FOREIGN TRADE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000600010155-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: January 20, 2011
• Sequence Number: 155
• Publication Date: January 15, 1952
• Content Type: REPORT

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Importance of Czechoslovak Foreign Trade and Need of Imports
Government trade Policy
Foreign Trade Cc ,enies
rlana!w of Fozclgn Trade
Policy Prficiag Imports into US
Effect of AS Policy of Froze n Vest Fm its-into Czecb=2ovr .
and Losses Inflicted on Its Economy. Co=ter Measures to
Cwt and Evade Effect or US Export Control
t of US Ccmwoditiee is Violation of NB Control
Licensing Procedures
Procurement Hard Currency
Trade Statistics
Blocked US Equipment for Construction of a Synthetic Rubber
Plant in Bratislava and some Steel Mills
Decentralization of the Czech Textile Industry and Foreign Trade
i
T
n
extiles
Czechoslovak Trade with the USSR.
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cam. ESE XENCY
INFORMATION REPORT
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Imgportance of. Czecv,oslovak Foreign Trade and Need of Imports
1. Foreign Trade is practically the only way for Czechoslovakia
to obtain scarce raw materials and finished products. Raw
materials which the Czech Government is trying to get from the
West are: copper, nickel, tin, oil, iron ore, aluminum and
rubber. Manufactured goods most urgently needed include
spare parts for various machinery obtained from the US during
the early postwar years, special drills, machine tools, presses,
communications equipment, medicaments (streptomycin, auree-
mycine), automatic mining machinery, low current electrical
equipment and rubber hoses. It is very unlikely that these
materials are being stockpiled, for several plants had even
before serious difficulties in maintaining production
because of raw materials shortages. Some efforts were made
to alleviate this disastrous situation and to replace the
laoidln-g a i=aw mabcriala and parts with those imported. from
the USSR. The final results were poor since the Czechoslovak
industry in general uses different grades and kinds of
material from those available from the USSR; for example,
Czech textile industry machinery is suitable only for western
types of cotton and wool and substituted Soviet cotton and
wool have considerably complicated production.
2. The government's inability to obtain sufficient amounts of
scrap metals from the Went has resulted in concerted drives
to collect scrap metals from all possible sources. This
action has been adequately organized and heavy penalties
are envisaged for agencies and individuals who fail to
comply with provisions of this directive. Local and internal
Communist Party organizations in various enterprises are
responsible for fulfilling the scrap metal collection pro-
gram. Even school children have to collect and deliver every
month a certain amount of scrap metal.
3.
Plenty c 1''t,:ncra to
t1.i1c .6"i4 U6 is " i-eL;uli as zuQii
shortages the entire pi'()duc Vion in NY.cehvrsluYakia has been
seriously hampered.
.Government Trade Policy
4. Since February 1948 there have been two distinct periods
in US-Czechoslovak trade relations, characterized by
quite different policies. The, first period lasted until
late 1949, and the second until 1950. The actual policy
maker during the first period was Evzen Loebl, the Deputy
Minister of Foreign Trade who was practically the head and
the brain of his ministry until his arrest. The general
directive at that time was to expand mutual trade with
the US in all possible ways. During this period the US
market had the first riori,. someti*es even over the
USSR market, in private conver- 50X1-HUM
sations with Loebi during his visits to the US in 191.9 he
stressed the importance of the US for the Czech economy,,
advising the staff not to engage in political matters but to
devote their entire time to commercial activities aimed at the
strengthening and development'of mutual trade relations. He
made it clear that some pePrague did not agree with
this policy. At that time no information as to what
was going on in Prague and dICL no knov .,hat shortly there- 50X1-HUM
after Loebl's opposition to the policy of complete economic sur-
render to the USSR would result in his arres3 .
