Outward-Processing Trade between Germany and Eastern Europe

German enterprises have adopted a strategy based on outward-processing trade (OPT) with Eastern European partners to improve international competitiveness. In the 1990s, East German firms attached even more importance to this strategy because their competitiveness was hampered by wage rising faster than productivity. Thanks to these pre-1989 relations, German firms have been able to play a leading role & outstrip other Western companies in East European marketplaces. This situation has been reinforced by the EU's specific legislation granting incentives to trade with Eastern Europe. A microeconomic approach completes the authors' macroeconomic analysis. As interviews show, most German firms do not regard OPT as a futureless choice, as they continually switch countries when labor costs start rising. Instead, they see it as a strategy for closer forms of international cooperation, such as direct investment. 7 Tables, 1 Appendix. Adapted from the source document.