Concerning Estonian-Latvian trade relations during the 1930s

The article discusses the Estonian poor trade relations with Latvia in the 1930s. The statistical record shows that Latvia’s share in Estonia’s balance of trade amounted to less than one per cent prior to the time that World War II broke out. It’s possible that due to their fairly sparse bilateral trade during the 1930s, trade relations of that period between Estonia and Latvia haven’t received much attention in the annals of economic history. The objective of this article is to provide a statistical snapshot of trade between Estonia and Latvia during the 1930s and a sketch of the trade measures that regulated the trade relations of the two nations, and to help discern the factors that might have influenced trade between them. After the UK had taken the step of devaluating the pound, Estonia and Latvia quickly introduced exchange control and licensing systems. Since the national currencies of both countries were initially not devalued, the competitiveness of their products fell off on the markets of the countries that had carried out devaluations, and this boosted trading between Estonia and Latvia up to a point. Viewed from the ten- year perspective, the apogee of trade between the two was during the years of 1933 and 1934. The devaluation of the kroon during the summer of 1933 favoured exports from Estonia to Latvia with her expensive currency, and the Bank of Estonia didn’t block forex transactions being conducted with Latvia. Hand in hand with this, a favourable attitude also prevailed towards granting of licenses for the conduct of trade with Latvia. Nonetheless, trade between the two countries lessened during the second half of the 1930s. Estonia’s positive balance of trade then brought about Latvia’s clearing debt, and the measures taken to lessen that debt led to a lessening of interest on the part of Estonia towards her southern neighbour. In 1936, the lat was devalued, with the result that products from Estonia lost their competitive edge on the Latvian market. During that year, Estonia’s trade with Latvia was quite evidently passive. Estonia, which had ended up in an unfavourable position, reacted in 1937 by backing out of previous trade agreements.