E, :T
S E V; 2,
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5. The second pertr4 wa.s characterized by the general directive
to g.t Pro tht US as south goods as possible, regardless of
the volume of Czech exports to the US WMI, +1K4,
decision was made too late. At the time the 50X1-HUM
US licensing policy was airead in an nothing
could be done, no individual or 50X1-HUM
organization in e , or elsewhere had the support or
help of the Czech Commercial Mission in evading trade
controls. tb,?-re have been some cases of this 50X1-HUM
nature but they eve been in~.tiated and realized without
the knowledge of =commercial mission. Presumably such 50X1-HUM
transactions have been carried on outside the US and were
not known in the US. 50X1-HUM
6. Prior to the expiration of the Czechoslovak-West Germany
trade treaty in 1950, West Germany was of great economic
importance to Czechoslovakia; and although the Czech govern-
ment was not dependent upon Western Germany's trade to keep
its economy functioning, this trade was still very signifi-
cant. Even now,(August 1951), trade relations with West
Germany are extremely profitable for the Czechoslovak Govern-
ment. Were they not, political differences, would require
severance of such relations.
meeting of the Communist Party in the Ministry of Foreign
Trade in fall of 1950 Minister Dr Gregor spoke con-
cerning Czechoslovak foreign trade policy. He emphasized
that3as a primary political task,it was necessary for the
national economy to achieve independence from trade with the
West. This was and still is the main objective of Czeohos-
lovak foreign trade.
Foreign Trade Companies
8. As of August 1951, no national corporations as such had
been created in Czechoslovakia to conduct foreign trade. The
original foreign trade companies were established by govern-
ment dears* in 1948. Their legal structure as determined
at the time when there was considerable trade between
Czechoslovakia and the West. It=was the intention of their
creator, Evzen toebl, to obtain for the Czechoslovak foreign
trade companies a status which would "ve most acceptable to
the West. Loebl feared that if the foreign trade companies
were national corporations, western businessmen would oon-
eider them stiff bureaucratic state agencies. Loebi succeeded,
and the companies obtained a status similar to that of an
average business joint stock company, with a certain number
of shareholders and a board of directors. The State
officially had northing to do with their internal administra-
tion. All shares, aowever, were actually owned by the
National Hark of Czechoslovakia.
9. In the full sense of this term, national corporations were
established in Czechoslovakia in the fields of production,
distribution of output,and services. Foreign trade, however,
was always completely separated from production and from
internal distribution of goods. Actually, at the present
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time t4 sere ie little difference between a foreign trade
^:o'_T.0 any and a national corporation? Yet, in 1948-49 it
was oons.?? dered important to make between them a strict
dia. -i! .ction . And although it Is no longer necessary
to pretend that the foreign trade companies are not direct
ins :ruments of the government', their original organization
arid .titatu~ have remained,,aaeban-ged.
10. The enact names and addresses of all foreign trade companies
are stated in various publications of the Czechoslovak
Zha..r.her of Commerce in Prague, as well as in the bi?-monthly
Er:g? .s?~- la age periodical "Czechoslovak Exporter". Much
U:~ef;xl. information conoerning the foreign trade companies
can ales be obtained from. the bi-.weel*,lr periodical "Foreign
11'ra: de" ('"Zahrat icn:. Obchod), published by the Ministry of
For?eig i Trad=e. This periodical can be obtained in all
part er ):i;ckatores in Czechcslovakl a
11. Tr;,(-- main ^zeoheslnvak foreign trade companies transacting
iar~e?-s?e:a"fe businese with the US, are Centrotex, Glass-
t'.a,~~ Hc:ps-Malt, Centrokomise, and Kovo. Glassexport,
;ti".cv: ;a.~;; Centrotex ~ w're been especially significant in
e r:: icv ak-US trade i.n handling the bulk of goods exported
,;; ;,Xe o Anot*ner company, Merls ir?ia handles many types
ti:f Fc,a ? )P. an excluii ve"may .arver basis. Since the US
A o this t:,r:oe of commercial trans-
xr~n y:e :~ s nc: A:; su:.s ~o:~sed y
;; in. t'ne US have been quite
~~c:?._ 1^E; l :.tteniptec to convLn::e the Minister of Foreign
