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Czechoslovakia FOREIGN TRADE
An important characteristic of the Soviet model that was
imposed on Czechoslovakia in 1948 was the attempt to insulate the
domestic economy and minimize the impact of world economic
trends. The system accomplished this in part by severely
restricting foreign currency transactions and confining them to
official channels at fixed and favorable exchange rates. Within a
few years, the exchange rate had lost its historical basis and no
longer bore any direct relationship to purchasing power in other
currencies. The Soviet model tended to treat foreign trade as a
minor aspect of planning. Imports were simply those materials
needed to meet the net material balances for the economy, while
those commodities that were least needed for the national plan
were surrendered for export. Cost was not a real consideration
because there was no basis for estimating cost; essentially the
central authorities made a political decision that commodity X
was needed enough to give up commodity Y for it. Such decisions
were often of minor importance in the large Soviet economy. The
same was not true in Czechoslovakia, where foreign trade played a
prominent role in the national economy. The establishment of
state-owned foreign trade enterprises, which served as buffers
between foreign companies and the domestic producers of exports
and consumers of imports, further isolated the domestic economy.
The foreign trade companies bought Czechoslovak goods for export
at domestic prices and sold foreign goods to Czechoslovak
customers at domestic prices; but the other half of these
transactions, involving actual foreign trade, took place in
foreign currencies in foreign markets. The government budget then
made adjustments to compensate for any unwanted gains and losses
caused by varying foreign and domestic prices.
The foreign trade enterprises successfully carried out the
government's policy of rapidly redirecting the bulk of the
country's foreign trade from noncommunist countries to communist
countries in the period from 1948 to 1953. Many observers
contended, however, that the new system had seriously adverse
effects on the economy. Isolating domestic producers of export
products--primarily manufactured goods--from developments abroad
slowed the introduction of new technology, the upgrading of the
appearance of products, and the development of sales and service
staffs with adequate parts inventories. Isolation hampered the
development of export industries and products, reinforcing the
autarkic bias of the Soviet model.
After Stalin's death in 1953, Czechoslovak trade with Western
countries gradually revived, although it still was far below
prewar levels. More than two-thirds of the foreign trade
continued to be with Comecon member states. Because of its
relatively advanced industrial position within Comecon,
Czechoslovakia initially had a secure market for its machinery
and equipment exports. As years passed, however, the Soviet Union
absorbed growing portions of Czechoslovakia's export capacity and
very soon the country came to depend on the Soviet Union for
imports of raw materials as well.
By the 1960s, it became clear that the country's dependence
on foreign trade was substantial and that a restructuring of the
economy was necessary. In the 1970s, the government authorized a
number of large enterprises to deal directly, or through
affiliations with Czechoslovak foreign trade companies, with
foreign purchasers of their products. To encourage further export
and modernization, the central authorities permitted Czechoslovak
firms to retain a regulated portion of export proceeds.
Authorities also acknowledged that the economy seriously lagged
behind the noncommunist industrialized countries in application
of new technologies. In response, they increased imports of
Western products and processes that incorporated advanced
technology.
In the mid-1970s, the terms of trade for Czechoslovakia began
to deteriorate rapidly. In 1975 the pricing system used to set
values on imports and exports in trade between communist
countries was adjusted to make them more current and closer to
world prices
(see Appendix B).
The adjustment raised the price of
fuels and raw materials (primarily Czechoslovak imports) much
more than it did manufactured goods (the country's main export).
The same trend manifested itself in trade with Western
industrialized countries. During the late 1970s, the terms of
trade continued to worsen; greater and greater quantities of
exports were required to purchase the same volume of imports. The
combination of worsening terms of trade and the difficulty of
expanding exports caused Czechoslovakia's trade imbalance to grow
in almost every area. Between 1975 and 1979, the country's excess
of imports over exports was nearly US$1.2 billion with the Soviet
Union, US$690 million with Eastern Europe, and US$3.3 billion
with noncommunist developed countries. These imbalances emerged
despite efforts to conserve fuel and raw material use, to slow
the volume of other imports, and to increase exports.
During the 1970s, Czechoslovakia, like other countries of
Eastern Europe, turned to West European credit sources to obtain
financial help for imports as well as longer term investments in
modern technology. Czechoslovakia did not publish information on
these credits. However, one Western estimate placed
Czechoslovakia's hard currency debt to the West at the end of
1979 at US$4 billion gross and about US$3.1 billion net.
Czechoslovak officials had been much more prudent in building up
a foreign currency debt than had several other East European
nations, however, and the country's credit standing remained
good.
Beginning in 1980, Czechoslovakia was able to achieve a trade
surplus with noncommunist countries, but only by drastically
curtailing imports. When Western banks tightened credit to
Eastern Europe in 1982 (largely in reaction to Polish
insolvency), Czechoslovakia redoubled its efforts to curb imports
and pay off its debt. This cautious attitude continued to prevail
even after the creditors' policy eased. The government's stance
did have the disadvantage of depriving Czechoslovakia of
potentially helpful Western technology. However, at the end of
1984, Czechoslovakia could boast one of the lowest net hard-
currency debts per capita (about US$15 per inhabitant) in Eastern
Europe; only Bulgaria's debt was lower. With the Soviet Union, by
contrast, Czechoslovakia continued to run a substantial deficit.
