Agnew, Stans & Mitchell on Soviet-U.S. trade relations

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The Chamber of Commerce.

In the fifth step side of Moscow, I met with the Deputy Chairman and members of the Council of Ministers of the Council of the Russian Republic, and the Chairman and Deputy Chairman and members of the Council of the Ministers of the Georgian Republic.

Also the mayors of Leningrad, Baku, Belize, all over us.

and forced to the red carpet.

And I had occasion, for instance, to trip down inside of the meet with approximately 100 American businessmen who were in the Soviet Union at the time, and to look over at trade prospects.

I also visited some industrial installations, a generator manufacturing plant in Leningrad, named Electric Steel.

There's a tiny steel plant there in Belize, a very large plant, employing 30,000 people.

From the Golden Department Store in Moscow, I had a visit with a manager in the service line, who seems to show us all his figures and so forth.

In Baku, we visited the oil field, we were taken out on a boat to see the oil store running its operations there.

in Malaysia's Industrial Achievement Exhibition, which is a permanent affair.

And I want to say also that we were well entertained, and I mention this simply because it illustrates the attitude of receptivity, the desire to please on the part of these people.

In eleven days, eleven nights that we were there, we saw five ballets, one opera, the Moscow Circus, the Georgia State Dancers, and had four state dinners.

which adds up to 12.

They put a jet plane at our disposal, a TU-134, that sees buddy people remove it from their musket, land-grab bag, and also give us a villa approximately equal to their idea of their house.

There were no restrictions on travel, no restrictions on talking to anyone, Poseidon said in his first meeting, that I could go anywhere and talk to anyone.

And I did.

I talked to factory employees that I walked to.

I talked to customers in the stores.

I talked to employees that were steel mail shoppers at Utopa.

The two high points besides the opening visit with Poseidon, strictly from a personal standpoint, were that

In that first visit, he talked about his five-year plan.

He said he was going to present it to the Supreme Soviet on Wednesday morning at 11 o'clock.

He said, I think it would be very nice if you could attend, and I hereby invite you to come.

And I accepted.

I went to the Supreme Soviet expecting to be up in the balcony somewhere, but I was escorted right out to the door among the delegates, right behind the delegates from Kazakhstan.

and participated in the entire discussion and presentation of the five-year plan.

I'm told it's the first time, I'm not sure.

It's the first time anyone from a western country has ever been on the floor of the Supreme Soviet for a session.

The second was in the field of entertainment, but the other one simply forgot because it demonstrated the other to be pleasant to us.

In Belize, the capital of the Georgian Republic, on Saturday night they put on a special performance at the Georgian State Tennis School for an hour and a half.

We're at a new opera house and see 3,000 people, the only people there to see the show are the 10 people, 9 people in our party, plus a few Russian escorts and protocol officers.

But on this magnificent show, there's a sensation in the United States.

Now, just by way of identification, Moscow is here.

This is a tremendous country.

Moscow is here, Leningrad is to the north, Syria is to the west.

Baku is down here on the Caspian.

But you see the capital of the Georgian Republic is over here.

Now you see, the population center of the Soviet Union is here in Georgia.

What's the distance from Moscow to Baku?

Moskva to Baku is three hours on the plane, about 900 miles.

It was in a jet, so it must take about 1200 miles.

And a little less here.

But this tremendous country here is important in our discussions because the natural resources that they apparently have are almost unbelievable, and I'll refer to the map again, talking about natural gas.

The substance of the conversation were a certain stride, but I understand there would be no negotiations, no commitments of any kind, no agreements.

It was an exploration.

And we can point to that, an exploration of the trade potentials in both elections, the trade problems that were in the way of realizing those potentials, possibilities for investments in one bank and another, and tourism.

All the meetings that I had were very friendly, very direct, very businesslike.

There was no ideological propaganda of any kind anywhere.

No notes, talks about how superior they were, so on and so forth.

It was all as you would expect if you went to Spain or France or Italy or strictly on the south.

From the substance of the talks, I really keynoted in my first talk with Chairman Sagan, which I said lasted almost three and a half hours.

He greeted me with members of the press there, and with photographers.

And the press said, during the first opening remarks, which was quite unusual, he opened for about five minutes, started saying, as I said earlier, it was probably because it was high hopes,

They saw it as a means of improving relations with the United States, and he thought they ought to establish some kind of order of priority to indicate a major shift of policy on the part of both countries.

They were prepared to make that major shift with respect to economic and commercial ties.

At that point, after having just talked along that line, their desire for understanding who the United States was for Biden, he just met a surprise.

He said, I think that's enough for them to print for one time, let's go ahead.

So, I responded, and I agreed with the approach, and I wanted to talk about the kinds of things they had to sell, the kinds of things they were required to buy, what they meant when they were talking about joint ventures,

I hope we can accelerate the promotion of tourism in both countries.

It will mean that there is changing understanding.

I referred to the greening contract and expressed satisfaction with that, and that I thought the special efforts we had made indicated that the United States did want to do more business.

I also referred to the fact that we issued a billion dollars of export licenses to the Kama River plant, and that we were reducing, slowly but gradually, reducing the export controls that the United States had unilaterally imposed.

President said that was all fine, but he wanted to go into more detail because he thought we ought to go back to the attitude that prevailed in the 20s and early 30s when the United States and the Soviet Union did have significant economic collaboration.

He said, what we have now that we call trades, a few leasing machines coming over to some of our factories, and a few sales for vodka and caviar, and that's still a trade.

