Created: 8/1/1959

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The general purpose of this report Is to describe and evaluate recent and current trends in economic coordination between the USSR and the European Satellites and among the Satellites. The mainis on the objectives and efforts of the USSR, primarily through the Council for Mutual Economic Assistanceo enhance economic collaboration among the Satellites not only through increasedspecialization'and trade but alsoand most importantlythrough more effective coordination of the long-term planned development of the industrial material base of the Satellites,roblem area of considerable size. This report is not concerned with aanalysis of the exchange of goods, capital, and people within the Soviet Bloc or of the over-all effect of such exchanges on the economies of the Satellites.

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Summary and Conclusions

I. Introduction

II. Key Role of CEMA Standing

III. Types of Economic.

IV. Machine Building

V. Metallurgical

VI. Petroleum Industry

VH. Chemical

VIII. Electric Power and Coal


Appendix A. Recommendations by CEMA for Specialization of Production of Machinery in the European

Appendix B. Source3


Strmsry and Conclusions

Afterecade of relative dormancy, the Council for Mutual Economic Assistance (CEMA) has been markedly active since8 in its efforts to promote closer economic cooperation among theSatellites. The impetus came largely from Khrushchev, who ln8 sharply criticized the inadequacy of such cooperation, which still waa developing slowly ln spite of steps to Improve CEMA Ihia primarily Soviet drive is probably designed to contribute to Soviet industrial development, reduce drains on Soviet resources, further the economic penetration of underdeveloped countries in Asia and Africa, strengthen the Satellites economically, intensify their interdependence/ enhance their political stability, and tie then even closer to the USSR.

The CEMA program la focused on two interrelated problems: how to coordinate the economic plans of the European Satellites and how to establish an effective system of industrial specialization within the Soviet Bloc. The first problem is basically one ofore careful balancing of resources and requirements among the European Satellites. The second problem Is one of achieving greater Industrial efficiency and productivity by developing larger scale output ofreduced assortment of products in the individual countries of the Soviet Bloc.

The estimates and conclusions in this report represent the best Judgment of this Office as

Some officials ln the European Satellites recently have admitted that the current Five Year Plans had not been coordinated effectively. Furthermore, according to other sources, these plans generally were based on unverifiedanenrealistic assumptions as to supplies of industrial materials within the Soviet Bloc. The USSR, however, does not appear to be seeking to integrate the entire Bloc within the framework of one master economic planan ostensible purpose of CEMA when lt waa created9 oor is there anythat full integration is likely or feasible within the next few years.

Current efforts to Improve the coordination of economic planning have the more limited objective of insuring continued development of the industrial base of the European Satellites Inth Plenum of CEMA in Prague, the conclusion apparently wae reached that the ambitious goals In the preliminary draft plans of the Satellites for the periodould not be attained unless concerted action was taken to avert possibleof Industrial materials, fuels, pover, and equipment. The Plenumork plan9 which directed the strengthened industrial committees to prepare detailed recommendations foralong vith revised drafts of the country plans, ath Plenum* of CEMA. Guidelines5 are to be coordinated during the latter part

In promoting coordination within specific industries, CEMA will continue to stress the interrelated use of bilateral and multilateral trade agreements. Joint Industrial projects, standardization of designs and methods, and technical cooperation. Specialization generally is stilleginning stage, but it may ultimately facilitate real gains in efficiency, particularly with regard to new industrial construction and technology. The Satellite regimes, as well as that of the USSR, believe that their interests can be served significantly by such efforts.

I. Introduction

Two leading avowed purposes of the Council forhen it was createdere "toeconomies of the signatory countries within the framework ofeconomic plan" and "to study, ln each of thethe development of industries particular to tbatorder that the Industries of all the signatory countries mayeach other and. Mlkoyan, tbe leading Soviet officialCEMA, stressed the importance of binding together theSatellite economies. 2/ The Czechoslovak planning Journal then

* .ThePlenum met in Albania -tn mid-Mav 'oco

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declared that CEMA members "will coordinate their plans,oint investment prograa, begin Joint output programs,oordinate industrialy settingivision/ !

During the next half decade, however, the European Satellites were generally engaged la parallel and partly autarkic Industrial development, contrary to the concept of division of labor. The economic relationships were primarily bilateral and mainly between the USSR and Individual Satellites. Inter-Satellite exchange failed to developomparable scale. CEMA received virtually noand was active primarily ln the field of scientific-technical/ '

A second general stage began in*ighlightedoscow decision to synchronize and coordinate the Five Year Plans of the European Satellites beginning oviet advisers reportedly were instructed to begin studies of production capacity in thc Satellites,rief session of CEMA was called In Moscowthe preparation of plan

The concept of plan coordination was announced publiclyith the accompanying statement that each member of CEMA had determined the contribution it could make to over-all economic development ln the Soviet Bloc, but the fact was not made public that the analyses of the national planning commissions, based partly on the studies by the Soviet advisers, were uncoordinated. Each country, ln estimating Its potential Industrial output, had assumed that those industrialthat were unavailable from indigenous resources could be obtained

Although the term economic Integration is sometimes uned ln Western discussions of economic coordination of the Soviet Bloc,Id the sense ofingle master plan for the Soviet Bloc, has notoviet objective, nor does it appear to be at least for the next few years. In fact, if integration Is taken to Imply at least an extensive international movement of goods, capital, andreater degree of Integration probably exists In western Europe. There is very little cf such integration ir.urope, except in the movement of goods, which, however, is restricted by the absence of effective mechanisms for short-term credits and multilateral clearing. There areew long-term movements of capital and even fewerof labor. Present and foreseeable Soviet policy, as Indicated ln this report, is focused largely on achieving more effective lntra-Bloc coordination of the development of the key sectors of industrial materials and equipment.

** This field, although of secondary importance, is not without Some aspects are mentioned In later sections of this report dealing with particular Industrial sectors.

from other members of the Bloc. The combined requirements of the Satellites, however, revealed large shortages within the Bloc, especially of hard coal, iron and steel, basic chemicals, and heavy equipment. There wasarge difference between the planning assumptions and the actual industrial prospects. 6/

This situation focused attention on the need for more vigorous steps' to stimulate among members of the Soviet Bloc coordination and more efficient division of labor, especially ln production of industrial materials and machinery. It was realized that such cooperation could not be promoted merely by bilateral trade treaties between members of the Bloc,ubsequent organizationalandmark in the evolution of Bloc coordination and of CEMA, was the creation ln5 of working groups for the major industrial sectors. These groups, staffed by specialists from the CEMA countries, were directed to work out proposals for industrial standardization, specialization, and coordination.

II. Key Hole of CEMA Standing Committees

At the Plenum of CEMA in Berlin inhe followingCommittees for Economic and Scientific-Technical Cooperation" were created and their headquarters designated! Machine Buildinghemical Industryerrous Metallurgyonferrous Metallurgyoaletroleum and Gaslectric Powerood and Cellulosegriculture (Sofia) Defense Industryoreign Tradeelivery of Complete Ii*uTitallatlonsnd Geology (Moscow). Pour additional committees were created Economic Problemsonstructionransportationnd Light and Food Industry/

* The existence of this committee is not publicly admitted in the


** This committee merged with the Committee for Foreign Trade

A. committee generally is located Id the CEMA country considered toajor contributor to that sector, but the committee or its sections may convene elsewhere on special occasions. The appropriate minister of the home country usually serves as chairman and is assisted by the counterpart ministers or deputies from thc other countries. Each of the committees, staffed by specialists and ad hoc personnel from theand planning commissions of the host country, has the key role of preparing the detailed preliminary proposals for plan coordination.

specialization, and volume of trade. Tbe largest committees are the Committee for Machine Building, the Committee for Chemical Industry, and the Committee for Foreign Trade, of which the most complex is the Committee for Machine' Building, which Includes sections for heavy machinery, machine tools, forging and pressing equipment, and tbe like. 2/

Each committee meets several times each year, and the sections and subsections meet more often. asis for preparing its proposals, each committee worksetailed balance sheet by branch offor each country, showing on one side the total supply derived from production and Imports and on the other side the estimated From this balance sheet lt can be determined where there are shortages or surpluses. An effort may be made to suggest ain the requirements and to work out long-term improvement of supply and distribution through increased The proceedings Including disagreements as well as re commendationsare transmitted through the secretariat of CEMA to the Individual planning commissions in each country, which analyze the materialto plans and forward the scientific-technical documentation to an appropriate department concerned with collaboration In thesubject among members of the Soviet After thecommission and the top governmental and Party levels have reviewed the material, their reviews and recommendations are presented at the subsequent plenary session of CEMA, which works out general directives governing the future work of the committees.