`11"?l.re tc, -` quidate 1Jreign tra'ie companies abroad. He
.. ::.'J ed ~ eral. rr-.~ :,ar..:s ,? Firs::, the companies were supposedly
,1e t ,~ as Li.?vi'c_tes of f rat-class trading firms
w_' -c?~. zc,t
:Lt:.u:J:e'3. ;_,f i" Ccient working capital,
and. 6IL'IlleL per=o.cn! el' and organizational
,wn do Leb ti.c ccorporaticn would
1 v ~C' ::: !?:,'.:i y.`r. ~. ?r V. a.,,;_ l'. .=. L1V v:a. a cl.uu f,- the
~. _ - r f .y. +. ?.., r u.?~..~~ i.she rep tAb e
I.J.: -~, ~ ':~ ,.?rJ. U611LL liLl~r >. Gl V ice. G.'J J.:. 'i~u' , - "`Y 1"-'
rte.; er-"enced forelgrL ; tim ,an r to act as a sole importer
?~ _;:r;: ..;?~.~~ - e ::.:...e i.nexperier_c?d Cze
Miru~~t s -~. f ii'rt t -n addition, ,.,o~tht.5? , was believed that this
ever. her. foreign importers
rc'. e:i were operating on a c?uxaparatively high profit
~ec~r r ? 14-urt"hermore, considerable difficulties were en-
* n atterc-pting to build ?up and strengthen the new
foreign. -trade or'ganiza:tions., the monopoly
in Czechoslo?riakia. Even the older, prewar Czecho
0Z3?r tat foreign trade ;c .panies, later nationalized, were
ey?e,,s~.ia1 liquidated. ' Mcet of the foreign establishments
ha.d been owned by the .3kbda Wor ke and the Czechoslovak Metal
ird,.ytr'~=9 or by Kotva, the J.mtport-export organization of the
1ata Works. The Skoda and Czechoslovak Metal Industry offices
a. road were cal'! ed Qmripol and had been established in many
In the US this office was called the Oluefseas
Me 'oB:nt'i"le: Company and was located In New. York Ci 7y.
"13. In 195) the Ministry of : oreign Trade issued a confidential
ca .r^ec?..Ive ordering the monopoly .orrLpanies and heads of the
regional desks in the minis-try to terminate all agreements
with foreign cosrastercial representatives of Czech and Slovak
origin born in Czechoslovakia. The purpose of this directive
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was to eliminate uii those representatives who ;lad left
Czechoblovakia prior to April 1950. Another group to be
eliminated subsequently included those representatives and
agents who emigrated frog the satellite cotetries. Exceptions
to this directive are very rate And may be obtained only
through the approval of the NU ter or his Deputy after a
thorough investigation of thecase. This measure has
adversely affected Czechoslovak foreign trade with the West
because the great majority of the import-export agents used
by the Czechoslovak Government fell into these categories.
In the past, two types of Czeehoslovak foreign trade agencies
have been withdrawn from the West. These included trade
agencies or iompaniee which were owned and orated by
Czechoslovak domestic agencies, and representatives and
agencies abroad operated by individuals of Czechoslovak
origin who have legally or illegally emigrated from Czechos-
lovakia.
14. Late in summer of 1950, the Ministry of Foreign Trade
officials had worked out plans for the establishment of
Torgpred, a Czechoslovak foreign trade organization. The
name of the organization is derived?rom the abbreviations of
two Russian words "Torgovoye Predstavitelstvo", meaning
"Trade Representation$ . In the US Torgpred was to have had
the same functions as Soviet'Amtorg. However, the final
plans for its establishment were delayed due to the
difficulties entailed in obtaining residence visas for
reliable Communist employee who were to work in the western
countries, and in finding sufficient personnel considered
trustworthy enough to carry out these duties. The decreasing
volume of the trade with the 'Kest was also an important
factor in delaying the realization of plans for the establish-
15. The Ministry of Foreign Trade, has no great difficulty in
keeping its accounts since all foreign trade is channeled
exclusively through monopoly companies. The required
statistical data can be obtained from the various commodity
departments of the monopoly companies by the Statistical
Desk of the Planning Department, First Section of the
Ministry of Foreign Trade, and compiled rather easily. The
official statistics are prepared by the State Statistical
Bureau, a branch of the State-Central Bureau for Planning.
16. The Ministry of Foreign Trade has no direct role in handling
foreign financial transactions. They are handled by a special
department of the State Bank, with all payments made via
letters of credit. The State Bank reports balances of all
currencies daily to the Ministry of Finance and the Ministry
of Foreign Trade.
