USSR-EASTERN EUROPE: TRADE IN MANUFACTURED CONSUMER GOODS AND LIGHT INDUSTRIAL EQUIPMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00787R000300350001-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 40
• Document Creation Date: December 22, 2016
• Document Release Date: March 17, 2011
• Sequence Number: 1
• Publication Date: August 1, 1986
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Iq
Next 1 Page(s) In Document Denied
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Directorate of Confidential
Intelligence
?3 "T13
L
bpd ry , f
Gi ~: iJi~ t'4S tic!
j" ?~
U14 L.
USSR-Eastern Europe:
Trade in Manufactured
Consumer Goods and
Light Industrial Equipment
PROJDC.'r NUMBER ~-r - 03 / 9 - ?1
I W M &K
PAGE NUMBERS TOTAL NUMBER OF COPIES 6,(0 0
DISSEM Dl TE &o L6 t f ,if
, V/
EXTRA COPIES 502/1 - SG n n /t \ i
RECORD CENTER -S(, - / 0 JOB NUMBER Y -LE - & c_7
Confidential
SOV 86-10036
EUR 86-10026
August 1986
Copy 5 2 7
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
USSR-Eastern Europe:
Trade in Manufactured
Consumer Goods and
Light Industrial Equipment
CEMA Task Force, Office of Soviet
Analysis and Office of European Anaysis.
Comments and queries are welcome and may be
addressed to the Chief, CEMA Task Force
Confidential
SOV 86-10036
EUR 86-10026
August 1986
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Summary
Information available
as of 25 June 1986
was used in this report.
USSR-Eastern Europe:
Trade in Manufactured
Consumer Goods and
Light Industrial Equipment
ment before the end of the decade.
In 1983 the USSR demanded that Eastern Europe play an increased role
in its effort to improve the lot of the Soviet consumer. Beset with mounting
economic problems, Moscow intensified pressure on its allies to supply
more and better quality consumer products for Soviet workers and to
expand exports of light industrial equipment for its long-term moderniza-
tion drive. Soviet threats to reduce critical energy exports spurred East
European compliance in 1984-85. The Kremlin, despite tough talk, appears
to have backed off from this strategy for 1986-90, apparently because it is
reluctant to threaten political stability and economic growth in the region
with high trade targets. Inability to purchase Western consumer products
and machinery because of hard currency shortfalls or to achieve hoped-for
productivity gains at home, however, may force the Soviets to reapply
pressure on Eastern Europe to provide more consumer goods and equip-
European imports from the USSR.
Imports of manufactured consumer goods from Eastern Europe-some 4.7
billion rubles' worth in 1984-currently account for 15 percent of total
Soviet purchases from the region. Moscow allocates only 3 percent of its to-
tal imports from outside Eastern Europe to such goods. Because they are
reluctant to spend scarce hard currency on Western consumer goods and
have little interest in products from less developed countries, the Soviets
have relied upon their Council for Mutual Economic Assistance (CEMA)
partners for more than half of their imports of consumer goods, with the
bulk coming from East Germany, Czechoslovakia, and Poland. Clothing
and shoes represent the largest commodity category. Purchases of pharma-
ceuticals and cosmetic items, however, have assumed greater importance in
recent years. Moscow sells far fewer consumer goods to Eastern Europe
than it buys; such products account for only 1 percent of total East
smaller and more varied processing lines.
The USSR imported 735 million rubles' worth of East European light
industrial equipment in 1984. The purchases were almost double their 1980
level, reflecting the Soviets' commitment to modernizing their domestic
plant and equipment. CEMA partners-primarily Czechoslovakia and
East Germany-provide 90 percent of Soviet imports of textile equipment.
In response to Soviet plans to expand product assortment, these suppliers
have dramatically changed the composition of their deliveries to include
Confidential
SOV 86-10036
EUR 86-10026
August 1986
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Political considerations have been an important influence on the level of
East European goods demanded by the Soviet Union and on Moscow's
deliveries to Eastern Europe:
? Increasing supplies of Soviet household appliances appeared in Polish
stores throughout the 1980s to aid the Polish leadership in pacifying
restless workers.
? Because of its worsening economic conditions, Bulgaria was protected
from much of the cutback in Moscow's exports of consumer goods to
Eastern Europe in recent years. Although Sofia imported fewer passen-
ger cars-which went instead to Moscow's hard currency customers-it
received compensation in more appliances and automobile spare parts.
? Their political stability and relatively healthy economic performance
have made East Germany, Czechoslovakia, and Hungary victims of even
greater reductions. Exports rebounded somewhat in 1983 and 1984, but
were still lower than a decade earlier.
? East Germany and Czechoslovakia, with the brightest prospects for
increased output, are slated to remain the Soviets' leading suppliers of
consumer goods in 1986-90.
? Poland and Romania, who are courting Moscow for increased aid to their
ailing economies, have agreed to boost exports of consumer products in
the next five years dramatically over current levels.
Moscow has relaxed-at least for the near term-its demands on Eastern
Europe for rapid increases in deliveries of consumer goods. Soviet pur-
chases for 1986-90 are targeted for the slowest increases in 15 years.
Gorbachev also has shifted the focus of Soviet buying to machinery and
technology, banking on the long-term payoff of higher Soviet production of
consumer goods and decreased reliance on East European finished
products.
This pragmatic approach reflects Moscow's awareness of the risks in
squeezing its allies too hard. An aging stock of plant and equipment and
tight investment funds will probably hold down growth in East European
production of consumer goods. To meet increased Soviet demands, regimes
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
in the region would face the unpalatable choice of losing hard currency
earnings from sales to the West or cutting supplies to their own popula-
tions. By shifting its demands, Moscow apparently has chosen to avoid the
hazards of greater political instability in Eastern Europe, additional debt
service problems, and reduced access to Western materials and technology.
Current trends may compel the Soviets to reaccelerate their requirements
before the end of the decade. A drop in Soviet hard currency revenues-the
product of falling oil prices and faltering production-may press Moscow
to delay or curtail consumer goods purchases from Western suppliers,
filling the void with CEMA products. Additional purchases from Eastern
Europe could also result from:
? Production shortfalls in Soviet light industry.
? Stagnating labor productivity and/or failure of worker incentive
programs.
? Increased health problems from the Chernobyl' accident.
If Moscow raises the ante, we would expect to see increased bickering over
the volume and composition of such trade and some foot-dragging by the
East Europeans in fulfilling agreements. The loudest complaints probably
would come from Hungary, East Germany, and possibly Czechoslovakia-
the regimes with the most consumer-oriented domestic policies and the
greatest reliance on consumer goods for hard currency revenues.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
The Composition of Soviet Imports
4
Moscow's Imports of Light Industrial Equipment
9
CEMA Cooperation Agreements: Pressure for Integration
10
Prospects: Tough Talk, Modest Pressure
13
B. Reconciling Soviet and East European Trade Data:
A Methodological Note
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01 CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
USSR-Eastern Europe:
Trade in Manufactured
Consumer Goods and
Light Industrial Equipment
Introduction
At the CEMA Council Meeting in East Berlin in
October 1983, Moscow notified its allies that it would
no longer tolerate the large trade imbalances and
subsidies that characterized Soviet economic ties to
Eastern Europe during the late 1970s and early
1980s.' Beset by mounting economic problems at
home, Premier Tikhonov stated in blunt language that
future deliveries of fuel and raw materials-upon
which the East Europeans are critically dependent-
would be tied to increased exports of high-quality
intermediate goods and equipment from the CEMA
partners. In particular, the Soviets demanded a great-
er share of the manufactured consumer products that
contribute to the higher standard of living enjoyed by
the East European populace. They also called for
more light industrial machinery.
As the new General Secretary, Gorbachev embraced
and intensified the campaign for more consumer
goods and light industrial equipment from Eastern
Europe as part of his overall strategy to revitalize the
Soviet economy. The Soviet leader knows that, if his
plans to modernize the Soviet industrial base are to
work, he must move quickly to improve worker perfor-
mance. A key element of his strategy to spark greater
labor effort in the short term focuses on stocking
shelves with sought-after East European clothing,
shoes, and associated goods. For the longer term,
Moscow is seeking East European machinery to retool
and expand production capacity in the USSR's ne-
glected light industry.
