THE PATTERN OF SOVIET BLOC-FREE WORLD TRADE SINCE 1948

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CIA-RDP79T01149A000400060003-4
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November 9, 2016
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July 20, 1998
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3
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September 8, 1954
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REPORT
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Approve For Release 1999/09/21: CIA-RDP79TO1149A000400060003-4 US OFFICIALS ONLY THE PATTERN OF SOVIET BLOC-FREE WORLD TRADE SINCE 1948 CIA/RR MP-115 8 September 1954 THIS MATERIAL CONTAINS INFORMATION AFFECTING THE NATIONAL DEFENSE OF THE UNITED STATES WITHIN THE MEANING OF THE ESPIONAGE LAW, TITLE 18, USC, SECS. 793 AND 79L1, THE TRANSMISSION OR REVELATION OF WHICH IN ANY MANNER TO AN UNAUTHORIZED PERSON' IS PROHIBITED BY LAW. DOCUMENT NO NO CHANGE IN CLASS. U DECLASSIFIED CLASS. CHANGED TO: TS NEXT REVIEW DATE: AUT DAT TIEVtEWER: _372044 20 CENTRAL INTELLIGENCE AGENCY Office of Research and Reports US OFFICIALS ONLY 6 Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved For Release 1999/09/21: CIA-RDP79TO1149A000400060003-4 FORE;4WORD This paper has been prep?ed to reflect the effects of Soviet Bloc-Free u?Jorld trade on the Bloc rather than on the Free World. The ;ire: entat3 on of =later has been oriented to reflect this viewpoint. Thus Bloc exports data which is reported in C.I.F. Western ports values have been adjusted to F.O.B. Bloc port values, similarly Bloc imports normally reported F.O.B. Western ports have been converted to C.I.F. Bloc ports. Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved. For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 CIA/RR 17 -115 (OM Project '2.565) 1. Sur Lary of f Postwar Trace and Observations on Pre The Cc .unist Bloc has ho=e an apparent desire to increase trade with the Fred World . Following t7e propaganda line of the,,, USER,, the: Bloc has atteuipte to convince non-Bloc areas that increased trade with the Coimaunist World will s rve as the solution to their economic proble s . Th= . Bloc appears to be using this tactic, at least in part., as a zuoans of encouragil ; dissension betvreen the US and other nations of the Free: World. Aside from political advantages which may accrue to the Bloc through the use of th.:is tactic, it has also helped to brew: Iwo?.r the control system imposed on trade in strategic itc rn . It is unlik e3.,y, however, that the traditional trade objectives of the Soviet Bloc, hit.ii have been d.irectid towards achieviz economic self-sufficiency, have been substantially changed. Although the current Coz niu mist propaganda line portrays Bloc nations as desiring to increase imports of consumer goods from the Free World, aiy increase in trade over the next few years will probably include :signiflcaht quan- tities of -specialized types of capital goods. With the excel_-tion of China, the Bloc may be expected to increase to some extent i nport,s of foodstuffs and capital used for the production of consumer goods. The- postwar pattern of Bloc exports, and especially thus-- of the USSR, may bocause of increased dme tic requirements for foodstuff. be z-xk cted to change in composition. The capacity for export of foodstuffs d11 be reduced and expansion of other exports and develo nt of ne exports w.-ill be needed. As an indication of this in the latter half of 1953, iargz-r cuantities of petroleum, manganese,, precious metals, and manufactured goods were :xported to the Free ld. Recorded trade totals for the ~riod 19' 3 through 1.953 are shown in tha table C odity composition of this trade is shown in a :.cm,,,,l x ying graphs. Soviet Bloc Trade with the Free World as ions of Constant 19=8 US Dollar-, Year Bloc Imports Bloc 2E EI Total 19h 2,096 1,880 3,976 191;-9 1,901 1,758 3,66k 1950 1,765 1,629 3,39' 11951 1, 730 1..6 23 3,323 1` 5 1 163 1,468 2,931 1953 1,506 1,556 3,06,;i a. See Addendum for = xplanation of c sti- _--spite the existence of a system of trade controls maintained by various nations of the Free World, substantial shients of controlled materials and ;quient have reached the Soviet Bloc through the medium of clandestine trade. Although good coverage