s& the u$smYrri KRASN

O Yuri K.RASNOV

Novosti Press Agency Publishing HouseMoscow, 1979

CONTENTS

From the AuthorWhy State Foreign Trade Monopoly Was IntroducedA Revolutionary Decree

Opposition to State Foreign Trade MonopolyA Bureaucratic Organisation or a Flexible Form ofManagement? 17The Organisation of Soviet Foreign Trade Today 23Facts and Fiction 26Foleign Trade and Foreign Exchange Monopoly 33Foreign Exchangc Relations of the Socialist Countries 36What Benefits I{as State Foreign Trade MonopolyBrought to the Soviet People? 40

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O__Novosti Press Agency publishing House,1979

Editing conpleted on Nouember 1. lg\g0604000000

From the Author

In recent years many developing countries haveintroduced either complete or partial state monopolyof foreign trade in the belief that this would pro-mote greater economic independence, better utilisa-tion of natural resources and a faster rate of eco-nomic development.

State monopoly of foreign trade is not a novelty.It was introduced in Soviet Russia a few monthsafter the victory of the October Revolution of 79L7.

What does state monopoly of foreign trade mean?What does it consist in? In what way does it fur-ther a country's economic independence and develop-ment?

State monopoly of foreign trade means that allforeign economic relations are administered and con-trolled exclusively by the state. Its main functionis to safegtard and promote the interests of thecountry as a whole in the sphere of foreign trade.

The experience of the Soviet Union shows that inthe period of consolidating political and economic in-dependence, state monopoly of foreign trade protect-ed the country's economy from the onslaught offoreign capitaT, and made it possible to work out aunified foreign trade policy, and to prevent foreigninterference in the country's internal affairs.

Not only does state monopoly of foreign tradeguarantee the independent development of ih" .o.rrltry's .economy; it facilitates its re-constructio, ulorgsocialist lines and provides reliable protection of thecountry's economic interests on the world -"rt "t.This booklet tells how an

. Foreign capital held strong positions in the lead_ing branches of the economy"-In 1g13 foreign invest_ments in Russia's economy totalled 1,ZOO riillion ru_b1es, or 47 per cent of thl entire joint_stock capitalin Russia. Inyolvement in the world *u, *u. uheavy drain on the country,s resources and causedeconomic- disruption, especially in transport. Graincrops _fell sharply. The foreign debt rose to an un_precedented extent, as a ,"srrlt of which the coun_try-s dependence on foreign capital further increased.

Russia's backward e.onomy could not withstand.the immense strain imposed by the war. Famine hitthe majority of the cities, and throughout the coun_try there was a shortage of raw mat"erials and fue1.Besides

- causing additional hardships for the citilsthis - led to _a grave situation in industry, torcinghundreds of factories and plants to close down. Withlin only a few months in tgtZ fi undred and sixiy_eight enterprises 104,000 p;6i"

were shut down. reached ,'#;;scale by the autum 917. Workers, wages drop_ped to half of that of 7g73, while prices went upeight times.

But then came the _victory of the armed uprising,f Petrograd (now Leningrrad), in Octobei tgti.Breaking the frenzied resistarrce of the ,"li"g Jur_ses, the revo the whole country. Thegovernment ists and landlords wasoverthrown, ation of man by -u" *u.abolished in

The newly created state ofwas faced with extremely difovercome the sabotage of forcialists, crush the resistanceploiters, rebuild the nationalof public property, and repulse the attack of foreignimperialists.

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IThe Soviet government immediately abolished

landlord property rights; all land was nationalisedand became the property of the whole people. Thestate took over the major banks and some of thelarge enterprises. At all enterprises workers' con-trol was introduced over the production and distri-bution of commodities. The Soviet republic annulledall agreements on foreign loans concluded by thetsarist and bourgeois governments, thereby endingforced financial dependence on the big imperialistpowers. The worker-peasant government proceededto nationalise more banks and large industries andthe railways. Deepgoing economic changes werecawied out over a number of years. It required pro-longed and strenuous efforts to gradually oust pri-vate capital from all spheres of economic trife andcreate a planned economy. The tasks involved in acomplete transformation of the national economycould be carried out only after the economic inde-pendence of the young socialist state was assured.

The difficulties connected with the revolutionarybreak-up of the old state machinery and the creationof new administrative bodies to take its place weremultiplied as the country's national wealth was indanger of being plundered. Foreign as well as Rus-sian capitalists hastened to take out of the countryeverything that they could. This is why only a fewdays after the victory of the revolution the Sovietgovernment established control over the export offoodstuffs, fabrics, footwear, gold. silver and jewelry.Military-revolutionary committees in all towns wereinstructed to safeguard export and import goods.fn Petrograd shipments of privately-owned goodsfrom bonded warehouses were stopped. And on De-cember 29, 7977 the Council of People's Commissarsissued a decree introducing a temporary system ofstate control of foreign trade.

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goods out or into the country unless a special per-mission was presented.

Actualiy thete was nothing funrlanrentally new insuch a systern of state control. It was an initrumentprevio tect certain brarnchesof the competition. But inSoviet he foreign trade ap-patatu who retained closecontacts with industrialists and merchants and withrepresentatives of foreign capital. Under these cir-curnstances neither customs protection nor a ban onimports and exports could be a reliable barrieragainst theBesides, mwould notment of sothe whole national economy along socialist lines.

phasised that "under the circumstances indicatedany of the wealthy industrial countries can complete-ly break down such tariff barriers. To do this itlvill be sufficient for it to introduce an export bountyto_ en.courage the export to Russia of goods uoonwhich we have imposed high import duties. A1l ofthe industrial countries harre more than enough mo-ney for this purpose, and by means of such a mea-sure any of them could easily ruin our home in-dustry."

