The United States and the whole West are facing particularly hard times. Détente between the superpowers has come to a standstill; world peace is in jeopardy, and mistakes now can be more hazardous than ever before. The time has come to speak as candidly as possible, to avoid dangerous misunderstandings among Western partners and allies.

I am a businessman, not a politician. And though I think business to be good in itself, I am fully aware that, at critical times in history, business may heavily depend on political decision-making. Today, indeed, the decision-making process involves, to an unprecedented degree, measures in the economic sphere. At all times it is necessary that this process-widened to include Japan as well as Western Europe-rest on hard fact-finding efforts, shared judgments, agreed principles and values, full consultation, and the greatest possible degree of policy coordination. But when the measures being considered are at the economic level, it is especially critical to take into account the mutual interests, structural diversities, domestic political concerns, and capacity to act and exert influence of each partner.

Thus, as a former Japanese Foreign Minister, Kiichi Miyazawa, recently put it, there is today a special "need for America to acknowledge the plurality of interests of the allies and accept its consequences. . . . The definition of the interests of the alliance on any issue has to become a collective exercise." The same is emphatically true for Europe: if the United States fails to take into account the variety of national interests and viewpoints, which are the result of economic structures and of historical realities, it will be led to misjudge the reactions of its allies. Some recent and sudden changes in American policies, as well as the inadequacy of consultations, may have made it increasingly difficult for the Europeans and Japanese to align themselves with America's strategies, especially when they often have little or no influence in defining and timing such strategies.

Today, the aggressive thrust of Soviet military power, the Mideast diplomatic and political turmoil, the skyrocketing prices and the scarcity of oil, the galloping worldwide inflation, and the strains on the international monetary system have drastically changed the global situation and made the economic and social position of Europe much more difficult. Yet all this is paralleled by a new widespread feeling of impotence on the part of the Western alliance in coping with the latest Mideast political events, which both Iranians and Soviets have overtly exploited to their own advantage: the former by viciously tearing down the basic principles of international relations, the latter by trying to widen, step by step, their geopolitical sphere of influence.

In part the situation involves the newly perceived importance of relations with nations once considered in the category of developing nations, a new predominance of North-South relations or, as some might say, an end of Eurocentrism. But it also involves a redefinition of the notion of détente in East-West relations-if indeed it was ever defined at all-in terms of the roles and conduct not only of the superpowers themselves but also of the Western countries allied with the United States.

In this latter area, no subject is more central, or controversial, than the policies to be followed in East-West trade relations. Europe's trade with the East now far exceeds that of the United States; yet it is the United States, not only the present Administration but its predecessors, that has pressed for a forceful approach linked to political developments. The need for understanding and coordination is acute.

I shall approach this subject using recent history as frame of reference. This subject has been indeed the center of a hot debate which has not stopped to this day, creating diverging views inside the United States itself. I then propose to sketch briefly the opportunities and problems created by East-West trade. I shall finally try to draw some general conclusions. These notes are motivated by the desire to share my views and experience as a European industrialist who is deeply committed, as a citizen of the West, to the improvement of relations between America and its Western partners, for the sake of our common democratic values, the preservation of peace and for the common good as well.

II

Debate on the advantages and dangers of trade with Russia is indeed a perennial issue, which even predates the establishment of Soviet power. According to George Kennan, "it was a serious problem as early as the days of the Grand Duchy of Muscovy." In the sixteenth century, when great quantities of English goods were being sold to the Russian foreign trade monopoly of the day at the mouth of the Narva River, a Polish warning to Elizabethan England read: "We know and feel of a surety that the Muscovite, enemy to all liberty under the heavens, is daily growing mighty by the increase of such things as he brought to the Narva . . . by means whereof he maketh himself strong to vanquish all others." In the days of the second Elizabeth, the governments of the United Kingdom and of the United States have been using the same arguments in order to advise restraint in the sale of "advanced technology" to the U.S.S.R.

