The Risks of Trade With the USSR

...The recent experience of Finland, as another example, has shown that the Soviet Government has not hesitated to use its commercial power to exercise a veto over the domestic politics of a trade partner...

...The reason was that the Soviet Union could not resist demonstrating its "friendship for Egypt" by means of this hostile act...

...In light of the above, the major Western trading nations are faced by an urgent responsibility in world commerce...

...The offending ministers were dropped and the new cabinet so constituted as to appease the Soviet Union...

...Consider, for example, the case of Australia...

...When Australian authorities refused to surrender Petrov, and especially when they stopped Russian agents from carrying off his wife, Evdokia, by force, the Soviet Ambassador promptly announced that his country would buy no more wool in Australia...

...cumulation of practical experience...

...While the ink is barely dry on the new Cuban-Soviet agreement, glistening with the promise of an annual outlet for one million tons of sugar and a long-term credit for $100 million worth of machinery imports, it would be foolhardy for any outside observer to try to persuade the present Cuban authorities that they have not been the unique and enduring beneficiaries of an outstanding piece of commercial largesse...

...The answer lies, instead, in a rising demand for the products of the less-developed nations...

...For the long pull, however, stable prices are not the answer...

...When the occasion called for it, as it did for example in Cuba, the commercial and political hierarchies of the USSR were easily merged in the personality of Comrade Anastas Mikoyan, the Kremlin's versatile and indestructible drummer-at-large, who negotiated a crash trade agreement that was everything it could be from the standpoint of Soviet policy...

...It is clearly within their power to work for maintenance of a climate of orderly procedure while simultaneously allowing for the utmost freedom of movement of all goods entering the world market...

...Another type of hazard in Soviet trade may be described as a breach of contract for "the sake of friendship...

...A campaign to that effect was launched in the official Soviet press and at its height the Soviet Ambassador to Finland pointedly broke off the important talks under way on a new commercial agreement between the two countries...

...A sober appreciation of the facts of commercial life does not usually come through the gift of outside advice...

...This embargo, proclaimed in a fit of bad temper, remained in effect for the next five years and through trade Australia was punished for asserting its sovereign rights as an independent nation...

...One basic fact is that the same monopoly trading apparatus which enables the Soviet regime to move quickly into a new market, or to enter into the breach between two nations, works both ways...

...No wonder, then, that the major trading nations sometimes seem to fail to practice what they preach...

...It also permits Soviet rulers to shut off the flow of trade whenever it becomes necessary to punish a trade partner for some act of independence...

...Under these conditions, countries like Iceland and Finland have given a hostage to fortune far out of proportion to that of their trade partner...

...They must, in particular, reduce their own trade barriers to a minimum, as many GATT members are now doing, thus affording freer access to their markets to all comers, especially to the weaker trading communities of the non-Communist world, especially the less-developed nations which are dependent on one or two export crops for their economic viability...

...Nowhere is this effect felt more painfully than among the small, less-developed, less-diversified trading nations, because it cuts sharply into their critical income from trade, thus reducing their capacity to maintain current economic good health and, most of all, to support significant programs of economic growth...

...Only through the visible presence of this alternative can we reasonably expect them to be able to resist the pull of the Soviet bloc...

...Neither we nor our allies can afford to reduce our commitments to steady economic growth...

...He left for Moscow and a grave Finnish crisis ensued— lasting 40 days—over the issue of the trade agreement versus political self-determination...

...For, in its own way, the plight of weaker trading nations helps to underscore the one new lesson in world politics learned by our generation: A "beggar-my-neighbor" policy can be as destructive of the future of the rich nation as that of its poor neighbor...

...Especially where the trade partner concerned is the Soviet Union, this appreciation must be acquired directly, through the slow acLeon M. Herman studies Soviet economic developments as a Senior Specialist in the Library of Congress...

...See chart below...

...They have demonstrated to themselves and to the world that they can accommodate a sizeable volume of Soviet trade without becoming too dependent on it and have thus remained less vulnerable to Soviet pressure...

...In December 1958, Moscow decided to bring pressure to oust several political figures from the Finnish Cabinet...

...In the end, Finland had no choice but to give in...

...Here, a great deal will depend on how well the industrialized nations manage their own internal economic affairs...

