Instead of Begging, the Soviets Should Follow China's Lead

THE incongruity between the requests that the Soviet Union is making of the United States and those being made by the Chinese has reached breathtaking proportions. This very incongruity, however, brings into focus the issues facing the US government in its relations with Moscow and Beijing. On the one hand, Moscow asks for massive financial assistance, holding out the carrots of continued political change and future economic reform and the stick of global instability caused by the disintegration of a nuclear power. On the other, China simply asks not to be discriminated against in its trade with America.

We should be striving to give non-discriminatory (most-favored-nation) treatment to Moscow, instead of massive financial assistance. At the same time, we shouldn't be contemplating taking MFN treatment away from China. Such an approach recognizes our limited capabilities and promotes our values and interests.

Integration into the world economy has stimulated political liberalization throughout much of Asia, notably in South Korea and Taiwan. The Chinese path of not tying reform plans to external assistance, but rather to international trade and domestically inspired entrepreneurial activity, is more consistent with American interests, capabilities, and values than the Soviet approach of requesting financial assistance. We should not let our outrage at setbacks to political reform and civil rights in Ch ina lead us to counterproductive and self-defeating actions.

The essence of the Soviet approach is captured in a letter to the Group of Seven (G-7) industrialized nations by two Gorbachev advisers, Yevgeny Primakov and Grigory Yavlinsky. They argue, correctly, that efforts to transform the Soviet Union, combined with festering nationalities problems, have created an explosive situation. They further say that the United States and the West can pay now, or pay later - if we choose to pay later, the costs will not be merely economic.

In exchange for an agreement, in principle, to provide massive financial assistance, the Soviets promise to develop an economic reform plan that would delineate the economic responsibilities of Moscow and the republics; develop a fiscal and monetary policy and structure; implement widespread privatization; develop an open economic policy; and develop a legal system to underpin a more market-driven economy and international trade. This is to be done, Primakov and Yavlinsky candidly acknowledge, in unprom ising circumstances: an economy on the verge of hyperinflation, increasing poverty, and rising dependence on imports.

Turning to China, we see a far different situation, albeit one in which political changes have not progressed as far as those in the Soviet Union:

* The role of the non-state sector is already huge in China's economy, and still growing. By 1990, less than 40 percent of China's national income was from state-controlled enterprises.

* The Chinese are biting the bullet with price reform, having increased the prices of housing, some energy and transportation products, grain, and edible oils.

* The Chinese have a 10-year head start over the Soviets on building a legal structure to facilitate integration into the world economy.

* Finally, while the Soviets increasingly are dependent upon imports and have trouble paying international obligations, the Chinese have an export surplus. Indeed, the surplus in bilateral trade with the US (some of which has not been fairly acquired) is what angers many in Congress and the executive branch.

If you look at what economic reform has brought China, not forgetting the tragic and unnecessary bloodshed in mid-1989 and the repression thereafter, you see a doubling of per capita incomes, a doubling to tripling of the percentage of China's GNP derived from foreign trade, and a rapidly growing percentage of national income coming from the entrepreneurial, non-state sector of the economy. These trends will produce a more pluralized society that inevitably will demand, and achieve, politica l reform and improved civil and human rights.

In short, rather than debating whether to give the USSR assistance and impede economic reform in China by withdrawing MFN, we should be giving the USSR most-favored-nation treatment and encouraging Moscow to learn lessons from China's economic reform.

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