At Issue; 23; Trading with Communist Countries

. . . . . . . . .

National Educational Television presents at Issue, a weekly commentary on events and people in the news. This week, at Issue, looks at the growing controversy over trading with communist nations. Commentator is Robert Lubar, assistant managing editor of Fortune magazine. Should we trade with the communists? That question is growing in importance and in controversy. The United States has just sold over a million tons of wheat to the Russians, and opinion is divided over the wisdom of that deal. We've also been having differences of opinion with our closest allies, the British, over their sale of buses to Cuba. And with the French, over their intention to trade with both Cuba and red China. These events have set a lot of people to wondering just what U.S. policy is on east-west trade. What is this policy supposed to accomplish and is it working?

Or is it time for a change? One man who sees the need for a thorough re-examination and clarification of U.S. policy is Senator William Fulbright of Arkansas, who was chairman of the Senate Foreign Relations Committee, and he's in a position to do something about it. Senator Fulbright is about to begin hearings on the subject. He gives his views and an interview with Leonard Swig. I think there's considerable dissatisfaction now with the fact that our allies, some of our best allies, do not look at trade as we do. They are proceeding to trade. And a unilateral restriction that is just for the United States is obviously ineffective, I think, to a great extent so that we find ourselves going through an exercise and futility. We have large surpluses which we can't sell in our allies and some of our closest trans-Canada, as an example of the Guard of Wheat, are proceeding to trade.

And so here's a case where nearly everybody's out of step at the United States, and we're wondering whether or not this may be the United States, he's out of step. Senator, do you think we can use trade as a weapon to force political concessions from the Soviets? Well, if you're acting alone, I don't see any probability that this can be effective. If all of the free world was in agreement on this matter and you could effectively deprive the Soviets of something they need very badly, it's possible. I think it's highly unlikely and if it to succeed and being highly unlikely to succeed, it's a mistake to attempt it. So I don't think it will succeed and what good is it going to do? I'm sorry, anybody or our political objective is if we refuse to sell wheat to Russia, and she can get all the wheat she wants from Canada and Australia, which she can, I think, and there's no way for us to stop it.

I mean, there's limitation upon our power to influence these events, and it's the same way with Cuba. We don't sell Cuba, but our friends do. Now, this is still our government's policy, and I don't know whether it can succeed or not. I'm inclined to doubt that it will succeed. The sale of British buses to Cuba pointed up the conflict between the US and its allies. Donald Stokes, president of Leyland Motors, was questioned about it on British television. Well, I understand the Americans feel that this is something that's going to help Castro wage war, but it seems to me a bit odd. I think they're going to go along in city service buses, great big things, 36 feet long with under-floor engines. Is there any design for paved city streets? You look completely foolish trying to go to war in them. You're quite sure that Cuba can pay for such a large contract? Oh, yes, we're buying 13 million pounds worth of sugar from Cuba every year,

and that will be used in exchange to pay for these buses. At a recent Washington press conference, Prime Minister Hume discussed overall British policy on trading with the communists. I think it is quite likely that we shall, in the next few months, be able to land some contracts with the Soviet Union. We have always felt, perhaps we feel different from you on this. I'm not very sure. We've always felt that the more comfortable a person is, the less likely he is to be a fanatical communist. And therefore, we've, I think, gone on the principle, that if Russia, in Russia or China, they're able to improve their standards of living. But they're less likely to be doctrinaire and aggressive and militant communists. British shoppers are accustomed to seeing Soviet goods on sale. But consumer items are only a minor part of what Britain buys from Russia.

The major Soviet exports are basic raw materials. The British have been selling the Russians, machinery, and even complete chemical plants. Currently, they're considering giving the Soviet Union long-term credits on chemical plants. The United States government will not allow American companies to make such sales. Here's a comment from Senator Fulbright. If we don't sell the mechanical plant, the chances are they can get the same kind of plant from Germany, or from France, or from England. And another aspect of this, you know, the Germans are very sensitive to us doing business with the Russians or the communists. And yet at the same time, the Germans, the US Germans, are the largest traders. This is very difficult for me to understand, frankly. I don't quite know why they should have the goal to protest our selling wheat when they are one of the largest one selling wheat. If they get it, he's reselling our own wheat.

