Foreign trade of Communist Czechoslovakia
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Foreign trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...
played an important role in the national economy of
Communist Czechoslovakia The Czechoslovak Socialist Republic, ČSSR, formerly known from 1948 to 1960 as the Czechoslovak Republic or Fourth Czechoslovak Republic, was the official name of Czechoslovakia from 1960 to 29 March 1990, when it was renamed the Czechoslovak ...
as opposed to the economic system of the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...
.


History and timeline


1948–1953

After the 1948 coup d'état, foreign trade enterprises successfully carried out the government's policy of rapidly redirecting the bulk of the country's foreign trade to
communist state A communist state, also known as a Marxist–Leninist state, is a one-party state that is administered and governed by a communist party guided by Marxism–Leninism. Marxism–Leninism was the state ideology of the Soviet Union, the Comi ...
s in the period from 1948 to 1953. Many
observer An observer is one who engages in observation or in watching an experiment. Observer may also refer to: Computer science and information theory * In information theory, any system which receives information from an object * State observer in co ...
s contended, however, that the new system had seriously adverse effects on the economy. Isolating domestic producers of export products—primarily manufactured goods—from developments abroad slowed the introduction of new technology, the upgrading of the appearance of products, and the development of sales and service staffs with adequate parts inventories. Isolation hampered the development of export industries and products, reinforcing the
autarkic Autarky is the characteristic of self-sufficiency, usually applied to societies, communities, states, and their economic systems. Autarky as an ideal or method has been embraced by a wide range of political ideologies and movements, especiall ...
bias of the Soviet model.


1953–1960

After
Joseph Stalin Joseph Vissarionovich Stalin (born Ioseb Besarionis dze Jughashvili; – 5 March 1953) was a Georgian revolutionary and Soviet political leader who led the Soviet Union from 1924 until his death in 1953. He held power as General Secretar ...
's
death Death is the irreversible cessation of all biological functions that sustain an organism. For organisms with a brain, death can also be defined as the irreversible cessation of functioning of the whole brain, including brainstem, and brain ...
in 1953, Czechoslovak trade with the
Western world The Western world, also known as the West, primarily refers to the various nations and states in the regions of Europe, North America, and Oceania.
gradually revived, although it still was far below prewar levels. More than two-thirds of the foreign trade continued to be with
Comecon The Council for Mutual Economic Assistance (, ; English abbreviation COMECON, CMEA, CEMA, or CAME) was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc#List of s ...
member states. Because of its relatively advanced industrial position within Comecon, Czechoslovakia initially had a secure market for its machinery and equipment exports. As years passed, however, the
Soviet Union The Soviet Union,. officially the Union of Soviet Socialist Republics. (USSR),. was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 to 1991. A flagship communist state, ...
absorbed growing portions of Czechoslovakia's export capacity and very soon the country came to depend on the Soviet Union for imports of raw materials as well.


