Freer Soviet Trade?

Truly important events in world history do not always look especially dramatic when they occur. The Kremlin’s decision to give Soviet enterprises a freer hand in trade with the West may well fit that category.

According to an announcement published in an obscure economic newspaper this week, the Central Committee of the Communist Party has decided to give 20 government ministries and 70 major enterprises the authority to deal directly with foreign companies. If the change in policy is for real, this marks a historic turning point in Soviet economic policy.

Now all trade transactions with the West, whether important or inconsequential, must be cleared through the Foreign Trade Ministry, which has absolute control over both the earning and expenditure of hard currencies. Direct contacts with Soviet enterprises are possible, but in the final analysis you can’t buy or sell so much as a thumbtack without going through the highly centralized bureaucracy.

The rigid system has been a source of exasperation to Western firms that want to do business in Russia--and, one judges, to the Soviet enterprises themselves. However, the prospects for change have never seemed very bright because the Marxist-Leninists in the Kremlin have always feared that decentralization in the economic sphere would lead to increased pressures for decentralization of political control as well. It is precisely for this reason that the Soviets crushed the “Prague spring” in Czechoslovakia in 1968 and more recently bullied the Polish Communists into a crackdown on the labor union, Solidarity.

Against this background, it is wise not to be too euphoric over the announced change in policy this week. To begin with, the reform does not cover all branches of industry--the oil industry, for example, is excluded. And while the enterprises that are covered will apparently be allowed to accumulate foreign currency reserves which they will have a great deal of leniency in spending, they will still have to depend upon central banking authorities for most of their financing. Moreover, the Foreign Trade Ministry and the State Committee for Foreign Economic Links will apparently retain a veto power over transactions they deem politically or economically unwise.

However, it is noteworthy that the announced reform comes on the heels of a Soviet bid to join the General Agreement on Tariffs and Trade, the non-Communist world’s major forum for setting trade rules and resolving trade disputes. The Soviets have been rebuffed, so far, on grounds that their tightly controlled trading system--in which traditional tariffs or quotas are not the relevant barriers to trade--is inconsistent with GATT membership. The announced reform comes as a hopeful sign that Soviet leader Mikhail S. Gorbachev understands both the substantive and the diplomatic need to change the Soviet way of doing business.

If the Russians are indeed serious, the implications for the future evolution of Soviet communism--and, in the long run, for East-West relations--are enormous. So far, however, all we have is an announcement. Time will tell whether the reforms in the Soviet foreign trade system are real or cosmetic.