U.S.-RUSSIA TRADE RULES MUST BE WORKED OUT BEFORE PLANS CAN GET FAR

Press, Volume CXII, Issue 33034, 29 September 1972, Page 8

U.S.-RUSSIA TRADE RULES MUST BE WORKED OUT BEFORE PLANS CAN GET FAR

(Reprinted from the "Economist" by arrangement)

Quite soon, possibly before the American election on November 7. President Nixon will reach a trade agreement with Russia. Then all those who for a year now have been forecasting an imminent SUS2OOO million trade deal will finally be able to claim that their prophecies came true. Or at least half-true. For the American Government will not at any point, either now or next year, be signing a “trade deal.” What President Nixon does hope to sign is an overall charter or agreement which, by achieving a number of not very remarkable things, will give the green light to American businessmen to make their own deals with a fair degree of confidence.

This charter has, first, to clear the decks between the two Governments. It has to settle the debt which Russia has owed to the United States since common cause was made against Germany and Japan 30 years ago. The Russians consider that the debt they accumulated in the Second World War was expunged by the amount of Russian blood lost in that war; so a debt which was numbered in millions of dollars will doubtless be whittled down to repayment by Russia of around SUSSOO million at about 2 per cent interest over a period lasting into early in the next century. With this token in his pocket, Mr Nixon hopes to get Congress to give Russia what most advanced nations already give it—equal tariff treatment against the competing imports of all comers.

Trading facilities

Such subjects—the lendlease debt and most-favoured-nation tariffs—are the politically striking ones. But they are markedly less important than the rest of what the United States wants. American businessmen are at present tumbling over one another to get into Russia, sometimes unwittingly undercutting President Nixon’s bargaining position by doing so. The fact is that little they do will be durable if several matters are not sorted out in advance. There needs to be some sort of guarantee of lasting business facilities in Moscow —an apparently insignificant point until one hears of the limitations, when the first flush of enthusiasm has worn off, of working from a Russian hotel, without access to telex, and dependent for introductions on the lady from Intourist. It is with this in mind, and with his usual eye on the main chance, that Mr Hammer of Occidental Petroleum now suggests a Western-designed hotel and trade centre in Moscow. Arbitration process Of more lasting importance, if Western businessmen are to enter joint enterprises inside a Soviet Union whose absorption of credit will be limited, and whose political fuse is sure at times to prove short, is that Russia should be brought to accept arbitration procedures outside those offered by Soviet courts. Something also needs to be written down which recognises that Russia does not yet subscribe to any international policing of dumping and marketdisruption practices. Who will decide, for instance, whether those fine trucks to be built with American tools on the Kama River are being sold by Russia at crackpot prices in Western markets just in order to earn a little handy foreign exchange? These are the thickets across any path meant to lead to lasting economic cooperation between a market economy like America’s and

a place where the only commercial company is the State. Other countries in the West, notably Japan and the West Europeans, have managed it without quite so much fuss. But then Japan and Europe are only secondranking members 'of that alliance with which, Mr Brezhnev admits, Russia is still ideologically at war. The United States, by contrast is its declared leader.

Anyway, for all their enterprise, and despite the fact that together they sell nearly 20 times as much to Russia as the Americans do, the trade which Japan and Europe do with Russia is still modest; their exports were under SUS27OO million last year. Precisely because so much lost ground in Soviet-American trade may now be made up so fast, there is an overriding need for care.

The grain sales

Some notion of the volume of trade which may now grow up between two such complementary economies as Russia’s and America’s can be gathered from the scale of just the first of the American grain sales to Russia this year, which is so unexpectedly large that it has disrupted prices in the United States and become an election issue between Mr Nixon and Mr McGovern.

It is now a commonplace, even a subject for Art Buchwald to write about, that the world’s two great antagonists, the United States and the Soviet Union, find themselves with economies which may increasingly depend on each other. Beyond wheat in a bad harvest year like 1972, Russia will need animal feed-grains for many years yet come fair weather or foul: an A. erican now eats more than two and a half times as much meat as a Russian. Russia needs technology for its industry, too. But more than that it needs the sheer ability to make things and manage them in long, efficient runs.

It is this last need which such projects as the Kama River are about. In the Soviet Union there are four vacuum cleaners and one car for every 100 Russians. In the United States the figures are 29 and 45. Soviet labour

productivity is perhaps two* fifths that in America.

Filling U.S. needs

| And maybe the ' dependence on their adversary could one day be as great as Russia’s on them. To be prosperous the United States has consumed resources, as its present Secretary of Commerce likes to say, like a drunken sailor. It is increasingly short of metal ores: Russia has them. Russia has natural gas. some of which could come from eastern Siberia to America’s west coast by way of Japan, some to the east’coast from western Siberia: the United States, on the other hand, is unpleasantly short of domestic supplies of natural gas. These two projects alone may take SUSIO,OOO million of credit just to get them off the ground. How safe will those credits be? What exercises Mr Nixon’s Administration about all this, and exercises it rightly, is that haste may take over from care. There is the unspoken fact that the climate of opinion in America will be more amenable to making concessions over the lend-lease debt, and other things, if events show that the Russians have helped, or at least not hindered, a satisfactory end of the Vietnam war. And if any agreement is to be signed it must work. If credits are to be given or underwritten by the American Government on a scale which has never been attempted before by the Export-Import Bank or any other American government agency then the conditions must be known. For a lot can happen to world politics in the 10 years that it will take to get such schemes out of the harsh Siberian ground and into the air of Western trade.