The Review of Economics and Statistics Vol. 41 No. 2 1959
Terms of Trade between the Soviet Union and Smaller Communist Countries, 1955-1957
Abstract
SOVIET bloc spokesmen assert that trade among their countries is governed by market prices. Prices prevailing on the capitalistic market, or some relevant section of it, supposedly serve as standards for set in the trade agreements between communist countries. Statements to this effect have been particularly emphatic since the I956. rebellions in Poland and Hungary. Extensive market research has sprung up in the foreign trade administrations of the smaller communist countries to discover charged in comparable transactions outside the bloc (particularly in the London market) and between bloc countries. Up to this time, data have not been available to test whether the charged in intra-bloc trade agree with in free markets. Even if there was an intent to make the terms of intra-bloc trade reflect those of free markets, this might not have been accomplished for various reasons. The trade officials are looking for appropriate to commodity transactions that will be spread out over a year or more, covered by a trade agreement under negotiation. Free-market do not stand still. We do not know how well the bloc traders would forecast if they tried to; but supposedly they are not forecasting at all. Instead, they are reported to select some historically observed free market price, e.g. last year's price, for their purpose. Such a price may of course differ from the free market that develop during the period of the agreement. Official statements make it appear that the problem of finding tomorrow's true market price can be solved by subjecting yesterday's observed market price to some corrective manipulation. They emphasize the need to eliminate undesirable fluctuations due to business cycles, speculation, or sharp competition and contend that in this fashion the fair price can be determined objectively and impartiallv.1 The existence of bargaining among communist traders is usually denied. But bargaining undoubtedly takes place. The trade negotiators of the various countries are known to bring a variety of world market prices to their meetinfgs. So there are alternatives to choose from. The choosing is done by haggling.2 Where there is bargaining, the bargaining power and strategy of the parties matter. Undoubtedly, the bargaining power of the Soviet Union is much superior to that of her satellite trade partners. She is their principal customer and raw material supplier, mentor and protector. If the Soviet Union wished to use this power to fix relatively high for her exports to and low for her imports from the satellites, she could do so even while accepting the market standard, by making corrections. The bargaining strategy of the Soviet Union, however, cannot be assumed to be fixed. The Soviet Union can derive great economic advantages from division of labor with the satellites, without price discrimination. She can benefit from their varied resource endowment while conducting trade at fair prices. The satellite regimes, moreover, are power positions for the Soviet Union; their maintenance may at times demand economic sacrifices, and these could take the form of price concessions. When rebellions or other pressures threaten the regimes, Soviet policy might well call for restraint in
- DOI
- 10.2307/1927793
- Volume
- 41
- Issue
- 2
- Pages
- 106
- Sources
- openalex crossref