INTELLIGENCE MEMORANDUM NORTH VIETNAM: DEVELOPMENTS IN TRADE WITH THE FREE WORLD IN 1970 AND PROSPECTS DURING 1971
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~/JO C /"?i
Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
North Vietnam: Developments In Trade With The Free World
In 1970 And Prospects During 1971
Secret
ER IM 71-165
August 1971
Copy No.. 67
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
oROUP 1
Hxdoded from oUlomollf
downgrodinp and
dedms I t ,n
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
August 1971
NORTH VIETNAM: DEVELOPMENTS IN TRADE
WITH THE FREE WORLD IN 1970 AND PROSPECTS DURING 1971
Introduction
1. Exports to the Free World are only a small part of North
Vietnam's total trade picture, but they are Hanoi's most important source
of hard currency earnings. These earnings are needed to support diplomatic
representations in Free World countries, including the Paris delegation, and
to support military and political activities in the neighboring countries of
Indochina, as well as to pay for imports. In addition, North Vietnam
undoubtedly gains some political dividends through its commercial contacts
abroad. This memorandum describes developments in North Vietnam's trade
with the Free World in 1970 and discusses probable trends in trade with
the Free World during the next several years.
2. North Vietnam has published no trade statistics since 1963, but
data on North Vietnam's trade with the Free World are available from
trading partner statistics. Data on North Vietnam's receipts of grants from
Free World countries are incomplete and payments by North Vietnam for
shipping and insurance costs - included in Free World statistics on North
Vietnam's exports but excluded from statistics on North Vietnam's
imports ?- must be estimated from fragmentary data. Thus, estimates of
North Vietnam's hard currency earnings are approximations only.
Note: This memorandum was prepared by the Office of Economic
Research.
SECRET 25X1
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25
North Vietnam: Trade with Free World Countries
Million US $
Figure 1
Figure 2
North Vietnam: Commodity Composition of Export;, to the Free World
t:;lillion US $
25
1965 1966 1967 1968
'Including crude materials, animal and vegetable oils and fats,
unprocessed chemicals, and some unspecified miscellaneous products.
511805 8.71
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Discussion
Exports
3. In 1970, exports to the Free World continued to recover from
the wartime low in 1968 (see Figure 1 and Table 1). Exports rose to $17
million, more than 20% over the 1969 level and more than 60% over the
1968 level, but still less than 75% of the 1965 level. There ;lave been major
changes in the composition of exports in the past few years. In 1965, coal
made up over one-half of total exports to Free World countries, and
manufactures (mainly pig iron and cement) about one-fourth. In 1970, coal
exports were down to about one-third and manufactures to about 6% of
total exports.
4. Agricultural products continued to spark the recovery in exports
as North Vietnam increased its deliveries of rice and other foodstuffs such
as coffee, tea, and spices to Singapore, Malaysia, and Hong .. ng. North
Vietnam's agricultural exports in 1970 were more than three times the 1968
level and surpassed coal as a source of hard currency. They have increased
from about 12% to more than one-third of total exports to the Free World
since i965. Coal exports have been superseded by foodstuffs as the single
largest source of hard currency earnings because they have stagnated since
1968 and remain below one-half of the pre-bombing level (see Figure 2).
Coal expor~s to Western Europe, which amounted to about $3.3 million
in 1965, have not resumed since mid-1967, when shipments were halted
because of the bombing of coal processing facilities and the closing of the
Suez Canal. Shipments to Japan reached $4.7 million in 1970, somewhat
more than half of the 1965 level, as production problems continued to
limit the output of coal.
5. In 1970, manufactured goods, which have stagnated for three
years at about $1 million compared with nearly $6 million in 1965,
accounted for about 6% of total exports. Pig iron exports to Japan
amounted to more than $2 million in 1965, but have not been resumed
since the bombing of the Thai Nguyen Iron and Steel Complex in March
1967; cement exports in 1970 were probably still less than 5% of the levels
achieved in 1965 and 1966; coal exports to the Free World in 1970
amounted to less than half of the 1965 level. Exports of crude materials
increased slightly over the 1969 level and surpassed the 1965 level of about
$1.5 million, but still remained below -the 1966 peak of $2 million.
Chemical exports approached the 1965 level of $0.3 million as North
Vietnam expanded its deliveries of essential oils and resinoids to Western
Europe and other markets.
