| Summary: | The process of transition from a "socialist" centrally planned economy to a "capitalist" market economy was recognized early on as a comprehensive one, requiring a long time, even if the beginning needed to be quick or shock-like. If for convenience we mark the beginning as Poland's January 1990 leap towards the market,2 nearly a decade has passed and much has been learned, much has been achieved, and-especially in those countries which started later-much remains to be done. One of the many areas of change in the transition concerns external trading relations, that is, the shift from trading patterns established by central plan decisions to new patterns (geographical and sectoral), determined by comparative advantage decisions reacting to market signals. Our paper addresses only this last aspect of transition, but we narrow the issue somewhat, focussing on the degree of openness of trade and the geographic diversification of export patterns since 1990. A full assessment of shifts to comparative advantage trading patterns remains difficult at this stage because of data quality problems. Despite the data shortcomings, some clear trends are seen already based on an analysis of a number of transition countries, and a comparison with non-transition countries.
This paper looks at the progress in transition and the geographic diversification of trade, focusing on two issues--the degree of trade openness and trade integration--for a sample of countries in transition. It concludes that about half of the group of countries sampled are becoming as open as similar market economies, but that many others remain relatively closed. Geographic diversification (to the European Union) is found to be greater the closer is geographic proximity and the more advanced the country is with reforms. The analysis is then extended, in an illustrative way, to show how much larger would be the share of exports to the EU if structural reforms were more ambitious.
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