Dimensions of International Business

Transcription

1 Soviet Foreign Trade

2 Dimensions of International Business Previously published books in the series: William A. Evans, Management Ethics Frank Long, Restrictive Business Practices, Transnational Corporations, and Development

3 Soviet Foreign Trade The Decision Process H. Stephen Gardner Baylor University Kluwer-Nijhoff Publishing Boston The Hague London

4 Distributors for North America: Kluwer-Nijhoff Publishing Kluwer Boston, Inc. 190 Old Derby Street Hingham, Massachusetts 02043, U.S.A. Distributors outside North America: Kluwer Academic Publishers Group Distribution Centre P.O. Box AH Dordrecht, The Netherlands Library of Congress Cataloging in Publication Data Gardner, H. Stephen. Soviet foreign trade. (Dimensions of international business) Bibliography: p. Includes index. 1. Soviet Union-Commercial policy-decision making. I. Title. II. Series. HF1557.G ' ISBN-13: e-isbn-13: DOl: / Copyright 1983 by Kluwer-Nljhoff Publishing. No part 01 this Softcover reprint of the hardcover 1 st edition 1983 book may be reproduced in any form by print, photoprint, microfilm, or any other means, without written permission from the publisher.

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6 Contents Preface ix 1 An Overview: The Bureaucracy and the Plan The Foreign Trade Bureaucracies Foreign Trade Planning 7 2 The Party and the Government 17 The Communist Party 17 The National Government 23 Motivations of the Political Leadership 26 3 The Central Planning Agencies 35 The State Planning Committee (Gosplan) 35 The State Committee for Material and Technical Supply (Gossnab) 44 The State Committee for Science and Technology 45 The Ministry of Finance and the State Bank 48 The State Price Committee 54 4 The Foreign Trade and Industrial Ministries The Ministry of Foreign Trade The Industrial Ministries 5 Cost-Benefit Analysis for Foreign Trade Foreign Trade Efficiency Indices: A Brief History Efficiency Indices for Simple Commodity Trade Inadequacies of Domestic Prices Replacement of Prices with Full-Cost Indices Advantages of Wholesale Prices over FUll-Cost Indices Special Problems of Import Valuation vii

7 viii CONTENTS Efficiency Indices for Specialization Agreements 107 Efficiency Indices for Credit Deliveries 109 Efficiency Indices for Compensation Agreements 111 Efficiency Indices for Trade in Licenses 115 Practical Application of Efficiency Indices Foreign Trade Optimization Models 121 The Trzeciakowski Model 122 Shagalov's Basic Model 123 Dynamic Models 126 Interregional Models 128 Models of Socialist Economic Integration 128 Branch Models Empirical Analyses of Soviet Foreign Trade Decision Making 133 The Commodity Structure of Soviet Foreign Trade 133 The Traditional View 137 Fundamental Comparative Advantage 141 Cross-Sectional Commodity Studies Summary and Conclusions 153 Notes 157 References 171 Index 187

8 Preface The enigma of Soviet society is nowhere more strikingly manifested than in its economic relations with the outside world. Western business people, even those with representative offices in Moscow, often describe their negotiations with the Soviets as a veritable black-box affair. Offers for purchase and sale are funneled into the bureaucracy, usually via the Ministry of Foreign Trade, where they are digested for very long periods of time. When a response emerges, little is usually known about the level at which decisions were made, and even less is known about the criteria that were employed to make them. In the abstract, at least, foreign trade decision making in the Western market economies is a rather simple exercise. An American consumer will purchase a Toyota rather than a comparable Chrysler if its price, expressed in dollars at the market exchange rate, is lower. The influences of governmental tariffs, quantitative restrictions, foreign exchange controls, "buy American" policies, and the like, are usually of only secondary importance. In contrast, the Soviet consumer, whether an individual or an industrial enterprise, does not generally have the authority to order the importation of goods or services. That authority is concentrated at the top of Soviet society and administered through a labyrinthine system of overlapping bureaucratic agencies. Furthermore, those Soviet agencies cannot respond to price signals in the same way as the American consumer can, because Soviet domestic prices and exchange rates are themselves set rather arbitrarily by governmental agencies. Some of the questions this book will explore, then, are these: Which Soviet agencies are actively involved in the planning and administration of Soviet foreign trade, and what role does each play? What are the motivations of each of these agencies in the foreign trade realm, and to what extent are their motivations mutually consistent? How are decisions ix

