# 1. INTRODUCTION

Assessing the export impace of the transformation of the post-communist countries is difficult. For the CEE-5 (Central European Economies: Bulgaria, Czechoslovakia, Hungary, Poland, and Romania) attributing change in export performance to a change in a particular policy variable is extremely complicated. First, all variables have been in a state of flux; next, in some casws too short a time bas elapsed to make any generalizations; and finally, the quality of trade data is poor as national s4tistical offices have not kept pace with the expansion of the private sector and the move to a new customs system. Predicting the economie responses to a stabilization package in "socialist economies in traasition" is a problem, too, since more than 90 percent of industrial output came from the state-owned sector, and organizational structures were designed to facilitate administrative management by the state rather than to respond to market signals.

In addition to its organizationa **l** egacies, central planning also left a legacy of production and investmeut patterns heavily distorted by the misallocation of resources. Development strategies wt-re inwardoriented, with one exception-investment decisions in the smaller CPEs (centrally planned economies) were largely directed by the import requirements of the FSU (the former Soviet Union). The mismatch between the CPEs' production structure and demand in international markets resulted in their declining competitiveness in markets for manufactures. Consequently, although transformation programs may bring about thc necessary changes in incentives and make enterprises responsive w external business opportunities, Cheir capacity to ccmpete internationally will be limited for some time because of outdated technologies. It is puzzling, therefore, to consider why manufactures were the driving force behind the export expansion to OECD markets from countries which implemented radical transformation programs.

The disintegration of the CMEA (Council for Mutual Economic Assistance') inflicted a severe shock on all CMEA member economies, including the FSU which "..was hurt more than it gained" (ECE 1992:104). The sudden switch from the soft transferable ruble (fR) to the hard currency settlement mechanism, accompanied by the fall in Soviet oil output, changed dramatically the external position of the former CMEA economies. Sectors that had been developed to serve the intra-CMEA division of labor have faced a major contraction in demand for their products. These sectors, together with those established for political rather thac economic reasons, accounted for a considerable portion of the industrial output of the former CMEA region. This paper addresses the question of the extent to which the contraction in intra-CMEA trade resulted in the switching o- exports from the CMEA toward the OECD.

The size of the export sector in overall economic activity has significantly increased in only the three most reformed countries (CEE-3)--the FCSK (the former Czechoslovakia), Hungary and Poland. This I The CMEA was officially dissolved at its 46th general meeting on June 28, 1991. Its memb _.B_ included Bulgaria, Cuba, Czechoslovakia, German Democratic Republic, Hungary, Mongolia, Poland, Romania, Soviet Union and Vietnam.