Foreign Trade


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Foreign Trade

 

trade of one country with other countries, consisting of the importing and exporting of commodities. The foreign trade of different countries in the aggregate constitutes international trade. The nature, level of development, and significance of foreign trade are determined by the specific mode of production. International division of labor is the basis of foreign trade.

Foreign trade arose far back in antiquity and contributed to the growth of commodity production and commodity-money relations in precapitalist societies. In the age of slave owning and feudalism, when production was basically nonmonetary in nature, foreign trade embraced an insignificant portion of the commodities of production and served primarily to fulfill the personal consumption needs of the ruling classes. During the decay of feudalism, the consolidation of the capitalist mode of production was furthered by the development of foreign trade and the formation of a world market (16th century to the 18th). Foreign trade received its greatest development in the era of capitalism, particularly in the phase of heavy machine industry. “Capitalist production,” Marx wrote, “generally cannot exist without foreign trade” (K. Marx and F. Engels, Soch., 2nd ed., vol. 24, p. 534). The worldwide market ’ ’is the basis and vital atmosphere of the capitalist mode of production” (K. Marx, Soch., 2nd ed., vol. 25, part 1, p. 122). The world market—the historical prerequisite for the development of the capitalist mode of production—was at the same time also its result. Foreign markets constitute an inseparable part of the capitalist market in general. Therefore, “it is impossible to imagine a capitalist nation without foreign trade; indeed, there is no such nation” (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 3, p. 56).

V. I. Lenin, after striking down the false notion of the petit bourgeois economists (J. C. Sismondi and the Russian Narodniks [Populists]) that the realization of surplus value through the expanded reproduction of capital was apparently theoretically impossible without foreign markets and a non-capitalist environment, set forth the true reasons for the necessity of foreign markets under capitalism. First, the need for foreign markets by capitalist countries is determined by the fact that “capitalism appears only as a result of the widely developed circulation of commodities, which goes beyond the bounds of the state” (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 3, p. 56). Capitalist large-scale industry arises on the basis of already existing well-developed international circulation of commodities and expanded trade links between states. Many large enterprises and whole branches of industry are oriented to some extent during their emergence, and even more so during subsequent development, toward foreign markets, in addition to those at home. Second, the necessity for foreign markets is associated with capitalism’s characteristically uneven development of individual branches of social production (an unevenness caused by anarchy in production). “Different branches of industry, serving as a ’market’ for each other, do not develop evenly but overtake each other, and the more developed industry seeks a foreign market” (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 3, p. 56). Moreover, foreign trade does not elimi-nate, nor can it eliminate, the contradictions arising from the capitalist economy’s lack of balance within individual coun-tries. On the contrary, anarchy and the lack of balance between different branches of industry prove to be even greater on the scale of world capitalist production. Therefore, foreign trade only carries over the contradictions of capitalism to the wider realm of the world market and, in particular, lends an international quality to the crises of overproduction. Third, foreign markets are made necessary because constant transformation of the modes of production and tendencies to increase production are inherent characteristics of capitalist production. If the repetition of the process of production on the former scale using previously existing technology is the law of precapitalist formations, then “the capitalist enterprise will inevitably outgrow the confines of the community, the local market, the region, and later even the state,” which leads each branch of industry “to the necessity of ’seeking a foreign market’ “ (V. I. Lenin, Poln. sobr. soch., 5th ed., vol. 3, p. 57).

The relative narrowness of the domestic market in capitalist countries strengthens the role of foreign markets and leads to intensification of the struggle for these markets. The struggle for foreign markets is also exacerbated by the efforts of capitalists to force the export of goods to economically backward countries at prices higher than those on the domestic market, in order to extract the highest possible profits. In the struggle for sales markets the capitalists extensively exploit the machinery of government and combine methods of “peaceful” trade with the methods of coercion, robbery, and piracy. Slogans of “free trade” in the history of the foreign trade of capitalist countries have always been merely a guise concealing the tendencies of economically developed countries to penetrate freely into foreign sales markets and exploit less-developed countries, while selling them finished products at high prices and exporting from them raw materials and food supplies.

During the premonopolistic period of capitalism, foreign trade grew rapidly, based on the involvement of new areas of the globe in international commodity exchange. By 1880 the turnover of world trade had increased ten times over 1800 and 3.5 times over 1850. This period was characterized by England’s industrial monopoly and preeminent role in world trade.