Last year, between the two countries, he said it all amounted to only about $150 million, whereas we did $5 billion for the trade for the Western countries.

And he said, that's still a trade.

It's a...

Italy, France, and we're doing very little.

And he was a bit scornful of that.

Between the two largest economies in the world, we're dealing in those figures.

He said, however, that we have to approach it seriously, and I have a number of subjects I want to raise, and I'm sure you have some you want to raise, and how do we get there?

He said the first is that we feel that there's discrimination in the United States against Soviet products and the Soviet Union.

That, anyway, they do not have most of their things in treatment for their goods, which means that they would have to pay extra tariffs on anything they ship to the United States.

And the other is also not only...

The Kokan control list of the major western countries limiting what they will sell to the Soviet Union, but the United States has its own list of thousands of items which it will not sell.

He said, he particularly...

He felt that the co-cop list was the public evidence of discrimination that he didn't think was any more pertinent.

He said, we don't want to sell the United States, but we don't publish a big list of it.

He said, if there's something you don't want to sell us, sell us some.

And we'll work within that framework.

And we would understand there's some things you don't want to sell us.

So why do you have to publish a long list of things and then from time to time add a few items or take off a few items?

He said that just called public attention to the fact that

You are discriminating against us.

You send in trade.

We send credit in our export transactions to...

for as much as ten or twelve years, and we get similar terms from other countries.

The United States gives us no credit.

And we think that the practical possibility is that we can't buy a great deal unless you do extend credit or credit guarantees.

And he said, also, I think this kind of goes on, we'd like to establish a Soviet bank in the United States, a French bank in the United States, that helps in trade transactions.

He said, really without credit, we can't build up the trade as we'd like to.

But he said, there are some things in the way of products that have great possibilities between us, and I think we should study those very carefully on both sides and protect the quantities.

As he said, you know, we work within a five-year plan, and we do have to have some relationship in our current activities to what is projected in the five-year plan, even though there's some flexibility.

He said, also, I think there ought to be a separate study in grain, that we can't grow corn in Soviet Union.

— 1 min 35 s with no transcribed speech —

I didn't think it was any more pertinent.

He said, we don't want to sell the United States, but we don't publish a big list of it.

He said, if there's something you don't want to sell us, tell us so.

And we'll work within that framework.

And we would understand there's some things you don't want to sell us.

So why do you have to publish a long list of things and then from time to time add a few items or take off a few items?

He said that just called attention to the fact that you are discriminating against us.

He sends in trade.

We send credit in our export transactions to...

as much as 10 or 12 years, and we get similar terms from other countries.

The United States gives us no credit, and we think that the practical possibility is that we can't buy a great deal unless you're doing 10 credit or credit guarantees.

And he said, also, I think as time goes on, we'd like to establish a Soviet bank in the United States, a French bank in the United States, that helps in trade transactions.

He said, really without credit, we can't build up the trade as we'd like to.

But he said there are some things in the way of products that have great possibilities between us, and I think we should study those very carefully on both sides and protect the quantities.

As he said, you know, we work within a five-year plan, and we do have to have some relationship in our current activities to what is projected in the five-year plan, even though there's some flexibility.

He said also, I think it ought to be a separate study in grain.

That we can't grow corn in the Soviet Union.

And we have decided we want to increase the protein consumption of our people, so that means we have to raise a lot of meat.

We want some meat cattle.

He said up until now we've had dual purpose cattle producing milk and food.

He said now we want to produce single purpose meat cattle.

And he said, that's going to take a lot of grain.

And he said, for example, if the United States would do us credit, similar to the terms it gives other nations, we should be willing to enter into an agreement for two or three million tons of corn a year for five years.

And perhaps even other products as well.

We spired a little bit on credit terms, assuming that credit was available, but I indicated that this was not a time to negotiate those terms.

Then he went off into the possibility of participating in the United States companies in developing their actual resources, where he would contribute capital and technology, and they would contribute the local costs, and the resources would then be developed, and the United States company would get repaid for its investment out of the product, and the nation would have a 20 or 30 year supply contract.

As an example, he cited natural gas, where he said they have great resources, and they have steels and drilling, and some technology which they believe is very hard in drilling.

He said what we would need is a pipeline capital from the United States, and the liquefaction plants in the port, so that we could send the gas to the United States.

And of course the tankers, which carry the gas, and these are special.

He said, this sort of thing will take time, it will have to work out in advance, so it's illegal.

Commercial details, established principal continent of the United States, and Soviet law, within which the United States companies and our enterprises can negotiate with.

But he displayed quite a bit of knowledge to our fuel situation.

He said your fuel and power needs are getting accused now.

They're going to be much more so in 10, 20, 30 years.

And he said, assuming that there is an improvement in relations between our two countries, there would...

It would make total sense for you to buy some of your supplies from the Soviet Union, and use the proceeds, we would use the proceeds on the paper every night.

He said, we can deliver up to 120 million tons of gas for a while a year, and we're talking billions of dollars.

He said, I understand this has to be done on a business-like basis.

Either side is interested in sharing, and your companies are interested in profit.

We recognize all that.

He said, we're even interested in ventures in the Soviet Union that would relate to third countries.

He said, when Henry Porter was here, I offered to have him build an automobile plant for us, at which they would provide technology and some capital.

And after the money was all repaid, Porter could take 20% of the output and sell it anywhere in the world they wanted to sell it.

