| The Vienna Institute for International Economic Studies - WIIW |
ABSTRACT
The paper examines the macroeconomic problems related to trade liberalization and EU eastern enlargement. In Part I, the export surplus is analysed as a factor co-determining (together with investment and budget deficit) the size of savings and GDP. The abrupt liberalization of foreign trade exhibited the transformation countries' weak competitiveness and was responsible for a large part of the sharp economic decline at the beginning of the transformation. Weak competitiveness is also the main cause of the unsustainable import surplus in many transforming countries. Two strategies of easing difficulties in foreign trade are analysed: expansion of export capacity supported by state intervention, and increase in domestic savings. Part II deals with capital inflows, especially FDI. The dangers related to speculative capital inflows are analysed. Part III deals with the problems of exchange rates related to the future eastern enlargement of the EU. The spread between nominal exchange rates and PPP as well as differences between prices for food and clothing inside the EU are in general small, while they are large in CEECs. This can be taken as a proof that goods markets are well integrated inside the EU. Hence a sharp increase in these prices in the new member countries may be expected when they join the EU. The consequences of the related cost of living increase upon real wages and competitiveness are then analysed.
Keywords: export surplus and aggregate demand, capital imports and speculative capital, exchange rates and prices of food and clothing inside the EU and the CEECs
JEL classification: E2, E12, F31
WIIW Research Report No. 241, K. Laski: Macroeconomic Problems of
Trade Liberalization and EU Eastern Enlargement, September 1997, 33
pp. including 7 Tables & 5 Figures, US$ 24.00/ATS 300.00
For orders please contact Ms. Ursula Straka, WIIW, tel: (+43 1) 533
66 10-11, fax: (+43 1) 533 66 10-50, e-mail: straka@wiiw.ac.at