Trade policy during the transition: Lessons from the 1990s

With a decade of transition experience behind us, enough has been learned about trade policy in the transition economies to justify a review of the region's experience in order to elicit key lessons. Accordingly, this paper proceeds as follows. Section 2 reviews the trade policies pursued by transition economies during the 1990s, looking separately at trade in goods and services, foreign exchange market liberalisation and the exchange rate, and foreign direct investment. Section 3 then presents a brief statistical overview of what actually happened in the region in regard to the direction, composition and scale of trade. This section also outlines theoretical approaches to projecting trade flows, considers how far the region has moved towards a new equilibrium configuration of trade, and examines issues of competitiveness. Based on the previous two sections, the concluding Section 4 sketches what ideal trade policies might look like under a variety of transition conditions and draws out relevant lessons from the 1990s experience of trade policy.