Using a Country's Advantage in the European Union: A Study of Evolving Trade Structure in Eastern Europe

This study explores the impact that entry to the European Union has on the trade structure of Eastern European countries. To narrow the scope of the the-sis, this study focuses on a comparative analysis of two Central Eastern Euro-pean countries (CEECs) explored by Bernard Hoekman and Simeon Djankov in their article "Determinants of the Export Structure of Countries in Central and Eastern Europe —Czech Republic and Romania". These member states were chosen because external factors such as Foreign Direct Investment, Out-ward Processing Trade, and Imports in Intermediate Consumption interact with their trade structure in a similar way. This aids the comparison of their accessions to the European Union. By examining their import and export data to the EU, using the UN ComTrade database, we track trade structure changes from 1999-2009. We look at the commodities that fall into the top 80% of the total dollar values for each country's import and exports year by year to under-stand the structural changes in the country's trade structure. We then quantify these changes using the measure of Revealed Comparative Advantage (RCA). RCA analysis demonstrates that both Romania and the Czech Republic expe-rienced a decline in apparel manufacturing followed by a rise in heavy indus-tries production. Romania, however, experienced a much more drastic change in trade structure than the Czech Republic. Romania's shift from apparel to heavy industries was much more pronounced between 1999 and 2009. To compare this shift within each country, we run a correlation analysis between the RCA values of 1999 and 2009. Our findings demonstrate that Romania underwent significant changes in over half of its trade structure, while the trade structure of the Czech Republic remained largely unchanged over the same ten-year study period. Therefore, this study explores the changes in trade dy-namics Romania and Czech Republic underwent during their EU accessions. It disaggregates those differences to provide a comprehensive understanding of two EU accessions and lays a foundation for future research to explore the social, political and external factors driving these differences. Extrapolating the findings suggests that depending on different pre-accession conditions, a candidate's trade development may influence fundamental structural changes of primary trade sectors in Eastern European nations undergoing accession to the European Union.