<!-- Start of picture text --> Pollay Roe"arch<br><!-- End of picture text --> <!-- Start of picture text --> International Trade<br><!-- End of picture text --> WPS 1 179 This paper -a product of the Intemational Trade Division, International Economics Department -is part of a larger effort in the departnent to analyze the transition from central planning to market-based economies. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Pauline Kokila, room S7-040, extension 33716 (September 1993, 38 pages).

Empirical ,tudies have paid little attention to the supply-side forces behind the export performance of the Central and Eastern European countries of Bulgaria, Czechoslovakia, Hungary, Poland, and Romania (CEE-5) in OECD markets after the collapse of central planning.

Kaminski examines export developments in these countries in 1980-91, focusing on how transformation programs affected trade. QECD markets now receive three-fourths of CEE-5 exports. Sustaining this market penetration is cru.al for countries making the transition to market-based economies. Kaminski provides insight into the impact of wansformation-cumstabilization programs on export performance. These insights are relevant to former centrally planned economies that have yet to restore macroeconomic equilibrium and to liberalize prices.

Kaminski examines the export performance of the CEE-5 before and after the collapse of central planning. He fmds a close link-between export performance and the decision to move quickly to a market-based economy. Countries that removed administrative controls on prices, devalued currency, introduced unified exchange rates, and liberalized trade also expanded exports. Bulgaria and Romania, crippled by macroeconomic chaos and vacillating macroeconomic reforn, registered drops in both exports and imports.

Kaminski suggests that differences among Czechoslovakia, Hungary, and Poland (CEE-3) had little to do with previous trends in export performance, extemal economic factors, and earlier attempts at trade reform. The expansion of exports in 1990-92 represented a dramatic reversal of trends prevalent in the prior two decades. The surge in exports is explained neither by the length of time experimenting with foreign trade under central planning nor by earlier trends in competitiveness in OECD markets.

The driving force of export growth was manufactures, some of them redirected from CMEA markets, primarily to Germany. The severing of links that used to bind the economies of the CIMEA had a less destructive impact on the foreign trade performance of the CEE-3 than one might have expected.

The fact tha exports to the CMEA fell at the same time that exports elsewhere (often of the same products) increased suggests a causal relationship.

'Me Policy ReserchWorking PaperSeoes disseniinates the fadings of wosk under way in theBank. Anobjectiveof the series is to get these findings out quickly, even if presentations are less tha _fully_ polished. 'Me findings, interpretatiores and conclusions in these papers do not necessarily represent ofrficial Bank policy.

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