5th NORDIC-BALTIC CONFERENCE IN REGIONAL SCIENCE
GLOBAL-LOCAL INTERPLAY IN THE BALTIC SEA REGION
Pärnu, Estonia, October 1-4, 1998

Tiiu Paas, Horst Todt, Urmas Varblane

Transition in Central and East European countries is a remarkable economic process. Opening of these markets and tremendous rise of trade has been one of these aspects during the last years. There has been a striking change in the direction, volume and composition of trade flows in all over the transition economies. The general trend has been very rapid growth of East - West trade and therefore trade has been one of the most important and quickly acting economic factors pushing economies to the integration.

Starting from early 1990`s Baltic Sea region has got an excellent potential for the future economic growth. Baltic countries are rapidly growing transition economies with relatively cheap but skilled labour and neighbours from Baltic Sea region - Scandinavian countries and Germany can provide capital and technologies through investments. This creates a very good base for mutually beneficial economic cooperation. Baltic Rim countries are with the equal importance to the world export market as NAFTA and double as important as ASEAN countries, forming 15,8 percent of the world export in 1996. Economic growth is connected with the growth of trade. Baltic Rim countries have reached to the export growth which is significantly higher than growth in the EU and OECD member countries as a whole. It is indicating to the future growth of importance of Baltic Rim in the world trade and therefore also to the need of regional cooperation to support these growth prospectives. This region should be looked as Baltoscandia, term used already in 1930`s by Estonian economist and geographer Edgar Kant.

In this paper the main aim is to describe foreign trade flows between countries of Baltic Sea region and to work out different scenarios for the future development of these flows. Gravity model will be used in order to describe the trade flows in the Baltic Sea region. Within that framework relative importance of different countries in intra Baltic Sea region trade will be figured out and the potential for future growth will be specified. Special importance will be given to the problems of different modes of transportation as facilitating factors for trade. The role of Baltic Sea as an engine of trade growth will be also monitored.