4 u .9viwu v :20"; I ‘Ph TRAD; .54. an...“ . . .1! w». an? ... .r. ....u. anal/"22.22%, .. r, 2.2.»: // ...,... ,.....22..,.....~V2?. . ,..r...:v.... tee» EEG Eéunnn§§3r1_fi= LLEMERI OF _ WEST De rm my 8 (If IRAN“ C 1‘ E SS; EFFE .vvnifoE THE 7Ihes ' Nuc ‘ . . . y ..y.‘ .... : 2...‘....Jr..l;..;f.n.. . .2: TJ. ...: 2).» c . ......“ iv: ... .. (1 r 3w¢JI.'I Ici ‘ 32:2 aifiwfifififi in? _ LA;— L H3 3 1R Y Michigw 1 State szi‘: Sity - - rnr‘ r“- “.- This is to certify that the thesis entitled W gfi’CUl/Swg MEL-EC 0m, WWM Tm has been accepted towards fulfillment of the requirements for M. degree 1n MU) éM/JWz/4/W Major rofessor Date 741/4 2 /, //”7/ 0 0-7639 ABSTRACT THE EFFECTS OF THE EEC ON EAST-WEST TRADE By Willy Sellekaerts This thesis is a study of the trade expanding and diverting effects of the EEC on her members' imports from the Communist Countries of Eastern Europe. The economic, political and ideological framework of East-West trade is briefly explained. A. short discussion of some conceptual problems, related to the measurement of the effect of a customs union, is followed by a review of the theory of customs unions and a survey of previous empirical research on the effects of the EEC. Two models are presented, measuring the effect of the EEC on her extra-area suppliers. The relative share model separates ‘a Common Market effect, a competitive effect, a price effect and a total effect. The linear regression model measures the global effect of the BBC on her extra-area suppliers. The empirical results based on the relative share model and the results of the linear regression model indicate that Romania, Bulgaria, Yugoslavia, Albania, Hungary, the GDR and Willy Sallekaerts Poland shared in the extra-area trade expanding effect of the BBC. The USSR and Czechoslovakia, on the contrary, suffered from trade diversion. As a group, the Communist Countries of Eastern Europe were favorably affected by the formation of the EEC. THE EFFECTS OF THE EEC ON EAST-WEST TRADE By Willy Sellekaerts A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Economics 1971 ACKNOWLEDGMENTS I am indebted to a large number of people who have helped me to make this dissertation possible. First of all, I would like to thank the members of my dissertation committee for their assist- ance. Professor A.Y.C. Koo, who has helped me repeatedly during my graduate education, has encouraged me to complete this thesis and gave valuable suggestions to improve the research. Professors K. Liedholm and W. Samuels read the preliminary draft and made valuable comments which are mostly incorporated in the final version of the thesis. Some of their suggestions have even stimulated me in my further research on the effects of the EEC on her Extra-Area Suppliers. I also thank M.E. Kreinin and L. Manderscheid, who had stimulating discussions with me, related to the topic of my thesis. I am especially grateful to Professor Dole Anderson, the director of the Division of Business and Economic Research at Michigan State University, who has helped me financially and who made the research facilities of his centre available to me. Denise Paiement edited the thesis and Monique Beauchamp typed the manuscript. I thank them both for their fine work. Last but not least, I thank my wife Brigitte Sellekaerts who has helped me with the collection and the computation of the data. ii 2. 3. 5. 6. 10. ll. 12. 13. 14. 15. 16. LIST OF TABLES Table Page 1. The Effect of the EEC on her Raw Material Imports from the USSR in 1967 O O O O O O O O O O O O 38 Ex-Post Income Elasticities of the Demand for Extra- Area Imports of the EEC . . . , , , . , , , , 52 The Overall Trade Expanding Effects of the EEC . , . 55 The Four Effects of the EEC on Romania's Exports to the BBC 0 O O O O O O O O O O O C O O O O 59 Romania: Common Market Effect for the Seven Commodity Groups 0 C O O O O O O O O O O O O O O O 60 Romania: Competitive Effect for the Seven Commodity Groups I O O O O O O O O O O O O 0 O I O 6 2 Romania: Price Effect for the Seven Commodity Groups. . 63 Romania: Total Effect for the Seven Commodity Groups; . 64 The Four Effects of the EEC on Bulgaria's Exports to the EEC , 67 Bulgaria: Common Market Effect for the Seven Commodity Groups 68 Bulgaria: Competitive Effect for the Seven Commodity Groups , , 70 Bulgaria: Price Effect for the Seven Commodity Groups. .71 Bulgaria: Total Effect for the Seven Commodity Groups. .72 The Four Effects of the EEC on Yugoslavia's Exports to the EEC O O O O I O O O O O O O O O O O O 75 Yugoslavia: Common Market Effect for the Seven Commodity Groups 0 O O O O O O O C O O O 0 C O C O 77 Yugoslavia: Competitive Effect for the Seven Commodity Groups 0 O O O O O O O O O O O O O O O O 78 iii 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. Yugoslavia: Price Effect for the Seven Commodity Groups..80 Yugoslavia: Total Effect for the Seven Commodity Groupso-8l The Four Effects of the EEC on Albania's Exports to the BBC 0 o o o o o o o o o o o o o o o o 84 The Four Effects of the EEC on Hungary's Exports to the BBC 0 o o o o o o o o o o o o o o o o 87 Hungary: Common Market Effect for the Seven Commodity Groups 0 o o o o o o o o o o o o o o o 88 Hungary: Competitive Effect for the Seven Commodity Groups 0 o o o o o o o o o o o 6 o o o o 89 Hungary: Price Effect for the Seven Commodity Groups ... 91 Hungary: Total Effect for the Seven Commodity Groups ... 92 The Four Effects of the EEC on the G.D.R.'s Exports to the EEC o o o o o o o o o o o o o o o 95 G.D.R.: Common Market Effect for each Commodity Group .. 96 G.D.R.: Competitive Effect for each Commodity Group .... 97 G.D.R.: Price Effect for the Seven Commodity Groups .... 99 G.D.R.: Total Effect for the Seven Commodity Groups ....100 The Four Effects of the EEC on Poland's Exports to the BBC 0 O O O C O O O O O O O O O O O C O 103 Poland: Common Market Effect for the Seven Commodity Groups . . . . . . . . . . . . . . . . . 105 Poland: Competitive Effect for the Seven Commodity Groups 0 o o o o o o o o o o o o o o o o 106 Poland: Price Effect for the Seven Commodity Groups ... 108 Poland: Total Effect for the Seven Commodity Groups ... llO The Four Effects of the EEC on the USSR's Exports to the EEC o o o o o o o o o o o o o o o o 0113 USSR: Common Market Effect for the Seven Commodity Groups 0 o o o o o o o o o o o o o o o 0114 iv 37. 38. 39. 40. 41. 42. 43. 45. 46. 47. 48. 49. 50. USSR: Competitive Effect for the Seven Commodity Groups..117 USSR: Price Effect for the Seven Commodity Groups. . . . 118 USSR: Total Effect for the Seven Commodity Groups. . . . 120 The Four Effects of the EEC on Czechoslovakia's Exports to the EEC O O O O O O O O C O O O O C O O 123 The Commodity Composition of Czechoslovakia's Exports to the EEC in the 1960's . . . . . . . . . . . 125 Czechoslovakia: Common Market Effect for the Seven COMdi ty Groups I O O O O O O O O O C C O O 1 26 Czechoslovakia: Competitive Effect for the Seven Commodity Groups . , , , o o o o o o o o o o o o o 129 Czechoslovakia: Price Effect for the Seven Commodity Groups 0 O O O O O O O O O O O O O O O O 130 Czechoslovakia: Total Effect for the Seven Commodity Groups 0 O O O O O O O O O O O O O O O O 132 The Effect of the EEC on her Members' Total Imports from the Communist Countries of Eastern Europe , . , , , 135 The Effect of the EEC on her Members' Imports from Palmd . O O C O C O O O O O O C O O O O 142 The Effect of the EEC on her Members' Imports from the USSR 0 O O O O O O O O O O O O O O C O O 146 The Effect of the EEC on her Members' Imports from Czechoslovakia , . . , , , , , , , , , , , 150 The Absolute Value of the Price Elasticities of Imports of the EEC Countries from the Communist Countries of Eastern Europe, prior to and after the Formation of the EEC O O O O C O O O O O O O O O O O O O 152 TABLE OF CONTENTS Page ACKNOWLEDGMENTS . . . . . . . . LIST OF TABLES . . . . . . . . INTRODUCTION AND STATEMENT OF THE PROBLEM . . . 1 Introduction . . . . . . . . . . 1 Statement of the Problem . . . . . . . 9 CHAPTER I. THE THEORY OF CUSTOMS UNIONS AND EMPIRICAL STUDIES 21 The Theory of Customs Unions . . . . . . 21 II. III. Substitution in production . . . . . . 22 Substitution in consumption . . . . . . 22 Substitution in consumption and production . . 23 The dynamic effects of a customs union . . . 23 Empirical Studies . . . . . . . . . 26 TWO The The The The The The MODELS MEASURING THE EFFECT OF THE EEC ON HER EXTRA-AREA SUPPLIERS . o o o o o o 32 R818tive Share Made]. 0 o o o o o o 32 Linear Regression Model, Explaining the Demand for Imports of the EEC from the Communist Countries of Eastern Europe . . . . . . . . 39 EMPIRICAL RESULTS OF THE RELATIVE SHARE MODEL 51 Effect of the EEC on the Exports of Romania to the BBC 0 o o o o o o o o o o 58 Effect of the EEC on Bulgaria's Exports to the BBC 0 O O O O O O O O C O O O C O 66 Effect of the EEC on the Exports of Yugoslavia to the EEC o o o o o o o o o o o o o 74 Effect of the EEC on Albania's Exports to the EEC O O O O O O O O O O O O O O O 83 Effect of the EEC on Hungary's Exports to the EEC O O O O O O O O O O C O O O O 8 6 vi The The The The IV. THE The The The Effect of the EEC on the Exports of the GDR to the BBC 0 o o o o o o o o o o o o o 94 Effect of the EEC on Poland's Exports to the EEC O O O O O O O O O O O C O O O .102 Effect of the EEC on the USSR's Exports to the EEC O O O O O O O O O O O C C O 0 Effect of the EEC on Czechoslovakia's Exports to the BBC 0 e o o o o o o 0 etc o 0 Relative Effect of the EEC on the Exports of the Communist Countries of Eastern Europe . . . . EMPIRICAL RESULTS OF THE LINEAR REGRESSION MODEL, MEASURING THE EXTRApAREA TRADE EXPANDING OR DIVERTING EFFECTS OF THE EEC ON HER MEMBERS' IMPORTS FROM SOME COMMUNIST COUNTRIES OF EASTERN EURO? E O O O C C O O O O I O O C 0 Effect of the EEC on her Members' Imports from Paland o o e o o o o o o o o o o 0 Effect of the EEC on her Members' Imports from the USSR 0 o o o o o o o o o o o 0 Effect of the EEC on her Members' Imports from Czechoslovakia o o o o o o o o o o e V. SUMMARY OF THE RESULTS AND SUGGESTIONS FOR FURTHER APPENDIX A: APPENDIX B: RES EARCH O O I O O O O O O O O O 0 Tables Representing the Empirical Results of Of the RBICtive Share Made]. 0 o o o o o 0 Data BrOblems I O O O O O O O O O C The General PrOblem o o o o o o o o 0 Specific Problems and Proposed Solutions . . BIBLIOGRAPHY . . . . . . . . . . o . . o . 0 vii 112 122 134 139 140 144 148 155 165 239 239 247 253 INTRODUCTION AND STATEMENT OF THE PROBLEM INTRODUCTION East-West trade can be defined as the trade between communist and capitalist countries; as trade between countries with different political, ideological and economic systems. Private producers of market economies exchange commodities with state owned foreign trade monopolies and, occasionally, with individual firms of centrally planned economies.1 Both political and economic factors influence the trade flows between the countries of the two systems. During the heat of the "Cold War", in the late 1940's and early 1950's, the political factors were dominating East-West trade but, since the mid 1950's, economic factors are increasing in importance. Both business- men and central planners are, in the first place, interested in the gains from trade. After the Second WOrld War, the USSR rapidly gained military and economic strength. The expansion of the Soviet power in Eastern Europe and the Berlin Blockade created political tension between the two major world powers. In 1948, as a weapon in the Cold War, the United States decided to license her exports to the communist countries.2 Since 1948, export licenses have been refused for all "strategic materials", or materials of "indirect strategic" importance. The purpose of these measures was to slow down the USSR in the armament race and, in- directly, in her economic development. The "Export Control Law" of 1949 and the ”Mutual Defense Control Act" of 1951 (also called the "Battle Act") formed the legal framework within which the United States controlled her trade with communist countries.3 The United States' trade with Communist China, Cuba, North Korea and North Vietnam, was embargoed under the "Trade with the Ennemy Act".4 In 1949, as a consequence of the Berlin Blockade, the United States persuaded her European allies not to export "strategic materials" to communist countries. Members of NATO, in a Consult- ative Group (0.6.) and a Coordinating Committee (COCOM), established three separate lists restricting East-West trade: an embargo list, a quantitative control list and a surveillance list.5 The content of these lists was often changed, depending on the state of the Cold War, on the estimates made of the communist countries: changing vulnerability, and on the strength of the "laissez-faire" forces in the capitalist countries. Since the mid 1950's, the Western European countries have changed their position toward the strategic embargo. Lack of agree- ment on the "strategic importance" of the items to be included on the list caused frictions among the Western European countries and between these countries and the United States. Both the members of the European Economic Community (EEC) and the European Free Trade Association (EFTA) have expanded their trade with all communist countries and especially with the communist countries of Eastern Eu; rope.7 Although the embargo policy has inflicted a real cost upon the USSR and her allies, it is now clear that the USSR has been able to achieve a strong military posture and an acceleration in her economic development, in spite of the strategic embargo, and that the capitalist countries have lost profitable trade opportunities.8 It is now generally accepted that international economic relations between two different political and economic systems can bring all participating nations closer together. Orignially, East-West trade had not been reduced below its potential or natural level by the United States and her allies, but rather by the Soviet leaders. The foreign trade of the USSR with market economies fell considerably after the October Revolution in 1917.9 The Soviet leaders favored autarky for three reasons: first, to speed up, at any cost, a structural change in the economy in favor of industrialization; secondly, to avoid excessive dependence on imports of strategic materials from capitalist countries; and thirdly, to avoir that business cycles be transferred from the market economies to the centrally-planned economy, which was considered free of economic fluctuations. Stalin developed a theory of "parallel markets", in which he expressed the idea that he could undermine the economies of the capitalist countries by closing the markets of the communist countries to the exports of the capitalist producers.10 As a result of Sta- lin's policy, the imports of Western Europe from Eastern Europe in 1948 were merely 34% of their level in 1938, while in the same year, the imports of Eastern Europe from Western Europe only reached 42% of their level in 1938.11 After Stalin's death in 1953, the Soviet leaders recognized the need to trade with the market economies, and since the mid 1950's, trade between the centrally planned economies of Eastern Europe and the market economies of Western Europe have expanded at a faster rate than world trade.12 In addition to the reduction in political tension, there were several economic reasons for this change in Soviet policy. To take advantage of the technological gap between the advanced economies of Western Europe and the developing economies of Eastern Europe, and because of the central planners' preferences favoring industrial production, the Eastern European communist countries in- creased their imports, from Western Europe, of machinery embodying the latest technology. The communist countries are often interested in manufactured products imported from Western Europe and other capitalist countries rather than in similar products of the members of COMECON, because the products of the market economies are of better quality, higher technological parameters, more esthetic design, and are delivered more promptly than those of their partners in COMECON.13 Imports of Western products by communist countries are also important to balance the demand and the supply of scarce domestic resources. During the plan construction, the central planners either receive output targets and their relative priorities from the political authorities or they derive this information from the official speeches of the Soviet leaders. By means of the method of material balances, the planners then equate sources and uses of raw materials, intermediate and final products.14 To meet the targets in the high priority sectors, the planners can either re-channel resources from the "buffer sectors" to the high priority sectors or import resources. Exports are planned to maximize the amount of foreign exchange under the constraint that the resources employed in their production add less to the output in the priority sectors than the imports for which the exported products will be exchanged. Exports are considered a necessary evil and in years when the export earnings do not cover the expenditures on imports, the USSR exports gold instead. Gold is only exported because of the shear lack of exportables.15 Since the mid 1950's, the former "buffer sectors": agriculture, the consumer sector and residential construction, developed slowly into semi-priority sectors which placed upon imports more of the burden to balance sources and uses of materials, of machinery, of manufactured products and, in years of harvest failure, of agricultural products.16 Considering her wide resource base and the size of her domestic market, the USSR can more realistically adhere to a policy of autarky than the smaller communist countries of Eastern Europe, whose foreign trade sector ranges from 20% to 40% of gross national products, as compared with 3% to 4% in the USSR. Prior to the Second World War, the USSR had successfully practiced a policy of autarky, but in the early 1950's, she was forced to be the trading partner of the other members of COMECON. The smaller partners of COMECON exported machinery and manufactured products to the USSR in exchange for raw materials. They themselves needed Specialized machinery to achieve the ambitious targets in their own industrialization plans. Because of the weak- ness of the USSR as a trading partner for the other COMECON members, and because of other problems with economic integration in COMECON, both the USSR and the other communist countries of Eastern Europe were eager to expand trade with the capitalist economies and espec- ially with the Western European countries.17 Consequently, trade between the members of COMECON and Western Europe was expanding fast during the mid 1950's. At the same time, the idea of European economic integration was born in Western Europe. The United States, hoping to strengthen NATO, gave her support to any form of economic and political unification of the Western European countries. The USSR was especially concerned that the European economic integration, of which the EEC was the most advanced form, would change the balance of power in favor of the NATO members. Therefore, the first Soviet reaction to the formation of the EEC was extremely unfavorable.l8 The official statements of the communist ideologists and political leaders were mainly concerned with politics, ideology and strategy, and little was said about the economic effects of the EEC on the exports of the members of COME; CON.19 Western economists and EEC officials have made some state- ments on the economic effects of the EEC on East-West trade. Although these statements are not always supported by empirical studies, they give a preliminary idea of the problems involved and are a guide to design a method of analysis. In June 1962, Alec Nove, writing on "The USSR and the EEC" in The Spectator, gave the following statement: "The Soviet Union is against the Common Market,... Both political and economic grounds for opposition are very strong. The economic objections are pre- cisely the same, in principle, as those advanced by any country which is outside the proposed trading group... The Soviet Union too, will find it harder to sell its goods... The same is even more true of the other communist countries, almost all of whose exports are affected by competition from West European producers. This would be all the more awkward since the countries of the Soviet bloc are in urgent need of foreign currency to finance an ambitious import program." 20 Speaking in Brussels, on July 6, 1962, E. M. Bolasco, director of the division dealing with East European countries on the Common Market Executive Commission, declared: "In the economic field the Soviet Union has nothing to fear from the Common Market, since her exports to the latter are chiefly raw materials and duties on these commodities will be negligeable in the common external tariff that is being built around the Common Market. On the contrary, the People's Democracies which export mainly agricultural and industrial products, fear an adverse effect on their trade with the EEC countries." 21 In 1963, Stanislas Zdiechowski, writing on the "Impact of the Common Market on the Soviet Union", shared the fears of the communist countries of Eastern Europe that the EEC would adversely affect the exports of the COMECON partners to the Common Market. He expressed his opinion as follows: "This fear is justified, and based, not as in the case of the Soviet Union, on political factors, but on economic considerations. The agricultural policy of the Common Market, with its raising of tariffs on imports, is bound to hurt the East European countries, particularly Poland and Cze- choslovakia." 22 ‘ It is clear from the previous statements, that the exports of each communist country will be differently affected by the EEC and more specifically, one can expect that the exports of Poland and Czechoslovakia will be affected unfavorably, compared with the USSR's exports, because of the difference in the commodity mix of these countries' exports to the EEC. It will therefore be necessary to study the effects of the EEC, as a customs union, on the exports of each communist country of Eastern Europe separately. The total ex- ports will have to be broken down into several commodity groups, because differences in the export commodity mix of the communist countries explain why each country's exports are differently affected by the formation of the EEC. The importance of this inquiry can be deduced from Nove's statement and has also been clearly observed by J. P. de Cars.23 The communist countries of Eastern Europe need the industrial products and machinery of the EEC for their economic development. Therefore, a loss of export earnings in hard currency would reduce the import capacity of the Eastern European countries, which would slow down their economic development, make them more economically dependent on the USSR and the other members of COMECON, and create ill feelings against the Western European countries, particularly, the members of the EEC. The problem may even be bigger if the communist countries of Eastern Europe try to earn hard currency in other capitalist countries and realize that these countries have less liberal export policies than the EEC for machinery, in- dustrial products, and some raw materials such as copper. These adverse indirect effects of the EEC on the economic development of her European neighbors would have been regretable, especially during the last decade of peaceful coexistence in which some communist countries of Eastern Europe decided to loosen their political and economic ties with the USSR. STATEMENT OF THE PROBLEM: The importance of this inquiry into the effects of the EEC on her members' imports from the communist countries of Eastern Europe is explained in the introduction and relates to the economic and political independence of the communist countries of Eastern Europe vis-a-vis the USSR. It is not the purpose of this thesis to prove or disprove the theory of economic and political independence, but rather to measure the effects of the EEC on the exports of the communist countries of Eastern Europe. ’ Although the Treaty of Rome was signed in 1957, it was only in 1959 that the EEC was actually operative. The EEC is a further de- veloped form of economic integration than a customs union. In a customs union, the member countries agree to gradually reduce and finally eliminate the tariffs on each others' products, while they accept a common external tariff on their imports from all sxtgararea suppliers. In addition to free movement of commodities between the member countries, the EEC promotes free mobility of capital, labor and other resources. It is to be expected, therefore, that the creation of the EEC not only changed the internal and external lO tariffs of the members but also induced changes in relative prices of most commodities, changes in existing market structures, changes in the application of new technology, changes in profit wages and in interest rates. In general, one can say that the formation of the EEC caused major structural changes in the economies of the member countries. Most economic theories are based on partial equilibrium analysis and on the method of comparative statics. In partial equilibrium analysis one market or a sector of a larger model is studied separ- ately, assuming that the other parts of the economy are in equili- brium. With the method of comparative statics, the economist studies economic variables in a position of rest. He starts from a model representing a market or an economy in equilibrium, then assumes a change in a variable or parameter of the model, and sub- sequently studies the new position of rest which the variables have obtained. In this method, the economist does not trace the path of the variables from one equilibrium to another but studies only the initial and the final equilibrium positions as if no time was needed for the variables to reach this new position of rest. Most of the traditional theoretical models in price theory, the pure theory of trade and the theory of customs unions, are based on partial equi- librium analysis and on the method of comparative statics. The method of comparative statics is fully satisfactory to study the effect of the EEC on the economy of her members.24 However, one can say that the traditional partial equilibrium models are not well ll equiped to measure a major structural change in an economy such as the one caused in the economies of the member countries by the formation of the EEC.25 Ideally, a study of the total effect of the EEC, which in- cludes both static and dynamic effects, on her Extrgyarea suppliers, requires the knowledge of the structure of the economies of the member countries prior to and after the formation of the EEC. Under certain restrictive assumptions (or additional transformation) the change in the economic structure can then be attributed to the formation of the EEC. Finally, the effects of the structural change on the flows of the extgéfarea imports of the member countries can be computed. Representing the structure of an EEC country prior to 1958 by matrix A and the structure of the same country after 1958 by matrix B, one can then write that T A = B where T is a transformation, representing the structural change which occurred in this economy in the post-integration period, relative to the pre-integration period.26 Two questions must now be answered: 1. Is the transformation T unique? 2. (Assuming that T is unique) is the formation of the EEC the only structural change which occurred in 1958? The first question can be answered by changing the year which separates (dichotomizes) the periods for which the matrices A and B are being compared. It would be possible, for example, to verify 12 whether in the following relationships: TlAl - B1 where Al - before 1950 where B1 - after 1950 TZAZ = ”2 where A2 a before 1954 where B2 = after 1954 T3A3 = B3 where A3 = before 1962 where 33 = after 1962 T4A4 = B4 where A4 = before 1966 where B4 = after 1966 T1, -- , T4 are significantly different from T. If the transformator T is not significantly different from the other transformators, T1, -- , T4 , T cannot be called unique and it is impossible to assert that T measures the effect of the EEC. Although the uniqueness of T is a necessary condition in iipplying this general method, it is not a sufficient one. Trans- fkarmator T will measure the effect of the EEC only if, in addition tr) being unique in the above sense, it can be demonstrated that in 15958 (or a given period 1957-1959) the formation of the EEC was the £23111 major structural change which occurred in the economies of the weastern European countries which are members of the EEC.27 It is feasible to use input-output tables of the members of tile EEC to form matrices A and B, measuring the economic structure (3f these countries prior to and after the formation of the EEC. C11Ianges in their extra-area demand for imports can be measured in a Similar way. However, in order to test the uniqueness of the trans- 13 formator T, one needs several input-output matrices for each country to derive AlBl , AZBZ , A3B3 , and A4B4 for example. Input-output tables are not constructed at sufficiently short inter- vals to verify the uniqueness of T. However, if input-output tables were available at sufficiently short intervals it might be possible to find a trend in the transformators (L) for periods prior to the economic integration. If T is sufficiently different from T1’--’T4 and if L is known, one can form either T - L or LT such that: LT = T where Ta adj is the new adjusted transformator which J . dJ' has been derived from T by filtering out of T the long run structural changes L which slightly deformed the matrices representing the structures of the economies of the EEC prior to the integration. Tadj could then be called the net effect of the EEC, or the EBtructural change in the economies of the members caused by the ft>rmation of the EEC. However, if L cannot be formed because only two input-output tables are available, one for the pre-integration and one for the FNDst-integration period, then T cannot be tested for uniqueness. IIldeed, during the 1950's, US foreign aid affected Western European e'-<:onomic reconstruction and short-term indicative planning copied fI‘om the French and Dutch examples was adopted in most Common 1“larket countries after the formation of the EEC. In addition, the Eseneral convertibility of the currencies of the European countries OCcurred virtually simultaneously with the formation of the EEC. But even if L is formed and Ta can be constructed, then one (13' 14 has only fulfilled the necessary conditions for T8 to express the dj effect of the EEC. Indeed, it has to be demonstrated that the EEC was the only major structural change which occurred in the EEC countries in the late 1950's. It has previously been said that the convertibility of the currency was another structural change in the EEC countries which occurred in the same period as the formation of the EEC. If this method is chosen, and if data on the structures of the economies of the EEC countries are available to form A, B and T, but if the data are not available in sufficient close intervals to find L and therefore Ta then we cannot prove the uniqueness of dj’ the transformator T8 In that case, simplifying assumptions have dj' to be made concerning T. 1) that T is unique; 13) that the EEC is the only major structural change which occurred in 1958. This reduces to a large extent the attractiveness of input-output analysis as a powerfull tool to measure the effect of the EEC. Other methods, based on the same simplifying assump- tions namely, that the formation of the EEC is the most important or single cause of a structural change in the economies of the member countries, have substantial advantages to input-output Models: 1) they are simple 2) they require less data 3) they provide an opportunity to separate several different 15 effects of the EEC. However, they have the major shortcoming that they are based on par- tial economic analysis. Both the relative share model and the linear regression model which will be developed in this thesis (Chapter II) belong to this category of simple models. The major problems related to the study of the effect of the EEC on her members' imports from gxtggrarea suppliers have been out- lined. To find a satisfactory solution to the problem, a framework of analysis was developed. This framework includes a review of the theory of customs unions, an evaluation of early empirical studies, a presentation of a method to compute import figures in constant prices and finally, the presentation of two models measuring the effect of the EEC on her members' imports from extgararea suppliers. Since the second World War and especially since the mid 1950's, economists have created a theory of economic integration which has mainly developed into a theory of customs unions. Although the EEC is mainly a custom union, it should rather be considered a more ad- vanced form of economic integration. A review of the theory of customs unions will be presented in Chapter 1. Although the theory of customs unions is well developed, there exist few satisfactory models to measure empirically the effect of the EEC on her members' imports from an individual gxtggrarea supplier. The major problems encountered by the design of such models will be explained in the final part of Chapter I. 16 Because of lack of data, two simple models, a relative share model and a linear regression model, will be presented in Chapter II. The data, which were needed to estimate the parameters of the models were computed on the basis of the method explained in detail in appendix B. The empirical results of the relative share model are presented in Chapter III, while the results of the linear regression model are summarized in Chapter IV. A summary of the results, proposed modifications of the models and suggestions for further research are presented in Chapter V. 17 FOOTNOTES lJoseph Szabados, "Hungary's N. E. M.: Reorganization or Basic Reform7", East Europe, XVII, (June, 1968), 13-18. 2J. Wilczynski, "Strategic Embargo in Perspective", Soviet Studies, XIX (July, 1967), 74. U.S., Congress, Senate, East-West Trade, "Hearings before the Committee on Foreign Relation", U.S. Senate, Part I, March and April 1964 (Washington, 1964), p. 77. U.S., Congress, Select Committee on Export Control, Investigation and Study of the Administration Operation, and Enforcement of the Export Control Act of 1949 and Related Acts, (Washington, 1962) p. 9. U.S., Congress, world-Wide Enforcement of Strategic Trade Controls, Mutual Defense Assistance Control Act of 1951, (Washington, 1953) p. 1. 4Nicolas Spulber, "East-West Trade and the Paradoxes of the Strategic Embargo", International Trade and Central Planning, ed. Alan A. Brown and Egon Neuberger (Berkeley: University of Califor- nia Press, 1968), p. 110. 5Ibid., p. 108. 6For a breakdown of the list see: Robert Oakeshott, "The Strategic Embargo: An Obstacle to East-West Trade", The World Today, XIX (June, 1963), 243. 7J. Wilczynski, "Strategic Embargo in Perspective", Soviet Studies, XIX (July, 1967), 86. ' 8Robert L. Allen, "U.S. Policy Toward East-West Trade", East-West Trade, A Compilation of Views of Businessmen, Bankers, and Academic Experts, Committee on Foreign Relations, U.S. Senate, 88th Congress, 2nd Session (Washington, November 1964), p. 217. 18 9The following table gives an indication of the evolution of Soviet foreign trade since 1913. Quantity index of Soviet foreign trade, 1938 = 100 Year Q. index Year Q. index 1913 365.74 1936 142.59 1920 10.19 1937 132.41 1922 27.78 1938 100.00 1927 105.56 1946 128.00 1929 148.15 1950 278.00 1930 225.93 1955 500.00 1931 235.19 1958 692.00 1932 187.96 1959 870.00 1933 176.85 1934 169.45 1935 171.30 Source: Office Suisse d'Expansion Commerciale, Lausanne Rapport Special no. 43, Serie A, Avril 1944, "Le Commerce exte- rieur de 1'URSA", p. 1-94. 10J. Stalin, "Economic Problems of Socialism in the USSR", Bolshevik, XXIX (September, 1952), 1-50. 11United Nations, Economic Commission for Europe, Economic Bulletin for Europe, Vol. I, 1949, p. 27. 12This is naturally the result of the low level of East-West trade prior to 1953. 13Ota Sik, "On the Economic Problems in Czechoslovakia", U.S. Senate, Hearings, Subcommittee on Antitrust and Monopoly, 19th Congress, 2nd Session, 1969, p. 4515. 14J. M. Montias, "Planning with Material Balances in Soviet- Type Economies", American Economic Review, XLIX (December, 1959), 963-985. 15 Keith Bush, "Soviet Gold Production and Reserves Reconsidered", Soviet Studies, XVII (April, 1966), 490-493. Economic Bulletin for Europe, Geneva, no. 1, 1961, p. 29. 16A Round Table Discussion (A. Bergson, A. Ehrlich, H. S. Levine, G. W. Nutter, A. Wellisz), Soviet Economic Performance and Reform: Some Problems of Analysis and Prognosis, Slavic Review, XXV (June, 1966), 231. 19 17Czechoslovakia, for example, has been called the workshop of the USSR. ' Vaclav Holesovsky, "Planning Reforms in Czechoslovakia", Soviet Studies, XIX (April, 1968), 544-556. 18David F. P. Forte, "The Response of Soviet Foreign Policy to the Common Market, 1957-1963", Soviet Studies, XIX (January, 1968), 373-386. Bernard Dutoit, "L'Union Soviétique Face a l'Integration Eu- ropéenne", IIe Partie, L'ldéologie Soviétique et l'Intégration Eu- ropéenne, (Lausanne: Université de Lausanne, Centre de Recherches Europeennes, 1964). 19Ibid. 20Alec Nove, "The USSR and the EEC", Spectator, 208 (June, 1962), 744-745. 21E. M. Bolasco, The New York Times, July 7, 1962. 22Stanislas Zdziechowski, "The Impact of the Common Market on the Soviet Union", Studies on the Soviet Union, New Series, II, 4 (1963), p. 54. 23John P. de Gara, Trade Relations Between the Common Market and the Eastern Bloc, (Bruges: De Tempel, 1964), 60-61. 24Until recently, most models in the pure theory of international trade were static. In the last five years, however, several dynamic models have been developed. 5Walrasian general equilibrium analysis was a break with the old partial equilibrium approach in price theory. Modern general equilibrium analysis is the cornerstone of welfare economics. Leontief's input-output model is a form of general equilibrium analysis, which is well suited to study major structural changes in an economy such as the one caused by the formation of the EEC. W. Leontief, The Structure of the American Economy 1919-1939; an Empirical Application of Equilibrium Analysis, 2nd ed., New York, Oxford University Press, 1953. 