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Opening up International Trade with Eastern Europe
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1992
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Eastern EuropeTradeEconomic IntegrationAgricultural EconomicsInternationalizationEastern European Economic HistoryEconomic AnalysisCommercial PolicyInternational BusinessEconomicsAgricultural LiberalizationTrade PatternTransition EconomyGlobalizationTrade LiberalizationTrade PolicyEconomic PolicyMacroeconomicsTrade EconomicsBusinessGlobal Trade
Historically, Soviet‑era policies restricted trade with market economies, but liberalization is expected to spur a large increase in trade that will significantly affect both Eastern European economies and their new partners. The study aims to forecast long‑run trade flows as former Soviet states reintegrate into the global economy and to analyze agricultural trade in detail. Using an empirical model, the authors compare three regime changes—Eastern reform, EC CAP admission, and GATT liberalization—and examine how high‑quality human capital may give Eastern Europe a comparative advantage in sophisticated products. They conclude that Western markets can only benefit if they grant market access to emerging producers from the former Soviet Union, since trade cannot remain permanently unbalanced.
Trade with Eastern Europe Carl B. Hamilton and L Alan Winters Previous economic policy in the Soviet Union and Eastern Europe sought to restrict international trade with market economies. Hence, liberalization and reform should now lead to a huge increase in such trade. This will have a major impact both on the reforming economies and on their new trade partners. First, we develop an empirical model of trade flows between existing market economies, and use this to forecast long-run trade flows as the former Soviet Union and Eastern Europe are reabsorbed into the world economy. Second, we provide a more detailed analysis of one key sector, agricultural trade. We compare and contrast three regime changes: reform in the East, admission of the East to the EC CAP and worldwide success on agricultural liberalization in the GATT. Third, we adduce evidence of high quality human capital in Eastern Europe and argue that this will tend to confer a comparative advantage in quite sophisticated products. We conclude by stressing that since trade cannot be permanently and profoundly unbalanced, Western market economies can enjoy potential gains from trade only if they allow market access to emergent producers from the former Soviet Union and Eastern Europe.