He said, now we're getting ready to build another truck factory in addition to the Connor River plant.

The start of that is in our five-year plan toward the end.

He said, I think we ought to look into formulas for collaboration of that type.

He said, another area is paper and pulp.

We've got tremendous resources of paper in that area.

The vast Siberia there.

He said that we worked out the formulas.

I think we could find ways to show you items of that type that you need.

Plus the non-ferrous metals.

Platinum, copper, germanium, titanium, zinc.

That we don't have much in, unfortunately.

But all of these are available either to sell to you, or on a joint venture basis in an economic collaboration.

He said, you believe in such a diamond, he said, the world doesn't know yet.

Very generally, but we now produce 60% of the world's diamonds.

I didn't know that either.

He then went on to say, continuing his monologue, which went on for quite a time, I've been thinking about how to make your visit really useful.

He said you could go one of two ways.

This could be a nice series of conversations.

You could have a pleasant time and go back and nothing would happen.

Or he said we could try to make some progress on some fronts here and lay the groundwork to the moon bridge for the visit of President Nixon.

He said that if we agree that it is desirable to accomplish something before he comes here, he said I think we could exchange a paid memoir and conclude it here with it, in which we would agree on a reciprocal desire to develop economic ties and establish four task forces of X groups.

One would deal with legal matters such as most favored nations, trade restrictions.

The second would deal with financing, banking, credit, and so forth.

The third would be an analysis of the commodity categories to identify areas of maximum potential in both directions.

The fourth would be joint ventures, general economic ties, third country, sales, and so on.

I said, if you would agree to do that, we would not impose any restrictive instructions, we'd give them constant encouragement, they could work longer than they did between Moscow and Washington.

But he said, I'd like to see them accomplish something within three or four months.

He said, I'd be willing to help, personally, meet with them in order to keep things moving, and he said, I would hope you would be willing to do that on your side.

Well, the time came for me to respond.

And I said at some length that in the framework of the kind of relationship he was talking about, all the suggestions he made were possible, although there were a number of factors involving time that had to be considered.

There were legal and legislative problems that had to be resolved, and they would all have to be dealt with in the framework of the public opinion and the political relations of the two countries.

I said, you know very well that public opinion has been shifting in the United States.

for the kind of arrangement you're talking about.

I assume it's consisting of the Soviet Union.

But President Nixon is now still leaking public opinion and seeking a closer collaboration.

And it's very important to be sure that there is support and that we take these steps in the right sequence so that we can accomplish objectives that we might hope for.

I said...

The restricted trade lists, for example, were created in an atmosphere of flooding pressure some years ago.

The public is now receptive to the reduction of those restricted lists.

The Congress set new standards at the end of 1969 that requires that we consider the availability of a product somewhere else before refusing to sell it from the United States.

And we are applying that standard.

I said that as far as the most favored nation is concerned, this request is a congressional action.

I could make no commitments of any kind with respect to that.

As far as trade credit is concerned, the Congress has just given 60 days ago to the President the authority to decide.

When we send credit to the socialist countries, and if somebody was receiving and would receive consideration, I could indicate to them whether or not there should be a change in our position.

It certainly is what we consider as part of our report.

He went back to the subject of long-term credits and said he had a fiat deal for the automobile plant.

They had a 12-year credit.

And similar terms were applied to other equipment purchases in Europe, either from the seller or from a bank.

I indicated that the United States credit did not extend for quite that long.

The exchange bank was in a sort of a lower frame position.

He then said gratuitously that he thought I ought to know that during the early August run on the dollar, the Soviet Union had deliberately decided not to dump a single dollar or conduct any operations that was undermined.

He said that anything like that, that these pinpricks were unnecessary among the big powers, and I expressed thanks for their restraint on that point.

They went back again to their armies for cash and oil, metals and minerals, referred to as talks with Henry Ford, referred to the Colmar River situation, in which MacTucket indicated an interest and then withdrew.

So they were now decided to go ahead and build the plant themselves, but they would buy equipment for their various countries, including the United States.

I would say that before we could consider that we had all the items on the table, I wanted to bring up a few which were very important to us.

One was that the American businessman was a very difficult business in the Soviet Union.

He could not get an office, he could not get hotels, he couldn't get living quarters for his personnel, he was just a child.

and had other kind of gifts, including the plans of users of his equipment.

He had a deal with the Minister of Foreign Trade, and that I intended to pursue this subject with him, with the Minister of Foreign Trade, and he said he recognized it as a matter which, of course, there would have to be dealings to work things out.

Then I said there's another factor that's very important in the public opinion in the United States, which I certainly think has to be dealt with as part of any arrangement we come to, and that is the Lend-Lease debt created during World War II.

My recollection is that the United States is making no claim for the Lend-Lease equipment which was damaged and destroyed during the war.

And there has been payment to the United States for the land lease equipment which was sent after the end of the war.

What we're talking about is reusable equipment still in the Soviet Union at the time the war ended.

Negotiations on that went on in the fifties and ended about ten years ago, and nothing's been done or said about it since.

And I think it's very important, if we're going to develop public opinion in the United States to support extending credit or doing other things, that there be a prompt resumption of negotiations and a settlement of this debt.

I did not mention to him that the difference apparently is that we offered to accept $800 million 10 years ago, and he offered $300 million at that point.

Again, he made a deal to consider his proposal for a memorandum establishing these joint study groups.

He said that he recognized the importance of public opinion in the United States, and thought I excited to read it a bit, because he had been there once.

