The paper analyses development of agri-food trade specialisation pattern in eight EU Member States of the 2004 and 2007 enlargements (NMS) during the period 2000 – 2005. Over the period analysed, the NMS were not able to hold trade positions in the most competitive commodities, but on the other hand, positions of a number of previously uncompetitive commodities improved. We show convergence of dynamism of agri-food trade specialisation across NMS in trade with the partners/groupings investigated.agri-food trade, specialisation, EU Member States of 2004 and 2007 enlargements, International Relations/Trade,

Bartova, Lubica

Drabik, Dusan

English

Research Papers in Economics

  1 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
Agri-food Trade Specialisation Pattern in the New EU Member States 
Dusan Drabik 
1 and Lubica Bartova 
2,1 
1 Slovak Agricultural University in Nitra, Tr. A. Hlinku 2, 949 76 Nitra, Slovakia  
2 Joint Research Centre - Institute for Prospective Technological Studies (JRC - IPTS), European Commission, Seville, Spain
Abstract— The paper analyses development of agri-food 
trade specialisation pattern in eight EU Member States 
of  the  2004 and  2007  enlargements  (NMS)  during  the 
period 2000 – 2005. Over the period analysed, the NMS 
were  not  able  to  hold  trade  positions  in  the  most 
competitive  commodities,  but  on  the  other  hand, 
positions  of  a  number  of  previously  uncompetitive 
commodities  improved.  We  show  convergence  of 
dynamism of agri-food trade specialisation across NMS 
in trade with the partners/groupings investigated. 
 
