The Rise of the Baltic Tigers : A study of the impacts of EU-accession on Baltic States trade patterns

Abstract: After regaining independence from Soviet Union in 1991, Estonia, Latvia and Lithuania started transition process from centrally planned- to market economy and their rapid progress has claimed to be one of a kind. Baltic States experienced a long period of exceptional economic growth and earned nickname of Baltic Tigers. International economic integration was one their main agenda and the countries signed several Free Trade Agreements during the 1990’s. The integration process culminated in 2004 when the countries joined the European Union.   We were interested in to study how Baltic States trade patterns has evolved after they joined the union and research question was set out to ask:   What changes have Baltic States trade patterns undergone since their EU accession?   Complemented by sub-questions:   Has the trade with Russia changed for the Baltic States? Have there been any changes in size of SITC sectors of export and import when comparing before and after EU accession.   The aim of this study was to investigate how the Baltic States EU membership has affected on their trade patterns and also to examine what kind of role Russia still has in their trade. In addition to general changes in the Baltic States trade we aimed to analyze trade patterns on a commodity level and studied trade flows in SITC (Standard International Trade Classification) sectors.   The study is conducted from the positivistic standpoint and by using a deductive approach. Theories of economic integration and international trade have been used to formulate the research problem. We have used a quantitative research strategy and data of the Baltic States trade flows are gathered from Eurostat, Statistical office of the European Communities. The time frame of this study was limited to cover years 1999-2007 and since our focus was to examine trade developments over time, we have computed annual changes of trade flows. Our theoretical framework consists of theories about economic integration, and Customs Union theory which has been the basis for our analysis.   According to our findings intra-EU trade dominates both in exports and imports in all the Baltic Countries. We can see that EU accession has had impact on import patterns as imports from within the EU has increased and even more so after accession. Russia has continued to be a significant trading partner and exports to Russia have even increased after the countries joined the EU. Our findings suggest that joining the European Union has had effect on their trade patterns but we also argue that major change and specialization has already happened when they signed Free Trade Agreements.