PRG MEETING ON US-SOVIET ECONOMIC RELATIONS, 25 APRIL 1988

Created: 4/25/1988

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MEMORANDUM POR THE RECORD

SUBJECT: PRG Meeting on OS-Soviet Economic Relations,8

The meeting assessed the results of the US-USSR Joint Commercial Commission (JCC) meetings held ln Moscownd discussed the status of DOD's review of the licensing requestoint venture between the USSR and the US firm. Combustion Engineering.

The meeting openedrief overview by the Department of Commerce of the results of the JCC meetings. It was noted that the two major objectives of the US delegation were achieved: o reiterate that fundamental improvements in trade relationships depend on further improvements elsewhere ln the bilateralemigration and human rights; to seek improved market access for US companies in the USSR. umber of agreements were reached during the JCC meetings in the area of market access and trade facilitation (see attached fact sheet).

briefly his

discussions wj.cn soviet acaaemics ana economic officials during the JCC meetings, and provided his assessment that the Soviet economy was not doing well and that progress in Gorbachev's program of restructuring would be slow in coming.

supported this assessment by

uidwing on nis own

oDservatioris based on discussions with Soviet machine tool and computer manufacturers. The ADDIrief assessmentubstantial increase in US-Soviet trade through joint ventures was not likely in the near term due to the uncertainty and confusion created by the Soviet reform effort. The ADDI also noted that the proposal of the Trade and Economic Councilonsortium of large US firms to dealimilar group of high-level Soviet officials appeared to go against the

decentralizing spirit of the reforms and would likely complicate the conduct of business.

^SESliET

plants.

4. The Department of Defense (DOD) reported on the status of its review of Combustion Engineering's request for licenses tooint venture in the USSR to manufacture instrumentation for Soviet petroleum refineries and petrochemical

requested that the

review process Be expedited in Viewhe approaching summit. DOD

handled expeditiously,V

e STT"K

A. Fact Sheet

FACT SHEET:

RESULTS Or

THE. - USSR COMMERCIAL COMMISSION MEETINGS,

, 8

U.S. Secretary of Commerce C. William verity and Soviet Foreign Economic Relations First Deputy Minister Kachanov have concluded three days of meetings of theUSSR Commercial Commission. This wash meeting of the Commission, which was formed

The Commission net this year at the specific instruction of President Reagan and General Secretary Gorbachev, who in their joint statement at the conclusion of the7 Summit, directed Secretary Verity and his Soviet counterpart to convene the Commission to propose concrete measures to expand mutually beneficial trade and economic relations between the two countries.

The two major objectives of. delegation were: (li to reiterate that fundamental improvements in the trade relationship depend upon further improvements elsewhere in the bilateral relationshipparticularly in human rights and emigration;o see- market access gains. companies in the Soviet Union . Both goals were achieved.

. delegation reaffirmed the support of the Administration for the expansion of mutually beneficial non-strategic trade and economic relations. Secretary Verity explained. willingness to make step-by-step progress ln trade and economic relations within the guidelines of. policy,. Interest in pragmatic and concrete proposals to increase trade.. share of western trade with the USSR is small. or example,. share of OECD trade with the Soviet union wasercentand the vast bulk of this. grain.

Secretary Verity also stressed that fundamental changes. trade policy toward the Soviet Union were related to the quality of the overall relationship between the two countries. Ee noted that major trade gains were possible depending on major improvements in other aspects of the bilateral relationship. He particularly pointed to. interest in human rights and emigration. He noted that present emigration levels are notably higher than in the last few years, but are still below the average fors.

MARKET ACCESS IMPROVEMENTS

. delegation's principal goals with respect to marketing were to obtain improved market access and greater transparency of marketing information in the Soviet Union. This is particularly important as trade decision-making authority in the USSR is decentralized toifferent Soviet ministries and enterprises.

. delegation-sought specific, concrete steps which would improve the ability. companies to sell non-military, non-strategic goods and services in the USSR. umber of agreements were reached in the Joint Commercial Commission that will improve the prospects for bilateral trade and investment, in particular, the steps that the Soviets have agreed to take should improve the conditions for doing business in the USSR and should shorten the time that has been required to negotiate business.

In the area of market access and trade facilitation, agreements were reached on the following:

. marketing and advertising program will be set up

through. Commercial Office in Moscow, which willommercial Newsletter arid, in cooperation with the USSR Chamber of Coranerce and Industry, will distribute it to thousands of Soviet trade organizations and officials. This newsletter will substantially improve the ability. companies to advertise their products and services to interested Soviet buyers.

program of cooperation will be initiated to boost

business in selected non-strategic areas with high potential, with bilateral working groups being formed in medical equipment, construction equipment, oil and gas equipment, and equipment for the consumer goods industries.

Soviets agreed to take steps enabling Soviet business

and trade personnel to have open access to. Commercial Office in Moscow. This will provide potential Soviet buyers with access to marketing information on thousands. companies and products.

