Central and Eastern Europe in the Global Context

How the business potential of CEE compares with that of China or India

Today, more than 17 years after the fall of the Berlin Wall, the region of Central and Eastern Europe (CEE) is thriving. The CEE region has become a major services and production base for Western European and US companies, and increasingly also for businesses from Japan, Korea, China and India. While the emerging markets of India and China are very visible, and are the hot topics for media and analysts alike, the CEE region as a whole enjoys somewhat less media space. This article provides some basic comparisons of the CEE region with China and India - where they differ markedly and where they share similarities, primarily from the business perspective.


Regionalization

One aspect these regions have in common is the opening up of their economies and their inclusion in international trade and globalization trends in general over the past few decades. During this period, they have attached themselves to the existing "triad" of the major regional trading blocs of Europe (the European Union), Asia (Japan, APEC and ASEAN), and the Americas (NAFTA), and have established themselves as up-and-coming economic partners.

The CEE region has benefited from the proximity to - and for many countries, membership in - the EU. The region has become a major manufacturing base for sophisticated industries such as the automotive sector, and enjoys fast-growing popularity as an outsourcing center for high-tech and R&D industries. Effectively, it has become a "near-sourcing" location for the whole of Europe, offering the advantages of a talented and educated workforce, lower costs of living and labor as well as cultural proximity.

China and India are close to the Asian trading blocs. China is a member of APEC (the Asia-Pacific Economic Cooperation) forum, a loose grouping of the countries bordering the Pacific Ocean. Recently China has also started to sign bilateral free trade deals with a number of individual APEC member countries. The impact of the regional trading blocs has now also prompted the members of the 10-strong Association of Southeast Asian Nations (ASEAN) to accelerate plans to create a single economic community. Countries such as Thailand, Singapore, Vietnam and others hope that this will enable ASEAN to compete more efficiently against the fast-growing larger economies of China and India. ASEAN members now hope to establish a single trading market, similar to the European Union, as early as 2015.

To complement the triad, NAFTA (the North American Free Trade Agreement, encompassing the USA, Canada and Mexico) countries benefit in a similar way from the proximity of the Central and South American countries such as those clustered in the Central American Free Trade Area (CAFTA) encompassing Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic, and also from the relative proximity of the Mercosur countries (Brazil, Argentina, Uruguay, Venezuela, and Paraguay). The CAFTA countries in particular are well positioned to profile themselves as the near-sourcing center for the Americas, providing offshoring operations to the US, making use of the same time zones and proximity to North American markets. While NAFTA has gained ground since its implementation in 1994, plans to create a Free Trade Area of the Americas (FTAA) that would include the rest of Latin America are currently on hold.


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