Neven Mimica Table 1. Largest CSEE recipients of services FDI projects, 2002-2003 (Number of projects and percentage) Number of projects Country Total Greenfield FDI a Cross-border M&As Share(per cent) Russian Federation 126 81 45 15 Hungary 121 72 49 14 Poland 116 37 79 14 Czech Republic 95 31 64 11 Romania 77 57 20 9 Bulgaria 53 31 22 6 Slovakia 43 18 25 5 Serbia and Montenegro 31 21 10 4 Total 852 439 413 100 Source: UNCTAD, based on information provided by OCO Consulting and UNCTAD, cross­border M&A database. a Based on projects monitored in five key services areas: financial services, telecommunications services, headquarters and distribution centres, R&D and shared services/call centres. IMPACTS Impacts on economic welfare and labour markets of source countries International trade is widely accepted to have beneficial effects on aggregate economic welfare through the exploitation of gains from trade. However, when it comes to effects on the sector level and micro level of the economy, the results are not as clear cut. Traditional economic theory, based on the notion of comparative advantage, predicts that in Western Europe high-skilled workers gain whereas low-skilled workers lose and vice versa for developing and transition countries(because European countries are relatively well endowed with high-skilled workers and transition countries are relatively well endowed with low-skilled workers). As a result, inequality within countries rises. As production processes that require low-skilled workers are relocated abroad, those that involve higher skilled labour remain in the country. Relative demand for high-skilled workers increases and wages increase. The inverse is true for low-skilled workers. As relative demand in the source country labour markets 154