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The breathing spacc the young republic got aftersrgning the Brest peace treaty with Germany inMarch 7978 and after its declaration of nonbelli-gerency in the world war opened up opportunities toestablish trade ties with some European countries.But with the permissive-prohibitive system operatingin foreign trade the initiative remained in the handsof -private capital. Naturally, the bulk of foreigntrade profits went into the pockets of private im-polters Only to an insignificallt de-Eree co the workers and peasants useforeign ote the economic transforma-tion of the country.

So that all profits from foreign trade would re-main in the hands of the state and be used to

national-way to-

gn tradefor state

control of foreign trade as well as by the introduc-tion of state monopoly on trade in grain and someother goods.

A Revolulionary Decree

On April 22, 7978 Lenin signed a government de-cree on establishing state monopoly of foreign trade.It read as follows:

"I. All foreign trade is hereby nationalised. Tradedeals for the buying and selling of any type of prod-ucts (products of the mining and procesiing indus-tries, of agriculture, etc.) with foreign states and in-dividual commercial enterprises abroad shal1 be car-ried out by the authorised agencies on behalf of theRussian Republic. All import and export transac-tions conducted with foreign countries by bodies

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other than the authorised agencies shall be prohib-ited.

"II. The nationalised foreign trade sha1l be admin-isteted by the People's Commissariat for Trade andfndustrv."

Thus, already at the beginning of 1918 the statehad assumed the key positions not only in industrialproduction, but also in the sphere of circulation, in-cluding the sphere of foreign economic ties.

However, in practice it was not possible to estab-lish state monopoly of foreign trade immediatelyafter the signing of the decree. The respite from warcame to an end. The joint forces of internal counter-revolution and fourteen imperialist powers attackedthe young Soviet republic. But nevertheless foreigntrade operations in the period of the foreign inter-vention and civiT war, which were insignificant involume, were conducted in a centralised manner bythe People's Commissariat for Trade and Industry.

Victory over internal counter-revolution, achievedin the main towards 7920, and the rout of the for-eign interventionists enabled the Soviet republic tostart implementing the decree on establishing statemonopoly of foreign trade, and on its basis to con-duct the exchange of goods with other countries. In7920 a People's Commissariat for Foreign Trade wasset up and charged with the direction of the natio-nalised foreign trade and goods exchange. The Com-missariat was the republic's sole agency vested withthe right to conduct all trade relations with foreign.state, public institutions and private organisations,commercial and industrial enterprises and indivi-duals, and to implement all measures and carry out,through the respective bodies, all operations con-nected with the irnport and export of goods. A11foreign trade operations were to be conducted accord-ing to state plans for export and import. The draw-t2

ing up of these plans was entrusted to the ForeignTrade Council of the Commissariat.

Thus the state came to assume full control of oneof the most important sectors of the country's econ-omy-foreign trade. State monopoly of foreign tradewas called upon to accompiish three main tasks:

- to facilitate the building of the country's econ-nomy on socialist foundations with the aim of trans-forming the country trom an agtatian to a highlydeveloped industrial power;

- to defend the socialist economy under constluc-tion against possible economic intervention by thecapitalist world, and against the influence of thespontaneous world capitalist rnalket;

- to ensure peaceful coexistence with the capital-ist countries by pursuing the peaceable Soviet for-eign policy in the sphere of foreign economic rela-tions.

Opposition to Sfale Foreign TradeMonopoly '

The introduction of state monopoly of foreigntrade was met with fierce resistance on the part ofinternational reaction as well as of Russian capital-ists, who, though limited in their scope of activity,still held important positions in the Soviet repub-lic's economy and trade during the first years of So-viet rule.

For international capital the introduction of stateforeign trade monopoly meant the loss of the possi-bility to plunder the abundant resotr.rces of SovietRussia, to take valuable raw materials out of there,and to dump on the Russian market goods whichmight have been produced domestically. It virtuallymade it impossible for international capital to join

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forces with capitalist elements inside Russia whichwele hoping to restore capitalist relations. It adverse-ly affected the basic interests of world capitalismas well as those of the propertied classes of the for-mer tsarist empire, now overthrown by the revolu-tion.

The imperialists used diverse forms and methodsof struggle against the Soviet system of state mo-nopoly of foreign trade. After the failure of the14-power intervention and of the counter-revolution-aries' attempts to restore capitalism, the imperialistpowers tried to wreck the war-torn economy of So-viet Russia by means of an economic blockade.

The Soviet republic was discriminated against inall spheres of foreign trade. The majority of coun-tries refused to trade with Soviet Russia. A "goldblockade" was imposed, i.e., most countries did notaccept Soviet gold as payment for purchased com-modities; and there was a "credit blockade": thetop banks in Europe and America refused to ad-vance loans for foreign trade deals with the youngrepublic. The attack on the foreign trhde monopolywas also carried out by such crude methods as raidson Soviet trade delegations in other countries.

Flowever, necessity forced the imperialist circlesgradually to slacken the economic blockade and thenlift it altogether. The capitalist states could not forlong shun their traditionai trading ptafitter withoutdoing serious damage to theil own eco1.!.omies, sincethat partner was in possession of tremendous nat-ural resources. fn addition, Russia had always pro-vided a market for their commodities. Because ofthese circumstances, already in the early 1.920s thegovernments of many capitalist countries, includingsome of the major ones, were compelled to concludetrade agreements with the Soviet reptrblic and offi-cially recognise its state monopoly of for.eign iradc.14

But even after recognising the Soviet state's Loreigntrade monopoly the capitalist states did notcease denouncing it. From the 1920s the press in theEuropean countries had been complaining that stateforeigi.r trade monopoly, i.e., the conduct of foreigneconomic relations by a centralised foreign trade de-partment, hampered "Iively communication". Today,more than sixty years later, the sarne complaints areheard: the information media of some imperialistcountries continue to allege that state foreign trademonopoly hampers the expansion of economic tiesbetween the USSR and countries with a "market-oriented economy", that exercising the monopolythrough a " Pre.Yentsthe speedy nd that,moreover, th gn tradealso hinders scientif-ic-technical exchange.

