Trade openness and vulnerability in Central and Eastern Europe

Trade liberalization is the emerging issue of development studies. It is not only the key component of the current wave of globalization1 but also the most direct means by which globalization influences poverty dynamics in the developing countries. The debate on the trade liberalization and poverty nexus is very lively (Cline, 2004): on the one hand, common wisdom suggests that openness to trade and factor flows offer remarkable opportunities for the economic and political progress of countries (hence, the main international organizations advocate structural reforms centred on trade openness for the developing countries). On the other hand, empirical studies on the impact of trade liberalization on poverty do not reach a common stand on the issue (Hertel and Winters, 2005; IPALMO, 2005) and trade openness for the most part in developing countries translates into a growing feeling of insecurity and uncertainty towards future poverty dynamics. This fosters intense political debate on the options and strategies available to help developing countries capture fully the benefits of trade integration, and to reduce the likely negative effects.2 This debate is currently taking place within the WTO, in the throes of carrying out the Doha Development Agenda, and within the EU under the framework of the new Cotonou Agreement, which established a set of Regional Economic Partnership Agreements with developing countries in Africa, the Caribbean and the Pacific — and of the enlargement towards CEECs (Central and Eastern European Countries).