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Living with the Soviet Superpower (3)

TRADE,E C H N O L O G YA N D L E VE RA G E:

ECONOMICIPLOMACY

by Samuel P. Huntington

A n e ffec tive an d rea lis tic approac h to U .S . -Sovie t economic re la t ions today must re f lec tthe ke y characte r is ti cs o f the cu r ren t phase o ft he supe rpow er r e la t ionsh ip . T h i s phase d i f -fe r s s ign i f i can t ly f rom the co ld war pe r iod ,l a s t i n g r o u g h l y f r o m t h e m i d - 1 9 4 0 s t o t h em i d - 1 9 6 0 s , w h i c h w a s c h ar ac te riz e d b y i n -tense com pe t i t ion be tween t he Sov ie t U n io nan d t he U n i t ed S ta te s, b y t he gene ra l p r i -m a c y o f A m e r i c a n p o w e r - - p o l i t i c a l , e c o -n o m i c , a n d m i l i t a r y - - a n d b y a h i g h d e g r e eo f po la r i za t ion in in te rna t iona l a ffair s. Inthe l a t e 1960s and ea r ly 1970s , however, amajor change in th i s r e l a t ionsh ip occur red .A m o n g o t h e r d e v e l o p m e n t s , t h e S o v i e t sach ieved s tr a teg ic pa r i t y w i th t he U n i t e dStates , the Sino-Soviet spl i t in tensi f ied, theU n i te d S ta tes consc ious ly reduced i ts ro le inwor ld a ffa i r s , and the re was a r e l axa t ion inSov ie t-Am er i can t ens ions kn o w n a s d ten te .T hes e t r ans i t ion yea rs la s ted un t i l ab ou t

1973 . S ince the n So v ie t -Am er ican re la t ionshave en te red a n ew pha se - - - in e ffect, E ra I I - - -w h ich d if fe rs i n m a n y fun da m en ta l re spec tsf r o m b o t h t h e c o l d w a r p e r i o d , o r E r a I ,an d the b r i e f yea r s o f t r ans i tion .

T w o im po r t an t charac te ris tic s d i s ti ngu i sh

the p resen t pe r iod . F i r st , du r ing the C oldW a r t h e co m p e tit iv e e le m e n t d o m i n a t e d t h eSov ie t -A m er i can r e la t ionsh ip . D ur in g thebr ie f yea r s o f d ten te , the emphas i s was oncoo pera t ion . S ince a t least th e fa l l o f 19 73 ,

SAMUEL P. HUNTINGTON, F r an k G . T h o m s o n P r o -

l e s s o r o f G o u e r n m e n t a n d d i r e c t o r o f t h e C e n t e r f o rI n t e r n a t i o n a l A f f a i r s a t H a r v a r d U n i u e r s i ty, w a s c o -o r d i n a t o r o f s e c u r it y p l a n n i n g a t t h e N a t i o n a l S e c u r i t yC o u n c i l i n 1 9 7 7 - 1 9 7 8 . T h i ~ a r tff le , a d a p te d f r o m a na dd rees a t W e s t P o i n t l a st J u n e . d o e s n o t n c c e u a r i l yretlect th e o ieuas o f a ny go ve rn m en t agency.

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in reso lv ing reg iona lconflicts, reduc ing ten-s ions , and achieving adequately verifiablearm s co nt ro l agreem ents. H e sa id tha t theseadvan tages , t oge the r w i th o the r m eans i f nec -essa ry, shou ld be used to coun te rba lance ad -verse Sovie t inf luence in key areas of thew o r l d a n d t o p r o m o t e h u m a n r ig h ts a n dna t ion a l i ndependence. In shor t , econom iccapabi li ti es and econo m ic re la t ions m us t servethe bas i c U .S . fo re ign po l i cy ob jec t ives o fe n c o u r a g in g E a s t - W e s t c o o p e r a t io n , c o n t a i n -i ng S o v ie t e x p a ns io n , a n d p r o m o t i n g A m e r-ican values.

Condit ioned Flexibi l i ty

I m p l e m e n t a t i o n o f t h e p r e s id e n t 's s t r a te g yrequ i re s som e fun da m en ta l changes in thew a y s t h e U n i t e d S t a t e s h a s t e n d e d t o a p -p roach U .S . -Sov ie t economic r e l a t ions in the

p a s t. O n e a p p r o ac h , w h i c h p r e d o m i n a t e dd u r i n g t he h e i g h t o f th e C o l d W a r, a t te m p t e dto min imize economic r e l a t ions be tween theUni t ed S ta t e s and i t s a l l i e s on the one hand ,a n d t h e S o v i e t b l o c o n t h e o th e r. T h i s d e -n i a l a p p r o a c h a s s u m e d t h a t w a r w a s h i g h l yp r o b a b l e a n d t h a t c o n s e q u e n t l y W e s t e rn n a -t ions s hou ld engage in no econom ic r e la t ionsw i t h t h e S o v ie t U n i o n t h a t m i g h t s tr e ng th e ni ts econom ic , t echnologica l , and m i l i t a ryw ar-m ak ing capaci ty. I t l ed to the deve lop-m e n t o f e m b a rg o lis ts a n d t h e c re a ti o n o fm e c h a n i s m s , m o s t n o t a b l y t h e c o o r d i n a t i n gcom m i t tee on exp or t con t ro l s (COCOM)1 top rod uce co ll ec tive ag reemen t on the en fo rce-m e n t o f t h o s e e m b a rg o l i s t s b y t h e We s t .D u r i n g t h e l a t e 1 9 6 0 s a n d t h e e a r l y 1 9 7 0 s ,th i s app roach t ended to un rave l . A s eco -n o m i c r e l a t i o n s b e t w e e n t h e S o v i e t U n i o na n d t h e We s t m u l t i p l i e d , t h e e m b a rg o l i s t sw e r e n a r r o w e d t o i n c l u d e i t e m s o f p u r e l ym il i ta ry s ignificance, an d COCOM an d na-t iona l con t ro l s were loosened o r evaded .

A second , l a i s sez fa i re approach to U.S . -Sovie t economic re la t ions la te r appeared , i t s

in f luence peak ing dur ing the heyday o f d~-

1 Da t ing f rom 1950 ,COCOM includes Japan and allmember countries of tbe N o rtb Atla nt ic Trea ty O rga-n iza t ionexcept Iceland.

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te n te b e t w e e n 19 7 1 a n d 1 9 7 4 . T h o s e w h osuppor t ed th i s app roach e s sen t i a l ly a rguedt h a t A m e r ic a n e c o n o m i c d e alin g s w i t h t h eSov ie t U n io n sho u ld , so f a r a s poss ib l e, r e-s e m b l e t ho s e w i t h a n y o t h e r so c ie ty. A c -c o r d i n g t o t h i s v i e w, t h e g o v e r n m e n t c a ne n c o u r a g e a n d p r o m o t e t r a d e w i t h t h e S o v i e tU n i o n a n d p r o v i d e g u i d a n c e t o U . S . b u s i -n e s s m e n a n d b a n k e r s , b u t i t s h o u l d n o ta t t empt to i n f luence t r ade fo r po l i t i ca l pu r-poses. In the long er te rm , i t is a rgued , thedev e lopm en t o f m u t ua l ly beneficial econom icr e l a t i o n s b e t w e e n t h e t w o c o u n t r i e s w i l l e n -

courage l ibera l and p lura l i s t i c t rends in theS o v i e t U n i o n a n d s t r e n g th e n t he g r o u p s inb o th soc ie tie s t ha t have a s t ake in the m a in -t enance o f peace be tw een the tw o coun t r ie s .

Nei ther the den ia l nor the l a i s sez fa i re ap-p roach p rov ides an adequa te gu ide fo r shap -

ing U .S . -Sov ie t economic r e l a t ions in E raI I. T h e S o v ie t U n i o n r e m a in s A m e r ic a 'sp r inc ipa l compe t i to r i n wor ld po l i t i c s , andthe poss ib i l i t y o f mi l i t a ry conf l i c t be tweent h e t w o c o u n tr ie s r em a i ns . Y e t t h e p r o b a -b i l i ty o f such conf l ic t has d imin ished , and

m a n y a re as o f n e g o t i a t io n a n d c o o p e r a t i o nb e t w e e n t h e t w o c o u n t r i e s h a v e d e v e l o p e d .U . S . p o l i c y c a n n o l o n g e r b e b a se d o n t h ea s s u m p t i o n t h a t r e l a t i o n s w i t h t h e S o v i e tU n i o n a re e x c lu s iv e ly h o s tile . T h e w a n i n go f t h e C o l d Wa r a n d t h e e m e rg e n c e o f n e w

e c o n o m i c i m p e r a ti v es in b o t h E a s t a n d W e s thave d i c t a t ed a subs t an t i a l expans ion in eco -nom ic r e la tions . P ro h ib i t i on o f ce rt ain typ eso f e c o n o m i c i n t e r a c t i o n w i t h t he S o v i e tU n i o n m a y, in d e ed , b e c o u n t e r p r o d u c t iv e .A s t r a t egy o f pu re den ia l cou ld dep r ive theU n i t e d S t a t e s o f a n o p p o r t u n i t y t o u s e i t se c o n o m i c a d v a n t a g e s e i t h e r t o c o m p e t e m o r ee ff ec tiv e ly w i t h t h e S o v i et U n i o n o r t o i n -duce des ir ab le Sov ie t ac t ion on m a t t e r s o fc o m m o n i n t e r e s t .

The l a i s sez f a i r e approach , i n i t s mos ts t r a i g h t f o r w a r d f o r m , is a ls o i n a p p r o p r i a t efo r t he p re sen t t im e . A m er ican econo m icr e la t io n s w i t h t h e S o v i et U n i o n a re n o t ,and canno t be , l i ke those the Un i t ed S ta t e se n j o y s w i t h th e U n i t e d K i n g d o m o r th e

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Federal Republic of Germ any. Fa r m oret h a n a n y o t h e r m a j o r s ta te , th e S o v i e t U n i o nbehaves a s a un i t a ry ac to r in the in t e rna -t iona l econo m ic a rena . I t thu s possesses ad i s t inc t and impor t an t advan tage in dea l ingwi th the many p r iva te bus inesses , pub l i c o rs e m i p u b li c c o r p o r a ti o n s , a n d g o v e r n m e n tagenc ies tha t ex i s t in the h igh ly p lura l i s t i cWeste rn soc ie t ies . This fac t in t roduces majorasymmet r i e s in to the r e l a t ionsh ip tha t cano n l y b e c o m p e n s a t e d f o r b y a n a ctiv e r o leo n th e p a r t o f W e s t e rn g o v e rn m e n t s . I na d d i t i o n , w h i l e t h e p r o b a b i l i t y o f S o v i e t -

Amer ican mi l i t a ry conf l i c t a t any g iven t imeis low, the fac t s o f d ip lomat ic , po l i t i ca l ,ideo logica l, and econo m ic co m pe t i t ion a rev e r y real. T h e U . S . g o v e r n m e n t c a n n o t b eob l iv io us to the e ffec ts tha t d i ffe ren t pa t te rnso f U . S . - S o v i e t e c o n o m i c r e l a t i o n s m a y h a v e

o n t h a t c o m p e t it io n . T h e S o v i e t U n i o n i ts e lfi s ce r t a in ly ve ry much aware o f t he compe t i -t ive re la t ionsh ip and consc ious ly shapes i t seconomic pol ic ies to serve i t s pol i t ica l andsecu r i ty goals.

