26 particularly striking when set against the same share for the former Soviet Union which stood in 1993 at 51 percent of its level in 1990.34 The case of the former Czechoslovakia sheds comparative light on the assessment of trade among former Yugoslav republic, revealing that the decline in trade among the former Yugoslav republics has been smaller than could have been predicted. Three observations are noteworthy. First, the contraction in mutual trade was dramatic in both relative and absolute terms. Following the 'velvet divorce' of the Czechoslovak federation on January 1. 1993 the trade between the two new sovereign states immediately fell as compared with their 'domestic' sales in 1992-Czech exports to Slovakia declined 24 percent, and imports 26 percent (ECE 1994, p. 96). This decline continued each year over 1993-99 (Table 7). The value of both exports and imports was lower in 1999 than in 1993.

**_Table 7: The Share_** _of_ **_Slovak Republic in_** _Czech_ **_Exports and Imports and the share_** _of_ **_Czech Republic in Slovak exports and imports, 1993-99 (in percent)_**

||1994|1995|1996|1997|1998|1999|2000|2001|Memo:<br>Index2001,1994=100|
|---|---|---|---|---|---|---|---|---|---|
|**CzechRepublic**||||||||||
|Shareinexports|16|14|14|13|11|8|7|7|44|
|Share inimports|14|12|10|8|7|6|_5_|5|36|
|**SlovakRepublic**||||||||||
|Shareinexports|37|35|31|31|21|18|17|17|46|
|Shareinimports|30|27|25|22|19|17|15|15|50|

Source: Central Statistical Office and Ministry of Industry and Trade and Direction of Trade Statistics Yearbook, IMF, Washington D.C., various issues., and the official web site of the government of Slovakia http://www.statistics.sk/webdata/english/tab/fot/iaeOl.htm.

Second, the case of Czech-Slovak mutual trade seems to suggest that a more developed country expand its other commercial ties faster than the less developed one. For a more developed Czech Republic, the fall in the significance of its trade with a less developed Slovak Republic was steeper and Slovakia's dependence on trade with Czech Republic has remained much more significant than that of the Czech Republic on trade with Slovak Republic.

Third, customs union arrangement between these two countries did not prevent the relative and absolute contraction in trade. If anything, this clearly demonstrates that even free trade falls well short of assuring the level of interaction occurring among firms operating within the same state boundaries and using the same currency.35 Hence, neither historical ties nor the experience of other countries that had shared the experience of the dissolution of a "national" market would justify the expectation of a lower contraction in trade among former republics. Policy attempts specifically designed to engineer recovery of this trade are bound to fail, as there is not much, if anything, to be recovered. Intra34 Calculated from data in Michalopoulos and Tarr (1994, p. 6).

35 A quick disappearance of a monetary union, which barely lasted for five weeks (between January 1, 1993 and February 8, 1993) exacerbated the decline in trade. So did the devaluation of the Slovak koruna against the Czech koruna as well as establishment of a complicated payment system. For more, see UN ECE 1994.