1960–1980

By the 1960s, it became clear that the country's dependence on foreign trade was substantial and that a restructuring of the economy was necessary. Škoda_Works_ChS4,_built_in_1969,_is_an_example_of_a_locomotive_exported_to_the_Soviet_Union_and_still_used_in_modern_Ukrainian_Railways.html" "title="ChS4.html" ;"title="Škoda Works ChS4">Škoda Works ChS4, built in 1969, is an example of a locomotive exported to the Soviet Union and still used in modern Ukrainian Railways">Ukraine Ukraine ( uk, Україна, Ukraïna, ) is a country in Eastern Europe. It is the second-largest European country after Russia, which it borders to the east and northeast. Ukraine covers approximately . Prior to the ongoing Russian inv ...
. file:Aero L-29 Delfín (14081099552).jpg, Aero L-29 Delfín became the standard jet trainer for the air forces of Warsaw Pact nations in the 1960s. In the 1970s, the government authorized a number of large enterprises to deal directly, or through affiliations with Czechoslovak foreign trade companies, with foreign purchasers of their products. To encourage further export and modernization, the central authorities permitted Czechoslovak firms to retain a regulated portion of export proceeds. Authorities also acknowledged that the economy seriously lagged behind the non-communist
industrialized Industrialisation ( alternatively spelled industrialization) is the period of social and economic change that transforms a human group from an agrarian society into an industrial society. This involves an extensive re-organisation of an econo ...
countries in application of new technologies. In response, they increased imports of Western products and processes that incorporated advanced technology. In the mid-1970s, the
terms of trade The terms of trade (TOT) is the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices. It can be interpreted as the amount of import goods an economy can purchase per unit of export goods. An i ...
for Czechoslovakia began to deteriorate rapidly. In 1975 the pricing system used to set values on imports and exports in trade between communist countries was adjusted to make them more current and closer to world prices. The adjustment raised the price of fuels and raw materials (primarily Czechoslovak imports) much more than it did
manufactured goods Manufacturing is the creation or production of goods with the help of equipment, labor, machines, tools, and chemical or biological processing or formulation. It is the essence of secondary sector of the economy. The term may refer to a rang ...
(the country's main export). The same trend manifested itself in trade with Western industrialized countries. During the late 1970s, the terms of trade continued to worsen; greater and greater quantities of exports were required to purchase the same volume of imports. The combination of worsening terms of trade and the difficulty of expanding exports caused Czechoslovakia's trade imbalance to grow in almost every area. Between 1975 and 1979, the country's excess of imports over exports was nearly US$1.2 billion with the Soviet Union, US$690 million with
Eastern Europe Eastern Europe is a subregion of the European continent. As a largely ambiguous term, it has a wide range of geopolitical, geographical, ethnic, cultural, and socio-economic connotations. The vast majority of the region is covered by Russia, whic ...
, and US$3.3 billion with noncommunist developed countries. These imbalances emerged despite efforts to conserve fuel and raw material use, to slow the volume of other imports, and to increase
export An export in international trade is a good produced in one country that is sold into another country or a service provided in one country for a national or resident of another country. The seller of such goods or the service provider is an ...
s. During the 1970s, Czechoslovakia, like other countries of Eastern Europe, turned to West European
credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt) ...
sources to obtain financial help for imports as well as longer-term investments in modern technology. Czechoslovakia did not publish information on these credits. However, one Western estimate placed Czechoslovakia's hard currency debt to the West at the end of 1979 at US$4 billion gross and about US$3.1 billion net. Czechoslovak officials had been much more prudent in building up a foreign currency debt than had several other East European nations, however, and the country's credit
standing Standing, also referred to as orthostasis, is a position in which the body is held in an ''erect'' ("orthostatic") position and supported only by the feet. Although seemingly static, the body rocks slightly back and forth from the ankle in the s ...
remained good.


1980–1991

Beginning in 1980, Czechoslovakia was able to achieve a
trade surplus The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
with non-communist countries, but only by drastically curtailing imports. When Western banks tightened credit to Eastern Europe in 1982 (largely in reaction to Polish
insolvency In accounting, insolvency is the state of being unable to pay the debts, by a person or company ( debtor), at maturity; those in a state of insolvency are said to be ''insolvent''. There are two forms: cash-flow insolvency and balance-sheet ...
), Czechoslovakia redoubled its efforts to curb imports and pay off its debt. This cautious attitude continued to prevail even after the creditors' policy eased. The government's stance did have the disadvantage of depriving Czechoslovakia of potentially helpful Western technology. However, at the end of 1984, Czechoslovakia could boast one of the lowest net
hard currency In macroeconomics, hard currency, safe-haven currency, or strong currency is any globally traded currency that serves as a reliable and stable store of value. Factors contributing to a currency's ''hard'' status might include the stability and ...
debts per capita (about US$15 per inhabitant) in Eastern Europe; only
Bulgaria Bulgaria (; bg, България, Bǎlgariya), officially the Republic of Bulgaria,, ) is a country in Southeast Europe. It is situated on the eastern flank of the Balkans, and is bordered by Romania to the north, Serbia and North Macedo ...
's debt was lower. With the Soviet Union, by contrast, Czechoslovakia continued to run a substantial deficit. In the mid-1980s, according to official statistics, Czechoslovak trade activities remained overwhelmingly oriented toward intra-Comecon trade. Within Comecon, in keeping with the plan for regional specialization set forth in the Comprehensive Program of 1971, Czechoslovakia concentrated on production of
machine tool A machine tool is a machine for handling or machining metal or other rigid materials, usually by cutting, boring, grinding, shearing, or other forms of deformations. Machine tools employ some sort of tool that does the cutting or shaping. All ...
s and electric
railroad Rail transport (also known as train transport) is a means of transport that transfers passengers and goods on wheeled vehicles running on rails, which are incorporated in tracks. In contrast to road transport, where the vehicles run on a pre ...
locomotives; the traditionally strong Czechoslovak
armament A weapon, arm or armament is any implement or device that can be used to deter, threaten, inflict physical damage, harm, or kill. Weapons are used to increase the efficacy and efficiency of activities such as hunting, crime, law enforcement, s ...
s industry also remained important. In 1985, almost 78% of total Czechoslovak foreign trade turnover was with Comecon members. Trade with "developed capitalist countries", by contrast, was listed at just under 16% and
developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agreem ...
accounted for over 6%. Most Western analysts believed that official Czechoslovak methods of calculation tended to overstate considerably the value of trade conducted in transferable
ruble The ruble (American English) or rouble (Commonwealth English) (; rus, рубль, p=rublʲ) is the currency unit of Belarus and Russia. Historically, it was the currency of the Russian Empire and of the Soviet Union. , currencies named ''rub ...
s, i.e., with Comecon partners, and to underestimate the value of
hard currency In macroeconomics, hard currency, safe-haven currency, or strong currency is any globally traded currency that serves as a reliable and stable store of value. Factors contributing to a currency's ''hard'' status might include the stability and ...
trade with non-communist countries. Nevertheless, the general structure of Czechoslovakia's foreign trade was unmistakable.


