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U.S. Trade Law Overhaul Threatens to Make Soviet Deals More Difficult

November 15, 1987|Sarah C. Carey | Sarah C. Carey is a Washington attorney who specializes in U.S.-Soviet trade.

WASHINGTON — Congress is considering a massive overhaul of U.S. trade laws, hoping to create a level playing field for American companies participating in international trade and to open new markets. Like other nations, the United States is intent upon increasing exports and reducing its trade deficit.

Despite these objectives, pending trade bills do little to improve the U.S. position toward a potentially exploding market: the Soviet Union. In fact, several measures included in the bills threaten to worsen the current depressed state of U.S.-Soviet trade. The worst is a prohibition against the import to the United States of seven Soviet products on the grounds that they are produced with forced labor, a proposition that the U.S. State Department has labeled "economic warfare" and that the Commerce Department states cannot be substantiated.

Other measures include the extension of export controls to loans made by U.S. banks to the Soviet Union, the creation of new grounds for unfair-trade-practice challenges to Soviet and other planned economy imports and provisions that would make anti-dumping laws more readily available against imports from the Soviet Union, China and others, even though such imports are already subject to a disproportionate number of anti-dumping challenges.

If enacted, these proposals would overlay existing laws that discriminate against the Soviet Union as a trading partner by denying that country most-favored-nation status (the status shared by most countries, including Hungary and Romania in the Soviet Bloc), by prohibiting U.S. government financing and insurance for U.S.-Soviet trade deals, by limiting private bank credits to support Soviet trade transactions, by barring the import of specific Soviet products such as gold coins and furs and by restricting the export to the Soviet Union of a broad range of U.S. high-tech products.

The signal this legislative statement conveys to the Soviets--and to the rest of the world--is that the U.S. government opposes significant business involvement with the world's second-largest economy. This policy is reflected clearly in bilateral trade figures, declining for the past three years. In 1985 U.S.-Soviet trade totaled $2.8 billion, constituting only 1.9% of the Soviet Union's total foreign trade. Agricultural sales accounted for 77% of the United States total.

Unless a more positive legislative framework is created, U.S. companies will be denied full participation in one of the most significant foreign markets of the decade, opportunities that instead will go to our allies. And if proposals such as an amendment by Sen. William L. Armstrong (R-Colo.) to the pending omnibus trade bill, banning the import of items allegedly produced by slave labor (including agricultural machinery, gold ore, tractor generators, tea, crude petroleum, motor fuel and kerosene) are enacted, the Soviets may well reach the political decision that if they can't sell to the United States they won't buy from the United States and will turn to other markets.

At the same time, new trade opportunities appear from massive Soviet commitments to the modernization of industry and agriculture, combined with the far-reaching economic restructuring initiated by General Secretary Mikhail S. Gorbachev. Soviet and U.S. experts alike agree that the bilateral trade opportunities today far outstrip those of the detente period. Bilateral trade in 1979, at the height of detente, reached $4.5 billion. Projections for the near future range between $10 billion and $15 billion.

Gorbachev's economic reforms include a restructuring of Soviet foreign trade that contemplates direct dealings by ministries and enterprises responsible for manufactured products with overseas trading partners, the encouragement of foreign investment through participation in joint ventures with Soviet partners, decentralization of economic planning, increased autonomy for local enterprises, the creation of performance incentives for factories and workers (with corresponding disincentives for non-performance) and a revamping of the banking and pricing systems. There are plans to make the ruble convertible and to establish stock companies.

Although many of these changes will not be operational until 1998, taken together they open the Soviet economy to Westerners and attempt to make the Soviet foreign trade system more compatible with standard international trade practices. For those companies that can tolerate the ambiguities and risks that accompany massive social and economic reform (certainly superior to the political instability or economic decline that characterizes many foreign markets), the opportunities are significant.

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