Trade liberalization and export transformation in new EU member states
Abstract Prior to 1990s Baltic and Central European new member states of the European Union (NMS) have mainly exported to markets of other centrally planned economies. The exception from this were Croatia and Slovenia whose more liberal institutional setting and existence of economic relationships with market economies resulted in sizeable portion of exports being directed to Western European markets. The aim of this paper is to explore the effects of trade liberalization with European Union on changes in the structure and quality of exports from NMS in the period 1990–2015. Results obtained using synthetic control method (SCM) signal that the timing of trade liberalization with the European Union shaped the evolution of export performance, structure and quality of exports from NMS. The most advanced NMS managed to reap full benefits of preferential access to EU markets. The effects on countries that later embarked on this process, Slovenia and in particular Croatia have been several times smaller. Trade liberalization increased quality of exports and the share of high technology intensive industries in its structure across all NMS. Robustness of findings is confirmed through sensitivity analysis.