This paper combines an analysis of EU international trade and investment with case studies of the automotive and ICT industries. Previous enlargements of the EU had allowed productivity growth through scale and competition effects among quite similar countries. Related intra-industry trade and specialisation have had a limited impact on the structure of production of each country. The latest enlargement has on the contrary stimulated a process of vertical specialisation, with a more radical impact on the location of production. It thus represents a further pressure to structural change in a context of increasing global competition. Examples in the paper illustrate the process of value creation through value chain reorganisation and relocation of production both within the EU and more globally. It suggests that vertical specialisation within Europe can contribute to increase competitiveness of firms located in the EU.

Slavo Radosevic is Reader at the School of Slavonic and East European Studies, University College London.

Frédérique Sachwald is Head of Economic Studies at Ifri.