With their elaborate structure and procedures, the committeesey role In the efforts of CEMA to promote economic coordination. These committees have been characterizedeading East Germanperiodical as "the organs by which the coordinated perspective planning will be worked

* It ls not clear whether or not the Industrial committees also attempt to assess the potential supply available through trade with non-Bloc countries. One of the alms of the committeesand of CEMAs to decrease dependence on outside countries. The Foreign Tradehowever, allegedly does not oppose Increased trade outside the Bloc If such trade has been coordinated with the other members of

The committees, however, generally have been criticised (at least up toor. being preoccupied largely withexchange and other secondary questions, with too little attention being paid to the more basic problems of plan coordination andwhich require'much detailed research and appraisal. One high official, the Czechoslovak Deputy Premier, ln8 characterized the committees asorum for passing resolutions, with few practical accomplishments. Ik/

8 the committees expended their studies and discussion, both ln terms of scope and detail, particularly vith regard to problems of long-term economic relations involved in coordination of plans up Their operations, however, continued to be hampered by substantial shortcomings. The material emerging from the preparatory discussion in the sections of the committees tended to be Insufficiently and tardily processed. Thus the committees, in their full meetings, often formulated resolutions which were inadequately prepared and vere too general to be effectively carried out by the member countries. This shortcoming applied especially to recomaendations dealing with plans for development ofbranches of the national/

Ath Plenum of CEMA In Prague in8 It vas decided that a' special meeting of representatives to CEMA should be held at least quarterly to improve the supervision of the work of the standing The secretariat of CEMA and the deputy representatives to the Council were directed by9 to work out proposals for improving work methods of the standing committees. The secretariat of CEMA vas instructed to initiate9 the publication of an economicbulletin to Improve the reciprocal supply of economic data among the member Presumably such organizational measures will improve the functioning of the industrial committees appreciably.

III. Types of Economic Collaboration

* CEMA comprises, in addition to the standingentral secretariat In Moscow, headed by the Secretary to the Councilember of the USSR). The Council Itself Includes the representatives of tho member states, vho began to hold plenary sessions semiannuallyThey generally are top planning officials and have the status of deputy premiers in their countries. There are also deputy representatives who meet more often. The total budgetary allotment9 reportedly1 million rubles, of5 million are for the standing committees (aa compared withillionillion, respectively,ilateral economic cooperation and scientific-technical cooperationare in close liaison vith CEMA but are not formally part of it.

Untilugoslavia vas invited to send observers to CEMA meetings. Communist China, North Korea, Rorth Vietnam, and Mongolia still have only observer status in CEMA meetings but have "expressedake an active part In the economicy measures conforming to the specific conditions of their countries."

The work of CEMA to promote economic coordination and Integration may be examined meaningfully vith reference to major Industrial sectors.

Before such examination, lt ahould be noted that there are five general type* of economic collaboration: (l) bilateral and multilateraland technical cooperation accords, which Involve exchange of personnel, blueprints, and otherilateral and multilateral Industrial construction and production arrangements, which are sometimestenolol etc rial or interplant basis;pecialization agreements, which are recommended by CEMA and sometimes are incorporated in trade pacts or In other "economic cooperation agreements" concluded during meetings of the bilateral economicilateral and multilateral trade pacts;ong-term plan coordination, which la primarily multilateral. The interrelationship of these five types of collaboration is not fully recognized by moat Western analysts of this subject.

The first type has been used fairly widely during the past decade, whereas the second and third types have been emphasized mainly6 and are as yet only ln an early stage of development. Trade agreements continue to be thc primary and most tangible means ofcollaboration. Such agreements not only provide the framework for supplying within the Soviet Bloc the material needs of the economies of the member countries of CEMA, especially those of the Europeanbut also are used more directlyeans of giving effect to recommendations for specialization made byfl/

During the past several yeara there has been an effort, especially on the part of Soviet delegates to CEMA, to promote and increase use of multilateral trade and other economic agreements, but ln8 there reportedly had beenlight decrease in bilateral19/ Significantly, however, aboutercent of all economic

These ccmaissiocs were created during the past several years, whereas the bilateral- commlaslona for "technical and scientific collaboration" have functioned9 Theomewhat narrower scope, and the standing of their participants ln their home governments is not so high.

** Soviet delegates to CEMA have proposed that membero of CEMA integrate CEMA agreements into their national plans and thus endow thea with legal force. There were some indications In8 and9 that thla step la partly being done and that more attention la being given9 In CEMA to analysis of progress ln fulfillment by member nations of the CEMA recommendations.

*** Settlement of accounts continues toasic obstacle toagreements. imited multilateral clearing aystcm was agreed to at the 8th Plenum of CEMA In Warsaw lnut thereittle evidence of concrete use of even this restricted system.

contacts (presumably scientific and production exchanges ao well as trade) are said to be Moreover, in recent years CEMA has sought toreater coordination of bilateral inter-Satellite trade.

The precise role of CEMA in bilateral trade agreements ls not entirely clear. Official statements that such agreements arc "within the CEMA framework" or are "pursuant to CEMA resolutions" may be largely rhetorical flourishes. The agencies of CEMA, however, seem to have an important general role ln this field, particularly at the prenegotlatlon stage. Before the bilateral discussions foreriod, for example, discussion by CEMA reportedly determined which commodities ahould be bilaterally and which multi-late rally negotiated. This information was passed on to the various foreign trade The committees of CEMA also examine the extent to which bilateral agreements solve anticipated supply problems." Moreover, according to one official explanation, the encouragement of the bilateral approach for matters of concern to only two countries enables CEMA to concentrate on problems of more widespread

In addition to discussing the general requirements for and supplies of basic materials and developing proposals for meeting shortages, the standing committees of CEMA also seek to provide increased statistical and clearinghouse services. Eventually the Foreign Trade Committee, for example, may provide periodically to members of CEMA detailed,trade data for the Soviet Bloc, which presumably would largely remove discrepancies between statistics of individualn the important area of trade with the underdeveloped countriesthe Bloc, this committee receives reports from government trade organizations on inquiries received and offers made for sale of factory equipment and other commodities. Extensive analyses also are presented at meetings of the committee concerning the possibilities of selling complete factory installations to underdeveloped areas. Such trademay not be complete, but the volume of the Information seems to be increasing. This exchange of information may contribute to greater coordinationessening of intra7Bloc competition, particularly as increasing economic integration in western Europe and other pressures may cause the Bloc toore common front against Western.

Lbng-tcm coordination of plans is closely related to the other types of collaborationparticularly trade and productionwhich provide the primary means of implementing the plans.

" Specific aspects of Satellite bilateral and multilateralare discussed in the following sections dealing with keysectors.