of officially recorded Soviet I .oc - Free World trade is available, the very nature of cndestine trade precludes the co apilation of firm aggr'egates. Reports from various free ports of Western Europe, as well as from Gdynia, ing Kong, and Macao, indicate substantial shipments of controlled goods moving to the Bloc. Reports also indicate movement of such good& overland to Bloc areas. In view of various limitations, which seriously prevent the =,`athering of clandestine trade data into firm aggraegatrees, no attempt has been made in this paper to quantify the sum total of illegal tras flowing to the Bloc from the Free World. In the prewar period, 1936-38, total Soviet Bloc** ` trade with the Free World. ;ars in the. order of US < 4.5 billion, in terms of 1948 prices. Bloc exports to Thca estimates and conclusions contained in this report represent the best udgxa nt of the responsible analyst as of 1 September 19514. :?* Albania,, Bulgaria, Czechoslovakia, Hungary, Polaxnd, Ruma lia, U& R, and China. Approved For Release 1999/09/2f:tTA=`I~'bP79T01149A000400060003-4 Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 fw tur a, t goods w id industrial raw t tr?__rials ac counter . for cles __- to 5 p rcent total Moe im o :?ts from the Free Worrld. Food prodaets, t pprox1x ti 3 on thir ., f total exports, coupled with industrial ra. tt at srial accounted for about GO per- t of total Bloc exports to the Free World. Thirty -percent. of Bloc exports ted of 1t nu factured goods. r c if alete ezin &ariso of prewar .n analysis of rec to c x,I trade with the Free : `orl ii ,, the basic trade A major aim of current Soviet trade tactics a er eatc. dissension bet seen the and the rest of the 01-S. le trade data shows tl e ft or-P Beet imports. If the actua:L ly eon titute CL most i u -rt, tnlbos styes to increase 1-Test trade:, it is probable that a substa ii fraction of Soviet i : its will continu., to be in iii nea, and other ?:c vital goods. The iziport of food W1 machinery used for the production .o wacr goods, will c ztixue to be subordinated to the imp. t of capital g a . :.itlonall, exerts of the UOM have included timber, erains., .ars,, cold and other precious metals. Ineveasit dzwographicr essures, couple with a higher consumption level, has reduced to sore extent, the capability e2 the USSR to exkxwt agricultural pr ducts. Consequently cuarre $c iet ex- show increased sales of petrola , i ecious a - t l s, a rot metallic ores uc ? as chronr. and n;Z1nese. ie with the Free World fob'' 1953 muountc-,d to t1S 2 Million- Soviet US `=3 a flit a a ee a ical and xportstotaled US million ~T~t~~ eW ~,} )ill of current `Soviet trade itith the F World sows that Lhe '5; agra e of this trade is with I estern =u i . Of all 1953 Soviet exports to the k w 1?orld, 86 rcent reached Western `tr`ope and percent of the 1953 for is ? the Free World. to the LEM came f'z this rc .on. The ' ar east and Africa because of bo ary a jt to nts and t a ee in t' climate of the are. of 1953 Soviet exports to the Free World and accounted for only is . r- of it Free World trade to the USER. Australia and i Zeel aru shared e - t imports fro the Free cam`?d. Soviet trail with other non- "a[ ca areas accounted for a very small percentage of total {d, wJo . o'd'der, and probable do- et tr ,. z ,th the Free World 1al t' of 195' . if I probably bocc a one of the The " op aan .tell it :s shared a renewed interest in r. ast li shins . any. ; nil nC tras] relations with the Free World in late 1953 and early 1954, . rersi the trend of decreasing try between the two areas. Special effort : z dir ect . towards the ex,, expansion of such trade with the is le East and a to Western uro t nations. Latin Am ica, but overtures were also mad urrcent tray.' ' ? ree nts reflect this policy. , l aria, past G r any, is have not only concluded trade aMee ~r s with '? e World nations -,,, 9 percent of all Soviet exports to the Free World a exported 7 per- ly at this time, that the USM is prepax d to alter sub_ policy one the major aims of Latch bace been the achie=ve- of economic indep ncie e. Although it is a that particularly since the ascendance of 21cn , hav-e :cru to the ', such ate:.