Intra-industry Trade as a Measure of Specialisation Changes in the EU-10 Countries in 1995–2014

In this paper we identify trade specialisation changes in the 10 Central and Eastern European countries which joined the European Union after 2004 (EU-10, without Croatia). We measure those changes using indices of the intra-industry trade (IIT), i.e. is of simultaneous exports and imports of products belonging to the same industry. We conclude that the pattern of inter-industry trade based on comparative advantages is still dominating in the EU-10, but its role has been decreasing. At the same time, almost all the EU-10 countries recorded a significant rise in the proportion of high quality vertically differentiated products, thus showing the improved competitiveness of their exports. According to the theory, such type of specialisation is based on factors such as human capital and R&D. We also identifi ed the increasing role of IIT in horizontally differentiated products trade (i.e. simultaneous exports and imports of products of similar quality and technology) in the EU-10, typical for more developed countries and refl ecting income convergence. This paper extends earlier studies by using more recent data and a long period for comparison of IIT developments (20 years) and by covering all 10 Central and Eastern European countries which joined the EU.