The competitiveness of the new EU countries

eu.gif A while ago I reported on a World Bank study about exports in Eastern Europe and how the diverging perfomance Eastern European contries were creating a two-tier picture of Eastern Europe. A quick re-cap of the World Bank's arguments show us the main argument back then.

"The two blocs [of Eastern European countries] have begun to coalesce in terms of:

• Volume and direction of trade flows
• Commodity composition and factor intensity of trade
• Export competitiveness
• Development of trade facilitation institutions and infrastructure
• Extent of intraindustry trade, both in the services sectors and by
participation in global production-sharing networks through FDI
• Extent to which trade flows enhance domestic competition and
governance, and vice versa."

This time the theme is struck on a similar tune as the Economist reports on Central European economies' (EU-8/Lynx economies) rising competitiveness vis-à-vis the Asian emerging economies. The article is based on a study by the Vienna Institute for Comparative Economic Studies (I have not been able to find the study but please leave the link in a comment if you have).

"A study by the Vienna Institute for Comparative Economic Studies, a think-tank, and Bank Austria Creditanstalt paints an encouraging picture, at least for the eight ex-communist countries that joined the European Union two years ago.


The study measures the EU-8's competitiveness in terms of export performance (both size and quality), economic structures (a big share for services is a strength, farming and manufacturing are not) and the friendliness of the business environment (from bureaucracy to infrastructure). On some scores, the lynxes have almost caught up."

As was also the case in the World Bank study the focus is on the exports and FDI and the data are impressive indeed. For example did the FDI share of GDP in EU-8 rise from 29 to 38.1 % from 2000-2004 a development which beats all Asian countries save China. However, even more impressive is the nature of the exports ...

"Even better, the quality of exports is shifting upwards. The study notes particularly fast growth in what it calls “medium high-tech” industries, which now make up the biggest category of exports. Here the lynxes are raising not only the prices they charge but also market share."

Not everything is perfect though and in apt journalist fashion the Economist ends on a slight pessimistic note as it points to two downsides; the relative weakness of the EU-8's public insitutions and the lacking expenditure on R&D.