Those Soviet Buyers

In U.S.-Soviet trade, grain deals get all the attention, and are provoking a red-hot debate about the wisdom of allowing the U.S.S.R. untrammeled access to American food supplies (see THE NATION). But almost unnoticed amid the hullabaloo, another type of American-Soviet commerce has been expanding far more smoothly and consistently. In an effort to modernize and expand their inefficient economy, the Soviets are turning to the U.S. for machines and technology. As a result, American sales of nonagricultural goods to the Soviet Union are likely to top $550 million this year, v. $309 million in 1974 and only $131 million in 1971.

The rapid rise is occurring despite the lack of any political agreement between the two superpowers on trade. Last January Moscow abrogated a trade-expansion treaty that would have lowered American tariffs on Soviet goods and made Soviet buyers of U.S. products eligible for long-term credits from the Export-Import Bank. Reason: Congress attached an amendment, promoted by Democratic Presidential Hopeful Henry ("Scoop") Jackson, that required the U.S.S.R. to allow freer emigration of minorities, especially Jews. At the time, the Soviets grumbled that they would get along without U.S. imports rather than allow such interference in their internal affairs. As recently as three months ago, Communist Party Chief Leonid Brezhnev greeted a U.S. delegation headed by Treasury Secretary William Simon by asking: "Which one of you blocked the trade agreement?"

Self-interest. Brezhnev, however, accompanied his words with a hearty clap on Simon's back--and other Soviet officials have shown in more concrete ways that they will not allow their anger to stand in the way of their self-interest. Since January, they have been signing deals with U.S. companies, both well-known and obscure. Some samples: a $50 million order to Allis-Chalmers Corp. for an iron-ore pelletizing plant, a $47 million contract with Gould Inc. for a plant to produce heavy-duty engine bearings, a $21 million order for Caterpillar bulldozers and a $7 million contract with General Instrument Corp. for technical assistance and equipment for manufacturing hand-held calculators. On the consumer front, the Soviets have placed a $23 million order with Intertex International for machinery to make synthetic furs and signed a contract (dollar amount unspecified) with R.J. Reynolds Industries for technical advice on improving the quality of Russian cigarettes and tobacco.

So eager are the Soviets for some American equipment that they are willing to pay hard cash--including almost $200 million expended over the past year just to buy U.S. earth-moving machinery. In other instances, the Soviets have suggested to U.S. sellers that a deal be made through an American subsidiary in a country where low-interest government-guaranteed credit is readily available. For example, the Gleason Works of Rochester, N.Y., arranged credits for a $14 million sale of machine tools and production technology through its Belgian subsidiary.

But, as Ohio's Marion Power Shovel Co. recently learned, the unavailability of U.S. credits to the Soviets can still cost an American company valuable business. After being invited by the Soviets to bid on an order for ten mining shovels, worth about $30 million, Marion failed to line up financing in the U.S. The Soviets then turned to Marion's Japanese licensee, which had been able to arrange a low-interest government loan for the Soviets. All that Marion will get from the deal is a relatively modest licensing fee.

Slipping to Seventh. Marion's experience points up one major qualification to the rapid rise in U.S.-Soviet trade: mainly because of financing difficulties, it is still not growing as rapidly as Western European and Japanese exports to the U.S.S.R. Indeed, in the past year the U.S. has fallen from second rank (behind West Germany) among the Soviet Union's non-Communist suppliers to seventh. The ranking is unlikely to change, because the Soviets are buying from other countries even more eagerly than from the U.S. Moscow last year bought four artificial fertilizer plants from the U.S.; it ordered the next 13 from Western Europe and Japan. Pullman Corp. was one of the first U.S. companies to land a big contract in the Soviet Union when it won the job of designing the foundry for the huge Kama River truck plant. But, says Donald Morfee, Pullman's vice president responsible for Soviet operations, "We cannot expect business to continue at its present pace without a renewal of credits from the Ex-Im Bank."

To spur a faster expansion of sales to the Soviets, President Ford plans to send Congress a new trade bill that would allow the Russians long-term credits without any political conditions. The Administration's argument: the Jackson Amendment did not help Soviet Jews (who are being allowed to leave in smaller numbers than before), but it hindered the ability of American companies to expand in the increasingly competitive Soviet market.

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