I am pleased to have the opportunity to speak to such a distinguished audience of business leaders this evening on a topic which is of considerable interest to me and to you as well, I’m sure with the Soviet Union.
The increasing level of U.S. trade in 1973 the United States exported over one billion dollars worth of food, machinery, chemicals and other goods to the Soviet Union while importing approximately 210 million dollars worth of raw materials, petroleum products, diamonds and furs from the Soviet Union. That volume will increase this year, with the United States enjoying a 300 million dollar surplus for the year.
The mushrooming growth of economic relations between the two countries raises practical and philosophical questions of extraordinary complexity. There is even controversy over the concept of trade itself - whether it should be viewed solely as an independent exercise in bilateral business dealings, or as an integral part of a government policy called, for want of a more precise word, détente.
While I do not purport to know the answers to all the questions raised by our economic dealings with the Soviet Union, I have been fortunate to travel to the Soviet Union approximately a dozen times in the course of the past two years on behalf of U.S. business concerns and have observed and participated in negotiations with different agencies of the Soviet government at virtually all levels. Those visits serve as the basis for my remarks this evening.
It would be safe to say that the practical problems associated with doing business in the Soviet Union are, as I know you’ve heard or experienced, many and varied. let’s assume a U.S. corporation has a product it would like to market in the Soviet Union. How does the corporation go about it? Does it advertise? Does it send representatives to the Soviet Union to set up shop and sell the item? Does it attempt to approach the ultimate consumer?
Perhaps the single most important thing to remember when trading with the Soviets is that theirs is a planned economy. U.S. advertising and marketing techniques are unlikely to “create” a market for a particular item, as government planners will have long since determined what is required. That determination having been made, the weight of bureaucratic inertia makes affecting change extremely unlikely in all but the rarest cases. The various foreign trade organizations of the Ministry of Foreign Trade are informed as to the products and technology to be acquired through imports during the period in question, it is their job, among others, to acquire them.
To find out what products or technology the Soviet government is interested in acquiring, a U.S. corporation can turn to any one of a number of sources. First, the foreign trade organization charged with responsibility for the technology in question. If the name of the appropriate foreign trade organization is not known, the Bureau of East-West Trade of the Department of Commerce can help by providing the name and address of the appropriate FTO.
Second, the State Committee of the USSR Council of Ministers for Science and Technology in Moscow. This State Committee is charged with overall responsibility for acquiring scientific and technological information and processes and serves as the primary liaison contact between Western firms and the functional Soviet Ministries. Its Deputy Chairman, Dr. Dzherman Gvishiani, is an extremely personable, capable man who has a prodigious knowledge of U.S. business practices and techniques.
Third, Amtorg, the Soviet trade mission located in New York.
Fourth, the Bureau of East-West Trade of the Department of Commerce. The Bureau maintains addresses of the Soviet agencies noted above and is extremely knowledgeable concerning Soviet trade objectives.
While there are other sources, these are the most important and the most likely to provide the answer as to whether the Soviet government needs the U.S. corporation’s product or technology.
Assuming the U.S. corporation determines that the Soviets want its product, with whom does the corporation deal to market the product in the Soviet Union? Again, it must be stressed that the individual U.S. businessman or corporation doing business in the Soviet Union is not dealing with a private entity motivated by the same considerations of profit, loss and changing market conditions. Rather, it is dealing with the Soviet government, whose decisions are grounded in its interpretation of the projected needs of the country. The U.S. businessman will therefore not be likely to talk with the ultimate user of his product. Rather, he will talk to the agency charged with responsibility for procuring the product.
While “profit” as we know it is not the prime mover from the point of view of the Soviets, their ability to “out-capitalist” the capitalists should never be underestimated, however. Recent events, notably the grain deal debacle, have shown the Soviets to be shrewd businessmen in anyone’s vocabulary. Although extensive economic relations between the U.S. and USSR are a relatively recent phenomenon, the Soviets have been trading with Western countries in Europe and Scandinavia for some time and have done their homework well.
The status of the Soviet government as the real party in interest in trade negotiations is partly responsible for the sometimes tortuous pace at which such negotiations move. Soviet negotiators do not enjoy the decision-making autonomy of representatives of US corporations with whom they’re dealing. as a result, Soviet negotiators often serve as middlemen between the government and the US corporation, and proposals must be cleared with the government before they can be accepted or counter-proposals made. Having said that, I should add that to the extent a proposal is expected and its impact weighed in advance by the Soviet government, Soviet negotiators are empowered to accept in principle even the broadest proposal and often do so before details have been finalized, which is sometimes unsettling to U.S. firms, which often don’t like to agree to anything until they know precisely what they’re agreeing to.
