US Moving Fast On Trade, Aid
THE Bush administration's Czechoslovakia policy, newly announced this week during the Czech delegation's visit to Washington, may be the most bullish of its positions on Eastern Europe. From his Tuesday and Wednesday meetings at the White House to his Wednesday address on Capitol Hill, Czech President Vaclav Havel's reception was dramatic: Mr. Havel's country was promised a negotiated commercial agreement leading to most-favored-nation trading status, and the participation of United States Import-Export Bank financing and the Overseas Private Investment Corp.Skip to next paragraph
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Czechoslovakia's Minister of Foreign Trade Andrej Barcak expects a bilateral trade agreement to be signed before the June 8 parliamentary elections. US Secretary of Commerce Robert Mosbacher arrives in Prague on Monday for two days of trade talks.
President Bush this week endorsed technical assistance for Prague and announced his support for Czech re-admission to the International Monetary Fund (IMF) and the World Bank. Minister of Finance Vaclav Klaus says that he will host an IMF mission in Prague on March 5, when government and Fund economists will prepare national income accounting for Czechoslovakia's imminent application to the IMF and the World Bank.
``First, our membership in the World Bank will demonstrate that our economy is open to the international community,'' he says. ``Secondly, we will seek technical assistance, for tax reform, enterprise management, privatization, etc.'' The minister did not negate the possibility of seeking a stand-by agreement with the Fund after membership is secured.
In his speech to Congress, Havel said that the US could help Eastern Europe ``most of all if you help the Soviet Union on its irreversible, but immensely complicated road to democracy.''
The sooner the Soviet Union moved toward political pluralism and a ``working - that is a market - economy,'' he said, the better it would be for the world and the sooner the US would be able to reduce its defense budget.
Deputy Secretary of State Lawrence Eagleburger, recently appointed by Mr. Bush as coordinator of US assistance to Eastern Europe, emphasizes that the extent to which the US provides assistance relies on the seriousness of East European reforms: ``Our policy demands democratic differentiation ... Czechoslovakia is clearly determined to move rapidly toward economic and political reform.''
Three months into reforms after 40 years of a communist command economy, government officials acknowledge that official statistics are poor. The Czech economy continues to suffer from low growth. The ``net material product'' (roughly approximating gross domestic product) has grown between 1 and 2 percent annually over the past decade. Farmers have relied on heavy government subsidies. Industries, in disrepair, have 18-year-old machinery, according to an economist with the US Treasury.
Nonetheless, Bush administration economists, who have to date focused their attention in Eastern Europe on Hungary and Poland, have found Czechoslovakia to have a more resilient economy, and one less burdened by debt overhang than some of its neighboring reformers.
Czechoslovakia, whose population is 16 million, carries a gross debt of $7 billion. By comparison, Hungary's population of 10 million, is saddled with a debt of $20 billion. While debilitating percentages of Poland's and Hungary's export earnings are absorbed by debt service, only 15 percent of Czech export returns go toward servicing its debt.
This bodes well for US investment, observes Roger Robinson, an analyst with the Center for Security Policy and a former National Security Council adviser. ``The limited debt service claim on Czechoslovakia's hard currency resources affords the government a liberal attitude on profit repatriation, private property rights, and a legal as well as a regulatory framework for joint ventures,'' he says.
Mr. Eagleburger told business leaders at the US Chamber of Commerce earlier this week that Prague's plans ``to revamp their joint venture laws to allow majority foreign ownership in Czechoslovakia'' are encouraging for American private investors. He cautioned his audience to ``be patient and aggressive at the same time. If you wait until East European markets stabilize, you will probably find that foreign competitors have beaten you to the punch.''