The significance of the"Europe agreements"for Central European industrial exports

In 1991 and 1992, the European Union (EU) and the economies in transition of Central and Southern Europe - the CEE-5 (Bulgaria, the former Czechoslovakia, Hungary, Poland and Romania) - signed the European Association Agreements. The Agreements established a new framework for their mutual economic relationship, including the transition to a free trade regime for industrial products. The importance of the"Europe Agreements"has been underscored by the rapidly shifting trade patterns between the CEE-5 countries and OECD markets, and by the emergence of the EU as their major trading partner. The author examines the significance of the trade concessions granted by the EU to the CEE-5 countries (1) by analyzing the incidence of EU trade barriers on imports from the CEE-5 before and after implementation of the Agreements and (2) by identifying trade flows of groups of industrial products subject to different concessions.He focuses on trade liberalizing measures for industrial products for which a free trade regime should be in place no later than five years after the Agreements are in force. (Excluded are textiles and clothing, discussed in the Uruguay Round of Trade Negotiations.) Overall, the industrial product trade provisions of the Agreements, which affect about 80 percent of CEE-5 exports to the EU, significantly improve those countries'access to EU markets. In 1992, the first year they were in force in Hungary, Poland, and the former Czechoslovakia, the Agreements freed slightly less than 50 percent of total exports to the EU from import duties and nontariff barriers (NTB's). In terms of the 1992 composition of exports, this"free trade"share in total exports increases over five years to about 80 percent for the former Czechoslovakia, 60 percent for Hungary, and 70 percent for Poland. Although there are significant differences in the composition of exports from CEE-5 economies affected by EU trade liberalizing measures, these are the result of varying shares of sensitive (especially agricultural) products across countries, not dissimilar of concessions from the EU. The EU's negotiation approach, as revealed in the Agreements, was to minimize the adverse effects of opening up"sensitive"sectors: the time and the pace of transition tends to be longer and slower for groups of products with higher NTB-coverage ratios and higher average tariffs. Whether by design or not, the variation in products identified in various provisions assures a more equitable treatment of CEE-5 countries, judging from their industrial export patterns in 1990-92.