NATIONAL INTELLIGENCE ESTIMATE PROBABLE ECONOMIC EFFECTS OF A SEVERANCE OF EAST

Created: 4/16/1958

OCR scan of the original document, errors are possible

PROBABLE ECONOMIC EFFECTSEVERANCE OF EAST-WEST TRADE

THE PROBLEM

To estimate the importance of current East-West trade, and the capability of the Bloc and the West' to adjust to its severance.

SCOPE

estimate relates exclusively to trade now being carried on between the Bloc and the West; it is not concerned with the effects of present trade controls, or with the effects of an increase in the current amount of East-West trade.

The analysis of economic consequencesomplete cessation of trade. However, it is virtually certain that some, if not many, non-bloc countries would refuse to cooperateompleteof trade in any circumstances short of general war. The over-all effectseverance of East-West trade could not be estimated without examining the political reactions to measures to achieve severance. Therefore, it should bethat this estimate docs not examine political questions connectedeverance of East-West trade.

amount of trade still carried on between the Bloc and the West is so small in relation to the total productiveof either side that its severance could notignificant effect upon the general level of economic activity of either the Bloc or the West.

Among the goods imported into the Bloc from the West, however, there are

'The Soviet Bloc consists or the followingthe Soviet Union. Poland. EasternHungary. Bulgaria.Hereafter, thecountries will be riferred to as theWest refers tothe world

other than those Included tn the Bloc.

' For note on the nature of the evidence available for thli eitimate. and th? related footnote of the Director of Kava! Intelligence, aee page 13

certain items which are of substantial importance to current Bloc industrial and military production. These items include electron tubes and components, certain chemicals, certain types ofand equipment with their spare parts, and probably also tin, naturalcopper, zinc, and cork. If these items of import ceased to be available, bottlenecks would appear in the Bloc productive system andimited period of time adverse repercussions would spread through the economy.

omplete cessation of imports and withdrawal of Western shipping services would not bringignificant re-

i

duct ion in the present gross national product of the Bloc. It would, however, significantly retard the planned increase of Bloc national product in the years immediately after trade severance.these years, also, production of some specific military end-items wouldbe reduced, but the amount of this reduction, and the particular itemswould depend on Sovietpolicies and on the size and rate of the use of Bloc stockpiles of strategic materials. We are unable to estimate these factors.

We believe that, with the possible exceptions of natural rubber andtubes and components, the Bloc would be capable of replacingwithin about four years, all goods presently imported from the West. Once this had been done, the effectstoppage of imports would becomenegligible.

Within the Bloc, the Europeanaccount for more than half the Bloc's trade with the West; the burden of readjustment would therefore fall very heavily on them, and might give rise to additional difficulties in their relations with the USSR. The demands ofChina upon the USSR forassistance would also become more insistent if all supplies from the West were cut off.

The physical availability of resources in the West is sufficient to make theeffectseverance of East-West trade virtually negligible. An added strain would be imposed on the dollar resources of some Western countries. Appropriate measures, possibly mcluding international allocation machinery and international financial arrangements, would be necessary if those particular Western countries which now trade extensively with the Bloc were not toserious economic dislocations.

It is impossible to estimate theas distinct from theeverance of East-West trade without examining all the political, economic, and other effects ofeverance In the fight of the policies and objectives of the Bloc and the West respectively, and the probable nature, duration, and timinguture war. For this reason we are unable to estimate the relative strategic effects upon the Bloc and the Westeverance of East-West trade.

General Level and Pattern of East-West Trade

he value of officially reported merchandise trade between the Bloc and the Westased on official reports by Westernis estimated to be67 billion each way, inrices. This representsercent of the grossproduct of the Bloc, and about one-fourthercent of that of the West West-em trade with the Bloc constitutesercent of the total international trade of all Western countries. Bloc trade with the West constitutes about one-third of the totaltrade of all Bloc countries.

ver and above the officially reported trade summarised above thereubstantialin goods smuggled out of the West into the Bloc, or transferred more or less openly but without being oiBclaUy reported The value of such irafTlc is not exactly known; It may be fromoercent as great us the value of

Ifli

W7f

officially reported trade. So far as possible this irregular traffic has been taken intoin estimating the importance of specific items of current East-West trade. Inthe capability oi the Bloc to adjusteverance of East-West trade It has beenthat clandestine and unreported trade will cease together with officially reported trade. Some of the more important itemsinto the Bloc, however, such as electron tube components and Industrial diamonds, are high in value and small in bulk, and lend themselves readily to smuggling. We cannot estimate the probable amount ofeverance of legitimate trade;as smuggling took place it wouldthe eilectsessation of legitimate trade.

