ABSTRACT
In the course of a discussion with Ed Hewett, I became aware that my article "The Significance of Soviet Studies to Eastern Europe" (1986) neglected to allow for the well-known fact that the Eastern European nations tend not only to bilaterally balance overall trade with one another but to also bilaterally balance trade in hard goods and soft goods, respectively. Hard goods are those with lower prices in CMEA nations than in the West; they can be sold easily for hard currency. Petroleum is an example. Soft goods tend to have higher prices (and poorer quality) than similar products made in the West and are not easily marketed in Europe, the United States, or Japan—for example, advanced machinery. The function of separate balancing for hard and soft goods rather than aggregate balancing is to reduce or eliminate the gains and losses from implicit subsidies of the sort that result from Soviet-CMEA trade. This was Hewett's point. 1