Potentially thc process of plan coordination Is sore encompassing and intricate but as yet has not been carried far in practice. Inhrushchev and other leaders of the Soviet Bloc declared at their Party congresses that the then announced Five Yearad been coordinated. In spite of official claims, there was little actual coordination, and such coordination as there was was confined to the discussion level of the Industrial groups of CEMA, which had not been given formal status as standing committees. The higher level of the representatives of the CEMA Council and their deputies was not brought Into the process. 2kJ

There wasonsiderable delay in approving and putting into effect the largely uncoordinated plans of the individual countriea. Tho East German Five Year, for example, was not presentedinal form until the end By this time, thereuch clearer awareness of the impact of the shortages of basic materials, Intensified by the events ln6 in Hungary and Poland. The 8th Plenum of CEMA in Warsaw in7 was devoted mainly to the planning dilemma arising from this shortage of

The Warsaw session publicized the Idea that CEMA was to focus more attentiononger, planning period extendingrimarily because development of basic industriesong time. The members of CEMA decided to begin to draw up plana for coordination of economic development of basic Industries and major products, especially coal, electric power, basic Industrial materials, machine building, and chemicals. Hot determined, however, was the comprehensiveness Of this coordinated planning as to types of products and branches of Industry. The initial stageould be planned more specifically and the second stage ofears, only in general terms.* Thia plenary session and later ones would develop general guidelines only. The detailed proposals for coordination would be worked out by tho standing committees which vould transmit them to the state planning commission. Thesepresumably would revise their plans accordingly forlenary session of CEMA. Tbe proposals would contain some suggestions for industrial specialization. The newly created Committee for Economic Problems of CEMA wasey role in this work.

At meetings in the autumnt the level of this committee and of the chairmen of the state planning commissions, two general attitudes reportedly .were expressed concerning the basic approach to be followed in long-term coordination of plans. East German delegates, with support from their Soviet and Czechoslovak counterparts, emphasized discussion of the development of production sectors, at leastoint of departure, whereas the Polish representatives stressed discusuloo of

Recently the ideaingle, long-term plan for the entire Soviet Bloc has been voiced less than in earlier years.

forelgn Poland generally has been less favorable to the concept of broad Integration thao its relatively more industrialized neighbors have been.*

In spite of the stepped-up frequency of meetings, especially of the standing committees, progress ln7 and3 wasand unsatisfactory- peech at Csepel, Hungary, In earlyhrushchev expressed dissatisfaction with the extent of economic cooperation within the Soviet Bloc, especially inter-Satellite cooperation. Subsequently, an unprecedented meeting of top Party and government leaders of the members of CEMA was held fromoay in Moscow. The conferees (l) agreed on 'recommendations on further development of economicpecialization of production and on the preparation of long-range national economic developmenttressed the development of the material branches, pover, newand techniques, and further cooperation and specialization in machine building, to make it possible "to go over to the sore rational mass and serialecided "to enhance the role of CEMA .and Itsj/

ollow-up the 9th Plenum was held in Bucharest in latendh Plenum vas held ln Prague in early December,ew policy of convening at least two top-level sessions per year. Ath Plenum lt was indicated that the Soviet bilateral negotiations with the European Satellitesad been concludedonsiderably less favorable picture, however, was presented of thointer-Satellite negotiations. In these negotiationsumber of economic problems" arose, especially concerning the future supply of certain nonferrous metals and minerals, certain ferrous rolled products, equipment (especiallyoking coals, electric power, and mineral The emphasis seems to have been primarily on inadequate coordination among the Satellites ln working out their respectiveand consumption of such materials and products. The indicated possibility of shortages would affect the projected priority development, particularly of such industrial sectors as the chemical sector.

The USSR occasionally has made up deficits of Industrial materials stemming from the noninplementation of inter-Satellite commitments. Possibly the USSR would do this again, but it evidently fears that the Satellites may continue to rely excessively on Soviet supply aad may fail to strive with sufficient vigorore rational pattern of utilization of indigenous and substitute materials and of exchange within the Soviet Bloc. In order to promote more coordination and integration.

For further discussion of this subject, see IV, p. U, below.

h Plenumork planhich among other things Instructed the standing committee* of CEMA to develop detailedfor the problem areas.*

IV. Machine Building Industry

Machineasic to Industrial development andide range of products, is generally considered to offer the best prospects for division of labor within the Soviet Bloc. This sector isan increasingly Important share of total industrial production in most of the European Satellites. The percentage share ln each of the Satellitesccordingoviet tabulation, was as follows: Eastndg/

Moreover, products of this sector have, lnajor androle in the foreign trade of most of the Satellites, as Indicatedoviet tabulation of this sector's percentage share of total exports of the following:



By excluding the few years Justhe tabulation doca gloss over some fluctuations. It does not show, for example, that theshare ln Czechoslovakia vaa actually slightly higher earlier: 553jj The general trend, however, has been upward in all the European Satellites and will probably continue to rise somewhat in most. Thus in Poland the share8 was

* Collaboration is'also being promoted Increasingly by committees of CEMA in transportation, telecommunications, construction, light and food industry, agriculture, and probably in defense industry. Thla report, however, is focused on the problem areas especially emphasized ln recent plenary sessions.

** The total on vhlch this percentage ia based does not Includedeliveries..

ercent mod Is slated to increase toercent In those countries of CEMA vith the meat developed machine buildingEast Germany and Czechoslovakiathe future percentage increase may be appreciable but will be less marked.

Several potential advantages of grcutcr specialization have been particularly stressed sincespecially by Czechoslovak and Polish spokesmen. Much attention la being focused on the problem of reduction of cost. It has been conceded that the earlier policy of relative autarky, with its emphaala on generally small unit outputide assortment of products, led to inefficiency and high cost,ln the machinery industries. This situation, although serious In East Germany and Czechoslovakia, became even more aggravated in the other European Satellites, which have relatively lesseveloped machinery

Czechoslovak and Polish writers hold that costs can be reduced significantly only byarger volume of production,educed assortment of products, which would be made possible bySln-creased lntra-Bloc Industrial specialization und/ Discussions in CEMA on engineering specialization for the planning period up5 allegedlyeduction ofercent in the number of types of products in production (presumably in the Europeanhich will permit an increased volume of series production and great/

In Czechoslovakia, for example, machine building was criticized8 by official spokesmen as "scattered and consequently wasteful" with

roduction" accounting for onlyercent of the entiret was charged that in this industry the policy orf the total range of world types had an adverse influence onandnd it is planned to reduce this range considerably and to step up the volume of production in the smaller range. koj The success of this policy in the next few years will depend on theof CEMA agreements and especially on Soviet support. According to

thc Minister of Heavy Engineering,rade agreement will enable Czechoslovak deliveries to be made to the USSR "in unusually large scries and spread over several years." Although the range of goods io to become more limited, the volume of dellverlea Is to be more than double that/ Total exports of engineering equipment reportedly will Increase5imes the level The agreement will make itfor Czechoslovakia to produce electric and dlesel-electric locomotives

* Series production is usually mentioned, but the current forms of limited serial output (automotive, for example) are not necessarily considered satisfactory, 3kJ Some singly produced Items such aa electric locomotives would be manufacturedmall-series basis.* One reason for this "overexpansion" wus sold to be the US


electric power equipment, nachlne toola, equipment for the chemical and food Industry, automobiles, compressors, and other products ln greater quantities and much more efficiently. The USSR, for its port, will deliver engineering products to Czechoslovakia, whichwill not produce itself because of

