The effect of trade liberalization in south-Eastern European Countries

The dissolution of the Council of Mutual Economic Assistance (CMEA), and the breakdown of the Socialist Federative Republic of Yugoslavia (SFRY) in 1991 have deeply affected trade flows of South-Eastern European (SEE) countries. They have also created incentives and initiatives for a reshaping of trade patterns in the region. A first initiative was the progressive integration of SEE countries to the World Trade Organization (WTO). A second initiative was the regional economic integration with the European Union (EU). Finally, a sub-regional process of economic integration has emerged through the Central European Free Trade Agreement (CEFTA) and a set of bilateral trade agreement. As a result of these policies the IMF highlights in 2002 that SEE countries have relatively open trade economies. Thus these countries offer a natural experiment to assess the effects of trade liberalization, first, on trade flows and second on the firms'performance.