gardless of their acquisition cost. Foreign trade losses were
covered out of the state budget, and enterprises assumed no risk
whatever in foreign trade transactions. Producing enterprises had no
interest in marketing their output abroad or in making their products
competitive in world markets; neither were they interested in using
domestic substitutes to avoid the need for imports.

Under the new law authority to engage in foreign trade has been granted
to some of the industrial ministries, trusts, and enterprises. Others
must continue to trade through foreign trade enterprises. The delegation
of authority has not involved a transfer of basic decisionmaking powers,
and the continuance of central control is therefore assured. All trade
must be conducted in accordance with binding state plans and guidelines
issued by the minister of foreign trade. Every transaction requires
approval by the Ministry of Foreign Trade in the form of an import or
export license. Central controls have also been retained over foreign
exchange and over export and import prices. The main advantage of the
new regulation lies in the opportunity it provides for producers to
develop direct customer relations, thus enabling them to learn at first
hand the preferences of buyers and the nature of the competition they
must face. It also encourages them to exercise initiative in seeking out
potential customers.

Under the law production for export must be given priority. Failure by
economic units to discharge their export obligations adversely affects
their profits, even if they meet their total output target, because in
these circumstances the production plan is considered underfulfilled by
the value of the undelivered exports. This provision applies equally to
suppliers and subcontractors of export manufacturers. A positive
incentive to exceed export quotas has been provided in the form of
export bonuses. Export manufacturers, however, have a greater interest
than their suppliers in exceeding the export plan because they are
entitled to keep for their own use a portion of the above-plan foreign
exchange earnings, whereas their suppliers have no opportunity to do so.
This difference of interests has been interpreted by foreign observers
as a weakness in the law, in that it may hamper manufacturers' efforts
to maximize export production because the requisite supplies and
components may not be forthcoming.

The decentralization of foreign trade activiti