Share this story
Close X
Switch to Desktop Site

Williamsburg: remove the East-West trade issue

East-West trade has been headlined now at each of President Reagan's two allied economic summit performances, while far more pressing industrial and financial concerns languish within the Organization for Economic Cooperation and Development (OECD) because of rampant Western parochialism. East-West issues should be removed from the agenda of the forthcoming Williamsburg summit, or at least reduced to their proportionate level of total OECD trade volume, in order to avoid a repetition of last year's disastrous outcome.

Ironically, confronting Western Europe's penchant for subsidizing trade with the Soviet bloc through generous government-guaranteed credits and interest rates in the Williamsburg forum would serve only to weaken the President's long-term objectives. The Reagan approach emphasizes the strategic nature of such trade; at Versailles in 1982 it was argued that the Siberian gas pipeline deal would strengthen the Soviet energy base and economy while earning Moscow a substantial stream of desperately needed hard currencies. The military buildup could thus continue unabated, for resources would not then have to be shifted out of the defense sector and into the export-oriented energy and raw materials complex.

About these ads

Such concerns merit serious analysis and policy attention. Indeed, precisely because East-West trade has been placed in a category separate from other trade (by the President himself), new institutional mechanisms must be created to cope with ''strategic trade'' in the 1980s and beyond. Strategic trade, if it is as important as the administration contends, deserves special treatment apart from the more mundane intra-OECD pressures arising from steel and agricultural export subsidies, growing import protection, and increasingly clever and pervasive nontariff barriers to trade.

When Secretary of State Shultz ostensibly put the pipeline dispute to bed, several alliance working groups were established to examine the problems caused by interest subsidies, credit extensions, and Soviet gas penetration of European markets. The results have yet to be announced, but it is unlikely that their conclusions and recommendations will both placate the President and satisfy our allies. The official US position will still hold in regard to the dangers caused by the undue reliance on Soviet energy, whereas NATO-Europe still contends that the community's very sovereignty is at stake as long as President Reagan interferes with the formulation and direction of their trade policy.

This is so, at least in part, because the studies were geared to the annual summit cycle. As with other highly contentious issues, only vague platitudes guaranteed to obscure rather than enlighten will therefore be acceptable.

East-West trade and all it entails - the multilateral Coordinating Committee on Export Controls, technology transfer and theft, East European debt-service burdens, Soviet oil and gas exports, NATO energy security, and the relationship between Western imports and Soviet military might - have become much too large and complicated a set of concerns for the economic summits. The time has come to recognize the essential relationship between the political and the security aspects of East-West trade and therefore elevate these issues to a routinized yet separate forum.

Such a forum should be based within NATO, with membership extended to Japan as well. The organization's Economics Directorate should provide the staff work, for what group is better placed to examine - on a multilateral and alliance basis - the cross-cutting problems of strategic trade as it relates to the West's military security? Annual institutionalizedm (rather than ad hoc) ministerial meetings would be attended by ministers of trade or commerce in order to iron out definitions, problems, and priorities and to review allied progress in these areas.

It was not the economic summits, for example, that pushed 22 of the OECD's 24 member states to set up the 1978 ''Consensus'' guidelines on officially supported credit. Then the minimum interest rate level for long-term loans to the Soviet Union was 7.8 percent. Despite a ratcheting upward of rates to 11 percent in November 1981, the Soviet-West European pipeline equipment contracts were signed at rates ranging between 7.8 percent and 8.5 percent - well below the newly established level and even farther below commercial lending rates.

In June 1982, following the Versailles summit, rates were again raised to 12. 4 percent for the USSR. But the impetus to change Moscow's credit status stemmed from earlier ''Consensus'' meetings, and not from anticipated or actualized American summit pressure; several leading European financial centers and national governments realized that uncoordinated negotiations with Moscow would continue competitive rate-cutting at a time when very high real interest levels dictated a change in policy.

About these ads

The specialized nature of the ''Consensus'' meetings allowed economic realities to more readily filter through their deliberations. The same cannot be said of the necessarily broad-brush and generalized economic summit gatherings, where a premium is placed on success at the expense of momentarily intractable problems.

East-West trade constitutes no more than 5 percent of West German total trade turnover; the figure is less for other summit partners. With third-world debt crises threatening to create additional instability in world financial markets, with long-term energy security removed from serious debate because of short-term market shifts, and with a host of advanced industrial problems emanating from recessionary protectionism, the participants at the Williamsburg summit will have a difficult enough time reaching consensus on the strictly economic issues confronting the alliance. Introduction of strategic considerations on East-West trade should rightly be reserved for another day.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.