Organization

Under the Czechoslovak system, foreign trade was a state
monopoly A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
, supervised by the central Ministry of
Foreign Trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...
. The ministry oversaw the operation of about thirty foreign trade enterprises. As
intermediaries An intermediary (or go-between) is a third party that offers intermediation services between two parties, which involves conveying messages between principals in a dispute, preventing direct contact and potential escalation of the issue. In la ...
between the domestic export producers or import purchasers and the external market, the enterprises were responsible for arranging contracts as well as for financing and generally supervising Czechoslovak foreign trade, usually setting prices that have little connection with domestic production factors. The
foreign trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...
companies bought Czechoslovak goods for export at domestic prices and sold foreign goods to Czechoslovak customers at domestic prices; but the other half of these transactions, involving actual foreign trade, took place in foreign currencies in foreign markets. The government budget then made adjustments to compensate for any unwanted gains and losses caused by varying foreign and domestic prices.


Foreign exchange and exchange rate

An important characteristic of the Soviet model that was imposed on Czechoslovakia in 1948 was the attempt to insulate the domestic economy and minimize the impact of world economic trends. The system accomplished this in part by severely restricting foreign currency transactions and confining them to official channels at fixed and favorable exchange rates. Within a few years, the exchange rate had lost its historical basis and no longer bore any direct relationship to purchasing power in other currencies.


