THE SOVIET UNION IN WORLD TRADE

Created: 4/2/1957

OCR scan of the original document, errors are possible

AeaiBlnnt^lSSStor, Hsaocreh aodApril IPS7

Acting Chiof, Booaonle Research

Draft Speech fort a Soviet Onion In World Trade0

oo will recallttached reouert) that w> vera ffakad to prepare none material for delivery by Mr. Aaoryeting In Floridapril.

, ettached draft, cobalt ted herewith for year review

end entitled "The Soviet thiea la Worlde, ia ayirst class piece of work end coots tho rooaircaant etipalated by yon that itpolished ;job."

* Bwn*eiy ren and fonnd that It talks forinatas.

On tha qnoatloa ofoj

afeat sort of thing veeld be suitabls and was Inforaod that draft work sketches of the typo attached are ell that la neaasGary at thlao not eea how ha eon use taoso ainoe ho has no wish for preeentatico typo canals and also ocean't eeen enthusiastic about slides.

ws SOVIET UHIQH IH would mJXS

Introductory

II. nr Alsroach

m. Da Pattern of Soviet Foreign

rree

n too Ohflffl>levcloped Areoo .

Word, about Soviet

She Soviet moe

ixwodity Crjcpoalttoo of floviet Fereiei Trede .

Pree

Introductory Rerarkfl

A study on vorld trade published by tho Soviet Klniotry of foreign trade0 orproased approval Of the fact that tha USSR ranked second aneng the notions of the vorld froa the standpoint of indue trial production and only nineteenth with roepect to foreign trade. ovover, tho Soviet gOTornaent wa boastingrade turnover core then ten tines the prewar figure and looked approvingly upon tho progress of tho USSR to sixth ploco among tho trading nations of tho vorld. Sorlot foreign tradet noted,ercent greater than In lOW, Franco, In contrast hoeain ofcroent, tho Doited stetcoercent end the Dai ted ilngeea onlyercent daring ft* save period. (See

Ever7 Soviet poll ay has coooiotently caught after ecoiranic independence froa the root of the world. Pees the precent rapid expansion of Soviet trodohange In this hlatorio

attitude! Io tire Oovlct economy in fact dloinantllng Ito autarkic barricadoB and aabruclag radically new attitudes and patteroo of trade? Anything moraursory asaral.notlou of Soviet theory and practice vlth regard to foreign trade should suggest ea anowor in the negative. It vould he erroueoua to conclude, of course, that Soviet eoonofiiic philosophy vlevo the attainoent of eelf-oufficionoy aa deolrableao. Hoither la tho vri tings of soviet oeanoado theoreticians nor in the official piooouneerjenta ef the Soviet govcrranant can one find autarky advocatedalid boats for econoalo organisations. On tha oontrary, the opposite is coacoaly aaeertodj and tho advantages and daalxehillty ordivision of labor and wrld-ulds exchange of goods havo boon streaoed by Soviet leaders froa Lenin to rhre*hchev. Xf the aotual poUoioa of the Soviet goverowaat hard beenirected tovcrd rendering tbe OSSH eooixndeelly icdenendoat Of tho outeido world, thoy appear to bave etentaed^Mt froa[say

alAviBh oocoptAoco or autarky as on Integral element of eoclollot economy but nrthorvent for oeaurlty froa eaanocila blockade againot too Oorlet Uaion or the eruption of the outright struggle vlth world capital vhioh la decned Inevitable.

Tbue Soviot trede policy In tho prewar parlod bad, in enoenoe, two principal gaols? The do aire for expansion of trade vita the Vest and tbe ouoat for ea ecoooadoolly self-reliant state. Thin apparent paradox ln Soriet coaoarolal policyefforts to increase trade on the one hand end en equally doterodned desire te eebleve eelf-avffiolenay on the otherneed notouroe of confusion for Koatorn obeorvere. She too policies, far froa being actually excluolvo, oorve to oaaplenent one another, selective trade vlth the Kentriaary iaotruaant for the narQ rapid -

eft**"

acMcveceat of the/self-eaff ielflnoy the Soviet leaders OO fervent!^

daBlro.

