Carrot-and-Stick Approach Won’t Buy Much Leverage in Trading With Moscow

Michael S. Dukakis, anxious to show that he wouldn’t be a patsy in dealing with Moscow, has pledged to use America’s economic leverage to “improve Soviet behavior in world affairs.”

Noting that the Soviets face serious economic problems, the Democratic presidential nominee said that the United States should take advantage of the Kremlin’s need for greater trade and access to Western resources and technology.

Dukakis promised to use carrot-and-stick economic policies to press Moscow to respect human rights, end repression in Eastern Europe, reduce Soviet conventional forces in Europe and do a host of other good deeds.

It’s a praiseworthy notion--one with considerable support in Congress. But hard realities suggest that it won’t work.

There is no question that if Mikhail S. Gorbachev is to succeed in his efforts to reform and modernize the arthritic Soviet economy, he needs a greater infusion of computer-age technology from the West. You can make a case that if more trade will help Gorbachev succeed, then it’s in our interest to cooperate.

Also, some economists are convinced that the Soviet Union will become a major trading power--and if America doesn’t go after its share of the business, U.S. firms will be disadvantaged in world competition.

What Dukakis is saying is, “Fine, but let’s use the opportunity to insist on acceptable Soviet behavior toward the world and their own people.”

The problem is that, as Gorbachev has said repeatedly, the Soviet Union can manage “without America as far as trade goes.”

The experience of the last 15 years indicates that, while withholding trade and credits can make the Soviets pay a price for behavior that we don’t like, it cannot force a change in that behavior.

During the 1970s the United States dangled and jerked away favorable trade status and Export-Import Bank credits to encourage freer Soviet emigration policies. But the number of Jews allowed to emigrate went down instead of up.

The main result of President Jimmy Carter’s grain embargo, imposed in response to the Soviet invasion of Afghanistan, was to cause the Soviets to shift their business from American farmers to Argentina and other alternative suppliers.

When the Soviets ultimately decided to withdraw from Afghanistan, the grain embargo--which had long since been lifted--had nothing to do with it.

When President Reagan curbed U.S. business participation in construction of a $15-billion natural-gas pipeline from Siberia to Western Europe in 1981, the project went ahead without us.

The lesson was that the United States, whose economic ties with the Soviets are dwarfed by those of the Europeans and Japanese, simply doesn’t have effective economic leverage on Moscow without the strong and willing cooperation of allied countries. And that cooperation has always been half-hearted except where export items of clear strategic importance were involved--and sometimes even then.

The Soviets still have great respect for U.S. technology. But with the rise of Japan and the diffusion of information-age technology around the world, the Soviets can get almost anything that they want elsewhere.

Western banks are stumbling over each other in the rush to offer loans on favorable terms. Banks in West Germany, Britain, France and Italy are in the process of extending credits totaling more than $6 billion to the Soviets.

Some large American banks are eyeing the Soviet market with mouth-watering interest, but so far their share of the action is small--about 2%, compared with 40% for the Japanese and 30% for the West Germans.

Defense Secretary Frank C. Carlucci opposed the West German credits, warning that such loans indirectly support the Soviet defense effort. His objections were ignored by the West Germans, who, along with most other Europeans, are convinced that greater economic interdependence between West and East will itself moderate Soviet behavior.

Meanwhile, the Soviets are angling for membership or observer status in such bodies as the World Bank, the International Monetary Fund and the General Agreement on Tariffs and Trade.

The Dukakis campaign cites this area as one where Western economic leverage should be used to extract political concessions from the Soviets.

It may be that the real challenge facing U.S. policy-makers is not how to exert economic leverage on the Soviets but how, within reasonable national-security bounds, to help U.S. exporters share in the Soviet buying spree.

Those who disagree must face facts: Until and unless we rebuild U.S. national economic strength, our economic leverage on Moscow will be very limited.