Baker Rejects Soviet Bid to Join Global Groups

The United States rejects membership by the Soviet Union in international trade and financial organizations because the Soviet economy remains “significantly incompatible” with Western institutions, Secretary of State James A. Baker III said Wednesday.

The former treasury secretary, issuing the most comprehensive prescription for change in the chaotic Soviet economy, challenged Moscow to institute six reforms to move the Soviet Union from its “socialist market” system toward the freer markets of the West.

Baker’s remarks at a Senate Finance Committee hearing were the first public statements on the subject by a senior U.S. official since Soviet Foreign Minister Eduard A. Shevardnadze said last month that Moscow “would like to participate actively in the work of the international economic organizations.”

Although the Soviet Union has not formally asked to join, Shevardnadze said it wants to “establish contacts” with the International Monetary Fund and the World Bank and to cooperate with the General Agreement on Tariffs and Trade.

Membership in the international financial institutions would mark a major step in making the Soviet Union a full-fledged partner in global economic policy-making, providing prestige as well as technical advice, loans and access to worldwide markets.

Could Ease Pressure

Baker reiterated that the United States hopes that Soviet President Mikhail S. Gorbachev will succeed in his efforts to restructure Soviet political, economic and social systems. But he warned that the collective leadership under Gorbachev is finding it “exceedingly difficult” to develop a comprehensive and coherent program of reform.

Moreover, the Kremlin is run by “utilitarian, purposeful and determined men” who are “not pursuing freedom for freedom’s sake,” Baker said. While their goal is to modernize the Soviet Union, they will not necessarily adopt Western values even if their reforms are successful, he said.

Allowing Moscow into world financial institutions prematurely, Baker said, could reduce pressure for the perestroika reforms to be carried through and cause difficulties within the affected organizations.

“The Soviet economic system remains significantly incompatible with the operation of institutions like the GATT, the IMF and the World Bank,” Baker said. “Furthermore, given the size of the Soviet Union, its membership could prove disruptive . . . especially if the long-term Soviet commitment to the values represented by those institutions remains uncertain.”

The interests of both the United States and the Soviet Union are best served “by insisting that trade and other economic relations be conducted on a commercial basis,” Baker said. “Operating under these terms, we welcome mutually beneficial, nonstrategic trade.”

Baker listed six changes that the Soviet Union should undertake before it increases its international economic involvement: price reform, stabilizing the ruble, freer competition among Soviet enterprises, property rights, taxation and regulation, and social welfare.