Trade and Cost Competitiveness in the Czech Republic, Hungary, Poland, and Slovenia

Abstract

This study attempts to evaluate various aspects of international competitiveness of the four more developed transition countries in Central and Eastern Europe--the Czech Republic, Hungary, Poland, and Slovenia (CEECs)--both at the macroeconomic and the industrial branch levels. The cross-country analysis focuses on the evolution of labor cost and trade competitiveness, as well as on the role of exchange rate policies and foreign direct investment (FDI) in the process of catching up and integration with the European Union (EU). Apart from the national statistics available in the databases of the Vienna Institute for International Economic Studies (WIIW), the authors also use Eurostat data COMEXT database. Based on the research findings, policy recommendations are made for enhancing international competitiveness in a pre-accession strategy. Section I of the report reviews wage and labor productivity, first at the aggregate level of the whole gross domestic product (GDP), then for the manufacturing industry total and for its individual branches at the 2-digit (NACE) level. Section II examines in detail the evolution of export competitiveness as reflected in the changing composition and factor content of manufacturing industry trade with the European Union. Section III sums up the main findings from the ongoing WIIW research on the impact of FDI on restructuring, and provides some policy recommendations.