REPORT OF JOINT DISCUSSIONS ON SINO-SOVIET BLOC TRADE 2-11 DECEMBER 1958

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79S01046A000600130008-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 19
• Document Creation Date: November 9, 2016
• Document Release Date: October 28, 1998
• Sequence Number: 8
• Publication Date: March 1, 1959
• Content Type: REPORT

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25X1X7
25X1X7
RESEARCH AID
REPORT OF JOINT DISCUSSIONS
ON SINO-SOVIET BLOC TRADE
2-11 DECEMBER 1958
CIA/RA 59-4
March 1959
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
OF 1N 25X1X7
25X1X7
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7V.AR,NING
This material contains :information affecting
We (National Defense of the United States
within the meaning of the espionage laws?
Title 18, TUC, Sees. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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NOFORN 25X1X7
25X1X7
REPORT OF JOINT DISCUSSIONS ON SINO-SOVIET BLOC TRADE
2-11 DECEMBER 1958
CIA/RA 59-4
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
25X1X7
25X1X7
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A series of informal discussions on Sino-Soviet Bloc trade was held.
in Washington, D.C., from 2 to 11 December 1958. The participants were
representatives from both the US and the
including CIA (ORR), State (IRA),
Members of the EIC Subcommittee on Trade and Finance
were kept fully informed of the progress of the discussions.
The conference was convened to enable informed senior analysts to
engage in detailed round-table discussions of major intelligence prob-
lems relating to Bloc trade, f=inance, and foreign economic policies.
The subjects for discussion had been agreed. on in an exchange of mem-
oranda early in the fall of 1958. For each discussion, the Trade
Branch of ORR designated a chairman who outlined the problem to be dis-
cussed and later summarized the results of the discussion.
Because of the broad intelligence implications of the topics dis-
cussed and the important conclusions which were reached, it is believed
that the proceedings may be of sufficient interest to the intelligence
community to warrant their dissemination. Part I contains a summary of
the main conclusions reached, and Part II contains a more detailed re-
port of each discussion.
25X1X7
25X1X Messrs. Edward Jones, Harry Bell, Wendell Woodbury, and Herbert
Block, IRA (State); and representatives of the following Branches of
ORR (CIA): Trade Branch (Services Division); USSR, Satellite, and Far
East Branches (Analysis Division); and Nonferrous Metals Brarch (Mate-
rials Division).
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REPORT OF JOINT DISCUSSIONS ON SINO-SOVIET BLOC TRADE
2-11 DECEMBER 195
I. Summary.
A. Communist China's Foreign Exchange Rates.
25X1X7- State, and CIA all agreed that Communist China appears
to be using dual conversion rates -- one for Bloc trade and another for
Free World trade -- in determining the Yuan value of its foreign trade.
In its trade with the Bloc, China appears to use a ratio of 1 yuan to 1
ruble, equivalent to a cross rate of 4 yuan to US $1. The yuan value in
China's Free World trade, however, apparently is derived by applying a
rate of 2.46 yuan to US $1. Concurrence on this subject has removed a
major obstacle to arriving at a generally acceptable valuation of
China's foreign trade.
B. Bloc Credits to Underdeveloped Countries.
Although there were no serious problems regarding this subject,
it was determined that differences between CIA and estimates of 25X1X7
Bloc military credits have been due, in part at least, to their differ-
ent approaches to the subject. has been estimating the value of 25X1X7
Bloc arms delivered or promised, whereas CIA has estimated the value of
arms contracts in terms of the financial indebtedness incurred by the
recipient countries.
C. Future of Sino-Soviet Economic Relations.
It was generally agreed that Soviet economic credits have been
important in China's industrialization and have been adequate, in terms
of China's ability to repay, but that China will continue to rely main-
ly on domestic savings and domestic production to carry out its economic
development. No further Soviet economic developmental credits are an-
ticipated, although Soviet exports of capital equipment on commercial
account probably will continue at about the current level over the next
few years. Military loans are likely only in the event of greatly ex-
panded Chinese military requirements.
D. Communist China's Economic Relations with the Free World.
The representatives concurred in the view that, although Commu-
nist China's trade with the Free World has in recent years expanded at
a faster rate than its trade with the Bloc, this rapid rate of increase
is unlikely to continue. Future trade between China and the Free World
probably will expand at about the same rate as China's total trade.
