Trade Policies of the Former Centrally Planned Economies

Abstract

Since the end of Communist rule, the countries of Eastern Europe and the former Soviet Union have been forced to restructure their formerly centrally planned economies. Among the dilemmas they have faced is how open they should be to international trade. Using multiple regression, the openness of these economies to trade is empirically determined while controlling for the effects of both population and wealth. Residuals from the regression equations are then examined in order to identify how much more or less open to trade each country has been. Analysis of the residuals for six distinct regions of the former Communist world presents no definitive answers but does suggest some preliminary conclusions. A country’s degree of political openness is found to be most important in determining relative openness to trade; close behind that are its geographic proximity to important world markets and its prospects for future accession to the European Union.

Governments of the Left and Openness to Imports

“…The resulting residual values can be included in additional analyses as the dependent variable. This method of controlling the effects of wealth and population was used to determine the relative levels of protection in Western industrialized countries (Lutz, 2000) and the former centrally planned economies of eastern Europe (Toole and Lutz, 2005), Greater wealth, of course, would have increased the capacity for imports, all other things being equal. A larger population would have potentially decreased the need for imports, all other things being equal, since a country would be more likely to produce a wider variety of goods internally (Hanson and Xiang, 2004).…”

Evolving Trade Patterns in the CIS: The Role of Manufacturing

“…On the other hand, Subramanian and Wei (2003), Babetski et al ( 2004) find more robust evidence that the WTO has a strong and positive impact on trade, although imports of industrial countries have generally increased substantially more than imports of developing countries. Toole and Lutz (2005), also concluded that membership in the WTO failed to explain the degree of trade openness of a sample of transition economies. 75 73 For instance, Russia's average trade-weighted statutory tariff rate is only 12 percent, which is lower than that in many developing countries.…”