At negotiations with Soviet foreign-trade delega-tions, the capitalist states frorn the very outset putdown as a condition for trade the abolition or asignificant siackening of state control of foreigntride. At the Genoa Conference of April 7922 lheWestern powers declared that they were ready tolender Russia economic aid provided it abrogatedits state monopoly of foreign trade. They demandedguaranteed freedom of action on the territory of So-viet Russia for foreign busiuessrnen, including un-controlled impori and export of goods. 'Ihese de-mands were rejected by the Soviet state.

In the face of. widespread econornic disruption in

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on state foreign trade monopoiy by capitalist elementsinside the country seeking unhampered access to theworld market.

It should be mentioned that in those days somegovernment ecowere also criticsaying that it hthat the Peoplewas inefficient. It is true that this newly createdbody, owing to a number of objective reasons, fail-ed to cope with all the tasks assigned to it. Amongits employees were peoples who were loyal to therevolution but lacked experience in foreign trade ac-tivity. They were not to blame. That was the firsttirne in history that foreign trade activity was con-.ducted by a centralised state agency and in accord-ance with a single export-importplan; optimal organ-isational forms of foreign trade were yet to beworked out. On top of this, there was the sabotageof the secret enemies of the young Soviet govern-ment, who worked at customs checkpoints and in thenewly formed state bodies empowered to concludetrade deals with foreign countries.

These critics did not openly call for the abolitionof state foreign trade monopoly, they suggested that"only" some frontiers should be opened and thatfree import and export of certain goods should beallowed. As one prominent Soviet economist put it,what they were really proposing was a quiet andunnoticeable abolition of state foreign trade monop-oly. Had their proposal been accepted, the foreigntrade monopoly would have collapsed as surely asa balloon would burst if it were punctured.

But nevertheless in that period the Soviet govern-ment temporarily allowed more organisations tohave commercial contacts, under the control of thePeople's Commissariat for Foreign Trade, with for-1G

eign markets. These organisations conducted most oftheir foreign trade operations through Soviet tradedelegations abroad.

The livening up of economic activity which be-gan in the country in the period of the New Econom-ic Policy made it possible aTready in the mid-1920s to embark on full-scale socialist constructionin town and country. This called for consolidationof state foreign tlade monopoly and the annulmentof the concessions granted in previous years.

A Party document of those days (7924) said,"State monopoly of foreign trade has been fully jus-tified itself, particularly in the NEP period, both asa weapon for protecting the country's wealth againstplunder by domestic and foreign capital, and as afiIeans of socialist accumulation.

"Only by preserving the systern of state foreigntrade monopoly in its entirety have we been ableto achieve a favourable balance of trade even now,and to concentrate incomes from foreign trade inthe hands of the state.

"By preventing the waste of public funds on theimport of articles which can be produced domesti-cally, state foreign trade monopoly makes it possi-ble to plan the import of those items which are in-dispensable for the development of our industry andagriculture."

The Soviet system of state monopoly on foreigntrade as a major instrument in the building of thenew society withstood all tests in spite of all the at-tempts of the capitalist powers to d.estroy it.

A Bureaucratic Organisaiion or a FlexibleForm of Managernent!

What is state monopoly of foreign trade from theorganisational point of view? Is it really a "cumber-3-1099 17

some bureaucratic organisation" that hampers "live-Iy communication", as critics in the capitalistcountries continue to assert? Or is it a flexible formof rnanagement of foreign trade that can be modi-fied in accordance rvith the situation, with the suc-cesses of socialist construction, and also with the in-ternational situation, and, at present, of the entirerange of the Soviet Union's foreign economic ties?

The sixty-year history of state foreign trade monop-oly in the Soviet Union shows that it is not some-thing rigid and unalterable, that ever since it wasintroduced its organisational forms have been con-stantly improved. They did not always prove to beoptimal for every given stage of the country's eco-nomic development. The experience of a number ofyears demonstrated the need to change one of itsfolms or another, and to introduce new forms. Butthis did not change the essence of the monopoly sys-tem.

Foreign trade is an important economic sector forany country. That is why its form of organisationis determined primarily by the systent of economiclnanagemellt in the country concerned. The basicprinciple of management in the Soviet Union is dem-ocratic centralisrn, which rneans centralised man-agement with broad initiative of lower bodies'

At the same time, the development of a country'sforeign trade takes place in close contact with theworld market, with countries that may have a dif-ferent economic systern. So the organisational formsof foreign trade are also influenced by an externalfactor, namely, the commercial- and political condi-tions that attend this or that market, that exist inthis or that country. It was under the impact of thesetwo factors (intelnal and external) that the structureof Soviet foreign trade took shape.

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As said earlier, in the 7920s the People's Com-missariat for Foreign Trade was charged with thedirection and control of economic relations with for-eign countries on the basis of an import-export plan.Direct operational work on external markets wascarried out by organisations empolvcred by the So-viet government to do so. In the NEP years thisright was given to some mixed conrpanies (i.e. com-panies with both state and private capital), to theco-operative society "Tsentrosoyuz", amd to certainproduction associations. In that period several joint-stock foreign trade companies in which foreign cap-ital owned shares were also set up. But such organ-isational "llbetalisation" of the Soviet system ofstate foreign trade monopoly lvas necessary only fora short period.

