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THE EVOLUTION OF SOVIET FOREIGN TRADE. AN ATTEMPT TO ASSESS SOVIET DEPENDENCE ON FOREIGN TRADE

by

Renzo Daviddi

Composition of the Dissertation Committee:

Prof. Alberto Chilosi, University of Pisa

n Phil Hanson, CREES, University of Birmingham

" Wojciech Maciejewski, University of Warsaw

" Domenico Mario Nuti, E.U.I., Supervisor

" Jozef van Brabant, United Nations, New York

LIB

382.0947

DAV

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TABLE OF C O N T E N T S

1. Aims, h y p o t h e s e s and m e t h o d o l o g y .

P ART X. Trade dependence: definition and i»»ues.

2. The co nc e p t u a l fr am ew or k.

2.1. The conc ep t of d e pe nd en ce .

2.2. C o m p o n e n t s of e c o n o m i c depend en ce . 2.3. Fl ex ib i l i t y : f o r e i g n tr ade and the home market.

2.4. Central planning, f o r e i g n trade and de pe nd e n c e . 3. S o v i e t f o r e i o n tr ade de p e n d e n c e : a critical appraisal of the l i te ra tu re . 3.1. S o v i e t t r a d e p a r t i c i p a t i o n and de pe nd e n c e . 3.2. L e v e r a g e as a p o li cy instru me nt .

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P art I I . S o v i et fo r e ion trade in the 1970s: an increase of d e pendence? 4. The e x p a n s i o n of S o v i e t t r ad e and fi na n c i a l r e l a t i o n s in the 1970s. p. 49 4.1. The d i m e n s i o n s of " o p e n i n g up". p. 51 4.2. P a r t n e r s h i p : S o v i e t - E a s t e r n v e r s u s S o v i e t - W e s t e r n trade. p. 55 a . T r e n d s . p. 55 b. I n t r a - C M E A v e r s u s S o v

1

e t - U e s t e r n trade. p. 61 c. H a r d - c u r r e n c y tr ade and pa yments. p. 68 4.3. F l e x i b i l i t y : d o m e s t i c v e r s u s f o r e i g n tr ad e s e c t o r . p . 77 a. M a c h i n e r y and eq ui p m e n t . p. 81 b. E n e r g y p r o d uc ts : p r o d u c t i o n and trade. p. 87 A p p e n d i x A. M o t e s on value, v o l u m e in d i c e s and t e rm s of t r a d e c a l c u l a t i o n . p. 90 5. D e p e n d e n c e and i n t e g r a t i o n : S o v i e t r e l a t i o n s with E a s t e r n Europe. p. 90 5.1. G a i n s and lo ss es in i n t r a - C M E A trade. p. 90 5.2. P r i c e c h a n g e s and the e v o l u t i o n of i n t r a - b l o c r e l a t i o n s . p. 94 5.3. The e m e r g e n c e of a S o v i e t t r ad e s u rp lu s, p. 99 5.4. So me r e m a r k s on the " i m p l i c i t s u b s i d i e s " t h e o r y . p .101

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6. T o w a r d s a r e f o r m of the f o r e i g n trade system. P . 1 09

6.1. So v i e t trade in the 1980s:

the c r is is mature. p . 110

6.2. P e r e s t r o i ka in the f o r e i g n trade sector, p

. 1 1 4

a. The a d m i n i s t r a t i v e r e o r g a n i z a t i o n . p . 116 b. J o in t ve ntures. p . 119 c. The O c t o b e r 1987 decree. p .120 d. L i m i t s of the p r op os al s. p . 1 2 2 <6.3. S h o r t - t e r m a d j u s t m e n t v e r s u s s t r u ct ur al v a r i a t i o n s : a p r e l i m i n a r y a s s e ss me nt . p . 125 A p p e n d i x B. Main m e a s u r e s c o n c e r n i n g S o v i e t f o r e i g n trade. p . 129

7. F i n d i n g s and l i m i t a t i o n s of the re search. P .130 - T a b l e s and graphs.

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TABLES.

Table 1. So v i e t expo rt s and imports in f o r e i g n trade and d o m e s t i c prices. S e l e c t e d years.

Table 2. S o v i e t trade p a r t i c i p a t i o n ra tes in 1980.

Tabl e 3. A v e r a g e annual g r ow th rate s of S o v i e t total trade in c u r r e n t prices, 1961-85.

Table 4. Sh are of the USSR in w o rl d trad e in percen ta ge . T a bl e 5. USSR total trade at c o n s t a n t prices, 1960-87. T a ble 6 . P l a n n e d and r e a l i z e d gr owth of NMP and trade,

1966-65.

Table 7. Annual gr ow th ra tes of NMP, e x p o rt s and imports. Ta ble 8. Q u a n t i t y indi ce s by main regions, 1960-85.

Table 9. S h ar e of trade partners, regions, in p e rc en ta ge . T a bl e 10. C o m m o d i t y c o m p o s i t i o n of e x p o rt s and imports. T a ble 11. Ex p o r t and import s t r u c t u r e at c o n s t a n t prices,

1960-84.

Tabl e 12. S o v i e t terms of trade, total and by main region, 1960-84.

Table 13. USSR h a r d - c u r r e n c y B a la nc e of P a y m e n t s on cu rrent a c c o u n t and debt to West, 1970-85.

Table 14. Gold s a le s in h a r d - c u r r e n c y , s e l e c t e d years. Ta ble 15. Te rms of s y n d i c a t e d loans.

Ta ble 16. G r o w t h r a te s and e l a s t i c i t y of imports with r e s p e c t to i n v e s t m e n t in m a c h in er y.

T a b l e 17. C r u d e oil p r o d u c t i o n and export. Total and by main a r e a .

Table 18. C r u d e oil e x p o r t as p e r c e n t a g e of pr oduction. T a bl e 19. Oil and gas exports. Total and to W e s t e r n

i n d u s t r i a l i z e d co un tr ie s.

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Table 21. I n c o m e s from oil and natural gas e x p o r t s to OECD c o u n t r i e s .

;f> i) Table 22. I n d i c e s of w o r l d m a r k e t prices, S o v i e t ex p o r t

pr i c e s to CME A and S o v i e t d o m e s t i c w h o l e s a l e prices. S o v i e t e s t i m a t e s 19 60 -1 97 6.

T a b l e 23. I n d i c e s of S o v i e t net ba r t e r t e rm s of t r ad e vi s -s

y_LS_ CME A. ,

T a bl e 24. Ex p o r t of oil and non-oil p r o d u c t s to CMEA. T a bl e 25. T r a d e b a l a n c e w i t h the EE6.

T a bl e 26. Fund s r a i s e d on the i n t e r n a t i o n a l market. T a bl e 27. S o v i e t i m p o r t s at c u r r e n t prices, 1980-87.

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G R A P H S .

G r ap h 1. S o v i e t total trade, 1960-85. G r ap h 2. S o v i e t total exports.

G r ap h 3. S o v i e t total imports. G r a p h 4. Terms of trade, 1970-84. G r a p h 5. Oil p r o d u c t i o n and export.

G r a p h 6. E x p o r t as p e r c e n t a g e of oil produc ti on .

G r a p h 7. Oil e x p o rt s as p e r c e n t a g e of oil production, G r a p h 8. Oil and gas export.

G r a p h 9. E x po rt of oil and non-oil products.

CHARTS

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A C K N O W L E D G E M E N T S .

A Ph.D. D i s s e r t a t i o n is n e we r w r i t t e n w i t h o u t the help of others, and mi ne is no ex ce p t i o n . M a r i o Nuti first e n c o u r a g e d me to s t u d y this p a r t i c u l a r t o pi c and then guid ed me wi th ad v i c e and c r i t i c i s m . I have b e n e f i t t e d from d i s c u s s i o n s w i t h A l b e r t o C h il os i, G i ov an ni Gr az i a n i , U o j c i e c h M a c i e j e w s k i and J o z e f Uan Brabant, who read and c o m m e n t e d p r e v i o u s v e r s i o n s of the m a n u s c r i p t . S h e i l a M a r n i e and J e s s i c a S p a t a r o s u b s t a n t i al 1 y e n h a n c e d its le gibility, wi th p r e c i o u s e d i t or ia l work. D e s p i t e all this help, I r e m a i n s o l e l y r e s p o n s i b l e for any mi s t a k e s , m i s j u d g e m e n t s and m i s c o n c e p t i o n s .

Finally, I w i s h to t h a n k my p a r e n t s for th ei r c o n t i n u o u s e n c o u r a g e m e n t , s u p p o r t and i n t e r e s t in my e d u c a t i o n . My wi fe R o b e r t a to ok the br unt of the burden, h a v i n g to s h a r e time wi th a m a n u s c r i p t so ma ny times r e f e r r e d to as " a l m o s t " f i n i s h e d .

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1. AIMS, H Y P O T H E S E S AND M E T H O D O L O G Y .

