Trading With the Soviets
After six dormant years, U.S.-Soviet trade relations show signs of movement. Considering the sad state of this country’s international trade balance, this is a welcome development, even though no really big expansion of commerce between the two great powers is likely.
A record 400 American business executives representing 152 companies attended the meeting last week in Moscow of the U.S.-U.S.S.R. Trade and Economic Council, created in the mid-1970s to promote trade.
President Reagan’s assertion in a message to the gathering that commerce is essential to better U.S.-Soviet relations dramatized the change in thinking that has occurred within the Administration since the first years of his presidency.
Soviet leader Mikhail S. Gorbachev, in his address to the American visitors, was at pains to say that, if need be, the Soviet Union can do quite nicely without more U.S.-Soviet trade. But the Kremlin obviously prefers not to. Gorbachev had a long private meeting with Commerce Secretary Malcolm Baldrige. And Gorbachev’s speech to the gathering was broadcast by Moscow television.
Both sides pronounced the meeting a success in terms of setting the stage for improved economic ties. Several interesting deals were in fact under negotiation as the meeting ended. But neither the visiting business people nor their Soviet hosts predicted anything resembling a major breakthrough. And for good reason.
Gorbachev, in his address, said that there can be no major expansion of trade with the United States until Washington removes “political obstacles”--specifically, unfavorable tariff treatment of Soviet exports to this country, the U.S. controls on exports of strategic goods to the Soviet Union, and the American record of breaking trade contracts for political reasons.
Baldrige was able to reassure the Soviet leader that Washington would not be so quick to employ embargoes and boycotts in the future. But, to paraphrase an old Russian proverb, shrimp will learn to whistle before the Reagan Administration agrees to remove the controls on exports of militarily significant goods. And, until the Soviet record on human rights improves, there is no prospect that Congress will approve “most-favored-nation” treatment of Soviet exports.
However, most of the political restraints that Gorbachev complained about were already in place in 1979, when the United States was the Soviet Union’s second-largest trading partner in the capitalist world. Some of the obstacles are economic.
The Soviet Union, whose purchases from the United States are made up overwhelmingly of grain, is in the market for modern machinery and equipment, especially in high-technology areas. But it also wants to export.
The trouble is that the Soviets produce very little that this country needs or wants. Russia’s two largest export items are oil and military arms; we are not in the market for either. In any event Soviet oil production has topped off at the same time that world oil prices have declined. This means that the Soviets’ ability to expand purchases from the West may be constrained by pressures on their hard-currency earnings.
If so, the Soviets may be understandably reluctant to switch orders from established, reliable European and Japanese suppliers in order to give big contracts to U.S. firms.
Still, politics is paramount in the Soviet Union. If the Kremlin feels that an expansion of U.S.-Soviet trade would have favorable political as well as economic effects, it will act accordingly. Even a modest expansion of U.S.-Soviet trade in non-strategic items would be in the American national interest, considering the erosion of jobs and profits in U.S. export industries. It’s encouraging that Reagan has come around to accepting this fact.