Planninjof Foreinw: Trat+e
17. The planning of foreign trade in Czechoslovakia is done in
the following way. The State; Planning Bureau prepares the
general production and consumption plan according to pro-
duotion capacity, available manpower, domestic raw materials,
etc. On the basis of this plan the same . bureau determines the
needs in imported raw materials, finished. p d*cts, An's GYrnater
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goods, and sends this estimate through its Foreign I ' `rade
Sections headed by Dr Sindelar, to the Ministry of Foreign
Trade. The ministry then prepares a detailed plan with the
breakdown on various regions. Participating in preparation
of this plan are the Planning Department of the Ministry of
Foreign Trade, heads of territy^ial departments, representa-
tives of various foreign trade companies and of the foreign
department of the State Bank. Since the subjects involved are
very complicated, these conferences are extremely exhausting
and the participants work in 16-hour . shift c sfor many days.
When a plan finally is prepared and all statistical data
obtained, a breakdown is made on various regions according
to existing needs and requirements. This detailed plan is
accompanied by a counter-plan for export requirements to
permit provisions to be made for sufficient foreign exchange
currency to pay for imports, plus some requirements of the
State Bank,-tor payments of various international obliga-
tions, maintenance of diplomatic offices, etc. The export
plans prepared in compliance with the prevailing export
policy determined by the State. In the latest period the
requirement was, for instance, to export as far as pos-
sible goods manufactured solely from domestic raw materials.
Needless to say, offers and requirements of the USSR and
satellite countries are taken into consideration and satisfied
as much as possible.
18. As tar as it deals with the West, the planning is sometimes
strongly influenced by various fluctuations on the western
markets, new fashions, etc, involving amendments in prepared
plans with respect to envisaged commodities or a different
territorial distribution plan. Such amendments are to be
approved by the Territorial Department of the Foreign Trade
Ministry, by the State Planning bureau and the State Bank.
Foreign Trade plans for countries with a planned economy are
prepared in rough figures for a longest possible period of
time, and the mutual requirements are usually adjusted once
a year.
19. Although as a result of the elimination of profiteering in a
planned nationalized foreign trade, the adequately organized
agencies for foreign trade have considerable advantage in
competition with smaller and profit-seeking western traders,
the insufficient flexibility of the entire state-dominated
organization and the general mismanagement rm.lltfy all
mentioned advantages of..the nationalized Czechoslovak foreign
trade.
20. Among 'Cze4'hosldvak- expor?r,? =',4hlp6 nto .to b "USSR Nam: fs. ' :?'?'
priority. In this respect even consumer goods badly nc,:.ed
on domestic markets are shipped to the USSR in a complete
disregard for Czechoslovakia's own needs.
clearly all the contursion and enormous efforts of the ministry
when some export atom, earmarked for the USSR was short, or
plants manufacturing export goods for the USSR urged import
of some spare parts in order to fulfill the export production
quota. Such requirements always received top priority, and
everything else had to be put aside and all efforts con-
centrated to solve the export problems to the USSR. This
policy was, of course, detrimental to production and foreign
trade as a whole.
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21. `;her(t e_ e ati1 . ;uaoy non-Communists in the S to Pl-v.':Ill eg
Bureau, but these individuals occupy minor positions in
departments not directly oonoez'ned with planning in
sensitive fields. Otherwise the State Plar_riirig Bureau, or
at least the majority of its depart:nencs, operates under the
Caine strict security rules as the Ministry of National
Security and the Ministry of National Defense.
Policy in Pricing Csaeaho*levsk &portss into US.
22. A special policy was applied In pr ainiz Czechoslovak
exports to the US, Here, however it necessary to
give a generaA i1e6t of normal inet, use in pricing goods
on free marks-la. The peg1icy generally applied to the free
markets coul4 be chiaraoterized btsieflyt to sell and buy
within the 2f'.ffiita of the foreign trade plan for the best
world priced. Under sltoh a poliLey the profits are not
decisive, and r,atnetimob play no role at all. This is true
in cases where hard eurremesy is obtained for goods manufactured
from domestic raw materials and with domesatie manpower. In
Czechoslovak exports, for instance, such a place is held by
glassware. With these eomstodities production costs in Czech
crowns are given almost no consideration in the Czech foreign
trade policy.
23. Until the end of 1949, 1 e at the time -ben Czechs still
believed they would be able to buy
:a~imw "h,are3." the T . T T or ,i t ahh~r' ors,t;.,:trfaor F,tt
vsasl.ling Czeohoei.ovak policy for the US market was to cell
ass much as possible. The Foreign Trade Ministry insisted
on sales to the US even when better prices could be
obtained for the came commodities on some other markets.
