When the East goes West: the impact of GATT on socialist countries

There is a growing body of literature on the economic history of Eastern Europe during the Cold War, thereby mainly trying to explain the demise of the Eastern bloc by discussing a range of different aspects. Trade has been largely excluded so far, even though Socialist countries were participating in international trade. This paper aims to discuss the impact of one of the most remarkable events in this period, the accession of four Socialist countries into the General Agreement on Tariffs and Trade (GATT), which is an explicitly Capitalist trade treaty, between 1966 and 1973. The results suggest that the signing of GATT is associated with a 48–56 per cent increase in export volume, depending on the type of specification. However, the paper finds modest welfare gains for these countries, which can be explained by their comparatively closed economies and other barriers to trade beyond tariffs. Given the methodological limitations, the results should be understood as the lower boundary of the actual impact of GATT on Socialist countries, thereby suggesting that trade deals between countries with different economic and political structures can be beneficial.