26When A and B are square matrices of order n and if T is a linear transformation, than T is also a square matrix of order n. 7A variant of this method has been presented by J. Waelbroeck. Instead of considering changes in the structure of the economy of the EEC members, he measured whether the matrix of the EEC's imports from the rest of the world was significantly deformed in the post- 20 integration period relative to the pre-integration period. However, the uniqueness of this deformation was not established. I I - J. Waelbroeck, "Le Commerce de la Communaute Europeenne avec les Pays Tiers", in Integration Europeenne et Realité Economigue (Bruges, 1964), 139-164. CHAPTER I A BRIEF REVIEW OF THE THEORY OF CUSTOMS UNIONS, AND SOME EMPIR- ICAL STUDIES The Theory of Customs Unions The creation of a customs union causes a gradual reduction and final elimination of the tariffs between the members of the union and a unification in the external tariffs of the members vis-a-vis non-member countries, which is often an average of the existing tariffs of the member countries prior-to the formation of the union. Changes in relative prices cause substitution and in- come effects in consumption and production. In a member country, substitution takes place between the following categories of commodities: a) domestically produced and consumed products not entering foreign trade and exportables. b) between domestic exportables and the exportables of member countries. c) between the exportables of extra-area suppliers and domestic exportables. d) between the exportables of extra-area suppliers and the export- ables of member countries. Lipsey, for example, makes a distinction between inter-country 22 substitution and inter-commodity substitution. Historically, the literature in the pure theory of trade considers first, substitution in production and later, substitution in consumption. Substitution in production In his pioneer work, The Customs Union Issue, J. Viner demonstrated that in addition to the trade creating effects between the members of the union, the formulation of a customs union may cause a diversion of trade from low cost producers, outside the union, toward high cost producers inside the union. The overall effect on welfare, resulting from the re-allocation of resources is then the difference between the trade creating and trade diverting effects of the union.2 Viner‘s analysis implicitely assumes that commodities are consumed in some fixed proportion, which is in- dependent of the structure of relative prices.5 This assumption assures that the price elasticity for the demand of each product is zero. _§pbstitution in consumption A customs union, changing relative prices, may also be eXpected to lead to substitution between commodities in consumption, insofar as more of the cheaper goods and less of the more expensive goods will be bought. The importance of the substitution effect in Consumption has presumably been independently discovered by J. Meade, F. Gehrels and R. G. Lipsey.4 In his analysis of the consumption effect, J. Meade reversed Viner's assumptions. He assumed a fixed 23 pattern of production and hence a zero elasticity of supply. Substitution in Consumption and Production Vanek developed a simplified general equilibrium model, represented by an offer curve analysis, to demonstrate the effects of a customs union. He assumes both production and consumption to be variable and constructs excess offer curves for the two countries forming the union.5 This method shows also the effects of a customs union on the terms of trade. The static effects of a customs union can best be analyzed in a general equilibrium model. R. G. Lipsey and K. Lancaster studied the static effects of a customs union as an illustration of the general theory of the second best.6 The previous review is related to the static effects of a customs union, which include: trade creating, trade diverting and terms of trade effects. In addition to static effects, a customs union has also dynamic effects. The dynamic effects may be either in production, in consumption, or in both. Most dynamic effects of a customs union relate to the widening of the market for the pro- ducers in the member countries. Both internal and external economies will be created. Some production techniques, fully automated equipment, better trained managers, high-quality technical personnel and expenditures on research and development are only profitable and hence feasible, if the firm can reach a minimum scale of operations, which is determined by the size of the market. It is therefore that a widen- 24 ing of the market of the firms in the smaller countries of the EEC is a necessary condition for the realization of internal economies. To circumvent the EEC's external tariff wall, some U.S. corporations have built new plants in the EEC countries.7 These firms operate under advanced U.S. technology and modern managerial practices. The U.S. firms competed ( and in some cases still compete ) with smaller sized, privately owned European firms. This competition has stimulated a reorganization of the smaller firms into larger scale operations, under professional management and operating with outside capital. Although many cartels were formed, competition between the large corporations has increased. Both Scitowsky and Balassa predicted that a customs union would promote competition.8 A common market is more than a customs union, because capital and labor can move freely from one member of the union to another. Capital markets have been strengthened and labor shortages avoided by labor migration, Which are external economies accruing to firms in the common market. Both increased competition and free factor movements have enhanced the realization of an optimum allocation of resources. Large corporations, in an oligopolistic market, do not so much compete in the market by undercutting their rivals' prices, but rather by means of product diversification, the production of new products as a result of their expenditures on research and development and, especially, by means of advertising.9 Consequently, 25 dynamic changes in consumption occur simultaneously with dynamic changes in production as artificial needs will be created, potential needs activated, and old tastes modified. Another important factor which will create expansionary policies of enterprises is the reduction in uncertainty. Joint policies on duties, tariffs and quotas between all members stimulate certainty by exporters concerning the availability of the market of the members in the union. Joint action between governments on eco- nomic research, indicative planning and policies to stimulate business activities, all reduce the uncertainty of the businessmen about regular inflows of future net earnings. These dynamic changes will increase real income and output and cause secondary changes in relative prices; in addition there will be autonomous changes in relative prices, which would have occurred even if the union had not been created. It is virtually impossible to separate the primary induced changes in relative prices, caused by the changes in tariffs, from the secondary changes in relative prices, caused by dynamic effects, and it is even more difficult to separate the previous two types of changes in relative prices from the autonomous ones. Presentday economic theory is not well equipped to deal with the dynamic effects of a customs union. To my knowledge, the best theoretic analysis is based on Harry Johnson's article: "Economic Expansion and International Trade".10 Because dynamic effects may stimulate growth of output and real income in the economies of the 26 members of the union, it is necessary to inquire whether this growth is pro- or anti-trade biased, in order to determine the dynamic effects of a customs union on the trade flows among the members and between the members of the union and non-members. This problem can be resolved by comparing the output elasticity of supply of export- ables with the output elasticity of the demand for exportables.11 The effects of growth on the demand side are considered neutral, if the output-elasticity of the demand for exportables (E ) equals one. DQ Similarly, growth is pro-trade biased if EDQ)'1, and anti-trade biased if EDQ< l. The production effects of economic goowth are neutral if the output elasticity of supply (ESQ) equals one, while growth is pro-trade biased if ESQ<'1 and anti-trade biased if ESQ7 1. Both elasticities have to be considered jointly to determine the final effect of growth on international trade.12 Empirical Studies 0n the basis of these theories, several empirical studies have been conducted to actually measure the effects of the EEC. Most researchers have been interested in the static effects, although attempts have been made to measure the dynamic effects.13 The models, measuring the static effects, can be divided in ex-ante and ex-post models. There are two types of ex-ante models: first, those which were built before the EEC was Operative but with the aim to predict the effects of the EEC after the union was actually established; and secondly, the models contracted after the EEC was actually operative but with the aim to predict the future effects of the European Common Market. P. J. Verdoorn's model belongs to the first category of ex-ante models, while the models 27 of L. H. Janssen, L. B. Krause and W. S. Salant are ex-ante studies, published after the EEC was operative.14 In these models the authors had to solve two problems: first, to estimate the imports of the EEC countries, under the assumption that the EEC had not been established and, secondly, to estimate the EEC's imports, under the assumption that the EEC was operative. The ex-post models, on the contrary, cover a period in which the EEC was actually operative. The major problem in the ex-post models is to estimate imports of the EEC countries after the EEC was actually established, but under the assumption that the EEC had never been formed. The effect of the EEC is then the difference between the estimated imports of the member countries under the assumed absence of integration and their actual imports in the same year or period. The ideal way to estimate the members' imports, under assumed absence of integration, is to select a group of countries, not in- cluded in the customs union, which had an identical economic structure in a given period prior-to the formation of the union. More specifically, this group of countries should have in common with the EEC countries the following characteristics: a) the same size and growth of the population (same labor force and market size). b) the same geographical cohesiveness. c) located in the immediate neighborhood of the members of the EEC. d) the same degree of dependability on foreign trade. e) the same infrastructure (banking system, legal system, etc...). 28 To summarize, the group of countries must be acceptable as a control group. In this control group, no major structural changes may occur after the customs union is formed in the other group of countries. After the formation of the customs union the differences in her imports and the imports of the control group are a measure of the effects of the union. Unfortunately, no group of countries in the neighborhood of the EEC has an economic structure which meets the requirements to qualify as a control group. The EFTA countries are a geographically heterogeneous group, while the EEC countries are clustered in the same geographical area. In addition, the EFTA countries will have experienced an EFTA effect, which disqualifies them as an untreated control group. In spite of these problems, Verdoorn and Meyer zu Schlochtern explained inter-commodity substi- tution in the imports of the EEC on the basis of three explanatory variables: the weighted average of internal and external tariff changes and an index of effective import demand. This index has been computed as an unweighted rate of change of imports in the United Kingdom, Sweden, Denmark and Switzerland, and supposedly represents the expansion of trade which would take place in the EEC countries in the absence of integration.15 J. Waelbroeck calculated the hypothetical imports of the EEC by extrapolating the world trade matrix of an earlier year (prior to the integration), under the assumption that the structure of world trade has remained unchanged.16 Based on a method measuring changes in input-output matrixes as an indication of structural 29 changes in the economy of a country, Waelbroeck finds that the EEC indeed has caused the deformation of the trade matrix, but he cannot conclude whether this deformation indicates either trade diversion or creation.l7 Waelbroeck later includes gross national product and geographical distances in his model and concludes that intra-area trade creation is substantial, while there is no evidence of extra- area trade diversion.18 However, this method only considers total imports and, therefore, hides possible effects of the EEC on individual commodity groups and hence on specific suppliers of these commodities. The average income elasticities of the demand for imports and exports are calculated on the basis of cross-section data from all trading partners of the EEC. Income elasticities of import and export demand for agricultural products are mostly smaller than those for manufactured products. Insofar that the EEC has a sectoral distribution (percentage of agriculture, manufactures and services in gross national products), which is different from that of her trading partners, the estimated income elasticities of the demand for imports and exports of the EEC, calculated on the basis of cross-section data, will be biased.19 In the following Chapter, I will present two models to measure the effect of the EEC on her extra-area suppliers. 30 FOOTNOTES 1The term exportables has been introduced in the international trade literature by J. Bhagwhati and indicates all commodities which enter international trade. 2Jacob Viner, The Customs Union Issue (New York: Carnegie Endowment for International Peace, 1950), pp. 43-44. 3R. G. Lipsey, "The Theory of Customs Unions: A general Survey", Economic Journal, LXX (September, 1960) 496-513. 4J. E. Meade, The Theory of Customs Unions (Amsterdam: North Holland Publishing Co., 1955) pp. 44-52. - F. Gehrels, "Customs Unions from a Single Country Viewpoint", Review of Economic Studies, XXIV, no. 63, (1956-1957), 61-64. - R. G. Lipsey, "The Theory of Customs Unions: Trade Diver- sion and Welfare”, Economica, XXIV (February, 1957), 40-46. 5J. Vanek, International Trade: Theory and Economic Policy (Homewood, Illinois: R.D. Irwin, 1962), pp. 346-359. 6R. G. Lipsey and K. J. Lancaster, "The General Theory of the Second Best", Review of Economic Studies, XXIV, no. 63, (1956-1957), 11-32, in particular pp. 18-21. 7Bela Balassa, Trade Liberalization Among Industrial Countries, Objectives and Alternatives, (New York: McGraw-Hill Book Company, 1967), p. 125. 8Bela Balassa, The Theory of Economic Integration, (Homewood, Illinois: R.D. Irwin, 1961), pp. 164-165. - Tibor Scitovsky, Economic Theory and Western European In- tegration (Stanford, California: Stanford University Press, 1958), pp 0 19‘48 0 9K. J. Cohen and R. M. Cyert, The Theory of the Firm, (Englewood Cliffs, N.J.: Prentice-Hall, 1965), pp. 256-258. - Nicolas Kaldor, "Economic Effects of Advertising on Selective Demand", Review of Economic Studies (1950-1951), 13. 31 0Harry G. Johnson, “Economic Expansion and International Trade", in: International Trade and Economic Growth: Studies in Pure Theory (London, 1958), p. 65. 11G. M. Meier, International Trade and Development (New York, Harper and Row, 1963), p. 33. 12A synthesis is given in: M.O. Clement, et a1, Theoretical Issues in International Economics (Boston: Houghton Mifflin Company, 1967), pp. 153-155. 13E. Thorbecke, "Problems of Regional Integration, European Integration and the Pattern of World Trade", American Economic Review, Papers and Proceedings, LIII (May, 1963), 173. 14P. J. Verdoorn, "A Customs Union for Western Europe - Advantages and Feasibility", world Politics, (July, 1954) 482-500. - L. H. Janssen, Free Trade, Protection and Customs Union (Leiden: H. E. Stenfert Kroese, 1961) 1-139. - L. B. Krausse, "European Economic Integration and the United States", American Economic Review, Papers and Proceedings, LIII (May, 1963), 185-196. - W. S. Salant, The United States Balance of Payments in 1968 (Washington: The Brookings Institution, 1963), 95-118. 15P. J. Verdoorn and F. J. M. Meyer zu Schmdchtern, "Trade Creation and Trade Diversion in the Common Market", Integration Europeenne et Realite Economique, (Bruges, 1964), 59-137. l6J. Waelbroeck, ”Le/Commerce de la Communauté'Epropeenne avec les Pays Tiers", Integration Europeenne et Realite Economique (Bruges, 1964), pp. 139-164, in particular pp. 160-163. 17J. Waelbroeck, op. cit., p. 157. 181f Waelbroeck's study is repeated for the period 1954-1958, the same deformation of the world trade matrix is observed, which indicates that his method does not provide a clear indication of the trade expanding or trade diverting effects of the EEC. 9For a further evaluation of Verdoorn and Meyer zu Schloch- tern's work on "Trade Creation and Trade Diversion in the Common Market, see: B. Balassa, "Trade Creation and Trade Diversion in the EuroPean Common Market", The Economic Journal, LXXVII (March, 1967 , 4-5. CHAPTER II TWO MODELS MEASURING THE EFFECT OF EEC ON HER EXTRA-AREA SUPPLIERS The Relative Share Model In 1963, B. Balassa suggested that, under ceteris paribus assumptions, trade diversion and creation can be measured by the differences in the income elasticities of the demand for imports for a period prior to and after the formation of a customs union. An increase in the income elasticity of the demand for imports, after the formation of the union, is an indication of trade creation while a fall in this elasticity is an indication of trade diversion. Some ceteris paribus assumptions are crucial and therefore will be made explicit: 1) no autonomous change in relative prices 2) no changes in exchange rates 3) no changes in trade flows, caused by the dynamic effects of a customs union.1 Under these restrictive assumptions, the change in the tariff structure, resulting from the formation of the customs union, and the elimination or creation of other barriers to trade, are the only factors altering the income elasticities of the demand for imports. Because this model is only concerned with gxtEE-area trade creation and diversion, I will only consider changes in the EEC's 33 income elasticities of'gxtggyarea imports'pgig£_to and after her formation. Extra-area trade creation is also known in the trade literature as trade expansion, while extgéfarea trade diversion is trade diversion in the Vinerian sense. The income elasticities of the demand for extra-area imports of the EEC will be calculated for several periods 2£22£.t° and after the formation of the EEC. The periods chosen are: prior to the after the actual actual working working of the of the EEC EEC 1951-1959 1959-1967 1952-1959 1959-1966 1 1953-1959 1959-1965 1954-1959 1959-1964 The elasticities will be calculated as the ratios of the average annual percentage change in imports of the EEC from all extgg-area suppliers over the average annual percentage change in GNP.2 Four effects explaining the influence of the EEC on her gxtgg-area imports will be derived, namely: a Common Market effect, a competitive effect, a price effect and a total effect.3 The Common Market effect is an estimate of gxtgg-area trade creation or diversion, depending on whether it is positive or negative. This effect is derived as the algebraic difference between two estimates of imports into the EEC from a specific country. The first estimate of imports of the EEC from an gxtgg-area supplier is derived under the assumption that no customs union is established. This estimate is derived by applying an adjusted growth rate of imports, from all extra-area suppliers of the EEC, 34 for a given period prior to the formation of the EEC, to the actual value of the EEC's imports from this specific Exppg-area supplier in a given base year. I have chosen 1959 as base year because this was the first year the EEC became operative.4 An alternative choice of base is the average value of imports of the EEC from a specific Expgg-area supplier for the period 1958-1960. This alternative base period has been proposed because the value of the EEC's imports in 1959, from a specific gxggg-area supplier, may be unusually high or low and, therefore, if chosen as base for the projections of imports in later years, may yield over- or underestimates of imports.5 The adjusted growth rates of gxppg-area imports of all suppliers, for a period prior to the formation of the EEC, are also formed under the assumption that no customs union was established. Indeed, this last assumption, together with the ceteris paribus assumptions, assures that no change in the income elasticity of the demand for ‘gxppg-area imports will take place in periods prior to and after the formation of the EEC. It also means that, whenever the average annual growth rate of income of the EEC for a given period after her formation is different from the average annual rate achieved prior to her formation, the average annual growth rate of Expgg-area imports for the period prior to the formation of the EEC will have to be adjusted in order to keep a constant income elasticity of the demand for imports prior to and after the year the union was actual- 6 ly established. The second estimate of imports of the EEC is derived under the 35 assumption that the EEC was operative. Its purpose is to estimate the EEC's imports from a specific gxggg-area supplier on the basis of the actual average annual growth rate of ggpgg-area imports from gfll_£§£Eg-area suppliers for a given period after the formation of the EEC. Both estimates will be calculated in constant prices of 1959 and in exchange rates of 1959. The difference between these two estimates of the EEC's imports is the Common Market effect; it indicates the amount of trade diversion or creation, which is "most likely" to affect an individual supplier, calculated on the basis of the performance of the "average" supplier of the EEC.7 However, there is no assurance that, in reality, either this specific ggppp-area supplier will have gained this predicted amount of trade creation, or that he will have suffered from the predicted amount of trade diversion. The answer to the problem can be found in the competitive effect, which indicates whether, in a given year, the specific 33333- area supplier has exported more or less to the EEC than predicted on the basis of the performance of the "average" ggpgg-area supplier of the EEC. The competitive effect is measured by the difference between the actual imports of the EEC from this supplier (in a given year at 1959 prices and exchange rates) and the second estimated value of the EEC's imports from the same supplier. The price effect is measured by the difference between the imports of the EEC from the specific gxppg-area supplier in current prices and the same imports in constant prices of 1959. The price 36 effect indicates an additional gain or loss realized by the gxppg- area supplier and also includes changes in exchanges rates between the national currencies of the EEC countries and the U.S. dollar. The total effect is the algebraic sum of the Common Market effect, the competitive effect and the price effect. These effects will be studied not only for total imports, but also for food, raw materials, chemicals, fuels, machinery, transport equipment and 8 manufactures. Graphical representation of the relative share model Expgple: The effects of the EEC on her raw material imports from the USSR, in 1967. Explanation of the variables: M1959 are the raw material imports of the EEC from the USSR in 1959 prices and 1959 exchange rates. M11967 18 the first estimated value of raw material imports of the EEC in 1967 from the USSR, derived as follows: 7 1 adj (1 + r1) = M 1967, where r1 3 (a!) M1959 M 1951-59 is the adjusted average annual growth rate of raw material imports of the EEC from all extra-area suppliers for the period 1951-1959. M 1967 is the second estimated value of raw material imports of the EEC in 1967 from the USSR, derived as follows: 7 2 M (l + r ) a M where r :- AM 1959 2 1967, 2 (M )1959_6, is the average annual growth rate of raw material imports 37 of the EEC from glluggpgg-area suppliers for the period 1959-1967. “1967’ in 1959 p., is the value of the EEC's raw material imports from the USSR in 1967, in 1959 prices. M1967, in 1967 p., is the value of the EEC's raw material imports from the USSR in 1967, in 1967 prices. C.M.E. is the Common Market effect. 2 l C.M.E. a M 1967 - M 1967 Comp.E. is the Competitive effect. 2 0°“P' 5' ' M1967 in 1959 p. ' M 1967 P.E. is the price effect. P.E. 8 M1967 in 1967 p. M1967 in 1959 p. T.E. is the total effect. 1 M1967 in 1967 p. ' H 1967 TOE. B = COMOE. + Comp.E. + P.E. The empirical results of this model will be presented in Chapter III. In appendix A, I have presented the actual computation of the relative share model under the assumption that both the imports in 1959 and the average value of imports between 1958-1960 are chosen as base values for the projections. Figure 2.1: 38 The Effect of the EEC on her Raw Material Imports from the USSR in 1967. n 'n \,060$A 2,63,2'15 4» M.:: m 67 p. . ' 11%} “53"" W64 tn 59 e. - L’M'EK‘LE. A9. J ‘81’8829 air-“H6" [a ’l ,’ one. / I / ‘ 6 5 1 ‘ I o L) I52 ) 196,1 / / /’/ I / i I I ’ urn). was We: 3%3 mes n%'1 39 The Linear Regression Model, Explainingrthe Demand for Imports of the EEC from the Communist Countries of Eastern Europe. In the discussion of the relative share model, I stressed the advantages of the model relative to previous empirical studies. In spite of these advantages, the relative share model has some limitations. Indeed, the elimination of internal tariffs, the changes in external tariffs and the resulting changes in relative prices, causing inter-commodity and inter-country substitution, are implicitely measured by a "global income effect". The following simple linear regression model, explaining the demand for imports of the EEC from the communist countries of Eastern Europe on the basis of yearly data, will correct some problems of the relative share model, but it creates some econometric problems that cannot easily be solved.9 Structural changes in an economy are reflected in changes in the structural parameters of a model. Because the formation of the EEC m ay be considered the most important structural change occuring in the partner countries since 1958 (actually 1959), I decided to measure the effect of the EEC on a specific ggppp-area supplier, by studying the change in the parameters of a linear model explaining the EEC's imports from that'ggppgrarea supplier. The variables which will be included are: 40 M a imports of the EEC in constant prices and constant exchange rates of 1959, representing the quantity variable which is expressed as an index where 1959 a 100. Y a GNP of the EEC countries in 1959 prices and exchange rates. Income is expressed as a percentage value index, 1959 . 100. P = Domestic price index of the EEC. 1959 a 100 (GNP deflator) PM 2 Import prices of the EEC, computed as Z 1’8: 2E:P0Qi X n Dummy variable a 0 for the years prior to 1959 a 1 for the years since 1959 (including 1959, the first year the EEC was operational) First, I will estimate imports in the EEC as a function of income and relative prices. P = a" P1) Secondly, I included the dummy variable and derived the following 41 equation: (22)M =B+BX+BY+BXY+BPM+BXPM+ ° 51-67 0 2 3 4 5— 6'13- D D For the period prior to the EEC, X = 0 and the equation will be: (2 3) M = B + B Y + B PM + m ' 51-58 0 3 5— D For the period after the EEC was formed, X = l and the equation is: P (2.4) M59-67 = (BC + B1) + (B2 + B3) Y + (B4 + BS)._§. + n PD The dummy variable is here included to measure the effect of a structural change, namely the formation of the EEC on her partners' imports. This method of dummy variables permits to separate shifts in slopes and intercepts of a linear model. The significance of these shifts can be tested by means of an F test. Indeed, the E881 (error sum of squares) of the regression with dummy variables will always be at least equal or smaller than the E882 of the regression model without dummy variables. The ESS2 belongs to equation 2.1 and the E381 belongs to equation 2.2. If the EEC had not been introduced, such a dichotomy of the period 1951-1967 into two sub-periods, 1951- 1958 and 1959-1967 would yield an ESS approximately equal to E882, 1 and an F test would reveal that the explanatory variables did not significantly explain more of the variation in imports by introducing dummy variables. But, because the EEC has been made operative since 1959, such a dichotomy of the period 1951-1967 will normally make 42 E881 smaller than E882, whenever the EEC has had an effect on the imports of her partners. The F test will then reveal that ESS1 is smaller than ESS2 at a certain level of significance. If the F test is significant at the 5% level of confidence, I will accept that the EEC had an effect on a specific sgfiggfarea supplier. Whether this effect is trade creating or diverting will depend on the sign of the differences between two estimates of imports. This last test can be performed by first computing the estimated value of imports M2 on the basis of equation 2.3 and the value of income and relative prices in each year between 1959 and 1967. Secondly, one computes M1 on the basis of equation 2.4 and the values of income and relative prices in each year between 1959 and 1967. The difference for each year between M1 - M2 will then be computed and added over all years. If the sum of the differences i (M1: - M2) is negative, I 1 5 1 i will call the effect of the EEC trade diverting. If this sum is positive, I will call the effect trade creating. In spite of the shortcomings of the model, as explained in footnote nine, it gives the opportunity to answer the following important questions: 1) does this portion of East-West trade respond to economic factors? 2) are the imports of the EEC from the communist countries of Eastern EurOpe rather incOme or price elastic? 3) do relative prices play a more important role in the 1960's than in the 1950's? The answer to this question often indicates 43 whether this part of East-West trade responds more to economic factors in the 1960‘s than during the 1950's. 4) most important of all, one can answer the question whether the EEC had an gxgpp-area trade expanding or diverting effect and whether the conclusions of the relative share model are supported. In this Chapter, two models have been discussed to measure the effect of the EEC on her members' gxppp-area imports. Both models have their advantages and their weaknesses. The relative share model, however, is especially simple and operational even if the data are not free of errors. In Chapter IV, I will present a selection of empirical results based on the linear regression model. The results based on the relative share model are presented in the following chapter. 44 FOOTNOTES 1 - Thorbecke found that the dynamic effects of integration favor imports of fuels, minerals and basic metals but are likely to be negative for foodstuffs as a whole. - E. Thorbecke, "Problems of Regional Integration, European Integration and the Pattern of Wbrld Trade", American Economic Review, Papers and Proceedings, LIII, no. 2 (March, 1963), 173. - Balassa gives the impression that the dynamic effects of the EEC may be rather limited. - Bela Balassa, "The Future of Common Market Imports", Weltwirtschaftliches Archiv, (Hamburgh, 1963) Band 90, Heft 2, 306-308. - The estimates of extra-area trade creation and diversion obtained by comparing ex-post income elasticities of extra-area import demand for the period after the formation of the union with those obtained for the periOd prior to its formation will be biased either- upwards or downwards depending on whether the dynamic effects of the union stimulated pro- and anti-trade biased growth. 2The income elasticities of the demand for imports have been calculated on the basis of growth rates of extra-area imports of the EEC at constant prices of 1959 and exchange rates of 1959, while GNP of the EEC is a proxy for the income variable and is measured in 1958 prices and 1958 exchange rates. The extra-area imports of the EEC have been transfered from current prices to constant prices by multiplying unit values of 1959 with the quantities of all other years. This has been done on a.commodity-by-commodity basis (three- digit S.I.T.C.) and on a country-by-country basis. The same method was chosen to calculate the value of the EEC's imports from the communist countries of Eastern EurOpe in constant prices. This method is‘explained in more detail in Appendix B . 3Bela Balassa, "Trade Creation and Trade Diversion in the European Common Market", The Economic Journal, LXXVII (March, 1967), p. 11. 4The actual operation of the EEC began in 1959, even though the Treaty of Rome was signed on March 24, 1957. 5The choice of base year (1959) may also influence the estimates considerably. Exceptionally high values of imports for 1959 will yield over-estimates of the Common Market effect, but under-estimates of the competitive effect, while extremely low values of imports in 45 1959 will yield under-estimates for the Common Market effect and over-estimates of the competitive effect. I have tried to correct this weakness in the method by taking as base both the value of imports of the EEC in 1959 and an average value of imports for the period 1958-1960. 6This is achieved as follows: Given C; as the average annual growth rate of imports between M51_59 1951-1959. erI as the average annual growth rate of income between Y51_59 1951 and 1959. ATM, as the average annual growth rate of imports between M59-67 1959 and 1967. ATY' as the average annual growth rate of income between Y59-67 1959 and 1967. adj Ki [Pi Then M59.67 = M59.437 K? E? Y59.67 Y51.59 adj AJi is the average annual adjusted growth rate included M59-67 in the computations of the model. 7The performance of the "average" supplier is measured by the imports of the EEC of all extra-area suppliers. 8The coverage of the commodity groups is defined in Appendix EL 9This model is plagued with several serious econometric problems: ‘multicollinearity between the independent variables, errors in the dependent variable and an identification problem. The most important problem is multicollinearity between the independent variables. Value indexes of income in constant prices and domestic price indexes in the EEC are highly correlated. In addition, some import price indexes are also highly correlated with income in the EEC, be it only accidental.- Consequently, relative prices PM (import price index, divided by domestic price index) PD 46 are highly correlated with income, causing multicollinearity between the independent variables of my linear model. Including dummy variables worsens this problem because part of the crossproduct terms X.Y and X‘sy' will be highly correlated with Y and X. The problem P D can be recognized by testing whether BY :11 is nearly one. It is P D not necessary to consider the case of perfect multicollinearity because it is unlikely that this model would be plagued with it. The more important case is that where "some" multicollinearity is present. The consequences of multicollinearity are that OLS still give unbiased estimators of the parameters, but the variances and co-variances of the estimators become large, the coefficient of determination is unusually high and finally, small changes in observations in the sample may change the sign of the estimators contrary to the one expected on the basis of economic theory. The SEE (standard error of estimate) is still correctly estimates. If the correlation continues to exist in the future, predictions will be unbiased. However, if one uses such a model to understand the structural relationship between dependent and independent variables, it will be rather disappointing because of the large standard errors of the estimators. There are many cures for multicollinearity. The solutions can be stated briefly: a) Use cross-section data to estimate some of the parameters (also called outside information). No such information is available to me. b) Use first differences. However, the major objection to this solution is that one introduces auto-regression. I transformed my data to percentage changes. c) Increase the sample size. This is important if multicollinearity is not in the population but only in some samples. Increasing the size of my sample was not possible because of the shortness of the time series. d) Use outside information; for example, estimate some parameters from other samples of the same population. This was not feasible. e) Exclude one variable which is highly correlated with the other variable. I have tried this with little success. If the method of deletion is followed, B1, estimated by OLS (ordinary least squares) is no longer unbiased. It would also have reduced the linear regression model to a variant of the relative share model. f) Finally, a solution which is suggested by some econometricians in cases of "moderate" multicollinearity is to "accept it and 47 live with it". However, this cannot be called a real solution. On the basis of this review of the literature on multicollinearity, I conclude that, although the estimates of the parameters derived from OLS are not biased, their standard errors may become extremely large and one is often inclined to reject the estimates on the basis that they are not significant at a 5% level of confidence. I will not reject the estimated values of my parameters for this reason even if they are not statistically significant at 5%. The main reason why I have decided to accept the results is that this problem is inherent in many foreign trade models and, because of lack of out- side information it cannot be properly corrected. A second reason, not less important, is that in East-West trade studies, the majority of statements are based either on institutional studies or "educated guesses". East-West trade is indeed affected by many non-economic factors, and one should be satisfied to find that this form of international trade also responds to economic variables. There is an urgent need for quantitative studies in this area even if perfection cannot be achieved. A third reason is that I will be especially concerned with the sign of the algebraic sum of differences of estimated and predicted values of the EEC's imports from a specific extra-area supplier rather than with the absolute magnitude. This argument related to my second test in this model. The second problem with this model is that there are errors in the dependent variable. Under certain conditions, this is not so much of a problem. Indeed, if the errors are only in the dependent variable, and if they are not correlated with the true values, their presence tends to lower the correlation and to in- crease the standard error of estimate, but it does not tend to change the slope of the regression line from the true slope for the universe. Unfortunately, the errors may be somewhat negatively correlated with the absolute size of the import data, as explained in Appendix B. I do not know whether there are measuring errors in the relative price variable, but it is clear that this variable is only a proxy for the variable indicated by economic theory. It may, therefore, be necessary to assume some degree of error in one of the indepen- dent variables. This would tend to bias the estimator downwards (towards zero). None of the three solutions to correct errors in variables, namely: the classical approach, groupings of observations or the use of instrumental variables has been applied. Finally, the model measuring the EEC's demand for extra-area imports consists of a single equation. This equation represents the price - quantity relationship and a demand shifter, namely in- come. A single equation demand model is not a complete model and the demand equation is not exactly identified, which could lead to the estimation of a supply curve, a demand curve, or a combination of both. The problem leads to the "simultaneous equation bias". The solution is to write out the complete model, namely both the demand and supply functions, where the quantity of goods offered is a function of relative prices and an "appropriate supply shifter" 48 (which is different from the demand shifter). This would make the complete model and hence the demand equation exactly identified bee cause both the necessary and sufficient conditions for identification of the complete model would be fulfilled. Both equations can then be jointly estimated. The problem in international trade models is to find the appropriate supply shifter. An example of a supply shifter for the world supply of a specific commodity or group of commodities is the weighted average of labor costs for all suppliers or a group of dominant suppliers. If only a trade model between two market economies is studies, it is sometimes feasible to find a supply shifter for the exporting country. In my model, it was impossible to find the appropriate supply shifter. I experimented with two supply shifters for each communist country of Eastern Europe, namely: "labor costs" and "the need for foreign reserves". In communist countries, foreign trade is conducted by foreign trade monopolies. Export prices are not related to labor costs because of the existing subsidies paid out of the budget or because of taxes paid into the budget that equalize domestic prices with the prices prevailing on the world market. Exports are planned centrally and labor costs do not play a major role in deciding which commodity will be exported and in what quantity. The "labor cost" variable was completely insignificant, even at a 20% level of confidence. Since East-West trade is considered to be mainly bilateral, I assumed that exports might be the only means to pay for imports. Therefore, I chose the value of imports of the USSR, first from the EEC and later from all market economies, as a supply shifter. Both these variables, introduced in separate models, were insign- ificant, even at a 20% level of confidence. This can be explained by the fact that some communist countries of Eastern Europe have large balance of payments deficits with the EEC and even with the world as a whole, while others have balance of payments surplusses. In addition; some communist countries of Eastern Europe, in particular the USSR, have paid in gold for their imports in excess of their maximum export earnings. Because East-West trade is not purely bilateral, the variable "value of imports" is not a success- ful supply shifter. I have finally decided to estimate the single equation model, representing the demand for imports of the EEC from each communist country of Eastern EurOpe. A brief survey_on the effects of Multicollinearity: - A. S. Goldberger, Econometric Theory, (New York: John Wiley and Sons, Inc., 1964), 192-194. - J. Johnston, Econometric Methods (New York: McGraw-Hill, 1960), 201-207. - E. Malinvaud, Statistical Methods of Econometrics (Chicago: Rand McNally and Co., 1966), 187-192. 