chapter  4
15 Pages

Post-CMEA Trade and Payments Arrangements in the East

WithHarriet Matejka

This chapter discusses economic union among Eastern economies. It argues that the west should give priority to the creation of viable market systems in the planned economies in transition (PETs) and, in the short run, sustain their mutual trade through international financing. The chapter analyzes the breakdown of trade and payments between Eastern economies, has identified the organizations that are filling the void left by the dissolution of the Council for Mutual Economic Assistance, and focuses on the payments unions and trading areas proposed for PETs. The trade and payments of the countries in the East have undergone some major disruptions since 1988. The chapter also argues that the creation of preferential arrangements between them is premature, because the necessary administrative prerequisites and market institutions are lacking in the PETs. The threat of the Eastern economies pursuing highly protectionist trade and restrictive payment policies is best avoided by integrating them into the world trade and payment system.