The creation of the Soviet state, and its reluctant recognition by the capitalist nations (last of all the United States), gave the debate new impetus. In 1920, Mr. Lloyd George felt that having failed "to restore Russia to sanity by force," the West might "save her by trade," which, in his opinion, would "bring an end to the ferocity, the rapine and the crudity of Bolshevism surer than any other method." Opponents of such trade could, however, quote, against Mr. Lloyd George's views, statements by the Soviet leaders which are remembered to this day, like the declaration made in March 1921 by L. B. Kamenev, Deputy Chairman of the central Soviet government:

We are convinced that the foreign capitalists, who will be obliged to work on the terms we offer them, will dig their own grave. . . . Foreign capital will fulfill the role Marx predicted for it. . . . With every additional shovel of coal, with every additional load of oil that we in Russia obtain through the help of foreign technique, capital will be digging its own grave.1

This statement, by the way, was being made in order to reassure the Soviet hard-liners, who feared that trade with the West might "contaminate" the new communist society. Not so, Lenin said; on the contrary, capitalists would even sell communists the rope with which to hang themselves.

Whether trade with the West will strengthen communism and make it more lethal, as Lenin and friends seemed to believe, or whether it will make it "saner" and more peaceful, as Lloyd George hoped, is a question which, to this day, has not been settled to everybody's satisfaction. The issue took on fresh importance after World War II, when the Soviet Union came to be perceived as threatening to all its neighbors including Western Europe. At the same time, the Soviets themselves concentrated on making themselves as nearly self-sufficient as possible, especially in areas related to military power, and for years their ability to pay for imports through the export of needed goods or raw materials was limited, along with their willingness to borrow-while the West for its part regarded the Soviet Union and Eastern Europe as doubtful business partners and retained an underlying fear that trade might indeed increase Soviet military strength.

In the past 20 years, and especially in the past decade, the situation has changed drastically, both in political and economic terms. In Europe at least, the end of the Berlin crisis in 1962 brought with it at least a relaxation of the cold war, and the term passed from use entirely in 1971-72, with the advent of what we now call détente. Thus, limitations and controls on Western exports to the Soviet Union were gradually lowered, while in the 1970s the Soviet Union showed itself able to export much increased quantities of raw materials and also of oil and methane gas-and, along with the East European countries, more willing to enter into credit arrangements with the West.

In Europe, the new possibilities of trade and investment thus opened up were accepted with general approval, not only in the business community but in government and indeed throughout European societies. In the United States, on the other hand, there continued to be a heated and complex confrontation of sharply differing opinions. While the business community was generally favorable to the expansion of trade, many trade unions were opposed or skeptical, and there were others who continued to fear that the West might simply add to Soviet power.

The American government itself was divided between supporters, mostly in the economic and State Departments, and skeptics, mostly in the White House. Former Secretary of State Kissinger has given an interesting account of those debates.2 In his memoirs he tells us that, when the Nixon Administration came into office, the traditional restrictions on America's trade with the U.S.S.R. were being widely criticized: liberal opinion regarded them as "archaisms of the Cold War." President Johnson himself had announced, in October 1966, a shift from "the narrow concept of co-existence to the broader vision of peaceful engagement," which was expressed in a series of minor liberalizing measures on trade and credits. Even during the Nixon years, the prevalent theory of the Administration was that we should move from an era of confrontation into an era of negotiation and even cooperation.

But, while the State Department generally favored liberalization on the ground that "it would improve the political atmosphere" and the Commerce Department favored it in answer to the demands of the American business community, the White House held the view that "given Soviet needs, expanding trade without a political quid pro quo was a gift." This was the so-called linkage theory. "Our strategy," Mr. Kissinger states, "was to use trade concessions as a political instrument, withholding them when Soviet conduct was adventurous, and granting them in measured doses when the Soviets behaved cooperatively."

With the development of détente, in fact, especially after the Moscow agreements of 1972, in spite of "the White House's determination to have trade follow political progress and not precede it," Washington seemed to have accepted the view that by creating relations of "interdependence," pressure groups would develop on both sides that would make détente and cooperation between the superpowers more secure, especially in a time of crisis. Yet there always were enough contradictions and uncertainties about the exact meaning of détente to make it rather difficult to obtain universal agreement on the connections between détente itself and the strengthening of trade relations.

