US Pressured To Alter Policy

UNITED STATES-SOVIET TRADE

UNITED States trade and economic negotiators faced mounting pressure this week to change policies toward Eastern Europe. During US-Soviet Union trade talks here, US officials were pressed on issues ranging from the lower tariffs that the Soviets would win if granted most-favored nation (MFN) status to liberalizing US Export Import Bank (ExIm) credits for US exports to the Soviet Union.

And in Paris, US negotiators joined their Canadian, West European, and Japanese counterparts in the Coordinating Committee for Export Control (COCOM) for talks on whether the US will agree to more transfers of strategic technology to the Soviets and Eastern Europe.

For the East, US concessions would mean greater access to consumer products and previously restricted goods. For US exporters, they would promise a greater foothold in the East European market, with a chance to compete with European and Asian suppliers.

Regarding MFN status for the Soviet Union, President George Bush has resolved to reach an agreement in time for his and Soviet President Mikhail Gorbachev's signatures at the presidential summit scheduled for June. US and Soviet negotiators were confident after their first round of talks this week that they will meet that deadline. A second round of talks will start at the end of the month.

But COCOM concerns demonstrate the complexity of the US-Soviet trade talks, which must ultimately address US high-tech exports. This week's Paris meeting ``was much more dramatic for the US than we originally intended,'' says Henry Nau, assistant dean at George Washington University's Elliott School of International Affairs.

The dominant issue there was whether the US could loosen its rein on the 4,000-plus items under COCOM scrutiny and satisfy European interests for liberalization. The COCOM body may unravel, say observers, if the US does not quickly reclassify a substantial amount of US technology goods as nonstrategic.

``It is more and more difficult for anybody in the world to insist on the existence of the Soviet threat,'' the Soviet ambassador to the US, Yuri Dubinin, said at a press conference on US technical economic assistance and business opportunities in the Soviet Union. ``It is nonsense. Absolutely. Every sensible person in the world knows this.''

``Clearly there is a lag in US strategic thinking concerning technology transfers,'' says Richard Feinberg, executive vice president and director of studies at the Overseas Development Council. ``For COCOM to be operative, the list of restricted items must be pared down considerably. Otherwise the Europeans will drop out.''

Many European companies and even governments are negotiating sales of COCOM-restricted goods. They plan to ignore COCOM if it remains so prohibitive.

If COCOM regulations are liberalized, Mr. Nau says, ``virtually everything needed for manufacturing and infrastructure would be available for sale and export to Poland and Hungary, but nothing much vis-a-vis the Soviet Union.'' The Soviets do not have the same capacity or sophisticated industries to make use of the high-tech products, says Mr. Nau.

Still, Mr. Feinberg foresees a ``spurt of growth'' in US-Soviet Union trade in the 1990s. Assuming that normalized commercial relations are restored, including MFN status for the Soviets, he projects that by the year 2000, two-way commerce will increase 10-fold, reaching $35 billion.

``Gorbachev's priorities are to offer consumer goods domestically,'' observes Feinberg, ``and whether they're imported or Soviet-produced [in factories that are operated by joint ventures and capitalized with foreign investment], US exporters will supply a range of items including agricultural goods, machinery, and consumption goods.''

Valentin Vologzhin, chairman of the committee on economic reform in the Supreme Soviet, led a delegation from the Soviet Council of Ministers and other officials to Washington this week where he assessed the Soviet Union's economic priorities. After meeting with officials from the US Departments of State, Commerce, the Small Business Federation and independent businessmen, Mr. Vologzhin stressed the importance of US help in promoting small business in the Soviet Union. ``It's the only way to create a competitive market - with small and medium-sized business and joint ventures,'' he said.

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