Geographic Diversification of Trade in Transition Economies

Abstract

The process of transition from a socialist centrally planned economy to a capitalist market economy was recognized early on as a comprehensive one, requiring a long time, even if the beginning needed to be quick or shock-like. If for convenience we mark the beginning as Poland’s January 1990 leap toward the market (Sachs, 1993; Blejer and Skreb, 1997, esp. Introduction), nearly a decade has passed, and much has been learned, much has been achieved, and, especially in those countries that started later, much remains to be done. One of the many areas of change in the transition concerns external trading relations—that is, the shift from trading patterns established by central-plan decisions to new patterns (geographical and sectoral), determined by comparative-advantage decisions reacting to market signals. This chapter addresses only this last aspect of transition, but we narrow the issue somewhat, focusing on the degree of openness of trade and the geographic diversification of export patterns since 1990. A full assessment of shifts to comparative-advantage trading patterns remains difficult at this stage because of data quality problems. Despite the data shortcomings, some clear trends are seen already based on an analysis of a number of transition countries and a comparison with nontransition countries.