Proponents of expanded trade with the Soviets argue that closer economic ties will promote better understanding and help avert military confrontation. Opponents fear that trade with the Soviets will strengthen their economy and free additional resources for military purposes. Pentagon officials warn that the United States must tighten controls on a broad range of goods and technologies in order to prevent the Soviets from using Western advances to modernize their military systems. Still other observers view trade as an important lever to influence Soviet foreign policy and human rights behavior.

As with most complex policy questions, there is a measure of truth in each of these viewpoints. The challenge for Congress and U. S. policy-makers is to balance all of the competing economic, foreign policy and national security imperatives.

Two aspects of the East-West trade question that illustrate the difficulty of reaching consensus in these controversial policy areas are export controls and "most-favored-nation" (MFN) trade status. The bitter three-year struggle to reform our nation's export control system demonstrates how ideological biases can drive policy at the expense of economic and foreign policy interests. The ongoing debate over MFN trade status for the Soviet Union and other East bloc nations points out the limits to which our trade leverage can be used to alter the domestic or foreign policies of another nation.

National Academy of Sciences

Last January, the National Academy of Sciences WAS) published a study, prepared by a prestigious panel of national security and trade experts, which charged that American export controls have cost our economy over 188,000 jobs and $9 billion in GNP each year without significantly improving our national security.

Within several months of the NAS study, Congress learned that subsidiaries of Japan's Toshiba Corporation and Kongsberg, a Norwegian firm, had diverted highly sensitive propeller milling equipment and know-how to the Soviet Union, thereby enabling the Soviets to greatly diminish the noise of their submarine fleet.

These two events should convince every observer - from the most trade-oriented businessperson to the most fervent anti-communist of the need to reform our nation's restrictions on the export of high technology.

We need to focus our nation's controls on the most militarily sensitive technology, and strengthen and coordinate our multilateral enforcement efforts with our allies. Unfortunately, opponents of export control reform continue to obscure and confuse these goals, mistakenly citing the Toshiba/Kongsberg diversion case as a basis for even broader controls.

No one in Congress doubts that the Soviet Union and its Warsaw Pact allies are actively engaged in efforts to acquire strategically important Western technology. Nor does anyone in Congress wish to promote trade that would enhance Soviet military capability or undermine U.S. national security. Our defense strategy rests on qualitative technical superiority over the Warsaw Pact countries, and we must ensure that the Western alliance maintains this technological edge. Clearly, we must improve the effectiveness of U.S. and multilateral intelligence and enforcement programs to prevent these diversions of specific Western technologies.

Quite distinct from illegal theft and espionage activities, however, is legitimate trade regulated by the export licensing system. The issue is not whether trade with the Soviet Union and its allies should be controlled; such controls have been in place for more than 30 years and continue to have widespread support. The key challenge is to protect U.S. security and harmonize enforcement efforts with our Western allies without placing U.S. exporters at a disadvantage in fiercely competitive world markets.

The Reagan administration has failed to implement an export control policy that balances the equally critical goals of protecting national security and promoting U.S. economic vitality. Instead of focusing controls on goods and technologies that can truly enhance Soviet military capability, the administration has promoted a bewildering, cumbersome and sometimes inherently contradictory regulatory framework that unnecessarily impedes U.S. exporters.

A review of the Commodity Control List - the list of commercial goods and technology requiring prior government approval for export -demonstrates that our government is simply trying to control too many items, many of which have little or no strategic value. The list includes more than 200 broad categories of goods and technologies, encompassing hundreds of thousands of items. Computerized games, hand-held calculators, petroleum jelly, and chemicals used to make corn flakes and ice cream are just a few of the many nonsensitive goods that require export licenses.

More than 99 percent of license requests for these items are eventually approved, but only after weeks and sometimes months of costly delays. The Department of Commerce itself admits an average processing time of 21 days for export licenses to "free world" countries and 85 days for East bloc license applications. Worse yet, applications routinely sit for as long as two weeks before the official processing time clock begins, with an additional delay after a decision is made before the paperwork is returned to the exporter. In today's fast-moving international trading environment, an export license delayed often means an export lost.

In addition to bureaucratic delays, the sheer complexity of our export control system discourages many small and mid-sized U.S. firms from exporting. Foreign customers have an even more difficult time understanding and complying with our regulations. Currently, all foreign companies must get U.S. approval before reexporting a product that contains even a trivial number of U.S.-origin components, such as a$5 microchip. In many cases foreign companies have simply opted for other sources of goods rather than contend with uncertain, confusing and burdensome U.S. export requirements.

