ORGANIZATION AND REGULATION OF FOREIGN TRADE IN HUNGARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000700070276-7
• Release Decision: RIPPUB
• Original Classification: R
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: August 19, 2011
• Sequence Number: 276
• Publication Date: July 14, 1952
• Content Type: REPORT

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COUNTR
SUBJECT
HOW
~oR o~icwr usE ouL
PUBLISHED Monthly pert ical
WHERE I
PUBLISHED Moscow
GATE
PUBLISHED Dec 1951
LANGUAGE
CLASSIFICATION
CENTRAL
INFORMATION FROM
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DATE OF
INFORMATION 1951
DATE DIST. I~ Jul
C~O. OF PAGES 6
J~UPPLEMENT TO
EPORT No.
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ORGANIZATION A2iD REGUL;.TZO?;
OF FOREIGN TRADE IN HVftGARY
M, Kudryashov
N. Pohov
With the aim of setting up state control of forei~r. t.~>_ke, the government,
in June 1945, created a Directorate of Foreign Trade, attached to the Ministry
of Ca?erce. This directorate vna given management of e;:r,ort and import apera-
t_oas (!da_gyar Kozlot>,y, Ho 53, 1 fi .rune '-445)
An Interminlatry Council on Foreign Trade vas created under ',:;~ Ministry of
Commerce. This council included representatives of the various minlstriea, the
Hungarian National Bank, the Directorate of Foreign Trade, and other agencies.
A Coffiittee of Six vas appointed from the staff of the council. It vas to stork
under the representative of the Ministry of Commerce.
By the decision of the government, a fond and a financial commission were
set up on 23 December 1945 to stimulate foreign trade. Both were to operate
under the Minister of Finance (Ma Kozlogy, fto 208, 23 December 1946). The
Fund vsa to be used to equalize foreign trade prices. At the recommendation of
the financial commission, the Minister oY Finance could recoup sot only the
losses suffered by importers and exporters, but also the profit they did not
realize. The fsaui vas to include part of the profits d;:rived from Hungary's
foreign trade and state subsidies and loans.
In December 1945, the National Economic Council star created to direct the
entire national economy of the country, including foreign trade (Decree No
12090/1945, Magyar Kozl a No 7, 1 January 1946).
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Oa 18 January 1946 (Ma Kozlony,No 15, 18 January 1946) ana 1 Jaauaiy
1947 (M~agya_r Ifozlo , No 1, 1 January 1947), the Bovernment decreed that accept-
ance o ems and the issuing of import orders mere aub~ect to the per-
mission of the Directorate of Foreign Trade. Compensation transactions, nego-
tiated oa the basis of trade agreements betveea Hungary and other countries, and
tranaaCtionc for pr aceoniag foreign products within the ec,:ntry irarc 2ieTiiy,.ed
from the above decrees.
For the purpose of improving control over foreign trade, the fttnetions of
the Directorate of Foreign Trade, the Committee of 31x, and the Interministry
Council were defined.
The Directorate of Foreign Trade was to have ,jurisdiction over all exports
and imports on the basis of contingents covered by trade agreements. Imports
contracted for outside of trade agreements were to be authorized by the Commit-
tee oY Six, which also mode funds available for the purchase of foreign exchange
for this purpose. The Interministry Council uas empowered to authorize exports
contracted for outside c: trade agreements, as well as exports and imports under
compensation agreements (monthly reFort of t'- Hungarian National Bank, No 3-4,
1947).
The decree of 17 Ju:~ (bl:ayar Kozlon^t. :;0 169, 28 July lj~~,) regulated the
circulation of foreigr:~.>ciuutge, foreir:. securities, and gold .n Hungary and
also contain~3 a^v regulations cn tt:~ c;:port of currency.
?ae above c+easures guarantee? '.?:e necessary state ~~cnt.--. over foreign
trade and ~,.:rency circulatior.
