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The Soviet Union and GATT: Gesture, Metaphor or Serious Trade Policy?

  • William Diebold

Abstract

In view of the German invasion of Russia a special meeting of the War and Peace Studies Project of the Council on Foreign Relations was called by Mr Hamilton Fish Armstrong ... Mr Diebold pointed out that some very interesting problems might arise concerning the relation of the Soviet Union to the international economic institutions which were contemplated on the assumption of Anglo-American collaboration. It had been generally assumed that the reconstructed world economic order would be ‘liberal’, but with a greater degree of government participation in international economic processes than had existed in Britain and the United States before the war. What would be the relation to such institutions and such a system of a country in which the economy was entirely state-controlled?2

This not very profound observation was correct in 1941, held good for the next few decades and is still true. It is set at the head of this chapter only to put the subject and the author in perspective. I write not as a specialist on the Soviet Union but as someone who has long been concerned with the evolution of the international economic system and the place of different kinds of countries in it. This approach and a sense of the history of the subject colour this essay which touches on issues which cannot be adequately dealt with in a chapter of this size. Interpretations and judgements that are only sketched rely in part on earlier work, not all of which is cited and some of it not published.

Keywords

Trading System Uruguay Round Foreign Relation Soviet Economy CMEA Country 
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Notes

  1. 1.
    This chapter was prepared as a paper for the conference on Soviet Foreign Policy at the Crossroads, sponsored by Carleton University and the Canadian Institute for International Peace and Security, at Ottawa, 30 September and 1 October 1988. An earlier version was written for a study group of the Council on Foreign Relations in January 1988. Much of its substance was presented orally and discussed at two meetings with Soviet and American economists arranged by the United Nations Associations of the two countries in New York in October 1986 and in Moscow in December 1987. I am grateful to Toby Gati and Michael Mandelbaum for inviting me to undertake these earlier efforts without which I would almost certainly not have written this paper.Google Scholar
  2. 2.
    Archives of the Council on Foreign Relations, Studies of American Interests in the War and the Peac?, Political Series, no. P-A 12, 25 June 1941. Unnumbered flyleaf and p. 6 (mimeographed).Google Scholar
  3. 3.
    Quoted in Karin Kock, International Trade Policy and the GATT 1947– 196?, Stockholm, Almqvist & Wiksell, 1969, p. 54. No date is given for the original article inNew Time? which is quoted from the New York Time? of 17 May 1947. Along with the Kostecki book cited in the next footnote, Kock is a good source of possible explanations for Soviet policy in the GATT and ITO issues and has been drawn on for other points later in this section.Google Scholar
  4. 4.
    M. M. Kostecki, East—West Trade and the GATT Syste?, St Martin’s Press for the Trade Policy Research Centre, New York and London, 1978, p. 3.Google Scholar
  5. 5.
    Strictly speaking, GATT is not an organization; participants are ‘contracting parties’, not members, but the more common usage is easier.Google Scholar
  6. 6.
    Eliza Patterson, ‘Improving GATT Rules for Non-market Economies’, Journal of World Trade La?, vol. 20, no. 2, 1986, p. 185, fn.Google Scholar
  7. 7. New York Time?, 25 February 1988; the earlier quotation was from 21 January and the original report on 20 January.Google Scholar
  8. 8.
    Clair Wilcox, A Charter for World Trad?, New York, Macmillan, 1949, pp. 164, 102.Google Scholar
  9. 9.
    Boris Eliacheff, Le Dumping Soviétiqu?, Paris, Marcel Giard, 1931, p. 191 and passim? The Westerners were not alone in their fears. Lenin warned Bukharin that tariffs would not suffice to protect Soviet industry from attacks by the ‘incredibly rich’ capitalist countries, W.N. Turpin, Soviet Foreign Trade: Purpose and Performanc?, Lexington, Mass., Lexington Books, 1977, p. 16.Google Scholar
  10. 10.
    Frederick C. Adams, Economic Diplomacy: The Export—Import Bank and American Foreign Policy, 1934–193?, Columbia, University of Missouri Press, 1976, p. 112.Google Scholar
  11. 11.
    On Dealing with the Communist Worl?, New York, Harper & Row for the Council on Foreign Relations, 1964, p. 23.Google Scholar
  12. 12.
    Marshal I. Goldman, Détente and Dollars: Doing Business with the Soviet?, New York, Basic Books, 1975.Google Scholar
  13. 13.
    The formulas are quite different. The Poles agreed to an annual percentage increase of imports from GATT countries. The Romanians were committed only to increase imports from GATT countries as fast as total imports grew. The concepts became a little foggy as these and other CMEA countries became GATT members.Google Scholar
  14. 14.
    Ed Hewett, ‘Most-Favored-Nation Treatment in Trade under Central Planning’, Slavic Revie?, March 1978, pp. 25–39.Google Scholar
  15. 15.
    The ITO had a broader sweep. It had a chapter on restrictive business practices (public as well as private) and another on commodity agreements. Both dealt with some of the issues of discrepant market power; the latter was much stronger than the former but neither was carried over into GATT.Google Scholar
  16. 16.
    League of Nations, Trade Relations between Free-Market and Controlled Economie?, Geneva, Economic, Financial and Transit Department, 1943, II.A.4, pp. 80, 81. This report came close to saying there was n? general way of overcoming the systemic differences between state-controlled and market economies.Google Scholar
  17. 17.
    However, this protection of the home market does nothing to offset the effects of Soviet dumping in a third market if the importing country does nothing to raise prices or restrain the flow of goods.Google Scholar
  18. 18.