In the mid-1920s the various concessions wereabolished and rnixed industrial and foreign tradecornpanies shut down. With socialism rapidly ad-vancing on all fronts of economic construciion, itbecame necessary to introduce major changes in theorganisational forms of foreign trade, and first ofall to rernove from the sphere of foreign tradc plo-duction and other econornic organisations whichoften competed with one anothet. Becarrse of thiscompetition deals were sometirnes made in the inter-ests of an individual organisation or province, con-trary to the interests of the state as a whole.

By the early 1930s the reform in the rlanage-ment of foreign trade in the USSR was cornpleted.Its purpose was to enabie the state better to copeurith the task of socialist reorganisation of the na-tional economy. The industrialisation of the counLryand the collectivisation of agricultule reqnircd a sub-stantial increase in the purchase of merchinery an

duce at the time. And impolts could be increasedonly if more Soviet goods were exported. In viewof these tasks the number of organisations havingthe right to trade on foreign markets was consider-ably decreased.

All foreign trade operations wele since placed un-der the supervision of newly created export and im-port associations, which worked on a profit-and-lossbasis and were subordinate to the People's Commis-sariat for Foreign Trade.

This Commissariat was the sole body empoweredto regulate and control the country's foreign fuade;it directed the activity of all foreign trade associa-tions. An important instrument in the hands of theCommissariat was the system of licences and quo-tas; this meant that import and export operationscould be carried out only with written permission ofthe state, and that the amount of exports and importsrnust be within the limits set by the state. In addition, the Commissariat exercised contlol over foreignexchange operations in connection with export andimport transactions, and took over the matter of thechartering of foreign vessels and the leasingof Soviet ships for transporting foreign trade car-Eoes.

The system of organisations set up under stateforeign trade monopoly included customs offices atthe country's frontiers, at its seaports and airports.They ensured state control of exports and imports,checked whether deliveries confortned to the importand export plans, verified import and export licencesancl the observance of quotas, and combated allforms of smuggling.

Soviet trade delegations were opened abroad backin the early 1920s, and they enjoyed exterritorialrights in most countries. They promoted the USSR'sinterests in matters of foreign trade in the countries

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concerned. Some cf their main functions were tocheck whether the country concerned and its foreigntrade boclies carrierl out ihe bilateral or multilateralagleements signed with the Soviet leptrblic, to con-tr-ot the activity of Soviet organisations which had

of origin of goods.

In countries where for one reason or another the

within Embassies of the USSR.

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The foreign trade associations were empowered toconclude, in the USSR and abroad, a1l kinds of ex-port and import deals, and to perform credit andbanking operations with foreign business partnersconnected with these deaIs. The associations could

Thus specialised foreign trade associations r-eprr.-sented the basic organisational form of state foreigntrade monopoly. In the late 1930s the USSR h;dnine import and fiftecn export associations. In somecases the associations carried out both export andimport functions.to

The Organisaiion of Soviet ForeignTrade TodaY

Soviet Union has been stetific and technological renew forms of co-oPeratiri"i""rii.*.rr"i"ur aJra.. The high level of develop-;#11'-ih; p"oa"tii"" forcei in the ussR hasl"rli"J-i, io tur." a more important part in inter-

""L-i"f ar"rtr"" of labour and to expand its foreign

trade.'- fr-rrau-"nta1 changes have taken place on the in-

t".;;l;;;i t""""' AJ I result of -victorious socialistrevolutions i, ma'i countries of Europe and Asiaa world socialist tvtt"; f"t tak-en sh.ape ' and doz-;";;f ;;;ties in Asia and Africa have won po-litical indePendence."'iilt;;i"'r;;;ins that the emersence o{ new nation5*U.f, nurr" "t ot"tt

th" socialist road of develop--i"i'fr"t considerably changed-and broadened

the'f"""if."t

of the So"ili 'y't"i' of state foreign trade

"i"""p"fv' rh"r" ,,uiio'i U"rq. to pool their efforts

;l;i;i;11i" frum"work of socialist economic integra-tion, having ."t ,p-1 n 7949 the-first international;;;";1.__6tgurriru-tio' of socialist countries-theCouncil for Mutuai--*o"omic Assistance (CMEA)'ifr"',o"f"--goui=oi integration is optimal utilisation.i'irr"'""t"i,"."t of "utfr

,,,"*ter of the Council for;h";;";i-"tt *"-ter states' To this end the ac-ilt"t-.i ,n th" pu,i"L's 'eed to be coordinated

with

;;;"r;;r"d l;" ?" ;"iional interests .of each' This;;;";;;-f"utiur" ir'""tts to international socialistdivision of labour'

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A11 thjs calls for a further improvement of theorganisational forms of state foreign trade monopo_1y in the Soviet Union.

to promote economic ties with the socialist and de_24

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veloping countries, and to see that the USSR's ai:1commitments with regard to these countries inbuilding a variety of projects are fulfilled. The or-ganisaduct potherplantspecialists abroad to render technical services andlrain loca1 personnel in socialist and developingcountlies.

Also taking parL in the rnanagement of foreigntrade are the transport ministries, each of which su-pervises the transportation of goods by the respec-tive means of conveyance and maintains contactswith foreign transport agencies.

There are a number of other state institutions

foreign contacts in matters relating to fishing andexploration of fisheries in the World Ocean. TheState Committee of the USSR for Cinematographyhas a monopoly on the export and import of filmi,and carries out such transactions through the asso-ciation "S is under its jurisdic-tion. The ion "Tsentro soyuz"also has t ommodity-exchangedeals with

In the 1960s and 197Os many ministries set uptheir own special boards, departments or even asso-ciations whose main function is to organise the ex-port of machinery, equipment and other goods. Thishas greatly increased the efficiency of the Sovict ex-port svstem.