-control syste.:' of the Free >orld and thus Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved. For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 -vrlhieh they formerly had no agreeuaents,* but they have also r=~negotiated w ments with other Froc World countries superseding the :Lar ely ineffective ;ree tints signed in 1947 or 1948. Czechoslovakia., I1u aLy, and Poland have made an effort to revive old agreements but they have not concluded any new agreements. Some attempts by these countries to imp ram con rcial relations with Asiatic nations have also been reported. In an evaluation of trade agreements as indications of future levels of trade it should be pointed out that actual trade in the past has frequently been only 60 percent to 65 percent of that provided for in the annual trade agreements. In a few cases there have ben downward. revisions in export cuotas under Satellite trade agreements. Recent Satellite propaganda has professed a desire to increase trade with the Free World. The reason for this may be that the Parom-an Satellites now require increased imports of food and consumer goods to help implement the '"new course" (current satellite program for increased .,phasic on consumer goods). Relaxation of international security controls may also produce a limited expansion of trade. On balance, however, it is improbable that Eaaro- pcen Satellite-Free i- orld trade will show more than a modest increase. The requirements of than Satellite Industrialization program,, the heavy economic commitments with the USSR, and the econc .ic needs under the "new course" will t(.-.,nd to limit Satellite export ca ' ilities . analysis of the trade pattern since l94- indicates that Western .arol n the European Satellite's largest trading partner in trade with thy{ Free World. The percentage of trade with this area remained quite stable between 9d8_53, averaging appr. ox mate3y- 75 per cent . The Western Hemisphere has experienced a large decrease in trade with thT> Satellites. Imports fr this area a.:eprent.i.?a; about 21 percent of total E opearx Satellite imports in i948, fell to about 2 pcrcent of such trade in 1953. Exports to the Western Hemisphere, bo ever, rc; iained relatively stable at about 7 percent. Trade with the Far East, Australia, and New Zeal 'id_ rose during 191 .53 while trade with the. Near East remained. stable,. between the 13E of>ean ;satellites and the Free World. in the first quarter of 195 showed a turnover increase of approximately USd j41,CK)0,000. We-stern ,urope absorbed only US `a' million of this increase. The remainder of the in- crease apparently can be attributed to an increase in trade with the Near Bast, East, and latin P ricer. The largest category of commodities imported by the Europe-an "atell1tes from the Free World was that of crude materials. Approximately one-third of total, imports consisted of this group} of commodities. Manufactured goods, machinery" and foodstuffs were the other major cowodity groups imported by the 'uropean Satellites during the period 19=r8-53. The two largest categories of exports frcarn the European Satellites to the 1d were foodstuffs and mineral fuels and lubricants. Together they comprised, approximately 4O percent of the European Satellitc4 exports in 1953. fa;ctua: ed goods are the third largest in the Satellite group of exports. IV. China's Trade with the Free World. Cora .unist China's recorded trade in constant 1948 US dollars with the Ms t declined from US '=1,1? million in. 1950 to a low of US x10 million in 195L. * The number of 1954 trade agreements of those countries with Free ;fiorld coun- tries compared with the number of agreements made in 1953 are as follows: Bulgaria, 7-3, East Germany, 10-7, Rumania, 13-5. Approved For Release 1999/09/21 : CIA-RDP79T011'49A000400060003-4 Approved-For Release 1999/09/21: CIA-RDP79TO1149A000400060003-4 1-)54. rade iner with Special ahasi s on Potential Soviet 1916c Trsdi. - Partnr, s . (This section should draw heavily on the conclusions of Part B -- determining first the Soviet needs and surpluses and secondly the Free World ability to supplant the Soviet influence.) a. Investments. b. Tariff Changes. e. Technical Assistance. cis Other (Student Exchange, Union Leader and Executive 2xchanges, etc.) Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved For Release 1999/09/21 CIA-RDP79T01149A000400060003-4 a. Reaction of the USSIR . (Th?a effort here should be to analyze the reaction of the. o the denial or supplanting of her potential sources of supply or that could be her c petiti reaction - price, quality, military, b . Effect on Free World 11 lier and Markets. Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 VI. Bib3.i2graah Trade Activities vi.th the West. neral efe3rences That May Be of Assis Uest Trade 1. Vulnerability of Western ?'e to a Soviet Da Secret State, O ., 5477, 10 August 1951, l,estern Europe as a whole, dcpend.s only slightly on ;astern Europe for imports -- 3 to 4 percent of total imw)orts, representing leas than 1 percent of total national income of Western uropean nations. Only i percent of this volume of Vest European imports is made up of "strategic iteSas." About 50 percent of these imports from astern Europe is made up of grains, coal, good, and rood naroducta. For certain nations, the imports from Eastern Europ - arc more IDiport t than the over-all aggregates indicate. For example, in 1950, Norway received 36 percent of its bread grain consumption fr cin Eastern E rope; the UK received. 13 percent of its sagas soft wood and 10 percent of its coarse grain supplies frc i Eastern Eurot ; East European coal met 25 to 33 percent of Scandinavian In most cases, the US could supply the items "'without serious difficulty." wood would be the most difficult problem. Loss of the export market in eastern Europe would not prove a maj zroblem for Western Europe. t:. Vulnerability of the Soviet Bloc to Fxisti and Ti.-hterrd tern _'conomic Controls. Revised Secret Fiat", Q1., 1951- This study includes: (1) The Soviet Bloc as a wholc (including, Soviet Bloc dependence on imports from the outside world,, Soviet Bloc vulnerability to a ban on its exports, and limitations on Soviet Bloc vulnerability; (?L) Deficit cccmod.itics (including fuel, and power, =tall and Ear-tallurgical ?ment, non-metallic minerals and selected manufactures, chemicals, rubbt r rubber products, and industrial rsachlnery and equi nt . T study states that Satellite dependence on the Western world has been j reatly reduced as compared with prewar periods, but it remains substantially greater than that of the USSR itself. Although the USSR and its Satellites have tmde strenuous efforts to develop self-suf'f'iciency, the fact remains that the orbit is still dependent to an important degree on western imports. The stay ap aise-s Soviet vui erabili_ty with respect to broads categories such as *"high quality machines and instruments" as well as with respect to general er miodities . 3. Trade of the Free World with the Soviet Bloc.. (3e:ere#J) E.C.A. February 1951. This report includes (1) The nature of the Soviet Bloc econ and its foreign trade; (2) Soviet Bloc imports from the rest of the. world. (including, the import needs of the Soviet Bloc, the relative dependence of Soviet Bloc nations on inports, is-rports as related. to military potential,, sources of Soviet Bloc imports, dependence of the Free World on the Soviet Bloc markets, and present controls over exports); (3) zove~t Bloc exports (including, the need of the Soviet Bloc to e)qort, partied ti.n~ country im- ports fret the Soviet Bloc, and the commodity cr I3osition of Imports); (4) the valance of Advantage (including, the Economic Balance, the ?iannce of Initiative, and the Balance of Political Objectives); (5) the vulnerability of the Soviet Bloc; (6) a general program of economic sanctions; and (7) a program of ,elec- tive controls. V Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 The study states, under the heading of "A arning," "In casting up a balance of advantage it might be recalled that neither, Ride can injure the other decisively through economic action. The most that we can do is to slog down the rate of Soviet develoi nt . The raost that the Nast can do is to force the Free World into a program of developing costly resources, and of allocating limited supplies of commodities which need not be scarce so long as there is trade between, the Free World. and the Soviet Bloc" ... "serious as these problems would be, however, production a the economic program of the Free World woull be less seriously upset than 1rogramG of the Soviet Bloc." Secret iieek y intelligence Report, No - 132; 1)epartent of the Ai' y., Office, Asst. Chief of Staff, G-2, 31 August 1951. This article states, "The Soviets apparently :intend to exploit their pos ti,on as suppliers of these 3 camodities (grain, timber, coal) to obtain d i - i t . z s they urgently need frc . the vest . ... Recent develox n cate that the Soviets may succeed in their designs." The article then briefly analyzes the vast ? et trade situation in the countries; the UK, France, Belgium-Luxembourg, and. Austria. 