A COMPARISON OF OECD AND COMECON

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83-00036R000500020012-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 31
• Document Creation Date: December 9, 2016
• Document Release Date: August 10, 2000
• Sequence Number: 12
• Publication Date: June 30, 1961
• Content Type: PAPER

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A COMPARISON OF OECD AND COMECON
NOTE:
Attached is the first draft of a paper in preparation
by the Atlantic Institute Secretariat. Its purpose is
to compare certain features of the structure and opera-
tion of the OECD and the Comecon. The current draft
is being submitted to several experts in various countries
who are well- acquainted with the question.
Rather than a full report, this paper consists of a
June 30, 1961
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Original: English
A COMPARISON OF OECD AND COMECON
A comparison is here attempted of the treaties
which form at least the partial basis for economic coop-
eration and coordination within the separate Eastern and.
Western camps. Just such. a comparison would seem vital
today now that the battlefield of the two blocs is shift-
ing so clearly onto economic 't.:erarain.
This type of report is designed on the one hand
to call attention to the subject by sketching a general
analysis of the question aia.d drawing tentative conclusions
therefrom, but above all to serve as the starting point
for further studies or research into the question.
This presentation begins with a brief historical
glance at-the background to the two treaties, only slightly
less hurried for, Comecon, as its history is perhaps less
known than. OECDBs. They are followed by a comparative
analysis of the important features of the treaties . first
from the forma.], viewpoint of the texts themselves, and
second with a glance at their practical application. within
their. respective spheres. Some of the present and pos-
sible effects of the treaties are suggested as a conclusion.
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PART I
Background: OECD
The Organization, for Economic Cooperation and
Development, still awaiting the formal blessing to be granted
through its various member- countries' ratifying procediures, is
today the latest child of the West's efforts at economic coop-
eration.. Juridically, it. is dae to be born on, or before,
September 30, 1961. It. will be full heir to the Or^gan.ization.
for European Economic Cooperation which entered its thirteenth.
a. d last year of operation or, April 16, 1961.
The O O E O E 0 C. began. as a logical outcome of
the program. outlined by Secretary of State Marshall in his
Harvard, speech of June 5, 1947. Within less than. a year,
the Convention for European Economic Cooperation. was ratified
and Europe felt ready for this aspect of the American aid
program's innplementation. At the outset the American observers
held high hopes for a large degree of integration among the
economies of the individual European member states. (1) In
practice the results were considerably more modest.
O.E.E.C.. Accomplishments
- payments
Besides] the initial task of administering effec-
tively American aid. to Europe, the most notable of the OEEC's
achievements have been. "the establishment of the European.
Payments Union and the liberalization of i..ntra-European grade"". (2)
From the initial phases of the recovery of European, commerce,
the EPU, established in September 1950, produced the first
"breakthrough into a multilateral system of settlements and
credits". y.2)
(1) A tentative United States participation was formalized by
OEEC decision of June 2, 1950, admitting the 'U. S. and
Canada as Associate countries.
2) Report by the Group of Four: OEEC, Paris, April 1.960.
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After EPU's more than eight year service of broadening the
original bilateral basis of European trade, the European Monetary
Agreement established non-resident convertibility in December 1958.
- trade
With the institution of the Code of Liberalization
in August 1950, quantitative restrictions on imports for the
member countries were gradually though not always regularly
redu.c ed .
These are the Organization's major accomplish-
ments, and these, added to the initiatives stimulated 'by the
European Production Agency, have had as one of their partial
results the several economic miracles which seem. of late to
have blessed numbers of these European countries.
OEEC: Lacks
None the less, on the deficit page must be
noted the early failure to institute any serious degree of
coordination in. the recovering economies of Western. Europe,
the continued failure to obtain. any important degree of inte-
gration. of policies, and the later growth of peculiar region-
alistic tendencies - in particular, the complete failure of the
"last chance" Paris meeting in December 1958 and with it the
inability to avoid, before the zero .hour, (January 1, 1959),
the split between the Common. Market and the rest of Europe.
