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German trade policy in Eastern Europe, 1890–1990: preconditions for applying international trade leverage

Published online by Cambridge University Press:  22 May 2009

Robert Mark Spaulding Jr
Robert Mark Spaulding Jr
Affiliation:
Postdoctoral fellow at the Center for International Affairs, Harvard University, Cambridge, Massachusetts.
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Abstract

Over the past century, Germany has repeatedly attempted to use trade as a tool of foreign policy vis-à-vis Imperial Russia, the Soviet Union, Poland, and Czechoslovakia. Against the background of continual German economic superiority, this article analyzes Germany's ability to apply trade leverage in terms of four other factors: the nature of the prevailing international trade regime, government views of trade leverage as a tool of statecraft, the degree of German state autonomy in setting trade policies, and the availability of an effective bureaucratic mechanism for controlling German imports and exports. The historical record demonstrates that beyond economic superiority, the application of trade leverage requires a permissive international trade regime, state acceptance of trade-based economic statecraft, an autonomous domestic regime, and a rigorous trade control bureaucracy. Surprisingly, this conjunction of factors, as they applied to Eastern Europe, occurred during both the Nazi period and the early years of the Federal Republic. The article closes by pointing out how two important factors—the politicized nature of the East-West trade regime and the Federal Republic's high degree of state autonomy in setting Eastern trade policy–are being eroded by political and economic change in Eastern Europe.

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Articles
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International Organization , Volume 45 , Issue 3 , Summer 1991 , pp. 343 - 368
Copyright
Copyright © The IO Foundation 1991

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References

Earlier versions of this article were presented to the Diplomatic History Workshop, chaired by Günter Bischof at Harvard University, and to the Seminar on Non-Violent Sanctions, directed by Christopher Kruegler at the Center for International Affairs, Harvard University. In addition to the valuable comments received at these presentations, the article has benefited from suggestions offered by Jonathan Kirshner, Stephen Krasner, Charles Maier, Beth Simmons, and two anonymous reviewers.

1. In this article, I use a means-oriented definition of “trade leverage” that emphasizes the use of merchandise trade flows as a means of pursuing nontrade related foreign policy goals. Of course, the conceptually less challenging use of trade policy as a means of influencing other states' trade policies also constitutes trade leverage. Employing Baldwin's terms “economic statecraft” and “economic diplomacy,” I also refer to “trade-based economic diplomacy” and use that term interchangeably with “trade leverage,” distinguishing where necessary between trade-based economic diplomacy and forms of diplomatic pressure with other bases. See Baldwin, David A., Economic Statecraft (Princeton, N. J.: Princeton University Press, 1985), pp. 35 and 39–40Google Scholar.

2. Acheson, Dean, Present at the Creation: My Years in the State Department (New York: Norton, 1969), pp. 139–10Google Scholar.

3. Putnam has developed the concept of “two-level games” to describe the dual frameworks in which policymakers of sovereign yet interdependent countries must respond to both domestic and international constraints and pressures. See Putnam, Robert, “Diplomacy and Domestic Politics: The Logic of Two-Level Games,” International Organization 42 (Summer 1988), pp. 427–60CrossRefGoogle Scholar.

4. See, for example, Bergsten, C. Fred, Keohane, Robert O., and Nye, Joseph S., “International Economics and International Politics: A Framework for Analysis,” International Organization 29 (Winter 1975), pp. 3–36CrossRefGoogle Scholar; Baldwin, , Economic Statecraft, p. 58Google Scholar; and Cohen, Benjamin J., “The Political Economy of International Trade,” International Organization 44 (Spring 1990), pp. 261–81CrossRefGoogle Scholar.

5. As long as the “inadequacy of basic theoretical work” and the “lack of attention to history” remain two of the “major lacunae in the intellectual development” of security studies, historically based case studies with theoretical implications should be an especially valued type of contribution to the entire field of international relations. See Nye, Joseph S. Jr, and Lynn-Jones, Sean, “International Security Studies: A Report of a Conference on the State of the Field,” International Security 12 (Spring 1988), pp. 5–27CrossRefGoogle Scholar.

