EAST-WEST TRADE

Europe Wants It, While Russia Laughs

A HOUSEWIFE once asked her butcher why he charged 50-c- a Ib. for hamburger when the man down the street advertised it for 10-c-. Retorted the butcher: "Why don't you buy your hamburger there?" "I tried to," she replied, "but he was all out." Said the butcher: "Well, when I don't have any hamburger, I sell it for 10-c- a Ib., too."

For months, the Soviet Union has been dangling the same kind of bargains before U.S. and European businessmen. In their "ruble offensive," the Reds hope to cash in on the growing desire for a vast revival of East-West trade. A year or two ago, when European businessmen could sell most of the goods they produced, it would have fallen flat. But now, with shortages about gone and world markets shrinking, the Soviet Union's East-West trade proposals make businessmen's mouths water. Moreover, since tariffs limit their U.S. markets, and U.S. law (the Battle Act) prohibits MSA beneficiaries from selling "strategic" goods to the Communist bloc, the Soviet proposals also stir the growing anti-American feeling in Europe.

Actually, far from discouraging East-West trade, the U.S. is encouraging it in nonwar goods as the best means of reducing Europe's dependence on dollars. And U.S. -restrictions have cut East-West trade comparatively little--to $3 billion last year v. 3.9 billion in 1948, the postwar trade peak. The biggest cut was in U.S. trade, the total loss to Europeans only $348 million.

Since prewar East-West trade was three times bigger in units than the postwar peak, businessmen tend to regard the prewar level as an attainable goal. They forget Russia itself deliberately wiped out two-thirds of the prewar trade. Most of it came from the once-independent nations, Czechoslovakia, Poland, Hungary. Rumania, and East Germany. As Soviet satellites, they now send goods which once flowed to the West, to Moscow and Peking at Soviet-set prices. The West's normal trade with mid-Europe has dropped from the prewar level of 8% of its total trade to the present 3%. The Soviet-bloc nations, which once did 85% of their .total trading with the West, now do little more than 20%.

In suffering the biggest losses in East-West trade, the U.S. has cut its Sino-Soviet imports from $233 million in 1948 to $67 million last year, and its sales to the same bloc from $397 million to only $1 million. By comparison, Britain last year sold $156 million worth of goods to these nations; Benelux sold $97 million, Italy $58 million, France $42 million. All the sales are about one-third or less in units of the prewar level.

Could they sell much more if all strategic restrictions were lifted? Switzerland, which gets no MSA assistance, is not affected by the embargoes. Yet its total Soviet-bloc trade last year was only $57 million, also only about a third of the prewar level.

The Soviet Union at various trade conferences has promised to buy big quantities of the consumer goods Europe wants to sell. But whenever businessmen pin the Reds down, it turns out that what they really want is heavy goods either embargoed or in short supply. Even the Socialist British Trades Union Congress minimizes the chances of expanding trade with the East. Last week it reported that all the Moscow conference hullabaloo produced only $20 million worth of new orders, "and these were not mainly for consumer goods . . ."

For the Communists, trade is not a business, but a political weapon. In Italy, every businessman who deals with the East must pay a brokerage fee to a Communist Senator, Egisto Cappellini. The fees provide the chief financial support of Italy's Communist Party. Individual businessmen cannot trade with state monopolies on anything approaching equal terms. In trying to deal with Soviet monopolies, businessmen have to pay in advance for imports which may take months to arrive, often have their own shipments arbitrarily rejected at great loss.

Despite all the pitfalls of trade with Russia, the clamor for it by European businessmen who are being shut out of the U.S. market will probably increase. To lessen it, the U.S. will have to revise its list of strategic goods, try to eliminate all the borderline products whose export must be approved by a NATO-wide committee in Paris. If the list were more precise, a needless source of anti-American irritation would be removed, and more European businessmen could learn firsthand the Soviet shell game. But U.S., European and Japanese businessmen must keep in mind that the Communist bloc needs trade worse than the West. Its need for capital goods to industrialize China, even of rice to feed it, is the major reason for the ruble offensive. Hence, the West has a bargaining advantage which it would be foolish to sacrifice merely to permit any individual businessmen to gain a few minor, short-lived advantages. For as long as the cold war lasts, the free world, too, must treat trade as a weapon.

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