49 - J. Tobin, "A Statistical Demand Function for Food in the U.S.A.", Journal of the Royal Statistical Society, Series A, vol. 113 (1950), 113-141. - J. Meyer and E. Kuh, "How Extraneous are Extraneous Estimates?" Review of Economics and Statistics, Vol. 39, (November, 1957) 380-393. - M. Ezekiel and K. A. Fox, Methods of Correlation and Regression Analysis (New York: John Wiley and Sons, Inc., 1959), 312. The effect of errors in variables: - J. Johnston, Econometric Methods (New York: McGraw-Hill, 1960), 148-175. - E. Malinvaud, Statistical Methods of Econometrics (Chicago: Rand McNally and Co., 1966), 326-363. - A. S. Goldberger, Econometric Theogy (New York: John Wiley and Sons, Inc., 1964), 282-287. - M. C. Kendall and A. Stuart, The Advanced Theogy of Statistics (London: Griffin, 1961), Vol. 2, Chap. 29. - M. Halperin, "Fitting of Straight Lines and Prediction When Both Variables are Subject to Error", Journal of the American Statistical Association, LVI, no. 295 (September 1961), 657-669. The identification problem: - A simple explanation of the identification problem is given by: Ronald L. Teigen, "The Demand for and the Supply of Money", in:— Warren Smith and Ronald L. Teigen, Readings in Money, National In- come and Stabilization Policy, (Homewood, Illinois: Richard D. Irwin, Inc., 1965), 50-53. - Carl F. Christ, Econometric Models and Methods (New York: John Wiley and Sons, Inc., 1966), 298-346. - F. M. Fisher, "Generalization of the Rank and Order Conditions for Identifiability", Econometrics, XXVII (July, 1959), 431-447. - A. S. Goldberger, Econometric Theory (New York: John Wiley and Sons, Inc., 1964), 306-318. Former research on the demand for imports which did not cope with these problems: - On the basis of quarterly data, R.R. Rhomberg and L. 50 Boissonneault estimated imports as a function of real income and relative prices in a single equation regression model. Often the income and price variables were not significant at the 5% level. The problem of multicollinearity is not extensively discussed, and no values for the correlation between Y and PM are given. See: PD - J. S. Duesenberry et al, The Brookings Quarterly Econometric Model of thengpited States. (Amsterdam: North Holland Publishing Co., 1965), 375-406, in particular p. 381. - Also the Wharton Econometric Forecasting Model has a similar equation for imports of crude and manufactured food products: M=a+b_Y_-cP If N F”- D where N a population M = imports Y a personal disposable income . :12 -.- relative prices. D The advantage of this equation is that both coefficients b and c are highly significant, but R = .305 is quite low. However, the multicollinearity is presumably lower. None of these models is exactly identified. See: - Michael E. Evans, et al., The Wharton Econometric Forecasting Model, (University of Pennsylvania, Studies in Quantitative Economics, no. 2, 1967), 9. CHAPTER III THE EMPIRICAL RESULTS OF THE RELATIVE SHARE MODEL The purpose of this thesis, as stated in the introduction, is to measure the effects of the EEC on the exports of the communist countries of Eastern Europe. To achieve this goal, two models were developed in Chapter II. The results of the test of the relative share model will be presented in this Chapter. In the relative share model, ggpgg-area trade creation and diversion in total imports of the EEC is measured either by an in- crease or by a fall in the income elasticity of the demand for ggpgg-area imports of the EEC. In Table 3.1, ex post income elas- ticities for gypgg-area imports are presented for four periods ppipg £g_and after the formation of the EEC.1 It can be observed in this table, that the differences in income elasticities for each commodity group do not always carry the same sign in each period.p£ip£_to and after the formation of the EEC. For the periods 1951-59 and 1959-67, one finds that the EEC had an gxppp-area trade diverting effect for food and chemicals, while for raw materials, fuels, machinery, transport equipment and manufactures, only trade creation can be observed. If one studies the period 1952-59 and 1959-66, an extra- 52 ammo. mmmo. ammo. News. «maze mono. mHNH. ~o.- m~.~ a~.~ HoNH. Emma. mousuuaoscqz Hens. mNmo. sa.a ma.~ so. mean. ammo. .am “toamasua mesa. News. ma.~ ea.~ om. mesa. Home. sameness: scan. seed. “0.- no.~ s~.~ coho. mesa. mamoaamao ammo. memo. oo.~ am.~ mm.a ammo. coma. moose memo. memo. an. as.a ma. make. some. maaauouaz see «was. Name. Ho. ao.~ wo.~ ammo. ammo. soon eeuomao on-~mo~ mucoumoeaa oo-oma~ am-~mafi souammo mmummaa come. come. some. ammo. «sees anon. such. so. + HH.~ mo.N mmoH. anon. evanescence: ammo. mNec. oo.a + mm.H mm. ammo. mesa. .ue uuoaacsua some. some. eo.~ + mm.~ om. echo. some. sausages: anon. maNH. on. . eo.~ oe.~ aaoa. eons. mHsoaemao coma. ammo. mm. + oe.~ Na.a coma. Hose. moose mace. ammo. an. + e~.H as. whee. ammo. mamatauaz see ease. come. no. - as. ~H.H ease. ammo. soon he-smma am-amaa woesumuoan as-amaa sm-amaa as-mmam am-HmoH 8qu 530.5 3.39!— How person no 3qu 530mm 12.53 owouo>< powwow: mowuwomumoam oaooaH umomlxm aong owouo>< mamas a. "0mm ma mo 955% gig mom gn— mmh mo mHHfiHUHHgm $5qu Hmomlxm 1m. man—on. 53 .mouou owcocoxo mmaa one seemed wmofi uo venomous on mzw aw voucmooum monuoe on» no mason onu :0 .ommH mo mouou swoonoxo one mooaua a“ oouooooa one .memH ecu swan .mausm .Aaooa-wmaav was Aaosa-omoav "monsooo< HoCOwuoz mo mowuowuoum .uCoEQoHo>on one ceauoquOIOU oHEocoom pom coHuoncowuo "MUM—40m: .m xwocoaa< manomaa .coaanunma .a magnum .ooaumwuoum ovens huwooeaou .oouwmo aooauoauoum .mcoHuoz mouwcs "oouooms ammo. ammo. ammo. ommo. ssmzu 0mmH. hung. on. mo.~ o~.~ ommH. oawa. mousuoomocoz Nona. mass. no. os.~ mm.~ Nona. ammo. .um uuoamcsua soon. nONo. oo.~ Nm.m on. sham. memo. spocoauqz «mma. came. mm. ¢M.N mm.H «mma. Como. mHooHEono mama. quad. an. mo.~ oa.~ NmmH. omca. mason mooH. come. m¢.~ oo.~ no. mmca. mNNO. «Hammond: 3mm coco. cane. mm. I mo.H mm.H coco. omno. moon «onomma mmnomma oocouomwmn oouomma onlomma «ouammd onlomma ammo. ammo. ammo. mmmo. ssmzw mama. mood. «m. : om.N om.~ mama. mmoa. monouoomocoz moan. some. oH.H mm.~ am.a mash. meme. .sm uuoamesua mama. admo. mm.~ m~.m mm. BNNH. mono. muocmnooz Gama. «Hod. mm. : wH.~ mm.N CHNH. Mung. oHooHEono omma. memo. OH.H om.~ o~.~ omma. maoo. mason mmwo. mmmo. ea. mm.H om. mmwo. memo. oHoHuouoz 3mm once. Nmuo. «N. I «H.H om.~ omoo. cmmc. uoom metamoa amummad oocouommua monomofi amlmmaa monomaa amtmmoa mouom :uSouo amused owouo>< oouoanud ouuooEH How possum mo ooquwowuooam oeoocH uoomnxm mound nusouo aoscc< ammuo>< mhmomZH .fi 54 area trade diverting effect of the EEC can only be observed for chemicals and manufactures. For all other commodity groups the EEC's external effect was trade creating during the period 1959-1966, relative to the period 1952-1959. Considering the periods 1953-1959 and 1959-1965, the effect of the EEC was trade diverting in food, chemicals and manufactures, while for the other commodity groups, only ggppg-area trade creation can be observed. Finally, for the period 1954-1959 and 1959-1964, the EEC had only a trade diverting effect on her members' imports of food. In the four periods studied, the number of commodity groups for which the EEC had an‘ggppg-area trade creating effect is larger than that for which she caused trade diversion. In Table 3.2, I present the average percentage commodity mix of the EEC's total imports for the period 1959-1967 and the weighted sum of the differences in income elasticities for the periods 1951-1959 and 1959-1967. This sum is positive, which indicates that the overall effect of the EEC is trade creating. Table 3.1 indicates that in'pllhfgp£|periods the EEC had a trade creating effect for raw materials, fuels, machinery and trans- port equipment. Part of the gxppg-area trade creation in the imports of machinery is due to dynamic effects, as indicated by Thorbecke; my estimates in Table 3.1 may be over-estimates of the static trade creating effects of the EEC on the extra-area import demand for machinery.2 The empirical results of the relative share model will depend on the length of the period (prior to and after the formation of .¢ xfiocomm< "oousom 55 «Ho. 00. www. mousuommscmz BNO. oo.H NNO.. .Um uuoaocouh ooH. om.a Hoa. . huocanomz mNo. I on. I Nmo. mHmoHEonu Hma. mm. oqa. mason oma. mm. wNN. oHouuouoz 3mm mNo. I mH. I cam. ooom aeoHIamaa sauces“ mowuwowumofio 0800:“ cw mowuuowuomao o.omm mo ooHuoofluuowo moose oocoHoMMMo mouswwoz oEoocw cw mucouommwn owmucoouoa hammoh owouo>< huuooeaou emu may no muoooom weasasmwm sense Hasum>o one N.m «Home 56 the EEC) that is chosen to compute adjusted average annual growth rates of the demand for imports. I chose the longest period avail- able, namely 1951-1959 and 1959-1967, to capture the trend in the changes in income elasticities prior to and after the formation of the EEC, rather than accidental yearly changes. Consequently, the results of the test of the model will be based on the adjusted growth rates of gyppg-area imports for the period 1951-1959 and 1959-1967. As base year for the projections, both 1959 and the average 1958-1960 were chosen. The results are presented in Appendix A. The following tables in this chapter are only based on projections with 1959 as base year. In the relative share model, the effect of the EEC on her members'-ggpgg-area imports is divided into four effects: a Common Market effect, a competitive effect, a price effect and a total effect. These four effects will be presented, first, for total imports of the EEC from each communist country of Eastern Europe and secondly, for the same imports, but disaggregated into seven commodity groups. This order in the presentation is chosen because the export commodity mix of each communist country of Eastern Europe determines the way in which its total exports to the EEC will be influenced by the economic integration of the Six. This chapter will be divided into two main parts. In the first part, I will compare the relative competitive position of each communist country of Eastern Europe vis-a-vis all ggppg-area suppliers of the EEC. In the second part, I will compare the export performance to the EEC 57 of each communist country of Eastern Europe, relative to its part- ners in COMECON. The order in which the effect of the EEC on each communist country of Eastern Europe is discussed, depends on the relative success of that country in expanding its share in the EEC's market for extra-area imports. 58 The Effect of the EEC on the Exports of Romania to the EEC Romania has shared very favorably in the overall trade ex- panding effects of the EEC. Table 3.3 indicates that the total effect of the EEC on her members' imports from Romania is positive from 1960 to 1967 and ranges from 21% to 60% of the yearly exports of Romania to the EEC in current prices. The estimated Common Market effect for the total exports of Romania to the EEC, represented in Table 3.3, is positive between 1960 and 1967, indicating that the commodity composition of Romania's exports to the EEC is favor- able vis-a-vis the gxppg-area trade expanding effects of the EEC. The size of the Common Market effect, which is estimated on the basis of the effect of the EEC on 2l1,her.g§pE§-area suppliers, . ranges from 2% to 10%»of Romania's yearly exports to the EEC in current prices. Romania is a strong competitor in the EEC's market for £§££2f area imports, relative tolpll,other'g§££§-area suppliers. The competitive effect is positive between 1960 and 1967 and ranges from 25% to 51% of Romania's yearly exports to the EEC, as can be observed in Table 3.3. The competitive effect is always larger than the Common Market effect, indicating that, measured in constant prices of 1959, the share of Romania's exports in the EEC's market for‘ggpgg-area imports is constantly growing. The fact that Roma- nia is so successful in the import market of the EEC is extremely important for that country as a way to preserve some degree of political and economic independence from the other communist countries .< xHoCooo< "oousom .mmo voodoou coon o>o£ .ucoonoa oco cozy nowuoH .mouawam owoucoouoa HH< I .oooflua noonuoo an .Umm ozu ou nowaoqsm moumImuuxo esp mo musedxo Houou ha poofi>wo .muoowmo any Ho ooao> ecu om Amy » ms ooo.H an museums can no maas> was so AHV 59 as- an em as- aw- an- a I. as- Auv soo.m- sw~.o soa.Na owN.m- mum.m- asa.o- amo.~- “so.s- Ase .m.m Nam ems amm eon eon ens ass emu Ana mmo.~ua amw.ma aaa.~m mm~.em ma~.mk ss~.ae m-.mo oos.mn Ase .méeoo sea as as an an an an an any mge.m~ saa.wa aca.ea ~m~.ao am~.m oss.m sme.m mom.a Ago .m.z.o new new ems ems amm sea son saw Auv Ne~.meo aam.moa Nao.ow mm~.oe muo.~m maa.ee owe.¢e mem.ma “no . .m.a “can soon moss «can mean Noon Essa omen Hausa» a m: scorn condoms was on sarcasm m.so=seoe so use use so assumes race was "m.m moses 60 .< xfiocooom noonsom .mwo poocsou coon o>os .uCoouoo oco cozy nowuoa .oouowmw owoucoouoo HH< I .mooaua udouuso aw 0mm ozu ou nomaaaao mono Iouuxo ecu mo macaw humooEEoo o>wuooamou onu mo ouuooxo on» ma poo«>«v .uoommo emu mo o9Ho> ecu ow va a ma ooo.~ an .wuouoom was no uaas> one an AHV at. as. an see an. as. ah. ah. Ana am.maa m~.~ma ea.soa es.ow s~.wm am.sm am.m~ ~m.o~ wa~ .wacmz I I I I I I I I as I I I I I I I I na~ . m o mfiflhfi. I I I I I I I I Amo I I I I I I I I na~ . Hun—finance as- emI eeI scaI an- esI as- a I Auv mm.mmMI aa.wa~I m~.ea~I oo.osHI ca.sHHI so.AAI wa.mmI ms.o~I may mHmUHEwr—U eon son ans emu ems NNE em as a~v om.msw.aa mw.owo.sa ms.mwm.oH Na.mma.m ee.~oa.m wo.sos.m Nm.eos.~ oe.mwo.n who GHQ—uh as so as as am an an NM “NV mm.m~m.s ma.~mw.m oo.ofim.s em.mme.m no.a~s.~ sw.eew.a wa.eam.a as.aom may .umz see ee.I aa.I ak.I am.I as.I am.I em.I sm.I Auo ae.mnmI so.oeeI as.mwMI as.AOMI Hm.mmNI me.ssa- sm.moHI h~.omI wa~ , 600% “can scan mesa «can mesa neon Essa osaa "memos undone NuwooEEoo co>om ago How uoowmo moxumz :OEEOU “macoEom "dIM wanna 61 of Eastern Europe. The price effect for Romania's total exports to the EEC is mostly negative between 1960 and 1967, and ranges from -6% to +8% of Romania's yearly exports to the EEC. To some extent, the pre- dominantly negative price effect represents the costs of the tremendous expansion of Romania's share in the EEC's market for ggpgg-area imports. However, this cost, expressed by the negative price effect, is small compared to the large positive competitive effect. The Common Market effect for the seven commodity groups shown in Table 3.4 indicates that the commodity composition of Romania's exports to the EEC is favorable relative to the EEEEET area trade expanding effect of the EEC. In 1967, raw materials comprised 33% and fuels 15%»of Romania's exports to the EEC. For both commodity groups the EEC has a strong ggppg-area trade expand- ing effect. All the commodity groups for which the EEC expanded its external trade counted in 1967 for 58% in the total exports of Romania to the EEC. The negative Common Market effect for fuels and food is much smaller in absolute value than the positive effect for the other commodity groups. If measured on the basis of the competitive strength of the "average" gnpgg-area supplier one can predict that Romania gained substantially from the formation of the EEC. In addition, Romania is a strong relative competitor for food, raw materials, chemicals and manufactures, but a weak competitor for fuels, which can be seen in Table 3.5. Prior to 1962, Romania .< xwocoao< ”oosoom .mmo poocoou coon o>on .ucoonoo moo cozy Howuow mouowhu owoucwowoa HH< .moohha ucounoo oh comm ecu ou uohhoosm oops Iouuxo sou mo QDOHw huhoofisoo o>huooamow map No ouuooxo onu wn ooow>qo .uoomwo ecu mo oowo> ecu ow Amv » m: ooo.h ah .mhomooo who he ashm> ah» ah who 62 ems awn sch amh ,amm saw sum awn huo wa.ooo.mh oe.moh.~h oa.soa.h ma.aeh.h oo.m~o.a sm.eow.h aa.wm~.hh hm.hs~.~ who .mscmz I I I I I I I I wNo I I I I I I I I who . m.mcouh eemh ehoh I ammh I shah I I wNo we.eoo.h om.oe~.h I hm.msh I e~.mmh I I who .th2 aehh seNh anhh aha aemh aha she- NON wNo hm.sae.hh hw.ww~.o mm.smm.m eh.smh.h mm.e~h.m em.-o.h eh.ma~I m~.w- who .8030 has sou- eMMhI see. as am.I amI eNhI who sw.sme.e~I sm.hh~.ohI ew.ohm.~mI me.~ehlth eh.msm.m em.haI wa.owAI mh.hsm.~I who mason ate she was she has see new ahm wNo No.ame.um hm.so~.om eh.she.oe am.sh~.hm mh.mm~.mm om.ome.ah No.a~s.s~ hm.moe.o who .hsz sea emu has has has sch ass has she wNo w~.mee.se h~.heh.sm os.mha.am oe.sam.o~ w~.hmm.e~ mo.ssm.e~ hk.ahs.s~ mh.~Nm.~h who soon hash sash mesh «ooh mesh «ooh hash cosh "shame mooouo huhooeeoo co>om on» now uoommm o>huuuomEou "ohcmsom hmIm manna 63 I< xhoCooo< ”oouoom .mwo poocoou soon o>o£ .ucoonom oao cozu powwow .oouswhm owouaoouoo HH< .moowuo uconuoo ow .Umm may mo nowaooom mono Iohuxo onu mo ozouw wuhooasoo o>huooamoh may «0 muuooxo ecu an ooofi>ho .uoomwo ecu mo on~o> moo ow Amv » m: ooo.h oh .ohooooo one no oshe, ooh oh hho an sch ah~ ha ahNI so- aha ash hho oo.aoo oo.ho~.~ oo.omm.m oo.aem Nm.wNw.mI No.wwmI hh.soh.e ow.oow.~ who .wocmz I I I I I I I I he I I I I I I I I who I Nomcmhfi aoNI shI I ammI I emhI I I huo mo.ooMI om.oI, I hm.omI I oh.MMI I I who .hooz aOMI ammI sooI sweI somI somI sch eNN wNo mm.hao.mI oo.hoo.~I Nm.ooo.hI kh.mmAI oh.maw.hI m~.ooAI oo.mo No.50m who .aoso emhI aNNI emu amhI akI eeI smI em.I who mo.hoo.oI hm.mom.mI ow.wom.m oo.mmw.mI mo.ooo.mI mm.h-.hI oo.wmm.hI mh.h~hI who mHmflh aoI em NNI emI eoI aoI amI smmI wuo om.omw.oI oo.aam.h ho.~om.hI mo.oo~.MI om.oom.MI oo.hmo.hI oo.hhh.~I ow.omh.aI who .3. 33h emh saw ash am an ahI aoI eMI who hm.ANN.hh a¢.~oo.Mh hw.~oo.a wo.omo.h ow.o~o.h oh.~oh.~I mo.oha.~I om.mhmI who soon hash oooh mosh oooh mosh Noah hooh oooh logos» onnouu muwooesou co>om ozu you uoowmm ooaum howsoEom "oIM wanes 64 .< Khocooo< hoohsom .mmo voodoo“ coon o>o£ .ucoouoo oco cozy powwow .oowowwm owouooohoo HH< .moowua ucowuso cw .omm osu mo powwoaom some Iohuxo ozu mo QDOMw zuwooEEoo o>wuooomoh ecu mo muhooxo may >2 pooh>wo .uoomuo onu mo onwo> onu ow ANV w m: ooo.h eh .oooooo one no ooho> one oh who II soo soo ems 3mm sow aON aww awn who ho.hho.mh mo.wom.oh No.mmo.m mo.oom.h oo.owo.~h o~.mm~.h sw.oho.mh oo.o~o.m who .mocmz I I I I I I I I who I I I I I I I I who I m. mCmHH sooh sooh I sooh I each I I who oo.mom.h oo.oo~.h I oo.ooh I oo.omh I I who .hooz aha woo woo ash ass ash ehoI woo who oh.oo~.m om.~om.m mo.mmm.m ww.o~N wm.NMh.h h~.ooh, mm.~w~- mo.oom who swamp—U aNMI eNhI . sooI smNI ssh am eh smI wNo hm.omo.th om.mow.oI wm.owo.mhI No.oho.wI mw.oo~.o ho.mmo.~ mm.em~. mm.mmo.hI who mHmfih goo goo see she woo has won am.I who wm.m~o.hm o~.ooo.wm mm.moh.mo m~.mmm.wm om.oom.om oo.oom.oh oo.hmo.m~ ho.oohI who .omz sou ems ehm who now ‘ amw aha sow son wNo oo.~oh.ww oh.mmm.wo No.moo.oo oh.m~h.mN wu.-~.m~ oh.wmm.- oo.oom.m~ om.moo.hh who ooom wooh oooh mosh sooh mosh Noah hooh oooh nouns» omsouo huwooeaou co>om may now uoommm Hooch newcosom w.m owooh '65 did not export machinery to the EEC. In 1962, the export of machinery to the EEG was $ 150,000 in current prices, but by 1967 this figure increased to $ 1,508,000. This shows the eagerness of this developing country to expand its trade with the EEC as a means to be more independent from the other communist countries of East- ern EurOpe. The price effect is mostly negative for fuels, raw materials, chemicals and machinery, but it is positive for food and manufactured goods, as can be observed in Table 3.6. The negative price effect for fuels is partly the result of a fall in the world price of this commodity group. The fall in Romania's export prices of chemicals, from 1960 to 1967, relative to the price level of 1959, indicates the cost at which Romania has captured a larger share of the EEC's market for‘sngg-area imports of chemicals in spite of the trade diverting effect of the EEC in this commodity group. The total effect, represented in Table 3.7, indicates that Romania gained substantially from the formation of the EEC. From this analysis, one can conclude that: 1) Romania has very favorably shared in the trade expanding effects of the EEC. 2) Romania is a strong competitor in the EEC's market for ggppg- area imports. 3) The prices of Romania's exports to the EEC were generally lower in the period 1960-1967 than in 1959, which indicates that she may have had to buy part of her favorable competitive position at the cost of a fall in her export prices. 66 The Effect of the EEC on Bulgaria's Exports to the EEC The effect of the EEC on her members' total imports from Bulgaria is especially interesting, because the predicted Common Market effect is negative from 1960 to 1967 and ranges from -.1% to -.7% of total exports of Bulgaria to the EEC, as indicated in Table 3.8. This can be explained by the commodity composition of Bulgaria's exports to the EEC, relative to the trade diverting effects of the EEC in food and chemicals. However, Bulgaria's competitive strength in the EEC's market for pagan-area imports, relative to all other ggppgyarea suppliers of the EEC, is remarkable. Table 3.8 indicates that the competitive effect for total exports of Bulgaria to the EEC is positive between 1960 and 1967, and ranges from 22% to 51% of Bulgaria's yearly exports to the EEC. The positive competitive effect completely overshadows the negative Common Market effect. From this observation, I can conclude that the relative share of Bulgaria in the EEC's market for‘ggppg-area imports is growing over time. Another interesting observation is that the price effect of Bulgaria's exports to the EEC is always positive, as indicated in Table 3.8. This suggests that Bulgaria has not bought her memark- able positive competitive effect at the cost of a fall in her export prices. The total effect, represented in Table 3.8, is always positive between 1960 and 1967, and ranges from 28% to 62% of Bulgaria's yearly exports to the EEC. 67 .< xwocooo< noowoom .mwo voocnou coon o>o: .ucoouoa oco coca powwow woohowfiw owouooouoo HH< .ooohuo ucouhoo cw .Umm onu ou wowHQQSo ooonouuxo ecu we ounooxo Houou ho oooH>Hv .ouoowmo emu mo ooao> who ow Awo m m: ooo.h eh ohoohoo one no ooho> on» oh who ooh eON awh so so an aw so who om.owo.Mh oo.oow.o~ mo.ooo.mh om.omh.o om.th.o om.~om.~ o~.o~m.m oo.oom.~ who .m.m ohm eaho son amm ems ohm an" s- w~o hh.ooo.om No.ooh.~o h~.mmm.o~ om.omh.mh om.ooh.hm hm.h~o.oh mo.omo.wh wo.hoo.o who ‘ .ahoeoo so.I ah.I so.I ew.I so.I ao.I e~.I eh.I who ow.hhoI Ne.~ooI oh.hmmI oo.MhoI oo.ooMI oo.wh~I mm.omhI ~w.moI who , IQCzCD who goo emm aha aha awn she sou wNo wo.wmm.~w oh.om~.~o Mh.ooo.~o oo.owo.oh o~.hho.mm o~.oow.oh om.ooo.o~ mh.owh.hh who . .m.a wooh oooh mosh oooh mosh hooh hooh oooh "oooow w o: ooooh oh .omm oh» oh oooomxu o.ohooohoo so one ooh ho oooooom “zoo ooh "o.m ohooa 68 .< whosoao< “oouoom .mwo voodoou coon o>o£ .ucoowoo oco cosy powwow .oouswhm owoucoohoa HH< .moowwa ucohhoo cw .Umm onu Cu powwoosm mono Iouuxo ago «0 moouw muwooEEoo o>wuooaoou onu mo muuooxo on» us ooow>wo .ouoowmo ozu mo oowm> may ow ANV o m: coo.h oh oooohoo ooh ho ooho> ooh oh who gm. Sm. gm. fix. Nu. No. $0. sh. wmo oNIth ho.am m~.on mm.wm mw.hc q¢.wm wh.ww ww.w who .wscoz I I I I I I I I who I I I I I I I I h I MImcouH I I I I I I I I who I I I I I I I I who .hooz smhI xth fimhI thI xth xohI NoI RNI wuo mqumcI mw.o¢mI ww.ho~I om.mahI mh.o¢wI ohI¢mI mNIomI oHImNI who .Eonu gmh fine who sch 3m I so sm wNo eoImoh Nw.omw mo.hoh mm.mw mw.¢m oonm ~n.- wo.oh who owosm so No we so RN sN sh sh wNo ocImmw om.whw 00.0mm om.oo¢ oh.omm oa.¢m~ oh.~oh oq.ww who .umz 3mm xNI NNI NNI so.~I x¢.hI Ne.hI Nm.I Nm.I wNo we.o~m.hI oo.mo~.hI Nw.mmo.hI mm.whmI mm.-oI mm.m¢¢I owIHmNI ow.mme who ooom . wooh oooh mosh oooh mooh Noah hooh oooh ”oooo» masono huwooEEoo co>om may you uoowwfl uoxwoz COEEoo howuowwom u¢.m momma 69 The Common Market effect for agricultural products and chemicals is negative, as indicated in Table 3.9. Agricultural products, for which the EEC has a trade diverting effect, take the largest share in the commodity composition of Bulgaria's exports to the EEC. Chemicals, for which the EEC has a trade diverting effect, have also a fairly large share in Bulgaria's exports to the EEC. This explains why Bulgaria has a negative predicted Common Market effect for her total exports to the EEC, as indicated in Table 3.9. Nevertheless, Table 3.10 shows that this country is a strong relative competitor for food, raw materials, fuels, machinery, and even manufactures, in the EEC's import market. This can be explained by the fact that Bulgaria was extremely underdeveloped after the second world war. The development efforts since the early 1950's have, in the 1960's, created the economic potential for Bulgaria to expand her exports to the EEC in all commodity groups, with the ex- ception of transport equipment and chemicals. The strong competitive effect in machinery coincides with a large negative price effect for that commodity group. The price effect for agricultural products, raw materials, chemicals and manufactures is predominantly positive, as indicated by Table 3.11. The total effect is mostly positive for food, raw materials, fuels and manufactures, as can be observed in Table 3.12. From the previous analysis, one can conclude that:‘ 1) Bulgaria may have suffered from the trade diverting effects of the EEC, because of the unfavorable commodity composition of her 70 .< xwwcmaa< ”mohaow .mmo.vovcson comp m>m£ .uCoouoa oco cmnu umwuma wouawww mwmucoouma HH< . .mmownm ucmuusu a“ .0mm ecu ou pmflaaazm mend Imuuxm any mo macaw hquOEEoo mbfiuowawou man we muuomxm mam ha wovw>wv .uowwmo msu wo msHm> mnu ma Amv m m: ooo.H cm .muommmm was mo soam> and am “He fiam sac ans emu see ama amm- an ANV aw.eam.ofi om.mao.w ms.omm.o Ha.moa.m wo.~mm.~ No.0om as.oow- mm.H¢H WH~ .mscmz - - - - - - - - Awe - - - - - - - - na~ . M. meHH. swam awed Noam scam a~a - - - Amo mw.mwo.~ o~.ooa. oo.swm m¢.mn~.~ a¢.mam - - - “EN .nosz an smN- ems- son- as. amH- so- aw Amv oq.~¢o Nw.mom-. -.aoo- ow.aom- um.wa- oa.~sm- no.5m- oa.e~ “HM . .8050 gas smm amt- Rom sNo - ems am“ Amv mo.amo ~m.¢a ms.ema- om.m¢ mm.mme mm.m~m- as.~mm sm.oo nH~ mHmfih sea ass saw gas sma Nam a~a “as ANV oo.wom.wH om.ss~.ma om.ms¢.a mm.mos.o Na.maa.ma om.mam.m mm.sem.- mm.~co.o ”EN cum: 3mm awn amm son at smm smm sad so ANV s~.maa.a~ oo.moo.~m No.qmo.m~ Hm.os~.~ No.mmo.sH ¢¢.s¢m.a a¢.m~¢.m mo.sao.N WH~ noon Noam coma mesa seam moa~ Noam Emma coed "stoma undone NwHUoEEOU co>om may now assume m>wuaummeoo "manmwamm "OH.m anme 71 nmuuxo may .< Nancoma< "mouaom .mmo vacancy coon w>m£ .ucoouma moo cmnu uwwuma .mmuswwm mwmucoouoa Had .moowum uamuuso cw .omm may mo nomamasm moan mo aaouw >umUOEEoo m>wuommmou ecu mo muuoaxm may ha vowa>wv .uowwwm saw no m5Hm> o£u ma ANV m m: ooo.H ca .muoowuo may no o=Hm> «Au ma Aav as aha ssN aha sag sac sN. sow Auv aw.oao as.qo¢.~ m~.~mo.m am.~e~.~ «H.ama em.~¢m.~ Nm.m oo.wom “EN .mscmz - u - - - - - - x~v - - - - - - - - na~ .. m. mcmhfl NNH- am- . sou- an - u - Aug mm.a-- om.om- oo.o we.mas- mo.mm - a - na~ ‘ .ausz¥ . so see emu sou an saa- am- sad ANV mo.mm~ mw.moa q¢.msm am.Hsm No.00 oa.~o~- aa.ea- s~.o-. WEN .EGSU son- awed- and- as. an - as an Ame aa.mmm- s~.omm- Nu.mqu ~o.~ Na.~m - o~.mm. Na.a na~ mHQ—uh as sea sad as saa «EH sum “No oo.omm.fi mm.aeo.a Hm.m~m.a No.~ws Nm.smm.a ms.oma.~ m¢.oaw.a mw.ea~.~ wH~ cum: 3mm gag ssN sad sa No an an. Awe mm.~ms.aa ma.ama.ma ea.m~e.m No.oao.~ em.mms.m 0H.~H- o~.wm¢.~ mm.e~a may coon Noam seam mesa seam mesa Noam Hoam ooam asses» mazouu hu«608500 ao>om mnu How uommmm soaum "mfiummazm "HH.m manmh 72 .< xwwcmaa< “mousom .mwo coccsou coon o>m£ .ucmouoa omo cmzu nowuma .mouzwfim mwmucouuma HH< .mooHuQ udouuoo cu .omm onu mo HowHQQSm mono tmuuxm may mo azoum muHmoEEoo m>wuomammu ozu mo wuuoaxm may ha wwwa>wv .uoomwo wfiu mo m=~m> mcu mg Amy m m: ooo.H ca .uuomwu was we mamm> was ma Ame goo soc awe an: sum and NNM- an a~v Nm.~a~.ma mm.Hwo.HH ms.wmm.oa mo.qm~.m aa.sms.a Ha.s~m Na.oma- ~a.aoo.a wa~ .wmcmz - - - - - - - - Ame - - - - - - - - wa~ . o m. mcmhfi good good scam good aoo~ . u - ANV oo.oom.a oo.omo oo.swm oo.mmo oo.~He . u - “my .zosz ems so- Nam- sau- sum- smm- sou- as Amy Na.wcm am.w~m- so.m~m- mm.mmm- mm.~m~- Hm.wmm- mo.o¢~- sa.mo na~ .8030 3mm 3mm- smm- sau sea - sac amN Auv m¢.awe oa.oo- mo.o~H- mm.s~H mo.mea ow.~m~. aH.aoe s¢.om nm~ mmwfih saw sow amt sea smm gas an” sea Ame NH.®N¢.ON em.o~o.mH mH.Hmo.oE om.¢mm.a so.¢~o.ma mm.~as.ma ma.~wm.¢a wm.¢ma.~ n- .uwz 3mm smm awn see ama Noe sew amN as Auv oo.aom.am MN.HHm.om sm.e~¢.- w~.wmo.m so.qs¢.oH oo.wms.a Hm.mmo.o Nw.ooo.~ haw soon Boom seam mosh seam moom Noam mesa coed notes» mmaouu unavoEEou ao>om may you uuowmm Hmuoa "mgumwasm "NH.m mHan 2) 3) 73 exports to the EEC. Bulgaria is such a strong relative competitor in the market for extggrarea imports of the EEC that her relative share in that market has considerably increased between 1960 and 1967. During the period 1960-1967, Bulgaria received prices for her exports to the EEC that were above their 1959 level. She did not have to buy her relative competitive strength at the cost of a fall in her export prices. 74 The Effect of the EEC on the Exports of Yugoslavia to the EEC The total effect, which is the sum of the Common Market effect, the competitive and the price effect, is an estimate of Yufoslavia's performance during 1960-1967, relative to all suppliers of the EEC. This total effect is positive for Yugoslavia's total exports to the JEEC from 1960 to 1967, and it increases steadily over time, as can lae seen in Table 3.13. The total effect fluctuates from 7% to 47% <>f Yugoslavia's yearly exports to the EEC in current prices. Part of this effect is the Coumon Market effect, which indicates the estimated amount of either flag-area trade diversion or creation, ‘Wfliich is "most likely" to occur on the basis of the performance of tile "average supplier" of the EEC, as measured by.gll imports of tile EEC. IThis means that if Yugoslavia's exports to the EEC grew exactly at the same rate as those of the "average" e_x_t_r_a_-area supplier of the EEC in both periods 3.1.9.1; to and after the formation 9f the EEC, the estimated amount of trade creation would be equal ‘13 the Common Market effect. Given the commodity composition of Y:ugoslavia's exports to the EEC, the Common Market effect was always Pesitive from 1960 through 1967. The competitive effect tells whether Yugoslavia exported more 01‘ less to the EEC than predicted on the basis of the exports of the "average" gigs-area supplier of the EEC. The competitive effect fOrYugoslavia's total exports to the EEC was always positive from 1960 to 1967, which indicates that Yugoslavia's share in the EEC's 75 .mmo vmvcsou coon o>m£ .ucoouoa .< xwvcoaa< oco cmnu umwuma .mouswwm ammuaoouom AH< .mwogua uamuuao "QUHDOW cw .vmm ecu ou nowaaasm moumnmuuxm ecu mo manomxm Hmuou hp voca>wc .ouoowmo can no on~m> any ma ANV m: coo.“ ca museums may we usam> may ma Amy and sad xNN sou Rom an an «m Auv mm.amm.om aa.aaw.am os.sao.mo om.mem.ae Hw.amm.o~ so.mae.m «H.s¢o.a wo.~mo 5 Amy .m.m aim ss~ and am saw NHN am am “No He.am~.wam No.0mo.mm H~.mqm.~¢ ¢~.¢mo.oH Ho.Hmo.oa mo.amm.ss Ho.~o¢.a wa.s~o a game On“. ECU am an an sN ”N am «a gm. Ame H¢.ams.oH ms.aoe.¢ mm.-a.a am.m~a.o mm.aoo.s mw.mmm.m mm.oma N ca.woo H Ame .m.z.o gas ass flan Non sea son Na .xm ANV mo.owo.aaa No.muq.wsa Nm.ms~.sma ¢N.sse.ma an.o¢a.aoH No.amm.ee wH.moH.HH om.mm~ ea xiv .m.a Roam comm moaa seam mood Noam mesa ooaa "messy w m: oooua aw .omm msu ou manomxm m.m«>m~mowdw :0 0mm 0:9 «0 muoomwm Mach och "mH.m mHmmH 76 nnarket for Extggfarea imports was larger than predicted on the basis <>f the "average" gxgggyarea supplier of the EEC. The size of the <:ompetitive effect of total exports of Yugoslavia to the EEC ranged :from a minimum of 1% of these exports in 1961 to a maximum of 31% of these exports in 1967. The price effect, which is the difference between imports in current and constant prices of 1959, was positive in each year ‘between 1960 and 1967. The size of the price gains ranged from a Ininimum of 3% of the value of Yugoslavia's exports to the EEC in 1962 to a maximum of 30% of these exports (in current prices) in 1965. The years 1961 and 1964 were the least successful for Yugo- slavia, as can be observed from the small, but positive total and competitive effects. In Tables 3.14 to 3.17, I will present the effects of the EEC on the exports of individual groups of commodities that YugoSlavia exports to the EEC. In Table 3.14, one can observe that the pre- dicted Common Market effect is negative for food and chemicals while it is positive for all other commodity groups. The most important table, however, is Table 3.15, indicating the competitive effect for each commodity group. Yugoslavia is a strong relative competitor in food, fuels, machinery, transport equipment and manufactures. The competitive effect for these commodity groups is mostly positive between 1960 and 1967, with some exceptions. A harvest failure in 1964, for example, caused a substantial negative competitive effect for food in that year and a 77 .< xwwcmqa< ”mousom .mmo popcsou Gown w>m£ .ucmouma mco cmcu uwwumfl .mwnswfim mmeCmouoa ~H< .mmoHuQ uamuuvo cw .Umm wnu on nomaaamm moum amHuXo ecu wo macaw hquOEEoo m>fluoommmu ozu mo muuoaxo on» up popfi>wp .uomwmm may mo oDHm> on» ow ANV » m: ooo.~ ca .muommmm was we maaw> and ma Amy as. go. go. as. ea. an. as. RN. a~v ma.ama No.aaa om.oam Nm.mss mo.H~m wa.wam ao.NmH om.am “HM .oscmz an an aw am SN ea am an Ame -.asa oa.maa m~.ma mw.~a Ha.em .Nm.mm o~.¢~ Hm.aa “EN . Momcwuh sea sad god and Na NNH “Nu ama Ame Na.¢am.a aa.~ao.a oo.wmw Ho.aoo ao.aae aa.osm a~.mHN -.~oa wm~ .aomz aHN- aha- XNH- sag- ama- sum- am. an- Ame HN.HN©.H- mo.aa~.a- ca.oaa- oa.mma- am.-m- wH.Hmm- ha.ao~- so.mm- REM .Eofiu swa ea aaN gnu am an em as Amy oa.ama.a ma.aow mo.eao ow.H~m Ne.oam ma.am~ um.mma -.oo na~ , mHODh NON aha Rea sad an as am aw ANV mm.mma.ma ma.eme.aa «3.3mm.a am.am¢.a oo.aao.m mo.moo.s wa.mmm.~ ea.mm~.a haw .umz 3m“ «m- am. .am- am- am- am- Na- am.- a~v aa.mo~ a- oo.esm.m- aa.amw.~- am.am~.~- mm.mma.H- so.os~.a- oo.~wa- Ha.mam- uhm~. coca Noam seam moaa seam moaa Noam aeoa oaoa imbue» mmsouu NufipoEEoo co>om mnu you uoommm uwxumz :oEEou "mw>mamowsw "wH.m mHamH 78 .< xfipcoaa< "wousom .wwo popcsou Coon m>m£ .ucmuwmm oco away umwuma .mmuswwm ammuCoouoa HH< .mooHuQ acouuso CH .omm onu ou umHHaQDm moum Imuuxm ozu mo macaw xuwpoEEou m>wuomamou mnu mo muuoaxo Hmuou >3 Umpfi>fip .uomwmo on» no maam> may ma ANV » m: ooo.~ ca .muoomas was no oaam> and ma may amm ass aam gas son gas am $03. Awe wa.¢am.ea as.oma.mm wa.mao.am mo.aa~.om aa.aam.sm Nm.mmm.m~ Na.moa.~ ow.0mm.m- ”HM .ascmz aka xma ama sma am» Nam xmm as- Awe aH.OmM.s wo.~am m wa.eoo e oo.~o~ m om.amo H m¢.oom mo.moa Ha.wa- Maw . m. mCmHH awe amm awed sac wen sum aam- ama- Amv o¢.oo~.o Nw.ams.m «o.mo~.a mo.ama.m o~.qqm.~ m~.m~a Ho.wam- mm.amo- REV .aumz 3a- as- am fine. sea- aha- 3mm- son- Awe mN.aam- mm.aa~ am.aq~ Hm.moa.N- mm.mas.a- am.ose.~- mm.m-.a- oa.¢~¢.a- ”HM .8050 xaaa xaaa ate ax- was fine sma ea “NV ac.aam.aa NN.mwa.aH No.mNm.H ao.mm~- ma.¢ae.m mm.wm~.m am.~s~ um.aaa may mHvflm Nam- gem- gag- aw- and am we.. ae.a- Auv Na.Naa.HH- mo.~ao.o- ma.~aa.a- m~.oseia- oH.mHo.a m~.¢aa.u so.Na~- o~.mwo- m- .umz 3mm Nam as ea. Nam- sea sea am. sag Ame so.owm.am oa.¢am.s ma.mam.a- o~.aaa.ma- a~.asm.a~ ea.aam.ma a~.ma~ Ho.aaa.mm na~, coca Roma aoaa moaa aoaa moaa Noam mama coma "mussw mmmduo huwpoasou mm>mm mnu now uoommm m>guwummsou ”m«>mHmow=» "mH.m mHnmh 79 small negative effect even in the following year. Most gxgrgyarea suppliers have increased their exports of machinery to the Common Market, especially during the first years of its formation. Yugo- slavia was slower than the other gxtggrarea suppliers in capturing a share of this market, but since 1962, she has increased her share of the EEC's import market of machinery. Yugoslavia is a rather weak competitor relative to all-gxgggyarea suppliers of the EEC in raw materials and chemicals. The price effect, as shown in Table 3.16, is often of the same absolute magnitude as the competitive effect, although it does not necessarily carry the same sign. This effect is generally positive for food, raw materials, machinery and manufactures, which indicates that Yugoslavia's export prices for these products have been increasing since 1959. The price effect was always negative for fuels, which coincides with the fall in world prices for this commodity group. During 1960-1967, the signs of the price effect for chemicals and transport equipment were sometimes positive and sometimes negative, which indicates price instability in both commodity groups. The algebraic sum of these effects is presented in Table 3.17, in the total effect for each commodity group. The total effect is positive in each year during the period 1960-1967 for food, raw materials and transport equipment. It is positive in most, but not all years, for manufactures, machinery and fuels. It is negative in most years for chemicals, which indicates that, first, Yugoslavia 80 .