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7. In 1929, German exports to Poland were 339 million marks, or 2.5 percent of total German exports (13,482 million); imports from Poland were 343 million marks, or 2.6 percent of total German imports (13,434 million). See Reichsamt, Statistisches, Monatliche Nachweise iiber den Aussenhandel Deutschlands—Ergänzungsheft: Der deutsche Aussenhandel nach Erdteilen und Landem, 1929 (Monthly record of German foreign trade—Supplement: German foreign trade by continent and country, 1929) (Berlin: Reimar und Hobing, 1930), p. 5Google Scholar. On the other side, Polish exports to Germany were 877 million zloty, or 31 percent of total Polish exports (2,813 million); imports from Germany were 850 million zloty, or 27 percent of total Polish imports (3,111 million). See Mitchell, B. R., European Historical Statistics, 1750–1970 (New York: Macmillan, 1975), pp. 496 and 547CrossRefGoogle Scholar.

8. In 1929, Czechoslovak exports to Germany were 4,691 million koruna (with total Czechoslovak exports equal to 20,499 million); imports from Germany were 7,675 million koruna (with total imports equal to 19,998 million). See Mitchell, , European Historical Statistics, pp. 493 and 513Google Scholar. German exports to Czechoslovakia were 658 million marks; imports from Czechoslovakia were 480 million marks. See Reichsamt, Statistisches, Monatliche Nachweise—Ergänzungsheft: 1929, p. 5Google Scholar.

9. In 1929, Soviet exports to Germany were 169 million rubles (with total Soviet exports equal to 724 million); imports from Germany were 153 million rubles (with total imports equal to 691 million). See Mitchell, , European Historical Statistics, pp. 496 and 557Google Scholar. German exports to the Soviet Union were 353 million marks; German imports from the Soviet Union were 425 million marks. See Reichsamt, Statistisches, Monatliche Nachweise—Ergänzungsheft: 1929, p. 5Google Scholar.

10. The Weimar Republic's economic potential for applying trade leverage is captured in Hirschman's “index of preference for [trade with] small countries.” By this measure, Germany under the Weimar regime concentrated its trade on smaller countries to a greater degree than did either Britain or France. In 1925, this index of concentration stood at 126 for German imports and 158 for German exports, well above both Britain (111 for imports and 114 for exports) and France (93 and 93). See Hirschman, Albert O., National Power and the Structure of Foreign Trade (Berkeley: University of California Press, 1980), Table 1, pp. 92–93Google Scholar.

11. The international trade regime can be defined as the web of “institutions, fundamental assumptions, and rules of the game” governing trade practices and trade relations between states, according to Bergsten, , Keohane, , and Nye, in “International Economics and International Politics,” p. 5Google Scholar. Lipson, Charles refers to “rules, norms, principles, procedures, [and] expectations” when discussing trade regimes in “The Transformation of Trade: The Sources and Effects of Regime Changes,” in Krasner, Stephen, ed., International Regimes (Ithaca, N. Y.: Cornell University Press, 1983), pp. 233–71Google Scholar. See also Krasner's own contributions in the same volume.

12. While Lipson, Krasner, and others have turned their attention in part to the question of how international regimes are constructed, this study takes the international trade regime as exogenous and offers explanations of how existing regimes influence national trade policies. For a discussion of the benefits and drawbacks of “upward-looking” and “downward-looking” analyses of system management, see Cohen, “The Political Economy of International Trade.”

