IS "Europe" to become only a geographical expression? The great diagonal from Stettin to Trieste splits national policies as well as a continent. Governments are forced to recognize a Western Europe which they treat differently from Eastern Europe. The pull and the push of Moscow and Washington increase the division and sharpen the differences. Since the Marshall Plan has become a program of Western European reconstruction, it inevitably widens the gap in some ways. At the same time, the Plan postulates some crossing of the great diagonal and some of its effects may bridge the gap. The most clear-cut of these features is the resumption of large-scale commerce between the eastern and the western countries of Europe, on which the program is premised.

In 1938 the 12 principal countries of Western Europe that are participating in the Marshall Plan got about 5.5 percent of their imports from the seven Eastern European countries now in the Soviet orbit.[i] Two-fifths of this $523,000,000 worth of goods went to the United Kingdom, amounting to about 5 percent of total British imports. Switzerland took about 10 percent of its total imports from the east, and Italy 12 percent, the largest share for any of the 12 western countries. France took only $43,000,000 worth of goods from the eastern countries, or 3.2 percent of its total imports.[ii] The U.S.S.R. and the three Baltic States sent $228,000,000 worth of goods to the western nations in 1938, about 2.4 percent of their total imports.

It would be easy, arguing from these general figures, to dismiss the significance of eastern trade to the western countries. However, most of the imports from the east were concentrated in a few lines of considerable importance to the economies of the west. Wheat, meat, other food products, timber from Finland and Russia, and Polish coal were the major items; others of importance were Rumanian oil, some minerals, especially from Jugoslavia, and Czechoslovak manufactures.

Turned around, the figures tell a different story. The western countries accounted for a much greater proportion of the trade of the eastern nations than vice versa. Almost two-thirds of the imports of the seven eastern countries came from Western Europe; Germany alone accounted for 25 percent, and the 12 principal Marshall Plan countries for another 33 percent. For Czechoslovakia and Poland the figure is lower, about 52 and 57 percent respectively, but it rises to almost 75 percent for Bulgaria, Rumania and Finland. The U.S.S.R. and the Baltic States got 38.2 percent of their imports from the 12 western countries and 13 percent more from Germany. As a market, the Western European countries were somewhat less significant to the east, but still a very important factor. Germany took 22.5 percent of the exports of the seven eastern countries in 1938, and the 12 western countries another 37.5 percent. More than 70 percent of the exports of the U.S.S.R. and the Baltic states went to Marshall Plan countries and Germany.

II

The prewar trade pattern helps us to understand some of Europe's present troubles, but is not a sufficient guide for the future. Since the end of the war, east-west trade in Europe has been at a very low level. Trade and payments agreements between eastern and western countries are numerous, but the volume of goods exchanged is much smaller than before the war. Generally speaking, the foreign trade of the eastern countries has recovered much more slowly than industrial and agricultural production. Polish coal and Finnish timber are moving west in appreciable quantities, but in nothing like the amounts the west would like to have. The supply of foodstuffs and oil from the east has almost completely stopped. The partition of Germany (and to a less extent that of Austria) has prevented resumption of major movements of goods that used to take place, thus enlarging the west's deficit in food, coal, potash and some industrial products.

For the most part, the low level of east-west trade is due to the same causes as the low level of trade among the western countries themselves: devastation, disorganization, shortages, inconvertible currencies, transportation difficulties, large domestic demand. Since the end of UNRRA, the eastern countries have had only a tiny share of the American assistance that has gone to Europe. Danubian agriculture was particularly hard hit during the war and has recovered slowly, partly because of drought in 1945-46, and partly for lack of fertilizer and farm machinery. The chief special factor affecting the trade of Eastern European countries is the Soviet Union's great need for goods of all kinds for reconstruction. Partly as reparations, partly as ordinary commercial exchange, partly as politically directed trade, much larger quantities of Eastern European goods are going to the Soviet Union than before the war. The damage to the coal mines of the Donets Basin, for instance, led the U.S.S.R. to import about 8,000,000 metric tons of Polish coal last year. Oil from Rumania now flows east instead of west. Reconstruction needs also reduce Russia's ability to export, thus contributing to Western European deficiencies, particularly in timber. The inability of the Western European countries to supply the fertilizer, machinery and other capital goods that they badly want has reduced the eastern countries' incentive to ship to the west. The virtual disappearance of Germany as both a supplier of manufactures and a market for eastern products aggravates the situation.

