Editorial
In this study, Jan Fidrmuc and Jarko Fidrmuc investigate the effects of integration and disintegration in Europe on trade in the course of the last decade. The analysis utilizes the gravity model of trade, which relates bilateral trade flows to the distance between the countries and their economic size, proxied by total GDP. The authors document the evolution of trade intensities among the former constituent parts of extinct federations in Eastern Europe – Czechoslovakia, Yugoslavia and the former Soviet Union. They find that the bilateral trade among the constituent parts of the former Czechoslovakia, the Baltics and the Soviet Union (Belarus, Russia and Ukraine) around the time of disintegration exceeded the potential level, i.e. the level that is predicted by the distance and economic size, approximately 40 times. The trade intensity between Slovenia and Croatia (due to lacking data, other former Yugoslav Republics could not be included in the analysis) was lower, but at 11 times the potential level still very high. Disintegration brought about a sharp fall in bilateral trade intensity, but the trade relations remain important. By 1998, the bilateral trade exceeded the potential level seven times in case of the Czech and Slovak Republics, 13 times in the Baltics, two times for Slovenia and Croatia, and 30 times for Belarus, Russia and Ukraine (rebounding from eight times the potential level in 1997). These results are contrasted with the effects of the EU, CEFTA and the Association Agreements on trade. The authors find that the intra-EU trade exceeds the potential level 1.4 times, whereas the trade within CEFTA (Central European Free Trade Agreement) was nearly twice the potential level by 1998. Finally, the liberalization of trade between the EU and the Accession Countries has so far resulted only in normalization of trade relations, i.e. bringing East-West trade back to the potential level.