Both the den ia l and the la i ssez fa i re ap-

proaches, each in it s o w n w ay , d ivorce eco-n o m i c c o n s i d e r a t i o n s f r o m f o r e i g n p o l i c ygoa ls . W h a t is needed ins tead is a ne wapproach o f cond i t ioned f l ex ib i l i t y in wh ichchanges in the scope and cha rac te r o f U .S . -Sov ie t economic r e l a t ions a re l i nked to andcond i t ioned by p rogres s in the ach ievemen tof U.S . po l i t i ca l and secur i ty ob jec t ives .

The l egacy o f the yea r s o f d6 ten te p ro -v ides a s t r ik ing i rony. D ur ing the pas tdecade , economic in te rac t ions be tween theS o v i e t U n i o n a n d t h e U n i t e d S t a t e s , a n d ,on a much broader sca le , be tween the USSRa n d t h e We s t , h a v e m u l t i p l i e d d r a m a t i c a l l y.T h e S o v i e t U n i o n h a s cle a rl y b e ne fite d m o r ef rom th i s in tens i f ied economic in te rac t iont h a n h a s t h e U n i t e d S t a t e s o r e v e n t h e We s tgene ra lly. A p rocess has been a t w o rk th a th a s c o n v e r t e d We s t e r n e c o n o m i c a d v a n t a g e sin to So vie t econo m ic benefit s. T h is p rocessa n d t h e o u t c o m e i t h a s p r o d u c e d a r e n o tacciden ta l. T h e e xpa ns ion in econom ic in -t e r a c t i o n s w a s p r i m a r i l y a p r o d u c t o f c o n -

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a n d e q u i p m e n t f r o m t h e We s t , h e a v i l y c o n -

cen t ra ted in the chemica l , pe t rochemica l ,au tom ot ive , and ene rgy indus tr ie s . B e tween3 0 a n d 4 0 p e r c e n t o f t h e s e i m p o r t s w e r e i nadvanced t echno logy areas. M a n y w ere fi-nanced through off ic ia l credi ts , somet imesbe low m arke t ra te s. T h e ev idence seemsconc lus ive tha t t hese impor t s have made asma l l , bu t real, impac t o n Sov ie t p rod uc-t iv i ty and g row th . In ce rt ain key areas, t heyhave p layed a par t icu la r ly s ign i f ican t ro le .I t has been e s t ima ted tha t Sov ie t o i l p ro -d u c t io n w o u l d t o d a y be 1 0 - 1 5 p e r c en t lessthan i t i s , were i t no t fo r recen t impor t s o fce rt ain typ es o f W es te rn t ech no log y.

Whi le the Sov ie t s bene f i t ed subs tan t i a l lyf ro m in tens if ied econom ic engagem en t , t heya lso co nt inu ed and in tens if ied the i r m i l i t a ryb u i l d - u p . T h e y ex p a n d e d th e ir o ve rs ea sm i l i t a r y d e p l o y m e n t s a n d a r m s t r a n s f e r s t o

less deve loped coun tr ie s . T h e y su pp or t ed in -t e rven t ions by the i r Cuban a l l i e s in Ango la ,in E th iop ia , and more r ecen t ly, a t oneremov e , i n Za ir e. A nd du r ing the pas t yea r,the Sovie t s l aunched new repress ive measuresagains t d iss idents .

T o b e m e a n in g f u l, d 6 te n te m u s t b e c o m -prehensive and recip rocal. O ne supe rpo w ercanno t expec t t o invoke i t s sp i r i t on ly ins i tua t ions in wh ich i t s erves tha t po w er ' sin te rest s. I f the Sovie ts , fo r exam ple , con-t i n u e t o e m p l o y m i l i t a r y m e a n s , i n c l u d i n g

those of thei r a l l ies , to expand thei r inf luencein Af r i ca and e l sewhere , t he Un i t ed S ta t e sand i t s a l l i es wi l l eventua l ly have no choiceb u t t o b e g i n t o c lo se t h e d o o r o f e c o n o m i cd6 ten te . Ec on om ic d6 ten te and m i l i ta ry ad -v e n t u r i s m c a n n o t g o h a n d - i n - h a n d f o r l on g .

A t s o m e p o i n t t h e S o v ie ts w i ll h a v e t o m a k ea choice.At presen t , qu i te c lear ly, the Sovie t s face

increased problems as a resu l t o f the ex t raor-d i n a r i l y p o o r p e r f o r m a n c e o f t h e i r e c o n -o m y in the l as t tw o yea rs . In the fu tu re ,

t h e y w i l l c o n f r o n t a g r o w i n g l a b o r s h o r t a g e ,p robab le fu r the r dec l ines in p roduc t iv i ty,and an increas ing energy c runch .

I n m a n y w a y s , S o v ie t e c o n o m i c p r o b l e m s

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come into focus on the issue of oil and gas

extraction. The December 1977 Plenumof the Central Committee, which created anemergency commission on the economy, alsodevoted extensive attention to the energyquestion. It inaugurated a major energyconservation program and decided to concen-trate on increasing west Siberian oil produc-tion at the expense of other producing areas.This has led to expanded orders for Westernoil field equipment. In the first quarter ofthis year, Soviet orders for such equipmentfrom the United States were more than inany other full year, and total 1978 ordersfrom the West could amount to close to $1billion. Further down the road, there is thepossibility of massive undertakings such asthe Yakutsk liquefied natural gas project,which would involve $6 bil lion in Americanand Japanese investment and substantial

long-term cooperation. Repayment wouldcome eventually in the form of exports ofgas to the United States and Japan.

The critical issue now is whether theSoviets will continue on a course of eco-nomic engagement in attempting to deal

with their energy problems or shift backtoward economic autarky. It is unlikelythat the Russians will try to solve theirproblems through economic reforms. Ifthere is to be an alternative to engagement,a shift toward autarky is much more in

keeping with the historical Russian patternof economic engagement with the Westfollowed by economic withdrawal. Yet fromthe Soviet point of view, the costs of autarkywill also be very high.

The Carrot and the Stick

In this situation, U.S. policy should notjust respond to a Soviet choice, but shouldattempt to influence it. Unforunately, how-ever, in the economic area, due to the legacyof the denial and the laissez faire approaches

there exists a variety of institutional, legal,and political constraints that have tended torestrict the freedom of movement of Ameri-can decision-makers. Un ti l last summer, for

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instance, apart from military technology,

the door on technological transfers to theSoviet Union was, in many respects, wideopen. The door on official credits, however,is at present nailed shut. Consequently, inthe.economic field, the Soviet Union has lit tleto hope for or to fear from the UnitedStates. We have denied ourselves both thecarrot and the stick. If, however, the UnitedStates is to have a successful policy of con-ditioned flexibility, it must be able to openor close the economic door as our long-termsecurity interests and political relations withthe Soviet Union dictate.

The problems of achieving this goal are, inmany ways, even more extensive than thoseinvolved in the use of military force for po-litical purposes. Harnessing economic powerto foreign policy goals presents formidableobstacles: bureaucratic pluralism and inertia;

congressional and interest group politics: theconflicting pulls of alliance diplomacy; andmost important, in dramatic contrast tomilitary power, a pervasive ideology thatsanctifies the independence, rather than thesubordinat ion, of economic power to govern-

ment. Th is ou tlook complements the obvi-ous Soviet interest in separating economicsfrom politics. Yet if war is too importantto be left to the generals, surely commerceis, in this context, too salient to be left tobankers and businessmen.

Several popular misconceptions also standin the way of a successful policy of condi-tioned flexibility. It is often alleged that eco-nomic leverage is impossible because Sovietforeign trade is so small compared to its grossnational product (GNP). In fact, Soviet

foreign trade does amount to only about4 per cent of Soviet GNP. But as RaymondVernon has pointed out, Western firms de-velop technology for their own purposes andrecover their costs from its use for these pur-poses. Since there is usually more than one

potential Western seller of a particulartechnology, competition is likely to drivethe price down below average cost. Inaddition, despite their small proportion of

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GNP, impor t s a re c ruc ia l to many key

aspects o f the Sovie t econ om y. F or over adecade , the Sovie t s have a rden t ly a t t empted ,th rough bo th l ega l and i l l ega l means , toacqu ir e W es te rn t echno logy. T h i s d r ive hasbeen based on the recogni t ion that increasesin Sov ie t p roduc t iv i ty mus t come l a rge lyf rom t echno log ica l inno va t ion , a s t hey havefor the pas t two decades in the Wes t , r a the rthan f rom add i t iona l inc rements o f cap i ta land labor, a s they d id in the 1950s andea rly 196 0s in t he Sov ie t U n io n . As aresul t , dur ing the pas t decade , impor ts off o r e i g n t e c h n o l o g y a n d e q u i p m e n t h a v ep layed a cen t ra l ro le in the expans ion o fSovie t o i l and gas p ro du c t ion . O ver 70 percen t o f the inc rease in Sovie t ammonia p ro-du ct ion c apa ci ty in the 1970 s , fo r instance ,has come f rom wes te rn-suppl ied ins ta l l a -t ions . In ad di t ion , o f course , except in rareyears o f un us ua l ly go od harves ts , the Sovie tshave a lso ha d to im po r t s igni ficant quan t i tieso f g ra in f rom the Un i t ed S t a t e s and o the rcountr ies .

" T h e S o v i e t s w i l l n o t t r a d e t h e i rp o l i t i c a l s o u l f o r a m e s s o f c a p i .t a l i s t p o r r i d g e . "

Anothe r mi sconcep t ion i s t ha t t he po ten -t ia l for economic leverage, even i f i t exis ts ,

can no t be t rans la ted in to effec tive pressureagains t the Sov ie ts , because the y w i l l n otm ake p o l it ica l concess ions fo r econo m ic pu r-poses. In fac t, how ever, on ly ra re ly haveW es te rn coun t r ie s a t tem pted to u se economicleverage agains t them . F o r the Sovie ts , as

for o thers , leverage works most e ffec t ive lywhen app l i ed in t he fo rm o f a ca r ro t r a the rthan a s t i ck and when exe r t ed sub t ly anddisc ree t ly ra ther than open ly and a r rogan t ly.