In any event, whereas Mr. Kissinger intended only to link the level of U.S.-Soviet trade to the overall state of relations, i.e., to Soviet external behavior, the U.S. Congress in late 1972 began to exert pressure for a link to Soviet policy on emigration, a matter clearly regarded by the Soviet leaders as domestic. This "far more ambitious form of linkage," as Mr. Kissinger rightly describes it in his memoirs,3 culminated in the Jackson-Vanik and Stevenson Amendments of 1974, putting emigration conditions on most-favored-nation tariff treatment and limiting American official credits, with the result that the Soviet leaders refused to go through with the trade agreements that had been a major feature of the original détente agreements of 1972.

Thus, there were domestic political factors that limited the growth of U.S.-Soviet trade, although the policy of détente was pursued in the 1960s and 1970s with equal conviction by Europe, Japan and successive American administrations. In addition, there are practical conditions that tend to limit American trade with the Soviet Union.

The United States and the U.S.S.R. are both economic areas of continental size. They have a wealth of raw material and energy resources, low population density, a high level of economic self-sufficiency. Foreign trade represents a much larger proportion of the gross national product (GNP) for the European nations than for America and the Soviet Union. Europe's and Japan's need for primary commodities and energy resources, together with the Soviet Union's need for manufactures and advanced technology, creates conditions of "complementarity" among these economies which do not exist to the same degree between the American and Soviet economies.

Whatever the balance among political and economic causes, in practical terms the growth of trade links was far greater among the Western "middle powers," particularly Germany, Japan, Italy and France, and the Soviet Union. Trade between the superpowers grew much more slowly.

The following table will better clarify the current mutual relationship:4

OTHER

USA EEC U.S.S.R. EAST

EUROPEAN

COUNTRIES

GNP (in billions of dollars) 2108.0 1950.0 1254 384

Total export 144.0 462.0 52 64

Total import 183.0 463.0 51 71

Export to COMECON 7.0 17.0 - -

Import to COMECON 1.5 16.0 - -

Export to Western countries5 - -13 15

Import from Western countries - - 16 12

The above figures show how heavily EEC countries depend on foreign trade and to what extent East European countries depend on the West, more than the Soviet Union itself. They also show a structural trade deficit, which becomes much greater in the overall balance of payments because of the indebtedness charges.

III

In addition to this basic quantitative difference, there developed important differences both in the character of the goods traded between the Soviet bloc countries and Western Europe, on the one hand, and these countries and the United States, on the other, and also on the extent to which Western Europe and the United States entered into deals by which the West supplied capital and technology for new industrial enterprises and received in return a portion of the output of these enterprises.

If one looks at the inner export structure of Western Europe's trade with the bloc, we can see that European Economic Community exports to East European countries (including the U.S.S.R.) consist of 88 percent machinery and other industrial goods, the remainder being food. Imports from the East cover only 8 percent machinery, and 17 percent semifinished goods, the remainder being oil, methane gas and raw materials. In particular, imports from the Soviet Union show a still greater prevalence of fuel, oil and raw materials.

This trend has increased in the last few years. In fact, Soviet exports of energy to Europe have grown remarkably. In the EEC, imports from the Soviet bloc in coal, oil and gas amount to between five and six percent of the EEC's total primary energy consumption. It is worth noting that the import-export mix has remained almost unchanged during the last decade, with the periodic floatings linked to Russian imports of grain. Once again a high degree of complementarity between the European economy and the socialist economy becomes evident.

The current high unreliability of energy supply from traditional Middle East sources gives greater relative importance to "marginal" supplies from the Soviet Union, even though the Soviet Union, too, is potentially unreliable. This is a condition of structural vulnerability which cannot be quickly modified.

