The foreign trade regimes of the Central and East European countries (CEECs) have changed fundamentally since 1989. Tariffs have been reduced, many quantitative restrictions have been eliminated, and foreign exchange transactions have been liberalized, thereby decentralizing trade decisions and stimulating increased competition. The Central European Free Trade Agreement (CEFTA) aims to eliminate trade barriers in the region and to remove discrimination in favour of CEE-EU trade against intra-CEEC trade. CEEC trade has been reoriented from East to West, as the CMEA and the Soviet Union collapsed and as trade with the West was liberalized. Intra-industry trade has increased considerably between the EU and the CEECs.

In Discussion Paper No. 1182, Zdenek Drábek and Research Fellow Alasdair Smith argue that a central issue for the future is how trade policy is related to exchange rate policy. They show that future trade policy priorities should include continued liberalization, better coordination of trade and exchange rate policy, the attraction of foreign direct investment, resistance to pressures for selective protection, further development of trade relations with the EU and of intra-regional trade relations, and full participation in the WTO

Trade Performance and Trade Policy in Central and Eastern Europe
Zdenek Drábek and Alasdair Smith