In Interview With Igor Kondakov

Multinational Monitor: Gorbachev has called for the radical reform of Soviet foreign trade and domestic economic management, but many Western observers view the changes as incremental and ineffectual. How do you view the ongoing program of economic reform in the Soviet Union? Igor Kondakov: First, I would like to dispute one part of your question, that many American economists think the "perestroika" reforms are incremental. I try to read everything published here about reforms being undertaken in the Soviet Union, and I think that the ratio between those who think that they are real and deep to those who think they are incremental is probably 10 to 1. In reality, I think we have never undertaken such an overhaul of the economy as we are trying to do right now. This whole reform of the economic mechanism in the Soviet Union is directed toward more integration of the Soviet Union into the world economy. We are trying to change the system, because there are problems in the running of this mechanism. Obviously, we have a lot of problems, including the area of foreign trade. We are not satisfied with the structure of our exports and imports. We were hit hard by the drop in world prices of raw materials and especially oil, when you take into account the fact that about 80 percent of our hard currency earnings from trading with the Western countries are directly from selling our oil. It forces us to think twice about how to improve the situation. Monitor: How do you view the current status of U.S: Soviet trade? Kondakov: Unfortunately, as General Secretary Mr. Gorbachev said lately, we have almost no trade with the United States and the volume of U.S.-Soviet trade has been decreasing dramatically for several years. Last year, for example, it dropped almost 50 percent, and we think that this year it will decrease even more. You know our two countries are two economic giants in the world and the mutual trade between the two countries does not exceed, I would say, $2 billion. Our trade with the Federal Republic of Germany, for example, is about $10 billion. Of course, we have lost something due to a decrease in oil prices. Our overall trade turnover decreased, but with the United States it decreased much more than with other countries. There are a lot of obstacles in the way of SovietAmerican trade, most of which are of a political character. Mr. Gorbachev named the obstacles and he put on the list the lack of the "most-favored-nation" treatment denied to the Soviet Union by the United States. It is a normal way of trading nowadays, and we do extend such treatment to the United States. I can tell you that with no other country have we such unfavorable trade conditions as we have with the United States. The second obstacle is the lack of U.S. government supported credits for trade with the Soviet Union. There is also a rigid system of export controls in the United States. Other obstacles include restrictions on imports of Soviet products. Monitor What potential do you think exists for trade between the U.S. and U.S.S.R.? Kondakov: Our two countries have a great potential for trade since we are natural trade partners. It is difficult to name any figure, but some years ago, it was estimated that $10 billion. But we can not reach it without the removal of obstacles. There is another problem I would like to mention. The result of these obstacles is that the United States has had for many years a positive trade balance with the Soviet Union. For the last 15 years, the positive trade balance of the United States totalled more than $20 billion. With no other countries in the world have we had such a negative trade balance as with your country. Our exports to the U.S. are five, and in some years, 10 times less than our imports from the U.S. because our goods are subjected to tariff duties 5 to 10 times higher than products for any other country. The only way to develop large-scale trade on a long term basis is the removal of the political obstacles. Monitor: How do you view the current interest and trends herein the U.S. toward reforming export controls and other aspects of U.S. trade policy with the Soviet Union? Kondakov: Every country has the right to have its own export controls. Obviously, national export controls should be suited to national security considerations and interests. Of course, we are not going to sell you everything we have in the Soviet Union, just as we do not expect you to sell us everything you are producing. The problem is that this control of exports should be rational. When it is abused and used for political reasons then we cannot accept this concept. Take COCOM controls, for example. Most of the time the United States is much more restrictive on export controls than any other country in the world. This is because the U.S. views export controls as a political instrument. There is no single business explanation for manyprohibitive steps taken by the United States government over the years, especially when we can buy anything abroad outside the United States. I think it is perfectly absurd for the U.S. businesses to be deprived. Our basic approach is that any country in the world has the right to have some kind of controls to protect its own industry and national security interests, but they should not be abused in any way. Otherwise it becomes an instrument of economic warfare. You mentioned that there is a lot of movement in the United States toward changing U.S. trade policy with the Soviet Union. On one side that is right, because there is a lot of interest in the U.S. business community to expand trade and economic relations with our country. On the other hand, unfortunately, we are witnessing the