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Because there is little evidence that China's trade with Southeast
Asia, except for Hong Kong, has increased in 1958, the representatives
held in abeyance their opinions on the degree of China's promotional
success in Southeast Asia.
E. Soviet Foreign Trade Handbooks.
Although the Soviet foreign trade handbooks present a consider-
able amount of new information on Soviet trade for 1955-57, the hand-
books contain several major discrepancies. The large discrepancy
($106 million in 1957) between the stated total of Soviet exports and
the total derived by summing Soviet exports to each country remains
unaccounted for despite long and detailed discussion. The consensus was
that the discrepancy was due to several factors, involving both normal
accounting practices (such as goods shipped on consignment with no re-
corded destination) and possibly such purposeful omissions as gold
shipments. It was agreed that additional information must be obtained
before a satisfactory explanation can be found. Means for obtaining
such information also were discussed.
F. Soviet Gold Exports and Policy.
It was agreed that the USSR strives to pay for merchandise im-
ports with merchandise exports and -- unlike a country such as the Un-
ion of South Africa -- regards gold only as a balancing item in its
trade rather than an export commodity.. It was the consensus of the
group that 1958 gold sales would be considerably lower than the record
1957 sales (estimated at approximately $300 million), which largely re-
flected Soviet financial aid to Eastern Europe following the Satellite
uprisings. Although the had some reservations 25X1X7
about CIA's estimate of annual Soviet gold production (4.5 million to
5.0 million ounces), it was generally agreed that the annual volume of
Soviet gold exports is consistent with a production of this order of
magnitude. It was further agreed that increasing mining costs should
result in intensified efforts to balance Soviet imports with exports of
other goods rather than gold.
G. Ruble-Dollar Ratios in Soviet Trade.
It was agreed that more ratios -?- 'both ruble-dollar and exter-
nal ruble - internal ruble -- must be available before the economic
rationale of Soviet trade can be determined. Thus, although it may ap-
pear that the USSR is generally ignoring comparative costs in its trade
with the industrial West (by exporting high-cost goods in exchange for
low-cost goods), the data needed to support such a conclusion are lack-
ing. It was agreed, however, that the composition of Soviet trade is
governed by the priorities of domestic plans and by domestic availabili-
ties of goods for export.
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H. Autarky and Soviet Foreign Trade Policy.
There appeared to be general agreement on the role of autarky,
defined as a policy of establishing independence of imports, in
Soviet trade policy. Originally a Soviet response to a position of
isolation in a hostile world, the effectiveness of autarky has --
particularly since Stalin's death -- been vitiated by the rapid in-
crease in Soviet economic strength and by the increasing economic
integration of the Bloc as a whole. It was the consensus of the
group, however, that in the foreseeable future it is unlikely that
Soviet leaders will permit the USSR to become dependent on external
sources for any goods deemed strategic to Soviet national interests.
Within these limits, however, there is room for a considerable ex-
pansion of Soviet trade.
I. Satellite Trade Statistics.
The availability and completeness of trade statistics pub-
lished by each Satellite were reviewed and discussed. It was agreed
that trade reporting by all the Satellites is still unsatisfactory,
although only Albania and Rumania are still reluctant to publish any
meaningful trade data. Exploration of the possible reasons for dis-
crepancies in Satellite statistics took up the remainder of the dis-
cussion, although no conclusions were reached.
J. Soviet Economic Aid to European Satellites.*
Since the 1956 Satellite uprisings, the Satellites have re-
ceived greatly increased Soviet aid, which has been extended on more
favorable terms than previously. It was agreed that, because of im-
balances still existing in the Satellite economies, additional
credits -- particularly commodity credits -- probably will be required
in the future. The current high level of Soviet aid which reflects
the USSR's response to the 1956 uprisings should, however, diminish.
By 1961-62 the reverse flow of Satellite goods to the USSR in pay-
ment for past credits may possibly exceed new extensions. It also
was suggested that future Soviet developmental credits will be more
selective and will go primarily to selective industries of importance
to Soviet and Bloc-wide plans.
K. Bloc Economic Integration.
The group expects that, over the short run, there will be in-
creasing Bloc economic integration along present lines -- that is,
* This discussion took place at a meeting of the Satellite Committee
(Services Division, ORR), at which a member of the Trade Branch gave
a 30-minute talk on the subject.