Even during the past several years, some specialization in the Czechoslovak machinery industry has been engendered by sizable and continuing Soviet orders for specific models, producedonsiderable extent on thc basis of Soviet designs and specifications. ukf This type of aid, which relates primarily to heavy machinery, nerves thebuild-up of the USSR, however, and tends to Integrate the Czechoslovak engineering Industry more closely with that of the USSR.**

A related advantage of specialization also stressed by Czechoslovak and other spokesmen is that it can facilitate efforts to Improveand organization of Greater specialization in the development of new and specialized machines offers "extraordinary savings" and accelerated innovation. For example, the head of the Czechoslovak Institute of Machine Tools has stated that such machines willasic factor in the development of the Czechoslovak machinery/

also has been emphasized by Czechoslovak spokesmen thatis not related solely to an increase ln series production, which will take time. Even under existing conditions, if specialized production of universal components such as traction wheels, belts, geared wheels, and the like were subdivided among the members of CEMA, savings would result, hjj An effort to introduce within the Soviet Bloc widespread specialization of this type, however, vould have to overcome the strong reluctance of plant managers to become dependent on suppliers in another country. There is even resistance- to Increased interplant specialization and cooperation within one country, such as in Poland and,roader scale, the

Although there were Home scattered instances of specializationrood start seemingly was made at the 7th plenary session of CEMA


in Bast Berlin lnhen recommendations developed in February and March by morepecialists wereO/ According to various brier official statements, agreement was reachedroducts. Elsewhere reference has been madeypes or machines, ships, and precision Instruments" and to "lk groups of power equipment,roups of diesel motors,roups of cutting machineypes of forging and pressing equipment,ypes ofmachines and tractors,odels of diesel locomotives, trucks and passenger automobiles, motor buses, railroad cars and other types of machines and

Although an official list (if such exists) of the recommendations made6 (and subsequently) has not beeneneral picture of the recommended specialization has been developed from varioussource statements.** Several basic qualifications should be noted: (l) the specialization does not relate to entire industries or machinery sectors but rather to types and sizes ofj he table does not portray the more detailed specialization as to types and sizes within some commodities such as balluch of the specialization is not new but rather derived from historicalhe USSR Is not to become significantly dependent on other Bloc countries, although it is to become the sole producer of some large and specialewountry apparently not "assigned" as producer has continued toroduct, (for example, Rumaniato produce grain combines).

* Thc CEMA Committee for Machine Building, createdizable staff and headquarters In Prague, withajor sections: (l) Heavy Machinery (East Germanachine Tools, Forging, and Pressing Equipment (Soviet chairman);ransportation Machinery (Hungariank) Shipbuilding (Polishoad Building Machinery and Equipment (Polloheneral Machinery (East German chairman) (equipment for light, food, and paperotor Vehicle, Tractor, and Agricultural Machinery (Czechoslovakppliances and Automatic Equipment (East German chairman);

Technology and Means of Communication (Hungarian chairman);

(Czechoslovaknd (ll) Ball BearingsFarts (East German

** See Appendix A.

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The sketchy tabulationurface impression of widespread progress of specialization, particularly in the categories of heavy machinery, machine tools, transportation machinery, motor vehicles, tractors, and agricultural machinery. In many Instances, however, several countriesnotably East Germany and Czechoslovakiare "confirmed" as producers of types and sizes which they had developed previously.

Seme modifications, involving ateginning of an extensive "division ofave been proposed. or example, CEMA recommendedertain specialization" in production of machine tools, which wouldeduction in the number of types: fromn Czechoslovakia, fromon East Germany, from Uo tod Poland, and fromon Hungary. 5j/ The nature and methods of ouch reduction was not indicated, nor wau there any indication as to whether or noteduction, if carried out, would resultignificant cutback in established production by any CEMA member. There is no evidence that such reductions have yet been undertaken on an appreciable scale, but presumably they could be effectederiod of some years.*

Ineading Soviet official criticized the Insufficiency of specialization by referring to the very limited trade with the Soviet Bloc ln machinery and equipment in comparison with production. essercent of* cutting machine tools and lessercent of theorging and prosslngroduced in the eastern European CEMA countries were mutually traded. Similarly,ercent of production in these countriesrucks andercent (almost entirely from Czechoslovakia) of0 tractors wore exported to other European

When usedritique of specialization, however, the Sovietbetween production and trade does notlear picture of the accomplishment and potential of specialization. In the cited cases, the percentage of production reportedly Involved In trade among

* In late8 the Soviet deputy representative to CEMA publicly acknowledged that specialization and cooperation "has not been adequately developed" and stated that the 9th Plenum of CEMA in8 had drawn "particular attention to the need for greater specialization andin engineering and the Eanufacture of newJ*/ In his discussion of the Polish plan directivee, Jedrychowskl, the head of tbe Polish Planning Commission, stated in9 thativision of work exists (among the USSR, East Germany, Czechoslovakia, und Poland) in the production and exchange of lathes." He added that such examples constituteeginning of economic cooperation in this field" (industry* Slightly more than one-half of the production in the The figures reported officially by the individual countries total Possibly the difference can be attributed to accumulated upward rounding of totals and to production for the military not shown by individual countries.

This critique did not refer to exports to countries outside the Soviet Bloc. The main thesis, however, was unnecessary parallel production..


thc European Satellites certainly is strikingly low. The critique, however, does not indicate either (l) what the percentage should have been if the CEMA recommendations had been fully implementedhat maximum percentage could be developed realistically. Data arc probably not yet available to CEMA officials to permit even rough estimates of this nature.

Writers in the Soviet Bloc admit that even the relativelybut nevertheless formidable problem of developingbetween industrial production and existing export Isa solution. Major difficulties arise from differences inand valuation of domestic and foreign trade and fromdifferences in classification ofbetween production and trade are generally lacking,tentative estimates have been made of categories,tbe machine building sector. Thus it was said8 that one-third of the output of heavy engineering Isfor/ In East Germany3 an average ofof the unit production of metalworking tools has been In Poland the share of export sales in the total salesmetal and machinery industry7 was estimatedercent.certain products such as textile machinery, however, themuch higher.

Soviet criticism also has pointed out thatumber ofEMA member has initiated production without the necessary materials and assemblies, withimited domestic requirement for the product, and in spite of the fact that production of the Item had been establishedin other CEMA countriea. Unsatisfactory development ofand cooperation in production was attributed partly to the "feeble effort" to workroper foundation. The CEMA Committee on Economic Problems was directed to developoundation, with the aid of the CEMA standing conmittees and or the scientific organizations of the CEMA members.

The problems of developing general criteria for specialization and studying in detail the feasibility of greater specialization withinsectors have been emphasized earlier by economists andtechnicians of the Soviet Bloc. eading Czechoslovak economist and member of the CEMA Committee for Economic Problems, admitted In8 that the whole subject of criterlo has been examined Be suggested the following as general criteria (not yetand still under intensive study): (l) assessment of each country's natural resources, production capacity, traditions, and labor skillsnalysis of comparative coats and labor productivity. The latter analysis, however, ahould make allowance for the special problems of the leas developed CEMA countries (especially the Balkanith some effort to calculate potential future costs after attainmentigher


level of development. He conceded that the differences in price systems presented greatl/

The less industrialized CEMA countries have been concernedIntegration program might hold them to the role of merefoodstuffs and industrial raw materials. In an effort toconcern, the communique of the Moscow meeting inhat it was necessary "to discuss together the mostof cooperation for raising the level of Industrializationwith less well developed industries." Khrushchev hasstatements, which suggest that Soviet policy seeks toconsistent with continued rapid industrializationcountries of the Soviet Bloc although in different ways. Inrun, however, this policy would tend to limit the degree This' policy, if reasonably successful, would notthe weakest Satellites but would also promotein lieu of the evolution of strong bilateral orgroupings, which might tend to be significantlythe

Another factor underlying poor implementation of specializationever-present inter-Satellite competition and deep reluctanceoutput, especially in the machinery field,roduct insizable stake has been developed. Iftake has notountry, it may complyEMA agreement, primarilyis not costly and the creation of the new productionunsound. East Germany, for example,lan to buildboring machines and adheredEMA agreement thatwould produce the larger East Germany,not actually built the facilities and had real interest only indesignated as its "specialty". Similarly, with regard toCzechoslovak "resignation of her rights to thethe self-propelled grain combine in favor of Hungary"former had not been an important

* In Poland the Socialist Market Section of the Laboratory of Economic Research (created in the Ministry of Foreign Trade inas the mission of analyzing the scope and criteria of intra-Bloc division of labor. eeting in Prague in8 of Sino-Soviet Blocinvited by the Czechoslovak Institute for Economic Sciences, it was decided that the various country institutes would prepare drafts on "the theoretical foundations and perspectives on the development of the international division of labor among the socialist countries." The discussion, presumably to be helda to deal with generaland the position of individual countries and economic* See, below.

