The newly emerging market economies (NEMs) of Central and Eastern Europe have displayed both similarities and significant differences in their patterns of industrial specialization and trade orientation over the past 30 years. In Discussion Paper No. 546, Michael Landesmann and István Székely report a preliminary analysis of the industrial restructuring currently taking place in Czechoslovakia, Hungary and Poland. They find that a detailed comparison of their intra-industry trade performances with those of EC member countries reveals substantial gaps between East and West European commodity structures and the qualities of traded goods. Further, while previous East European efforts towards reform have been limited in scope, they none the less led to significant differences in these three countries' industrial development and their more recent trade performance.

Landesmann and Székely also report a detailed monitoring of the short-run characteristics of the East European economies' current restructuring processes, which reveals both the significant difficulties and differences in the speed with which industrial transformation and the reorientation of trading structures are taking effect. Insights from analyses of the impacts of past shocks (such as previous reforms or external shocks, e.g. oil price increases) on their structural adjustment shed light on the potential impact of the current wave of internal and external shocks, which are deeply affecting both the structure and behaviour of these countries' trade.

Landesmann and Székely advocate including the West European economies in this comparative analysis for two reasons. First, they represent a `target structure', which the NEMs will no doubt achieve in the long run. Second, the significant heterogeneity of structural patterns among the West European economies demonstrates that the East European economies may still aim at or indeed achieve a wide spectrum of economic structures and levels of development. Analysing the developmental paths of different groups of economies (such as the Southern European or the small Central and Northern European economies) illustrates how structural change may take place at a variety of speeds of adjustment in different historical circumstances. The authors note in conclusion that the scale and time-horizon of current institutional and behavioural changes in Eastern and Central Europe economies suggest a need for considerable caution in evaluating such inter-country comparisons.

Industrial Restructuring and the Reorientation of Trade in Czechoslovakia, Hungary, and Poland
Michael Landesmann and István Székely

Discussion Paper No. 546, April 1991 (IT)