Abstract
Bilateralism, that malfunctioning vehicle for East-West trade, has acquired increased horsepower in recent years. Credit extensions, more liberal provisions in trade and payments agreements, and greater use of convertible currencies have given greater maneuverability to the system of bilateral balancing. Further lubrication was added in June, 1957. Under the auspices of the United Nations Economic Commission for Europe (ECE), a multilateral clearing union was instituted. Designed to reduce some of the friction to trade caused by attempts to balance trade bilaterally, the compensation system offers an opportunity for countries to apply a credit with one trading partner against a debit with another. Its primary effect will be to strengthen bilateralism in East-West trade. An understanding of how the clearing union will influence East-West trade and payments can be gained from an examination of its method of operation, its operation to date, obstacles to East-West clearing, and country attitudes toward the new system.
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