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coordination of plans, subcontracting of production, and Bloc-wide divi-
sion of labor. It was agreed that a rational division of labor within
the Bloc is inhibited by differences in national price structures and by
vested national interests which are reluctant to give up the production
of a given item in favor of another Bloc: supplier. It was pointed out
that the Soviet spokesmen treat centralized, supranational Bloc planning
as being, at most, only an extremely long-run objective.
II. Proceedings.
A. Communist China's Foreign Exchange Rates (2 December).
25X1X7 Participants included representatives of- 25X1X7
IRA (State), and. ORR (CIA). The Chair-
25X1A9a man was ORR.
It was agreed that a comparison of data on foreign trade as re-
ported by Communist China with data as reported by the trading partners
of China indicates that China has been using more than one conversion
ratio in order to determine the yuan value of its trade. The yuan
value of China's trade with the Free World apparently is calculated by
using conversion ratios equivalent to about 2.46 yuan to US $1. The
yuan value of China's trade with other Bloc countries appears to be de-
rived by applying a conversion ratio of 1 Yuan to 1 ruble, which is
equivalent to a cross rate of 4 yuan to 'US $1. Furthermore, a state-
ment made in 1957 by the Minister of Foreign Trade of China, Yeh Chi-
chuang, indicates that the method of conversion is based on a 1 to 1
ratio between the ruble and the yuan.
Although the empirical evidence indicates that the ratio of ap-
proximately 1 yuan to 1 ruble is valid for trade with the USSR,, it does
not clearly confirm this ratio for trade with the European Satellites.
The discrepancy, however, is slight and probably can be reconciled as
more information regarding customs procedures and transshipments be-
comes available. For example, the Satellites sometimes act 'as middle-
men in the procurement of Western European goods for China or in the
sale of Chinese produce to the West. In such cases the conversion may
be at the "Western" rate or recorded as Sino-Satellite trade by only
one party to the transaction. Finally, the. participants concurred that,
because a conversion ratio of 1 yuan to 1 ruble exists in Sino-Soviet
trade, adoption of the same ratio for Sino-Satellite trade appears rea-
sonable.
In discussing the reasons why China. has adopted dual conversion
ratios for foreign trade, it was agreed that the trade of China is con-
ducted in foreign currencies, with possibly minor exceptions. It was
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agreed, therefore, that insofar as the adoption of a dual system was ra-
tional, it was done for reasons related to internal problems.
A number of explanations were offered, but it was generally rec-
ognized that no satisfactory answer to the enigma has yet been dis-
;covered. All concurred in the notion that, insofar as the economics of
the matter is concerned, the yuan-ruble ratio is an arbitrary one, and
any other ratio would serve as well as 1 to 1. The Chinese probably
have chosen parity between the yuan and the ruble because it is conven-
ient and because of the belief that any other rate might have reflected
on the prestige of one of the two countries. All participants agreed
that the ratio of 2.46 Yuan to US $1 for trade with the Free World (in
existence since 1953) probably was based, at least in some measure, on
relative internal prices.
In the course of the discussion it was brought out that the
yuan-ruble conversion ratio was originally consistent with the yuan-
dollar rate. In 1950 it was established at or near 10,000 yuan to the
ruble when the yuan-dollar ratio was set at 40,000 to 1. The ruble
rate became about 1 yuan to the ruble at the time of the currency re-
form in 1955. The Yuan-dollar rate was gradually appreciated until
1953, when it reached the present rate of 24,600 Yuan to US $1, a rate
subsequently revised by the currency reform to 2.46 Yuan to US $1.
There was general agreement among the participants at the conference
that China's leaders felt no need to alter the yuan-ruble rate, that
the appreciation of the yuan in terms of Western currencies resulted in
an improved alignment of domestic prices with Free World prices, and
that the greater value attributed to the yuan in Free World trade was
fairly realistic in terms of its internal purchasing power. Most par-
ticipants felt, however, that further evidence is needed to verify the
hypothesis that the appreciation was made for this reason. Some partici-
pants believed that the dual system provided the Communist regime in
China with an unobtrusive weapon for putting pressure on private foreign
traders. A few participants thought that the system was adopted in
part because it enabled China to exaggerate statistically the degree to
which its foreign trade was oriented toward the rest of the Bloc. All
agreed that the appreciated yuan - Free World currency ratio reduced
the yuan amounts that had to be paid to Chinese receiving remittances
from friends and relatives residing abroad, but no one felt that this
was a complete justification for the move.