9 x PREFACE made regarding the commodity and geographic compositions of exports and imports? To what extent are those decisions influenced by political, as opposed to economic, criteria? How does the institutional structure respond to changes in international prices, foreign and domestic supply and demand conditions, and the balance of payments? If the purpose of this book is to enlarge the window through which the inner workings of the Soviet "black box" might be seen, this is a task that can be accomplished only very imperfectly. The Soviet literature on foreign trade is rather limited and tends, with a few significant exceptions, to be self-serving, unanalytical, and redundant. Much of what would be useful to read, such as a 1976 Central Committee decree calling for reform of the foreign trade bureaucracy, is a state secret. Nevertheless, the bulk of the published literature on the subject has appeared in the last several years. For example, the 1974 edition of the instructions issued by the State Planning Committee to those involved in the compilation of economic plans devoted a chapter to the foreign trade sector, whereas the 1959 edition made little mention of the subject. 1 Particularly notable is the growth of the Soviet literature, including several full-length monographs, on efficiency criteria (cost-benefit analysis) in foreign trade planning? Growth of the monographic literature merely compensates, however, for a growing secrecy with respect to foreign trade statistics. The Soviet record in this field has never been very good, of course, as they have not published figures on their balance of payments, gold sales, or arms trade since the 1920s. Since the mid-1960s, although the physical volume of Soviet commodity exports has roughly tripled, the level of detail in the reporting of those exports has been cut nearly in half. Until 1976, for example, the trade yearbooks reported the value and tonnage of exports of seven different nonferrous metals. By 1977, those metals had been purged from the yearbook altogether. Likewise, 1975 was the last year for which the tonnage of oil exports was reported. If we hope to improve our understanding of Soviet foreign trade decision making, therefore, we must approach the subject from several angles to fully use the information we do have. In the first several chapters we shall look at the institutions and agencies that make or influence foreign trade decisions-their internal structures, their motivations, and their abilities to exercise decision-making authority. In the next several chapters we shall review the somewhat more theoretical Soviet literature on costbenefit analysis. That literature is revealing not only in what it tells us about the progress of Soviet economic science and economic planning but also in what it tells us about the departmental interests of those representatives of the Ministry of Foreign Trade, the State Planning Committee, and other agencies that are engaged in the methodological

10 PREFACE Xl debate. Finally, in the last chapter we shall review the statistical evidence to find what it can tell us about Soviet foreign trade decision making. In particular, we shall assess whether the evidence suggests that cost-benefit analysis has had an impact on the commodity structure of trade. Acknowledgments In one form or another, this book has been in the works for several years, and I have accumulated many debts. Edward Hewett sparked my interest in the Soviet economy, particularly its foreign trade sector, during my undergraduate years. Now, a decade later, he has continued to contribute to my education by his insightful comments on an earlier draft of this manuscript. Gregory Grossman guided me through my years of graduate work, suggested the subject of the present study, and has remained a source of encouragement. A four-month study tour of the Soviet Union in 1980 to gather material for the book was made possible by the exchange program between the American Council of Learned Societies and the Soviet Academy of Sciences, administered by the International Research and Exchanges Board. My host at the Central Economics and Mathematics Institute, Dr. G.L. Shagalov, arranged interviews with about a dozen Soviet economists and officials. A late draft of the manuscript also benefited from the comments of Soviet and East European scholars and business people working in the United States. Among these, the suggestions made by Jerzy Thieme were particularly helpful. Thanks are due to the administration of Baylor University for supporting the development and writing of this book in many ways. Sharon Fisher typed and retyped the manuscript with speed, accuracy, and enthusiasm. All errors and omissions are mine entirely.