This was followed by a period of so--called "rewatricted"
exports to the US, I e exports limited to the extent necessary
to obtain sufficient dollars for ?ornparati-Nf- y small pur_
chaasess on US markets and for the fulfillment of arious
ix 4rsx~ri~ational obligations. This period lasted until epria1g,
1951, when Prague beoaeae convinced that sea a raa,i1 t of the
cold we:r And arz'es of Mx" Uxatie,trade relations would reach
a standstill. The motto during this period ws- to sell to
the ;1S an z uoh an ponal,ble regardlessas of price.. This was a
real !'export driven ' caused by fear that trade would be cut
off , Yet, Since the time the 0Z. aha experienced difficulties
duo to the anti.-dumpiing law, with their exports of hate and
y have been more aaretiil.
the f ollowIng art"ioiesa were exported to the- US
n the period ]948..l9,%Q, w&tt;h a xv$0 in t~Jseah crowns
ohooolate and 000010%9' graduate exported by. Cent*okotstlbe
PraSue (here the oalcu,l.sxtion oven in hard currency brought
a loos for C ech trade, since a large part of raw materials
was bought tor dollar inetrunontu because of the Anabilit;y of
the state lanx:ing agencies to gent these raw materials eloe-
where . 71,''he same happened to some woolen and cotton
textilosa. Some types of gle.ss0wax'o and motorcycles have
been sold with no profit at all, The dollar instrument:;
obtained in trade with the TJS were used mainly for 1, svn~c:a
of pux'rhasese on the US markets) at thr prekfent time very
limited, on eve*xtuall "black v rko ;4' mootiy !A iVienna,
Austria . for the paymeza'ta of 7laari.ous I.x>;be:r"xrLctlona1. c~a J.9 Fzu
lions, I-or diplomatic rrzlnronetnt3t:iono,, ars't for the ptr,
of Brit;leh pounds, w'hteh is V ,4o sru.:in rittr'd ourretioy .i.r :;l,ia??
talwmktl.a at the present t arm. .
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24. As a vv1e Foreign Trade Ministry officials do not :low' p,ro
duction costs of export goods since production is cornplctely
separated from the trade. many eonmpl'-L1.x
concerning this from people. connected with producticnL.
Prices paid by foreign trade companies to production enter-
prises for export goods do not represent actual. production
costs, but, are determined, as are all Tither transactions
between these two types of national corporations, on the
basis of some very complicated keys.
25. In view of the imminent withdrawal of "Most Favored Nation"
treatment under GATT, the Czechoslovak export policy is to
hurry with sales before the termination of GATT. This
directive was given in early 1951, when relations with the US
became worse. It remains to be seen whether the Czechoslovak
export organization will be flexible enough to accomplish
anything in the few remaining months. After GATT takes
effect, the Czechoslovak Government will contine its
Some steps to this effect were already taken before
few items (originally there were hundreds of them): glassware
(these goods can be sold at lower prices since except for
insignificant quantities of Austrian borax, they are manu-
factured entirely from domestic raw materials), some types of
textiles, like linen manufactured from domestic or Pa]ish
flax, artificial silk, hope,. some chemicals, etc.
the Ministry of Foreign Trade
intend to "go slow" in the certifying of consular invoices.
26. It can be expected that in order to evade the US anti-
dumping law, the Ministry of Foreign Trade will offer the old
goods under new names and under new commeroial markings
to deceive responsible US authorities and make them believe
that these goods, exportea under rtuen lower prices to
come higher tariff e in esi 1 e V ,oil 1 er t e GA T' is ci=utin a tics r
are entirely different from those exported previously,.
Thit3 Would lApply illy inly to to 11 1466 rtiia 1-'-G-- . rc c'r Cii uc
typical Czech designs will be changed, The Tariff Department
of the Foreign Trade Ministry believes however, that It would
be difficult and very complicated for the US authorities to
enforce anti-dumping laws and not hurt at the same time
in order to obtain dollars, the Czech Government will try to
maintain some trade with the US, limiting It to a rather
small number of goods. The changes which recently took place
in the Communist Party (the removal of Rudolf Sla.n:Fky, the
once all-powerful General Secretary of the Communist Party and
the rise to power of Gottwald's group), could be interpreted
also as a desire to increase i..he trade with the US, Tt-e
Gottwald group, with its Oxford-trained personalities like
Dr Goldlnann tanl-M~ is ~Fri9:;lcs~' ?`f~ ti:.?1_ [+_+i>r.t'm::i~.".