With the ootohliatoent oftrading bloo In the

poatvar period, and with Govlct produotlvo capacity end reserves apparently dcooed odeouato to moot any unforeseen contingencies, an eloaent of chouse baaaae evident In too offioial attitude ofH touurd foreigneooapt of trade as priaarlly oa lnetrmootality for prorating Soviet lnduotriall ration end eelf-sufficiency vaa aov Barged, vlthln the Jlcrttfl of Sovtotwltb an eiapanded use of fexeiga trade to eehjave opecifie objectives of currant foreign policy. ^Indeed, autarky as an eclroovlodged ciajor determinant of Soviet coaasroial policy, at lenetaa been all but ecllpced by tho Cceaunlat propenanda drive for ineroaaed awt-Heet trodorim rexpxtoite

for >cacofol coapotltivo eo-exiateaooVj Tbo foreign eeonoaio activity of tbe esaK boa becoao inexeesiagly peiitdoal ia pappooe.

directed toward the ped^tloal and. dceaoate dcoinft*Maof

Satellites/ tbo eoonoalo poaetratioa of uoderdovolojed eioee end tho nullification of Western export controls. Thlo eEargonco of

Soviet foreign uconooic activityowerful adjunct of Soviot foreign policy bearo tootlnony not only to an Increasing Sovietcapability, but perhaps of even greater significance,ay Cocwntst appreciation of tbe role of foreign tradeactical weapon In its struggle with worldeU could Ehnmhnhov^daciarojittWo value trade least for ooonoodo roacons and cost for political purposes ae a of pioaarting better relationfl between countries.'

tty purpose tonight is to eosedno with you the current role of tho Goviot Onion in world trade and to explore eome of tho icplica-tlona for the Free World of the nor Soviet eoonoadc diplocwcy.

-5-

H. Soviet Ooamorolal Follcyi ov Approach

Buring Worldhere vas such optinlsa that the and of hoot-Uitiea TOuld inaugurate en oxtended period of paaeeful ceo* norcial exchange between tbe OSES and tho VcGtern vorld. tt vas hoped by nsny Wo atom oountrieo that the Soviet eovenuamtwith Ita flocurlty adequately guaranteed and tho Irrr^nge took of tfeooa-atructson aheadWold be eflUIng to texo its place peacefully In Uu> Cattily of nations. But these hopes vent anfatflUsa1 and later-national political relatioao after the vsr deteriorated rapidly.

With the establishmentasding bloo la Burtera Europe aa decent of ohaags van evident la the offioial attitude of the Soviet govemnant towxd foreign trade. concept of trade as primarily aa tastranentalitj for promoting soviet ind^atrieliaatlon end self-uut'ficletay wis increaolosly conpled vltb the cSa ofc^opoly to attain specific foreign policy objectives. Soviet foreign trade new Moused uov facetious in tho socialist vorld.

Tho Soviet raonopoly of forelflo trade hod becone, in tho vordo or ftLioyen, "aa instrument for Um planned integration or the Soviet oeonoBi/ wilh the econoalea of too People 'a

She Soviet offort to veJdlue European Satellite*elf-contained trading area uoa epltoaiBad In the Bnamorhen Stalin promulgated the theala of "theoorld narSorts" in bis last vorx, gconogic Probleoo of .SoclaU an in, the USgR. Bare, Stalin contended that "the dl integration of the alugle, eil-eabraolng vorld cerkot cant be regarded as the coat laportant coeooadc sequel of the Second Worldnd he wrned tbe Westtrong and united cocioliet eaap would soon prove toovorfui cooaeroial competitor for the capitalist powre. "It cay be confidentlytolln vrote, "that vith tola pace of Industrial daTalnpCBat, It vill eeon cone to pass that these countriesheoontrios) vill not only bo in no need of Jnparta froa capltellat couatriee, but vill theaeelvaa fool the necesoity of finding en

outolde market for their aurplue produete.* Thie 6talinlat oaoortion that tho world nov eacoepaesed two rival crapt, one on the verge of oconoQlo collapao and tho other* strengthened by lto loolatlon fron tbe old decaying Vest,oaporery half to Sovieto facilitate Eoot-Uent trade.

Doopitooady tayaeate1 on Intro-bloc oooooetlc cooperation through rsutuel trade, the Soviet orbit apparently failed to becone the eonplately oelf-sufficient unit tbe USSR had envisaged. The need for eosnerciel intercourse vl th the Vest, nov haapcrod by Free World trodo controls, grew even more iaperative for the OSSR as lfcbclaaces in the grovth of certain of its cccnoade sectors, es

veil ae those of ita Satellites, bocaao coreAutArky for the Soviet Bloc bad of necessityxl Ot the core distant/

There ia no voy of knowing uroolflcly on vhat date tha decision ess node to launch tbe Krealla'o trade drive. Bat once mde, there

vore majilfootationo of this nev policy in every direction. An Intensified propaennan con-pal or. enainat Western trodo restrictlone, inoroaeed. pertlcipation in tho writ of too Bconooio Coaalflalcc for Europe, ond oa^anded trade tloa vith Free World oeuatriee, all followed In rapid aocoooeion. Inbo canpelan to present the Soviet Unionhanploa of peaceful trodo saa launched at an International Bcononlc Conferencecov, vhsro the lure of vast carlcete in tho USSR vaa donalod before the eyoB of Weataro bualnessBon.