5. Vul r ra'bilit of the Soviet Bloc to Economic "Waif e . Secret CIA; NEE 22, 19 February 1951. te includes: (1) General conclusions (inc1 .is ,. Military Capabilities, Conduct of Foreign Policy, Economic and political 'Stability, Ecranomic veloi=nt, Ability to Reduce the Effects of Controls, Chinese Discussion including, litary Capabilities, and the. ChineseCE7nc,Y4 (-) UT Vulnerabilities of the USSR and its Eastern Satellites, and. Soviet Bloc Caaabilities to Minimize the Effects of Controls). The esti to states HAithounh, because of ti-,e advanced state of soviet si iii icatatly preparedness for i>'?3Y', such a program (economic warfare would not affect the present capability of the USSR to wage initial campaign y it * ou11 sreve?thr less, seriously affect the ability of the USER to conduct a general wear of long duration and might correspondingly influence a decision concerning such a venture . " Tb : estimate: discusses s cific cc odity and equij iient vv-1nerabilities of the USSR and its Eastern European Satellites. nt :lli ersce. Report oJR - No. 6347 Date 3i~tober 9 (Secret). This study deals with the various aspects of Soviet trade with the ern trodd and is divided into five parts -- (1) Trade reea cnts, u 2) Contracts and Barter Agreementu, (3) Trade Negotiations, (1) Composition of Soviet Impo~.:t,a, and (5) Composition of Soviet Exports. ir, pointed out that trade of the USSR with the countries of the Free World during the T rio. January-try 1953 was about ='-5 percent less in value than for a si.miler period in 1952. The report estimates that total -;ast-West trade will be substantially under the 195 figures. Al.thouGh tht.: 1uded more Trade A eements than in 1952, the bulk of them. arc- concerned with deliveries to be made in 1954 and therefore those trade figures cannot be included in the 1953 totals- The composition and shift of Sc i.et irii orts and exports is easo discussed. 7. Soviet Ext}rnal Trade and Finance -_. A study.. (Secret . Auist Vs 1953 This basic study is concerned with the policies of the USSR as regards foreign trade and finance. The study notes taro characteristics Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved-For Release 1999/09/21 CIA-R P79T01149A000400060003-4 D f -: . yy 1- Ffyi `' of USSR trade that ar4 most peculiar. ... one characteristic is the form, nai ely, state. monopoly of foreign trade; the second is a policy feature, defined as the continued and persistent drive to achieve th-? greatest of self-sufficiency. Section B entitled "International Finance and TraCe" contains one part dealing with Soviet foreign trade policy. Under this particular portion of the study can be found material on Postwar Soviet trading tactics with the vlcst, the lbscaw Economic Conference, and the Soviet attitude.:. towards the Economic Council of Europe. Another part of Section 33 deals with the various mechanisms that are employed by the Soviets in their trade relations with non- orbit areas. 3. Analysis of Cc nist Propaganda. (Connfide tial), OIR Intelligence Report No. 57141, 30 y 1952. This report is concerned with an analysis of Cooniun:ist propaganda in various areas of the w-rorld. It contains references to specific types of propaganda pertaining to economic matters, that is employed by Communists to proselytize their cause in various regions of the world. 9. The Economic Im. ortence of Current Trade with the Communist Bloc . (Confidential); OIR Intelligence Report No. 5696, 26 April 195 : This study - s prepared as a contribution to NiE 59 which dealt with the relative strategic importance of East-West trade to the Soviet Bloc and to the rest of the world. It is concerned with two basic cucation:: "What is the current level of trade between the non-Communist Far Last and the #ovviet Bloc?" and "What would be the cost to the non-Con nun:ist Far East of a complete cessation of this trade?" 