The q u e s t i o n of a n a t i o n ' s p a r t i c i p a t i o n in i n t e r n a t i o n a l trade can be t a c k l e d from at least two d i f f e r e n t p o in ts of view. The first c o n c e r n s the nation's role in i n t e r n a t i o n a l trade, that is its b e h a v i o u r on the w o rld market, its impact on c o m m o d i t y and fa c t o r markets. The o t he r deals with the role f o r e i g n trad e plays in the d o m e s t i c economy. As far as the USSR is conc er ne d, several s t u d i e s have a t t e m p t e d to a n a l yz e the first set of prob le ms from v a r i o u s p e r s p e c t i v e s and no a t t e mp t will be made to r e p l i c a t e them here

1_-The main o b j e c t i v e of this r e s e a r c h is i n s t ea d to a s se ss the role f o r e i g n trade plays wi t h i n the So vi et Union. In p a r t i c u l a r I shall i n v e s t i g a t e w h e t h e r the proc es s of " o p e n i n g u p" that has c h a r a c t e r i z e d the 1970s has led to

some form of d e p e n d e n c e of the So v i e t do m e s t i c p r o d u c t i v e p r o c e s s upon f o r e i g n t r a d e .

The ex t e n t of a n a t i o n ' s parti c i pa ti on in f o r e i g n trade v a r i e s d e p e n d i n g on size, natural endowment, geogra ph ic al p r o x i m i t y to d y n a m i c markets, historical trends, political

]_. W e s t e r n c o n t r i b u t i o n s include the cl as si c

t e x t b o o k s on C.P.E. tr ade by Wi les (1968); H o l z m a n (1974) Bo lt ho (1971). The d e t e r m i n a n t s of Sovi et f o r e i g n trade have been i n v e s t i g a t e d among o t h e r s by M c M i l l a n (1973a), (1973b), (1974); R o s e f i e l d e (1973), (1976a), (1976b), (1979), (1980) and G a r d n e r (1979), (1983). R e c e n t d e v e l o p m e n t s have been s u m m a r i z e d for in s t a n c e by H a n s o n (1982c), (1985), H e w e t t (1983), Z o e t e r (1982), M c I n t y r e (1987a). The impact of the S o v i e t U n io n in p a r t i c u l a r c o m m o d i t y m a r k e t s has been studied, among others, by Kostecki (1984).

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factors, etc. S i nc e 1917 the S o v i e t e c o n o m y has been c h a r a c t e r i z e d by a s t r o n g a u t a r k i c te nd en cy , built into the p l a n n i n g s y s t e m and s t r e n g t h e n e d by S o v i e t gr ow th p o l i c i e s and the s t a t e of its

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n t e r n a t i o n a l re la t i o n s . Two n o t a b l e e x c e p t i o n s to this a u t a r k i c bias were the f o r e i g n tr ad e dr i v e s of the 1930s and 1970s, p e r i o d s c h a r a c t e r i z e d by r e l a t i v e l y high t r ad e t u r n o v e r w i t h f o r e i g n c o u n t r i e s and i n c r e a s i n g t r ad e p a r t i c i p a t i o n ratios. Ue may c o n j e c t u r e that the two dr i v e s s h a r e a c o m m o n d e t e r m i n a n t , na me ly the n e c e s s i t y to s p e e d up the p r o c e s s of growth: in the 1930s, the a t t e m p t to a c h i e v e the r a p i d in d u s t r i a 1 i z a t i o n of a b a c k w a r d a g r i c u l t u r a l country, in the 1970s, the n e c e s s i t y to i m p r o v e the q u a l i t y of p r o d u c t i o n and to s t i m u l a t e i n n o v a t i o n . The two periods, however, p r e s e n t d i v e r g e n t price trends: t e rm s of t r a d e d e t e r i o r a t e d d r a m a t i c a l l y in the th i r t i e s , w h i l e th ey m o v e d s t r o n g l y in f a v o u r of the S o v i e t U n i o n in the s e v e n t i e s .

The h y p o t h e s i s is o f t e n a d v a n c e d that s i n c e 1970 the r a p i d i n c r e a s e in t r a d e and c o o p e r a t i o n wi th W e s t e r n i n d u s t r i a l i z e d c o u n t r i e s and the s u b s t a n t i a l f a i l u r e of p r o g r a m s of speci al i zati on and i n t e g r a t i o n in si de the CM EA 2.

2_. T h r o u g h o u t th is work, Bulg ar ia , C z ec ho sl ovaki a , the G e r m a n D e m o c r a t i c R e p u b l i c , Hu n g a r y , P o l a n d and R u m a n i a are r e f e r r e d to as the East E u r o p e a n m e m b e r s of CMEA, also i n d i c a t e d as E a s t e r n

E u r o p e a n c o u n t r i e s or E a s t e r n Europe. O t h e r m e m b e r s are Cuba, M o n g o l i a and V i et na m. The East E u r o p e a n six and the U S S R a c c o u n t e d for 90S: of CM EA total t r a d e in 1980. The g r ou p " S o c i a l i s t c o u n t r i e s " i n c l ud es : CM EA pl us A l b a n i a ( f o r m a l l y still a m e m b e r of CMEA), China, N o r t h Korea, Y u g o s l a v i a , and s i n c e 1979, Laos. D e v e l o p e d

c a p i t a l i s t c o u n t r i e s , also r e f e r r e d to as W e s t e r n i n d u s t r i a l i z e d c o u n t r i e s , and less d e v e l o p e d

c o u n t r i e s r e p r e s e n t the a g g r e g a t e " n o n - s o c i a l i s t c o u n t r i e s " . The f o l l o w i n g c o u n t r i e s are i n c l u d e d

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have in v o l v e d a grow in g d e p e n d e n c e on m a r k e t s o u t s i d e the s o c i a l i s t community. It is true that So v i e t trade p a r t i c i p a t i o n r a ti os have i n c r e a s e d during the last two d e ca de s and that the share of n o n - s o c i a l i s t pa r t n e r s in total S o v i e t trade, as m e a s u r e d in c u r r en t prices, has i n c r e a s e d s i g n i f i c a n t l y since the s e c o n d half of the 1960s, t h r o u g h the 1970s. Over these y e ar s f o r e i g n trad e appears as one of the most dyna mi c e l e m e n t s in the S o v i e t economy.

Import of W e s t e r n m a c h i n e r y i n c r e a s e d d r a m a t i c a 11 y , with a g r o w i n g r e l i a n c e on W e s t e r n s o u r c e s of f i n a n c e and c o n s e q u e n t l y an ex ce pt io na l i n cr ea se in So v i e t h a r d - c u r r e n c y debt. The s h if t in import and export fl ows has led some s c h o l a r s to p o s t u l a t e a s u b s ta nt ia l r e - o r i e n t a t i o n of Sovi et t r ade away from the s o c i a l i s t area t o w a r d s the W e s t e r n i n d u s t r i a l i z e d co untries. However, as has become i n c r e a s i n g l y clear in the first half of the 1980s, Soviet t r ad e p e r f o r m a n c e did not stem from a d e l i b e r a t e growth st ra te gy , and most of the o u t c o m e can be r e la te d to the d r a m a t i c price f l u c t u a t i o n s on the w o rl d market. To a large ex t e n t we can say that an u n e x p e c t e d and large i m p r o v e m e n t in US SR t e rm s of tr ade has n a t u r a l l y o f f s e t an u n e x p e c t e d and large d e c e l e r a t i o n of growth rates, a l l o w i n g the USSR to avoid a d o p t i n g an a d j u s t m e n t policy.

-DCs: West G e r m a n y ( i n c l u d i n g West Berlin), Finland, Italy, France, Japan, USA, the U.K., N e t h e r l a n d s , Belgium, Austria, Canada,

S w i t z e r l a n d , Greece, Spain, A u st ra li a, ot he r c o un tr ie s; -LDCs: India, Arge nt in a, Libya, Iran, Iraq, Brazil, A f g h a n i s t a n , Egypt, Syria, Nigeria, o t h e r co un tr ie s.

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In p a r t i c u l a r a ve ry large o o r t i o n of the a p p a r e n t l y g r o w i n g d e p e n d e n c e mu st be i m p u t e d to price m o v e m e n t s : d a t. a in real t e rm s sh ow that no s u b s t a n t i a l s h if t in the regional ex po rt d e p e n d e n c e of d o m e s t i c p r o d u c t i o n and import d e p e n d e n c e of d o m e s t i c c o n s u m p t i o n has o c c u r r e d . This does not me an that tr ade wi th the West has had a m a rg in al role ov er the period. T h e r e are s e c t o r s w h i c h g r e a t l y b e n e f i t e d from the c o n t r i b u t i o n of W e s t e r n k n o w - h o w and te ch no l o g y , and o t h e r s w h e r e the p r o c e s s of s u b s t i t u t i o n of d o m e s t i c a l l y p r o d u c e d for i m p o r t e d go ods w o u l d be a d i f f i c u l t task. But it is cl ear that the way out of the e c o n o m i c s t a g n a t i o n p r e s e n t l y a f f e c t i n g the US SR has been i d e n t i f i e d in the f i rs t pl ace w i t h a m o r e ra t i o n a l and e f f i c i e n t u t i l i z a t i o n of d o m e s t i c r e s o u r c e s , and s e c o n d l y , in a cl o s e r col 1a b o r a t i o n and i n t e g r a t i o n w i t h i n the C M E A . The p u r p o s e of this r e s e a r c h is that of s u b s t a n t i a t i n g , q u a l i t a t i v e l y and q u a n t i t a t i v e l y , t h es e ar g u m e n t s .