Trade in Manufactured Consumer Goods
Trade Trends, 1970-84. Manufactured consumer
goods-which include such items as fabrics, clothing,
shoes, housewares, pharmaceuticals, cosmetics, appli-
ances, and automobiles-are the third-largest com-
modity group, after machinery and food and raw
materials, of Soviet imports from Eastern Europe. In
1984, they accounted for 15 percent of Soviet pur-
chases from the region. The USSR, reluctant to spend
scarce hard currency on Western goods and little
interested in low-quality products from less developed
countries, has relied upon its CEMA partners for
more than half of its consumer goods imports. In spite
of the brisk growth in these imports-from roughly
1.4 billion rubles' worth in 1970 to nearly 4.7 billion
rubles' worth in 1984-they grew at three-fourths the
rate of total purchases from the CEMA countries,
reflecting Moscow's higher priority for machinery and
equipment imports from its allies. Measured in real
terms, the Soviets roughly doubled imports of con-
sumer goods from Eastern Europe between 1970 and
1984 (see figure 1).2 They sustained their most rapid
real growth in 1975-78, only to level off in 1979-81.
Faced with the traumas of the second global oil shock
and the Solidarity uprisings in Poland, Eastern Eu-
rope, with Soviet approval, put consumer goods trade
with the USSR on hold.
Soviet efforts to reduce large trade surpluses with the
region in recent years have produced brisk growth in
East European exports of consumer goods to the
USSR. During 1981-84:
? Consumer goods accounted for some 40 percent of
the rise in volume of East European exports to the
Soviets.
? Eastern Europe's nominal trade deficit with the
USSR would have been roughly twice as large 25X1
without the 13-billion-ruble increase in net exports
of these goods.
2 Official Soviet data published in Vneshnyaya Torgovlya SSSR
(Foreign Trade USSR) are cited, except where specified. Trade in
constant prices is derived from Hungarian indexes. See appendix A
for a more detailed accounting of consumer goods exports and
imports. Appendix B explains our methodology for estimating trade
' CEMA-the Council for Mutual Economic Assistance-is made
up of the USSR, Poland, East Germany, Czechoslovakia, Hungary,
Bulgaria, Romania, Mongolia, Cuba, and Vietnam. In this paper,
however, our discussion of CEMA excludes the three non-European
nations. The terms Eastern Europe and CEMA partners are used
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Figure 1
Eastern Europe: Exports of Manufactured
Consumer Goods to the USSR, 1970-84
111111111111111
0 1970 75 80 84
a Imports in constant prices are derived from Hungarian foreign trade price
indexes for consumer goods. Data for 1984 are preliminary.
Source: Foreign Trade USSR and Hungarian Foreign Trade Statistical Yearbook.
Table 1
Eastern Europe: Shares of Selected
Exports of Consumer Goods
to the Developed West, by Country
3.9 9.9
20.6 55.0
25.8 35.4
14.2 30.9
Declines in Polish and Hungarian exports-a result of
trade adjustments with the West necessitated by the
worst of the debt crisis in 1982-caused a slight drop
in real East European exports to the Soviet consumer
market during 1983. In response to continued Soviet
arm twisting, however, sales in 1984 jumped almost
10 percent in real terms, and preliminary data indi-
cate similar growth in 1985.
The East Europeans, however, expanded sales to hard
currency markets at an even higher rate, as the region
directed exports to the West to pay debt service to
Western banks.' Moscow's allies, which could offer
few other goods that US and Western European
buyers wanted, shipped their top-of-the-line consumer
products to the West and delivered generally shoddy
merchandise to the Soviet market. Hard currency
exports grew so rapidly that by 1983 over one-half of
Hungarian clothing exports went to Western buyers,
compared with one-fifth in 1970 (see table 1). Poland
' Czechoslovakia proved the exception. Conservative borrowing in
the West during the 1980s spared the Czechs from the regional
and Romania sold nearly 70 percent of their leather
footwear exports to the West in 1983-more than
double the shares in 1970. Even the surge in deliveries
of consumer goods to the USSR in 1984-85 did not
dampen comparable East European sales to hard
currency buyers, undermining Moscow's implicit goal
of reorienting its allies' trade away from the West.
In contrast, manufactured consumer goods play a
minor role in Soviet exports to Eastern Europe.' They
currently comprise only 1 percent of total Soviet sales
by value to the CEMA partners. Real growth in
Soviet exports of consumer goods surged during 1970-
78, but plunged sharply in 1979-81, reflecting Mos-
cow's own domestic production woes in light industry
(see figure 2). Although exports rebounded slightly in
1982-84 from their 1981 nadir, in real terms they
were lower in 1984 than a decade earlier.
Although the standard Soviet trade classification of manufactured
consumer goods does not include passenger cars, motorcycles, and
associated spare parts, we have incorporated such data into our
discussion of Soviet exports because of their large volume and
importance to the East European consumer. Automobile purchases,
in comparison, constitute less than 1 percent of total Soviet imports
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Figure 2
Eastern Europe: Imports of Manufactured
Consumer Goods From the USSR, 1970-848
800
600
Constant
1970 prices b
I I I I I I I I I I I I I I
0 1970 75 80 84
it Includes passenger cars, motorcycles, and associated spare parts, which
are not listed in the Soviet classification of manufactured consumer goods.
b Imports in constant prices are derived from Hungarian foreign trade
indexes for consumer goods. Data for 1984 are preliminary.
Source: Foreign Trade USSR and Hungarian Foreign Trade Statistical Yearbook.
Trade Partners. A strong record of consumer goods
production and high overall economic performance
have underpinned Moscow's choice of consumer goods
suppliers within Eastern Europe. East Germany-
renowned for stylish products and large selection-
took over as the Soviets' major CEMA supplier in
1982 (see figure 3). Western press sources have noted
that the East Germans have moved vigorously to
restructure production and alter specifications to meet
Soviet requirements. Czechoslovakia follows closely
as the second-leading exporter, its position boosted by
average annual increases in exports of some 18 per-
cent during 1981-84.5 Rapid growth in Czechoslovak
exports to the Soviet market has been buttressed by
Prague's staunch commitment to CEMA integration
and by output gains in consumer goods production-
an area where Czechoslovakia is trying to capitalize
on its historical advantage.
'Czechoslovakia actually became the leading supplier of Soviet
consumer goods in 1984 by a very slim margin, but preliminary
Figure 3
Eastern Europe: Exports of Manufactured
Consumer Goods to the USSR, by Country,
1970-84
Million rubles
I I I I I I I I I I I I I I
Once Moscow's prime source of consumer goods in
Eastern Europe, Poland was unable to maintain its
deliveries in the early 1980s. Consumer goods output
dropped sharply because of economic and political
upheaval, leaving less for both consumption and ex-
port. The Polish leadership won relief from some of its
export commitments to Moscow after the declaration
of martial law in December 1981. With Moscow's
approval, Warsaw redirected some consumer goods
earmarked for delivery to the Soviet Union to the
Polish domestic market to placate workers.
In the second tier of CEMA suppliers, Hungary and
Bulgaria raised their annual volumes of consumer
goods exports by 11.7 and 15.5 percent, respectively,
in 1981-84, although hard currency trade pressures
led Hungary to reduce its exports slightly in 1983.
Romania, with the weakest economic links to the
USSR and mounting financial and production diffi-
culties, allowed its deliveries of consumer goods to
stagnate during the early 1980s.
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Figure 4
Eastern Europe: Imports of Manufactured
Consumer Goods From the USSR, by Country,
1970-848
Million rubles
Bulgaria
Hungary
I I I I I I I I I I I I
a Includes passenger cars, motorcycles, and associated spare parts, which are
not listed in the Soviet classification of manufactured consumer goods.