worsening of conditions for trade between our two countries. Let's just look at the past several years. In 1984, President Reagan declared that he favors so-called "peaceful trade" of nonstrategic goods with the Soviet Union. It is a fact that some positive steps have been undertaken by the U.S. administration since that time. The Joint Commercial Commission resumed its work. American companies began participating in exhibitions in the Soviet Union. Then export controls on oil and gas equipment for foreign policy reasons were removed. However, there have been some negative steps. For example, in October of last year, the U.S. Congress banned imports of Soviet gold coins. Then the administration introduced a bill to remove the ban on imports of seven types of Soviet furs which has been in existence since 1951. This bill was introduced in Congress two years ago. The question still has not been resolved by the U.S. Congress, while it took the Congress only a few minutes to introduce a ban on Soviet gold coins. This year the administration put an anti-dumping duty on Soviet urea, one of our main export products. We deliver this product to U.S. markets, while buying super phosphoric acid from Occidental Petroleum Corporation. This major agreement was completely destroyed by the administration. Occidental cannot continue the agree ment because importers have to pay a prohibitive antidumping duty. A year ago a similar case was brought up over Soviet potash, the second product we sell in the agreement with Occidental. Though we won this case and it was announced by the International Trade Commission that there was no dumping at all, we had to stop the deliveries of these goods to the American market for a year and a half. Looking at the omnibus trade legislation now in the U.S. Congress, you will find that there are about a dozen articles in versions of this legislation passed by the House and Senate affecting Soviet-American trade. Some of them are directed against imports of Soviet goods. For example, an amendment supported by Sen. Armstrong RColo., in the Senate's version of the trade bill which would ban imports of seven Soviet goods on the grounds that they are illegally produced with so called "slave labor." A similar amendment is also in the House bill, though with different wording. U.S. courts denied such an allegation several times. So, somebody tried to introduce this ban as a legislative bill. This amendment passed in the Senate and the House unanimously. There is also an amendment by Sen. Durenberger RMinn., in the trade bill which would extend the ban on Soviet furs. There are other amendments that would be destructive for Soviet-American trade, and even representatives of the administration think so. Recently, Deputy Assistant Secretary of State, Mr. Simons, said that if Senator Armstrong's amendment and other provisions are adopted, it would mean economic warfare against the Soviet Union. Monitor: Rep. Bonker D-Wash., is supporting an amendment to the House version of the trade bill that, if passed, would reduce the list of items subject to U.S. export controls by 40 percent. How do you view this amendment? Kondakov: Mr. Bonker proposed the reduction of the commodity control list by 40 percent over the next three years. However, there are several provisions in the Senate bill which will probably result in the rejection of Congressman Bonker's proposal. In this current environment, I believe the amendments in a positive direction for improving U.S.-Soviet trade relations will not be adopted by the Congress. On the contrary, Congress is a very conservative force. Monitor: Do you think that while certain individuals in the administration and in Congress are saying they support an expansion of nonstrategic trade with the Soviet Union, in fact, these bodies are not acting on this stated policy? Kondakov: That is my personal point of view. I wouldn't like just to blame the administration or the Congress, but the facts indicate that is the real situation. In order to improve our bilateral balance of trade, we have to export more to the American market. In the past we used to sell a lot of gas and oil in Western Europe and had a huge positive balance with Western Europe, $2 or $3 billion. We took some of that money and sent it to the United States to buy U.S. products, in particular, grain. Now the situation is changed. We no longer have a positive balance with Western Europe dueto the drop in oil prices. So, we have no money to pay for American goods, except the money we earn in this country from exports. When our exports are cut by such measures, as I have mentioned, the prospects for U.S.-Soviet trade as determined by the conditions for Soviet exports to the U.S. are limited. We are not begging you for anything special. We would like to have the same treatment as any other U.S. trade partner. We are not demanding that you buy our products. We are only asking for the opportunity to sell our products in the United States. Monitor: How serious is Soviet interest in GATT, IMF and the World Bank? Why is the U.S. opposing Soviet entry into them? Kondakov: Last year we expressed interest in joining GATT. We sent a letter asking for observer status at the multilateral negotiations. The U.S. simply said no. We are still interested and will try again. The interest is serious. The Soviet Union is one of the few major trading partners in the world that is not a member of GATT. We think it is appropriate to have GATT membership. As a member of GATT, every country is supposed to extend "most favored nation" status to other members. My personal feeling is that the U.S. does not want to extend this status to the U.S.S.R., and so they oppose our membership.