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Table 1
North Vietnam : Commodity composition of Exports to Free rld countries a/
million us $
1965
1966
1967
1968
1969
b/
197
0
Total exports
23.0
21.0
12.0
10.0
14.0
17.0
Foodstuffs
2.7
4.4
2.0
1
9
4
9
.
.
6.0
Of which:
Live animals
Ric
0.4
0.1
Negi.
Negl
Ne
l
N
e
0.4
1.5
0.6
.
0.4
g
.
3.3
egl.
3.5 c/
Crude materials
1.5
2.0
1.3
1
2
1
.
.5
1.6
Mineral fuels (coal)
12.6
9.0
4.7
5
7
5
A
.
.3
5.6
T
Animal and vegetable oils
and fats
0.4
Negl.
0.1
0.1
C!)
I
Chemicals
0.3
0.2
0.2
01
0.2
0.3
Machinery and transport
equipment
N
ir1
egl.
0.1
Negl.
Negl
N
l
eg
.
N--gl.
H
Manufactured goods
5.8
4.6
3.0
0
8
1
.
.U
1.0
Of which:
Textile yarns and fabrics
C
t
0.3
0.1
0.1
0.2
0
1
N
emen
Other lime, cement, and con-
2.0
1.7
0.9
Negl.
.
0.7_
.A,
N.A.
struction materials
Pi
i
0.1
0.2
0.1
0.1
0
1
N
g
ron
2.9
1.1
1.3
Negl.
.
Negl.
.A.
N.A.
0.1
0.3
0.6
0
5
0
9
.
.
2.2
a. Totals are rounded to the nearest 1 million. Individual commodity categories are rounded to
the nearest $100,000. Because of rounding, components may not add to the totals shown.
b. Preliminary estimate.
C. P_-e7;.minary estimate for Hong A ng and Singapore only.
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6. Asian e'''ntries continued to be North Vietnam's most important
markets (see Table 2); Western Europe's share of North Vietnam's exports
remained below 10%, compared with nearly 25% in 1965. Exports to
Western Europe remained low mainly because deliveries of coal to France,
Italy, and the Netherlands ceased after mid-1967. Japan, Singapore,
Malaysia, and Hong Kong together accounted for nearly 95% of total
exports. Coal was the major commodity exported to Japan and foodstuffs
dominated exports to the other major markets.
Import
s
7. Imports from the Free World were reduced from about $11
million in 1969 to about $9 million in 1970, less than two-thirds of the
1965 level (see Table 3). A major part of this cutback was North Vietnam's
reduction in purchases of Japanese urea, _1/ which declined from nearly
$5 million in 1969 to less than $2 million in 1970, probably to conserve
hard currency. Other imports from the Free World remained substantially
below the 1965 levels, in some cases reflecting the slow recovery in North
Vietnam's economy. Such imports consist mainly of textile fibers, yarns
and unfinished cloth, and leather; pesticides and other inputs for agriculture;
wood for the construction industry; and metal and rubber for light
manufacturing. imports from the Free World are not critical to North
Vietnam's conduct of the war, industrial growth, or consumer welfare and
have declined in importance since 1965 as North Vietnam devoted its major
efforts to waging the war. The Communist countries have supplied some
goods such as rubber and wood products to replace products formerly
manufactured from materials supplied by Free World countries.
8. Japan remained North Vietmam's largest Free World supplier in
1970 (see Table 4), but its share of total imports from the Free World
fell from about 65% in 1969 to about 55% in 1970 because of the cutback
in purchases of Japanese urea. Singapore declined in importance as North
Vietnam reduced its purchases of crude rubber. Imports from Cambodia
spurted in 1969, after declining steadily from 1965 through 1968, but
ceased after th': ouster of Sihanouk in March 1970. Deliveries from Hong
Kong increased more than 3-1/2 times the ;969 level to $1.3 million in
1970 as a result of a sharp increase in shi,,ments of cotton fabrics, all
of which occurred in the secoi,d half of the year and may have been financed
1. The reduction in imports of urea from Japan from 77,000 metric tons,
or $4.9 million, in 1969 to 34,000 metric tons, or $1.8 million, in 1970
was offset by an increase in deliveries of ammonium sulfate reported by
the USSR from 34,000 metric tons, or $1.6 million, in 1969 to 112,000
metric tons, or $4.9 million, in 1970.