At the b e g i n n i n g of the 1980s a large body of l i t e r a t u r e e m e r g e d on the issue of S o v i e t d e p e n d e n c e on f o r e i g n t r a d e and mo re g e n e r a l l y on the v u 1n e r a b i 1 ity of the S o v i e t e c o n o m i c s y s t e m to external forces. In t h es e s t u d i e s d e p e n d e n c e was m e a s u r e d al m o s t e x c l u s i v e l y by im port an d / o r ex p o r t r a t i o s to an i n d i c a t o r of national in c o m e 3_ and o f t e n i d e n t i f i e d w i t h t h r e a t and fe ar of po l i t i c a l l e v e r a g e and w i th the use of t r a d e as an i n s t r u m e n t to i n f l u e n c e the f o r e i g n p o l i c y of the U S S R ±. I n d i c e s we re g e n e r a l l y

3_. For in st an ce : Treml ( 1982); U a n o u s ( 1982).

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c a l c u l a t e d at the a g g r e g a t e level, w i t h ou t taking into ac co un t s e c t o r data or draw in g a d i s t i n c t i o n between di f f e r e n t tr ade partners. The debate has f o c u s e d ma in ly on the way in w h ic h trade v e c t o r s are e v a l u a t e d (i.e. at d o m e s t i c prices, f o re ig n trade prices or pr ices p r e v a i l i n g on the w o rl d market), w i t h o u t a p p r o p r i a t e r e f e r e n c e to all the m e t h o d o l o g i c a l o b s t a c l e s i n v o l v e d in the a s s e s s m e n t of S o v i e t a g g r e g a t e d trade flows. Many authors also seem to imply a o n e - t o - o n e c o r r e s p o n d e n c e b e tw ee n ri s i n g trade s h a r e s and the v u l n e r a b i l i t y of the So v i e t e c o n o m y to external forces. Obvi ou sl y, d e p e n d e n c e ra is es the p o s s i b i l i t y of i n f l i c t i n g damage on the tr ade partner, but more g e n e r a l l y it d e pe nd s on the " f l e x i b i l i t y " , the c a p a c i t y to " s u b s t i t u t e " of the system. The gr ow th of f o r e i g n trade, e s p e c i a l l y wi th W e s t e r n in dustrial ized countries, has i n c r e a s e d the s e n s i t i v i t y of the So v i e t econ om y to external shocks, e s p e c i a l l y via f l u c t u a t i o n s of world m a rk et prices for raw ma te r i a l s . But d e f i n i n g and c a l c u l a t i n g an actual i n d i c a t o r of d e p e n d e n c e is a much more comp le x task. An i n c r e a s i n g r a t i o of import or export to GNP, however it is ca l c u l a t e d , ca n n o t be c o n s i d e r e d a s u f f i c i e n t l y r e l i a b l e i n d i c a t o r of the level of d e p e n d e n c e of the S o vi et ec on om y on its f o r e i g n t r ad e sector, e s p e c i a l l y if it does not take into a c c o u n t the c o m m o d i t y and geog ra ph ic al c o m p o s i t i o n of t r a d e .

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rhe p r e s e n t s t u d y is o r g a n i z e d as follows. In the first part a more c o m p l e t e c o n c e p t of d e p e n d e n c e is i n t r o d u c e d and a n alyzed. D e p e n d e n c e will be i n t e r p r e t e d as the r e v e r s e of the a d v a n t a g e d e r i v e d by a p a r t i c u l a r n a t i o n from its p a r t i c i p a t i o n in i n t e r n a t i o n a l t r ad e w i t h s p e c i f i c p a r t n e r s or gr o u p s of pa rt ne rs , as an i n d i c a t o r of the s e n s i t i v e n e s s of a c o u n t r y ' s c u r r e n t p e r f o r m a n c e and f u t u r e d e v e l o p m e n t w i th r e s p e c t to i n t e r n a t i o n a l trade. The c o n c e p t u a l f r a m e w o r k will be d e v e l o p e d in c h a p t e r 2: the c o n c e p t of d e p e n d e n c e is f i rs t d i s c u s s e d at a t h e o r e t i c a l level ( s e c t i o n s 1 to 3) and th en the p e c u l i a r c h a r a c t e r i s t i c s of a c e n t r a l l y p l a n n e d e c o n o m y w i t h r e s p e c t to t r a d e are ex am i n e d . C h a p t e r 3 p r e s e n t s a s u r v e y of the l i t e r a t u r e on S o v i e t f o r e i g n t r a d e d e p e n d e n c e . The f i rs t s e c t i o n r e v i e w s a g g r e g a t e i n d i c e s of t r a d e p a r t i c i p a t i o n and d e p e n d e n c e , the v a r i o u s m e t h o d o l o g i e s f o l l o w e d for t h e i r c a l c u l a t i o n and gives d e s c r i p t i o n of the c o n t r o v e r s y o v e r the e v a l u a t i o n of t r ad e f l o w s and in c o m e a g g r e g a t e s . The f o l l o w i n g s e c t i o n of this c h a p t e r d e al s w i t h a b r ie f s u r v e y of the large n u m b e r of c o n t r i b u t i o n s on l e v e r a g e and e m b a r g o e s . The c h a p t e r ends w i t h an e v a l u a t i o n of S o v i e t p e r c e p t i o n of the pr oblem.

The s e c o n d part of the w o r k a t t e m p t s to m e a s u r e S o v i e t f o r e i g n t r a d e d e p e n d e n c e .

The o p e n i n g p r o c e s s of the 1970s is c r i t i c a l l y r e ­ e x a m i n e d in c h a p t e r 4. A c o m p r e h e n s i v e set of data in real terms, r e c e n t l y m a d e a v a i l a b l e by the U n i t e d N a t i o n s , are c o m p a r e d w i t h data in c u r r e n t prices, and the key a s p e c t s of the p e r i o d e v a l u a t e d by m e a n s of data d i s a g g r e g a t e d by main

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t r a d i n g area and c o m m o d i t y group. The first s e c t i o n of the c h a p t e r a n a l y s e s overall tr en ds for the p e r i o d 19*0-1985. The f o l l o w i n g s e c t i o n d i s c u s s e s the h y p o th es is , often a d v a n c e d in the literature, that the So v i e t U n io n in the 1970s saw a dr am a t i c shift in the g e o g r a p h i c a l d i r e c t i o n of its t r ad e t o w a r d s W e s t e r n co untries, with a c o n s e q u e n t i n c r e a s e of d e p e n d e n c e on w e s t e r n s o u r c e s of impo rt s and W e s t e r n m a r k e t s for its energy exports. Finally, in se c t i o n 3 d e p e n d e n c e is r e l a t e d to the role that tr ade plays at sectoral level and c o n s i d e r a t i o n s are d e v e l o p e d c o n c e r n i n g two basic s e c t o r s of the So v i e t economy: the M a c h i n e B u i l d i n g Metal W o r k i n g (M B M W ) se c t o r and the en er gy sector.

The S o v i e t " s p e ci al " r e l a t i o n s h i p with E a s t e r n Euro pe is a n a l y s e d in c h a p t e r 5, wher e the conc ep t of n e g a ti ve d e p e n d e n c e , i.e. the o p p o r t u n i t y costs i n c u r r e d by the S o v i e t U n io n in its trade with the E u r o p e a n p a r t n e r s of the C M E A , is i n t r o d u c e d and utilized. The v a r i o u s i m p l i c a t i o n s of the e x i s t e n c e of an a s y m m e t r i c r e l a t i o n s h i p b e tw ee n the US SR and the E E 6 are e x a m i n e d in the firs t thre e s e c t i o n s of the chapter, w h i l e the fo u r t h deals with a s u r v e y of re c e n t l i t e r a t u r e on gains and losses in i n t r a - C M E A trade.

C h a p t e r 6 is d e v o te d to analyse the r a t i o n a l i z a t i o n of the f o r e i g n trade se c t o r r e c e n t l y a t t e m p t e d by the new S o v i e t leader sh ip . The c h a p t e r at t e m p t s to i n v e s t i g a t e the p o s s i b l e c o n s e q u e n c e s of the re fo rm and in p a r t i c u l a r its i m p l i c a t i o n s on the level of Soviet trade p a r t i c i p a t i o n and d e p e n d e n c e .