Political considerations have been an important influ-
ence in determining the level of Soviet consumer
goods exports to Eastern Europe (see figure 4). Mos-
cow stepped up its support for Warsaw-currently the
leading recipient of Soviet consumer goods in
CEMA-to aid the Polish leadership in limiting
political fallout from severe domestic shortages. Po-
land enjoyed Moscow's favor in two ways-with a
boost in deliveries of consumer goods and an even
greater reduction in its export commitments. Al-
though Bulgaria retained its position as the USSR's
second major purchaser of consumer goods in CEMA,
the Soviets trimmed average annual deliveries of these
goods to Sofia slightly in 1981-84 to reduce their
trade surplus. Political stability and relatively healthy
economic performance made Czechoslovakia and East
Germany targets for even deeper cuts during 1979-83,
although exports rebounded in 1984. Hungary, too,
felt the pinch of Soviet adjustments in consumer
goods exports during the early 1980s, but managed to
obtain increases in deliveries in 1982-85. Sales to
Romania remained at low levels.
Figure 5
Eastern Europe: Exports of Manufactured
Consumer Goods to the USSR, by Commodity,
1970-84
Billion rubles
Appliances/
other-
Household
goodsr
Wearing
apparel d
0 1970 75 80 84
a Household appliances, bicycles, watches, TV sets, cameras, and other
miscellaneous consumer items.
b Includes pharmaceuticals, cosmetics, and soaps.
c Includes household utensils, tableware, and furniture.
d Includes clothing, shoes, and miscellaneous haberdashery goods.
Source: Foreign Trade USSR.
The Composition of Soviet Imports. As a counter-
point to the USSR's comparative advantage in the
production of durable consumer goods, Soviet imports
from Eastern Europe are weighted heavily in favor of
"soft" commodities (see figure 5).6 Soft goods at
present comprise some 80 percent of Soviet purchases
of consumer goods from the region-about the same
as in 1970. Within this category, clothing imports
dominate, with Moscow tailoring its purchases to
match specific domestic needs (see figure 6):
? Shoe imports-which reached almost 40 million
pairs in 1984-offset Soviet production shortfalls
and offered greater size, quality, and style selections
to Soviet consumers.
6 As used in the strictest sense in both Soviet and US economic
nomenclature, the term "soft goods" refers to fabrics, clothing,
shoes, and other wearing apparel. We have expanded our definition
of soft goods to include other "nondurable" items, 'such as dishes,
glassware, pharmaceuticals, cosmetics, and soaps. Appliances, oth-
er household machinery, furniture, and miscellaneous consumer
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01 CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Figure 6
Eastern Europe: Who Clothes Ivan?a
Source: East European and Soviet
foreign trade handbooks and journals.
a Data are for 1983.
? Changing Soviet lifestyles and tastes have spurred
increased imports of sportswear and leisure-time
clothing. Soviet consumers demand jogging suits in
particular.
? Children's clothing and blue jeans account for a
growing share of imports, supporting increased So-
viet attention to the needs of young people.
? Imports of men's and women's outerwear, still the
mainstay of Soviet buying, include more synthetic
fabrics and clothing with greater color and variety
to satisfy the increasingly sophisticated tastes of
consumers.
Rapid growth in imports of pharmaceuticals reflects
Soviet concern over growing health problems and
severe domestic drug shortages. To reduce heart
disease-a major cause of climbing Soviet mortality
rates-Moscow has stepped up purchases of East
European cardiac, circulatory, and blood pressure
medicines. The CEMA countries also fill Moscow's
Jewelry
Hats
Stockings
Undergarments
high-priority prescriptions for analgesics, antibiotics,
and drugs for stomach disorders. The lack of re-
sources and incentives for Soviet enterprises to pro-
duce small-ticket goods has contributed to equally
large jumps in Soviet purchases of cosmetics and soap.
Moscow shops almost exclusively in Eastern Europe
for several other consumer goods. The Soviets pur-
chase more than 75 percent of their total imports of
linen fabric, jewelry, dishes, furniture, toothpaste,
household sewing machines, baby carriages, lamps,
and stationery in the region. Over half the Soviet
imports of carpets, hosiery, toys, glassware, books,
musical instruments, outerwear, undergarments, and
sports, hunting, and camping gear come from CEMA
suppliers.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Figure 7
Eastern Europe: Exports of Manufactured Consumer
Goods to the USSR, by Country and Commodity, 1984
Poland
Total: 894.9 million rubles
Haberdashery 1.7%-
Furniture 4.9%
Recreational items 5.1%
Cosmetics 5.6%
Shoes 7.2%
Clothing 22.9%
Bulgaria
Total: 629.7 million rubles
Shoes 2.6%
Furniture 8.9%
Pharmaceuticals 28%
East Germany
Total: 1026.9 million rubles
Shoes 2.1%
Housewares 2.4%
Haberdashery 6.2%
Textiles 10.1%
Furniture 14.4%
u Includes recreational items.
Source: Foreign Trade USSR.
Hungary
Total: 684.2 million rubles
Textiles 6.1%
Clothing 23%
Czechoslovakia
Total: 1031.2 million rubles
Shoes 31.9%
Housewares 3.2%-
Pharmaceuticals 6.3%
Textiles 10%
Romania
Total: 396.2 million rubles
Pharmaceuticals 0.7%
Haberdashery 2.6%-
Textiles 4.3%
Appliances 4.6%-
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Soviet purchases exhibit broad areas of differentiation
among East European trade partners (see figure 7):
? East Germany provides the widest range of consum-
er products and changes one-third of its product
selection annually-high by Soviet standards, but
far below Western trade practices. Moscow turns to
East Berlin in particular for hosiery, carpets, toys,
blankets, china, soaps, and baby carriages.
? A large portion of Czechoslovakia's deliveries come
from its comparatively sophisticated shoe and cloth-
ing industries. Prague's other bestsellers on the
Soviet market include jewelry, hats, glassware,
pianos, and wool fabric.
? Polish exports in the early 1980s shifted to pharma-
ceuticals and appliances-despite severe domestic
shortages-because of a decision to retain more
clothes for personal consumption. The Poles, howev-
er, remained the Soviets' major source for table
linens, cooking ranges, stamps, silk fabric, and
sports, hunting, and camping gear.
? Hungary continues to send the Soviets mostly shoes
and clothing. Budapest is not a preeminent supplier
in any consumer goods category, but increased its
share of pharmaceutical deliveries during 1981-84.
? Bulgaria, known for its high-quality perfumes,
raised its proportion of cosmetic, pharmaceutical,
and toothpaste exports over 1975 shares. Sofia's
traditional mainstays of fur coats and clothing
expanded at a much slower rate.
? Offering fewer types of commodities for export than
its East European neighbors, Romania has focused
on sales of clothing, furniture, and shoes.
The Soviet Export Picture. Soviet exports are concen-
trated in "heavy" consumer products (see figures 8
and 9). To meet their own domestic needs, however,
the Soviets altered the mix of these durable goods and
cut real deliveries to the East European market
throughout the 1970-84 period. Moscow's priority
program to develop its fledgling automotive industry
in the early 1970s generated a surge in exports of
passenger cars to Eastern Europe, from 84,000 units
Figure 8
Eastern Europe: Imports of Manufactured
Consumer Goods From the USSR, by Commodity,
1970-84a
Million rubles
1,200
0 1970 75 80 84
u Negligible trade in household goods, textiles, motorcycles, and motorcycle
spare parts are not included in totals.
n Includes household appliances, bicycles, watches, TV sets, cameras, and
other miscellaneous consumer items.
~ Includes pharmaceuticals, cosmetics, and soaps.
a Data omitted for 1970 because of change in trade classification.
Source: Foreign Trade USSR.
in 1970 to a peak of 388,000 units in 1978. By 1975,
auto sales overtook appliances and other household
machines as the leading category of exports.