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At the end of ~. and in the first half of 1948, the government stepped
Sato the private sector of industry. Due to the nationali^.ation of banks in
Dece--:~cr i~i47 and the nationalization in b1r,y !=+I~Fi of industrial, transportation,
,:. .,. _, and other enterprises having more t:~an J00 workers, the major part of
.. productive capital passed into ,.he hands of the state. As a result, the
...~.re, of the state and of narional enterprises in Hungary's foreign trade rose to
i:ercent about the mtdd'_e :. i3u8 The almost complete nationalization of Hua-
~arian fo.+:+;n trade whic4 cvus pence in the second half of 1948 guaranteed
that the capitalist elemr-nts would be squeezed out.
:.ln the basis ui leis J.av of 2? July 1948 ;.~Sch regulated the legal status
_nd activity of the nationalized enterprises, the first seven natioral enter-
prises for foreign trade were set up in Hungary in fall 1948, moFtly in the form
of point-stock companies.
Toward the end oY 194$, more than 90 percent of the foreign trade of the
country was In the hands of the state. Private capital was further squeezed out
o? foreign trade by the establishment of nex foreign trade monopolies and the
introduction of additional limitations for the private sector.
The private firms were, in essence, excluded from exports and imports and
were permitted to participate in foreign trade only in cases where their opera-
tions did not conflict with the interests and policy of the state.
The creation of national enterprises for foreign trade, the considerable
increase in foreign trade, and the need for the firmer ties between foreign
trade and the national economic plan required the creation of a special state
organ for directing and controlling foreign trade. In conjunction with Law No
19, the Ministry of Foreign Trade was formed in June 1949 (official 8andbook of
Lawn of the Hungarian People's Republic, 1949, Section I -- Laws and Decrees,
p 7~+) ?
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According to the decree of 15 July 1949, all foreign trade transactions
were subject to license by the Ministry of Foreign Trade. All previous licenses
sere declared void (Official Handbook of Laws, 1949, Section II -- Decrees of
the Council of Ministers and of the Ministries, Vol I, (i 4i3).
By order of the Praeidi~ oY the People's Republic of 28 December 1949,
the nationalization of manufactvrin? industry and wholesale bvsiness was cow
plated (Official Handbook oY Laws, 1949, 3ectioa I -- Laws and Decrees, p 12).
This completely eliminated the possibilities Yor private capital to participate
in Hungary's foreign trade.
In August 1949, the Constitution of t'ie Hungarian F:~ople's Republic ztas
adopted. Paragraph 6 oP the Constitution states "Foreign trale and wholesale
business are in the hands of the state. The state conducts all cotmnerce."
The general management of Yoreign trade is the responsibility of the Coun-
cil of Ministers. This council confirms international treaties not requiring
ratification, conducts for8lgn trade negotiations, appoints and recalls dele-
gatex for carryin~c out trade negotiations, and appoints and recalls commercial
attaches.
The National Economic Council, created in June 1949 ~si], P1eys an impor-
taut role in the field of foreign trade (Law No 16 Official Handbook of Laws,
1949, Section I -- Laws and Decrees,p'~). It regulates trade, determines the
nature of trade relations between Hungary and Yoreign states, coordinates for-
eign trade plena with the national economic plan and the work of the Ministry
y~,of Foreign Trade with the work of other departments, and sets up and modifies
the organization of foreign trade. Foreign trade is planned by the National
Planning Office in cooperation xith the Ministry of Foreign Trade.
In May 1951, the Import Council was set up, It investigates and author-
izes proposed imports. The president of the National Planning Office directs
the work of this council.
The accumulation and distribution of foreign exchange, the control over
the cir.:ulation of precious metals, and the management of customs are under the
3uriadiction of the Ministry of Finance,
The Financial Commission of State Enterprises was set up as s consulting
organ attached to the Ministry of Finance. It has oubcommissions, among them
one for foreign trade. The staff of the latter includes representatives of the
ministries of Finance and Foreign Trade sad of the National Bank.
The Miaiatry of Foreign Trade guarantees the fulfillment of export and im-
port plans, exercises-? control over foreign trade transactions, supervises the
activities of Hungarian foreign trade enterprises and commercial attaches, con-
trols the work of MASPID (Me Altalanoa Szallitmaryozasi Vallalat, Hungarian
General Forwazding E~erprise), directs the activity of the Hungarian Chamber
of Commerce, etc.