< KHUCeaa< ”eouoom .wmo pepcsou ceec e>mc .uceouea eco cmcu uewuma .eeuswwm ewmuCeouem HH< .meufiua uceuuse a“ .Umm ecu mo HeHHQQSm meme neuuxe ecu mo azouw mquOEEoo e>fiuoeameu ecu mo muuoaxe ecu ac pepw>mp .uoewwe ecu mo esam> ecu mu Amv a m: ooo.~ ca museums and mo usam> was we Aav aa 303 .aaa ama as gem sag sea Ame HH.~¢~.HH wa.¢oo.m~ mo.oam.aa mo.ama.¢ am.¢oa.~ so.HHo.m a~.sam.m wa.mam.~ wa~ . .cscsz am- aa. aa. am. am am aam- gem ANV am.amm- sm.cmm- am.~m- ma.m~ mm.me no.~a om.ma- «a.oma HEM . Momcmhfi an awu sun. so gem ama ssu sou x~v am.m~s qe.maa.~ ea.mca.~- o a¢.-m ms.omm Nw.am~ as.~ma “EN .aosz ace ama sea 3mm x - an- smN ecu Auv ma.sao.a no.3ma.a em.aam.a om.aam.a wo.om- o~.oa~- em.mmw aw.¢wm may .Eeco awe- sand- ace- awn- New- $03. emu- aa.- Ame ac.moo.o- mm.sea.ma- mm.¢~a.as a~.aoo- sa.aaa- Ha.oma- -.ewm- oa.o~- na~ . maesm am sac gem sea as as an sea Ame sa.aaw.s ~m.aaa.a sa.oa~.oH oo.oam.a on.-o.e o~.esm.e oo.mmm.a mo.aew.a ”HM .umz 3mm sm~ aim smm amm awe . as an as. x~v ms.aaa.mm aa.maa.am ma.wma.om mm.maa.- mo.H~a.aa ca.am~.o o¢.woo.~ aa.moeu “EN sooa aaaa mesa mesa seam mood Noam 30am ooaa Hausa» mQ§OHU SAUCE—=00 Gm>mm OH; ...—OH uomwmm mowhm uwfi>mHmOwfifl "ca-m. mafia 81 .< kwpceaa< ”eousom .mwo meccaou Ceec e>mc .uceouea eco cecu Hewuea .meuswfim eweuceouea HH< .meowua uceuuso ad .omm ecu mo Hewaaase meme neuuxe ecu mo Q90pw mufivoEEoe e>wuoeameu ecu mo muuomxe ecu an pepfi>wp .uoemwe ecu mo eDHm> ecu aw ANV a m: ooo.~ ca .uumeeo was mo maaa> was as Aav ans See New awn awn awn sHN am- Awe oo.oaa.oa aa.~ma.ma Ha.moa.om Na.aos.os sa.mam.am sa.mmm.aN ma.¢a¢.o ae.~ao.a- “HM owsdwz aNa ama ado ama amm gas Ram smm Awe ca.mma.e oa.~mo m so.asa e Ho.mom m oo.oaa N No.o~a as.em «a.maa haw . m.mceua aha saw sow Nah awn sac and- Row. Ame oe.osa.a m~.Noa.m we.aom.a aa.mms.e we.mea.s so.mow.a Nm.-H- oh.~oq- ”EN .eosz sad. so- see ans- sac- wok- sea- amm Ame oa.aao.a- wa.am¢- Hm.msm Hm.o~a.a- aa.mao.~- am.ooa.a- ma.~am- ao.ema- na~ .Ewfiu ass sax sea and- “an awn an. awa may om.qao.o as.aaa.o so.ma~ om.aa~- e~.~amt~ a~.ama.~ ao.a so.m- may mfimfim am ama sea saw eon saa an gas Amy oa.~aa.m oe.omw.aa ma.meo.aa «aaaomima as.mam.a~ wa.HmH.aH ma.aoa.m am.aae.m ”HM cum: 3mm was awn saw gum sen aMN am gag ANV om.o~m.wa am.eoa.mm H~.m~m.Nm oo.aom.oa oa.ama.as Ne.aam.ou ae.oam.a Ha.~ma.~a “cc soon Noam ooaa moaa seam moaa Noam Home coma “assay mmdouo hufipoaeoo Ge>em ecu now uoemmm HmHOH "ma>maemwsw "ma.m eHceH 82 is a weak relative competitor of chemicals in the EEC's import Inarket, and, secondly, that Yugoslavia may have been strongly affected by the trade diverting effects of the EEC in this commodity group. On the basis of the model, one can conclude that: l) Yugoslavia has a commodity composition which is favorable visez-vis the common external tariff of the EEC. 2) Yugoslavia has shared favorably in the overall Extggrarea trade creating effects of the EEC. 3) During the period 1960-1967, Yugoslavia has increased her share in the EEC's import market relative to all other extggrarea suppliers. She is a strong relative competitor for food, machinery, transport equipment and manufactures, but a weak one in raw materials and chemicals. 4) During 1960-1967, the prices of Yugoslavia's total exports to the Common Market were above their 1959 level. 83 'Ihe Effect of the EEC on Albania's Exports to the EEC. Albania has a very favorable composition of her exports to the EEC. This can be concluded from the positive Common Market Effect of her total exports to the EEC, as represented in Table 3.18.- In spite of this favorable commodity composition of her exports to the EEC, from 1960 to 1962, Albania lost a large part of her market share in the EEC's market for gxgggrarea imports. This conclusion can be reached from the negative competitive effect for total exports of Albania to the EEC from 1960 to 1962, represented in Table 3.18. The weak relative competitive position completely overshadowed the positive Common Market effect. The 'price effect for total exports to the EEC during 1960-1962 was ‘positive, indicating that Albania's export prices were above their 1959 level. Excessively high export prices may have been the cause of the substantial negative competitive effect from 1960 to 1962. From 1963 on, the situation improved. Albania lowered its export prices relative to their 1959 level and increased her competitive position in the EEC's market for‘gxtggrarea imports. The competitive effect for total exports, represented in Table 3.18, ranged from 18% to 71% of Albania's yearly exports to the EEC. Between 1963 and 1967,therefore, Albania received more of the trade creating effects of the EEC, than the "average" gxggafarea supplier of the EEC. Albania's extremely successful performance from 1963 to 1967 was a reaction against her relative weak competitive position in .< prceaa< "eousom .mmo pepcmou ceec e>ec .uceouea eco cecu uewums .meuswwm eweuceouea HH< .meomuc uceuuae CH .omm ecu ou ueHHaamm meumleuuxe ecu mo wuuoaxe Heuou kc pepa>wp .euuewwe ecu mo esHe> ecu ea ANV m m: ooo.~ ca museums and mo suam> was we Amy 84 Sou- as A $0. am. so aNN RN am Awe sm.NHa- mm.¢ma mm.~a- He.awau ma.aa sm.wa o~.ea oo.~m AHV .m.m sea aeN sea sen soc awuw- emu- aeaw- “NV ms.oma.a mm.mwe «a.amu «a.mm~.a aN.a~w.H -.mmm- no.0ms- Hm.aea- Ame .m.QEoo sea sum and ea as sea sea sea Ame Hm.sa~ so.am~ wa.oo~ mm.ama co.-~ mm.»w em.mm ~m.o~ AHV .m.:.o awn ame sea smm awe amwa- amt- sesN- x~v os.~am.a sa.mam aa.oam wa.o-.a ma.ooa.a mm.aeo- am.oa¢- am.wma- Aav .m.a mama seam mama seam moaa Noam Howe ooaa amass» w m: ooo.~ caliomm was as muuoaxmm.macaaa< no one was no auoommm each was "ma.m magma 85 1960-1962 and is similar to the reaction of Hungary, previously described. From this analysis one can conclude that: 1) There are two separate periods in Albania's export performance to the EEC. From 1960 to 1962, Albania did not share in the ‘gxgggrarea trade expanding effects of the EEC, but from 1963 to 1967, Albania did share very favorably in the overall extra- area trade expanding effect of the EEC. 2) Albania was a weak relative competitor in the EEC's market for ‘gxgggfarea imports between 1960-1962, but a strong relative competitor since 1963. 3) From 1960 to 1963, the prices of Albania's exports to the EEC were above their 1959 level, but from 1964 on, a fall in these prices can be observed, bringing their level below that of 1959. 86 The Effect of the EEC on Hungary‘s Exports to the EEC The Common Market effect for Hungary's total exports to the EEC is shown in Table 3.19. For the period studied, the Common Market effect is small but positive, which indicates that the commodity composition of Hungary's exports to the Community was not very favorable towards the overall trade expanding effects of the EEC. Table 3.19 represents the competitive effect for total exports of Hungary to the EEC. This effect was negative from 1960 to 1962 and in 1964, indicating that in these four years Hungary was a weak competitor in the EEC's market for extggyarea imports, as compared to the "average" supplier of the EEC. From 1963 to 1967, excluding 1964, the competitive effect was positive, which shows that Hungary's competitive position improved over the years. The price effect for Hungary's total exports to the EEC is positive between 1960 and 1967, with the exception of 1961. This demonstrates further the strength of the Hungarian foreign sector, insofar as, during the 1960's, the prices of her exports to the EEC increased steadily and remained above their 1959 level. This favor- able movement in Hungary's export prices occured simultaneously with the increase in her share in the EEC's market for‘gxtggyarea imports . The total effect (Table 3.19) shows that, since 1963, Hungary shared favorably in the overall trade expanding effects of the EEC and even more than the "average" extra-area supplier of the EEC. .< xupceaa< "eousom .mwo metamou ceec e>mc .uceouec eco cecu newuefi .meuawum eweuCeouea HH< . .meouuc uceuuse cu .Umm ecu ou Heuuaasm memenmuuxe ecu mo munoaxe Heuou ac pepu>up .euoewme ecu mo e9~m> ecu mu ANV w m: ooo.~ as museums was mo saum> was ma Auv 87 sea emu , ama aNH as as aw- ea ANV aw.mw¢.m~ ea.as~.m~ om.oso.~u am.asm.mu om.ma¢.m ea.¢ms.m e~.mom.a- sm.m~o.a Ame .m.m sou. amN gem se.a- ao~ emu- sea- ecu- x~v am.ame.am am.moc.uq no.9am.aw mm.amo.a- me.sos.m~ mm.aao.¢a- o~.aao.w- mm.omu.aa- aaav .m. eoo as.u a~.a am.a a~.a am. em. am. an. Awe ma.ama.~ sm.m-.~ aN.HoE.~ Na.~mm.u su.ama ma.Hao ma.m~¢ Ho.aaa Ame .m.z.o son sum eon emu New ecu- sum- Auv aa.oma.mo om.msm.oo am.mso.os as.~o~.mu oo.ama.am so.-a.a- ow.mam.w4 mm.aam.su- Ame .m.a Noam aaau maaa seam moo“ Noam Head seam "mummy w m: ooo.u ca .omu on» o» muuoaxm m.aumw::: so can one we mouommm usoa use "au.m «Hams 88 .< xupCecQ< ”eouaom .wmo pepcsou ceec e>ec .uCeouea eco cmcu uewumu .meuswum ewmuCeouea HH< .weouua uceuuso cw .omm ecu ou Heuucasm meum umuuxe ecu mo amouw muupOEEOU e>uuoeaweu ecu mo muuoaxe ecu ac pepu>up .ueemwe ecu mo enum> ecu mu ANV a m: coo.E cE museums was we anm> was mE REV 3E aE xE 3E sE SE aE go REV wo.ome NE.mmm so.~o~ No.aaE ma.NeE NE.Ea so.wm mm.o~ RE~ .WDCQZ gem eon 3mm aaoE NEE saw aaE em RNV aq.w- Em.amE ma.omE ow.aEE oq.ww m~.~e am.wm a~.wE E . Momcmhh awe gem ace aEm saw seE gaE so RNV oo.omE.~ oo.aaE.E am.m~s.E wa.ooE.E ~m.a~m m~.omm ma.Eom om.aeE RE~ .nuwz aoE- aaE- as- smE- REE- soE- am- . an- RNV Nm.aam- oo.moa- mm.waE- om.moe- a~.aw~- Ee.aaE- ME.oEE- Eo.~m- REM .Eeno a~m Nam xmm xsu NNE aNE am as RNV mm.mmo.E om.oa~.E «c.5aa so.oma am.Esm s~.aom Em.o- as.aa REM meDh emE aEE aEE an as as an aw RNV os.Emm.N 0E.Emm.~ m~.aea.E Ea.msm.E oa.EmE.E ao.oew mm.wmm Ea.om~ RE~ .Emz see an- an- an- as- aw- aw- SE- 3E- RNV No.qoe.m- no.0so.m- Ee.Ema.~- mm.moo.E- mm.ma¢.E- mo.moo.E- am.eao- mE.E~m- RE~ eooa aaaE can maaE san man Nan anE oaoE “apnea masouo huuposfioo ce>em ecu pow uoemmm uecuez 606500 “hwewcsm EON.m eucmw 89 .< xupceaa< Eeousom .wmo meccaou aeec e>mc .uCeouea eco :mcu pewuea .meuswum eweuceouec HH< .meouuc uceuuso Cu .Umm ecu Cu neuaaamm meme ImmuXe ecu mo amouw xuuppEEoo e>uuoeameu ecu mo muuoaxe ecu kc pepu>up .uoemwe ecu mo escm> ecu mu “NV w m: ooo.E aE euuewwe ecu mo e9~e> ecu mu Acv gem son 3am sEN sum as- sou- NEE- “NV oq.Eoo.a «E.~so.mE oo.mea.EE m¢.~oo.m am.aoo.o wo.oam- No.owa.E- sw.oso.E- REM .mscmz aoEE- NEN- awn- seas- eon- aEsE- gaME- aNa- ENC mm.ass- ew.w~E- ea.Em~- mo.mom- mE.e~E- em.mEm- ME.sm~- om.ao~- RE~ . momfimhfi amN awe an aNN- as Eam an an ENC so.~ae.E mm.Em~.~ mo.Ea am.Eaau Em.mo~ mm.amm.E No.mEE -.me RE~ .aosz sow Ne awn- aEE- RE- awn- saw- saw- RNV am.wms.E ma.er Ea.Eo~.E- Ea.wmm- m~.mm- mo.wao.E- ~0.o~m.E- as.an- RE~ .506 aoE aoE- asE- am-. gnu as- aEE aEE- REV mE.sae am.mom- m~.mEs- Es.~m~- ~m.mwo.E am.sEE- oE.MEm we.am~- RE~ 0H0fih aNm awn ea awn aha emu emu ROE- ENC mo.mmo.a EN.oE~.a mm.~sm.E em.sam.a EE.amm.w aw.omm.m am.s~E.m ww.mEE.E- REN .902 30% EKE aaE NEE saw- smE awn- aaE- sum- ENC sm.seo.ow E~.~mm.wE 0E.EaE.oE ma.Ewa.NE- ms.moa.a w~.awm.eE- EE.Ewa.E- sm.EEE.~E- REM coca anE oaaE maaE «aaE maaE NeaE EaaE oan "mummy mmdouw Muupoeeoo.ce>em ecu you uuewmm e>uuuuemEoo uNumwcsm "HN.m eucma 90 The Common Market effect for the seven commodity groups, represented in Table 3.20, indicates that the commodity composition of Hungary's exports to the Common Market was not very favorable relative to the trade diverting effects in agricultural products and chemicals. ‘ The competitive effect, represented in Table 3.21, shows that this country is a strong relative competitor in raw materials, machinery and manufactures, but a weak relative competitor in fuels, chemicals and transport equipment. For food, the competitive effect is unclear. It was negative from 1960 to 1962 and 1964, and ranged from -l7% to -38% of the yearly exports of Hungary to the EEC. From 1965 to 1967 and in 1963, it was positive, ranging from 11% to 17% of Hungary's yearly exports to the EEC. Table 3.22 shows that the price effect is mostly positive for food, chemicals, transport equipment and manufactures, but pre- dominantly negative for fuels and machinery. The total effect, shown in Table 3.23, indicates that Hungary gained more in her exports of raw materials, machinery and manufac- tures to the EEC, than the "average" gxtgayarea supplier. From this analysis, one can conclude that: 1) Hungary shared favorably in the gxggafarea trade expanding effects of the EEC, although the commodity composition of her exports to the EEC was not very favorable. 2) From 1960 to 1963, Hungary's share in the EEC's market for extra: area imports declined, but her position improved strongly between 1964 and 1967. Hungary is a strong relative competitor for raw 91 Imuune ecu .< xupCeaa< Eeousom .mmo pepcmou ceec e>ec .uCeouec eco cecu Eewueu .meuswuw eweuceoueq cc< .meouum uceuunu Cu .Umm ecu ou HeuHQQSm wo amouw huupoEEoo e>uuoeameu ecu mo muuoaxe ecu kc pepu>up .uoemwe ecu mo ezum> ecu mu ANM a m: ooo.E aE museums was mo eace> ecu mu Adv aoE a» sh ENE an- go so amE- REV wa.mEE.m sw.mam.~ mE.maEt~ sm.eoo.m Em.owm- as.a~E.E No.0sm em.ama- REM cwflcwz ENE as am - as- so as am- REV Ee.oa ae.e~ os.- - sa.mE- ma.ME mm.ME E¢.m- E . usmCEwHH. HcE- asE- NEE- awn an an- em- 30. REV ma.ecm- m¢.mma- aa.¢mm- Em.mmm.E me.EmE aE.aEE- aE.mEE- so.~NE- REM .aosz NE so sau REE- am- sea Nam saw REV mm.Ee oa.Em~ sm.~ma mw.sam- mo.ms- mE.mms mm.~sm ma.~ms REM .Eecu aEE- gem- ace- emu- ea- as- aeE- sN- REV ae.e~e.E- sm.eom.E- mm.~E~.E- so.oaa- mE.Ew- ms.EoE- so.Eam- no.5s - REM 0H09h an as NEE am. EEE- as ssN- smN REV so.an ow.oam Ea.smw.~ mm.om EE.oaa.E- sw.awmy EE.wom.~- em.mow.~ REM .UQZ 30m New NON aaE aNE NEE a» NE NE. REV Ee.oms.mm oo.~s~.E~ ma.wam.EE aE.emw.o ma.aem.w ma.mas.m we.aoo E¢.Ewo.E- REM soon NeaE ecoE man san mooE Nan EaaE oan .mtsow mnsouo huupofiaoo ce>em ecu mom ueemmm ecuum "humwdnm ENN.m eHcmH 92 .< xupceaa< Eeousom .mmo meccaou aeec e>mc .uceouem eco cmcu Eewuea .meuswum eweuceouec HH< .meouuc uceuuau Cu .Umm ecu ou heucccnm meme Imuuxe ecu mo asouw huwmoEEoe e>wuoecmeu ecu mo muuoaxe ecu xc pepE>up .uuewwe ecu mo e=Hm> ecu mu ANV w m: COO.H CH muo0mw0 0£u HO 09~0> 0cu mu AHV gem awe gas use emu am seE- gem- REV o~.EOE.EE oE.sEm.eE ew.owm.sE aw.smm.EE Eo.ae~.m Ea.~mm as.eam.E- NE.~EE.N- REM .msawz can- asE awE- samm- NEE- REE- aeEE- use- REV wa.omE- sm.mm ea.ma- aa.mmm- oe.mm4 mm.am~- Ew.Em~- ac.maE- REM , . m.mceua an awe sum see sea son aoE so REV so.EME.m mo.ea~.m mo.amE.E oe.oao.E Em.maE.E so.o~w.E 00.5mm mo.~EE REM .aomz aEE am- asE- aNE- asE- ame- ace- eon- REV m¢.-e mo.m~m- ma.aes- as.aam- c~.mem- 0E.aom- os.qom- ma.oa¢- REM .5030 aeE aoE- aEN- ea- amm am am a»- REV sm.~o~ ms.aam- ea.~mo- ms.wa~- EE.msm.E E~.ssE Ec.msE «E.me- REM 0H0§h gas awe sum see ans aEm aoE aEE REM Eo.wom.oE EE.Ewa.oE mm.sam.o mE.er.a Ea.oEE.E om.oma.e aE.sao.E aw.esa.E REM .802 30% smm gem sum NEE- sNN gum- NEE- Nam- REM aE.Emm.am em.m~m.om om.wom.m~ E~.an.m- os.EEo.oE Ea.mma.mE- me.mma.a- oa.sEm.mE- REM coca aaaE oaaE man saaE meaE NaaE EeaE oeaE uses.» mmwouu Nuuposaou ce>em ecu pom uoemwm Hmuoa Emwmwwsm Em~.m ecceh 3) 93 materials, machinery and manufactures, but a weak relative competitor in fuels, chemicals and transport equipment. The prices of Hungary's total exports to the EEC were well above their 1959 level and increased steadily over time. 94 The Effect of the EEC on the Exports of the German Democratic Republic (GDR) to the EEC. The exports of the GDR to the EEC do not include exports of this country to the German Federal Republic (GFR), since these are registered as iEEEErGerman trade. My figures will, therefore, only partially estimate the effect of the EEC on the exports of the GDR to the EEC, not including the GFR. The GDR received a share of the extagyarea trade expanding effects of the Common Market. This can be seen in the positive Common Market effect for total exports of the GDR to the EEC, re- presented in Table 3.24. The competitive effect for total exports, shown in Table 3.24, is also positive between 1960 and 1967, with the exception ef 1962. This shows that, from 1960 to 1967, the GDR, measured in constant prices and exchange rates of 1959, shared more in the trade ex- panding effects than the "average" gagggfarea supplier of the EEC. From 1960 to 1967, the export prices of the GDR's total exports to the EEC have been below their 1959 level, as can be concluded from the negative price effect represented in Table 3.24. The total effect, shown in Table 3.24, is positive, with the exception of 1962. This indicates that, measured in current prices, the GDR still shared in the EEC's gxgggrarea trade expanding effects to a larger extent than the "average" gigggrarea supplier of the EEC. 95 .0mm ecu ou neuacasm meumueuuxe ecu «0 .WHO UOUGQOH C003 .< xupCeac< “eousom e>ec .uceouea eco cmcu Eewumu .meumwuw emeuceouec uH< .oeouuc uceuuau cu muuocxe Heuou 5c pepu>up .muoewwe ecu «0 emue> ecu mu Amy w m: ooo.~ :u mueemwe ecu mo esum> ecu mu Acv NE- am.~- aa. as- an- as- an- as- ENC mo.MOE.~- s~.eom.~- c¢.oaa.m- mm.amm.~- m~.mma.u- so.m~a.E- mu.mam.E- am.eem.~- REV . - - .E.a emu sea aaE soE am aEE- an aeN ENE mm.~ma.mm ms.eao.e~ oo.oma.mE mm.EEo.E ma.Emw.s Eo.Eae.m- Ee.~Em.E aE.asm.mE REV .m.asoo as as as as ea an sE aE ENE aa.maE.m Na.aam.a Es.mse.m o¢.a~a.~ Eo.mm~.E mm.omo.E wa.aaE.E NE.~OE REV . . . I OWOZOU aEm emu NEE NEE ea REE- aE aEN ENE sm.msa.om EE.oEe.m~ Eo.mwm.mE Em.mme.a wo.ooE.s oa.¢ma.m- sa.CME.E s~.mma.EE REV .E.a anE aaaE maaE saaE neaE NeaE anE oan "mussa a a: coo.E cE .omm was as mutoawm ...a.a.u was so one was me snowmen “soc was us~.m .Easa 96 .< xupCecc< nevusom .wwo pepczou ceec e>mc .uCeoueQ eco cecu uewueu .meuswuu eweuceouen ~H< .eeUEua uceuuao Cu .Umm ecu ou ueucacsm meum leuuxe ecu mo asouw muupoEEoo e>uuoeameu ecu mo muuoaxe ecu kc pepu>up .uoemwe ecu mo esue> ecu mu ANV a m: coo.E eE assumes was Ea m...EE; was .E REV aE.~ ae.E as.E s~.E am. as. as. aw. REV mm.m~a aa.aEm ea.Ess Em.mmm sm.ss~ No.0eE q~.ooE ms.ms REM .Escmz REE as Ea NE so NEE at an REV sw.mms oo.sam om.com NE.mmE wa.aaE sE.sEE 0E.EE we.am E . m.mCOH.H aka awe «Ea sEs son NOE asE an REV as.aao.m ae.~ao.a ma.ama.a mm.Eos.a s~.oa~.m E~.Eom.~ so.ame.E ~o.mao REM .numz awn- Ram- aaN- NEE- saE- asE- an- an- REV ~a.moe.m- aw.sam.s- Eo.mam.m- om.owm.~- mm.oow.E- o~.sE~.E- a~.maa- Em.s~m- REM 2:06 am aEE a» as so so an an REC as.Ems wa.qmm mm.aa~ mm.m- mm.EaE wE.aoE ae.me ao.a~ REM 0HODm an am so an as as amE aE REV so.aoe oE.Emm mm.maa ma.wam mm.wm~ mm.eo~ om.mm~ Ea.Na REM .3: 33E NE- NE- aN- aE- ea- as- NE- sm.- REV Ea.mmE- oa.maE- we.amE- as.a~E- mE.ea- am.ma- Em.ms- Eo.o~- REM eooa anE aan man san man NeaE anE oeaE "mummu w m: oom.E cE mucus EEEeoeeoo nus. EOE somuum Emacs: season ".a.a.o "mm.m .Easa 97 .< xupceaa< "eousom .wmo pepcsou ceec e>mc .uceeuec eco cmcu newuea .meuswuw ewmuceouea H~< .meeuua uceuuso cu .omm ecu ou neuuaaam eeum neuuxe ecu mo csouw huupoeeoo e>uuoeameu ecu mo muuoaxe ecu kc pepu>upr.uoemue ecu mo esue> ecu mu Amv » m: coo.E cE ..Eosuuo was u. 3E3 was .E REV ea- amE aEN aEE aNE sE NEE saw REE Em.EEa.E- aa.oEm.s oe.woe.m oa.~oo.m mm.aao.e No.0eE oa.wom.m em.asm.a REM .Escmz sen Eco awe awe ans xma as an- REV om.¢~a .aw.aaa N Eo.sma N ma.ooE N mm.ooa s~.eEE 0E.am- Ew.E~. REM . M.m:0.H.H as- as- an RME- as aCE son REE REV mm.~so- mo.ooo- mm.osa mm.mmm.E- ma.mme EN.Eom.~ am.meE.m Ew.aaE.E REM , .;umz awe aNOE- saw- aEE- as»- asE- eon- REE- REV em.w~m.a- sE.E~o.EE- ao.mss.a- me.smo.w- mm.mEm.a- o~.sEE.E- mo.om~.m- wo.wam.~- REM .806 saw goo ama ama sea as ash “Em REV oa.aas.m wa.emo.~ NE.mom.~ oo.mo¢.~ m~.sma.E wE.aoE «E.aEm.E mE.ae~ REM 0H05h 30E . NEE amm amE NEE as sau- was REV wo.eaw.a mm.mm~.s ea.oEE.s sm.mmE.E mm.oEE.E mm.oom oa.m~o- se.E~m.m REM - .umz 30M awe sow awe New use so- Nos- New RwV om.qem.a~ cE.mmo.~E em.¢sE.m as.mao.m ma.aE~.E Em.wo- sm.oam- so.omE.m REM coca EeaE ean meaE seaE mooE anE anE caaE uses.» mQDOHO huHUOEEOU C0>0m 0£u HON uo0mwm 0>Hufiu0nu800 u.M.G.0 "0N.m 0H30H. 98 The commodity composition of the GDR's exports to the EEC is favorable vis-a-vis the gxgggfarea trade creating effects of the EEC. This can be concluded from the Common Market effect for the seven commodity groups, shown in Table 3.25. In spite of the trade diverting effects of the EEC in agri- cultural products, the exports of food from the GDR to the EEC increased six times between 1960 and 1967. The positive competitive effect overshadows the negative Common Market effect for agricultural products completely (see Tables 3.25 and 3.26). The GDR is a strong competitor in food, raw materials, fuels, transport equipment and manufactures, relative to the "average" gxggggarea supplier of the EEC, as indicates in Table 3.26. The GDR is a weak relative competitor for chemicals; in 1964, 1966 and 1967 it was also a weak competitor for machinery. In the other years between 1960-1963 and in 1965, the GDR was a strong relative competitor for machinery in the EEC's market for gxgggrarea imports. The price effect for the seven commodity groups is represented in Table 3.27. In the 1960's, the prices of the GDR's exports to the EEC of food, fuels, machinery and manufactures were mostly below their 1959 level. From 1960 to 1967, the prices of the GDR's exports of raw materials and transport equipment to the EEC, were predominantly above their 1959 level. The total effect for each commodity group, as shown in Table 3.28, indicates that for raw materials, fuels, machinery, transport equipment and manufactures, the GDR shared in the trade creating 99 Imuuxe ecu .< xupceca< nevusom .mmo metamou ceec e>mc .uceeuea eco cmcu Hewuea .meuswuu eweuceouec HH< .meeuun uceuuso cu .omm ecu mo ueucccsw eeue mo amouw huupoeaoo e>uuoeameu ecu mo muuoaxe ecu kc pepu>up .uoewwe ecu mo eace> ecu mu ANV a.m= coo.E aE museums oEE no maEs> «Eu «E REV as we- amE- awE- at- RN- an ac REV an.mmm.E mm.aoe.E- mm.maa.m sa.wow.s- ~a.aaa.E- cE.oEm- mo.cme Em.~eE.E REM .Escsz ea aw- , RE RE- am NEE an sew REV sE.wa~ am.mm- ma.EoE Ea.ms- ma.we ~a.mo‘ se.ae( mm.me~ E . m.m60HH. an- am am. so. an- sEE- me- sEE- REV as.aEw- ae.oam Ea.mw~- mm.Ea oa.mm~- oa.awE.E- oo.~om.E- aE.owm- REM . .Eomx ea- NE. sE an as as.. aE 3E REV o~.Eeo.E- ma.m~ Eo.ecE Em.owm «a.mem ma.¢m- ma.ooE om.EE REM .Esao aoE- aaE- 30E- EME- awE- NEE- amE- awE- Rue mm.~ma- so.mmm- «E.~Em- ~a.aEs- cm.aos- ou.mmm- aa.mse- ms.amE- REM mH0$h . as- soE- as smm EOE so am «a REV as.mom- Na.mee- as.EEm Em.aea.~ em.EE~ Em.me~ aa.on Ee.Ema REM .umz 30M xE- a - NEE- a¢.- aoE- NCN- aaE- REE- REV sa.¢m¢- o~.Eom- Eo.Noe.E- Ea.am- aw.esa- wo.ma~- Em.~oe- Em.oae- REM coca acaE san meaE san mooE EmaE anE oan norms» madouu qupoeaoo ce>em ecu How uoemmm eouum E.M.a.0 ENN.m eucma 100 leuuxe ecu .< xupcecn< Eeousom .mmo pepcsou ceec e>ec .uceuuea eco cecu uewumu .meuswum emeuceeuec H~< .meouua uceuuau cu .omm ecu mo Heuuccsm menu 00 asouw huupoEEoe e>uuoecmeu ecu mo muuoaxe ecu hc pepu>up .uuemme ecu mo e=He> ecu mu Amy 0 a: coo.E aE sumac. on» ma ano> «Eu .E REV so aEE soE as soE aE amE REE REV Em.oEE oo.ama.m a~.mEE.m «E.NME.E me.mam.e Em.mEE as.m~E.e ma.Ema.e REM .Esaoz saw sea sma REE sen sue- amE ama REV ew.mEa.E om.oao.m so.amE.m mw.aee.~ so.o~E.E os.omm- am.smE oo.ma~ E p . u.e:eua «as was fine saw sun awn son ENE REV as.ao~.a mm.aem.o om.EEo.e mm.oEE.m as.ooe.m m~.Eam.m om.omo.m «m.sma REM .aumz aoEE- sEeE- aEEE- sEa- goo- gas- sac- emu- REV mE.maE.oE- Em.oaa.mE- mo.smE.EE- ea.mE~.oEu Ee.sms.o- ao.mem.m- Eo.msw.m- mE.NEa.~- E . , .55 Non sEo ecu sac use sEm flan 30E REV am.¢aa.s ~o.wwo.E om.mmm.~ o~.mE~.~ Em.eaa.E aa.oEa am.EME.E m¢.¢mE REM . . eueah sea so» sac son sEs sEN REE- ans . REV mo.mwo.oE EE.EEE.e mm.aoE.m EE.aEw.m EE.¢MR.E oa.omo Ea.mN~- eE.E~E.e REM .udx 30m Now an» eon Ema REE aosE- RE»- sEs REV Es.wow.m~ oo.maw.E~ Em.NEm.o oo.a~a.s Ea.EEE.E mE.a~e.E- mm.EEm.E- oo.ome.~ REM eooa aaaE eeaE man san man NCOE anE oeaE nous.» easouo huupoaaou ce>em ecu now uoemmm Heuoa ".m.n.o EQN.M eucua 101 effects of the EEC more than the "average" gxgggrarea supplier to the EEC. It also shows that the GDR suffered more from the gxggafarea trade diversion in chemicals caused by the EEC than the "average" ‘gxgggfarea supplier. From these observations, one can conclude that: l) The GDR has shared favorably in the overall gxggayarea trade expanding effect of the Common Market. 2) The GDR's share in the EEC's market for gxgggyarea imports has increased, relative to the share of the "average" gxggararea supplier. The GDR is a relatively strong competitor for all commodity groups, except chemicals, in the EEC's import market. 3) It may be that this strong relative competitive position came at the cost of a fall in the GDR's export prices. 102 The Effect of the EEC on Poland's Exports to the EEC The effect of the EEC on Poland's total exports to the EEC is presented in Table 3.29. From 1960 to 1967, Poland shared favor- ably in the trade expanding effects of the EEC, except in the year 1964, when the total effect for all Polish exports to the EEC was negative. The commodity composition of Poland's exports to the EEC was favorable towards the trade expanding influence of the EEC, which can be concluded from.the positive Common Market effect between 1960 and 1967. Poland is a weak competitor in the EEC's market for‘gxgggyarea suppliers of the EEC. Between 1961 and 1966, the competitive effect is negative and large, relative to the actual exports of Poland to the EEC in current prices. The predominantly positive price effect indicates that, during the 1960's, the prices of Poland's exports to the EEC were above their 1959 level. The gain from favorable export prices partially compensated for Poland's weak competitive position as measured in constant prices and exchange rates of 1959. A detailed analysis of the four effects for each of the seven commodity groups will give an explanation of my previous conclusions related to Poland's total exports to the EEC. The bulk of Poland's exports to the EEC is in the form of agricultural products for which the EEC has a trade diverting effect, .< Kupceca< Eeousow .mmo pepcsou ceec e>mc .uceouea eco cecu uemuec .meuswuw eweuceouec cud .meouuc uaeuuau Cu .umm ecu ou ueuccasm eeumleuuxe ecu mo muuocxe Heuou Ac pepu>up .ouoemme ecu mo eaue> ecu mu ANV a m: coo.E cE «assume on» ma gEg was mE REV 103 EE.E EME asE as.E sEm an.- EE.EE aE.E- REV mm.ocE.aE sa.smm.Em mE.oEo.Em mm.Ewm.~E mw.wms.sE sm.mma- m¢.am~.mE as.EaE.~E- REV . .m.m Ea.~ EN.E- aa.m- a~.-- am.m- as.m- so.a- so.s~ REV au.m~a.o Eo.oom.EE- ac.mse.aE- oa.ooE.wm- No.saE.aE- sm.mam- oE.mEa.sE- Em.emE.~s aREV Om. ECU ea so.m EE.m aE.m am.m ao.~ ao.E Ea. REV ao.omE.wE mm.m~s.eE oE.m-.EE so.mas.m NE.¢EE.¢ aE.EE~.e so.mmm.m aE.moE.E REV .m.=.o EEE sEE aoE aoE- an EE am amE REV mm.omm.om Om.oeq.w~ aE.Eam.- Ea.o-.EE- ma.mae.m Em.omm.~ om.¢~a.m s~.mmE.Em REV .m.H EmaE san man «aaE man «aaE anE oan "stoma w m: OOQEE aE .omm ecu oE mEanxm m.ec.Eom co 0mm ozu mo maomuum upon «ea "o~.m mEama 104 as indicated by Table 3.30. In 1960, the share of agricultural products in Poland's exports to the EEC was 56%, but by 1967 this share fell to 43%. This shift in the composition of Poland's ex- ports to the EEC was favorable in relation to the trade diverting effects of the EEC on her members' imports of agricultural products. Although chemicals are a minor part in the exports of Poland to the EEC, the trade diverting effects of the EEC were considerable as can be observed in Table 3.30. The share of chemicals in Poland's total exports to the EEC was 7.5% in 1960. It was unfavorable that this did not change between 1960 and 1967, considering the trade diverting effects of the EEC in this commodity group. The share of fuels in Poland's total exports to the EEC fell from 14% to 13% in spite of the trade creating effects of the EEC for fuels. This can be explained by the fact that Poland was a major exporter of industrial coal to the EEC and that, in the 1960's, a substitution of coal for oil took place in the EEC countries. In addition, the EEC countries buy most of the industrial coal they need from their partners, Germany, France and Belgium which are major producers, while virtually all crude oil and some oil products are imported from non-members. The share of raw materials, machinery, transport equipment and especially manufactured products in total exports of Poland to the EEC, increased between 1960 and 1967. Because the EEC had a trade expanding effect on her members' imports of these commodity groups, it is clear that Poland has profited from the shift in the commodity composition of her exports to the EEC. Both 105 .< xupceca< ”eousom .mmo,cepcaou ceec e>mc .uceouen eco cecu Hewuec .eeuzwum ewmuceeuea HH< .meUuuc uceuuso Cu .omm ecu ou neuuaasm eeue neuuxe ecu mo amouw auupoEEoo e>uuoecmeu ecu mo muuoaxe ecu ac pepu>up .uoemwe ecu mo ezue> ecu mu ANV m m: coo.E aE museum. «as «o esam> ecu mu Auv sE.~ aa.E aw.N am.E am.E aE so. an. REV oo.amo ma.-m ~m.mo¢ NE.eom wo.E- N~.omE ca.oa oE.Es REM .usamz a¢.e am.e a~.a aa.a - aw.~ so.s am.E REV aa.~m~ Eo.ao~ as.moE Em.a~E oc.aa oa.we oE.ms mE.o~ E . m. mCflHH NEN NE.E~ a~.o~ aa.a~ aNE am.E~ am.oE am.e~ REV mo.e~o.E wo.omm ao.weo om.o~m ma.wmm «E.~EE EE.oEE Ee.aa REM .aumz REE- am.o~- NE.E~- as.EE- a~.mE- aoE. an- a~.~- REV wo.soa.eu mm.¢¢w.m- mo.~ma.~- oo.mo~.~- Ea.owm.E- om.~eo.E- Em.emo- 0E.sw~- REM .806 ass.Em ems am.me am.mm a~.mN so.wE NEE aE.m REV 0E.mma.o~ Ne.woa.aE mw.qmo.~E Em.omm.a mm.mmm.o «c.9ma.e aa.Eow,~ mo.mo~.E REM mH09h Nm.a an.» ea ao.a aa.o aa.a am.m aw.E REV mm.m~a.e Em.EEE.e Em.~om.m mm.sao.~ No.Eso.~ oo.Eee.E mm.oEa mo.mss REM .mp0: 30% sE.a- s~.m- am.m- am.m- aE.~- aa.E- aE.E- as.- REV es.oam.s- EE.oEm.m- oo.aoE.m- Em.Nea.~- mm.EEm.E- Eo.mmm.E- mm.aem- mm.~os- REM , eooa acaE eeaE meaE aeaE man NeaE EsaE ceaE «mus.» mmdouw auupoEEoo ce>em ecu uom uoewmm uecuez coEEoo "camcom "om.m eccma 106 umuuxe ecu .< xupceaa< ueousom .mwo pepcsou ceec e>ec .uceouec eco cecu uewuea .meuzwuu ewmuceouec Hc< .meouuc uceuuso cu .omm ecu ou neucacsm eeue mo aoouw auupOEEoo e>uuoeameu ecu mo muuoaxe ecu ac pepu>up .uoewme ecu mo escm> ecu mu RNV m we ooo.E,eE mucouuo was we mBEE; «Eu mE REV as.~- am.sE- ao.Ew- aE.o~- aw.mE- aa.E~- as.oa- so.o~- REV mm.ama- om.oma.m- aa.cmo.EE- em.o~o.s- oa.ouo.a- oa.an.s- oN.oms.a- Em.asm.m- REM .HDCQZ NEE am.om~ as.mm a~.sa~- - aE.me am.OME am.mmE REV wo.Eeo.m em.oom a EE.oao E mm.aas- aE.eEe- oa.omm E Em.sso E sm.mEE E REM . . . m.m60H.H as.~o aw.oo ao.am aa.m~ aE.mE am.s- a~.am am.mmE- REV NE.mmm.~ o~.Emm.E E~.mom oo.qom Ec.EoN No.sm- oa.~Eo s~.~oo- REM .Eomz am.-- am.aa- aa.mm- am.au- am.as- as.mm- am.-- aa.m- REV oa.amm.a- mm.ama.o- ~a.oam.¢- ~m.aae.m- mE.eeE.m- ca.maa.m- Ee.mwm.~- mm.maa- REM . .Eeco sa.ma- am.EME- am.mEE- REau aE.Eo- am.wm- 3E.~s- am.w~- REV mm.eea.em- NE.aom.sm- EE.omo.Em- mo.mEm.eE- so.ma~.mE- ao.aam.sE- EN.Eae.oE- Es.Eso.E- REM ocean sm.oo sen ae.am aa.E~ NE.mm son as.eE am.~m REV mE.am~.Em NE.awm.EE aw.mma.sE mm.Ewm.a ae.moE.~E Ee.moa.oE EE.aEm.s o~.wom.a REM ” ......z .3 am.m- aE am.~E a«.-- an. as.oE NE ass REV E~.aEa.m- oa.omE.E mm.oas.EE QE.EEa.mE- am.mEm c¢.¢om.m as.EmE as.oam.ss REM _ . Hooch anE oaaE man san man anE EeaE oan ..Es.» mqnuOHO NWHMVOEEOU 60>0m 08H HON u00mmm 0>fiuwu0m800 "ficmfiom "Hm.m. 0H£0H 107 the shifts in, and the overall composition of Poland's export commodity mix to the EEC, were favorable with respect to the ex- ternal trade expanding effects of the European Common Market. Poland is a weak relative competitor in fuels, chemicals and manufactures, but a strong relative competitor in agricultural products, raw materials, machinery and transport equipment.(Table 3.31). The competitive strength in machinery and transport equipment, as indicated by the model, is partly the result of the extremely low level of exports of these products to the EEC during the 1950's. Poland's share of raw materials, agricultural products, machinery and transport equipment in the EEC's market for gxggararea imports has been growing faster between 1960-1967 than the share of the "average" gxggayarea supplier of the EEC. In spite of this favorable development in raw materials, agricultural products, machinery and transport equipment, I concluded earlier that the share of Poland's total exports to the EEC was falling relative to the share of the "average" gxgggfarea supplier, where both shares are measured in constant prices and exchange rates of 1959. During 1960-1967, the prices of Poland's exports of food, raw materials and chemicals to the EEC, were generally above their 1959 level. The prices of Poland's exports of fuels and transport equip- ment to the EEC were lower during 1960-1967 than in 1959. This can be concluded from the negative price effect for these commodity groups presented in Table 3.32. It can also be concluded from this Table, that during 1960-1967, the prices of fuels steadily declined. 108 neuuxe ecu mo acouw auupoEEoo e>uuoeameu ecu mo euuoaxe ecu ac pepu>up .uoewme ecu .< xupcecc< ”eounom .wwo pepcnou ceec e>mc .uCeeEea eco cmcu uemuma .meuswum ewmuceouea HH< .eeouuc uceuuno Cu .omm ecu ou Heuccaae meue mo eace> ecu mu Amy m m: ooo.E cE museums ecu mo eace> ecu mu aHV aE.m a~.EE sa.~m an .as.E- sm.q- am.- an. REV ms.ooo.E mE.sEE.m aw.oao.e EE.EEo N~.me- aa.-©- oe.om- 0E.ma REM .wficmz NE aa.swE- as.oE as- - as.wu- aw.ma- aa.~a- REV as.Es mm.~aa a- om.EwE om.e- - Eo.Eae- Em.m~o- as.o~a- REM . m.mCmVHH aa.oE- aa.wE- ao.m- am.oE- am.~E aa.mE an. am.~ REV oh.aqe- EE.EEm- No.~a- mm.amE- sm.E- om.eEE ca.» as.w REM . .Eomz aa.a aa.a am.a am.m- sa.a aa.a am.~ am.aE REV oa.asm.E mo.c¢m.E aa.mmo.E ao.m~¢- ~s.oEm me.EaE wa.aa~.m oa.Eem.~ REM .Eecu aN.sE- am.om- a~.oE- aa.m- .ae- aa.a- aa.E- ae.u- REV Eo.asE.m- Em.owa.a- oo.asm.~- 0E.¢am.Eu om.aoE.E- mE.Eae.E- aa.¢ae- Em.saa- REM 0HODh EN.a- ae.aE ao.mE aE.~E aa.- Ea. am.aE aw.E- REV am.¢om.s- EE.Eaa.o om.woo.m EN.am~.e o~.mEm- mo.oE~ EE.Eom.e wa.ass- REM .....02 30M aa.m~ aE.EE aa.s~ am.mE aE.EE aE aa.sE am.ME- REV os.moa.e~ ow.-~.mm ca.waa.u~ ea.Eae.a Ew.EEa.mE Ea.aew E~.omw.EE Eo.oea.~E- REM eooa EaaE san meaE eaaE meaE NeaE anE oaaE "stoma wmaouo auuposeoo ce>em ecu How uoemmm eouum Epcecom "Nm.m eccea 109 The price effect for machinery indicates that prices increased between 1960 and 1963, but declined between 1964 and 1967; while the price effect for manufactured products shows a fall in Poland's export prices between 1960 and 1963, it also shows a rise in prices between 1964 and 1967. The prices of Poland's total exports to the EEC during the period 1960-1967 were above their level of 1959. In spite of the trade diverting effects of the EEC on her members' imports of agricultural products, the total effect for this commodity group was positive as shown in Table 3.33. Poland has especially gained from the formation of the EEC in her exports to the community of raw materials, machinery and transport equipment. Although the EEC had a trade expanding effect on her members' S§££2f area imports of fuels, Poland's exports of fuels to the EEC have suffered from the formation of the European Common Market for reasons previously explained. The total effect for chemicals and manufactures is negative, indicating a decline in Poland's share of the EEC's market for gxgggrarea imports of these products. The total effect of the EEC on Poland's total exports to the EEC was positive and indicates that Poland has shared favorably in the overall EEEEEC area trade expanding effects of the EEC. From the previous analysis, one can conclude that: 1) Poland has a commodity composition of her exports to the EEC which is favorable towards the gxgggyarea trade expanding in- fluence of the EEC. Poland has shared favorably in the trade expanding effects of the EEC. 110 Imuuxe ecu .wwo vepcmou ceec mo asouw auuposeoo e>uuoeceeu ecu .< xupceac< "eounom e>mc .uceouec eao cecu uewumc .eeuswum eweuceouec HH< .meouuc uceuusu cu Eomm ecu ou ueucaase menu a m: coo.E aE mo euuoqxe ecu ac pepu>up .uoemwe ecu mo esce> ecu mu RNV muo0ww0 0£u HO 0:H0> 0£u ma Adv Ea.~ x~.E- aw.ms- am.mE- aa.m~- NE.Em- aoa sea REV oE.mEm ma.amm- mw.smm.a- E~.moE.m- om.mso.e- mE.eEm.e- oa.ame.a- mo.om~.m REM . .uacmz as.sw awn Nah NE.E-- . am.ma Nos s¢.ma REV mm.Eom.m aE.mEa E EE.m~e.E Nw.eam- ma.aEm- ma.Ema E ae.eee mE.mow . REM m.mdm.HH. am.aa ae.ao a~.oe aa.ae ao.ae sE.Em awe aE.me- REV me.mmE.m EE.er.~ w~.amm.E Ew.mmm om.aaw No.aam Es.EaE mE.sEm- REM .Eusz aa.am- awe- Ea.Es- sm.we- Em.am- aa.am- aa.E- ae.EE REV «E.Nss.a- Ea.mme.a- oa.mEm.a- Em.aoE.e- sa.sEN.e- Em.oao.e- mE.N-- aa.mms.E REM .8050 aa.~m- aa.EoE- s~.wa- a~.~o- aa.ma- am.as- amm- aEE REV ma.aao.aE- EN.~wo.m~- ao.mem.E~- wo.~am.eE- aE.aEm.~E- oo.Emo.EE- eE.emm.w- mo.o~a.e- REM mH0—uh so.oo aam am.Eo ao.aa so.me aa.Es am.am am.~m . REV EE.eoa.Em ma.~a¢.m~ ME.EEE.m~ ms.msw.oE e~.Emm.ME oa.mwm.~E oe.mmo.a mw.Eom.E REM .umz 3mm aEHeE am.mu aa.mm a~.~E- ae.mE am.a aE.eE aa.~m REV mE.EoE wE em.mom.om aE.oom.Em EE.qu.m- mm.Eoo.eE «E.Emm.a E~.aoE.EE mE.sm~.Em REM coca NeaE oeaE man san man NaaE anE oan amuse» nmwouu auupofiaoo ce>em ecu pom woemuu HeuOH "camcom Emm.m eccoa 2) 3) 111 Considering her total exports to the EEC, Poland is a weak competitor in the EEC's market for gxggafarea imports relative to the "average" gigggrarea supplier of the EEC. Poland is a weak competitor in fuels, chemicals and manufactures but a strong one in agricultural products, raw materials, machinery and transport equipment. During the 1960's, the prices of Poland's exports to the EEC were above their 1959 level. The gain from favorable export prices partially compensated for Poland's weak competitive position measured in constant prices and exchange rates of 1959. 112 The Effect of the EEC on the USSR's Exports to the EEC The effect of the EEC on her members' total imports from the USSR can be seen in Table 3.34. The total effect is positive in most years, indicating that the USSR has shared in the overall trade expanding effects of the EEC. The total effect ranges from -5.7% to 15% of the USSR's yearly exports to the EEC in current prices, and is highly volatile during the period 1960-1967. The three components of the total effect are: the Common Market effect, the competitive effect and the price effect. The positive and steadily growing Common Market effect of total Soviet exports indicates that the USSR has a favorable commod- ity composition of her exports to the EEC relative to the gxgggyarea trade expanding effects of the Six. The competitive effect is predominantly negative during the period of 1960-1967 and indicates that, if measured in constant prices of 1959, the USSR's share in the EEC's market for gxgggyarea imports has been declining relative to the share of the "average" igxgggyarea supplier. The negative competitive effect fluctuates from -l.7% to -l3.3% of the yearly Soviet exports to the EEC in current prices. In 1961, 1963 and 1967, however, the competitive effect was positive and ranged from 2.9% to 14.4% of the USSR's exports to the EEC in current prices. In these three years, the USSR's share in the EEC's trade eXpanding effects was larger than predicted on the basis of the performance of the "average" extra- 113 cu .Umm ecu ou EeuHamam eeumnmuuxe ecu mo euuoaxe HeuOu .mmo pepcsou :eec e>ec .uceouec .¢ xupcecc< nevusom eco cecu uewumc .eeuawum eweuceouec cc< .eeouua uceuusu ac pepu>um .muoewwe ecu mo e3Hm> ecu mu Amv m: coo.E aE mEerum onu E0 2.E2 was mE REV aa.e- an a~.- as.s- am.m- am.~- as. am REV mR.REE.em- Ea.oRa.~m Ra.~wE.E- oo.Rwa.m~- ae-Eam.Om- oe.EEN.EE- ma.~am.~ Es.Rom.m REV . . .m.m aw.m am.ME- am.R- as.m- as.sE am.a- am.~ ER.E- REV mo.oas.aN ao.~ma.em- mE.Esm.es- aq.an.mE- ae.oEm.~m am.Rse.Ee- mo.Eeo.ME am.mEo.R- aREV 0m. ECO xe.mE am.eE as.EE am.oE as.R $0.0 am.m am REV Em.mEo.wEE mo.EEE.ma oa.mea.sa E~.eoE.Rm aE.saa.Ee oo.ama.w~ mm.osR.RE sm.ERE.m REV .E.z.o am.eE amo aa.e aa.E amE aR.m- am.R am.