East-West Economic Relations in the Changing Global Environment

Transcription

1 East-West Economic Relations in the Changing Global Environment

2 East-West Economic Relations in the Changing Global Environment Proceedings of a Conference held by the International Economic Association in Budapest, Hungary, and Vienna, Austria Edited by Bela Csik6s-Nagy and David G. Young Palgrave Macmillan

3 ISBN ISBN (ebook) DOI / International Economic Association Softcover reprint of the hardcover 1 st edition 1986 All rights reserved. For information, write: Scholarly & Reference Division, St. Martin's Press, Inc., 175 Fifth Avenue, New York, NY First published in the United States of America in 1986 ISBN Library of Congress Cataloging-in-Publication Data East-West economic relations in the changing global environment. Inc1udes index. 1. East-West trade (1945- )-Congresses. 2. International economic relations-congresses. I. Csik6s-Nagy, Bela. 11. Young. David G. (David Gordon), III. International Economic Association. HFI41O.5.EI '.09171'3 8(r6615 ISBN

4 Contents Acknowledgements List of Participants Abbreviations and Acronyms Introduction Bela Csikos-Nagy Opening Address Jozsef Marjai ix Xl XV XVll xxi PART ONE: THE GLOBAL FRAMEWORK AND EAST-WEST ECONOMIC INTERACTION 1 Recent Developments and Some Issues in East-West Economic Relations Klaus A. Sahlgren 3 2 Changing Position of Europe in the World Economy and East-West Economic Relations J6zsef Bogntir 9 3 Deterioration of the Global Environment and East-West Relations Oleg Bogomolov 25 4 The Global.Framework and East-West Economic Relations Ed A. Hewett 41 5 Political and Economic Influences on East-West Economic Relations Peter Knirsch Discussion of Part One PART TWO: INSTITUTIONAL FRAMEWORK AND SPECIAL FACTORS INFLUENCING EAST-WEST TRADE 6 Legal and Institutional Framework of East-West Economic Relations Krystyna Michalowska-Gorywoda 97 v

5 VI Contents 7 The Impact of the Polish Crisis on East-West Trade Franz-Lothar Altmann 104 Discussion of Part Two 114 PART THREE: COUNTRY EXPERIENCES IN EAST-WEST TRADE AND ENERGY TRADE 8 Soviet Energy Supplies as a Factor in East-West Relations Jochen Bethkenhagen 9 Austria's Trade with the East Friedrich Levcik 10 US East-West Trade Policy, Focusing ca Recent Legal Developments Paul Marer 11 Hungary's Experiences in GA TI Janos Nyerges Discussion of Part Three PART FOUR: EAST-WEST CO OPERATION IN THE FIELD OF TECHNOLOGY 12 Transfer of Technology in East-West Economic Relations Gunter Nötzold East-West Relations in Technology Transfer in the 1980s Mihaly Simai Trends in Direct Investment and the Transfer of Technology Carl H. McMillan 260 Discussion of Part Four 276 PART FIVE: EAST -WEST FINANCIAL COOPERA TION 15 Relations between Western Capital Markets and the CMEA Six Carlo Boffito Eastern European Countries and the IMF Marie Lavigne 298

6 Contents vii 17 Some Aspects of East-West Financial Cooperation lose! Soldaczuk The Impact of Debt Problems on East-West Economic Relations: an Additional Proposal for the Solution of International Debt Problems Kaiman ncsi 321 Discussion of Part Five 335 PART SIX: MARKET BEHAVIOUR AND COMPARATIVE ADVANTAGE IN EAST-WEST TRADE 19 East-West Trade and Market-Conforming Behaviour: a Case Study of Hungary Bela Csik6s-Nagy Systems' Adjustments to East-West Economic Cooperation Pawel H. Dembinski Comparative Advantage and Competitiveness in East-West Relations Christopher Saunders Criteria for a Political Cost-Benefit Approach Towards East-West Economic Relations Heinrich Vogel 405 Discussion of Part Six 411 Name Index 423 SubjectIndex 426

