East-West Trade and
Détente
28 February 2005
Juhana Aunesluoma
University of Helsinki
tel. 09-191 24939
email. juhana.aunesluoma@helsinki.fi
www.valt.helsinki.fi/staff/jauneslu
Economy and international
relations: why bother?
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what are international relations
about?
international economic system
economic interdependence and
security
• connected?
Today’s lecture
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economic matters in the CSCE
developments in East-West trade
Western economic warfare
economic issues as a part of détente
US, Soviet and European views
CSCE: I Basket (Security in
Europe): principles …
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1 sovereign equality, respect for the
rights inherent in sovereignty
2 refraining from the threat or use of
force
3 inviolability of frontiers
4 territorial integrity of states
5 peaceful settlement of disputes
… I Basket principles
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6 non-intervention in internal affairs
7 respect for human rights and
fundamental freedoms, including the
freedom for thought, conscience, religion
or belief
8 equal rights and self-determination of
peoples
9 cooperation among states
10 fulfilment in good faith obligations
under international law
CSCE: III Basket (Co-operation in
Humanitarian and Other Fields)
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1
2
3
4
human contacts
information
culture
education
CSCE: II Basket
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1 commercial exchanges
• business contacts and facilities
• economic and commercial information
• marketing
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2 industrial co-operation and projects of
common interest
3 provisions concerning trade and industrial
co-operation
• harmonization of standards
• arbitration
• specific bilateral arrangements
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4 science and technology, 5 environment, 6
other areas (tourism, migration)
Economic statecraft
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economic restrictions imposed for the sake of
national security
• strategic embargo
• purpose is to limit the opponents military capability
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measures to influence the opponent’s decisionmaking
• sanctions
• leverage
• linkage
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long-term economic warfare/détente
• enourage/discourage trade
• purpose is to create long-lasting changes in the
opponent
East-West trade: 1917-1945
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effects of the First World War and
1917 Bolshevik revolution
1935 US-SU trade agreement
• MFN status
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1938 ”high water mark”
effects of the Second World War
• Lend-Lease Program
• wartime destruction and post-war
reconstruction needs
Early cold war:1946-1953
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US economic containment policy:
• 1948 control program for US technology and
commodity exports
• 1949 Export Control Act
• 1950 China embargo (-1971)
• 1951 Trade Agreements Extension Act
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together with allies:
• 1949 Coordinating Committee (COCOM)
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Soviet policies 1940s:
• redirection of satellites’ economies
• Soviet-led integration
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effects on East-West trade:
• 1950-53 rapid decline allround
Economic Cold War: 1954-1969
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US-Europe disagreements
European openings mid-1950s onwards:
• bilateral trade agreements with East European countries
on the basis of MFN
• credits
• revisions of COCOM listed commodities
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US maintained a more extensive list
changes in US policy: differentiation
Soviet policies:
• 1950s: attempts to increase trade in Europe
• 1958 Khruschev letter to Eisenhower
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effects on trade
• recovery and expansion (Europe)
• remains on low level (US)
The Economy of Détente
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Europe: intensified economic East-West
interaction
new US policy
• Kissinger: ”Our strategy was to use trade
concessions as a political instrument,
witholding them when Soviet conduct was
adventurous and granting them in measured
doses when the Soviets behaved
cooperatively”
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1969 Export Administration Act
1971 end of China embargo
… economy of détente
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1972 US-Soviet negotiations
• agreements (trade, credits, facilities)
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problems for Nixon-Kissinger policy
• Jackson-Vanik Amendment 1973
• 1975 Soviet Union rejects 1972 agreement
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effects on trade:
• 1969-1980: boom
• 1980-1989: stagnation, differentiated
development
II basket in the CSCE process
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East bloc interest greater in principle
• but demands were modest
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material benefits also for the West
• practical issues
• links to III basket issues
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reflected the contemporary East-West
trade boom
”comprehensive notion of security”
North-South (Europe) dimension as well
as East-West dimension
II basket: problems
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abstract principles: symbolic value limited
• comparisons with III basket
• contracts and further official agreements
required to achieve the stated ends
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existing bilateral and multilateral
agreements and institutions
• GATT, MFN-status, bilateral trade
agreements...
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Nixon-Kissinger economic engagement
policy in trouble
Epilogue: after 1975
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a new life for United Nations
Economic Commission for Europe
(est. 1947) in the follow-up process
advances in practical issues
wider conception of security: benefits
of interdependence
1980s economic realities
Selected reading
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John J. Maresca: To Helsinki (1985)
Gunnar Adler Karlsson: Western Economic
Warfare 1947-1967 (1968)
Michael Mastanduno: Economic
Containment. CoCom and the Politics of
East-West Trade (1992)
David Baldwin: Economic Statecraft
(1985)
Angela Stent: From Embargo to Ostpolitik.
The Political Economy of West GermanSoviet Relations 1955-1980 (1981)
People’s democracies trade with
Western Europe
50 %
49 %
45 %
40 %
35 %
30 %
25 %
20 %
14 %
15 %
10 %
5%
0%
1948
1953
US trade with the Soviet Union
1950-1983 (million $)
4000
3500
3000
2500
2000
1500
1000
500
19
50
19
53
19
56
19
59
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
0
exports
imports
US trade with the Soviet Union
1950-1969 (million $)
160
1964
140
120
1969
100
exports
imports
80
60
40
19671968
1961
1960
20
19
50
19
52
19
54
19
56
19
58
19
60
19
62
19
64
19
66
19
68
0
1962
1959
US trade with the Soviet Union
1970-1983 (million $)
4000
1979
3500
3000
1982
2500
1976
2000
1978
1981
1983
1975
1977
1500
1980
1973
1000
1972
500
1974
19
83
19
81
19
79
19
77
19
75
19
73
19
71
19
69
0
exports
imports
US exports to Soviet Union 19711982 (million $)
3000
2500
2000
Agricultural
Nonagricultural
1500
1000
500
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
0
US imports from Soviet Union
1971-1982 (million $)
1400
1200
1000
800
Agricultural
Nonagricultural
600
400
200
1982
1981
1980
1979
1978
1977
1976
1975
1974
1973
1972
1971
0
EC trade with Eastern Europe
1958-1983 (million ECU)
30000
25000
20000
exports
imports
15000
10000
5000
0
1958 1963 1972 1974 1976 1978 1980 1982
East German-West German trade
1950-1983 (million clearing units)
8000
7000
6000
5000
4000
3000
2000
1000
19
50
19
53
19
56
19
59
19
62
19
65
19
68
19
71
19
74
19
77
19
80
19
83
0
East to West
West to East
Exports to East Europe and USSR
in % of total exports 1969-1982
8
7
6
5
FRG
Italy
US
4
3
2
1
0
1969
1971
1973
1975
1977
1979
1981
Importance of Eastern exports for
Mannesmann A.G. in % 1970-1982
50
45
40
35
30
of turnover
of total exports
25
20
15
10
5
0
1970
1972
1974
1976
1978
1980
1982
FRG-USSR trade 1970-1983
(million DM)
14000
12000
10000
8000
exports of FRG
imports of FRG
6000
4000
2000
19
82
19
80
19
78
19
76
19
74
19
72
19
70
0