Little wonder that our nation's trade balance in high technology products has plummeted from a $26 billion surplus in 1980 to a $2 billion deficit in 1986.

To deal with such problems, Congress has been working to craft an export control system which does a better job of preventing militarily critical technology from falling into Soviet hands, but eliminates the unnecessary restrictions that have made U.S. firms uncompetitive in the world market.

In 1979, Congress sought to focus controls by requiring the Department of Defense to identify those technologies most critical to superior military capability in order to decontrol less critical products. This effort has not succeeded because the Militarily Critical Technologies List (MCTL) catalogs virtually every modern industrial process. As Fred Bucy, the former president of Texas Instruments who headed the Defense Science Board task force which recommended the MCTL approach, noted last year, "we are squandering valuable resources trying to control all types of technology, when we must concen trate on controlling only the technology or know-how which can give our adversaries a revolutionary leap in military capabilities."

The Export Administration Amendments Act of 1985 made further changes designed to improve the efficiency of the export licensing system and the effectiveness of our enforcement efforts. While these reforms were not easily won, the final bill struck a delicate balance between easing the burden of export controls on U.S. manufacturers and protecting national security.

The new law called for eliminating unnecessary licenses for low-technology exports to allied nations and speeding up licensing decisions for all U.S. exports to our allies. The 1985 amendments also sought to improve procedures for recognizing and responding to foreign availability of goods on the U.S. control list. Under the new law, when U.S. industry makes a reasonable case that an item is freely available overseas, the executive branch is supposed to either decontrol the item or persuade the foreign supplier to impose similar controls on the item. If unsuccessful after 18 months of negotiations, the bill calls for removal of the item from the control list.

Unfortunately, the Reagan administration has frustrated, undercut and ignored many of these reforms. Indeed, explicit congressional directives to remove controls on the basis of foreign availability have been subverted by the regulatory process and interagency disputes. As a result, only a handful of products have been decontrolled on the basis of foreign availability in eight years.

Due to the administration's failure to implement past reforms, the House Foreign Affairs Committee drafted further amendments in 1986, which have been incorporated into the 1987 Omnibus Trade Bill (H.R. 3). This legislation passed the House on April 30 by a bipartisan vote of 290 to 137. The bill reaffirms the principles established in past reform laws - that export controls should be focused on state-of-the-art, critical technology and that our government should not penalize U.S. manufacturers when a given product is widely available on the world market.

To meet these objectives, the 1987 H.R. 3 legislatively mandates a sharp reduction of excessive export controls. The secretaries of Commerce and Defense would be directed to identify approximately 40 percent of the goods on the control list that contribute least to the military potential of our adversaries and seek removal of these items from control over a three-year period. This is not a radical step; former Secretary of Commerce Malcolm Baldrige acknowledged that the control list is oversized by as much as 40 percent and needs to be overhauled.

In a provision similar to the 1985 reforms, H.R. 3 would eliminate licenses for low-technology items to all "free world" countries and eliminate the majority of licenses on shipments to Western nations that work with us to jointly control technology transfers. H.R. 3 also clarifies the foreign availability test in existing lawand establishes stringent timetables for the decontrol process.

In addition, the 1987 H.R. 3 addresses U.S. reexport policy, perhaps the area that has caused the most friction with our allies and has most weakened the competitive position of American industry. Licensing requirements for the reexport among our allies of multilaterally controlled goods would be eliminated. Requirements for U.S. reexport approval of foreign products that contain only a limited amount of U.S. parts and components would be removed.

The fate of these reforms is uncertain as of this writing because the Senate and House have passed differing versions of omnibus trade legislation. These differences must be resolved by an enormous conference committee, involving over 200 members of the House and Senate. While the fate of these reforms is uncertain at this time, prospects for significant export control reform are encouraging. Both bills move in the same direction to streamline the export licensing process and focus efforts on enforcing controls on strategic goods. Both bills seek higher fences around fewer items.

Given the justifiable anger over illegal diversions like the Toshiba case, however, it will take cool heads and foresight for Congress to remove some of these unnecessary and counterproductive restrictions on legitimate U.S. trade.