10. Generalized Assessment of Economic Dam e to the Soviet Bloc in the Event of a Cc late Severance of East.-West Trade. Secret , 'SIC-R-3, 31 August 1953. Prepared jointly by US Intelligence Agencies, Economic Intelligence Cormiittee. This study is designed to assess the effects of a total severance of Western trade with the Soviet Bloc. It concerns itself with the question : "How Mould the total cessation of trade affect Soviet.-Satellite capabilities to wage war?" The purpose of the report, is "to aid long-range planning, with little attention directed to providing information needed for the day-to-day operations of a trade restriction program." U. Probable Economic Effects of a, Severance of East-West Trade. Secret , N 59, 1 April 1953. This estimate deals with an analysis of economic consequences that would result from a total stoppage of trade between East and West. An An ical Framework for Stud- of Economic Warfare with Special Reference to East-West Trade Problems. (Confidential)., CIA RR 22, 30 April 1953. This project provides the analyst with a basic framework for the development and analysis of the various problems arising from East-West trade. This study is divided into four component parts: (a) Problems and definitions; (b) General analysis of strategic damage froom trade restrictions; (c) Methods of measuring strategic costs; and (d) Special factors in the analysis of East-West trade. 13. Econcedc Conditions in the Furor Satellites. (Secret, US Officials Only), C570 IP- b 4, 15 May 195. This study contains a section dealing with the Foreign Trade of the =_'uropean Satellites. It contains information pertaining to (a) Inter - t 3l it Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved-For Release 1999/09/21: CIA-RDP79TO1149A000400060003-4 25X1 C8a 25X1 C8 Officials- Only). Gold Sales. contains information concerning (a) Soviet capabilities to purpose of recent Soviet fold shi nes, and (c) certain trade and the rad.i.cal_ shift of this trace in the postwar ; riod, (b) inforrlation concerning . Satellite trade with the West and a talble showi . the value of each Satellite's tree with the West from i943 through 1953, (c) a limited amount of information on the ccodity composition of Satellite trad.&_ and. a table listing the major exports and Imports of the Satellites to t+ Soviet anion, oth=er Bloc nations , anL shwa West, (d) Satellite trade as it is conditioned by their economic. policies, (e) Try a e nts and Negotiations, (f) Foreign trade planning in the Tzro e S -Wteilites, (g) Price differentials in Soviet -S to lite trade, and (h) Satellite reparations to the USSR. 1"7. Ces in the Pattern of Soviet Trade Ii et , CIA/RR h- ! 1 July 1954. ,the Frs c World 1953-5-' This report is concerned with the shii'ti g pattern of Soviet trade arxI :ysi of the various factors that have been responsible for this change. Approved For Release 1999/09/21 : CIA-RDP79T01149A000400060003-4 Approved -For Release 1999/09/21: CIA-RDP79TO1149A000400060003-4 These charts represent attempt to portray East 41est trade frmi t1 aoint of view of the Soviet-Bloc countries. As such, very rough. adjust- p:.ents for shipping and insurance costs were incorporated in the data. Soviet Bloc e oxttc are presented, therefore, on an :FOB bazis, and imports, on a CIF basis. Moreover, the yearly values of total exi t $ an imports v:erc adjust.. for price changes from U.N. statistical data on the basis of 198 'id, prices. which are based on official trade statistics of the Free or d nations, are subject to max' limitations inherent in such data. Because of this, information in the charts should be construed as roh orders of magnitude only. This is especially true in the- charts co cernin the ccnodity cc position of trade. Particularly in the earlier years, large portions of recorded trade were reported by Free World countries in "other" categories. Because of these residual categories, eor .od ty? patterns in earlier years are probably distorted. In the ease of China., 191 48 and. 19149 data reflect Chinese Nationalist trade. Further- reported Chinese trade for all the years is probably overstated because of the inclusion of Taiwan, Korea, and UUo Kong,. in. certain reports of Free World countries under the title of "trade with China.." 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