Under state socialism trade resembled a hub-and-spokes model of bilateral trade between the Soviet Union and the individual eastern bloc countries, with relatively weak trade ties amongst the latter (Dangerfield 1995). After 1989, trade with the Soviet Union collapsed, while trade reorientation to Western Europe was framed by the 19911992 Europe Agreements which mapped out a 10-year transition to free trade. Despite the asymmetrical nature of the agreements, which many commentators consider favoured the interests of the EU states (Gowan 1995), there was rapid territorial reorientation of foreign trade in goods after 1989. Whereas the EU15 markets accounted for 32.1% of Polish, 27.1% of Hungarian and 18.5% of Czechoslovak exports in 1989 (United Nations 1995), by 1995 these shares surpassed 60% in Hungary and the Czech Republic and 70% in Poland (Fig. 5.2). The share of direct exports from Slovakia to the EU15 (37.4%) in 1995 were far lower (UNCTAD 2015b), reflecting the importance of direct exports to the Czech Republic, although their ultimate destination was often the EU. By 2004, all the V4 countries exported 60-75% of their goods to the EU15 countries and over 80% to the EU28. The EU members remained the key export markets for the V4 countries also in late 2000s and early 2010s, although multinational branch plants and offices were developing new export markets, especially in Russia and China.
This reorientation occurred against the background of truly spectacular growth in foreign trade after 1989. The shares of exports/imports of goods and services in GDP roughly doubled in 1993-2014 in all the V4 countries (Fig. 5.1). In contrast, the national shares of world exports/ imports declined in the GDPs of Portugal and Greece, while stagnating in Spain, in the same period. The most important increases in foreign trade happened in early 1990s, which are related to (i) the EU association
Fig. 5.2 The share of the EU15 in exports of goods and services from the V4 countries and southern EU Member Countries, in %. Source: UNCTAD (2015b): International Trade in Goods and Service in 1995-2014, online database
agreements in the 1990s, and (ii) the introduction of macroeconomic and structural reforms. This was followed by further increases in export intensity, which are related to (iii) the arrival of multinational companies (MNCs) in the 2000s, and (iv) economic boom in 2001-2007. Within this overall picture, however, we can also see the importance of different national strategies. In 2014, Slovakia and Hungary had the highest degree of openness in foreign trade, equivalent to almost 100% of their GDPs, followed by the Czech Republic (78%), and Poland (48%). These differences only partly reflect country size (trade is usually a smaller share of GDP in larger economies), because Slovakia and Hungary, for example, were more open than the very small Baltic economies. They received more FDI and were more strongly integrated in global value chains. Significant increases in total exports reflected cross-border movements of parts and components (especially in the car industry and consumer electronics) in the V4 countries, and the creation of generally attractive conditions for inward investment in Hungary and Slovakia, in particular. The trade transformation was very much the outcome of the conjunction of external shocks after 1989 and 2008 with institutional changes.
The influx of FDI and the substantial presence of the MNCs influenced the export structures of the V4 countries. Because of their position in the global division of labour, the share of high-tech exports in total exports was low - 21.0% in the Czech Republic, 19.1% in Hungary, 9.7% in Slovakia, and 9.4% in Poland by 2014 - but it was even lower (2.0-6.6%) in the three southern European economies.