Konstantia Darvidou

The European Union and the Black Sea Economics Cooperation countries are geographical neighbors and important trade partners. Greece, Bulgaria and Romania have a cross-membership in both organizations. The paper analyzes trends and structure of trade relations of the EU and BSEC countries. The EU trade with the 12 BSEC countries is about 640 billion dollars. The BSEC countries with the EU membership or a custom union with the EU have more intra-industry trade with the EU than other BSEC countries. International tourism is an important component of the trade in services between the regions. Following the review of the factors of international tourism demand, a gravity model for tourism arrivals is presented. The model considers demand in the country of origin, international tourism capacities in destination countries and distance. The analysis helps to determine under-traded and competitive destinations in the BSEC countries for the EU travelers. Greece is the most efficient in attracting the EU tourists. Finally, country-specific differences in demand factors are considered.

Economic integration facilitated international trade within the EU with overall benefits for its economy. However, the importance of intra-EU trade varies by country and industry. This paper aims to estimate the efficiency of the intra-EU trade for particular Member States and economic sectors. The trade efficiency of the Member States is measured with the net export index and the difference in export and import growth. Correlation and regression analysis is used to assess sector-specific effects. The results show that South European Member States perform better in the efficiency of intra-EU services trade and worse in merchandise trade, but the difference is decreasing. Western European countries tend to have medium efficiency of services trade and stability in the efficiency of merchandise trade. North European countries are likely to have less than average trade efficiency and no major changes in it. Central European countries perform better than average and have an upward trend in merchandise trade efficiency. Ireland, Poland, Czechia, Slovenia, and Bulgaria have the best performance in the total intra-EU trade. The EU has a well-diversified intra-bloc trade with the domination of manufactured goods. The elasticity of value added to exports is the highest for apparel, automotive industries, agriculture, and travel services (0.8-1.2). Other sectors have lower elasticities: 0.3-0.7 (goods) or 0.4-0.6 (services). Export demand has little effect on the food industry, fuel industry, construction, and insurance sectors. The negative correlation in financial services was a prominent exception among industries.

The paper concentrates on the analysis of inward and outward FDI in the BSEC countries, their structuring by countries of origin and destination, and how the investment climate (in particular economic freedom and economic development) affects the actual FDI influx in the region. The BSEC countries became considerably attractive for FDI at the beginning of the 2000s, and now they receive about 4% of the world FDI. All the BSEC countries are net recipients of FDI, but some of them also actively invest abroad. Most FDI to the region originates in Europe. FDI is the most important for several small BSEC economies, especially in some periods when they made a significant contribution to capital formation. Despite a temporary increase in imports, FDI also helped to stabilize the balance of payments. Most BSEC countries usually outperform average countries worldwide by trade freedom, low tax burden, fiscal health, financial freedom, property rights, and low inflation. However, this group of countries is quite diverse by particular indicators. Corruption and excessive regulations often act as the drawbacks for the investment climate. The overall economic freedom and low tax burden are the strongest determinants of inward FDI to the BSEC countries. Improving the overall economic freedom, protecting property rights, and better control over government spending are the most crucial for stimulating economic growth. Economic growth and trade freedom are less important factors for FDI.