US Firms Seek Fewer Restraints On Soviet Trade

WHILE United States businesses eagerly wait to expand trade with a reforming Soviet Union, they are pushing for a little perestroika (restructuring) at home."There are some things that need to be done overseas, but there are a lot of things the Americans need to do as well," says Stuart Bensley, manager of corporate business development at Brown & Root Inc. in Houston. "Most of our allies have had more normal trade relations with the USSR than the United States," adds Kathryn Wittneben, president of Enterprise Development Information Inc., outside Washington, D.C. The US needs to stop using trade with the Soviet Union as a political bargaining chip and start seeing it as an economic opportunity, according to several businessmen and experts familiar with America's Soviet trade. Ms. Wittneben is writing a report due out this fall comparing America's Soviet trade policy with that of other developed nations. The initial findings suggest that the US is hurting its own chances to move into the Soviet market. The biggest obstacle - at least symbolically - is the Jackson-Vanik amendment to US trade law. The amendment denies most-favored-nation status to the Soviet Union. That means the US sets very high tariffs on Soviet goods it imports. Jackson-Vanik was an attempt to pressure the Soviet Union into allowing the free emigration of Soviet Jews and other minorities.

Image problems The amendment's noneconomic impact has been even greater, says Margaret Chapman, director of the US-Soviet trade program of the American Committee on US-Soviet Relations, a public policy organization in Washington, D.C. "It cast a certain stigma. There were people who didn't want other people to know that they had trade going on with the Soviet Union." Although President Bush has granted a waiver of the amendment and asked Congress to repeal it, the current situation makes it extremely difficult for a US manufacturer to set up shop in the Soviet Union and export products back to the US, says Michael Claudon, head of the Geonomics Institute in Middlebury, Vt. There are other obstacles. High-technology firms cannot export certain restricted items to the Soviet Union. Getting loans and loan guarantees to do business in the Soviet Union is next to impossible. Even if Jackson-Vanik is repealed, the Stevenson and Byrd amendments to US trade law limit Export-Import Bank loan guarantees on exports to the Soviet Union to $300 million. The law restricts oil and gas investments even more severely. The US has advanced $1.5 billion in credit for grain. But the political risk insurance that the federal government typically offers to companies operating in developing countries is not available in the case of the Soviet Union because of these amendments.

Illegal loans Under some interpretations, even private loans to US companies in the Soviet Union are illegal because of the 1934 Johnson Debt Default Act. The act also prohibits the Soviet Union from selling its bonds and other debt instruments in the US. "None of these things is expensive" to change, says Benjamin Jaffray, chairman of the Sheffield Group, a small international investment banking firm in Minneapolis. Companies normally get US guarantees to protect their overseas investments from sudden currency devaluations and other unforeseen circumstances. The US needs to set up a system whereby an investment in the Soviet Union would be as secure as one in Mexico, he says. Large companies with the resources and the legal staff to work through such problems can still attempt to do business, but the red tape is overwhelming for small and midsize firms. Meanwhile, companies in Austria, Germany, Finland, and elsewhere operate in the Soviet Union with more government support and far fewer restrictions. Many US businessmen complain of an uneven playing field. One sign of the times: Italy has 60 commercial trade representatives in the Soviet Union; the US at the moment has one, W ittneben says. Although US-Soviet trade has doubled since 1986, it represents less than 1 percent of total US trade. Several longtime observers expect Washington to ease soon some restrictions on Soviet trade.

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