He said he'd never encountered hostility, and he said, of course, there are small groups of malcontents, and you have some now.

You see conflict, and there will always be tensions, but he said the real Americans are not hostile to the Soviet people anymore.

Uh...

I then told him that since he was going to see the president in May, I thought he might let me know something about him, because I had been a close friend of the president for many years, and I thought it was interesting to him that all the men were going to meet with him.

I explained to him that he was a man of great intelligence, modest and quiet, with a profound anger, one of the ways issues carelessly take the far-seeing approach.

and had the confidence of a majority of American people, although he was elected with only 43% of the vote.

The economy was strong, and with the president's efforts to ensure peace in the world, with his political opponents in disarray, I was confident that he would be re-elected by a wise margin.

And I thought that this would mean that there were another five years in which there could be...

relationships developing between the two countries if that was the will of the Soviet people.

And there was no doubt that the president, by the letter that he had sent to the chairman, did want to see improved political and economic relationships.

Well, he was very interested in discussions about President Nixon, asked a few questions about him and so forth.

And I assured him that I thought they were two people who could talk things over in a very business-minded way.

The president in turn was very much interested in my appraisal of Terremont for speaking.

I said this, that he was very obviously a very able resident man.

Whether he would be around another five years or something, I couldn't judge at all because he was 67 years old.

But he is not at all the dour, serious character that his pictures portray.

He is businesslike and intents his business discussions.

But he also has a great sense of humor.

He loves banter.

He likes to break in a serious conversation with an irrelevant but friendly remark.

For example, at one point, after we'd been talking for an hour, they brought in tea and glasses.

He took his and started to gulp it down, and I grabbed for mine, and it was so hot I had to let it go.

And he laughed.

He said, we drink our tea hot in Russia.

We make it in a salad bar.

Have you ever had tea made in a salad bar?

And I said, no.

He turned to the Minister of Foreign Trade and said, I want you to go out and buy a nice salad bar and give it to the Secretary and send me the bill.

And he turned to me and he said, that's the only way to make tea.

Well, that kind of intrusion a half dozen times in the course of the conversation, that made it interesting and made it evident that the guy is still in the country, and he's on the pressure in England.

At one point we were talking about the dangers of the itself of the United States, and he went through with this, and he said, Oh, I understand that...

Some of you Americans like to buy old bridges.

He said, we've got a lot of old bridges.

I don't think some silly American would come over here and buy some of your bridges.

I don't care how silly he is, as long as he has money.

Western-type conversation.

He likes that kind of discussion.

He went back to technology.

He said that Europe has very low oil and gas.

We've got unlimited potentials.

Our hydro water price is very large, but it is limited.

But we have great supplies of natural fuel.

We can develop a large production for Europe and for the United States.

He said in science and technology, joint ventures or divisions of research could be worked out to avoid duplication of batteries.

I think we ought to set up a fifth working group to see what we could do in the whole field of science and technology.

So that in the environment or in space and all those things, maybe we could work together instead of duplicating.

Well, I said, Mr. Chairman, I think that's a very interesting thought, and you're suggesting that when we get ready to go to Mars, instead of competing, we go together.

Well, in the translation, this came out as a personal invitation.

He said, well, no, I don't want to go to Mars.

I'm going to stay right here on Earth.

I said, well, I intend to watch it on television.

He said, well, I'll watch it on television with you.

That gives you some tone to make a conversation.

He did not raise any political subjects.

There was no discussion of China, no discussion of the other communist countries or anything like that.

He did talk a bit about the five-year plan.

He pointed out that their great purpose was to increase the amount of consumer goods in their five-year plan as distinguished from the

from cattle goods, and that this was one of the reasons that they wanted more trade, because they needed technology in that field.

She then urged me to see what I could do to provide a sound basis for the president's visit, and consider some kind of an ace memoir before I left.

I agreed with him, I desire to believe, going as far as we could, but said that this was not...

answer his suggestion as to creating working groups and so forth, the latter I had met, ministers and government, and was in a position to know more fully just what the possibilities were.

Well, that was a general tender, a meaningless decision.

I had one part, here's still a trend of their imports from the industrial west, these were sent against the other countries over the last ten years, obviously we were

They're standing still, not doing any of that.

And another crisis here shows the difference in consumption expenditures.

50% in the Soviet Union, 68% in the United States against investment.

30% in the Soviet Union against 17%, this is the capital goods area.

Japan's 13% against 9%, and so forth.

And then he talks to the various ministers with more detail of the same subtleties.

I won't go into them in any way, except to point out a few things.

The minister of natural gas, this is only one minister for natural gas and one for petroleum.

Minister of Natural Gas pointed out all the gas fields they have.

Considerable number in the east, surrounding here and in the south, some over here, again in the north and south, and a tremendous field that he says is over in here.

If there were any land that should be brought to a port that would be open a large part of the year, we could ship out of there, otherwise...

We probably have to move considerably over to the vaulting in order to, with pipelines, in order to move the gas out.

But there's also a lot of natural gas and apparently oil and minerals over in this area, which we said could be brought down to Vladivostok and shipped from the parts in that area.

I assume that the charts were valid and no reason to question it.

They do seem to have a very good amount of resources.

Now I'd like to go on to the, that's the second part of what I want to present, to the third part, which are the impressions, the conclusions, and the significance.

The plants I saw were not very modern, even though they were selected by them.

