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Master's Professional Reports Abstract

Regional Trading Blocks: Trade Creating or Trade Diverting? A Case of Eastern Europe
Sanderski, Andzej.
REPORT 1999 SA574 Public Affairs Library

The expansion of global trade between individual countries accompanied by the growth of regional trade blocks have become the two trends that have generated heated debates over the role of regions in world trade rules and practices. The question that often arises in this context is whether the recent regionalism threatens the future of the world trading system and how regional trading arrangements affect trade of the member and non-member countries.

Simultaneously with the rise of regionalism, the long lasting integration in Europe has been reinforced in recent years, with the new democracies of Central and Eastern Europe undertaking the bold challenge of structural transformations and completely remodeling their external economic policies. The question remained how the goals of opening up to external competition and seeking world market should be achieved. Should these countries look for their place among the multilateral community as shaped by Bretton Woods, or should they seek partnership in regional trading and other economic arrangements? Most of the countries in the region chose to follow both paths simultaneously. At the beginning of the decade, ten Central and Eastern European countries signed association agreements with the European Community and became members of the World Trade Organization shortly after.

This report is an attempt to analyze the impact these regional association agreements had on the trade patterns of the countries in Central and Eastern Europe and find out if they lead to a deeper integration, both internal as well as with third party countries, and whether these regional trade agreements hinder or foster trade creation. The report concludes that the association agreements between Central and Eastern European countries and the European Community turned out to be conducive to a more rational pattern of trade reflected in a more efficient allocation of resources and stimulated growth of trade and specialization according to the countries' comparative advantages.


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