East-West trade consists primarily of an exchange of Western capital goods, industrial raw materials and services, for coal andforest and mineral products from the Bloc The West sends to the Bloc not only raw materials but also items produced bytechnology, labor-savingfacilities, and skilled labor, and receives in return mainly commodities requiring only limited capital equipment and unskilled labor. The composition of East-West trade is set forth in more detail in Annex A. From these tables it appears that machinery,equipment, natural rubber, chemicals, metal ores and metal manufactures together account for about half of the value of Blocfrom the West. Western imports from the Bloc consist primarily of coal, grains, fats and oils, and forest products.

The Bloc merchant fleet now comprisesross registered tonsf thisrl are lendhips,00 grt each) which have never been returned to the US. Seventy-two of these, includingiberty ships, are virtually the backbone of the Bloc long-haul merchant fleet both in European waters and on the route to the Far East. In addition to these lend-lease ships (which in this estimate are accounted as Blocn averagert. of Westernare engaged in carrying cargo either between the West and Bloc or between various ports of the Bloc itself. Five hundredtons of this shipping are engaged in trade with Communist China; oi this about two-thirds are used between Communist China and the West, and one-third between Communist China and the European Bloc. Most Bloc vessels trading with Communist China arc bunkered with Western fuel and use Western ports en route. Moreover, the Bloc receives other services from the West inwith East-West trade. Including ship repairing and rebuilding, insurance, and banking. During the past yearloc ships,rt. underwentays or more of repair work each in Western

The Importance of Imports to the Bloc

It is clear from the figures presented inhat the value of goods annually imported into the Bloc from the West isin comparison with the Bloc's total economic activity. Considered in thetherefore, the effect on the Bloc economy of cutting off imports appears negligible. As might be expected, however, some imports arc more important to the Bloc than others, and trade severance would naturally haveeffects upon different sectors of the Bloc economy. In order to reach conclusions as to the importance oi specific imports to the Bloc, it would be desirable to have detailed accounts of the utilization by the Bloc of each separate item imported from the West. We do not have enough data to give such accounts; hence the importance of specific imports to the Bloc will be indicatedew examples, where information is available. Theeffect of cutting off these imports can be approximately assessedethod ofwhich will be explained below.

A preliminary indication is given inB, wiuch shows the estimated proportion

'There Is evidencearge number ofships arc awaiting repair. These cannot be accommodated as long as Soviet yardsercent to naval construction.

7 2

that imports of certain commodities and classes of commodities bear to total Bloc(production plus net imports) of these items. It appears from these tables, and from other information, that the Bloc supply of natural rubber and of cork is virtually allImports of tin provideercent of current supplies; zinc,ercent; copper,ercent: andercent. Imports of raw woo! and rayon accountercentercent, respectively, of Bloc supplies of those goods. In the various broad categories of capital goods and manufactured Items,account for only small fractions of total supplies.

The significance of some of the figures ins limited, however, by the fact that they apply to broad classes of commodities; this is particularly true of the figures ongoods and manufactures, imports of which formmall proportion of Bloc supplies. Thus, for example, It can be shown that the Bloc depends upon imports for onlyercent of its total supply of machine tools, yet withinercent may be certain types of tools which the Bloc does not make forThus some specific items of import, thoughinor share of total Imports and an insignificant fraction of the gross national product of the Bloc, may be of greater importance to the Bloc economy than their money values suggest. If these imports ceased to be available, bottlenecks wouldcertainly appear in the Bloc productive system, and for this reason the real damage to the Bloc could easilyultiple of the replacement cost of the import, as the indirect repercussions of its loss spread through the economy.

