Drumming Up Trade

The East-West trade winds are stirring with uncommon force. Both a U.S. presidential commission and the prestigious Committee for Economic Development have urged the U.S. to expand its commerce with Eastern Europe, and President Johnson repeated his earlier promise to ease restrictions on sales to Russia and its satellites. Going farther, the U.S. Chamber of Commerce at its annual meeting urged the U.S. to "open channels of communications with the people of Communist China." Last week the trade drive picked up speed in three European capitals. The U.S. opened its first trade show in Budapest amid the whir of computers and the roar of tractors; West Germany unveiled a $6,000,000 industrial display in Bucharest; and the Red Chinese showed up at the Paris Trade Fair with the biggest and best display of the 37 nations present.

Coal & Cashmere. East-West trade has been rising by 10% annually, in 1965 is expected to top $7 billion for the first time in history. This commerce takes some fascinating forms. Japan imports millions of dollars worth of coal from North Viet Nam--and is distressed because the trade recently has been impeded by the refusal of some frightened Japanese seamen to sail into Vietnamese waters. Britain buys cashmere from Red China, weaves it into sweaters and socks for sale to the U.S. and other Western countries. Italy is keeping its state-run shipyards busy by building six tankers for Russia. Several countries rely heavily on their sales to the East; Finland sends 18% of its exports behind the Iron Curtain, Austria and Greece 20% each.

Many Western businessmen think that trade can be expanded substantially, view the vastness stretching from the Brandenburg Gate to the China Sea as one of the world's greatest underdeveloped markets. Russia is by far the East's biggest customer for capitalist enterprise, buying close to $2 billion worth of goods from the West yearly. Red China is second with $900 million worth of purchases, followed by Poland, Czechoslovakia and East Germany. The greatest seller is West Germany, whose Eastern exports last year jumped 20% to $656 million. Second and third among traders with Communist nations: Britain and Italy. Japan and Spain are the leading non-Communist dealers with Cuba.

Declines & Disappointments. The Communists try to swap their raw commodities for sophisticated capitalist technology, but recently they have been forced by crop failures to import fewer Western machines and more Western food. For both Russia and Communist China the biggest import from the West is grain. China now takes more than 50% of Australia's wheat exports and 10% of Canada's; last week it agreed to buy about another $100 million worth of grain from Canada. Most of the U.S.'s $340 million worth of exports to the East last year was in the form of grain for Poland and Russia. While this business has helped to pare Western crop surpluses, it has the disadvantage of being a one-shot affair that will quickly end if and when the Communists straighten out their farm mess. Western businessmen are thus looking yearningly toward the more stable business of exporting hard goods to the Communist countries.

So far, they have been disappointed. France late last year signed a trade pact with Russia calling for a more than 100% increase in trade--to $140 million annually in each direction--but its exports in 1965's first quarter rose scarcely 20%, to only $13 million. Italy's sales to Russia dropped from $114 million to $91 million last year, and Britain's exports to Eastern Europe declined from $342 million to $276 million. Japanese businessmen had high hopes of increasing their sales to Red China from $150 million last year to $250 million this year, but Peking has canceled several deals because of Tokyo's refusal to extend low-interest, government-guaranteed credits. The Japanese will be lucky to increase their China trade to $200 million this year.

Shortages & Shifts. A prime reason for the lag is that the Communists are strapped for cash. Their pools of hard currency and gold are shallow, and they have had to dip into them to pay for Western wheat during the recent farm crises. In their search for capitalist money, the Soviets recently opened a store in Moscow that sells luxuries to foreigners for Western currency, opened a similar store in London. The Communists are also trying to increase their barter deals--Red oil, furs, metals and other commodities for Western food, fertilizer and technology--but the West is already surfeited with the limited range of goods that the East has to offer.

As an alternative, the Communists are striving to develop better and cheaper industrial exports. Agricultural Bulgaria has begun to ship motors and small trucks to Greece, Switzerland and India. Poland, with help from the Swedes, is beginning to produce Scandinavian-style furniture, and Czechoslovakia's Skoda Works recently started selling huge machine tools to the U.S. To lift the quality of their production to world standards, the Communists are being forced to form joint companies with Western firms. Rumania's Foreign Trade Minister, Mihail Petri, has invited Italian companies to open plants in his country and share their management with the Communist government. West Germany's Krupp is negotiating similar deals in Poland and Bulgaria. Doing that kind of business with capitalism is a daring step for the Communists, but it holds out the largest promise for expanding East-West trade.

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