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Improvement of the organisational forms of stateforeign trade monopoly in the USSR is an unending

other countries.In the management of foreign economic activity

wide use is made of automatic control systems andvarious types of computing equipment. The latter isused in piepaing commodity market forecasts. Thefulfilment of contracts is checked with the help of auto-matic control systems. In a word, state foreign trademonopoly makes possible optimal and extensive,rse, without duplication of effort, of the achieve-ments of the scientific and technological revolutionin the management of foreign trade activity in theUSSR.

Facts and Ficlion

State foreign trade monopoly has functioned inthis country fcr more than six decades now. But theattacks against it have not slackened' One of themain arguments of its opponents is this: "Becauseof the monopoly, in the USSR foreign trade is sep-arated from production, and this prevents the lrtr/est-ern countries from making maximum use of Sovietmarkets. And besides, foreign buyers incur consider-able losses in prices because they are deprived ofdirect access to producer enterprises."

A reasonable argument at first glance. It is truethat the present structure of management of foreigntrade in the USSR does not provide to producer en-terprises or industrial ministries direct access to

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tors, industr dividual enterprises.Repr,esentati ss concerned ,it o,one of the of the association,namely, its 11. In tact all tech-

However, one of the basic principles of stateforeign trade monopoly in the USSR ls ihat commer-cial activities should be conducted mainly by special-ised foreign trade organisations. The Lssociations,

state foreign trade monopoly means conduct of

foreign trade on a planned basis, and that since con-ditions on the world market are in a constant stateof change this hampers the development of worldtrade based on the dynamics of demand and supplyon the market. The critics usually speak of Sovietimport and export plans as hard-and-fast directiveswhich make it impossible for foreign trade organi-sations to take market conditions into account, andwhich therefore run counter to the incessant changestaking place on the world market'

While they have much to say about centralismin the organisation of Soviet foreign trade, the criticsforget about the second aspect of this principle. Thefaci is that under centralised managemenl of foreigneconomic relations on the basis of annual and long-term plans and plan assignments, the foreign.tradeassociitions and firms enjoy a large degtee of inde-pendence in theit operations and commetcial ac-tiuity.

What does this mean in pracfice? The export andimport plan of a foreign trade organisation outlines,as it were, the final goal of its commercial activityfor a certain period. Acting within the framework of

rule, is not very detailed, theding from commercial and, make independent decisions

rcgardiog the volumes of purchases or sales, thetimelimit in which they are to be carried out, andthe choice of buyer or se1ler. What is more, the ex-port-import plan is not something handed down fromiborr", lt is drawn up with the participation of bothhigher of thepropos coulse

"f i-p hanges

on thL be in-troduced in the original plans based on proposalsof the associations. Thus the planning principle does28

not rule out commercial flexibility of Soviet foreigntrade organisations operating on the world capitil-ist market and cannot be an obstacle to mutuallyadvantageous trade between countries with differentsocial systems.

Ihe opponents of state foreign trade monopoly areagain reviving the old myth about autarky beingcharacteristic of the trade policy of the USSR, andof all socialist countries foi thai matter. State for-eign trade monopoly, bourgeois economists assert, hasas its main aim the establishment of complete eco-uomic self-sufficiency of each socialist country and,of late, the self-sufficiency of the bloc of socialistcountries. They say that the socialist communitystrives to isolate itself from the capitalist market andhas dealings with it only once in a while in orderto eliminate snags in its planned economy.

Such arguments are untenable. State foreign trademonopoly protects the country's economy from for-eign _influences, but autarky has never been its goal.On the contrary, the Soviet state has always rcgard-ed it as the principal means of enabling the countryto participate in international division of labour-apor.verful factor accelerating the development of itsproductive forces. The Soviet goverrr-ent has in factalways tried to estabiish mutually advantageous co-operation with all countries of the world. Thus, So-viet Russia participated in international division oflabour in the first years of its existence, in the 1920s,in spite of the economic blockade, and later duringthe cold war yealrs in spite of the discriminatorytrade policy adopted by the majority of capitalistsl-ates tolvard the USSR. And now, in conditions ofrelaxation of international tension, it is making re-doubled efforts to promote international econLmicco-operation. It is impossible that it should want tohamper this objective process.

The assertion that the economy of the socialistcommunity as a whole is isolated is equally untrue.Unlike the Common Market, the Council for MutualEconomic Assistance is not a closed economic grollp-ing that opposes itself to the rest of the world.CMEA's Comprehensive Programme for SocialistEconomic InteEration provides for the vigorous par-ticipation of all member countries in international di-vision of labour, in the development of all-round eco-nomic, industrial and scientific-technical ties lvithcountries having a different socio-economic systemon a bilateral or multilateral basis. To be convincedof this one only has to make a careful and objec-tive study of the programme.

Finally, critics of state foreign trade monopolyclaim that the state rnonopoly has turned the foreigntlade of the USSR into a mere instrument of itsforeign policy, which often runs counter to its eco-nomic interests.

But is it not a fact that the foreign economic tiesof any country are in some ways related to itsforeign policy at any given time? The point is, whatis the nature of this policy?

The imperialist powers, as we have already said,many a time resorted to discriminatory lneasulreswith regard to the USSR in the sphere of foreigntrade so as to undermine the Soviet economy orat least to slow down its growth rate.