They had much older equipment, the housekeeping wasn't too good, the floors weren't prepared and so forth.

But the morale of the employees seemed to be good.

They were friendly.

They were friendly when I spoke to them.

I broke off the protection to the plants and talked to some of them from time to time.

They were friendly.

I noticed they had suggestion systems along the walls, just like we do in our plants.

They also had, of course, the Soviet propaganda signs, and so on.

As far as the people are concerned, the average income, according to them, is 150 rubles a month.

That's very little even in the power of exchange, which would be $165.

But, on the other hand, everything is in proportion.

Rents are 4% of income, so an average worker pays $6 a month in rent.

He gets all his medical, hospitalization, education, retirement, paid free, no taxes.

Income taxes are rolled 10-12%, and they don't apply on the first part of that income.

A cabinet officer, in case any of you is interested, makes 700 rubles a month.

That would be $777.

But, and prices are high of many things.

A black and white ordinary seat would be around 440 rubles, which would be, for the average worker, a three month pay.

And I'm not sure that they can deliver them immediately.

On the other hand, the shortages of the urethra dinosaurs don't exist.

There's an awful lot of floating food and appliances and a great many other things.

The major shortages, the ones they will concede, are in housing.

And there are great shortages in housing.

And of course, there will be a theme at the end of the next five-year plan.

They won't be making a lot of money this year against our tenement.

And the rate of exchange is such a thing because there's a black market and the rate of about 3 to 1 for the dollar, the 1 to 1.

And they have special stores in which higher currency buyers go, with dollars or Swiss francs and so forth, where the prices in rubles are about half, or one third of what they are in the regular stores for their own people.

So, incomes are very low, but on the other hand, so are expenses very low.

From all the people I talk to, I get an impression, which can only be one person's impression, of course, that it is an improving nation, that it is a rather comfortable nation.

They want to advance their living standards now.

They're just thinking in some ways the capitalist concepts, because they now use the profit motive at the enterprise level.

Where once they worked only to five year targets.

They used profit motive and they used part of the profits to create incentives and make bonuses to the employees and so forth.

So we've gone quite a ways for our system in that respect.

And on the average, my impression would be they're a generation behind the United States in the welfare of the people.

But it is a country of growing strength, conscious of the strength, and no longer seems to have an inferiority complex with a lot of blusters and so on.

There was no boastfulness, no illogical rhetoric in any of the discussions.

Apart from a couple of other conclusions, one is that with their immense natural resources and that tremendous range of desired area, which is bigger than the United States, apparently they have an awful lot of areas that haven't been researched for.

They can be a very strong rival to the United States in a period of time.

I had a feeling that, overall, they had the habit of silence, and the attitude of being number two, and they had their sights on the United States as number one.

Kosygin's remarks in his five-year plan were misinterpreted.

He did not say that in five years it would be equal to the United States.

He said that in five years, in most measurements, it would be up to where the United States is today.

And when you translate that in terms of our growth in five years, and also the per capita difference, because they have 20% more people than we do, that means that in five years, they will still be 40-45% behind the United States in most respects.

One other question I got, one of the characters of government is that business...

The way they do it in the United States is not for the small companies, even the medium sized companies.

This is something that takes the companies in the big chips.

It had a big capital, a big know-how.

It was negotiated in big terms.

A three billion dollar gas deal, a billion dollar automobile plant deal, things like that, are just as likely as a ten million dollar order for machine tools.

There will be a lot of those, too.

But there won't be any small trades.

Coming up, the issues.

They want mostly remission treatment, because they're exports to the United States, admitting that it's mostly psychological, and it's not of any great significance in keeping goods out.

It's not because they don't have the kind of goods.

It would be subject to it.

They want credit facilities for their imports.

So that they can buy more and pay more on time, including normal credit on agricultural products.

And they know, of course, that we grant credits to Poland and other countries on agricultural products now.

They want a reduction of our unilateral list of export controls.

They consider them to be an obstacle, discriminatory and psychologically unsatisfactory, even though the practical effects may not be too great.

They want to increase scientific cooperation, and they would like to work with us in research and development and whatever fields we can work on.

They would like to have a trade agreement.

After all of these things are worked out, they have trade agreements, more than 100 trade agreements with other countries, they take them into account in their five-year plan.

Similarly, the State Committee on Science and Technology would like, as I said in the room, a scientific and technical cooperation such as they have with Canada and France now.

The issues that are of importance to the United States

We sold out, and incidentally, I'll tell you in a minute how I dealt with this proposal for five task forces.

We won most of our nation's treatment in their terms, in the Soviet Union.

We want procurement practices that don't discriminate against our products.

We want earlier and better market information as to what products they need that we can supply, instead of waiting until the Ministry of Foreign Trade says we want to buy 100% gold.

And we want greater opportunities for American businessmen to contact the users of the products, not just the Ministry of Work and Trade.

Secondly, we want a better commercial infrastructure.

We want the opportunity to open offices and salesmen, attainable experts in those offices, housing for their people, telecommunications.

and we want a greater ability to travel around the country, and we want a procedure for setting commercial disputes by some type of arbitration, third-party arbitration, so that we don't build up a great deal of differences.

We are interested, we'll take a look at their joint ventures,

recognizing that under the American system, again, that has to be done primarily by private business.

The only thing the two countries can do is create the atmosphere in which private negotiation can be successful.

We are interested in selling them increased agricultural products, and indicated that we would follow through on that upon our return to Washington.