7 Acknowledgements The conference reported in this volume was unique in that it was held part in Budapest, organised by the Hungarian Economic Association with generous help from the Hungarian People's Republic, and part in Vienna, organised by the Austrian Economic Association with support from the Erste Österreichische Spar-Casse. The continuing support of the work of the International Economic Association from UNESCO helps to make possible such international gatherings for deliberating important subjects such as the interaction between East and West. The settings for both parts of the conference were most congenial and the cordial atmosphere was greatly assisted by the hospitality offered in Budapest by the Deputy Prime Minister and in Vienna by the Federal Minister for Foreign Affairs, as weil as by the principal hosts of the conference. To all we express our very sincere thanks. Programme Committee B. Csik6s-Nagy (Chairman) F. Levcik (Co-chairman) O. Bogomolov Ed A. Hewett M. Kaser J. Pajestka K. A. Sahlgren P. Sydow ix

8 List of Participants Mr Mikhail Afanasiyev, Chamber of Trade and Industry of the USSR, Vienna, Austria Dr Franz-Lothar Altmann, Osteuropa-Institut, Munich, FRG Dr Jochen Bethkenhagen, Deutsches Institut für Wirtschaftsforschung, Berlin Dr Gerd Biro, Hungarian Chamber of Commerce, Budapest, Hungary Mr Carlo Boffito, University of Turin, Italy Professor Jozsef Bogmir, Institute for World Economics, Budapest, Hungary Professor Oleg Bogomolov, Institute for the Socialist World Economic System of the Academy of Sciences of the USSR, Moscow, USSR Professor Bela Csikos-Nagy, President, Hungarian Economic Association, Budapest, Hungary Dr Pawel H. Dembinski, University of Geneva, Switzerland Dr Raimund Dietz (Vienna only), Wiener Institut für Internationale Wirtschaftsvergleiche, Vienna, Austria Dr Karl Dyba, Czechoslovakian Academy of Sciences, Prague, Czechoslovakia Ministerialrat Dkfm (Dr Peter Feith) (Vienna only), Bundesministerium für Handel, Gewerbe und Industrie Dr Gerhard Fink, Wiener Institut für Internationale Wirtschaftsvergleiche, Vienna, Austria Professor Helmut H. Haschek, Austrian Kontrollbank AG, Vienna, Austria Mr Yozo Hasegawa (Vienna only), Nihon Keizai Shimbun (Japanese Economic Journal), Vienna, Austria Dr Ed A. Hewett, The Brookings Institution, Washington DC, USA Dr Patricia M. Hillebrandt, Assistant General Editor to IEA, London, Great Britain Dr Gerald Hinteregger, Secretary General of the Austrian Federal Ministry, Vienna, Austria xi

9 xii List 0/ Participants Professor Andreas J0rgensen, Institute of East-West Studies, University Centre of South Jutland, Esbjerg, Denmark Professor Vitali Kaftanov, International Institute for Applied Systems Analysis, Laxenburg, Austria Mr Michael Kaser, St Antony's College, Oxford, Great Britain Professor Peter Knirsch, Osteuropa Institut, Freie Universität Berlin, FRG Mag. Csaba Körtvelyessy (Vienna only), Erste Österreichische Spar-Casse Mr Gennadij Krasnov, Director, Division for Trade with Socialist Countries, UNCTAD, Geneva, Switzerland Professor Marie Lavigne, Centre d'economie Internationale des Pays Socialistes, University of Paris I, France Mr. Todor Levanshki, Bulgarian Academy of Sciences, Sofia, Bulgaria Professor Friedrich Levcik, Wiener Institut für Internationale Wirtschaftsvergleiche, Vienna, Austria Professor Lou Yuanzheng, Chinese Academy of Social Sciences, Beijing, People's Republic of China Professor V. S. Mahajan, North-Eastern Hili University, Meghalaya, India Professor Paul Marer, Indiana University, Bloomington, Indiana, USA Professor Harriet Matejka, Institut Universitaire des Hautcs Etudes Internationales, Geneva, Switzerland Dr Kurt Mauler (Vienna only), Oesterreichische Nationalbank, Vienna, Austria Professor Carl H. McMillan, Carleton University, Ottawa, Canada Dr Krystyna Michalowska-Gorywoda, Central School of Planning and Statistics, Warsaw, Poland Professor Renato Mieli, (CESES) Centro Studi sui Sistemi Socio Economici dei Est, Milan, Italy Professor Ken Morita (Vienna only), Otaru University of Commerce, Hokkaido, Japan Mr Kurt Neubauer, Osteuropa Business International, Vienna, Austria Mrs Margit Nielsen, Institute of East-West Studies, University Centre of South Jutland, Esbjerg, Denmark Professor Jürgen Nitz, Academy of Sciences of the GDR, Berlin Professor Günter Nötzold, Karl Marx University, Leipzig, GDR Mr Janos Nyerges, Academy of Foreign Trade, Budapest, Hungary Professor Josef Pajestka, Institute of Economics, Warsaw, Poland

