Bush Offers Trade Benefits to Soviets : Summit: Gaining most-favored-nation status is seen as a major element in bilateral ties. The President has praise--and a stern lecture--for Gorbachev.

President Bush sought to give a political boost to Mikhail S. Gorbachev’s beleaguered program of economic reform Tuesday by announcing that he will move to grant the Soviet Union its long-sought “most-favored-nation” trading status.

Winning so-called MFN status, which must be approved by Congress, is seen as a major element in normalizing political and economic relations between the two countries. It would drastically cut tariffs on Soviet exports to the United States--now subject to the highest tariff barriers in U.S. history.

Bush’s decision to seek most-favored status for Moscow is also a symbolic step toward integrating the Soviet Union into the global trading system after more than 50 years of Communist isolation.

“The Soviet Union should become a full participant in the global economy, and the United States will support you in that effort,” Bush told Gorbachev.

During a busy day of meetings and public appearances capped by a state dinner set amid the resplendent religious murals and frescoes of the 500-year-old Hall of Facets in the Kremlin, Bush heaped praise on Gorbachev for his courage in transforming the Soviet Union, but he also bluntly lectured the Soviet leader on the need to do still more.

And he spent nearly an hour in one-on-one discussions with Boris N. Yeltsin, president of the Russian Federation and Gorbachev’s chief rival for power.

As a result, while Bush has repeatedly declared that he does not want to become involved in the internal politics of the Soviet Union, that is exactly where he landed Tuesday.

Yeltsin gave the political equivalent of a stiff-arm to Gorbachev by spurning an invitation to attend a luncheon meeting with Bush and the Soviet president, explaining acidly that he did not “fit into a voiceless mass audience.”

In a television interview following his meeting with Bush, Yeltsin also pointedly declared that he and Bush are united in strongly supporting independence for the breakaway Baltic republics, Estonia, Latvia and Lithuania--a position Gorbachev opposes, he noted.

Nor did Bush himself shrink from the issue of the Baltics, which were annexed by dictator Josef V. Stalin at the outset of World War II. Bush commented on the subject repeatedly. The newly elected leaders of the Baltic republics, he said, are asking Soviet leaders “to repudiate one of the darkest legacies of the Stalin era.”

“Surely, men and women of reason and goodwill can find a way to extend freedom to the Baltic peoples,” the President said.

Bush, in a speech on the opening day of his two-day summit meeting with Gorbachev, declared that the process of normalizing economic relations between the two countries is “now nearly complete” and said he will submit the trade agreement to Congress when he returns to Washington.

Speaking at the Moscow State Institute for International Relations, Bush said the “key impediment” to approval and increased trade was removed on May 20 when the Supreme Soviet lifted restrictions on emigration. “The new Soviet emigration law stands as a major step forward--a victory for all who value human rights,” he said.

Bush will send the most-favored-nation approval to Congress as part of a broader U.S.-Soviet trade agreement. It will be considered under recently passed “fast-track” rules, which require Congress to act within 90 days to vote the proposal up or down without amendments.

Tariffs on Soviet exports to the United States would be reduced from an average of 34% to the same 6.7% tariff rate applied to most U.S. trading partners.

Soviet exports to the United States are relatively small, and the immediate economic impact of lower tariffs is not likely to be significant, but it could become important in the longer term if the Soviet economy gathers strength.

The broader U.S.-Soviet trade agreement provides improved market access for both countries and prohibits the adoption of standards that are discriminatory or designed to protect domestic production. Administration officials said it also will facilitate the operation of U.S. firms in the Soviet Union by establishing an expedited accreditation procedure for commercial representations, allowing these offices to hire local and third-country employees directly on mutually agreed terms.

The United States and the Soviet Union have been negotiating most-favored-nation status since 1989 and finally agreed to the text of a trade agreement on June 1, 1990, during the Bush-Gorbachev summit meeting in Washington. But final approval ran into various snags, including the Soviet restrictions on free emigration.

The President also announced Tuesday that he will propose legislation to remove restrictions on Soviet eligibility for U.S. government credit and credit guarantee programs in support of American exports.

“Removing these restrictions on programs will help U.S. exporters compete in the Soviet market, signal the U.S. government’s strong interest in expanding bilateral trade and investment, and further normalize U.S.-Soviet economic relations,” said Marlin Fitzwater, White House press secretary.

Bush also formally announced details of agreements or understandings that provide for:

* Cooperative procedures to be followed in the event that a civil aircraft registered to one of the countries is hijacked in the other country. Both countries agree to use force to resolve such an incident.

* Cooperation in providing disaster assistance, including an exchange of specialists, researchers, information and technologies.

* U.S. technical assistance to the Soviet economy at the republic and local levels as well as the federal, including development of joint projects with the various governments.

* A mixed U.S. public-private effort to help the Soviet Union deal with acute, immediate shortages of pharmaceuticals and basic medical supplies. Since February, 1991, $8 million worth of medical supplies have been sent to several hard-pressed republics, and subsequent shipments are being planned to regions where needs are intense.

* A new framework for cooperation in housing and economic development, with the Department of Housing and Urban Development designated as the U.S. executive agency for implementing the agreement.

Bush, who arrived here Monday night, lavished praise on Gorbachev during an official Kremlin arrival ceremony Tuesday, saying the Soviet leader “has earned our respect and admiration for his uncommon vision and courage in replacing old orthodoxy with glasnost (openness) and perestroika (political and economic restructuring) . “

Pointing out that he had visited Moscow three times in three years as vice president, Bush said that on his third visit he met for the first time “with a new leader, Mikhail Gorbachev--the man who put many monumental changes into motion.”

