Next Step : U.S.-Soviet Trade Agreement May Hit a Snag Called Lithuania : The accord, politically important to the Kremlin, would be a quick and easy summit ‘success’ to show the world. It’s virtually ready to sign--but now it may go on hold.
The sweeping U.S.-Soviet trade agreement that was supposed to be signed by President Bush and Soviet President Mikhail S. Gorbachev during their summit meeting here next week may run into a snag--over Moscow’s continuing drive against Lithuanian independence.
Except for a few technical squiggles, the agreement has been hammered out by high-level negotiators over the past three months and is ready for signing. It would be an easy way for the two leaders to show “success” at the end of their meeting. And it would be virtually cost-free.
For the Soviets, the signing of the trade document would be important politically. The accord would provide low-tariff trade preferences to Moscow and normalize U.S.-Soviet trade relations for the first time in 39 years.
But Bush Administration officials, in the wake of Secretary of State James A. Baker’s latest visit to Moscow, are hinting that the trade accord may be put on hold over Gorbachev’s apparent refusal to relax his economic campaign against the new Lithuanian government.
A decision is expected within the next few days.
If the trade pact is signed next week--and if Congress does not block it later if the situation in Lithuania worsens further--Moscow could win such “most-favored-nation” trade status, or MFN, by late summer.
Granting MFN status would trim U.S. tariffs on Soviet imports here to 6.7%--about one-fifth of the 34% tariff rate now in effect--giving Moscow the same preferences that most other U.S. trading partners routinely enjoy.
But Arthur A. Hartman, who served as U.S. ambassador to Moscow during much of the 1980s, says the move would be “largely symbolic” because Moscow has neither the goods nor the hard currency to boost trade in either direction barring any sort of unexpected economic revival.
“It doesn’t give the Soviets any particular advantage that everybody else doesn’t already have,” he said. “American business has some opportunities in the U.S.S.R., but because of economic realities, right now they are very limited.”
Restoring MFN status to the Soviets would be one of a series of small--but symbolically important--economic favors that Washington is giving Gorbachev as tokens of U.S. support, now that the Cold War seemingly is fading into history.
Just last week, with U.S. approval, the 97-country General Agreement on Tariffs and Trade--the Geneva compact that sets and administers world trading rules--granted observer status to Moscow. The move would have been unthinkable even a year ago.
And the White House, under pressure from U.S. allies to ease longstanding limits on the sale of sensitive technology, has unveiled a plan for a sweeping overhaul of Western barriers to high-tech exports--opening the way for more sales of U.S. equipment to the Soviet Union.
But analysts caution that despite the political importance of the new trade accord, symbolism is about all that Moscow is apt to gain from these new ventures--at least for as long as most forecasters here are willing to predict.
Although reduced U.S. tariffs ought to bring the Soviets somewhat higher revenues for the goods that they already sell in the United States, it is unlikely that the move will spur any new export boom here for the Soviet Union.
Analysts say Soviet products are so shoddy that there is not much that American buyers are likely to want right now. And the Soviet economy “isn’t yet positioned to produce more exportable goods,” contends Ed Hewitt, an expert on the Soviet Union at the Brookings Institution.
In 1988, for example, the United States bought a scant $578 million worth of goods from the Soviet Union--primarily oil, silver, vodka, furs and fertilizer. That’s about the same as America imported that year from the United Arab Emirates.
And as for exporting more U.S. goods to the Soviet Union once the accord is signed--forget it. The $3 billion in goods that America ships to the Soviets each year already is proving more than Moscow is able to pay for; the Soviets are slipping behind on bills to Western firms.
What is more, the Soviet economy is getting worse, and Gorbachev has conceded that he will be unable to make the needed reforms as rapidly as he would like. Until he does, Brookings’ Hewitt asserts, the trade concessions that he is about to receive “will not mean very much.”
Perhaps not surprising, the atmospherics consistently have outweighed the economic considerations in U.S.-Soviet trade relations as symbol-minded legislators, eager to “do something” to vent their displeasure with Moscow, have used trade as a political weapon.
According to government historians, Congress first revoked MFN status for Soviet exports in 1951, the year of the Berlin Blockade and the height of post-World War II Cold War feeling. A special act of Congress cutting off preferential tariffs passed both houses overwhelmingly.
The Nixon Administration sought to restore MFN status in 1972, in response to Soviet moves embracing detente, but was stymied by Congress when lawmakers became upset over Moscow’s refusal to allow Soviet Jews to leave the country.
In the Jackson-Vanik bill, enacted in 1975, lawmakers forbade restoration of MFN benefits to the Soviet Union--and most of what then was the East Bloc--until the governments eased emigration restrictions significantly. Moscow already has fulfilled that requirement.
The latest trade accord--which Bush promised Gorbachev last September at their first summit conference, in Malta--goes well beyond trade alone, committing Moscow to drafting new laws protecting intellectual property, such as patents, copyrights and trademarks.
“Even a year ago, this sort of thing would have been virtually unthinkable,” said a U.S. negotiator who was involved in the recent talks. Indeed, the Soviet envoys who appeared here in February to begin discussions on the accord had no such broad agenda in mind.
Despite all those changes, the effort to improve U.S.-Soviet trade relations could be held up again--this time by lawmakers anxious to hold Gorbachev’s feet to the fire over the Lithuanian independence issue.
“There are a lot of people up on the Hill who want to say ‘no’ over the Lithuania issue,” Hartman said. “There’ll be screams as to ‘why are we giving them this’ and ‘why are we giving them that.’ I think that’s wrong. It’s in our interest to give them MFN.”
The Soviet observer status in GATT also will prove to be largely symbolic, former Ambassador Hartman asserts. Even if Moscow learns quickly from its apprenticeship stint, full-fledged membership is likely to be years away.
Western governments have warned repeatedly that Moscow will have to make sweeping economic reforms before it can join the global trade organization, whose rules are designed primarily for free-market economies.
Top Imports from Soviet Union: Petroleum products Silver Platinum Inorganic chemicals Vodka Bveerages Scrap iron
Top U.S. Exports to Soviet Union: Corn Wheat Fertilizer Animal feeds Oil seeds