16 Bulgaria and Romania. The former stands out because of a weaker performance, whereas the latter due to a stronger performance throughout the whole period. They experienced slow down in 1998-99 (Turkey also a contraction in 2000) and subsequently impressive expansion (Figure 5). The increase in Turkey’s share by 10 percent in 2003 over 2002 was larger than for the EU-8 and Romania—both 9 percent.

Similarities between the aggregate performance of the EU-8, which in terms of population roughly equals Turkey’s, and Turkey go beyond the time profile over 1996-2003. The factors accountable for the improvement in their export performance in EU markets have been also similar. One may distinguish three factors accountable for change in exports—import demand, competitiveness and diversification. When a country merely maintains its share in imports, the increase in exports is to the growth in import demand. When it increases more than import demand, then these extra exports can be attributable to increased competitiveness. When the increase comes from new exports, it is due to the diversification effect. Table 8 presents the results of calculations of factors of growth in EU-15 oriented exports of EU Eastern Enlargement countries in 2000-04 using four-digit SITC data for EU imports. For each four-digit SITC sector, the shares of regional suppliers in EU imports are calculated for 2000 and 2004. The growth in import demand was accountable for 52 percent of the increase in Turkish exports between 2000 and 2004, the growth in competitiveness for 48 percent of the increase, and the growth in diversification for 1 percent of the increase in exports. Decomposed factors accountable for the expansion of Turkey’s EU-15-oriented exports are very similar to those explaining the growth in exports from the EU-8 economies. Except for Croatia, other countries have capitalized not only on the EU-15 demand for exports due to income growth but also succeeded in exploiting costeffective advantages.

**Table 8:** _Sources of growth in EU-oriented exports in regional perspective in 2000-04_

||Ex|ports ($ m<br>|illion)<br> <br>|Source o|f Change (%<br>|)<br> <br>|Share in Total<br>|Exports<br>|
|---|---|---|---|---|---|---|---|---|
|Exporter|2000|<br>2004|Change in<br>2000-04|Demand|Competi-<br>tiveness|Diversif-<br>ication|(%)<br>2000|(%)<br>2004|
|Bulgaria|2,834|5,066|2,232|38|58|4|1.8|1.8|
|Croatia|1,910|3,315|1,405|66|7|27|1.2|1.2|
|Romania|7,134|15,138|8,004|37|62|2|4.5|5.3|
|**Turkey**|**16,220**|**33,353**|**17,133**|**52**|**48**|**1**|**10.3**|**11.6**|
|EU-8|80,521|145,765|65,243|53|46|1|51.3|50.7|
|Total above|108,619|202,636|94,017|51|47|2|69.1|70.5|
|Memo:|||||||||
|All ECA Countries|157,082|287,317|130,235|44|58|-2|100.0|100.0|

Note: In addition to EU Eastern Enlargement countries, ECA includes South Eastern Europe (Albania, Bosnia and Herzegovina, Macedonia, Serbia and Montenegro) and CIS (Commonwealth of Independent States) economies (Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Moldova, Russia Tajikistan, Turkmenistan, Ukraine, and Uzbekistan). Source: Computations based on UN COMTRADE Statistics with the EU as a reporter.

Turkey’s export performance in EU markets also stands out against other European and Central Asian countries. While the share of Bulgaria and Croatia in total EU-oriented exports from the European and Central Asian region remained stable, those of Romania, Turkey and EU8 significantly increased demonstrating superior performance vis-à-vis CIS economies. Turkey’s share grew from 10 percent to 12 percent in 2000-04. Overall, the share of EU Eastern Enlargement economies increased from 69.3 percent in 2000 to 70.5 percent in 2004.

# F _. Concluding observations_

The analysis provides empirical support to the following observations. First, thanks to steady expansion of trade in goods and services since the mid-1980s, Turkey has become highly