Structure and performance of technology intensive trade

Trade performance of EU-candidate countries in 1996 - 2000 is assessed in terms of specialization deepening and widening. The process of technology catching-up is analyzed from quantitative and qualitative aspects. The former stresses the tendency towards increasing geography and product concentration, which brings higher sensitivity to industry specific external demand shocks, the latter points to the limited skills and technology intensities within the segments of international production value chains located in the EU-candidate countries. The remarkable technology catch-up visible in trade statistics therefore mostly relies on external sources of knowledge and technology, as the innovation capacity in transition economies remains low. Without an adequate development of national knowledge and technology base the potential of qualitative spillovers accompanying FDI remains limited and the (cost-based) comparative advantage turns out to be rather short-lived.