An example of such "bottleneck" import items is furnished by certain components of electron tubes. For its manufacture oftubes the Bloc is dependent on the West for various critical materials, such asmetals in refined and fabricated forms, and diamond dies for drawing fine wire. In addition, though the USSR has enoughmica for its own uses, the Satellites must rely on Imports of this material.the snme situation exists with regard to nickel, especially radio-grade nickel forsleeves. Tungsten wire, essential to the production of electric lamps, is largelyfrom the West. None of theserepresents an appreciable proportion of the total value of Bloc imports, yet anembargo on these critical materials would probably cause the Bloc output of electron tubes to drop byercent as scon as existing inventories of these materials were used up.ropurn heavily affect the production of radio and radar apparatus. Since the production of electron tubes in the Bloc has been weighted in favor of types for use in null lory applications, and will continue to be sorop in their production would probably have an appreciable effect on military procurement.

Another example is that of heavy electrical machinery. Approximately one-quarter of the Bloc's annual increment of heavymachinery is currently imported from the West Many of the Bloc's Industries require this machinery for military orproduction. The submarine program, the steel Industry, the atomic energy program, and the railroad equipment industry areof strategic sectors of the Sovietwhich would be likely to have difficulties in fulfilling planned output if either theof heavy electrical machinery or theof other basic industries which In turn depend on this supply were curtailedeaser extent the steam and hydraulic turbine Industry may be placed in the same category. Denial of Imports in this field would have an adverse effect on ship construction, and would limit the proposed expansion of the electric power supply.

These examples illustrate the fact that there are, among the comparatively smallof imports still going from the West to theumber of "bottleneck" Items, loss of which would cause cUfftculties to the Soviet economy and to its production of militarybottleneck" item of import must have the following characteristics: (a) It mustornjoodity ofubstantialof total Bloc supplies is Imported, or the stoppage of imports wUI not be much

set

felt; (b) it mustmall number ol uses, all of which are important, or the loss of imports may be overcome by smallof outputarge number of(c) it mustommodity for which substitutes cannot easily and quickly be found; and {d) inventories of the item must be small in relation to the requirements for its use

wc do not have sufficiently detailed knowledge of tbe bloc economy to identify directly all such bottleneck items of import. according to the standard described above, however, current bloc imports of foodstuffs, textile fibers, iron and steel products, some non-ferrous metals, fertiliser,izeable proportion of miscellaneous goods clearly do not constitute bottleneck items. thesetogether represent about half the value of bloc imports from the west. we therefore estimate, for the purpose of costto be made later in this paper, that the remainingercent of the value of bloc imports represents bottleneck items.*

the most important bottleneck items of import into the bloc from the west arecertainly electron tubes and components, certain chemicals, and certain special types of machinery and equipment with their spare parts in addition to these finished products certain raw materialstin, copper, zinc, cork, and natural rubberare imported to the bloc in sufficient quantities to suggestessation of imports would causeif onlyimited extent.

*thli estimate is probably over-generaus, since the bloc already has considerable production of many goods in the "bottleneck" categories here ajsucifd. moreover, there is evidence that the bloc has lately been acquiring capital equipment to produce some oi the goods which we nowto be bottleneck items. for example, the bloc lias rccenuy imported machines lor making capacitor paper, diamond dies for wire drawing, and wire drawing machinery. thus it may be that the bloc's most crlucal deficiencies for theact ere of electron tubes and components, as described in paracraph is above, bavt already been overcome.

cut off the shipment to the bloc ofitems would obviously causeto the bloc economy. yet we cannotthe exact impact ofeasure, and in particular we cannot estimate its impact upon the production of specific military end-items. much of the effect of the embargo would depend upon the policy of the bloc planners. if, for example. bloc production ol electron tubes were reduced bytoppage of imports, we maythat the bloc planners would cause as much of this setback as possible to fall upon the production of civilian radio sets rather than of military radar, but wc cannotspeculate on the details of the planners' decisions. likewise, we cannot predict inthe consequenceshortage of electric generators in the bloc arisingessation of imports, even though we may presume that these consequences might be made to bear upon other things than the soviet atomicprogram.