Gottwald, can be considered as economy-minded, wher'ear Siancsky's
group, atreti95ing only
complete disregard for economic damages. Even if tine
Ministry abstained from all purchases on L?S^
Government would still need several.' millions of
annually 1"r )f...y,.r
the USSR is givino or will .ivc, dollars to tY:r. CZethcsloua?
Government. US %.uthorltlei tc keep a close
eye on Czech exports o . glassware and linen after
Lion of GATT, T'h,, Czecb9 }fill pr a~~~~i ly try to co some
more business with other free dolls..*z; m.a:r.;.,.?ts, 1i;~ce Cuba;
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Canac!a, etc, novrever, with the poor set-up of the Foreign
Trade Ministry and foreign trade companies E:::]do-Li'-)"-.
can achieve much success
Effect of US Policy of Frozen West Imports into ~zect?o: iov_ ki.
and Losses n Ta e upon its = conom ountermeasures_ 4`o:-"Com:iat
and Evade Effects of i15 nor -on--r-o1.
27a The Czechoslovak economy suffered severe losses when
imports for its heavy industries from the US were fro^en,
Among other consequences this has resulted in the blocked
delivery of a complete steel mill ordered in the US in
1.946-47, the synthetic rubber plant for enterprise Matador
in Bratislava, and some mining equipment. It is extremely
difficult to trace the exported product to its ultimate
consumer, but Czechoslovakia may presently
attempt to import from the US small quantities of commodities
over which it is difficult to maintain export controls. Such
commodities will primarily beg tubes for communication
equipment, precision instruments, chemical and pharmaceutical
materials, J.Ti.7. _ ..:1.i _&."
28. The countermeasures to alleviate the losses caused by US
export controls were mostly only considered and very few
realized in 1949 and 1950,
the present organization of the Ministry of Foreign Trade
and other foreign trade agencies does not leave any hope
that they will find ways to evade the effects of US export
control. Of course, they would be happy if they could do
the illegal trade has almost disappeared during
the last months,. The available illegal channels are
restricted today to Vienna, sea and inland
i1V ..4-1., ., ,. ., ., .
., i:.-!(~,C.t. ?V I.Ly 1. , !C r~ ~.la n, .. >~
L UC'v NU. A , n 4.
/ o InWV.+ V Ls ..S4 ' VVaII.+V ?.S .A
VT UI.
or from Snit F:h AmPrinn Anvrwav _ If there i e
any considerable illegal trade, the territorial departments
* eT i ii ;ti:
in the ci*?i ry ~oe> nothing o , The m7.n~ ~ ; iL,
trying very hard to get as much of needed materials as
possible in a legal way, a,:J ?
In this it is rather successful in and the
countries. The Czechoslovak Government still counts
on the lack of cooperation among Western countries
t gat various raw materials of rigin were and .1
in 19_,9 and 1950 the evasfon zone taa.s
Almost all material brought to Czechoslovakia illegally was
offered by some profit-seeking individuals abroad, and the
actual deliveries did not orginate from and were not. prepared
by the Ministry of Foreign Trade or other Czechoslov:O
official agencies,
in spring,1951, the Czeohos1 ovals
the representatives of the Ministry of F e ;.gn
favorable results were achl.eved, mainly be_,&c.se of
negotiations were extremely dif.fic~zlt, but tha.,. .. -.:.c~
Trade who had attended nr goti.atl on.s~ stated ,
e44r
eagerner-..~ to obt tf';:~ some compensation for
property by allo:,at inb. ahou r 1 e: ~ o t? ". he i mporete ' value for
Czechoslovakia has agreed to p,.... the a tits?=: a zed
investments and property natione1.ized. by the Czech. G-
S
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this purpose o Here the Communists had exploited tlPe rsit
"dati'ori ifl _~1"`11 fi?n:{. ?[:? .'..41:' R yr ~ r.r
.? '. m a117a._. .:~":2!''T' i"IT4 (. ~'?.i
L
i
requests :gad corcplied wits,
Czechoslovak reque s, so that the Communists would not
rescind their offer of compensation for the nationalized
assets
Procurement of US Conodities in Violation of US Control
csenaff Proce is es 31. Various leading officials in the Ministry of Foreign Trade
believed that the Five Year. Plan was prepared under the
assumption that it would still be possible to import all
necessary raw materials from the West. The rapid deterioration
of trade relations with the West was apparently not anti-
cipated; if it was expected at all, nobody thought iE'b Would
happen in such a short time.. In 1949, prior to the arrest
of Evzen Loebi, extensive preparations were made by the
Ministry of Foreign Trade to increase the trade w the
West, the US in particular. in
September 1950, there was still some procurement o US
commodities in violation of US export control licensing pro-
tb'
cedures,
third
and Austria.
