Implementation of special support measures and resolving its main problems with effective methods in medium-run may allow to maintain the dairy sector as a significant traditional element of the Latvian economy. It is important to know the gross economic effect of the Latvian dairy sector in order to take informed and rational support decisions. Authors have developed and approbated methods and by applying these have obtained new, unpublished data that characterize economic effect of the sector. The data have been analysed in Latvian and the Baltic States context. It is concluded that the dairy sector is significant to the Latvian economy mainly due to gross value added and especially because of its role in providing work opportunity. Authors call attention to reserves in gross value added growth per full time equivalent unit in the secondary production in all Baltic States. The data of the primary dairy sector level in turn indicate lower potential of growth that is evidenced by even a slight decrease in indicators of the comparatively more effective Estonian producer structure. Therefore, it can be expected that the weight of dairy sector secondary level in the dairy sector gross value added will increase. Authors point out certain possible solutions of the Latvian dairy sector's problems such as promotion of joint ownership structure. Main analysed indicators are gross value added at factor cost, use of labour in full time equivalent units and labour use effectiveness.

The paper deals with the evaluation of resource price preferences and resource utilization efficiency in Latvian dairy sector that shows Latvian relative competitive position both in terms of producing competitive products for the market, as well as ensuring competitive salaries and a general rise in living standard for the employees. The evaluation is carried out through analyzing price levels of the main production resources and the utilization efficiency of these resources, based on the comparison with other EU countries. The efficiency indicators in Latvian primary milk production sector are considerably lower and despite resource price preferences the cost level per production value in Latvia is higher than in other countries. The analyzed resource utilization efficiency is low in Latvia also at the processing industry level, though the current price level of the main production resources helps to ensure competitive positions of Latvian dairy products. But considering large differences in compensation levels for labour force between Latvia and other EU countries, without increase in productivity, the situation is not sustainable in long-term.

Appropriate resources, availability of infrastructure, economic significance and food market forecasts determine the rationale for development of the dairy sector in the Baltic States. The sector is faced by significant economic problems; inter alia, production structure fragmentation, lack of investments and low labour productivity. Several sector's problems can be directly or indirectly solved by integration. Competition legal acts setting strict penalties directly and widely apply to integration processes, imposing a high level of legal risks on integrating parties. Thus, competition legislation forms a central framework limiting and guiding integration. As the subject has not been explored earlier, the author researched the Baltic dairy sector integration options at primary and secondary levels as influenced by the EU and Baltic national competition legislation and its implementation practice. Abstract-logical, monographic and interview methods have been used. The author concludes that law-compliant cross-border integration opportunities for the Baltic dairy sector exist to form larger integrated undertakings with higher market power. Reference to market shares in the competition legislation in countries with lower aggregate crude milk market sales puts the dairy sector participants at a disadvantage in case of integration processes resulting in smaller absolute size of the allowable integrated undertaking. Integration by agreements, decisions and concerted practices is appropriate for national level arrangements but is with limited applicability in the Baltic states cross-border integration at both levels of the dairy sector. In case of concentration, integration may be used to create cross-border integrated structures increasing concentration at every level of the Baltic dairy sector.

Recently economic development has been an issue of intense research and discussion in an academic society. Many facets of countries’ economic development were examined, including foreign trade. As a foundation of international cooperation, this indicator is relevant in observing one’s internal development and external ties. In case of Latvia, this topic is heavily influenced by economists, and the geographical perspective is quite underdeveloped. In this research, the economic ties of Latvia were explored through the analysis of its main export groups in sectors of agriculture, forestry and fisheries throughout the first decade of the 21st century. With the aim of establishing clear ties between Latvia and its major export markets, the statistics of foreign trade was analysed using frequency analysis. It can be reported that in general Latvian export markets are closely located and consist of the Baltic Sea Region countries such as Denmark, Germany, Russia and others. Despite the differences in commodity group destinations, it can be clearly stated that a division of trade flow still exists, separating it into two directions - Eastern and Western, where the former allocates the majority of Latvian processed commodities and more sophisticated goods, and the latter consumes raw materials and less transformed materials. This arguably shows a difference in demand in Western and Eastern markets, where the first mostly requires materials for its own industry, while the latter procures them for consumption on the local market, again pointing to a complexity of reforms required for the Latvian economic focus turning towards Western markets.