Some c o n c l u d i n g r e m a r k s s u m m a r i z e main f i n d i n g s and l i m i t a t i o n s of the research.

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2. THE C O N C E P T U A L FRAMEWORK.

The c o n c e p t of d e p e n d e n c e has been wi d e l y used in e c o n o m i c literature, e s p e c i a l l y when d e s c r i b i n g N o r t h - S o u t h re la t i o n s . It has, however, assu me d a large v a r i e t y of m e a n i n g s not only p e r t a i n i n g to ec o n o m i c rela ti on s, but also with r e f e r e n c e to v a r i o u s social, political and ec on om ic di me n s i o n s . I n t e r e s t in the issue arose also in the p o s t - w a r pe r i o d in the c o nt ex t of E a s t - W e s t trade rela ti on s. More r e c e n t l y it has r e g a i n e d p o p u l a r i t y due to p r o b l e m s c o n c e r n i n g the g a s - p i p e l i n e deal betw ee n w e s t e r n Eu ro pe and the US SR and the a t t e mp t by the Un it ed S t at es to impose s a n c t i o n s on tr ade in r e s p o n s e to the S o vi et in v a s i o n of A f g h a n i s t a n . The aim of this c h a p te r is to define the term d e p e n d e n c e as p r e c i s e l y as po ss i b l e and to develop a few o b s e r v a t i o n s on its a p p l i c a b i 1 ity to the S o vi et economy.

2.1. The c o n c e p t of de pendence.

The body of l i t e r a t u r e that has f l o u r i s h e d around the c o n c e p t of d e p e n d e n c e is so wide that I will not even a t t e m p t to s u m m a r i z e it here. More si mp ly I wo uld like to d i s c u s s some of the d e f i n i t i o n s that have been proposed.

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This area of s t u d y a p p e a r s h e a v i l y beset with p r o b l e m s of d e f i n i t i o n . A c c o r d i n g to Duvall

t h e r e is general a g r e e m e n t that the term d e p e n d e n c e r e f e r s to a s y m m e t r i c p r o p e r t i e s of the s t r u c t u r e of r e l a t i o n s h i p amon g social en ti ti es , but t h e r e is a lack of real pr e c i s i o n , c o n c e p t u a l clarity, in the p a r t i c u l a r a s y m m e t r i c s t r u c t u r a l , or r e l a t i o n a l , p r o p e r t i e s that are d e n o t e d by the term 5. T e rm s s u c h as d e p e n d e n c e , v u l n e r a b i l i t y , i n t e r d e p e n d e n c e are used i n t e r c h a n g e a b l y in d i f f e r e n t c o n t e x t s and w i t h a p l e t h o r a of m e a n i n g s D e p e n d e n c e is o f t e n i d e n t i f i e d w i t h so me r e l i a n c e on f o r e i g n actors, a s t a t e of s u b o r d i n a t e or s u b j e c t r e l a t i o n s h i p . Its s u p p o r t e r s "... seek to pr obe and ex p l o r e the s y m m e t r i e s and a s y m m e t r i e s among nati o n - s t a t e s " 7_. This s t u d y is p a r t i c u l a r l y c o n c e r n e d w i t h d e p e n d e n c e on the o u t s i d e w o r l d c r e a t e d by e c o n o m i c r e l a t i o n s 8_. 5. Duvall (1978), p . 52. 6_. A v e r y d e t a i l e d s u r v e y of the l i t e r a t u r e c o n c e r n i n g d e p e n d e n c e and d e p e n d e n c i a t h e o r y can be f o u n d in a m o n o g r a p h i c issue of I n t e r n a t i o n a l Q r g j n i z a t i o n 3 2 ( 1 ) , 1 9 7 8 . S o m e t i m e a d i s t i n c t i o n is i n t r o d u c e d b e t w e e n d e p e n d e n c e and d e p e n d e n c y . a c o m p r e h e n s i v e a n a l y s i s of h i s t o r i c a l p r o c e s s e s of s o c l o - s t r u c t u r a 1 t r a n s f o r m a t i o n , " e s p e c i a l l y ' d i s t o r t i o n s ' of ' p e r i p h e r a l ' s o c i e t i e s that r e s u l t from, or are the r e f l e c t i o n s of, the

i n c o r p o r a t i o n of t h o s e s o c i e t i e s into the global c a p i t a l i s t s y s t e m " C a p o r a s o (1978), p . 6. The l a t t e r co n c e p t , h o we ve r, has to be i n t e r p r e t e d m a i n l y as lack of n a ti on al i n d e p e n d e n c e , s o m e t h i n g that does not p e r t a i n to our r e s e a r c h .

7.. C a p o r a s o (1978), p . 2.

8.. In the c o n t e x t of S o v i e t f o r e i g n r e l a t i o n s the c o n c e p t of d e p e n d e n c e may be f r u i t f u l l y a p p l i e d both to i n v e s t i g a t e S o v i e t " i m p e r i a l " r e l a t i o n s w i t h E a s t e r n E u r o p e a n c o u n t r i e s a f te r the S e c o n d

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D e p e n d e n c e cannot be c o n s i d e r e d n e c e s s a r i l y a "one-way" relation, i.e. a s i t u a t i o n where just one of the agents i n v o l v e d "d e p e n d s " on the acti on s of others; it causes a mutual re la ti on , th ough not n e c e s s a r i l y a s y m m e t r i c one. H o w e v e r this i n t e r p r e t a t i o n is too wide; a c c o r d i n g to it all t r a d e r e l a t i o n s are r e l a t i o n s of d e p e n d e n c e and all nations are in one way or another i n t e r d e p e n d e n t . As has been s u g g e s t e d by Michaely, we can r e s t r i c t the d e f i n i t i o n by s t a t i n g that when the extent of d e p e n d e n c e in both d i r e c t i o n s is equal it is p o s s i b l e to s p ea k of i n t e r d e p e n d e n c e and that a r e l a t i o n of d e p e n d e n c e is one in w h i c h i n e q u a l i t y or a s y m m e t r y in the extent of mutual d e p e n d e n c e is i n vo lv ed 9_. This kind of m e a n i n g is cl osely l i nked with the conc ep t of v u l n e r a b i l i t y . A c c o r d i n g to the sa me author,

a na tion is " d e p e n d e n t " on ot h e r s via its f o r e i g n trade to the extent that it is v u l n e r a b l e to the d i s r u p t i o n of its trade - either its co m p l e t e elimin at io n, or the partial d i s t u r b a n c e s of its trade fl ows 1_0_.

D e p e n d e n c e may be c o n s i d e r e d a f u n c t i o n of two c o m p o n e n t s : the extent of the damage (that w o ul d occur s h o u l d the d i s r u p t i o n of flows on wh ich the agent is d e p e n d e n t take place) and the 1 i keli hood of the event (i.e. the d i s r u p t i o n a c t u a l l y ta king place). Ch art 1 at te m p t s to

U o r l d Uar and So vi et r e l i a n c e on external actors p a r t i c u l a r l y in the peri od s of major "opening".

9.. M i c h a e l y ( 1984), p. 6. On this point see also Graziani (1982), p. 10.

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f o r m a l i z e the r e l a t i o n s h i p among v a r i a b l e s in the case of t r ade d e p e n d e n c e .

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The ex tent of the damage is a f u n c t i o n of what can be ca l l e d the de gr ee of o p e n n e s s of the e c o n o m y and its f l e x i b i l i t y . The degree of o p e n n e s s of the e c o n o m y would be p r o p e r l y r e p r e s e n t e d by the gains from trade, i.e. the i m p r o v e m e n t in ec o n o m i c p e r f o r m a n c e and w e l f a r e that can be o b t a i n e d by a l l o w i n g for f o r e i g n trade in a c o m p l e t e l y c l os ed economy. Ga ins from trade are often a p p r o x i m a t e d by i n d i c a t o r s such as the size of the f o r e i g n tr ade se c t o r (total tr ade turn ov er ) on some in d i c a t o r of income (GNP, GDP, etc.) or do m e s t i c ac t i v i t y (consu mp ti on , pr od uc ti on ). The de gr ee of f l e x i b i l i t y of the economy can be i d e n t i f i e d by the ease of r e p l a c e m e n t of trade fl ows by home t r a n s a c t i o n s . The abil it y to re du ce demand in r e s p o n s e to pr ice (terms of trade) changes (demand e l as ti ci ty ), import a n d/ or p r o d u c t s u b s t i t u t i o n , and the a d j u s t m e n t of the e c o n o m i c s t r u c t u r e in the event of f o r e i g n demand s h o r t f a l l s are all c o m p o n e n t s of f l e x i b i l i t y . The l i k e l i h o o d of the event is m a i n l y d e t e r m i n e d by the nature and r e l i a b i l i t y of t r ade p a r t n e r s 11. and it may be the re s u l t of both e x o g e n o u s s h o c k s and s p e c i f i c p o li ci es (sanctions, e m b a r g o e s ) . An i n d i c a t o r of this v a r i a b l e may be a p p r o x i m a t e d by the regional d i s t r i b u t i o n of trade and by the n a t u r e of the t r ad e fl ows with di f f e r e n t trade part ne rs (e.g. bi lateral v e r s u s m u l t i 1 a t e r a l ).