It was during t:.h.is same period that two factors
carne to take on a major importance for the OEEC: first, with
the general . convertibility of foreign exchange for these coiant.ries,
the Organization's role was partially fulfilled and partly eclipsed,
and second, the recovered European countries were now turning
outwards towa:r?d, one of the greatest of today's world problems:
the underdeveloped country. These factors, plus the immediate
impulse of' Under- Secretary of State Douglas Dillon's November
visit, produced a result seen. initially in the form of a communique
./.
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from the meeting of Western heads of state held in Paris,
December 1959. In this way began, the reshaping and "strength-
eni:ng of the arrangements for European economic cooperation.
to reflect changed economic conditions and the prospective full
membership of the United States and Canada "r . (1)
Then followed, this sequence of efforts to
remodel, the Organization.-.
January 12-13, 1960: Meeting of Ministers of 13 countries
(including the U . S m and Canada) and the
European. Economic Commission. recommending
a reorganization study by the Group of Four.
- ~.januar?y 1., 1.960: Recommenda.tio:n approved by the OEEC.
April 7, 1960: Committee of Four (Chairman, W. Randolph
Burgess, U , Go Permanent Representative to
OEEC) gives report: "A Remodelled Economic
Or?gan.i.zati on" .
-December 1.4, 1960: Convention on the Organization for
Economic Cooperation and Development signed
by the Ministers of Austria, Belgium, Canada,
Denmark, France, Germany, Greece, Iceland,
Ireland, -Italy, Luxembourg, the Netherlands,
Norway, Portugal., Spain, Sweden, Switzerland,
`rur.key, the United Kingdom and, the United
States
Bac.k.grLou:rad: Cornecon
Paralleling this thirteen-yeas development in.
Western. Europe was an effort on. the part of the Communist
world. toward what su.pe.r?fi.cially appears to be a similar end.
Following the war, in. an effort to rebuild her own. economy
as fast as possible, the Soviet 'nion exploited to the full
those favorable reparations clauses- in. her treaties with the
East European. countries, over which. she came to have more
and more control. Th.r?ough t:h,e transpla:nti:n.g of capital equip-
ment, occasionally even. their operators, and by exploitation of
joint-stock corporation.s, she was accomplishing an effective
"milking" operation as early as 1.94 6. It was in the midst of
(1) Report, ibid.
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this that Marshall's idea exploded. After a hint of interest by
Foreign Secretary Molotov the same month of June in Paris
and the Soviet rapping of Czechoslovakia's knuckles for accept-
ing so willingly, the Soviets began to interpret this move and
all. its consequences (including the OE EC) as an American and
capitalist desire to strengthen the existing regimes in Western
Europe, and to attempt to maintain or re-establish economic
ties between these countries and those of Eastern Europe.
Thus in January 1949, nine months after the OEEC was formed,
came the treaty establishing the Council on Mutual Economic Aid
(sometimes "Cooperation" for "Aid"), or "Comecon". This
move seems to have, been, specifically designed to counter the
supposed. sinister motives of the Marshall Plan, and included
initially the USSR, Bua.lgarla, Czechoslovakia, Hungary, Poland
and Rumania.
Comecon'.--, first phase
During the period since the war, the trade
.relations of the East European countries had seen a complete
reorientation. Not only due to the Soviets' own efforts, but
with, the collapse of Germany as a market (especially for food-
stuffs and. raw materials) and Western Europe's inability to meet
the capital goods demands for reconstruction, the Soviet Union
had become, by 1948, the largest single trader with these states.
Comecon. could then, serve as a coordinator for this new trade
orientation.. In fact, this seems to be its primary function.
during the first phase of its existence, which continued through
Stalin's death.
Yet even. within this field there seems to have
been little real, activity of the Council: only two conferences
were held in these four years, during which time East Germany
and Albania joined the Council. In this same period, through.
more individual control, the Soviet Union was directing these
countries towa:r?d, economic autarchy and a form of economy
following in. the steps of the leading socialist country. These
directions are clearly indicated in. the results of the first
industrial drives of all these countries. (1) By 1953, 70% of
their trade was within the Comecon area; the Soviet Union.
