1.4 Changing trade links
In the 1970s and 1980s the BSR belonged to three different economic associations, the market based EU and EFTA and the eastern countries based on non-market principles.
The economic border between the two former did not have major importance on trade flows. The latter was much more important. Trade between the countries belonging to the former East bloc and the Scandinavian countries and Germany has been strongly enhanced during the 90s, while internal trade within this group of countries lost importance.
Latvia, Estonia, and Poland have already achieved 'normal' trade intensity with EU. A further decline is expected for the shares of their trade with transition countries.
Still higher trade re-direction is expected for Lithuania and Belarus.
Future trends depend on comparative advantages in each country, for different sectors. An EBRD analysis of transition countries shows a bias towards resource- and labour-intensive industries, and a disadvantage in high-tech sectors and mild disadvantage in agriculture and capital-intensive industries.
In Poland, EBRD expects a change towards capital- and skill-intensive production, in Latvia and Lithuania for labour-intensive, in Estonia for skill-intensive, and in Belarus for agriculture-, labour- and skill based productions. 3
| Regional shares in export trade of selected BSR transition countries, 1997 (%), and expected future change |
| Country |
Trade with |
| EU |
Transition economies |
| 1997 |
predicted |
future change |
1997 |
predicted |
future change |
| Poland |
71% |
73% |
+2% |
22% |
9% |
-13% |
| Latvia |
66% |
60% |
-6% |
25% |
11% |
-14% |
| Estonia |
64% |
60% |
-4% |
28% |
10% |
-18% |
| Russia |
38% |
50% |
+12% |
38% |
6% |
-32% |
| Lithuania |
47% |
72% |
+25% |
50% |
11% |
-39% |
| Belarus |
7% |
59% |
+52% |
90% |
11% |
-79% |
| Source: European Bank for Reconstruction and Development, Transition report 1999 - Ten years of transition, London, 1999, p.91. Predictions are based on trade simulations under ‚normal' conditions, i.e. with no trade barriers or trade privileges |
|
Trade and Foreign Direct Investment (FDI) of the BSR countries according to origin 1997, BSR share as percent of total imports and FDI received
|
|
|
Source: Nordregio based on IMF (1998); Note: Lithuania 1996; Poland: 1995; Data for Belarus not included
|
But irrespective of these mid-term trends, all countries will move towards skill-intensive production.
Foreign direct investment
Foreign direct investment (FDI) is another indicator for international economic integration. The BSR economies are important destinations for FDI. Highest values of FDI relative to foreign trade volumes occur in Estonia. Denmark, Latvia and Lithuania follow, while Germany and Russia are at the lower end. In German new Länder, this disadvantage is offset by high inflow of capital from other parts of the country.