1 i . This issue is e x t r e m e l y r e l e v a n t in the a s s e s s m e n t of So v i e t de pe ndence, si nce tr ade is v e ry m u c h d i f f e r e n t i a t e d by t r a d i n g partners.

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2 2 . C o m p o n e n t s of e c o n o m i c d e p e n d e n c e

Several c 1 a s s i f i c a t

1

ons of e c o n o m i c d e p e n d e n c e have been p r o p o s e d 1 2 :

D e p e n d e n c e on t r a d e in go ods and s e r v i c e s . The d o m e s t i c e c o n o m y i m p o r t s c o m m o d i t i e s fr om the o u t s i d e w o r l d n e c e s s a r y for the p r o d u c t i v e p r o c e s s and part of the d o m e s t i c p r o d u c t i o n r e l i e s on external m a rk et s. In th is respect, the is su es can be s u b d i v i d e d f u r t h e r into im po rt and export d e p e n d e n c e .

D e p e n d e n c e on t r a n s f e r of t e c h n o l o g y . Both e m b o d i e d and d i s e m b o d i e d t e c h n o l o g y t r a n s f e r r e d t h r o u g h t r ad e may beco me an e s s e nt ia l c o m p o n e n t of the d o m e s t i c p r o d u c t i v e pr o c e s s e s .

D e p e n d e n c e on f o r e i g n c u r r e n c y e a r n i n g s and capital i n c o m e . In the case of an e c o n o m y that lacks hard currency, as is u s u a l l y the case w i t h the c e n t r a l l y p l a n n e d e c o n o m i e s of E a s t e r n Europe, a m o t i v e of d e p e n d e n c e is r e l a t e d to the p o s s i b i l i t y to earn h a r d - c u r r e n c y in t r a n s a c t i o n s with f o r e i g n pa r t n e r s . The im p a c t of f o r e i g n capital on the d o m e s t i c e c o n o m y ma y s h o w i t s e l f in a v a r i e t y of ways, all mo re or less r e l a t e d to the fact th at part of the p r o d u c t i v e r e s o u r c e s may be o w n e d by f o r e i g n e r s .

D e p e n d e n c e on f o r e i g n la b o u r and l a b o u r i n c o m e . F o r e i g n w o r k e r s may be used a n d / o r part of the d o m e s t i c la b o u r fo rc e may be e m p l o y e d abroad. In the f i rs t case a f o r e i g n - p r o v i d e d e l e m e n t is a g ai n an es s e n t i a l c o m p o n e n t of the d o m e s t i c

1 2 . Cf. for i n s t a n c e M i c h a e l y ( 1984), pp.4-<5 and M u e l l e r (1978), p p . 215-7.

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p r o d u c t i o n of goods and services; in the second, part of the national in come may be p r ov id ed by the rest of the wo r l d ' s p a y m e n t s to the workforce.

2.3. Fl ex ib i l i t y : fore ig n trade and the home market.

Many a n a l y s e s of d e p e n d e n c e tend to id en t i f y the degree of o p e n n e s s of the econ om y with its v u l n e r a b i 1 i t y , wi thout p r o p e r l y ta k i n g into account all the r e p e r c u s s i o n s that may arise, the a d a p t a t i o n pr o c e s s e s and c o m p e n s a t i n g m e c h a n i s m s that may be a c t i v a t e d in the event of d i s r u p t i o n of trade 1 3 . In fact, a c c o r d i n g to our definition, only in the event of t r ad e f l ow s not being pr op e r l y s u b s t i t u t e d by home mark et t r a n s a c t i o n s , wo uld it be p o s s i b l e to sp eak of d e p e n d e n c e 1 4 . It is t h e r e f o r e essential to evaluate the c a p a c i t y to s u b s t i t u t e in the economy. An attempt to work out the r e p e r c u s s i o n s that may be g e n e r a t e d in the event of a r e d u c t i o n in i m p o r t s may fur.ther clar if y the issue 1 5 .

The r e a c t i o n of the ec o n o m i c sy st em to an u n e x p e c t e d v a r i a t i o n of im port flows, in p a r t i c u l a r to a r e d u c t i o n of imports, is li ke ly to be ra ther di f f e r e n t in a short-,

1 3 . This aspect is p a r t i c u l a r l y r e l e v a n t in a n a l y z i n g So v i e t f o r e i g n trade dependence. C f . C h a p t e r 3.

1 4

. As far as the So v i e t Un ion is concerned,

i n t r a - b l o c s u b s t i t u t i o n , i.e. s u b s t i t u t i o n t a k i n g plac e inside C M E A , has to be taken into account too .

1

5 . The analysis, d e v e l o p e d in terms of import flows, co uld be e x t e n d e d quite easily to the case of exports.

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m e d i u m - and l o n g - t e r m p e r s p e c t i v e . The impact will also d i f f e r among i n t e r m e d i a t e pr oducts, raw m a t e r i a l s or c o n s u m e r goods. The central issue is r e p r e s e n t e d by the s u b s t i t u t a b i l i t y of the f o r e i g n p r o d u c t by a d o m e s t i c one at a given s t r u c t u r e (short term p e r s p e c t i v e ) . S u b s e q u e n t l y o t h e r s o u r c e s of s u p p l y may be id e n t i f i e d , both d o m e s t i c a l l y or in the external ma r k e t s . Let us i l l u s t r a t e the p r o b l e m wi th a h y p o t h e t i c a l e x a m p l e r e l a t e d to an i m a g i n a r y p r o d u c t A and a s s u m i n g a s h o r t - r u n p e r s p e c t i v e . An u n p l a n n e d d e c r e a s e in i m p o r t s has di r e c t as well as i n d i r e c t effects. T h re e d i f f e r e n t a l t e r n a t i v e s may be e n v i s a g e d . First, p r o d u c t A may have a d o m e s t i c s u b s t i t u t e and the m a i n di r e c t e f f e c t will be to r a i s e the d o m e s t i c p r o d u c t i o n of the s u b s t i t u t e 14.. It may be s u p p o s e d th at the q u a l i t y of the d o m e s t i c a l l y p r o d u c e d good is s o m e w h a t lower th an the f o r e i g n a l t e r n a t i v e , and that the p r o d u c t is m a n u f a c t u r e d at h i g h e r p r o d u c t i o n costs, but on the w h o l e the e c o n o m y will not s u f f e r too m u c h from the im port c u tb ac k. Second, p r o d u c t A may have no s u b s t i t u t e , in w h i c h case t h e r e will be mo re d a m a g i n g c o n s e q u e n c e s . As long as i n v e n t o r i e s are present, the s u p p l y of p r o d u c t A nay be r e d u c e d in all the s e c t o r s w h e r e it is less d a m a g i n g ( r a t i o n i n g h y p o t h e s i s ) , l o w e r i n g o u t p u t in so me s e c t o r s in o r d e r to p e r m i t " n o r m a l " p r o d u c t i o n of some p r i o r i t y se c t o r s . If p r o d u c t A is an i n t e r m e d i a t e good i n d i r e c t e f f e c t s will be p r o d u c e d too. The ef f e c t will be la r g e s t if t h e r e is no s u b s t i t u t e , not o n l y for A, but also

16 . If full c a p a c i t y is u t i l iz ed , as i n d e e d can be the case in CPEs, t h e r e will be a drop in ot h e r s e c t o r s .

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for any o t he r pr od u c t s in which A enters as an input ( m a x i m u m damage hy po thesis). On the o t he r hand, the effect will be less d i s r u p t i v e if s u b s t i t u t e s for A - i n t e n s i v e p r o d u c t s can be found. In a longer p e ri od of time, different r e s u l t s may be expected, such as, ma r k e t su bs ti t u t i o n , di v e r s i f

1

ca ti on of s u p p l i e r s or even d e v e l o p m e n t of RSD a c t i v i t i e s in the af f e c t e d area.

2.4. Central planning, f o r e ig n trade and dependence.

So far d e p e n d e n c e has been d i s c u s s e d wi th ou t c o n s i d e r i n g the kind of ec o n o m i c sy st em in wh ich trade takes place. This s e c t i o n is d e v o te d to a brief d i s c u s s i o n of some of the s p e c i f i c f e a t u r e s of a c e n t r a l l y planned ec onomy

(CPE) with r e s p e c t to trade and dependence.