10 List of Participants xiii Dr KaIman Pecsi, Institute for World Economics, Hungarian Academy of Sciences, Budapest, Hungary Mrs Petra Pissulla, HWW A Institut für Wirtschaftsforschung, Hamburg, FRG Dr Philipp Rieger, Creditanstalt-Bankverein, Vienna, Austria Mr Klaus A. Sahlgren, Executive Secretary, Economic Commission for Europe, Geneva, Switzerland Professor Stefan Sarenkov, Bulgarian Academy of Sciences, Sofia, Bulgaria Professor Tsuneaki Sato, Yokohama City University, Japan Professor Christopher Saunders, European Research Centre, University of Sussex, Great Britain Professor Mihaly Simai, Institute for World Economics, Budapest, Hungary Mr Joseph Smolik, Economic Commission for Europe, Geneva, Switzerland Dr Josef Soldaczuk, Foreign Trade Research Institute, Warsaw, Poland Professor Ernst Streissler, University of Vienna, Austria Professor Peter Sydow, Academy of Sciences of the GDR, Berlin Professor Shoichiro Takenami, St Andrews University, Osaka, Japan Mr Masaya Tsuchiya (Vienna only), JETRO (Japan External Trade Organisation), Warsaw, Poland Dr Heinrich Vogel, Bundesinstitut für östwissenschaftliche und internationale Studien, Cologne, FRG Dr Gerhard Weber (Vienna only), Vereinigung Österreichischer Industrieller, Vienna, Austria Mr David G. Young, Multilingual Economics Dictionary, Budapest, Hungary

11 Abbreviations and Acronyms ASEAN b BIS c CAP CCC CIF CMEA CNT COMECON COCOM CPE CSCE CSSR DAC EC EEC ECE EAA ECU EFTA ERDI FRG FTO GATT GDR IBRD ICA Association of South-East Asian Nations billion (1000 million) Bank for International Settlements cubic Common Agricultural Policy (of the EEC) Commodity Credit Corporation (US) Cost including freight Council for Mutual Economic Assistance Comecon Nomenclature of Trade seecmea Coordinating Committee (for Multilateral Export Controls) Centrally Planned Economy Conference on Security and Cooperation in Europe Czechoslovak Socialist Republic Development Assistance Committee European Community European Economic Community Economic Commission for Europe Export Administration Act (US) European Currency Unit European Free Trade Association Exchange Rate Deviation Index Federal Republic of Germany Foreign Trade Organisations General Agreement on Tariffs and Trade German Democratic Republic International Bank for Reconstruction and Development International Cooperation Agreement xv

