Anca M. Voicu

CEECs Integration into Regional and Global Production Networks

This paper examines the involvement of the CEECs into regional and global production networks over the period 1999 to 2009. We employ a theoretically justified gravity model which incorporates the extensive margin of trade and accounts for firm heterogeneity. We first estimate the model for highly disaggregated exports (SITC 5-digits) in final goods, and then augment it by including the corresponding imported intermediate products from the OECD together with the usual control variables. Next, we estimate the model for each trade margin (extensive and intensive) separately to evaluate the effects of economic integration on exports and imports of each category of goods. Our results indicate that the CEECs have indeed become more integrated into regional production networks and this has had a positive impact in terms of increasing trade volumes and trade varieties between the two parts of the European continent.

Is Free Trade Good or Bad for the Environment? New Empirical Evidence

One of the most important debates in trade policy concerns the impact of trade liberalization on the environment and, hence, on climate change. “Increased trade liberalization, increased trade, increased production, increased energy use and climate change,” while treated as separate issues until the early nineties, have become the focus of scholars researching trade and the environment (Stoessel, 2001). In particular, the debate originated in the early 1990s, following negotiations over the North American Free Trade Agreement (NAFTA) and the Uruguay round of the General Agreement on Tariffs and Trade (GATT), both of which emerged during a time of rising environmental awareness. Environmentalists argued that the creation of NAFTA would result in an environmental disaster for Mexico and pointed to the Maquiladora zone, where trade with the United States caused a concentration of industry that had detrimental effects on the local environment. Moreover, trade is related to numerous environmental problems. The Handbook on Trade and Environment emphasizes that trade acts as facilitator of the “international movement of goods that, from an environmental perspective, would best never be traded. With hazardous wastes and toxic materials, the environmental risks increase the further the goods are transported, since spillage is always possible. Equally, such ‘goods’ may end up being dumped in countries without the technical or administrative capacity to properly dispose of them, or even assess whether they should be accepted. Trade also makes possible the overexploitation of species to the point of extinction—there is rarely enough domestic demand to create such pressure.“ Examples include the threats to species such as elephants, due to trade in ivory, the deterioration of air quality in parts of China attributed to export-led growth, and unsustainable harvest rates in tropical rainforests due to trade in timber (Copeland and Taylor, 2003). A major concern is that the increasing competition between companies induced by further trade liberalizations causes a ”race to the bottom” in environmental standards, because countries might weaken their environmental policy in order to shelter their industry from

Are the Central East European Countries Pollution Havens

The aim of this article is to investigate the relationship between environmental stringency and intra–European Union (EU) trade flows. Two main hypotheses are tested. First, we test whether the stringency of a countrys environmental regulations may result in pollution havens. Second, we test whether the results differ by industry and by the EU membership tenure (EU-15 vs. the newly added Central East European Countries). An augmented gravity model is estimated using panel data for 21 countries during the period from 1999 to 2013 for the full sample and also separately for the Central East European Countries and the EU-15 members. Our results show weak support for the pollution haven hypothesis for some dirty industries, mainly for net exports from western EU countries to the rest. Instead, support for the “Porter hypothesis” is found for trade in clean goods.

Does Corruption Facilitate Trade for the New EU Members

The paper uses a gravity model to examine the role of corruption in the direction of trade in a data set comprising OECD economies, new EU members and developing nations. Contrary to a number of studies, the findings suggest that membership of the RTAs does not always increase bilateral trade whereas reducing a countrys corruption does tend to increase trade flows. The results suggest that EU membership, with the associated improvement in the perceived level of corruption, should have a positive impact on Romania and Bulgaria.

Structural Change and Transformation within the Transition Economies

While previous chapters have concentrated on trade-related issues (including foreign direct investment and institutions with global values), we now consider the inter-dependencies that exist between foreign trade, European integration, economic development and structural change within the common framework of transition. The performance of Central and Eastern European Countries (CEECs) is a classic example of ‘diversity in unity’ where countries have faced differing economic environments and pursued different tactical and strategic policies while maintaining a common vision within the framework of market reforms. The dynamics of economic change, starting from early transition with high sunk costs, to the ‘big push’ forward given by membership of the European Union to the adverse impact of the Great Recession (the ‘big pull’ backward) is explained within a formal framework.

Conclusion: Back to the Future

This chapter provides a brief summary of the issues discussed in the main body of the book. It also gives a perspective on future trends, particularly in terms of productivity, innovation and technology, which is how future trade expansion and technological progress could impact on economic growth and development in the CEECs.

Introduction: The Journey Begins

This chapter discusses briefly the transition journey that Central and Eastern European Countries (CEECs) have travelled in the last two to three decades. It mentions the faltering early years, the sunk costs of transition, the transformation into maturing upper-income countries, the expansion of trade as well as the process of integration with the European Union, which acts as a core catalyst in growth acceleration. It highlights the importance of trade in general and its importance for the CEECs in particular. We explain the advantages of specialization and trade. We also present the challenges that trade faces in the context of globalization.

Economic Performance of Six Economies of Central and Eastern Europe

The transition decade of the 1990s was characterized by a dramatic rise in exports, which rose steadily during 1990–1995 but then doubled in the latter half of the decade (see Table 8.33.1). Germany’s share, as the leading economy of the European Union, doubled during the whole period, while the advanced economies of the European Union came to hold 75 percent of aggregate exports by 1999. Overall, the restructuring of the economy was catalyzed by export-led growth.

Foreign Direct Investment

Since planned economies were relatively autarkic, none of them traded extensively with the capitalist outside world. During the transition, as trade relationships widened internationally, these economies also went through a process of creating new institutions and organizations that required new skills and attitudes more relevant to the global trading world. The relationship between citizens and the state also changed substantially. This chapter discusses the importance and the role played by institutions in a changing economic environment. It also analyzes how institutional change affected the business participants in the new capitalist environment.

The Role of Domestic Institutions

Since planned economies were relatively autarkic, none of them traded extensively with the capitalist outside world. During the transition, as trade relationships widened internationally, these economies also went through a process of creating new institutions and organizations that required new skills and attitudes more relevant to the global trading world. The relationship between citizens and the state also changed substantially. This chapter discusses the importance and the role played by institutions in a changing economic environment. It also analyses how institutional change affected the business participants in the new capitalist environment.