Moreover, business in Western Europe was much more prepared than American business to enter into technology-for-output deals. Such deals are an interesting phenomenon which started with the Eastern countries, particularly eager to cooperate with Europe, either because they lacked the financial means to pay for industrial technologies, or because they could partly compensate for the stiff division of labor imposed by the Soviet Union inside the COMECON countries. Today, even the Soviet Union does not hide its interest in this type of approach to trade. Its motivations may be different. The Soviet Union, in fact, is industrially self-sufficient, very close to having a trade balance surplus and, of course, it even benefits from a major gold output.

As a matter of fact, in Eastern countries today, we can build up joint ventures with a minority participation of Western capital investment and, recently, in Bulgaria, even with a majority participation. These facts show a certain adjustment to Western patterns, considering that we are dealing with East European countries. To date, these countries have been punctilious in honoring their contracts. Yet, of course, no one could expect any deeper degree of production integration, at this time.

In addition, an important and convenient business for Western countries developed whenever they could get methane gas in payment for the installation of gas pipelines connecting Eastern countries with each other and, later, with Western Europe.

Why was American business, or in some cases the American government, reluctant to have the United States, with its highly appreciated know-how and technology, enter into similar deals? Obviously, the holding back was on the American side, again related to a generalized concern lest trade and the furnishing of advanced technology contribute to Soviet military power, and on occasion due to specific political concerns, in effect a form of "linkage." The ground was therefore clear for large West European involvement in the construction of industrial plants such as the Togliattigrad car manufacturing facility.

One particular example of the impact of political considerations was the decision of the United States and Japan not to cooperate with the Soviet Union in the development of the large potential oil and gas fields of Eastern Siberia, especially in the Yakutsk area. This "Siberian deal" hung fire through the mid-1970s, but was finally allowed to lapse, apparently in part lest it disturb the development of stronger political and economic ties with China, but in large part also because of security concerns that expanded oil and gas output might increase the military potential of the Soviet Union.

It would be inappropriate for me to criticize the American position on these matters, but I do believe that time has shown that the Siberian deal would have been, on balance, wise from the standpoint of American interests as well as those of the West in general. Specifically, had it gone through there would be less pressure today by the Soviet Union for access, through peaceful or not so peaceful means, to the oil of the Middle East. Obviously, that enterprise involved great risks, both political or economic, due to the dozen billions of dollars to be invested in the project. The Russians, who are good at long-term planning, but not very good appraisers of short-term targets, were certainly right in foreseeing the future scarcity of energy both for themselves and the COMECON countries. The political will of the West should have prevailed over myopic economic considerations, such as an assumed collapse of international oil prices. Today's world tension perhaps would not overwhelmingly concentrate on the Persian Gulf, which ever since Mohammed has been an area of instability.

My conviction is that the failure of the "Siberian deal" was a great opportunity lost to world peace. There was danger, of course, of creating a simultaneous greater dependence of the West on Soviet energy resources. But this fact would have balanced off the intense, almost exclusive relation with the Middle East.

Finally, because both trade and investment opportunities in the Soviet Union and Eastern Europe were picked up far more by West European (and to some extent Japanese) business than by American business, the great bulk of the necessary financing was arranged in Europe and under European management, albeit with extensive private American participation.

Was this growth in East-West trade, including both scale and characteristics, good or bad? In Europe, businessmen are convinced that the proposition that trade and business relations, on a worldwide scale, are a good thing holds true equally for relations with the East. The fact that this is the universal view of business leaders and people involved must have some weight. Business with the East is usually good business, for reasons which are related to its own special characteristics. Even if intense inter-Western competition, against a monopolistic buyer, may sometimes reduce profit margins to narrow limits, the very size of the "buyer," as well as the size of the deals this gigantic buyer may offer, make these relations rather unique.

Mr. Piero Savoretti, one of the leading European operators in this field, estimates that almost all deals concluded by his trade company in recent years with the Soviet Union produced, as a result, the construction of huge factories or the incredible expansion of already existing facilities. The most important of these deals has been the Togliattigrad car factory.

