The period from 1947 to 1991 when competition and tension existed between the Soviet Union and the United States, but no conventional war occurred.
The Cold War helped to determine the direction of world trade in the decades after World War II. After 1949, when the communist regime under the leadership of Mao Zedong established the People’s Republic of China, the Cold War spread to East Asia. Capitalist countries, allied with the United States, conducted most of their trade with each other. Communist states, allied with the Soviet Union, directed most of their trade to other communist nations. Nonaligned states, such as India, traded freely with both sides.
Both the United States and the Soviet Union created organizations that facilitated trade with their allies. The General Agreements on Tariffs and Trade (GATT) of 1947 provided a forum for the United States, Great Britain, France, and twenty other countries to lower tariff barriers and increase international trade. For the U.S. government, GATT and trade liberalization were part of a wider anticommunist strategy, which helped rehabilitate the West European economies. Economic reconstruction was an important element of U.S. foreign policy that resisted the threat of domestic communism in Western Europe.
The Soviet Union and its satellites refused to join GATT and responded to U.S. and West European efforts at economic cooperation by creating a rival body. In 1949, the Soviet Union, Albania, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania founded the Council for Mutual Economic Assistance (CMEA). Dominated by the Soviet Union, CMEA established a series of bilateral trade agreements among the Eastern (communist) bloc countries. The German Democratic Republic joined CMEA in 1950, Cuba joined in 1972, and Vietnam in 1978.
Despite the basic separation of international commerce between capitalist and Marxist states during the Cold War, there was some trade between these two opposing blocs. U.S. administrations carefully monitored trade with the Soviet Union and its allies, in part to prevent the transfer of strategic technologies to the Soviet Union. In October 1963, President John F. Kennedy approved the sale of $250 million worth of surplus wheat to the Soviet Union to help meet poor harvests, an initiative that helped repair relations that had been damaged during the Cuban missile crisis a year earlier.
Barriers to trade between the communist and noncommunist blocs began to disappear during the 1970s. U.S. diplomatic recognition of China and the détente with the Soviet Union expanded the opportunity for trade between the opposing sides. A West German opening to the German Democratic Republic, Poland, and the Soviet Union also facilitated trade with Eastern Europe. In 1969, Willy Brandt, the West German chancellor, initiated Ostpolitik (eastern policy), which resulted in a massive increase in trade between the two Germanys.
The communist leadership in Eastern Europe and the Soviet Union were anxious for greater access to Western markets to meet domestic shortages and accumulate West German deutsche marks and U.S. dollars. Poland experienced food riots in 1970 that forced the resignation of Party Secretary Wladyslaw Gomulka. After a poor harvest in 1972, the Soviet Union was obliged to purchase 25 percent of the U.S. wheat crop.
Economic détente between the communist and noncommunist states reached its zenith with the Helsinki Final Act of 1975. The agreement formally recognized post–World War II borders in Europe and included unenforceable provisions for the respect of human rights in the Soviet Union and Eastern Europe. Yet, at West European insistence, the treaty also contained provisions for future East-West economic cooperation and trade.
Raw materials dominated exports out of the Eastern bloc in the 1970s and 1980s. In the 1980s, only 20 percent of Soviet exports consisted of manufactured goods. Only 3 percent of Soviet exports consisted of consumer goods. Trade liberalization with the West revealed that the Soviet economy was not competitive. Soviet manufactures were unattractive to consumers outside of the Eastern bloc. At the end of the Cold War in 1991, 60 percent of Soviet trade was directed toward CMEA countries.
Chinese trade with the West grew after Deng Xiaoping consolidated his control over the Communist Party in 1977. He encouraged foreign investment in Chinese enterprises, supported trade with noncommunist countries, and allowed Chinese managers to pursue profits. Experiments with special economic zones, which opened up fourteen southern cities to foreign investment, were also successful. China successfully attracted international investment and expanded its trade in manufactured goods.
In spite of a brief period of economic sanctions, which followed the brutal suppression of prodemocracy demonstrations at Tiananmen Square in 1989, China maintained its export-led growth in the 1990s. Inexpensive labor offered an irresistible competitive advantage to firms that produced goods in Chinese factories. The value of Chinese exports grew from almost nothing during the Cultural Revolution to $250 billion by 2000. The United States and Japan became China’s largest foreign markets, despite their legacy of poor relations with China during the Cold War.
James Waite
See also: China; Soviet Union.
Gaddis, John Lewis. Russia, the Soviet Union, and the United States: An Interpretive History. New York: McGraw-Hill, 1990.