Wooing US trade is part of Soviet reform agenda. The Soviet `great communicator'
The Soviet Union is actively soliciting a new export from the West, one that West Europeans, Japanese, and Americans are competing to supply: capitalism. Mikhail Gorbachev would not couch it in those terms, but his actions appear to override his lexicon. Today the Soviet leader is meeting with about 60 United States businessmen to talk about joint ventures between American companies and Soviet enterprises.Skip to next paragraph
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The agenda and the guest list have been kept under wraps, but there are rumors that Mr. Gorbachev will announce the formation of some new joint ventures, including one with PepsiCo (setting up Pizza Huts), Archer Daniels Midland (food processing), and Dresser Industries (oil-field products).
The meeting is the latest in a string of overtures to lure American management skills, capital, and marketing techniques to the Soviet Union. In January, the Soviet govern ment began allowing Western companies to link up with Soviet enterprises and own up to 49 percent of the joint ventures. To show it meant business, the government bought nine pages of advertising in the Wall Street Journal in August, touting Soviet economic reforms and investment opportunities.
A couple of months ago, the Soviet minister of automation came to the US with a proposal for three US companies to join the ministry in producing parts for automation systems. According to Vladimir Gorbunov of the Soviet-American trading company Amtorg, it was the first time a minister had approached US firms.
And there may be more to come. According to one American source close to the Soviet economic delegations, Abel Aganbegyan, the economist who is overseeing Soviet economic reform, will return to the US in about two months to tour the country and talk with American businessmen in more depth.
Despite such gestures, Americans have shown less interest in joint ventures than their European counterparts have, Mr. Aganbegyan says. Of the 280 joint venture proposals from foreign companies, he said, only 26 came from US firms. Of the 19 deals that have been completed, 2 have been from American firms (Occidental Petroleum and Combustion Engineering). The Finns and West Germans meanwhile have garnered 5 apiece; Italy, 3; and the Japanese 2, according to Interflo, a newsletter that monitors East-West trade.
Politics is a major reason. In the wake of the Toshiba scandal, in which a Japanese company sold machine submarine propeller technology to the Soviets, there is little sentiment for giving the Soviets easier access to ``dual use'' technology that has commercial and military applications. Any joint-venture arrangement involving technology transfer, says Rep. Don Bonker (D) of Washington, ``is going to be very closely watched.''
For their part, the Soviets have had their fingers burned in the past, as when the US government restricted trade relations after the Soviets invaded Afghanistan. Another restriction links trade to Soviet emigration policy.
Moreover, Mr. Gorbunov says, ``European companies are more flexible in their conditions,'' such as whether profits are paid in rubles or hard currency. Still, he says, ``We would prefer American companies,'' because they are used to operating on large-scale projects.
Winning their assistance is another matter. ``I don't think anybody's standing in line'' for these projects, says Leo Welt, publisher of Soviet Business and Trade, a newsletter and monitoring service. For the first few years, at least, most ventures would be money losers, many economists say. Beyond that, the Soviets and Americans have different, often antithetical goals.
The Soviets, thirsty for hard currency, often write contracts so that new joint ventures will export to the West. For example, a new Japanese-Soviet venture will take red pine from Siberia and use Japanese technology to process it. Under the contract, 70 percent of the wood must be exported to Japan. ``It's a nice fit in this case, because Japan doesn't have any trees,'' Mr. Welt says.
Beside that, American companies are skittish about Soviet law. For example, an American who snaps a photo of a plant for the home office could be thrown in jail. While that's unlikely, there are other questions: Can the new joint venture fire Soviet employees? Will it pay higher labor prices than foreign companies pay, or the lower local wages that Soviet enterprises pay? Will the joint venture buy raw materials at subsidized prices that Soviet companies get, or the higher prices for foreign firms?
The Soviets would ``presumably'' write the contracts to help the joint ventures turn a profit, says Randy Bregman, program director for Soviet law at the International Law Institute. But the law is unclear. ``Every case is an exception; there is no rule,'' he says. ``If that isn't scaring people, I think it should.''
Despite such snags, there appears to be some momentum growing in the US. C.William Verity, the new commerce secretary and former head of the US-USSR Trade and Economic Council, supports closer economic ties with the Soviet Union.
And it may be a long-term investment. ``It's a good time to get the foot in the door'' through joint ventures, says Paul Surovell, editor of Interflo. ``If the hard-currency situation improves - if oil prices increase - the Soviet Union could be an extremely lucrative market to be in.''
Mr. Surovell says an almost unnoticed decree in October allowing Soviet enterprises to buy each other's products with hard currency may remove one of the biggest stumbling blocks to American-Soviet joint ventures.
Since other Soviet enterprises would be major buyers of joint-venture products, Surovell says, ``This is going to go a long way in encouraging Americans to get involved'' in joint ventures.