(1) Heavy industry had an. average of 37% of the economy,
agriculture - except for Bulgaria - less than 15%, light
industry less than 10%. S . JJ . Zyzniewsky, Political Science
Quarterly, Vol. LXXV, 2.
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. /.
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"Mol
had become their chief market and supplier. (1) ' The West's
own, embargo policy against Communist regimes had an. especially
important effect in this 'trade deflection, between 1949 and. 1951.
Second phase
-(part one)
The second phase began with. Stalin's death and
continued, as a tortuous period of transition. until 1958. During
the first half of this phase, 1953-1956, the need for greater
:r rationalization of Comecon bloc production. was made evident by
the constant shortage of raw materials (the Soviets' niggard-
liness is explained by their own ambitious industrial plans).
Comecon's orientation began to change slowly. In 1953 and 1954,
the idea of "harmful parallelism" was emphasized. (2) A general
reorganization and coordination of natural resource exploitation
and distribution was begun, in 1955, though., despite Stalin's
removal from. the scene, self-sufficiency for the individual states
remained their ultimate goal. Finally, i.:n. 1956, a large degree of
coordination was realized as five-year plans began simultaneously
in all the Comecon countries, coinciding with the Soviet Union's
sixth., In, fact, Comecon. seems to have come alive during this
period. From June 1954 to September 1956 at least sixteen
meetings of the different sections were held. Of particular
importance for Comecon was Khrushchev's declaration at the
Twentieth Party Congress in. 1956 that there was n.ow"no need
for every socialist country to develop necessarily all, branches
of heavy industry as the Soviet Union was compelled to do",
but that each "can specialize in. the development of those branches
of industry for which it has the most favorable natural. and
economic conditions". (3)
- (part two)
The important May 19.56 meeting of Comecon and
,the immediate subsequent changes in Comecon policy were guided
by this thesis, and began the second part of the Comecon's
(1) Forty percent of their trade was with the USSR, 30%
intra-East European.
(2) Economic Survey of Europe for 1954, PP. 131-135.
(3) As cited from :Pravda, Feb. 15, '1956, in the Political
Science Quarterly, ,op_ c.i.t.
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second phase. Thus, by the October revolutions in Poland and
Hungary, the importance of .heavy industry per se had been
scaled down, and 600 groups of machine products were distributed
for production among the bloc members according to national
abilities, and local resources - exemplifying a rising catch-word:
the international division of labor. The effect of the October
debacle was to increase this tendency and, as far as Comecon
is concerned, to emphasize the idea of a "Socialist equality"
to prevail in. future relations, using world prices to guide trade
transactions.
Third phase
The beginning of the third phase coincides with
the Eighth Comecon Council meeting in Warsaw in 1.958, at which
time bold supranational plans were adopted, methodology standard-
ized, plans laid down. for the linking of power networks (completed
at Tirana in. May 1959) and sync hroni.zation of major economic
plains, some as far into the future as 1975. It was the favor-
able results of this third phase which prompted the formalization
of these new forms of cooperation in the treaty signed in Sophia
on December , 1959.
Comparative Analysis
Structural. Comparison
Thus after more than. a decade's functioning of
both regional. institutions, new treaties were signed for each
within a year of one another, confirming new political directions
and laying the basis for future expansion. Our first task will
be to compare the two documents themselves.
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From a structural point of view, each organ-
ization has at its head a body composed of representatives of
all the member countries. (1) This organ has the power to
make decisions or recommendations. The likeness, however,
ends here - it might be noted, at a very early point. Whereas
the Council of the OECD is both the investigating, deliberative,
and d.eciding body for the activity of the Organization, in the
Comecon its Assembly is set up to act more as a general
guiding organ, which meets annually to review the past year's
activity and formulate directions for the future. Recently,
however, with increased activity, the Assembly has met in
extraordinary sessions in 1958 and 1959.