At tha Nineteenth party Congroeo, held in leje, further evidence vac conlfest that tha Soviet Onion aould not ceriouoiy conadt Itoolf to the poaition inpUed la Btolin'o earlier nroaoanee-aeata.rief reaesertdon of the mrxtat-Lenlniflt Uae that "chill deeper coatrodiotieoa hove arlncn in the Capitalist eoonoay" and that "the vorld cyeten of capitalist eoooonyifile baa become coneidorably- ahrunten end water and atlll core una table

than it hod been boforo tbe vox, ^italaakovo-iavs Wiot "tho Soviet Union hoa always stood for, end now atande for, the development of trade and cooperation vltb. Other COrotrios irrespective of differences in ooolal aystesm. 2he party vill oontiuuo to pursue this policy on the basin of oatualthoyan, at the ootae COneTese, echoed his future chief and declared that "the analtalintho want to develop trade vltb the Soviet Onion onprofitable aaeea^tjeeej will always neet with support froa our aide."

Kith tbe death of Stalin, an even greater Ismetas unato the Bosnian trade propanpnda offensive, then already elmoat two years old. cv regino, notlvated by the desire to procureutcreat, and to sow extant sonaucjer gcoda, end to ccu.tir.ue Soviettond trade contralo eaong Pros is>rld nations, tried to convince tbe vorld that only increased East-teat trodo would proaoto

Kutual andaraUndlng and ralnx International tone Ion. Atunaral Inalenkov vovod to continue tho work of his prodeoooeore for too proaotlon of "international cooperation end dovolopoent of bueineaa relatione with all countries."

Open tha aooesBlon to powor of Wldta Khrnshchov, efforts wore renewed, in light of the Krei-lln'e csacaign forooapoUUvo coexistence" to expend trade relatione with the Pree World. In an interview with five vial ting. Senators in September ofbrttshehov told tosseal on eurplna Anerioen agricultural ooanodltlea would bo "highly desirable no hastened to add, however, that Hassle's desire to expand trade with the Doited States vas not the result of any particular oconoidc need bet ratherolitical goal* do not vent your iMChlaes to create Steele enefny or to build hydrogen end atowiebruahcbev declared, "We have plenty of nachlnaa oureelvea that era do that. With us eaumrtinea of

trade ara not neinly econoodo. They oro practical. We wmt more trade because ve think tkat vill help to Icy rove political xdXai&jxxa*"

Botvlthfltanllug hoixuibchov's protestations of Eovlet oeie-sUEfletenoy, he perbaoa betrayed the true aoonlag behind the Russian trade offensive vkon ho closed tho lntervicvhareetoxlette tirade eeainst whet he teamed "silly" Koatern trade restrictions and inveighed against Aserica'D mslUlnfinese to let the Russisno buy heavy mebioery end cncMne toola. "Xbu vint to buy ourKfarusheaaV- said, "but you want to sell us toys*"

At tbo Twentieth tarty Congraea, held luS, the restrictivefor trade ecu-Joined In 8tati&*ttaa&ot* tonacpt and^rwnt ftirtbsr nattflflattoVhat the Qrffltcncc of two vorld nariseta precluded trade between eeuBfertoa end foresaw mutually profitable trade relations

bctvocu fclio Eaot and Uw West. Moreover, hoooitioo unique In rocoat Soviet pionouncoBsntothat thoro ven ouch to be sained from uuiveroal ill.vision Of labort

Abroad too, Soviet representatives vere viaorouely paTening tbcdr trade offensive. At the6 coating of the United nations Kcouomic Coaedsalon for Buropo, Kuaoiea Foreign Trade JOniater Ivan Kahonav held forth guttering opportunities to Kostom Suropoana If only they would ovoreoate their fear end suspicion end reaovoconfeolo froa trade with the OSSR. ramttc geatare, the Soviet delegateropoaol for drafting enAgreenent on Kccnaedc and Technical Cooperation within the freaevork of the SB.