Keywords—  agri-food  trade,  specialisation,  EU 
Member States of 2004 and 2007 enlargements 
I. INTRODUCTION  
  New political and economical changes related to 
the  EU  enlargements  in  2004  and  2007  (e.g. 
elimination  of  tariff  and  non-tariff  barriers  to  trade 
within the enlarged European Union (EU)) led to new 
trade patterns that originated at the beginning of the 
nineties.  Technological  changes  and  a  variety  of 
supportive domestic and trade policies (e.g. Common 
Agricultural  Policy  (CAP),  export  subsidies)  have  a 
substantial  effect  on  production  and  inter-country 
exchange of goods. Moreover, growth in the per capita 
income increases intra-industry trade among countries 
which can influence trade specialisation pattern of a 
country.  In  the  paper  we  take  a  closer  look  at  the 
dynamics  of  the  development  of  agri-food  trade 
specialisation pattern of eight EU new Member States 
of the 2004 and 2007 enlargements. 
  We  assume  that  a  commodity  which  shows 
specialisation position from a longer time perspective 
is also competitively advantageous.  
  The  recent  empirical  literature  on  trade 
specialisation  yields  similar  conclusions  about  the 
development  of  the  trade  specialisation  patterns.  It 
should be stressed, however, that the results are not 
directly  comparable  considering  different  time  and 
country  coverage  as  well  as  commodities/products 
analysed. [1] found that the extent of specialisation of 
agri-food exports of the Central and Eastern European 
Countries  (CEEC)  to  the  EU  exhibited  a  declining 
trend.  They  also  concluded  that  the  pattern  of 
specialisation  indices  of  individual  CEEC  have 
converged  rather  than  polarised  over  the  analysed 
period. [2] observed a reduction in trade specialisation 
of six largest industrialised countries and eight East 
Asian countries. [3], by analysing dynamics of total 
trade specialisation in six geographical regions: OECD 
North,  OECD  South,  East  Asia,  South  Asia,  Latin 
America, and the CEEC pointed to a global tendency 
in decreasing of trade specialisation. A recent study by 
[4]  made  a  similar  conclusion  for  specialisation  of 
total trade of the enlarged European Union. However, 
[5] found an increase in trade specialisation of ten new 
EU Member States of the 2004 enlargement. 
  The goal of the paper is to analyse the dynamics of 
development of agri-food trade specialisation of eight 
new  EU  Member  States  of  the  2004  and  2007  EU 
enlargements  (Bulgaria, the  Czech  Republic,  Latvia, 
Lithuania, Poland, Romania, the Slovak Republic, and 
Slovenia)  with  respect  to  their  selected  trade 
partners/groupings in the period 2000 - 2005. 
  Our paper contributes to the existing literature on 
trade  specialisation  development  in  several  ways. 
First, it looks only at agri-food trade specialisation and 
thus can extend the insights into this area. Second, it 
provides  a  multi-country  analysis  based  on  very 
detailed trade flow data. Third, the paper analyses the 
changes in agri-food trade specialisation induced by 
the  2004  EU  enlargement  by  using  latest  data 
available  from  national  statistical  offices  of  the 
countries.   2 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
II. DATA AND METHODOLOGY 
A. Data 
   The data used in this study were collected under 
the TRADEAG FP6 project (TRADEAG CEEC data 
base)  from  the  national  statistical  offices.  Nominal 
yearly exports and imports of the NMS expressed in 
Euro  and  specified  by  the  six-digit  code  of  the 
Harmonised System (HS) (altogether 729 commodities 
for each year and country) were used. The period 2000 
– 2005 is covered.  
   The  following  trade  partners/groupings  of  the 
individual  NMS  were  considered  in  our  analysis: 
EU-15 (EU Member States before 2004 enlargement); 
new  Member  States  of  the  2004  EU  enlargement 
(NMS04):  the  Czech  Republic,  Estonia,  Hungary, 
Latvia,  Lithuania,  Poland,  Slovakia,  and  Slovenia. 
Agri-food trade with Bulgaria and Romania (NMS07) 
has also been investigated. The NMS agri-food trade 
with Commonwealth of Independent States (CIS) was 
of interest because of close trade relations in the past, 
while  agri-food  trade  with  the  United  States  (USA) 
benefited  from  several  bilateral  agreements  before 
2004. All other countries were aggregated to the rest 
of the world grouping (ROW). Total agri-food trade 
served  as  a benchmark  for  comparison  of  agri-food 
trade development with individual trade groupings. 
B. Static analysis of agri-food trade specialisation 
  The  analysis  of  the  evolution  of  agri-food  trade 
specialisation  follows  computation  of  Lafay  index 
(LFI) [6] of trade specialisation: 
   (1) 
where 
i
j x  - export of commodity j of country i to a selected 
trade grouping; 
i
j m   -  import  of  commodity  j  of  country  i from  a 
selected trade grouping; 
N  -  number  of  commodities  for  which  the  LFI  is 
calculated; 
k - number of countries/groupings. 
 
  We modified the part of the index expressing that 
LFI takes value zero if there is none trade with a trade 
grouping in a commodity and a given year.  
  The advantage of LFI over the classical RCA is 
that  LFI  takes  into  account  intra-industry  trade.  To 
consider  both  exports  and  imports  is  important  for 
assessment  of  specialisation  in  a  commodity.  Given 
the  index  structure,  sum  of  LFI  values  over  all 
commodities equals zero. The higher the index value, 
the higher the degree of specialisation. An important 
advantage of LFI lies also in its ability to eliminate the 
influence of cyclical factors on trade specialisation [5] 
C. Dynamism of trade specialisation development 
  The development of agri-food trade specialisation 
over  time  was  investigated  by  Markov  transition 
matrices. We followed an approach of [7] and [8]. The 
idea  of  transition  analysis  lays  in  construction  of 
transition  probability  matrices  -  square  matrices 
consisting of probabilities of transition from one stage 
(of trade specialisation) in time τ to another point in 
time τ + n. The transition probabilities were computed 
by counting the number of transitions out of and into 
each  stage.  Sum  of  elements  in  a  row  of  transition 
probability matrix is equal to unity (total probability). 
  In our study, the zero LFI values were controlled 
for by  dividing  the  LFI  group into  five  intervals  of 
unequal size. The middle (third) interval included all 
values related to commodities with no mutual trade. 
The remaining edges of the LFI range were split into 
two equally sized intervals, according to the number of 
commodities.  
  Development  of  the  NMS  agri-food  trade 
specialisation year by year and over a five-year period 
has  been  investigated  to  compare  situation  after  the 
enlargement  and  before  it.  In  the  former  case,  five 
one-year matrices for each reporter-partner pair were 
computed. Next, those five matrices were averaged to 
find out how agri-food trade specialisation developed 
from  a  short  time  perspective.  For  the  latter  case,    3 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
transition matrices between 2000-2001 and 2004-2005 
were calculated. Comparison of the two results reveals 
dynamics of the NMS agri-food trade specialisation. 
  An  inter-trade  grouping  and  a  cross-country 
comparison  of  trade  specialisation  dynamics  was 
carried out by two measures suggested by [9]: 
        
