Why East-West trade?
The Polish economic morass raises a fundamental question. Has the West become too entangled economically with the Soviet bloc and has the time come to rethink the whole subject of East-West trade? Some voices, like that of New York financial expert Felix Rohatyn, go so far as to say the West ought to declare Poland bankrupt, put the burden of the Polish economy on the Russians, and stop financing an inefficient system, especially one inimical to Western interests.Skip to next paragraph
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Such a course seems attractive in its simple logic. Whether it is the wisest one, economically or politically, is another matter.
There is no denying the failures of the Soviet system. Poland is not the only member of the bloc in trouble. The Soviet Union itself owes Western traders and banks close to $20 billion and its economic growth rate has been steadily declining. Romania has a debt of $10 billion and, in order to export more food, has instituted food rationing. Czechoslovakia, one of the technologically most advanced in the bloc, has had to scale down its economic goals. Overall economic growth for the Comecon countries, the East European economic grouping, has slowed every year since 1976 and was down to 1.2 percent in 1980. The total East-bloc debt is nearing $80 billion. While the recession in the West accounts for some of the bloc's problems, including those of Poland which overoptimistically counted on exports to the West to pay for its heavy investment borrowings, the underlying flaws in the communist system are basically to blame for the poor performance and the inability to meet obligations to the West.
This is not to absolve the Western bankers of responsibility for the difficulties in which they now find themselves. The fact is, they have tended to look on the Eastern bloc as a stable market for Western exports, thinking the Soviet Union would pay the debts of its East European allies rather than risk destroying the bloc's credit-worthiness. The banks in effect went on a spree, with less than a keen commercial analysis of the projects underwritten or the economic policies of the communist governments. Few if any conditions were attached requiring financial discipline; often the terms were extremely low. Then, instead of cutting their losses when it became clear such countries as Poland were overextended, the banks proceeded to issue new loans to protect the loans already made. After the binge
Behind this binge lay political as well as economic considerations. By creating a web of economic relations with the East - so went the Kissingerian argument--the Soviets would have an incentive to moderate their behavior abroad. Helping build up consumer economies in the Soviet bloc, moreover, would create increased internal pressures on communist governments. At the same time, rising unemployment and recession in the Western nations made trade with the East all the more attractive. By pushing exports, such countries as West Germany have sought to save jobs, spur high-technology industries, and keep up competitive strength abroad.
To begin with, East-West trade is not so large as to arouse alarm. Trade with Comecon by the European members of NATO accounted for about 4 percent of their total world trade in 1980. For West Germany the figure was 6.5 percent, France 4 percent, Italy 3.5 percent, and Britain 2.3 percent. For the United States the figure was only l.7 percent. This is hardly a serious ''dependence'' on the Soviet bloc.