Baltic Trade with Europe: Back to the Roots?

The statistical analysis of Baltic trade flows and gravity estimates reveal that Estonia, Latvia and Lithuania have rapidly integrated into the international division of labour with a distinct EU focus. The three Baltic States have taken a road towards the EU common market which pays particular attention to close trade relations with their direct neighbours on the Baltic Rim. The Baltic Sea obviously serves as a major integrating device for these countries, although each of them has developed relations with different regional foci. At the same time Estonia, Latvia, and Lithuania, although being no longer integrated into the former intra-Soviet division of labour, have not abandoned their contacts to the Soviet successor states altogether. From a sectoral perspective, Baltic exports are dominated by “traditional” labour-intensive goods. However, this common feature is embedded in heterogeneous patterns of trade specialization, ranging from Estonia's exports with higher technological content to Lithuanian raw-material-intensive exports.