Apparently undaunted by tbe lack of any ponitive feopenee in ths aa-naUon ccoeiitted, einite proposals Sore0 to the UB EcenoKic end Social Council, in July, and to tbe General Asoeably itself, in Bjvenbcr. Although few concrete

rcoulta ore oxpoctod from ttieoo Goviot nvanouvorri in toe United nations, tbay any veil horold the bofidanlng of ft aoro accelerated and veU-publioitted Soviet canned gu to portray the BSSBhfuisdon of inerceaedot trade.

Although it to porUsns too early to predict the inclusion of

- decent in the Soriet Union'o basic foreign trade doctrine,

there io eviaenoe to suggest tlmt postwar Soviet foreign oconosio

activity hasecidedly Bore political orientation than

it had in tho past. Ihe cor.polidatioo of the QSDS'a rdiitary power,

thb ereatdoa oftrading SLoe^ and technological .icvelop-

cente in Soviet industry have apparently enabled toscov to enploy

foreign trodo aoro fully for the oohievesent of opeelfid foreign

policy objectives. Kith increasing iatonalty, the Soviete have

utUleed their foreign eeonaoic relations to oeoure the political

and Qcononic doodnatioa of the Satellites end tho oaoaoaic

penetration ofoan, end toropaganda. afTonslvu denlfined to create dlaacoaion in tbe Boat and to vookoa Proa World ooourity controlo.

For tba neat row aoaante, bovevor, let us tarn our ftttonUcc

to come of tbe core practical eenlfnetatlono of tbe current soviet trade offensive*

gfro Patterngp^Elfiafl^

radeelatively ndnar rede la tbef tbe Soviet Onion,J Soviet trade turnover (exports plea laportn) vas cejusi to pereent of tbe grosfl notional raoduat;9 Itereent end5 It bad risen toercent. Ib- cor->orloon, the relotdonQhip. trodo turnoverucli Weber erWJa national product for tajooe yearsereent, "fce pereentercent

Zn terno of total vorld trade, Soviot trada boo boon andwill continue to be of little quantitative olgnlflcence. In

he pool; pro war yoor of Soviot foreign trado,R aocouirtod for llttlo acre thau fl parcont of world cxporta and leasercent of world lajporta. %tB oowuulod for-oaay-ereent ofua proportion of Soviot trade to world trade baa risenoo-ttiea, however, and5 itercent of vortd trada, planing the USBH Id oixth plaoo noons tho trading nationa of the world.iUuetnitoo the rapid crovth of Soviot vorld trade, end particularly ite trado vith tho sotcaUtooT) A. She Tree World

Soviet trodo turnover with non-moo countries rose9 ainIon6 nilHonercentage rioo ofereent. Tfaia increase ia orall, fcooover, fa co^parlcon with the fife paroent expemsion in the trade of the rent ef tbtfCoanoiDiet Stateo with tbe Pree World during the ooiM period.

Approximatelyercent of USSR trodo with the Free world

56 won wttli the oountrlas of Westarn Europe.

A rloe of aboutercent in soviet exporte to- thecoupled with relatively otable Soviet lntportsavorable balance of Eoat^ieet trade forHaa unusual condition in the Soviet Phlaa'g poetuaxexporte to cost West European acncrtricn exoecded itsIt corned its mast Eubatantial export Burnlua, as

trade with the Onited Kngdan. 5 performance appears to havo been only tcr^rary, however, ond did not initiate any trend, aa evidenced by the Finable Soviet Insert rarnlxoctineted to havo been at0 nlUlfln.

11. "Ruble Mplonecy" In tho Itoderdoveloped Areas

Lot ua turn to what is perhaps tho tost dwsnatto aft^cot of the new Soviet eeenoaao dialflffiodyi too Gesraralfit fiWlftftSsr into the forcifin lending field eepeciaily in tha leaser dtnejopod exoaa. After yearn of denouncing foreign aid ea en unvarnished

inctruweat ofB and European Satelllteo Iiqvo nov Blguad ogiocnoutfl to extend to IX underdeveloped oouutrlea about billion In credit for tho purcbeeo of Soviet BLoo goods and tecbnicsl oorvieeaincluding, anna. Tbla le aore than double

tba level On tba baaio of reported offers, tba

A

largeot eiaelo bcnefioiary la to bo xusealayia vita alMloaj although tola perhapsn lightoviob-fugoaLav relations. With the exception of Yugoslavia, the emphasis of thie leading drive baa been on tbe underdeveloped nations of the Boar Seat end South Asia. Three of these notions, Egypt, 'India, and Afghanistan,wieffte, account Jbr the bulk of the total asreodredits to India, yhtoh had

?

nd^Mnp line of credit* In addition, firs offers totaling0 million are under ooaniderotioo by other underdeveloped

USSR intUo over half of the crodlto extended and tho European BaftOtoffya the reminder.