13. Despite recent challenges to the hegemonic model, it continues to dominate explanations of economic regime change and stability. See, for example, Kindleberger, Charles, The World in Depression, 1929–1939 (Berkeley: University of California Press, 1974)Google Scholar; Katzenstein, Peter, “Introduction: Domestic and International Forces and Strategies of Foreign Economic Policy,” in Katzenstein, Peter, ed., Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States (Madison: University of Wisconsin Press, 1978), pp. 3–22Google Scholar; Gilpin, Robert, “Economic Interdependence and National Security in Historical Perspective,” in Knorr, Klaus and Trager, Frank, eds., Economic Issues and National Security (Lawrence: Regents Press of Kansas, 1977), pp. 19–66Google Scholar; Gilpin, Robert, U.S. Power and the Multinational Corporation (New York: Basic Books, 1975)CrossRefGoogle Scholar; Krasner, Stephen, “State Power and the Structure of Foreign Trade,” World Politics 28 (04 1976), pp. 317–47CrossRefGoogle Scholar; Keohane, Robert, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, N. J.: Princeton University Press, 1984)Google Scholar; and Snidal, Duncan, “The Limits of Hegemonic Stability Theory,” International Organization 39 (Autumn 1985), pp. 579–614CrossRefGoogle Scholar. For a critical review of the structural, game-theoretic, functional, and cognitive approaches to regime analysis, see Haggard, Stephan and Simmons, Beth A., “Theories of International Regimes,” International Organization 41 (Summer 1987), pp. 491–517CrossRefGoogle Scholar. For thoughts on how an international economic regime corresponds to the international political power system in a given period, see Irye, Akira, “The Internationalization of History,” American Historical Review 94 (02 1989), pp. 1–10CrossRefGoogle Scholar.

14. Lipson, , “The Transformation of Trade,” p. 241Google Scholar.

15. Domestic factors such as the late unification, the federal structure of the Reich, and the almost exclusively aristocratic character of the upper levels of the civil service also played important roles in the noteworthy underdevelopment of the central Reich bureaucracy before 1914. See Facius, Friedrich, Wirtschaft und Staat: Die Entwicklung der staatlichen Wirtschaftsverwaltung in Deutschland vom 17. Jahrhundert bis 1945 (Economy and state: The development of state economic administration in Germany from the 17th century to 1945) (Boppard: Harald Verlag, 1959)Google Scholar.

16. Rothschild, Joseph, East-Central Europe Between the Wars, vol. 9 of A History of East-Central Europe (Seattle: University of Washington Press, 1974), p. 22Google Scholar.

17. League of Nations, Commercial Policy in the Interwar Period: International Proposals and National Policies (Geneva: League of Nations, 1942), p. 70Google Scholar.

18. Ibid., pp. 70–71.

19. One line of this thinking culminates in the questions surrounding the costs and benefits of conquest versus trade. An early discussion of this issue can be found in Benjamin Constant's De l'esprit de conquête et de l'usurpation dans leurs rapports avec la civilisation européenne, part 1, chap. 2, as cited in Hirschman, , National Power and the Structure of Foreign Trade, p. 14Google Scholar. For more recent thoughts on this question, see Milward, Alan, The New Order and the French Economy (Oxford: Clarendon Press, 1970), especially chap. 1Google Scholar; and Rosecrance, Richard, The Rise of the Trading State: Commerce and Conquest in the Modem World (New York: Basic Books, 1986)Google Scholar.

20. This “separatist” view was not unique to Bismarck; it can be traced back through the first U.S. president at least to Machiavelli. In his farewell address, Washington declared that “the great rule of conduct for us, in regard to foreign nations, is, in extending our commercial relations, to have with them as little political connection as possible.” Machiavelli offered the following argument: “Fortune has decreed that as I do not know how to reason … about profits and losses, it befits me to reason about the state.” For further discussion, see Gilbert, Felix, To the Farewell Address: Ideas in Early American Foreign Policy (Princeton, N. J.: Princeton University Press, 1961)Google Scholar; and Baldwin, Economic Statecraft. See also Hirschman, , National Power and the Structure of Foreign Trade, p. 54Google Scholar. Hirschman notes that before 1914 even those contemporary scholars who warned specifically about the dangerous growth of German exports—such as Williams, E. E., author of Made in Germany (London: Heinemann, 1896)—saw “foreign, and in particular export trade … as an end in itself and not as a means to political penetration and economic subjugation.”Google Scholar

21. In 1887, Bismarck also pulled Russian government bonds off the list of securities usable as collateral at the Reichsbank and applauded a court ruling prohibiting the investment of German trust funds in Russian bonds.