When Moscow abandoned plans to expand automo-
bile production capacity during 1976-80, the Soviets
curtailed car exports to Eastern Europe in favor of the
domestic market and exports for hard currency. Sovi-
et auto exports probably have appeared generous to
Soviet consumers because Soviet car ownership still
has not reached the level in Eastern Europe during the
early 1970s. The quantity of automobiles exported to
Eastern Europe, however, was slashed some 60 per-
cent from 1980 to 1983, as deliveries to the developed
West rose by almost 40 percent. Eastern Europe
received partial compensation in the form of more
automobile spare parts, which stemmed demand for
cars somewhat by enabling current owners to prolong
the service lives of their vehicles. Increased exports of
appliances also helped offset the drop in automobile
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Figure 9
Eastern Europe: Imports of Manufactured Consumer Goods
From the USSR, by Country and Commodity, 1984a
Poland
Total: 258.5 million rubles
Passenger cars 4.2%
Pharmaceuticals 7.6%
Hungary
Total: 180.3 million rubles
Otherb 1.5%
Housewares 1.1%
Pharmaceuticals 5.5%
Bulgaria
Total: 186 million rubles
Other C08%
Czechoslovakia
Total: 146.9 million rubles
Pharmaceuticals 6.2%
Passenger cars 18.1%
Appliances 41%
East Germany
Total: 122.1 million rubles
Romania
Total: 50.3 million rubles
Motorcycles 1.3%
Pharmaceuticals 4.9%
Car spare parts 16.5%
0Includes passenger cars, motorcycles, and associated spare parts, which
are not listed in the Soviet classification of manufactured consumer goods.
bTextiles and motorcycles.
c Motorcycles, motorcycle spare parts, and miscellaneous consumer items.
Source: Foreign Trade USSR.
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
deliveries to Poland, Bulgaria, Czechoslovakia, and
Hungary. By 1984, household machines once again
represented the largest group of Soviet consumer
commodities exported to the region.
The composition of consumer durables exported to
Eastern Europe varies widely by country:
? Poland, with the most critical requirements for
household goods, receives refrigerators, televisions,
radios, cameras, movie projectors, and watches.
? Household sewing machines, washing machines,
lamps, televisions, and automobiles top Bulgaria's
shopping list.
? The lion's share of vacuum cleaners, furniture, and
enamelware goes to Hungary. Directed by CEMA
agreement to specialize in bus production-at the
expense of automobiles-Budapest lays claim to
almost half of the Soviet passenger cars exported to
the region.
? Czechoslovakia's leading purchases include radios,
televisions, toys, and sports, hunting, and camping
equipment.
? East Germany is weaning itself from most of its
Soviet consumer durable imports and instead is
expanding its own appliance industry. East Berlin,
however, has increased purchases of car spare parts.
? Romania concentrates its buying on bicycles and
motorcycles.
Moscow's Imports of Light
Industrial Equipment
The USSR spent 735 million rubles for East Europe-
an light industrial equipment in 1984-about 4 per-
cent of its imports of all types of machinery and
equipment from the region.' Measured in real terms,
imports of light industrial machinery grew at an
average annual rate of 14 percent in 1976-79 and,
after a lull in 1980, climbed back to some 11 percent
per year during 1981-84. Purchases of such equip-
ment have risen dramatically since 1975, indicating
' Soviet and East European sources only report trade in equipment
used to manufacture wearing apparel and do not provide data on
modernize light industry's aged capital base.
Because of hard currency constraints, the Soviets
have increasingly called on their CEMA partners for
these goods. Eastern Europe supplied 87 percent of
Moscow's imports of light industrial equipment dur-
ing 1981-84, up from 73 percent in the late 1970s.
Czechoslovakia-acknowledged as a world leader in
textile technology-is by far the major supplier in
CEMA.' East Germany, the next leading exporter,
sells mostly textile dyeing and finishing equipment.'
Data in the CEMA Statistical Handbook show that
the other East European partners were unable to
boost deliveries to the USSR because they allowed
their own spinning and weaving machine-building
industries to atrophy. Instead, they imported technol-
ogy and equipment from the West to upgrade domes-
tic fabric output.
Textile equipment currently accounts for about 90
percent of Soviet imports of all light industrial ma-
chinery from Eastern Europe.10 The emphasis on
textile equipment implies that Moscow has targeted
fabric production for special attention-probably a
reflection of consumer interest in new textiles and the
advanced age of the sector's capital stock. In 1984 the
region provided over 90 percent of all Soviet imports
of textile machinery. The imports from Eastern Eu-
rope were double their 1975 level, while imports from
the West were virtually unchanged, accounting for
less than 100 million rubles. In addition, East Europe-
an manufacturers-mostly Czechoslovakia, East Ger-
many, and Poland-dramatically changed the compo-
sition of their deliveries to include smaller and more
varied processing lines in response to Soviet plans to
expand product assortment.
' See section on "Textile Machinery: Intertextilmash" for details on
Prague's capabilities
Once removed from the loom, c of is run through several
chemical baths. This "finishing" process can be altered to meet
consumer preferences for such features as fabric brightness, soft-
ness, and easier care.
10 The remainder is in the form of industrial sewing equipment,
mainly from Hungary, and leather, footwear, and fur-processing
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
CEMA Cooperation Agreements:
Pressure for Integration
The Soviet leadership has held up specialization and
cooperation as a major goal in Soviet-East European
relations. In economic terms, Moscow promotes such
ties for the payoff from economies of scale, standard-
ization, and efficient use of each partner's resource,
labor, and capital endowments. Equally important,
this strategy meshes with the USSR's campaign for
sets ambitious production targets for a wide range of
consumer durables, soft goods, and consumer services,
with the goal of raising the Soviet citizen's material
standard of living over the next 15 years. It also
promises improvements in the quality, variety, and
style of consumer items. The Soviet document assigns
a key role to Eastern Europe, but gives few specifics.
Bloc independence from the West.
While CEMA has seen some results from its coopera-
tion initiatives in the consumer sector, the program
has fallen far short of Moscow's expectations. F__~
mains one of the lowest in all industry.
The Raw Materials Base: Interkhimvolkon. CEMA's
program of cooperation in the consumer sector begins
with textile raw materials. The main goal is develop-
ment of new and stronger chemical fibers-a need
created by higher textile machinery speeds, changes
in fabric-processing methods, and heightened consum-
er demand for easy-care materials.
any progress in specialization of CEMA established Interkhimvolkon, with headquar-
CEMA consumer goods production and trade has ters in Bucharest, in 1974 to oversee research in fiber
been a natural outgrowth of East European economic technology and promote increased production and
development and owes little to the CEMA cooperation trade in synthetic materials." Each member is as-
program. signed a work agenda that reflects its industrial and
few of the program's measures have actually been
implemented. Reliance on voluntary participation,
failure to impose penalties for noncompliance, the
absence of an oversight committee to coordinate
efforts, and poor ties between production enterprises
and research institutes have contributed to the pro-
gram's dismal performance. Soviet irritation grew to
such heights in 1980,
=that Moscow made unprecedented moves to
disband the program's administrative bodies but in
the end only cut back some staff.
Discussions in CEMA publications indicate that, in
1983, Soviet officials demanded closer East European
adherence to cooperation agreements at the same time
they announced their get-tough policy on trade. Tired
of East European foot-dragging, Moscow ordered its
allies to devote more attention to long-established
specialization assignments in the consumer sector.
Inclusion of measures on CEMA cooperation in the
high-profile Soviet Long-Term Consumer Goods and
Services Program indicates Moscow's pressure is con-
tinuing." This program, approved in September 1985,
research capabilities. According to a CEMA publica-
tion, participating countries specialize in the following
areas:
? Hungary-acrylic fibers.
? Poland-polyester fabrics.
? Bulgaria-viscose-base fibers.
? Czechoslovakia-polypropylene materials.
? USSR-blended cotton fibers.
Eastern Europe also is responsible for the creation of
a wide variety of new artificial leathers.
According to discussions in CEMA publications, this
strategy yielded poor returns during the early 1980s.