Ln other lnstancea,EMA member has refused tofrom productionachinery model or type, which itery Inefficient or costly basis and which logically should be manufactured largely by other CEMA countries. Poland, for example, has successfullyiew advanced in CEMA discussions that it should not develop extensively In the automotive field, which Czechoslovakia and East Germany generally have developed more efficiently. The Soviet delegates reportedly did not attempt to influence or resolve the Issue. 6k/ In such oases the greatest obstacle to coordination la thc fearEMA ceaber of having rigidity imposed on its Industrial structure. It is sometimes argued in the Soviet Bloc that greater efficiency could later be achieved, in order to Justify the continuance of autarkic policies which appear toisallocation ofin the short

A rough general pattern of specialization waa recommended6 for automobiles, trucks, andhich, however, would not entail on theharp departure from the existing pattern. There have been some isolated instancesr at least appearancesofor abandonment of production in accord with this recommended general pattern. For example, the East German Werdau plant reportedly ceased output of heavy passenger buses and shipped its machinery and equipment to Ikarus in Hungary and to Skoda in In thla Instance however, special factorshift largely to military output) dictated this step by Werdau. Inoland announced that it hod arranged with Czechoslovakia tohassis of the Skoda type to be used in producing Polish buses. Itot clear, however, whether the importation of this chassis will be sizable or whether thiswill mean any diminution of current or planned Czechoslovak work In bus assembly.

The sector of transportation machine building (railroad equipment) also seems to be susceptible of considerable division of labor, but the actual record of agreements* appears to beonfirmation of historical specialization, Involving considerable duplication among the CEMA states. Reportedly, however, future production plans for such Items aa diesel locomotives involve some specialization as to

See Appendix A.

According to another recommendation, steam turbines of0 kilowatts (kw)w would be produced only in the USSR, East Germany, and Czechoslovakia, and the less industrialized countries would not attempt to enter this field. The largest, morew, would be mode only by thc USSR. Thla recommendation seems generally to have been followed, although inast Germany announcedtow

In these and other Instances the recommended specialization seems to relate primarily to the creation of new production facilities and new products and would notignificant curtailment orof existing output. Thus, ln referring to the discussion of specialization ln machine building at the CEMA Plenum in Bucharest lnhe Polish Deputy Premier, Jaroacvlcz, said that "special attention was paid to specialization in the production of new goods, of which so far insufficient quantities hove been produced." This statement was related to the necessity for increasing series70/

Thus far, collaboration in machine building has generally been more active ln standardization and technological exchange than in strict specialization of production. InEMAonference in Prague, reportedly for the purpose of coordinating the development, design, and production of machine tools ln the Soviet Bloc. The conference recommended that auchlne tools be standardized and that new designs be coordinated by The Institute for Machine Tools in Karl-Marx-Stadt, East Germany, has been designated by CEMA to standardize machine tool models.

ater,onference of the Soviet Bloc on "Speclallta-tlon in the production of metal /Tutting/ machine.tools, woodworking machines, and forge and foundry installations" held ln the SovietResearch Institute of Metal /cutting/ Machine Tools in Moscow, recommendations were worked out for "broadening the specialization of production, which wouldore rational use to be made ofcapacity, research workers, and ." Thealso recommended "the expansion and distribution of production" of automatic machine tools, machine tool aggregates, automatic lines, and specialized machine toolsigh

Standardization of steel rolled sections and estimated resultant saving of steel wasubject of discussion by the CEMA Machine Building Committee inhj This committee also adopted recommendationsrdlnatlng plans for research and developmentarticularly with reference to chemical equipment.oreover, it hao been emphasized that such collaboration within the Soviet Bloc will facilitate more effective specialization andprogress of enterprises within on industryfor example, of the machine tool Industry in Eastj/

Tbe CEMA Plenum in East Berlin in6 reportedly adoptedon "problems of technicalhich,among other things discussed the reduction of obsolescence of metal-cutting machines and machines and improvements of

** Direct cooperation among several plants in different CEMA countries, involving some modification of the product mix, also has developedimited scale.

During the last several years, cooperation within the Soviet Bloc also has developed significantly with regard to engineering andprojects in the underdeveloped countries. The most important instances are the Soviet-Egyptian and Soviet-Syrian economicn which the USSR arranged to subcontract segments of Soviet projects to individual European Satellites or to have several of them collaborate in complex projects. Thc USSR probably exercisescontrol but encourages the Satellites to initiate contracts and execute the projects of interest to them. The United Arab Republic probably will make the long-term payments to the USSR, which will settle withhorter period of time. This system has the advantage to Moscow ofoordinated and more effective penetrationwhile strengthening the Satellite economies and promotingln some types of engineering equipment and services. Such activity is coordinated generally by the CEMA Committee for Foreign Trade and the secretariat, probably with the participation of the Committee for Machine Building. The Soviet State Committee for Foreign Economic Relations alsorominent role, perhaps handling much of the detailed Implementation and Insuring Soviet control. In late9 the State Committee for Foreign Economic Relations reportedly told the country planningthat the construction of the Aswan Dam, an important part of the Soviet-Egyptian agreement,ask for CEMA rather than for the USSR

V. Metallurgical Industry

* This committee, with headquarters in Moscow, reportedly has thesections: coke chemistry, pig iron, ore dressing, rolled material, steel plants, material distribution, technical problems of plantresearch and training, and foreign trade/

The work of the CEMA Committee for Ferrous Metallurgy* has focused on two general groups of problemstechnological improvement and critical supply situations. The technological discussions may have rather general application, or they may relate primarilyarticular plant. The former type is illustratedeeting of the coke chemical section in Prague at the end ofhich, among other things, agreedystem of classification of grades of hard coking coal and discussed the recommendations of experts regarding technological80/ An example of specific plant discussionoint meeting in8 of the pig iron and ore dressing sections at the Danube Metallurgical Combine, Stalinvaros, Hungary, to examine suggestions for improvement of the operation of the.blast furnace and agglomerating plant. Ol/ Polish specialists, among others, figured prominently. Chinese Communist delegates have observed such discussions, although mainly at meetings of the full committee. They eventually maymore

In the area of supply problems, the committee ls assuming anprominent role. ajor objective seems to be toealistic picture of short- and long-term deficits of critical items and to recommend appropriate policies for consumption, industrial devel-ment, plant construction, trade, and specialization. Considerable attention, for example, was devoted to anticipated shortages of certain grades of cokingroblem which ls expected to be solved only to seme extent byilateral agreements. 8j/ It is doubtful, however, that specific allocations are recommended to be carried out by these bilateral agreements.*

The initial basic step of acquiring realistic data froa the CEMA members evidently has entailed difficulties for tbe Committee for Ferrous Metallurgya problem shared by the other committees. With regard to steel pipe, for Instance, information presented to thein the summer8 indicated an expected ehortage5OCO metriceappraisal by Novemberorrected estimate

This fact and other informationeries of recccaaendations by the committee toh Plenum of CEMA (Prague,n "specialization and cooperation" in thc production of individual types of rolled products and pipes up CEMA adopted thethat the membern preparing their plansmphasize the production of certain specified types of steel products.