In the p r e v i o u s pages d e p e n d e n c e has been r e l a t e d to the a d v a n t a g e s d e r i v i n g to a p a r t i c u l a r nation from its p a r t i c l p a t i o n in i n t e rn at io na l trade. In p a r t i c u l a r a real i n v o l v e m e n t in in te rn at io na l trade has been a s s o c i a t e d with an i n c r e a s e in the degree of i n t e r d e p e n d e n c e betw ee n two d i f f e r e n t ec on o m i e s , or in the event of a s y m m e t r i c r e l a t i o n s , wi th an increase in d e p e n d e n c e itself. C o n v e n t i o n a l tr ade t h e o r y s u g g e s t s that a s y st em which u n d e r u t i 1 izes its trade potential "will", as e x p r e s s e d by G r e g o r y and Stuart, "deny itself the a d v a nt ag e of s p e c i a 1 iz a t i o n and will be f o r c e d to produce at home a wide r a ng e of prod uc ts , some at low e f f i c i e n c y r e l a t i v e to world

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s t a n d a r d s " l?_. In o t h e r words, refusal to t r a d e m e an s to f o r e g o an a d d i t i o n a l s o u r c e of gr ow th and a s y s t e m a t i c u n d e r u t i l i z a t i o n of t r a d e pote nt ia l r e s u l t s in a loss of effi c i e n c y .

In the r e l e v a n t l i t e r a t u r e t h e r e has been s o m e d e ba te as to w h e t h e r or not the level of t r a d e of a CPE t e n d s to be lower than th at of a m a r k e t e c o n o m y of c o m p a r a b l e size and r e s o u r c e e n d o w m e n t . In the p a r t i c u l a r e n v i r o n m e n t of a CPE, w h e r e all the r e l a t i o n s b e t w e e n v a r i a b l e s have to be d e f i n e d in advance, t r a d e i n t r o d u c e s u n c e r t a i n t y into the p l a n n i n g p r o c e s s and m a k e s the d o m e s t i c e c o n o m y s u b j e c t to external f l u c t u a t i o n s . A c c o r d i n g to s t a n d a r d t h e o r y (Brown, Ho lzman, Wi les) the level of t r ad e of a CPE is m a i n l y d e t e r m i n e d by im p o r t r e q u i r e m e n t s : e x p o r t s are c o n s i d e r e d a " n e c e s s a r y evil" to p r o c u r e imports. In o t h e r w o r d s the q u a n t i t y o r i e n t e d n a t u r e of the c e n t r a l i z e d s y s t e m t e nd s to limit ri s k s ___bv m i n i m i z i n g __ d e p e n d e n c e on__ ggt?itie .s u p p l i e r ? . even for p r o d u c t s th at c o u l d be a c q u i r e d m o r e e c o n o m i c a l l y abroad. Even mo re st r o n g l y , it can be s u g g e s t e d that the c e n t r a l i z e d s y s t e m t e n d s to p r e v e n t a full e x p l o i t a t i o n of c o m p a r a t i v e a d v a n t a g e s and p a r t i c i p a t i o n in the i n t e r n a t i o n a l d i v i s i o n of labour. T h e r e is a t r a d e - o f f b e t w e e n m i n i m i z i n g the r i s k s i n v o l v e d in t r a d e (low level of d e p e n d e n c e ) and a c o m p l e t e e x p l o i t a t i o n of the a d v a n t a g e s d e r i v i n g fr om p a r t i c i p a t i o n in i n t e r n a t i o n a l trade.

In the l i t e r a t u r e , C P E s in general, and the S o v i e t U n i o n in p a r t i c u l a r , have been t r e a t e d m a i n l y as closed,

s e m i - a u t a r k i c e c o n o m i e s . The c h a r a c t e r ! s t i c s of the

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c e n t r a l i z e d s y st em of pl a n n i n g seem to indicate, in fact, a s u b s t a n t i a l lack of o p e n n e s s in the se nse of direct and a u t o m a t i c e x p o s u r e to trade c o m p e t i t i o n 1_8_. But even a na t i o n of the size and the r e s o u r c e e n d o w m e n t of the Soviet U n io n ca nn ot rely e x c l u s i v e l y on d o m e s t i c resour ce s; the n e c e s s i t y to get involved in trade comes p r i m a r i l y from the r e q u i r e m e n t to fill s h o r t a g e s and/or re mo ve bottle ne ck s.

S p e c i f i c f e a t u r e s of the classic So vi et e c o n o m i c syst em tend to r e i n f o r c e trade av e r s i o n ]_9_. The main one is the m o n o p o l y of f o r e i g n trade, e s t a b l i s h e d in 1918 and r e ­ a f f i r m e d in the 1976 C o n s t i t u t i o n , ac c o r d i n g to w h ic h the s t a t e has the e x c l u s i v e right to u n d e r t a k e trade with f o r e i g n p a r t n e r s .

The a d m

1

n i s t r a t i o n of the m o n o p o l y has been c a r r ie d out until now by the M i n i s t r y of Fore ig n Trade, wh ich draws up v a r i o u s t r ad e plans in a c c o r d a n c e with other central a u t h o r i t i e s (Gosplan, G o s b a n k , Fore ig n Trade Bank, etc.) t a k i n g into a c c o u n t the overall in di c a t o r s of national e c o n o m i c d e v e l o p m e n t . The most impo rt an t of these plans is the ex p o r t and import plan in whic h overall imports and e x p o r t s are first set in the ag g r e g a t e and then broken down into t r a d e wi th v a r i o u s groups of countries. The s h i p m e n t of e x p o r t s from in dustrial m i n i s t r i e s to the M i n i s t r y of

1 8 . The issue of what d e t e r m i n e s Soviet trade o u t c o m e s has been a d d r e s s e d extensively, even t h o u g h not c o n c l u s i v e l y , in the literature, among others, by: Brown (1968); Hewett (1980a); H o l z m a n (1966) and (1974); U i le s (1968).

1 9 . New m e a s u r e s i n t r o d u c e d at the b e g i n n i n g of 1987 m o d i f y p a r t i a l l y the "c la ss ic " system. A full a c c o u n t of th ose m e a s u r e s is pr e s e n t e d in ch a p t e r 6 .

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F o r e i g n Trade and the s h i p m e n t of i m p o r t s in the o p p o s i t e d i r e c t i o n is c a r r i e d out u s in g the pl ans for d e l i v e r y of e x p o r t s and i m p o r t s (the f o r e i g n c o u n t e r p a r t of the d o m e s t i c d i s t r i b u t i on plan).

F o r e i g n t r ad e ne eds to be f i t t e d into the overall p l a n n i n g process: l o n g - t e r m p l a n n i n g i n v o l v e s p r o v i s i o n s on the level of e x p o r t s and imports, w h i l e s h o r t - t e r m plans s h o u l d c o n t a i n d i s a g g r e g a t e d a d m i n i s t r a t i v e orders. In prac ti ce , however, from ye ar to ye ar the level of im port and e x p o r t f l ow s is for the mo st part a m a t t e r of marginal a d j u s t m e n t s to p r e v i o u s flows, and it may be ar g u e d that the p r i n c i p l e of " p l a n n i n g from the a c h i e v e d level" is also a p p l i e d to the f o r e i g n t r a d e s e c t o r 20_. T h eo re ti cal 1 y , the c e n t r a l i z e d s y s t e m of p l a n n i n g and m a n a g e m e n t p r e s e n t s a d v a n t a g e s d e r i v i n g fr om a di r e c t and u n i f i e d control of t r a d e flows, a l l o w i n g a m i n i m i z a t i o n of d a m a g e s d e r i v i n g from u n a n t i c i p a t e d v a r i a t i o n s of t r a d e flows. R e a c t i o n s of the kind d e s c r i b e d in s e c t i o n 2.3 are mu ch e a s i e r to hand le in the c o n t e x t of a CPE t h a n of a m a r k e t economy, w h e r e it is n e c e s s a r y to c o o r d i n a t e a p l u r a l i t y of d e c i s i o n - m a k i n g cent er s. H o w e v e r , s t r u c t u r a l d e f i c i e n c i e s of "r ea l" CPEs ma ke t h i n g s less simp le . As for the d o m e s t i c s o u r c e s of

2 0 . " The chie f 'secret' of the S o v i e t t e c h n i q u e of p l a n n i n g lies in the t i t l e of th is article. The well k n o w n w o r d s f r o m the a c h i e v e d level d e n o t e th at the pl an i n d i c a t o r s are d e r i v e d by m e a n s of a d d i n g to the r e l e v a n t e x - p o s t f i g u r e a c e r t a i n p e r c e n t a g e of growth. This is the

f o u n d a t i o n of all the t e c h n i q u e , the m e t h o d o l o g y of S o v i e t p l a n n i n g " . I. B i r m a n From the

A c h i e v e d Level Sovi et Studi e s . U o l . XXX, n.2, A p r i 1 1978, p .161.

