Factors Affecting Trade Reorientation of the Newly Independent States

Despite the differences existing among the newly independent states that emerged from the dissolution of the Soviet Union, they all face the common, daunting task of merging into the framework of international trade and finance. In most of the newly independent states, this task is compounded by several factors, including the twin challenges of dismantling the central planning system and establishing new state administrative structures. ¹ In addition, all the states inherited bloated and distorted production capacities with poorly developed export sectors (Winiecki 1988); a poorly developed transportation network; macro-economic imbalances aggravated by a deterioration in the terms of trade of net importers of hard goods, mainly energy (Tarr 1994); and an initial lack of expertise in conducting foreign trade activity. Moreover, since the Soviet Union was not a member of the Bretton Woods institutions (the International Monetary Fund, World Bank, and General Agreement on Tariffs and Trade), the newly independent states face the not yet fully completed task of “normalizing” their external economic relations. Since this a time-consuming process, for some time following their independence the newly independent states were victims of discriminatory treatment in Organization for Economic Cooperation and Development (OECD) markets previously open to the Soviet Union. So despite their common legacies, the pace at which the newly independent states have been able to free themselves from inherited distortion has displayed significant variation.