She oaa$ositian of^Boviat Bloo oredltoairly Vide variety of projects for developing Industry, paver, transport, and tdnorel rooouroee ao well ss fecilltloa for scientific research and education. In eaah case, projects have been AJXltrnVjlf dovioed toarti polar appeal to tha recipient country, and it sjuat be recosaited that, Inlfliil.ly at least, the paychologlgBl lnpaet of ths oeolstanee has been cuhstantlal. We should not naderestlmte the favorable Ispreaalon vhioh tha Deviate have mode on cost of the rociplenta by tha speed vith thieh they have cacpletod lean negotiattoas and noved to laplesont ogrccaoato, end by tho quality of eenlpaest and technical dervioa furnished thaa far.

In iooldug at recent Soviet eeondnle nettvltiM ohrwtf,end perhaps to be overly ianroseod vlth their Ifcrelgn aid proprnc end we tend to lose our eenao of perspective oa to the

dlnonniouo of this ventureo piooe In the overall volume of Soviet trade, the aid efforts of the Oossonlst Bloo are certainly novel and cpeatacalar, but the neflnltudao Involved ore stillnedent. As ve have already noted, tha credit ogreeoorta actually conoluded by the Bloc nov aggregate roughly one end one-half billionTet^maata voro oonclndednd the credits vill be. draen onarlod of about five years. Thus the annual flow Of trade resulting fron these arrange-Bents, although large to tho recipients, will not bulk larae In vorld trade. Moreover, both thin end other soviet efforts to preaote trade with the undordevelpped countries bare been launched froa an oxtramaly alenflor base of existing ooanodity exchange, so that doeptba those new trade end aid orrangoBente> fev xaic^evolopod co-T. .tries as pat ecacuot rare than ten percent of their irafa tltfe theo not wish to inply that tho Oeviet effort in tlds area nay not be highly effective, bet Its effectiveneEO eteao froa

ita eelGotlvKtf rather than ita alec.

Aaother point to bear la Bind ia the foot tint tha Soviet excursion into the underdeveloped, areas reproaentoasil portion,uite unrepresdafifttive portico, of overall Bovlat trade ectivltiod. e overwhelniag bulk Of Sovlot trade (core thaaercent) la conducted within the Ooeounist Bloc aad vltb the countries of Woatera Europe*

C.ord About Soviet Geld

ould be realaaid not at leant sake con-tioa of the recent heavy aalee of Soviet gold which hove already elicited Duohend spoculatloa in the areas andTbe colos of Soviet ealdotlmtcd at0 Billion, exct not aifflcult to raUocnllce. Xt eegad evident tbat thdoa

cen no longer bo norml replcniohrsBrta of Soviet sterling reserves, it le tree, of course, that despite trade surpluses vltb tbe Sterling Area In

tho past, oovlet sterling resources arc Dot bellevod to be largo and the deuaad for Uuasfc-rable otoxling vita vhlch to eettla thaJot Dhioa'e not deficit vlth other uon-doUor countries haa not ueoeurobla' dlfluaiebed. Bat Itbo abnorseily heavy Soviet pur-chaaeo of rev mtorlala and -processed tatariela In the Stoning Areaoupled vlth tha increasing Qoviot assumption Of Satellite foreign exchange obligations, that appears to bo the major motivation of the recent Soviet sales.

Vhlle doctrinal lnhlMtaons apparently do not prevent tho eovJotc froa using gold either to settle moderate laport our-pluses or to extend eeeacalo oaslstanoe to friendly- nations, it appears unlikely that the OSSR vill resort to (pld financingny large and poraonant ocalo. If this bouostlou vorth pcaalerlas,ccent, la the wtaooala behindsm to? bo the Inordinately large Soviet gold reserve, far larger thaa the prescribedercentbooking for tbs ruble would appear to require.

lino the USSR time for refrained froa any larce eeolo diminution of ita oiRabla cold reserve in the continued beliof in too inevitabilityejor cacltalioturing vhieh Soviet Sold stocks could ho ecployod with auch aoro tolling effectf It

has often been suggested, of course, that the OSSR nay "doap" gold

on the world aarket in on ottjacjpt to further disrupt alreadyTree world ocooocdea.