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supply, the central a u t h o r i t i e s face st r o n g pr e s s u r e from below (i.e .b r a n c h e s of the national economy, mi nistries, e n t e r p r i s e s ) for additional imports, e s p e c i a l l y for p r o d uc er goods. This is in part the o u tc om e of p r o b l e m s wh ich often c h a r a c t e r i z e a c e n t ra ll y plan ne d economy, such as the p o s i t i v e c o r r e l a t i o n of i n c e n t i v e s with v o l u m e and/or gross va lue of o u t p u t and the lack of p e n a l t i e s c o r r e l a t e d with the costs of production, which leads to an "u nl i m i t e d " de m a n d for reso ur ce s, or to a p r e f e r e n c e being given to i n v e s t m e n t as o p p o s e d to innovation. At the same time i m p o r t s de pe nd not only on the p r es en ce of a sh ortage, but also on the de gr ee of p r i o r i t y given to the s h o r t a g e pr oduct 2 1 . The p l a n n e r s also face ex port c o n s t r a i n t s from below, in so far as special bonuses for export p r o d u c t i o n are not s u f f i c i e n t to make p r o d u c t i o n for the f o r e i g n market at tr a c t i v e . In p a r t i c u l a r costs c o n n e c t e d with the i m p r o v e m e n t of quality, delivery, s e r v i c i n g of expo rt s are h i g h e r than the gains assu re d by the i n c e n t i v e sy s t e m 22..

The r o u b l e is e x t e r n a l l y i n c o n v e r t i b l e 2 3 . a purely d o m e s t i c currency, and indeed not even that, but, p a r t i c u l a r l y in the plan ne d sector, only a unit of account.

2 1

. E s p e c i a l l y for a low p r io ri ty good the s h o r t a g e may be tolerated, internal uses may be r a t i o n e d and/or a l t e r n a t i v e s may be found.

2 2 . T h e r e f o r e such gains are often s u b s t a n t i a l ; the w h o l e s a l e price of a machine, for instance, may i n c l ud e up to a 405 markup. See Treml (1981).

2 3

. The r o u b l e was r e mo ve d from in te rn a t i o n a l q u o t a t i o n s in 1926.

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A d o m e s t i c capital m a r k e t is a b se nt and the S o v i e t a u t h o r i t i e s do not i n t e r v e n e to s u p p o r t an o f fi ci al pari ty in the f o r e i g n e x c h a n g e mark et . The only f u n c t i o n e x e r c i s e d by the e x c h a n g e rate is that of c o n v e r t i n g pr i c e s in f o r e i g n c u r r e n c i e s into d o m e s t i c p r i c e s for B a l a n c e of P a y m e n t s pu rp os es . A r e c e n t wo rk by the W o r l d Bank 2 4 . i d e n t i f i e s at least t h i r t e e n d i f f e r e n t e x c h a n g e rates. A partial c o n s e q u e n c e of i n c o n v e r t i b i l i t y is the large a m ou nt of trade that t a ke s p l ac e on the b a si s of bi la te ra l a g r e e m e n t s . This does not i n v o l v e m o n e y s e t t l e m e n t and the pr i c e s t e n d to be s p e c i a l l y n e g o t i a t e d 2A- In p a r t i c u l a r in b i l a te ra l trade wi th o t h e r c e n t r a l l y p l a n n e d e c o n o m i e s the pr i c e s used are s u p p o s e d to r e f l e c t w o r l d prices, w h i l e i n t r a - C M E A tr ad e pr i c e s are now a d j u s t e d a n n u a l l y on the ba sis of "w or ld " a v e r a g e s fr om the p r e c e d i n g five years.

A spec ia l unit of account, the t r a n s f e r a b l e (p e r e v o d n v e ) r o u b l e was c r e a t e d in 1963 as a m e a n s of p r o m o t i n g m u l t i 1a t e r a l i t y in s i d e CMEA. In t h e o r y in t r a n s a c t i o n s i n s i d e this area, a s u r p l u s in r o u b l e s c o u l d be used for r e p a y i n g a de f i c i t ; in r e a l i t y th ere is i n c o n v e r t i b i 1 ity even in s i d e C M E A and the s h a r e of m u l t i l a t e r a l e x c h a n g e s in total has r e m a i n e d at a ve ry low

2 4 . Uan B r a b a n t (1985).

2 5 . A n o t h e r way to look at the sa me p h e n o m e n o n is t h r o u g h the s e p a r a t i o n b e t w e e n h a r d - c u r r e n c v and s o f t - c u r r e n c v . The f o r m e r is e s s e n t i a l l y c a r r i e d out w i t h d e v e l o p e d and d e v e l o p i n g m a r k e t e c o n o m i e s , w h i l e the l a tt er c h a r a c t e r i z e s the e x c h a n g e of the U S S R w i t h o t h e r a d m i n i s t r a t i v e e c o n o m i e s . S o m e m a r k e t s e c o n o m i e s too, F i n l a n d and In dia in p a r t i c u l a r , have bi l a t e r a l a r r a n g e m e n t s w i t h the S o v i e t U n i o n

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IeveI 26 .

In a s e ns e the rouble is not fully c o n v e r t i b l e into goods even w i t h i n the USSR. Money alone is not su fficient, o u t s i d e the retail sector, to provide a claim on av ai la bl e goods; a do c u m e n t (plan allocation) is also needed. In this s e ns e the So vi et Union has been defi ne d as a d o c u m o n e t a r v e c o n o m y 2 7 .

Two f e a t u r e s of the financial s y s t e m r e g u l a t i n g fo reign t r ad e are w o rt h stressing. First, the r o ub le does not link d o m e s t i c p r ic es to world prices and the s t r u c t u r e of d o m e s t i c pr ic es di v e r g e s s h a r p l y from that of f o r e i g n trade prices. Up to 1987 a m e c h a n i s m exis te d (the s o - c a l l e d Prei s a u s o l e i c h ) ac c o r d i n g to which Fore ig n Trade O r g a n i z a t i o n s paid the So vi et s u p p l i e r s and c h a r ge d Sovi et p u r c h a s e r s a p p r o p r i a t e w h o l e s a l e prices, in such a way that the d o m e s t i c o p e r a t o r never had f o r e i g n cu r r e n c y at h-i s disp os al . The wi de d i s p a r i t y betw ee n d o me st ic and v a 1uta pr i c e s we re a d j u s t e d via the State budget. B r o a dl y speaking, from the m i c r o e c o n o m i c point of view there were no price d i f f e r e n c e s for firms w h e t h e r they sold abroad or on the d o m e s t i c m a r k e t 2 8 .

2 6 . A t e n d e n c y t o w a r d s an in c r e a s e of radial trade has r e c e n t l y taken place. Trade among each me m b e r c o u n t r y with the S o vi et Un ion has in c r e a s e d more than the aver ag e i n t r a - b l o c trade.

2 7 . B e r l i n e r (1976).

2 8 . In r e a l i t y the s y s t e m of i n c e n t i v e ma r k u p s (n a d b a v k i ) on the w h o l e s a l e prices o p e r a t e s with c o n t r o v e r s i a l results. See T r e m l (1981).

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Second, the fact that the pr i c e s used do not re f l e c t the d e s i r a b i l i t y of a g i ve n t r a n s a c t i o n . The m e t h o d o l o g y for c a l c u l a t i n g the e f f e c t i v e n e s s of f o r e i o n t r ad e is, as o f t e n h a p p e n s in S o v i e t pr ac ti ce , ba sed e n t i r e l y on " e n g i n e e r i n g " rules, r a t h e r than on an e v a l u a t i o n of costs and b e n e f i t s 29.. On the one hand this p r o c e d u r e has a l l o w e d d o m e s t i c p r i c e s to be i n s u l a t e d from v a r i a t i o n s t a k i n g place on the external mark et , but on the o t h e r hand it is the cause of i m p o r t a n t ti me lags in the t r a n s m i s s i o n of wo r l d m a r k e t s i g n a l s .

2 9 . U e r y b r i e f l y the m e t h o d o l o g y for c a l c u l a t i n o the e c o n o m i c e f f e c t i v e n e s s of f o r e i g n t r a d e is

based, for e x po rt s, on a c o m p a r i s o n of va 1 uta e a r n i n g s w i t h c o st s in ro u b l e s , a d j u s t e d with a c o r r e c t i v e c o e f f i c i e n t for the i n a d e q u a c y of i n te rn al prices. On the o t h e r hand, i m p o r t s are c o m p a r e d w i t h a n a l o g o u s go ods or w i t h the cost of » g o od s e x p o r t e d to pay i m p o r t s ( t h o u g h it is almo st

i m p o s s i b l e to i d e n t i f y w h i c h are the goods e x p o r t e d ).

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3. SOVIET FOREIGN TRADE DEPENDENCE: A CRITICAL APPRAISAL OF THE LITERATURE.

In w e s t e r n l i te ra tu re on the So vi et Un ion the concept of d e p e n d e n c e is used, in an ex t r e m e l y r e s t r i c t i v e way, in c o n n e c t i o n with threat and fear of political leverage and with the use of trade as an i n s t r u m e n t to i n f l ue nc e the fo r e i o n p o li cy of the USSR. Mueller, for instance, in an o f t - q u o t e d de fi nition, su g g e s t s that

d e p e n d e n c e exists if a coun tr y (or e c o n o m i c bloc), by e m p l o y i n g or t h r e a t e n i n g ec on o m i c m e a s u r e s (refusal to pay, embargo, t e r m i n a t i o n of e c o n o m i c r e l a ti on s) , can j e o p a r d i z e the ot he r c o u n t r y ' s (bloc's) s e c u r i t y or en force political o b j e c t i v e s against it 3 0 .