The Comecon. Council (2) is, in its turn, made
up of one representative from each member country. It is
relatively independent in that it too can make substantive
decisions. It is designed to serve as the major working body,
maintaining 'the real contact with member-countries, coordin-
ating the work of the various permanent commissions, and
following the general, lines established by the Assembly. Thus
the functions fulfilled 'by OECD's Council correspond roughly
to those of Comecon's Assembly plus its Council: the Assembly
acting as the ultimate authority, though the Council is respon-
sible for the practical implementation of plans. Each. council
has a secretariat (called a "staff" by OECD) and is empowered.
to create other organs as necessary. Whereas Comecon has
its presidium-like Assembly as its directive organ, the OECD
Council elects an individual Secretary-General, responsible for
the guidance of the Organization, for a five-year term. (3)
Given the elaborate provisions for Comecon's
various permanent commissions, one is struck by, the breadth
and depth of the cooperation envisaged: broad, since, as we
shall see (p..11), the fields are many and varied; deep, inas-
much as its planning coordination requires a total commitment. (4)
(1) For OECD, a Council, cf. Arts. 7-9; for Comecon, an
Assembly, cf. Art. 6.
(2) cf . Art. 7.
(3) cf . Arts. 10-11.
(L.) Since the OECD is as yet non-existent, comparisons here
are of course impossible.
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OECD has no such provisions. With respect to the breadth,
this Is to be expected, as numerous other organizations--especially
i:n. Western. Europe--were already fulfilling these functions of
cooperation and coordination. As to the depth, it would seem
t.ha.: a substantial difference exists which is not presently other-
wise complemented by the OECD
Decision-ma..ki n.g mower
One of the more interesting comparisons is to
be made between the real decision-making power, of each organ-
ization. The OECD is quite clear (1) : every member may
either veto a. measure or abstain, and thus withdraw itself
from participation "in the recommendation or decision". Comecon,
though less clear on, this point (2), has a similar provision per-
mitting countries to refuse participation. o:rn specific questions.
Since, however, there is no veto possible for Comecon, countries,
and so no means for an. individual country to prevent the insti-
tution of an over-all program, either an. abstention (and thus a
refusal, to participate) becomes an effective withdrawal, from
the Council, or is so .minor as to be relatively meaningless.
- Declared purpose
The formal statements of the aims of each
organization are perhaps somewhat revealing of the real purposes
behind. each. Both pay allegiance in their preambles to the
purpose of the United. Nations and to world peace. The OECD
goes on to mention "1 the preservation of individual liberty and
the increase in general well-being", whereas the Comecon
emphasizes the "I building of socialism and communism in. their
respective countri.es". Both state they are convinced that the
economic development and cooperation among their members will
lead to higher standards of living for their peoples, though the
OECD indicates a more open concern for general world welfare
through bettering world trade and improving international rela-
ts.io.rl.s. This concern. of the OECD is seen. even more clearly
in. its declaration to assist "the countries in process of economic
development".
( I) cf . Art. 6.
(2) T. Arts.
./.
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- Other provisions
Other parts of the treaties are roughly com-
parable: both have provisions for the participation of non-member
countries in their work. (1) Comecon's Article II provides for
relations with the United Nations; OECD's Article 13, and a
supplementary protocol provide for representation of other exist-
ing European economic organizations. OECD's Council will meet
permanently in Paris; Comecon's in Moscow, though the latter's
Assembly meetings are held alternately in the various member
countries. E oth organizations are to be financed by their
member governments' contributions, though OECD leaves the
method up to Its Council's decision. (2) The two organizations
both have special provisions for the admission of new members;
the OECD however must be unanimous in any decision for such
admission. (3)
Substantive comparison
Any real comparison, of the more practical
aspects is as yet almost impossible as OECD has yet to be
ratified by its member countries. Still, the conception of
this projected activity is known.