Thus it was agreed that none of the suggested hypotheses was, by
itself, a complete explanation, and it was concluded that arriving at a
thoroughly acceptable explanation, if this is possible at all, depends
on obtaining additional information regarding foreign trade operations
and internal pricing practices in China. It was suggested that foreign
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trade or banking officials of Communist China might be approached on
several of these matters and asked, in particular, for an explanation
of the dual system and the rationale for adopting it.
B. Bloc Credits to Underdeveloped Countries (3 December).
Participants included representatives of - 25X1X7
25X1X7 IRA (State), and ORR (CIA). The Chair-
25X1A9anan was ORR.
The major subject covered in this discussion concerned the
methodology of evaluating military credits. Past differences in esti-
mates, it was found, were in part the result of quite different ap-
proaches to the problem. Essentially, has been attempting to 25X1X7
estimate the value of Bloc arms delivered or promised for delivery
to underdeveloped countries. CIA, on the other hand, has been at-
tempting to estimate the value of arms contracts in terms of the sums
of indebtedness incurred by underdeveloped countries. Both 25X1X7
CIA expressed misgivings about some of their past estimates; the former
believes that its estimates have probably been high, and the latter be-
lieves that its estimates have been low. Each is presently revising
its estimates, and it appears at this preliminary stage that the esti-
mates will be approximately the same, if due allowance is given for
conceptual differences.
C. Future of Sino-Soviet Economic Relations (4 December).
Partici ants included representatives of 25X1X7
25X1X7 IRA (State), and ORR (CIA). The Chair-
men were 25X1A9a
ORR.
It was agreed that Sino-Soviet economic relations have grown
enormously since the Communist takeover in China in 1949. Trade, in
particular, is extremely high and appears to be continuing to expand.
The USSR has provided China with loans amounting to about $1.3 billion,
of which approximately $430 million were designated for economic pur-
poses.
Some participants expressed the opinion that the amount of eco-
nomic loans extended by the USSR to China was modest. It was generally
agreed, however, that the amounts extended probably were adequate in
terms of China's ability to absorb foreign capital and, in the light of
its military debts, to repay its foreign obligations. All agreed, more-
over, that China was attempting primarily to rely on domestic savings
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and, insofar as possible, on domestic production to carry on its eco-
nomic development program. Finally, it was pointed out that, in addi-
tion to extending economic loans, the USSR has provided considerable
technical assistance and has aided in the technical education of a
large number of Chinese.
It was generally agreed that the USSR probably would not extend
additional economic loans to China in the future. It was suggested
that new military loans may be forthcoming, but all agreed that this
was likely only in the event of greatly expanded military requirements
in China. It was the consensus that Soviet shipments of capital equip-
ment would continue at about the current level in accordance with ex-
isting agreements. China, it was agreed, probably would expand its
exports to the USSR during the next several years and would be required
to maintain an export surplus of considerable size in order to meet its
debt repayment obligations. The possibility was suggested, however,
that China may repay the Soviet loans in sterling or goods obtained
from Free World suppliers, and it was agreed that this was a subject
that demanded additional study. Trade between the Satellites and China
also, it was agreed, can be expected to continue at a high and rising
level, for there are economic advantages to both sides in these ex-
changes.
D. Communist China's Economic Relations with the Free World
December).
Participants included representatives of - 25X1X7
25X1X IRA (State), and ORR (CIA). The Chair-
man was ORR. 25X1A9a
It was agreed that, although China's trade with the Free World
has expanded more rapidly than trade with the Bloc in recent years, a
pronounced continuation of this trend is not anticipated. Trade with
the Free World probably will continue to expand, but at about the same
rate as total trade.
All participants agreed to reserve their opinion on certain re-
ports regarding China's recent promotional success in Southeast Asia,
for there is little evidence that China's total trade in the area has
expanded above the 1957 level, with the exception of Hong Kong. Imports
from Western Europe increased, however, during 1958.
All agreed that China probably has considerably smaller foreign-
exchange reserves than in the past and probably is experiencing certain
difficulties in this respect at the present time. Some participants
thought that China would attempt to maintain approximately balanced
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accounts in each of the two major trading areas of the Free World --
Asia and Western Europe. Others believed that exchange earned in trade
with other Asian countries would be used to finance imports from Western
Europe. All agreed that China would attempt to continue earning ster- 25X1X7
2WUJ8JJn Hong Kong for use in Western Europe. All agreed that overse
remittances had dropped precipitously during the past year.
