Transition Economy:

A transition economy is an economy that is changing from a centrally planned economy to a free market one. Transition economies experience economic liberalization (letting market forces set prices and lowering trade barriers), macroeconomic stabilization where immediate high inflation is brought under control, and restructuring and privatization in order to create a financial sector and move from public to private ownership of resources. These changes often may lead to increased inequality of incomes and wealth, dramatic inflation and a fall of GDP. The transition process is usually characterized by the changing and creating of institutions, particularly private enterprises; changes in the role of the state, thereby, the creation of fundamentally different governmental institutions and the promotion of private-owned enterprises, markets and independent financial institutions. Since 1945, both regional and multilateral regimes have governed international commerce and investment. These regimes helped create five decades of prosperity - one of the best periods in modern economic history. Because of their success, both regimes are likely to coexist in governing the international economic system of the 21st Century. National security objectives acted as "circuit breakers" on trade and investment disputes between the United States, Japan, and Europe. During this era, the substantial liberalization achieved under the auspices of the GATT and the PTAs principally reached the industrial nations of Europe, North America, and Asia - all market-oriented economies with high levels of income and similar social structures. Most of the developing nations in Asia and Latin America, not to mention the economies in transition, were on the fringes of the system or totally beyond its reach. Deeper integration now exists both within once separatist economies - such as those states in Latin America, Asia, and Africa - and as between former adversaries - such as the People's Republic of China and the states of the former Soviet Union. It should be mentioned that the first stop for nearly all the economies in transition (EITs) would be the World Trade Organization.