When dealing with a unique social and economic entity such as the Soviet Union-generally rich, yet characterized by uneven levels of development in different areas-the Western seller may use technology which has already been developed for his own uses; or he may, if the size of the deal justifies it, experiment on a grander scale on new technology, which he will then find useful at home. For some Western producers (including American grain producers), the Soviet Union, and sometimes also the East European client-nation, can be the only client in his category, as far as the size of possible deals is concerned.

Although the Eastern buyer is usually considered "a hard customer," who is quite aware of his "monopsonic" powers, he is as often considered a reliable customer. He may ask for easy credit on a large scale and accumulate debts. This applies more to East European countries than to the Soviet Union. In fact the Soviet balance of trade is fundamentally sound, due to that country's great wealth in rare minerals and energy resources. The U.S.S.R. is also thought to be a reliable partner in its payments, one that may pay in gold when necessary. Of course, a special strength is attached to this condition: the debtor has a certain hold on his creditor.

In fact the indebtedness of East European countries is today in the order of over $66 billion, half of which is covered by government-insured export credits. Barring an impending war menace, one can hardly believe that credit services can be cut off abruptly. For those countries, that would mean an interruption of imports of products and equipment which are essential to ensure the continued operation of the Western technological capital investment underway.

A payment failure-should it hypothetically occur-would affect not only government expenses but also the Eurodollar market. In fact the amount of money involved is relatively small, yet its impact on the highly sophisticated mechanism of such a market would be substantial. The outcome is that certain banks are likely to be badly hit, triggering as a consequence a chain reaction. In a situation of this kind, the institution of a supernational body would be needed to avoid a potentially more serious crisis for the international banking system.

Nevertheless, the special conditions of East-West trade do not contradict the unanimous opinion of people involved who say that "this is good business." It is good for the Soviet Union as well. But trade is not supposed to be a "zero-sum game," rather an activity profitable and agreeable to both sides. Trade relations which are profitable only to one side, and damaging to the other, would not last long.

IV

If this is a fair summary of the way East-West trade has evolved, and of the prevailing European view of its economic merits, there still remains the original question of its political impact. Here I must frankly state my personal view. Based on my direct experience in this field and concrete knowledge of facts and people concerned, I believe that, on the whole and within certain limits, trade does indeed encourage the growth, inside Soviet society, of forces and views naturally oriented toward the pursuit of more peaceful relations with the rest of the world. It is not so difficult to identify, in the Soviet hierarchy of power, those economic and technocratic groups which are in favor of strengthening ties with the West for economic reasons, in order to develop Soviet technology and, in general, to compensate for Soviet economic failures and backwardness. If these people and groups have a certain influence on Soviet policy-and they presumably do have one-theirs is bound to be an influence for détente and peace, rather than for actions leading to a "cold war" atmosphere.

Along with this pressure the Soviet Union is experiencing a certain "dissent" which may be effective in the context we are discussing. This is not an anti-Soviet movement, but rather a grass roots force that strives to introduce within the Soviet regime a greater sensitivity for an economy management resting on economic evaluations rather than on the rigid planning of the bureaucratic military system. We must carefully avoid stifling the emergence of such new forces. Trade restrictions would cause serious problems for them.

As for the COMECON countries, their reliance on trade and "détente" relations with the West is frequently linked with their aspiration for greater autonomy from the U.S.S.R. I think such relations (more trade, more freedom, or a growing degree of self-determination, at least in business) are evident and should not be discouraged.

I would like to present one more point in favor of trade. Should the final result of growth in East-West trade be a noticeable improvement in the living standard of the Russian people, that in my opinion would be good for Western interests. Any time I go to Moscow and see cars in the streets-not just official cars, but private cars in increasing number-I can't help seeing an evident relation between freedom of moving around and political freedom, or, at least, a growing desire for it.

In conclusion, a "better off" Soviet Union will have additional reasons not to risk its new affluence in a confrontation with the West, and it could be more easily liberalized. The breakup of East-West economic relations would weaken those political forces which are supporting détente and cooperation. The Soviet "hawks" would be strengthened in their expansionistic policies, as the only remedy for the economic problems of the Soviet Union: arms, rather than trade, would have to be chosen as an instrument to achieve the great ideological ambition of the Soviet Union.