E. Soviet Foreign Trade Handbooks (5 December). 25X1X7
Participants included representatives of
25X1X7 - IRA (State), and ORR (CIE). The Chairman was
25X1A9a ORR.
Although they present a considerable amount of new information
on Soviet commodity trade for 1955-57, the trade handbooks published by
the USSR contain several. challenging discrepancies. The discussion was
directed primarily at trying to account for these discrepancies.
The major discrepancy ($106 million in 1957) is the difference
between the stated total of Soviet exports and the total derived by
summing Soviet exports to each country listed. Despite long and de-
tailed discussion, this residual remains unaccounted for. It was gen-
erally agreed that no single factor accounts for this discrepancy but
that both normal accounting practices and. possibly purposeful omissions
are involved. The residual is thought to involve two or more of the
following factors:
1. Omission of the USSR's minor trade partners from the
handbook -- which, however, could account for no more than $10 million
of the unexplained residual.
2. Goods sent on consignment, for which no country of des-
tination is recorded. A representative believes that this fac- 25X1X7
tor does not account for the unexplained residual.
3. Military goods sent to Free World countries.
4. Gold shipments.
The suggestion that gold shipments might account ra rood
part of the discrepancy was the most controversial. fo 25X1X6
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25X1X gold is included in total Soviet export
figures and in Soviet exports to individual countries. Most available
evidence, however, suggests that gold is not included in Soviet export
figures.* It was agreed that additional information must be received
before this discrepancy can be explained satisfactorily. Means of ac-
quiring such information were discussed.
It was noted that the sum of specified Soviet commodity exports
to individual Bloc countries fell short of the total value of exports
to each.. The consensus was that the unaccounted residual probably rep-
resents military and other strategic goods exported to these countries.
The possibility that the residual may include intra-Bloc gold shipments
was also suggested.
It was generally agreed that the difference between the listed
total of Soviet imports from East Germany and Rumania and the sum of
categorized imports from these countries probably reflects mainly ura-
nium ore shipments. In the case of Czechoslovakia, this residual ap-
pears to reflect Czechoslovak arms exports.
In a brief discussion of Soviet foreign trade prices it was
noted that unit values in the USSR's Free World trade, as computed from
handbook data, differ from those in its trade with the Bloc. It was
agreed that no conclusions can be reached on the basis of these data,
because the sample is too small and absolute identity of product cannot
be established in every case. It was also pointed out that, although
intra-Bloc trade prices are presumably based on world market prices,
the former usually remain fixed for at least a year and thus often lag
behind changes in the world market level. Furthermore, the fact that
the USSR may charge a Bloc country a higher price than it would a Free
World country for a given product does not, in itself, prove discrimi-
nation; higher prices to Bloc countries may be offset by a quid pro quo
of some sort on the part of the USSR.
F. Soviet Gold Exports and Policy (5 December).
Participants included representatives of
- IRA (State), and ORR (CIA). The Chairman was
ORR.
* The US Resident Delegation to the ECE, Geneva, has recently reported
that both the Delegation and the ECE Secretariat have modified their
previous views on the inclusion of gold in Soviet export figures and
now believe that gold is excluded and that military deliveries on com-
mercial account are included.
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It was agreed that the USSR strives to pay for merchandise im-
ports with merchandise exports and -- unlike a country such as the
Union of South Africa - - regards gold only as a balancing item in its
trade rather than an export commodity. It was the consensus of the
group that 1958 gold sales would prove to be substantially lower than the
record 1957 sales (estimated at approximately $300 million), which
largely reflected the Satellite uprisings. It was further agreed that
the increasing costs of gold mining resulting from depletion of depos-
its and. labor scarcities have made the consistent use of gold to aug-
ment export earnings an. increasingly costly operation for the USSR.
The Soviet government therefore can be expected to intensify its ef-
forts to balance its imports with exports of goods other than gold --
possibly tin, aluminum, and petroleum will be important substitutes for
gold exports ir2 Xjuture.
Although the had some reservations about
CIA's estimate of annual Soviet gold production (4.5 million to 5.0
million ounces), it was generally agreed. that the annual volume of
Soviet gold exports is consistent with a. production of this order of
magnitude.
