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Trade and payments arrangements in post-CMEA Eastern and Central Europe

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  • Michalopoulos, Constantine
  • Tarr, David

Abstract

A web of trade and payments arrangements binds countries of Eastern and Central Europe under the Council of Mutual Economic Assistance (CMEA) agreements. However, it is incompatible with these countries recent commitments to move toward liberalized trade and currency convertibility. The importance of trade with other CMEA members, and the apparent desire of the USSR and others to denominate all future mutual trade at international prices poses a number of problems of transition for the countries of Eastern and Central Europe. This paper identifies three broad problems in this connection: (1) the breakdown of the CMEA arrangements has led to a serious breakdown of trade relations and reduced trade volume among former CMEA members; (2) denominating international trade at international prices implies changes in the terms of trade for each country in the system; and (3) all countries may not reach full currency convertibility in the near term, but the continuation of the old CMEA arrangements is also impossible. The purpose of this paper is to discuss the possible interim institutional arrangements for trade of payments among previous CMEA members and how such arrangements can contribute to addressing the emerging payments imbalances.

Suggested Citation

  • Michalopoulos, Constantine & Tarr, David, 1991. "Trade and payments arrangements in post-CMEA Eastern and Central Europe," Policy Research Working Paper Series 644, The World Bank.
    • Handle: RePEc:wbk:wbrwps:644
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    References listed on IDEAS

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    1. Brada, Josef C., 1988. "Interpreting the Soviet subsididzation of Eastern Europe," International Organization, Cambridge University Press, vol. 42(4), pages 639-658, October.
    2. David Tarr, 2014. "Second-Best Foreign Exchange Policy in the Presence of Domestic Price Controls and Export Subsidies," World Scientific Book Chapters, in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 4, pages 75-93, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Erzan, Refik & Holmes, Christopher & Safadi, Raed, 1992. "How changes in the former CMEA area may affect international trade in manufactures," Policy Research Working Paper Series 973, The World Bank.
    2. Michalopoulos, Constantine, 1996. "Payments and finance problems in the Commonwealth of Independent States," Policy Research Working Paper Series 1587, The World Bank.

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