Since his last visit in 1985, Bush said, “we’ve witnessed the opening of Europe and the end of a world polarized by suspicion. That year, Mikhail Gorbachev assumed leadership of the Soviet Union and began instituting reforms that changed the world. In the United States, everyone now knows at least two Russian words: glasnost and perestroika. And here, everyone appreciates an English word, democracy. “

Later, at a state dinner, Bush attributed Gorbachev’s success in bringing change to the Soviet Union to “a unique mixture of determination, courage and skill.”

For all the praise, though, Bush, in his formal speech at the Moscow State Institute, also lectured Gorbachev on the need for further reforms and struck what some observers considered a patronizing tone in discussing the economic problems plaguing the Soviet economy.

He bluntly told Gorbachev that the Soviets should cut military spending, stop providing aid to Cuba, return the islands it seized from Japan in World War II and do more to bring about “real reform” of their state-controlled economy.

Gorbachev, in his welcoming remarks, stressed the continuing importance of the two nuclear superpowers in world affairs, declaring that much in world politics will “continue to depend on how the Soviet Union and the United States interact with each other.”

“We are beginning to realize that we need each other,” he said, “that the security, internal stability and dynamic development of each of our countries benefit both of them. Not only our two nations, but the entire world needs this kind of U.S.-Soviet relationship.”

Neither Gorbachev nor his spokesman, Vitaly N. Ignatenko, challenged Bush’s criticism of Soviet policy. At the same time, both stressed that the Soviet Union is vitally interested in U.S. aid.

Ignatenko, queried at a joint press briefing with Fitzwater, conceded that there are differences between the two countries, but he would not comment on Bush’s criticism of Soviet policy. Asked whether the Cuban and Japanese issues were not matters for Soviet-Cuban and Soviet-Japanese relations, he told reporters to put the question to Gorbachev today when he holds a joint press conference with Bush.

Bush said that in all aspects of U.S.-Soviet relations--military, political and economic--there are positive signs of a new partnership. But for all the progress, he said, obstacles remain.

“In many cases,” he said, “we face conflicts and quarrels rooted in the world war we fought 50 years ago, frozen in place by the long Cold War that followed: disputes like Japan’s claim--which we support--for the return of the Northern Territories. This dispute could hamper your integration into the world economy, and we want to do whatever we can to help both of you resolve it.”

Declaring that the future of the Baltic republics is another irritant to fully normalized relations, the President said that “only good-faith negotiations with the Baltic governments can address the yearnings of their people to be free.”

“Another obstacle,” he said, “lies close to home for the United States--90 miles off the Florida coast, in Cuba. The United States poses no threat to Cuba. Therefore, there is no need for the Soviet Union to funnel millions of dollars in military aid to Cuba--especially since a defiant (Fidel) Castro, isolated by his obsolete totalitarianism, denies his people any move toward democracy. Castro does not share your faith in glasnost and perestroika. “

What Does Trade Status Mean?

President Bush opened the way to grant the Soviet Union most-favored-nation trade status, allowing lower tariffs. The gesture has more symbolic than actual value since U.S. trade with the Soviet Union is relatively small.

TARIFFS: Soviet products now carry tariffs that are as much as 10 times higher than the duties levied on similar products from other countries. Duty on Soviet vodka would drop more than $1 a bottle, for example.

PRODUCTS: The Soviets don’t make many products that Americans are likely to want. Their cars, clothes, cameras and washing machines are in short supply at home and don’t meet the quality demanded by Western consumers.

INVESTMENT: Soviets say granting MFN trade status will invite more U.S. investment.

NEXT STEP: Permanent MFN status cannot be granted until Congress approves a formal trade agreement.

AGREEMENT PROVISIONS:

--Facilitate the opening of business offices in the two countries.

--Improve market access.

--Encourage trade promotions.

--Provide copyright protection for literary and artistic works, as well as computer software.

--Permit businesses to bank in local currency and export convertible currencies.

--Guarantee firms the right to hire local and third-country employees of their choice.

Source: Associated Press

Other Agreements Made in Moscow

These accords were signed Tuesday at the summit :

AVIATION SECURITY: Outlines procedures to be followed if a plane registered in one country is hijacked in the other, including assistance in criminal proceedings.

DISASTER ASSISTANCE: Creates a system for “timely and direct exchange” of information, requests for assistance and joint responses in natural or man-made disasters.

MEDICAL SUPPLIES: Formalizes a program begun earlier to provide medical products in short supply. Administered through the private organization Project Hope, it has already given $8 million in supplies to the Baltics, the Ukraine, Kazakhstan and Uzbekistan, as well as a burn treatment center and AIDS clinic in Moscow.

HOUSING: The program, to be implemented through the Department of Housing and Urban Development, will focus on:

--Converting government-owned housing to non-government ownership.

--Expanding housing supply and home ownership.

--Encouraging construction by setting up and managing non-government housing finance institutions.

--Developing policies, including free-enterprise zones, to encourage construction.

--Developing a private sector construction industry.

ECONOMIC COOPERATION: This agreement allows Washington to offer aid to the 15 Soviet republics as well as to the central government. It focuses on food distribution, energy, conversion of military factories to civilian use, economic education and transportation. The Bush Administration supports legislation that would provide up to $20 million in fiscal 1992.

Sources: Associated Press, Reuters