We quite expressed again

and all of our discussions the need for a settlement of the land lease debt as evidence of their fairness and as a necessity in creating the right atmosphere in the United States.

The conclusions and the significance that we reach are something like this.

or I might say what we did with respect to this proposal.

The action that we took over there at least, we committed only to continue the discussions between the Ministry of Foreign Trade and the Department of Commerce, and agreed to accept a delegation on four or five of them, as by a deputy minister, to do strictly a fact-finding tour on trade opportunities.

not to deal with financing our most favored nation.

We left a letter expressing the views, their views as we understood them, and our views as to what needed to be done, and I got in return a letter from him confirming

those points of approach, with slight changes in emphasis on their part, but no difference expressed.

Also, as I said, I got a personal letter proceeding to President Nixon, and invited the Minister of Foreign Trade to come to the United States as my guest, probably after the President's visit to Moscow.

Conclusions...

Obviously they want more trade with the United States, and they can speak progress of their, sort of towards their economic and social goals, particularly if they can get credit.

They need capital, and they get capital in three or four ways.

They get credits per month for selling us more goods, by getting our investments in their ventures, and by letting more money to tourism.

And there's no doubt there are great tourist attractions there if they build the facilities.

I could not sell them on the idea of American-style hotels, but I think they will go to that point because the hotels are not of the standard that will attract American tourists.

In a meeting of the Minister of Petroleum, he gave me a shopping list of almost 100 items of equipment they would like to buy at this time, and some items of technology they would like to get.

Our people have looked over the list, and about 90% of it does not give any problems of licensing under our present procedure.

But again, I don't need to point to acquired credit.

The second conclusion I have is that increased trade with the Soviet Union would benefit the United States, because the main items they would buy for several periods of time would be cattle goods and equipment, later intensive items.

The main things they would sell, except, of course, agriculture, which is less intensive, but is nevertheless important to us to back them up politically, the main things they would sell would be the area of raw material, minerals, water products, fuel, natural gas, and so forth.

And our relationship could almost be the reverse of what they are with Japan, where we sell raw materials and buy back many goods.

And we could probably, to a very large extent, in the early years,

for the first 5-10 years sell manufactory goods and buy back raw materials.

We could also advance our positions against the other European countries where last year we only supplied 1% of their imports and took 1.5-1% of their exports.

And so far as the joint ventures are concerned, this is not a new thought.

They negotiated, oh, 50 or more of them with other countries.

They have joint venture deals with western countries for timber development, building ports, coal mines, nickel mines, pipe mines.

glass manufacturing, nickel refining, gas mining, diesel engines, automobile manufacturing, chemical plant construction, and a number of other things.

That's their arrangement already.

But it will take some time for American companies to negotiate that kind of a deal.

I would say the growth of trade between our two countries, my third conclusion will be raised by most favored nations and export credit facilities.

American exporters have a lot to learn about doing business over there.

They've got a lot to learn about doing business in the United States, and they'll never be able to sell consumer products until they do market research here as to what it is with the public.

The economy over there is going steadily, and this does continually increase the potential for trade between the two countries.

The next five year plan calls for 47% increase in industrial production and 49% increase in consumer goods.

Calls for an overall productivity of 7.5% per year for five years.

This is dependent upon getting the high technology equipment that they need.

So the potentials for trade looking ahead are very high.

I've resisted making any estimates for anybody publicly.

I've clearly said that I think that it can be a multiple of present trade.

But I think it's not a reasonably expected value.

In five years we could have our exports up to a couple billion dollars.

If we found ways to buy part of that.

So there is long-term opportunities.

It's going to take a while to negotiate politically.

It's going to take a while to negotiate in terms of business.

I've made it quite clear to everybody I've talked to that this is a development that could take place only in parallel with improvement in political relations.

I think collaboration on raw material extraction and processing is feasible.

I don't think there's any doubt they have the reserves to go all the way with it.

And my final point here is the significance of it.

And again, this is one man's analysis.

They are ready to step up economic relations because they want to advance the living standards of their people.

To do that, they need capital.

And they want to do it in a business-like way.

They wasted no time anywhere on protocol, proceeding with direct, but right to those proposals.

They're ready to step up all the economic contacts and face the trade and negotiate access to their markets in any way that's necessary.

Obviously they need to catch up on technology if they're going to meet their appetites and the appetites of their people.

They have the one advantage that their industry operates on a scale similar to our industry.

What they do is in terms of big plans, big industry, big orders, big transactions.

They have a great respect for American management techniques.

The realities...

Of course, they're talking in terms of their narrow self-interest.

They're going to be top bargainers on any coin.

Right-hand companies have not had to be the case so far.

And then they even have begun to believe their own propaganda that our economy needs their market in order to help extradite ourselves from our present economic difficulty.

That, as he had said in his five-year message.

There's an opposite side to this self-interest part, and that is that a communist government is cumbersome and is advised to production and distribution.

You'll see that every way to go in every conversation.

Certainly, if they acquire our capital and technology, it will advance conditions in the Soviet Union by itself.

It won't make the system operate any better.

It will still be clumsy.

Another point, they're going to remain anti-capitalist.

They're not going to change their ideology.

They're not going to insulate themselves totally from our ideological contamination as more people and more business enter the Soviet Union.

They probably will no longer be anti-U.S.,

And there's a considerable decrease in that in the press and other signs in the last year.

But they will be anti-capitalist, they'll be strongly pro-communist.

