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East-West trade: lubricant or leverage?

One of the knottier issues which the Reagan administration will face will be trade with the Soviet Union. Should it be encouraged, discouraged, or left to market forces?

During the Cold War trade was severely restricted and amounted to little. With the thaw in the late 1960s many began to argue that the economic dependencies which would be built up on both sides by expanding trade would lower political tensions, penetrate and loosen the closed Soviet society, and create vested interests in a continuation of the process. This philosophy came to be widely held in the early 1970s, and facilities were offered by both sides to make trade easier and more attractive.

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This process, however, met a setback in the United States when the agreement according to the Soviets most favored nation treatment was linked by the Jackson-Vanik amendment to Soviet emigration policies, while the Stevenson amendment limited credits to small proportions. The Soviets rejected these conditions and the agreement fell through.

Soviet-American trade tended therefore to be concentrated in the area of grain and fodder, which the Soviets needed badly and the US was glad to sell. Trade of Western Europe and Japan with the Soviets, however, spread over a much wider range of commodities and was supported by generous credits. It grew to substantial proportions. At this point came the invasion of Afghanistan and the relatively severe Western sanctions against trade.

Now, almost a year later, the trade restrictions are fraying badly. Mr. Reagan during the election campaign denounced the grain embargo and said he would lift it. Since it is, however, beginning to be more effective than it was at first, he may have second thoughts, particularly if American farmers are finding ample markets elsewhere. European trade with the Soviet Union is regaining its earlier upward curve and seems likely, if the Russians stay out of Poland, to increase even more. This difference between the perceived interests of the United states and its allies is likely soon to cause trouble in the alliance.

While some American corporations would no doubt profit from an expansion of US-Soviet trade, it is unlikely that it would be large enough to have much effect on the American economy as a whole. The Europeans, on the other hand, have already built up substantial markets in the Soviet Union and elsewhere in Eastern Europe, which are important to their economies even in good times and are perceived as being nearly indispensable in time of recession. Their governments are therefore rapidly sloughing off the remnants of the Afghan boycott and competing with each other for expanded sales to the Soviets, usually based on substantial credits. A further incentive for this behavior is the preservation of what remains of detente to which the Europeans are not unnaturally more attached than we are, since they would very likely be the first victims of hostilities between East and west.

There is therefore a growing concern among Americans and some Europeans that the tables are being turned, that instead of the Soviets being softened up by their economic dependence on the West, it will be the West Europeans that will become so dependent on Soviet markets that they will be subject to Soviet political pressure. It is pointed out that some of them may soon be obtaining 25 percent of their natural gas from the East. The specter of "Finlandization" once more rears its ugly head. On the other hand, it is worth noting that Soviet dependence on imports from the West is also steadily increasing.

Tis is the issue the Reagan administration will have to face, one which, coupled with potential differences about arms control and arms deployments, could if badly handled rend the Western alliance apart. Of course, if the Soviets should invade or otherwise coerce Poland, these differences would at once be overshadowed, but one cannot count on them to solve our problems for us so neatly.

My own view is the following:

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(1) That US-Soviet trade is unlikely under the best of circumstances to be very great, nor even if it were to provide a reliable and sufficient foundation for better US-Soviet relations;

(2) That, on the other hand, trade with the Soviet Union can be important to the welfare of Western Eurpopean economies and is almost certain unless political relations become much worse, to be actively pursued in the hope that it will be;

(3) That the US administration should not permit this perceived divergence of interest between the US and its allies to become a source of such serious friction between them as to weaken the alliance, this being one area of policy in which uniformity is neither necessary nor possible;

(4) That political interests almost always outweigh economic interests. Should the Soviets attempt to use whatever economic leverage they may acquire in Western Europe to pressure those governments politically, should they invade Poland, move further toward the Persian Gulf, or try to duplicate elswhere their Afghan adventure, any rifts in the NATO alliance arising from differng trade policies would be almost immediately overcome.

In other words, the alliance, particularly in its present mature state, is much more likely to be held together by Soviet misbehavior than by US attempts to dictate to its allies policies which they perceive to be contrary to their interests.