~ REV ma.m~a.EEE m~.mmE.Ee Ew.owm.a~ «R.RRR.sE «E.asa.ma me.aEa.e~- mo.ooo.sm om.ams.a REV .m.H Ran asaE maaE seaE meaE NeaE anE oeaE "assay a m: coo.E cE.+oEE was as .Euoamm ..amma was so oEE was no msosuum Essa use "sm.m mEEma 114 .< xupceca< ”eousom .wwo pepcsou ceec e>ec .uceouea eco cmcu uewumu .eeuswuw ewmuceouea cc< .eeouuc uceuuau cu .omm ecu ou neucaaoe eeue umuuxe mo aoouw auuvoeaoo e>uuoeameu ecu mo euuocxe ecu ac pepu>up .ueewme ecu mo ezce> ecu mu RNV a m: coo.E eE museums «no «o 0:E.5 was .E REV aa.~ sw.E am.E us.E Ea. am. so. NE. REV ae.~ee.u -.sma.E as.aEm.E sa.msE.E mE.eNm mm.Eem ma.wmm mm.mmE REM . .Esamz ua.e xe.e s¢.n ac am.a Ea.~ am.m aa.E REV Rm.E~E oa.aa ao.om oo.~o ma.ee wo.mm ca.o~ ER.¢ E . m.mCOHH «E.oE au.oE aE.EE a~.eE «E.RE am.oE am.m am.m REV ms.moo.E mw.-m EE.mme mo.~Em om.~mm me.mo~ Na.ReE oa.wR REM .aumz u~.E~- ao.a~- smE- 3E.o~- aN.sE- amE- aE.m- aa.~- REV NR.ema.w- ao.mao.a- oa.oEe.m- 0R.oso.e- mo.aam.~- me.oqa.E- RR.~eE.E- ma.o~m- REM .80r—U aE.Em a~.~m aa.m~ am.mE an.ME am.o~ am.a as REV oe.~ms.ma Em.msa.ma am.oEo.Rm mm.oem.us we.ema.om w¢.m~a.o~ R~.mam.~E ~e.mme.m REM . ecesm a~.mE NME REE as.oE an.» NE.E aa.e a~.~ REV aw.mmm.mm mo.RNm.a~ as.eeE.e~ wa.so~.aE mm.ame.eE ER.Eae.oE Em.mae.o oR.me.m REM . .uez 3mm aw.w- am.a- 3E.e- ao.oE- am.m- aw.~- aN.E- aw.- REV wa.mom.¢- Em.maa.m- ae.mm~.m- mN.RRm.N- we.wma.E- ao.Ram.E- sa.owm- so.E~a- REM eooa ReaE aeaE maaE eeaE meaE NeaE EeaE can Hausa» mnHQOHU HHGOEEOU G0>0m 0S... HON HUOHMM u0v—HNZ $08800 “MmmD "mm.m 0Hn—0H. 115 area supplier of the EEC. The price effect is negative from 1962 to 1965 and also for 1967 and indicates that the prices of the USSR's exports to the EEC fell in this period relative to the export prices of 1959. The range of the negative price effect, as a percentage of Soviet exports to the EEC in current prices, is -.2% to -8.8%. In 1960, 1961 and 1966, the price effect was positive and ranged from .6% to 5% of the value of the USSR's exports to the EEC in current prices. Con- sequently, prices of total Soviet exports to the EEC were volatile during 1960-1967 and they had an overall tendency to fall. The underlying causes of these results can best be observed by a study of the four effects of the EEC on each commodity group. In Table 3.35, considering the periods 1951-1959 and 1959-1967, one finds that the EEC has a trade diverting effect only for food and chemicals. Although food is a major component in the USSR's exports to the EEC, its relative importance declined between 1960 (11%) and 1967 (7%). This shift in the commodity composition of the USSR's exports to the EEC was a favorable one, relative to the trade diverting effects of the EEC. The share of chemicals, a minor part in the Soviet exports to the EEC, increased from 4% in 1960 to 5% of total Soviet exports to the EEC in 1967. This is an unfavorable shift in the commodity composition of Soviet exports to the EEC, relative to the trade diverting effects of the EEC. However, this unfavorable shift is negligible in absolute value. 116 The bulk of the USSR's exports to the EEC is raw materials, fuels and manufactures, for which the effect of the EEC on her members' imports was found to be trade expanding. Machinery and transport equipment are a small part in the USSR's exports to the EEC but, for both commodity groups, the formation of the EEC had a strong trade expanding effect on her members' gxgggrarea imports. Consequently, the study of the Common Market effect for each commodity group explains the large pOsitive Common Market effect for total Soviet exports to the EEC. The USSR is a weak relative competitor of food, chemicals and manufactures, as can be seen in Table 3.36. The problems in the USSR's agricultural sector are well-known and her chemical industry is still lagging compared to her heavy industry, although special investment efforts have been made in the 1960's. Manufactured products in general and consumer durables in particular are still scarce in the USSR. This situation explains the weak relative competitive position of the USSR in food, chemicals and manufactures. The USSR is a strong relative_competitor in raw materials, machinery and transport equipment. The competitive strength of the USSR in fuels is difficult to assess. For 1960, 1961, 1963, 1964 and 1965, I found a positive competitive effect for fuels, while in 1962, 1965 and 1966 the competitive effect for this commodity group was negative and large, as a percentage of Soviet exports of fuels to the EEC in current prices (-64.9% in 1962 and -32.0% in 1966). The analysis of the competitive effect for the seven commodity 117 neuuxe ecu mo amouw .wmo pepcsou ceec auuposeoo e>uuoeameu ecu .< xupceaa< ueouoom e>ec .uceouec eco cecu Hewumc .eeuswuw eweuceoueq cc< .eeouuc uceuuse cu .Umm ecu Ou ueucccse eeum mo esce> ecu mu Amv a a: coo.E :E museum» was mo muuoaxe ecu ac pepu>up .ueewwe ecu mo eace> ecu mu Acv am.mm- aE. am.m aa.om- so.m- xe.E~ am.wm- am.E~- REV aE.Eas.ON- ma.sw NE.aoE.m Ea.ooo.oE-y «R.Roa.s- aa.wam.EN Ea.oow.mE- 0E.~sm.EE- REM .MDCMZ SN.EEE aE.oEE am.amE ae.EoE aa.aoE aa.sEE ae.ooE aa.NE RNV Ea.mma.~ sa.mmE.~ Em.E~m E Ra.Neo.E ao.aeE E Rw.aom.E Ra.ENa mm.w~q REM . Mfmcmhh. NR.oa aR.Ew aw.sw ER.Em sa.ao aa.~q se.me aa.Eo REV Eo.aso.a Na.EsE.s oR.maa.e NR.an.E EN.mas.E oo.¢ao.E ~m.~oo.~ sa.aam.E REM .ausz am.a ENE- amm- aE.ss- 3E.aE- ue.Em- aNE- eon- REV NE.oma.m NE.amN.o- ow.EER.R- mm.amw.m- ma.soa.m- RE.Eaa.e- mo.ssa.~- aw.~wo.m- REM .80r—U am.m awn- ae.a- aE.m~ am.am sa.se- am.mE aE.oE REV am.Ewm.aE E~.-m.mR- ma.mwa.mE- mw.oao.em mE.Eaa.mm oa.Eo~.ma- as.ew~.RN mo.REm.eE REM mHODm am.~N am.a am.m aw.m REE am.mE as. am.m REV mo.maa.am oEEoRm.NN as.smm.aE mo.~Ew.oE Eo.R~o.o~ mm.ame.- EE.mmm mR.QME.NE REM .umz 30m am.oe- was- am.ae- am.as~- aEm- aR.Rm- aa.~ as.mm- REV aa.EmE.am- mm.ERo.om- mo.mea.om- Rm.sme.oo- Ea.smo.wE- mm.MEE.wE- mE.mow.E aE.0me.mE- REM . eooa . RsoE aaaE meaE eeaE meaE anE EeaE oeaE “apnea emoouo auupOEEou ae>em ecu new uoewwm e>uuuueaeoo “mmmb Hom.m ecceH 118 .< xupceaa< "eousom .wuo peccnou ceec e>mc .uceouec eco cecu uewumu .meuswuu eweuceouea ccc .weouua uceuuao cu .omm ecu ou ueucaase meum neuuxe ecu mo coouw auupoEEoo e>uuoeameu ecu mo muuoaxe ecu ac pepu>up .uoewme ecu mo esce> ecu mu Amv a m: coo.E :E museum. ago we m:3: may mE REV aa.~ ao.E a~.oE aa.oE NEE am.o a~.EE aE.NE REV No.EmN.E am.mmo.E mN.oEo.oE mm.aca.w wa.NoN.a mo.Emm.e aa.oRE.a ww.e~m.a REM .wocmz am.wm- amE- am.¢~- sen- aa.em- awn- a~.Es- so.EE- REV as.mae- os.wwm- mw.~am- am.~mm- Re.mam- wE.~ms- 9E.mE~- NE.aa- REM m.mC0.H.H a~.oE- aa.mE- as.EE- a~.m a~.m~- am.NE ao.s ea- REV NE.REo.E- «R.MNw- sa.~Ra- mm.~oE as.aEm- Em.e~m we.msE No.meE- REM , . .cosz sm.m- sw.o- sE.a- aw.o- aa.mE- am.mm- a~.~E a~.E~ REV am.oRN.~- am.Rea.E- aw.osE.~- RN.©R~.E- Nu.om~.m- os.emm.m- -.~Ra.~ mo.REo.e REM _ .e.ao as.aE- aE- am.EE- am.q~- am.eu- aa.aE- aR.oE- a~.EE- REV sa.saa.mm- co.mE~- QE.mEo.om- ma.am~.am- Rw.msm.~e- mo.eaa.aE- N~.swm.mE- cm.ooE.eE- REM , 0H0§h aoE aa.eE sm.EE a~.~E aR.e aa.a am.oE aoE REV am.aaa.om ao.mqa.mm mm.Rsm.wm sm.saa.- NE.~©E.w ER.sms.mE -.mOm.mE R~.mqo.sE REV .umz 30% am.- a~.~ an.» as.qE NE.~- aa.aE- am.s- aE- REV ma.RaE.m- 0N.EEN.E «E.soo.e ME.mEm.m Rm.REE.E- NO.ONN.E- oE.maE.mu mE.Ras- REM eooa ReaE aaaE man seaE meaE .NaaE EaaE can "messy mmmwuu auupoaeou ce>em ecu u0m uoemmm eouum "mmma Eam.m ecceH 119 groups explains why the competitive effect for total Soviet exports to the EEC is predominantly negative between 1960 and 1967. The price effect is mostly negative for food, fuels, chemicals, machinery and transport equipment, as can be seen in Table 3.37. In years of harvest failure, when exports of food were drastically reduced, for example in 1964, the export prices for agricultural products increased. The price effect of food in 1964 was 14.4% of the value of the USSR's exports of food to the EEC in current prices. The negative price effect of fuels coincided with a fall in the world prices of fuels between 1960 and 1967. The price effect is always positive for raw materials and manufactures, indicating that during the period 1960-1967, the prices of the USSR's exports to the EEC for both commodity groups were always above their 1959 level. The price effects of the individual commodity groups indicate why the price effect of total Soviet exports to the EEC is pre- dominantly negative between 1960 and 1967. Table 3.38 represents the total effect for each commodity group, and indicates how the USSR's exports have been affected by the formation of the European Common Market. The EEC had a trade diverting effect on the USSR's exports of food, chemicals and, to some extent, on manufactures; but, the effect on raw materials, fuels, machinery and transport equipment was trade expanding. 120 .< Xupceaa< Eeousom. .mmo mepczou ceec e>ec .uceouea eco cecu uemuec .meuswum eweuceouec ccc .meouuc uceuuoo Cu .omm ecu Cu ueucacsm eeue neuuxe ecu mo anouw auupoEEoo e>uuoeaweu ecu mo muuocxe ecu ac pepu>up .uoewme ecu mo esce> ecu mu va a m: coo.E :E museums was co gES, was .E REV EE.ME- as.m as.m am.w- am.e am.wN aRE- Ea- REV mm.RsR.EE- a~.~NR.m RR.mEs.m Em.oEw.e- Es.E~m.m N¢.~Ew.m~ Rs.emm.a- OR.Eew.e- REM .MDCQZ aa.Rw aa.wm aE.mm ae.sa am.ea xR.aE Ne.~e as.~e REV Nw.amE.N sa.sew E Rm.a~o.~ ER.NER os.-m Re.wsa Em.Rmm ma.mem REM . m.mCQHB Em.oa ae.Em am.em as.EE aw.oe am.ee am.ma am.se REV sw.RNc.a eo.EeE.s mm.eaa.a mm.sm~.~ mm.wmm.E oe.ame.E Na.mEm.~ EE.oae.E REM .aomz aN.RE- am.mm- aN.me- sEa- as.ae- am.om- am- am.EE- REV aE.Eom.R- Re.~om.mE- am.e~m.mE- em.sRN.eE- NE.Rmo.oE- NE.saa.EE- oe.sME.E- am.eRE.~- REM .805 NE.RE aE. aN.e- aEE am.m~ am.me- am.~E aw.~ REV mN.aem.Em ee.wc~ os.ma~.~E- oR.owe.am «R.RRN.sm m~.a~E.qe- Em.ma~.E~ o~.emo.a REM mH0fih am.me ae.am as.am ae.m~ am.m~ am.R~ aa.mE am.o~ .RNV wN.Emm.~NE Nw.osm.mm eR.wNo.~m mm.Eae.~m Ee.ess.ma Ra.mmm.es . mw.wma.- aw.oRa.a~ REM .umz 30M aa.om- aE.ER- aa.ae- ae.ms~- am.em- am.mm- a~.m- am.oq- REV Em.MME.Eq- ow.aEw.wm- mm.sEe.mm- ~m.eEm.am- ee.o-.EN- as.omw.e~- ae.es~.~- e¢.mem.aEu REM eooa ReaE eeaE meaE seaE meaE NeaE EeaE . oeaE ..Eso» endouo auupoEEoo ce>em ecu now uoemmm ceuoa Emmma Emm.m ecceH l) 2) 3) 4) 121 From this analysis one can conclude that: The USSR had a very favorable commodity composition relative to the trade expanding effect of the EEC. The USSR has a weak competitive position relative to the "average" extra-area supplier of the EEC. The USSR is a weak competitive in the EEC's import market for food, chemicals and manufactures, but a strong relative competitor for raw materials, machinery and transport equipment. During the 1960's the prices of the USSR's exports to the EEC were below their 1959 level. The USSR shared in the gxgggrarea trade expanding effect of the EEC but it shared less than predicted on the basis of the per- formance of the "average" extra-area supplier of the EEC. 122 The Effect of the EEC on Czechoslovakia's Exports to the EEC From 1960 to 1967, Czechoslovakia's share in the gxgga-area trade expanding effects of the EEG was quite small. This can be concluded from the small but positive total effect of the EEC on her members' imports from Czechoslovakia, represented in Table 3.39. The estimated Common Market effect of total exports of Czechoslovakia to the EEC is positive, which indicates that the commodity composition of Czech exports to the EEC is favorable vis-a-vis the overall trade expanding effects of the EEC. The most interesting part of Table 3.39 is the negative competitive effect of the EEC on her members' total imports from Czechoslovakia from 1961 to 1967. The yearly competitive effect is often of similar absolute magnitude as the Common Market effect, but it is negative, indicating that, if measured in constant prices and exchange rates of 1959, Czechoslovakia did not receive much of her predicted share of the gxgggfarea trade expansion caused by the EEC. It is a clear indication that Czechoslovakia is an ex- tremely weak competitor in the EEC's market for gxgggrarea imports. The problems of Czechoslovakia's foreign trade sector have been discussed in a paper on the economic problems of Chechoslova- kia'by Ota 21k, and several paragraphs support my conclusion that Czechoslovakia is a weak competitor in the EEC's import market. WWe are forced to sell at world market prices. Consequently, a great amount of domestic production 123 cE .omm. .< Kupceac< Eeouoom .mwo pepcoou aeec e>ec .uceouec eco cecu uewuec .meuswuw eweuceouec cu< .eeouua uceuuzu ecu ou ueucaasm eeueleuuxe ecu mo euuoaxe HeuOu ac pepu>up .euoewwe ecu mo eace> ecu mu ANV a m: coo.E :E muoeece was no gEg eaE sE REV aw am am so aE ea am an- REV ma.ame.m mm.esm.a ae.mm¢.e om.a~s.E NE.emw.~ «E.Emw.~ we.emm.m wo.m~R.m- REV .m.a aEE- at- am- as- as- am- go. as REV Ea.Nao.eN- «E.ama.eE- em.EsN.e- mo.oEm.R- EE.mee.EE- we.oma.R- RR.Emm- am.Roa.m REV OWOQEOU aEE am am $0 No as am aE REV ww.emq.m~ mm.meE.aE ma.emm.mE ma.mom.EE em.mea.w os.ea~.e Na.mma.m oE.mem.E REV .E.z.o «N as ea am so aE an an RNV oa.Eso m Ea.~ma.w ew.wsm.RE mq.awm.m Rm.emE ew.eeE.E me.Rmm.R Ee.REo.e REV .E.a ReaE eeaE meaE eeaE meaE NeaE EeaE oeaE nausea m: coo.E :E .omm ecu ou muuoawm m.sEas>oEmocueuo so omm ecu co muoeeem pace «as "am.m «Ease 124 expenses will not be paid. In this manner we actually export part of our labor completely free. On many export products we do not obtain any profit... For many exported products we do not even re- ceive what we spent for raw materials, which often is imported... In this situation, we cannot compete on the world market against our own production expenses. It is then self explanatory that we are compelled to export year after year a larger volume of imports... Our goods have lower technical parameters (than those sold on the world market) and we cannot supply the needed sparepparts... Unfortunately, for the majority of our machinery, we are able to obtain only 50% and in many groups of our products only 40-30% of the price achieved by capitalist countries for similar products... We were only concerned with our balance of pay- ments. They are governed by ministerial decrees. The main objective was to increase exports to the point where we can obtain enough foreign currenpy needed togpay for imports." 3 It appears from this paper that there was neither pressure for competition, nor interest in increasing the efficiency of foreign trade. The easiest ways of marketing were chosen. In addition, the foreign trade monopolies can only sell to the West below or at world market prices. In many cases, domestic prices - centrally calculated on the basis of average industrial cost plus mark-up - were substantially above world market prices. The losses were covered by subsidies paid from the budget by the Foreign Trade Minis- try. Imports, bought at world market prices, were centrally allocated and did not compete with domestic substitutes. Therefore, complete protection of both production for exports and import substitutes has made it possible for domestic producers to neglect the problem of efficient allocation of resources as well as the improvement of the quality of the products. 125 Between 1961 and 1967, the price effect of the EEC on her members' total imports from Czechoslovakia was positive but small, as indicated in Table 3.39. This means that the prices of Czech exports to the EEC were somewhat higher between 1961 and 1967 than in 1959.4 It is this small positive gain in export prices which makes that Czechoslovakia has shared somewhat in the overall trade expanding effect of the EEC. The weakness in Czechoslovakia's foreign trade sector can be better understood after an analysis of the four effects of the EEC on her members' imports from Czechoslovakia disaggregated in seven commodity groups. Table 3.40: The Commodity Composition of Czechoslovakia's exports to the EEC in the 1960's Commodity 1960 1967 Change in the i=commodity group group commodity j=(l960-l967) distribution 2 xi]. 5 xi]. j Food 14.0% 18.4% +4.4 16.7% Raw materials 24.5% 22.2% -2.3 25.4% Fuels 8.4% 4.8% -3.6 6.7% Chemicals 8.8% 8.0% - .8 7.5% Machinery 9.0% 7.9% -l.l 8.8% Transport equipment 4.2% 2.7% -1.5 4.3% Manufactures 30.8% 35.7% +4.9 30.5% Czechoslovakia has a commodity composition of her exports to 126 .< xupCeac< ”eouzom .wwo pepcsou ceec e>ec .uCeouea eco cmcu uewumH .eeuowum eweuceeueq cc< .eeouuc uceuuoo Cu .Umm ecu mo ueuccase meue neuuxe ecu mo QDOHw auupoEEoo e>uuoeameu ecu mo euuoaxe ecu ac pepu>up .euoewwe ecu mo esce> ecu mu va a m: coo.E cE museums ecu co maEe> was mE REV aw aE aN aE aE aE aE go REV sm.ome.E RR.maE.E sR.~oo.E Em.RmR ma.esm me.ERm am.¢- we.EoE REM .Esamz aam awn gem emu emu sea am an REV No.sam.m oa.moa N ee.mEE N so.aae E a~.mR~ E aR.Ram Ea.Eem Ne.mem REM . m.mfim.uh. aEe aEm awe sen aaE EKE amE ea REV oo.~Ea.a ow.mEa.R Em.RRm.e sE.~ea.e ss.aoa.m eE.Eoe.E an.-e.E ma.ama REM .Eosz gem- sow- NEE- asE- aeE- am- as- aw- REV wE.mEm.m- E¢.emo.m- ma.Emm.N- mm.EeR.E- me.weN.E- aa.wmw- mE.Eom- m¢.¢-- REM .e.ao awe see sow aka aeE aEE as as REV mm.wae.e ~m.mw~.m om.emo.s oE.ERc.m oE.REE.~_ oE.oom.E se.~oa Em.aos REM . 0HODh SEE amE aEE am am so as aN REV ao.a~m.a ea.mww.o w~.er.m e~.mwo.e EE.o~E.m as.mm~.~ eo.E~e.E aE.wRe REM .HQE 30% as- as- am. so- aw- aN- aw- sE- REV NR.EEe.E- aw.amm.E- Ee.an.E- mm.Emm.E- oE.Rme- mR.wes- Em.aa~- eN.EsE- REM sooa anE eeaE meaE seaE meaE NeaE EeaE oeaE Hose.» mQfiOHO NHHUOEEOU C0>0m 0£u HOW u00mmm UOXHO: 808800 "0wx0>OHmO~—UONO "H¢.m 0~£0H 127 the EEC, represented in Table 3.40, which resembles that of other developed countries. Manufactured products take the largest share, namely 30.5% on the average between 1960 and 1967. The second largest commodity group is raw materials 25.4% and the third largest group is agricultural products 16.7% of Czech exports to the EEC. Fuels, chemicals, machinery and transport equipment have a share of 27.3% of which machinery is the most important with a share of 8.8%. Considering the effects of the EEC on her members' gxggafarea imports, represented in Table 3.41, I conclude that Czechoslovakia has a very favorable average commodity composition of her exports to the EEC. Indeed, on the average, between 1960-1967, 75.7% of all Czech exports to the EEC belonged to commodity groups for which the EEC had a trade expanding effect on her members"£§££§farea imports. The shift in the commodity composition between 1960 and 1967, as indicated in Table 3.40, was unfavorable for Czechoslovakia. The fall in the share of raw materials, fuels, machinery and transport equipment in total exports of Czechoslovakia to the EEC, occured in spite of the trade creating effects of the EEC. The rise in the share of agricultural products was contrary to the trade diverting effects of the EEC. Only the rise in the share of manufactures and the fall in the share of chemicals were consistent with the effects of the EEC on her members' imports of these commodity groups. Although the shift in the commodity composition of Czech exports to the EEC was unfavorable, the absolute commodity distri- bution was very favorable relative to the extra-area trade expanding 128 effects of the EEC, as indicated in Table 3.41. The unfavorable shift in the commodity composition of Czech exports to the EEC, in spite of the favorable absolute commodity distribution of these exports, is an indication of rigidities in Czechoslovakia's export sector, which partly explain the weak relative competitive position of Czechoslovakia among the other gxgggrarea suppliers of the EEC. This can clearly be observed in Table 3.42, which represents the competitive effect of the EEC on her members' imports from Czechoslovakia between 1960-1967. Between 1960 and 1967, the competitive effect for food, fuels, machinery, transport equipment and manufactures was predominantly negative. This indicates that for these commodity groups, Czechoslovakia is a weak competitor relative to the other gxgggyarea suppliers of the EEC. In other words: Czechoslovakia received a share in the EEC's market for extrgfarea imports which is considerably smaller than predicted on the basis of the performance of the "average" gxgggrarea supplier of the EEC. The size of these negative competitive effects, as a percent- age of Czechoslovakia's exports of the respective commodity groups to the EEC, is also large and ranges from -l6% to -32% for food, from -1% to -l37% for fuels, from -8% to -33% for machinery and from -3% to -30% for manufactures. However, Czechoslovakia is a strong relative competitor of raw materials in the EEC's market for 129 .< xupceac< "eousom .wmo pepcsou ceec e>ec uceouea eco cecu uewuec menswum ewmuceouea cc< .eeouua uceuuoo cu .omm ecu cu ueuccaoe eeue neuuxe ecu mo amouw auupOEEoo e>uuoecmeu ecu mo euuocxe ecu ac pecu>up .uoemwe ecu mo eace> ecu mu Amv w m: coo.E :E euoeume ecu mo escm> ecu mu Acu so- aNE- seE- sou- saN- eon- sEE- an- REV sm.amm.e- em.Eam.E- sm.mea.a- am.Rme.o- em.mwa.oE- Rm.REe.oE- Rm.osE.s- «E.EE~.E- REM .Escmz aoEE- aaN- on ROE- ENE- saw- ac- aaE- REV ao.wME.e- NE.mEE.~- mw.m~E.E mm.ana- mm.R~o.E- so.e~m.m- e~.eem- ae.~Eo.E- E V . m.eceuh amm- xRE- aqE- so- an- aRE ah amE REV Em.sm~.m- am.REm.s- ma.~aE.~- em.m~m.E- oR.RRa- aa.~ae.~ aE.wew mm.amo.~ REM .Eumz aEN- an aRE New aEm- Ea- aE Ea RNV aR.Eam.m oa.mma mo.moe.~ se.omm.m em.Roe.~- ma.~em- oe.EoE Em.mee REM .805 aeNE- aamE- sENE- gas. as- 3E- ea 30 REV an.amm.~E- a¢.omm.EE- mo.aea.a- es.~ae.m- se.awa- m~.Re- wo.oem RR.aEe REM 0HOEuh awE aNm aeN sen aew sou aaE son REV Em.qm~.w RE.oEo.mE em.oma.EE Em.eRR.eE ae.mwe.a Ew.omm.a ma.oae.e Ee.eea.m REM ‘ .uwz 30% an aEN- am awn- sRE- aeE- Nam- emu- REV Re.EEE.E Em.aEm.e- EE.~mm.E Ra.s~e.m- aa.meo.e- Ra.E~m.m- «R.EEq.e- ow.ema.m- REM . eooa EeoE eeaE meaE seaE meaE NeaE EeaE oeaE nausea mmmouu auupoesoo ce>em ecu you uoewmm e>uuuuemeou "euce>0ceocoeuo "Nc.m eccea 130 .< Xupceca< "eouaom .mwo pepcsou ceec e>ec .uceouea eao cecu uewumc .eeuawuw eweuceouec -< .eeouuc uceuuao cu .Umm ecu mo Heucaase eeue umuuxe ecu mo aoouw auupoEEoo e>uuoeceeu ecu mo muuocxe ecu ac oepu>up .uuewwe ecu mo esce> ecu mu Amv a m: ooc.E aE .Euoeea was co osEs> ecu .E REV aE go ea aE- ea- aE- ac- aE REV eq.was RR.RaE om.am~.s mm.~m¢- ea.mam.mu sm.mom- we.m- .o~.m~s REM .Escsz so am am REE- saE- aoE- at- so- REV Es.~sm E~.aee ee.smm ms.a~m- as.EeE.E- NE.~mm- as.moe- Ne.w- REM . M.m¢0HH aeE ecu amE aeE amE amE aeE an REV aw.~om.~ ma.omE.m om.mm~.~ ow.aem.~ eo.moe.E ME.eRo.~ oe.oEo.~ mw.EEm REM .aosx amE . aNE- aEE- eon- sow- acE- aEE saE REV ea.awE.~ so.mEm.E- so.EEa.~- Em.swa.m- Na.sam.E- em.EEa- mm.¢~m.E Eo.oem.E REM .805 aeu- gem- aNE- so- am. so- aE- as- RNV Ea.sam.N- oe.EEo.~- aa.eEo.E- am.sE- Rm.me- a~.o~R- oE.mEE- Rm.awe- REM ma09h ea- so- 3E- ea- aE- am so asE- REV mE.an.E- aE.waE.m- Rm.mom- ma.mmE.m- m~.mue- aw.m~o.E e~.osm.~ am.N~E.eu REM Sum: 3mm smE am~ aEE amw sea aoE Na. Na- REV as.oae.s om.mmR.R mw.maa.m «N.mom.R mo.Eeo.m Eo.Emm.~ am.aom.E- em.¢o~.E- REM coca ReaE eeaE meaE eeaE meaE NeaE EeaE oeaE noses» mmdouo auupoEEoo ce>em ecu uom uuemmm eouum "euce>oHeocueNo mc.m ecceH 131 .gxgggfarea imports. Czechoslovakia's relative competitive strength in chemicals is uncertain. This can be seen from the competitive effect for chemicals which fluctuates between 27% and -31% of Cze- choslovakia's exports of chemicals to the EEC. Table 3.43 shows the price effect for each commodity group between 1960 and 1967. During 1960-1967, the prices of Czechoslova- kia's exports of food and machinery to the EEC were generally above their level of 1959. The prices of raw materials, fuels and chemicals were generally below their 1959 level. The export prices of transport equipment and manufactures were below their 1959 level from 1960 to 1964 but remained above their 1959 level from 1965 to 1967. From 1961 to 1967, the prices of Czechoslovakia's £2291 ex- ports to the EEC were always above their 1959 level. This small gain in prices partially compensates for the overall negative competitive effect of the EEC in Czechoslovakia's total exports to the Six. The total effect of the EEC on each of the seven commodity groups exported by Czechoslovakia to the EEC is presented in Table 3.44. Czechoslovakia's exports of chemicals to the EEC are more adversely affected by the trade diverting effects of the EEC than predicted on the basis of the performance of all gxggayarea suppliers of chemicals to the EEC. In spite of the small trade expanding effects of the EEC in manufactures, the total effect on Czechoslova- kia's exports of manufactures to the EEC is negative between 1960 and 1967. This stresses the problems in Czechoslovakia's foreign .< xwpceac< Eeousom .mwo cemcsou seec e>ec .uceouea eco cecu uewuec .eeuswuw eweuceouec Hc< .meeuua uceuuso Cu .omm ecu mo ueucacoe meue neuuxe ecu mo coouw auupoEEoo e>uuueameu ecu mo muuoaxe ecu ac pepu>up .uoewwe ecu mo eoce> ecu mu ANV a m: coo.E :E sauces was me ssEs> was sE REV 132 as- as- aR- sou- sen- son- aoE- xE- REV sR.mm~.s- aw.aaw.m- oE.eRE.s- oa.~mm.a- me.sma.mE- eR.EEm.oE- so.¢~a.m- s~.~ae- REM .MDCQE ems- aEE amm aN amE- amt- an- asE- REV me.Eom.N- a~.mmo.E ma.ome.m w~.sME Em.maw- Rm.aow.~- aa.ao~- ae.RmR- E m.mcm..u.H ans ans awe aEs gem aka sen emu REV mm.osm.e aE.RwR.e sw.Rms.e os.moo.e om.¢Em.s eo.oam.a wE.Eom.e eE.EEE.m REM aEm- aEN- sow- aaE- aRe- aME- as NEE REV EE.mRo.m- aa.meo.s- Ea.msm.m- o~.mRE.~- aw.om~.m- so.maE.N- mw.0ma aw.mow.E REM . .Eecu aEw- ass- use- aEN- ac as amE an RNV ea.mEo.w- Ro.EEE.m- «a.Row.e- ma.sms.~- aw.msm em.~Ea Ne.eme.E Na.~qm REM mHODh aEm aam sen gem sEm Saw a¢~ awE REV ss.osw.ME «E.RoE.aE Rs.amm.eE me.sRe.mE as.mmm.~E «E.mmw.oE mo.~m¢.oE E~.~Nm.m REM .uwz 30m aEE go- aeE as- em as- asm- aEm- REV ~s.ooE.s oe.o~E- mm.sea.s ms.swa.E- EN.sss.~ EE.ama.E- os.wEo.e- Ne.Nom.m- REM eooa EeaE seaE meaE seaE meaE NsaE EemE oeaE ”sumac mQDOHO 532008800 C0>0m 05 HOW u00wwm HmuRuH. ”waxw>OHmO£UONU u¢¢.m 0H£08 133 sector, eSpecially in the production of manufactures. The trade expanding effects of the EEC in transport equipment were substantial, but Czechoslovakia could not take advantage of this situation because of its extremely weak competitive position in this sector relative to the other gxggararea suppliers of the EEC. The total effect is predominantly negative for food and chemicals. This was to be expected because of the trade diverting effects of the EEC on her members' imports of food and chemicals (Table 3.44). Czechoslovakia received more than her predicted share of the trade expanding effect of the EEC in raw materials, and nearly her predicted share in machinery. On the basis of this analysis one can conclude that: 1) Czechoslovakia has a very favorable commodity composition of her exports to the EEC vis-a-vis the gxggayarea trade expanding effects ofthe EEC. 2) Czechoslovakia is a very weak competitor in the EEC's market for gxggafarea imports. Her relative competitive position is _especially weak in food, fuels, machinery, transport equipment and manufactures but strong in raw materials. 3) Czechoslovakia shared favorably in the overall trade expanding effects of the EEC although her share was quite small. 134 The Relative Effect of the EEC on the Exports of the Communist Countries of Eastern Europe In the previous part of this chapter, I explained the effect of the EEC on the exports to the EEC of gagh_communist country of Eastern Europe separately. In this part, I will compare the way in which the exports to the EEC of each communist country of Eastern Europe have been affected by the formation of the EEC, relative to the exports of its partners in COMECON. Table 3.45 represents a synthesis of the previous analysis, based on the relative share model. The percentage effects have been derived as the sum of each effect from 1960 to 1967, divided by total exports of each communist country for the same period. For each effect the countries have been ranked from most favorably affected to least favorably or unfavorably affected. The average Common Market effect indicates that the USSR and Albania have the most favorable commodity composition of their exports to the EEC, relative to the overall-gxgggrarea trade creat- ing effects of the EEC. Bulgaria has the most unfavorable commodity composition of her exports to the EEC and therefore suffered a negative Common Market effect. The average competitive effect indicates the competitive strength of each communist country in the sample, relative to all other gxtgagarea suppliers of the EEC. Although Bulgaria has a negative Common Market effect, her competitive effect is positive 135 .eaouzm cueueem mo auucsoo umuc:EEoo e>uuoeaeeu ecu Eoum 0mm ecu mo euuanu Heuou ecu eue z vce A.m.H "w u: use .m.m ..m.anu ..m.2.ov uoewwe come museeeuceu m euec3 E aWu me pe>uueo eue meuswum ewmuceouea eca m ac .< Xupceac< "eousom w.m euce>oceocoeuo ¢.m| eucecc< o.ml ouce>oHeocoeno m.| euuewcom a.e awe: R.m- ace e.m- ecman E.E assess: m.e easan E.E- ems: e.E- ammo e.~ mE>mEsow=a o.eE ago a.. .Eam50a a.m Ramses: e.m ago m.mc auewcom w.c euxe>0ceocoeno o.oc mam ~.¢ mcecom «.mm eucecc< ~.a pceuom ¢.c~ eu>eceowsa o.a euce>0ceocoeuo o.am eu>ecmowsa w.o auewcom o.m~ eucecc< H.a euceeom 0.08 euuewcom m.cc euuewcsm o.wm euumwcam N.¢ eucecc< c.0m euceaom m.¢~ eu>mcmowsa a.m¢ euceEom m.a Mmm: .mmmmmm cueumem mo meuuucsoo umuc:EEoo ecu Eoum euuomEH Heuoa .euecEez uec :0 0mm ecu mo uoemmm ech Emc.m ecceh 136 and second largest among the other communist countries of Eastern Europe. The important factor is that Bulgaria did not have to buy its competitive effect at the cost of a fall in the price: of hi? exports to the EEC. Among the communist countries of Eastern Europe, Bulgaria experienced the second highest increase of her export prices to the EEC. Romania has a favorable commodity composition of her exports to the EEC relative to the trade creating effects of the EEC. In addition, she is the strongest relative competitor in the EEC's market for gxgggrarea imports among all communist countries of Eastern Europe. However, in the 1960's, Romania experienced a small fall in the prices of her exports, relative to their 1959 level. In the last decade, Romania has tried to be politically and economically independent from the USSR and the other members of ‘ COMECON. Romania's excellent performance in the EEC's market for gxggararea imports can be explained in the light of this policy of independence or neutrality. Among the communist countries of Eastern Europe, Albania suffered most from a fall in her export prices. However, Albania is a strong competitor in the EEC's market for Extgafarea imports and shared very favorably in the overall trade creating effects of the EEC. The three countries which are less favorably affected by the EEC are Poland, the USSR and Czechoslovakia. Czechoslovakia has a favorable export commodity mix relative to the overall trade expand- ing effects of the EEC. Unfortunately, her competitive strength in 137 the EEC's market for gxggayarea imports is the weakest of all communist countries of Eastern Europe. Czechoslovakia's export prices increased slightly since 1959 which partly compensated for her negative competitive effect. The total exports of the USSR to the EEC are roughly 50% of the exports of the other communist countries of Eastern Europe to the EEC. She has the most favorable commodity composition of her exports to the EEC among her COMECON partners. However, her competitive effect is negative, indicating that she is a weak competitor in the EEC's market for gxggggarea imports. Her price effect is also negative, indicating that, during the 1960's, the prices of the USSR's exports to the EEC declined. Poland is also a relatively weak competitor, but she gained subs- tantially from rising export prices during the 1960's. As a group, the communist countries of Eastern Europe shared favorably in the trade expanding effects of the EEC.5 In the following Chapter, I will discuss some empirical results of the linear regression model, developed in Chapter II. 138 FOOTNOTES 1The four periods prior to and after the formation of the EEC are: Pre-Integration Period Post-Integration Period 1951-1959 1959-1967 1952-1959 1959-1966 1953-1959 1959-1965 1954-1959 1959-1964 2 E. Thorbecke, "Problems of Regional Integration, European Integration and the Pattern of World Trade", American Economic Review, Papers and Proceedings, LIII (May, 1963), p. 173. V 3Ota Sik, "0n the Economic Problems of Czechoslovakia", U.S. Senate, Committee on the Judiciary, Hearings, Subcommittee on Anti- trust and Monopoly, 19th Congress, 2nd Session, Part 7-A, 1969, p. 4515. V 4This conclusion is fully consistent with Professor Sik's statement. He compares world prices with Czech prices at one specific time, while I compare only Czech prices over a period of time. 5The same conclusion has been reached by: Bela Balassa, "Trade Creation and_Trade Diversion in the European Common Market", The Economic Journal, LXXVII (March, 1967), ppp.l4, 20. _ CHAPTER IV THE EMPIRICAL RESULTS OF THE LINEAR RE- GRESSION MODEL, MEASURING THE EXTRApAREA TRADE EXPANDING OR DIVERTINC EFFECTS OF THE EEC ON HER MEMBERS' IMPORTS FROM SOME COMMUNIST COUNTRIES OF EASTERN EUROPE The linear regression model, expressing changes in the EEC's demand for gxgggyarea imports, caused by the formation of the EEC, has been explained in Chapter II. In Chapter III, I presented the empirical results of the relative share model. In Table 3.45 it was shown that among all communist countries of Eastern Europe, Poland, the USSR and Czecho- slovakia were least favorably affected by the formation of the European Common Market. It was difficult, however, to draw a dividing line between the countries which gained by the formation of the EEC and the others whose exports to the EEC suffered from trade diversion. The relative share model was not sensitive enough to provide a clear dividing line, although it suggested that Poland was somewhat more favorably affected by the EEC than both the USSR and Czechoslovakia. I decided, therefore, to apply the linear regression model only to the EEC's imports from Poland, the USSR and Czechoslovakia as a means to find the dividing line between the 140 countries of Eastern Europe whose exports have increased because of the trade creating effects of the EEC and those whose exports have suffered from trade diversion.1 The Effect of the EEC on her Members' Imports from Poland As explained in Chapter II, the linear regression model in- cludes two tests: the first one indicates whether the EEC has a significant effect on the exports of an'gxgggrarea supplier and the second test indicates whether the effect is either trade diverting or trade creating. The single equation linear regression model, 4.1, represents the EEC's demand for total imports from Poland for the period 1951-1967.2 PM 4.1 M51-67 = 92.8779 + .6555 Y - .6403 -53— St. error (52.5000) (.1702) (.3135) Sign. level .099 .002 .060 R2 . .9024 R = .9500 Can-:31 = - .8649 D SEE = standard error of estimate = 16.1649 ESS ; error sum of squares - 3658.2572 (14 degrees of freedom) F = 64.7395 ; significant at a sign. level of (.0005 In model 4.1, both income and relative prices are highly significant 141 in explaining the EEC's demand for imports from Poland, which indicates that in this portion of East-West trade economic variables are extremely important. The single equation linear regression model 4.2 also expresses the EEC's demand for imports from Poland for the period 1951-1967. However, this equation includes a dummy variable to separate the pre-integration period from the post-integration period. For the period prior to the formation of the EEC, namely 1951-1958, the value of the dummy variable X is equal to zero, but for the years 1959-1967, after the EEC became actually operative, the value of X is equal to one. 4.2 M51_58,X=0 = -159.2436 + 403.0618 x + 1.9411 Y 59'67’x=1 (174.9143) (210.8402) (1.0668) (.382) (.082) (.096) - 1.5833 x Y + .5489 i - 2.3212 x35 PD PD (1.0885) (.7696) (1.2680) (.174) (.491) (.094) QY, PM u - .8649 PD SEE = 15.0472 ESS = 2490.6046 F = 30.9171 ; significant at a significance level <; .0005 142 The problem of multicollinearity is increased by including a dummy variable in the model. This increased the variances and covariances of the estimates of the parameters. Although in equation 4.2, some coefficients are no longer significant at a 5% level of significance, it is still desirable to accept the results. The following F-test indicates whether the formation of the EEC had a significant effect on her members' imports from Poland. Test I: 3658.26 - 2490.61 14 - 11 F3,11 = a 389.21 = 1.71 2490.61 226.41 11 The value of F3 11 is 1.71, and is not significant at the 5% level 9 of significance. The F-test therefore suggests that the formation of the EEC had little effect on the exports of Poland to the EEC. The second test shows whether the effect of the EEC on her members' imports from Poland was either trade diverting or trade expanding. Test II: Table 4.1: The Effect of the EEC on her Members' Imports from Poland 1 2 1 2 Year Mi M1 M1 - M1 1959 89.81 102.37 -12.56 1960 105.40 122.17 -16.77 143 1961 132.47 96.78 35.69 1962 146.89 131.55 15.34 1963 173.74 129.69 44.07 1964 200.34 142.71 57.64 1965 228.14 141.57 86.57 1966 250.25 152.34 97.91 1967 265.09 169.45 95.64 ‘ 1:29 (Mi 2 ME) = 403.53 The figures are expressed in percentages of the actual imports of the EEC from Poland in 1959, measured in prices and exchange rates of 1959. Source: The percentage import figures in constant prices are derived from the tables in Appendix A. The percentage income and domestic price indexes (1959 = 100) for the EEC were derived from: National Accounts of the O.E.C.D. 1951-1967, O.E.C.D., Statistical Bulletins, Paris. 