The po ten t i a l o f qu i e t l eve rage was mos tdramat ica l ly revealed in1973 when , i n t he

mids t o f r ece iv ing $469 mi l l i on in U .S .government c red i t s and in eager an t ic ipa t ionof mos t - f avo red -na t ion s t a tu s , t he Sov ie t spe rm i tt ed 35 ,0 00 Je w s to leave the ir coun-

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t ry, a f i gu re much h ighe r t han any be fo reor s ince . I t has a l so been a rgued tha t Sovie twi l l i ngness to r each ag reemen t s w i th theU n i t e d S t ate s in 1 9 7 2 w a s in p a r t d u e t o t h e irneed for U .S . g ra in . S im i la r ly, in recen t yearsthe Sovie ts have accepted the pol i t ica l r i skst h a t a c c o m p a n y g r ea te r W e s t e r n p a r t i c ip a t i o nin the i r economy in o rde r t o ach ieve theeconomic benef i t s such par t i c ipa t ion br ings .

O b v i o u s l y, t h e S o v i e t s w i l l n o t t r a d ethe i r po l i t i ca l sou l fo r a mess o f cap i ta l i s tpo r r idge . B u t , a s go od M arx i s t -Len in i s t s ,they a re per fec t ly wi l l ing to ca lcu la te eco-

nomic -po l i t i ca l t r adeoff s and make suchexchanges when the benef i t s are , in the i rv i ew, w o r t h t h e c o st. T h e d e e pe n in g e c o-n o m i c p r o b l e m s th a t t h e y c o n f r o n t w i llincrease the va lue of the economic benef i t st h a t t h e W e s t c an o ff er a n d , p r e s u m a b l y,

t h e p r i c e t h e y m a y b e w i l l i n g t o p a y t o g e tthose benefi ts .

T h e a rg u m e n t is a ls o m a d e t h a t a n y U . S .e ffor t to use economic leverage aga ins t theS o v ie t U n i o n w i l l b e u n d e r m i n e d b y th eS o v i e t a b i l i t y t o g e t w h a t e v e r i t w a n t s f r o m

W es te rn Eu rop e o r J ap an . In seve ra l c riti ca la reas , however, such as sophis t i ca ted com-p u t e r s a n d m a n y e l e m e n t s o f o i l a n d g a st e c h n o l o g y, t h e U n i t e d S t a t e s h a s a v i r t u a lm o n o p o l y. I n o t h e r areas, e q u i p m e n t m a n u -f a c t u r e d a b r o a d h a s U . S . c o m p o n e n t s a n d i ssub jec t t o U .S . li cens ing con t ro ls . T h e ex -p o r t o f o th e r t y p e s o f e q u i p m e n t t o t h eS o v i e t U n i o n r eq u ir es a p p r o v a l t h r o u g hCOCOM, in w hic h W as h in g to n can exerc ise ave to . In add i t ion , i f t he U n i t e d S ta te s hasbeen the pr inc ipa l suppl ie r o f a par t i cu la rt y p e o f e q u i p m e n t t o th e S o v ie t U n i o n , a n di f e x p o r t o f t h a t e q u i p m e n t i s s u b j e c t e dto fl ex ib le U .S . go ve rnm en t con t ro l s , fo re ignm a n u f a c t u r i n g c o n c e r n s w i l l t h i n k t w i c eb e f o r e e x p a n d i n g t h e ir c a p a c i ty t o s u p p l y ad e m a n d t h a t c o u l d q u i c k l y b e w e a k e n e d b ythe loosen ing o f con t ro l s .

I t i s a l so somet imes a l l eged tha t economicleverage w i l l adv erse ly a ffec t the U .S . ba lanceo f p a y m e n t s . C u r i o u s l y e n o u g h , t h is c la imh a s b e e n a d v a n c e d b y t h e s a m e p e o p l e w h o

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a rgue tha t U .S . -Sov ie t t r ade i s t oo sma l l ap ro po r t ion o f Sov ie t t rade to p rov ide a basisfo r eco nom ic leverage. H ow ev er , i t is asma l l e r p ropor t ion o f U .S . t r ade than o fSovie t t r ade , wi th 1977 U.S . expor t s to theS o v ie t U n i o n a m o u n t in g t o $ 1 . 6 b i ll io n o u to f t o t a l U .S . expor t s o f $1 18 b i ll ion , T h ee x p o r t o f t e c h n o l o g y in t h e f o r m o f t u r n k e yplan t s may i t se l f have long- te rm adverseeffects on the ba lance o f paym ents . G erm anchemical and pet rochemical f i rms are nowfac ing s t i ff compet i t ion in Wes te rn Europef rom the unde rp r iced p rod uc t s o f t he f ac -tor ies they themselves he lped bui ld in theUSSR in the ear ly 1970s .

F ina l ly, the a rgument has been advancedthat i t i s in some sense undes i rable or im-proper to c ross agendas in U.S . -Sovie t r e la -t ions tha t is, tha t the U ni te d S ta tes sho u ld

only use economic pressure or leverage tocoun te r economic m oves b y the Sov ie t U n io n .In s imi lar fashion, i t i s a rgued, Sovie t mis-t r ea tmen t o f i t s own d i s s iden t s o r o f U .S .c it izens shou ld be met no t b y econom ic ac t ionbu t b y coun te rmeasu res a l so i nvo lv ing peop le

(for example, cancel ing scient i f ic or cul turalv i s i t s o r res t r i c t ing the movement o f Sov ie tc itizens i n t he U n i t e d S t a t e s ) . U nd e r t h i slog ic , howeve r, t he Un i t ed S t a t e s wou ld endup coop e ra ting w i th t he Sov ie ts i n t hosea renas i n wh ich the Un i t ed S t a t e s had the

advan tage and compet ing in those a renas inw h ich the USSR w as supe rio r. I t wo u ld , i neffect, conced e al l the ini t ia t ive to the Sov iets ,deny ing the U n i t ed S t at es the ab i li ty t o cap i -t a l i ze on i t s s t reng ths , whi le pe rmi t t ing theSov ie ts to capi ta l ize o n thei rs .

Strategy fo r Era IIDur ing the pas t year, these a rguments

aga inst econ om ic linkage hav e been repea ted lyraised and deba ted in d i scuss ions bo th in an do u t o f t h e g o v e r n m e n t . O u t o f th is d eb a te

has come a more acu te awareness o f the pos -s ib i l i ty a nd the need, as w el l as the d i ff icul ty,o f cap i ta l i z ing on U.S . economic and tech-no log ica l advan tages. In add i t ion to thesechanges in the in te l lec tua l and psychologica l

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Huntington

e n v i r o n m e n t , h o w e v e r , i t i s a l s o n e c e s s a r y t odeve lop the in s t i t u t ion a l m echan i sms neededto make a po l i cy o f cond i t ioned f l ex ib i l i t yin to a r ea li ty. Fu l l im p lem en ta t ion o f thep res iden t ' s s t r a t egy r equ i re s movemen t infour a reas ; i t has a l r eady begun in two o ft h e m .

Firs t , i t i s essent ia l tha t there be more ef -f ec tive cen t ra l ized c on t ro l ove r Ea s t -W es te c o n o m i c r e la t io n s w i t h i n t h e e x e c u t iv ebran ch o f gove rnm en t . T h i s is necessa ry sotha t t he va r ious dec i s ions tha t have to bemade concern ing t rade , t echnologica l t rans-

fers, scientific contacts, credits, and grain ex-p or t s w i ll be b r ou gh t toge the r a t a s ing lep o in t and e ffec tive ly re la ted to the fore ignp o l i c y p u r p o s e s t h a t t h e U n i t e d S t at es is p u r-s u i n g a t a n y g i v en tim e . T h i s c an o n l y b ed o n e a d e q u a t e l y t h r o u g h t h e f r a m e w o r k o f

t h e N a t i o n a l S e c u ri ty C o u n c i l ( N s c ) .U n t i l r ecen tly r e spon s ib i l it y fo r t hese m a t -te rs has been w id e ly d ispersed . In S eptem ber1 9 7 7 , fo r in stance , a t a t im e w he n the Un i t edSta tes was engaged in severa l cr i t ica l d iplo-ma t i c nego t i a t ions wi th the Sov ie t s , memberso f the NSC and the S ta t e D ep ar tm en t l ea rnedf r o m t h e n e w s p a p e r s t h a t t h e D e p a r t m e n t o fA g r i c u l tu r e h a d a p p r o v e d S o v i e t p u r ch a s e o f15 m i l l ion ton s o f g ra in , 7 m i l lion ton sa b o v e t h e a m o u n t t h e y w e r e p e r m i tt ed u n d e rthe U .S . -S ov ie t g ra in ag reemen t . S im i la r ly,the pr inc ipa l p rocesses for the rev iew of ex-por t l i censes involve a ne twork of in te r-agency commi t t ees , cha i r ed by the CommerceD e p a r t m e n t a n d o n w h i c h t h e b l sc h a s n o tbeen represented.

S teps a re be ing taken to remedy these de-ficiencies, G ra in sales w il l n o w be clearedt h r o u g h th e N S C . T h e a d m i n is t ra t io n ' s n e wa c t i o n p l a n o n t e c h n o l o g y t r a n s f e r p r o v i d e sfo r NSC pa r t i c ipa t ion in the ap prop r i a t e ex -p o r t c o n t r o l c o m m i t t e e s a n d , i n a d d i t i o n ,c rea tes w i th in the NSC s t ruc ture a ne w A dH o c Te c h n o l o g y Tr a n s f e r G r o u p t o dealwi th the b road po l i cy i s sues invo lved in thei m p l e m e n t a t i o n o f t h e n e w p l a n . A s t h istype of i s sue increas ing ly becomes h ighpol icy, i t may a l so be necessary to c rea te a

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sm al l cent ra l s taff un i t , a ffi liated w i t h theN SC , t o m o n i t o r th e b r o a d s p an o f E a s t - W e s teconomic r e l a t ions and to p rov ide the b r idgeto the fo re ign po l i cy -m ak ing p rocess .

Second, i t i s necessary to review and re-v i se ex i s t ing l i s t s o f embargoed goods andtechn o log y so a s to r equir e, on fo re ignpolicygrounds , va l ida ted l i censes fo r those i t ems ofm a c h i n e r y a n d t e c h n o l o g y f o r w h i c h t h eSo vie t s have a cr iti ca l need , and fo r w hi cht h e y a re l arg e ly d e p e n d e n t u p o n U . S . s u p p l y.Al l such i t ems shou ld be con t ro l l ed r ega rd -l e s s o f t he ex ten t t o wh ich they a re l i ke ly to

be used fo r mi l i t a ry pu rposes . In o the rw o r d s , w e s h o u l d p u t o u r se lv e s i n a p o s i t io ni n w h i c h t h e t e c h n o l o g i c a l d o o r c a n b e m o r eeas i ly c losed , o r sw u n g nearer to b e ing c losed,i f tha t seems des i rable or necessary.