12 xvi IDL IEA IMF ITC LDC LTFV MCTL ME MFA m MFN mtce MTE NATO NBH NIC NME NTB OECD OPEC OPIC PPP PRC R&D SDR SITC t. th. TR UNCTAD UNIDO Abbreviations and Acronyms International Division of Labour International Energy Agency International Monetary Fund International Trade Commission (of the USA) Less Developed Countries Less than fair value Militarily Critical Technologies List Market Economy Multifibre Agreement million Most favoured nation million tons co al equivalent Market-type economy North Atlantic Treaty Organisation National Bank of Hungary Newly industrialised countries Non-market economy Non-tariff barrier Organisation for Economic Cooperation and Development Organisation of Petroleum Exporting Countries Overseas Private Investment Corporation Purchasing power parity People's Republic of China Research and Development Special Drawing Rights Standard Industrial Trade Classification tons thousand Transferable Rouble United Nations Conference on Trade and Development United Nations Industrial Development Organisation

13 Introduction Bela Csik6s-Nagy PRESIDENT, HUNGARIAN ECONOMIC ASSOCIA non Among the first decisions of the newly elected Executive Committee of the IEA last year in San Sebastian was to organise a conference on this very important issue, and I gladly accepted the invitation to be the Chairman of the Programme Committee, with the dose collaboration of the Austrian Economic Association. The IEA has often addressed East-West, North-South issues. I would like to mention several important IEA conferences: Economic Development for Eastern Europe, 1968 Planning and Market Relations, 1970 The Gap Between Rich and Poor Nations, 1970 Industrial Management: East and West, 1971 Methods of Long-term Planning and Forecasting, 1976 Economic Relations Between East and West, 1978 The Relevance of Economic Theories, The conference recorded in this volume reflects a continued concern for the salience of East-West economic relations, not only for the role they play in the volatile relations between East and West, but as an essential part of the global environment. Whenever at international meetings I faced the issue of East-West economic relations, I often found that my colleagues viewed these relations as being outside the re alm of normal economic phenomena, and either relegated them to a special category or considered them an unimportant part of the total world trade. It is true that the share of East-West trade in total world trade is not large; nevertheless, trade between East and West has a significance beyond its relative size, and it cannot be denied that the increasing web of interconnections between the world's economies indudes the CMEA members as weil as the countries of the OECD. XVll

14 xviii lntroduction This approach is the same as one can find in the Helsinki Accords, which stress the importance of economic cooperation between East and West. Recognising the deep interdependence of security, political understanding and normal economic ties, the document emphasises the basket two in East-West economic cooperation. What actually is specific in this relationship is the divergence of socio-economic systems. Problems connected with this must, of course, be thoroughly examined and everything must be done to put cooperation on a smooth path. But specific issues also emerge in North-South relations and can be observed among industrially developed capitalist countries because of their different national interests. We all know quite weil that even if we leave out of consideration differences in existing socio-economic systems: geographical and historical peculiarities, not to mention divergences in economic growth, give enough reason for dispute even between the best of friends. The strained and tense state of relations between East and West at the time of the conference, in 1984, lends an added emphasis to the following papers and discussion. The opening address by J6zsef Marjai, Deputy Prime Minister, Hungary, sets the tone of the conference by pointing out the need for increased cooperation and the importance of natural partnerships already in existence between some East and West European countries. K. Sahlgren, J. Bognar, O. Bogomolov, Ed Hewett and P. Knirsch outline various aspects of the global framework and East West economic interaction, with a special emphasis on political and economic factors affecting this interaction. Special factors inftuencing East-West trade are considered by J. Bethkenhagen (energy), F. L. Altmann (the Polish crisis), P. Marer (US East-West trade policy), and F. Levcik (Austria's trade with the East). K. Michalowska analyses the legal and institutional framework of East-West relations, while J. Nyerges concentrates on Hungary's experience in GATT. The important question of East-West cooperation in the field of technology is addressed by G. Nötzold, M. Simai and C. McMillan. East-West financial cooperation is discussed in three separate papers by M. Lavigne, C. Boffito and J. Soldaczuk; K. Pecsi's paper examines the international debt problem, with special reference to Eastern Europe. The interrelated topics of market behaviour and comparative advantage in East-West trade are explored by P. Dembinski, C. Saunders, and myself. H. Vogel presents a most interesting