V

Let me consider now some of the main arguments against East-West trade. It is difficult to believe that the great expansion of Soviet military power is really conditioned by East-West trade. To the contrary, such trade is the result of choices and decisions which can be independently pursued by the Soviet leadership, and for which that leadership can command adequate resources from inside the Soviet territory. It is impossible to prove-with the exclusion of a few high-technology areas-that East-West trade adds more to Soviet power than it contributes to the well-being of the Western economies.

It has been claimed that, without the support of Western food and technology, the Soviets would be forced to divert essential skills and resources from the production of armaments. That is hard to believe. The political control of Soviet society by the communist system is such that it surely can concentrate on armaments production as much strength as it considers necessary to achieve its aims. This was the case during the past decades when the level of available resources-and the living standards of the Soviet people-were immeasurably lower than they are now. The Stalinist regime was the dreadful outcome of such hard times. Today's conditions are sharply different. Yet the structural over-power of the Soviet bureaucratic and military system does not seem to have changed. To some extent, it automatically produces the required concentration of human and material resources in high-priority areas, within the fundamental aims of a global strategy determined by the system itself. To blame East-West trade for the increase in Soviet power during the last decade or so is therefore unrealistic. It is especially so when considering how small these exchanges are if compared with the size of the Soviet economy. In fact, the latest data available show that the total Western trade (including American) with the U.S.S.R., in 1978, is no higher than 1.4 percent of estimated Soviet GNP.

Finally, one should not forget that a net separation still exists between the "civil" and "military" sectors of the Soviet economy. The Soviet leadership, being well aware of the inadequacies of its economic system, makes quite sure that the "military" sector remains independent of developments in the "civil" sector of the economy. They have concentrated there the very best of their technicians and scientists with a system that rewards only the people engaged in that sector. This structure allows for, and explains, the high rate of innovation in the weapons industry and, vice versa, the slow transferring of innovations in the civil segment of industry.

Soviet technological developments in the "military" field, including, for instance, space research, have not lagged behind Western developments, and have occasionally taken the lead, quite aside from the level of East-West trade. From Sputnik onward, the experience of the last two or three decades is there to prove it.

Yet experts and Western governments still think that a certain number of high-technology products-such as electronic equipment and miniaturization-must be excluded from East-West trade, because they have a recognizable strategic value, being directly usable for arms production. Western governments have agreed on lists of "forbidden" goods, which vary from time to time. I happen to believe this policy is correct, insofar as these lists are kept under constant review and these prohibitions can in fact be rigorously enforced. It represents, in fact, a "safety rule" that it is definitely advisable to enforce independently from other and different evaluations of the overall problem.

In the last analysis, the question is one of judgment. If the West were to refuse to build plants in the U.S.S.R. or to supply the technology and machinery to make them workable, would the result be that a number of the most skilled Soviet technicians would have to be diverted from military work in order to meet the minimum demands of the Soviet people? This seems to be the conclusion of much American argument. To me it seems dubious. I am concerned that the result might be, instead, not only a cooling of official relations and a tendency to return to an irrevocable cold war mentality on both sides but, within the Soviet economy, a belt-tightening and partial return to the Stalinist era, justified to the Russian people by the demonstrated hostility of the West.

VI

But could East-West trade be used to influence and condition Soviet policies? This is the assumption on which the Kissinger "linkage" theory was obviously based, on the premise that the Soviets are more interested than the West in economic relations and, therefore, can be made to pay for trade deals in that delicate currency called "political good behavior." It is also the apparent assumption behind the measures taken by the Carter Administration in response to the Soviet occupation of Afghanistan, including the cancellation of grain exports (above the annual levels guaranteed in the 1975 agreement on this subject), the tightening of agreed export controls in military-related areas, and, in addition, the attempt to limit all forms of technology-bearing exports. The Carter Administration has asked its NATO allies to join in all three of these measures, and there has in fact been a high level of agreement on the first two-Europe is not replacing the denied American grain (though Argentina, alas, may have done so to a very great extent, and to the tune of greatly increased ties to the U.S.S.R.), and tightened controls on military-related items seem to be on the way to being accepted.

