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Summit Trade Concessions to Have Little Effect, Experts Say

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TIMES STAFF WRITER

The trade concessions that President Bush offered Soviet President Mikhail S. Gorbachev will remove some irritants between the two superpowers but will do little to improve Soviet trade with the West or the Soviets’ massive economic problems, analysts said Monday.

“These changes will provide some encouragement, but they are not the key to unlocking the door to Soviet economic improvement,” said Abe Becker, a Soviet expert at the Rand Corp. think tank in Santa Monica. “The fundamental imbalance in the Soviet economy is a consequence of their own system. We’re still waiting to see if the Soviets are prepared to make the really radical changes that are the only way to solve their problems.”

In Malta, Soviet leaders hailed Bush’s offer to move quickly to discard decades-old trade restrictions. Except for dismantling U.S. barriers to high-technology exports to the East Bloc, Bush granted the Soviets practically everything that they had been seeking in their quest to join the global economic system dominated by free-market nations.

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“George Bush has in essence declared that Washington has stopped economic warfare against the Soviet Union,” said Georgi A. Arbatov, the director of Moscow’s Institute of the U.S.A. and Canada.

Bush’s support for Gorbachev should strengthen the Soviet leader’s hand at home against conservative opponents of reform as he embarks on a new round of economic measures. But there is little that the U.S. government can do that would help Gorbachev deliver on his promise to boost Soviet living standards at a time when shortages of food and basic consumer goods are contributing to widespread public disenchantment with perestroika .

Analysts point out that the Soviet Union, despite the comparatively large size of its overall economy, could not sell much to the West even if all trade barriers came down. The fact is that Soviet factories make very little that consumers anywhere in the world want to buy.

“I don’t think the Soviets recognize how far they have to go to integrate themselves with the rest of the world economy,” a top U.S. trade official said. “In terms of quality and competitiveness, what they have to offer is maybe similar to what Malaysia sells on the world market. If they plunge ahead with reform and are lucky, they might catch up with Mexico within a decade.”

The Soviet Union, with an economic output estimated by the Central Intelligence Agency at approximately 45% the size of the U.S. economy, sold only about $40 billion worth of goods to non-communist countries last year, according to PlanEcon, an independent research group here. That compares to more than $280 billion in U.S. exports.

More importantly, of the $40 billion in exports to the West, only about $5 billion was in the form of machinery or industrial goods. The rest was generally raw materials such as oil, natural gas, minerals, lumber and furs. Weapons are probably Russia’s most successful export--$9 billion last year--reflecting the pampering that its military establishment still receives inside the Soviet Union.

Even counting exports to its socialist allies, the Soviet Union depends on fuel exports for more than 40% of its foreign trade.

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Until the Soviet Union is able to sell more abroad, it will not have the hard cash needed to import more of the consumer goods that Gorbachev needs to quiet unrest at home.

“Lowering the tariff barriers to Soviet goods is a logical first step, but it will be a long time before it has much impact on their economy,” said Ernest H. Preeg, a senior fellow at the Center for Strategic and International Studies here. “Other than oil, they just don’t have much of value to trade.”

Despite the meager results expected from knocking down tariffs, now as high as 60%, to under 5% on most goods, Bush’s decision represents a highly symbolic turnaround in U.S. policy toward the Soviet Union.

Bush proposed lifting the U.S. restrictions imposed by the 1974 Jackson-Vanik trade amendment once the Soviets codify their liberalized emigration rules. Lifting the restrictions would allow the Soviet Union to benefit from drastically lower tariffs and to buy American goods on government credit. Bush also said the United States would no longer oppose Soviet efforts to achieve observer status in the General Agreement on Tariffs and Trade, an international body made up of 96 countries that regulates world trade.

Officials at GATT, which is based in Geneva, said Monday that the Soviet request is expected to be discussed at a February meeting. Currently, 13 nations, including China, have observer status at GATT, which is generally the first step toward becoming a member country and benefiting from the lower trade barriers and improved dispute mechanisms available to full-fledged members. Moving from observer status to full membership generally takes several years.

Although Bush said Soviet entry to GATT should be delayed until the current round of trade talks is completed at the end of 1990, some officials said the Soviet Union could well attain the observer status that it wants before then.

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To the Soviet Union, however, it might be more advantageous to join the International Monetary Fund and the World Bank, Washington-based organizations that funnel money to countries facing economic difficulties. The Bush Administration has not yet endorsed Soviet entrance to those organizations.

Times staff writer Art Pine in Geneva contributed to this story.

WHAT WE TRADE WITH THE SOVIET UNION

Top 10 Soviet exports to the United States, 1988, in millions of dollars.

Crude petroleum: $208

Platinum metals: 114

Fertilizers: 92

Aluminum waste: 31

Vodka: 31

Potassium chloride: 28

Raw furs: 17

Ferrosilicon*: 12

Tractors: 11

Uranium compounds: 9

Total above: 553

Total exports: 649

*A crude alloy of iron and silicon used for making cast iron.

Top 10 U.S. exports to Soviet Union, in millions of dollars.

Corn: $888

Wheat: 750

Oilcake and meal: 246

Fertilizers: 223

Soybeans: 158

Pressure-sensitive tape: 55

Almonds: 47

Food oils: 37

Cotton: 31

Tallow: 26

Total above: 2,461

Total exports: 2,768

Source: Commerce Department

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