In the face of Congressional pressure to overhaul U.S. export controls, the administration has grudginglybegun to implement some limited reforms. Last year, for example, the departments of Commerce and Defense unveiled the so-called "Gold Card," or certified end-user plan, that would relieve U.S. companies of the need to obtain licenses for exports to pre-approved foreign endusers. Efforts to automate the system and speed licensing decisions are ongoing. Recently, the administration has moved to eliminate licensing requirements for low technology exports to the "free world" and reexports to certain allies.

While these initiatives are steps in the right direction, they fail to address the fundamental flaw of current U.S. export control policy: the administration is still trying to control too much, regardless of the sophistication of the technology involved or its availability from other countries.

Ironically, our ineffective export control system works directly counter to our national interest. By spreading our enforcement resources too thin, we allow critical Western technology to fall into Soviet hands. By unilaterally constraining our high tech exporters, we unwittingly export jobs and economic activity to foreign firms.

Our nation would be better served by a vigorous commitment to working with our allies on multilateral export controls. As Malcolm Baldrige noted, thereis no contradiction between a call for a shorter control list and strengthening export licensing and enforcement. The reverse is actually true. The list ...has grown so long and unwieldy that we could get much better cooperation from Western Europe with a shorter list of more sensitive technologies."

The Reagan administration fails to recognize that a vibrant economy and a healthy high technology sector are critical fora strong defense. The reforms con tained in the House version of the 1987 Omnibus trade bill will help to refocus our overgrown export control system on truly militarily critical technologies. In the proc ess, it will help strike the proper balance between the needs of our economy and the need to control sensitive technology transfer, all of which are critical to our long term national security.

Linking Soviet Trade with Emigration

The treatment of the Soviet Union under our trade laws has been a simmering issue for nearly 40 years.

While most nations have enjoyed "most favored nation" (MFN) status since the 1934 Trade Agreements Act, Congress in 1951 suspended MFN status for the Soviet Union and all countries under the control of "international" communism. As a result, the Soviet Union and several other nations were forced to accept less favorable tariff and trade terms than most of our trading partners.

In 1962, Congress took steps to further restrict trade relations with communist nations, eliminating the distinction between "international" and "national" communism and suspending MFN status for "any country or area dominated by communism." The result of the 1962 law was that MFN status could not be restored to any communist country without specific legislation.

During the mid-1960s, several bills were introduced to restore conditional MFN status to some or all communist countries, but few even made it beyond committee. After the Soviet invasion of Czechoslovakia in August 1968, attempts to relax MFN restrictions grew less frequent.

During the detente era, the Soviet Union pressed forcefully for restoration of MFN status. Any hope the Soviets had of regaining MFN status was lost, however, when Western sources learned that the Soviet Union had begun to levy high educational fees, possibly running into several tens of thousands of dollars, on all Soviet citizens wishing to emigrate for permanent residence in noncommunist countries. While the Soviet Union attempted to justify these fees as repayment for the free education received by all Soviet citizens, American reaction was rapid and negative.

Despite administration warnings that confrontation would be counterproductive, Sen. Henry "Scoop" Jackson, D-Wash., and 73 other Senators introduced legislation to prohibit the extension of MFN status to any "non-market" economy country which denies its citizens the right to emigrate or imposes on their emigration more than nominal exit visas or other fees.

While the Soviet Union took limited steps over the next two years to reduce its emigration fees, Sen. Jackson and Rep. Charles Vanik, D-Ohio, sponsored an amendment to the Trade Act of 1974 which prohibits MFN status to nonmarket economy countries that deny their citizens the freedom to join permanently their close relatives in the United States, or imposes on such emigration or emigrants more than a nominal tax or fee. The amendment required the president to report to Congress annually on the emigration practices of each non-market economy country, and increased the reporting requirement to semi-annually if MFN treatment was extended.

In response, the Soviet Union cancelled the 1972 commercial agreement with the United States. Practically, this doomed any hope the Soviets might have had of increasing exports to the United States, and postponed indefinitely Soviet repayment of its $674 million in lendlease settlement.

In 1975, President Ford proposed a waiver of the Jackson-Vanik amendment and extension of MFN status as part of a new trade agreement with Romania. While both the House and Senate were critical of Ford's assurances on the emigration question and warned that action on Romania should not be taken as a precedent for future waivers, Congress approved Ford's request of MFN status for Romania.

