Soviet-Led Trading Bloc Will Be Scrapped for a New One : Eastern Europe: Comecon will give way to a new organization aimed at integrating economies into the world market.

Members of Comecon, the Soviet-led trading bloc, agreed on plans Saturday to dissolve the organization and replace it with another that would promote their integration into the world economy on the basis of market principles of supply and demand rather than central planning.

Comecon’s executive committee, after meeting here for two days, announced that it had approved “proposals for the radical overhaul of the system of economic cooperation by member states, including a draft charter for a new organization.”

The transition, expected to begin in late February after a final meeting by its members’ heads of government in Budapest, Hungary, could take two years and in some cases even longer, according to East European diplomats, because of the desire of Comecon members to preserve the sources of raw materials and markets developed over the years.

Although expected for more than a year, the dissolution of the Council for Mutual Economic Assistance, as Comecon is formally known, will mark the end of four decades of Soviet efforts to dominate the economies of its onetime satellites in Eastern Europe as well as their attempts to spread state socialism to the Third World through trade and economic cooperation.

“The Council for Mutual Economic Assistance has exhausted itself, but the economic ‘space’ of its member countries is not a myth but a reality,” the Soviet news agency Tass commented in a report on the meeting. “This must be taken into account, and member countries should not break the traditional economic links between them.”

However, trade fell sharply last year and is expected to decline again in 1991, according to Soviet officials.

The new group will be called the Organization for International Economic Cooperation. It will attempt to preserve as much of the economic web as possible while trade is switched to world prices--payable in convertible currencies--from an elaborate system of barter deals whose value was calculated in Soviet rubles.

Tass said that it will promote cooperation on a market basis, rather than through the coordination of the centrally planned economies that its nine members once had, determining priorities jointly, allocating development of certain industries to various countries and combining their investment funds.

“The theory was all right if you believed in central planning,” a senior Hungarian economist here said. “The problem was that central planning failed in one country after another on a national level, and attempts to elevate it to a supranational level inevitably failed too.

“And there was that rather unpleasant aspect of big brother in Moscow telling us what to do in Budapest or Warsaw or Prague. You always suspected that he benefited more from the deal than you.”

Instead of trying to coordinate government development and investment plans as before, Comecon officials said that the new organization will attempt to facilitate continued or expanded cooperation between individual enterprises or within specific industries, bringing together buyers and sellers in various countries.

The new organization will also aim, Tass reported, at the integration of its members into European and other regional economic groups, ending their determined attempt to isolate their socialist economies from the vicissitudes of capitalism and the market and to build a rival economic system.

“Comecon, in the way that it existed, has exceeded its possibilities and does not correspond to the existing economic and social conditions of its member states,” Stefan A. Sitaryan, a Soviet deputy prime minister, said after the meeting.

“These countries, however, are linked to one another by established economic ties, and it would be pointless for any of them to cut these ties and reject one another right away.”

In addition to the Soviet Union, Comecon comprised Bulgaria, Cuba, Czechoslovakia, Hungary, Mongolia, Poland, Romania and Vietnam. East Germany had been a member until it united with West Germany in October, and Albania was a member until 1961.

Yugoslavia has long had observer status, participating in many Comecon projects. Afghanistan, Angola, Ethiopia, Laos, Mozambique and South Yemen, all of which had tried to adapt the Soviet-style planned economy to their Third World environments, have taken part on a lesser scale.

In planning the February meeting, Comecon’s executive committee agreed to invite Yugoslavia as a longtime partner and Germany in the hope of its support as the successor to the German Democratic Republic, both as observers. Albania may also be invited and perhaps a delegation from the European Community.

“At first, everyone wanted to go ‘cold turkey’--to withdraw, to break contracts, to get out fast and completely,” another East European economist observed at Comecon headquarters. “And then they looked at those markets in which they would have to compete and decided, well, a prolonged transition would be better as long, of course, as all the trade was in U.S. dollars or, even better, German marks.”

Hungary and Czechoslovakia were among the first East European countries to have multi-party political systems--and to declare their intention to move away from central planning toward market economies and effectively out of Comecon.

The fate of Comecon was sealed last January with the Soviet Union’s proposal to go to world prices and hard currency. The Soviet Union, which has provided low-cost oil, gas and other commodities to Eastern Europe in exchange for manufactured goods of mediocre quality, wanted to recover the approximately $10 billion each year it was losing under these terms of trade.

“The move by Comecon members toward market economies exposed serious defects in this international organization,” the Communist Party newspaper Pravda commented before the meeting. “The bulky, bureaucratic structures of Comecon had become legendary.”

BACKGROUND

The Council for Mutual Economic Assistance, or Comecon, was founded in 1949 as the Soviet response to the U.S. Marshall Plan, which was rebuilding the economies of Western Europe. Comecon sought to integrate its members’ economies through the pooling of capital and other resources and extensive specialization. The aim was to achieve both economies of scale and improvement in quality. At its peak, Comecon accounted for an estimated 30% of world industrial output. In theory, Comecon should have created a dynamic, expanding market for its members, but its isolation from the world economy deprived it of the discipline of international competition and cost-based pricing. This hastened the collapse of the members’ state-controlled economies--and of Comecon itself.