EASTERN EUROPEAN EXPORT PERFORMANCE DURING THE TRANSITION

During the past decade, the structure of Eastern European exports has undergone a deep transformation, as communist bloc trading relationships have collapsed and trade with the West has increased. The extent of this geographical re-orientation has generally exceeded the predictions of equilibrium models developed by Hamilton and Winters (1992) and Collins and Rodrik (1991). Significant changes in the product composition of Eastern European exports have accompanied the geographical re-orientation. Exports of manufacturing goods to former communist countries have declined sharply, but exports to the European Community across an array of goods—including heavy machinery—have grown robustly. The observed changes in export composition appear to reflect the redirection of physical goods through price competition and the emergence of market-determined comparative advantage.