protectionist measures and, rather, to promote exports. Japanese exporters were never disadvantaged relative to producers for the domestic market because of effective economic and trade policies. One of the essential ingredients of the Japanese success was extremely efficient and impartial civil service which designed and enforced a successful mix of policies, such as guaranteeing tariff free access to intermediate inputs for exporters. As for Republic of Korea, this is another example of a strategy that can be implemented only if bureaucracies are very capable and impartial, a condition rarely available in developing countries.<sup>7</sup>

**_Central and Eastern Europe and the former Soviet Union_** _._ Harry G. Broadman in chapter 6  summarizes the results of the larger study of these countries conducted for the World Bank entitled “From Disintegration to Reintegration: Europe and Central Asia (ECA) in International Trade.”  He shows that today, most of the 29 countries in ECA are significantly (re)integrated into the global economy, far more so than at the start of transition. Current exports and imports of ECA countries account for more than two-thirds of the region’s total output of goods and services. But two “new” intra-regional trade blocs have emerged. One bloc includes the eight countries in central Europe that recently acceded to the EU and countries in South Eastern Europe. This bloc contains countries that are fast growing and tending toward the advanced countries in Europe. The other bloc includes the CIS countries, registering significantly slower growth, little reduction in poverty and pulling back towards a Russia-centric sphere, still dominated by commodity trade and risking non-participation in the international division of labor.

The role of oil in Russia’s trade has been increasing throughout transition, partly because of a realignment of administered prices, partly because of the increase of international oil prices and partly because of the loss of competitiveness of other Russian products like machinery, which accounted for a large share of Russia’s exports at the beginning of transition. Intermediate manufacturing products account instead for the largest share of Russian imports. This heavy reliance on commodity exports stands in sharp contrast with the pattern observed in the European transition countries. These countries were quite successful in expanding their exports in heavy industries like automotive, parts and machineries.

Russia has a stated goal of diversifying out of commodities into export of manufacturing and services. That diversification, however, will be dependent on complementary behind the border reforms. Broadman argues that countries that have liberalized trade and judiciously implemented behind the border complementary reforms, have been more effective in leveraging international integration to raise growth rates and reduce poverty. Behind the border reforms include economy-wide efforts in boosting domestic inter-enterprise competition and market flexibility, strengthening basic market institutions and incentives, developing trade-facilitating infrastructure, deregulating services sectors and attracting cutting edge foreign direct investment. Meeting these challenges will require certain policy reforms by developed countries and assistance from donors. But the lion’s share of actions will need to come from the countries in the region themselves. WTO accession should also be evaluated from this perspective.

> 7 On the other hand, our website background paper by Arvind Panagariya discusses several debacles in economic development when protection was employed for extended periods of time without understanding the need for an efficient bureaucracy to offset the protection.

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