22. See Stenographische Berichte des deutschen Reichstages (Stenographic report of the German Reichstag), 27 February 1894, p. 1451. Assessing the success of Caprivi's reversal of Bismarckian practice is complicated by the asymmetry between Caprivi's use of trade treaties as foreign policy incentives (“carrots”) and Bismarck's policy of withholding treaties as disincentives (“sticks”).

23. Stresemann, speech to the Central Committee of the Deutsche Volkspartei, 22 November 1925; reprinted by Henry Turner in Vierteljahrshefte fur Zeitgeschichte 15 (October 1967), pp. 412–36. Posse, Hans, the influential undersecretary in the Economics Ministry, privately arrived at the same conclusions, as indicated in his unpublished manuscript of 1924–1925, “Denkschrift zur Politik der Regierung” (Memorandum on government policy), Bundesarchiv Koblenz, Nachlass Posse/2Google Scholar.

24. Formal trade negotiations took place on the basis of “trade and payments agreements” signed by the Allied occupation authorities on behalf of the western zones of Germany with Poland (October 1947 and July 1948) and Czechoslovakia (February 1947). These agreements were among the many international obligations undertaken by the Allies for the Bizonia and Trizonia and subsequently taken over by the Federal Republic.

25. Foreign Office report, 1 July 1953, Bundesarchiv Koblenz, Economics Ministry (B102), file 7197.

26. Truetzschler (Foreign Office) summary for the Chancellor's Office, 5 December 1953, Bundesarchiv Koblenz, Chancellor's Office (B136), file 1261.

27. An early exploration of these issues can be found in Krasner's, Stephen “Domestic Constraints on International Economic Leverage,” in Knorr, and Trager, , Economic Issues and National Security, pp. 160–81Google Scholar. Gilpin touches on this issue in a discussion of the costs of negative economic sanctions. See Gilpin, Robert, “Structural Constraints on Economic Leverage: Market-Type Systems,” in McCormick, Gordon H. and Bissel, Richard, eds., Strategic Dimensions of Economic Behavior (New York: Praeger, 1984), pp. 105–28Google Scholar.

28. For classic pluralist writings, see Truman, David B., The Governmental Process: Political Interests and Public Opinion (New York: Knopf, 1952)Google Scholar; and Dahl, Robert A., Who Governs? Democracy and Power in an American City (New Haven, Conn.: Yale University Press, 1961)Google Scholar. For “neopluralist” variants, see McConnell, Grant, Private Power and American Democracy (New York: Knopf, 1967)Google Scholar; and Lowi, Theodore J., The End of Liberalism: Ideology, Policy, and the Crisis of Public Authority (New York: Norton, 1969)Google Scholar. On social corporatism, see Schmitter, Phillippe, “Still the Century of Corporatism?” Review of Politics 36 (01 1974), pp. 85–131CrossRefGoogle Scholar. For recent Marxist theory, see Miliband, Ralph, Marxism and Politics (New York: Oxford University Press, 1977)Google Scholar; and Poulantzas, Nicos, Political Power and Social Classes (Atlantic Highland, N. J.: Humanities Press, 1975)Google Scholar. Gourevitch's coalition-based interpretation of foreign economic policy has been a valuable recent addition to societal actor explanations. See Gourevitch, Peter, Politics in Hard Times: Comparative Responses to International Economic Crises (Ithaca, N. Y.: Cornell University Press, 1986)Google Scholar.