In his bool< Rebirth L.I. Brezhnev recalls sucha case. In the postwar years the Americans ttnder-took to provide a complete plant for the restorationof the Dnieper hydropower station (the SovietUnion's biggest at the time), which had been de-stroyed by the fascists during the war; but they stop-1:cd deliveries aftet having supplicd only thrce units.In their list of strategic materials they included sheetsof steel and stopped delivering these, too, to the

30

Soviet Union, although they knew full well thatwithout such sheets neither motor cars nor tractorscould be made.

"That was not the first, and, unfortunately, notthe last instance where capitalist countries, taking ad-vantage of our difficulties, tried to dictate theiiwillto us and interfere in our internal attafus,,,L.I. Brezhnev wrote.

But the US politicians had rniscalculated. The So-viet Union, utilising ed by aplanned economy, re by ctn-centrating resources able todo without the help o

socialist countries developed allconomy in a planned manner,ir technical and economic inde-

pendence from the capitalist world.But for many Western firms the loss of big and

stable mar.kets in the socialist countries por5d ,roinconsiderable problems. This is what the West Gei.-

viet Union by a pro-dccisjon to imposc anare giving Russia ablow..."

Towards the late 1960s economic necessity com_pelled the capitalist world virtually to lift the block-

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ade of the CMEA countries, which by that time ac-counted for about a third of world industrial pro-duction.

However, even today, when there is a relaxationof international tension, certain imperialist powersare lesorting io o1d rnethods by attaching politicalstrings to foreign tlade and interfering in the inter-na1 iffairs of the USSR. A vivid example is the ban

criminatory measures.This demand aroused indignation among the public

and business circles in the West European countries.The organ of the French business community, thenewspaper Les Echos, declared that the Soviet mar-ket hld become too important to Paris to be ignor-ed. And the West Gelman Westdeutsche Allgemeinenoted on the same day: "Economic boycott is by no

rd to such a greatis ineffectual. Thehighest scientific

inventive, as theyhave quite often proved. We Germans learned aboutthis long before the sputniks, during the last wat. . ."

For the Soviet Union and its partners in the so-cialist community, foreign trade and other forms offoreign economic ties are a key factor in the peace-ful c-oexistence of cotlntries with different social sys-tems, the material basis for detente. And this factordoes not run counter to the economic interests ofany group of countries ' in developing trade with thecleveloping and the capitalist countries, the USSB'has always taken their economic requirements intoaccount.

32

Foreign Trade and Foreign ExchangeMonopoly

State monopoly on foreign trade is closely con-nected with another state monopoly-that of foreignexchange. As a matter ot tact, state foreign exchangemonopoly is an essential complement of state foreigntrade monopoly and one of the main means of im-plementing the latter.

Let us imagine for a moment that the socialiststate has taken foreign trade into its own hands buthas left the door open for the free movement offoreign exchange. This would have made the foreigntrade monopoly vulnerable because through variousfinancial channels foreign capltal would have beenable to penetrate deeply into the country's economyand hamper the carrying out of socialist changes.

What does state foreign exchange monopoly con-sist in? The state takes possession of all foreign ex-change earnings from exports and other foreign eco-nomic transactions, and from the extraction of pre-cious metals in the country.

Under state foreign exchange monopoly the StateBank of the USSR has the exclusive right to operatewith foreign currencies and other foreign exchangevalues on the territory of the Soviet Union. On theinstructions and under the control of the State Bank,such operations can also be carried out by the Bankfor USSR Foreign Trade.

State foreign exchange monopoly enables the stateto accumulate the necessary foreign exchange fundsand to use them for the development of the nationaleconomy. It also serves as a reliable barrier againstthe influence of the spontaneous capitalist moneymarket, which is subject to periodic crises.

The international settlement and credit transac-tions of the Soviet Union, like all its foreign econom-

33

to theplans,

rs) areof the

overall economic plans of the country.By means of foreign exchange plans the state de-

termines over what periods and to what extent for-eign exchange resources should be used. The statealio establishes the procedure to transfer foreigncurl.ency, and valuables and securities abroad andthe procedure for the import and export of foreignand Soviet currencies.

were prohibited and stock exchanges closed down.From the mid-1930s all foreign exchange operations

were conducted by the State tsank. The exchangerate of the ruble was established by the State Banicand was therefore unaffected by current fluctuations-sharp fall or rise-in the value of foreign curren-cies taking place on the world capitalist moneymarket. A11 foreign exchange began to flow into theState Bank, and under its control into the ForeignTrade Banh. These banks were vested with the ex-clusive right to a11ot foreign cutrencies for the pay-ment of imports and for setvices done by foreignorganisations.

In making international payrnents the State Bankand the Foreign Trade Bank of the USSB' checkedthe timeliness of foreign exchange receipts, the cor-rectness of payments, and their conformity with theinter-state agreements concluded.

s4

A majol function of staLe foreign trade monopolyis to ensure the stability of international payments ofthe Soviet Union. For this purpose the country main-tains a gold and foreign exchange reserve, r"ormedf,rom a favourable balance of trade and growing goldoutput. The need for such a reserve is also dictatedby market fluctuations in capitalist countries and bythe various discriminatory measures applied bythese countries in their trade with the USSR.

In trading with capitalist countries unforeseenfactors often arise. fn such cases, too, reserves comein handy.

State foreign exchange monopoly also applies tothe sphere of credit relations of the Soviet Union,which has become a major creditor providing sub-stantial economic aid to other countries. These aremostly socialist countries but aiso include a targenumber of developing nations.

Soviet credits to socialist countr.ies are grantedon highly favourable terms: the interest rate doesnot exceed two per cent annually, and the creditsand the interest on them can be repaid with delive-ries of the recipient countries' traditional exports.

