`New Thinking' in East-West Trade

FLEDGLING entrepreneurs are turning a profit on the streets of Leningrad. Independent trade unions are springing to life in Hungary. After decades of xenophobic isolation, China now has its very own Colonel Sanders' Kentucky Fried Chicken. The world is witnessing rapid and sometimes bewildering changes in many communist countries. But US trade and commercial ties with most nonmarket economies remain largely frozen in time. We need some ``new thinking'' in the United States to respond to the ``new thinking'' in the Soviet Union.

Since the Jackson-Vanik amendment was enacted in 1974, the US has withheld favorable tariff treatment, commercial credit, and loan guarantees from any communist-bloc country that restricts freedom of emigration. This linkage has made the ebb and flow of Soviet Jewish emigration both the starting and ending point of any US policy innovation. America's fundamental challenge is to reshape policy in a way that tangibly rewards perestroika-style reforms but retains substantial leverage to encourage additional economic, political, and foreign policy changes.

President Bush should step up to this challenge and frame a coherent, imaginative US policy, complete with carrots and sticks, to govern trade and commerce with nonmarket economies.

A good place to begin might be to seek greater respect for the basic rights of workers in the Soviet Union and other nonmarket economies. The rise of Solidarity in Poland illustrates how recognition of the economic rights of workers can be a harbinger of greater political rights.

The US should use its economic leverage (prospects for expanded trade and improved access to the American marketplace) to test and stretch the practical parameters of perestroika and glasnost. Extending and broadening most-favored-nation (MFN) coverage on more imports from the Soviet Union, over time, could serve as an important ``carrot'' with which to support broader economic reforms in the Soviet Union. Since worker cooperatives are conducive to worker rights, the first ``carrot'' could sensibly be to extend MFN treatment to imports from Soviet cooperatives.

A remarkable new law enacted in the Soviet Union last summer allows Soviet citizens to freely join and leave cooperatives. They can be employed by both a state-run enterprise and a cooperative. Cooperatives may actually own property and assets and may lease or lend their assets. There are no apparent ceilings on the earnings, profits, and size of cooperatives, and they are being encouraged to compete with state industries for government contracts. Foreign currency from export sales may be kept by the cooperatives to further their own development.

Nevertheless, though the rights of Soviet workers have been significantly expanded within the burgeoning cooperative sector, the new Soviet cooperatives are certainly not free of or exempt from state influence. Even if the US extended MFN treatment exclusively to imports from the Soviet cooperatives, a monitoring mechanism would still be necessary to verify that such goods were produced in accordance with internationally recognized worker rights, such as the right to organize and freedom from forced labor.

A nongovernmental organization, with US cooperative and private-sector experts and nonmarket economy participants, would serve this purpose. To avoid burdening US taxpayers, the organization could be funded by earmarking a small portion of the reduction in tariffs on the imports from eligible Soviet cooperatives.

Mikhail Gorbachev, Deng Xiaoping, and other communist leaders need and want economic modernization and growth. They recognize that their economic future depends upon introducing competition into their markets, something the US has long advocated and could greatly profit from.

Now we must recognize that our opportunities extend to the marketplace of ideas as well as the marketplace of goods. More freedom for their workers and their enterprises must be part of the price nonmarket economies pay to become part of an integrated global economy.

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