But the attempt to limit technology-bearing exports has not met with a similar favorable response, leading to the suspicion that there may even be a converse premise-that Europe, at least, is more interested in East-West trade than the Soviet Union, so that the Soviet leaders are in a position to demand from West European nations their own form of "political good behavior." In its extreme form, the fear is expressed that Western Europe may become-or perhaps has already become-"Finlandized," which presumably means not objecting to Soviet political or military actions no matter how threatening.

I believe the situation is not as simple as either of these two premises would suggest. I know of no instance in which the behavior of the parties involved could be taken as proof that there really was any sign of political-economic dependence of one on the other. We cannot presume that we could have the other side in our power by withholding Western trade. As a matter of fact, Mr. Kissinger's "linkage" theory never worked because political and economic interdependencies are much more complex, and the linkage, to be effective, calls for a much longer time span than is available in an emergency. The Soviet Union almost certainly cannot be induced to moderate its external behavior by the withholding of trade by the West, or at least will not do so in any case where it believes it is protecting or advancing major Soviet interests.

But, on the other hand, we are no "addicts" of East-West trade relations. Western Europe is not so dependent on East-West trade that it could be forced to sacrifice any vital interest-obvious examples would be a direct Soviet threat to European borders or European nations outside the Iron Curtain-just to maintain trade with the East.

Yet there can be no question that Western European nations view the issue of reducing or cutting off trade with the East with substantially greater concerns than are felt in the United States for the impact on their own societies. I have already mentioned the fact that significant energy supplies are now imported by Western Europe from the Soviet Union. More broadly, though this type of calculation has a large margin of uncertainty, it is estimated that about 300,000 jobs in Europe are directly dependent on trade with the Eastern bloc. And indirect jobs of course are far higher. It should not be difficult for America (although it apparently is) to understand that a cut in the level of trade relations with the Soviet bloc is, in economic and social terms, much more costly for Europe than for America itself. Although the amount of trade between the European Community and the COMECON countries is fairly modest and would seem therefore not likely to produce serious consequences should that amount be sharply reduced or eliminated, the cut will be mainly concentrated in particular segments of the mechanical industry, with much more sizable negative effects. Actually, the real damage suffered would be much greater: the "cost and benefit" assessment of such a strategy is therefore bound to have quite different results for America than it has for its allies. This fact ought to be taken into consideration before, rather than after, sudden changes in policy are decided by the American Administration.

Thus, one can easily understand that the adequacy of the instrument of economic retaliations against Soviet misdeeds, as compared with other possible actions, is bound to appear quite different to the minds of American and European decision-makers. Of course, all this does not deal with matters of loyalty. Rather, it deals with different realities and perceptions which seem not to be taken adequately into account. It is very difficult for the instrument of economic retaliation to work, especially over short terms, unless the party one wants to hit is in a condition of particular weakness. It is even more difficult whenever the retaliating party is itself badly hit, not only in terms of jobs, energy supplies, and similar tangible elements, but in terms of the very large human stake that one country in particular, the Federal Republic of Germany, has in the continuation of an Ostpolitik that has made a tremendous difference to communication and movement among the German people as a whole.

In short, even as Western Europe has greater trade ties than the United States with the Soviet Union and other East European countries, so it necessarily takes far more seriously the impact of any impairment of those ties.

But by the same token Europeans may have a greater "feel" for what trade with the West is doing, in the long run, to the attitudes and felt desires not only of the Soviet people but of Soviet leaders. The conviction that over the long run the influence in these key respects is a positive one could, of course, yield if the Soviet Union took an action such as I have suggested above. Afghanistan may have brought us all very close to that point, but most Europeans are not yet persuaded that it has been reached.

VII

Let me try to sum up a few principles which, in my view, should guide Western policies in the field of East-West trade. This outline is meant as a contribution to a debate which ought to be urgently undertaken in both governmental and non-governmental circles.