) det( 1 ;
1
) (
2 1 M M
n
M tr n
M − =
−
−
=
  (2) 
where 
n – number of rows/columns of a transition matrix M 
tr – trace of the transition  matrix (sum of elements on 
the main diagonal) 
det (M) – determinant of M. 
  For  both  indicators  higher  value suggests  higher 
degree  of  mobility  of  commodities  between  levels 
(intervals) of trade specialisation. M1 uses information 
on  the  main diagonal, i.e.  it  measures explicitly  the 
mobility (by means of transition probabilities) only of 
those commodities that were supposed not to change 
their specialisation level. M2 is complex because via 
determinant it captures all changes in the matrix, i.e. in 
addition  to  M1,  it  evaluates  probabilities  of  any 
changes  in  specialisation  level.    Thus,  M1  and  M2 
formally  measure  the  degree  of  specialisation 
dynamics  for  a  trade  grouping  and  a  country  in  a 
selected period. 
  To  investigate  how  specialisation  dynamics 
changed  in  the  period  analysed,  differences  of 
mobility indices pertaining to the five-year period and 
one-year period, respectively were calculated: 
          ∆Μ1  = M15 – M11      ∆Μ2   = M25 – M21                  (3) 
where  
M15 - M1 pertaining to a five-year period;  
M11 - M1 pertaining to a one-year period, 
M25 - M2 pertaining to a five-year period;  
M21 - M2 pertaining to a one-year period. 
III. RESULTS 
  The  year-by-year  development  of  specialisation 
patterns was analysed by Markov transition matrices. 
We found rather significant stiffness of commodities 
in  trade  with  the  EU-15,  NMS04,  ROW,  and  total 
agri-food  trade.  This  holds  true  especially  for  the 
commodities that were each year either significantly 
uncompetitive or, on the contrary, highly competitive. 
On the other hand, there was much higher probability 
of  agri-food  competitiveness  changes  in  NMS  trade 
with NMS07, CIS and the USA, which means higher 
dynamism in that trade. 
   Yearly, it was rather difficult for NMS to improve 
the  position  of  competitively  disadvantageous 
commodities  with  regard  to  individual  trade 
groupings. But once obtained a competitive advantage, 
the  countries  were  able  to  maintain  this  commodity 
position over the period analysed.  
   Five-year  transition  matrices  revealed  significant 
dynamics  of  agri-food  trade  specialisation  of 
individual  NMS  according  to  trade  groupings.  We 
observed  a  gradual  expansion  in  the  number  of 
mutually traded commodities in NMS trade with the 
EU-15,  NMS04,  ROW  and  in  total  agri-food  trade, 
which, however, made the level of trade specialisation 
decrease  over  the  period  analysed.  Moreover,  the 
magnitude  of  the  five-year  diagonal  probabilities 
suggests  that  during  2000  -  2005,  NMS  were  more 
likely  to  see  their  trade  positions  in  competitively 
advantageous commodities worsen than their positions 
in competitively disadvantageous ones improve.  
   The fact that there were changes in specialisation 
patterns  of  NMS  agri-food  trade  with  all  analysed 
groupings  does,  however,  not  answer  the  question: 
with  which  trade  grouping  did  agri-food  trade 
specialisation see highest dynamism? In other words, 
is there some relation between trade groupings and the 
magnitude of the specialisation dynamism?  
   To investigate this issue, we have regressed values 
of M1 (Figure 1) and M2 on changes in values of the 
respective indices. The idea behind this regression is 
that  if  higher  dynamism  in  agri-food  trade 
specialisation  is  related  to  previously  rigid  trade 
specialisation  pattern  and,  on  the  other  hand,  lower 
specialisation  dynamisms  corresponds  to  previously 
more  dynamic  trade,  this  leads  to  a sort  of 
convergence  in  NMS  agri-food  trade  with  their 
partners. 
  Figure  1  and  Figure  2  reveal  that  there  is  an 
indication of such convergence among individual trade 
groupings and all countries considered. In both cases, 
respective  regression  coefficients  are  highly 
significant  and  negative,  confirming  the  hypothesis 
stated  previously.  Thus,  during  the  EU  enlargement 
agri-food trade of NMS saw higher dynamism in trade   4 
12
th Congress of the European Association of Agricultural Economists – EAAE 2008 
of previously less dynamic partners, and on the other 
hand,  a slow-down  in  agri-food  specialisation 
dynamics  was  found  for  previously  dynamic  trade 
partners. 
 