The answer, certainly, cannot be given here with eny finality, if the Soviet Onion does indeed intend to employ Ita gold reservooesson of econonie wBrfere, Soviet eeooceric writoro ore, quite underetsndahly, reluctant to discuss the natter. It does Qjjpoor unlikely, however, that tba soviet union oeriOODly

bareoro any ouoh alaa. Any eeonoaie dislooatdcoo whicha-

suit fraa soviet Maeping*in viev of crietdrg aaticfliifwK international doviooo to Jnsulato Tree World ocoreezloa froa such coutingenciooat cost, would be rierely fccsnxwery. Furthermore,

Ifolicy vera vleorounly pursued, ltd effects could actttrailant to faltering Westorn econpaloeeinforcerent of forolen exchange reservea and night depressthe price of gold to tho great dliiodvantcgc of the USSR,ajor gold producer,

!Ric answer, perhaps, nlgit more properly be oought In the peculiar, alaost aeroeatlllot pre-eadnenoe which the Soviet Union attributeo to Ita otore of prceioua iwtals, and lawt rttrttcularly to ita gold reserves, mis peycholocjical attachment to (pld, however, nay be explained on cercrol very practical grounds* Ew Soviet eueet for security, vhlch so deednated Soviet thinkingeriod whoa the VSSB considered itself "en oasis In tha capitalistee lost none of ita urgency in an era when Soviet confidence in tbe etreagtb snd oeourity of the "socialist csap" has undouTrtodly been chahen by Satellite rsttifeetetionfl of ccOWaaio and political Independence* mo enphasia oa largo and evergrowing state receivesrotective buffer against tbe eoonosia

encroachoauta of world eapltaXlaa una uot lajaaurably abated. Soviet Sold roeaxveo inda of tbe Soviet ocooontot EOtKln atill "provide tee insurance noooaoary to protectS from nejor ehifts in IntorratrtnnaA aarket ccwvllttors, the xoasiblllty of pertdal orecococie end flnanoiel hlocfcado, the pooaiblilty of crop failure vithin the country and the poasioility af dirootesault upon the. The Soviet Bloo '

At tho Twgntleth Congroas ef the Corxsuolat Party, Freeder hulgauln announced that Soviet trade vita the lost Of the hloc55 billion rubles,illion dollars. Tela figuro, hovevor,light dccroaoe ia Soviet trado tdtb its satellitesk Xeveia, the first cuch decline odnoe the dov^lopBont of the co-<allod "saoJalWV1aaritWr CMfat^iti renalne, by far, the largest bloc trading partner of the TJ63H> oeoounting forhird Of total Soviot trade with its eatellitoo.

Olio roc-ant doc Una lo Bovlot trade with itaocn be explainednrinty of ways. Onetoe failure ox tbo Soviet Union totsof coasucer goods exporte, particularly groin, touhcre Uk> bod harveote bad reined inport roQidreosnta. the Satellite quest for foreign exchange vlth. ehiohneeded goods In the Kent rwcoosarilyTxs lod to aof their exportd to that area, nosever,ooraTtratoa anazodos ia Itoita European Satellites. In too case of folnnd, Hopolitical autoony granted carrico withertainend, in point of fact, Eolaxd'e trade haa displayedwestern bias.ho other hand, it woolfi beargue thai tto

insurrection of occo degree of stollnlat control la Eastern Kuropo, and tho loans and pronlees of lrioroaaed trade end old to the

Satellited both before and after the rebellion vould oeea to ladl-cato that ooonocdo ties, too, ore being fairly finnly laaintnined.

Hlfclte Karuohcbev'o dieoloauro at tbe wentlotb party Coagroco that the USSH haa thus far extended to countries of tho Soviet Bloc credito totaling sx Mlaaaa5 billion) and ouboogucnt anixniacaaonta of ions tern credit extensions to Bulgaria, Boat Geraany end Polandev end veil publicised Soviet program of economic aid to its European Satellites. China has alsoojor recipient of Soviet aid.0 the OSSH haa extended to China en Industrial loon0 MlHon and aull-tery loans vhioh base averaged0 aHllan annually during the-

da rationale for this nov Soviet trove pith regard to- ita Etwspean BoteiUteo la fairly clear. Sfce CDfsE erst either help alleviate the eouto Dhertage of foreign exchange and ceuouoer goods vhioh pleguos the European BotalliOOfl orecurrence

of tbonroot already evidenced In Fast Centaur, Poland ana Hungary. Perhaps, too, the Sovlota Cool it politically expedient to appear wore oynj^thotle to the eoonoslo needs or tho Satellites in viev of the RBI announced policy of oconoaic assistancenou-coconmiot countrioo.

