Economic facts


History of foreign trade

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Foreign trade has always been influenced by the political situation in our country. With regard to this fact the history of foreign trade can be divided into three key periods.

First Republic, 1918–1948
Following the dissolution of the Austro-Hungarian Empire and the origin of an independent Czechoslovakian state in 1918, much of the industry remained in our territory. Foreign trade focused on France and England, and trade also took place with the USA. In 1928 the Czechoslovak Republic participated in worldwide industrial production by 1.4% and held 10th place worldwide. Foreign trade fell along with the arrival of the worldwide depression in autumn 1929. Industrial production in general fell more than 40 per cent. In 1934, when the Depression culminated, the Czech crown was devalued and foreign trade fell to nearly zero. During the time of the Protectorate and the Second World War there was no foreign trade to speak of. Most of our industry production was for Germany and the Germans considered the Czech factories as their own.

Socialist planning, 1948–1989
The political changes in February 1948 brought many fundamental changes to the Czech economy. The private sphere began to be liquidated and the entire national economy was nationalised. Foreign trade companies (FTC), which monopolised all foreign trade, were established.
Everything was focused towards and subordinated to the wishes of the Union of Soviet Socialist Republics, but really to the directives of the USSR.

In 1949 the Committee for Mutual Economic Assistance (CMEA) was established in Moscow. Its founding members were Czechoslovakia, Bulgaria, Hungary, Poland, Romania and the USSR. Later on Albania, the German Democratic Republic (GDR), Mongolia, Cuba and Vietnam acceded to the Committee. Under political pressure, we were forced to become involved in the Programme of Socialist Economic Integration of Member States. We provided the USSR with interest-free loans and released technical documentation to it. The slow growth of our scientific technological development and the demands of production resulted in the gradual loss of our competitive advantage towards Western manufacturers. According to estimates, only 3 to 5% of Czech exports were of top quality.

Immediately after the CMEA was established, a basic structure for territorial orientation by our foreign trade was created. The territorial structure of Czechoslovak Socialist Republic imports was chiefly formed of socialist countries, which covered 69.8% of the total imports to the Czechoslovak Socialist Republic; 24.6% of the imports came from developed capitalist countries and 5.6% from developing countries.
The commodity structure of our exports was made up primarily of machinery and equipment. Export was also focused on industrial consumer goods (particularly textiles) and subsequently, as a result of problems with sales to western territories, we also started to export raw materials. To a great degree our exports were orientated towards weapons and development wholes (chiefly to developing countries). Thanks to increasing petroleum consumption, fuel (chiefly petroleum) subsequently predominated in imports.
Post-November development 1989 – to date
The November Revolution initiated great political and economic changes. The state monopoly by FTC was terminated and the transformation of a centrally planned economy into a market economy based on private ownership and free competition was initiated. Privatisation was launched. Small companies, large companies and services were privatised.
Export and import companies were established and companies established their own export departments. In spite of this, foreign trade in the Czechoslovak Federation was initially forced to overcome a crisis, originating chiefly as a result of the fundamental changes in its territorial and commodity structure. Following the dissolution of the CMEA, most of the traditional markets in socialist countries were lost. Concealed inflation occurred, foreign indebtedness increased, industrial production fell steeply and it was very difficult to find trade outlets on western markets.

Another positive element was the renewal of the Czechoslovak Federal Republic’s (CSFR) membership in the International Currency Fund (ICF) and in the International Bank for Renewal And Development (IBRD) in 1990. The chief goal was to redirect exports and imports from and to CMEA countries towards countries with a developed market economy, particularly towards EU countries. However, this had negative points in the form of a great decrease in exports with a simultaneous steep rise in imports, chiefly from western countries. In spite of this, we succeeded in increasing exports to developed countries by nearly 21 per cent. The primarily exported article was raw materials; exports of machinery decreased. A large quantity of consumer goods was imported, the most significant increase was in imports of machinery and means of transport, which we were lacking.

An independent Czech Republic originated on 1 January 1993. The entire year was affected by unsettled transactions and disputes with the Slovak Republic, so numbers concerning foreign trade are misleading.
However, in 1994 under conditions of the beginning of an upswing and revival in world trade, the dynamics of Czech exports were reduced, remained imbalanced territorially and the trade balance ended in liabilities in the sum of CZK 26.6 billion. With an overall 9.9% fluctuation in foreign trade a turnover of CZK 835.4 billion was achieved. Imports increased by 13.1% and exports by 6.9%. The GDP increased by 2.6%. Important trade with the Slovak Republic fell by 25% (the Slovak Republic was the second largest trade partner of the Czech Republic). Trade turnover with other countries increased smoothly from 1991 to 1994. Relations with countries with a developed market economy deepened. Turnover in foreign trade with developed countries rose by 62% in 1994 in comparison with 1993.
In 1997 the Czech National Bank (ČNB) cancelled the Czech crown fluctuation zone and enabled devaluation of the Czech crown by approximately 10%. The foreign trade balance achieved a deficit of more than 150 billion crowns. Apart from 2000 and 2001, the foreign balance deficit continued to decrease and in 2005 it reached positive numbers. This was the first time since the Velvet Revolution in 1989. In 2008 the foreign trade surplus reached 367 billion crowns.
Author: Aleš Martínek
Added: 25.01.2010

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