G. Ruble-Dollar Ratios in Soviet Foreign Trade (9 December).
Participants included representatives of _ 25X1X7
IRA (State), and ORR (CIA). The Chairman was
ORR.
It was suggested, on the basis of a superficial look at the
pattern of Soviet commodity trade with the industrial West, that one
might conclude that the USSR is ignoring comparative costs -- that is,
the USSR exports goods (for example, agricultural products) which it
finds relatively costly to produce in exchange for goods (for example,
machinery) which it produces relatively cheaply. The available ruble-
dollar :ratios for Soviet machinery prices from which the above conclu-
sion is drawn do nothowever, reflect the types of machinery which
enter Soviet trade. Ruble-dollar ratios for the latter may diverge
widely from those applicable to machinery in general. It was agreed
that more ratios -- both ruble-dollar and internal ruble - external
ruble -- will be required before the degree of economic motivation in
Soviet trade with the industrial West can be determined. Meanwhile,
only the general proposition can be made, that Soviet agricultural
production is for the most part high-cost and machiner production
low-cost.
The consensus was that the USSR is beginning to show a greater
awareness of cost -- absolute, if not comparative -- in the conduct of
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its foreign trade.. At present, however, the composition of Soviet
-trade continues to be dominated by the priorities of domestic plans and
by domestic availabilities of goods for export.
H. Autarky and Soviet Foreign Trade Policy (9 December).
Participants included representatives of 25X1X7
25X1X7 IRA (State), and ORR (CIA). The Chairman was
25X1A9a ORR.
The discussion showed that it is difficult to obtain precise
agreement on the formulation and implications of a concept as abstract
as that of autarky. There appeared, however, to be general agreement on
the role of autarky when defined as a policy of establishing independ-
ence of imports. During the prewar period the Soviet quest for eco-
nomic self-sufficiency was a natural response to the Soviet position of
isolation in a hostile world. Since World War II the rapidly growing
economic power of the USSR and, more recently, the increasing economic
integration of the Bloc as a whole have made the USSR virtually inde-
pendent of the Western world. Now that the USSR has achieved a high
degree of economic self-sufficiency, autarky has become, particularly
since Stalin's death, a less important determinant of Soviet policy.
25X1X7The doubts whether in present conditions autarky
retains any importance as a practical factor in Bloc trade planning.
It was the consensus of the group that, until East-West rela-
tions are characterized by something more than merely an armed truce,
the USSR will not permit itself to become dependent on external sources
of supply for any goods deemed strategic to Soviet national interests.
Meanwhile, considerations of cost will continue to remain secondary to
those of national security as a determinant of Soviet commodity trade.
Within these limits, however, there is room for a considerable expan-
sion of trade. The magnitude of both Soviet imports and exports may
increase in response to the ever-present technological needs of a rap-
idly growing economy, to the desire to add to consumer welfare without
diverting resources from more essential investment, or to the wish to
further an economic offensive which has already reaped significant po-
litical rewards.
I. Satellite Trade Statistics (10 December).
Participants included representatives of
25X1X7- and ORR (CIA). The Chairman was W
25X1A9a
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Analysts from the Trade Branch, ORR, reviewed the status of
trade reporting by the various Satellite governments. The partici-
pants noted a general improvement in both the quality and the volume of
Satellite trade statistics published over the past several years, al-
though the degree of coverage varies widely from country to country.
Czechoslovak trade reporting was poor for the earlier years,
but recent Czechoslovak yearbooks and other statistical periodicals
have provided considerable data on the commodity structure of exports
and imports and on the value of Czechoslovak trade with major Bloc trade
partners. Value figures have been lacking for trade with Czechoslovak-
ia's less important Bloc trade partners, particularly for the years be-
fore 1955?*
Since 1956 the Hungarian government has released a substan-
tially increased amount of trade data, although some gaps still exist
for earlier years. A statistical handbook published in 1956 was fol-
lowed in 1957 by a statistical yearbook covering the years 19+9-55.
The 1956 Statistical Yearbook, just released, includes a commodity
breakdown of major exports and imports by source and destination. Two
monthly trade publications** contain current information on the value
of Hungary's trade with major trade partners.
East Germany also publishes a relatively large amount of trade
data. Several deficiencies remain, however, particularly in regard to
the commodity composition of trade since 1955 (in value terms) and in
regard to the distribution of key trade commodities among leading trade
partners. Balance-of-payments data also are lacking.