Eastern Europe shared few of its advances in textile
fiber technology with Interkhimvolkon, and those
discoveries for which the organization was responsible
remained in the laboratory. Moscow met its export
commitments to its CEMA partners-despite a
'2 Synthetic fabrics comprise less than 5 percent of total Soviet and
East European textile output, and in 1984 Eastern Europe supplied
about 3,000 tons of chemical fibers to support Soviet production.
Moscow, in turn, exported some 408,000 tons of ginned cotton in
1984 to its allies. Cotton fabrics at present account for roughly 70
25X1
25X1
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
steady decline in its cotton production during 1980-
84-by turning to international cotton markets.
East Euro-
Table 2
CEMA: Specialization in
Intertextilmash, 1981-85
25X1
25X1
pean countries angered Moscow by reexporting the
cotton to the West to earn hard currency. Concomi-
tant shortfalls in chemical fiber deliveries from its
allies added to Moscow's irritation.
Textile Machinery: Intertextilmash. CEMA has de-
voted more attention and resources to light industrial
machine building, the second tier of its cooperation
program. Soviet prodding reflected high-level concern
about insufficient production capacity and technologi-
cal backwardness in Moscow's own stock of plant and
equipment.
CEMA commissioned Intertextilmash in 1973 to co-
ordinate the efforts of CEMA textile machine-build-
ing enterprises, associated scientific research insti-
tutes, and planning and design organizations in the
production of equipment to manufacture wearing
apparel." Its members-who meet regularly in Mos-
cow-include Bulgaria's Association for Heavy Ma-
chinery, Czechoslovakia's Elitex, Poland's Polmatex,
East Germany's Textima, Romania's Imatex, the
Hungarian Association for Production in Light Indus-
try, and Soviet textile machinery enterprises in Kli-
movsk and Cheboksary. Because of a long tradition in
textile engineering, Czechoslovakia and East Germa-
ny shoulder most of Intertextilmash's research pro-
gram (see table 2 for specific projects during the
period 1981-85).
while Inter-
textilmash fell far short of its announced goal of
efficient CEMA production of modern textile equip-
ment, it could claim several technological advances.
progress resulted
not from Intertextilmash's management, but rather
from Czechoslovakia's use of the organization's re-
search centers and production enterprises as testing
grounds to improve its products for hard currency
customers. state-
of-the-art Western processing methods are still based
heavily on Czechoslovak technology of the 1960s and
Czechoslovakia, East Equipment for ready-to-wear clothing
Germany, Hungary, and and shoes
Romania
East Germany, Poland, Conventional spinning frames
and Romania
Bulgaria, Poland, and Conventional weaving looms
Romania
Czechoslovakia and East Specialized and shuttleless weaving
Germany looms
Czechoslovakia, East Textile dyeing and finishing equipment
Germany, and Romania
Czechoslovakia and East Knitting machines
Germany
a Sulzer-type looms-used extensively in the West during the 1950s
but less frequently today because of relatively slow processing
speeds-weave fabric by "throwing" threads through a series of
metal needles.
1970s. Widely used know-how developed by Czecho-
slovak engineers includes:
? Open-end spinning. This process eliminates two
stages of yarn preparation-twisting and winding.
Its advantages are faster processing speeds, savings
of labor and energy, ability to use shorter fibers, and
improvements in weaving and dyeing. These fea-
tures have the potential to relieve critical bottle-
necks in Soviet fabric production.
? Airjet and waterjet weaving. Pulses of air or water
carry horizontal threads across the loom, which
allows large increases in weaving rates. CEMA
textile enterprises, however, have been slow in ac-
cepting this machinery because of shortages of
chemical fibers. Natural textile fibers cannot with-
stand the equipment's high speed and extreme
friction.
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Czechoslovakia currently is putting another textile
technology through its paces in Intertextilmash-a
technology that has the
potential for a major breakthrough in the world
market. Known as multished weaving, this process
makes even greater strides in speed by weaving
several threads at one time. Problems in weaving the
finer threads that Western consumers prefer remain
the only technical stumblingblock. Western experts
also believe that Prague will be strapped to bring this
equipment into serial production because of insuffi-
cient investment and a deteriorating machine-building
base.
Finished Goods: The Long-Term Target Program.
The third leg of CEMA's specialization program
addresses Moscow's most pressing need-improve-
ment in the quality and variety of consumer goods
supplied. Under Soviet pressure, the CEMA partners
made this the centerpiece of their plans for coopera-
tion in the consumer area during the 1981-85 period.
Moscow hoped that the focus on finished goods would
yield a quick and direct payoff in contrast to the long
gestation periods required by CEMA programs on
textile raw materials and machinery. To stimulate
and guide this effort, CEMA launched in 1979 the
ambitious and detailed Long-Term Target Program
for Industrial Consumer Goods (see table 3).14 More
modest programs adopted in the late 1960s and 1970s
fizzled after only a few years.
The Target Program initially singled out five broad
areas for special emphasis: fabrics, clothing and foot-
wear, furniture, electronic consumer products, and
household appliances. To carry out this work plan,
CEMA concluded some 56 bilateral agreements, the
largest number dealing with production of clothing.
Both Soviet and East European representatives, how-
ever, felt the need to narrow their focus, and at the
CEMA Summit in June 1984 they amended the
"Alternately referred to as The Long-Term Special Purpose
Program for Industrial Consumer Goods, the Target Program was
accompanied by four similar long-range decrees for CEMA cooper-
ation in transportation, agriculture and the food industry, machine
building, and energy and raw materials. These long-term programs
took the lead from CEMA's 1971 Comprehensive Program, the
organization's much heralded blueprint for Soviet-East European
economic relations.
Table 3
USSR-Eastern Europe: The Tasks
of CEMA's Long-Term Target Program
Passenger cars, household appliances
(radios, TV sets, refrigerators, washing
machines, clocks, cameras)
Hungary, Poland, Leather footwear
Czechoslovakia, and Ro-
mania
Hungary and Poland Pharmaceuticals
East Germany Textiles
Bulgaria, Romania, and Furniture
Czechoslovakia
Hungary, East Germa- Knitwear
ny, Poland, and Roma-
nia
Czechoslovakia Jewelry
Czechoslovakia and East Dishware, glassware
Germany
East Germany Small household appliances,
lamps/lighting
Czechoslovakia, Roma- Clothing, linens
nia, Poland, and
Bulgaria
Sources: L. S. Kosikova and S. P. Petukhova, Promyshlenniy
Tovari Narodnogo Potrebleniya (Manufactured Consumer Goods
for National Consumption) (Moscow: Nauka, 1985) and Soviet
press articles.
Target Program to concentrate on specific trouble
spots, including nonwoven fabrics, artificial leather
and fur products, toys, sporting goods, color televi-
sions, refrigerators, and washing machines. The pro-
gram's main goals remained the introduction of new
products and increased quality and consumer appeal
of existing models.
From Moscow's perspective the Target Program foun-
dered badly.
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
than 5 percent of total Soviet-East European consum-
er goods trade during the early 1980s. Western
observers place the blame for the program's failure on
East European preoccupation with development of
new consumer product lines for Western customers
and poor Soviet enforcement of negotiated agree-
ments.
Prospects: Tough Talk, Modest Pressure
Moscow has kept up its rhetoric about the need for
more East European exports as CEMA enters its new
five-year plan period. Nonetheless, the Soviets have
actually relaxed-at least for the near term-de-
mands on Eastern Europe for rapid increases in
the value of Soviet imports from
Eastern Europe will rise roughly 6 percent per year
during the period 1986-90, the slowest pace of growth
in both planned and actual Soviet purchases during
the past 15 years. Because price increases probably
comprise a portion of this trade target, we believe
Soviet goals in volume terms are even more modest.
Bilateral trade protocols affirm.this slowdown. Con-
sumer deliveries from East Germany-on whom the
Soviets will continue to rely as their major supplier-
are slated to rise 7 percent annually in 1986-90,
slightly less than half the average rate of increase in
East Berlin's exports during 1981-84. Soviet and East
European trade journals, although lean on specifics,
also note less ambitious trade plans for other CEMA
partners. Exceptions are Poland and Romania, who
have agreed to boost deliveries of consumer goods
dramatically over depressed 1981-84 levels to secure
more Soviet imports for their ailing economies. =
We believe Moscow will continue to buy mostly
clothing, shoes, and medical supplies from Eastern
Europe to cover shortfalls in domestic production.