Trade partners


Major partners

Czechoslovak trade was heavily concentrated among a relatively small group of countries. According to official statistics, five countries accounted for 71.7% of all
foreign trade International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. (see: World economy) In most countries, such trade represents a significant ...
in 1985: # # (
East Germany East Germany, officially the German Democratic Republic (GDR; german: Deutsche Demokratische Republik, , DDR, ), was a country that existed from its creation on 7 October 1949 until its dissolution on 3 October 1990. In these years the state ...
) # # # (
West Germany West Germany is the colloquial term used to indicate the Federal Republic of Germany (FRG; german: Bundesrepublik Deutschland , BRD) between its formation on 23 May 1949 and the German reunification through the accession of East Germany on 3 O ...
) The Soviet Union exerted a powerful influence over the Czechoslovak economy. In 1985 it accounted for 44.8% of foreign trade turnover, according to official statistics. In 1985 by far the most important export from Czechoslovakia to the Soviet Union was machinery and various kinds of equipment, such as machine tools, power generating equipment, instruments and laboratory equipment, agricultural machinery, railroad rolling stock and other transport equipment, and equipment for the food, textile, and chemical industries. Such items made up over 60% of exports to the Soviet Union. Other minor items were
ore Ore is natural rock or sediment that contains one or more valuable minerals, typically containing metals, that can be mined, treated and sold at a profit.Encyclopædia Britannica. "Ore". Encyclopædia Britannica Online. Retrieved 7 Apr ...
s and
metal A metal (from Greek μέταλλον ''métallon'', "mine, quarry, metal") is a material that, when freshly prepared, polished, or fractured, shows a lustrous appearance, and conducts electricity and heat relatively well. Metals are typicall ...
s, clothing and footwear,
chemicals A chemical substance is a form of matter having constant chemical composition and characteristic properties. Some references add that chemical substance cannot be separated into its constituent elements by physical separation methods, i.e., wit ...
, furniture, domestic appliances, and
beverage A drink or beverage is a liquid intended for human consumption. In addition to their basic function of satisfying thirst, drinks play important roles in human culture. Common types of drinks include plain drinking water, milk, juice, smoo ...
s. Czechoslovak imports from the Soviet Union, by contrast, consisted primarily of raw materials and energy-related items;
petroleum Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crud ...
and petroleum products accounted for almost 43% of import value, and
natural gas Natural gas (also called fossil gas or simply gas) is a naturally occurring mixture of gaseous hydrocarbons consisting primarily of methane in addition to various smaller amounts of other higher alkanes. Low levels of trace gases like carbo ...
and
electricity Electricity is the set of physical phenomena associated with the presence and motion of matter that has a property of electric charge. Electricity is related to magnetism, both being part of the phenomenon of electromagnetism, as describ ...
totaled 18%. Other imported products were machinery and transport equipment, representing almost 10% of total imports; metal ores, coal and coke, and pig iron and ferroalloys made up almost 8%. Second, third, and fourth in order of rank in Czechoslovak foreign trade turnover were
East Germany East Germany, officially the German Democratic Republic (GDR; german: Deutsche Demokratische Republik, , DDR, ), was a country that existed from its creation on 7 October 1949 until its dissolution on 3 October 1990. In these years the state ...
,
Poland Poland, officially the Republic of Poland, is a country in Central Europe. It is divided into 16 administrative provinces called voivodeships, covering an area of . Poland has a population of over 38 million and is the fifth-most populou ...
, and
Hungary Hungary ( hu, Magyarország ) is a landlocked country in Central Europe. Spanning of the Pannonian Basin, Carpathian Basin, it is bordered by Slovakia to the north, Ukraine to the northeast, Romania to the east and southeast, Serbia to the ...
. Among noncommunist countries, an important trade partner was
West Germany West Germany is the colloquial term used to indicate the Federal Republic of Germany (FRG; german: Bundesrepublik Deutschland , BRD) between its formation on 23 May 1949 and the German reunification through the accession of East Germany on 3 O ...
(fifth in rank). Principal Czechoslovak exports to West Germany in 1985 were various manufactured goods (especially
paper Paper is a thin sheet material produced by mechanically or chemically processing cellulose fibres derived from wood, rags, grasses or other vegetable sources in water, draining the water through fine mesh leaving the fibre evenly distrib ...
and paperboard,
textile Textile is an umbrella term that includes various fiber-based materials, including fibers, yarns, filaments, threads, different fabric types, etc. At first, the word "textiles" only referred to woven fabrics. However, weaving is not the ...
s, and
iron Iron () is a chemical element with Symbol (chemistry), symbol Fe (from la, Wikt:ferrum, ferrum) and atomic number 26. It is a metal that belongs to the first transition series and group 8 element, group 8 of the periodic table. It is, Abundanc ...
and steel products), mineral fuel products (briquettes, coke, and refined petroleum products), and chemical products. Principal imports from West Germany were machinery (textile- and leather-working machinery, machine tools, and electrical machinery and instruments), chemical products, and various manufactured goods.