T h e p r e s i d e n t ' s d e c i s i o n , i n J u l y 1 9 7 8 , t o

p u t o n th e C o m m o d i t y C o n t r o l L i s t (C C L)e x p o r t s t o t h e S o v i e t U n i o n o f t e c h n o l o g ya n d e q u i p m e n t f o r t h e e x p l o r a t i o n a n d p r o -du c t ion o f o i l and gas , is a m a jo r s t ep in th isd i rec t ion . F o r m a n y i tem s in th i s a rea , in -c l u d i n g d o w n h o l e p u m p s , g a s l i f t e q u i p -

men t , d r i l l b i t s , we l l comple t ion equ ipmen t ,and o ff sho re d r i ll ing t echno logy, t he U n i t edS t a t e s h a s v i r t u a l l y b e e n t h e S o v i e t U n i o n ' ss o le s u pp lie r. T h i s t y p e o f e q u i p m e n t i sab so lu t e ly e s sen ti al t o t he So v ie ts i f t h ey a reto s tave off a s igni f icant decl ine in the i r o i lp r o d u c t i o n i n t h e e a r l y o r m i d - 1 9 8 0 s .

Whi l e t he t iming o f t he p re s iden t ' s dec i -s io n w a s o b v i o u s l y d et er m i n e d b y t h e S o v i e tac t ions agains t d iss idents , the measure i t se l fhad been unde r i n t ens ive cons ide ra t ion wi th -in the execu tive b ranc h fo r s everal m on ths .P lac ing these i tem s on the CC L, i t sho u ld ben o t e d , d o e s n o t p u t t h e m u n d e r em b a rg o . I ts i m p l y m e a n s t h a t U . S . c o r p o r a t i o n s w i l lhave to app ly for l i censes before they cane x p o r t su ch e q u i p m e n t - - o r th e e q u i p m e n t t om a k e su ch e q u i p m e n t - - t o th e S o v ie t U n i o n .W h e t h e r t h o s e a p p l i c a t i o n s a r e a p p r o v e do r d i s a p p r o v e d w i l l d e p e n d , a m o n g o t h e rth ings , on the ove ra l l s t a t e o f U .S . -Sov ie tr e l a t ions and whe the r, i n t he l anguage o fth e E x p o r t A d m i n is t ra t io n A c t, a p p ro v a l

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or d i sapp rova l w i l l"further signif icant lythe fo re ign po l icy o f the U ni te d S ta tes . " Int~he hap piest ou tco m e fo r a ll concerned, theS o v ie t U n i o n w o u l d a p p r o p r i a t el y m o d e ra tesom e of i ts undes irab le beh av ior, and A m er-ican o il and gas equ ipm en t w ou ld con t inueto f low in to the Sovie t Union , eas ing i t sene rgy p rob lems and bene f i t i ng Amer i can

companies .T h i r d , t o m a x i m i z e t h e A m e r i c a n a b i l i t y

to em ploy i ts economic advan tages, new andm ore f lexib le ar rang em ents are requi red tog o v e rn t h e p r o v i s io n o f U . S . g o v e r n m e n tc re d its t o t he S o v i et U n i o n . A n y m a j o r

expans ion o f U .S . -So v ie t economic re la tions,par t i cu la r ly one inv o lv ing sub s tan t ia l p r iva teAmer i can inves tmen t i n t he Sov ie t Un ion ,wi l l ve ry l ike ly depend on the ava i lab i l i tyo f s uc h c re dits. E x p o r t - I m p o r t B a n k l oa n sa re t he m o s t i m p o r t a n t f o r m . D u r i n g t h e

b rie f 1 5 - m o n t h p e rio d in 1 9 7 3 - 1 9 7 4 w h e nsuch loans were pe rm i tt ed , the E x im ba nkprov ided $469 mi l l i on in c r ed i t s fo r some16 different projects that a lso received anequa l am ou nt o f p r iva te c red it. A t p resent,h o w e v e r, th e d a c k s o n - V a n i k a m e n d m e n tprohibi ts off ic ia l credi ts or guarantees to anyno nm ark e t co un t ry tha t "den ies to its c it i-zens t he r i gh t o r oppor tun i ty t o emig ra t e . "I n a d d i t i o n , t h e S t e v e n s o n a m e n d m e n t p r o -h i b it s a n y E x i m b a n k l oa n s t o t h e U S SR i nexcess of $300 mi l l ion , unless the pres identdetermines tha t a h igher l imi t i s in the na-t i ona l i n t e r e s t ; Congres s wou ld have to ap -prove such a dec i s ion by concur ren t reso lu-t ion . T h e effec t of these ena ctm ents has beento pu t a fr eeze on U .S . gov e rnm en t c red itsa n d t o d e n y t h e g o v e r n m e n t t h e p o s s i b i l i t yo f u s ing c red i t s a s a way o f p romot ing i t sfo re ign po l icy ob jec t ives wi th the Sovie tU n i o n .

The present sys tem of inf lexib le res t r ic -t ions sh ou ld be modif ied . Leg is la t ion perm i t -t ing president ia l ly approved off ic ia l credi tsto t he Sov ie t U n io n , w i th in congress iona llydefined l im i ts , w o u ld be h i gh ly des irable .One poss ib i l i t y wou ld be to c r ea t e t h reecategor ie s o f po t en t i a l E x im ba nk loan r e-

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c ip ien t s: " A " coun tr ie s , t o w h ich loans cou ldb e m a d e w i t h o u t c a se -b y -c a se r ev i ew ; " B "count r ies , to which a l l loans over a ce r ta ina m o u n t w o u l d b e s u b je c t t o p re s id e n tia lr e v ie w ; a n d " C " c o u n tr ie s , w h i c h w o u l d b einel ig ib l e fo r l oans . T h e p res iden t w o u ldhave the au thor i ty, sub jec t t o congress iona lveto , to p lace co un tr ies in the three ca tegor ies

on the bas i s o f t he i r coopera t ion in p romot -ing bas ic U .S . ob jec t ives o f i n t e rna t iona lpeace , human r igh ts , na t iona l independence ,and econom ic jus ti ce . T h e p res iden t cou lda l so sh i f t coun t r i e s f rom one ca t egory toano the r. Such a scheme w o u ld n o t s ing le

o u t t h e S o v i e t U n i o n f o r i n v i d i o u s t r e a t -men t , bu t wou ld p rov ide use fu l f l ex ib i l i t y.

F ou r th , the U n i t e d S tate s , a s has beenpo in te d ou t , is in a suff ic ien tly adv an tageo uspos i t ion economica l ly to be ab le to makeuse o f t hose advan tages in dea l ing wi th the

Sovie ts . T h e effectiveness o f th is l inkage,however, c l ea r ly wou ld be g rea t ly enhancedi f a l l the pr inc ipa l count r ies in the Organi -z a t io n f o r E c o n o m i c C o o p e r a t io n a n d D e -v e l o p m e n t ( O E C D ) c o o p e ra te i n e x c h a n g in gi n f o r m a t i o n a n d d e v e l o p i n g g u i d e l i n e s a n dpol ic ies to govern the i r economic dea l ingsw i t h t h e S o v i e t U n i o n . A t p re s en t, th e t w opr inc ipa l mechan i sms fo r such coopera t ionare COCOM, w ho se pu rv ie w is genera lly l im-i ted to good s w i th po ten t i a l m i l i ta ry s ign ifi-cance, an d the so-ca lled "g en t lem an ' s agree-m e n t " o n c re d its d a t i n g f r o m 1 9 7 6 , w h i c hs ets g u id e lin e s f o r m i n i m u m c lo w n p a y -men t s , min imum in te re s t r a t e s , and max i -m u m r e p a y m e n t p e r i o d s f o r l o a n s t o t h eUSSR an d o ther count r ies . T h e e ffec tivenesso f these gu ide lines has been h igh ly depen den tu p o n t h e d e m a n d f o r c a p i t a l w i t h i n t h eWes t and hence on the r a t e o f Wes te rn eco -n o m i c g r o w t h .

T h e W e s t E u r o p e a n c o un tr ie s a n d J a p a nhave in the pas t been r e luc tan t t o deve lopm o r e m e a n i n g fu l w a y s o f c o o r d i n a ti n gWe s t e r n e c o n o m i c d e a l i n g s w i t h t h e E a s t .Recen t ly, however, t he re have been ind ica -t ions o f som e sh i f t s in p os i t ion , caused inp a r t b y t h e e n t r y i n t o We s t e r n m a r k e t s o f

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18/44

" I n fo r e ign econom ic r e la t ions , " Sov ie tP re s iden t Leon id Brezhnev s a id two yea r sago , "po l i ti c s and economics, d ip lo m acy andcomm erce, i ndus t r ia l p rodu c t i on and t radea re w ov en toge the r. C on sequ en t ly, the ap -p ro a ch t o t h e m a n d t h e m a n a g e m e n t o f t h e mmus t be i n t eg ra t ed , t y ing i n to one kno t t heeffor t s o f a ll dep ar tm ents , an d ou r pol it ica lan d econ om ic in te res ts . T h is is precise ly h o wthe P a r ty ' s C en t r a l C om m i t tee ha s posed th i si m p o r t a n t q u e s ti o n ." A n d t h a t is h o w t h eU n i ted S tates, in E ra I I, m us t a lso deal w i ththe im po r t an t ques t ion o f i ts e conomic r ela -tio n s w i t h t h e S o v ie t U n i o n .

T H E L IM f l~ ( F PRK~k'tURE

by Franklyn Holzman and Richard Portes

A n y p a r t ic u l a r ly h o r ri b le c rim e g iv es a m -m u n i t i o n t o p r o p o n e n t s o f t h e d e a t h p e n -a l ty. A n y pa r t i cu la r ly eg reg ious Sov iet v io -l a t ion o f the so -ca l l ed " sp i r i t o f d~ ten te"provo kes W es te rn ana lys t s to seek a su i tab le

pun i shment , o r a t l eas t a th rea t shor t o fmi l i t a ry fo r ce , t ha t wou ld i nduce t he Rus -s ians to be less beas t ly an d m ore coopera t ive .The s imp le and unde r s t andab l e de s i r e t o dosom e th ing is u sua l l y accom pan ied by an im -pl ic i t the o ry o f de ter rence and , less of ten , b yev idence tha t the p ropo sed de te r ren t wi l l beeffective.

There i s l i t t l e economic reason to be l ievetha t any t h r ea t o f r e s t r i c t i ng t e chno logyt rans f e r t o t he USSR and Eas t e rn E u ro pecou ld ex t rac t s ign i f i can t noneconomic con-cessions f ro m the Eas t . N o r a re there a n y

F R A N K LY N H O L Z M A N i s professor of economics a tTu f t s U n i t ~ r s i t y, a n dR I C H A R D P O R T E S i s proft~orof economics a t B i rkbeck Co l l ege , Un ive r l i t g o f Lon-don. T h is a rtic le is adapted f ro m a repor t on " 'Eco-n o m i c Rela t ions Be tween Eas t and Wes t : P rospec t sa n d P r o b l e m s , " d r a w n up at a conference i n K i d ,West German; / , l as t June , sponsored bY the IG 'd Ins t i -tute of World Economics, the Japan Economic R e -search Center, a n d th e B r o o k i n g s I n s ti tu t i o n , w h i c hhas publ i shed the repor t in En gl i sh . T h e au thors ,w h o participated in th econference, have d r a w n uponth i s mater ia l wi th permiss ion , bu t take fu l l respons i -bi l i ty fo r the v iew s expressed here .