While the increase in trade among the eastern countries is significant, it has often been overemphasized. Perhaps the most striking shift has been in Polish trade. In 1935 the U.S.S.R. supplied only 1.8 percent of Poland's imports compared with 78 percent in 1946. More than half Poland's exports went to the U.S.S.R. that year compared with 1.1 percent in 1935. Other eastern countries and the Soviet Zone of Germany accounted for 8 percent of Poland's imports and 11 percent of her exports during 1946. However, the Soviet share in Poland's trade declined steadily from the high level of 1945 when the Red Army occupied the country and transportation to the west was poor. In the first half of 1947 Russia got only 37 percent of Poland's exports. In the spring of that year the two governments agreed to reduce the amount of coal Poland was to supply to the U.S.S.R. from 13,000,000 to 6,500,000 tons a year for four years.

Czechoslovak trade shows a different pattern. During 1947 the U.S.S.R. supplied 6.2 percent of Czechoslovakia's imports and took 5.1 percent of its exports; the comparable figures for 1938 were 1 and 2.5 percent. Another 13.1 percent of Czechoslovakia's imports during 1947 came from the other eastern countries, which took 14.2 percent of its exports. Switzerland and Britain were Czechoslovakia's chief trading partners during this period, followed by the United States, Sweden and Holland. Trade with each of these countries was at least 25 percent greater than that with the U.S.S.R. The other eastern countries lagged far behind. Toward the end of 1947 new trade agreements were negotiated between Czechoslovakia and the U.S.S.R., Poland, Jugoslavia and Bulgaria which (together with existing agreements) were estimated to cover about 40 percent of Czechoslovakia's foreign trade for 1948. If these agreements are carried out, about 16 percent of Czechoslovak trade will be with the U.S.S.R. and 24 percent with other eastern countries.

The Czechoslovak trade agreements form part of a series concluded among the eastern countries, the U.S.S.R., and the Soviet Zone of Germany since the launching of the Marshall Plan. More ambitious steps have also been foreshadowed. A customs union is talked of among Jugoslavia, Bulgaria and Rumania. (In 1946 a treaty of economic union made Albania virtually a province of Jugoslavia in economic matters.) Czech-Polish conversations on the integration of the industries of the two countries have been reported -- an interesting revival of a project discussed by the governments-in-exile of these two countries during the war but opposed by the U.S.S.R. after their liberation. These and other arrangements comprise the "Molotov Plan" for intensifying economic relations among the eastern countries and coördinating their industrial development. The Soviet agreement in January 1948 to provide Poland with $450,000,000 worth of machinery on credit over the next four years was clearly intended as compensation to the Poles for the American aid they might have received if they had been allowed to go to Paris. But only the label and a speeding-up of the tempo are new. Industrialization and increased trade among themselves were already parts of the economic plans of all the eastern countries before the Marshall Plan was announced.

