Integration, Globalisation, Technology and Trade Patterns in the EU8

Abstract

This paper discusses trade developments in EU8 economies: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. The objective of the study, based on a panel model estimated with modern techniques of pooled mean group estimation with common correlated effects (Pesaran, 2006), is to identify determinants of new members’ exports and imports and assess commonalities (and idiosyncrasies) across countries. Having provided the empirical diagnosis, the paper discusses policy implications of the findings. The effectiveness of Single Market policies at stimulating new member states’ trade is assessed as high. The analysis suggests strengthening of EU8 competitiveness policies, with particular focus on technology advancement whose role increases as the globalisation process intensifies. We show that an adequate policy environment – privatisation, restructuring of enterprises, reform of the banking sector, and improving the quality of infrastructure – helps maximise trade gains from liberalisation and technology advancement.