Through the law oa the Five Year Plan the foreign trade organs were given
the task of cooperating in the industrialization of the country by importing
raw materials needed for the national economy, equipping industry, and'stimu-
luting exports to raise the foreign exchange required for imports. For the
purpose of fulfilling these tasks, the Ministry of Foreign 't'rade was reorganized
in July 1950.
? Due to the great increase in commodity exchange between Hungary and the
?USSR and other People:'s.:Democracies, a special Administration for Countries With
Planned Economy was set up under the Ministry. The task of this administration
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is to control commodity exchange with the USSR, other People's Democracies, and
the German Democratic Republic. Hungary's trade frith other countries is con-
trolled by the Administration for Western Countries.
The Financial Cam~ission for Foreign Trade, which was at first under the
direction of the Ministry of Finances was transferred to the Ministry of Foreign
Tr.da. The representative of the Ministry Of Finance is the president of the
canmi.asioa, and members include representatives of the industrial ministries,
the Ministry of Finance, the Rational Planning Office, and the Hungarian Na -
tional Bank.
The legal position and the sphere of activity of the foreign trade enter-
p~rises were regulated by a decree of the Presidium of 'the Hungarian People's
Republic (Magyar Kozlony, No 132-134, 6 August 1950). The state, as guarantor,
has assumed unlimited responsibility for commitments of state enterprises.
The foreign. trade enterprises are legal persona; they can assume obliga-
tions in carrying out their activities under the direct supervision oP the Min-
istry of Foreign Trade. At the head of the enterprise is the directory agpoibtld
by the Minister of Foreign Trade. The director represents the enterprise be-
fore other enterprises, organizations, persona, and authorities. He is person-
ally responsible far its activities.
Paver of attorney for the foreign trade enterprise is held by the director
and by employees authorized by the director. The documents of the enterprise
have binding force in the event that they are signed by the director or by at
least trro authorized employees.
The decree of 6 August 1950 permits certain enterprises to function as
,point-stock companies by the authorization of the Council of Ministers.
The Yoreign trade enterprises operate under the direct control of the Min-
istry of Foreign Trade, with the exceptions of MAFIi~hi (Magyar Filmforgalm{
VaJlalat, Hungarian Film Trading Enterprise) and MAVAD (Magyar Vad tenyeszto es
Kereskedelmi Vallalat, Hungarian Game Breeding and Trading Enterprise), which,
administratively, are sub3ect to different aepartments.
The transportation of export and import cargoes is entrusted by the foreign
trade enterprises to HASPED which is under the ,jurisdiction of the Ainistry of Com-
munication. However? the Ministry of Foreign Trade takes direct part in man-
aging the activity of HASPED and exercises control ove.^ it.
Foreign trade cargoes are in part forwarded by the Meszhart Soviet-
Hungarian Steamship Line, organize3 in March 1946. The Meszhart transports
cargcea between Hungarian and foreign parts; stores cargoes; issues warehow,e,
mortgage, and guarantee certificates; clears cargoes of customs duties; pays the
ta~oes aid duties on the shipments; selects the ports of entry and exit; acts as
representative for foreign tr-.nsport companies etc. Insurance of fore~.gn trade
cargoes is done ,jointly by the Hungarian State Insurance Company and HEBIRP
ICeleteuropai Bistosito Reszveny Tarsasag, East European Insurance Compaz~y~
through their general offices.
According to the decree of the Presidium of the Hungarian People's Republic
of 2 August 1950(Tlte Regulation of Planned Foreign Exchange Management) neither
Hungarian nor foreign citizens have the right, without the permission of the for
~ign exchange organs, to import, export, or sell within Hungary domestic cur-
rency, foreign exchange, gold, or platim~m.
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IInless the`foreign exchange authorities have authorized other means of pay-
ment, the payments of Hungarian debtors to foreign creditors are made in do-
mestic currency into tug blocked forint account of the Yoreigner, who can vas
these funds only with the permt.saion oP the foreign exchange authorities. It
is also Forbidden to mare ttse, without per'-fission, of cr23it given by a forte'
signer either in domestic or foreign currency or to establish credits Por for-
eigners. The above limitations, however, do not apply to the operations of the
Ministry of Finance or the Hungarian National Bank.