Some Americans suspect that the true aim of the Molotov Plan is to exploit the eastern countries for the benefit of the U.S.S.R. and that the ultimate aim is an autarchic bloc enhancing the Soviet war economy. Judgment on these points depends on more detailed information than is yet published. Whatever their ultimate intentions, it is clear that the eastern countries do not now want to forego trade with the west. Polish and Czechoslovak spokesmen have frequently reiterated their desire to do business with Western Europe and the United States. Soon after the coup in Prague, the new Communist Minister of Foreign Trade issued a statement reaffirming this view. Czechoslovakia has put into effect the tariff reductions negotiated at Geneva and has signed the Draft Charter of the International Trade Organization. (But Poland did not sign.) After emphasizing plans for the closer coordination of the eastern economies, Premier Dimitrov of Bulgaria said, "If possible, we shall want to trade with the United States, Great Britain, France and other western countries on the principle of complete equality." [iii]

Behind these statements is the great need of the eastern countries for capital goods and manufactured products from the west. The industrialization programs heighten this need and will probably keep it high for some time to come. The U.S.S.R.'s ability to supply goods of this type is very limited compared with Western Europe and the United States. Without trade with the west it would take the eastern countries much longer to carry out the programs of industrialization, and it would cost them much more in terms of lower living standards. So there is no reason to doubt that the eastern countries desire it.

It is clear, though, that even if this trade prospers it will, as time passes, depart in important ways from the prewar pattern. Even after the time of reparation and reconstruction has passed, more of the eastern countries' trade will be with the U.S.S.R. and among themselves than was the case before the war. Closer political relations, the Molotov plan, and the mixed corporations that give the U.S.S.R. control of important resources in Rumania and Hungary will all contribute to this result. Czechoslovakia and Poland are both ambitious to replace Germany as exporters of manufactured goods to the southeastern countries. So long as Germany remains partitioned, the Soviet Zone forms part of the eastern economy. This increases the area's industrial capacity; there are reports of the expansion of the steel industry in Eastern Germany. Since most of the German potash mines are in the Soviet Zone, the western countries will be more dependent on artificial nitrogen and imported fertilizers. The transfer of German Silesia to Poland adds considerably to that country's importance as a coal supplier to both eastern and western countries.

The most important factor likely to change permanently the composition of trade between Eastern and Western Europe is the industrialization of the eastern countries. As that takes place, some of the results we may expect are: increased domestic consumption of foodstuffs, coal and oil in the east; perhaps a shift in agricultural output from grains to fruits, vegetables, livestock and dairy products (total food production might increase as the result of the mechanization and modernization of farming even though people were drawn off the land into industry); reduced dependence on imported manufactures; [iv] and probably reduced exports of raw materials. The effect of these changes already appears very vividly in the trade agreements Italy has made with Poland, Czechoslovakia, Bulgaria and Jugoslavia. Before the war, these countries were an important market for Italian textiles, other consumers goods, fruits and vegetables. Now such products are far down on the list of goods the eastern countries want from Italy; at the top of the list are machinery, replacement parts, precision instruments, mercury, sulphur, and the equipment for whole factories. The Jugoslav agreement, for instance, calls for Italian shipments of only 100,000,000 lire worth of fruits and textiles, compared with over 1.5 billion lire worth of machinery, parts, ball-bearings, radio equipment, etc. In return, the eastern countries are sending foodstuffs, timber, coal and metals; some special arrangements have been made for them to supply to Italy the raw materials required to make some of the manufactured goods they want.

It is most unlikely, then, that the prewar pattern of trade between Eastern and Western Europe will be restored. It does not follow that the changes will reduce trade or make it less important to the participants. That may or may not prove to be the case. For the time being the only sure conclusion is that there will be significant changes in the character of the trade which will require adjustments on both sides.

III

Though absent from Paris, the countries of Eastern Europe played a rôle in the calculations of the Committee of European Economic Coöperation. In estimating what aid they would need from the United States, the participating countries had to judge what supplies they were likely to get from Eastern Europe. They decided to assume "a substantial and steady resumption" of the flow of the principal goods from the east, reaching prewar levels in some important categories by 1952. The supposed ability of Western Europe to stand on its own feet -- more or less -- by 1952 is predicated on this assumption (along with many others, of course). If the assumption does not prove valid, the choice will be between additional American aid and a lower level of life and economic activity in Europe.