15 Introduction xix paper entitled Criteria for a Political Cost-Benefit Approach Towards East-West Economic Relations. The volume also includes summaries of the discussions that follow each group of papers. Often the discussions broach new topics and bring new insights to the formal presentations. Following J. Bethkenhagen's paper on energy, M. Kaser and Ed Hewett differ with the author and between themselves on future Soviet energy production levels and export potential. In an important contribution P. Marer raises the question of how to identify and evaluate alternative methods for computing the per capita dollar GNPs and growth rates of cent rally planned economies. H. Has~hek's optimistic review of East-West trade and the resolution of Eastern Europe's debt problem urges patience and cooperation in East-West economic relations. The conference provides new insights into the state of East-West economic relations. Several papers and the discussions lead me to conclude that certain figures have been exaggerated in the past, and East European debt is not so high as significantly to harn per relations. Also, the painful but necessary process of adjustment in Eastern Europe has been better and more flexible than had previously been thought in the West. It became c1ear during the conference that the evaluation of East-West relations was not the same in Europe as in the United States. This is interesting because the most economic interaction takes place between Eastern and Western Europe. Although the USA plays an important part in influencing these relations, its extent of control is not as large as had been earlier considered. U nfortunately, the conference does not leave one too optimistic ab out a big improvement in these relations. It seems to be a general conclusion that East-West economic relations will not be a dynamic factor in world development in the foreseeable future. Despite this rather pessimistic outlook, East-West economic relations remain perhaps the most important source of stability and continuity between the two systems. I feel very strongly that with cooperation and compromise some progress can be made in the coming years. Our conference was in a sense a sign of a willingness to cooperate, and it is hoped that the ideas presented in this volume will lead to additional research and fruitful cooperation in all fields of East-West relations.

16 Opening Address Jozsef Marjai DEPUTY PRIME MINISTER, HUNGARIAN PEOPLE'S REPUBLIC Ladies and Gentlemen, Allow me to welcome you on behalf of the Government of the People's Republic of Hungary. The International Economic Association has chosen once again an extremely important area as the subject of its present se ries of presentations. The shaping of East-West relations reveals a rather colourful picture. From the 1960s on, relations became more and more dose. The uncertainty in the initial phase was followed by a dynamic growth in trade, which was supported by political detente. One of the most important peaks of this process was represented by the concluding document of Helsinki. It is not by accident that the intensity of foreign trade and lending reached its peak in this period too. Experience has shown that in our world, politics and economics are closely dependent; the turning points, however, are even more emphasised by changes occurring in world politics. The very same correlation can be seen in the present period when relations between the two global powers have become strained, and the earlier economic relations loosened. Hungary, together with the socialist countries, is of the opinion that political confticts are to be settled by conferences. In our opinion a frank exchange of views and mutually advantageous and complementary economic relations may in themselves beneficially inftuence the revival of the process of detente. We may well consider it symbolic that the issues of East-West cooperation will soon be discussed by the participants under the auspices of the Austrian and Hungarian Economic Associations. These two countries, small in their dimensions and possessing a long common history and a different social system today, are equally XXi

17 XXll Opening Address interested in extending East-West economic relations and in normalising the world's political environment. Historically, Hungary has always been interested in maintaining East-West relations. In our foreign trade the greatest part is represen ted by the socialist countries and from among them by the CMEA member states. Economic relations with the socialist countries provide our economy with an immense and balanced market and purchasing possibilities. Supported by this, Hungarian foreign trade in convertible currency has undergone so me remarkable changes. We have succeeded in stopping the deterioration of our foreign trade balance, and what is more, we have achieved major trade surpluses in the past years. Thus the foreign payment situation of Hungary has been stabilised. It cannot be denied that we paid a steep price for this, and for the results undoubtedly achieved in this period, as weil as for changes in quality obtained by strong economic measures. The pace of growth decelerated as compared with earlier periods, the share of investments diminished, real wages receded and we were forced to employ limitations in the field of convertible currency imports. Parallel to the normalisation of the situation, however, we have alleviated and are alleviating the strict character of our import economy. It is hardly our intention to solve the present economic problems by restricting imports, rather we intend to employ active exporting policies. The preconditions for that are significantly worse than they were for example ten years ago. Protectionist tendencies are present in wide areas of the world's trade, and there is strong competition going on to obtain commodity markets by non-market means as weil. It cannot be denied that the structure of the Hungarian economy is still not up to date for a number of reasons, all which hinder rapid progress. Considering all this we are working now on the creation of a new phase of development which will be new from the point of quality, and wh ich has to ensure the strengthening of the foreign trade balance of our people's economy. It is important for us to encourage growth in the most dynamic and most export-oriented branches of our economy. An important tool for achieving this target is the updating of our system of economic management which is going on now. We have supervised the system of gene rating prices and wages, and we are making the regulations continuously more elastic. The independence of the companies is increasing considerably and the possibility of central management to intervene in the day to day activities of the companies is limited. The

