ABSTRACT
In this chapter the consequences of trade liberalization for the associated countries in Central and Eastern Europe1 as foreseen in the association agreements with the European Union (EU) and their position in the international division of labour are discussed, especially in relation to the eventual emergence of new regional economic blocs. First, the heritage of the socialist past upon present international economic relations of associated countries is analysed. Until the late 1970s leaders of the socialist countries believed in the system of two competing world markets and the growing share of their socialist countries in the world economy and fast expanding mutual trade. The 'socialist world market' functioned on different principles from the 'capitalist world market'. International economic relations between socialist countries were planned and based mainly upon clearing arrangements, i.e. in practice, barter trade. They were channelled and controlled through the central state apparatus, mainly foreign trade organizations. Enterprises usually did not know their suppliers and customers abroad. International economic relations were mainly confined to trade in tangible commodities. Trade in services, Foreign Direct Investment (FDI) and international capital flows were negligible. Although there were international specialization agreements within the Commission for Mutual Economic Assistance (CMEA), specialization within the CMEA was weakly developed. Related to this, the share of intra-industry trade was very low. Within the CMEA, international economic relations were above all centred on the Soviet Union as the dominant power in the CMEA. One unique aspect of the Soviet Union was that it was less developed economically than some of its satellite states. Trade between the smaller CMEA countries was on a very low level (see Table 3.1) and trade with the developed market economies was, on average, about 30 per cent of foreign trade turnover.