I don't believe that trade and economic contacts will make it necessarily easy to deal with on major political issues, but I think it could, if there is more trade and tourism, it will help to establish a better overall relationship.

If the economic benefits could then become large, they could make a stronger effort to want to cultivate a better image.

But realistically, we have to recognize that we're communists, and we're capitalists, and free-handers of our measures, and that this is not going to be an easy course in order for it all to happen over time.

We have to base our decisions...

with due regard to national security and to the economic factors.

The businessmen generally will take care of most of the economic factors.

If it presents those significant strategic risks, then we should foster and stimulate this trade and economic cooperation.

If it promises profits for American business, and if it gives strength to the American economy, then I think we ought to seek to normalize the relationship.

I normalize to get our share of trade and content.

Perhaps in time, excitement of this will arise on the political side.

Only time will tell, but I feel that the doors are wide open for movement on both sides as we want them.

Poland was anti-climatic after all that.

They expressed the same desires for greater trade, greater economic collaboration with the United States.

They are interested in joint ventures in Poland along the same pattern.

They now have most bigger nation treatments for the United States, but they would like credits.

And they presented to me a 350 million dollar shopping list of things they would buy within the next year if they had credit to finance most of it.

The relationships between the United States and Poland have considerably more to build on.

Of course, there are many Poles in the United States.

We have been doing business with them.

And I understand that the consideration is being given, or will be given, certainly to extending exporting and coordinating credits to Poland as we did to Romania a short time ago.

I think that took a lot more time.

Sorry, that was extremely well done and very definitive.

I'm sure we've all learned a great deal from what you've had to say.

Before I throw this open to general discussion, I just...

First I want to ask one question, and that is,

Was there any response or indication to some of the points you raised, for example, the Lend-Lease debt, the debts in the U.S., things of that sort?

Did they respond at all or just receive that information without comment?

With the Lend-Lease debt, the response was not very positive.

It was a recognition that it was something on the table that dealt with no commitment to deal with it.

The best communication we've had on that since is from the American ambassador to Japan, who got it from the Soviet ambassador there, who recorded all these visits and said the only hard one to deal with would be the landing step.

I think you put your finger right on, really, what has to be a very principal concern in the United States, and that is

to weigh very carefully the impact on our national security of whatever we do.

The very fact that what they want from us is a technological improvement, rapid technological improvement, which means finished goods and sophisticated techniques for basic productions, which can rapidly be turned to overcoming some of their

Disabilities.

It makes us have to be very cautious when you stop and think that the preponderant strength and size of the country and a disciplined workforce, a completely regulated economy that they have, makes it very difficult for us to compete without a very superior technology.

We must be extremely careful that we don't supply all their deficiencies, particularly as long as they adhere to this rigid ideology that prohibits things like inspections, direct contact, as you mentioned, with the people who are in production and so forth.

I think it's probably that one.

He said, you know, we can buy anything we want, anything we need.

And he said, I started to object, he said, well, I know some of it isn't as good as the American equipment, but it'll do almost all we need to have done, a little less efficiency.

So he said, we can do all the things that we need to do, and your technology will really advance at some point in time, we can get there.

Now, on the other subject, on the American business management so far,

They were very forthcoming.

They said to apply for offices and show us why you need them, and we would allow you to have offices to help you get the communications in the living quarters.

And there's nothing that prevents you from visiting the plant if you have a reason to go there.

So if you don't want American children running around in one factory or another,

Unless there's a purpose to it, on our side.

But American companies that are selling equipment for a purpose can go to the plants to see how it's working, and to see that it's all right, and to see that it's prepared and cut up and all that.

We won't talk about that.

On that, I would say it's as forthcoming as I could expect, since it's something that would be part of a negotiation, but they're not as pleased as that would be no problem.

Mark, I could give you one illustration of what can happen, and maybe premature in telling this story, but I got a cable from Howard Clark of American Express the day I arrived, saying we have an office in Moscow and we've been trying for 11 years to get a telecommunications agreement.

Will you bring it up?

So then I saw they had tourist people, and one of the things I brought it up and said, now, how do you expect to develop your tourism with that kind of a relationship?

Well, they professed not to know, and said they'd look into it.

The next day, at 6 o'clock, there was a messenger at the embassy to say that American Express would have their telephone equipment within three days.

Sorry, I just wanted to talk about what the Vice President had to say.

I was there a few years ago.

Frankly, no matter how much technology we provide, until such time as the end of the century or amongst workers,

And at that time, they had status as proper children, as the golden citizens, and so forth.

But you could go around, as I did, to quite a few of their factories and other things that were destructed, which was a plan for the purpose of our visit to inspect their destructions.

And you see some simple employees, and usually your America boss comes along the way, you know, a few employees, the load is quite heavily on the boss, and some of my friends go to get back to work, to make back at them, so that fellow just gets on loading, gets on smoking, and the fact that the boss came along didn't mean a thing.

And there's a corporation like here as well, I believe.

But the main thing that I find when they express me on...

What the recommendation I might have was that, I suppose, how you can use your superintendents to inform them.

Because it seems to me that's the key to the success of a corporation.

And they get it in any term.

Fine, you know, what comes out is, generally speaking, the guys who get the bigger money, the guys who, you know, form so-called body blocks.

It makes no difference whether the guy was on a construction job in his life before or not.

And I said, until that time, if you train your management personnel, even with all the advanced technology you want there, unless they have some people who know what they're doing, they're not going to go very far.

And I think probably this is what...