67 The difference (M: - Mi), if positive, is an indication of 1:59 extra-area trade expansion, and, if negative, of extra-area trade 3 diversion. Because of the multicollinearity in the model, I pro- 67 pose only to look at the sign of' E (Mi - ME) and not at its 1: absolute magnitude. This sign is clearly positive, as can be observed in Table 4.1. The linear regression model yields the same conclusion as the relative share model, namely that Poland's exports to the EEC were marginally affected by the EEC and that the effect was positive, indicating that Poland shared in the trade expanding effects of the 144 EEC. The Effect of the EEC on her Members' Imports from the USSR The relative share model indicates that the exports of Poland and the USSR are affected in a similar way by the formation of the EEC. This is clear from the percentage total effect, represented in Table 3.45. However, this conclusion is based on imports of the EEC from the USSR and Poland in current prices. In the same table the percentage competitive effect indicates that Poland is the stronger competitor in the EEC's market for‘gxgggrarea imports relative to the USSR, although both countries are weak competitors relative to the "average" gxgggrarea supplier of the EEC. The competitive effect is measured in constant prices and exchange rates of 1959. The linear regression model is also based on import figures expressed in constant prices and exchange rates of 1959. One can, therefore, expect that the linear regression model will indicate that Poland has been more favorably affected by the EEC than the USSR. This statement will now be tested. The demand for imports of the EEC from the USSR is represented by the linear regression model 4.3. P M 4.3 M51-67 = 39.3521 + .9781 Y - .4752 '5; (38.6362) (.1492) (.2017) (.326) (.0005) (.034) 2 R = .9674 ESS SEE F CY: D "dl "UI! I! 145 .9836 2052.9680 (14 degrees of freedom) 12.1095 207.7767 (significant at a level of significance .0005) -.9034 Income and relative prices are again very significant variables explaining the demand for imports of the EEC from the USSR. This result demonstrates once more that this part of East-West trade is mainly determined by economic variables. Including dummy variables to make a distinction between the pre- and post-integration period, the demand of the EEC's members for imports from the USSR can be written as follows: 4.4 ESS SEE M51_58 (x=0) = -77.2244 + 324.2820 x + 1.4654 Y "dl'ti UK" 59-67 (X=l) (97.2846) (149.5792) (.6382) (.444) (.053) (.042) PM PM 1.0207 XY + .0748 P— - 2.0236 X — P D D (.6906) (.3783) (.9704) (.167) (.847) (.061) .9826 .9912 1097.56 (11 degrees of freedom) 9.9889 124.0597 (significant at a significance level (..0005) a -.9034 146 Equation 4.4 indicates that relative prices were not a significant variable explaining the imports of the EEC from the USSR in the period prior to the formation of the EEC, but that they became a very important variable after the integration of the Six.4 The F-test shows whether the USSR was significantly affected by the formation of the EEC. 2052.9681 - 1097.5623 l4 7 11 F3,11 = '1097,5623 = 318.47 = 3.19 11 The value of F3,11 is 3.19, which is not significant at a 5% level, but which is significant at a 10% level of significance. I there- fore conclude that the formation of the EEC had a significant effect on the exports of the USSR to the EEC. The second test indicates whether the effect of the EEC on her members' imports from the USSR was trade diverting or expanding. Table 4.2: The Effect of the EEC on her Members' Imports from the £8881 Year M8 M2 M1 - M? 1 i i 1 1959 96.66 77.78 18.88 1960 102.49 165.40 ~62.91 1961 114.99 175.74 -60.75 1962 134.18 188.17 -53.99 1963 157.47 204.22 -46.75 1964 163.70 226.39 -62.69 147 1965 169.15 241.78 -72.63 1966 170.65 261.68 -91.03 1967 193.03 268.71 -75.68 67 (M; - ME) = -507.55 1:59 Source: See table 4.1 The sign of Eff: (Mi - ME) is negative and indicates that the USSR's expor::S:uffered from trade diversion caused by the formation of the EEC.5 This result is consistent with the conclusion derived on the basis of the relative share model. Indeed, the relative share model indicates that the USSR's exports to the EEC are less favorably affected by the formation of the EEC than the exports of Poland. However, the relative share model suggested that the total effect of the EEC on her members' imports from the USSR is positive, indicating that the USSR shared marginally in the gxggararea trade expanding effects of the EEC. This result was based on imports measured in current prices and exchange rates, while the import figures in the linear regression model are based on constant prices 6 This result of the second test also ‘and exchange rates of 1959. indicates where the dividing line is between the countries which have gained from the formation of the EEC and the other communist countries of Eastern Europe, namely the USSR and Czechoslovakia, whose exports were negatively affected by the formation of the EEC. It is now necessary to show that the linear regression model will consistently indicate that both the USSR and Czechoslovakia suffered from trade diversion. 148 The Effect of the EEC on her Members' Imports from Czechoslovakia The EEC's demand for imports from Czechoslovakia for the period 1951-1967 is expressed by the following single equation linear regression model (4.5) P M (40.1331) (.1242) (.2530) (.289) (.0005) (.211) R2 = .9681 E88 = 1133.2487 (14 degrees of freedom) SEE = 8.9970 F 212.3228 (significant at a level .005)f,~ 9 6L?!“- a -.9238 The relative price variable explaining the variations in the EEC's demand for imports from Czechoslovakia is less significant than the relative price variables explaining the EEC's demand for imports from Poland and the USSR.7 The EEC's demand for imports from Czechoslovakia, before and after the economic integration of the Six, can be represented by equation 4.6 4.6 -l65.5627 + 177.8494 X + 2.0206 Y M51.58, x=0 = 59-67, x=1 (50.7513) (171.8398) (.2737) (.008) (.323) (.0005) 149 PM PM P P D D (.42009) (.2635) (1.3606) (.015) (.031) (.680) R2 = .9898 R = .9949 SEE = 5.7424 s 213.1562 (significant at a level .0005) P (in?! E -.9238 D The F-test, indicating whether the EEC has a significant effect on her members' demand for imports from Czechoslovakia is presented as the first test: 1133.2487 - 362.7240 14 - 11 F331? = 362 7240 = M = 7’79 ‘”'11"" The value of F is 7.79. It is highly significant at the 5% 3,11 level.8 This test demonstrates that the EEC has a considerable effect on her members' imports from Czechoslovakia and even to a much larger extent than on her members"imports from either Poland or the USSR. Test 11: r The second test indicates whether the effect of the EEC on her members' imports from Czechoslovakia is trade diverting or 150 expanding. Table 4.3: The Effect of the EEC on her Members' Imports from Czechoslovakia 1 2 Year M1 M1 - M 1962 125.83 161.72 -35.89 1963 135.79 184.54 -48.75 1964 147.51 211.94 -64.43 1965 158.22 238.35 -80.13 1966 167.98 261.38 -93.40 1967 175.76 280.08 -104.32 (M? - 11.2) -.- -462.62 1 - 1 Source: See Table 4.1 The effect of the EEC on her members' imports from Czechoslovakia is clearly trade diverting. If measured by the linear regression model, the USSR's exports to the EEC suffered even more from the trade diverting effects of the EEC than the exports of Czechoslo- vakia. Before I present the summary of the results of this thesis 151 in Chapter V, I will demonstrate that in the 1960's the trade be- tween the EEC countries and the communist countries of Eastern Europe was more responsive to economic factors than in the 1950's, when this portion of East-West trade was more determined by political factors, such as the change in temperature of the Cold War. The changes in price elasticities of the EEC's demand for imports for the two periods 1951-1958 and 1959-1967 will be considered an in- dication of the changes in responsiveness of East-West trade to economic factors. The results shown in Table 4.4 are based on ex- periments with the linear regression model for a sample of communist countries of Eastern Europe. It can be observed from Table 4.4 that only the priCe elasticity of the EEC's demand for imports from Czechoslovakia fell in the 1960's, relative to the 1950's. The price elasticity of the EEC's demand for imports from all other communist countries of Eastern Europe is much larger in the 1960's than in the 1950's. Considering that over a twenty-year period the commodity distribution of the exports of the communist countries of Eastern Europe to the EEC is very stable, the changes in price elas- ticities are really an indication that, in the 1960's this part of East-West trade is much more determined by economic factors than in the previous decade. 152 Table 4.4: The Absolute Values of the Price Elasticities of Imports of the EEC Countries from the Communist Countries of Eastern Europe, prior to and after the Formation of the EEC Countries pre-integration period post-integration period 1951-1958 1959-1967 Bulgaria .06 .46 Czechoslovakia .65 .08 Hungary . .12 3.71 GDR .20 5.31 Poland .54 1.77 Romania .20 . 4.08 USSR .07 1.95 Yugoslavia .39 4.20 Source: Import figures are derived from theresults in Appendix A. This idea was presented previously in the introduction of this thesis. It is therefore that I was tempted to present empirical support for this idea, which could be easily derived from my ex- periments with the linear regression model. In Chapter V, I will give a synthesis of the results derived from the analysis in this thesis. 153 FOOTNOTES 1 The results of the linear regression model for the EEC's imports from the GDR and Romania are not presented in this thesis. However, experiments indicated the existence of trade expansion in the GDR's and Romania's exports to the EEC, which coincides with the results of the relative share model. 2A8 indicated in Chapter II, imports, income and relative prices are measured as indexes, with 1959 = 100. Imports and income are measured in constant prices and exchange rates of 1959. This makes the results between countries directly comparable, by avoiding problems of differences in the size of the countries in the sample. 31f the linear regression model were not plagues with multi- collinearity, one could give a specific meaning to 67 (Mi - ME) = 403.53. This would mean that the gains from i: trade expansion accruing to Poland from 1959 to 1967 were 4 times her level of exports to the EEC in 1959. In dollar terms this would be 684,988,000 US dollars in 1959 prices and exchange rates, spread over a nine year period. In the absence of multicollinearity, therefore, I would have suggested that on the average between 1959 and 1967, Poland gained roughly 60 Million US dollars per year from the formation of the EEC. The introduction of a dummy variable has once more increased the problem of multicollinearity. This may be an explanation of the positive sign of the relative price variable in equation 4.4, for the period prior to the integration, which is contrary to econo- nuc theory. 5If no multicollinearity were present in this model, I would have said that the USSR lost, on the average, 206 Million US dollars a year of her export earnings in 1959 prices and exchange rates, as a result of the trade diverting effects of the EEC. However, this figure is unreliable because of the multicollinearity, and seems to be excessively large. 6Another important reason for the differences in the conclusions derived from both models is that the relative share model compares the pre-1959 performance of gll_extra-area suppliers of the EEC with the post-1959 performance of a specific extra-area supplier, while the linear regression model compares the pre-1959 performance of the specific extra-area supplier with the post-1959 performance of 154 the same supplier of the EEC. 7This may be because the multicollinearity between the ex- planatory variables is higher in the model explaining the imports of the EEC from Czechoslovakia than in the model explaining the EEC's imports from Poland and the USSR. 8In fact, this value of F is even significant at the 1% level. 9On the basis of the relative share model, I expected that the exports of Czechoslovakia would have been less favorably affected by the EEC than the exports of the USSR. The two models yield somewhat different results for Czechoslovakia. However, this can be expected, because the models are based on different assumptions. CHAPTER V SUMMARY OF THE RESULTS AND SUGGESTIONS FOR FURTHER RESEARCH In the introduction to this thesis, I quoted three statements by experts on East-West trade, who have been writing or speaking on the effects of the EEC on the exports of the communist countries of Eastern Europe to the members of the European Common Market. E. M. Bolasco concluded that: "In the economic field the Soviet Union has no- thing to fear from the Common Market, since her exports to the latter are chiefly raw materials, and duties on these commodities will be neglige- able in the common external tariff which is being built around the Common Market. 0n the contrary, the People's Democracies, which export mainly agricultural and industrial products, fear an adverse effect on their trade with the EEC countries."l Bolasco only considered three commodity groups and the height of the common external tariff of the EEC, which was mentioned as the only cause for changes in trade flows between the communist countries of Eastern Europe and the EEC countries. If one studies ex-post both income and substitution effects caused by the elimination of internal tariffs, as well as the unification of external tariffs, then one comes to the conclusion that the EEC has a trade diverting effect for agricultural products and chemicals, but a trade expanding 156 effect for most other commodity groups, especially all industrial products (Table 3.1). Insofar as the People's Democracies (communist countries of Eastern Europe) export industrial products to the EEC, it may be expected that the EEC had an gxggggarea trade expanding effect on the exports of these countries. However, Bolasco was correct when he stated that the USSR has a commodity composition of her exports to the EEC which, among all communist countries of East- ern Europe, was the most favorable, relative to the overall gxgggy area trade expanding effects of the EEC. This, I demonstrated in the total percentage Common Market effect in Chapter 111, Table 3.45. But, if the commodity composition of their exports to the EEC is the only criterion for deciding whether the EEC has a trade expand- ing or diverting effect on their exports to the EEC, then I can conclude from my study that all communist countries of Eastern Europe, with the exception of Bulgaria, gained from the formation of the EEC. This last observation is contrary to E. M. Bolasco's statement. However, it is not sufficient to study the effect of the EEC on the communist countries of Eastern Europe in constant prices and exchange rates of 1959 as I did in the Common Market effect. The EEC will also have affected the relative competitive position of her.£§££2f3rea suppliers, as well as the prices which these suppliers could charge for their exports to the EEC. Therefore, a detailed break-down by seven commodity groups and a consideration of the three effects of the EEC, namely the Common Market effect, the competitive effect and the price effect, yields conclusions substantially 157 different from the statements of Bolasco. S. Zdiechowski stated that, in the economic sphere, the USSR would not be seriously affected by the EEC, but that the agricultural policy of the Common Market was bound to hurt the East European coun- tries, especially Poland and Czechoslovakia.2 From the empirical results of the relative share model, presented in detail in Appendix A, I derived figures for the average percentage Common Market effect for food. This effect was negative as expected on the basis of the EEC's agricultural policy and reached -4.7% of the exports of food of the USSR, -2.4% for Poland and -3.2% for Czechoslovakia. It is clear from my results, that the USSR suffered more from trade diver- sion in her exports of food to the EEC than either Poland of Czecho- slovakia. Again, this was contrary to the statements of Zdiechowski. Zdiechowski gives further the impression that, in an economic sense at least, the USSR has nothing to fear from the EEC. If the USSR's total exports to the EEC are studied on the basis of my linear re- gression model, it is clear that the USSR suffered from trade diversion, which was predicted by A. Nove.3 Contrary to Zdiechowski's statement, my linear regression model indicates that Poland gained from the trade expanding effects of the EEC. However, Zdiechowski was correct in pointing out that Czechoslovakia's exports would be adversely affected by the EEC. The prOblem with the statements of most authorities on East- West trade, concerning the effects of the EEC on the communist countries of Eastern Europe, is that no formal models were presented 158 on the basis of which these statements were made. It was therefore necessary to develop quantitative models to measure the effect of the EEC on the exports of the communist countries of Eastern Europe to the EEC. This thesis was an attempt to construct such models and to verify the few statements made by the authorities on East-West trade. Further research in this area would be useful. First, the two models presented in Chapter II can be improved and secondly, a study can be done on the changes in both the income and commodity terms of trade between each communist country of Eastern EurOpe and the EEC.4 The relative share model is based on the assumption that gxgggrarea trade expansion or diversion can be measured by a change in the average income elasticity of the EEC's gxgggrarea import demand for a period after the economic integration, relative to the period prior to the formation of the Common Market. If the yearly income elasticity of the gxgggyarea demand for imports of the EEC was steadily growing or falling between 1951 and 1967, the method of comparing average income elasticities for the periods 1951-1959 and 1959-1967 would automatically lead to the conclusion that the EEC had a trade expanding or diverting effect even if in reality the EEC may have had no effect at all on her members"g§££§farea imports, or perhaps an effect contrary to the one observed by this method. It may be possible to adjust the differences in average income elasticities of extra-area import demand for periods prior to and 159 after the formation of the EEC by correcting the average income elasticities for a trend value observed in the yearly income elas- ticities prior to integration. An alternative, but less desirable way to improve the relative share model, is to design a lower or upper bound estimate for the Common Market effect by taking into consideration the changing trend in world trade prior to and after 1959. Both suggested modifications may yield a purer estimate of the effect of the EEC on her gxgggrarea suppliers. The linear regression model could be expanded by including average weighted tariffs for periods prior to and after the form- ation of the EEC. The expanded linear regression model could then be formulated as follows: 1) M =a+bX+cXY+dY+eXPM+fPM+gXT 51-67 -- — ext P P D D . T, + hT + 1X int ext where d>0 and wherethe sign of a, b, c, e and g f<0 cannot be determined a priori. 8<0 1>o The EEC's demand for extra-area imports in the pre-integration period could be represented as: 2) a-I-dY~|-ff')_l'g+hTe PD "Bl-58 = xt for X = 0 in the pre-integration period. The EEC's demand for extra-area imports in the post-integration 160 period could be represented as: 3) M58-67 = (a+b) + (c+d)Y + (e+f).:M,+ (g+h)Text + i Tint PD Text for X a l in the post-integration period. The variables in this model are defined as follows: M = extra-area imports of the EEC in constant prices and ex- change rates of 1959, expressed as an index where 1958:100. Y a national income in constant prices (1959) expressed as an index where 1958:100. 3!; = relative price index (1958:100), where PM is an index of PD import prices from the specific supplier and PD is the GMP deflator of all the EEC countries. Text a tariffs on imports from an'gxgggyarea supplier, especially weighted with weights, derived from the import commodity mix of the EEC from this supplier. Tint a tariffs between the EEC members weighted with weights, derived from the import commodity mix of the EEC from this supplier. There are obviously many problems to solve before this model can be successfully applied. The average weighted tariffs, both external and internal, have to be computed. If non weighted average tariffs or if poorly constructed weights and hence inappropriate average weighted tariffs are included in this model, it is certain that the independent variables explaining the effect of tariffs on imports will be insignificant. In addition to seventeen observations and eight independent variables (including the cross-product of the dummy variables with 161 an independent variable and a constant) one would only have nine degrees of freedom left to conduct significant tests. However, if these problems could be solved, the following important information could be derived from this model: b indicates the shift in the function attributed to the formation of the EEC. c indicates the change in the income elasticity of the demand for gxgggyarea imports caused by the EEC. e indicates the change in the price elasticity of the demand for lgxgggyarea imports due to the formation of the EEC. g indicates the change in the demand for imports due to changes in external tariffs. i indicates the shift between external and internal demand for imports due to the formation of the external tariffs and the gradual elimination of the tariffs between the member countries. It is clear that the feasibility of this model depends on the availability of data on weighted import tariffs. To my knowledge, such data are not readily available and have to be constructed for each gxgggyarea supplier. A brief summary of the conclusions reached in this thesis may be necessary at this point. The empirical results of the relative share model presented in Chapter III, indicate that all communist countries of Eastern Europe, with the exception of Bulgaria, have a commodity composition of their exports which is favorable relative to the overall extra-area trade expanding effects of the EEC. Con- 162 sequently, the Common Market effect, which is an estimate of the trade expansion or diversion caused by the EEC and calculated on the basis of the competitive strength of the "average" gxgggfarea supplier, is positive for all communist countries in the sample, except for Bulgaria. The relative share model (Chapter III) also shows that Roma- nia, Bulgaria, Albania, Yugoslavia, the GDR and Hungary are strong competitors in the EEC's market for gxgggfarea imports. The USSR, Poland and Czechoslovakia, on the contrary, are weak competitors relative to the "average" gxgggrarea supplier of the EEC. In the 1960's, Yugoslavia, Bulgaria, Hungary, Poland and Czechoslovakia experienced a rise in the prices of their exports to the EEC, relative to the level of these prices in 1959. During the same period, the prices of the exports of Romania, the USSR, the GDR and Albania to the EEC, fell in comparison to their 1959 level. On the basis of the total effect represented in the relative share model (Chapter III) and the results of the linear regression model (Chapter IV), it has been demonstrated that, by studying the effect of the EEC on the communist countries of Eastern Europe, one can divide the communist countries into two groups: those who gained from the formation of the EECfand those who's exports to the EEC suffered from trade diversion. Romania, Bulgaria, Yugoslavia, Albania, Hungary, the GDR and Poland shared in the gxgggyarea trade expanding effects of the EEC. The USSR and Czechoslovakia, on the contrary, suffered from trade diversion. As a group, the communist 163 countries of Eastern Europe gained from the extra-area trade ex- pansion caused by the formation of the EEC.5 164 FOOTNOTES 1E. M. Bolasco, The New York Times, July 7, 1962, 3. 2Stanislas Zdiechowski, "The Impact of the Common Market on the Soviet Union", Studies on the Soviet Union, New Series, 11 April (1963), 54. 3Alec Nove, "The USSR and the EEC", Spectator, 208 (June, 1962), pp. 744-745. 4The study of the terms of trade effect of the EEC on the exports of the communist countries of Eastern Europe to the EEC requires data on the prices of the exports of the EEC as a group to the communist countries of Eastern Europe. These are not available, especially not for seven commodity groups, and could be computed on the Basis of the method presented in Appendix B. 5Bela Balassa, "Trade Creation and Trade Diversion in the European Common Market", The Economic Journal, LXXVII (March, 1967), Appendix. * 165 APPENDIX A: TABLES REPRESENTING THE EMPIRICAL RESULTS OF THE RELATIVE SHARE MODEL F;pfiié tion of the Variables in Appendix A: An Example. 1 . M1959 are the imports of the EEC from a specific.g§££2yarea supplier in 1959 prices and 1959 exchange rates. 2 - “1958-1960 is the average value of the EEC's imports from a 'specific'ggpppyarea supplier in 1959 prices and 1959 exhhange rates. 11 M1966 from the same extra-area supplier, derived by applying the is the estimated value of imports of the EEC in 1966 growth rates for 1952-1959 to M1959. 4 . "$966 is the estimated value of the EEC's imports in 1966 from a specific'gggggrarea supplier, derived by applying growth rates for 1959-1966 to M1959. 5 - M1966 is the estimated value of the EEC's imports in 1966 from a specific extra-area supplier, derived by applying growth rates for 1952-1959 to “1958-1960' 22 1966 from a specific extra-area supplier, derived by applying 6 u M. is the estimated value of the EEC's imports in 1966 growth rates for the period 1959-1966 to “1958-1960' 7 - 1M1966 in 1959 p are the actual imports of the EEC from a specific extra-area supplier in prices of 1959. 8 a “1966 in 1966 p are the actual imports of the EEC from a specific extra-area supplier in current prices. 10 n 11- 12- 14 15 a Source: 166 C.M.1 is the Common Market effect, derived as (4) C.M.2 is the Common Market effect, derived as (6) Comp.E.1 is ths competitive effect derived as (7) Comp.E. is the competitive effect derived as (7) 2 P.E. is the price effect derived as (8) - (7). T.E.1 is the total effect and can be derived as (8) - (3) or (9) + (11) + (13) T.E.2 is the total effect and Can be derived as (8) - (5) or (10) + (12) + (13) The data in the following tables are computed from: United Nations, Statistical Office, CommoditypTrade Statistics, Series D, 1952-1966. Figures in constant prices and exchange rates of (3). (S). (4). (6). 1959 are computed on the basis of the method proposed in Appendix B. 167 mmmo m www.0H m . mom I mm b mmH mmo.a 1 0mm mE - msE mam.m 3mm.» 5E am: 1 no: a emu owm.m u m we . mmm 3mm u and m o ommRa a o E amu mom.m Ema :mm smm 1 mu 1 mm m as mm . has. ma 1 omm 1 amo 1 NH m b m - m 3 a HF AH 80 am . mam. emE a: E.- z m ma : mo mom m1 mm: 1 cm 1 mad Hm I H 99 m Ml Hmmat mmw I mm mm I now: Olb 0m: I mmmafl Hmfih 2| $50 I 230% a poo mwbao mlo h ma ma . m: H mid m a i as men mme. mm: mm m -. mm m . H @33. mmmafl mmwaw mmb mbN Hm mm b a 36H mmon a no a Hmho FmNo manH mmN MFSaON . H was as s m: E m m o: . EmE.m smo.ms mme.E OEa.m mao.u em m cm a oom.mw aa:.:: mma.a :om.m own man m cm: a cam.me mmm.es ooa.E mEm.m omo.E case a oms.am mmo.ms omm.E asm.m com: .a . e www.mm mmo.m: mom.u eeco w.D CCCH CH m fimwamwu mama”: wflwfih .cmnommu . : mum.om 23mm . WH>MHmow m ”COM 0% 80 am e m upomEH m H . cecsez Eec c moose 0 0mm ecu .EEo mo wuoe o mam e £9". 0-H 0H£mP 168 mmm.m meE.EE saw.a mm~.eu mo:.E mEm.E mEE.m Emuoa ame.o. sms.e smm.m mam.u mea.m Emu mmE as: :E on mo 1 mm mCE am an memes Ema «NE - emu REE - mam . EsE mEm com: om . «mm - was mam . mEN.E- Emu - mom 1 secs mm . m . was - «em as“ EmE mmE mEesc mmm.s Ema.m mmm.E mEs «Em - Ema.“ mmm.~ 22mm «so m . mam E meo.m mam.m- mam pom . use . coca m-m mum a-m one sue m-o mus Eas.mmE www.msE mmE.mmE «Em.cmE mm:.ssE acm.msE eEm.=mE mac.amE Emuoa sam.Em aam.km omo.mm www.3m sum.mm moo.mm ma:.om ose.om cm: can can aEm Eaa mam mew mom was mamas mam. amp. 3mm. mEa mEm.E amo.E ewe emo.E com: moa.m mam.“ mam m mma.m mmo.s amm.s mEm.m sem.m emco emm.E use.“ msmHE amm.E omm.E esm.E omm.E mom.E mEesc www.cm www.ms mEm.m: mea.ms msE.ms mam.es mmo.ms www.ms seem aEa so mam we Ema Ea mma.ma www.me osE.me smm.me mme.em eooc m a e m s m a E scone . EEoo .Hmummoa EmH>mHmom5a scam muhomEH .mpecEez cec :0 0mm ecu mo muoemmu .m eacea 169 www.mm EmE.:e www.mE m:m.mm Emm.=: mEo.m mmm.m Emvoe wom.om www.mm EEo.m mph.mw mmm.mm “Em mEm am: now can as mm: mom E: mm mumps ccm.m mom.E cmm m=:.E mam bmm arm new: m:m.E - mam.E - mmE . mam - m::.E - :om - Emm . Emco hrs.“ nmu.m emu . cmw.m mmm.m «mm :mm mesm mm>.EE EmE.EE :am.: :::.m :un.m CEo.: moo.: 23mm mmE.0E 5mm.om mmm.m mom.m bum.mE mm:,E- ozm.E- coop m-m mum bum w-b 2-5 m-o ms: www.1Em OEc.mmE Emc.me 0:0.mmE mmo.:mE :m>.omE oEm.:mE mmo.me Empoe m:o.um hmz.Em mmm.bm m::.b~ :mm.>m www.5m mu:.om o:o.om cm: Eom mum m3m mom mEm can mam m3m mumps mmm.m 5mm.m 1mm bub mo:.E mEE.E owe omo.E pom: mmm.m mmo.m zom.m mom.: :om.: mmm.: mEo.m pwm.m smzo mwb.: mEm.m 5mm.“ :mm.E mmm.w :co.m 0mm.E mom.E mEmsp mom.mm Emm.:m bEm.Em mom.b: me.mm :NE.m: mmo.m: mam.m: 23mm Ebo.bm EEm.om «1:.mh mum.m> mm:.mm mum.om :mm.mo mmw.mm noon m E o m a m m E macaw .EEoo .mmummmH "mH>mHmow:> Eopm wuLOQEH .mLmnEoz pm: co 0mm mcv mo mpommwm «:9 .m manmh 170 omm.mm oo>.hOE 33m. hm FMMoDN mom.: OHHEN :mm.m Hm©.®h 23m.E . mmE.z mm oom.:m Emm.: mmm.m mbo.m n mum Hom.a Eam.:m boo.: HmmaHN Ndmaw mm I mdtam mmmnH mHm HMPOB Emm.om mam.am mum u «mm s :3m.m mm Emm Hman: “No.0 05:00 MOJAH I 3N” :m cm: mum Emm.oE omu.m =::.m mm: - mm: mamas bum mmmamm mowam mum mEmSU 0th nooaml mbwam Hth o SIB mmhafll 23mm moo.a:m ml: NoE. Ems. mo mud mozam hmflnmo mmtammH vom.m 5mm.w ohm.om Ha:.:ma HHfiam :wfia: mbm menOm Mibammfl mEo.m 05:.0 moo.H mam mum.om mam.:ma Emo.ab mmo.m mom.: Ear bzm mom.om mmo.bma me.mEE mm:.:o bum.m mmn.: cam.E mom mp:.om Empoe www.mm mcu.:m mma.m mom.: H:H.H mom o:m.om b mbH.Hm mH:.mm wbH.m mam.“ wmc.H mumps w www.mm Mmb.m: mmm.H bmm.m sow: m 03.05 ammnm: MMMHE mflwno .mm- , a mm m: an GmOH ”MH>w m meamm 23mm . Hmoma > 509% N Ugh mpfioafiH w& H . QQEQE (ng CO @526 0mm mcp .eeoo wo mpow mmm .: GHAMB 171 hm:.:m mam.mb mom.bz cmo.EE :mm.mE m:m.m mmE.m Empoe o:u.o: mo:.o: Emh.m bam.om Ebm.om «:3 m:: cm: mum.m mom.m mm EbE.m mom.m mp mu mamas mom.: mm:.: o mw:.: pmb.m mm: pom com: :mo.E - cam.E - :Em“E mum.E - mop.“ - Emm . was - Ewso 3mm - ppm - Ewe - mOE . mmE - mEm Emm «Ewan bom.mE bom.mE mEm.m com - 0:0.E . E:m.> um:.> 23mm zoo.E - momaOE mEb.>m osE.om- bEE.mE- 5mm.m . 5mm.m- coop m-m m-m sum a-“ 3.5 mum mu: mmo.m:m mmE.mmE mmE.:mE .Emc.mpE Egm.m>E mE:.mmE oEm.:mE moo.b~E Empoe NOE.:b cmm.:m mcm.mm Emm.mm muo.:m www.mm mu:.om o:o.om am: moc.m omm.m we: own mum mom mum mam mumps aEm,m me.m mmE.E mmr Emm.E moE.E owe omo.E com: mum.: mm>.m 035.: mum.m mm:.m mmE.m mEm.m bom.m sane mmo.~ 5:5.m mmm.m o:m.m mmm.~ mom.“ 0mm.E mom.E wEosm 0E5.mm mmE.bm :mo.mm m:b.om o:m.mm «0:.Em mmo.m: mom.m: 23mm www.3m E:m.mm Emo.mm mE>.mm mmo.u> o:m.:> :mm.mo www.mm uoom m b o m a m a E macaw . EEoo .nwnmmoH "ww>mHmom:> Eopm mphomEH .mhmnEmz awn co 0mm wcp mo mpommmm 0:9 .m mflnmh 172 000.00E 000.0EE 050.00 .000.00 000.00 000.0 005.5 E0000 000.00 000.00 0E0.0E 000.00 000.00 000 000 00: E00.0 500.0 00 . 050.0 000.0 00E 00 0:000 555.5 E00.5 005.0 - 000.0 000.0 500 000 0002 055.E 000 E50.E 000.E 000 000 - 050 - 0000 E00 000 005.E . 000.E 000.E 500 000 0E000 500.0E 000.EE 050.0E 00E.5 . 000.5 - 000.0 E00.0 2:00 0E0.00 000.00 000.00 00E.0E- 050.E - 000.0- 500.0- 0o00 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.000 E00.000 000.00E 000.00E 0E0.50E 005.05E 0E0.00E 000.50E E0000 000.00 000.05 000.50 005.00 050.50 000.50 050.00 000.00 :0: 000.0 0E0.0 000 000 EEO 0E0 000 000 00000 000.0 000.EE 000.E 055 000.0 00E.E 000 000.E 0002 000.5 050.0 000.0 000.0 000.0 000.5 0E0.0 500.0 5000 000.0 000.0 000.0 000.0 000.0 000.0 000.E 000.E 0E000 005.00 0E0.00 050.E0 000.00 050.00 00E.00 000.00 000.00 2300 000.EEE 000.05 00E.50 5E0.00 000.05 500.05 000.00 000.00 0000 0 5 0 .0 0 0 0 E 02z0 . Esoo .mwammma "ww>mflwomd> £00m mupomEH .mhmAEmz am; no 0mm may mo mpommmm 0:9 .0 maan 173 550.50 000.00E 000.00E 0E0.E5 000.E0 000.0 500.0 E0000 000.05 000.05 000.00 000.00 00E.00 005 E05 :02 000.0 000.0 000 - 000.0 050.0 00E 0EE 00000 00E.0 005.0 E0E.0 500.0 500.0 000 050.E 0000 500 0E0 - E0E.E 500 500 - EOE.E - E50.E- 5000 000.0 E00.0 00E.0E- 000.0E 00E.0E 000 500 0E000 000.0E 000.EE 5EE.5 000.0 - 050.0 - 000.EE 000.EE 0300 000.00 005.00 0E0.50 005.5 - 000.0 000.0 - 000.0- 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.000 E00.E00 500.000 00E.E00 000.000 000.00E 0E0.00E 000.50E E0000 0E0.0EE 000.00 0E0.E0 500.00 000.E0 500.00 050.00 000.00 002 000.0 000.0 000 000 500 E00 000 000 00000 0E0.0 005.5 000.E 005 000.0 000.E 000 000.E 000: 000.5 000.0 005.0 500.0 000.0 EE0.5 0E0.0 500.0 5000 005.0 050.00 500.0 005.0 000.0 005.0 000.E 000.E 0E000 005.00 000.00 000.00 00E.00 000.00 000.00 000.00 000.00 0300 000.E0E 005.00 000.E0 000.00 500.05 E00.00 000.00 000.00 0000 0 5 0 0 0 0 0 E 02E0 . EEou .mm-mmma ”00>mflmom90 eonw wupomEH .wnmnswz am; no 0mm may mo wuummmm was .0 manmh 174 0E0.00E 000.05E 500.00 000.0EE E00.0EE 000.0 500.0E E0000 00E.55 005.05 000.EE 0E0.00 000.00 000 000 00: 00E.0 00E.0 500 - 0E0.0 000.0 00E EOE 00000 050.0 000.5 000 000.5 000.0 000 0E0.E 0000 00 500.E - 000.E 000 E50 - 000.E- E00.E - 0000 005.0 000.0 000.0 - 000.EE E00.EE 00E.E 50E.E 0E000 E00.0 055.0 000.0 050.0 - 0E0.EE- 550.5 005.0E 2300 000.00 000.05 E50.00 000.E0 0EE.00 0E0.0- 000.0 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 500.E00 000.E00 000.5E0 000.0E0 500.0E0 0E0.000 0E0.00E 000.50E E0000 000.E0E 500.0EE E50.00 0E5.00 000.00 000.00 050.00 000.00 00: 000.0 500.0 000 050 500 000 000 000 0:000 05E.0 005.0 000.E E00 000.0 000.E 000 000.E 000: E00.5 005.0 000.0 005.5 5E0.5 000.0 0E0.0 500.0 0000 005.0 005.0E E0E.0 000.0 00E.0 000.0 000.E 000.E 0E000 0E0.00 0E0.50 000.00 0E0.00 000.00 005.00 000.00 000.00 2300 000.00E 000.50E 0E0.00 000.00E 050.00 000.50 000.00 000.00 0000 0 5 0 0 0 0 0 E 0250 .2500 .bwlmmmd "mm-Pmflmomdr 50.0% mPQOIQEH .mhmnEwZ hm: CO 0mm wnu MO mwuwnwmm- $5.“. .m wHflmH. 175 050.0E 00E.E0 E0E.0E- 0E0.00 00E.00 0E0.E 00E.E E0000 E00.0 - 000.0 - 05 000.0 - 000.0 - E0 E0 00: 000 000 000 - 000.E 0E5.E E0 00 00000 000 - 0E0 - 0 000 - 000 - 00 05 0000 000.0 000.E E00.0 0E0 055 - 000 - 000 - 5000 000.5 - 000.0 - 000 - 500.0 - E00.5 - E00.E 000.E 0E000 000.0 E00.5 000 - 000.0 000.5 000 000 0300 0EE.0E 000.E0 005.0E- 000.E0 000.00 000 - 000 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 500.E5E 000.00E 00E.50E 050.00E E00.EOE 000.00E 000.00E 050.00E E0000 000.0E 000.0E 0E0.0E 550.0E 500.0E 000.0E 000.0E 05E.0E 00: 000.E 00E.0 500 000 000 000 500 000 00000 000 0E0 000 000 0E0 000 000 000 000: E00.0E 000.0E 000.0E 000.0E 000.EE 500.EE 500.0 00E.0E E000 000.00 000.00 505.00 000.00 E00.00 050.E0 000.00 E00.00 0E000 000.00 000.00 000.0E 00E.0E 000.0E E00.0E 0E0.5E 050.0E 2300 0E0.00 050.00E 0E0.55 000.55 050.00 050.00 000.05 000.00 0000 0 5 0 0 0 0 0 fl 0250 .EEOU .cwlmmmH uvcmHOm 60.0% mHLOAHEH .mfimnEmZ can no 0mm 9:. MO mvowwmm 9.3. .m wHAMH 176 005.0E- 000.0 000.0E 005.E0- 0E0.0E- 000.0 000.0 E0000 5E5.5 - 000.5 - 00 - 005.5 - 000.5 - 00 00 00: 00 - 000 000 - 000 000.E 00 00 00000 E00.E E05 0 0E0 0E0 00E 05E 000: 000 000 - 500.0 005.E - 000.0 - 050 - 000 - 0000 000.0 - 000.0 - 000 - 000.0E- E00.0E- 500.0 E00.0 0E000 E00.5 000.0 E00.0 000.0 0E0.0 000.E 000 0300 000.0 - 00E.EE 000.EE 0E0.0E- EOE 000.E- 500 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.00E 000.50E 5E0.00E 005.00E 000.00E 000.00E 000.00E 050.00E E0000 005.0 000.0 000.5E 000.5E 0E0.5E 000.5E 000.0E 05E.0E 00: 500 050.E 0500E 000 000 000 500 000 00000 500.E 000.E 005 000 000.E 000 000 000 0000 055.0E E00.0 050.EE 000.EE 000.0E E00.0E 500.0 00E.0E 0000 000.00 000.00 05E.00 000.00 000.00 005.00 000.00 E00.00 0E000 000.00 000.E0 E05.0E 0E5.0E 050.5E 005.0E 0E0.5E 050.0E 2300 00E.05 000.50 EE0.00 E00.E0 E0E.50 050.50 000.05 000.00 0000 0 5 0 0 0 0 0 E 000.00 . EEOU .E0-000E .000E00 5000 0000000 .0000500 000 00 000 000 00 0000000 000 :00E 0E000 177 Eom. a ma omm.w mm m I cam. u. 50:.“ 0E0.0 - 000.0E- 050 0:0 E00.0 000 - . .. 00.}. mwNamHl 3 I om 0mm0N NmH m: . Emw.a 0m» m o: omH m CH HI 0 :5 0 I 2m I H o . 000. E00 E- 0 0 00 00 00: or m u hm .mH 0E0 m::.wan m00.m n a mum mange w 5 how mmzum bmmoiHl mwmn I Nmoa com: 0-0 E00.0 , 005.0E :00 0 .E- E0 Mlm I zomnm NmmaH 0mm 3 m £0 bum bow0Hl Hwaad Honk OIN. 3|“ mmnafll 23mm mlm m 600“ I: m0E.m0E NNHawa mbb. 00:. 00E mmz.ME :OE.mE . o5m.mbE ooo.mmE homad Nmaam :m: ma N . mmb.ooa a mea Om OH Nm 0 000. 000 E E 0: . 0 00E 0E . 0E0 500.E E 3 050.0 000. 000 0 05 000.0 0E E0 mN O a mNfin me m H 00 a . #09 000. 00 00 0E . 03E. mom a :H 000.Mm E5:.00 00E.0: MM0.0E 000.“ 050 500 . M5E.:E 0 N ,0 N H 2 w: 000.00 mmo.o0 www.mm 5m0.E: 000.:E 000. mum 0:000 m m :m 0H:.®M mmb.ma mzmawm ”MM.m mmH00H now: a 0 53:.o0 00.50 m .90 E00. 80:0 0 005 E5 E0 5E 00 0E0: 0 a 000.05 M50.0E 2:00 . 0m. . m 00-000E "000 0 00 0000 How EOQ N M wHQOQE H 2 km: co . 0 MO ”PUGMM m 0:0 .HE 0En00 178 E00.0E- mba.m E00.0 - 000.0E Hho.H I m:o.: I 5mm000I fiflHnH mHm- I QMN I :mH0mHI Hmha: I §FO O 600.: I 55300 me.:HI :Hm.m I Hum H6N0H I muo03 I m>H.w mNbaHH mHmaNHI OHm 03m 0H0 I :NN HMPOH 000.E I E00.0E 50E.E I 000.0 - 500 000 E00 E00.0E 0E0 - 000.00- 00E.0 - 050 50 a0: WIN bfliomfl “Chum MGNamHI H33QHI 0mm ”GMHF MIm mamasdl medamd Hmdab ommadl now: 5-0 0E0 E00.0 000.0 2000 mIb www.mI H200N mHmdm 0-5 E00.E- 2:00 me @OOh H a C3 00H 0. m cm ma 0 . om 00E 0 ,. 5 .0 0E 5E 0 . E0 00E 0. . 05 E 0 .0 E00.E0 0 . 00 05E 5 . Hmm0oH -:m H hm H am am a: mud mabadm Hbm.mN Homamfi me0 0H0 +:._m.CN mbmnoma 000.00 E00.00 005.00 00E.0E 050.E 0E0 000.0E E0000 000.05 000.00 E00.E: 0E0.0E 000 500 05E.0E 0 000.00 500.0E M00H0: M00H0E M00. m:: 00:02 5 000.E0 00 0E 05 00 000 0 000. 000 0 000.05 +.00.5E 00.00 E0E.0E “002 0 000.00 ME0H5E 000.00 0 000 .00-000E 0 00 00 50 0E E000 "0:0 0 000.00 2300 E00 5000 0o mthQEH N 0m .mfimflewz H .ng GO U @308 mm 0:0 .55 mo muo ou mmmm 0 :9 .NH GHAMB 179 000.00- 000.5E- E00.0E 000.50- 00E.00- 000.0 000.0 E0000 050.0 - 00E.0 - 5E0 000.: - 000.0 - EEO 000 00: 000 - 050 - 0 - 000.E - 500 - 000 00E 00000 00E.E 000 00E - E00 000 000 000 000: 000.0 - 50E.0 - 000 - 0E0.0 - 050.0 - 0E0.0- 000.0- 00:0 000.0E- 050.00- 000.E - 050.00- 0E0.00- 000.0 000.0 0E000 E50.0E 000.0E 000.0 000.5 E00.0 000.0 050.0 2300 000.00- 005.0 - E00.0 E05.E0- E50.0E- 000.0- 000.0- 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 005.50E 0E0.00E 000.0E0 E00.000 0E0.00E 0E0.00E 000.00E 050.00E E0000 000.0E 050.0E 055.00 000.00 000.00 000.00 000.0E 05E.00 00: 50E 05E 000.E 5EE.E E50 E00 500 000 00000 005.E E00.E 0E0.E E00 500.E 000 000 000 000: 000.0E 500.0E 000.0E 000.5E 000.0E 005.0E 500.0 00E.0E 0000 000.00 0E0.00 E00.00 000.00 005.00 50E.00 000.00 E00.00 0E000 000.00 000.E0 000.00 500.00 50E.E0 000.0E 0E0.5E 050.0E 2300 000.E5 000.E0 000.00 000.00 0. 000.55 000.00 000.05 000.00 0000 0 5 0 0 0 0 0 E 00000 . . EEoo .zoummma "camaom £00m muaanH .mhonswz has no 0mm 020 MO 0000mmm mnh .mH wanna 180 00E.0 000.00 0E0.E0 000.00- 000.0E- ,000.EE 000.EE E0000 000.0 - 000.0 - 000.0 500.0E- 000.EE- EE: 000 00x 000 000.E 50E 000 050.E E00 00E 00000 000.E 000.E 00 - 000.E 000 050 000 000: 000.0 - 0E0.0 - 000.E 000.0.- 000.0 - 000.0 - 000.0 - 00:0 000.00- 000.E0- 500.0 - 000.00- 000.E0- E00.0E 000.0E 0E0=0 050.00 5E0.00 000.0 00E.0E 005.0E 505.0 000.0 2200 E00.0E 000.E0 000.00 00E.0 - 000.EE 005.0 - 00E.0 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.000 500.00E 000.000 00E.0E0 000.000 000.00E 000.00E 050.00E E0000 000.0E 500.0E 000.00 050.00 000.00 000.00 000.0E 050.0E 00: 000.E 000.E 000.E 00E.E 005 000 500 00: 00000 000.0 000.0 50E.E 000 000.E 000 000 000 000: 500.0E 000.0E 000.0E 0E0.0E 000.0E 00E.E0 50000 00E.0E 0000 E00.00 000.50 000.00 000.00 000.00 000.00 000.00 E00.00 0E0=0 000.00 E00.50 50E.00 000.E0 000.00 00E.0E 0E0.5E 050.0E 2:00 000.0EE 000.00 000.00 005.E0E 0E0.E0 000.00 000.05 000.00 0000 0 5 0 0 0 0 0 E .586 OEOQ .00-000E .000E00 0000 0000050 .000000: 000 00 000 000 00 0000000 000 .0E 0E00H 181 0} ”fl m m m b m b m m m m m H hm H m m m m . m H 182 055.5 000.00 00E.0E E00.00- 000.0 00E.0E 00E.0E E0000 050. 