Intra-Industry Trade and Foreign Direct Investments:The Case Analysis

This paper analyzed foreign trade pattern of Lithuania and foreign direct investment flows to country after re-creation of independence in 1990 when the main political and economical reforms took place. The country has successfully managed its transition towards a market economy. With a consistent program of structural reforms and comprehensive privatization, major results have been achieved. Although the country has been successful in reorienting its exports to new markets, notably the EU countries. Geography and the approach taken to dismantling central planning have ultimately driven FDI flows into Lithuania. The Lithuanian-EU trade liberalization agreements have helped the country to attract foreign investors. Such questions as which were the main factors of the change in export reorientation and why did trade flows increase with EU market were discussed in this paper. The question of the role of foreign direct investments in the pattern of these changes was discussed profoundly. Overall the main research question was to find which role foreign direct investments played in the changes of trade reorientation towards EU market during the transition process in Lithuania.