In the mid-1980s, according to official statistics,
Czechoslovak trade activities remained overwhelmingly oriented
toward intra-Comecon trade. Within Comecon, in keeping with the
plan for regional specialization set forth in the Comprehensive
Program of 1971, Czechoslovakia concentrated on production of
machine tools and electric railroad locomotives; the
traditionally strong Czechoslovak armaments industry also
remained important. In 1985 almost 78 percent of total
Czechoslovak foreign trade turnover was with Comecon members.
Trade with "developed capitalist countries," by contrast, was
listed at just under 16 percent; and developing countries
accounted for over 6 percent. Most Western analysts believed that
official Czechoslovak methods of calculation tended to overstate
considerably the value of trade conducted in transferable rubles,
i.e., with Comecon partners, and to underestimate the value of
hard currency trade with noncommunist countries. Nevertheless,
the general structure of Czechoslovakia's foreign trade was
unmistakable.
Czechoslovak trade was heavily concentrated among a
relatively small group of countries. Five countries--the Soviet
Union, the German Democratic Republic (East Germany), Poland,
Hungary, and the Federal republic of Germany (West Germany)--
accounted for 71.7 percent of all foreign trade in 1985,
according to official statistics. The Soviet Union exerted a
powerful influence over the Czechoslovak economy. In 1985 it
accounted for 44.8 percent of foreign trade turnover, according
to official statistics (see
table 10, Appendix A). In 1985 by far
the most important export from Czechoslovakia to the Soviet Union
was machinery and various kinds of equipment, such as machine
tools, power generating equipment, instruments and laboratory
equipment, agricultural machinery, railroad rolling stock and
other transport equipment, and equipment for the food, textile,
and chemical industries. Such items made up over 60 percent of
exports to the Soviet Union. Other minor items were ores and
metals, clothing and footwear, chemicals, furniture, domestic
appliances, and beverages. Czechoslovak imports from the Soviet
Union, by contrast, consisted primarily of raw materials and
energy-related items; petroleum and petroleum products accounted
for almost 43 percent of import value, and natural gas and
electricity totaled 18 percent. Other imported products were
machinery and transport equipment, representing almost 10 percent
of total imports; metal ores, coal and coke, and pig iron and
ferroalloys made up almost 8 percent.
Second, third, and fourth in order of rank in Czechoslovak
foreign trade turnover were East Germany, Poland, and Hungary.
Other East European Comecon countries--Bulgaria and Romania--were
also of considerable importance (seventh and ninth in rank,
respectively). Czechoslovak exports to these countries in 1985,
according to official data, consisted mainly of machinery and
transport equipment, chemical products, and (especially to
Hungary) coal and briquettes. Imports likewise were primarily
machinery and transport equipment, chemical products, and various
other manufactured goods. Czechoslovakia also imported food and
animal products from Hungary.
Among noncommunist countries, an important trade partner was
West Germany (fifth in rank). Principal Czechoslovak exports to
West Germany in 1985 were various manufactured goods (especially
paper and paperboard, textiles, and iron and steel products),
mineral fuel products (briquettes, coke, and refined petroleum
products), and chemical products. Principal imports from West
Germany were machinery (textile- and leather-working machinery,
machine tools, and electrical machinery and instruments),
chemical products, and various manufactured goods. Other
significant trading partners were Austria, Britain, Italy, and
France. Engineering products, which accounted for more than 50
percent of all Czechoslovak exports, had a share of only 10 to 11
percent in noncommunist trade, owing to very strong and
successful West European competition. Instead, consumer goods,
metallurgical products, chemicals, and fuels and raw materials
were more important. With regard to imports from noncommunist
countries, Czechoslovakia in 1986 was especially interested in
the high technology offered by Western Europe and Japan (twenty-
fifth in rank). Particularly in demand were products from
engineering, electronics, and electrical engineering industries,
as well as biotechnology and pharmaceuticals.
As of 1985, Czechoslovakia also conducted substantial amounts
of trade with Yugoslavia, China, Syria, and Cuba. Czechoslovak
trade with the United States (twenty-third in rank) was modest.
In 1985 Czechoslovak exports to the United States included, among
other things, footwear and jewelry, glassware, steel bars, wire,
shaped steel, prepared or preserved meats, and hops. In 1985
imports consisted, among other things, of raw materials (hides
and skins, seeds for producing vegetable oil, and ores and
concentrates of base metals), specialized industrial machinery,
and printed materials. During the late 1970s and early 1980s,
Czechoslovakia had imported substantial amounts of grain from the
United states, but more abundant domestic harvests enabled the
country to reduce these imports in the mid-1980s.
Data as of August 1987
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