According to a Western chemical industry journal,
pharmaceutical deliveries from Warsaw could in-
crease as much as threefold by the end of the decade
if the Tarchemin antibiotics plant comes on stream as
expected. A barter arrangement already on the books
calls for much of the factory's output to be shipped to
the USSR, and Moscow may push for the plant's
speedy completion. Textile imports will probably de-
cline in importance as the Soviets introduce newly
acquired fabric-processing equipment into production.
Additional changes in Soviet import strategy bear
Gorbachev's stamp. The Soviet leader has shifted
Moscow's buying focus to machinery and technology,
banking on the long-term payoff in higher Soviet
consumer goods production and decreased reliance on
East European finished items. He appears to have
assigned to his allies a larger role in modernizing
Soviet light industry, calling for the CEMA countries
to:
? Provide engineering and technical advice to redesign
and upgrade Soviet consumer goods factories.
? Accelerate exports of light industrial equipment and
machinery.
? Assist in the construction of three major light
industrial complexes in Yerevan, Zhodino, and Vo-
roshilovgrad (see figure 10 and tables 4 and 5).
Another hallmark of Gorbachev's influence is the
high priority on improvements in the quality and
variety of the allies' consumer exports. To promote
the Soviet leader's aims, recent bilateral and CEMA
agreements urge Eastern Europe to:
? Impose stricter sanctions on suppliers who deliver
poor-quality goods.
? Reduce prices for less desirable products.
? Develop closer trade links to the Soviet retail net-
work.
Gorbachev's pragmatic approach reflects the USSR's
awareness of the limits of East European industrial
capabilities. Moscow's acceptance of modest trade
goals was probably influenced by conclusions in a
confidential Soviet study that aging capital stock and
tight investment funds would hold down growth in the
East European output of consumer goods during the
next 15 years. Moscow's demands for more of its
allies' machinery and equipment, however, may make
it harder for them to modernize their consumer goods
industries. The Kremlin is probably gambling that the
region will be able to cope with this longer term
conflict. On balance, we believe the region can meet
current Soviet trade targets without dramatic strains
25X1
25X1
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Figure 10
What Moscow Wants To Buy From Eastern Europe
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table 4
USSR-Eastern Europe: Selected Joint Projects
in the Manufactured Consumer Goods Sector, 1986-90
East Germany, USSR Nine clothing mills,
three shoe factories, and
three furniture plants
Hungary, USSR Sewing factory
Krakow, Poland Soviets finance plant's modernization in return
for share of output.
Yerevan, USSR Czechoslovakia builds turnkey facility for Soviets
and receives payment in kind.
Voroshilovgrad, USSR Coconstruction of new plant; partners divide re-
sulting output.
Zhodino, USSR Czechoslovakia builds turnkey facility for Soviets
and receives payment in kind.
Moscow, Leningrad, L'vov, Enterprise-to-enterprise links. East German tech-
Tbilisi, and various other lo- nicians advise Soviet sister plants on how to
cations in the USSR modernize and reequip current facilities.
L'vov, Tshchenets (Georgia), Hungarian firms reequip and upgrade technology
USSR in existing Soviet factories in return for sewn
goods.
Moscow Budapest gives technical assistance in expanding
assortment of shoe output in return for shoes.
Sources: L. S. Kosikova and S. P. Petukhova, Promyshlenniy
Tovari Narodnogo Potrebleniya (Manufactured Consumer Goods
for National Consumption) (Moscow: Nauka, 1985) and Soviet
open-press articles.
on living standards and economic performance. Ex-
cept for Hungary, which, according to Hungarian
foreign trade officials, is operating at almost full
capacity, the CEMA partners can generate moderate
increases in output through higher utilization rates in
light industry. Difficult economic conditions, however,
may undermine consumer goods production in Poland
and Romania and hold down their export commit-
ments to the USSR. We believe Moscow would
probably turn to East Germany and Czechoslovakia
to make up the difference.
The Soviet leadership is keenly aware that insistence
on a dramatic jump in exports of East European
consumer goods could pose serious problems for its
allies. Attempts to satisfy such demands could force
reductions in living standards in the Bloc. This, in
turn, raises the specter of consumer unrest, which
both Soviet and East European leaders appear deter-
mined to avoid. Moscow's actions signal that the
Kremlin has decided for now to continue giving
greater weight to political stability in Eastern Europe
than to improvements in living standards for Soviet
consumers.
Cutbacks in hard currency sales of consumer products
would be the second-and equally unpalatable-
result of even higher Soviet demands. Although the
region largely has recovered from the financial crisis
of the early 1980s, exports to Western markets re-
main a high priority for the long term. Eastern
Europe continues to require hard currency to pay debt
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table 5
The Soviet Agenda for Light Industrial
Machinery Purchases, 1986-90
Embassy sources, a Soviet foreign trade representa-
tive told a Swedish official in recent meetings that
Soviet imports of such goods from OECD (Organiza-
tion for Economic Cooperation and Development)
countries "would be practically eliminated" because
of revenue shortfalls. In 1984, hard currency suppliers
provided 723 million rubles' worth-some 10 per-
Czechoslovakia, Poland Air-jet weaving looms and open-ended cent-of total Soviet consumer goods purchases.
spinning frames Trade volumes, however, understate the importance of
case vermany i nreaa-texturizmg equipment, cotton
combing machines, and ring-spinning
technology
Open-ended spinning machines and such high-quality Western goods to Soviet consumers
automated spinning/drawing frames who have shown increasingly sophisticated tastes
Bulgaria, Romania Standard knitting machines with
greater speed and capacity
Industrial ironing machines and laser
cutting and sewing equpiment
East Germany Flat-bed knitting machines and contin-
uous weaving looms
Poland, Romania New finishing technology
East Germany, Poland, Open-ended spinning equipment
Czechoslovakia
Bulgaria, Romania Dyeing and laundering machines
Czechoslovakia New knitting technology
Bulgaria Yarn-twisting equipment
Poland
Poland
Wool-carding machinery
Research on ways to use textile-pro-
cessing waste and byproducts
Hosiery manufacturing equipment
service and to import Western materials and ad-
vanced technology. Soviet pressure to reduce East
European access to the West would almost certainly
backfire, leading to an eventual decline in the quanti-
ty and quality of the consumer goods Moscow wants.
Current trends, however, may eventually compel the
Soviets to raise their requirements for East European
consumer goods above trade protocol targets. A drop
in Soviet hard currency revenues-the product of
falling oil prices and faltering oil production-could
cause Moscow to delay or curtail purchases from
Western suppliers and turn to Eastern Europe to fill
the void. Because planners traditionally have been
reluctant to spend hard currency on consumer goods,
these items may well be cut first. According to
Less likely events may also spur increased Soviet
purchases from the CEMA partners, including:
? Production shortfalls in Soviet light industry caused
by investment and resource constraints.
? Stagnating labor productivity and/or failure of
worker incentive programs, which would undercut
Gorbachev's industrial modernization drive.
? Health problems in the population resulting from
the Chernobyl' nuclear accident.
Soviet demands for East European exports above
levels projected in the trade protocols would probably
extend beyond light industry. But increased require-
ments for consumer goods could generate particularly
sharp tensions between Moscow and its allies because
of the possible impact on hard currency trade and
living standards. If Moscow raises the ante, we would
expect to see increased bickering over the volume and
composition of consumer goods trade and some foot-
dragging by the East Europeans in fulfillment of
trade agreements. The loudest complaints probably
would come from Hungary, East Germany, and possi-
bly Czechoslovakia-the regimes with the most con-
sumer-oriented domestic policies and the greatest
reliance on consumer goods for hard currency exports.
In the final analysis, however, the East Europeans
would be forced to comply with most of Moscow's
requirements.