1. Trade, according to Western values and culture, is, in itself, a good thing, and we should pursue it with the Eastern bloc as well, unless there are compelling reasons to the contrary.

2. The idea that Soviet global or domestic policies can be modified and improved through trade "linkage" has been proved unrealistic. One cannot reduce the expansionist impact of Soviet policies by withholding trade. On the contrary, one might even increase it.

3. The claim that Soviet policies will become more moderate and peaceful as a result of a higher level of trade and economic interdependence with the West is also beyond proof. Yet, experience tells us that the growth of trade strengthens forces and individuals inside Soviet society which are recognizably committed to détente with the West and to peaceful policies.

4. The danger that economic interdependence may bring about the "Finlandization" of Europe and the West remains, for the time being, purely a theoretical possibility, not a reality. The true danger of "Finlandization" was actually removed when Western Europe became a powerful economic community, strongly embedded into the fabric of international trade.

Of course, it is of paramount importance to have a comprehensive vision of needs and problems of all partners of the Western alliance to ensure that none of them will ever fall into some sort of dependence on the Soviet bloc. In the field of energy or rare raw materials, for instance, it is dramatically important that common policies be agreed upon in order to reduce Western dependence on any single source of such vital resources. The present overall levels of trade with the East are far from making our economies, with their wide variety of world trade relations, dangerously dependent on Eastern trade. The "safety limits" of trade with the Eastern countries have not been reached, so far. But businessmen feel the urgent need for a multilateral body capable of determining when those "safety limits" may be dangerously close.

5. A certain number of well-defined areas of strategic importance ought to be excluded from East-West trade, in order to deprive the other side of goods which could be used for military purposes.

6. A distinction should be made between trade with the Soviet Union and trade with the Eastern bloc countries. Some of the political arguments being currently advanced in the West against excessive dependence of our economies on trade with the Soviet Union could be used in favor of an increasing level of trade between some of the Soviet Union's European allies and the West. Should two separate sets of rules be devised?

7. Any strategy agreed upon in the matter of trade with the Soviet bloc must either be a common policy for all Western countries, or it will be no policy at all. If the rules of the game are not respected by all (the present rules very often are not), no policy will prove workable. (For example, it is known that the recent Paris agreements on government-assisted credit aids have been overtly violated by some countries just a few hours after the signature.)

8. In view of the different relative importance of trade with the Soviet bloc for Western countries, it is not advisable that policy changes be decided unilaterally by any single member of the Western alliance, without prior consultation and agreement among all nations concerned. At present, the political instruments for achieving this new kind of coordinated policies do not seem to exist. It is unthinkable that it is just up to the businessmen to fill up such a vacuum.

9. Unilateral actions of any kind, creating a fait accompli and facing others with an apparent choice between "loyalty" and "vital interest" are dangerous for the unity of the Western alliance. The lack of a comprehensive Western strategy today is evident: so long as the situation remains so, the prime beneficiary will be the U.S.S.R. Necessary rules should be established that take into account the relative exposures to risks of the individual members, both in economic and political terms.

Businessmen cannot be expected to define such strategies. They can only be asked, in a well-ordered democratic society, to pursue proper economic aims and to respect guidances agreed upon by governments. These governments must, however, take into account the principle of equality of opportunity for all, and recognize the values of a free-market economy.

1 Quoted in George F. Kennan, Russia and the West Under Lenin and Stalin, Boston: Little, Brown, 1961, p. 187.

3 Ibid., p. 1272.

5 The term "Western countries" was used by the compilers of these figures to include the members of the Organization for Economic Cooperation and Development (OECD), less Turkey but with the additions of Israel and South Africa. The share of these last two countries in East-West trade is of course minimal.

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  • Giovanni Agnelli is Chairman of the Board of Fiat, S.p.A., of IFI (Istituto Finanziario Industriale) and of the Agnelli Foundation. From 1974 to 1976, he was Chairman of Confindustria, the Italian Federation of Industry.
  • More By Giovanni Agnelli