To the developing countries, too, the Soviet Uniongr:ants credits on preferential terms: the interest rateis usually no more than 2.5-3 per cent annlally, andthe term of repayrnent is 10 to 15 years. The SovietLlnion dses not demand of them, as the capitalistcountries usually do, that they should repav theircredits in freely convertible currencies; they canpay with their export goods.

On the other hand, the Soviet Union has becomea major recipient of credits, especially in transac-tions involving co-operation and compensation agree-ments.

The exclusive right of the state to engage in for-eign exchange transactions, and the foreign exchange

36

plan which covers all types of earnings (from for-eign trade, scientific exchange, tourism, and also thegold and foreign exchange reserves) ensure a stablesystem of the country's international payments andmake it possible to utilise foreign exchange re-sources for the development of the socialist economy.

Foreign Exchange Relalions of theSocialist Countries

State foreign exchange monopoly came to per-form many new functions with the formation of aworld socialist system after the Second World War'.Economic relations between the socialist states havebeen developing on the basis of coordination oftheir national economic plans, on the basis of divi-sion of labour and specialisation in production.

With regard to the socialist countries, state foreignexchange monopoly is a means of coordinating anddeveloping economic co-operation. At first the mainform of settlement between the socialist countrieswas a system based on bilateral clearing agreements.In the late 1950s and early 1960s, as a result of thesuccessful development of co-operation among thesocialist countries and the rapid growth of their eco-nomies, conditions were ripe for the introduction ofinternational settlements on a multilateral basis. Thiswas facilitated also by the establishment of quotasfor mutual deliveries of goods for long periods.

In 7963 the CMEA member countries signed anagreement on the setting up of an International Bankfor Economic Co-operation (IBEC). As of January 7,1964 settlements on a multilateral basis were intro-duced for goods deliveries and other transactionsbetween the CMEA countries.

lt0

Multilateral payments are made in a collectivecurrency, namely, the transferable ruble (gold con-tent-O.987472 gram). The transferable ruble is ba-sically different from the ruble used under bilate-ral clearing agreements in that the transferable rubleperforms the role of an international currency, andnot that of the Soviet currency used in bilateralclearing. As a means of multilateral payment thetransferable ruble can be used without any restric-tion by any party to an agreement. Transferablerubles cannot be circulated inside the USSR.

Of great importance for the functioning of stateforeign trade monopoly is the stability of the cur-rency used as a means of payment. The transferableruble meets this demand. Its stability is guaranteedby a system of regulating foreign trade based onthe import-expofi plan, and by stable prices ofgoods bought and sold (adjusted every year on thebasis of average world market prices for the fivepreceding years). It is also ensured by the mainte-nance of an equilibrium of the balance of paymentsof each country in relation to the other parties tothe system of multilateral payment as a whole forevery year. Every partner has the right freely touse the transferable rubles in its possession to buygoods or services from other partners in the sys-tem. Any temporary deviation from the balance ofearnings and payments is regulated by means ofshort-term credits granted by the Int^:rnational Bankfor Economic Co-operation.

IBEC has become a centre for multilateral pay-ments among the socialist countries. It also carrieson a great deal of work to expand and strengthenits ties with banks of socialist countries which arenot its members, and with those of the industrialcapitalist and the developing countries.

87

fn recent yeals IBEC has done business with morethan 160 banks, including many major banks of cap-italist countries.

In the credit relations among the CMEA coun-tries a considerable role is played by a second in-ternational banking organisation, namely, the Inter-national Investment Bank (IIB), which began tooperate on January 7, 7977. Its authorised capital(the main source of the bank's credit fund) was putat 1,050 million transferabie rubles, 70 per ccnt ofwhich is contributed by the member r:ouutr:ies of theBank in transferable rubles and 30 per cent in freelyconvertible currencies.

The main task of the International InvestmentBank is to mobilise financial resources and grantlong-telm (up to 75 years) and medium-terrn (up to5 years) credits to its member countries for carry-ing out economic measures connected with intelna-tional socialist division of labour.

In addition to its authorised capital and someother financial resources. the International Invest-ment Bank sets up special funds made up of contri-butions of the countries concerned.

By its aims, by the terms and type of credits itgrants, and by the methods it uses in running itsoperations, the International fnvestment Bank repre-sents an international credit institution of a new typewhich differs fundamentally from international capi-talist credit institutions.

Being an organisation of socialist countries, thefnternational Investrnent Bank does not set as itsmain aim the earning of profit. However, to ensureprofitability and observance of the rules concerningpayment, and to enable borrowers to use most ef-fectively the loans granted to them, the Bank iin-poses on its loans an interest rate which depends onthe length of the period for which the credit is grant-

38

ed, the nature of the credited proiect, and the cur-lency in which the credit is given.

Apart from its main activity which is the grantingof long-term and medium-term credits, the fnterna-tional Investmeot Bank has been co-operating sLlccess-fully with other banks and international organisa-tions of socialist, capitalist and developing countries.

The collective currency of the CMEA countries-the transferable ruble--can be widelv used in futuresettlernents between the socialist and developingcountries. It will be possible to make all payrnentsin transferable ruble, i.e., without the use of the dol-7ar ot any other capitalist currency; this will preventthe capitalist monetary system exerting an influenceon economic relations between the two groups ofcountries.

Use of the transferable ruble will enable the de-veloping states experiencing monetary difficulties toenjoy the advantages of the socialist countries' sys-tem of multilateral settlements. For those develop-ing countries with insufficient foreign currencv re-serves it would mean that they would not have tocut back on trade but could increase the range oftheir irnport and export goods.

