The foreign trade dimension of the market transition in Poland : the surprising export performance and its sustainability

To the extent that foreign trade has been discussed in the debate about the transformation of former centrally planned economies, discussion has focused on what should be done to minimize the costs of external adjustment through managed foreign trade and exchange rate policies. Little attention has been paid to the supply-side forces behind export expansion. The author addresses questions that have been ignored: What product categories were the driving force behindthe expansion of exports to the OECD? To what extent were exports from the CMEA reoriented to the West? What was the factor content of exports to the OECD? Was export expansion accompanied by a shift in relative comparative advantage? Will the Central European economies preserve their recent gains in OECD markets? He finds that developments from the beginning of the transformation program represent a dramatic acceleration of the trends in exports observed between 1984 and 1989. Contrary to expectations, the driving force behind the export upswing were manufactures; not raw materials, mineral fuels, or agricultural products. Exports expanded because of the efforts of state-owned enterprises to export more in metallurgy, electro-engineering, and chemical and light industries. Evidence on the relationship between Poland's export performance in the West (especially trade with the European Community) and the collapse of the CMEA seems to suggest that the fall in Polish exports to the CMEA was smaller than expected. The redirection of Polish exports from the CMEA fueled only limited export expansion to the West. The developments in Polish trade during the first two years of the transformation program suggest that attempts to recreate the CMEA arrangements in some new guise would have unnecessarily weakened incentives to restructure the economy with its comparative advantage.