- Regional characteristics - OECD
First, of particular interest, is the regional
characteristic of each. organization. One of the most striking
aspects of OECD has been the change from "European" to
"Atlantic" in its. geographical make-up, in which some see the
loss of all. meaningful regional character (.) and others an
important step forward in reinforcing the economy of the free
world. (5) The more optimistic generally agree that the OECD
-
(1)
cf.
OECD
Art.
12;
Comecon, Art. 10.
(2)
cf .
OECD
Art.
20;
Comecon., Art. 12.
(3)
cf .
OECD
Art.
16;
Comecon Art. 2.
(4)
cf .
Santero Report, March 3, 1960, in the Council of Europe.
(5)
cf .
Dillon Report.
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countries are at least entering a new stage and form of economic
cooperation. It does in fact seem a sign of maturity that these
countries' preoccupation is now not only with their own recovery
and development, but also with that of the lesser-developed parts
of the world.
- Regional characteristics - Comecon
Comecon, on. the other hand, though representing,
in Stalin's words, the formation, of a "second. socialist world
market", has remained, limited to those countries which were
members of the socialist bloc at its inception. It is true that
China has had the token representation of an observer on the
Council since 1956, North Korea, Outer Mongolia and North Vietnam
all since 19.58; yet there has been no apparent effort to integrate
these countries' economies in the same manner as those of
Comecon. It would seem (despite Khrushchev's statement: at
the Twenty-First Party Congress to the contrary) that a
distinction had been. made between the popular democracies of
Europe and those of Asia: the first forming an intimate econ-
omic grouping on. the path to communism, the latter, on the same
path, but neither organized nor cooperating in any evident manner,
It is hard to imagine, in fact, how the integration of the
economic quinquenniums and the international division of labor
could be extended to countries in such a different stage of
economic development.
- Fields of activity
The extension of Comecon, into other fields, not
always strictly econ.om.ic, presents another significant point of
comparison. While OECD is limited on the whole to the field
of i.ntra-bloc and international economics, Comecon provides for
scientific and even. cultural exchanges of engineers, specialists,
and students, as well as close collaboration, among research
institutes and the economic planners of the member countries,
- Supranationality in Comecon
On the question of supranational characteristics,
there is a striking difference. Strictly speaking, OECD has
none. Though in theory this is also true for Comecon, in
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practice the Soviet. Union maintains a relatively tight control
over all its activities. This fact has had two important= conse-
quences. First, it has permitted the Soviet Union to give up
its obvious "milking" tactics for much more subtle ones. For
example, while acting as market and. supplier, still. often on a
bilateral basis, for the other member countries, the Soviets
can continue to milk through the establishment of prices lower
than those on the world market when they buy, a:r:.d higher when
they sell. (1)
it has been argued that for this very reason:
China, which has a favorable balance of payments with R:u s sia ,
has refused to enter Comecon. There are, of course, limits
to these tactics, and recent trends seem to indicate Soviet
awareness of them. This aspect of Comecon relations is in,
particular contrast with the unformalized "method of cooperation"
in. the "OEEC spirit" which. OECD so hopes to continu.re.
The second consequaen.ce is that a high degree of
control over non-Comecon, policies, economic and other, in. the
East European countries flows through such strict economic
planning coordination, regional anal. operational.. In this fashion.
Soviet direction. can be made both effective and more easily
palatable to these countries.
Su.pranatio:r ality in OECD
the long ran, political implications of a degree
of continued effective economic cooperation and policy coordina-
tion, are legion. Given. these conditions, some pooling of sover-
eignities will inevitably take place also in OECD. A certain amount
. ,o be necessary if OECD is to
of "Intervention" will. be seen ,r
work seriously to accomplish its stated goals. Further in.. this
sense lies the implicit goal of orienting the under-developed
countries' economies and. political institutions toward. the Wes',--
There exists an important difference, not only
in the degree, but in. the kind of interventions to be used by the
two organizations- in Comecon the intervention is by one country
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I l) of. Swiss Review of World Affairs, Vol. X, no. 12,
Ma.r^e