Agricultural and food trade in Central and Eastern Europe: the case of Slovenian intra-industry trade

One of the striking features in Central and Eastern European (CEE) countries is the deterioration of their agricultural and food trade balance during transition to a market economy as im-ports increased faster than exports or exports even declined. This paper investigates the Slovenian agricultural and food trade in more detail focusing on changes in the geographical distribution of trade and the nature of trade specialization on the basis of the Grubel-Lloyd Intra-Industry Trade index and Marginal Intra-Industry Trade Indices. The results indicate that Slovenian agricultural and food trade largely remains of the inter-industry type with specialisation of exports towards the former Yugoslav markets and imports from the European Union. The proportion of intra-industry trade was especially low for bulk commodities with little or no processing. A major explanations for these findings is that despite the free trade agreements Slovenia signed with the EU and countries of Central and Eastern Europe the level of protection in the agricultural and food sector has remained rather high. Due to EU membership Slovenia faces now direct competition in a market of 25 countries. This intensifies the restructuring process in the Slovenian agricultural and food sector. Due to the present low level of IIT this likely induces rather high adjustment costs since restructuring and reallo-cation of factors will have to occur between and not within industries.