1. WP-2 tradeFDI A short presentation of WP-2 International context of cohesion: the role of trade and FDI GRINCOH Halle meeting 22-23 November 2012

2. Participating institutions IEHAS, Budapest (Coordinator) IER, Ljubljana IWH, Halle UCL, London WIIW, Vienna

3. Overarching objective Analysing the role of the changing international context in terms of international trade and Foreign Direct Investment (FDI) in the economic cohesion process of the CEECs within the EU and the wider global economy

4. Objectives in more detail Trade Trade: impact on CEECs’ employment structure, productivity, technology, and innovation upgrading FDI FDI:  productivity effects of inward/outward FDI on CEECs’ firms  embeddedness of inward FDI (of foreign investm enter-prises)in CEECs’ production and innovation networks  location patterns of FDI at the regional level across CEECs. Policy conclusions on how trade and FDI can foster enhanced cohesion of CEECs

5. Six tasks of which the last one will be policy conclusions

6. Progress in implementing activities foreseen Progress achieved in the various activities foreseen will be characterised in short below. In some cases, for activities whose deadline is far away, no progress will be reported, partly obviously only because I am not aware of progress achieved.

7. Task 1: Changing patterns of CEECs’ trade A.Question: reasons for, and implications of, differential movements in export prices (on market shares) of the CEECs. Progress: building database (IEHAS). B.Question: intra-industry trade’s role in the development of production and employment structure (IEHAS). Progress: database half-ready, preparing estimations. C.Question: export growth performance and potential of the 10 CEECs up to 2010(IER). Progress: database ready, preparing estimates.

8. Task 2: Trade: impact on CEECs’ prod- uctivity, innovation and technology A.Question: productivity gains from variety in CEECs’ trade and the effects on the skill premium over time (WIIW). Progress:- B.Question: technology upgrading in CEECs through trade (WIIW). Progress:- C.Question: gains of firms in CEECs from international trade: exports, imports and innovation at the firm level in CEECs (IER). Progress:-

9. Task 3: Effects of FDI on CEECs’ firms catching-up A.Question: the role played by firm heterogeneity in spillovers from inward FDI (IER & IWH). Progress: some preliminary results. B.Question: effect of outward FDI on investing firms’ performance (IER). Progress: -

10. Task 4: The role of inward FDI in CEECs’ production and innovation networks A.Question: producing evidence on the extent of and barriers to foreign affiliates’ embeddedness in internal and external networks by analysing production and technological linkages (UCL & IWH) Progress: someimportant research results achieved. B.Question: case study evidence on the extent and nature of foreign subsidiaries’ R&D and innovation capabilities (IEHAS) Progress: Questionnaire and other preparatory work for interviews done, interviews started.

11. Task 5: Role of FDI in terms of regio- nal development and policy impact A.Question: the extent of convergence of CEECs’ regions (NUTS-2) in attracting FDI over time (IWH) Progress: - B.Question: regional location decisions of FDI – agglomeration and policy impacts (IWH & WIIW) Progress: databases selected, hypotheses formulated.