ABSTRACT
This chapter shows that the Soviet subsidies were due to customs union effects and were not payments by the USSR for military and political cooperation, so-called noneconomic services. It suggests that such customs union effects that, caused Soviet-Eastern European trade prices to differ from world prices would do the same to intra-Eastern European trade prices and would lead to apparent "subsidies" by some eastern nations to others. That test is to examine directly intra-Eastern European prices of hard and soft goods to see if the former are , and the latter, world prices as they are in Soviet-Eastern European trade. If yes, the customs union explanation is validated; if no, the Marrese and Vanous explanation is correct. If the Soviets had balanced trade by commodity groups to cut their losses, trade with Eastern Europe would certainly have shrunk well actual levels.