In the era of imperialism, capitalist foreign trade acquired new features determined by the supremacy of monopolies. Monopolistic capital developed aggressive protectionism on a wide scale, seizing foreign markets by means of dumping goods and other aggressive foreign trade methods. There was an enormous development in the export of capital, which was used to increase the export of commodities and to seize profitable sales markets and the sources of raw materials.

Such factors as the geographical location of a given country, the presence of rich and abundant mineral resources, and the existence of convenient natural means of communication exert a definite influence on the development of foreign trade. However, as Marx emphasized, the decisive influence on the formation of the international division of labor and on the structure and direction of international trade is determined not by nature and geography but by socioeconomic factors, if the natural characteristics and advantages of individual countries for the development of foreign trade are exploited at all, to what extent, and for what purposes. This is quite apparent from the fact that, for example, developing countries, which possess vast natural resources, territory, and human resources, occupy a small place in capitalist world trade.

Capitalist foreign trade reflects an abnormal division of labor: industrial production and the exporting of finished products (especially machinery and equipment) are concentrated mainly in the hands of imperialist governments, and economically underdeveloped countries are for the most part relegated to the role of producers and exporters of raw materials and primary agricultural commodities and importers of industrial products. The creation of imperialism’s colonial system led to the transformation of colonial and dependent countries into raw-materials appendages of the parent states. The financial capital of the parent states exploited the population of the colonies and dependent countries by means of nonequivalent exchange—sales of the parent state’s indus-trial products at monopolistic high prices and the pumping of raw materials and food supplies out of the colonies at low prices. The predominant portion of the foreign trade turnover of all capitalist countries was taken up by the mutual ex-change of commodities between industrially developed coun-tries, whose population constituted only a small portion of the total world population. Thus, before World War I (1914-18) more than 55 percent of the total international commodity circulation was shared by 11 capitalist countries—the USA, Great Britain, France, Germany, Italy, Japan, Belgium, the Netherlands, Sweden, Switzerland, and Canada—when the population of these countries amounted to approximately 20 percent of the earth’s population. Conversely, no more than 5 percent of the world commodity circulation fell to the share of China and India, where 40 percent of the total world’s population lived.

The foreign trade of countries in the worldwide capitalist economic system after World War II (1939-45) differs in a number of features. The volume of commodity circulation in the foreign trade of capitalist countries (see Table 1) has grown considerably and continues to grow.

This growth of foreign trade reflects the increased importance of the world capitalist market in the process of social reproduction. It is characteristic that the volume of foreign trade grows faster than the volume of industrial production. If the index for the industrial production of capitalist countries (1963 = 100) increased from 86 in 1960 to 126 in 1967, then the physical export volume index rose from 84 to 134 and that of imports increased from 83 to 135. Changes in the position of individual countries in the world capitalist market may be seen in Table 2.

The commodity circulation of capitalist industrial states, particularly their reciprocal turnover, is growing rapidly. The developing countries’ share in the total export of the capitalist world is being reduced. (In 1967 it amounted to only 21.2 percent, as against 28.5 percent in 1955.) Trade between imperialist and developing countries serves to a large extent as a tool for the exploitation of the latter, particularly through the export of capital and nonequivalent exchange.

Important changes have been occurring in the foreign trade goods structure of the capitalist countries. These changes are associated with the prevailing growth in the export of finished products versus the export of raw materials and foodstuffs (the export of machinery, equipment, and transportation

Table 1. Volume of commodity circulation of capitalist countries (in billions of dollars)
 19501955196019651966196719681969
Export
Asia developing countries8.510.212.216.317.418.420.422.6
Latin America developing countrie7.18.69.312.012.712.714.115.0
Africa developing countries3 04.45.37.68. 28.49.711.1
Total ofdeveloping countries18 723.427.036.238. 640.044.549.2
Industrially developed countries36.860.084.8126.7140. 0147.7166.4191.4
Total55.583.4111.8162.9178. 6187.7210.9240.6
Import
Asia developing countries7.410.213.618.019. 419.522.324.0
Latin America developing countries6.38.69.611.212. 212.814.915.9
Africa developing countries3.45.36.67.98. 28.28.79.3
Total of developing countries17.124.230.037.740. 642.046.650.2
industrially developed countries41.264.487.9135.0149. 0157.0175.6202.2
Total58.388.6117.9172.7189. 6199.02222252.4
Table 2. Share of individual countries in capitalist world exports (percent)
 19481969
West Germany1.112.1
Great Britain12.17.7
France3.86.3
Italy2.04.9
Western Europe total33.049.5
USA23.816.0
Japan0.46.5
Entire capitalist world100.0100.0

equipment is growing at an unusually rapid rate). There is also the fact that several imperialist countries have become major producers and exporters of agricultural products and raw materials (see Table 3). This worsens even more the position of the developing countries in the world capitalist market and reinforces the unfavorable export-import trade terms for these countries.