And as well as trading in every other way. And the fact is, these countries in Europe and most of the free world feel that its trade should not be restricted to just your friends, which you trade with anybody that can pay for it. It's in the class by itself. As long as they feel that way, whether or not we object, I think it makes any other policy rather ineffectual. And this is the reason we're going to study. I don't know what the results will be. But these are the reasons that we're curious about it. The Canadian point of view was presented by Minister of External Affairs Paul Martin. I suspect that there are a lot of people in the United States who believe that Canada's trade with the Soviet Union, with communist China and some of the Eastern European satellite countries, is not a wise course for Canada to pursue. That is in our policy.

We believe very strongly that to isolate the communist countries is not in the interests of world peace, not in our own interests. We feel that trading with a country in non-strategic goods is not an acceptance of that country's ideological program. We are as anti-communist as anyone in the United States. We are as anti-communist vis-a-vis the so-called Chinese People's Republic as anyone in the United States. We are opposed to communism in every form in Canada. And I emphasize this because it is thought by many people that because we enjoy commercial relationships with a country like communist China, that we in some way accept the ideology of that country, not at all. Some people see a contradiction in State Department policy. We sell wheat to the Russians and at the same time complain about allied trade with Cuba.

Under Secretary of State George Bole offered this clarification on meat the press. Economic warfare, so to speak, or economic denial to the country. It's a matter which should not be used lightly out of peak. It's a matter which should only be used if it can materially affect the economic and political decisions of a nation. Now, in the case of Russia and Cuba, we have an elephant and a rabbit, an arabic which has the kind of infection which can affect the whole of the Western hemisphere. And you don't use the same weapons against an elephant that you use against a rabbit. Soviet Union, for example, is almost self-sufficient. It depends on its free-world imports for only something less than 1% of its requirements. Cuba in the pre-castro day is dependent 30% on the free-world for its requirements, so that it makes sense to impose a general economic denial program against Cuba. And it makes very little sense against the Soviet Union and no one who's studied the problems ever seriously urged it.

The Commerce Department is in charge of enforcing our policy on trade with the Soviet block. It issues the licenses which an exporter needs for the shipment of most goods behind the Iron Curtain. Assistant Secretary Jack Bareman explains the criteria the Commerce Department uses in deciding whether or not to issue a license under the terms of the Export Control Act of 1949. We will not permit trade and items which are strategic or which can contribute to their military or economic build up in a way which would be detrimental to the United States. The way in which we do this is to impose the requirement for licenses which have to be obtained from the Department of Commerce by anyone exporting to the Soviet block or to the Sino-Countries. We have a flat embargo on all goods that might be shipped to China, North Korea, North Vietnam and a very high embargo on items to Cuba, including only foodstuffs and medicinal.

To the countries of the Soviet block and Russia herself, we have a list of items which can be shipped we call it a general license and then a larger list of items for which the exporter must obtain a license from the Department of Commerce. In 1962, we had applications for the Soviet block mounting to about $100 million. We denied about half of them because about $43 million fell into one large category of automotive equipment. We decided that the entire complex of requests should be denied. Whereas last year in 1963, we had requests for about the same amount and we denied a much smaller percent, only about 5%. It depends entirely on what the Soviet block wishes from the United States. We do not have that much control over what is requested.

We take requests only as the trade brings them in, but then we look at them very carefully to see whether or not they fall into the categories of denial or approval. What kinds of items are now being denied that they do wish to have? Largely, items of high or unique technical development, the best technology, the most modern plants for production of items which we think would be too detrimental to the United States. Difficulty of course here arises in whether or not we have an effective control over certain types of items. For example, we wouldn't be bothered about a textile plant which produces fabric clothing such as the West normally has or which they can be obtained anywhere in the West. We have licensed plants for production of textiles. Whereas on the other hand, the production of one of the more unique or rare rubbers or video equipment or something of that sort, we might be much more reluctant to let them have.

How much business would the United States do with the Soviet block if the official restrictions were relaxed? Well, to begin with, let's see how much business is now being done. In 1962, according to Department of Commerce figures, all the countries of the free world exported a total of $4.7 billion worth of goods to the Soviet block. And Soviet block exports to the free world totaled $4.8 billion. But this trade was only an insignificant part of the total trade of these nations, only 3.8% for the free world, and 3.6% for the Soviet block. The United States accounted for only a very small fraction of the free world's trade with the Communist block. In 1962, it exported $125 million worth to the Russians and their satellites, and imported only $82 million worth.

