The Pivotal Role of the European Union for Central and Eastern Europe

This paper assesses the actual and potential trade arrangements between the European Union and Central and Eastern European countries. European Agreements have facilitated the reorientation of external trade of the Central European countries. This reorientation has already occurred with remarkable success. Central European countries are already selling over 60% of their total exports to the European Union. Taking as a benchmark a gravity model, actual export shares to the EU are generally larger than what the gravity model would suggest, contradicting the view that European Agreements were too protectionist for the export re-orientation of Central European countries. For those Eastern countries not covered by European Agreements, establishment of a European Free Trade Zone is proposed.