Table 3. Capitalist world exports (1968, in billions of dollars)
CommoditiesDeveloped
countries
Developing
countries
Total
Raw materials15.58.423.9
Fuel5.514.823.9
Total of agricultural products and
raw materials
40.734.274.9
Machinery and equipment56.90.757.6
Chemical products15.00.715.7
Total of finished products124.39.6133.9

The bulk of finished products exports on the world capitalist market (85.8 percent in 1967) is shared by 11 countries: the USA, West Germany, Great Britain, Japan, France, Italy, Canada, Belgium, the Netherlands, Sweden, and Switzerland. In this group the decisive positions are occupied by the leading imperialist powers. In the 1960’s, the export of finished products from West Germany, which overtook Great Britain and closely approached the level of the USA, grew rapidly; similar export increases were made by Japan and Italy in the latter half of the 1960’s (see Table 4).

Table 4. Export of finished products from developed capitalist countries (in billions of dollars)
 19601968
USA13.0023.65
Federal Republic of Germany10.1322.28
Great Britain8.4012.67
Japan3.6212.19
France5.069.39
Italy2.708.39
Canada2.527.34
Belgium and Luxembourg3.126.70
Netherlands2.125.02
Switzerland1.723.60
Sweden1.623.59
Total54.01114.82

The development of state-monopoly capitalism, of state regulation of the credit and monetary system, and also of international state-monopoly associations exerts a rising influence on the foreign trade of capitalist countries. It is characteristic, for example, that in the period since the closed economy grouping of the six Western European Common Market states was established in 1959, the mutual trade of member countries increased far more (from $7.5 billion in 1958 to $28.9 billion in 1968) than their trade with nonmember countries (from $15.9 billion to $35.3 billion) and, in particular, with developing countries (from $6.1 billion to only $9.3 billion).

Developing countries seek to make good use of foreign trade in the interests of developing their national economies. Exports from these countries serve as a source of inflowing valuta, which goes to pay for importing means of production and foodstuffs (in many cases) as well as to pay income on foreign investments. However, the rates of growth in the foreign trade of developing countries (particularly exports) lag behind the growth rates of world trade as a whole; there-fore, their relative share of world trade has diminished (from 25.3 percent in 1960 to 20 percent in 1968). There are several reasons for the slow growth rates in the exports of developing countries: the low level of general economic development, the insufficient demand for many raw materials and agricultural products on the world market, and the competition of developed capitalist countries and their protectionist policies. The growth of trade between developing countries and the Soviet Union and other socialist countries, an in-crease in the export of finished industrial products, and the gradual development of mutual trade relationships exert a positive influence on the foreign trade of developing countries . A typical feature of the foreign trade of many developing countries is the lag in exports behind imports and the ensuing trade balance deficit, which makes their international financial situation even more complicated (see Table 5).

Table 5. Foreign trade of developing countries (in billions of dollars)
 196119651968
Export27.836.442.7
Import31.138.044.5
Balance-3.3-1.6-1.8

With the victory of the Great October Socialist Revolution in the USSR, a fundamentally new system of foreign trade was created, a system based on the nationalization of foreign trade and the implementation of all foreign trade operations within the limits of a state monopoly of foreign trade (introduced by the decree of Apr. 22, 1918).

After World War II, the worldwide system of socialism arose and the world socialist market was formed, which exists side by side with the world capitalist market. The foreign trade of socialist countries is an integral part of the planned socialist economy, and its development serves to hasten the growth of each country’s productive forces and world friend-ship on the whole and to improve the well-being of the working masses. Foreign trade is the principal form of economic relations between the member states of the Council for Mutual Economic Assistance, based on strengthening the mutual coordination of the national economic plans of the socialist countries. The foreign trade of the USSR is steadily expanding on the basis of the high and stable rates of growth of the national economy (see Table 6).

