Poland’s Trade with Eastern Europe: Drawbacks and Opportunities

The paper focuses on Poland’s dual integration into Eastern and Western European markets. It is analysed to which extent Eastern European partners act as a counterbalance towards the Western industrialized countries to which close trade relations developed during the nineties, especially to Germany. The statistical analysis and a gravity model of Poland’s regional trade relations confirm the deepening integration into the Western European division of labour. Furthermore, the Visegrad countries form an integration area of its own. The gravity estimates also reveal that trade with CIS countries, primarily with Belarus and the Ukraine, is significantly above-average. In a second step, Poland’s industrial trade patterns are analysed in order to shed more light on the quality of Poland’s trade integration. We apply both a factor-intensity- and a trade-type-decomposition of sectoral trade flows, the latter combined with a gravity model. The estimates show that a growing technology content of Poland’s exports to Western Europe goes in line with a higher share of intra-trade with these countries; a two-way-trade in technology intensive products seems to emerge. The opposite finding is made for the trade with the European CIS partners which is ruled by inter-trade relations having a focus on the import of primary goods. In between these polar cases, trade with the V-4 partners is characterized by an increasing technology content, at the same time intra-trade has come up to a significant level. It is concluded that at present Poland has no realistic alternative to the intensive participation in the Western and Central European division of labour as the engine for the modernization of the Polish economy.