Together with the regulation of the Yoreign exchange transactions,. the de-
cree also regulates Foreign trade transactions. According to Paragraph 39 of
the decree, "negotiations for delivery of goods abroad, Yor import of goods from
abroad, or Por the processing oY domestic raw materials abroad, or oY import rax
materials within the country are allowed only if the permission oP the Ministry
of Foreign Trade is first obtained." These limitations do not apply to agree-
ments concluded by Hungarian foreign trade organizations.
Export and import operations are permitted only if the proper licenses are
obtained. These licenses are issued by the Yoreign exchange authorities vith
the permission of the Ministry of Foreign Trade. Hungarian and foreign ^itizens
can export goods only with the permission of the binistry oP Foreign Trade,
xhile export of valuables is subject to authorization by the Ministry oP Finance
and the Hungarian National Bank. The Hungarian National Bank handles all trana-
actiona iavblving gold and foreign currency (through the Foreign Trade Bank.
The Hungarian National Bank has the right to conclude transactions and perfoz,s
financial operations, both at home and abroad.
According to the decree of the National Economic Council of 17 August 1950,
the Financing of exports and imports is carried out by menus of revolving
credits for groups of goons on a quarterly plan basis. The Foreign trade enter-
pr'.ses are required to give the Hungarian National Bunk a monthly accounting as
to the use of the credit accorded to them. Ln addition, the Hungarian National
Bank accords the foreign trade enterprises special-purpose credits Por goods
stored in the warehouses of the foreign trade enterprises, for payment of export
goads in the process of production, and for averting temporary Yinancial c?iffi-
cul.ties arising 1Y~om delny in the acceptance of goods.. At present, the foreign
trade enterprises have no working capital of their ow, and their financial
needs are covered exclusively by credits.
Disputes arising from forei,pz trade transactions in which one of the par-
ties is a Foreign person are settled by the Foreio Trade Psbitratior. Co~issioa
nttached to the Chamber of Commerce, provided that both parties agree to arbi-
tration, The procedure is regulated by decree of the Minister of Foreign Trade
No 27, of 1951. The decision of the Arbitration Commission is final and cannot
be appealed.
Hungary ~:id not participat> in the Ceneva Convention of 26 September 1927
on foreign trade arbitration and did not recognize, under the Horthy regime, any
decisions made under the provisions oi' the convention, A foreign party could,
on the basis of a aecision on the basis of a decision in its favor, exercise
its rights only by appealing to n Iiungarinn court for so-called "action for ful-
fillment of a treaty" To bring such a suit, it was necessary to submit to the
court the arbitration agreement of the parties anG the decision of the foreign
arbitration committee. Without examining the decisions of the foreign arbitra-
tion committees, in essence, ~ court accepted as true and lawili7. the declara-
tions of the parties and other proofs which had served as a basis for the deci-
ion made by the foreign arbitration committee anb established the following:
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 2. Whether the rules for arbitration existing in a given foreign state had
been observed (xas the party given s hearing, was the party which did not appear
invited to examine the matter according to established procedure, etc).
3. Whether the decision made by the arbitrators conflicted with the lax,
social order, er murals; Wither the decision ra411re3 the party to do the im-
possible.
4. Whether the decision is valid on the basis of existing legislation in
a given foreign state.
5. Whether there is reciprocity between Hungary and the state in which
the decision was made (the Ministry of Justice decides whether reciprocity ex-
ists).
At present, Hungary has no agreements with capitalist countries concerning
she carrying out of decisions of foreign arbitration organs and does not recog-
nize the decisions of the Yoreign trade arbitration organs of capitalist coun-
tries.
The situation is dlPferent between Hungary and the USSR and other People's
Democracies. In striving to expand and stabilize its trade relations with the
latter countries, Hungary has recognized arbltration decisions made in these
countries.
In particular, Article 17 of the Treaty of Trade and Navigation concluded
between the USSR and Hungary on 15 July 1947 recognizes arbitration decisions
on disputes which may arise from trade transactions concluded by citizens, or-
ganizations, or institutions of the tvo countries, if arbitration was provided
for in the transaction itself or in a separate agreement. The arbitration de-
cision may be rejected in case it has not been tested under the laws of the
country in which the decision xas made.
Hungary has also concluded a reciprocal agreement with Poland on arbitra-
tion and is negotiating similar agreements xi.th other People's Democracies.
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