inally, we cannot estimate the immediate effectstoppage of "bottleneck" imports because we do not know the size o! blocsince the soviet rulers must be aware of the vulnerabiutlcs of their economy, iteasonable presumption that they haveto provide as far as possible against cessation of critical imports by buildingof the commodities in question. tills, as well as needs for current use, may account for the pressure which the bloc uses in trade negotiations, the clandestine buying, theto pay considerably more than market prices, and the general urgency with which the bloc seeks to acquire critical materials. we believe it probable that bloc stockpiles of all critical items would be sufficient to cushion the immediate impacttoppage ofbut we arc unable to estimate how long the stockpiles would last, or what the policy of soviet planners might be with regard to the rate of using them

adjustment by the bloc to severance of trade

t may be assumed that upon theof east-west trade the bloc would take steps to adjust its economy to the newlo compensate as far as possible and as

7

qutckJy as feasible for the loss of Imports. We hare therefore to estimate: (a) whether and how far such compensation is possible, (b) how long It would take; and (c) how much it would cost

ith respect to the first of thesewe believe that the Bloc is capable of satisfactory adjustment to the loss of imports from the West, given sufficient time and effort applied to the task. During the last three decades the USSR hasroductive capacity second only to that of the United States. Its technical and scientific skills,in strategically important fields, have ceased to be markedly Inferior, and have proved themselves by the production of jetatomic bombs, and many lessaccomplishments, to beigh order. The Bloc can draw on the diversified resources of an entire continent, and on the technical skills of Germans, Czechs, and others tothe Soviet capability. We therefore believe that the Bloc could. In time andost, reallocate its resources, develop the new or expand the old facilities and techniques as required, and produce for itself the goods now imported from the West or acceptable It is in this connection that thevalue of these imports becomesit is so small in relation to the total of Bloc resources that the Bloc's ability to achieveull economic adjustment to the loss of Western Imports is almost self-evident.

'The phrase "to replace lost imports" Is Inexact. It is used (or convenience In this estimate to mean the expansion within the Bloc (or the West) of existing producUon. and/or theof new facilities, sufficient to produce goods of the type and In the amount formerly imported, or acceptable subsUtutes Tor such goods.

he next question relates to the timefor the Bloc to replace lostnd to break the bottlenecks caused by aof trade. The answer to this question must of courseatter of Judgment; it cannot be demonstrated. We believe that within four years the Bloc could expand Its production sufficiently to replace any single presently imported commodity except natural rubber. Most of these imports, consideredcould be replaced in less than four years. We further believe that, with theexceptions of natural rubber andtubes and components, the Bloc would be capable of replacing all of these imports concurrently within about four years.

eplacement by the Bloc of Imports of natural rubberpecial problem. Wc believe that the Bloc could, within three years, produce an amount of synthetic andrubber equal to the amount of natural rubber now imported. For someses, however, there is no presently known substitute for natural rubber. The Bloc stockpile of natural rubber is estimatedto last five years at present rates of usage. If natural rubber were confined to the most essential uses, primarily airplane tires, the stockpile would probably last about ten years. We believe that the Bloc would be able, before the exhaustion of its stockpile of natural rubber, either toloc source of natural rubber or to develop substitutes which would be adequate for ail essential uses.

he factottleneck was brokeniven period of time would not mean that the eSecU of that bottleneck, in theirthrough the economy, would be' cancelledense the damage could never be made up, for Bloc production would permanently remain somewhat less than it would have been had the Inlcrruption not occurred. As the years passed, however, and Bloc producUon continued to increase, the proportion of this permanent shortfall to the total of production would diminishegligible quantity

c believe that most of the indirect and multiplied effectstoppage of bottleneck imports could be overcame by the Blocwithin about four years after theoccurred. In other words, theeffectseverance of trade upon the Bloc could not be expected to last more than about four years. However, the actualof these effects might in specific instances be longer or shorter because it would dependreat degree upon the decisions of Bloc

7

planners. They might, for example, choose to replace certain Importslower rate in order to reduce the annual cost of doing so. Our estimate, therefore, is of what it would be possible for the Bloc to accomplish, notwhat it would in fact accomplish.

inally, there Is the question of theeconomic cost to the Bloceverance of trade, or, in other words, of the effecteverance of trade on general Bloc economic capabilities. Calculation of this cost for the long-runhe period after fullto the loss of Imports had beencan be made with fair confidence. In the process of replacing Imports, resources would have to be transferred from other more productive uses, including those resourcesused to produce goods for export to the West, to import-replacing Industries. These resources would be used to increase output in existing plants, to expand productive capacity, and in some cases to develop new materials as substitutes. Having made these adjustments the Bloc would find itself with an allocation of resources different from what would have existed in the absence of trade severance. The gross national product would be lower than It otherwise would have been, and this reduction in gross national product would be the annual economic loss to the Bloc. We believe that the annual costs to the Blocomplete severance of trade, after adjustment to the severance was completed, would be0 million, representingof Bloc gross national product in the early years after full interna] adjustment. The percentage would thereafter decline as Bloc national product continued to increase.

