Trading with the Russians

The time has come for the United States to develop a coherent economic policy toward the Soviet Union. The matter arises because of sharpening differences between the United States and the Western allies on East-West trade. President Reagan, in keeping with his tougher Soviet policy, advocates more stringent restrictions on the sale of high technology and military-related exports to the Eastern bloc. The allies, for their part, see EAst-WEst trade as vital to peace and stability in Western Europe.

Fundamental philosophical issues are involved here. To what extent should the West provide the Russians with technological know-how to build up their economy, thus enabling them to divert more resources to military production and aiding their defense buildup? To take the other end of the question, would it be better to let the Russians go it alone and not trade at all unless they began to change their internal system and moderate their external behavior?

Few would argue that Moscow should be able to acquire everything it wants as long as it can pay. Defense considerations are paramount. The West certainly does not wish to supply critical sophisticated items which could enhance Soviet military capability. There are export controls on strategic items -- the so-called COCOM embargo list. Unfortunately, COCOM is in a state of disarray as allies have presed for changes, as past administrations have operated on an unpredictable ad hoc basis, and -- in the latest development -- as the US seeks to alter the rules for the other major communist power, the People's Republic of China. The confusion obviously needs to be ended.

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Security concerns aside, should the West trade with the East? It is hard to see what is to be gained by isolating the Soviet Union from economic relations with the rest of the world. It is possible to exaggerate the political benefits of drawing the Russians into normal, civilized intercourse with their neighbors. Plainly, trade alone will not change Soviet behavior or attitudes in any basic way. But, to the extent that the Russians are willing to be part of the international community, they expose themselves and their economy to ideas and methods that are antithetical to their centralized system and which do create pressures for change.

Not to be underestimated, too, is the psychological impact on the Soviet people of industrial projects built with foreign help. Thus, the Dnieper Dam, the Gorky Auto Plant, and other "monuments" of Western technological prowess have made a lasting impression favorable to the United States and other advanced capitalist countries.

Essentially, however, it is mutual economic self-interest which should and does drive commerce. The West does not trade with the Russians to do them a favor. American farmers sell their grain and the West Europeans their technology for sound commercial reasons. There is a benefit to be gained on both sides. And if the US refuses to sell certain technology to Moscow, the likelihood is that Soviet traders will simply buy it elsewhere. The US stands to lose its own competitive export position by placing too many restrictions on sales.

How much have Western goods and technology actually helped the Soviet economy? To be sure, such individual sectors as mining and chemicals have been appreciably benefited. But, looked at in terms of total Soviet economic growth, the gain appears to be fairly modest. Examining how the Russians would have fared without big increases in machinery imports in 1968-1973, for instance, a Harvard economist found that the GNP would have been affected only a fraction of one percent. Even the introduction of modern technology cannot rectify the terrible inefficiencies of Moscow's bureaucratic, over- centralized system of management.

To create a dependence on the Soviet Union for any given resource does, of course, raise valid concerns. Thus, Washington is worried that West Germany could become hostage to the Kremlin if it goes ahead with the multibillion-dollar pipeline project for bringing Siberian natural gas to its borders. Certainly Bonn must calculate carefully what degree of dependence is prudent.

But the Russians, too, need the deal and would think twice before cutting off the flow of gas and jeopardizing their foreign exchange earnings and their five-year economic plans. It may be a strained comparison, but the Soviet bloc's heavy financial obligation to the West may be a major factor in the Kremlin's reluctance to move into Poland. A certain East-West interdependence seems to be working on behalf of political restraint. It at least has created a dilemma for the Soviets.

Which brings us to the matter of using trade for political leverage. Obviously relations of any kind with an adversary nation are bound to have political overtones and cannot be treated entirely normally. The Russians themselves use trade for political effect and advantage. There is no reason why the Soviet leaders should not accept that their political actions around the world affect East-West relations, including trade. But, if Western businessmen are not to be scared off, they need to be assured that trade suspensions will be applied sparingly -- only in the overriding national interest. Linking US trade to Jewish emigration, for instance, did little but sour US-Soviet ties for dubious international gains. Placing a grain embargo on the Russians after the invasion of Afghanistan, on the other hand, had both a psychological and an economic impact in Moscow -- a benefit that was unwisely dissipated, however, when the embargo was lifted without a quid pro quo.

These are the kind of issues which need to be aired between the US and its partners. A recent report on US-Soviet relations commissioned by the Council on Foreign Relations concluded that, except for strategic export controls, there has been little effort to make economic ties a part of East-West relations in general or to coordinate Western economic policies toward the East. Trade has gone on -- but with no consistency or overall framework. The Reagan administration has an opportunity to make or der out of chaos.

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