In 1978, a similar agreement was reached extending MFN status to Hungary. But in 1979, the issue of extending the MFN status to non-market economies grew even more sensitive as relations improved between the U.S. and the People's Republic of China (P.R.C.). The Carter administration and some congressional leaders argued that MFN waivers should be granted in an "evenhanded" manner, to both the U.S.S.R. and the P.R.C. But others insisted that extension of MFN status to China should be considered independent of whether the Soviets were granted a waiver.

In the end, the refusal of the Soviet Union to provide explicit assurances on freedom of emigration resulted in Congress denying MFN status. When considering waivers for China, Romania and Hungary, however, U.S. policymakers did not insist on formal or specific assurances. Instead, broad statements promising efforts to resolve emigration matters in a humanitarian manner were deemed sufficient.

In 1979, Rep. Les AuCoin, D-Oregon, introduced legislation to make a presidential determination of liberalized emigration practices sufficient grounds for a waiver of Jackson-Vanik. Due to fears that such a change would make MFN status for the Soviet Union more likely, however, the amendment never saw action beyond subcommittee hearings.

Since that time, many bills have been introduced to revise the Jackson-Vanik provision. Some would loosen restrictions, such as Florida Democratic Rep. Sam Gibbons' bill to grant Hungary a five-year MFN status extension to replace the annual extension requirement. Others attempt to make MFN status more difficult to obtain, such as Illinois Republican Rep. Crane's 1985 bill to repeal the president's waiver authority on the freedomof-emigration provisions.

Despite all of this legislative activity, the only successful amendment to the original Jackson-Vanik provision was the denial of MFN status for Afghanistan in early 1986.

Later that year, continued extension of MFN status to Romania again became a sensitive issue. While President Reagan requested that Congress continue extension of MFN status to China, Hungary and Romania, he expressed disappointment with Romania's limited response to American concerns not only over emigration but also over human rights and religious issues. Although similarly concerned, Congress did not disapprove of the President's request and, therefore, Romania's MFN status remained intact.

This year, congressional concern over Romania's human rights record boiled over. Both the House and Senate have agreed to resolutions as part of their respective trade bill packages (H.R. 3 and S. 1420) which would suspend for at least six months Romania's MFN status.

The record of Soviet emigration during the last two decades illustrates the difficulty of using trade benefits to influence another nation's internal behavior. As many as 400,000 Soviet Jews have initiated emigration proceedings, but have yet to receive an answer. Over 11,000 Jews have applied for emigration, only to be turned down - some have been denied several times.

Soviet emigration levels fluctuated between 13,000 and 34,000 during the 1970s, reaching an all-time high of 51,300 in 1979. Since then, however, Soviet emigration has fallen precipitously, to 21,000 in 1980, 9,400 in 1981, and a record low 896 in 1974. During the first six months of 1987, emigration has rebounded significantly to an annual rate of roughly 6,000, but this is nowhere near pre-1980 levels.

At least for the near future, one can predict that the United States will continue to approach the issue of MFN status and its link to freedom-of-emigration on a countryby-country basis.

While it is difficult to assess the effectiveness of U.S. trade policy in leveraging a more forthcoming Soviet emigration policy, the Jackson-Vanik provisions continue to enjoy widespread support. Certainly, lifting Jackson-Vanik would send an inappropriate signal to the Soviets, so long as they maintain harsh restrictions on emigration.

At least for the near future, one can predict that the United States will continue to approach the issue of MFN status and its link to freedom-of-emigration on a country-by-country basis.

The Prospect of Improved Trade Relations

Spurred by General Secretary Gorbachev's economic reforms, many U.S. companies have recently sought to establish business contacts with the Soviet Union. These initial contacts may be only the tip of the iceberg. Increased trade within certain guidelines serves the best interests of both nations and improves prospects for reduced tensions.

Given the strategic competition that exists between the U.S. and the U.S.S.R., it is critical that we retain clearlydeveloped restrictions on the transfer of advanced Western technology to the Soviets. And given the moral imperative of promoting human rights and freedom of emigration in the Soviet Union and the Eastern bloc, we should continue to withhold favorable tariff treatment and search for more effective means to prod Soviet behavior.

Within these parameters, however, improved economic relations between the superpowers can provide important new markets for U.S. exporters and possibly give the United States more leverage to influence Soviet actions in the future. Even more importantly, increased trade could help to build cultural bridges, reduce suspicion and hostility and lay the foundation for superpower harmony in the future.