East-West Trade Trends. United States. Foreign Operations Administration

losses on individual transactions can be absorbed in longer-term government gains on other deals, the unit profit need not be the factor that determines the advantage of a deal, as it generally does for the free-world trader. Soviet-bloc governments can—and not infrequently do—set their prices at levels which discriminate among the various buyers and sellers with whom they deal. They exercise monopoly control not only in selling their own goods abroad but also in disposing of imported goods at home. The Soviet-bloc governments get bargaining advantages from such practices, made possible by their totalitarian trading system—practices which the West would not wish to imitate but which it might as well squarely face.

      Foreign trade is a political as well as an economic weapon in the hands of the Soviet Communist state. By way of illustration, in 1948 it was possible for the Kremlin first to reduce and then to cut off all trade between Eastern Europe and Yugoslavia as a part of the attempt to bring Marshal Tito to his knees. The attempt failed, but the Yugoslavs suffered serious economic difficulties before they could readjust. Even earlier, the world had seen how the Kremlin refused to allow the Eastern European countries to benefit from the flow of Western goods that could have been theirs under the Marshall plan—another evidence of how the state’s objectives took precedence over the people’s needs.

      The Kremlin in its propaganda made much of Western trade restrictions. But the West’s limited controls over the shipment of strategic goods did not come into existence until long after the Kremlin had begun using trade as a cold-war weapon. Even then these Western controls, far from being aggressive actions against peaceful trade or against the welfare of populations, were common-sense measures of economic defense, designed only to foster Western security by withholding from aggression-minded governments the important war-building materials that would make aggression easier.

      On the other hand, the Kremlin’s long-term objectives in its economic relations with the free world are far more than defensive. They have a dual character: strengthening the bloc and weakening the free-world powers. These objectives can be summarized as follows:

      1 To feed the economy, especially the industrial-military base, with imports that help the bloc become more powerful and less dependent on the free world.

      2 To drive wedges among free-world nations at every opportunity.

      3 To increase the reliance of free-world nations on the bloc for markets or supplies, and thus make the free world more vulnerable to bloc pressures.

West Has Never Barred Peaceful Exports

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      The Kremlin, while coldly managing the East-West trade of its domain in the manner described, always had its propagandists and fellow travelers out beating the drums and making a continual outcry against the security trade controls of the West. The main line of the propaganda was that trade was equivalent to peace and prosperity, and that the Soviet bloc always stood ready for unlimited trade, but that the Western “economic blockade” barred the way. In each country the businessmen were constantly handed the false but inflammatory story that they were being shamefully discriminated against by their government and that the businessmen of neighboring countries were less subject to restrictions. Western Europe as a whole was treated to an alluring picture of a vast prospect of East-West trade, beyond all factual probability in view of Soviet policies.

      This propaganda cannot be separated from the Soviet trading objectives. It is merely one of the instruments used in trying to achieve those objectives. It was used lavishly at a Moscow Economic Conference in April 1952, but although some Western businessmen who attended that meeting were impressed, the chief result was not an expansion of trade or elimination of Soviet discriminatory practices, but only the formation of new propaganda councils. And one of the significant facts of the present situation is that, although some new economic factors have arisen, the main propaganda line stays the same. At the Berlin four-power conference in late January 1954, Molotov used it again.

      The truth is that Western controls, which did not become effective until the 1950’s, have never been an “economic blockade.” The controls apply to a small percentage of the types of goods which made up East-West trade in the prewar years or in 1948. They leave room for the expansion of trade in many items. There are even many kinds of industrial raw materials and products which have never been embargoed by the Western Governments. Western security controls were not primarily responsible for the low levels of East-West trade.

      The main causes were Soviet policies, which wrenched the customary trade of the satellites away from Western Europe, tying it to the U.S.S.R., and which forced industrialization upon the whole European bloc in a manner which reduced its ability to trade with the West. In addition to these basic causes, the bloc countries were unsatisfactory trading partners in many ways. The prices were often higher than the world market; the deliveries were uncertain and sometimes deliberately withheld; the quality of their goods was often inferior; and some of the countries had a regrettable—and perhaps intentional—tendency to go into debt to the West.

Stalin’s Last Gospel

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      Stalin himself, in the year before he died, made some illuminating statements about the reorientation of the trade of Eastern Europe. He wrote an article, The Economic Problems of Socialism in the U.S.S.R., which was published in October 1952, though it had been written earlier in the year. In this article Stalin said that the most important economic consequence of World War II was “the disintegration of the single, all-embracing world market.” Actually there was scarcely a single world market before the war, but Stalin obviously was talking about the change in the trade of those countries that fell into the Soviet orbit during the war or shortly thereafter. He said that “now we have parallel world markets,” confronting one another. He then made the customary charge that the Western countries, through an “economic blockade,” had tried to “strangle” the Eastern European countries. He said the West had thereby unintentionally contributed to the formation of the new parallel world market. On this occasion, however, Stalin went on to say that “the fundamental thing, of course,” is not the Western economic blockade, but the fact that since the war the Eastern European countries “have joined together economically and established economic cooperation and mutual assistance.”

      He made it perfectly plain that, in Kremlin thinking, the breakdown of the “one world market” and the establishment of two rival markets was a tremendous boon to the Communist cause, because it shrank the markets available to the “capitalist countries” and intensified a struggle which the Communists always see as going on among those countries. And this, Stalin said, rendered more acute what he called the “general crisis of capitalism.”

      To picture the free world as in or near a general economic crisis is of course familiar Communist mythology. But Stalin’s discussion did reveal clearly the Communist indifference to the mutually fruitful and expanding international trade that the West desires. It was an admission of Communist responsibility for—or at least satisfaction with—a divided trade world.

      So much for Stalin’s last economic gospel. Stalin’s death was announced on March 5, 1953. Now let us examine what has been going on in his absence.

CHAPTER II

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      The New Regime and the Consumer

      After Stalin, the Soviet leadership was taken up by a group of top party officials. Georgi M. Malenkov was the Premier and the most influential, but apparently several other men held important shares of the responsibility and the power. This elite group included, with varying degrees of personal influence, Beria (temporarily), Molotov, Khrushchev, Voroshilov, Bulganin, Kaganovich, and Mikoyan. None of this new group was new to Soviet leadership.