Senator, you've got to admit that they've gone pretty far now, with technology and leavenry and things like that.

They've gone far.

A job, and trying to do a good job at it, such as they have in space, and so forth.

They do a hell of a job, and I am spoiled.

They were better than anything I've ever seen.

But when I think of housing, for instance, why had they to throw their hands right through holes between the concrete panels?

And they were proud to show you these things.

The floors, the factories, just as dirty as can be.

I mean, they have no sense of houses or anything else.

So they've got a long way to go, and I'm just interested to find out whether or not they have improved on their worker output or productivity.

John's already told us that it wasn't there a few years ago if you worked with them.

I would say they must have improved some in morale and sensitivity, but they're still far from efficient.

They would be shocked if they went through a United States steel plant or a generator factory to see how efficient federal electricity is, for example.

They recognize it, to a degree, but not to the extent that they really should.

They don't know how far behind they are.

First, I'd like to...

Comment on that.

Your report is certainly a very fine, comprehensive report.

Further, I'd like to make two comments that deal with, first, the actual security aspects of this problem, and secondly, the political ramifications which I believe are involved this year.

I would hope that we would take no steps to request further discretionary authority in the field of the most favored nation requirements, which does require congressional action in this next session of Congress.

And secondly, I would hope that there would be no action to extend further credit arrangements as far as the Soviet Union.

I know that I'm in the minority and was between Treasury, State and Congress.

In regard to the billion dollar technical and other implements that was made available for this, so we do need to go forward with the truck.

And my position was the minority position.

I understand that I don't appreciate Congress making a big thing in their press briefings about how the test was overruled and this, but that's all right.

I understand that you had a little games and shit down there at Congress departments and in your briefings.

I just pointed that out.

I don't know how they think they are.

But the only problem involved here...

is from a political standpoint and a national security standpoint, is what concerns me greatly.

Firstly, the charge that you have, and that was true as far as the gross national product was concerned, was solely due to 48 months and perhaps 24 months ago.

We are now at 6.8% of our gross national product going to the security affairs national test.

They're up to 13.2% according to the most recent CIA agreed on estimates.

This is with the CIA and CIA and their economic studies show that

They are continuing to supply all the weapons of war in Vietnam in order to keep that war going.

Eighty percent of all this is coming from the Soviet Union at this time.

They recently delivered 7,000 blue trucks.

We're requiring our pilots to go up and knock those trucks out.

And I know today four American pilots are going to be presented to the world as being captured within the last 48 hours on mission to knock out Soviet trucks.

This situation, unless we put pressure to interdict those supplies right in the Soviet Union,

and use this as a very hard bargaining weapon, I think that we're losing a very important chip in winding down American involvement in the Ryan Union's solution in Southeast Asia.

The Soviet Union is really number one as far as weapons are concerned in the strategic field today.

As far as numbers are concerned, they will be in suffering within a very short period of time.

The only thing that keeps us from being in a superior position from a national security standpoint

is the technological advantage that we have.

The Defense Science Committee believes that we have a two-year technical advantage, and I believe that it's longer than that, that perhaps we have as much as four years of a lead-on in this area.

But to supply all of this material, as well as technical knowledge to the Soviet Union at this time, without seeing...

Some concrete evidence of their winding down in this area and their being agreeable to wind down the situation in Vietnam, to see that they'd be more cooperative in situations such as South Asia, which they were not cooperative in.

They showed no real, we can try to do everything we can to say that they did, but they didn't.

Facts are, they didn't know.

I just think we have to be awfully careful in this year, 1972, that's just around the corner, to go to the Congress and make this big fight at this time.

when we're spending well over a billion dollars a year to knock out Soviet equipment that's being delivered to North Vietnam at this time?

Well, politically, from the standpoint of a person who's been in pretty good contact with some of our disaffected Republicans on the conservative side, it would be absolutely disastrous to do anything this year.

Because this truck thing has been specifically brought up as an issue to me at least six times in the past two months.

Well, you were framing the questions that I referred to at the end of my report, putting the commercials into full context.

You can only get partial answers.

One is that I think we have to decide on creating an item.

I don't know what sense it makes to refuse to sell once you can buy the same item somewhere else.

They're like the cats.

Do they get the credit elsewhere that they're asking for here?

When we're turning down on the holiday plans, they got it from P.F.

On 12 years credit.

Yeah, but that isn't quite the same.

They're having problems with P.F.

They're having serious problems with P.F.

I don't think the technology for it is...

Well, I think what you're saying has to be decided in terms of the specific issues, and I don't want to debate that in any way.

This was strictly a commercial expedition to see what was there, and now we know to a considerable extent.

I can only add one other remark, and that is, when I related to the scene the importance of political developments, and particularly the president's visit in May,

He said very directly, the political situation will be improved before the president gets here.

I didn't pursue that.

It was not my responsibility.

He had something in mind, I'm sure.

And the president will make an evaluation of his own.

It's been approved their way, all right.

The president will make an evaluation of his own when he's over there.

No, I understand that.

I feel that...

There are points that we do have to consider from a national security standpoint and from a political standpoint.

But I think the economic arguments are all on your side.

I'm not going to shout out the nationals.

Agnew, Stans & Mitchell on Soviet-U.S. trade relations

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Agnew, Stans & Mitchell on Soviet-U.S. trade relations

AI Summary

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NARA Description

Nixon Library Finding Aid

Transcript (AI-generated)

Also recorded on December 15, 1971

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