t is more difficult to calculate theaggregate cost to the Bloc during the four years irnmediatcly following tradewhen the adjustment would be taking place. Presently available dataonfident estimate. To theincreasing cost of replacing lost imports must be added the gradually decreasing cost arising from the non-Bvailubility of previously imported commodities. In estimating the latter, moreover, allowance must be made for

"bottleneck" effect's, by which the cast of an unreplaced Import is multiplied because of the repercussions which Its loss producesthe economy. On the basis of the limited data available, we bebeve that costs for each of the four years within the period of adjust menlomplete severance of trade would be roughly asercent of granproduct ill the first year after tradeercent in then the third; andn the fourthWe consider that these percentages might vary from one-half to twice the figures here given. It has elsewhere been estimated that the increase ol Bloc gross national product during theill be slightly lessercent. It follows that an immediate and complete severance of East-West trade would probably reduce this increase toercent. The retardation of growth might remainfor several years thereafter.

In making this calculation, it was assumed that SO percent of the value of Bloc Imported Items represented -bottleneck" Imports, and to allow for their bottleneck effect upon the economy thr direct value of Vbclr low was multiplied by three.

The nature of the principal Bloc imports, and of the resources required to build upto replace them. Indicates that the short-run impact of the adjustment would probably fall more heavily on the armaments and capital goods Uidustries than on the civilian consumer goods sector of theThe combined production ofand capital goods might, in the first year after trade severance, beo 6less than it would have been had the trade continued. In subsequent years the impact on these sectors of the economy, like that on the economyhole, woulddiminish.

The foregoing discussion ofeverance of trade has notthe strains which the adjustment might Impose upon the Bloc planning andsystem. For example, the European Satellites account for more than half the Bloc's trade with the West; the burden ofwould therefore fall very heavUy on them, and might give rise to additional

7

difficulties In their relations with the USSR. The demands of Cornmunist China upon the USSR for economic assistance would alsomore insistent if all supplies from the West were cut oft. To estimate the force and effect of these political and administrative difficulties is beyond the scope of this paper; their probable existence nevertheless needs to be pom ted out.

Adjustment by the Bloc to Withdrawal of Western Shipping

A complete severance of East-West trade would terminate the present employment'of all ships, both Bloc and Western, engaged in carrying goods between Western and Bloc ports. It would also presumably involvefrom Bloc service of those Western ships now carrying goods under charterports of the Bloc, and denial ofrepairing, and other shipping cervices now furnished by the West to the Bloc.

The Bloc would be faced with problems of adjustment In two distinct sectors: tradeEuropean Bloc ports, and trade between the European Bloc and Far Eastern ports. These two sectors require separate

If all trade between the West and the Bloc were slopped,rosstons of Bloc shipping now carrying cargoes between European Bloc ports and the West would be freed from this employment. Including lend-lease ships, this tonnage would be more than enough to make up for Western shipping now carrying dry cargo between ports of the European Bloc Even without lend-lease ships. Bloc tonnage freed byof Kast-West trade would probably still be equal to the amount withdrawn by theowever, the Bloc would not in either case have enough tankers to replace those chartered from the West which are now engaged In the oi! trade between Black Sea ports and the Baltic and Arctic ports. We believe that the resulting additional load on Bloc railways could be handled.

urrent seaborne Imports IntoChina are estimated atillion tons per year, of which perhapsercent arrives in Western ships. We believe that an additional amount as great as this is within the present maximum capacity of the Trans-Siberian railroad and the connecting tines into North China. The transportationof Communist China, including Bloc coastal shipping, would be adequate tothis tonnage, though some additional strain would be placed upon the ChineseSince some Bloc shipping would still be available for traffic to be carried between the European Bloc and Communist China, withdrawal of Western shipping would not in Itself affect the Bloc's capability ofthe present volume of trade betweenChina and the rest of the Bloc. It is unlikely, however, that if East-West trade were severed all present imports intoChina from the West would befrom Bloc sources. Thus the total volume of Communist Chinese imports might at least initially be less than at present.1

