In their growing forex trade with the West, CPEs heavily utilize Western convertible currencies as a means of payment and as a unit of account in order to facilitate trade on a multilateral basis. Unlike the immediate postwar years,  some small countries in Eastern Europe such as Poland and Hungary now have as much as 50 percent of their foreign trade directed towards Western countries with convertible currencies.

Take first the case of a single hypothetical CPE, Transylvania, that has a domestic currency we will call "franks," which are inconvertible in both the commodity and foreign exchange senses. Initially, consider Transylvanian trade with countries having convertible currencies. No foreign exporter, say from Sweden, is willing to set prices or be paid in franks because they can't be freely used to buy either goods or foreign exchange.

The Swedish exporter will demand payment either in Swedish kronor-normal commercial practice-or in some mutually agreeable third currency such as U.S. dollars. Hence, the Transylvanian state trading agency acquires and holds convertible currency(ies) for making payment. The system is asymmetrical because Transylvanian exports to Sweden will also be invoiced in kronor or in a third currency-rather than in franks as ordinary commercial practice (among convertible-currency countries) might suggest. Sven Grassman has calculated5 that 87.8 percent of Swedish exports to Eastern Europe were invoiced in kronor and 12.2 percent in Other convertible currencies; whereas 75.6 percent of all Swedish imports from Eastern Europe were invoiced in kronor while 24.3 percent were invoiced in Other convertible currencies. World prices were the unit of account so that the moneyness of Eastern European currencies was not utilized at all in Swedish trade.

Most importantly, Transylvania can freely engage in multilateral trade with other countries having convertible currencies. If it has an export surplus with Sweden and a trade deficit with Austria, the excess kronor balances can be sold using a Swedish or other Western commercial bank as an agent in the interbank market-to obtain Austrian schillings. If Austrian exporters do not have a strong commercial preference for invoicing in schillings, Transylvania may denominate all its trade in only one currency-say U. S. dollars.8 The multilateral aspects of foreign trade would be quite efficient if exchange rates among convertible currencies were sufficiently stable. Then the state trading agency could easily assess the economic value, at the margin, of goods shipped to Sweden in comparison to the marginal value of those imported from Austria-relative to other potential trading partners quoting prices in convertible currencies. Moreover, Transylvania can easily run a trade deficit with the West by borrowing abroad in, say, the Eurocurrency market; or it could deposit the proceeds from a trade surplus in a conveniently liquid form with Western banks.

However, commodity inconvertibility still leaves open the more basic question of whether Transylvanian foreign trade is efficient in terms of the domestic resource costs of her imports and exports. Transylvania still lacks a domestic money with international qualities to guide the efficient selection of a domestic bill of goods to enter foreign trade. This remains true for trade with other CPEs as well as with capitalist economies.

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