The Polish statistical yearbooks, the monthly foreign trade
journal Handel zagraniczy, and the Polish News Bulletin are valuable
sources of information on Poland's current trade payments. A lack of
data on Poland's balance of payments and on both the volume and value
of trade in individual commodities is the chief gap remaining.
Publications of Bulgaria's trade ministry, together with peri-
odic plan fulfillment announcements, provide the best continuing source
of Bulgarian trade data. The 1956 statistical yearbook contains useful
summary information on the composition and geographic pattern of trade.
* The 1958 Czechoslovak yearbook, received in early January, presents
value figures for Czechoslovak trade with all Bloc countries for 1953-
57.
** Monthl Statistical Bulletin (Statisztikai havi kozlemenyek) and
Foreign Trade Kulkeresk.edelem .
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Albania and Rumania publish no systematic trade statistics.
The Soviet foreign trade handbook is the best source of information,
on Soviet-Albanian trade and on Soviet-Rumanian trade.
Exploration of the possible reasons for discrepancies in Satel-
lite trade statistics took up most of the remainder of the discussion,
although no conclusions were reached.
J. Soviet Economic Aid to the European Satellites (10 December).
This discussion took place jointly with a regular
meeting of the Services Division Satellite Committee
25X1X7 of ORR (CIA) and was attended by a representative of,
and members of ORR. The subject was presented
25X1A9ADy ORR.
The speaker traced the course of Soviet economic assistance to
the Satellites since World War II, pointing out that Soviet aid of less
than $5 billion has been more than offset by Soviet takings, reflected
in about $9 billion of reparations from Eastern Europe. Soviet credits
nevertheless have been important to.Satellite development. In the
period 1951-55, for example, Soviet developmental credits amounted to
between 18 and 27 percent of Polish investments in machinery and equip-
ment. It was agreed that, since the 1956 uprisings, the Satellites
have received greatly increased Soviet aid and that it has been ex-
tended on more favorable terms than in the past.
Regarding future prospects for Soviet aid, it was agreed that
certain imbalances still exist in the Satellite economies, so that oc-
casional Soviet aid, in commodities or foreign exchange, probably will
be required. In the future, developmental credits are likely to be di-
rected to selected Satellite industries, the expansion of which is con-
sidered important to current Soviet plans for either Soviet or Bloc
wide economic development. The current high level of Soviet aid, rep-
resenting the USSR's response to the Satellite revolts, can be expected
to diminish rapidly. It is possible that in 1961-62 the flow of goods
from Eastern Europe to the USSR in payment for past credits will exceed
the flow of aid in the opposite direction.
Soviet aid extended to the Satellites-is insignificant in terms
of Soviet GNP -- about 1 percent. Certain sectors of the economy could
conceivably have been strained to a greater extent than this aggrega-
tive comparison would indicate. It was agreed, however, that the USSR
could, if necessary, maintain its present level of aid to Eastern Europe
without seriously disrupting domestic plans.
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K. Discussion of Bloc Economic Integration (11 December).
Participants :included representatives of
25X1X7 , IRA (State), and ORR (CIA). The Chairman
25X1A9a was ORR.
The group expects, over the next few years, an intensification
of Bloc economic integration along present lines, involving coordina-
tion of plans, subcontracting of component production, and speciali-
zation of production. It was'suggested that, because national planning
goals are themselves not precise (for example, the Soviet Seven Year
Plan expresses production targets as a range), coordination of national
economic plans is far from being a detailed blueprint for the Bloc as
a whole. It was further pointed out that Soviet spokesmen, although
treating a central, Bloc-wide plan as an ultimate objective, assert
that such supranational planning is impossible under current conditions.
There was general agreement that specialization of production
by country will meet with many obstacles. A :rational division of labor
is inhibited by the differences between national price structures. Fur-
thermore, the vested interest of each country in maintaining and uti-
lizing existing productive capacities is causing resistance to plans
calling
for
cutbacks or cessation of production. So far, recommendations
of CEMA
in
this area are not binding on member countries. It was sug-
gested
that
offers of economic assistance provide the USSR with a strong
weapon
for encouraging specialization where this is economically ra-
tional.
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SECRET
NOFORN 25X1X7
25X1X7
NOFORN1 25X1 X7
25X1X7
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