DEVELOPMENTS IN THE TRADE PATTERNS IN THE CATCHMENT-AREA OF THE RHINE-MAIN-DANUBE-WATERWAY

One of the explicit objectives of East European economic policy during the Communist period was to limit economic dependence on the West. It might be expected that today's liberalization and opening up of these economies will result in an increase in their international trade wit h market economies, and introduce new suppliers of goods and export ma rket opportunities at a scale and speed quite unprecedented in modern history. It is of crucial importance who they will trade with, and wha t and how much will be traded. This paper offers answers to such quest ions, limited though to the Rhine-Main-Danube trade region defined as the extended catchment area of the Rhine-Main-Danube Waterway (Austria , Belgium-Luxembourg, Bulgaria, the Czech and Slovak Republics, France , Germany, Greece, Hungary, the Netherlands, Romania, Switzerland, Tur key, and former Yugoslavia). The estimations are based on a realistic catch-up scenario, six product classes (agricultural products, raw mat erials, labour intensive products, capital intensive products, low end R&D intensive products, high end R&D intensive products), and gravity -type trade models that combine three sets of determinants of the size of bilateral international trade flows (importer's demand, exporter's supply and transaction costs). They are provided for short time (1995 ), medium term (2000) and long term (2015) time horizons. Our estimate s suggest that trade between the newly emerging national economies wil l decline in the short and medium run, but that they will increasingly orient themselves to the West. Even with low levels of national incom e, trade between the eastern and western markets will increase up to a factor of two to three in the medium run and even by fourteen times i n the long run in some relations. The results, moreover, show that agr icultural products may be absolutely predominant in the exports of som e of the transitional countries at least initially, while raw material s may decrease and manufactured products are likely to increase in imp ortance.