Abstract
The EU is the world’s largest market, with vast natural, technological and human resources. It encompasses 27 countries and about 500 million people with different needs to be satisfied and resources to offer. The EU is the largest trading bloc of countries of the world. The total trade turnover with other countries of the world and the intra-trade among the EU member states makes up about 40% of global trade. The flows of foreign direct investments are closely connected to the trade patterns. The EU member states also compete strongly to attract investment that can yield benefit from the potential of these resources.
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IFA and IG (2007).
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The whole Central and Eastern European region includes the EU-10 + 2, the six Western Balkans countries (Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro, Serbia) and four eastern neighbouring countries (Belarus, Moldova, Russia, Ukraine).
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The local market-seeking FDI flows are usually directed into the manufacturing industries. They look for potential effects on relocation via substituting exports by local productions. The liberalisation process in the new member states during the last 15 years opened new market opportunities for foreign investors, which boosted the market-seeking FDI flow into these economies.
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The efficiency-seeking FDI flows are also directed into the manufacturing industries but these investments aim at utilising the factor costs differences. On the basis of this advantage a strong export orientation can be built up. The efficiency-seeking FDI flow represents the main potential for relocation.
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This group of investments makes up an increasing portion of new FDI, but they cannot be properly identified in the statistics.
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This index is calculated as the ratio of the share of a given product in a country’s exports to another country or region to the share of the same product in that country or region’s total exports. If the ratio is greater than one for given product the country is said to have RCA in exports of that good.
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This methodology and classification was proposed by Neven (1995).
Category 1 is characterised by a high share of wages in value added, very high average wages, and a very high proportion of white-collar workers. These are typically high-tech industries where human capital is used intensively in production.
Category 2 comprises production activities intensive in human capital, but low physical capital intensity. This category includes industries, which have a relatively low level of investment relative to value added, high wages, and a high share of wages in value added. Manufacturers of electrical machinery and equipment serve as an example from this category.
Category 3 includes production intensive in labour and which uses relatively little capital. Average wages are low, and there is a low level of investment and a high share of wages in value added. An example from this category is textiles and apparel industry.
Category 4 includes industries that are intensive in labour and capital. These industries have a high level of investment, relatively low wages, a low proportion of white-collar workers, and an intermediate share of wages in value added. Automobile manufacturing, for instance, falls under this category.
Category 5 is dominated by the forest and food-processing industries that are intensive in both physical and human capital. Also the paper industry belongs to this category.
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Similar changes took place in the structure of these two countries as in the case of EU-15, Canada, Thailand or China, Mexico and Indonesia.
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OECD Bilateral Trade Database.
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Konings (2003 and 2004), Braconier, Ekholm (2000).
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According to the Dutch Ministry of Economic Affairs (2005) 1 to 1.5 % of jobs lost in the period between 1999 and 2004 could be directly attributed to job relocation. It made up about 9,000 jobs per year. Moreover, 52% of the relocated companies moved into the central European new member states.
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These platforms have in part replicated the global production strategy with which such firms experimented in China.
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Dezseri, K. (2011). Trade and FDI Related Effects of the Monetary Union and Structural Adjustment in the Central European New Member States of the EU. In: Welfens, P., Ryan, C. (eds) Financial Market Integration and Growth. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-16274-9_10
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