O b v i o u s l y d e p e n d e n c e ra ises the p o s s i b i l i t y of threat, but its m e a n i n g cannot be co n f i n e d to this narrow usage. As has been s u g g e s t e d in the p r ev io us pages, i n cr ea se d i n v o l v e m e n t in

1

nternati onal trade does not n e c e s s a r i l y br ing with it a r i si ng v u l n e r a b i l i t y to external trade pr es s u r e s . Wi th a few exceptions, more r e ce nt W e s t e r n l i t e r a t u r e on the topic has co n f i n e d itself to w o r k i n g out s i m p l e e c o n o m i c i n d i c a t o r s of trade p a r t i c i p a t i o n and to d i s c u s s i n g the v a r i o u s s t r a t e g i e s for i n f l u e n c i n g Sovi et b e h a v i o u r t h r o u g h e c on om ic pressure. The aim of this ch ap te r is to s e l e c t i v e l y re vi ew the debate on these issues. Ho we ve r, s i n c e the prob le m has been d i s c u s s e d ex te ns iv el y, it w o u l d be i m p o s s i b l e to give an account of all

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c o n t r i b u t i o n s . The first s e c t i o n of the c h a p t e r s u r v e y s the a r t i c l e s on S o v i e t tr ade p a r t i c i p a t i o n . The s e c o n d s u m m a r i z e s the de b a t e ov er s a n c t i o n s , e m b a r g o e s and e c o n o m i c leve ra ge , w h i c h was p a r t i c u l a r l y li ve ly at the end of the 1970s. Finally, a brief e x c u r s i o n into S o v i e t and East E u r o p e a n s o u r c e s is u n d e r t a k e n .

3.1. S o v i e t t r ad e pa r t i c i p a t i o n and d e p e n d e n c e .

The mo st s i g n i f i c a n t c o n t r i b u t i o n s to the a n a l y s i s of S o v i e t t r a d e d e p e n d e n c e c o n s i s t of an a s s e s s m e n t of the de gr ee of o p e n n e s s of the S o v i e t economy, ba sed on the a n a l y s i s of a g g r e g a t e i n d i c e s of i m p o r t s and e x p o r t s to an i n d i c a t o r of nati on al income, the s o - c a l l e d tr ad e partici p a t i o n r a t i o s , o f t e n c o n s i d e r e d a s t a n d a r d m e a s u r e of d e p e n d e n c e .

One of the f i r s t e f f o r t s to p r o d u c e t h e s e kind of c a l c u l a t i o n s was d e v e l o p e d by Mich ae l Do han in two s t u d i e s p u b l i s h e d in the s e c o n d half of the 1970s J1_. Both s t u d i e s a d d r e s s t h e m s e l v e s to the q u e s t i o n of w h e t h e r the ra pi d e x p a n s i o n of f o r e i g n t r a d e r e l a t i v e to o u t p u t has i n c r e a s e d S o v i e t d e p e n d e n c e on f o r e i g n t r a d e and in p a r t i c u l a r w h i c h s e c t o r s have been mo re e x po se d. The f i rs t s t u d y c o v e r s the p e r i o d 1913-70, the s e c o n d e x t e n d s the a n a l y s i s up to 1977.

The a u t h o r p r o d u c e d a set of a g g r e g a t e m e a s u r e s of t r a d e s p e c i a l i z a t i o n ( t r a d e / G N P ratio), but a t t e m p t e d also

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to re l a t e the s t r u c t u r e of exports and imports to changes in the d o m e s t i c economy. C l a i m i n g that the co nv en t i o n a l measure of ex po rt sp e c i a 1

1

zat

1

on and import c o n s u m p t i o n gives e r r o n e o u s results, unless s i m u l t a n e o u s expo rt s and imports for the same co m m o d i t y are taken into account, Dohan e l a b o r a t e s " e x t e n d e d ratios", which, in the case of exports i n cl ud e net direct exports plus some p o r t i o n of other e x p o r t s for wh ich this product is a ma jor input 32_. Exte nd ed trade s p e c i a l i z a t i o n ratios are c a l c u l a t e d for several major e x p o r t s and imports, s e m i - p r o c e s s e d mate ri al s, ag ricultural prod uc ts , ma ch i n e r y , consumer goods and foodst uf fs .

A n a l y s i n g his ag g r e g a t e m e as ur e of trade p a r t i c i p a t i o n , Do han s u g g e s t s that a n o r m a l i z a t i o n of the role of fo re ig n t r ad e in the S o v i e t econ om y since UU II has taken place. Ho we v e r , in both s t u d i e s the author c o n c l u d e d that the

i n c r e a s i n g l y large role played by f o r e ig n trade has n-ot s i g n i f i c a n t 1y in c r e a s e d the d e p e n d e n c e of the S o vi et economy on the o u t s i d e world; "where s p e c i a l i z a t i o n has occurred, it has not n e c e s s a r i l y in c r e a s e d v u l n e r a b i l i t y to p r es su re from the West. Often, the o b s e r v e d trade s p e c i a l i z a t i o n has been in t r ad e wi th East er n Europe, wh ich p r e s u m a b l y poses less p o litical risk th an trade with the West" 3 3 .

The c o m p l e t e l y o p p o s i t e c o n c l u s i o n is made by V l a d i m i r T r e m l . In a s t u d y done for the U S D e p a r t m e n t of C o m m e r c e in c o 11 a b o r a t i o n with Barry Kostinsky, he w o r k e d out a set of

3 2 . A more general a s s e s s m e n t of the role played by r e - e x p o r t trade in CPEs and of the d i s t o r t i n g e f f e c t s that these in t r o d u c e into t r a d e t o

-n a t i o -n a 1 -

1

ncome ratios and e l a s ti ci ti es , can be f o un d in M a re r (1978), esp. p . 410.

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e s t i m a t e s for the d o m e s t i c v a lu e of S o v i e t f o r e i g n t r ad e 1 4 . w h i c h were f u r t h e r e l a b o r a t e d in s u b s e q u e n t pa p e r s 35_. The fact that t h e s e data are o f t e n q u o t e d as c o n c l u s i v e e v i d e n c e of the i n c r e a s i n g d e p e n d e n c e of the S o v i e t e c o n o m y on f o r e i g n t r ad e m e a n s that a c l o s e r s c r u t i n y of the f i g u r e s and p r o c e d u r e s of e s t i m a t i o n is r e q u i r e d 3 6 .

Treml s t a r t s from the a s s u m p t i o n that any a t t e m p t to m e a s u r e S o v i e t t r ad e p a r t i c i p a t i o n as the r a t i o of tr ad e f l o w s m e a s u r e d in f o r e i g n t r a d e r o u b l e s and NMP m e a s u r e d in d o m e s t i c p r i c e s is m e a n i n g l e s s , gi ven the c o m p l e t e l y d i f f e r e n t s t r u c t u r e of S o v i e t d o m e s t i c and f o r e i g n tr ad e p r i c e s 27.. In the p r o c e s s of r e c o n s t r u c t i n g the 1972 Inpu t- O u t p u t t a b l e for the S o v i e t economy, Treml e s t i m a t e s v e c t o r s of e x p o r t s and i m p o r t s in d o m e s t i c p r i c e s for the pe r i o d 1955-78, as well as t r a d e p a r t i c i p a t i o n ratios, later e x t e n d e d to i n c l u d e 1980. His f i n d i n g s are s u m m a r i z e d in t a b l e 1 .

The t a b l e gi ves S o v i e t i m p o r t s and e x p o r t s m e a s u r e d in f o r e i g n t r a d e p r i c e s ( c o l u m n s 2 and 5), d o m e s t i c pric es ( c o l u m n s 3 and 6) and trade, m e a s u r e d in d o m e s t i c prices, as p e r c e n t a g e of Net M a t e r i a l P r o d u c t (NMP). In the 25 y e a r s exam in ed , S o v i e t t r a d e p a r t i c i p a t i o n i n c r e a s e d

3 4 . Treml (I960) and T r e m l - K o s t i n s k y ( 1982). 3 5 ■ Treml (1982) and (1 983b).

3 6 . T r e m l ' s f i g u r e s have been c o m m e n t e d on also by S o v i e t s c h o l a r s . For i n s t a n c e , see O g n e v (198«), p . 21 .

3 7 . T h e s e rati os , c a l c u l a t e d a c c o r d i n g to of f i c i a l data r e p o r t e d in N a r o d n o e khozvai st vo SS SR are:

E x p o r t Im p o r t

1975 6.6 7.3

Riferimenti

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