East and West German Trade
For the first twenty years after W.W.II, East and West Germany interaction was severely limited. West Germany (FRG) with it's contacts to NATO and East Germany (GDR) with it's contacts to the USSR embodied all that the cold war stood for. The FRG refused to recognize the GDR as a separate and sovereign state while the GDR demanded to be recognized as it's own state. This relationship can be seen in the building of the Berlin Wall by which East Germany cut itself off from the West and hampered most of the FRG influence on East Germany.
In the end of the 1960's and beginning of the 1970's West Germany realized the importance of the access to the Eastern Bloc. Under Willy Brandt the GDR and FRG reached an agreement for a new policy formula "two German states in one nation". This agreement, The Basic Treaty, satisfied both the East German desire for sovereignty and the West Germany's desire for one German nation. This agreement gave international recognition to the GDR by all NATO countries and eventually by the UN.. Recognition brought to East Germany economic aid, trade and visitors from all over the world, especially from West Germany.
The agreement also started the new era of inter-German cooperation. Initially the GDR was worried that its sovereignty would not be respected. and watched the growth of the trade carefully. By loosening travel restrictions East Germany allowed a significant increase of West German visistors, from a low of 1,107,077 in 1969 to a high of 3,177,273in 1978. East Germany required each visitor to exchange a certain minimum amount of currency which gave its government a significant new resource for investment.. An increase in visitors resulted also in growing awareness of the consumption advantages in the West. The East German government had to invest and modernize consumer goods industry to satisfy the consumption demands of East German citizens.
During the 70's large amounts of money poured into East from West Germany. The GDR vastly improved its postal and telecommunications networks. In 1975 there was just 9.7 million calls from West to East Germany, by 1980 it grew to 23 million and in 1986 it reached 30.3 million. At the same time the GDR infrastructure was also expanding. The road and rail systems from West Germany to Berlin was fully funded by the FRG and the GDR kept all of the toll revenue. More and more loans were given to the GDR on very lenient terms. For example in 1983 and 1984 GDR received two loans amounting to 380 million DM due to its concessions in humanitarian and environmental issues.
All of this resulted in a great boom in East-West trade reaching a high of 16.4 billion DM in 1985. For FRG it was only about 1.5% of its external trade but for the GDR it made up 8.5%. Only the Soviet Union at 38% was more important. The trade with the FRG was even more important for three major reasons. First, because the GDR was not considered a foreign country it had favorable terms of trade and thus avoided all trade barriers to the EC (European Community). Second, the GDR did not have to balance its trade due to the "Swing Law" allowing it to receive interest free credit Third and most important, trade with West Germany gave the GDR the necessary hard currency that it needed. The trade with the Soviet Union did not produce any hard currency.
The most impressive part about East-West interaction in the late 70's and first half of the 80's was that it was growing in spite of increasing tehsions between the USSR and NATO. In 1979 Afghanistan was invaded by Russia, in the early 80's NATO deployed intermediate range in Western Europe. All of these were burning issues which threatened the fate of the cold war but East and West Germany were able to hold on and develop together towards peace and mutual interaction.
After 1985 there was a sharp decline in trade between East and West Germany. The GDR internal economic conditions worsened while West Germany continued further growth. But a cornerstone was alreadylaid. The East and West German trade was not significant just for the growth of both economies, but more importantly it held two German states in one nation. Without the efforts of the FRG and its unrelenting policy of working with the GDR the reunification of Germany may not have occurred. The channel of communication betwee both governments and people came about through trade. Even though East Germany acted solely for economic purposes, there was not just a movement of goods but also of people, thoughts and ideas keeping the people united. When the Wall collapsed in October of 1989 so did East Germany's desire for sovereignty ultimately making West German policy of one nation the victor.