The crucial commodities are coal, timber and food. The C.E.E.C. assumed that in 1948 Poland will send 16,000,000 tons of coal to the west, doubling the 1947 level. For 1949, 24,000,000 tons are expected, 27,000,000 in 1950 and 30,000,000 in 1951. These figures are based on data supplied by the Polish Government and conform to its national economic plan. Both the Harriman and Herter Committees expressed doubt of the ability of the Poles to attain the production levels set out in the plan. However, State Department experts say the goals are attainable if Poland can secure more mining equipment. Polish coal production in 1947 exceeded 59,000,000 tons which is 97 percent of the prewar production of the same area (i.e. including German Silesia), a better rate of recovery than Western Germany or the United Kingdom. This year the planned production of Polish coal is 70,000,000 tons; next year it is to rise to 80,000,000, remaining there through 1951. To attain these levels, Poland plans to import about $90,000,000 worth of mining machinery. The principal sources would presumably be the United States and the Ruhr. The Paris report also tacitly assumes that Polish exports to non-participating countries will be limited and that domestic use will not increase more rapidly than is provided for in the Polish national plan. If the western countries get less coal than they expect from Poland, the United States could almost certainly supply the deficit, but that would increase the dollar needs of the participating countries.

Before the war, Western Europe depended on Eastern Europe, particularly Finland and the U.S.S.R., for large supplies of timber. The present need for timber is very great in almost all phases of reconstruction work. Pit props, for instance, are crucial to the German, British and other coal programs. Lacking coal, some timber-producing countries are burning wood they could otherwise export. Special efforts are being made to send more coal to Finland and Sweden in return for more timber. The Paris report assumes that by 1951 timber shipments from the east will rise to 75 percent of the prewar level. Whether this level will be reached depends partly on developments in the U.S.S.R., formerly a major source of supply. That country was a net importer of timber in 1946 even though its domestic cutting was above the prewar level. However, Finnish exports have been increasing and Soviet reparations requirements absorb a smaller share of Finnish timber production than of some other goods. The chances of getting the timber postulated by the Paris report will be increased if the producing countries are able to import tractors, timber-cutting machinery and other capital equipment.

The C.E.E.C. report assumes that by 1951 the prewar flow of cereals from Eastern to Western Europe will be restored. The Harriman Committee doubts very much whether Eastern Europe will supply the 4,000,000 to 5,000,000 tons of grain annually that this implies, and points out that the alternative will be less feeding of grain to animals in Western Europe or additional production of cereals in the participating countries (that is, on the assumption that the United States and other overseas countries cannot add to the grain they are scheduled to ship under the program). So much depends on the weather that the agricultural forecasts of the Paris plan are obviously very hazardous. It seems clear, though, that if they are to approach the hoped-for levels of production, the eastern countries will require more fertilizer and farm machinery than they have been getting lately.

Behind the assumptions and sub-assumptions concerning each particular commodity lie further questions. How sound a basis had the conferees at Paris for judging whether production would reach the necessary levels in the eastern countries? Do the assumed figures really represent the best judgment of the experts or were they expanded to help cut down the original estimate of the 16 nations' deficit to an amount judged reasonable by American officials? In calculating the availability of machinery and capital goods in the participating countries, has adequate allowance been made for the goods that have to be sent to the east to secure coal, timber and food? Two categories of goods are involved: those needed to produce adequate quantities of these products, and other kinds of goods that the eastern countries want in payment for shipping their basic raw materials westward. Capital goods of the sort that the western countries need themselves make up a large part of both categories. The question will be whether certain machinery, for instance, is worth more operating in Western Europe or as a means of paying for supplies from the east. Can these calculations be made several years in advance? How much of the eastern demand for capital goods do the Western European countries mean to supply themselves, and how much is to come from the United States? What trading relations between Eastern and Western Europe are contemplated for the years after the Marshall Plan?