The contracting process generally requires that three agreements be reached, each reflecting a different stage of development and increased level of complexity.
The first agreement, called a protocol, is essentially an agreement to negotiate further. It identifies the parties and defines the broad parameters of the parties goals and understandings. Although not substantively important, the protocol is vital to further negotiations as it is regarded as bestowing favored status on the U.S. corporation in question by establishing that company’s credentials with the Soviet government.
The second agreement, called the general agreement, spells out the rights and obligations of the parties in greater detail, including construction schedules, delivery schedules, etc.
The final agreement, called the commercial agreement, represents the culmination of all prior negotiations and takes the form of an exhaustive contract which purports to cover every possible contingency. The Soviets have an international reputation as strict observers of their contractual obligations, and one of the reasons is their practice of not entering into final agreements until they are sure that the contract contains everything they seek. One who desires to do business with them must therefore be prepared to spend considerable time negotiating every last detail.
I was recently interviewed in Washington for Soviet radio and television. The Soviet commentator told me the day before the interview that he intended to ask me, among other things whether I thought increased economic ties between the U.S. and USSR served the interests of both countries and whether such relations would result in an improved political climate between our two countries.
To the extent that increased contact at all levels increases the flow of communication between our two nations and makes dialogue more likely than unilateral action, increased trade relations do in fact serve both countries. There is, however, considerable concern among many knowledgeable leaders in the United States that the increased trade has resulted, and will continue to result, in a one-way flow of information and benefit to the Soviet Union, and that we are receiving little or nothing of comparable value in return. If we measure our return solely in terms of like products, I would agree with that premise, because except in a few highly complex fields such as nuclear fission and energy transmission, Soviet technology is generally not as advanced as our own. Still, there is little to be gained by trading assertions as to the relative sophistication of the two countries’ technologies, because there is no requirement that the benefit we receive as a result of increased trade be in like kind. The Soviets clearly desire access to various facets of our technology. Their five year plan reflects that desire. It being clear what the Soviets seek to achieve via the medium of increased economic relations, the question is, what does the other party to these bilateral negotiations - the United States - seek? Once we’ve established that, whether it be political concessions, increased cultural exchange, acquisition of raw materials or petroleum products, or what have you, we can more fairly judge whether we stand to “benefit” sufficiently from increased economic relations with the Soviets to warrant our helping them to develop their own technology.
I think it reasonable that, as in any negotiation, there is room for both the U.S. and the USSR to benefit. Whether or not the United States does will depend in large part on our government’s ability to clearly formulate its objectives and its willingness to engage in tough, extensive negotiations to achieve them.
With respect to the question of whether increased economic ties will result in improved political relations between the United States and the Soviet Union, I would say that the fact of increased economic relations between the two countries does not necessarily portend increased understanding at the political level, though certainly we can and should hope that such increased understanding will be a by-product of our economic relations. The fact is, it must be, because the problems facing the peoples of the world today transcend national boundaries and ideologies. Increased communications and technological sophistication transform local occurrences into international events. Unilateral action by our two countries is no longer possible. The United States and Soviet Union must therefore focus on their potential impact on the world not as it is currently viewed, but as it is; not as consisting of blocs of peoples to whom we seek to export ideologies, but as hundreds of millions of individual human beings.
The United States and Soviet Union bear heavy responsibility because of our potential for influencing the lives of people everywhere. It is for us to try to find a common denominator, from which to approach the world’s problems, and we cannot do so until we discard hackneyed pre-dispositions about each other. If, for example, the Soviet government proceeds from the premise that insatiable greed is the cornerstone of United States international policy, and that increased U.S. interest in better economic relations with the Soviet Union is a manifestation of this greed which, if properly orchestrated, can be used to destroy the United States, then the Soviet government misjudges not only our intentions, but our intelligence. By the same token, if the United States government assumes that Soviet international policy is keyed to military conquest of the world, it is guilty of the same misjudgment. Before there can be increased understanding at the political level, there must be a desire on the part of both of our governments to answer the hard questions about the way we do things, to address issues as they affect people, not abstractions. We in the United States must know why Soviet plainclothes police feel the need to pose as construction workers and use bulldozers and water cannons to destroy art, just as Soviet citizens must know why the people of South Boston feel the need to stone school buses loaded with black schoolchildren.
Until we answer these questions, and until we organize not just scientific exchange programs which, for all their usefulness, are essentially sterile, but programs involving exchanges of politicians, laborers, union officials and farmers, we cannot hope to accomplish a significant improvement in the political climate between the United States and the Soviet Union. Increased economic relations may prove a catalyst, but they do not themselves constitute the chemical reaction.