* It is reported that Polish delegates,9 trade talks with Yugoslav representatives, referred to CEMA "allocations" ofercent of Polish cokeasis for asserting inability to meet the Yugoslav request. This assertion, however, subsequently was not fully sustained by the Poles, who finally agreed to meet half of the Yugoslav* Tonnages are given In metric tons throughout this During CEMA discussions in7 the deficit in steel pipe production was estimatedonsonsons These totala did not make allowance forimports from the West. Bp/ The estimated production or pipe6illion tons in the Soviet Bloc,illion In the USSR. The Bloc total is planned toillion tonshc anticipated deficits, although relatively small, may consist of critical types and sizes.

The Hungarian .deputy minister of metallurgy and engineering later publicly stated that the Prague CEMA Plenum "coordinated the sets of rolls to bessessed the requirements which Insure theindustryntil Be added, without amplification, that "certain countries will manufacture various types of rollod goods for all

Thepparently related primarily to construction of new rollingnd called for expansion in the output of sheet

(by Czechoslovakia, Poland, Hungary, andn the output of seamless and welded pipe In 5mil and largo (moreillimeters) diameters for petroleum and gas pipelines (by all CEMA countries exceptnd in the outputide range of other products. the emphasis on pipe relates partly to the long-term project ofetroleum pipeline from the Ural-Volga region ln the USSR to Poland, East Germany, Czechoslovakia, and Hungary.* In the CEMA work planhe committee was directed to prepare further proposals for "Increasing the production of ferrous metals (pig iron, steel, rolled steel, andnd the development of the raw materialiron ore, coke,or frugal consumption of ferrous metals andf technically Improved producta which require lessreferential increase of coking-coal resources." These proposals were to be ready for consideration at the next Plenum scheduled for9 in Tirane, Albania, and actually held in mid-Hoy. go/

CEMA efforts to overcome the acute shortage ofajor problem in the pipeline project, may prove to be generally successful. However, the broader objective of coordinating the output of rolled productseven if restricted to new plant construction, would be much more difficult to achieve.

A past attempt6 to workroad specialization and exchange of rolled products and pipe turned out to be "nothing moreipe Another CEMA recommendation which waa not fully implementedlan for Poland to concentrate largely on the production of steel sheets and plates and Czechoslovakia on the manufacture of steel It la true, however, that Poland now haa tho only high-speed continuous wide-strip mill ln the European Satellites and thatla the largest producer of pipes and tubes.

In general, each Satellite has sought self-sufficiency In the output of various Iron and steel products, and CEMA efforts to coordinatehave met with relatively little success. There haveewin which CEMA had at least an indiroct "effect in modifying country piano. In East Germany, for example, CEMA may have been"for the East German decision, in the planning, not to expand blast furnace facilities but rather to depend more on importation of pig This policy is logical because of the lack of good-qunllty iron ore and other raw materials ln East Germany.

iscussion of this project, see VI, p.elow. ** These efforts may have included consideration of Imports from the Heat, in the event of insufficient output by tho Soviet Bloc, but there

is no evidence that CEMA discussions dealt with this Inowever, the Polish planning chief stated: umber of years an exchange of various rolledrofiles has been developing between Poland ando details were given.

Planning for the future product mix ln individual countries also seems to have been somewhat influenced, at least indirectly, by CEMA. In Czechoslovakia, for instance,0 plan for rolled steel calls for an appreciable increase in the percentage of structurals and bars, whereas the Polish planharp drop in the percentages of theseuggesting at least bilateral coordination, probably under CEMA sponsorship. Moreover, the East German Import plan for rolled steel and pipe90 callsizable Increase in imports from Poland and Czechoslovakia, as well as the

The future nature and intensity of lntra-Bloc specialization and cooperation ln ferrous metallurgy will be shaped primarily by Soviet policy, perhapsreater extent than in other industrial sectors. The European Satellites are becoming increasingly, perhapsdependent on the USSRupplier of the basic materials for ferrous metallurgy. zechoslovakia, for example, is to receive from thc USSRillion tons of iron ore, three times as much ashen the USSR suppliedercent of the imports. 9j/ In Poland, aboutercent of the Imports of ore will be from the USSRnd the dependence will become even greater as productionimilar situation exists for East Germany and Hungary.

The CEMA Committee for Nonferrous Metallurgy* also considers the general situation of supply and production and various technological problems, but it does not seem to discuss specific questions of cooperation and specialization as extensively as does its counterpart for ferrous metallurgy. In general, although there have been some changes in the pattern of production (for example, increased output of primary aluminum in the major European Satellites other thanhe historical specializations, as governed largely by localized sources of raw materials, have continued with relatively little modification. Thus Polandeading eastern European producer of zinc, Bulgaria of lead, Hungary of bauxite, and so on.

For the past few' years, there hasradually increasing trend toward more intcrcountry cooperation, particularly in the processing of ores and minerals, which CEMA has stimulated at least indirectly. In Hungary the Ajka alumina-aluminum works, for example, was5 through Soviet and Czechoslovak technological

Much attention has been devoted in CEMA committee meetings to cooperation within the Soviet Bloc in technological measures to improve quantity and quality of output. These discussions, however, may have

" ecretariat in Budapest, this committee has sections for light metals, ore preparation, and probably several others.

etailed analysis of production capacity ina-nr countries. Such reportedly vas the caseeeting inf the section for preliminary processing of nonferrous metals, during which the Soviet and Polish delegates did notroposal by the East German, Czechoslovak, and Hungarianto make known detailed data on capacityasis for extended cooperation in the Such an objection, although allegedly made on flimsy technical grounds, suggests an unwillingness to expand cooperation to the maximum. More recently, however, such reservations may have been somewhat reduced.

In8 the Committee for Nonferrous Metallurgy wasCEMA to prepare suggestions, on the basis of analysis of theplans for the period upincreasing the resources

and production of copper, aluminum, lead, nickel, and zinc. Also ln collaboration with the Committee for Machine Building, thc Committee for Nonferrous Metallurgy was to prepare suggestions on economizing in the consumption of nonferrous metals. TheBe suggestions were to be ready for consideration at the scheduled April/

VI. Petroleum Industry

The increasingly significant role of CEMA,upplement to direct Soviet European Satellite bilateral negotiations, is well illustrated by the long-term pipeline project. The projected system will transport petroleum from the Ural-Volga region in the USSR to Poland, East Germany, Czechoslovakia, snd Hungarythe latter two to be servedouthern section via western Ukraine and Uzhgorod. The system, which reportedly will be completed for Poland and East Germany by3 and the other two countries by4illarge build-up of petroleum refining and especiallyetrochemical industry. East Germany, scheduled to be thc largest producer, will be able to raise Its annual importation of petroleum from the USSRillion tons: nearly five times as much as An announcement in late8oviet-East German agreement disclosed that Soviet Specialists were then designing the pipeline project and were also to assist East Germany in the constructionetroleum processing plant and in the foundationetrochemical industryabor3imes as high as In our present chemical Industry based on brown/ Similar technical aid is being given by the USSRthe Other Satellites/

During this time thc CEMA committees for petroleum und gas, ferrous metallurgy, and machine building also were engaged in preliminary The work8 culminated in the first meeting of the working group, for the petroleum pipeline onoinciding withh Plenum of CEMA in Prague- The Soviet representatives presented

rr t

a series of proposals as to the procedures for planning the construction of the pipelines, the supplying of pipe and other materials, the financing of the various sections, and the timing of their/

These proposals and thc ensuing discussion suggestombined multilateral (CEMA) and bilateralat minimizing the effect of reservations by individualand at securingfrom the Satellites.

