To Reagan: 'East-West trade is a fact of life'
The conclusion that the Reagan administration should draw from the pipeline sanctions debacle is that the United States can no longer stop the Western allies from dealing with the Eastern bloc if they so choose. This is but a part of a larger lesson for American foreign policy in the 1980s. Unless the US accepts that it can no longer dictate Western policy, needless conflicts with the allies will recur in all areas of international relations.
Divergent European and American positions on East-West trade turn on a simple fact: The European stake in trade with the East is much greater than the American. As a percentage of GNP, West European trade with communist nations is over four times the US level. This is no accident or matter of political choice, but rather the result of a naturally complementary situation: geographic proximity, coupled with a Western need for raw materials and an Eastern need for industrial and manufactured goods.
Neither is East-West trade a recent phenomenon. A mutually favorable climate for trade has long existed, and so has extensive trade. Consider that in 1938 (despite an international trade arena depressed by high protectionism) trade with Eastern Europe and the USSR amounted to over 10 percent of total Western trade, while the East's trade with the West stood at 74 percent of total trade.
While most economists expected post-World War II East-West trade to return to its prewar levels, the cold war intervened. Natural economic forces were thwarted by politics, and the ideological polarization of the world was paralleled by an economic division. The Marshall Plan, and later the Common Market, formed the Western economic ''bloc,'' while COMECON (the communist ''common market'') formed the Eastern.
With the gradual easing of cold war tensions over the last two decades, East-West trade has climbed back toward its ''natural'' levels. And if it were not for the remaining ''unnatural'' restrictions, such as ideological barriers, national security fears in the West, and irrational controls and mechanisms in the East, the level of East-West trade would doubtless be much higher.
Viewed thus in its correct historical context, East-West trade is clearly seen as quite a natural state of affairs. It is the brief postwar interruption of trade that is anomalous, not the inevitable resumption of such exchange. And it is this fact, well recognized by Europeans, which we Americans do not fully appreciate. With a typical lack of historical perspective, President Reagan concludes that the problems of East-West trade can be solved by restricting such trade to a trickle (an impossibility), rather than tackling these problems in all their complexity.
If the economic forces behind East-West trade have remained strong, those resisting it have weakened. Postwar restrictions on East-West trade were, more than anything else, a result of decisions by the superpowers, and the US and USSR no longer have the ability to enforce such restrictions.
It was clearly the Soviet Union that forcibly reoriented East European trade away from the West. Marshall Plan aid was rejected, and Czechoslovakia and Poland were forced to withdraw from the International Monetary Fund and the World Bank. Likewise, the US Export Control Act of 1949 and the Battle Act of 1951 put severe pressure on the Europeans to restrict trade with communist nations.
But today the superpowers can no longer control the trading behavior of their allies so easily. East European nations defied initial Soviet preferences in expanding trade with the West. Similarly, West European countries can ignore American sanctions that would have crippled them in the 1950s. Moreover, the decline of American economic might relative to Europe has recently made possible independent action unthinkable even a decade ago.
A rational US policy on East-West trade demands more than simply accepting or understanding the limitations of US power. The US must also deal sensibly and consistently with its allies on particular issues:
* Grain sales. Our allies have been justifiably angry over Reagan's expansion of grain sales to the Soviets while attempting to block the pipeline deal. His justification, that grain costs the Soviets hard currency while the pipeline will bring them cash, is simply specious economic reasoning. As Wharton economist Jan Vanous recently noted, the morass of Soviet agriculture has created a situation in which it is far more profitable for the Soviets to buy grain rather than produce it themselves. Grain imports for 1981 (46 million metric tons) are calculated to have saved the Soviet economy roughly $32 billion over the cost of domestic production. That is four timesm the Soviets' expected annual earnings from the pipeline that upsets Reagan so - and the pipeline will not come ''on line'' until 1986 or 1987!
Even if the pipeline deal were halted, would the loss to the Soviets of $8 billion really be that critical for an economy with a total GNP roughly of $1.6 trillion? While the prevailing administration view is that the USSR is on the verge of economic collapse, statistics and the proven resilience of Soviet society indicate that, at best, Western sanctions and embargoes have a very limited effect.
* Technology transfer. Theft or sale of sophisticated technology contrary to Western security interests is a serious concern, and on this matter a more stringent and consistent allied policy is within sight. However, Reagan's restrictions on general commercial technology are a futile attempt to restrict ideas and knowledge.
With the strife of the pipeline sanctions finally settled, Reagan has a chance to establish a reasonable new US policy on East-West trade. This policy must be strong, but must also be rational and coherent. It must recognize that East-West trade is a fact of life. It must also recognize that the interdependent economies of Western Europe cannot afford the ideological self-righteousness that a largely self-sufficient nation like the US can.
Finally, the US must be fair, consistent, and straight-forward in dealing with its allies. It will be a tragic irony if US policy serves only to divide the allies and advance Soviet interests better than the Soviets themselves could do.