25X1
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Appendix A
Statistical Tables of Trade
in Manufactured Consumer Goods
Table A-1
Eastern Europe: Exports of Manufactured
Consumer Goods to the USSR
1978
2,837.6
414.7
343.8
809.3
526.0
432.4
311.4
1979
2,958.6
416.0
333.8
858.1
550.1
481.3
319.3
1980
3,184.4
439.5
390.0
866.9
594.3
539.8
353.9
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table A-2
Eastern Europe: Average Annual
Growth in Exports of Manufactured
Consumer Goods to the USSR
9.7 8.0
10.0
9.2
13.6 5.2
11.7
10.0
7.3 10.5
0.4
6.4
Poland
14.6 9.2
0.8
8.6
East Germany
5.6 6.9
14.6
8.6
Czechoslovakia
11.4 7.8
17.6
11.8
Bulgaria
3.6 8.6
15.5
8.7
Table A-4
Eastern Europe: Imports of Manufactured
Consumer Goods From the USSR a
Table A-3
Eastern Europe: Shares of Exports of
Manufactured Consumer Goods to the USSR
Total
100.0
100.0
100.0
Hungary
15.0
14.6
15.0
Romania
11.6
11.7
9.5
Poland
23.5
27.6
20.4
East Germany
22.3
18.9
22.0
Czechoslovakia
16.3
16.3
20.4
Bulgaria
11.3
10.9
12.7
Total b
Hungary
Romania
Poland
East Germany
Czechoslovakia
Bulgaria
1970
186.6
31.3
13.1
33.5
38.8
27.5
42.5
1971
306.1
51.6
12.9
39.7
70.3
62.2
69.4
1972
354.9
65.7
15.9
43.6
76.0
67.5
86.1
1973
428.3
73.6
17.3
55.0
94.6
92.9
94.9
1974
544.1
83.8
18.0
95.7
113.3
114.5
118.8
1975
626.8
94.0
15.1
130.6
149.7
112.0
125.4
1976
736.6
109.1
21.5
154.4
175.2
130.3
146.2
1977
793.7
114.6
25.7
174.8
175.1
138.2
165.4
1978
899.2
143.0
37.9
190.5
192.7
155.5
179.6
1979
831.8
146.8
39.8
164.4
144.3
155.0
181.5
1980
886.2
158.4
55.9
190.3
145.8
142.5
193.2
1981
734.3
139.4
44.9
208.4
100.3
98.0
143.4
1982
817.5
156.9
55.9
197.1
117.6
100.9
189.1
1983
837.6
171.9
51.1
216.4
94.6
131.4
172.2
1984 c
944.2
180.3
50.3
258.5
122.1
146.9
186.0
a Includes passenger cars, motorcycles, and associated spare parts,
which are not listed in the Soviet classification of manufactured
consumer goods.
b Because of rounding, components may not add to the totals shown.
c Preliminary.
Source: Vneshnyaya Torgoviya SSSR (Foreign Trade USSR).
Confidential 18
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
25X1
25X1
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table A-5 Percent Table A-7
Eastern Europe: Average Annual USSR-Eastern Europe: Trade in
Growth in Imports of Manufactured Manufactured Consumer Goods
Consumer Goods From the USSR a in Constant Prices
1971-75
1976-80
1981-84
Eastern Europe
27.4
7.2
1.6
Hungary
24.6
10.8
3.3
Romania
3.0
29.8
-2.6
Poland
31.3
7.8
8.0
East Germany
31.0
-0.5
-4.4
Czechoslovakia
32.5
4.9
0.8
Bulgaria
24.2
9.0
-1.0
a Includes passenger cars, motorcycles, and associated spare parts,
which are not listed in the Soviet classification of manufactured
consumer goods.
Source: Vneshnyaya Torgovlya SSSR (Foreign Trade USSR).
Table A-6
Eastern Europe: Shares of Imports
of Manufactured Consumer Goods
From the USSR
Total
100.0
100.0
100.0
Hungary
16.3
16.2
19.5
Romania
3.5
4.4
6.1
East Germany
22.3
20.1
13.0
Czechoslovakia
19.9
17.4
14.3
Bulgaria
21.9
20.9
20.7
Soviet
Exports a
Soviet
Imports
Soviet
Net Imports
1970
186.6
1,364.6
1,178.0
1971
301.0
1,643.8
1,342.8
1972
342.7
1,773.7
1,431.0
1973
412.5
1,746.4
1,333.9
1974
512.9
1,757.8
1,244.9
1975
551.4
1,896.4
1,345.0
1976
569.6
2,010.2
1,440.6
1977
586.9
2,231.9
1,645.0
1978
643.6
2,372.4
1,728.8
1979
576.5
2,386.4
1,809.9
1980
567.2
2,397.3
1,830.1
1981
436.3
2,336.3
1,900.0
1982
477.8
2,692.2
2,214.4
1983
463.2
2,596.5
2,133.3
198A h
499 7
1451 0
1 354 7
a Includes passenger cars, motorcycles, and associated spare parts,
which are not listed in the Soviet classification of manufactured
consumer goods. Estimates were derived from Hungarian foreign
trade price indexes for consumer goods.
b Preliminary.
Source: Vneshnyaya Torgovlya SSSR (Foreign Trade USSR) and
Kulkereskedelmi Statisztikai Evkonyv (Hungarian Foreign Trade
Statistical Handbook).
Table A-8
Eastern Europe: Exports of
Manufactured Consumer Goods
Percent
(except where noted)
Source: Vneshnyaya Torgovlya SSSR (Foreign Trade USSR). to the USSR, by Commodity
Total (million current
rubles)
1,364.6
2,166.0
3,184.4
4,663.2
Wearing apparel
55.1
53.8
50.0
43.8
Household goods
13.2
14.0
12.3
11.9
Medical goods
16.2
16.6
20.7
27.2
Appliances /other
9.7
7.9
8.9
10.3
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table A-9
Eastern Europe: Exports of Selected Manufactured Consumer
Goods to the USSR, 1983
Total
Eastern
Europe a
Bulgaria
Hungary
Poland
East
Germany
Romania
Czechoslo-
vakia
Shoes
468.6
15.1
102.2
55.7
20.1
66.2
209.2
Stockings
50.7
2.6
2.3
38.6
7.2
Hats
12.9
1.3
5.0
6.7
Leather handbags, belts, gloves,
wallets
179.6
31.5
39.8
19.5
32.9
12.1
44.0
Household sewing machines
5.6
5.6
Small appliances (irons, coffee
pots)
4.7
4.7
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table A-9 (continued)
Total Bulgaria Hungary Poland East Romania Czechoslo-
Eastern Germany vakia
Europe
Other musical instruments and 16.4 0.8 15.6
records
Sports, hunting, and camping 21.2 7.4 9.7 4.1
equipment
n Because of rounding, components may not add to totals shown.
b Estimate. See appendix B on methodology for derivation of
estimates.
Includes other plastic haberdashery items.
d Represents goods made from tulle, a woven net-like fabric. Tulle
also is used for scarves and other fashion accessories.
Sources: East European and Soviet foreign trade handbooks and
journals.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confdential
Table A-10
Eastern Europe's Share of Soviet Imports
of Manufactured Consumer Goods, by Sector
Total
67.0
65.5
58.0
Medical goods
81.5
78.2
70.3
Textiles
38.4
42.6
37.4
Pharmaceuticals
86.8
85.7
80.6
Cotton
53.3
52.0
38.5
Toothpaste
97.9
94.4
86.4
Wool
53.0
59.2
44.0
Cosmetics
11.1
16.2
23.6
Silk
13.6
24.6
16.3
Washing detergents
15.8
8.1
-
Linen
86.4
93.6
87.2
Appliances/other
82.8
76.2
70.7
Clothing
65.4
64.6
52.2
Large appliances
71.4
47.4
34.2
Undergarments/outerwear a
77.4
73.2
61.2
Household sewing machines
100.0
100.0
99.2
Fur coats
65.0
55.4
35.7
Other small appliances
96.5
89.0
80.0
Knitwear
46.7
56.8
48.9
Baby carriages
89.1
98.2
94.0
Hosiery
92.7
71.0
68.2
Lamps/light bulbs
95.2
93.6
88.9
Hats
53.5
42.6
30.7
Cooking ranges
77.2
75.8
71.0
Haberdashery items
74.9
71.2
71.7
Paper goods
71.3
66.7
66.5
100.0
100.0
100.0
56.1
53.1
45.6
Stamps
45.8
71.8
71.8
Stationery and
46.9
74.6
90.5
86.3
72.1
59.8
Carpets
44.9
49.3
56.4
Sports, hunting, and
80.3
71.1
60.1
Furniture
92.9
90.5
85.2
camping equipment
Source: Vneshnyaya Torgovlya SSSR (Foreign Trade USSR).
