Applying the principles — conceptual issues

Abstract

There is by now sufficient evidence to affirm that prices in intra-CMEA trade are not uniform, that they differ markedly from those observed in trade with other countries. MEs as well as PEs, and that they bear only a tenuous relationship with domestic prices in any of the CMEA members. At the very least, this situation is highly paradoxical when placed against the backdrop of the time and effort devoted to the gradual elaboration of common TRP formation principles and their alleged implementation at least since the mid-1960s. The paradox has several dimensions that need to be clarified before I can discuss properly the measurement of differences between EWPs, TRPs, and WMPs, or the surrogates of the first and the last, and embark on the examination of a series of explanations for these systematic differences as viewed by observers from east and west. The heterogeneity of TRPs and systematic divergences from reference prices stem to some degree from conceptual problems about the proper interpretation and application of vague principles that have mutated over time. But its central culprit is the environment within which these pricing rules must be applied, if they were intended as such in the first place.