050 000.E 000.E - 005 - 000 000 00: 0E5.0 EO0H0 E0 00E.0 500.0 0E0 000 00000 0E0.0 00E.0 000 - 00E.0 000.0 005 000.E 0002 000.0 - 000.5 - 000HE 000.0 - 500.0 - E50.0 - 000.0 - 5000 E50.E0- 000.0E- 50E.0 - 00EH00- 005.00- 005.E0 005.00 0E000 000.00 000.E0 000.0 - 000 00 500.E0 000.0 000.: 2:00 00E E - EOE 0E 000 00 00E 00- 0E0.0 - 000.0 - 000.: - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.000 E05.000 000.E50 000.000 000.500 000.000 000.00E 050.00E E0000 EO0HEO 000.00 00E.00 000.E0 0E0.E0 000.00 000.0E 05E.0E 00: E00.0 000.0 005.E 000.E 050 0E0 500 000 00000 000.: E00.0 000.E 000 000.E E00 000 000 0002 500 0E 505H5E 00E.00 000.00 00E.00 000.50 500.0 00E.0E E000 00E.00 000.E0 00:”05 055.50 E00.05 000.00 000.00 E00.00 0E000 0E0.E0 0E0.00 000.00 000H00 500.00 000.00 0E0.5E 050.0E 2300 000 0EE 005 00 500 00E 000 0EE 000.00- 500.00 000.05 000.00 0000 0 5 0 0 0 0 0 E 00000 . EEOC .50-000E .000E00 5000 0000050 .000050: 000 :0 cum 0:0 00 0000000 000 .0E 0E000 183 0E0.00 000.0 000.0 500.00 0E0.5 - 00E.0 E5E.0 E0000 0E0 - E00.0 - 000.0 000.5 - 000.EE- 00E 00E 00: 000 000 00 - 000 00: 0E 0 00000 500.E 000.E 00E - 500.0 050.E 00E 05 000: E00 05E.0 - 500.0 000.0 - 000.0 - 000 - 000 - 0000 000.0 000.0 00E.0E- 000.00 5E0.0E 000.0 000.0 0E000 000.E0 050.00 000.0E 00E.0E 00E.0E E00.0 00E.0 2000 000.0 000.0E- 500 - 000.0 000.0E- 000 - E0: - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.0E: E00.00: 000.050 000.000 050.0E: 000.000 50E.000 500.550 E0000 000.00 000.5: E00.00 000.00 500.00 000.00 E00.0: 000.00 00: E00 000 000 000 E00 000 :00 0E0 0:000 0E0.0 050.0 EE0.E 000.E 000 000 000.E 0E0 000: 0E0.0E 000.0E 050.5E 0E0.5E 000.00 000.E0 000.0E 000.0E 0000 505.00E 050.00E 000.00E E00.00E 000.00E 050.00E 005.00E 000.00E 0E000 0E0.00E 000.E0E 00:.5EE 000.0EE 000.0EE 000.0EE 000.0EE 050.0EE 2300 000.50 000.00 000.00 000.00 000.00 000.50 000.00 005.00 0000 0 5 0 0 0 0 0 E 00000 . E050 .00-000E .0000 000 0000 0000000,.0000502 000 00 000 000 00 0000000 000 .5E 0E000 184 5E0.05 000.00 000.0 00E.00 E00.0E 000.5E 005.5E E0000 000.0 - 000.0 - 05E.0 000.EE- 000.0E- 0E0 000 00: 000 500 000 - 050 E00 00 00 00000 000.E 0E0.0 00E 000.E 000.0 E00 50E 000: 000.0 00E.E - 055.0 E00 005.0 - 000 - 00E.E - 0000 E50.50 000.E0 000.00- 000.00 000.50 0EE.0E 000.00 0E000 505.00 005.00 000.0E 005.0 .000 E00.0 050.0 2300 000.E0 000.0 - 00E.0 - 055.00 000.0 000 - 000 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 0E0.000 005.000 000.EE: 000.000 000.000 0E0.000 50E.:00 500.550 E0000 500.00 000.00 000.00 000.00 005.00 000.00 E00.00 000.00 00: 0E0 050 000 000 000 E00 000 0E0 00000 00E.0 0E0.0 000.E 0E0.E 000.E 000 000.E 0E0 000: 000.00 5E0.0E 000.0E 000.00 E00.00 000.00 000.0E 000.0E 0000 000.05E 000.EOE 000.50E 000.00E 000.00E 000.E0E 005.00E 000.00E 0E000 550.0:E 000.50E 005.00E 05E.0EE 0E0.00E 000.00E 000.0EE 050.0EE 2300 000.00 000.05 000.50 E00.5: 000.05 00E.E5 000.00 005.00. 0000 0 5 0 0 0 0 0 E 00000 . E00 .Hm-mmma "mmms 0:0 800% uphanH .maonsmz 00: no own 0:» mo muommmm «:0 .ma wanna 185 mmm. 0E 0E0.00- . HH NH00m so I 0 0 0 . 50 . bom.H mam mm m m H:- m . 000.5 000.E 000 - 000.00 00 00 00 . 5m . - 000. 000 EE0.E 000.E0 0 00 0.5m- 00E.EE- 000.0 000 500.E 00m E0000 EE5 00 00 .00- 005.0 - 000 - 000.E Em E00 mbN0m a m w: an m . Hm . ma: mm cm: omm.mm- :m0.md ma mm: o a a m mam m 000.5 - mmm.00 E00.mm- 0mw.E - mm 09 lm film 0mm0m bmmawm HmHnON w3m-H I 20”: 5am mE0.mE- 0Em.¢E m0m.om 050:0 mlb 0:0 I Hm300H Hwfih 0-5 500.E - 2300 mlw fiOOh m-0 m0E. , 000 0m0.o 00 E05. oomomm 0min. mm 0 o . 50m. m E00 0E E 00 5o . . «0m. =H>.m o mm: m0m m E o E . boo. . E . 000 0E 00 000 000 0 00 0 m . 50E. H m5 0 mmbad mhm 3m H5 33m m3m000H N on mflma 0:00H :bN bmmao> bsmabmm www.cra 00m.owa mm .H0 wum.m bwa.d Ham Hmm.m: E0009 www.m3 0H200ma www.mba mo:. N cum.: mmm 3mm cmm0mm 5cm.mm 0 0mE o0 .mmE mom. 0 5Em.m 000.E «E0 :0: 0N0003 H NNH mmH a N mm a GHQ WCMLF 5 cm ma 0 H s 0 3mm. now Cfibam QQN 3“ 05 @NH mH z m b H a . an . Em m 5EE.m5 00 0EE 0 00E 0 00 .0 0 000.00 05m.0EE E000 0-000E . 005.0 2300 .mmma 0 m D cw EOhm N vOOh mun OQEH .mfio H OQMMM 0:5 . 186 0EE.0EE .000.00 E00.00- 000.00E 0E0.00 000.E0 000.E0 E0000 0E0.0E E00.0 000.0 000 505.0 - 055 000 00: 050 000 050 - 050 00E.E 05 00 00000 500 000.E 0E0 - 005 000.E 500 000 000: 500.0 - 500.0E- 000.0 - 000 000.0 - E00.0 - 000.0 - 0000 500.E0 550.00 000.00- 050.00 E00.00 000.00 000.00 0E000 000.00 000.00 00E.0 550.00 500.00 000.0E 000.0E 0:00 0E5.0 000.E0- 000.E -- 000.5 000.0E- 0E0.E - 000.0 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 0E0.050 050.000 000.000 00E.000 000.000 000.000 50E.000 500.500 E0000 E00.00 000.05 E05.05 000.05 000.05 000.05 E00.00 000.00 00: 050.E 500.E 000 000 000 E00 000 0E0 0:000 000.0 005.0 .000.E 000.E 000.E 050 000.E 0E0 000: 000.00 0E0.00 000.00 E00.00 0E0.50 EE0.00 000.0E 000.0E 0000 050.000 000.000 005.E00 E00.E5E 505.000 E00.05E 005.00E 000.00E 0E000 000.E5E 5E5.00E 000.00E 000.00E 000.00E 000.00E 000.0EE 050.0EE 2:00 E0E.00 000.00 050.00 000.00 000.55 E00.05 000.00 005.00 0000 0 5 0 0 0 0 0 E 0000m . EEOC .00-000E .0000 000 0000 0000000 .000050: 00; 00 000 000 00 0000000 000 .00 0E000 187 N a a o I 5E 00 555 0E 500 00 000.00 E00.0E- 000.00 00E.50 E0000 050 - 0E0.0 - 005.0 . - . - - 0... s 000 0... 0... 005.E 000.0 00E 000 0E0.E 005 0 000 EEE.0 - . - . - . E0 000: 050 0E 050 E E00 0 - 500.0 - 000.0 - . 050.50» 000.0 . - . . 000 0 - 0000 _ 0 000 50 00E 00 0 . . 000.00 E00.0 . . 50 00 000 E0 000 00 0E000 00E.00- 0E0. 0 050.00 0E0.0E 0E0.0E 050.0E 000.0E 2:00 00 0E0 0 0E0 00- 000.00- 005.E - 550.0 - 0000 0-0 0-0 0-0 0-5 0-5 0-0 0-0 000.500 0E0.E50 000.E00 000.000 000.000 00 . . . 0 000 50E 000 500 000 E0000 000H05 E05H05 000.E0 500.00 000.50 000.00 E00.00 000.00 00: ”Mm.“ “MM.“ www.0 EE0. 000. 000 000 0E0 00000 000.00 000.E0 . 000 E 000 E 000 000.E 0E0 000: 005 00 00E 00 5E0 00 0 . . . . . 00 00 000 0E 000 0E 00 000 000 000 E00 . . . 00 000.00E 005.00E E00 500 005 00E 000 500 50E.00E 005.00E 000.00E 0E000 000.00E 000.00E 000.EOE 005.00E . . 000.00 0 . . . 000 0EE 050 0EE 2:00 05 00 000 00 050 00 00E.E0 E05.00 000.00 005.00 0000 0 5 0 0 0 0 0 E 00000 ..EEOO 00-000E "0000 000 0000 0000000 .000000: 000 00 000 000 00 0000000 000 .E0 0E000 188 0EE.00 000.00 00E.E - 000.0 000.00- 000.05 005.05 E0000 000.0 0E0.0 050.0E 500.E - 00E.0 - 0E0.E 0E0.E 00: 050.E 000.0 050 - E00.0 000.0 00E 00 00000 050.: 000.: 050 - 0EE.0 000.0 500.E 000 :00: 000.0 - 000.0E- 00E.0 - 005.0 - 055.5 - 0500.: - 0E0.0 - 2000 000.0 - 000.0E- 0E0.00- 000.0 - 000.0E- 000.00 0E0.50 0E000 550.00 000.00 500.00 500.00 000.0E 005.00 00E.00 2:00 000.0 - 0E0.00- 000.: 0E0.0 - 005.00- 00E.0 - 000.0 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 EE0.000 000.E00 000.000 005.000 000.000 000.E50 50E.000 500.500 E0000 000.00 000.00 00E.00 005.00 500.00 00E.00 E00.0: 000.00 00: 000.0 050.0 000 000 000 050 :00 0E0 0:000 E00.0 000.0 500.0 000.E 000.E 0E0 000.E 0E0 000: E00.00 E00.00 000.00 000.00 000.00 5E0.00 000.0E 000.0E E000 0E0.00E 00E.000 0E0.500 055.000 0E0.500 000.0E0 005.00E 000.00E 0E000 000.0E0 E00.00E 000.00E E00.00E 000.E0E 00E.50E 000.0EE 050.0EE 2200 000.00 E00.0: 000.50 000.00 00E.00 000.00 000.0: 005.00 0000 0 5 0 0 0 0 0 E 00000 . EEOC .00-000E ”0000 000 E000 0000050 .0000200 000 00 000 000 00 0000000 0:0 .00 0E000 189 mom09ml E00.00 00E.E0 050.00 0000E0- 000.00 EEE.00 E0000 EE0H0E 005H0 000.E 000.5 00 000.E 000.E 00: 00500 000.E 000 - 000.E 00E.0 00E 00 00000 000.0-. E00.0 000. - 00E.0 E0E.0 000.E 000 000: 0E5.0 000 0E- 500 E - 505 - 000.0 - 000.0 - 000.0 - 0000 000.0 000. 0E0. - 005.E0- 000.05- 500.05 000.05 0E000 005.00 000.00 000.00 000.00 050.00 E00.00 500.00 2300 000 0 0E0 00- 000 E 000.0 - E50.00- 500.0 - 000.0 - 0000 0-0 0-0 5-0 0-5 0-0 0-0 0-0 000.000 500.000 0E0.000 050.000 00E.005 000.0E0 50E.:00 500.500 E0000 000H00E 000HO0E 000.00 000.50 500.00E 0E0.00E E00.00 000.00 00: 00E.0 000 0 000 500 000 000 000 0E0 00000 000.0 000.0 005.0 000.E 005.E 500 000.E 0E0 000: 000.00 E00H00 050.E0 000.50 EE0.00 000.00 000.0E 000.0E 0000 00E.000 0E0.000 0EEHE00 05E.000 500.000 E00.000 005.00E 000.00E 0E000 0EE.500 050.00E 500.00E 000H00E 000.E5E 055.E0E 000.0EE 050.0EE 0300 E00 00 000 00 05E 00 000 00 500.00 000.00 000.0: 005.00 0000 0 5 0 0 0 0 0 E 00000 . 6500 .00-000E .0000 000 0000 0000000 .0000000 000 00 000 000 00 0000000 000 .00 0E0mm 190 005.05E 000.EOE 55E.00- 000.00 000.00 500.5EE 0E0.0EE E0000 E00.0E- 505.E0- E00.0 000.0E- E00.00- 000.0 000.0 00: 000.E 00E.0 000 - 000.0 005.0 00E EOE 00000 500.0 500.0 500.E - 000.5 000.0 050.E 000.E 000: 00E E00.5 - 050.0 - E00.0E 000.0 000.5 - 000.0 - 0000 000.E0 000.E0 000.00- 000.00 E00.0E 000.00 000.00 0E000 000.00E E00.00E 500.00 00E.00 000.00 005.00 000.00 2300 E00.EE- 00E.00- 50E.0 - .000.0 - EOE.00- 000.0 - 000.0 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.055 000.000 0E0.0E5 050.E00 005.055 00E.000 50E.000 500.500 E0000 000.00 E00.E0 00E.0EE 000.50E 00E.0EE 000.0EE .E00.00 000.00 00: 500.0 00E.0 000 00: 0E0 500 000 0E0 0:000 050.0 E00.EE 000.0 050.E 000.E 000 000.E 0E0 000: 000.00 0E0.00 500.00 00E.00 000.00 000.00 000.0E 000.0E 0000 00E.000 500.000 E00.000 500.000 000.E00 000.000 005.00E 000.00E 0E000 050.000 550.E00 505.05E 0E0.000 000.EOE 000.00E 000.0EE 050.0EE 2200 000.00 000.00 00E.00 000.00 E00.00 000.00 000.0: 005.00 0000 0 5 0 0 0 0 0 E .395 5500 .50-000E .0000 000 5000 0000000 .000000: 000 00 000 000 00 0000000 000 .00 0E000 191 000.0 500.0 005.0- 050.0 500.0 000.E 000.E E0000 E00 - 000 - 000 000.E- 5E0.E- 00E EOE 00: 000 005 - 0 - 000 0E0.E- 0E0 000 00000 E00.0 EEE.0 EE0 0E0 000.0 000 005 000: 005.E 000.E 000.E 0E0 000 000 - 000 - 0000 50 000 000 - 000 0E0 5E0 50: 0E000 000.0 000.0 00E.0- 000.0 000.0 005 050 2300 050.0- 000.0- 000.E- 500.0- 000.0- 00E - EOE - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 00E.00E 000.00E 000.00E E00.00E E00.E0E 00E.0EE 050.0EE 000.EEE E0000 000.50 000.50 000.00 505.00 005.00 000.00 50E.00 E00.00 00: 000.0 550.0 000.0 000.0 000.0 000.0 000.: E05.0 00000 0EE.EE 000.0E 000.0 000.0 005.0 000.0 000.0 000.5 000: 000.0E E00.0 5E0.0 00E.0 000.0 000.0 000.0 000.0 0000 000.0E 000.EE 000.0E 000.0E 0E0.0E EE0.0E 000.0 000.0 0E000 000.00 EE0.00 005.00 000.50 000.00 005.00 000.50 000.00 :300 000.5E 000.0E E05.00 050.00 E00.00 000.00 005.0E 000.E0 0000 0 5 0 0 0 0 0 E 00000 .EEoo .00-000E .000000E0000000 0000 0000000 .0000000 000 00 000 000 00 0000000 0:0 .00 00000 192 500.0 500.5 000.0 000.0- 000 - 500.: 000.0 E0000 050.0- 000.0 - 0 - 000.0- 00E.0- 000 000 00: 000.E 000 - 000 - 000.E 000 - 0:: E00 0:000 E00.0 E00.0 0E0.0 000 000 E00.E 000.E :00: 000 000 . 000.E 0: 50E :00 - E00 - 50:0 000.E 000.E 0EE - 000 000 000 000 0E000 0EE.5 000.0E 000.0 50E.0 000.0 000.E E00.E :300 E0E.0- 0E0.0 - 000.E- 500.0- EE0.0- :50 - 500 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.00E 0E0.E0E 005.00E 000.00E 000.E0E 000.50E 050.0EE 000.EEE E0000 000.00 505.00 000.00 555.0: 000.0: 000.00 50E.00 E00.00 00: 050.0 050.0 050.0 000.0 000.0 000.0 000.0 E05.0 00000 E00.0E 000.0E 000.EE 000.0 005.0 00E.0 000.0 000.5 000: 00E.EE 050.0 000.0 000.0E 505.0 000.0E 000.0 000.0 00:0 500.0E 000.0E 050.0E 50E.EE 055.EE 000.0E 000.0 000.0 0E000 000.00 505.00 000.00 000.00 5E0.50 000.00 000.50 000.00 2200 000.5E 00E.0E 005.E0 000.00 050.00 500.00 005.0E 000.E0 0000 0 5 0 0 0 0 0 E 00000 . EEOC .E0-000E .0Ex0>0E0000000 0000 000000E .000050: 000 00 can 0:0 00 0000000 000 .00 0E00m. 193 000 - 00E.E E00.0 000.0E- 000.5- 0E0.0 000.0 E0000 000.0E- EE0.0E- 000 - 0:0.0E- 550.0E- 050 E50 00: 000.E - 000.0 - 000 - 500.E - 000.0- 0E5 500 00000 000.0 050.5 050.0 000.E 000.0 000.0 E00.0 000: 000.0 - 05E.0 - E50 - 50: - 000 - 000 - 000 - 5000 EE: 0E5 005 - 000 - 50 - 000.E 000.E 0E000 000.5 000.0E 000.E 000.0 000.5 000.0. 000.0 0300 00 - 000.E - E00.0 500.E - E00.0- 00: - 000 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.00E 000.00E 000.00E 005.00E 000.00E 500.00E 050.00E 000.EEE E0000 00E.00 000.00 500.50 00E.50 500.50 000.00 50E.00 E00.00 00: 005.0 00E.0 000.0 000.0 500.5 000.0 000.0 E05.0 00000 000.0E 0E0.0E 000.0E 000.0 E00.0E 0E0.0 000.0 000.5 :00: 000.0 000.0E 500.0E E50.EE 005.0E E00.EE 000.0 000.0 0000 0E0.0E 000.0E 000.0E 00E.0E 000.0E 000.EE 000.0 000.0 0E000 000.50 000.00 000.00 000.00 500.00 000.00 000.50 000.00 2200 000.00 0E0.00 000.00 050.00 005.00 000.00 005.0E 000.E0 0000 0 5 0 0 0 0 0 E 0:000 .5500 .00-000E .000000E0000000 0000 0000000 .000020: 000 00 000 000 00 0000000 000 .50 0E00H- 194 0E5.0 - 000 000.0 000.0E- 000.E0- 000.0 000.0 00000 E00.0E- .005.0E- 000.0- 05E.EE- 000.0E- 000 0:0 00: 000 000 - 00E.E- 000. 500.E - 000.E 050.E 00000 000.0 0E0.0 000.E 000.0 - 500 - 000E.0 005.0 000: 000.0 - 000.0 - 000.E- 050.0 - 500.0 - 000.0- 000.E- 0000 000 . 000 050 - 050.E - 000 - 050.0 5E0.0 0E000 000.0 000.0E 000 - 0E5.0 000.0 000.0 00E.0 2:00 E00.0 000.0 500.0 000.0 - 000.: - 000 - 500 - 0000 0-0 0-0 05-0 0-5 0-5 0-0 0-0 00E.50E 000.00E 500.000 000.00E 000.000 000.50E 000.0EE 000.EEE 00000 000.00 550.E0 000.00 000.00 000.00 0E0.E0 50E.00 E00.00 00: 000.0 050.5 000.0 000.0 00E.0 000.0 000.: E05.0 00000 005.0E 00E.EE 005.0E 050.0 00E.0E 000.0 000.0 000.5 000: 000.5 000.0 000.EE 00E.0E 000.EE 00E.0E 000.0 000.0 0000 000.0E 000.0E 000.0E 00E.0E 000.0E 0E0.0E 000.0 000.0 0E000 005.00 000.00 000.00 000.00 000.00 000.50 000.50 000.00 0000 050.00 0E0.E0 000.00 050.00 000.00 0E0.00 005.0E 000.E0 0000 0 5 0 0 0 0 0 E 00000 DECO .00-000E ”0000>0E0000000 0000 0000000 .000000: 000 00 000 000 00 0000000 0:0 .00 0E000 195 0E0.0 000.0 500.E 000.00- 0E0.5 - E00.0E 000.EE E0000 000.0 - 000.0 - 000 - 000.0 - 500.0 - 005 505 00: 000.E 00E 500 - 000.E 505 - 000.E 000.E 00000 000.0 000.0 000.0 050.0 - 000.E - 000.0 000.0 :00: 000.0 - 05E.0 - 005.0 - E50.0 000.0 005.E - E05.E.- 0000 005.0 - 000.0 - 0E - 000.0 - 000.0 - 00E.0 050.0 0E000 000.EE 050.0E 00E.0 - 000.0E 055.0E E00.0 000.0 2300 00E 000.E - 000.5 000.0 - 000.0 - 005 - E00.E - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 050.00E 000.00E 005.05E 000.00E 000.00E 000.50E 050.0EE 000.EEE E0000 005.50 E00.0: 500.00 500.50 000.50 E0E.50 50E.00 E00.00 00: 000.5 000.0 500.5 500.0 5E0.0 0EE.5 000.0 E05.0 00000 000.0E 000.0E 000.0E 005.0 EE0.0E 000.0 000.0 000.5 000: 000.0E 5E0.0E 00E.0E 500.0E 000.0E 000.0E 000.0 000.0 5000 E00.EE 000.EE E00.5E 050.0E 500.0E 0E0.0E 000.0 000.0. 0E000 000.00 0EE.50 E00.00 000.E0 000.00 000.00 000.50 000.00 2300 0EE.00 0E0.0E 00E.00 000.00 000.50 00E.00 005.0E 000.E0 0000 0 5 0 0 0 0 0 E 00000 . EEOC .00-000E ”0Hx0>0E0000000 0000 0000050 .000000: 000 00 000 000 00 0000000 0:0 .00 0E00m. 197 000.0E 000.5E 000.0 550.5 - E00.0 - 000.0E 000.0E E0000 000.0 - 05E.0 - 000.0 000.0 - 000.0 - 000.E . 000.E 00: 00E.0 000.0 000 000.0 00E.E 005.E 05E.0 00000 000.0 500.0 000.0 50E.0 - 05E.0 - 50E.0 550.0 000: 000.0 - 000.0 - 5E0.0 - 0E0.0 000.0 000.0 - E00.0 - 0000 000.5 - 500.0 - -000.E - 000.0E- 500.0 - 00E.0 000.0 0E000 005.0E 500.0E 000 - 050.5 000.EE 0E0.0 00E.0 0300 000.5 005.: 050.0 050.0 000.E 000.E - E00.E - 0000 0-0 0-0 5-0 0-5 0-0 0-0 0-0 000.50E 000.E0E 000.00E 000.E5E 000.00E 000.00E 050.0EE 000.EEE E0000 0E0.00 000.00 500.00 000.00 000.00 000.00 50E.00 E00.00 00: 050.EE 005.0E 050.5 000.0 000.0 E00.5 000.0 005.0 00000 550.0E 000.0E E0E.50 000.0 00E.0E 0E0.0 000.0 000.5 000: 000.0E 000.0E 000.0E E00.0E 500.0E 005.0E 000.0 000.0 0000 0E0.0 000.0 000.0E 000.0E 00E.0E 000.0E 000.0 000.0 0E000 000.00 000.00 000.00 0E0.00 000.00 000.00 000.50 000.00 0000 E00.00 500.00 000.00 000.50 000.00 050.00 0005.0E 000.E0 0000 0 5 0 0 0 0 0 E 00000 .0360 .00-000E .000000E0000000 0000 0000000 .000000: 000 00 000 000 00 0000000 000 .00 0E000 198 E00.0 005.0 000.0 0E0.0E- 000.0E- 000.00 00E.0E E0000 00E.0 - 000.0 - 50E 000.5 - E00.5 - 000.E 000.E 00: 000.0 000.E 500 00 - 0EE.0 - 00E.0 005.0 00000 000.0 505.0 00E.0 000.0 - 5E0.0 - 000.0 - 050.5 000: 00E.0 - 000.0 - 0E0.E - 000 005 000.0 - 000.0 - 0000 000.0 - EEE.0 - 0E0.0 - 000.EE- 000.EE- 00000 000.0 0E000 05E.0E 00E.0E 00E.0 - 0E0.EE 050.0E 00E.5 000.0 2000 050.0 00E - 005.5 0E0.0 - 0E0.0 - 500.E - 000.E - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 005.E0E 0E0.50E 000.000 E00.00E 00E.000 0E0.00E 050.0EE 000.EEE E0000 000.00 000.00 000.E5 005.00 005.00 000.00 50E.00 E00.00 00: 005.0 000.0 00000 EOE.0 000.0E 005.0 000.0 E05.0 00000 055.0E 000.0E 5:E.0E 00E.0E 000.0E E00.0 000.0 000.5 000: 000.0E 000.0E E00.0E 0E0.0E 000.0E E00.0E 000.0 000.0 0000 000.0 EE0.0E 000.00 000.0E E00.E0 000.0E 000.0 000.0 0E000 000.00 000.00 E00.E: 0EE.00 000.00 00E.00 000.50 000.00 2300 0E0.E0 000.00 E05.50 000.00 500.00 500.E0 005.0E 000.E0 0000 0 5 0 0 0 0 0 E 00000 . EEOC .00-mmma "wwxm>oEmo:ocuo scam munanH .0004202 000 no 0mm 0:» mo muoommm use .Hm oEnme 199 050.0 E00.0 500.0 0E0.50- 000.00- 000.00 000.00 E0000 000.0- 000.0 - 0:0 0E0.0 - 500.0 - 000.E 000.E 00: E00 - E00.0 - 000 000.0 - 00E.0 - 000.0 000.0 00000 E00.0 000.0 000.0 050.5 - 000.0 - .000.EE 055.0 000: 000.0- 050.0 - 00E.0 500.0 - E00.0 - 000.0 - 050.0 - 0000 000.0- 0E0.0 - 000.0 - 000.0E- 500.0E- 000.0 000.0 0E000 005.0 000.0E E00.E - 00E.0 000.0 000.0 500.5 0300 005.0 00E.0 000.0 E00.0 EEE.E 000.E - EE0.E - 0000 0-0 0-0 0-0 0-5 0-5 0-0 0-0 EE0.000 0E0.00E 000.000 E00.00E 000.000 000.50E 050.0EE 000.EEE E0000 000.05 050.E5 000.05 000.05 0E0.05 000.05 50E.00 E00.00 00: 000.0 E00.0 E00.0 000.0 000.EE 000.0 000.0 E00.0 00000 000.0E 005.0E 050.E0 500.0E 000.0E 00E.0 000.0 000.0 000: 000.0E 000.0E 500.5E 000.E0 000.5E 000.E0 000.0 000.0 0000 000.0 05E.0E 50E.00 000.0E 0E0.00 0E0.5E 000.0 000.0 0E000 000.0: 000.00 505.00 000.00 0E5.00 EOE.E0 000.50 000.00 2000 E00.50 000.00 000.00 000.00 050.E0 000.00 000.0E 000.E0 0000 0 5 0 0 0 0 0 E 00000 .0030 .0m0000E .000000E0000000 0000 0000000 .000000: 000 00 000 000 00 0000000 000 .00 0E000 200 m 0 | O - 5E 0 000 :E 000.E 000.0 - 00E.0E- . . 000 50E E0000 EE0 E - 050 0 - 500 - 050 - . - 00 - 00E - 0 - 00 000 E 00 00 00: E - 500 - 0ME - MM“ M0E - 0EE 00 ”ME ”ME 00000 - 00 000 - 000: 0 - - E50 - - 0mm.0 00E. 5: - EEO - 000 - M0 00 0000 E00.0 - 000.E 000.0 EE0 0EE.E - 0mm 00 0E000 0E0 0E- E00.E - 000.0 - EEE.0E- 0 000 0:00 0 50 E00 - 0000 -0 0-0 5-0 - 0-5 0-5 0-0 0-0 000.00 0000E0 . 00E 50 E00.00 000.55 000.50 000.00 50E.05 E000 E00.5 000.0 00E.0 00E.0 00E.0E . 0 000. 000 000 0E0 000 00E 0E 000.0 00E.0 00: 000 E 000.0 E0 . . 0E0 000 E . 0 E 005 E 00 . . 00 00000 0E0 . 0 E 00 . . .E 00E E 000.E 000.E . 5 E 005 E E05.E 000: 000.0 000.0 0E0.0 0E0.0 MWM.0 00EH0 000.E 000.E 0000 000.EE 000.0 0E0.0 000.5 00 .0 000.0 0E0.0 E00.0 0E000 000 50 000.00 050.00 00 . 0.0 000 0 500.5 050.0 . - 5 0: 000 E0 000.E0 0 . . 2:00 0: E: 000 0: 0 5 0 0000 0 0 0 0 E 00000 .00 000E .0000 I Eat EOfim m 00 0E000 201 000.0 000.0 - 000.E - 000.0 0E0.0 - E00 000 E0000 0E0 - 050.E - 000 0E0 - 000.E - 00 00 00: 00E - E00 - ‘0E 00E - 000 - 00 00 00000 500 500 0EE - 05E 0EE 000 E00 000: 050 - :00 - 000 000 000.E - 00 0EE - 0000 00 . 00E. E00. - 000 0E0 000 000 0E000 005 0 000.E 000 0 - 000.0 00E.0 50: 000 0:00 05 .000 5 - 000 E0 - E00.5 - 050 050 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 E00.05 005.05 500.E5 000.E5 0E0.00 000.00 000.00 50E.05 E0000 005.0 0E0.0 00E.0E 000.0E 00E.EE 00E.EE 000.0 00E.0 00: :00. 00E. 000. 000 050 000 000 E0: 00000 05E.0 000.0 00E.0 055HE 00E.0 000.E 005.E E05.E 0000 000.E 000. 005.E 000.E 000.0 050.0 000.E 000.E 0000 505.0 00E.0 000.0 005.0 050.0 000.0 0E0.0 E00.0 0E000 E05 0E 000.0E 000.0 E00.0 000.0E 000.0 500.5 050.0 0300 E50 00 E00 00 000 00 00E 0: 000.00 000.00 000.E: 000.00 0000 0 5 0 0 0 0 0 E 00000 .5000 .E0-000E .0000000 0000 0000000 .000000: 000 00 000 000 00 0000000 000 .00 0E000 202 5EE.0 000.5 - 000.0 000.0 - 000.0E- .005 E00 E0000 000.E 000 00E.E 000 000 - 50 50 00: 00E - 000 - 0E 00E, - 0E0 - 00 00 00000 E50.E 000.E 5EE - 000.E 500.E 000 000 000: E00 - 000 - 000 000 - 000.E - EOE 00E 0000 00 . 00E 50E - 000 - 0EE - 050 000 00000 050.0 005.0 000 000.0 000.0 005 000 0000 500.0 - 000.0E- 000.0 000.0 - 000.0E- 500 000.E - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 500.05 050.05 00E.05 000.05 05E.00 050.50 000.00 50E.05 E0000 0E0.0E 000.EE 000.0E 0EE.EE 050.0E 000.0E 000.0 00E.0 00: 0E0 E00 500 000 0E0 000 000 E00 00000 550.0 005.0 050.0 000.E 000.0 000.E 005.E E05.E 0000 050.E 000.E 000.E 00E.0 000.0 000.0 000.E 000.E 0000 000.0 00E.0 000.0 000.0 500.0 E00.0 0E0.0 E00.0 0E000 000.0E 0E0.0E 000.0 000.0 500.0E E00.0E 500.5 050.0 0000 500.00 E00.00 050.50 005.00 000.00 000.50 000.E0 000.00 0000 0 5 0 0 a .0 0 E 00000 0 Eco .00-000E 00000000 0000 0000000 .000000: 000 00 000 000 00 0000000 000 .00 0E000 203 005.00 500.00 000.0 000.00 000.00 E00.E 000 E0000 000.0 000.0 000 - 000.0 000.0 00E 00E 000 00 00 - 0E - 0E. 00E- - 00 00 00000 000.E 05E.E 50E 000 000 000 500 0000 000 000 - 00 - 000 00 - 000 000 0000 000.E 000.E E0 - 000. 000.E 000 E00 00000 5E0.0 055.5 050.E - 000.0E 000.0 000 E0E.E 0000 000.00 5E0.0E 500.0 _000.00 005.0 E50.E - 000.0 - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 E00.00E 500.0EE 500.E0 00E.00 000.00 000.00 000.00 50E.05 E0000 EE0.0E E00.0E 000.0E 000.0E 000.0E E00.0E 000.0 00E.0 00: 000 000 E00 000 000 050 000 E00 00000 000.0 000.0 000.0 000.E 005.0 000.0 005.E E05.E 0000 000.0 0E5.0 00E.0 050.0 505.0 500.0 000.E 000.E 0000 550.0 005.0 005.0 0E0.0 050.0 00E.0 0E0.0 E00.0 0E000 00E.0E 000.00 000.0 0E0.0 000.EE 500.0E 500.5 050.0 0000 00E.55 055.00 000.00 0E0.E0 000.00 000.00 000.E0 000.00 0000 0 5 0 0 0 0 0 0 00000 .Eoo .00-000E 00000000 0000 0000000 .000000: 000 00 000 000 00 ummvmmm 000 .00 00000! 204 000.00 000.0E E00.0E 000.EE E00.E - 0E0.E 000.E E0000 050.0E 000.EE 000.0 000.5 000.0 05E 50E 000 E00 - 000 - 0 000 - 000 - 00 5EE 00000 005.E 050.E 000.E 005 - E05 - 050.E 00E.E 000: 000 500 - 050 000 000 - 0E0 - 000 0000 050 - 050 - 055 000 - 000 - E55 005 0E000 000.0E 00E.0 00 000.0 050.5 500.E 000.E 0:00 000.E E00.0 - 000.0 005.0 - E00.0E- 050.E - 000.E - 0000 0-0 0-0 5-0 0-5 0-5 0-0 0-0 000.0EE 500.00 000.00 000.00 00E.00E 055.00 000.00 50E.05 E0000 000.00 E05.00 E00.0E 0E0.0E 00E.0E E00.0E 000.0 00E.0 00: 00E 00E 000 000 EE0 000 000 E00 00000 000.0 000.0 000.0 550.E 000.0 000.E 005.E E05.E 0000 000.0 000.0 000.0 000.0 500.0 E00.0 000.E 000.E 0000 0EEH0 000.0 000.0 000.0 50E.0 500.0 0E0.0 E00.0 0E000 000.0E 500.0E 00E.0E 000.0 000.0E 005.0E 500.5 050.0 0000 005 00 E00.00 005.00 500.00 000.E0 000.00 000.E0 000.00 0000 0 5 0 0 0 0 0 E 00000 . .380 .00-000E @0000 0000 0000000 .000000: 000 00 0.00 000 00 0000000 000 .50 0S0“. 205 m~:.om m:o.ma o:o.«~ mou.om mam.a~ oaa.~ Hog.“ Haves m:m.mH omn.:~. mud.“ omm.na mga.aa 5mm «om an: on up - «a ma . - Hm“ - «ad on” agape ma~.~ mma.d an» - an ; Hm amn.a nu:.~ can: can be: - «no man - ao«.a . mma - mod scan was - «mm - ~H~.H - m:m . ma: - mmo.H 5mm mama“ mmu.m :5m.o zoo.“ was.» «2m.a oam.a ham.” 23mm Hmm.mm mom.m~ mam.ba mso.ma Hma.oa mad.“ - Hm:.u - coon m-m mum b-m cup :.5 m-w «-3 wac.ama moo.mua mm>.~o omm.om mma.boa mmo.mo~ :3o.mo pma.mb Hugo» ::m.om www.mu mma.ma mmm.:a m~>.oa mm:.mfl mom.m mma.m nu: ma: ma: mm: mam mmo aam can do: mumps mm~.m cog.» bm~.m «Hm.a mom.» mmm.a mob.a Hmu.a no»: mo:.m aha.“ who.“ mac.» .mp0.» chm.m oms.a smo.a song omo.m mmu.a mao.: “mu.” mmm.: mom.” :Hm.« Hmu.« navy“ bm=.sa ~mm.:H mam.ca pma.m moo.ma mmo.~a ham.“ ouc.m xznm abh.um m5a.mu omm.mm «23.nm :mm.:m mo:.po oo:.az www.ma coo» a p o m a m a H gauge .380 .3133. naming scam nut—095 .9595: .5; :0 0mm 23. mo muuommu 05. .mm 343. 206 :Hm.am m:m.mo m:~.mm :mm.: moo.a: Hao.:m mum.“ Hmpoa Hom.ma oum.ma mmm.~ www.ma m:m.m~ mom man an: mam mm mm mm mma - o2H . “ma manna omm.m ou~.m map . awn.“ Hmm.m mmb.a 55>.H new: mac mmm - an“ 0mm mza m:m nor - swan Hm: . as” . :om.H - mm:.: . mom . mom.m omm.a «Hugh mo:.ma mm:.oH omm omo.m cam.“ Hmm.b Hmm.~ zsmm maa.u: www.mm u:~.au pam.ma- www.ma baa.mm o:o.m . noon mum m-m hum a.» 3.5 mum m.: www.mhfl m:o.mma :m:.omH mm:.mm mpm.mHH :m>.HHH :3o.mw “ma.mb Howey mmo.mm mmfl.mm mm>.mfl om:.ma om:.ma Hma.ma Nmm.m mmH.m am: «am mmm «am we: :ub wmm com Ho: mamas mmm.m mflo.m omw.~ Hmm.a mmh.m moo.“ mob.H Hmh.a pom: mmo.: mam.m mum.“ Hm:.m who.m omm.: wma.a :om.a song mum.m 0mm.: m~:.m FHH.: mmm.m moo.: saw.“ Hm~.m «Hash mam.aw :mo.am 5mm.ha mom.m mam.ma mm:.aa h:m.p who.m 22mm ebb.boa bum.mm m:m.mm umw.om mma.wm H:~.Hb on:.a: mmo.o: coon m b m m 3 m a H guano . Eco .moummma «wnmwmnm scam appomsH .maonsoz no; no own map mo mpowmmm «:9 .mm vague 207 mom.“ pmH.~m omm.mm mm:.m~ mm§.mm >mm.>m mms.~. Hangs «OH.mH Ho~.HH ”pH.” :3m.m Ham.p man was an: OH - omH - op «mu - ma: . HbH ouu manna HmH.m, mmH.m. mom - bpm.H ~o:.H ouH.~ omH.« can: moh.H «no Ho 33m.“ om:.H Hob . 5mm acne can no» o~:.H - own am: Ham.H mmo.H uHuau omm.uH www.0H Ham mum.m mmo.> cum.“ Hmm.~ mama omo.Hm Hmm.mm om:.mw mam.om :mc.ou mHH.m - awe.” - coo» m-m m-m sum mup :-p mum mu: Hmm.:mH so:.mmH u:m.m0H mmh.m0H mH>.H«H omm.mHH ::o.mm bmH.ns Hopes mH~.Ho u:o.m~ mm:.mH «HH.mH o::.c« :Ho.o~ «m«.o mmH.m an: ac: mam com mH: sob mmm com Ho: agape HmH.m 5mm.m OHH.: mmm.H m««.: mao.~ moh.H Hms.H so»: Hsm.m mom.m 30H.» mom.» Hmo.: o:m.: mm:.H som.H song ~mo.m mp:.m mmH.m Hp:.: :mm.m mam.a :Hm.u Hm~.u mHoam :mm.u~ map.H~ amH.uH nam.m 5mm.aH mHm.HH .p:m.b m»o.m azum abo.mHH ham.Hm Hmm.om Hmo.:m «mm.Hb www.ms om:.H: mmo.o: coo» a s m m 3 m m H macaw ...-=00 .bm-mmmH "mummnax scam mugoaeH .mpoaeuz no: no can may mo auoommm one .o: oHama 208 m:m.w baw.mH omm.: . Hmo.OH mHm.mH mum.H mom.H Hmpoe $03.: :mm.m mom.~ mmme 5:5.m mH OH gm: o o o _ o o o o manna 5H - o o mH , o H 0 sum: up: 3mm pom mmH bra mm on swan mm mmm.H . bmH . Ham Hmm.m . :oo.H mmo.H «Hush mum.m . ooH . moH.b . mmH.m mm:.m mmm mmm 23mm mom.m mom.HH ohm . oom.m www.mH om om coo» mum mum bum cub :up mnm mu: mmm.ou mmm.om hmm.o> mum.mm moo.mm 35:.00 mum.mo umb.mm Hmpop sz.m :5m.o om~.m o>~.m mmH.: oHH.: mmn.: mob.m cm: 0 o .a o o o o o 82c. o o mH‘ 5H o 0 5H o com: amm.H Hmo.H mom . mam :Hm 3mm mHm amp ease mmp.:~ mmm.:m cmmumu mbm.:m mmu.b~ www.mm mm».~u Hmm.:m «Hana $05.0“ m:m.b~ mmomgm :mo.:u «mm.H~ «Hm.o~ mmm.mm mmH.om 23mm H:>.mH :Hm.o~ w:n.:H mn:.:H «mm.u mzo.m abo.mH oHo.b woo; m b m m s m a H agape .EEOU .ooummmH ”£553 50pm mppomeH .mawaeuz awn co umm any mo muummmu asp .H: mHnme 209 www.mm coo.:m one.“ - mHo.:m mpu.mm 5mm.n mm:.n Hmuoa bmH.:H oH:.mH 20H.: «oo.OH mm~.HH on on ea: c o o o o o o mama. 5H - o o Hm o m o no»: mum - «bu no can mum - Hm mm song 3:3.“ 3mm mmm.H . 5mm.H ooh - mum.“ :o:.m manm umm.um Hmm.mu H5H.« - :HH.mu mam.oa mum.H :mH.H 23mm mam.mH mmm.m~ 3H5.“ - oms.mH mH:.ou omH mOH wean m-o a-» p-” 0-5 3-5 m-o m-: HuH.mmH 55H.HHH umH.ub mm>.mp mmm.uo o::.:m mhu.mm bm5.mm Hopes www.mH omm.mH m:m.m "Hm.m umm.: mmm.: mmh.a mmh.m an: o o o o o o o c mange o 0 Ha pH o o 5H o can: Hbm boo mam .ogo.H mom mgm mHm mm» saga w=w.m~ omm.on muo.mu hmp.m« Hmm.Hm bmm.mu mu>.~u Hom.:~ ”Hugh HmH.b: «mm.m: sHu.o~ mam.:« mou.mu mom.H« mmu.om mmH.ou zxum «mo.un oom.:m omo.mH m:~.mH omm.o «mafia upo.nH on.> voou m h m m g a u H usage . EEOU .HmymmmH .ocheom scum nugonsH .unoaeu: nomnmv cum on» mo uuoummu opal .m: oflmmmt --...- 210 Ham.mm mHs.o: moH.m - 35m.hm mHm.hs omm.m moo.m Hayes mmH - mmu.H mam - «on :om.H on an an: o o o o o o o manna HmH omH on - ooH mmH m o can: «a mmH 9:5 - :Hm «mo.H mm 55 sung buo.m moo.“ Huu.H - Hmm.~ Hm mam.» mam.m mHopu m::.oH omm.mH um:.H - mHs.mH om:.mH pmH.u mbm.H zsmx mo:.mH umm.mm uaH.m - ozm.5H m:m.:m mom mmH cook m-m m-m p-o a-» sub m-o «-3 mm:.mHH mam.HmH Hmo.:m :m:.mb mbm.:b oH>.mm mh~.mo um5.mm Hmuoa mmm.m baw.o mm:.o :H:.m m3o.m moo.m mop.: amp.» cm: o o o o o o o o 938. omH mmH mm mH o 0 5H o new: mum.H HHo.u mmo.H «mH.H mam mmo.H mHm map Sago muH.:n 5:0.mm mmb.mm mmo.mm mm:.mm «3:.Hm amp.«~ Hom.:u mHmpu HNH.~: mmm.m: www.5m Hum.mm uoH.:~ om~.«m www.mu mmH.om asum mom.Hm 53o.mn oom.mH moo.mH Hom.m sem.m «bermH mHo.p cook a u a m 3 o a H usage . EEOC .mm-mmmH "chmeom scam manomsH .mamaew: no: no can us» mo muoommu any .m: aHama 211 mpm.ub mmo.um mum.» 25H.oo «H«.o> awe.» mmu.m Howey HNH.HH oso.~H mom.“ mmn.m mum.m :5 on an: o o o o o o o mamas mH - o o ea c o o can: Hoo.H «HH.H mum.H poo.» omH.m baH :HH Bozo owp.m 3:“.m ooo.m omm.m m:m.m om:.m som.m mHosa mob.om 33m.:n com.» Hum.Hm www.mm “mo.m Hum.“ 23mm Hmo.oa ~u«.ou gum.H omH.mH Ham.om mH: mam coop m-m m-m 5-0 o-» 3-5 m-o m-: ». www.mmH hmh.mmH mam.Hm www.mm :3m.Hm mom.mh msm.mm bm>.om Hmpoe omH.oH mom.mH 53H.p «50.5 mum.m “Hm.m mmp.: ”as." am: o o o o o o o 0 means o c on mH o o 5H o new: 5mm.“ mHu.: mom.H mmm.H mmo.H :om.H mHm amp eono :mm.o: omn.m: omo.hm nmm.Hm o:o.o: mmH.:m amp.um Hom.:~ mHosm oun.pm omm.om www.mu Ham.o~ umm.mm mum.~u www.mu mmH.om 23mm «mm.hm bofi.mm omm.wH ooo.uH mmu.m mo:.m u>o.mH oHo.h cook a H o m : m n H ‘muono . EEOU .mo-mmmH .chmeom scum muaumaH .muunsox a»: no emu any we mwoommu one .2: oHamw 212 was. a: mmu.oo om ms«.m - n: . com. o m: o H om o ppm ~m«.:m an . ms moH o omm - a: . a OH «mu. 0mm.: I saw on n .o H A no Ha Hmuo mob. . :H:. mm» - mHH o H a 00 s. I a Q a mid 0 cm «5H.o mom.pm mm» m - co H a mu . mom. bum.m u and.n ea c an: H mm m - u . h usage mu mmo.« moommm :5 HH: hd c m 0:. wow. mH OHN. hm mbmo h OOH £06: a ohm. boo.» mmH.m saga hug ma . m o-u «mm mm: m Hosa z-» pom unwm m-o a mm:.mmH an: «55. m:H mom.“ www.mm . o HHm.b :oo mm om . mOH o Hom.s : mm 5mm. mmm.H mzH a o mmh.b 00H. mu mpu.mo mmm. can. a o o A an m mm A map. . H0909 muH.mm mmm.:o mum.H: mom.H o o 3 mm . moo.om bmm.am mom.:m comma ommw 5H 0 son an: m mmm.hH ou:.pm mmm m: m .H mH mamas «mm.pH omH.hu oo pm a o p «mo.m 3:».mm mah.- amp son: 9 m mmm.m www.mm Hom.:w Ewan . a who. and andoou mafia soummmH .anmso n mHm.> asum a so . u coo» um.mvnoma H .mnuna H Haw 0: no: :0 none can opp .520 MO upon 0 mum use . m: «Hams 213 «««.«« H««.o« «««.uH «mH.u: «««.«« ««H.:H «o«.:H Hmuoa :««.« ««:.« :««.« «a :««.H ««H «oH am: 0 o o o o o o mama. «H - o o «« - o «H o sum: :«H.« «m«.« «om.H - H««.« «««.« ««m :Hu 50:0 :««.«H- «««.«H- «o«.« «««.««- o««.««- «ho.oH «««.oH. «Hush «:«.«« «:H.«: ~««.H - «««.«« «H:.o: «««.: «H«.: 23mm ««~.«« «««.:: u««.« o««.«~ «H:.«« «mm ««« «ooh «-« «-« «-« «-« :-« «-« «-: - «««.:«H «o«.H«H :1H.«OH «««.:« «o«.«« :««.«« «««.«« «««.«« Hmpos ««H.~H «o«.« «««.« «««.« «H«.« «o«.« «««.: «««.« an: o o o o o o o 0 «amps o o «« «H ,o o «H o com: o««.: «««.« ««:.H «o«.H «u«.H. «««.H «H« ««« 20:0 «««.:m «««.«H «~«.«: «:«.«« ««H.H« omn.o: «u«.u« H««.:m «Hugh «««.«« «««.«« «u«.«« «««.«H «««.«u o:«.:~ ««N.«u ««H.om 23mm «««.«« o««.«: «««.«H «««.«H H«H.OH «««.0H ~««.«H «H«.« «can a h m m a « u H «wane . .5500 .««-«««H .chmaom scam «paommH .«aoneuz «us so own up» no «vacuum asp .«s «Hnmw 214 ««o.«OH «««.«HH «««.« :««.«« «««.«« ««H.«H .«««.«H Huuo« «H«.«H «««.:H H««.« «:o.OH «oH.«H ««H .««H an: o o o o o o 0 «cake o««.H o:«.H « - «H~.H «:«.H «H o no»: «mH.« «:«.« «««.« - ««H.« «««.« «c« - «««. song «::.H - «o«.: - «««.« - «o«.« - «H«.OH- o«o.«H o«a.=H «Hana o:H.«« «mo.«« «««.H ««:.«: «o«.o« «mo.« «««.« swam m«:.«« «««.«= «««.«H «««.«« H3H.:« ««« - «a: «com «-« «-« «-« «-« :-« «-« «-: ,: «H«.«o« o««.Ho« «««.«HH ««H.HoH «mo.«oH «H«.«« m««.«« «««.«« Hayes «««.H« Ho«.«H «««.« o«:.m «««.« «««.« «««.: «««.« an: o o o o o c o o «cons o:«.H «:«.H «« «H o o «H o com: ««o.« «a«.« «H«.H «««.H ««:.H «««.H «H« m«« sung «««.«« «««.«: ««:.«« :::.o: :««.«« «o«.«: «««.«« H««.:« «Hons ««:.«« o««.o« «««.«« «««.«« «:«.o« H««.«« «««.«u ««H.«« zznm ««:.«« «H«.=a «oH.«H «Ho.o« «««.oH «HH.HH «««.«H «H«.« «ooh « « « m : « a H «macaw .EOU .«o-«mmH .«Hcmeom scam «yuomsH .mpoasoz an; no 0mm can mo «uoommm one .«: «HH«« 215 «:«.o«H H««.«:H «oH.« - «H«.HHH «««.uaH «««.«« «H:.«« Houoa HH«.«H HH«.«H ««« H««.«H «««.«H ««« ««H an: o o o o o o o mange -««:.H «««.H ««« - «««.H «««.H H« a «on: Hmo.« «««.« ««o.« - «««.HH «««.HH ««« - ««« sugu «H«.« - «««.HH- H:«.: - «««.«H- ««««:«- «H«.«H «««.«H «Hush H««.«: «««.H« «««.« - «««.«3 «««.«m :o«.« «««.o 23mm «««.«« «0H.«« «««.HH «««.«m «3:.«« «««.H - ««« «ooh «-« «-« «-« «-« :-« «-« «-: «H«.««« «««.H:« «««.o«H «««.«OH «««.«HH «««.«« «««.«« «««.«« Hmuoe ««o.=« «««.«« «««.OH «««.OH «««.« ««H.« «««.: «««.« an: o o o a o o o o «page «««.H «««.H H: «H c o «H a «on: «««.oH «««.«H ,H««.H ««H.« «««.H H««.H «Hm ««« swan ooo.«« H:«.«: «««.o« «H«.«: «««.«« «««.«3 «««.N« H««.:« «chm «3H.«« «««.«o «««.«« «««.o« «««.«« HH«.«« «««.«« ««H.o« 23mm «««.«« «:«.«« «OH.o« ««H.H« «««.HH «««.HH «««.«H «H«.« «com « « m m s « a H Xmaoao ...-=00 .«o-«««H .chmeom aonm «ugomeH .«gunauz no: no can «a» mo «vacuum ««« .«s «Hnma 216 H3«.« «««.HH «««.« - «H«.« «3«.«H ««« ««« Haves «««.H H««.3 «««.H - «««.« «3«.« «« «3 an: ««« ««« ««« «« «a «« H«« manna ««« 3«« ««« - «««.H ««H.H ««« ««« gums «3H.H «H«.« - HH ««« «««.« - H«« 3«« - song «a ««H ««H - ««H ««« 3« «« «Hash «««.3 H«H.« H«« «no.3 «««.« «« «« mung «««.H ««3.« ««« - ««3.« ««H.« 3« cu - «ooh «-« «-« «-« «-« 3-« «-« «-3 3««.«« o«o.«« «««.«3 «««.«3 ««H.«3 «««-33 H««.33 «««.H3 H«po« «««.«« 3««.«« 3««.o« «««.«« «H«.«H «««.«H «««.«H «««.«H an: «HH.H «3m ««« ««« o«« 3«« 3o« ««« «nuns «««.« «««.« «««.« ««H.« «««.« ««o.« H««.« «««.« pom: H3«.«H «««.«H «0H.HH «««.HH «««.«H ««H.«H «««.oH «3«.HH song ««« «««.H ««« ««« ««« ««« ««« H«« «Hus» «H3.« «««.« «««.« «««.« «««.« «««.« ««3.« «H«.« zxmm «3«.« «H3.« «««.« «««.« «««.« «o«.« H««.« H«H.« «ooh « « m « 3 « « H «saga ...Boo .oo-«««H .znu any scum «unoamH .«aunam: «us so can on» mo «no-mum ««« .«3 «Hana 217 «3H.« - ««H.H «««.H - «««.« «H«.H ««3.H ««H.H H««oa «« ««H.3 ««« ««« «««.« H«H ooH cm: ««H 3«H «3 «m «m «« «« «amps «««.« «««.« «««.H - «Ho.« «3H.« ««3.H ««3.H «on: H««.« - «3«.« - ««H 3««.« «««.« - ««« ««« Sago «Ho.H ««H.H «33 - «««.H «H«.H «« «« «Hush 3««.H - ««« - ««H ««o.« ««« - «33 ««« 23mm «««.« - «H«.H - «o3 - 3««.H ««« - «m «3 «co» «-« «-« «-« «-« 3-« «-« «-3 «««.«3 H«H.H« ««3.3« «««.«« «««.«3 «««.«3 H««.33 «««.H3 H«uoe ««H.«« «H«.«« «««.«« «««.«« H3H.«H H3o.«H «««.«H «««.«H cm: 3mo.H «oo.H ««« 3«« «3« ««« 3o« ««« «cane «H«.«H «««.HH «««.« H3«.« «««.« «««.« H«o.« «««.« «on: «Ho.« «««.« «««.«H «««.«H ««H.3H H««.3H «««.oH «3«.HH 23:0 «««.H «««.« ««« HH« ««« H«« ««« H«« «Hung ««H.« «««.« «HH.3 «««.« «««.« «««.« ««3.« «H«.« zsmm 3«H.« «««.« H«H.3 ««H.3 «33.« H«3.« H««.« H«H.« coon « « m m 3 « a H «none .3300 .Ho-«««H "ago on» scam «upoaaH .«amnaoz no: so can opp mo «uoommm «3« .o« «Hana 218 «H«.OH- 3««.« - «««.H - H««.oH- H«3.« - «««.H «««.H Huuoa «3«.3 - «HH ««« - ««H.3 - ««« H«« ««H can ««« - ««« - «« ««« - «3« - ««H 3«H «amps «««.« H««.« ««H.H - «««.« «««.« o3«.« «««.« can: «HH.« - «««.« - 3« - ««o.« - «HH.« - H««.H - 3H«.H - aono ««« oH« ««« - «3o.H ««H.H ««H ««H «Hush «H« - ««« ««« H««.H - H«H ««« ««« xzmm H««.« - «««.« - ««« - 3««.« - «««.« - «« - «o - «ooh «-« «-« «-« «-« 3-« «-o «-3 «««.«3 H««.«3 «««.«« «««.«m «««.3« «««.«m H««.33 «««.H3 Hmuop «HH.H« ««3.H« «««.«« ««3.«« ««H.H« 3««.o« «««.«H «««.«H an: ««« 3«3 «««.H ««« «««.H ««« 3cm ««« «cups H««.HH ««3.«H «««.« ««3.« «««.« «««.« H«o.« «««.« can: ««3.« ««3.« ««3.«H «««.3H «««.«H «««.«H «««.oH «3«.HH 2030 «««.H ««H.« «HH.H ««« ««« ««« ««« H«« «Hush «««.« 3H«.« «HH.3 «««.« «««.« «33.« ««3.« «H«.« zzux «««.H H3«.H «««.3 «H3.3 «H«.« «««.« H««.« H«H.« «com « « m m 3 « m H «aways ...—350 .««-«««H .mnw esp scum «unoamH .«puaauz no: no can any mo «vacuum use .H« «H««« 219 man I ooa.3 «3m «««.« - o«3 ONH. I MFMafl o I Hmma: a H .. «3« H - 3«« u a mud H a . - ««« « . «3 ««H H . ««« a. 3««.H 3«3H« «3« - H«« ««« ««H 33« m« m«m H H« . - «m3 . ««H an: m mm: m m « hmm HFHoH FN Smmafl mm H I O a £0”: «-« - H«3.H ««H H «3 H«H swam mum :HN.N m 3 wow mdoah FIG Club HH I mm :30“ :-« mum coca m:o.ww . mu: «no mm m . :Nm.bm om mm bob.u H . H«3.« « ««H.« «o N a we . m H3m. mom. NNO«N m mm 00 « hm Ho « «OH Ohm. mNH.H 0 mm mm . m 3: mm . 00 « mmfla m m OH H a HNHaH MN I a POP « m «« . .o««.3H «« « 3H . 33« ««« «H « . mmw.: 6mm.m omu.d mm:.md www.0H :Nm.b :om own ma an: «««.« HH«.M «««.3 3«o”H 3«M.%H «««.«H H««”« ««M. «3«p« m mom.m m: m . mHoah 3 H«H.« “nmx .«m-«««H . « a « mam 0 8U. 52% H mPhOQE Qiohw H . mg 5: «H a 0: so 360 cum 0:9 mo 0 220 «««.« ««3.« «««.« - «3«.H HHH.« H««.« «««.« H«uoa «««.3 - ««H.H «««.3 - ««H «««.« «H3 ««« an: «33.« «33.« «3 - «««.« «««.« ««« ««« «saga «««.« «HH.«U H« «««.H - «««.H - 3«3.3 H«3.3 now: 33«.« - «H«.«H- ««« «3«.« - 3«o.« - ««H.« - «««.« - amno «««.« «H«.« «H3 - H««.« «o3.« ««« ««« «Hugh «««.« «««.« «««.« ««3 - ««H.H ««« ««« sang «HH.3 «««.3 «« - «««.3 ««o.« H«H - ««H «com «-« «-« «-« «-« 3-« «-« «-3 «««.o« «««.«« 33o.«« ««3.«« «««.«o «3«.«« H««.33 .««O.H3 H««o« «««.«m ««3.H« «««.H« «3«.«« H««.«« «««.«n «««.«H «««.«H cm: ««3.«. ««3.« «««.H H«« «««.H ««« 3cm ««« «cmp« «««.oH «H«.oH «3«.«H H««.« «««.«H «««.« H«o.« «««.« «on: «H«.HH «««.oH 3««.«H «««.«H HH«.«H H«3.H« «««.OH «3«.HH sono «««.« «3«.« 3«3.H ««H.H «««.H «Ho.H ««« H«« «H«3h «33.« 3«H.3 «3«.3 «««.3 o««.« «H«.« ««3.« «H«.« saw“ o3o.« «««.« 3««.3 «««.3 3««.« HHH.3 H««.« H«H.« «ooh « « o m 3 « a H -mnopo . 5:00 .3«-«««H .««u may scam «uaomeH .«punsu: no; no «an up» we «vacuum un« .«« «Have 221 «H«.« «««.«H o««.« - ««3.« «««.«H «3«.3 «3«.« Hayes «««.« - ”««H.« «««.« - 3«« «««.« «3« . «33 ac: «3H.« ««H.« HoH «3«.« 3««.« ««« ««« cacaa «o«.« «H«.« ««« - 3«3 «3a «««.« «««.« sac: ««3.« - 3««.«H- 30H «««.« - ««3.« - «««.« - «««.« - scan ««3.« «««.« ««« - «««.« «««.« «3« ««« «Haau «««.« ««H.« «H« «««.« «HH.3 ««« ««3 xzam H«3.« «««.« «««.H - «H«.« 33H.« . H«H - ««H - aoou «-« «-« «-« a-« 3-« «-« «-3 «««.«m «H«.«« «««.«« «H«.3« «««.«« «3«.«a H««.33 «««.H3 Haao« «««.H« «««.«« «««.3« ««H.3« «««.«« H3H.«« «««.«H «««.«H ac: ««H.3 H««.3 «««.H «««.H «««.H .««o.H 3o« ««« mamas «3«.«H ««H.3H H««.«H 3««.« ««3.«H «««.« H«o.« «««.« sac: ««3.HH 3««.HH «3o.«H «««.o« «««.o« «H«.3« «««.OH «3«.HH saga «««.« «««.3 «Ha.H «««.H «««.H «««.H ««« H«« «Hcau «H«.« «««.« «««.3 ««H.3 ««H.« «««.« ««3.« «H«.« 23cm 3««.oH «««.«H «Ho.« «««.« H«H.3 H3«.3 H««.« H«H.« aoou « « « m 3 « a H macaw .EEOU .«a-«««H "gnu an» saau auaonaH .aacnscx no: so can csa uo caacuum age .3« cHna« 222 a mma mH OHw«mN : a I mm N g o u «H 3««. “mm. N I- mmbo ” a 3“ mmmnm mm”. 3 ”@000 050:” $03 H I 33HAN I 05m» HflPOH. «« . ««« ««« a a nu: « «H- «««. - 3H« - «« 3«« m a m.” m“ a 000 I a 8”; Oh H mmm«H him 0 I « 05H 5 who. H000 fl HbHa 00m I wmfiofl FNQa HHI mowam I 3 a b £0“: «««.o« .3 ««« - «« . ««o a «33 «« 3 - saga ««« Hm H«« - « m «««.3 3«« «Ha mmo mm on I 3 I zswm m o «I« «Im «a ««H - voom th I 3 h min Iflm ': III! 0 « . a «« 3««.H« «««.o« . o«.3« «3.9” . «mm «H. Hoax... . HN m did 3 o m mm ON a 00 H: HQ 0 «3«. 3mm 3 ««3.H «.«« «om.H« «mo. a 9 .3H «33.3H «««. ««o H 333.H .H« 0««.«H «m . MMM.MH 3««.HH H««.MM «««.« «3o.«H m«a.H 3o« «cm «H can «H«.« . «««.«« Ho . «« « H«o.« . mamas mm: m « mmda mflfla mom 3 o m mdmom 3 m N . I H amonm mm mmmfl .KQU 0:9 EOfim m .850 PgogH own”: «N0; “0 0 0mm 0:0 mo mpo 223 «3«.o« «3«.«« «««.« - «H«.«« «««.«« «««.« ««H.« Hauoa «««.« - ««H «««.H «««.« - HH«.H - ««« ««« ac: H««.H «««.H «3« «H« 3«« ««3 ««3 agape H«o.« «««.« «H« - ««« «3« H««.« «««.« sac: «««.«H- ««H.«H- H««.H - 3«H.« - «««.« - «««.3 - «««.« - Saga «««.3 3««.3 ««« - ««H.« ««3.« H«« ««3 chsu ««3.« «««.«H ««« - H««.« «««.« «««.H ««« scam «o«.«« «««.«« ««3 - o«a.«« 33«.«« ««« ««« aoou m-m «-« «-« «-« 3-« «-« «-3 ««H.««H «««.«mH ««o.a« 3««.«« «««.«« «««.«« H««.33 «««.H3 Hauou «««.3« «««.«« 3««.«3 H«3.H3 H3«.3« «H«.3« «««.«H «««.«H ac: «3«.« ««3.« H««.H ««H.H «««.H «HH.H 3cm ««« aaaa« «3«.«H ««H.«H «««.«H «3«.« «««.«H ««H.« H««.« «««.« sac: «H«.3H «««.«H «««.H« «««.«« H««.«« «o«.o« «««.oH «3«.HH saga H««.m «««.« «««.« 3«3.H «««.H «««.H ««« H«« chau «««.«H ««3.«H «««.« ««3.3 «««.« 3««.« ««3.« «H«.« scam «o«.«« «3H.3« «H«.m «««.« 3««.3 «3«.3 H««.« H«H.« aoou « « a m 3 « a H «mace ...—soc .«a-«««H .«qa an» aaau cuaoaau .cacaec: «a: :0 cum cg» uo caacuuu csa .«« cHacu 224 «««.« ««H.HH o3«.« «««.« H««.« 3« - «a - Hcaoa H««.H «««.H «o« .a«« H«H « « ac: o o o c o o o «EEC. o o o o o o 0 now: H«H am and :w mm mm I ma I Ease «HH «a « HoH ac « «H «Haau «««.« 3««.« 3««.H «HH.« «««.« «HH «« :aca ««« «««.« ««H «o« 3««.« «3H - ««H - aoou «-a «-« «-« «-« 3-« «-« «-3 «««.«« «««.«« «o«.o« «3«.o« «««.«« ««3.«« «««.«« «««.a« Haaou «««.« ««H.« «««.« 3H«.« «««.« «««.« «««.« «««.« aa: a o, o o o o o o cacae a o a o o o o 0 :aa: «««.H ««« «3« ««« ««« «««.H ««« ««« ac:o ««« «H« «H« «o« ««« «3« H«H ««« chau H««.«H «««.« «««.3 «««.3 3««.« «««.« 3«H.3 «««.« :zca ««3.«« «3«.«« «««.«« «««.«« «««.H« «o3.H« «««.H« H««.«« aoou « « a m 3 « a H macaw .5300 .oa-«««H u«HaaaHaa aoau aaaamaH .cacAEc: ac: ac cum caa uo aaacuum cap .«« cHaa« 225 «««.«H «3«.«« «««.« «««.«H «««.«H ««. - ««H - Haaau «m3. - ««« - m ««3 - ««« - «H «H aa: .-a o o a a o o aaaaa o o a a o o 0 :aa: H«H - ««H - a« - H - «m - «m - «m - acaa ««« «ca «« N««« H«« «H «« «Haau «««.«H «««.3H «««.H «««.oH 33«.«H «3« ««H :aaa «««.« «««.« ««3.H H««.« ««3.« H«« - H«« - aooa «-« «-« «-« «-« 3-« «-a «-3 «««.H« «««.«3 «o«.«« «««.«« «««.o« «««.o«‘ «««.«« «««.«« Hauau ««3.« «c3.« «««.« «««.« «««.« H««.« «««.« «««.« aa: 0 o o o o o o o 253. o o o o o o o a cam: ««« «««.H «3«.H «««.H I «««.H ««H.H ««« ««« saga ««« «3« 33« ««« H«« ««« H«H ««« «Hcau 3««.«H «««.«H «««.3 «H3.3 «««.« H««.« 3«H.3 «««.« :aaa o3«.«« H««.«« «««.«a H«H.3« «««.«a 3oa.«« «««.H« H««.«« aoou « « a m 3 « a H aaoao . EEOC .H«-«««H .cHaawHaa aaau auaoaau .cacaac: ac: ao cum caa uo aaacuu: aae .«« cHaa« 226 ««o.«H «3«.«H «3«.« «««.«H H«3.