18 Opening Address xxiii structure of the companies is being updated. We are initiating company management systems in which company decisions of strategie importance will be made by the company managers and the workers jointly. The updating of economic management is an organic part of the reform started in Aprerequisite of successfully realising economic policies is to have more elbow room provided by our foreign economic relations. From this point of view it is of eminent importance to make our East-West relations more dynamic. In surpassing traditional economic relations, we are taking an active part in the work of the International Monetary Fund and the World Bank. We are endeavouring to establish effective relations with other economic organisations as well. We are urging an improvement in mutually advantageous East West relations at different international fora. In our opinion in this field progress is hindered by several types of misunderstandings, ulterior motives and intentions to assert presumed interests. Considering the commodity structure of East-West trade, it can be stated clearly that these relations are beneficial for both sides. We cannot accept the argument that the socialist countries endeavour to achieve some kind of unilateral benefits from the improvement of East-West economic relations. We have to condemn the tendency of some countries to limit technological trade by artificial means. We consider this tool of economic warfare as senseless. It is obvious that by restrictive measures none of the critical issues of East-West relations can be solved. A real solution can only be found in balanced relations. Hungary, on its behalf, is intent on establishing such relations. The greatest need for this is to be found in our trade with the developed Western countries. Hungary's trade balance with this group of countries has been characterised by deficit for a long period. We think that this could be changed by making the relations more mutually dynamic. We know weil, that in order to exploit this possibility properly, not only the discriminating measures against Hungarian exports should be eliminated, but simultaneously the structure of Hungarian exports has to be thoroughly modernised. We consider the increasingly direct participation of Western companies in Hungarian economic life as important. In the creation of East-West joint ventures in the past years so me improvement could be seen, but we think that the potential hidden in the framework of joint companies is several times bigger than the present level. The

19 xxiv Opening Address framework of joint companies can beneficially influence the dissemination of sophisticated technologies and working management methods. Hungarian companies are encouraged to join independently in East-West economic relations. In order to achieve this end the system of foreign trading has been thoroughly decentralised. Several producing companies were provided with licences for direct foreign trading. It is our intention to extend this process further in the future. In the field of regulating foreign trade our intention is to help Hungarian companies in establishing real trader's positions and in strengthening their competitiveness further. The technical standards of commodities supplied by them should be as high as possible and the price levels of the supplied articles should correspond to international trends. The latter is even more important for us, for in the past ten years a major worsening of terms of trade occurred in the Hungarian economy. Hungary has extended East-West credit relations. The main base for this has been the crediting policy of the Hungarian National Bank. Successful for years, this policy has been supported by the economy's exports and by the deli berate aim of the management of the economy to create balance. The Hungarian economy intends to use a number of methods to enrich its international credit relations. The process of modernising can be seen in the successful establishment and operation of an international bank, the Central European International Bank, wh ich is a joint company. A conference dealing with East-West relations can primarily promote the development of relations by pointing out without any bias the mutual benefits in economic relations or the factors that are hindering the realisation of these benefits. In this field there is great need for objective analysis based on scientific approach. We can only achieve results by a creative exchange of opinions and by the frank and open discussion of differing points.