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North Vietnam:
Direction of Trade with Free World Countries.-- Exports a/
1965
1966
1967
1968
1
Y
969
1970
Total turnover
38,000
34:000
18,000
17,000
25,000
26,000
Total exports
23,000
21,000
12,000
10,000
14, 000
17, O UO
Asia
18,000
17,100
10
600
9
400
12
,
,
,600
'5,100
Japan
11,457
9,651
6,686
6
108
6
01
5
Singapore
1
859
1
614
,
,
-
6,37.7
Malaysia
,
N
A
,
179
1,447
1,375
2,957
3,316
Hong Kong
.
.
2
660
3
032
229
199
1,199
1,800
,
,
1,097
1,168
1
834
2
C/)
Cambodia
Other
2,000
8
1,600
1
028
1,100
.7
500
,
800
,628
1,000
n
rn
,
2
Q
CID
1
200
1
,
,200
1,700
France
W
-
3,021
2,643
541
313
440
67
est Ge :
,any
i
215
147
122
172
229
8
39
lIl
Un
ted Kingdom
Netherlands
Ital
333
573
255
112
207
99
122
128
204
133
4
178
100
H
y
B
l
i
m
485
143
71
107
49
73
e
g
u
-Luxembourg
50a
19
2-7
2
2
Austria
78
139
74
10
.
20
9
Sweden
24
32
27
9
49
1C.7
Switzerland
44
47
39
h
9
74
46
8
Ot
er
4
7
3
N.A.
4
2
4
Negl.
a. Aggregate totals are rounded to Jhe nearest ?Cl million. Area totals are rounded to the nearest 100,000
and individual country totals are rounded to the nearest $1,000. Because of rounding, components
add to the totals shown. may not
b. Preliminary estimate.
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Table 3
North Vietnam: Common?ity Compo::ition of Imports from Free World Countries S/
Milli
on US $
1965 1966 1967 1968 1969 1970
Total imports 15.0 13.0 6.0 7.0 11.0 9.0
Foodstuffs 1.8 0.7 0.3 0
3 N
l
.
eg
. N.A.
Crude materials 3.2 1.8 1.6 1
3 0
9
.
1.0
.
Of which:
Crude rubber 1.9 1.2 1.0 0.6 0
8 N
.
.A.
Wood 0.4 0.3 0.2 0.4 N
A
N
A
T
Cn
.
.
.
.
extile fibers 0.9 0.3 0.3 0.3 0.1 N.A.
Animal and vegetable oils and fats 1.2 Os7 0.4 0
8 0
2
C)
v
.
.
0.5
Chemicals 3.8 2.1 1.4 1_5 5.9 3.0
Of which:
Urea 0.3 0.5 N.A. 0.4 5.0 1.9
Other nitrogenous fertilizers 2.0 Negl. Negl. Negl. 0.3 N.A.
Machinery and transport equipment 0.9 1.5 0.7 1.1 0.7 1.0
Manufactured goods 3.5 5.5 1.6 1.9 1.8 3.0
Of which:
Textile yarns and fabrics 1.8 0.7 0.5 0.9 0
9 N
A
.
.
.
Metals and metal manufactures 1.0 3.8 0.8 0.6 0
6 N
A
.
.
.
Leather and leather products 0.4 0.8 0.1 0.1 Negl. N.A.
Other and unspecified 0.4 0.3 0.,1 0.1 1.6 N
A
.
.
a. Totals are rounded to the nearest $1 milli
on. Individual commodity categories are rounded to the
nearest $100,000. Because of rounding, components may not add to the totals shown.
b. Preliminary estimate.
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North Vietnam: Direction of Trade with Free World Countries -- Imports a/
Total turnover
Total imports
Asia
Japan
Singapore
Malaysia
Hong Kong
Cambodia
Other
France
West Germany
United Kingdom
Netherlands
Italy
Belgium-Luxembourg
Austria
Sweden
Switzerland
Other
1965
38,000
15,000
9,600
3,853
2,800
447
2,160
325
2,124
136
202
93
633
1,685
1
6
101
83
1966
34 , 000
13,000
8,900
5,649
1,858
261
1,040
42
3,900
2,290
212
104
302
399
515
0
8
31
31
1967
18,000
6,000
4,000
1,817
1,228
151
830
N.A.
