Leiden University

Correspondence: Cees van Beers, Department of Economies, Leiden University, Hugo de Grootstraat 32, P.O. Box 9521, 2300 RA Leiden, The Netherlands. E-mail: JFAECB@RULJUR.LEIDENUNIV.NL.

Abstract

Reintegration of the Central and East European countries into the world economy factors prominently in the transition process. The success of such a challenge depends on domestic factors as well as the trade policy of the European Community toward the economies in transition. Some criticize the Europe Agreements for not being generous enough in the sensitive sectors. We analyze the export possibilities of Hungary and Poland in 1991 and 1992, taking into account their commodity composition of trade. Using a gravity model extended with a variable for the commodity composition of trade, it is shown that Poland and Hungary have not been able to convert their export possibilities into actual exports to the extent long-standing market economies could. However, we show that Hungary and Poland have better export possibilities that a number of West European countries and that Hungary has more export possibilities in the non-sensitive sector than Poland. Our results demonstrate that Europe Agreements appear to be less beneficial for Poland than for Hungary.