Allies Moving to Compromise on Soviet Aid

The United States and its six major allies, challenged to shape a new economic order for the post-Cold War era during the economic summit that opens here today, moved toward a shaky compromise Sunday on the contentious issue of whether to provide massive aid to the Soviet Union.

Although Secretary of State James A. Baker III reaffirmed Sunday that sizable U.S. lending to Moscow is “not in the cards” anytime soon, Washington appeared ready to accept broad new guidelines that would allow West Germany and France to give as much as they choose to the Soviets.

And, to help counter European charges that the United States is taking too hard a position on the Soviet aid issue, Bush is expected to pledge that Washington will send teams of technical advisers in a variety of fields to help the Soviets plan to the transition to a market economy.

The summit participants--the United States, Japan, West Germany, Britain, France, Italy and Canada--are widely split over the aid issue. Washington and West Germany hold diametrically opposed positions. Britain, Canada and Italy occupy the middle ground favoring at least token loans and credits. Japan is siding with Washington.

The compromise being fashioned on the aid issue is expected to form the pattern for agreements on some other controversies--that is, for the United States to continue to take a hard-line stance on paper while allowing each summit country to go its own way in practice.

The summit, the 16th that the heads of government have held in as many years, is expected to deal with a wide range of economic issues, from jump-starting the stalled global trade-liberalization talks and new aid for Latin America to such increasingly pressing environmental problems as global warming and the destruction of rain forests.

On the eve of the summit, President Bush and Canadian Prime Minister Brian Mulroney announced that Washington and Ottawa will begin formal negotiations July 16 on a treaty to reduce acid rain, which had been a major bone of contention between the two countries until early this year.

The action is largely symbolic, however. The pact is expected merely to reaffirm proposals that Bush already has sent Congress for revisions in the Clean Air Act that would cut pollution from sulfur dioxide and nitrogen oxide in the United States. Congress is expected to complete the bill this fall.

Although the summit will deal with many traditional economic issues, this year the leaders will have an added challenge--to begin reshaping the economic structure of the post-Cold War world, much as the North Atlantic Treaty Organization summit held in London last week dealt with redefining military and political relationships.

Specifically, the summit participants will grapple with ways to cope with fast-breaking developments in two areas: the integration of Western Europe and the assimilation of the former Soviet Bloc nations into the Western economic and political system.

Thus, “supporting the economic and political reforms now going on in the Soviet Union and Eastern Europe must be the No. 1 objective” for the seven, said Henry R. Nau, a former National Security Council strategist on international economics.

Michael Mandelbaum, an analyst with the Council on Foreign Relations, agrees. Mandelbaum notes that the seven have just finished taking part in the London summit that redefined the role of the North Atlantic Treaty Organization in light of dramatic East Bloc changes.

Mandelbaum argues that this week’s summit is an extension of the London meeting and other talks among the leaders on the structure of the post-Cold War world. “The old categories have broken down, and everything is interrelated,” he said.

The job here will not be easy.

Not only are the Western powers divided over how far and how fast to go in aiding the Soviet Union and Eastern Europe, they are also deeply split over a companion question--how to keep the Western economies robust so that they can accommodate the East Bloc changes.

There also are other potentially contentious issues--how soon the West should resume lending to China in the wake of last year’s Tian An Men Square massacre and how far the seven should go to curb carbon dioxide emissions, which are thought to be causing the Earth’s temperatures to rise.

The pressures on the leaders are sizable. With euphoria still high, there are growing demands for bold new action by the West. Former NSC strategist Nau, for example, argues for “a Marshall Plan for the Soviet Union and Eastern Europe.” Similar proposals abound.

But the leaders--particularly Bush and British Prime Minister Margaret Thatcher--are cautious about moving too rapidly, partly because of budget troubles and partly because they want to be sure that the former East Bloc governments are moving firmly toward democracy and reform.

As a result, apart from a new plan to increase trade--and aid--for Latin America, the United States is not expected to propose any major initiatives. Instead, Bush hopes to act “as a stabilizer” for the allies, reining in schemes that he believes would go too far.

Here is a rundown of the major issues that are likely to come up this week:

Soviet aid--West Germany and France are proposing that the West offer the Soviet Union $20 billion in aid over the next several years in return for assurances that Moscow will not stand in the way of the reunification of West and East Germany.

West German Chancellor Helmut Kohl argues that the money is needed to prop up the Soviet economy and stave off a collapse that could topple President Mikhail S. Gorbachev. But Bush and Thatcher oppose massive aid until Moscow begins reforms needed to make its economy work.

Bush also wants the Soviets to reduce the billions of dollars a year that Moscow provides for Cuba and other Communist countries that the United States regards as threatening. Cutting aid to Cuba alone could “save” Moscow $5 billion a year, the Administration contends.

The outlook for now is that the seven leaders will endorse the principle of increasing aid to the Soviet Union but leave it up to each country to decide how much it will provide. West Germany already has pledged $3 billion worth of aid and credits.

Trade--All sides agree that the summit must provide new political impetus to the Uruguay Round of global trade-liberalization talks now going on in Geneva. But the United States and the European Community are split on a key issue--how fast to cut farm subsidies.

Although the summit almost certainly will call for stepped-up efforts to complete the talks by mid-December, as is now scheduled, the outcome on the agriculture spat is crucial. If the seven cannot agree on a compromise, the entire negotiation could fall apart.

As it stands now, the Europeans hope to keep the issue off the Houston agenda entirely, but the United States is determined to force a stand.

The environment--The major issue on the agenda is what to do about global warming. The Europeans want the seven leaders to commit their respective countries to reducing carbon-dioxide emissions to specific levels and to pledge massive outlays for the cleanup.

But Bush, still not persuaded that global warming is the problem it is made out to be, is calling for a go-slow approach that would await the results of further scientific studies before setting new global standards or authorizing new outlays.

Third World relief--Bush is expected to propose a multibillion-dollar international aid effort for Latin America similar to that which the Western powers have set up for Eastern Europe. But it is not certain precisely how much the allies might contribute.

China--The question here will be how far the Western powers should go in resuming loans to China. Last year, in Paris, the seven cut off all lending to Beijing after the Tian An Men Square massacre, but they have restored some loans for human needs.

As is traditional for such events, much of what the leaders will do and say in Houston has been scripted in advance. A summit-planning team of sub-cabinet-level officials from each nation already has drafted the bulk of the final communique.

The summit is in Houston this year because Bush, who considers himself a Texan, wants to show off his home state. Each of the summit participants takes a turn at hosting the high-level parley.