Johnson Bill Would Free Trade With Communists

Press, Volume CV, Issue 31061, 17 May 1966, Page 10

Johnson Bill Would Free Trade With Communists

(From FRANK OLIVER, Special Correspondent N.Z.P.A.) WASHINGTON. At last Mr Johnson has made his longpredicted ploy with Congress for more freedom in trade negotiations with Russia and th e Communist countries of Eastern Europe, with the exception of East Germany. It was predicted that this would come early in this session and bringing it up at this late date almost assures that passage this year is an impossibility, although for diplomatic reasons the President very much needs the authorisation of Congress. There will he, of course, extended hearings on this touchy subject and the hope seems to be that these hearings will clear the decks so that passage of the measure next year will be almost a certainty. However this “almost a certainty” envisages minor losses by the Democrats in November’s elections and a su<*icient Democratic majority next year to ensure passage. This is a case where Administration and business are for the project and the congress remains sceptical and not very co-operative. The bill suggested by the White House would put an end to the post-war ban on most-favoured-nation treatment for most of the Communist States of Eastern Europe. At the moment only Poland and Jugoslavia enjoy such treatment. This ban has had uncomfortably limiting effects for the United States: indeed it is now the only country of the free world with its hands tied when it comes to adjusting, tariffs in East-West trade. Power Reduced This situation has long irked American business and American exporters. The Administration finds that the ban sharply reduces America’s use of its admittedly enormous economic power as a bargaining instrument. Some people feel that increased East-West trade could and should be a means of reaching a much more peaceful situation in the world. American business feels the ban is putting strict limits on its prosperity in overseas trade. It remains for Congress to be convinced that a lowering of the trade barriers would be a good thing. American determination to resist Communist expansion is only part of United States strategy. The other part is to make it cleat to Communist countries that their best interests lie in peaceful relations and economic contacts. To make the matter more palatable to Congress, the proposed bill specifically exempts from its provisions Cuba, Communist China, North Korea, North Vietnam and East Germany. The reason given is that America does not have diplomatic relations with those countries and the assumption is that if such relations become possible then they too might enjoy the benefits of expanded world trade.

This bill is not the only official effort to get expanded foreign trade working. This year, for the first time, the State Department has dropped its opposition to American exhibits at the Great Leipzig Fair, easily the most important trade fair in the Communist world. The limitation on trade with

Communist countries has not meant that American business is not selling goods to such countries. As the “Wall Street Journal” said recently, “American companies are selling more to Communist countries than anyone would ever guess from the trade figures.” This is being done through what must be called the back door, through the subsidiaries of American companies in Western Europe.

As the “Wall Street Journal,” says American sales and profits from dealing with Eastern European Communist countries “are buried in the consolidated corporate reports of United States companies and are reflected in export figures from European nations, rather than in United States trade totals.”

One large manufacturer, for instance, has subsidiary plant in West Germany which exports a considerable amount of goods to East Germany and that counts as German

exports, not American exports. This is by no means uncommon and, it is reported, this method of doing business with Eastern Europe is rising faster than American direct trading. It is interesting to note, as has the American press, that when the Italian Fiat company builds the car factory recently negotiated with Russia, American companies may be asked to bid on more than 50 million dollars worth of equipment for the plant. These shipments, should the American bid be accepted, would be made through the Fiat company and not direct. In trade Statistics they would show up as Italian, and not American, exports to Russia. Almost no-one seems optimistic about the bill becoming law this year, but many hope that the political climate will improve by 1967 and that the bill can go through during the first session of the new Congress which meets next January.