Use of the transferable ruble ensures an exactequivalence of exchange and the stability and relia-bilitv of trade, and nrles out any violation of theequality and sovereigntr.r of the trading partners"

The International Bank for Economic Co-operationgrants the developing countries transfer credits atan interest of 1.5 per cent annually. The fnternation-al Investment Bank has also started to use thetransferable ruble in managing the credit relatir:nsof the CMEA rnernber states with the developingcountries; in 7973 it set up a Special Fund to pro-vide credits for implementing measures of econom-ic and technical assistance to developing countries.

The Fund comes to 1,000 million transferable rubles.From this Fund the International Investrnent Bankgrants credits for a term of 15 years for the build-ing of industrial projects.

Thus, the mobilisation and collective use of fundsby the CMEA countries create conditions for deep-ening economic co-operation between the socialistand the developing states, and for adopting the mostra.tional forms of specialisation and co-operation ininternational division of labour.

What Benefifs Has Sfale Foreign TradeMonopoly Broughl lo fhe Soviel People!

State monopoly of foreign trade has existed inthe USSR for more than sixty years. We may nowsum up the results and see what benefits it hasbrought the Soviet people.

First and foremost, it helped to build a socialistsociety in the USSR, uphold the country's economicindependence and raise the living standards of thepeople.

With the help of state foreign trade monopoly thecountry's foreign trade was transformed from ameans of enriching capitalists, from a means of ex-ploiting and plundering other peoples, into an instru-ment for stimulating the growth of the socialist eco-nomy, furthering the conduct of a policy of friendshipamong nations and promoting the peaceful coexist-ence of states with different social systems.

From the first day the Soviet govetnment wasformed the country has organised its economic rela-tions with other states on a planned basis. This hasenabled it to make the most efficient use of inter-nationat division of labour for the benefit of thepeople.

40

, In the years immediately following the revolutionthe country had to purchase foodstuffs from abroad

a year of harvest fallure, grain imports helped tosave thousands of people in the Volga area from star-vation. At that time foreign trade facilitated commod-;,ty circulation inside the country, thereby promot-ing the rehabilitation of national economy. A majoritem of Soviet import was cotton, rvhich-was need-ed by the textile industry.

my in the countryside.State foreign lso made a great

contribution to transport.By the end o 20) three-quarters

of all the ioco of kilometres ofrailway, bridgesbeen destroyed.means for bringthe major citiesTransport machine-building plants stood idle; trans_

4t

In the 1920s the country embarked on the electri-fication of the national economy; in the next fewyears electric light came to hundreds of villages andworkers' settlements. Plant for the power stationsunder construction was purchased from abroad.

State foreign trade monopoly made it possibl-9for the Soviet state to concentrate in its hands allincomes from foreign trade and all the gold andforeign exchange reietves, which would be neededin the event of a natutal calamity, a new econom-ic blockade or a military attack. Thanks to theforeign trade monopoly all the contacts which in-terna"tional capital hid with the remaining bourgeoiselements inside the country were gradually elimi-nated.

port of plant was of decisive imqortance'--i"1fri early 1930s, after the foundations of heavy

i"J;ri;t had" been built, the Soviet people began

L' 43

The number of the USSR's ttading partners rosesteadily. It went up from 39 in 7946 to 118 in7977.

Today state foreign trade monopoly makes avaluabll contribution to the development of thecountry's productive forces and to scientific andtechnoiogiJal progress; it provides-the national econ-omy wiih raw materials and other materials andeqriipment which are in short zupply, and helps toraise the people's living standards'

In the p"iiod between 1950 and 7977 impottsfrorn abr6ad rose from 1,300 million rubles to30,100 million rubles-an increase of. nearly 28 times'

The development of the Soviet economy in con-tormity with ihe demands of the scientific and tech-nologilal revolution rests on the country's -own in-i"rtiiuf Uut", and the discriminatory policies ofthe imperialists in trade relations with the SovietUnion cannot prevent its economic advancement'- irf.i"g advaniage of international division of la-bour thJ Soviet Union purchases from other coun-tries industrial equipmet t whi.h it would be more;;ttly or more time-consuming to produce domes-tically.-.

ih; volume of Soviet imports of machinery and

n-and-stee1, auto, chem-and food industries,

and of water-borne and railway transport'More than ever before, foreign trade is today

helping to fulfil a foremost social task-to improvethe people's well-being'

44

In the '1.920s, 40 to 42foleign exchange earningsot consumer goods and ofproduction.

per cent of the USSR'swere spent on importsraw materials for their

ft is not difficult to see that it would be impossi_ble for the country to import the aforementionedgoods, which no doubt contribute to the well_beinjof the people, without state foreign trade *o"opoiy1

Now, a few concluding remarks.As an institution state foreign trade monopoly is

an essential part of the socialist economic ,yrt"rr.Irr a_ country where land, underground rcsources andthe basic means of productio, ure public proper:tyand where planning is practiced on a nationalscale, such monopoly is both natur;rl and essential.trt makes it possible to plan export and import onthe basis of the country's, potentialities and require_ments. It is an efficient lever for ensuring the pri_ority of national interests over the temporary inier_ests of individual enterprises and ,otiul i"orpr.It turns-fo,reign trade into an instrurnent promot_ing the fulfilment of national tasks and the iolutionof urgent social and economic problems.

4ft

yuri Krasnov"Why ls Forcign J rede in thc

USSR a Statc Monopoly?.,

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Yuri Krasnov is a writer on economica{fairs. He is a member of the Unionof Journalists of the USSR, and has beenworking in the field of Soviei foreigneconomic relations for more than25 years, Among his several bookdeaiing with queslions of inlernat nal.conoili. co-operation is a monog phentilled "From Confronlation loCo-operalion,"

The presenl booklef exPlains whYstate foreign tradewas introduced inwhat it consisls into consolidale the

monopolythe USSR,and how if helPseconomic

independence of the country andpromotes ils economic growth.