ABSTRACT
The USSR exports petroleum and other raw materials to Eastern Europe at less than world prices and buys machinery and other manufactured products from Eastern Europe at higher than world prices. In the case of Council for Mutual Economic Assistance, the East European nations were forced by the USSR, in the late 1940s, to divert their trade away from their customary western European channels and to substitute trade with each other and especially with the USSR. The 1979 price rise put an additional strain on Eastern Europe and, in fact, several of East European nations were, as a result, unable to balance their trade with the USSR. In consequence, the USSR was forced to grant credits to Eastern Europe, which show as trade surpluses and which amounted to over $10 billion from 1979 to 1982. Losses from trade diversion and trade destruction are likely to be viewed and measured statically but they do in fact cause dynamic losses as well.