Trade is a two-way proposition. The Western European countries export much more than we do to the Soviet block, but they also import more Soviet products, and they're buying the kind of things the United States can't use. Commodities such as oil and timber, which we've got plenty of. Even if all legal restrictions were removed, that would be a limiting factor on trade. We could increase ourselves to the Russians maybe as much as 250 million a year, but that would be only 1% of our total exports. So what we're talking about is not very important in economic terms. Some American businessmen feel a commerce department's rules are too confining. They would like to see a relaxation of controls, and even an encouragement of trade with the Soviet Union.

A leading spokesman for this view is Edwin Neelan, president of the United States Chamber of Commerce. I think trade tends to bring customs and people together. They begin to understand each other a little better. And I think also we have a great deal to gain because in this particular area, we know very little about the desires and the real needs of the Soviet Union. At least the average American citizen doesn't have a great deal of information on it, although much more than we had a few years ago. But I think generally speaking, the real thing we have to gain is that our agricultural production in this country is extremely competent, and we can put food and fiber almost anywhere in the world on a competitive basis provided we do not have artificial price supports. So I can see where an expanded east-west trade might help our farm part, immensely, that it would keep us from having to support farm prices and spend a lot of money. It might even bring down the cost of food in the United States. I think likewise that it would help our balance of payments a great deal.

There are so many angles like this that need to be pursued that I'm very highly in favor of trying to expand the east-west trade area. What about trade with red China, Mr. Nellon? I think the pressures are so strong that you will find both Europe and Japan trading with red China before long. As a matter of fact, there's a tremendous amount of trade going on through the free port of Hong Kong right now. It generates, I'm told, about two million dollars a day in exchange for the Chinese so that they can use this, the purchase needed supplies. And I don't think recognition of the government necessarily is needed to do a certain amount of trade in this area. In fact, I think that this is one area in which the force of circumstance sooner or later will require us to at least look with favor upon our partners in the free world trading. And if this is so, it seems to me that we should be equally as open-minded on it, but I still feel that basically the government ought to do everything possible to help promote trade throughout the world and this would not exclude, in my opinion, the Soviet bloc. One American company that is actually doing a lot of business with the Soviet bloc is Intertext International.

Its sales have included complete textile plants, such as these in the Soviet Union. Intertext President Sidney Scheuer was asked what it's like to do business with the Russians. There are vast differences, and it is a very tedious procedure. The endurance span of most Americans is not a very long one. The European has come up the hard way in this regard and is accustomed to the frustrations of international trade, but they're particularly accentuated in a state system of purchasing. After all, the individuals you deal with, the individual entities you deal with, represent everything that is bought in that country in these areas. And very few men make that determination as to the trading. If you create trust and credibility, you are extended trust and credibility.

You cannot do that in theory, and you cannot do that making faces in the United States. You do a disservice by so doing. And it is very time-consuming to be there. They are inefficient because they have too much to do in their procurement. And there are so many cross-checks that they can't be as definitive as a Western purchasing. We have no idea of the enormous needs of the Eastern countries. We would be hard put to it to supply them. I believe most of these countries are credit-worthy. We do not extend credit. Every other country in the world extends at least five years. And now we know that Britain has negotiated for 12 or 15 years, it is not entirely clear. And our government is very much interested in this aspect of the development of trade which Britain has followed.

What do you think the U.S. government can do to encourage trade? If it is possible to get a license from the board of trade in England in 24 hours or if it is possible to get a clearance from the board of trade to go ahead with a negotiation in 24 hours, we should not take three, four, six months or get no answer and no declination. We should get a declination at least promptly. As much more that we would be willing to do than the businessmen come to ask us if they can export. But there again is a very difficult problem of developing the business. No exporter is going to come to the United States government and say can I ship a certain thing to the block unless he has some evidence that he can sell it to develop that evidence is quite time consuming. It is an expensive negotiation to go into Russia, develop the business and then come back for an order, a license to permit the sale from the U.S. government. For all to talk about business, trade with the communists is primarily a political question. Some important people in Washington are fundamentally opposed to expanding trade.

