June 11, 08

NEWS / Eastern Europe Improves Its Status as U.S. Trade Partner

11 June 2008


Region offers energy resources, vibrant markets

By Jaroslaw Anders
Staff Writer

Washington -- U.S. trade with Eastern Europe, though still lagging behind trade with the western part of the continent, has been growing steadily since the region’s transition from a centrally planned to a market-driven economic model.

In 2007, the total of U.S. imports and exports to the fast-growing markets in the region reached $56 billion. Since 2000, exports from the United States to those countries increased by 215 percent and imports by 128 percent.

Eastern Europe as discussed here includes Russia and former European republics of the Soviet Union, European countries of the former Soviet bloc (except East Germany), countries of the former Yugoslavia, and three countries in the Caucasus: Georgia, Armenia and Azerbaijan.

The Russian Federation is by far the largest U.S. trading partner in this group, accounting for nearly half (about $27 billion) of the exchange in the whole region.

“Business relations [between the United States and Russia], both on trade and investment sides, have taken off even as the political relationships have grown cooler,” said a U.S. government trade expert.

In 2007, energy commodities accounted for nearly 57 percent of U.S. imports from Russia. The dollar value of Russian fuels purchased by the United States has increased more than tenfold (1,222 percent) since 2000. Imports of nickel, copper and other metals also grew at a considerable rate.

That increase, however, was due to the rise in global commodity prices and weakening of the dollar, rather than a higher volume of U.S. imports, the expert said.

U.S. exports to Russia have grown even faster than imports, reaching $7.4 billion in 2007 and making Russia the 20th largest export market for U.S. goods. The United States exports to Russia a range of manufactured goods, including aircraft, electronics, and vehicles and vehicle parts. The last category registered a stunning 2,652 percent growth since 2000.

“The Russian auto market is just flat booming,” said the U.S. trade expert. He added that, according to the estimates of the U.S. car industry, within five years Russia will be the largest single-country automobile market in Europe -- larger than Germany or the United Kingdom.

The Russian Federation is followed by three relatively mature and stable economies of Central Europe -- Poland, Hungary and the Czech Republic -- which together account for about 23 percent of U.S. trade with the region.

Trade patterns with those countries, which are European Union members since 2004, resemble those between most other industrialized nations with manufactured goods -- heavy machinery, vehicles, electronics, etc. -- flowing in both directions.

Ukraine, which aspires to gain EU membership, is in fifth place among U.S. trading partners in the Eastern European region. U.S. exports to Ukraine, at $1.3 billion 2007, have grown over the last seven years by more than 620 percent, though Ukrainian exports to the United States increased by less than 40 percent.

Ukraine sells the United States considerable amounts of vehicles and machinery and is a major buyer of U.S. iron and steel, which account for nearly 53 percent of total Ukrainian imports from the United States.

Despite frequent political disputes and strained diplomatic relations, Belarus occupies tenth place on the list of U.S. trading partners in Eastern Europe. Its imports from the United States are limited and were at $101.5 million in 2007, but they have grown 226 percent since 2000.

Belarusian exports to the United States, on the other hand, have grown in the same period by 892 percent. They reached more than $1 billion in 2007. Those exports consist mainly of mineral fuels (75 percent) and fertilizers (18 percent) with manufactured goods making up only a small sliver of the pie.

As in the case of Russia, those increases are accounted for mainly by the sharp increase in prices of the imported commodities and a lower purchasing power of the dollar, the expert says.

Among the countries of the former Yugoslavia, Slovenia, which avoided prolonged wars and ethnic conflicts during the Yugoslavian breakup and which joined the EU in 2004, leads today in trade with the U.S. with the value of mutual exchange at $785 million in 2007, while all the other countries of former Yugoslavia together represented slightly more than $1 billion in the same year.

Energy-rich Azerbaijan is the main U.S. trading partner in the Caucasus/Caspian region but the trade between the two countries is seriously unbalanced, both in value and structure of exchange.

Ninety-nine percent of U.S. imports from Azerbaijan consist of energy resources. At nearly $2 billion in 2007, they have grown by a staggering 8,917 percent since 2000 and have nearly tripled (from $716 million) since 2006, the year when the Baku-Tblisi-Ceyhan (BTC) pipeline, transporting Azeri oil to the Turkish Mediterranean port of Ceyhan, became operational.