29. Liberal and Marxist theorists of democracy deny that the state has the ability to act autonomously from society. Even when expanded to include the role played by the “intermediate agents” (the interest groups and political parties) of private economic actors, the liberal and Marxist frameworks still do not allow a role for the state in which state agents themselves habitually act as autonomous forces in the process of formulating policy. See Nordlinger, Eric, On the Autonomy of the Democratic State (Cambridge, Mass.: Harvard University Press, 1981)Google Scholar; and Mann, Michael, “The Autonomous Power of the State: Its Origins, Mechanisms, and Results,” in Hall, John A., ed., States in History (New York: Basil Blackwell, 1987), pp. 109–36Google Scholar.

30. The literature on state-society relations, particularly on the role of private sector interest groups (Verbände), in these four German regimes is voluminous. For good coverage of the entire period, see Jeserich, Kurt et al. , Deutsche Verwaltungsgeschichte (German administrative history), vols. 3–5 (Stuttgart: Deutsche Verlagsanstalt, 1983–1988)Google Scholar. For valuable individual studies, see Nipperdey, Thomas, “Interessenverbände und Parteien in Deutschland vor dem ersten Weltkrieg” (Interest groups and parties in Germany before the First World War), Politische Vierteljahresschrift 2 (09 1961), pp. 262–80Google Scholar; Pühle, H-J, “Parlament, Parteien, und Interessenverbände, 1890–1914” (Parliament, parties, and interest groups, 1890–1914), in Stürmer, M., ed., Das kaiserliche Deutschland (Imperial Germany) (Dusseldorf: Droste, 1970), pp. 340–77Google Scholar; Maier, Charles, Recasting Bourgeois Europe: Stabilization in France, Germany, and Italy in the Decade After World War I (Princeton, N. J.: Princeton University Press, 1975)Google Scholar; Mason, T. W., “The Primacy of Politics: Politics and Economics in National Socialist Germany,” in Turner, H. A., ed., Nazism and the Third Reich (New York: New Viewpoints, 1972), pp. 175–200Google Scholar; Weber, Jürgen, Die Interessengruppen im politischen System der Bundesrepublik Deutschland (Interest groups in the political system of the Federal Republic of Germany) (Stuttgart: Kollhammer, 1977)Google Scholar; Eschenburg, Theodor, Herrschaft der Verbände? (Dominion of the interest groups?) (Stuttgart: Deutsche Verlagsanstalt, 1955)Google Scholar; and Eschenburg, Theodor, Das Jahrhundert der Verbände: Lust und Leid organisierter Interessen in der deutschen Politik (The century of interest groups: Pleasures and pains of organized interests in German politics) (Berlin: Siedler, 1989)Google Scholar.

31. For an illustrated notion of “nonexistent, weak, moderate, strong, and dominant” levels of state power, see Krasner, Stephen D., Defending the National Interest: Raw Materials Investments and U.S. Foreign Policy (Princeton, N.J.: Princeton University Press, 1978), p. 57Google Scholar. For similar views, see Gourevitch, , Politics in Hard Times, pp. 61–62Google Scholar; and Migdal, Joel S., Strong Societies and Weak States: State-Society Relations and State Capabilities in the Third World (Princeton, N.J.: Princeton University Press, 1988)Google Scholar.

32. On the frustrations of two leading interest groups, the Central Association of German Industrialists and the Union of German Iron and Steel Industrialists, see the Union's own unpulished history by Klein, C., “Geschichte des Vereins deutscher Eisen- und Stahlindustrieller, 1874–1934” (History of the Union of German Iron and Steel Industrialists), Bundesarchiv Koblenz, Union of German Iron and Steel Industrialists (R 13 I), files 12 and 13Google Scholar.

33. The U.S. Congress granted the executive branch similar powers in the Trade Expansion Act of 1974 and in the “fast track” legislation for the Uruguay Round of GATT negotiations. In exchange for diminished legislative control, Congress established a network of private sector committees to communicate directly with U.S. negotiators before and during treaty negotiations. In the case of Imperial Germany's system, however, there were no analogous networks. For a detailed discussion of ratification procedures and international negotiations, see Putnam, “Diplomacy and Domestic Politics.”

