Specialization Agreements in the Council for Mutual Economic Assistance

This report assesses the effectiveness of specialization agreements for increasing economic integration and achieving other policy goals of the Council for Mutual Economic Assistance (CMEA). Under these agreements, one of the participating countries agrees to satisfy the needs of the group for a particular product and the other (nonspecializing) countries agree to either limit or stop production of the product. Specialization agreements are designed to encourage countries to develop a comparative advantage in the production of particular commodities by constructing plants that exploit economies of scale, by developing technical expertise, and by concentrating research and development in the industry of specialization. The Soviet Union is the motivating force in most multilateral specialization agreements, but some of the smaller, more industrially advanced East European countries participate more actively in bilateral specialization agreements than the Soviet Union does. The evidence suggests that specialization agreements have not been successful in achieving many of the policy goals for which they were designed.