3S. Withdrawal of bunkering and otherpresently furnished by the West to the Bloc would reduce the efficiency of the Bloc merchant fleet and require adjustments in Bloc shipyard employment. Most Bloctrading between Europe and the Far East would have to be fuelled from tankers at sea. This would have to be done at the expense of the Bloc's domestic petroleum liftfuel would have to be transported by the Bloc to the Far East, either over the Trans-Siberian railroad or by tankers Bloc shipyards would be forced to convert certain facilities from naval construction to merchant ship repair and replacement.

possibility thai the USSR rr.ieht decidecertain circumstances to limit the use of lend-lease ships is referred lo Ir,Proh-ablc Effects on the Soviet Bloc of Certain Courses Of Action Directed a! the Internal and External Commerce of Communist

? Jt/y?

cannot estimate in detail howwould allocate available shippingroutes if Western shipping andwere withdrawn. There would be aefficiency due to an inadequate numberships and increased repair timeavailable. Communist China'swould probably be reduced, andexpansion of the Communisteconomy delayed. We believe thatof adjustment presented tocould in time be solved, butthe period of adjustmentwoUid be placed on the Bloc'ssystem and costs wouldof the greater expense of land

Adjustment by the Westeverance of East-West Trade

The physical availability of resources in the West is sufficient to make the economic effectsessation of East-West tradenegligible, if successful arrangements are made for reallocation of these resources among the countries concerned. It Isthat Western European coal imports from the Bloc account forercent of total Western European coal consumption; bread grain Imports forercent, and coarse grains forercent. Moreover, the West Imports nothing from the Bloc which could not be replaced from Western sources, either in kind or by acceptable substitutes, if trade with the Bloc should cease. There would be no bottleneck problems worthNo appreciable curtailment ofproduction would be necessary.

To some Western countries, however,levels of trade with the Blocboutercent of the foreign trade of Finland, and aboutercent of that of Austria, was carried on with the Bloc Finland relied on imports from Poland for two-thirds of its coal consumption, Sweden forercent, Austria forercent, and Denmark and Italyercent In the crop, Finland bought more thanercent of its supplies of food grain from the Bloc. Norwayercent, and Egypt aboutercent The Unitedercent of its coarse grain supplies from the USSR. These Imports areto the receiving countries primarily because alternative supplies of thesewould have to be paid for mainly in dollars.

Some of the commodities now exported by Western countries to the Bloc are produced at relatively high cost, and tho producers have been enabled to make these exportsthe Bloc has paid premium prices or has made advantageous barter tradeIn such cases, special difficulties might be encountered in adjusting to theof East-West trade.inland soldercent of its commercial exports of machinery in Eastern Europe,wedenercent, and Italyercent. Soviet orders also proved attractive to some of the European shipyards. More recently, Ceylon sold one-third of Its rubber output to Communist China,rice which was only slightly higher than the world market price. In this case. Communist China's willingness toong-term agreement to supply rice In exchange for rubber was an important factor.

If the various Western countries thus affected were not to suffer serious dislocation of their domestic economieseverance of East-West trade, they would have to be provided with imports in place of those they now receive from the Bloc and to be assured of markets In which to sell the products they now sell to the Bloc. In the long run these problems might be solved as Western trade naturally settled Into new channels, so that Imports were bought from, and exports sold to, Western countries rather than the Blocevelopment would have Itsand would require adjustments such as lowering the prices of the exported goods, shifting production to other goods, and changing marketing practices If thelevel of Western trade remained high, these adjustments could probably bein about two years. There would be some permanent cost, because some comraodi-

ties would always be more expensive if pro-cuxcd in the West than If purchased from the Bloc. This cost would be low, however, and would scarcelyerceptible proportion of the gross national product of the West.

In the short run, while this adjustment was being made, the United States would have to be the chief Western supplier ofsuch as coal and grains which are now procured from the Bloc. These commodities would have to be paid for in dollars. As an indication of the magnitude of this problem, we estimate that if cur.ent East-West trade were suddenly and completely severed.Europe alone would have to incur an additional dollar expenditure of0 million in the first year after the severance, if Its imports from the Bloc were to be fully replaced. This estimate makes allowance for the additional dollar earnings (or savings) which would result from the retention In the Free World of goods which are now exported to the Bloc.