On balance, itair guess that Soriet aid to the Satellites vill in the future continue to include oone proportion of straight financial aid, laeviag then freer to oall on Western rather than Soviet Industry to root cose of ttftls needs. Recent Soviet aeles of gold for Bterling reinforeo this foolingould thin* eueh sales presage eayttdaglninutton of Boat-West trade.

eigu grade

Owef Vhdt to exportortals! bno for the tJSSR-end ita^anoaoanhe najor traditional exporte of cost of those countries havo been tha products of faro, forest and nine.

let, Utooo crodaoto ore huagfrlLy oougbt internally by those roopon-oihio for the cz&ltlouo heavy lndxiatrial progroa vhioh boo been the noin ccoux-Jc 0cel of soviet planncra. Soviettoward tho exeatjou of on InfavitrlaX espiro baa otaexod the cards ajvilnot ogrlcuUv.ro. At tbe rtiro, sovietoode ere not yot eotpotlng very aucoeeefuUy In world mrteto vhere Girdher produoto of tiaoteru indnnfcxy are avslXohlo. .JSwsvoay .certain banlc typco of Soviet hoevy cocfalnexy end equipeent bareeady aetftftJbl tho loooor aavelopod Bloc and Proaouutrlen*

Sbo wot significant change la tba ccJEOdlty ceqpcoieioo of Soviet foreign trade since the end of world Var ZL haa been the eucrgence' of Infafflfrrial etgdfeontajor <oajT6^aaal of SrrfotSw sesiet spvetiaftut boa recently resorted that

loachinary and eenipaent Kndo up C2 percentaaatod TOO nUlfon fleddnra) of ita exporto to all cariato 3iio

eeapareebonercent of Rusnla'o axporto eon-oiobod of goodo In tbo attohincry category, uortli apprcodantcly 6X3 latUlon la prices Of that year.

Another nojox cbaage thatroa the latest Soviet data oa tarudo io tho doclina of grainocdnnat coxort itenu 5 groin an counted, for little core thaaeroeat Of total exports coaraxed vlth overpercent recorded Ocxeiaer-ing the growth of doesattc reauiroaanta, Soviet groin produettoa fJ^jurca hardly Buggest that the OSSR io about to regala tho old. Russian pxc-revoluticoary positionjor vorld exporter of grain.

Apart frow mcblnory andariety of rev notorlale continue to atefe up the core of tbe Ooviot export potential, finio brood group of ovriMlttea aeeountod7 peroeat of total Soviet exporte hia ehara renaiaod virtually unchanged, axcomtlng9 paroent of ell exporta. Within this

umlHir of notable changes have Ogourrod. Bmo, Oxjorts of oera-procoaoed natal aad rav cotton have increased narkodly. Cool and potroloua exports reeainadaxroportion of total value of goods snipped out of toe oouatry. At tho ease tlm, oaporto of ruv fure aad luabor dooXlnod 1aimportance.

A. Zredo with the Free World

do coauodity pattern of Soviet iaporto froa Free World oxcos5aited shift towards Increased proenre-aent of industrial oquipaeat and oblps. she reeord for the year ehovo an increase ofercent5 chlpaoato toB In tho broad category of racfalncry and transport caulpooat.

sports of aetel intoH duringoubledof tha previous year,illion aa egaisot

[ft-

on. Toe lorgQOt oleseat ia thin expansion vaa copper wirewhich grewilo5k adllion '

Soviet lcaxuta of fcodntaffo declined pommvhftX froa^ level, flospitw an increase In Soviet Iaports of sugar aad rice. Vha ahcoluto dec-Una uaa due In part to reduced purchases of coat end tho cessation of butter inporte.

Soviet exporte to the Free world continue to desonsterte an increasingly high proportion of crude rAtorlels, rdnerol fools and lubricants ahlch togetherounted for appwodnrtely ba percent,ercent anderoeat of total Soviet exports to the Kootbespectively. B. rredo with the Soviet Bloc

While predeo infornatlon on the ccesx>sltioa of Soviet trade with Bloc countries ls scarce, there lo little evidooco to suggest any nojor chango in the general pattern of SOTlet-Batellitfl eosv-oodity traden the oasis of pubilnJied trade ogreerijate and other data the USSK apparently atlll ronoina, with the Bloc na with tho Freeet importer of capital eojripaont, tiiile

the bulk of Soviot exports to Jtn European SotoUltoo coitalsto of

raw mtoriole, fuel end foodotufTo.