The largest share of the USSR’s foreign trade goes to socialist countries (12,940 million rubles in 1969). Foreign

Table 6. USSR foreign trade volume (in millions of rubles)
 TurnoverExportImport
19461,280588692
19502,9251,6151,310
19555,8383,0842,754
196010,0735,0076,066
198514,5107,5377,523
197022,08511,52010,585

trade between the USSR and developing countries is making progress. Machinery and equipment required for the national industry of these countries occupy an important place in ex-ports from the USSR to the countries. At the same time, the Soviet Union is a major importer of the developing countries’ traditional export items and also of a number of finished products manufactured by young national industries. Exports from the USSR to developing countries increased from 29.1 million rubles in 1950 to 1,520.1 million rubles in 1969, and imports to the USSR from these countries during the same period increased from 83.4 million rubles to 992.1 million rubles.

The Soviet Union and other socialist countries have al-ways been and continue to be in favor of developing trade, on the principles of equality and mutual benefit, with all coun-tries, regardless of their socioeconomic systems. Such a policy is in complete accord with the principles of peaceful coexistence among states having different social orders and in accord with the objective requirements for the development of the international division of labor. Commodity turnover (export plus import) between the USSR and developed capitalist countries increased from 440 million rubles in 1950 to 4,331 million rubles in 1969. This growth could be substantially greater if the imperialist powers, above all the USA, would not set up artificial barriers in the way of world trade.

In accordance with the Directives for 1971-75 of the Twenty-fourth Congress of the CPSU, the volume of the USSR’s foreign trade turnover will increase by 33-35 percent over the five-year period, primarily through the expansion in every possible way of trade with socialist countries. Economically justified foreign trade relationships are being expanded with industrially developed capitalist countries manifesting a

Table 7. World exports by principal regions of the world,1968
Countries and groups of countriesmillions
of dollars
North American countries46.8
Common Market countries64.2
EFTA (European Free Trade Association) countries31.0
Japan3.0
Total of developed capitalist countries167.7
Latin American countries12.2
African countries (excluding the Republic of South Africa)9.7
Middle Eastern countries8.7
Southeast Asian countries11.2
Total of developing countries44.0
Socialist countries (excluding Cuba)26.9
Total238.6

willingness to cooperate with the USSR in this area. Foreign economic ties are being strengthened with the developing countries of Asia, Africa, and Latin America on mutually beneficial terms and in the interests of increasing their economic independence.

Thus, three groups of countries participate in modern world trade: developed capitalist countries, developing coun-tries, and socialist countries. Their relative share of world exports may be seen in Table 7.

The principal trends of international trade and the basic tendencies in this area are characterized first of all by the considerable growth of mutual trade between the socialist countries, the rapid increase in the volume of trade between the socialist countries and the developing countries, and the expansion of mutual trade among the industrial capitalist countries (see Table 8).

Table 8. Basic trends of modern international trade (export) (1968)
Exports fromExports to
Developed
countries
$millions %
Developing
countries
$ millions %
Socialist
countries
$ millions %
Developed capitalist countries427775 419704
Developing countries35.9759720255
Socialist countries6.9243.81318.063

The paramount social and political processes of modern times and, above all, the economic competition and struggle between the two world systems, as well as the steady strengthening of the positions of world socialism, are reflected in the development of foreign trade.

REFERENCES

Lenin, V. I. “Razvitie kapitalizma v Rossii.” Poln. sobr. soch., 5th ed., vol. 3, ch. 1.
Mezhdunarodnaia torgovlia. Moscow, 1954.
Vneshniaia torgovlia kapitalisticheskikh stran. Moscow, 1963.
Vneshneekonomicheskie sviazi SSSR za 50 let: Materialy iubileinoi nauchnoi konferentsii Nauchno-issledovatel’skogo kon“iunkturnogo in-ta MVT SSSR, Vsesoiuznoi akademii vneshnei torgovli i Moskovskogo gosudarstvennogo in-ta mezhdunarodnykh otnoshenii. Moscow, 1967.
Mezhdunarodnye ekonomicheskie otnosheniia. Moscow, 1969.
Voploshchenie idei leninizma vo vneshneekonomicheskikh otnosheniiakh sotsialisticheskogo gosudarstva. Moscow, 1970.
Whale, P. B. International Trade. London, 1961.
Handbook of International Trade and Development Statistics. Geneva, 1964. (UN Conference on Trade and Development.)
International Trade … (GATT report). Geneva, 1967.
Monthly Bulletin of Statistics, New York, March 1970.
Le Commerce international en 1969. Geneva, 1970.

A. B. FRUMKIN

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