32.
that some material after World War II was sold by the US War
t3.eta Adminiotration to various countries. This material=
was offered by profit-seeking individuals or firma
from such third countries to Czeohoslovakla._doubt very
much that today among so-called "workers' oadrea in the
foreign trade organizations in Czechoslovakia would be any
f
After the
establishment o
Metrans, an international shipping and
forwarding agency in Prague, branch offices of this company
were established abroad. These offices were probably used
for the illegal shipment of materials from the western
countries to Czechoslovakia. Some of Met'ran's affiliated
companies, most of which were liquidated early in 1951, were
called Intrasned.
and Austria are now the
moov p anannei-i or iiiekal trade transactionsL
the goods were Illegally transported
or or Ins ead of direct
shipments across the Czech-Coran land border, t.zw waterways
either using Inaccurate or false
two or three O:zecha representing Metrans In
ttempted to import some strategic items from
or e ems, or by shipping these items via.
customs a. ? nci,e?s exeroi s ed different,
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border; control is much more liberal however.
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controls at the Czech- border, on inland waterway8
and on sea harbors. There is a strict control at tb land
instan,es where shipments,rejecte at
border, were subsequently cleared without
any difficulty w en chipped by waterways.
33. not believe that the illegal trade channels from Latin
America exist any longer, since there are still some legal
routes through which this trade may move. It may be, however
that a part of thei god deflvered to Czechoslovakia under
normal trade agreements With-some Latin American or Western
Euro a countries is of US orUin.
some exports to Czechoslovakia included raw
materials of origin.
34.
I there is not much chance that these activities
have been continued. Illegal trade transactions are always
dangerous, and the executives of monopoly companies, afraid
usually to assume more responsibility than is absolutely
necessary, would not risk their a,axeers engaging in illegal
transactions unless directly ordered to do so by their
superiorseever heard that the Ministry of Foreign Trade
has ever planned or carried out any illegal trade trans-
actions. An analysis of the official trade statistics be-
tween the and other European
countries on one side and Czechoslovakia on the other will
trade even in strateG4c
-w a 9..-.- of a1 ega+ a-~.-
G'-iIW G:VilOIut7t'c"',L VvihNYlQ i ~+pr.
materials?blocked by the US many months ago. The most
common method used to obtain strategic materials and goods
from the Weat, is by maintaining normal trade relations with
Western European countries. Illegal Imports of raw
materials . machinery and equipment from these countries are
not extensive since there are still suff olent legal onannc.Le
to import these items.
Procurement of Hard Currency
35., Czeohoslovakia obtains hard currency mainly by the Cale of
domestic gold, by favorable balances of trade with the hard
currency countries, and finally through var. ious finanoinl
transactions. The gold used in the sale In primarily
obtained from private domestic reserves through the Darex
organizatian used as an instrument to induce the population
to deliver their rings, earrings, bra.oeleta,r etc In exchange
for scarce goods on domestic markets. The gold is
exchanged for Darer coupons which can be need to purchase
these rare articles at a "favorable" price. Another source
of gold Is rumored to be ti d o-US: '.; .? . it i
some gold was given to Czechoslovakia by t'he. uosn -.-a-rth t- wi
War 11 when the US and other Western European countries
began to ourta4,l their exports to the USSR. In this way
Czechoslovakia will. btifl 1 be able to purchase essential goode
with the Soviet and domestic gold. . Dn , the other hand, due
to restrx.otiana imposed by the West on exports, the need ec?;r
hard currency is not as critical as it was before. in re t-it
months there has been a shortage only In British pounds
During the past years considerable amounts of foreign
currency were received through export of automobiles to Wvst:~:rn
European countries,, In 1950-sir however, this export bas
declined sharply since the oustomers are not oonfz deTIt they
will be able in the fixture to geb spare parts or t'heee care
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and do not bslieve the Czechs - would go with automobile
export to the West for any considerable length of to
Another reason for the decline in this trade is
an delivery terms the customers had experienced in the
past. Exported are usually passenger oars Skoda-1200,
and few Tatraplans,. I have no exact information as to
number of exported cars, but the figures can be found
considerable profits in- hard, currency came fi~bm
legal
,
various financial transactions and. speculations conducted by
the Zivnostenska Ban'ka Y,,-. :r
London, and Paris) with the approval of'Czachoslova_.