The published materials do not permit very precise answers to these questions. But, after what has already been said, it is enough to point to three conclusions about east-west trade as it relates to the Marshall Plan: first, eastern supplies are very important to the Western European countries; second, whether these supplies are likely to be forthcoming is an extremely complex question; and third, the assumptions on which present calculations rest are precarious, so there is a considerable risk that the recovery program of the western countries will fall seriously short of its goal unless American aid is increased to compensate for any failure of supplies from the east.

IV

An easy syllogism begins to take shape. The Russians will use all possible means to frustrate the Marshall Plan. The Marshall Plan depends on supplies from Eastern Europe. Therefore, the Russians will cut off or manipulate exports from their satellites to the countries participating in the Marshall Plan. Perhaps they will, but the issue is not quite so simple. As we have seen, the eastern countries have a real stake in this trade, in some ways an even greater one than the western countries. So far, the evidence is that the Russians favor continuance of the trade. If they adopt a different attitude in the future, it will be at some cost to themselves in the loss of western goods to their orbit. They will also incur the political onus of blocking trade which the people at both ends of the transaction want to continue.

The Western European Governments are also anxious to continue trade with the east. They know how much the goods they get from that region contribute to recovery. They do not feel at the mercy of the eastern countries in commercial negotiations, and with American aid behind them they will feel even stronger. Their difficulties to date in getting adequate eastern supplies have been economic, not political. Trade with the east also has political value to the western governments. It symbolizes independence and a position between the two Great Powers, not wholly dependent on either. The list of Italian trade agreements with eastern countries, said Count Sforza, "makes ridiculous the daily accusations that our every gesture is governed by our western ties." [v] Absence of trade with the east would heighten the illusion of what might be gained from that trade. It is easy to dream of waving wheat fields along the Danube and endless forests in the north when they are beyond the horizon. In the past a few Europeans have spoken as if the east could supply something like an adequate alternative to American aid. The falsity of this view is plain, and the best way of demonstrating it is to let the eastern trade take place. Finally, the western governments know that if their economies are to be self-supporting by 1952, they will need all the export markets they can get.[vi] They see thriving trade between Eastern and Western Europe as a desirable and natural feature of the future world.

In the United States, growing tension with the U.S.S.R. has led many to favor restriction of trade with Eastern Europe. Naturally, the doubts and fears behind this view have been applied to east-west trade in Europe as well. In its commonest form the argument is that since a major purpose of the Marshall Plan is to check the spread of Soviet domination, it is ridiculous "to arm the enemy" at the same time by shipping goods to the east. There is no question that the shipment of war materials to this region would be foolish in the present state of the world. The United States and the countries participating in the Marshall Plan have controls to prevent that. But more complicated questions are involved in the shipment of machinery and other capital goods that have peaceable as well as warlike uses. Industrial development of the eastern countries will undoubtedly increase their war potential. This development would take place without trade with the west, but much more slowly. Apart from the military aspect, the sound industrialization of Eastern Europe, accompanied by rising living standards, would benefit the United States.

If our world were all a battle map and we assumed that war with Russia were in the immediate offing, then much of the Marshall Plan would be misdirected. Programs that reach their fruition in 1952 are little help in fighting wars in 1948 or 1949. Actually, we seek a variety of ends, and seek to balance a complex of present interests in preparation for several possible futures. Recognizing the risk of war and our continuing rivalry with Russia, we may still run a reasonable risk of strengthening somewhat the war potential of a possible enemy if that improves the chances of reaching one of our important goals: an independent and self-sustaining Western Europe.

After considerable debate, Congress directed the Administrator for Economic Coöperation "to refuse delivery in so far as practicable" to Marshall Plan countries of materials "which go into the production of any commodity for delivery" to Eastern Europe if the United States would refuse to license exports of such commodities to that area in the "interest of national security." In effect, this provision throws part of the United States export control system around the Marshall Plan countries. Apart from administrative difficulties, this may involve some rather delicate negotiations with the recipient countries. How difficult the Administrator's task will be in this matter depends largely on the kind of export licensing policy the United States follows. If we confine our security embargo on exports to Eastern Europe to items with primarily military significance, the Administrator will be on strong ground. If that list is greatly extended to include all kinds of industrial equipment, he will be in trouble, because that would seriously impair east-west trade in Europe.