34. This is by no means a one-way process, however. Reliance on a privately based trade control bureaucracy served as the narrow end of a wedge undermining the Weimar regime's trade policy autonomy.

35. Hirschman, , National Power and the Structure of Foreign Trade, p. 15Google Scholar.

36. Ibid., p. 16.

37. Trendelenburg, Ernst, Weltwirtschaftskrise und Aussenhandel (Economic crisis and foreign trade) (Berlin: Deutschen Hochschule fur Politik, 1921)Google Scholar.

38. Ibid.

39. Memorandum of conversation between Witzel (Economics Ministry) and members of the Allied High Commission's East–West Trade Subcommittee, 2 February 1951, Bundesarchiv Koblenz, Economics Ministry (B102), file 7233. The Economics Ministry oversaw the work of the Federal Agency for Merchandise Trade and its Central Export Control Group with nine departments. Below that level were the field offices and customs administration.

40. The Federal Republic currently employs over 200 trained professionals in the upper level of its principle export control agency and 2,350 “export controllers” in its customs service. See “Bonn Maps Controls on Arms Exports,” Boston Globe, 16 February 1989, p. 6; and “Bonn verschärft Exportkontrollen” (Bonn sharpens export controls), Deutschland Nachrichten, 8 February 1991, p. 1.

41. In Economic Diplomacy and the Origins of the Second World War (Princeton, N. J.: Princeton University Press, 1980), pp. 74 and 79–80Google Scholar, David Kaiser explained how changes in the international trade regime after 1931 allowed for the German penetration of Eastern Europe. However, in view of the agricultural obstructionism that plagued the Weimar regime, any explanation of Nazi success must also include an account of the policies and developments that solved the problems of domestic opposition. One of the best treatments of Nazi economic activity in the Balkans can be found in Lampe, John R. and Jackson's, Marvin R.Balkan Economic History, 1550–1950: From Imperial Borderlands to Developing Nations (Bloomington: Indiana University Press, 1982)Google Scholar. For a study that views Nazi economic expansion as serving capitalism as much as the state, see Teichova, Alice, An Economic Background to Munich (London: Cambridge University Press, 1974)Google Scholar.

42. Weinberg, Gerhard, The Foreign Policy of Hitler's Germany: Diplomatic Revolution in Europe, 1933–1936 (Chicago: University of Chicago Press, 1970), p. 73Google Scholar.

43. Fabry, Philipp, Der Hitler-Stalin Pakt, 1939–1941: Ein Beitrag zur Methode sowjetischer Aussenpolitik (The Hitler-Stalin pact, 1939–1941: A contribution to the method of Soviet foreign policy) (Darmstadt: Fundus Verlag, 1962), pp. 190–94Google Scholar.

44. See “Genscher: Rasche Hilfe für Polen” (Genscher: Quick aid for Poland), Deutschland Nachrichten, 10 05 1989, p. 2Google Scholar.

45. Despite the international parallels, a subtle but critical change in the nature of aid mechanisms has occurred as financial instruments (trade credits) and debt relief have assumed equal weight with import allowances and price concessions on merchandise trade.

46. See “Genscher: Rasche Hilfe für Polen.” We should also recall the detente version of this reform-seeking use of commercial policy, which was summarized in the Social Democrats' slogan “Wandel durch Annäherung” (change through rapprochement). After 1970, both the United States and the West European nations sought to expose Eastern societies to the “Western life-style” and the productive powers of the West by exposing them to Western products. In this way, they hoped to encourage Eastern regimes and elites to recognize the need for greater concern to their own consumers and to soften their domestic structures.

47. See “Deutsche und EG-Hilfsmassnahmen für Polen und Ungarn” (German and EC aid measures for Poland and Hungary), Deutschland Nachrichten, 28 September 1989, p. 2.