«H ««H «H« Hcao« «3« 3«« ««H «««.H ««« «a «a ac: o a o - o o o cacaa o o o - o o o aac: H«« - ««« ««H «« H3H «« 3« acna «3« - H«« o ««« ««« H« «« cHaau «««.« «H3.HH «««.« «««.« «««.« ««« 3«« 23cm 3««.« ««3.« «H H««.« 3««.« 3«3 «33 coca m-c «-« «-« «-« 3-« m-a «-3 «««.«m «««.«3 «Ha.3« «««.3« H««.H« «««.«« «««.«a «««.«« Hcaau H«H.3 «««.3 «««.« ««H.« 3««.« «««.« «««.«. «««.« ac: o o o o o o o o mange o o o o o o o o new: 3«« «««.H «3H.H «««.H «««.H «««.H Nana ««« acaa o o ««« «3« ««« H«« H«H ««« chau ««3.3H ««c.HH «3«.3 «««.3 3««.« «Ho.« 3«H.3 «««.« :zca «««.H« «««.H« «««.«« «H«.«« ««3.«« «ac.«« «ac.H« H««.«N coca « « a m 3 « a H «mace . 6500 .«c-«««H .cHacwHaa aaau caaoaaH .cacaac: «an ac am: caa uo aaacuuu c:« .«« cHacu 227 «««.«« HH«.«c HH«.3 o««.«« ««H.H« 3««.« ««« - cho« «««.H 3«3.H ««« ««3 «««.« «H3.« H3 ac: o o o o o o o mamas «H3 «H3 «« ««« ««« o a sac: «« - ««H «a «H «« ««H 03H - acao ««« «3« «« 3H« «ma «3 3« «Hana ««o.3H «««.«H 3««.H «3«.HH «H«.«H ««« ««« :zca «««.«H 33«.«H ««3.« «««.«H «««.3H ««« ««« - coou «-« «-a «-« «-« 3-« «-c «-3 «««.«a «««.3« ««««.«« «««.«« «««.«« «««.3« «««.«m «««.«« Hcaoa ««3.« «««.« «««.« «o«.« «oo.3 «««.« «««.« «««.« ac: o a a o o o o o cacau «H3 ««« o a o o o 0 :ac: «H«.H «««.H «««.H «««.H H««.H H«3.H ««« ««« acaa «««.H «««.H «H« ««« H««. «H« H«H ««« chau «««.«H ««H.«H 3««.« «H«.3 ««3.« ««H.« 3«H.3 «««.« :sc: «3H.«3 «««.«« «««.«« H3«.«« «««.3m 3««.«« «««.H« H««.«« coca « « c m 3 « m H cacao . EEOU .«c-«««H .cHacwHam aoau caaoaaH .caaaec: ac: ao omm c:u uo caacuum c:« .o« cHac« 33H.3H «««.«H 3««.3 ««H.oH ««H.«H «3« - «H3 - Hcaoa 228 «3«.« 3««.« «c«.H 3«3.« «««.H H« «« ac: o o c o o o o mamas ««« «ca ««3 - ««H.H ««H.H o a sac: ««« . - ««« - H3« ««3 - H«« - ««H - ««H - aaaa ««H 3«H « «HH c3 «c «« chau 3««.« 3««.« ««3 «H«.« «o3.« «o« ««3 :aca 3«H.« «««.« «H«.a ««« o3H.« ««« - «Ha - coca m-c «-« «-« c-« 3-« «-c «-3 ««H.«« «««.«3 «H«.«« ««o.«« «oc.«« «H«.«« «««.«m «««.c« Hcaoa «««.« «««.« 3H«.« «««.« ««3.3 H««.3 «««.« «««.« ac: o o o o o o o a cacau ««« ««H.H o a o o o o aac: «««.H ««« H««.H «««.H ««3.H «««.H ««« ««« acaa «c3 ««3 ««« ««« ««3 33« H«H ««« «Hana «««.«H «««.«H «««.« 3««.3 H««.« 3««.« 3«H.3 «««.« :aca 3««.o« «««.«a «««.«« «33.«« «««.«a «H«.«« «««.H« H««.«« coca « « c m 3 « a H aaoac . 5:50 .3a-«««H .cHacamaa aaau caaoaaH .caaaac: ac: :0 «mu caa uo caaauum cap .H« cHac« 229 3««.«« «««.«3 3««.«H ««H.a« «««.«« «H« H«« - Hcaoe «3«.oH «««.«H «««.« ««H.« «««.« «a «« ac: o o o o o o o cacua 3am 3«« a 3am 3«« o o aac: ««3 - ««« «3« 3«« «ca - «3« H«« - acao «« - ««H «3 - ««H 3«H - 3a H«H chau «3«.« H««.«H «H«.H «3«.« «3«.« «cc ««« :aca o«3.o« ««3.«« ««3.« o«H.«H 3««.«H ««H.H - «««.H - coo: «-« «-c «-« «-« 3-« «-a «-3 «««.H« 3H«.«a ««H.H3 3«3.H3 «««.«« «H«.«« o««.«« o««.«« Hcao« ««H.«H ««3.HH «««.3 «««.3 «««.3 o««.3 «««.« «««.« ac: o o o o o o o o cacuu 3cm 3«« o o o o o a sac: «««.H «««.H «««.H H««.H «H«.H «««.H ««« ««« ac:o «3« o«« ««« 3H« 3«3 ««« H«H ««« chau 3««.«H «««.HH 3««.« ««o.« «H«.« «««.« 3«H.3 «««.« :zca «««.«« cOH.«3 «««.«« H3o.o« H««.«a «oH.«« «««.H« H««.«« coo: « « a m 3 « m H «maoao .EEOU .moImmmH "mmammHsm scum mpummEH .maonsm: pan no can any mo muovmmm 0:9 .mm manna 230 «««.«« «««.« 3««.om «««.«« «3H.«3 ««« - ««« cho« «««.«H H«c.HH 3««.« «3«.« «H«.« «c «« aa: 0 o o o o o o campy ««« ««c o« - «o« co« 0 0 :ac: «H - ««H - ««« ««3 - ««« - ««« - «3« scao «« - «« - ««« - ««H «« «OH ««H chaa «««.HH «««.«H «««.H «HH.« 33«.HH 3«o.H «H« :aca ««3.3« HH«.«« «H«.«H coH.o« ««o.«« «««.H - «««.H - coou -- m-m «-« «-« «-« 3-« «-c «-3 «H«.«OH H«3.«m «««.«3 «««.«3 «c«.o3 «c«.o3 «««.«« «««.«« cho« «««.«H ««o.3H 3««.3 ««c.3 3H3.« «H«.« «««.« «««.« ac: o o o o o o o o cacaa ««« «o« o o o. o o 0 :oc: «««.H ««H.H «««.H «H«.« «««.H H«H.« c«« «o« acau co« c«« ««3 H3« c«« ««3 H«H ««« «Hana 3««.«H «o3.«H «««.c «««.« H«H.3 333.« 3«H.3 «««.« zaca o«H.cc ««3.o« «««.«« «««.H« «o3.«« «««.«« «c«.H« H««.om coo: « « c m 3 « N H «coco . EEOU .«c-«««H .cHacmwam Eoau caaoaaH .cacaac: co: co om: cau uo «uacuum c:« .«c cHoc« 232 own mam I am bum bar I 00000 to 0000000 0500000 0 0 mm 0000000 00000 0 Hcaou an: means new: acaa mesu 23mm coou 0mm 00100000 mIm mIm blm mIb :Ih 3mm mom 0 0 hwm rm :0 00100000 0000000 0000000 0000000 0000000 5mm 0 hm 0000000 0000000 Hcaou an: cache :ac: acaa mHasu 23mm coon lmdopw .EEoo .ooImmmH "mwcmna< scam mupanH .mthEmz has no own any uo «vacuum cap .mm magma 3mm ma: I :H mwm mm: I 0 mm HmuoH. cm: manna :ac: acaa mesh «« :zc: coou 00000 00000 00000 cH3 - 3H «« «« omooooo 0300000 0 0 0 233 ««o.H «««.H 0 0 0 3mm ««« ««« Hcaoa cm: mange :ac: acao mama“ :zc: coou 1.000000 mo 01.000000 0000000 0000000 0000000 0000000 0 « « c m 3 « m H acoco . .EEOo .H«-«««H .cHacaHa aoau cuaomaH .cacaac: ac: ao om: cau uo aaacuum cap .«c cHacH- 234 «««.« oc«.H HH «H«.« «««.H o ««H Hcpoa o o o o o o 0 ac: o o o o o o o cacaa o o o o o o o aac: o o o o o o o scam ««« c«« «H« «cc.H «««.H o o chau ««« OH« 3« 3«« c«3 o ««H :zca «H«.H «H«.H H«« «Hc «Hc o o coo: «-« «-« «-« «-« 3-« m-c «-3 «««.« «Ho.« 0 o H«H.H «««.H o ««« Hcaoa o o o o o o o 0 ac: o o o o o o o o cacau. o o o o o o o o :ac: o o o o o o o o acao ««« «cc.H o o o o o 0 «Hana ««« 3«« o o H«H.H «««.H o ««« 22c: «H«.H «Hc o o o o o o coou « « c « 3 « m H aaoac . EEou .«c-«««H .cHacaHa aoau caaoaaH .cacaac: ac: ao am: cap uo caacuu: c:« .«c cHac« 235 H««.« «««.H ««H - «H«.« «««.H c ««H chc« c c c c c c c ac: c c c o c c c cacaa c c c c c c c aac: c c c o c c c ac:o ««« ««« c«« - 3««.H 3««.H o o chau H«« «H« - «m «cm ««« - o ««H :sc: ««H.H ««H.H ccH «H«.H «H«.H c c coou m-c «-« «-« c-«11. 3-« «-c «-3 H««.« «H«.« o c 3««.H 30H.H c ««« Hcaca c c c c c c c c ac: o o o o o o o o mamas c c o o c c c c aac: c c c o c c c c acaa ««« 3««.H c c c o c 0 chaa H«« «ca 0 o 3c«.H 3oH.H o ««« :zca ««H.H «H«.H c o c c o c coca « « c m 3 « a H macaw .EEOO ..Hmlmmmd «MHCMAH< 58m $9.895” .thAEOZ h0£ CO OHM 9.3. m0 mvuflmmm 03h. .mw GHAQH. «««.H c«« «c - 3««.H H«« c ««« Hcvoe 236 ««H ««H «HH «« «c c c ac: o c o c o o o «acne o c o c c c o sac: o c c c c c o acao H«« H«« ««« - ««« ««« o o «Hcau 333 ««« - «« 3H3 ««« - o ««« :ac: ««« o«« 3« ««« ««« c c coca «-c «-c «-« c-« 3-« «-« «-3 «««.H 3««.H o o «3««H H3H.H c ««« Hcvoe ««H «c c o c o o 0 ac: c o o o c c o o «acne c o o c o o c c aac: o c c o c o o o acao H«« ««« o o o o o 0 «Hana 333 3H3 c c «3«.H H3H.H o ««« :aca ««« ««« c o o c o o coca « « c m 3 « m H aaono .aaco .«c-«««H ucHaccHa acnu «vnomae .«naaac: na: ac um: cav uo «vacuum cae .o« cHace 237 3««.« ««« 3«H «H«.H ««3 o H«« Hcvoe 33« 33« 3«« «H« «Ha c c ac: o o o o o o 0 «page c c c c c o c aac: o o o o o o o Emno ««H ««H «« - ««« ««« o o «Hca« ch o«« - «« ««« 33« - o H«« :aca ««3 ««3 «H - «33 «33 c c ccou «-c «-c «-« c-« 3-« «-c «-3 3««.« «H«.H o o H«3.H ««H.H o ««« Hcvoe 3«« «H« o c o c o o ac: c c c c o c o o «acne o o o c o o o 0 com: o o o o o o o o Emnu ««H ««« c o o c c o «Hcam «Hc «cc 0 o H«3.H ««H.H c ««« :sca ««3 «33 c c c o c c coom « « c c 3 « m H aacne .5500 .«c-«««H .cHacaHa aonu «vnomae .«ncaac: no: ac amm cav uo «vacuum cae .H« chmw 238 «««.« «H«.H «H« - 333.« «««.H o 3«« Hcvoe ««« ««« «3H - ««« ««« o 0 ac: o o o o o o o «acne o o c o o c c aac: c o o o o o o acac o«« c«« ««« - «H«.H «H«.H o o «Hcaa «cc ««« - ««H - ««« ««« - o 3«« 23cm H33 H33 c« - ««3 ««3 a o coca m-m mum oIc m-a :I« m-m mI: «««.« 333.« o o «H«.H «H«.H o ««« Hcvoe ««« ««« o o o o o 0 ac: o o o o o o o o «acne o o o o o o o o aac: o o o o o o o o acao ««« «H«.H o o o o o o «Hcam «cc ««« o o «H«.H «H«.H o ««« :aca H33 ««3 o o o o o o coca « « c m 3 « m H caonw . EEOU .«c-«««H .cHaccHa aonu «vnoaae .«ncaac: nca ac «mm cav uo «vacuum cae .«« cHace 239 APPENDIX 3: DATA PROBLEMS The General Problem: The test of the relative share model (presented in Chapter II) requires data on the exports of the communist countries of Eastern Europe for seven commodity groups and in constant prices. To my knowledge, export figures of the communist countries of Eastern Europe to the EEC, listed under the three-digit SITC, were not avail- able from Eastern European sources. Therefore, I have measured the exports of the communist countries to the EEC by means of the EEC's imports from the said countries. Estimates of imports of the OECD countries are registered in the United Nations International Commodity Trade Statistics, Series D. The imports are expressed in quantity and value terms. The value of the imports is listed in current prices, current exchange rates, and includes "cost, insur- ance and freight" (c.i.f.). It is customary to reduce all import figures in value terms by 10% to derive an estimate of imports measured "free on board" (f.o.b.). I have not done this because I believe that this rule is too crude and may create substantial error in the data. Not all commodities weigh the same and are of equal value per unit therefore insurance and transportation costs cannot be computed by a fixed percentage of the value. The quantity of imports is expressed in a large number of different units such as ton, meter, square meter, liter, etc. To 240 aggregate these quantities, it is necessary to express them in a common unit of account, namely in value terms. Over a period of time, the quantity of the EEC's imports from the communist countries of Eastern Europe steadily increase. This increase cannot be precisely observed if imports are expressed in current prices. In- deed, while the prices of some products sold on the world market increase over the last two decades, the prices of other products decline over the same period. Consequently, imports have to be measured in constant prices to observe the increase in real imports. I?“ .- ‘83.; To study the increase in real output of a national economy over a period of time, output is measured in constant prices which are the prices of output in a given base year. Nearly every country has price indexes for consumer goods, industrial products and gross national product. For each year, the value of one of the aggregates (consumption, industrial production, gross national in- come) measured in current prices, is deflated by the appropriate price index to obtain output in constant prices. Whenever a domes- tic price index for an individual commodity is available, it should be preferred to an aggregate price index to construct an estimate of the value of that specific commodity in constant prices. However, price indexes for individual commodities are not always available and the value of that commodity in constant prices is then derived by deflating its value in current prices by one of the three price indexes: consumer price index, industrial price index or gross national product deflator, whichever is most appropriate for'the 241 commodity in question. Seldomly is such an aggregate price index a good representative of the development in the price of a specific commodity. In spite of this shortcoming, most quantitative re- search, based on data in constant prices, relies on these aggregate price indexes to deflate output in current prices even for individual commodities. The international commodity trade statistics are published quarterly and yearly, both in current prices and in physical units. To derive figures of exports and imports in constant prices, two methods can be followed: one can either deflate by an appropriate price index, or apply the method of "unit values". If total imports and exports of either one country or group of countries have to be expressed in constant prices, a number of price indexes might be considered to be "appropriate". If price indexes of imports and exports for this country are available, they should be chosen as deflators. In most cases, however, such price indexes are not available; price indexes, either of world trade or of the dominant supplier, may be chosen as deflators. It is clear that the weights of these price indexes, derived either from world trade or from the trade of the dominant supplier (or/and consumer), will in most cases, be considerably different from the weights which could be derived from the export and import commodity mix of the country or group of countries for which trade data in constant prices will be constructed. This problem is especially important if trade data in constant prices for several commodity groups have to be derived. .._A ...—.-.. -... 3. HIV-'1 242 For example, the commodity mix of the EEC's imports of food, raw materials, chemicals, machinery, transport equipment and manufactures is so much different from the commodity mix of either world imports or exports of the dominant supplier, that no price index is satis- factory as a deflator. However, researchers deflate by these price indexes calling them the "appropriate" price indexes. Price index number problems are well-known and some can be summarized as 1 follows: i 1. Price indexes cannot fully account for shifts in the . 5' commodity mix over a period of time since the prices of the base year are exclusively based on the existing commodity mix in that base year. 2. Price indexes cannot account for changes in the quality of the products over a period of time. 3. Price indexes cannot include new products which enter the commodity group after the year chosen as base year for the index number. Therefore, the further away the base year, the less sensitive the price index will be relative to quality changes, the inclusion of new products and shifts within commodity groups. To avoid these problems as much as possible, the base year of price index numbers is changed every five or ten years. The second method for computing imports in constant prices is the method of "unit values". In a given base year, the value of each individual commodity is divided by the physical units (tons, 243 meters, etc.) to derive "unit values" which are the price of the commodity per ton, cubic meter, etc. In each future year, the unit value of the base year is multiplied by the quantity of imports measured in the same units as in the base year and the resulting figures are estimates of the value of imports in constant prices prevailing in the base year. This method can partially account for shifts in the commodity mix, provided that the unit values are calculated for well-defined homogeneous products. If unit values of aggregates are computed, this method is open for criticism. The unit value method cannot account for either changes in the quality of the product nor for the introduction of new products. The major problem with the last method is that it is very time consuming and that, therefore, some aggregation in commodity groups is unavoidable. If the commodities are defined on the basis of the three-digit SITC, the degree of aggregation may be somewhat excessive and small errors may be created in the import figures in constant prices. Indeed, shifts within the aggregates, representing one commodity defined on the basis of a three-digit SITC, will cause some errors in the values of imports in constant prices. However, the cost to one researcher for computing imports for the EEC at constant prices on the basis of the three-digit SITC, and covering the period 1951-1967, is already so high that it may be considered impossible for one person to use either a four-digit or five-digit SITC, even if the data for the imports of the EEC from the communist countries of Eastern Europe were available in such a detailed disaggregated form. 244 In spite of this problem, there are many reasons why I chose the method of "unit values" to compute the EEC's imports from the communist countries of Eastern Europe in constant prices. These reasons can be listed as follows: 1. The commodity composition of East-West trade is completely different from that of either world trade or of trade between in- dustrial countries. 2. The prices of the commodities supplied by the communist countries of Eastern Europe are often below world market prices. 3. The method of unit values filters out the effects of changes in the exchange rates of the EEC countries vis-a-vis the US dollar. I will explain each point in more detail. The major reason for choosing the method of "unit values" to compute import figures for the EEC in constant prices is that no "appropriate" price indexes were available to deflate the estimates in current prices of the EEC's imports from the communist countries of Eastern Europe, aggregated into seven commodity groups. Evenif price indexes could be found and could be considered appropriate to deflate the EEC imports, in current prices, subdivided into seven commodity groups and originating from other market economies, the same indexes would not be appropriate to deflate the EEC's imports (in current prices) from the foreign trade monOpolies of the centrally-planned economies of Eastern Europe. East-West trade is still mainly conducted on a bilateral and barter basis. The commun- ist countries are concerned neither with international marketing 24S practices, nor with distribution methods. The foreign trade mono- polies supply their products in bulk to a few customers, who themselves supply the communist countries with machinery, steel, and other products necessary for the development of the communist countries. In this process, Eastern European shoes, suits and sometimes agricultural products are exchanged for electrical machinery, consumer durables and scarce raw materials produced in the EEC. Because a machinery producer in the EEC has no outlet for either suits nor shoes, he will only buy these products at a lower price than the world market price in order to make up for the extra cost involved in the distribution and marketing of the product. The fear that trade could always end because of political tensions is the major reason why permanent distribution channels were not established. In the last five years, marketing practices have changed considerably. The communist countries of Eastern Europe have chosen to in- vest in the creation of permanent distribution channels, which is a short-run investment from scarce foreign exchange earnings, but which will yield permanently higher returns for many years to come. It is clear that poor marketing and distribution methods results in commodity prices below those prevailing on the international market. The manufactured products of the planned economies are often con- sidered of inferior quality, and spare parts for machinery and transport equipment are generally missing. Delays in deliveries are another characteristic of the poor trade practices of the foreign 246 trade monopolies. Machinery, produced in centrally planned economies, is mostly of lower technical parameters than similar equipment pro- duced in market economies. These are additional reasons why the prices of the exports of the communist countries of Eastern Europe are often below world market prices. In addition, for homogeneous products such as raw materials and fuels, complaints were made by western producers that the communist countries delivered their products at "fiaar" dumping prices. As a result of these observations it is clear why a general price index of the EEC's imports listed in seven commodity groups is not appropriate to deflate the EEC's imports in current prices from the communist countries of Eastern Europe, because these countries have a completely different export mix to the EEC and a different trading system than most other sxtggyarea suppliers of the EEC. It is true that the communist countries of Eastern Europe offer only a small number of products in each commodity group, but, once a commodity is offered for sale, it stays on the export commodity list of the communist countries. This pattern can clearly be observed on the basis of the three-digit SITC. It seems appropriate to use the "unit value" method because, over a period of time, the export commodity mix of the communist countries of Eastern Europe has been quite stable. Each country reports its imports in domestic currency units. These figures are transfered into dollar terms at current conversion rates (par value). Devaluations and revaluations of the national 247 currencies of the EEC members in terms of the US dollar, will affect the value of imports in current prices, not only through the change in the quantity of imports, but also through the change in official conversion rates of these currencies relative to the dollar. The method of unit values eliminates this problem by expressing all imports in constant prices and exchange rates of a given base year, although the effect of either a devaluation or revaluation on the quantity of imports is still included in the value of imports at constant prices. Because of these advantages, I computed the value of imports of the EEC from the communist countries of Eastern Europe in constant prices on the basis of the "unit value" method. §pecific problems and proposed solutions: As base year, I have chosen 1959, because this was the first year the EEC actually became operative. The imports in value and quantity of each EEC member (namely Belgium-Luxembourg, France, Germany, Italy and the Netherlands) from the communist countries of Eastern Europe (Albania, Bulgaria, Czechoslovakia, the German De- mocratic Republic, Hungary, Poland, Romania, the USSR and Yugosla- via) were obtained from the United Nations Commodity Trade Statistics, Series D, based on the three-digit SITC. ‘Unit values of 1959 were computed and multiplied with the quantity figures for the years 1951 to 1967. Most products imported in l959 were also imported prior to that year, which means that it seldom happened that a product 248 was imported between 1951-1958 and was no longer imported in 1959. Because of the accelerated development of the communist countries of Eastern Europe, it happened however that products imported by one of the EEC members from a specific communist country in the years between 1960 and 1967 were not yet imported in 1959. This occured for a maximum of 5 to 10% of the imports by the mid-sixties. To understand this problem and the solution I have chosen, I will illustrate it with a hypothetical example: Suppose that in 1959 the Netherlands did not import commodity #241 (fuelwood and charcoal) from Czechoslovakia. In 1966, however, the Netherlands imported this product from Czechoslovakia. A "unit value" for 1959 cannot be computed. The solution to the problem is as follows: 1. If in 1959 Czechoslovakia exported commodity 241 to other Common Market countries, then the unit value for Czech exports of 241 to all other EEC countries in 1959 was chosen to compute the Netherlands' imports of 241 from Czechoslovakia in constant prices for all other years between 1960 and 1967. 2. In 10% of the previous cases (which means in .5 to 1% of the commodities in the three-digit SITC) the specific communist country did not export 241 to any EEC country in 1959. Whenever this was the case, unit values of exports in 1959 of all smaller communist countries of Eastern Europe (excluding the USSR) to all EEC countries for commodity 241 were computed. This average unit value was then multiplied with the quantity in each year to find, 249 for example, an estimate of imports of 241 of the Netherlands from Czechoslovakia in constant prices in the years between 1960-1967. The unit values of commodity 241 for each communist country have been compared with the average unit value and it was observed that the average unit values were very close to the unit values of each communist country individually, which makes this procedure accept- able. 3. In 50% of the commodities considered in the previous case (point 2), not one small communist country of Eastern Europe exported that product to the EEC in 1959. In this special case, also the USSR's exports to the EEC were included to find the unit value of the commodity in question. This procedure was only applied to .25 to .5% of all imports of the EEC from the communist countries of Eastern Europe in the mid-1960's. It is important to realize, that if these three steps were not chosen, it would have been necessary to exclude 5 to 10% of the EEC's imports in current prices from the communist countries of Eastern Europe from the estimates of the same imports in constant prices. Even if my solution to the problem is not completely free of error, the error will be considerably smaller than the one which would be created by the omission of 5 to 10% of the value of imports in constant prices between 1960 and 1967. In addition, these omissions would not all be evenly spread over each year, but would have grown larger in the mid- and late-1960's. The imports (in constant prices) of each EEC country from ...... .. ......) ...—... - -ue- 250 each communist country of Eastern Europe were then aggregated into seven commodity groups and each commodity group was added over all member countries to derive the imports of the EEC per commodity group in constant prices. The seven commodity groups are: food, raw materials, fuels, chemicals, machinery, transport equipment, and manufactures. They are composed of the following three-digit commodities: Food: from 001 to 122, plus 921 Raw Materials: from 211 to 292, plus 421, 422, 431, 611 and 613 Fuels: 321, 331, 332 Chemicals: 271, plus 512 to 599 Machinery: from 711 to 729 Transport equipment: from 731 to 735 Manufactures: 231, 285, 341, 351, plus 612 to 698 and 812 to 899 The breakdown of these commodity groups is based on: United Nations, Economic Bulletin for Europe, Vol. 15, no. 1, August, 1963, Notes to the Statistics, p. 127. As previously indicated, the data are obtained from the United Nations Commodity Trade Statistics. In 1959, the SITC coverage had been altered. In 1960, of all the EEC countries only Germany re- ported in the new system, and by 1961 all countries reported in the new classification. The major changes, reported in 1959, were as follows: 272 was divided into 273, 274, 275 and 276 283 was divided into 283 and 286 251 412 was divided into 421 and 422 311 became 321 312 became 331 313 became 332 511 was divided into 513, 514 and 515 552 was divided into 553 and 554 591 became 571 599 was divided into 581 and 599 716 was divided into 717, 718, 719 721 was divided into 722, 723, 724, 725, 726, 727, 728, 729 671 became 681 681 became 671 to 679 811 became 691 699 was divided into 692, 693, 694, 695, 696 and 697 899 was divided into 893, 894, 895, 896 and 899 The data are reported in 1,000 US dollars and values smaller than 1,000 dollars are omitted. For that reason, the sum of the three-digit numbers is always either smaller than or equal to the reported totals. Because I needed the sub-totals for the construc- tion of constant prices, the aggregates I derived are somewhat underestimated. These rounding off errors which I estimate to be 5 to 10% of total imports, cannot be corrected. The rounding off errors are especially important for the EEC's trade with the communist countries of Eastern Europe, which consists of small trade flows (even below 1,000 US dollars for some specific commodities) and 252 are, therefore, not registered. As previously indicates, some re- searchers reduce the value of imports (c.i.f.) by 10% to obtain an estimate of imports (f.o.b.). Because of the rounding off errors, and for other reasons previously mentioned, I have decided not to correct for cost, insurance and freight. In this way, I hope that part of the rounding off error will be counterbalanced by cost, insurance and freight. Observation, computation and aggregation errors made in the National Bureau of Statistics in each reporting country of the EEC are not known to me; but, ideally, these errors should be added to those listed in this chapter. It is not customary to report at length on the errors in the data on the basis of which foreign trade models are tested. It is important, however, to know some of the errors, in order to choose the appropriate statistical methods. 253 BIBLIOGRAPHY Allen, Robert L. "0.8. Policy Toward East-West Trade". East-West Trade, A Compilation of Views of Businessmen, Bankers, and Academic Experts, Committee on Foreign Relations, U.S. Senate, 88th Congress, 2nd Session, Washington, November, 1964. Balassa, Bela. "European Integration: Problems and Issues". American Economic Review, LIII (May, 1963), no. 2. --------. "The Future of Common Market Imports". Weltwirtschaftliches Archiv, Ban 90 (1963), Heft 2, 306-308. --------. The Hungarian Experience in Economic Planning. New Haven, Conn.: Yale University Press, 1959. --------. The Theory of Economic Integration. Homewood, Illinois: R.D. Irwin, 1961.. --~-----. "Trade Creation and Trade Diversion in the European Common Market". The Economic Journal, LXXVII (March, 1967), 1-21 Balinky, Alexander, et a1. Planning and the Market in the USSR. New Brunswick, N.J.: Rutgers University Press, 1967 Baykor, Alexander. Soviet Foreign Trade. Princeton, N.J.: Princeton University Press, 1946. Bergson, Abram, and Simon Kuznets, eds. Economic Trends in the Soviet Union. Cambridge, Mass.: Harvard University Press, 1963. ~-------. Planning and Productivity under Soviet Socialism. New York: Columbia University Press, 1968. --------. et a1. "Soviet Economic Performance and Reform: Some Problems of Analysis and Prognosis." Slavic Review, XXV (June, 1966), 222-246. Bernard, Philippe J. Planning in the Soviet Union. New York: Pergamon Press, 1966. Bor, Mikhail. Aims and Methods of Soviet Planning. New York: International Publishers, 1967. Brown, J.F. The New Eastern Europe. New York: Frederick A. Prasger Co., 1966. 254 Bush, Keith. "Soviet Gold Production and Reserves Reconsidered". Soviet Studies, XVII (April, 1966), 490-493. Cheng, Hang Sheng. "Statistical Estimates of Elasticities and Propensities in International Trade". IMF Staff Papers, VII (April, 1959), 107-158. Clement, M.0., et a1. Theoretical Issues in International Economics. Boston: Houghton Mifflin Co., 1967. Cohen, K.J. and R.M. Cyert. The Theory of the Firm. Englewood Cliffs, N.J.: Prentice-Hall, 1965. Duesenberry, J.S., et al, eds. The Brookings Quarterlngodel of the United States. Amsterdam: North Holland Publishing Co., 1965. Dutoit, Bernard. "L'Union Sovietique Face a 1'Integration Euro- peenne", IIeme Partie, l'Ide6logie Sovietique et 1'Integra- tion EuropéEnne. Lausanne: Universite de Lausanne, Centre de Recherches Europeennes, 1964. U.S. Congress, Senate, East-West Trade. "Hearings before the Committee on Foreign Relations", (March - April 1965) Washington, 1965. Evans, Michael E., et al. The Wharton Econometric Forecasting Model. University of Pennsylvania, Studies in Quantitative Economics, no. 2, 1967. Ezekiel, M. and K.A. Fox. Methods of Correlation and Regression ‘ Analysis. New York: John Wiley and Sons, 1959. Feiwel, George R., ed. New Currents in Soviet-Type Economics: A Reader. Scranton, Pa.: International Textbook Company, 1968. Felker, Jere L. Soviet Economic Controversies. Cambridge, Mass.: The MIT Press, 1966. Fischer-Galati, Stephen, ed. Eastern Euro e in the Sixties. New York: Frederick A. Praeger Co., 1965. Flegon, Alec.' Soviet Foreign Trade Techniques. London: Flegon Press, 1965. Forte, David F.P. "The Response of Soviet Foreign Policy To the Common Market, 1957-1963". Soviet Studies, XIX (January, 1968), 373-386. 255 Ganarinkow, Michael. Economic Reforms in Eastern Europe. Detroit, Mich.: Wayne State University Press, 1968. Cara, John P. de. Trade Relations Between the Common Market and the Eastern Bloc. Bruges: De Tempel, 1964. Gehrels, F. "Customs Unions from a Single Country Viewpoint". Review of Economic Studies, XXIV (1), no. 63, (1956-1957), 61-64. Goldberger, A.S. Econometric Theory. New York: John Wiley and Sons, Inc., 1964. Goldman, Marshall I. The Soviet Economy: Myth and Reality. Englewood Cliffs, N.J.: Prentice-Hall, 1968. Grossman, Gregory. Economic Systems. Englewood Cliffs, N.J.: Prentice-Hall Co., 1967. Grub, P.D. and Karel Holbik, eds. American-East European Trade. Washington: The National Press, 1969. Halm, George N. Economic Systems. 3rd ed. New York: Holt, Rinehart and Winston, 1968. Halperin, M. "Fitting of Straight Lines and Prediction When Both Variables are Subject to Error". Journal of the American WW. LVI, noo 295 (September. 1961). 657-669. Harberger, Arnold C. "Some Evidence on the International Price Mechanism". Journal of Political Economy, LXV (December, 1957), 506-521. Holesovsky, Vaclav. "Planning Reforms in Czechoslovakia". Soviet Studies, XIX (April, 1968), 544-556. Holyman, Franklyn D. Readings on the Soviet Economy. Chicago: Rand McNally, and Co., 1962. Holzman, P.D. "The Ruble Exchange Rate and Soviet Foreign Trade Pricing Policies, 1929-1961". American Economic Review, LVIII (September, 1968), 803-825. U.S. Congress. Investigation and Study of the Administration ggperation and Enforcement of the Export Control Act of 1949 and Related Acts". Select Committee on Export Control, Washington, G.P.O., 1962. 256 Janssen, L.H. Free Trade, Protection and Customs Union. Leiden: H.E. Stenfert Kroese, 1961. Johnson, Harry G. "Economic Expansion and International Trade". International Trade and Economic Growth: Studies in Pure Theory. London: Allen and Unwin, 1958. Johnston, J. Econometric Methods. New York: McGraw-Hill Book Company, 1960. Kaldor, Nicolas. "Economic Effects of Advertising". Review of Economic Studies, XVIII (1950-1951), 1-27. Kaser, Michael. Comecon. 2nd ed. London: Oxford University Press, 1967. -------- . ed. Economic Development for Eastern Europe. London: Macmillan Co., 1968. Kendall, M.G., and A. Stuart. The Advanced Theory of Statistics. London: Griffin, 1961. Krausse, L.B. "European Economic Integration and the United States". American Economic Review, LIII (May, 1963), 185-196. Lipsey, R.G. "The Theory of Customs Unions: A General Survey". The Economic Journal, LXX, no. 279 (September, 1960), 496-513. -------- . "The Theory of Customs Unions: Trade Diversion and Welfare". Economica, XXIV, no. 93 (February, 1957), 40-46. -------- ., and K.J. Lancaster. "The General Theory of The Second Best". Review of Economic Studies, XXIV, no. 63 (1956-1957), 11-320 London, Kurt., ed. Eastern Europe in Transition. Baltimore, Md.: The Johns Hopkins Press, 1966. Malinvaud, E. Statistical Methods of Econometrics. Chicago: Rand McNally, and Co., 1966. Meade, J.E. The Theory of Customs Unions. Amsterdam: North Holland Publishing Co., 1956. Meier, Gerald M. International Trade and Development. New York: Harper and Row, 1963. Meyer, J., and E. Kuh. "How Extraneous are Extraneous Estimates?" Review of Economics and Statistics, XXXIX, (November, 1957), 380-393. 257 Mikesell, Raymond F., and J.N. Behnman. Financing Free World Trade with The Sine-Soviet Bloc. Princeton, N.J.: Princeton University Press, 1958. Miller, Margaret. Rise of the Russian Consumer. London: The Institute of Economic Affairs, 1965. Montias, John M. Central Planning in Poland. New Haven: Yale University Press, 1962. -------- . "Planning with Material Balances in Soviet-Type Economies". American Economic Review, XLIX (December, 1959), 963-985. Nove, Alec. An Economic History of the USSR. London: The Penguin Press, 1969. -------- . Economic Rationality and Soviet Politics. New York: Frederick A. Praeger Co., 1964. -------- . The Soviet Economy, Revised ed. New York: Frederick A. Praeger Co., 1969. ------- -., and Desmond A. Donnelly. Trade with Communist Countries. New York: Macmillan Co., 1960. -------- . "The USSR and the EEC". Spectator, 208 (June, 1962), 744-745. Oakeshott, Robert. "The Strategic Embargo: An Obstacle to East-West Trade". The Werld Today, June, 1963, 240-247. Office Suisse d'Expansion Commerciale, Lausanne. Rapport Special no. 43, Serie A. Avril, 1944, "Le Commerce Exterieur de l'URSA", 1-94. Orcutt, Guy H. "Measurement of Price Elasticities in International Trade". Review of Economics and Statistics, XXXII (May, 1950), Oxenfeldt, Alfred, and Vsenclod Holubnychy. Economicy§ystems in Action. 3rd ed. New York: Holt, Rinehart and Winston, 1965. Pozdniakov, V.S. "The State Monopoly of Foreign Trade in the USSR". The Soviet Review, IX (Summer, 1968), 42-49. Pryor, Frederick L. The Communist Foreign Trade System. Cambridge, Mass.: The MIT Press, 1963. -------- . "Foreign Trade Theory in the Communist Bloc". Soviet Studies, XIV (July, 1962), 41-61. 258 Salant, W.S. The United States Balance of Payments in 1968. Washing- ton: The Brookings Institution, 1963. Schwartz, Harry. An Introduction to the Soviet Economy. Columbus, Ohio: Charles E. Merrill Publishing Co., 1968. -------- . Russia's Soviet Economy. 2nd ed. Englewood Cliffs, N.J.: Prentice-Hall Co., 1954. Scitovsky, Tibor. Economic Theory and Western European Integration. California: Stanford University Press, 1958. Sik, Ota. "On the Economic Problems of Czechoslovakia", U.S. Senate, Hearings, Subcommittee on Antitrust and Monopoly, 19th Congress, 2nd Session, 1969. Spulber, Nicolas. The Economics of Communist Eastern Europe. New York: John Wiley and Sons, 1957. -------- . "East-West Trade and the Paradoxes of the Strategic Embargo", International Trade and Central Planning, Alan A. Brown and Egon Neuberger, eds. Berkeley: University of California Press, 1968. -------- . The State and Economic Development in Eastern Europe. New York: Random House, 1966. Stalin, J. "Economic Problems of Socialism in the USSR", Bolshevik, XVIII (September, 1952), 1-50. Szabados, Joseph. "Hungary‘s N.E.M.: Reorganization or Basic Reform?". East Europe, XVII (June, 1968), 13-18. Teigen, Ronald L. "The Demand for and the Supply of Money". in: Smith, Warren and Ronald L. Teigen, Readings in Money, National Income and Stabilization Policy. Homewood, Illinois: R.D. Irwin, Inc., 1965. Thorbecke, E. "Problems of Regional Integration, European Integration and the Pattern of World Trade". American Economic Review, LIII, no. 2 (May, 1963), 147-174. Tobin, J. "A Statistical Demand Function for Food in the USA". Journal of the Royal Statistical Society, Series A., Vol. 113, (1950), 113-141. Treadgold, Donald W. Twentieth CenturnyusSia. 2nd ed. Chicago: Rand McNally and Co., 1964. 259 Treml, V.G., and Robert Farrell, eds. The Development of the Soviet Economy. New York: Frederick A. Praeger Co., 1968. United Nations. Economic Commission for Europe. Economic Bulletin for Europe, I, Geneva: 1949. Vanek, Jaroslav. International Trade: Theory and Economic Policy. Homewood, Illinois: R.D. Irwin, 1962. Verdoorn, P.J. "A Customs Unionzfor Western Europe - Advantages and Feasibility". World Politics, VI (July, 1954), 482-500. -------- ., and Meyer zu Schlochtern. "Trade Creation and Trade Diversion in the Common Market". Integration Europeenne et Realité Economique. Bruges, 1964. Viner, Jacob. The Customs Union Issue. New York: Carnegie Endowment for International Peace, 1950. I Waelbroeck, J. "Le Commerce de la Communaute EurOpeenne avec 1es Pays Tiers". Integration Europeenne et Realité Economique. Bruges: 1964. Wellisz, Stanislaw. The Economies of the Soviet Bloc. New York: McGraw-Hill Book Co., 1964. Wilczynski, J. "Strategic Embargo in Perspective". Soviet Studies, XIX (July, 1967), 74-86. -------- . "The Theory of Comparative Costs and Centrally-Planned Economies". Economic Journal, LXXV (March, 1965), 63-80. Wiles, P.J.D. Communist International Economics. Oxford: Basil Blackwell Co., 1968. world-Wide Enforcement of Strategic Trade Controls, Mutual Defense Assistance Control Act of 1951, Third Report to Congress, Washington, 1953. Wszeladi, Jan. Communist Economic Strategy. Washington: National Planning Association, 1959. Zaleski, Eugene, Plannipg Reforms in the Soviet Union, 1962-1966. Chapel Hill, N.C.: The University of North Carolina Press, 1967. Zauberman, Alfred. "The Criterion of Efficiency of Foreign Trade in Soviet-Type Economies". Economica, N.S., XXXI (February, Zdziechowski, Stanislas. 260 "The Impact of the Common Market on the Soviet Union". Studies on the Soviet Union, New Series, II (1963), 50-59. "‘71111511113leMMIIEI’MTI'IMLIITLIWIR‘S 9