Central European Nations Boost Regional Economies

CENTRAL European nations are taking steps to boost regional trade, hoping to reinforce economic reforms at home and smooth the way for integration with the West.

The four members of the Visegrad Group - the Czech Republic, Hungary, Poland, and Slovakia - decided late last month to speed up implementation of the Central European Free Trade Agreement.

The decision will lift all tariffs on nonagricultural goods by 1998, instead of 2001 as originally planned when the four nations signed the CEFTA pact in December 1992. Tariffs on agricultural products, meanwhile, will be significantly reduced beginning July 1.

``This is an instrument for subregional stabilization,'' said Bela Kadar, Hungary's minister for international economic relations, in a recent Monitor interview.

``Prosperity creates political and social stability,'' Mr. Kadar added. ``It [CEFTA] might ease some historically inherited ethnic and other problems.''

Speeding up the implementation of CEFTA is the most significant attempt in the last year or so to reverse a centrifugal trend among the Visegrad states.

The Visegrad Group came into existence in 1991, before the disintegration of the Soviet Union. At the time, Visegrad members shared the view that, by presenting a united front, they stood the best chance of quickly breaking out of the Soviet sphere and rejoining the West.

But as time passed, Visegrad states began to go their own way. Lacking the common perceived enemy - the Soviet Union - Hungary, Poland, and the then-Czechoslovakia started to show tactical differences as they pursued the common strategic goal of joining the European Union (EU) and NATO.

In the last year, friction between some Visegrad members - particularly Hungary and Slovakia - has sometimes reached alarming levels. Hungary complains about discrimination against its ethnic kinsmen, while Slovakia criticizes Budapest's reluctance to sign a treaty recognizing the two countries' present border.

The CEFTA agreement is an important signal to the EU that Visegrad states have the political maturity to settle problems amicably, according to the Hungarian trade minister. Hungary and Poland have submitted applications for EU membership, and they are eager to show that they now share the same democratic values as Western European nations.

``There's a Freudian angst [in the EU] that new members might bring into the union their subregional conflicts and tension. This proves we can settle our own problems,'' Kadar said, referring to CEFTA.

Central European officials also hope that fast implementation of CEFTA will bolster entrepreneurs, who have struggled to survive in the protectionist climate. Many small businesses in Central Europe do not have the resources to establish markets in Western Europe, Kadar explained. Thus, their growth potential is limited.

``Any growth in this part of Europe has to be export-driven,'' Kadar said. ``If we create better conditions for trade with neighboring states, then we help small entrepreneurs.''

Janos Vecsenyi, a professor at the International Management Center in Budapest, said closer Central European economic cooperation could prove beneficial for regional privatization efforts.

The Visegrad states have been pursuing differing privatization strategies with little effort made to exchange ideas and information. Privatization has gone the farthest in the Czech Republic and Poland; Hungary is moving at a moderate pace, while privatization in Slovakia is becalmed.

``We can learn things from each other,'' Mr. Vecsenyi said. ``The more we learn from each other, the greater the possibility that we can find out better methods.''

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