East bloc likes earning capitalist dollars. Planned economies keep prices down, share of US market up
Consumers in the United States, eager to find a price or quality advantage among the imports pouring in, are increasingly thinking ``East.'' New York?, you ask. East Asia?Skip to next paragraph
Subscribe Today to the Monitor
Try Eastern Europe.
The falling value of the US dollar has pushed up the cost of imports around 19 percent since 1985, according to the Commerce Department. That's particularly true for products from Western Europe and Japan, which tend to export luxury items to the US, including cars, electronic equipment, and computer products. Import costs for goods from those areas are scooting upward, sometimes sharply.
Not surprisingly, given the dollar's slide, imports from Eastern Europe are also rising in cost, although in many cases the price hikes are far less than for goods from Western Europe and Japan. This means American consumers may find some real bargains in products from Eastern Europe, trade analysts say.
Total US trade with the six nations of Eastern Europe considered to be in the East bloc ``was slightly in excess of $2.3 billion in 1987,'' says Kevin Boyd, a Commerce Department economist. The six are Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania.
In addition, the US also maintains substantial two-way trade with nonaligned Yugoslavia, which is not an East bloc nation, but - for most Americans - is included in most discussions of Eastern European trade. Products from Yugoslavia continue to gain broad acceptance within the US. For 1986 - for which final trade figures are available - two-way US trade with Yugoslavia was around $1.2 billion, Mr. Boyd says.
Volume of trade small, but rising
The volume of US trade with the six East bloc nations is small, concedes Franklin Vargo, the Commerce Department's deputy assistant secretary for Europe. But, he notes, imports from the six nations have started to climb again, following the drop in imports in the early 1980s, when the US and Soviet Union were at loggerheads over such issues as the Soviet invasion of Afghanistan and the crackdown on the Solidarity trade union movement in Poland.
Both importers and retailers report that prices of Eastern European products appear to be holding steady more than imports from other regions. Why? The strong governmental role in Eastern European economies means central planning boards are instrumental in determining the price structure of products. For many Eastern European enterprises, winning market share in Western nations - or merely gaining access to Western nations in the first place - is as important as turning a profit.
Moreover, although Eastern European nations share a common geographical relationship, they are quite distinct. Quality - and the type of goods offered for export - can vary dramatically from country to country.
Take Yugos, those sometimes-scoffed-at economy cars from nonaligned, non-East bloc Yugoslavia.
Car enthusiasts may grumble about the quality of the Yugo. But price is quite another matter. The base price for the model GV is still considered the lowest-priced import in the US. When the car was first introduced into the US in 1985, the model GV had a base price of $3,990. That lasted into 1987, when the base price was boosted slightly, to $4,199.
Since Yugo officials reckon the average transaction price - what the customer pays at the retail counter - at about $4,700, the Yugo is far less expensive than such low-cost imports as South Korea's Hyundai, where a typical transaction price can reach $8,000 or more.
Sales of Yugos started off very slowly, around 3,500 in 1985; they rose to 36,000 in 1986, and reached 49,000 last year. ``We are very encouraged,'' says Fran Jacobs, a spokesman for Yugo America, in Upper Saddle River, N.J. Given the car's low cost, ``the US public seems particularly receptive at looking at Yugos in a period of uncertain economic times,'' Mr. Jacobs says.
Yugos are now sold by some 330 dealers in 49 states. A dealer network will eventually be established in Wyoming, Jacobs says. And a new Yugo convertible, priced at $8,300, will be introduced into the US this summer.
Yugos are not the only products from Yugoslavia or the other nations of Eastern Europe now doing well in the United States, though they are perhaps the most visible.