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grea t bene fit s fo r t he W es t i n such t ech no log yt r a n s f e r b e y o n d t h e n o r m a l e c o n o m i c g a i n s

f ro m fo re ign t rade . B u t the benef it s to theE a s t o f t e c h n o l o g y i m p o r t s f r o m t h e We s ta re s im i l a r ly l im i ted , s o tha t W es te r n re -s t r i c t i o n s o n t e c h n o l o g y e x p o r t s c a n n o t b ea se rious de t e r r en t o r b a rga in ing coun te r.

Te c h n o l o g y i s t h e k n o w l e d g e a n d t h e

t e c h n i q u e s w i t h w h i c h i n p u t s i n t o t h e p r o -d u c t i o n p ro c es s a re tr a n s f o r m e d i n t o o u t p u t .T e c h n o l o g y c an b e tr an s fe rr ed f r o m o n ec o u n t r y to a n o t h e r: th e s u p p l y o f i n f o rm a -t io n a n d k n o w l e d g e ( p u b l ic a t io n s , p e r s o n -ne l, t echnica l assis tance , an d so f o r th ) ; the

l icens ing fo r a fee o f p ro du c t io n processeso r advanced t echn iques ; t he sa l e o f ma-c h i n e r y a n d e q u i p m e n t e m b o d y i n g s o p h i s t i -c a t e d t e c h n o l o g y ; t h e s a l e o f a d v a n c e d p r o -du c t ion p rocesses, as i n t he c ons t ruc t ion o ft u r n k e y p l a n t s ( fa c to r ie s t h a t a re b o u g h t a n dso ld a s com ple t e un i t s , r eady to o pe ra t e a ssoo n a s t he y a re com ple t ed ) ; and the t r ans fe ro f re la te d m a n a g e m e n t a n d m a r k e t i n g s y s -tems , as w el l as t echnica l personn e l . Su chla rge - sca l e t r ans fe r s o f t en t ake the fo rm o fj o i n t v e n t u re s .

I t is o f t e n a rgued tha t e xp or t ing t ech -n o l o g y i s d i f f e r e n t f r o m e x p o r t i n g o t h e rcom m odi t ie s . A m ach ine (o r i ts b lue p r in t s )e m b o d y i n g a d v a n c e d t e c h n i c a l d e v e l o p m e n tmay g ive a buye r g rea t e r po ten t i a l r e tu rnst h a n c an b e h a d f r o m i m p o r t i n g o t h e r g oo d s .H a v i n g a l r e a d y r e a l i z e d o n t h e i r i n v e s t m e n tin r e sea rch and deve lopmen t , compan ies maybe ready to sell o r license the i r t e ch no log y fo rfees tha t a re mu ch less t han the p r od uc t iv i tyga ins to a buyer in a t echnolog ica l ly l essa d v a n c e d e c o n o m y. I f t h e i m p o r t e d t e ch -n o l o g y c a n b e c o p i e d a n d s p r e a d w i d e l y

t h r o u g h t h e e c o n o m y, t h e g a i n s t o t h e i m -p o r t i n g c o u n t r y m a y b e m u l t i p l i e d m a n yf o l d . T h i s c a n b e e sp e cia lly i m p o r t a n t i f t h ein i t i a l ho lde r o f t he t echno logy i s unab leto e s t ab l i sh h i s own p roduc t ion f ac i l i t i e s i nthe bu ye r ' s ma rke t , a s is l a rge ly t rue in th ecase of Eas tern countr ies .

T h e f l o w o f t e c h n o l o g y r u n s p r i m a r i l yf r o m W e s t t o E a st. T h e W e s t h as a n ad -

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van t age i n t e chno logy, pa r t l y because i tr ep resen t s a l a rge r poo l o f indus t r i a l ly moreadvanced na t ions . B u t t he un de r ly in g r ea sonfo r t he W es t 's ad van t age is t ha t t he o rga -n i za t i on an d sy s tems o f incen ti ves i n t hecen t ra l ly p lanned Eas te rn economies a re l e s ssu i t ed t o i nven t i on , i nnova t i on , and t hed i ffu s ion o f t e c hn o log y t ha n t he ir p ri va teen te rp r ise cou n te rpa r t s . T y p ica l ly , cen t ra lp l a n n i n g is p re o cc u p ie d w i t h q u a n t i t y r a t h e rtha n qu a l i t y o r cos t t arge ts ; en t e rp r is e m an -agers t end to avo id the d i s rup t ions and r i sksa s soc i a t ed w i th i n t roduc ing new p roduc t i onme thods ; l a ck o f compe t i t i ve p r e s su re and

p o o r c o m m u n i c a t io n a n d c o o p e ra tio n b e -tween r e sea r ch and deve lopmen t o rgan i za -t ions an d t he u se rs o f t e chn o log y a lso h inde rchange . T h e resu l t is a l ag in bo th the deve l-o p m e n t a n d t h e s pre ad o f t ec h n o l o g y. W i t h -ou t be l i t t l ing the o f t en impress ive ach ieve-

m ents o f cen t ra l p lan n in g , i t can be sa id tha tth is lag i s perh aps i ts w eake s t fea ture .

A l th o u g h t he USSR's a ch i evemen t s i n t hem i l i t a ry an d ae rospace indus t r ie s p rov ide ev i-dence o f a c apab i l it y fo r b e t te r pe r fo rmance ,e lsewhere in Sov ie t ind us t ry the re has been

n o n a r r o w i n g o f t h e We s t ' s t e c h n o l o g i c a llead over the pas t two decades , e i ther a t thep ro to type l eve l o r i n t he d i f fu s ion o f ad -v a n c e d t e c h n o l o g y.1 G o o d p e r f o r m a n c e inh ighes t p r io r i ty a reas i s c l ea r ly due to themis s ion -o r i en t ed o rgan i za t i ona l and i ncen -t ive s t ruc tu res used the re , which cou ld no tb e e x t e n d e d t h r o u g h o u t a n e n t i r e c e n t r a l l yp l a n n e d e c o n o m y.

Small Impact

Eas t Eu ropean i n t e r e s t i n impor t i ng t e ch -n o l o g y h a s u n d o u b t e d l y b e e n e n h a n c e d b ythe de sire t o m od e rn i ze m ore qu i ck ly, t he re -b y r ais ing econom ic g ro w th r ate s. T h es l o w d o w n ~ o f th e la te 1 9 6 0s p r o b a b l y m a d ei m p o r t s o f W e s t e r n t e c h n o l o g y m o r e a tt ra c -t ive , espec ia lly to the USSR, w hic h , un l ike i ts

2 R . A m a n n , e t a l.,Technological Level of Soviet In-dustry ( N e w H a v e n : Ya l e U n i v e r s it y P re ss, 1 9 7 7 ) .

t A b r a m B e rg so n , " ' T h e S o vi e t E c o n o m i c S l o w d o w n , "Challenge. Vo l . 2 0 , N o . 6 , J w a . ,F e b . 1 9 7 8 .

8 ? . .


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th ree t imes as g rea t a s tha t o f new domes t icp ro du c t ion equ ipm en t , t he impac t on the ra teo f g r o w t h c o u ld o n l y b e m a rg in a l. R e c e n tca lcu la t ions sugges t tha t va r ia t ions in Sovie tm a c h i ne r y im p o r t s f r o m th e W e s t w i th i n a n yplaus ib le range in the foreseeable fu turew o u l d a ffect t he annua l 5 pe r cen t g r o w thr ate o f S o v i e t i n d u s t r y b y o n l y . 1 o r .2 p e rcent, T h e effect o n the overa l l g ro w th ra teo f th e g ro s s n a t io n a l p r o d u c t w o u l d b e a b o u tha l f as grea t .'

I n t he case o f Po lan d , wh e re W es te rn m a-ch ine impor t s rose to a lmos t 30 per cen t o ft o t a l m a c h i n e r y i n v e s t m e n t i n 1 9 7 2 - 1 9 7 6(mo re than dou b le the 1961 - 1971 ave rage ) ,t he impac t was m a te r ia l ly g reate r. T h i s newpol icy appears to have ra i sed the annua lg r o w t h r ate o f i n d u st ri a l l a b o r p r o d u c t i v i t yb y an ad d i t iona l 1 pe r cen t, the p rev iou st rend ra te hav ing been s l igh t ly under 6 per

c en t p e r a n n u m . ' T o m a i n ta i n p e r m a n e n t l ythe inc reased l eve l o f machinery impor t sf rom the Wes t , t he Eas t e rn coun t r i e s w i l lh a v e t o e x p o r t m o r e m a n u f a c t u r e d g o o d s .P o l a n d c o u l d n o t d o t h i s a n d h a s h a d t ocu t back such impor t s . T h e h a rd cu r rency

deb t i t incur red in the meant ime i s onerous(e s t ima ted a t $12 .6 b i l l i on ne t by the endo f 1 9 7 7 , r o u g h l y t w o - a n d - a - h a l f t im e s t h eannua l va lue o f ha rd cu r rency ex po r t s ) .

O the r Eas t Eu ropea n coun tr ie s , a lso w i tha l ready la rge hard cur rency deb ts , cou ld no t

p o s s i b l y i m p o r t W e s te r n m a c h in e r y o n t h escale o f the Po l i sh exper imen t . T h u s thehard cur rency cons t ra in t a lone wi l l severe lyl im i t the m acroeconom ic effec ts o f W es te rnm a c h i n e r y i m p o r t s o n t h e E a s t , w h a t e v e rW es te rn po lic ie s on such exp or t s m ay be .

s S e e D o n a l d W . G r e e n a n d H e r b e r t 8 . L e o i n e ," M a c r o e c o n o m i c E u i d e n c s o f t h e V a l u e o f M a c h i n e r yImp orts to the So uiet U nio n," in John R. Thomasa n d U r s u l a M . K r u s e - V a u c i e n n , e d s . , S o v i e t S c i e n c ea n d T e c h n o l o g y : D o m e s t i c a n d F o r e i g n P e z s j ~ e c t i v e s(Washington, D .C. : George W ezbington Um oecsity,19 77 ). Th e methodology o f their model may beq u e s t i o n e d , b u t i t is g e n e r a l l y b e l i e o e d t h a t t b ~ ' r e s t i -m a t e s a r e i f a n y t h i n g o n t h e h i g h s i de .

I t a n i s l a w G o m u l k a , " T h e G r o w t h a n d t h e I m p o r to f T e c h n o l o g y ; P o l a n d 1 9 7 1 - 1 9 8 0 , " C a m b r i d g eJ o u r n a l o f E c o n o m i c s . Vo l . Z , N o . I , M a r c h 1 9 7 8 ,p . Z .

