Baltic Trade with Europe: Back to the Roots?

Abstract

Ireland's economic development since the late 1980s has been remarkable: From languishing at the bottom of the EU to one of the top spots in income per capita. It is thus not strange that the Irish "miracle" has attracted much attention among the New Member States in Eastern Europe. Some similarities with Ireland of the 1970s and 1980s are glaring: Small, open, poor economies on the periphery of Europe. This paper reviews the driving factors behind the Celtic Tiger and asks to what extent a similar development may be possible for Latvia, currently the European Union's poorest member. A classification of the reasons behind Ireland's growth paints a somewhat pessimistic picture for Latvia: Many features have long been implemented (e.g. macroeconomic stabilization) but several are unique to Ireland (e.g. language and substantial FDI from the US). Worse still, necessary reforms successfully introduced in Ireland are either difficult to implement in Latvia or the consensus is that they have, largely, been implemented (e.g. education and research). The idea of Latvia as an "Ireland copycat" is thus very deceptive which should send a strong policy signal.

Has the East African Community Regional Trade Agreement Created or Diverted Trade? A Gravity Model Analysis

“…Zarzoz and Lehmann 2003apply a gravity model to assess Mercosur-European Union trade and the trade potential following trade agreements between the two blocs and establish that belonging to either bloc fosters trade. Laaser and Schrader (2006) analyse the Baltic trade flows and establish a strong trade link between Estonia, Lativia, Lithuania and the European Union (EU) suggesting trade creation following their joining the EU common market. Foroutan and Pritchett (1993) looks at intra-trade in Sub Saharan African and concludes that despite the proliferation of RTA in Sub Saharan African there is very limited intra-trade suggesting limited trade creation.…”

Trade Effects of the European Union's Service Directive: Contrastingex anteEstimates with Empirical Evidence

“…The agreements with the EU in the early 1990s led to a reorientation of CEEC goods trade from the former Soviet Union towards the EU and a predicted decline in intra‐CEEC trade (Wang and Winters, ; Hamilton and Winters, ; Baldwin, ; Breuss and Egger, ). Laaser and Schrader () and Laaser et al. () evaluate ex post the changing trade pattern of the Baltic States and the Visegrad‐countries and find that with a technology upgrade of their export bundle, the new members tend to build a bridge between Western markets and their former integration partners.…”

“…The agreements with the EU in the early 1990s led to a reorientation of CEEC goods trade from the former Soviet Union towards the EU and a predicted decline in intra-CEEC trade (Wang and Winters, 1991;Hamilton and Winters, 1992;Baldwin, 1994;Breuss and Egger, 1999). Schrader (2006) andLaaser et al (2007) evaluate ex post the changing trade pattern of the Baltic States and the Visegrad-countries and find that with a technology upgrade of their export bundle, the new members tend to build a bridge between Western markets and their former integration partners.In a recent paper, Baldwin (2011) challenges the Vinerian view on trade diversion (which is based on tariff analysis) being not appropriate to explain the twenty-first-century regionalism 6 See Badinger and Breuss (2006) for an evaluation of the Casella (1996) argument of large versus small country bonus from EU trade integration. 7 Nielson and Taglioni (2003) review the literature on the measurement of restrictions in services sectors.…”