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The New Geography of Eastern European Trade

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  • Cheikbossian, Guillaume
  • Maurel, Mathilde

Abstract

This paper estimates the cost of the disintegration of the former Council for Mutual Economic Assistance (CMEA). It asks whether the reorientation of trade flows towards Western markets has been large enough to compensate for the huge destruction of trade flows between former CMEA countries. Given the severe recession and the reduction in export and import capacities, the answer to this question is not obvious. Furthermore, particular features of CMEA functioning imply that the decrease in regional trade flows is not necessarily welfare-increasing. Two gravity equations are estimated on a panel of 14 years to give a picture of CMEA trade before and after the disintegration. Trade reorientation from 1990 onwards and the penetration of foreign markets are assessed, and two conclusions emerge. First, despite the collapse of eastern trade, the increasing volume of trade flows with the West has not been large enough to compensate for the loss of regional markets. This is increasing, however, thanks to commercial policies which favour trade cooperation and liberalization. The contrast here between the 1990s and the 1920s, when a similar episode – the disintegration of the former Austro-Hungarian Empire – occurred, is striking. The second conclusion stresses the weakness of the regional market in the East, and the perverse effect of hub and spoke bilateralism, reinforced by the Europe Agreements. Similar regional eastern agreements have been signed as a result. They aim to limit the diverting effect of hub and spoke trade and to exploit the important potential seen to lie in the further development of eastern trade.

Suggested Citation

  • Cheikbossian, Guillaume & Maurel, Mathilde, 1997. "The New Geography of Eastern European Trade," CEPR Discussion Papers 1580, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1580
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    References listed on IDEAS

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    Cited by:

    1. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, pages 793-836.
    2. Helena Marques & Hugh Metcalf, 2003. "What Determines Sectoral Trade in the Enlarged EU?," Discussion Paper Series 2003_8, Department of Economics, Loughborough University, revised Sep 2003.
    3. Jan Fidrmuc & Jarko Fidrmuc, 2003. "Disintegration and Trade," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 811-829, November.
    4. Fidrmuc, Jarko & Fidrmuc, Jan, 2000. "Integration, disintegration and trade in Europe: Evolution of trade relations during the 1990s," ZEI Working Papers B 03-2000, University of Bonn, ZEI - Center for European Integration Studies.
    5. Fidrmuc, J. & Horváth, J., 1998. "Stability of Monetary Unions : Lessons from the Break-Up of Czechoslovakia," Discussion Paper 1998-74, Tilburg University, Center for Economic Research.
    6. Angela Cheptea, 2013. "Border Effects and European Integration," CESifo Economic Studies, CESifo, pages 277-305.
    7. Boone, Laurence & Maurel, Mathilde, 1998. "Economic Convergence of the CEECs with the EU," CEPR Discussion Papers 2018, C.E.P.R. Discussion Papers.
    8. Helena Marques & Hugh Metcalf, 2003. "Extending the EU Single Market Eastwards: Sectoral Trade and Real Wage Effects," Discussion Paper Series 2003_10, Department of Economics, Loughborough University, revised Oct 2003.
    9. Ion Lucian Ceapraz, 2008. "The Concepts Of Specialisation And Spatial Concentration And The Process Of Economic Integration: Theoretical Relevance And Statistical Measures. The Case Of Romania’S Regions," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 2(1), pages 68-93, June.
    10. Helena Marques & Hugh Metcalf, 2005. "What Determines Sectoral Trade in the Enlarged EU?," Review of Development Economics, Wiley Blackwell, vol. 9(2), pages 197-231, May.
    11. Crozet, Matthieu & Koenig Soubeyran, Pamina, 2004. "EU enlargement and the internal geography of countries," Journal of Comparative Economics, Elsevier, pages 265-279.
    12. Wolfgang Gerstenberger & Beate Henschel & Herbert Hofmann & Carsten Pohl & Heinz Schmalholz & Carola Boede & Michaela Fuchs & Martin Werding, 2004. "Auswirkungen der EU-Osterweiterung auf Wirtschaft und Arbeitsmarkt in Sachsen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 35, October.
    13. Simeon Djankov & Caroline Freund, 2002. "New borders: Evidence from the former Soviet Union," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), pages 493-508.
    14. Maurel, Mathilde, 2002. "On the Way of EMU Enlargement towards CEECs: What is the Appropriate Exchange Rate Regime?," CEPR Discussion Papers 3409, C.E.P.R. Discussion Papers.
    15. Beine, Michel & Benassy-Quere, Agnes & MacDonald, Ronald, 2007. "The impact of central bank intervention on exchange-rate forecast heterogeneity," Journal of the Japanese and International Economies, Elsevier, pages 38-63.
    16. Fidrmuc, Jan & Horvath, Julius & Fidrmuc, Jarko, 1999. "The Stability of Monetary Unions: Lessons from the Breakup of Czechoslovakia," Journal of Comparative Economics, Elsevier, pages 753-781.
    17. Laurence Boone & Mathilde Maurel, 2001. "Pegging the CEECs Exchange Rates to the Euro," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 77-89.
    18. Olivier Lamotte, 2003. "Disintegration and trade in South-eastern Europe," Cahiers de la Maison des Sciences Economiques j04031, Université Panthéon-Sorbonne (Paris 1).
    19. Jarko Fidrmuc & Peter Huber & Jan Jakub Michalek, "undated". "Poland's Accession to the European Union: Demand for Protection of Selected Sensitive Products," WIFO Working Papers 117, WIFO.
    20. van Brabant, Jozef M., 2001. "Transforming trade and payments in transition economies -- the regional dimension," Journal of Policy Modeling, Elsevier, vol. 23(1), pages 99-126, January.

    More about this item

    Keywords

    Central European Countries; Regional Disintegration; Transition Economies;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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