The role of state in the regulation of

The role of state in the regulation of foreign trade Zhirkova Sargylana, Kirsanova Aleksandra IFF 2 -3

Monopoly of foreign trade The management of the entire foreign trade of a country by the state. Under socialism, the socialist ownership of the means of production and the planned economy make the monopoly of foreign trade an objective necessity. The theoretical foundation for the state monopoly of foreign trade is found in the works of V. I. Lenin, under whose leadership the organizational means of implementing the monopoly were elaborated. Lenin considered the establishment of a foreign trade monopoly an important aspect of the socialist transformation of the Soviet economy. Furthermore, he believed that such a monopoly was absolutely necessary as a defense against foreign economic and trade expansion. He fought against the opponents of the monopoly, pointing out that the proletariat “will be totally unable to build up its own industry and make Russia an industrial country unless it has the protection, not of tariffs, but of the monopoly of foreign trade”. The basic function of the monopoly of foreign trade is to ensure the overall interests of the state in foreign trade. The monopoly promotes the achievement of maximally effective export and import operations and ensures the unity of action of all Soviet economic organizations in foreign markets and the coordinated activity of administrative bodies in foreign trade. It guarantees the independent development of the national economy of the USSR and the planned character of its foreign trade. In relations with capitalist countries, the state monopoly of foreign trade is the only defense against economic expansion. In relations with other socialist countries, it is an important method for coordinating the planned development of the national economy.

In the USSR the foreign trade monopoly was established by the Apr. 22, 1918, decree of the Council of People’s Commissars On the Nationalization of Foreign Trade. The decree entrusted direct state management of foreign trade to the People’s Commissariat for Trade and Industry, which was renamed the People’s Commissariat for Foreign Trade in 1920. Since then, foreign trade deals may be made only by bodies specially authorized by the state. The Ministry of Foreign Trade (formerly a people’s commissariat) exercises direct state management over foreign trade exchange. According to its statute, which was promulgated on Nov. 12, 1923 (ibid, 1923, no. 108, art. 1035), the ministry was established “for the management of the entire foreign trade activity of the USSR on the basis of a state monopoly. ” It carries out its functions in the Soviet Union through its representatives in the Union republics and in several major industrial centers, and abroad, through the trade representatives of the USSR. The State Committee on Foreign Economic Relations, which was established in 1957, also has some authority over the management of foreign trade exchange associated with the construction of industrial and other facilities abroad with Soviet aid. On the basis of and within the limits of their statutes, foreign trade plans, and export and import permits and licenses, all-Union foreign trade associations conduct export and import operations, following a specific nomenclature of goods and services established for each of them. Foreign trade associations are autonomous economic organizations that enjoy the status of juridical persons. In the exercise of their duties they have separate property liability.

Current Foreign Trade of the Russian Federation – the Flip Side of the Coin Foreign trade traditionally plays an important and sometimes crucial role as it is evident in the current development of Russia. From the historical standpoint imports and exports can explain the role of the country in the world division of labour. Trade with other countries is based on natural comparative advantages. For Russia these advantages are manifested in its vast natural resources, its well qualified and rather inexpensive labour potential and many creative opportunities of its domestic science research and development (R&D). Nevertheless, these opportunities must be explored further and new advantages must be created if Russia wants to achieve the set goals. Up to the end of the sixteenth century Russian exports were mainly agriculturally oriented, though in the epoch of Peter the Great, deliveries of raw material and materials abroad grew in numbers. It was the time when manufacturing and industry in countries of Western Europe were emerging and the main exports were iron, sailing cloth, linen, and a number of other industrial semi-finished items. Such wares made up approximately 40% of Russian exports to Europe in the seventeenth century. On the brink of the Industrial Revolution when young industries were withdrawing capital and labour force from the agricultural sector of the economy the Russian exports became once again mainly agricultural. In the last decade of the nineteenth century the sales of the agrarian products abroad provided for about 80% of exports, a share of grain breads being about 40%. As a result, Russia became the granary of Europe and ranked the sixth or the seventh in the list of the largest world exporters.

Factors of Development, the Role of Foreign Trade in Sustaining the Growth While analyzing the Russian transformation to the market structures and processes it is crucial to understand the situation facing the Russian Federation when it as a newly independent state and embarked on radical economic reforms in the wake of the Soviet collapse. It must be noted that the crisis of the Soviet system had its roots in the long-term secular decline in growth rates experienced by the USSR from the 1950 s onwards. Among other factors precipitating the final breakdown of the Soviet command economy were external shocks, ill conceived reforms and growing political unrest (Arbatov, Feygin et al. 2005). The year of 1991 saw the polity fragmenting and the economy in free-fall, whereas the real GDP that year declined by about between 8 and 21% – owing to the chaotic economic and political situation of the time. The statistics vary widely (See Leppänen 2004; BOFIT Russia Review 2005; Goskomstat, etc). Nevertheless, the fact is that the Russian GDP started to decline dramatically. According to Ahrend, the Soviet state budget deficit was pushed from 20% in 1992 to 9% of the GDP by the second half of 1992 and to 3% of the GDP by 1993 by rising subsidies to back controlled prices, falling production and collapsing tax discipline. As the easiest way to finance the deficit was printing money, its supply swelled and wrecked the remnants of the system of price controls. The combination of pricecontrols and monetary incontinence meant that very high inflation coexisted with the shortages produced by price controls (Ahrend 2005: 6). Faced with such an acute crisis at the end of 1991, the Russian authorities opted for a “big bang” program of economic transformation, involving the rapid liberalisation of prices and trade, as well as large-scale privatisation. Some researchers suggest that it would have been better to choose a more gradualist approach at that time.

And here is the test to check your brains!

What is the basic function of the monopoly of foreign trade? To receive all the money in the world To ensure the overall interests of the state in foreign trade To become the world’s only star and passion This question can’t be answered

Who created theoretical foundation for the state monopoly of foreign trade? Stalin Lenin Prince Henry of Wales Kirsanova

The state monopoly of foreign trade is the only defense against what? Economic expansion Alien invasion Unreal passion Economic leisure

What is NOT the one of the essential characteristics of the state monopoly of foreign trade? The direct management of the country’s foreign trade exchange by authorized administrative bodies Foreign-exchange regulation of export and import operations The direct ruling of the world by the state monopoly of one of the countries The establishment of procedures for conducting exchange operations

What does the Ministry of Foreign Trade exercise? Fitness Carrying out the functions of the Inquisition Direct state management over foreign trade exchange Human sacrifices

Thanks for your attention!