The USSR, by not relying wholly on bilateral negotiations, apparently hopes to enhance the concept of an integrated group project, mutually beneficial and, by implication, callingreater effort by each Satellite than might otherwise be the case. Thus the Soviet program surprisingly not only envisaged each Satellite's using its ownand funds to build the portion of the line in its territory but also each Satellite's participating in constructionather lengthy portion (ofithin the USSR (from Mozyr in the Belorussian SSR to the Polish border). It was even suggested that the Satellites might participate in building the more eastern Soviet section from the Volga oilfields to Mozyr. Despite some Polishthe Soviet program seems to have been incorporated in essence In the resolution of the CEMA Plenum.*

Follow-up action was also to be both bilateral and multilateral, with perhaps even increasing use of the latter. Thus the bilateral phases of further discussions were to be conducted largely under the aegis of CEMA. Further organizing measures during the next few months, especially relating to increasing the output of large-diameter pipe in Poland, East Germany, and Czechoslovakia, were to be worked out Jointly by the four CEMA committees for petroleum and gas, ferrous metallurgy, machine building, and. transportation. The Committee for Petroleum met in Bucharest9 to discuss further the pipeline

* Poland ultimately might secure an adjustment in the terms governing the procurement of Soviet petroleum. Moreover, Poland and the otherprobably will secure great benefits arising from the laterof the petroleum and petrochemical products. To emphasize the value of the pipeline project, the Polish planning chief stated in9 that "the expenditure on the import of liquid fuel will goercent, while at the same time the consumption of oil products5 will go upercent, compared" lOU/ Theis misleading because his Import expenditure figure apparently excludes the cost of the crude oil and of the construction of theand new refinery. The ultimate economic gain, however, undoubtedly will be substantial.

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project and other aspects of9 vork/ Presumablyh Plenum of CEMA, held at Tirane in mid-May, reviewed theof these groups.

VII. Chemical Industry

The manifold activities of the CEMA Committee for Chemicalave related generally to the ambitious expansion of this industryin almost all CEMA countries. Although this expansion began earlier the basic impetus came from the decision announced in Moscow in8 to accelerate the enlargement of the industry in the USSR. It wasthat the program could be mutually beneficial and should be pushed simultaneously in the key European Satellites as well as in the

The expansion would help in solving at least three general problems that limit over-all industrial development. lOg/ First, the problem of short supply of raw materials and semifabricated products in theindustries can be partly met by extensive substitution of chemical products, especially plastics and synthetic rubber. Second, production of artificial fibers, leather, rubber, and the like can help greatly in rapidly expanding output of consumer goods. Third, chemical fertilizers in large amounts are requisite to intensification of agriculture.

* -The Polish Central Agency for the Oil Industry had worked out by March the detailed route in Poland, and blueprints for various sections of the planned refinery at Plock had begun to arrive from the USSR. Poland's share of cost is to beillion/ ** This committee is located in East Berlin, under the chairmanship of Dr. Winkler, head of the chemical industry department of the East German State Planning Commission. The committee, which is large, has working groups as follows: Inorganic Products, Dyestuffs, Chemical Fibers, Synthetic Rubber, Plastics, Cellulose and Paper, Tires, Lacquer and Paints, Petrochemistry, Photochemistry, fnarmaceutics, Ethyl Fluid, Phenol Waste Water Disposal, Fertilizers, Insecticides, and Long-Range/

*** This decision may havehange in Soviet CEMA policy or at least the inability of CEMA to promote specializationtrict sense. ast Germany reportedly was designated as the CEMA member best suited to develop the chemical industry, and other members, notably Poland, were not to invest greatly in this sector but were to become more dependent on East Germany for/

From the outset6 the CEMA Committee for Chemical Industry has been concerned with the current and projectedgreedndgreedf the basic chemical products in

thc European/ Much of this discussion, however,confirms the natural, historical specialties of the various countries, such as potash fertilizer in East Germany and the USSR; phosphorus raw materials in the USSR; soda ash in East Germany and Poland; and coal chemicals (especially benzol and naphthalene) in the USSR, Poland, and' Czechoslovakia. Ul/

Comparatively few new specializations (that is, those limited to one or two countries) seem to have been recommendedignificant scale by CEMA. The general emphasis isroad-range simultaneous expansion of the Industry in most CEMA statea. h Plenum of CEMA ln Prague in8eport of the Committee for Chemical Industry in which, among other things, the following increases ln chemical production were Indicatedin comparison with the level: USSR byimes; East Germany byoland; Czechoslovakia; Hungary byumania by U; Bulgaria/ TO assist this ambitious development program, the CEMA Plenumeries of recommendations to the countries and directed the committee to continue to prepare suggestions referring to the country draft plans. The recommendations generally requested that the member countries increase prospecting for ore (phosphorus deposits, for example) or expand production or such items as cellulose.

The Plenum alsoeries of detailed committeeconcerning cooperation and specialization in the production of various products. Plastics, for example, generally are to be developed iu all CRMA countries (exceptut certain types of plastics are to be produced byew countries. Similarly, synthetic rubber in general is listed for all countries except Albania, Hungary, and Bulgaria, whereas one type, butyl rubber, is indicated only for the USSR and Rumoniu. The emphasis appears to be on intercountry cooperation in planning new capacity and target dates for construction. One purpose le to avoid overemphasis on certain products. For instance, the total capacity indicated in the country draft plans for chloroprene rubber would greatly exceed the total demandoordination. Involving some reduction, therefore was recommended to Poland, Rumania, and Detailed suggestions also were made with regard to chemical fibers and mineral fertilizers.

* In Kant Germany, more than half ofillion Deutsche Mark East earmarked for the chemical industry up5 is to be used for /

Attention was directed to the shortage of important types of chemical equipment.* The Committee for Chemical Industry was directed towith the Committee for Machine Building to prepare by9

an exact statement of needs. The two metallurgy committees are also to collaborate in investigating problems relating to theof special steels, nonferrous metals, and alloys required for chemical equipment. Asonsiderable part of the effort relates to technological improvement. CEMA has sponsored meetings of technicians, such as one ofays in Dresden in8 attended byhemical and engineering experts from seven CEMA The draft plans5 includeivision of the tasks in the field of research, designing and machine building" in the chemical industry. lib/

Another area of significant collaboration stimulated by CEMA is bilateral and multilateral development projects. 7or example. East Germany aad Czechoslovakia granted long-term credits to. assist Poland in the development of sulfur/ Significant collaboration also haB been carried on with regard to the production of soda ash and the exploitation of Rumanian natural gas. oint plan announced inlant for production of apatite is to be constructed on the Kola Peninsula in the USSR to supply the needs of Poland, East Germany, and/ h Plenum of CEMA made additional recommendations concerning the acceleration of this project.