 
Fig. 1 Higher dynamics in agri-food trade specialisation 
relative to previously less dynamic trade groupings 
(according to M1) 
 
 
Fig. 2 Higher dynamics in agri-food trade specialisation 
relative to previously less dynamic trade groupings 
(according to M2) 
IV. CONCLUSIONS  
  This paper dealt with the development of agri-food 
trade specialisation dynamics of the EU new Member 
States of the 2004 and 2007 enlargements. A drop in 
revealed competitive advantages of the majority of the 
most successful commodities over the period analysed 
was detected. NMS did not maintain positions of their 
competitively  advantageous  commodities,  but  at  the 
same  time  the  positions  of  a  number  of  previously 
uncompetitive commodities improved. 
  We  found  higher  dynamics  in  agri-food  trade 
specialisation relative to previously less dynamic trade 
groupings,  and  on  the  other  hand,  a slow-down  in 
specialisation  dynamics  was  found  for  trade  with 
previously  dynamic  trade  partners.  This  points  to 
a convergence in agri-food trade of NMS and can be 
explained by the efforts of NMS to penetrate EU-15 
markets, for which agri-food trade specialisation did 
not change much in the past.  
ACKNOWLEDGMENT 
  The  authors  gratefully  acknowledge  financial 
support  provided  by  the  EU  6
th  Framework 
Programme  and  the  Slovak  Ministry  of  Education 
under the project TRADEAG – „Agricultural Trade 
Agreements“ (No. 513666). 
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th Congress of the European Association of Agricultural Economists – EAAE 2008 
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Corresponding author’s address 
 
•  Author:   Dusan Drabik   
•  Institute:   Faculty  of  Economics  and  Management, 
    Slovak Agricultural University in Nitra 
•  Street:   Tr. A. Hlinku 2, 949 76   
•  City:   Nitra   
•  Country:   Slovakia 
•  Email:   Dusan.Drabik@fem.uniag.sk 
   
 

Corresponding author’s address • Author: Dusan Drabik • Institute: Faculty of Economics and Management, Slovak Agricultural University

Dynamics of Trade Specialisation in Developed and Less Developed Countries.

Evolution of Trade Patterns in the New EU Member States.

Evolving Patterns of International trade.

On the Dynamics of Trade Patterns.

Specialization Dynamics.

The Dynamics of Agri-Food Trade Patterns. The Accession Countries’ Case. Contributed paper presented at the International conference “Agricultural policy reform and the WTO: where are we heading?”

The Measurement of Mobility.

The Measurement of Revealed Comparative Advantages.

Trade Specialisation in the Enlarged European Union. Physica-Verlag Heildelberg.

Agri-food Trade Specialisation Pattern in the New EU Member States

Agri-food Trade Specialisation Pattern in the New EU Member States

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