V. Ooaelufllesuj,

What then can wq conclude froa thlo rather brief survey of the

role of tho Soviet Onion in world trade? Let ua,ocont, disregard dromtic soviot excumiono into tho underdeveloped arcoe end flnehoyant propaganda gestures cawtlng froa lbooov, end focus our attention, rathor, on thooo areas toward which tbe overvheladng bulk of Soviet trade leha satellite Bloc and the countries of Western Europe. Xt iohink, that ve oust lookue go to whether Soviot trade is In factranaforrjafcioa.

What do wo find when we look at the valuta) end occsedity coDrooitloa of this trader Despite crobstaatlel tains in recent yeoro, the voluae of USSB trade remains unioprosnivo.otal trade turnover cctraorahle to that of the Betherlandfl, tho USSR

accounts for littlethan threealf percent ef total vorld trade. Within Its own Bloc us find ^ho Sovietet Injporter of capital eouijoont, absorbing nearly half the capital goods exported by the Satellites, vhllc the bulk of Soviet exporte is asda up of rav aatcrisle, fuels end food. ook at Soviet trade vltb the West, vo alert laxly find that ita exporte ore dondnaied by rav raterlela and sccl-processed goods. An interesting recent developaent ls the eaorgoacc of oilsjor foreign exchange earner. Ito Imports oontlnus to be prodbBanantly cssufootursd goods. Soviet imports of onobinory and OJjulpmont, particularly, have been growing Bteadily while exports in this category, though expandingapid rate, ranoin suite omll.

In other vords, shea va look at tint has aoUoJly bocu happening to the volnse aad crcsnodity structure of Soviet foreign trade vo find little. If any, significant shift away froa the traditional pattern.

What then are tho lnpllcatlonn to bo drava froa the eurrout pOQition of tho USSR In world trader hink, first, In light of critical shortages In the USSR and tha increasing oecaxedc dnniands of Its Satellites, shortfalls In planned PTodnetlon night ba counteredather greater extent than hitherto by iaports. die ls most likely to concern foodstuffsin opite of this eeoaon'o fiuccosscs, and anticipated higher levels of agricultural produotion, fluctuations In weather eight cause temporary shortages to be net by increased lTuports.

Secondly, tbe fundsaental order of Soviet piloritioo Is not likely to be altered la the near future; certain raw raUxrlals andfor industry are still HhoKor Injorta than oousuasr goods. The nuoh vacated Soviet export capability In heavy Industry will probably he devoured by the aseitloua growth rotes ef the soviet Five Xoar Elan ead the heavy dononca ofoned eu of eastern Europe and particularly China, and will

piobubly ra&ft no acriouc Inroodi; on vorld Dnxfceta outside oroaa singled out for special attention by Soviet dlplocncy and propaganda.

tuirdly, there eeeaa llttto doubt that the nodeat hut ingeniously dooigned Soviet efforts in underdeveloped oxeae havo reaped oigni-fleant political end eccooalo rovoxds. Although exporte of capital goods night tend to iatonsify soviet domestic oconociic problems, the goods which the Sovicta receive in return, especiallyeocnoditios,ountervailing effect. Kith its total odd programaall fraction (less than one percent) of Soviot GBP, there Is every evidence that tho USS5 has the capability to carry en indefinitely vita en ooonoclc progrsn of tho typo undor-tolcn in tho Beax-and Far-Saet during tlio past two years.

Finally, any novo toward olgaificsat excaosloa of Soviet trade with the Prod world vould appear to bo inhibited by the ooa-tinulng reluctance of the Soviot Onion to tolerate torefijnirgri dofiree of dependence on external eourcee of supply. The

apparent difficulty of finding poodo for export to tbo itaot is nooliticui pbenoaocon as it is aa ecouoclc ouc. Too USSR, with largs and dive reified oconoay, oould certainly enjoy core of the advantages of foreign trado If It only vented to do no. True, there appears to be eons official recognition of tbe advantages of international apec1nT1itaticn and soae efforts have been node to pxonote en Intm-Bloc division of labor, but tho Soviet guest for self-sufficiency cannot but exercise on important Uniting influence on tba aagnitude and grovth of Soviet foreign trade.

Original document.

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