13

**Table 8: Relative specialization:**

**correlation coefficients, 1993**

||BUL|CSR|HUN|POL|ROM|
|---|---|---|---|---|---|
|Bulgaria|1.00|||||
|CSFR|0.21|1.00||||
|Hungary|0.35|0.28|1.00|||
|Poland|0.28|0.52|0.60|**1.00**||
|Romania|0.24|0.45|0.33|0.49|1.00|
|FSU|0.20|||0.19||

An obvious question suggested by this finding-and the export performance of the CEECs more generally-concerns the importance of comparative advantage as opposed to trade policy. What role have the Europe Agreements played?<sup>2</sup> ' The fact that the CEECs now have preferential access to protected markets (e.g., footwear, textiles and clothing) may be a determinant of what we observe. At the same time, quotas and tariffs on sensitive items may induce a shift towards non-sensitive products that have been granted free access into the EU.

Although the CEECs are specializing in many products where comparator countries have been confronted with contingent protection, the growth in the relative importance of intraindustry trade, and the ongoing diversification/differentiation of industrial exports--especially from the Czech Republic and Poland-suggests that the CEECs may have less to fear than their develoning country competitors in this respect.' The CEECs will gradually adopt EU laws and practices relating to competition, thereby reducing the scope for EU industries to invoke antidumping.2<sup>3</sup> Diversion of pressure for contingent protection may well turn out to be more important. Given the similarity between the CEECs and developing countries, the latter may come to face a more hostile trade policy environment in the future. Clothing producers in particular will face fierce competition from the CEECs in the ne,.t _5_ years as their preferential access to the EU is maintained/strengthened.

# **6. Conclusions**

Trade data suggest that a significant amount of restructuring has been achieved in the CEECs in the last four years. Although total exports of these countries as a group have barely attained the levels of 1989, a massive reorientation of trade towards the EU has occurred. Given the need to produce to high Western standards, while remaining price competitive, this reorientation must reflect restructuring at the firm level firm. This may or may not involve significant shedding of labor. It also does not necessarily imply large changes in the relative specialization of the economy. The CEECs demonstrate large differences in the extent to which changes in relative specialization occur, and in the magnitude of the shifts away from 'traditional' and towards 'new' products.

The trade data that have been discussed in this paper are perhaps most useful for crosscountry comparisons. Figuri 7 summarizes the main message that is suggested by the available data. It plots the change in per capita exports to the EU against the measure of change in the 'structure' of exports to the EU over the 198993 period. The Czech and Slovak Republics clearly outperform the other CEECs and the FSU by a substantial margin.

While all the CEECs have managed to increase their exports to the EU very substantially in the last four years (Romania being the exception), the Czech and Slovak Republics taken together are the most successful in this connection. In absolute ternis, exports have grown the most, and they also dominate with respect to the number and importance of 'new' products in total exports. At the same time, the Czech and Slovak Republics report the fewest negative-growth products.

The large increase in the number of products exported to the EU and the growth in intra-industry trade suggests that a lot of