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Holzmwn ~ Portes

E v e n w h e n t h e v o l u m e o f im p o r t s is r ela -

t ive ly la rge , the po ten t i a l im pac t o f im po r tedt e c h n o l o g y o n th e ra te o f g r o w t h t e n d s tobe g ross ly overs ta ted . E ve n i f the im po r t sare ob ta ine d a t favo rable pr ices, the resourcesused t o pay fo r t hem mus t be o ff s e t aga in s tt he ga in s t he y supposed ly p roduce . Im -

p o r t e d m a c h i n e r y o r te c h n iq u e s m u s t b ec o m b i n e d w i t h d o m e stic f a c t o r s - - l a b o r , m a -te ria ls , m ana gem en t sk i l l s - - t o be u seful. T h u si t is inapp ropr ia te to a t t r ib u te the fu l l ga in inp r o d u c t i v i t y o n l y t o i m p o r t e d t e c h n o l o g y.T h e s am e f ac to r s t h a t t e n d t o h a m p e r d o -

mes tic i nno va t i on and t echn i ca l adva ncem en ta lso reduce r e tu rn s f ro m im po r t ed t e chno logy.F i n a ll y, t ec h n o l o g y i m p o r te d f r o m a b r o adusua l ly wi l l have been des igned fo r use inthe Wes t and no t f o r t he qu i t e d i f f e r en te n v i r o n m e n t o f t h e n o n m a r k e t e c o n o m i e s .O n e s t u d y o f S o v i e t m a n p o w e r p r o b l e m sd o n e f o r t h e J o i n t E c o n o m i c C o m m i t t e e o fCongress in 1973 c i t e s the example o f f iveim po r t ed chemica l p l an t s o r i g ina l l y de signedto r equ i r e 91 aux i l i a ry worke r s f o r ma in -te n an c a n d re p air w o r k . T h i s r e q u ir e m e n tw as rev ised u pw ar d in the USSR, f ir st to 43 0aux i l i a r i e s and aga in , a f t e r the equ ipmentw as pu t i n to ope ra ti on , t o 732 .

Soc ie tie s tha t r e ly o n cen t ra l p la nn ingt end t o be unab l e t o sp r ead t e chno logy ve rye ffec tively th ro u g h the i r economies . T h e i rr ig id it ie s have a lso l imi ted th e up da t ing an d

i m p r o v e m e n t o f i m p o r t e d te c h n o lo g y. T h edeve lope r s o f a new t echn ique o r i t em o fe q u i p m e n t w i ll c o m m o n l y see k t o r e ap t h ebenefits fo r them se lves un t i l a fu r th e r t ech-n ica l advance ha s taken place . A n im po r t i ngna t i on w i l l t hus be ge t t i ng p roduc t s o r

processes tha t a re a l re ad y o ut da ted in th eo r i g in a t in g c o u n t r y.

In itse lf , t h is bu i l t - in l ag m a y be o fsm al le r consequence , bu t th i s has no t beenthe case in Ea s te rn coun tr ie s . T h e i r o rga n iza -t iona l and i ncen tive sy s tems a re po w er fu l i n -

h ib i t ion s t o t he d i f fu s ion o f ne w techn iques.T rav e l r e st ric ti ons l im i t an im po r t an t sou rceo f t e ch n o l o g y tr an s fe r a n d d i f f u s i o n - - t h eexposu re o f t r a ined domes t i c pe r sonne l t o

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t he ir fo re ign coun te rpa r ts . Im po r t ed tech -n o l o g y i s u se d m a i n l y t o p ro d u c e o u t p u t f o rt h e d o m e s ti c e c o n o m y ra t h e r t h a n f o r e x p o r t .As a r e su l t , t he p roduc t s usua l ly do no t f acefo re ign compe t i t i on and the consequen t needt o k e e p u p w i t h t h e c o n t i n u a l l y a d v a n c i n glevel o f fo re ign t echno logy.

W h a t e v e r te c h n o lo g y th e y i m p o r t f r o mthe W es t , t he Eas t e rn coun t r i e s w i ll t he re fo rep r o b a b l y b e u n a b l e t o d i ffu se a n d i m p r o v eu p o n i t a s , f o r e x a m p l e , J a p a n h a s d o n e s osuccessfu lly. T h e m a jo r excep tion is aga inin the mi l i t a ry f ie ld , in which the Eas t faces

d ir ec t f o re ig n c o m p e t it io n . T h u s a m a j o rs t u d y r e ce n tl y c o n c l u d ed t h a t " o t h e r t h a nthe ga ins f ro m t rade , the ne t benef its f ro m thefore ign technology tha t succeeds in pene-t r a t ing the econom ic s t ruc tu re w i l l be ve rym o d e s t. B o r r o w e d te c h n o l o g y is n o s u b s t i-

tu t e fo r s t ruc tu ra l change . " ' E xp or t ing t ech -n o l o g y t o t h e E a s t i s l i k e l y t o m a k e i t m o r ed e p e n d e n t o n t h e W e s t in t h e lo n g r u n .

There i s very l i t t l e reason to be l ieve tha tim por t ed t ech no logy w i l l a ffect t he in te rna lo rga n iza t ion o f the Eas t e rn economies . In

fac t, a p r im ary r eason fo r im po r t ing t ech -n o l o g y m a y h a v e b e e n t o a v o i d m a k i n gm o r e f u n d a m e n t a l c h a n g e s i n t h e o rg a n i -z a t io n o f t h e e c o n o m y. A n y s u b s t a n ti a lo rg a n i z a t i o n a l a l te r a ti o n w o u l d in v o l v e p r o -found changes in the po l i t i ca l power s t ruc -ture , a s w as ev idenced b y the a bor t ive 19 68C zech r e fo rms . N o r is t here m uch reason toe x p e ct t h a t m a rg in a l i m p r o v e m e n t s i n ec o -n o m i c g r o w t h a n d i n co m e le ve ls t h a t t ec h -n o l o g y im p o r t s m i g h t a ss is t w o u l d m a k e th eUSSR an d i ts a l li es sof te r o r m ore coo pera t ivew i t h t h e W e s t . T h e s e a re n o t s e rio u s a rg u -men t s fo r a l i be ra l expor t po l i cy.

Ineffective Monopoly

T ec hn o lo g y t rans fe rs a ffect exp or t e r s a sw e l l a s imp or t e rs . I t is o f t en a rgued tha tb y e x p o r t i n g t e c h n o l o g y t o t h e C o m m u n i s tw o r l d , t he W e s t n o t o n l y re du ce s its p r o d u c t

s Joseph Bediner. The Innovation Deciaion in SovietIndustry (Cambridge, Mass.: MIT Preu, 1976),p. 518.

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H o l z m a n ~ P o rte s

marke t s i n t he Eas t bu t a l so c rea t e s compe-t i t ion fo r i t se l f i n t h i rd m arke t s a s w e l l a s i ni ts dom es t ic marke ts . Su ch concerns seem tob e l arg e ly u n w a r r a n t e d . I n a d y n a m i c t ri l-l i on do l l a r t r ad ing wor ld , d i s tu rbances f romthe Eas t can o n ly b e m ino r in t he fo re seeab lefu tu re . T h i s is a l l t he mo re li ke ly because

o f t he d i f f i cu l t i e s t ha t t he nonmarke t coun-t r i e s have in expor t ing to marke t economies .In any case , t o t he ex ten t t ha t impor t edt e c h n o l o g y d o e s in cre as e e x p o r t s o f g o o d s a n dservices f r o m these cou ntr ies , the E as t w i l lb e a b le t o p a y f o r a d d it io n a l i m p o r t s. T h e

effec t w i l l be to increase t rade in b o th d i rec -t io n s , a n d a n y lo ss o f m a r k e t s t h r o u g h E a s t -e rn com pe t i t i on is li ke ly to be o ff set b y theexpend i tu re o f i nc reased expor t ea rn ings int h e We s t .

So f a r t he e ff ec ts o f W es te rn ex po r t s o f

t e c h n o l o g y t o t h e E a s t h a v e b e e n c o n s i d e r e din a g g re g a t e , a t a m a c r o e c o n o m i c le v el .C lea r ly, t he ove ra l l impac t o f t hese expor t son the Eas t e rn economies i s ve ry marg ina lindeed. T h e re i s l i t t le bas is fo r specia l con cerna b o u t t h e e x p o r t t o t h e E a s t o f t e c h n o l o g y,a s con t r a s t ed w i th the gene ra l range o f go od san d se rv ices. B u t a t the ind iv idu a l , m icro-economic l eve l , migh t no t a pa r t i cu l a r p rod -uc t o r p rocess be of c r it ica l im po r tanc e to theUSSR or it s a ll ies? I t em s w i th m ore or lessd i rec t mi l i t a ry app l ica t ions , da ta p rocess inga n d c o m p u t i n g e q u i p m e n t , a n d o i l p r o d u c -t ion equ ipmen t r equ i r e spec ia l a t t en t ion .

We a p o n s a n d e q u i p m e n t s u i t a b l e o n l y f o rt h e p r o d u c t i o n o r o p e r a t i o n o f w e a p o n s a r eu s u a l l y n o t e x p o r t e d to t h e E a st. B u t v i r-t u a l l y e v e r y g o o d h a s s o m e i m p a c t o n t h ea b i l i t y o f a n a t i o n t o b u i l d u p i t s m i l i t a r ys tr e n g th . T o s in g le o u t t h o s e e x p o r t s t h a thave a d i r ec t and subs t an t i a l r e l a t ionsh ip toWes te rn secu r i ty in t e re s t s ca l l s fo r h igh lysoph i s t i ca t ed a s ses smen t s , w i th emphas i s onbo th economic and t echn ica l cons ide ra t ions .C o n s p i c u o u s l y n o n m i l i t a r y p r o d u c t s lik efe ed g ra in s m a y b e a m o n g t he i m p o r ts m o s tessent ia l to the Eas t .

So fa r as the Sovie t s a re concerned , mi l i -t a ry r e sea rch , deve lopmen t , and p roduc t ion

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have the highest priority for scientific work-ers, skilled manpower, materials, and equip-ment, and must meet the highest qualitystandards--all in contrast to the civilianeconomy. With a far less developed economythan those of the advanced industrializedstates, the USSR has shown that it can equaland even surpass the West in some of thecritical dimensions of mil itary and aerospaceperformance. There is no t much in theseareas that the USSR does not have, or couldnot produce, if that were considered neces-sary. The West can delay the acquisition orincrease the cost to the USSR of some itemsby prohibiting exports; but to deny any-thing of high and direct military importanceis not likely to be feasible for very long.

Data processing is a military-related fieldthat has attracted much attention. Restric-

tions on the export of computing equipmentmight appear to have considerable justifica-tion on strictly defense or security grounds.But when a group of experts in computerand mili tary technology considered this issue,they were unanimous in their judgment that,

except for data processing networks for anti-ballistic missile (ABM) systems on whichopinions differed, the rdSSR's domestic com-puter capability was adequate to its tasks.To the extent that the best Soviet computerfell short of meeting needs, greater inputs of

time, labor, and other resources enable theRussians to produce "achievements compara-ble to those of the West's more computer-intensive defense policy. .' A sufficientlystrict export control system might deny theSoviets least-cost solutions to their militarydata processing problems, but it probablycould not prevent the Soviet military fromachieving satisfactory solutions. If this is soin the case of advanced computer technology,it seems likely that the same judgment ap-plies in other fields.