Other partners

Other East European Comecon countries, such as
Bulgaria Bulgaria (; bg, България, Bǎlgariya), officially the Republic of Bulgaria,, ) is a country in Southeast Europe. It is situated on the eastern flank of the Balkans, and is bordered by Romania to the north, Serbia and North Macedo ...
,
Romania Romania ( ; ro, România ) is a country located at the crossroads of Central, Eastern, and Southeastern Europe. It borders Bulgaria to the south, Ukraine to the north, Hungary to the west, Serbia to the southwest, Moldova to the east, and ...
and
Hungary Hungary ( hu, Magyarország ) is a landlocked country in Central Europe. Spanning of the Pannonian Basin, Carpathian Basin, it is bordered by Slovakia to the north, Ukraine to the northeast, Romania to the east and southeast, Serbia to the ...
, were also of considerable importance (seventh and ninth in rank, respectively). Czechoslovak exports to these countries in 1985, according to official data, consisted mainly of machinery and transport equipment, chemical products, and (especially to Hungary) coal and briquettes. Imports likewise were primarily machinery and transport equipment, chemical products, and various other manufactured goods. Czechoslovakia also imported food and animal products from Hungary. Other significant trading partners were
Austria Austria, , bar, Östareich officially the Republic of Austria, is a country in the southern part of Central Europe, lying in the Eastern Alps. It is a federation of nine states, one of which is the capital, Vienna, the most populous ...
,
Britain Britain most often refers to: * The United Kingdom, a sovereign state in Europe comprising the island of Great Britain, the north-eastern part of the island of Ireland and many smaller islands * Great Britain, the largest island in the United King ...
,
Italy Italy ( it, Italia ), officially the Italian Republic, ) or the Republic of Italy, is a country in Southern Europe. It is located in the middle of the Mediterranean Sea, and its territory largely coincides with the homonymous geographical ...
, and
France France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of overseas regions and territories in the Americas and the Atlantic, Pacific and Indian Oceans. Its metropolitan area ...
. Engineering products, which accounted for more than 50% of all Czechoslovak exports, had a share of only 10 to 11% in noncommunist trade, owing to very strong and successful West European competition. Instead, consumer goods, metallurgical products, chemicals, and fuels and raw materials were more important. With regard to imports from noncommunist countries, Czechoslovakia in 1986 was especially interested in the high technology offered by Western Europe and Japan (twenty-fifth in rank). Particularly in demand were products from engineering, electronics, and electrical engineering industries, as well as
biotechnology Biotechnology is the integration of natural sciences and engineering sciences in order to achieve the application of organisms, cells, parts thereof and molecular analogues for products and services. The term ''biotechnology'' was first used ...
and pharmaceuticals. As of 1985, Czechoslovakia also conducted substantial amounts of trade with
Yugoslavia Yugoslavia (; sh-Latn-Cyrl, separator=" / ", Jugoslavija, Југославија ; sl, Jugoslavija ; mk, Југославија ;; rup, Iugoslavia; hu, Jugoszlávia; rue, label=Pannonian Rusyn, Югославия, translit=Juhoslavija ...
, the
People's Republic of China China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
, Syria, and
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. Czechoslovak trade with the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
(twenty-third in rank) was modest. In 1985 Czechoslovak exports to the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
included, among other things, footwear and
jewelry Jewellery ( UK) or jewelry ( U.S.) consists of decorative items worn for personal adornment, such as brooches, rings, necklaces, earrings, pendants, bracelets, and cufflinks. Jewellery may be attached to the body or the clothes. From a w ...
,
glassware upTypical drinkware The list of glassware includes drinking vessels (drinkware) and tableware used to set a table for eating a meal, general glass items such as vases, and glasses used in the catering industry. It does not include laboratory glas ...
, steel bars, wire, shaped steel, prepared or preserved meats, and hops. In 1985 imports consisted, among other things, of raw materials (hides and skins, seeds for producing
vegetable oil Vegetable oils, or vegetable fats, are oils extracted from seeds or from other parts of fruits. Like animal fats, vegetable fats are ''mixtures'' of triglycerides. Soybean oil, grape seed oil, and cocoa butter are examples of seed oils, or f ...
, and ores and concentrates of base metals), specialized industrial machinery, and printed materials. During the late 1970s and early 1980s, Czechoslovakia had imported substantial amounts of grain from the United States, but more abundant domestic harvests enabled the country to reduce these imports in the mid-1980s.


References

{{Country study *''Journal of European Integration History'', 2004, Volume 10, Number 2 Economy of Czechoslovakia Cz Czechoslovak Socialist Republic Foreign relations of Czechoslovakia