SOVIET CAPABILITIES FOR FUTURE TRADE AND AID

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP62S00545A000100090051-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 9, 2016
• Document Release Date: July 17, 1998
• Sequence Number: 51
• Content Type: REPORT

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Soviet Capabilities for Future Trade and Aid
A4--aa ,-^I er meeting; the Searatary-b- State suggested that it
would be helpful in these deliberations to put, yourselves in the
4a {aw& r, 1-- -l 0.-i 'fi t
position of the Soviets That is, to consider the Kremlin's future
capabilities and possible courses of action in their trade and aid
offensive in the light of their total resources and the competing
demands for these resources.
I thought it might be prudent in our forward look to limit our-
selves to the next seven years. The reason for this is that next
Soviet planning period covers the years 1959 to 1965, and while the
Kremlin has not yet announced the details of this plan, enough key
commodity goals have been released so that we can be fairly confident
about its general shape and proportions.
The Soviet's trade and aid program is another competitor for
scare resources within their country. It can only be put in per-
spective by considering the totality of demands against goods and
services produced.
What are these demands?
First, there is the necessity of increasing the standards of
living of the Soviet people. There are two key reasons for this -
to secure the cooperation of thq workers so that productivity can
.dn.J.. A n .. t.. _ w ?
continue toVincrease and to.removeYath sti ' y
/1 Poverty which
attaches to Communism and thereby increase its attractiveness abroad.
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The key Soviet programs in the consumer field are those in
housing and agriculture.,' To pay increased attention to these
neglected sectors means that investment must be diverted from
producer goods industries. This in turn means a somewhat slower
future rate of industrial growth than we saw during the 1950-55
years - probably on the order of 8-9 per cent a year compared to
past rates of 10-11 per cent. ?+ '~ ''`'"~""~ ~'' ' 04
Total investment, however, must remain high, because.growth
rates must remain substantially above those in the U.S. The reason
for this is the often repeated boast of the Kremlin leaders con-
cerning the catching up with and then surpassing the United States
in production. The fulfillment of this ambition, they believe, is
necessary to prove the superiority of the communist system over the
free enterprise system.
Finally, there is the need to maintain, and indeed to increase,
military expenditures. The concentration of effort on research and
development and on the production of advanced design weapon systems,
as we all know, costs a great deal of money.
Let's take a look at how these competing demands are resolved
today.
Chart - Comparison of US & USSR GNP
1) In absolute terms, USSR GNP about 41% of US.
Consumption, however, about 35% of US. Investment about
60%, but investment in mining, manufacturing and electric
power was 80-85% of our own.
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2) Military expenditures, including foreign aid
about equal. Total foreign aid program probably best
considered together with defense, as in US, under the
combined heading of, "national security."
3) Looking forward to 1965, we have projected
ow
forward a growth rate of 6.5% a year. We ha= A divided up
the pie, the $300 billion GNP, between investment, defense
and consumption by, rejecting forward ecent trends.
lf,-~d `.4
the proportions going to defense and con
-
~~.,. 4
sumption decreased, and that to investment
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Main point is that Soviet aid program, which last year probably
~+riy
cost aloft A $1 billion in actual flows to Satellites and underdeveloped
countries, could be increased several fold by 1965 without doing
violence to other national objectives - to overall economic growth
or to the continued moderate improvement in living standards, 4L {?
a. f i..,LIa4& X...&)ta.ty ,6 k&.tt
We might 'turn now to consider briefly what the output of some
key commodities could be by 1965?
Chart - USSR Output of Selected Commodities
+ + e.1- tj c,,
wc Q,
a
- - -
"t- considering n steel, cement, petroleum, aluminum,
machine tools, tractors and trucks the
> producers goods out-
put of the Soviet Union by 1965 will be much closer to US producers
goods output than it is today.
t
Lh. ` 44
C
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While overall GNP may be only about half that of the US in 1965,
by that time the output of producers goods may be three quarters that
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of ours. And, of course, what the underdeveloped countries want is
producers goods.
In addition to producers goods, of course, there is the demand
for technical assistance, for engineers and technicians to train
people and to set up and place in initial operation the plants and
equipment going into the industrialization program of underdeveloped
areas.
Chart - Increase in Soviet Engineers and Technicians
1) USSR has today far more engineers than does US -
700,000 vs 480,000. By 1965, engineers expected to increase
to 1,300,000. .
2) Only few thousand of these out of USSR today.
Clear, however, that the availability of engineers and
technicians is not going to be a bind.
Having reviewed briefly the resources available for the trade
and aid offensive, we can now consider the possiblen of Soviet
exports by 1965.
Of total USSR exports in 1957, about 24+% went to the free world,
and most of these exports were sent to Western Europe. They were
sent in payment for imports of machinery and equipment needed by
l (~~1 -c emu [~ . ! 0-t-t ~ A4-,E., t /G'
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which the projection for 1965 expands considerably. Food ems have
comprised the bulk of trade in this category to date, ather item
available Iu underdeveloped areas.
The USSR 1%,s long been a net importer of mac inert' and equipment
4
although its own c mestic capabilities for pro Acing these items have
grown enormously. Tied projected import surlus in 1965 reflects the
pressures which current `6,,conomic plans 11 place on the Soviet machinery
and equipment industries. ,us imp is from the West (principally
4r
prototypes and complete plant f. lities) will be increased to
facilitate the accomplishmen of p ed goals. Meanwhile exports
of Soviet machinery items ill continu to expand, to satisfy the
demands of underdevelo ed countries both thin and without the Bloc.
Moreover, it is no inconceivable that the US will try to develop,
partly for the pose of internal security, a ne export
position in
this catego in order to build and maintain capacit beyond the
requirem is of the domestic economy. Such an effort wo d probably
be b t on the export of mass produced general purpose mach a tools,
ary processing equipment, and agricultural, construction and
mining machinery.
To summarize, the principal factors determining the size and
nature of the USSR's foreign economic offensive will be: (1) the
overall policy decisions of the Kremlin leaders; (2) the choices of
Bloc leaders with respect to the allocation of economic resources;
(3) the attitudes in underdeveloped countries toward the commitments
and risks implied in large-scale economic dealings with the USSR
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and other Bloc members; (4) the ability of the recipient states to
absorb new credits; and (5) the alternatives offered these countries
by the West.
In seeking areas in which to extend its foreign economic program,
the USSR will select those underdeveloped countries in the Free World
which appear most vulnerable economically or politically and which
offer the prospect of important political gains. It will select
targets of "opportunity as they arise from changing political,
economic and military relationships in the Free World such as offered
by the recent coup in Iraq and the turmoil in Lebanon.
The long-run threat posed by the Bloc economic offensive will
increase. The offensive will operate in a context in which the
steady growth of the economic, military, and scientific strength of
the USSR will make it a more formidable opponent of the West in the
underdeveloped countries. Soviet trade, credits, and technical
assistance will support the Communist image of progress and power,
and provide opportunities for the propagation of Communist doctrine
and the idea of rapid industrialization through the Soviet-type
organization of society. Unless effectively countered, these
psychological and economic inroads, in combination with other Soviet
policies and accomplishments, will continue to erode the Western
position in the underdeveloped world.
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