...The reason for this apparent double standard is simply this: The very size and diversity of the commercial giants' trade have made it possible for them, over the years, to take Soviet trade in their stride...

...In October 1954, the Canberra Government granted political asylum to a disillusioned Soviet Embassy official named Vladimir Petrov...

...It may be of some benefit to newcomers in the trade field to review some of the recent experiences of Russia's trade partners outside the Soviet bloc...

...Nor need we examine in detail each punitive act of the Soviet trade monopoly to get at its root cause...

...For contrast, take the case of the United Kingdom...

...It is worthy of note, too, that Finland's share in the total trade of the Soviet Union amounts to only 3 per cent a year...

...In value of goods traded with the USSR, the UK and Finland are about on par, but as far as the United Kingdom is concerned, Soviet trade represents only 1 per cent of its total volume of commercial transactions...

...In such an exchange, neither partner runs much risk in the event of a sudden break—or the threat of a break—in trade...

...They are often all too ready to warn the smaller, less well-endowed nations against the hazards of trade involvement with the Soviet bloc, but at the same time they have never overlooked a chance to trade across the Iron Curtain themselves...

...These incidents do not, of course, exhaust the record of Soviet pressure for political advantage through trade...

...To the USSR, the British account for only a little larger share of all trade, 3.6 per cent...

...In a world less interdependent, this vulnerability of weaker trading communities to political pressures from the Communist camp might have been ignored, or merely deplored as one of the grim but unavoidable risks of the marketplace...

...Since the more active trading nations today account for the bulk of transactions in world trade, they can ROLE OF SOVIET BLOC AS EXPORT MARKET (Selected countries—1959) TOTAL EXPORTS (In millions of dollars) SOVIET BLOC SHARE (In % of total exports) MAJOR TRADERS France 201 3.6 West Germany 445 4.4 Belgium 95 2.9 Italy 156 5.4 Netherlands 70 1.9 Sweden 114 5.1 United Kingdom 272 2.8 Canada 39 0.7 United States 89 0.5 MINOR TRADERS Greece 34 16.5 Iceland 22 33.7 Turkey 41 11.5 Finland 197 23.5 Egypt 230 52.2 Uruguay 27 28.0 Austria 143 14.8 Yugoslavia 149 31.3 Guinea 5 14.5 —both by the power of example and through the instrumentality of an agency like the General Agreement on Trade and Tariffs (GATT)—enforce the rule of law and fair commercial practice in the market place...

...The blackmail incidents on record have usually involved small trading nations who made the mistake of allowing a large or vital part of their trade to become dependent upon Soviet good will...

...In late 1956, the Soviet Union broke a signed contract with two Israeli firms to deliver fuel oil for producing electric power in Israel...

...Within the foreseeable future, too, there will have to be active cooperation between buyers and sellers in some sensible scheme for minimizing extreme fluctuations in the prices of raw materials, the export of which provides the life-blood of economic progress for so many underprivileged nations in the world today...

...As a matter of elementary economic self-defense, they must try to keep the channels of communication open to all potential traders...

...Such pressure has been exerted recently against Iceland, Iran, Greece, Yugoslavia and Denmark, to name just a few...

...With them the Soviet Union has not succeeded in entrenching itself either as an indispensable supplier of vital imports or an irreplaceable outlet for pressing domestic exports...

...Downward drifts in the level of economic activity among the industrial nations have always exercised a depressing effect on the level of world trade...

...Russia pressures for political advantage through trade The Risks of Trade With the USSR By Leon M. Herman The recent crop of bilateral commercial agreements between the Soviet Union and the countries of Latin America has served to demonstrate once again that Soviet trading is well-adapted for prompt deployment of its forces in any part of the world and for any direct action needed to exploit a promising political situation...

...Today, however, we need not be and we cannot afford to be quite so helpless...

...Underlying this unhappy event was the sad but all-important fact that nearly 20 per cent of Finland's exports annually go to the USSR (as distinct from the Soviet bloc) and the loss of that much trade with a partner of this size was too serious a risk to incur...

...Iceland, for example, has become involved to a point where it sends 19 per cent of its exports to the USSR, while receiving only a fraction of 1 per cent of Soviet exports...

...What is of interest for our present discussion is to view these incidents in a context that sheds light on a more general problem, namely the trading nations' vulnerability to Soviet political pressures...