One of the most publicized multilateral projects is the construction, begunf the biggest cellulose plant in Europe in the Danube delta near Braila, Rumania. The first building phase of the project is to be completedO; i0 the first yearons of reed are to be processed,0 tons of cellulose as basic material for paper or viscose and yielding various chemical byproducts. Production of cellulose ultimately will be raised/ Rumania has half-shares in the project, with Czechoslovakia, East Germany, and Poland participating by supplying harvesting and processing equipment, technical aid, and facilities for land and water/ This project is being administered generallyixed commission from these countries, with over-all guidance from the CEMA Committee for Wood and Cellulose, which apparently was absorbed by the Committee for Chemical Industry

A'considerable part of the chemical development program in theSatellites is to be based on Soviet credit and supplies, Although this phase is largely bilateral, it comes atunder the aegis of CEMA. Thus the director of the East German

* CEMA has stressed coordination in locating and mining sulfur but has decided that each CEMA member should cover its requirements for sulfuric acid because shipment over long distances is/

People-Owned Enterprise for Electrochemistry and Plastics referred to the Soviet credit* program for his key sector as having been worked out by/ presumably in collaboration with Soviet planning and industrial leaders. :


VIII. Electric Power and Coal Industries


At the6 plenary session of CEMA in East Berlin it wasthat plans would be worked out9 for exchange of electric power among the CEMA "members by means of main connecting linos which wouldommon/ Subsequently, there wastanding Committee for the Exchange of Electric Power and Exploitation of the Water Power of tho Danube to meet primarily in Bucharest. The main function of this committee is to develop recommendations for the unification of power systems and for an increased exchange of electric power on the basisational exploitation of power resources, especially to serve the countries1 raw material branches of industry. The committee is also responsible for preparing suggestions for wider and more effective use of low caloric fuels in thermal powerplaats and for working out plans for the complex utilization of the water power Of the

eeting of the committee in Moscow In7 it was announced that the group had alreadyecision onumberilovolt (kv) transmission linesecision on the basic lines to be followedroject to use the/ More recently, there has developed the conceptasic systemv lines and supporting lines. This higher0v) implies greater emphasis on inter-Satellite movements of electric power.

Int Bucharest, the Power Committeeeport on the analysis of the development of power in the" and "discussed the possibilities for expanding cooperation in the/ The committee was to submit byeneral report on further recommendations for unification of the power systems and mutual supply of electriceport to be discussed in Aprillenary session in/

* East Germany eventually will repay the loans primarily by shipping polyvinyl chloride to the/

. y-

CEMA discussion also has stimulated multilateral and bilateral cooperation in this field. or example, preliminary work

was completedower grid to connect East Germany, Poland, and Czechoslovakia. This grid would exploit unused reserves inherent in the differenceours ln peak consumption/ which, according to one Polish estimate, might be equivalent to an erected capacityegawatts/ After the completion of this system, reportedly another would be establishedinking the USSR, Hungary, Rumania, and/ In9 it was announced in Hungary that "very promising talks are in progress on the establishment of power transmission lines from the USSR" to be connected with inter-Satellite/ h Plenum of CEMA reached an agreement (details undisclosed) to link the Hungarian and Polish.systems with the western USSR.

A significant bilateral agreement, announced in


rovides for the constructionigh-output powerplant inwor which Czechoslovakia will deliver the power equipment on credit. In return, Rumania will deliverillion kilowatt-hours (kwh) annually to facilitate industrial development in Slovakia. This is similar to an arrangement7 betweenand/ Czechoslovakia also is collaborating with Hungary, particularly ln construction planninganube hydroelectric project at Kagymaros, which presumably* will supply Czechoslovak and Hungarian industry withillion kwh annually.* The project also will facilitate irrigation and improve shippingourse of/

* CEMA earlier had recommended support for Hungary in the increase of power production to permit further development of the aluminum industry in both Hungary and/

One of the most notable instances of multilateral collaboration is the planned construction5 of the largest power combine in Poland,apacityw. The combine is to be in the southwest corner of Poland in the area between Zittau, East Germany, and This project will exploit the brown coal reserves of the Turow-Turoszow area, estimatedillion tons. Inast Germany agreed to supply most of the machineryew mine in this area and for the expansion of theine, and East Germany extendedredit0 million rubles. Apartowerplant built6 In0 mw) by Polish, East German, and Czechoslovak engineers, other powerplants will be built near0 mw) in Turoszownd near0 mw). Part of the coal will be delivered to the East German Hirschfelde powerplant, which will transmit power to Poland and/ The coal also will be used by briquetting and chemical plants. In its report to the CEMA Plenum in8 on

Its bilateral agreementsntered Intohe USSR stated, among other things, that it will aid this power/

The CEMA Committee for Coal Industry, under the chairmanship of the Polish Minister of Mines andeadquarters staff in Warsaw, also is concerned with questions of technical development, output, and supply. Por example, during an extended meeting in8 in Moscow, this committee examined basic trends ln the member countries in coal mining technology, mineshaft construction, open mining techniques, and enrichment of coal. The committee then agreed on recommendations to guide the countries in their long-term/

In addition to such matters, the committee is said to have recommended allocations of coal supplies to the governments of the Soviet Bloc, which passed the figures to the various foreign trade ministries for use in bilateral trade negotiations. ilateral arrangement the recommended allocation is not necessarily consumed by the other trader but may be shipped by the latterhird/


The committee has also examined questions of planned development, and recommendations have been passed, according to which the CEMA members reportedly obligated themselves to reach an indicated capacity byspecified new coal shafts or reconstructing old/ It is clear, however, that the CEMA nations, especially Poland, have not been dictated to regarding the distribution of their coal and that they have not been penalized through the CEMA framework for nonfulfillment of their commitments. Polish cutbacks in coal shipments within the Soviet Bloc in0owever, resulted largely from short-terra economic necessity. ecurrence of such action by Poland on that scale seems unlikely in view of the Polish planned outputillion tons0illionillion tonsftp/ Moreover, cool-marketing difficulties in the West may prove to be morehort-term matter.

The indicated collaboration of East Germany, Poland, and Czechoslovakia In powerplant and coal development is reminiscent,mall scale, of speculation several years ago regarding the possible evolution ofregional integration, which, if carried far, could conceivablyounterpoise to Soviet dominance in the Soviet Bloc, iklf increasing cooperation may be expected in specific projectspower, Industrial raw materials, chemicals, machine buildingthe creation of such an 'integrated regional unit is not likely. The heritage of nationalist rivalries remains an important factor. although the USSR, especially sinceas criticized the European Satellites for inadequate cooperation within the Bloc, Moscow probably would oppose extensive sectional integration, fearing

Type of Machinery

Machine toolB d/

Metal-cutting types

Horizontal boring machines

Large (sorenches)to medium (upnches)

Vertical boring machines Sear grinding machines Thread grinding machines

Ketal-forming types

Forge-press equipment Hydraulic presses (large) Forging machines (small snd medium) Presses (small and medium)

Locomotives and rolling stock


0one) Electric (upons) Diesel (moreorsepower) Diesel (lessCO horsepower)

East Czecho-Oeraany Slovakia Poland Hungary Rumania








-ftc a

Sast Czecho-

Typo of Slovakia Poland Hungary Rumania Bulgaria

Electrotechnical equipment (continued)

Ferromagnetic texture X

Glass Tiber and other insulating X

Mica X

. Transformers. _ '

3-phase upv




Antifriction bearings j/


Textile spindle

Cylindrical grinding

a! This unofficial, partial list is derived from scattered sources of all types and attempts tc per-tray the over-all picture8ew instances the specialization Is not scheduled to begin. The USSR Is not included, because it produces virtually all items, relying little on the European Satellites. With some exceptions, these recommendations have been followed.

machine building categories are arranged by number according to the sections of thefor Machine Building and their reported areas of responsibility.

h Plenum of CEMA in9 in Albania lt reportedly was decided that "specialmills would be produced primarily in East Germany and Poland, footnotes continued on/

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Original document.

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