2,400
627
521
185
473
550
0
1
5
9
25
Negi.
a. Aggregate totals are rounded to the nearest vl million. Area
and individual country totals are rounded to the nearest 51,000.
add to the totals shown.
b. Preliminary estimate.
1968
17,000
7, 000
4,600
2,444
1,232
1s
240
700
N.A.
2,700
1,373
664
254
46
143
18
0
79
16
74
Thousand US $
1969 1970 b/
25,000 26,000
11,000 9,000
9,900 7,300
7,259 5,020
905 670
349 1,285
1,400 300
N.A. N.A.
1,300 1,900
566 534
34 223
161 130
9 108
216 144
30 15
8 32
78 648
22 8
76 68
Negl. 100
totals are rounded to the nearest 100,000
Because of rounding, components may not
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by Swedish aid. Sweden also sharply increased its deliveries in 1970,
replacing France as North Vietnam's largest West European supplier. Western
Europe's share of North Vietnam's imports rose to 20% in 1970 from about
10% in 1969, but remained below the 1965 share of about 35% when there
were large fertilizer deliveries from Belgium-Luxembourg and Italy and
substantial purchases of manufactured goods and machinery from France.
Hard Currency Earnings
9. The continuing recovery in North Vietmam's exports to the Free
World and the cutback in imports in 1970 led to a sharp improvement
in its balance of trade to about the 1965 level, as shown in the tabulation.
Million US $
1965
1966
1967
1968
1969
1970
Exports
23
21
12
10
14
17
Imports
15
13
6
7
11
9
Balance
+8
+8
+6
+3
+3
+8
Estimated shipping
costs
5
4
2
2
2
3
Net hard currency
3
4
4
1
1
5
earnings
In 1970 North Vietnam earned its surplus entirely in trade with Asian
countries, while it incurred a small deficit in trade with Western Europe.
Since 1965, North Vietnam has consistently earned a surplus in trade with
Asian countries and has incurred a deficit with Western Europe since 1967.
10. Adjustments of the trade data are necessary to estimate the
amount of foreign exchange North Vietnam has had available for other
purposes, including augmentation of reserves. Trading partner statistics
include shipping charges on imports from North Vietnam which, for the
most part, do not accrue to North Vietnam. Moreover, data on exports
to North Vietnam do not include shipping charges, part of which North
Vietnam does have to pay in hard currency. North Vietnam's small merchant
fleet carried less than 2% of the country's total seaborne imports and exports
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in 1970. As shown in the tabulation, adjustment for shipping charges
substantially reduces the surplus.
11. In addition to hard currency earnings through trade, North
Vietnam since 1965 has received some $10 million in grant aid. In 1970
the International Red Cross gave North Vietnam about $1.3 million in cash
and commodities. The Swedish government donated about $350,000 of this
sum to the International Red Cross and also contributed another $6.8
million of humanitarian aid to North Vietnam through the Swedish Red
Cross. As in previous years, North Vietnam in 1970 did not receive any
goods on medium- or long-term credits from Free World countries.
12. Sketchy data on North Vietnam's deposits of hard currency at
its primary international bank, Banque Commerciale pour 1'Europe du Nord
(Eurobank), indicate an increase from about $7 million in December 1969
to nearly $20 million in December 1970 - an amount consistent with the
observed increase in hard currency earnings from trade and aid in 1970.
13. North Vietnam's deposits at Eurobank provide an indication of
the level of Hanoi's hard currency reserves, although they may be offset
to some extent by short-term debt, on which we have no information. On
the other hand, North Vietnam may have some holdings at other banks,
including the Moscow Narodny Bank in London.
Prospects
14. North Vietnam's trade with the Free World in 1971 will probably
show another substantial increase, led by exports of coal to Japan. Coal
exports to Japan in the first half of 1971 nearly equaled the 239,000 metric
tons delivered in all of 1970, and will probably continue at a high level
for the remainder of the year. The increase in exports to Japan has been
accompanied by a halt in coal exports to Communist China in the first
half of 1971 and probably reflects an accommodation by the Chinese to
permit North Vietnam to earn additional hard currency. There probably
has been only a small increase in total coal production. Exports of foodstuffs
to other Asian countries will probably also show a further increase in 1971.
Deliveries of rice to Singapore and Hong Kong in the early months of 1971
fell below the previous year's level, but shipments increased in June and
reports point to larger shipments later in the year. Although imports from
Asian countries rose in the early months of 1971, North Vietnam's favorable
balance of trade continued to improve.
