CENSUS BUREAU REPORT ON THE DOMESTIC VALUE OF SOVIET FOREIGN TRADE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000100280002-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 5
• Document Creation Date: December 21, 2016
• Document Release Date: September 8, 2008
• Sequence Number: 2
• Publication Date: July 14, 1982
• Content Type: MEMO

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Central Intelligence Agency
14 July 1982
MEMORANDUM FOR: The Honorable R. T. McNamar
Deputy Secretary of the Treasury
Acting Director
Office of Soviet Analysis
SUBJECT Census Bureau Report on the
Domestic Value of Soviet Foreign Trade
1. The recent Commerce Department press conference
summarizing a forthcoming Census Bureau report ("The Domestic
Value of Soviet Foreign Trade: Exports and Imports in the 1972
Imput-Output Table") is being touted in the press as evidence
that the USSR is more vulnerable to economic sanctions than has
been suggested previously. 'According to the headline in the The
New York Times, the "U.S. Says Rise in Trade by Soviet Makes it
Vulnerable to Sanctions." The research, which we think is both
sound and thorough, does show that the ratio of imports to
national income (Soviet style) is higher when imports are valued
in domestic prices than when they are priced at official foreign
exchange rates. We believe, however, that the press coverage
implies a greater degree of Soviet dependence on East-West trade
than is actually the case and ignores the problems that are
encountered in translating dependence into leverage.
The Research Effort
2. The Census study is an attempt to reconstruct the values
for foreign trade in the 1972 Soviet input-output table. Because
the ruble is not convertible and Soviet price agencies pay little
attention to world prices in selling domestic prices, Soviet
domestic prices are very different from foreign trade prices for
similar commodities when the foreign trade prices are converted
at the official exchange rate. Although the USSR converts values
for foreign trade from transaction prices to domestic prices when
constructing national income and input-output accounts, these
values are not published officially.
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3. The main research conclusions are as follows:
- The ratio of Soviet exports (domestic pr-#-o-es) to national
income (Marxist definition) is higher than the ratio
based on exports converted at the official exchange.
rate. In the 1970s, exports (excluding gold) averaged
about 6.5 percent of national income and rose to 7
percent by 1980.
-- The ratio of Soviet imports to national income is much
higher when the value of imports is adjusted to a
domestic price base. The adjusted ratio, moreover, rose
from about 9 percent in 1970 to about 20 percent in 1980.
-- Imported machinery comprises from 15 to 20 percent of all
newly installed equipment in the USSR.
Imported consumer goods and agricultural products account
for about 15 percent of all consumption.
Trade Ratios, Dependence, and Leverage
4. We believe these measurements overstate Soviet
dependence on the West in the following ways:
-- Soviet national income does not cover the ullprangetofs
national
goods and services included in g o e
defined in the West. In 1980, Imports amounted to about
15 percent of Soviet GNP, roughly 5 percentage points
lower than the number calculated in the Census report.
-- The estimates quoted in press reports reflect total
Soviet trade, including trade with client states and
trade with LDCs that is settled bilaterally. Imports
that the Soviets had to pay for in hard currency were
equal to about 5 percent of Soviet GNP, while hard
currency imports accounted for less than 10 percent of
Soviet investment in machinery and equipment.
Much of the rise in the ratio of imports to Soviet
national income Soviet style is explained by the more
rapid rise in prices paid for imports than in the prices
prevailing in domestic economy. In 1980, the. ratio of
imports to national income was 10 percent in current
prices and about 8 percent in 1970 prices. While the
inflation in import prices imposed a burden, the USSR
benefited from an even more rapid rise in the prices paid
for its exports, especially energy and raw materials.
5. These ratios thus give a very fuzzy picture of the
Soviet dependence on East-West trade. The numbers being cited
are too general to show where the key dependencies lie--as~in
grain, where the Brezhnev livestock program cannot be sustained
without imports from the West or in energy, where Soviet
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requirements cannot be satisfied without Western pipe and
c ui ment
In any event, wet er Soviet
dependence on East-West trade in certain sectors can be used for
leverage--the ability to persuade the Kremlin to change its
policies--is highly uncertain. For leverage to be effective, not
only would the Western countries trading with the Soviet Union
have to maintain a common front, the Soviet leadership would have
to swallow the idea of bowing to Western pressure
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C_Z
Subject: New Commerce (Census Bureau) Estimate of Ruble Value of Soviet
Foreign Trade
1. The Census Bureau has just released a specialized study of the
d ti 1 E of Soviet foreign trade for use in their reconstruction of
c
a
v
u
ornes
the Soviet input output table for 1972. The study is carefully researched
and is clearly the most authoritative one or the subject. Some of tf;e
inferences drawn from the study's results, however, in press briefings and
articles are misleading.
2. Briefly, the study estimates the value of Soviet imports and
exports in domestic rubles at 18.6 percent and 6.8 percent respectively of
National Income (Soviet definiticn) in 1978, the last year covered. In
comparisons with Gross National Product (which is larger than national
income, Soviet concept, in that it includes services and depreciation
allowances), the import share becomes 12.6 percent and the export share
4.7 percent.
3. These figures in domestic rubles give a very different picture for
imports than the figures that are most coffmonly used, based on comparisons
of the dollar value of Soviet imports and exports wit', estimates of the
dollar value of Soviet GNP. In terms of dollars for 1978, the import share
was 4.8 pc-cent, and the export share, 4.1 percent. I4; other words,
imports are 2-1/2 times larger relative to GNP in terms of domestic rubles
than in terms of dollars.
4. The reasons for these large differences are complex. They appear
to include the following factors:
o Imoorts of consumer goods are taxed extremely heavily, and
consequently are sold on the retail market at very high and rising
prices, wh-',ch the Soviet people are willing to pay because they are
starved for quality, variety and style,
o Premium prices are charged for imports of machinery and other
producer goods, partly because of quality differences.
5. The inference drawn by Commerce officials that these calculations
demonstrate a greater Soviet dependence on foreign trade than wes formerly
believed is partly correct. A large part of Soviet imports are goods
which, because of their higher quality and technology, can be produced in
the USSR only at relatively high cost. The high prices of imported
consumer goods, however, also reflect market shortages rather than just
high production costs.
6. In its coverage of the Census Bureau rieases, the press has
treated total Soviet foreign trade as if it represented trade with the West
alone. In 1978, hard currency imports were about one-third of the total
dollar value of Soviet imports and hard currency exports were a quarter of
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total exports. The Co coerce study does not calculate the domestic ruble
value of hard currency imports or exports. A reas,)nabie guess for the
share of such imports in GNP in domestic rubles is 5 percent.
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