No other provision of the Economic Coöperation Act deals specifically with trade between Eastern and Western Europe. However, many Senators and Representatives, including some who opposed amendments to the Act that would have restricted such trade, made it clear that they expect the Administrator to pay close attention to the subject. Tacitly or explicitly, the Administrator will have to take a position on the trade that develops between Eastern and Western Europe and justify his view to Congress, especially when the next annual appropriation for European aid comes up for consideration. This does not mean that the United States ought to try to dictate what these trade relations should be, or substitute its judgment for that of the Western European governments involved. The Marshall Plan recognizes some mutual interests among the recipient countries and the United States; what kind of east-west trade will best achieve those interests ought to be determined by consultation and negotiation.

In addition to questions about the war potential of the eastern countries, the Administrator must expect to answer questions about the benefits eastern countries get from east-west trade, the allocation of scarce American materials, the risk of making Western Europe dependent on the U.S.S.R., and a variety of other matters. There are no firm rules to be laid down in advance. Even the shipment from Western to Eastern Europe of goods similar to those being supplied by the United States may be justified in some circumstances. That depends on whether the goods secured in return could not be obtained equally well from the United States or another participating country and are needed as much or more than are the exported products. "Shortages" and "scarcities" are often not absolute; they have to be judged in terms of the alternative benefits to be had from using the goods or trading them for something else that is also "scarce." Within a framework of rather clear general principles, the Administrator, in consultation with the 16 nations, will have to make the substance of policy as he goes along. One of the clearest of those principles is that the United States should be most cautious in interfering with the desire of the western governments to carry on such trade. They are not trying to put something over on the United States. The trade is of direct immediate benefit to them, and important in establishing the basis of their future economic self-support. The western countries have bargaining power; as recovery proceeds, it should increase, since the survival value that every ton of coal or bushel of wheat now seems to have will be less, and the western countries will have more manufactured goods with which to attract the eastern supplies. At any given moment, of course, the western countries will be vulnerable to Soviet threats of cutting off eastern goods for some political purpose. Assessment of the Russian area of manœuvre in this regard and the means of defending the west against such pressure are among the continuing problems of administering the Marshall Plan.

This is not an argument for a hands-off policy on east-west trade. The aim should be to guide the trade so that it makes the maximum contribution to European recovery. Since the Western European countries will usually be competent to deal with the matter, there is every reason for keeping American interference to the minimum, though it may be justified in some cases. Indeed, the United States ought to see if it commands any means of fostering that trade in such a way as to improve its value to the Western European countries, and therefore to ourselves. Direct financial aid from the United States, even for worthy projects, must presumably be ruled out for political reasons.[vii] The International Bank for Reconstruction and Development to which Poland, Czechoslovakia and Finland have applied for loans is not supposed to allow the political complexion of a government to affect its decisions. However, the indications are that the Bank -- in which the United States has an important voice -- would consider loans to countries behind the Iron Curtain as commercially unsound because of the political state of the world. But it has been suggested that Western European countries might be allowed to borrow to buy from the east. "Off-shore purchases" with Marshall Plan dollars are to be used to supply some of Europe's needs from Canada and Latin America. The same logic would apply to purchases from Eastern Europe, but whether the reasoning would survive political attack seems doubtful.