U.S. willrade missions program in the USSR,

and the Soviets agreed to provide appropriate assistance.

The Soviets agreed to accelerate efforts to improve working conditions. firms with offices in the Soviet Union. They announced simplified Soviet visa procedures, including multiple entry visas, for foreign business visitors,. business visitors.

The Soviets agreed to work on reducing business negotiatinq times and complications.

U.S. Department of Commerce will setJoint

venture Information Center" to provide guidance. companies in order to facilitate compliance. technology transfer regulationsoint venture.

Both sides willoint US-USSR legal seminar

series on business law to help government and private lawyers better handle the practical legal aspects of bilateral business, including investment.

Finally, two special documents were issued by Secretary Verity and First Deputy Minister Kachanov at the conclusion of the Joint Commission meeting:

o rotocol noting that the terms ofSSR Long-Term Economic Industrial and Technical Cooperation Agreement apply to joint ventures and other new forms of business organization now permitted by the USSR; and

o Joint Statement" listing the accomplishments of the Commission and stipulating the desire of both sides to increase bilateral trade and economic cooperation. This document will be publicized to Soviet enterprises and to. business community.

These steps, taken together, orward step to improve the prospects for the expansion of trade between the United states and the Soviet Union. . exports to the USSR last year were5 billionand0 million of this was in manufactured goods. Secretary Verity stated that he does notramatic increase in these numbersesult of what was agreed in the JCC, but that the agreements will contribute to the trade relationship and leadradual increase in two-way trade.

ADDITIONAL OFFICIAL MEETINGS

Secretary Verity, accompanied by Ambassador Matlock and other senior members of. delegation, had official meetings with General Secretary Gorbachev, Premier Ryzhkov, Foreign Economic Commission Chairman Kamentsev, First Deputy Minister for Foreign Economic Relations Kachanov, GOSAGROPROM Chairman Murakhovsky, and Central Committee Secretary Dobrynin.

NON-STRATEGIC TRADE ONLY

Secretary Verity stressed both in the Commission and in his talks that the United States is interested only in non-strategic trade.. delegation did not discuss any changes in technology transfer controls. The matter did not even come up. Secretary Verity has emphasized that our technology transfer controls are for the purpose of ensuring Western security, and not for the purpose of restricting trade.

The United States does not view technology transfer controls as an obstacle to peaceful,rade. The Dnited States believes that there are ample areds for increasing trade which are not affected by national security export controls, including many areas in consumer goods industries, oil and gas equipment, medical equipment, and construction equipment.

RELATIONSHIP. OVERALL GOALS

Secretary Verity and. delegation repeatedly stated. trade relationsart of the overall bilateral relationship and that fundamental improvements in the conditions for trade cannot take place without parallel improvements in other parts of the relationship, especially in the human rights area.. interest in emigration was particularly stressed. The delegation took note of the increased emigration last year, and stated its hope that further gains would follow.

CONTRACTS AND JOINT VENTURES

A number. companies signed contracts with Soviet enterprises this week. Some of these were for joint ventures in the Soviet Union. Combustion Engineering signed the. joint venture last December, and this week Honeywelloint venture.roup. companies formed the "American Trade Consortium" under which they will seek commercially viable business opportunities in civilian areas.

In the7 Summit statement. President Reagan and General Secretary Gorbachev agreed that commercially viable joint ventures couldole in the further development of bilateral economic relations. . government supports American companies in their efforts to conclude commercially viable business in non-strategic areaa. . Government, however, does not-endorse, and has not endorsed any particular business ventureincluding those signed this week. The position of. Government is that thisatter for private companies to decide.

. Government's position is policy-neutral toward 5oint _ ventures in principle, stating that the choice of business organizationommercial matter. . Government, of course, reviews all requests for export licenses for technical data, including those for joint ventures. Each license application is carefully reviewed to ensure. national security is not affected.

USTEC MEETINGS

USSR Trade and Economic Council has been meeting in Moscow this week, holdingh annual meeting. USTEC is an organization. companies and Soviet enterprises interested in bilateral trade. These meetings are totally separate from the government-to-government Joint Commission meetings. They are held concurrently so that the USTEC meetings may be addressed by the Secretary of Commerce and the Soviet Foreign Economic Relations Minister. Secretary Verity addressed the opening session of the USTEC meeting on Wednesday,

COMMERCIAL WHALING

while in Moscow, Secretary Verity took note of the fact that the Department of Commerce has received assurances from the Soviet Ambassador to the United States that the Soviet Union has ceased commercial whaling and intends to work through the International Whaling Commission (theor whale research and conservation. The cessation of commercial whaling by major whaling nations hasajor objective of global environmental groups and the IWC.

Secretary Verity welcomed the Soviet decision and stated his hope that itattern for similar decisions on the part of other whaling nations to work within the IWC for the purposes of research and conservation. Secretary Verity expressed his confidence that,esult, the United States and the Soviet Union will quickly be able to expand fisheries cooperation provided forew fishing agreement that was signed on Doing so will benefit both sides.

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