The CMEA Demise, Trade Restructuring, and Trade Destruction in Eastern Europe: Initial Assessment

Abstract

The traditional CMEA system of trade and payments in Central and Eastern Europe was dismantled in 1990. The political and economic changes that swept through the region paved the way for abandoning the centralized state trading regime and adopting market rules in mutual trade relations. Although economists and policymakers seem to agree that the switch to a market system will ultimately bring about substantial gains in efficiency, they also recognize that the short-term costs of transition are likely to be high, which would adversely affect levels of trade, output, income, and employment in the former CMEA countries. If not addressed in an adequate way, negative spill-over effects may cause serious deterioration in the economic situation in the region and even put the whole transformation process in jeopardy.