groups in the Baltic countries, while CEE5 countries show a successful upgrading process in technological and human capital intensive products.