Handelsutvecklingen efter Lettlands självständighet : En studie om ekonomisk transition under perioden åren 1993 fram till 2004

The main purpose of this essay is to investigate if Latvia´s pattern of trade has become more similar to the mature market economies, after Latvia´s independence 1991. Today, the intra-industry trade (IIT) dominates the trade of mature market economies. One of the pioneers of intra-industrial trade is Paul Krugman, who was the first to emphasize the importance "of scale and consumers' desire for variety" in explaining the basis for modern commerce. Customers get more variety and usually cheaper goods when the market gets bigger. I mainly use the modern trade theories to explain the trade pattern in Latvia. To measure how Latvia has developed its intra-industry trade, and thereby is approaching the mature market economies´ trade pattern, I use the Grubel-Lloyd index (GL-index). I can by my calculation of a weighted average of the GL-index, note that the share of IIT both has decreased and increased during the investigated years 1993 to 2004. The reduction took place during the 90s and the increase took place during the 2000s. I also use Balassa Index (BI) to calculate the “comparative advantage” for a number of Latvia's major export products. My calculations show that Latvia's main comparative advantage lies in semi-precious and basic metals. A comparison of the export flows from Latvia to Russia and to the EU15 from 1993 to 2004 shows two distinct trading changes. First, the trade has shifted primarily from Russia to EU countries. Second, many important export goods to Russia, (such as vehicles, machinery, electrical equipment and chemical products) have reduced its share of the total export. Instead we see a concentration to fewer export goods. Wood-, textile industry is the major export to the EU15. I note in the analysis, that the Foreign Direct Investment (FDI) is large in these areas. It seems to be a connection between the FDI to Latvia and the concentration of trade. In the conclusion of the essay I note that there are a trend that shows that Latvia is coming nearer the western modern economies’