OPENING UP INTERNATIONAL TRADE IN EASTERN EUROPEAN COUNTRIES

This paper addresses the effect of liberalisation and transformation in Eastern Europe on international trade flows between specific West and East European countries belonging to the Rhine-Main-Danube area. The discussion is focused on volume and direction of trade effects using a simple, but evidently robust model of bilateral trade flows. The estimates are naturally subject to a great range of uncertainty with respect to the likely developments in each of the countries concerned. The numbers might end up wide of the mark in the long term, but we think they are useful nonetheless in helping to frame the issues and focus thinking on the potential impact. The overall trade volumes tend to expand primarily as a result of a rise in living standards and output levels, and increase the openess of the Eastern European countries. Because any increase in income will take time, the global trade import will be spread over a number of years. The collapse of COMECON trading arrangements and the increasing influence of market forces in the Eastern European countries is likely to lead to a reorientation of these countries' trade away from each other and towards Western European markets.