    This chapter leaves aside some serious questions about the organization and functioning of GATT that would be raised by Soviet accession but were not important when the smaller countries applied. For example: Can a superpower be ‘just another member’ of an organization? GATT’s nominal one-country, one-vote formula is in fact modified by something approaching a requirement for consensus among major trading countries on major issues; how would Soviet membership affect this practice? Has GATT a sufficiently firm political and organizational superstructure to cope with so drastic a shift in its membership?Google Scholar
  19. 19.
    Kostecki, East-West Trade and the GATT Syste?, p. 11.Google Scholar
  20. 20.
    A further complication is that China has claims to differential treatment as a developing country. Under pressure of space and ignorance all these issues are left out of this chapter.Google Scholar
  21. 21.
    For a fuller discussion of prices, exchange rates, convertibility, joint ventures, and also the classic problems, especially dumping, see Chapter 2 of my paper ‘East European Countries in the World Economy’ in Lawrence T. Caldwell and William Diebold Jr, Soviet-American Relations in the 1980s: Superpower Politics and East-West Trad?, New York, McGraw-Hill and 1980s Project/Council on Foreign Relations, 1981, pp. 241–62.Google Scholar
  22. 22.
    Not all counter-trade works this way. British Christmas-card-makers complained that their domestic market was being ruined by cheap Soviet cards sold by a subsidiary of Control Data that was trying to help a Soviet customer obtain hard currency to pay for one of its computers.Google Scholar
  23. 23.
    Institute of World Economy and International Relations of the USSR Academy of Sciences, International Economic Securit?, Moscow, Novosti, 1988, pp. 39, 40.Google Scholar
  24. 24.
    Contrast, for example, Richard H. Ullman, ‘Ending the Cold War’, Foreign Polic?, Fall 1988, pp. 130–51, with Erik Dirksen, ‘What if the Soviet Union Applies to Join GATT?’, The World Econom?, June 1987, pp. 228–30.Google Scholar
  25. 25.
    Some indication of what ought to be done can be found in Miriam Camps and William Diebold, Jr, The New Multilateralism: Can the World Trading System be Saved?, New York, Council on Foreign Relations, 1983 and 1986. A fuller explanation of the deterioration which has been dealt with so briefly here can be found in the same work and, more broadly, in William Diebold, Jr, ‘The United States in the World Economy: A Fifty Year Perspective’, Foreign Affair?, Fall 1983, pp. 81–104. The case for strengthening GATT by specific measures is well made in the report of a group of ‘seven eminent persons’ appointed by the Director-General: GATT, Trade Policies for a Better Futur?, Geneva, March 1985.Google Scholar
  26. 26.
    For instance, the introduction of GATT consultation about national trade policies plus the acceptance of the fact that some practices could not be effectively governed by tight rules (two important points in The New Multilateralism? might make possible the working-out of problems in the way Wilcox and others thought could be done in the ITO in spite of the inadequacy of the provisions for dealing with state trading and centrally planned economies. This approach would also be a good vehicle for the application of Eliza Patterson’s recommendations: that a country with a centrally planned economy undertake to apply GATT ‘to the extent compatible with its economic system’ and use its system to give GATT partners ‘benefits equivalent to those accruing to’ itself under GATT and not use its system to ‘nullify and impair the benefits of the GATT’ Another example of how the evolution of the trading system in response to primarily Western problems might help or hinder the accommodation of East—West trade concerns what was done about dumping, subsidies and other ‘fair trade’ issues. Increased reliance on safeguards and measures to check market disruption — with, one would hope, increased international surveillance — would reduce the systemic obstacles to Soviet participation. However, an effort to make rules more precise and refined in measuring subsidies, dumping, and the like, would widen the gap between the system’s norms and their applicability to the Soviet system. For a fuller discussion of these and related issues, see two papers of mine: ‘Rethinking the Problem of Trade and Payments: the Soviet Union and the Process of Reforming Relations among Industrial Market Economies’, in The Soviet Union and the World Econom?, Council on Foreign Relations, 1979, mimeographed; and ‘The Soviet Union in the World Economy’, in Joint Economic Committees, Soviet Economy in a Time of Chang?, Washington, GPO, 1979.Google Scholar
  27. 27.
    Jozef M. van Brabant, The GATT and the Soviet Union — A Plea for Refor?, DIESA Working Paper Series, no 6, United Nations: Department of International Economic and Social Affairs, August 1987, mimeographed. I have not had the opportunity to check these references against a version of van Brabant’s paper published as Planned Economies in the GATT Framework; the Soviet Case’, Soviet Economy, January—Marc?, 1988.Google Scholar
  28. 28.
    This statement was written in 1971. I had not thought of it for a long time until I found it quoted by van Brabant; but it still seems true. William Diebold Jr, The United States and the Industrial Worl?, New York, Praeger for the Council on Foreign Relations, 1972, p. 349.Google Scholar
  29. 29.
    Three good examples of these views, two by scholars of quite different backgrounds and the third by a man of substantial political experience, are: Theodore Geiger, The Future of the International Syste?, Boston, Unwin & Hyman, 1988; Robert Gilpin, The Political Economy of International Relation?, Princeton, Princeton University Press, 1987; Edmund Bell, The Politics of Economic Interdependenc?, New York, St Martin’s, 1987.Google Scholar
  30. 30.
    See the process described by Edward C. Luck and Toby Trister Gati, in ‘Gorbachev, the United Nations, and US Policy’, Washington Quarterl?, Autumn 1988, pp. 19–35.Google Scholar
  31. 31.
    Robert J. Fogelin, Figuratively Speakin?, New Haven, Yale University Press, quoted in the New York Times Book Review,1? September 1988.Google Scholar
  32. 32.
    William Diebold, Jr, Commentary, in Robert W. Cox, (ed.) International Organization: World Politic?, London, Macmillan, 1969, p. 289.Google Scholar

Copyright information

© Carl G. Jacobsen 1989

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  • William Diebold

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