US business looks to the summit for signs of more Soviet trade
Boston — American business people have more than a passing interest in the summit between Ronald Reagan and Mikhail Gorbachev. A warmer superpower climate raises some intriguing questions. Will a new era of d'etente mean another market for United States companies to enter? Would a slower arms race allow Mr. Gorbachev to tend to economic reform, and would he then turn to Western capital goods and technology to get the Soviet economy up to speed? Would the US government relax some of its restrictions on ``strategic'' goods?
Clearly, the main determinant of US-Soviet trade is the weather. The lion's share of US exports to the Soviet Union -- a projected $1.6 billion this year, or about 75 percent -- are agricultural products, specifically, grain.
Of the nonfarm exports, a Commerce Department official estimates that perhaps half goes to a special case: Occidental Petroleum. Occidental's chairman, Armand Hammer, has parlayed his long relations with Soviet leaders, starting with Vladimir Lenin, into a steady stream of sales.
The rest, some $300 million, is almost more trouble than it's worth, economists and company officials say. It has never proved very profitable; it's subject to political whims; the competition is intense; and the restrictions by the US government are stiff.
Then why do some two dozen American companies keep offices in Moscow?
``It's worth keeping a foot in anywhere,'' says Karen Gervais at Hewlett-Packard, which in 1983 sold the Soviet Union and East bloc $13.4 million worth of low-end technology like calculators and medical equipment. ``We're not getting rich by any means,'' she says, ``but things have been loosening up as far as what can be sold.''
If the superpower atmosphere continues to thaw, there are some areas in which US companies could compete, says Michael Mastanduno, an assistant professor of economics at Hamilton College in New York. Those include products that would let the Soviets become more self-sufficient; they do not include consumer goods, which would make them more dependent on the West.
Agriculture-related exports, such as harvesting and food processing equipment, fit into that category, says Dr. Mastanduno, a specialist in Soviet affairs. So do machine tools and technology to increase manufacturing productivity; energy technology, such as deep oil drilling equipment (that is, if oil shipments don't drop this year by 22 to 25 percent, as expected); chemicals for food processing and consumer goods; and computers.
In the latter category, the Soviets seem of two minds over the benefits of the computer: They can be used to produce and multiply undesirable literature, but are the key to keeping up with the West in both civilian and military technology. The government seems to have given a tentative ``da'' to the machines: It has outfitted some of its elementary and secondary schools with 4,000 computers from Yamaha, the Japanese maker.
And the West -- including the traditionally foot-dragging US -- seems to be meeting the Soviets halfway. In January, the Coordinating Committee (Cocom), which includes Japan and most NATO countries, loosened its restrictions on sales of personal computers while tightening them on more-sophisticated computer software.
IBM spokeswoman Nadine Fletcher says the Soviets have expressed an interest in IBM personal computers but have placed no orders yet. ``We do not see a dramatic change [in sales to the Soviets],'' she says, ``because we don't see any significant change in US and Cocom policy on dual technology.''
In another potential growth area -- machinery for building and agriculture -- the Caterpillar Tractor Company is coming out swinging. Caterpillar was the victim of politics: The company lost sales of pipe-layers to the Japanese company Komatsu during President Reagan's gas pipeline embargo. Since 1983, Caterpillar has sold the Soviets more than 100 earth-moving machines and 50 pipe-layers, but that still represents only a fraction of a percent of Caterpillar's total sales, says spokesman Stephen N ewhouse. ``We hope to compete on an equal basis, and we're encouraged by the indications they've given us,'' Mr. Newhouse says, declining to elaborate.
A less noted reason for staying in Moscow is indirect sales. ``There's a misconception that trade with the Soviet Union is very low,'' says Jan Vanous, research director of PlanEcon Inc., which does research on the Soviet and East-bloc economies for the US government and corporations. ``I suspect that US companies sell a good deal more through Europe than from the US.''
But the benefits of trading with the Soviets should not be overblown, Vanous says. ``Most US businessmen are cautious and frustrated about selling to the Soviets. It takes a disproportionate amount of effort. It's subject to political changes. They're tired of looking over their shoulders,'' he says.
Donald Van Atta, a government professor and Soviet specialist also at Hamilton, draws a distinction between the period of d'etente in the 1970s -- which translated into some US exports to the Soviet Union -- and the possible warming trend today.
``What [Leonid] Brezhnev was up to was using foreign trade as a way to avoid change and reform at home,'' Dr. Van Atta says. Mr. Brezhnev solidified his political position with the elite by importing Western consumer goods and raising the nutritional level of the average Russian by importing grain, he says. ``But Gorbachev's policies . . . aren't designed to avoid reform at home,'' and Gorbachev seems loath to rely on the Soviets' ``worst enemy'' for even the small amount of imp orts they do buy.
The Soviets can't rely on the US as suppliers, he says, citing the grain embargo and the pipeline snafu under the Carter and Reagan administrations, respectively. That, combined with Mr. Reagan's past rhetoric and arms buildup, has meant that the Russians often ``throw contracts to Europe and Japan to punish the US politically,'' says an economist at the Commerce Department.
Others say that the strong dollar and the cost of US labor, not politics, are prime reasons American companies are losing out on contracts. But probably most important, company officials say, is the tight leash the US government puts on ``dual-technology exports,'' which have both military and civilian uses.
For whatever reason, the West Europeans and Japanese do appear to be beating out their US competitors. For example, three US computer companies have offices in Moscow, but when the Soviets bought 4,000 personal computers for their schools, they turned to Yahama.
US companies have been left with low-tech items such as typewriters and publishing equipment (IBM), medical equipment and calculators (Hewlett-Packard), and heating controls and switches (Honeywell). Their sales are in the rather modest $3 million-to-$15 million range.