Export of capital goods is the most effective means the United States has to promote desirable conditions for east-west trade in Europe. The Administrator has been given an important place in the export-control system to ensure that the aims of the Marshall Plan are not frustrated. He may challenge the licensing of exports to Eastern Europe by other agencies and carry the dispute to the President if necessary. When supplies of a commodity are so scarce that the needs of the Marshall Plan countries cannot be met, no export licenses for Eastern Europe may be issued unless he finds it to be in the national interest. Apart from his legal powers, his voice will obviously be a weighty one in deciding policy on these matters. As has already been pointed out, the prospects of the eastern countries sending as much coal, timber and food to the west as is called for by the Paris estimates depends on their getting the means of production. The United States is one of the principal sources of supply. If shipment of these goods is blocked, or other areas are always given priority in the issuance of export licenses, Western European recovery will be hindered. Provision of such equipment would usually by itself lead to expanded east-west trade; however, if it were thought necessary, perhaps means could be found to guarantee shipment to Western Europe of a reasonable share of the increased production made possible by the provision of American goods. Similarly the sale of other kinds of capital goods and manufactured products to the eastern countries might be made conditional on their provision of specified quantities of certain products to Western Europe. A kind of triangular trade might be devised in which, if necessary, eastern countries paid for American goods by deliveries to Western Europe, thus easing the burden of Marshall Plan aid on the United States. Whether such schemes are feasible and whether they are necessary can hardly be judged in advance. But they serve to emphasize that the problem of east-west trade in Europe is neither a very remote one nor one which should be approached as if the choice were between restriction and doing nothing.

Obviously the eastern countries would benefit from such policies by the United States, just as they benefit from trading with Western Europe. Otherwise there would be no trade. The loss would fall not just on the east, but also on the west -- and on the United States. Military considerations, scarcities and the nice balancing of advantages will sometimes justify restrictions on trade with the east. Possibly as a result of such steps, possibly because of a change in Soviet policy, possibly because the Paris estimates were too optimistic, eastern shipments to Western Europe may fall below the levels assumed at Paris. Then the Marshall Plan would not succeed without additional American aid or larger production than is expected in Western Europe. Plans should be made for that contingency. The prejudice against shipping to the east that has understandably resulted from political tension is not a very reliable guide to policy. The Administrator for Economic Coöperation faces an interesting problem in the use of foreign trade as an instrument of national policy.

[i] The 12 western countries are Belgium, Denmark, France, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland and the United Kingdom. The eastern countries are Bulgaria, Czechoslovakia, Finland, Hungary, Poland, Rumania and Jugoslavia. Iceland, Austria, Greece and Turkey -- the other four Marshall Plan countries -- and Albania are omitted from the calculations in this article.

[ii] Germany bought $310,000,000 worth of goods from the seven eastern countries in 1938, about 14 percent of her total imports. About 2.5 percent more came from the U.S.S.R. and the Baltic States. Two-fifths of Austria's prewar imports came from the east

[iii] The New York Times, January 18, 1948. D. Petrovsky, writing on "Foreign Trade Policy of the People's Democracies," in the Soviet journal, The New Times, January 7, 1948, stressed their desire for trade with the west and blamed the Western European countries and the United States for the low level of trade.

[iv] But not necessarily reduced imports of manufactures. During the initial period of industrialization the demand for foreign machinery and equipment will rise. Later, though no longer dependent on foreign suppliers of some goods now imported, the eastern countries may increase their imports of manufactured consumers goods and of capital goods. Much depends on the industrialization policies followed by eastern governments, the degree living standards rise, and, of course, the availability of foreign goods.

[v] Address to the Congress of the Republican Party, Naples, January 17, 1948. Relazioni Internazionali, January 24, 1948, p. 57-8.

[vi] In 1938, the 12 principal Western European countries sent 7 percent of their exports to the east, including the U.S.S.R. The figure was much higher for Greece, Germany and Austria.

[vii] In 1946 Poland received a $40,000,000 loan from the Export-Import Bank, primarily to buy locomotives and freight cars so as to be able to export more coal and other products to Western Europe. Completion of these transactions will help the Marshall Plan.

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  • WILLIAM DIEBOLD, Jr., economist on the staff of the Council on Foreign Relations; author of "New Directions in Our Trade Policy"
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