15. During the next several years, further improvement in North
Vietnam's exports will depend on successful reconstruction of industry,
especially coal, cement, and pig iron. A Soviet survey has estimated North
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Vietnam's anthracite reserves to be between 2 billion and 5 billion metric
tons. However, damage to the Cam Pha Coal Processing Plant was only
two-thirds repaired by the end of 1970. At the Thai Nguyen Iron and Steel
Complex the second of three blast furnaces was put back into operation
in May 1971. The first had been restored in August 1970 and had operated
intermittently since then, but sustained operation has r't yet been achieved.
Similarly, the Haiphong Cement Plant had been restored to three-fourths
of its former capacity, with the repair of five of the seven kilns, but work
on the remaining two halted in August 1970 frr unknown reasons. North
Vietnam will have to complete reconstruction ;f these and other facilities
to restore exports of its major industrial pr ?acts to pre-bombing levels.
16. Growth of exports of other industrial products to the Free World
does not appear very promising, primarily because such exports would have
to be diverted from Communist countries (for example, apatite ore) or
because reserves and production are low (for example, chromite and tin).
Agricultural products offer only limited opportunities for further expansion
of exports to the Free World even though recent policy statements from
Hanoi have stressed the need to expand agricultural exports to provide the
means for future industrialization. Chronic ills that beset Communist
agriculture have been aggravated by the war. Production of commercial crops
such as tea, coffee, tobacco, groundnuts, jute, and silk is dispersed, poorly
organized, and inefficient. In many cases North Vietnam's products could
not meet the quality standards necessary for success in Free World markets.
Seafood products offer good prospects for growth of exports to the Free
World. Small amounts of seafood viere exported to Hong Kong in late 1970
for re-export to other countries. However, North Vietnam will need foreign
investment to develop a modern seafood processing industry. Assistance
from the Free World may be forthcoming after the war.
17. Exports of consumer manufactures probably will not grow
rapidly, because of pressing domestic needs and quality problems. Textiles,
footwear, and clothing are exported to Communist countries, but poor
quality limits their prospects in Free World markets. North Vietnam has
engaged in negotiations with Japanese and West European firms for the
establishment of export-oriented textile industries and assembly operations.
One attempt by a Japanese firm to establish assembly operations in North
Vietnam for calculators made of Japanese components ended in failure
because of the r nor quality of the North Vietnamese labor. Inefficient
management and low labor productivity have impeded the establishment
of other plants in North Vietnam by Free World countries.
18. Although North Vietnam has not yet been successful in obtaining
developmental aid from Free World countries, several countries have
displayed an interest in aiding North Vietnam's economic development and
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some projects will almost certainly ' be undertaken following the end of
hostilities. Sweden is the only non-Communist government that has designed
an official aid program to assist North Vietnam's economic recovery. For
the three years beginning or 1 July 1970, Sweden allocated a total of
$43.5 million, of which $14.5 million was classified as humanitarian aid
and $29 million as developmental aid, particularly for the wood and paper
industries. Pressure from the United States and from domestic political
opposition, however, caused postponement of the developrn__e;;,ai assistance
until the war ends. Several projects have been discussed with Japanese and
West European firms for the development of North Vietnam's industries,
especially potential sources of hard currency. Development of a Hon Gai
coal mine by Japanese firms is the most important project nlanneca to date
Conclusions
19. Agricultural exports to Asian countries in 1970 led the continuing
recovery of North Vietnam's exports to the Free World. Exports of coal
and most other industrial goods continued to stagnate. because of the slow
pace of reconstruction.
20. North Vietnam cut back its imports from the Free World in 1970,
mainly by reducing its imports of Japanese uien from the unusually high
level of 1969. Imports of other goods from the Free World remained
substantially below the pre-bombing levels as Hanoi devoted its major
attention to waging the war rather than developing industry.
21. North Vietam's earnings of hard currency rebounded sharply in
1970 as a result of the increase in exports, the reduction in imports, and
the receipt of more than $8 million of aid from Sweden and the
International Red Cross. Further substantial increases, however, will require
expansion of exports of industrial goods. In 1971, exports will increase
because of a diversion of North Vietnamese coal from Communist China
to Japan. Export performance in subsequent years will depend primarily
on the pace of reconstruction and on the amount of developmental aid
received from both Free World and Communist countries.
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