Confdential 22
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table A-11 Percent
Eastern Europe: Imports of (except where noted)
Manufactured Consumer Goods From
the USSR, by Commodity
Total (million current
rubles)
186.6
626.8
886.2
944.2
Textiles
3.7
0.8
0.4
0.3
Medical goods
9.3
6.6
5.6
6.2
Furniture
0.9
1.1
0.3
Passenger car spare
parts a
2.4
13.6
17.4
24.8
Recreational
goods/other
9.2
4.5
5.9
6.6
a Includes negligible trade in motorcycles and motorcycle spare
parts.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87TOO787ROO0300350001-5
Confidential
Table A-12
Eastern Europe: Imports of Selected Manufactured
Consumer Goods From the USSR, 1983
Total Bulgaria Hungary Poland East Romania Czechoslo-
Eastern Germany vakia
Europe a
Total a 837.6 172.2 171.9 216.4 94.6 51.1 131.4
Of which:
Refrigerators
51.6
1.4
9.1
31.3
1.4
3.6
4.9
Bicycles
23.8
1.8
6.8
6.3
6.5
2.4
Washing machines
5.6
3.9
1.7
Radios
15.1
1.5
3.5
4.5
1.0
Light bulbs
0.3
0.3
Sports, hunting, and camping
equipment
8.1
1.6
2.4
Motion pictures
3.0
0.7
0.3
0.4
0.5
0.3
0.7
Motor vehicles
Passenger cars
145.2
36.0
66.0
13.3
12.2
NEGL
17.7
Sources: East European and Soviet foreign trade handbooks and
journals.
Confidential 24
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87TOO787ROO0300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Table A-13 Table A-14
USSR: Imports of Light Industrial USSR: Average Annual Imports
Equipment From Eastern Europe a of Light Industrial Machinery
and Equipment, by Supplier a
(million current
rubles)
(1970=100)
(million 1970
rubles)
1975
168.8
118.6
142.3
1980
387.1
159.9
242.1
1981
441.5
172.9
255.3
1982
559.7
179.7
311.5
,, Soviet and East European sources only report trade in equipment
used to manufacture wearing apparel and do not provide data on
other consumer goods machinery.
b Hungarian foreign trade price indexes for machinery.
Preliminary.
Source: Vneshnyaya Torgovlya SSSR (Foreign Trade USSR) and
Kulkereskedelni Statisztikai Evkonyv (Hungarian Foreign Trade
Statistical Yearbook).
Million Percent Million Percent
rubles rubles
a Soviet sources only report trade in equipment used to manufacture
wearing apparel and do not provide data on other consumer goods
machinery.
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Appendix B
Reconciling Soviet and
East European Trade Data:
A Methodological Note
Official Soviet trade statistics provide a broad and
consistent accounting of trade in manufactured con-
sumer goods with Eastern Europe. Soviet data encom-
pass the whole range of consumer goods commodities,
listing merchandise flows for clothing, shoes, house-
wares, pharmaceuticals, cosmetics, soaps, appliances,
and miscellaneous goods (CEMA Trade Nomencla-
ture code 9) and for cars, motorcycles, and associated
spare parts (code 195). Moreover, consumer goods
trade has not suffered the erosion in reporting evident
in other economic statistics since 1970, and on aver-
age Moscow draws a more comprehensive picture of
imports and exports of such goods than its East
European allies as a group.
Substantial gaps in Soviet statistics, however, limit
their usefulness. The Soviet ledgers omit price data
and a disaggregated breakdown of trade beyond the
three-digit level for many important commodities.
Noticeable in their absence are details on clothing,
pharmaceuticals, and furniture. Reporting is also poor
regarding the volume of consumer goods trade.
We surveyed East European statistical yearbooks,
foreign trade journals, industrial periodicals, and
CEMA publications to determine whether East Euro-
pean sources publish more detailed trade statistics
that could fill in the missing pieces in Soviet account-
ing. With data from these sources, we ran a series of
statistical comparisons from 1970-83 at the two-,
three-, and four-digit level-where possible-to test
for compatability with the Soviet data.15 Reconcilia-
tion of Soviet and East European data at these levels
was the necessary first step in determining whether
more disaggregated East European data could fit into
Soviet reporting.
For example, Soviet statistics on textile imports were
matched to each East European partner's detailed
accounting of textile exports. Comparisons made for
aggregate textile trade and fabric types-such as
cotton, wool, and silk-indicate a high degree of
commonality. Because Soviet reporting ended at this
point, we compiled East European data on finer
commodity categories, such as cotton fabric grades
and types. Corresponding statistics from Hungary-in
this case the only reporter--were set aside, because
they did not meet our threshold of representing 50
percent of total Soviet cotton fabric purchases. Final-
ly, we identified residuals by magnitude and commod-
ity category. The procedure was repeated for all trade
in consumer goods.
Clothing-an area of keen importance to consumers
and the largest category of Soviet consumer goods
imports-was the only category to benefit from this
systematic pairing of data sets. Hungary, with the
most detailed ledgers in the region, publishes Soviet
purchases of men's suits, shirts, and pants; women's
dresses and slips; sportswear; children's clothing;
coats; undershirts; and other clothing. Because we did
not strike such a rich lode in other East European
data, we totaled Hungarian statistics into the coarser
categories of outerwear and underwear. Applying the
resulting ratio to Soviet reporting of clothing imports,
we estimated that Budapest delivered 128 millions of
rubles' worth of outerwear and 14 million rubles'
worth of undergarments in 1983. Czechoslovak and
Bulgarian statistics, although not as complete, did list
exports of various clothing types. Again, compilations
of outerwear and undergarment purchases were made
and the shares converted into millions of rubles. Our
findings indicate Prague's shipments of undergar-
ments-40 million rubles' worth-are nearly three
times those from Budapest. Bulgarian and Czechoslo-
vak exports of outerwear, however, are comparable at
124 million and 134 million rubles' worth, respective-
ly. Normally stingy with its statistics, East Germany
reports the value of outerwear exports to the Soviet
market. Converted to 96 million rubles at the official
rate of exchange, this amount was subtracted from
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Soviet reporting of total clothing purchases. We as-
sumed undergarments accounted for the remaining 93
million rubles. But Poland and Romania were not as
forthcoming, and a CEMA ranking of clothing ex-
porters by commodity type allowed us to estimate
their deliveries of outerwear and undergarments. Ac-
cording to open press reporting, these two countries
are the Soviets' leading suppliers of men's suits and
shirts, women's dresses, and other types of outerwear.
We estimated Soviet outerwear purchases from Ro-
mania to be worth 142 million rubles and from
Poland, 150 million rubles to reflect this hierarchy,
and we assumed undergarments accounted for other
Soviet clothing imports
We also used Hungarian foreign trade price indexes
to remove the effects of inflation present in Soviet
trade data. These deflators were applied only to
aggregate merchandise flows. To avoid the statistical
bias caused by differences in trade composition, Hun-
garian indexes were not used to convert trade by
country or commodity. Such trade remains in current
rubles.
Confidential 28
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
 Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5
Confidential
Confidential
Declassified in Part - Sanitized Copy Approved for Release 2011/12/01: CIA-RDP87T00787R000300350001-5