Estonia’s Changing Trade Patterns with China and Japan from 1993-2012

Abstract: In this thesis, the focus is on the trade relations between Estonia and selected Asian countries based on their importance, aiming to identify the current trade flows, changes within them over time and the reasons behind these changes. Furthermore, the comparative advantage of Estonia in relation to those countries should be revealed. The main research question is how the trade flows have changed and what factors are causing these changes since Republic of Estonia regained its independence in 1991. Mixed methods were applied to this research. Quantitative methods such as descriptive statistics were applied to establish the trade flows and their characteristics. Qualitative methods were used to analyse the foreign trade policy and events that have likely had impact on trade relations. Major change in trade flows took place around the turn of the century, when China and Estonia joined the WTO. In 1993, trade between Estonia and China was based on comparative advantage; however, it is now very much based on intra-industry trade where both countries/partners trade similar articles with each other to meet the demands of their consumers. Trade between Japan and Estonia was and still is based on comparative advantage although Estonian goods exported to Japan have changed, whereas Japanese comparative advantage lies where it used to be.