Main Trade Partners and Product Groups

Intra-EU trade generated some 79% of total exports of goods in the Czech and Slovak Republics and Hungary, and 72% in Poland, in 2014. The geographical patterns of trade were considerably different to those of the southern EU Members. Spain and Greece, for example, exported only about one half of their goods to the EU.

Germany has been by far the largest partner in intra-EU trade since the early 1990s, and it has also been the largest investor in the V4 economies: these features are interrelated. Germany’s FDI helped establish strong export-oriented automotive, electrical engineering and machinery industries in the V4. German- and French-owned subsidiaries of the MNCs ranked amongst the most important importers and exporters ofintermedi- ate goods, and final products to/from the V4 countries. In addition, some cross-border trade exchanges reflect continuities from pre-1989 trade patterns. The Czech Republic, for example, remained Slovakia’s second most important partner until the mid-2010s.

The concept of comparative advantages provide insights into trade composition. This implies that marginal factor productivities are significantly higher in the exporting than the non-exporting sectors; small open economies should specialise in limited portfolios of exported goods; and foreign investors should prefer export-oriented sectors with above-average marginal factors productivities. These principles seem to apply to the V4 countries. The most important merchandise exports of the V4 countries were concentrated in a relatively limited number of product groups (cars and car parts, consumer electronics and products of electrical engineering), which corresponded with the industries receiving the highest volumes of FDI. The V4 group’s competitive advantage in EU export markets is indicated by the Balassa index of revealed comparative advantage (RCA)2 which, for example, indicates that consumer electronics and electrical engineering accounted for disproportionally high shares of V4 countries exports in the 1990s, 2000s and 2010s.

Cars and car parts, consumer electronics, products of electrical engineering, and basic metals and metal products ranked amongst the most import exports of the Czech and Slovak Republics, and Hungary by 2014. Poland had a similar product structure, but also had strong furniture and shipping exports. Moreover, the concentration index3 (the degree to which exports and imports are focused in a few products) points to a very high increase in the concentration of exports in a small number of export items for Slovakia, and high increases for the Czech Republic and Hungary in 1995-2013. These small and open economies tended to overspecialise in a relatively small number of export items. Slovakia in particular became extremely dependent on exports of cars and consumer electronics. The concentration indices stagnated in Poland and decreased in Portugal and Spain in the same period. The changes in the concentration indices related to rapid and deep integration of the V4 countries into global value chains. The strategy of export concentration had its own risk, and the overspecialised v4 economies (SK, HU and CZ) experienced deeper slowdown in economic growth after 2008 than Poland, which had more diversified exports (Gurgul and Lach 2013).

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