A similar argument may be made for othersupposedly essential items, such as oil produc-

e R. E. Kiitgaard, N a t i o n a l S e c u r i t y a n d E x p o r t C o n -trois . RANDCorporation, Report # R - 1 4 3 2 - l - A R P A /CIEP, April 1974, p. 46.

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denying expor t l i censes fo r o i l d r i l l ing equ ip-

m e n t o r a c o m p u t e r h o w m u c h m o r e effec-t ive , ho w eve r, is d iffi cu lt to say. B u t therea r e e v i d e n t l y s t r o n g d o m e s t i c a n d i n t e r n a -t iona l po l i t i ca l p ressures aga ins t the use o fsuch po lic ie s i n t he U n i t ed S ta te s and am on go the r Wes te rn coun t r i e s .

H AT G A P ?. W H I C H G A P ?.

I

b y J o h n W. K i s e r

T h e deba te ove r canceling sales o f t echn o l -o g y t o t h e S o v i e t U n i o n a u u m e s t h e e x i s -te n ce o f a " t e c h n o l o g y g a p . " A t i ss ue isw h e t h e r d e n ia l o f A m e r ic a n t e c h n o l o g y co n -st i tu tes a lever o f a n y signif icance. W h il e

t h e t h re a t o f d e n y i n g U . S . t e c h n o l o g y t o th eS o v i e ts p r o b a b l y d o e s n o t h a v e m u c h in f lu -ence , the premise that under l ies the d iscus-s ion of e cono m ic leverage is wid e ly accep ted .

T h e p h ra se " t e c h n o l o g y g a p " is o n e o fthose po pu la r expres s ions tha t , r epea ted o f t en

e n o u g h , e n t e r s t h e n a t i o n a l v o c a b u l a r y a n dacqui res an ind epe nd ent ex is tence . In som eund i ffe ren t ia ted sense , i t is p ro b ab ly cor rec tt o s a y t h a t t h e U n i t e d S t at es i n t o t o i st echno log ica l ly m ore advanced than the USSR.Ye t a s a concep t , t he t echno logy gap i s morea s logan fo r a s se r t i ng the supe r io r i ty o f t heAmer ican sys t em than a u se fu l desc r ip t ionof rea l i ty.

A n e x a m i n a t i o n o f t h e v a r i o u s c o n s i d e r a -t io n s t h a t c o n t r i b u t e t o n e g a tiv e W e s t e r np e r c e p t i o n s o f S o v i e t t e c h n o l o g y s h o u l d n o tbe t aken to mean th a t t he re is no gap . R a the ri t i s im po r t an t t o rea li ze tha t t he na tu re o fthe gap i s complex and canno t be d i scussedin sweeping genera l i t ies .

S o v i et i m p o r t s o f t e c h n o l o g y f r o m t heWe s t m a y s e e m t o p r o v i d e p r i m a f a c i e e v i -dence tha t t he R uss i ans are beh ind . B u t t heev idence is am bigu ous . O ne exam ple i ll u s-t ra te s t h e p a r a d o x . T h e S o v i e ts a re i m p o r t -

JOHN W. KISER iS a r e . a r c h c o n s u l t a n t s p e c i a l i z in g i nS o u i e t a~m' rs .

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Kisef

in g p i p e w e l d i n g e q u ip m e n t f r o m th e U n i t e d

S tate s . A t the same time , t he P a t on Ins t i t u t eo f Weld ing in Kiev i s s e l l i ng more advancedp i p e w e l d i n g t e c h n o l o g y t o a c o n s o r t i u m o fA m er ican eng inee ring firms . T h i s pa r t i cu la rSov ie t p ipe we ld ing t echn ique i s r epor t ed tob e s u p e r io r t o a n y t h i n g e x i st in g i n t h e W e s t ,and the Russ i ans a re now d i scuss ing thep o s s i b i l i t y o f b u y i n g b a c k A m e r i c a n - b u i huni t s manufac tured under Sovie t l i cense .

Sovie t impor t s in th i s case represen t aneffor t to c i rcum vent sys tem ic b lockages-- -- redtape , p roduc t ion bo t t l enecks , fac tory res i s -t a n c e t o i n n o v a t i o n , a n d a h o s t o f o t h e rp r o b l e m s t h a t i m p e d e t h e c o m m e r c i a l i z a t i o no f t h ei r o w n t e c h n o l o g y. S o v i e t i m p o r t s ca nreflect m an y th ings. T h e exam ple o f w e ld -in g t e c h n o l o g y s t r o n g l y s u p p o r t s t h e v i e w o fm a n y A m e r ic a n b u s in e s sm e n t h a t la ck o fo rgan iza t iona l and ma te r i a l wherewi tha l l ,

ra ther tha n lack of t echnical cap ab i l i ty per se,is t he p r inc ipa l Sov ie t p rob lem . T h i s s i tua -t ion is exace rba ted b y shor t ages o f i ndus t r i a lm a n a g e m e n t t a l e n t a n d s k i l l e d m a n p o w e r.

Deny ing a t echn ica l ly soph i s t i ca t ed coun-t r y s o m e t h i n g i t n e e d s w i l l o n l y s t i m u l a t e

eff orts at self-sutt~ciency. In th e s h o rt ru n,th i s may cos t t he coun t ry more r e sources ,b u t in t h e l o n g r u n th e re m a y b e s u b s t a n t ia lbenef its . T h e den ia l o f i ndus t r ia l d i am on dst o t h e U S S R i n t h e 1 9 5 0 s h e l p e d s p u r t h ed e v e l o p m e n t o f a s t r o n g s y n t h e t i c d i a m o n d

indus t ry and s t imula t e r e sea rch in h igh -p res su re phys ics . In 19 75 na tu ra l and sy n-the t i c d i amonds were the Sov ie t s ' t h i rd l a rg -est ha rd cu r rency exp or t , acco rd ing to a 19 77repor t o f t he Cen t ra l In t e l l i gence Agency," S o v i e t E c o n o m i c P r o b l e m s a n d P r o s p e c t s . "

Ano the r bas i s fo r a s suming Sov ie t t ech -n o l o g i c a l b a c k w a r d n e s s i s t h e c o m p o s i t i o nof the i r exp or t s . I t is som et imes sa id tha tRuss i an expor t s a re those o f a deve lop ingc o u n t r y - - - h e a v y o n r a w m a t e r i a l s a n d s e m i -f in i shed p roduc t s , l i gh t on manufac tu red

g o o d s , m a c h in e r y, a n d e q u i p m e n t . D o e s t h isind ica te t echno log ica l back w ardne ss? Y esa n d n o .

Seve ra l yea r s ago the B os ton schoo l sys -

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t em was i n te r es ted i n b uy ing Ru ss ian m ic ro -

scopes. T h es e m icroscopes, ho w ev er, h addetachable eye p ieces , whi le the Bos tonschools w an te d f ixed eye p ieces. T h e salefel l th rou gh . T h i s i llust ra te s one reason fo rthe Sov ie ts ' g enera l ly po or pe r fo rm anc e ine x p o r t in g m a n u f a c t u r e d g o od s. I n t h e W e s t,

cus tomers a re used to be ing ca te red to andproducers have an incen t ive to be adap tab le .These cond i t ions do no t ex i s t in the USSR.

D i a m o n d s , b a l l h e a r i n g s , a n d a l u m i n u mingo t s do no t have to be se rv iced o r pa in tedb lue i n st ead o f g reen . Y e t the t e chn o lo gy

f o r m a k i n g th ese p r o d u c t s m a y h e v e r y a d -vanced . F o r exam ple , un iqu e Sov ie t t ech-no logy fo r cas t ing meta l in e l ec t romagne t i cf ie lds has been sold to American, Japanese,and Swiss compan ies .

Appetite for Equipment

The Sov ie t s o f t en have d i ff i cu l ty massp r o d u c i n g c i v i l i a n p r o d u c t s t o We s t e r nper fo rm ance an d re li ab i li ty s t andards . A nofficial o f the F rench M ach ine T o o l Associa -t io n p u t t h e p r o b l e m t h is w a y :"The R u s -s i ans can p roduce qua l i t y and t hey canp r o d u c e q u a n t i ty. T h e i r p r o b l e m is m a s sp rod uc ing qu a l i t y. " T h i s a lso sugges ts t ha tt he t e chno logy gap i s mos t l y i n t e rna l .

F ina l ly, the USSR has a t r em end ou s appe-t it e f o r a ll k inds o f equ ipm en t . E xp o r t i ngf r equen t ly compe te s w i th domes t i c needs .T h i s c o m p e t it io n , c o m b i n e d w i t h i n ad e q u a tem arke t i ng capab il it y, help s exp l a in w h y theSoviets sel l l icenses instead of f inished prod-ucts . N o t m an y deve lop ing coun t r i es se llp a te n ts a n d k n o w - h o w , as t h e S o v ie ts d o , t ocompan ie s such a s 3 -M , Ka iser A lum in um ,

D u P o n t , 3 o y M a n u f a c tu r in g , M a x w e l l L a b -ora tor ies , Rol l s -Royce , Br i t i sh S tee l , Sa lz-g i t t e r. Hoesch , Mi t sub i sh i , and hundreds o fo t h e r W e s t e rn c o m p an ie s. N o r a re m a n ydeve lop ing coun t r i e s se l l ing compute r so f t -w are to th e U n i te d S ta tes , as th e Sov ie ts a re .

Tr a v e l e r s t o t h e S o v i e t U n i o n t e n d t obe lieve th a t the USSR is tec hn olog ica l ly back -w a r d . A m e r ic a n s n a t u r a l l y c o m p a r e w h a tthey s ee w i th wha t t hey a r e accus tomed to

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TE('JtNOLOGY EXPOfflSAND NATIONAL ,'~E(IJRITY

by Maurice J . Mountain

Many cur ren t d i scuss ions o f U .S . gove rn -m e n t - i m p o s e d s tr ate g ic e x p o r t c o n t r o l s t e n dt o tr ea t a n y t e c h n o l o g y as i m p o r t a n t t ona t iona l s ecu r i ty i f i t con t r ibu te s , i n someway, t o Amer ican economic , po l i t i ca l , o rsocia l w e l l -be ing . Such a v i ew ove r lo oks

the f ac t t ha t t he necessa ry l ink be tw ee n t ech -n o l o g y a n d n a t i o n a l s e c u r i t y i s t h e p r o d u c -t i o n o f m i l i t a r y w e a p o n s s y s t e m s .