The greatest problems of the West in adjustingeverance of trade with the Bloc would be political and administrative rather than strictly economic. Theof Western governments and peoples to make the necessary adjustmentsto give and to receive financial aid, to alter trade channels, to lower trade barriers, to seek new export markets, to use substitute materials, to set up and operate international machinery for the allocation of resourceswouldon many factors, including theunder which East-West trade was severed. These problems, like theones for the Bloc mentioned In paragraphbove, lie beyond the scope of thisimportant though they would probably be to the success of the adjustment.

...

Relative Strategic Effectseverance of Trade upon the Bloc and !he West

A decrease or cessation of East-West trade would be economically disadvantageous lo both the Bloc and the West. The preceding discussion Indicates that It would,urely economic point of view, almostbe more disadvantageous to the Bloc than to the West. It does not necessarily follow, however,ecrease or cessation of East-West trade wouldetadvantage to either side. Suchcan be usefully made only in relation to given situations or policies: whether peace or war Is contemplated; whether war Is to be short or long; whether It is to be begunorapse of time; where it is to be fought; what weapons are to be used, what allies are to be cultivated.

For these reasons we are unable tothe relative strategic effects upon the Bloc and the Westeverance of trade. For example, wc have not examined the political and social disturbances in the West that might under various circumstanceseverance of trade with the Bloc Even if we had done so, however, we could not weigh their strategic significance against such opposing factors as the retardation in the Bloc's economic growtheverance Df trade would produce. It is impossible tothe strategic significance of aof East-West trade without examining all the political, economic, and other effects ofeverance in the light ol the policies and objectives of the Bloc and the West respectively, and the probable nature,and timinguture war.

7 JfpQ

ANNEX A

beverages andats and oils Crude rubbci Raw cotton

BLOC IMPORTS PROM THE WEST,1

Percent

Fats and oils

Crude

7.6

Raw wool

Other fibers and textile

Iron ore, iron and steel and

Non-ferrous ores, metals and

Transport

Other

ANNEX B

RATIO OF NET BLOC IMPORTS OF SELECTED COMMODITIES TO ESTIMATED TOTAL SOVIET BLOC1

Commodity Cork

Crude rubber (natural

and synthetic) Tin Copper

Zinc Wool Lead

Storage and primary batteries

Ball and roller

bearingslectronic

testayon Fish catch

Cotton Mercury Telephone and

telegraph Iron ore

Timber

Aluminum

Radio and television

receivers Naphthalene

Crude petroleum and refined petroleum prod.

Plates and sheets

Caustic soda

Steel rails

Tungsten

Electric motors and generators

u.

000

000

000

000

000

Production plus net Imports.

'Reported net Soviet Bloc imports of steel structural shapes, animal Jala and oils, steel wire and wire rods, cattle, pig iron, professional electronic equipment, vegetable oils, meat and meat products, power and distribution transformers, cotton yam. sulfuric add, cobalt, wool yum. bauxite, chromlle. cresols. and nitric acid accounted lor less than one-half of one percent of total current Sorlet Bloc supplies of these conunodiUes

NOTE ON THE NATURE OF EVIDENCE AVAILABLE FOR THIS ESTIMATE

This estimate rests mainly on an analysis by tbe Economic Intelligencebased on evidence which in many respects is deficient. As is indicated more specifically at appropriate points in the Discussion, all estimates must be regarded a; rough orders of magnitude, subject to considerable margins of error. These margin! are wider for the short-run than for the long-run estimates.

With due allowance for these margins of error, however, we believe theas stated are valid.

believed thai this estimate tends toBloc economic strength and adaptability bj stressing the relatively minor quantitative efTeeb of denial of Western Imports without eufnclcnUj exploring the qualitative effects or theand vulnerabilities o! the Bloc economy This tendency, together with ourstimate the strategic effects of trade severance creates an impression of Dloc economicand self-sufficiency which Iswith past and present Blocbtain unporU and services from the West.

7 J? 23

Original document.

Comment about this article or add new information about this topic:

CAPTCHA