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Overview 1 Coming "Full Circle?" The Reemergence of Eastern Europe and the Former Soviet Union in International Markets 7 The Region's Openness to Trade Today: How Does It Compare with the Rest of the World? 21 How Have the Region's Countries Opened Trade and Increased International Integration? The Role of Trade Policy 24 Beyond Trade Policy: The Pivotal Role of Behind-the-Border Reforms in the Region's International Reintegration 29 Conclusion: Policy Agenda, Reform Linkages, and Action Plan 39 PART I THE TRADE RECORD OF EASTERN EUROPE AND THE FORMER SOVIET UNION SINCE THE TRANSITION 1 Introduction 51 Scope of the Study 54 Structure of the Study 55 2 Trade Patterns and Performance of Eastern Europe and the Former Soviet Union since the Transition 61 Introduction 61 Regional Dichotomy in the Growth of Merchandise and Services Trade Flows 62 Bifurcation in the Destinations and Origins of the Region's Trade Flows 70 Bipolar Clustering in Product Concentration, Commodity Composition, and Factor Intensity 78 Sub-Regional Variation in Sources of Intertemporal Change in the Region's Export and Import Market Shares 88 A Dichotomy in the Interactions between Trade Intensity and Domestic Competition and Governance 93 Uneven Development of Trade-Facilitation Infrastructure and Institutions 94 Intraindustry Trade and Global Production-Sharing Networks: Can FDI Enable Mobility between the Two Poles? 96 How Does the Region's Openness to Trade Compare with That of Other Regions? 100 Conclusions 109 PART II THE ROLE OF THE TRADE REGIME 3 Trade Policies and Institutions 121 Introduction 121 Trade Policy 124 Institutional and Other Domestic Constraints 136 Global Integration 151 Conclusions 174 PART III THE INFLUENCE OF "BEHIND-THE-BORDER" POLICIES AND INSTITUTIONS 4 Roles of Domestic Competition and Governance in the Region's International Integration: A "Two-Way" Street 185 Introduction 185 Interrelationships between Competition, Market Structure, and International Integration 187 Variation in International Integration among the Firms of the Region 189 Impacts of Entry and Exit Barriers on International Integration 193 Market Dominance and International Integration 198 Transactions with the State 201 Property Rights Protection and Contract Enforcement 203 Governance and Corruption 204 Impact of Competition and Governance on Firm Performance in the Region 207 Institutional Capacity for Competition and Governance 209 Conclusion 218 5 Trade-Facilitation: Challenges and Opportunities in Eastern Europe and the Former Soviet Union 225 Introduction 225 Trade Facilitation Conditions across the Region 227 Assessing Trade Gains for the Region from Domestic Capacity Building 259 Moving Forward on the Trade-Facilitation Agenda in the Region 273 6 Services Trade and Investment in Eastern Europe and the Former Soviet Union 281 Introduction 281 Shifts in the Structure of Services in the Region 284 Trade in Services in the Region 286 FDI in Services in the Region 296 Policy Stances and Reform Progress 297 Trade Agreements: EU Accession, Regional Cooperation, and the WTO 315 Services Reforms and Growth Performance 323 Conclusions 325 7 Linkages between Foreign Direct Investment and Trade Flows 337 Introduction 337 International Production and Distribution Networks 339 FDI: The Driver of Network Trade Expansion 351 Why Some Countries Got Involved and Others Are Yet to Tap into Networks 364 Lessons for Countries Left outside Global Production Chains 370 PART IV CONCLUSIONS 8 Policy Agenda, Reform Linkages, and Action Plan 377 Bibliography 385 Index 401 Boxes 1.1 Trade under Central Planning 52 2.1 Quality of Foreign Trade Statistics for the Region 63 3.1 Turkey's Trade Policies and Institutions 126 3.2 Russo-Ukrainian Trade Wars 130 3.3 The Interrelationships between Trade, Growth, and Poverty Reduction in the Region 137 3.4 The General Agreement on Trade in Services (GATS) 144 3.5 Transit Problems in the CIS 150 3.6 Least Developed Countries (LDCs) and Transition 152 3.7 Moldova's Free Trade Arrangements 162 3.8 Harmonization of FTAs in Southeastern Europe: The Options Ahead 165 4.1 Arrears as Constraints on Firm Performance in SEE 197 4.2 The "Home-Grown" Construction Sector in SEE: Evidence from Business Case Studies 203 4.3 Using Prepayment to Reduce Contractual Risks in Bosnia and Herzegovina 205 4.4 Market Dominance and Anticompetitive Pricing in Serbia and Montenegro 211 4.5 Economic Incentives in Turkey 214 4.6 Free Economic Zones in the Kyrgyz Republic 216 5.1 Examples of Development Assistance in Trade Facilitation in the Region 247