Senator Paul Douglas of Illinois. Stalin made a very interesting, pardon me, Lenin made a very interesting observation over 40 years ago. He said we are going to hang the capitalists and we will hang them with rope which the capitalists themselves sell to us. And he believed there was no cohesion amongst the capitalist classes of the various western countries and that for the sake of temporary profit, they would sell material to Russia which Russia could then use against the western countries. And I must say that as I hear various manufacturers step forward and the head of the U.S. Chamber of Commerce amongst them, advocating sales of this material to not only Russia but to red China, I am afraid that Lenin predicted fairly accurately what the behavior of certain groups in our society might be.

Senator Kenneth Keating of New York. We have been sending to Russia technical equipment, large industrial enterprises, information about how to build plants, some of them a semi-strategic character, and getting back furs and feathers from them. Now I would prefer, I would like to see our trade increased, but I would like to see our trade in finished goods, things that will show the benefits and the accomplishments of a free enterprise society, and finish goods, shoes, clothes, and that sort of thing. I would like to see that stepped up, but I am opposed to sending to Russia or other communist countries, items which can build up either their military potential or can relieve their own economies to the extent that they can plow more money into building up their military potential. What effect does American trade policy have on the Soviet Union? Students of the Soviet economy are divided. For example, Professor Warren Nutter of the University of Virginia, and Professor Franklin Holdsman of Tufts University.

Now they are seeking trade with the West Y because in this way they are able to get goods cheaper through the exchange than they could produce them internally, and this is particularly true at the present time when they are having these very special difficulties. If anyone really thinks that deprivation of trade would hurt the Soviet Union now, all one has to do is to look back historically. In the 1930s, many nations embargoed the Soviet Union. Their trade to GNP ratio fell down to one half of 1%, that's relatively one-sixth of what it is now, and still in that period when they were much less well developed, when their industry and their manufacturing were in a much lower state of development relative to the West, they still grew at enormous speed without almost any dependence on trade at all. From time to time, whenever they have a particular problem in a particular area or they decide to push forward a particular area, they move into the West and purchase equipment and purchase know-how to set up their own industry, and then of course as soon as they have purchased the know-how, which they can get relatively cheaply, because they don't have to pay the cost of all the development and so on, they cease trading in that particular item.

Denying them technology and denying them trade is always going to hurt them a little bit, but I don't think it can hurt them significantly. They have been denied, of course, the technology that goes with missiles and with all sorts of advanced military equipment, and we all know that having been denied these things, they have developed them on their own. I would say that at the moment, our most promising allies are thin communists, not fat ones, at least thinning ones, because as far as the people in Russia and the European satellites are concerned, they take out their feelings of discontent, not against us, but against the existing regime. And the fact that they've become thinner in the last couple of years means that they have become more discontented and have raised the pressure against the internal regime and an effort to cause some slackening off of the existing system.

It's obvious from the discussions in the Soviet press today that there's a great deal of grumbling going on. Now, suppose we were able to hurt the Russians, and this is something that I would question. Suppose we were able to hurt them. What would happen if we did hurt them, let's say, very seriously? Well, my guess is that if we were able to hurt them very seriously and did, that the Christchurch regime would fall. If it did fall, most Kremlinologists would agree, I think, that a hard-learner like Malinovsky would take over. A less moderate guy than Christchurch of a man like Malinovsky might press the buttons that began a nuclear war. The question of trading with communist nations will continue to arouse great and often passionate differences of opinion. There are no simple irrefutable answers, but one point should be made clear right now. Whatever we Americans decide to do or not to do about trading with the communists, our allies, the most advanced industrial nations of the free world, are going to continue trading as they have been doing and regarding it as a commercial, not a political matter.

Nothing we do, no amount of pressure we might put on them will deter them. Once the United States faces that fact, a lot of the bickering which is needlessly imbitering our relations with our allies will be removed. Then we can settle down to deliberating among ourselves whether it is wise for Americans to do business more freely across the Iron Curtain. This final decision must be fitted into our overall strategy in dealing with the Soviet Union. In the final analysis, it will be most strongly influenced by the temperature of the Cold War. If the present relaxation of tension persists and becomes a real datant, a lot of the opposition to trade is likely to melt away. If there is a return to the atmosphere of crisis, then even the most rational arguments for expanding trade will be at least temporarily silenced.

In the final analysis, the Soviet Union will continue trading with the Soviet Union. In the final analysis, the Soviet Union will continue trading with the Soviet Union. This is NET, National Educational Television.