National Bank Dr Zikmund Koneony, former head and director
of the foreign departmen' of the new State Bank, mentioned
such transactions during his, Visit to the Consulate in
New York in 1949. The center "of these operations was
Paris, In the period when"Stechoslovakia could still got
`rtcr - ; from tr?. ?.::;, there were persistent rumors that the
USSR was supplying dollars. It is _actually possible that
the present time, the entire hard currency is
us statisticss eorkcel~iii>g US export trado to Czechosiovaiti9
gave slightly higher figures than those given by the
Czechoslovak Government. Sometimes the US statistics ehowed
exports to Czechoslovakia which we could not find in Czech
statistics. They mentioned) for example, during several
months in 19k9-50, exports of tobacco and tobacco products
to Czechoslovakia, amounting monthly t.o several hyindred
thousand dollars. such exports were
never ordered by the Ministry of Foreign Trade and con-
ae uentl never reached Czechoslovakia D assume they went
and disappeared there on the
bla?:k market. It is possible that these and similar goods
were declared in transit to Czechoslovakia in order to evade
custom duties and taxes in West Europe. If some material of
US origin came illegally to Czechoslovakia, it is to be
assumed that it came via some other countries, in which case
it would not be shown in the gr.iup of Czechoslovak statistic. ?
with th-- US9 but in the group of Czechoslovak st.atisticQ
the particular country the material came from,
The volume of trade with the >, os t e
'Mnann nn6 its satellites was a carefully guarded secret.
trade would be pure fabrications intended to serve Cot*rr,,?.1.st
propaganda.
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Blocked U.3 Equipment for Construction of Synthetic Rubber-' Plant
n ra s Cava an some Steel-mills.
39. The equipment for construction of a synthetic r:': -r
Bratislava was ordered in the US several years ago and
eventually blocked by US authorities.* This has caused a
long delay in the expansion of production of the Matador
National Corporation in Bratislava for which this equipment
was ordered. The problem of this equipment is handled to--
gether with some other industrial equipment blocked by the
namely some steel-mill machinery. The last info
the liquidation of this and other assets, there were two
special advisors -gent from Prague in
Czechoslovak Embassy in Washington. The equipment for rubber
plant Matador in Bratislava is being now completed by
Brnenske Strojirenske Zavody IClementa Gottwalda in Brno.
The blocked steel-mill ordered by the Czechoslovak Govern-
ment in 1946-47 is ^ - "-. built according to blue Dr. ints of
the blocked equipment. Back in 1949
these blueprints, together with the detailed technical
description, were sold to Czechoslovakia for US $150 thousand.
40. There could be today about US $12 - 15 million value of
ordered and prepaid equipment and machinery for Czechoslovakia,
'blocked in the US.
Decentralization of the Czechoslovak Textile Industry and Por' i?n
Trade n er les .
Czechoslovak textile industries were mostly inherited in
1918 from. the Austro--Hungarian Empire. Very few were
i-e.oder?n i ied latter f1nd equipped with modern machinery. Except
for flax, the textile industry used imported raw materials
and the finished products were mostly exported. The largest
11V"!V __" of VGA Nd..6~ ptuia~u i:v~ vim... .. .+...
Expulsion of some three million inhabitants after the end of
the last war caused a great shortage of manpower in this
particular region, affecting especially coal mines and
textile plants.
42. When the Two and later the Five Year Plans went into effect.
with the emphasis put on the development of heavy industry,
and when the Czechoslovak economy received the general
directive to "eliminate the dependence of national economy
on western markets", it became clear that the textile
industry was facing its black period. Smaller textile ernter-
~_,_'_ and "co-4E 4?^'ate cl ffrom ethnI c Germann were
not Included in ? the newly org