Integrating Western and Eastern European Markets

Abstract

Although general trade theories are useful for specifying which groups support or oppose trade, these frameworks see preferences as static and do not explain how they change over time. Instead, this article proposes a dynamic perspective that considers how economic adjustment and liberal trade policies alter trade preferences. The article examines why the traditionally protectionist German textile and apparel sectors accept the recent trade agreements with Eastern Europe. Producers can exploit technological and product changes by gaining access to export markets. Furthermore, to take advantage of low labor costs abroad, producers shift production to these countries for later reimportation. Lower trade barriers are therefore attractive to producers. This strategy is also supported by increasingly liberal trade policy orientations in Germany, the European Union (EU), and the General Agreement on Tariffs and Trade (GATT). German producers have therefore modified their protectionist focus to a qualified support for more free trade, and German workers have reluctantly followed suit.