Trade Protection in Five EU Member Candidate Countries by Exchange Rate Adjustment,Customs Tariffs,and Nontariff Measures

Five central European candidate member countries for EU accession (Czech Republic, Hungary, Poland, Slovakia, Slovenia = CE-5) entered into the transition period with undervalued exchange rates to stimulate exports and protect domestic industries. However, this policy was not maintained. During 1993–1995, real currency appreciation increased competitive pressure by foreign firms. To protect domestic firms, governments applied high third-country tariffs, temporary import taxes, and numerous administrative barriers to trade. As countervailing pressure by the EU and the U.S. increased and current account deficits soared in 1996 and 1997, the five countries more and more brought exchange rate policies in line with the changes in purchasing power parity.There seems to be a positive correlation between large current account deficits and the more intense use of nontariff protectionist measures. Using exchange rate measures, Slovenia keeps the current account rather balanced. It employs many less nontariff protectionist measures than the other four countries, which show strong tendencies towards real exchange rate appreciation.