The Press MONDAY, MARCH 10, 1958. Russia’s Economic Offensive

Press, Volume XCVII, Issue 28531, 10 March 1958, Page 8

The Press MONDAY, MARCH 10, 1958. Russia’s Economic Offensive

Scepticism about Mr Khrushchev’s intention of “ declaring

“ war on the United States in “ the peaceful field of trade ” has proved ill-founded. The United States is now concerned about Soviet inroads in a field in which the United States has been pre-eminent; and the Administration is determined this j T ear to make Congress accept its £1760 million foreign aid bill and measures to liberalise American trade so it can effectively meet Russia’s vigorous and effective economic competition. Mr Khrushchev gave notice of his intentions three years ago when he announced that Russia would follow a policy of competitive coexistence. but it is only recently that the Soviet switch from military to economic pressure for the markets and minds of the uncommitted nations has become apparent. The State Department recently undertook a survey of the scope of Soviet aid and trade and it found that Russia undoubtedly means business. As Harry Schwartz put it in the “ New York Times", “ the stakes in this Soviet offen“sive are nothing less than the “future political orientation of “ the vast portion of humanity “which lives in the under- “ developed areas of Asia, “ Africa, and South America ”. Russia denounced aid in the past as “ imperialistic exploita- “ tion ”, but the nuclear stalemate in which East and West now find themselves has caused Moscow to change its mind, if not its heart. Mr Khrushchev cannot now achieve anything by force without inviting destructive retaliation; but he can seek to achieve his objectives by trade and propaganda. So far, he has concentrated on the Middle East, with political effects painfully apparent to the West. Egypt has received or been promised £225 million in loans, credits and aid for arms, power stations, bridges, and factories; and Syria is getting £lOO million for similar purposes. Substantial assistance has been given to India, Afghanistan, and Indonesia and smaller loans to Cambodia, Ceylon, Nepal, and the Yemen. The total has been estimated at £670 million in the last three years and there is no reason to believe that the rate will decrease. The programme has strained the Soviet economy. The gross national product of the Soviet bloc last year was estimated at 235 billion dollars and that of the United States at 435 billion dollars. The two countries spent about the same amount on defence, and Russia devoted very considerable sums to the development of industry and agriculture and to science. The State Department survey said it was quite clear, however, that in spite of recent economic difficulties within the bloc, Russia has decided that it can impose on its people whatever burdens are involved in carrying out a foreign credit programme of the present magnitude to support foreign policy objectives.

American aid since 1945 is estimated at £ 18,000 million, beside which the Soviet total seems insignificant. But the United States has something co learn from the Soviet tactics—the diversity of aid techniques, the use of credits, barter arrangements, and trade to supplement grants. Every rouble is put to effective use. The disparity is obscured partly because Russia has been better able to project the image of itself as a generous disinterested giver while in the United States foreign aid is the subject of a bitter annual debate. The uncommitted nations also suspect that American aid is closely tied to American economic, military, and political ends, all of which they tend to distrust. Soviet aid usually goes to socialised industries, the form of development many of these nations prefer, while American aid tends to go to private enterprise. The disparity is also obscured by the attractive terms the Russians offer. Loans normally bear interest at 2 J per cent., compared with 4 per cent, for most American loans and up to 6 per cent, for World Bank loans. Repayments over the initial years are sometimes waived or part repayment may be made in local currency or commodities. When money is lent to build industries, some repayment is usually made in products from the industry. None of the countries resents the stipulation that capital goods and technicians should come from Russia, even though about 2000 technicians were believed to be working in the recipient countries last year. Though there is a strong political element in all the transactions, they are economically sound. Soviet trade with the underdeveloped countries is increasing; and at a time of falling commodity prices, the Soviet barter agreements have been exceedingly welcome. With its emphasis on heavy industry, Russia is well placed to provide the type of goods most of tHfese countries want; it is keen at the same time to take the commodities and foodstuffs offered in return. The European satellites are also helping in providing credits and buying commodities in the Middle East; and the “ Financial Times ” says there is a grave danger that with the fall in free market commodity prices, “a succession of “ commodity - producing countries will be absorbed into the “Russian trading area, just as “some of the Balkan countries “were absorbed into the Ger- “ man trading system before the “ war

The Russians have heeded the lesson that trade is at least as important as aid. If the United States is to counter this unwelcome prospect, it must provide better markets as well as continued aid and investment. That is why President Eisenhower is urging Congress to disregard the protectionist lobbies this year and to lower the barriers to freer trade. Russia is attacking the United States where it is strong, but hampered.