O ne r eason fo r t h is is t he na tu ra l t endenc yt o re ga rd a l l t h in g s t h a t m a y s o m e h o w c o n -t r ib u t e t o m i l it a r y p o w e r a s h a v i n g d ir ec t

m i l it a ry va lue . T o a deg ree th is v i ew is co r-rec t , bu t i t i s fa r too genera l to be usefu l .T h e s im p le s t w a y t o a v o i d su ch c o n f u s io nis t o n o t e t h a t, w h a t e v e r i m p a c t a t e c h n o l o g ym a y h a v e o n t h e q u a l i t y o f h u m a n l i f e , t h edom es ti c eco no m y, fo re ign tr ade , t he ba lance

of pay m en t s , o r even d ip lom a t i c r e la t ions , i tsna t io na l secu r i ty s ign if icance dep end s e n t i re lyo n t he e x te n t t o w h i c h i t is o r m a y b e a p -p l ied to a spec if ica lly m i l it a ry pu rpose . T h u sa t e c h n o l o g y t h a t h a s n o p r e s e n t o r f u t u r em i l i ta ry app l i ca t ion can sa fe ly be ignored inthe con t ro l p rocess . Ev en t echno log ie s t ha tdo have a spec i f ic mi l i t a ry app l ica t ion bu tw h i c h , i f t r a n s f e r r e d t o a n a d v e r s a r y, w o u l dm a k e n o s i g n i f i c a n t c o n t r i b u t i o n t o t h e p r o -d u c t i o n o r o p e r a ti o n o f a m i l i t a ry w e a p o nare o f l it tl e im por t ance . F o r exam ple , sincethe Sov ie ts a l r eady hav e a dem on s t r a t ed ab i l -i t y t o p ro du ce rifles, U .S . t ech no log y in -vo lved in making r i f l e bar re l s , un less theresu l t were markedly be t te r o r l ess expens ive ,c o u l d b e a c q u ir e d b y t h e U SS R w i t h n o a p -prec iab le effec t on A m er ican secur ity.

T h e t e c h n o l o g y w h o s e tr an s fe r c o u l d b e

M A U R I C E J . M O U N T A I N i s director of strategic tech-no logy and m un i tions con trol in the off ice o f theauistant secretary of defeme for international ~ecuritva~airs.

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M o u n t a i n

conveyor be l t a r rangement i s essen t ia l .

S i n c e t h e c o n v e y o r b e l t s y s t e m m u s t b e d e -s igned fo r t he pa r t i cu l a r pa r t s be ing moved ,i t is a l so un ique . B u t the task o f design ing ,p r o d u c i n g , a n d o p e r a t in g s u ch a n a s s e m b l yl ine con ve yo r be l t r equ ir e s on ly the use o fgene ra l ly known o r r ead i ly ava i l ab le t ech -

no log ie s . B y con t r a s t, t he f ab r i ca t ion o fh igh-qua l i ty in tegra ted c i rcu i t s requ i res t ech-no lc~ies tha t are cri t ical precisely because, inadd i t ion to be ing e s sen t i a l and un ique ,theyi nvo lve t echn iquestha t t he S ov ie ts and the ira l l i es have no t mas te red .

H o w e v e r, t h e f a c t tha t t he Sov ie t s haven o t yet maste red a par t i cu la r t echnique tha thas m i l i ta ry s ign if icance to the W es t does no tm e a n tha t t h e y w i l l w a n t t o o b t a i n it . N o rdoes i t mean tha tthey w o u l d m a k e m i l i t a r yuse of i t i f they c o u l d o b t a i n it, f o r w e a p o n sd e v e l o p m e n t p h i l o s o p h y a n d p r a c t i c e d i f -f e r in t h e U S S R a n d t h e U n i t e d S ta te s.In add i tion , t he Sov ie t sys tem, in w h ichrewards fo r i nd iv idua l pe r fo rmance a re t i edt o t h e fu l f il lm e n t o f p r e d e te r m i n e d o u t p u tgoa ls , p laces a number o f obs tac les in thew a y o f i n n o v a t iv e c ha ng es in p r o d u c t i o nprocesses . I t i s therefo re qu i te po ss ib le tha tth e U S S R w o u l d n o t o r c o u ld n o t m a k emi l i t a ry use o f t echno log ie s cons ide red im-p o r t a n t i n t h e W e s t , e v en i f t h e y b e c o m eavai lable .

Yet the re lease of a cr i t ica l technology

c o u l d p r o v i d e t h e S o v i et s w i t h a n o p t i o nth e y do n o t n o w h av e b u t w h i c h t h e y w o u l dbe f ree to exercise a t an y t im e . M ore ov er,t he Sov ie t s have shown , by the i r ach ieve -m ents in space and in th e nuc lear f ie ld , tha tin l imi ted a reas they can overcome the soc i -

e ta l weaknesses tha t genera l ly bese t the i ri n d u s t r y. F i n a l l y, t h e s tr e n u o u s o v e r t a n dcover t Sovie t e ffor t s to ob ta in c r i t i ca l U.S .t e c h n o l o g y s u g ge s t t h a t t h e S o v i e t U n i o nintends to use a l l i t can acquire .

Iden t i fy ing c r i t i ca l t echnolog ies i s no t an

easy task . I t is, ho w ev er, re la t ive ly s imp lec o m p a r e d t o t h e p r o b l e m o f c o n t r o l l in g t he ire x p o r t . T o b e g i n w i t h , th e re is a w i d ev a r i e ty o f le g it im a te c h a n ne ls t h r o u g h w h i c h

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t e chno logy can and does f low. A P en t ag onDefense Science Board task force ident i f ieda number o f these channe l s and ra ted the i reffectiveness. A l th o u g h the y no ted som es li gh t va r i a ti on f ro m ind us t ry t o i ndu s t ry,the task force members were ab le to es tab-lish a f a i r ly u n i fo rm pa tt e rn . A t t he l owend of the effectiveness scale they placedt rade exhib i t s , commerc ia l l i t e ra ture , undoc-umented sales proposals , sa les of productsw i t h o u t m a i n te n a n c e a n d o p e r at io n s d a ta ,a n d licenses w i t h o u t k n o w - h o w . I n t h emiddle they p laced commerc ia l v i s i t s , p roc-

essin g e q u i p m e n t w i t h o u t k n o w - h o w , d o c-um en ted proposals , licenses w i th k n o w -h o w ,consul t ing serv ices , engineer ing documents ,and t echn ica l da ta. A t the h ig h end , the t askfo rce lis ted p rocess ing equ ipm ent w i th k n o w -ho w , t r a in ing in h igh t ech no log y areas, t ech-

nical ass is tance contracts , jo int ventures ,l icenses involving extensive t ra ining, andu l t ima te ly tu rnkey fac to r i e s .

W h a t is n o t e w o r t h y a b o u t t h is ra n k i n gis tha t the o rder appears to be d i rec t ly re la tedto the degree o f pe r sona l con tac t invo lved .

At the upper end o f the sca le ex tended pe r-sona l con tac t s be tw een h ig h l y qua lif ied peo-p le f r o m b o t h t h e d o n o r a n d t h e re cip ie ntcoun t r ie s a re r equ ired . A t the low er end ,such con tac t s a re min imal , and , in somecases, m ay be nonex i s t en t. T h e m echan ismsra ted in the m idd le r equ ire in te rpe r sona l ex -changes w hose qu a l i t y and du ra t i on f al lsom ew here i n be tween .

Controlling the Flow

W h a t these obse rva t ions suggest is tha tthe t a sk o f con t ro l l ing the expor t o f c r i t i ca lt e chno logy i s no t a s l a rge o r a s unmanage -able as i t o f ten appears. I t need o n ly focuson t r ansac t i ons t ha t con t a in subs t an t i a lamounts o f t echn ica l a s s i s t ance o r t r a in ing .T h e r e are t w o i m p o r t a n t ex c ep tio n s. O n einvo lves the exchanges tha t t ake p lace du r ingp la n t v is its an d con t rac t nego t i a tions . N or-m a l ly the se w ou ld no t i nvo lve t he t rans f e ro f any sign if ic an t t e chno logy. Y e t w he n t heperson seek ing the in fo rmat ion i s a l r eady

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tha t on ly technica l ass i s tance and t ra in ingp r o g r a m s t r a n s f e r s i g n i f i c a n t a m o u n t s o ft e c h n o l o g y. T h e e n d p r o d u c t s o f s o p h i s t i-c a t e d t e c h n o l o g y n o r m a l l y c a n n o t b e " r e -v er se e n g i n e e r e d " - - t h a t is t o sa y, a n o p -p o n e n t c a n n o t l e a r n h o w t o p r o d u c e t h e ms i m p l y b y d i s m a n t l in g a s am p le . B u t m u c h

o f m o d e r n t e c h n o l o g y c o n s i s t s o f t h e a b i l i t yt o u s e c er ta in t o o l s in p r o d u c t i o n a n d m a i n -t enance rou t ines . Hence , t o m ake go od onpe r fo rmance gua ran tees , a supp l i e r o f t oo l sm u s t f r e q u e n t l y o f f e r t h e b u y e r ' s p e r s o n n e le x te n s iv e t r a in i n g in h o w t o o p e ra t e a n d

m ain ta in the eq u ipm en t . A s a resu lt , c r it ica lt e c h n o l o g y m a y b e e x p o r t e d o n a p i e c e m e a lb a sis . Y e t t h e s u p p l ie r m a y b e u n a w a r e o fw h a t h e h a s d o n e , b ec au se o n l y a n e n dp r o d u c t i s i n v o l v e d .

" T h e r e l e a s e o f a e r i t i e a l t e c h -n o l o g y c o u l d p r o v i d e t h e S o v i e t sw i t h a n o p t i o n t h e y d o n o t n o w

C o n t r o l o f p r o d u c t i o n e q u i p m e n t is a ls oi m p o r t a n t w h e n t h e c r i t i c a l t e c h n o l o g y i sa lr e a d y k n o w n t o a n a d v er sa ry, b u t th esoph i s t i ca t ed mach ine ry and too l s neededt o e x p l o it i t a re la ck in g . K n o w - h o w w i t h -ou t t he means to app ly i t i s o f l i t t l e p rac -t ical s ignificance. F o r this reason , th e va lueo f a t echno logy a l r eady ava i l ab le t o t heSo vie ts can be l im i ted i f the i r access to theins t rumen t s r equ i r ed to use i t fu l ly can berestr icted.

F ina l ly, because c r it ica l t ech no logy andc lose ly r e la ted end p ro du c t s i n t he fo rm o fk e y s t o n e p r o d u c t i o n e q u i p m e n t a n d i n s t r u -men t~ a re o f p r im ary im por t ance , i t c er-t a i n ly d o e s n o t f o l l o w t h a t o t h e r e n d p r o d -uc ts are o f l i t t le m il i ta ry s ignif icance. F o re x a m p l e , t h e U n i t e d S t a t e s h a s i t e m s s u c ha s n i g h t v i si o n e q u i p m e n t , m o r e a d v a n c e dt h a n a n y t h i n g t h e S o v i et s a re c u r r e n t l y a b l et o p ro d u ce . T o e x p o r t th e se i te m s w o u l dt r ans fe r l i t t l e know-how s ince the c r i t i ca lt e c h n o l o g y i n v o l v e d i n t h e i r f a b r i c a t i o n i s

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Mountain

not extractable. Yet the products them-

selves can make a significant contribution toSoviet mi litary potential simply because theyperform better t han anything the USSR pos-sesses.

Most perplexing of all the difficulties inthe control of technology transfers is what

is known as the dual-use problem. While itis U.S. government policy to restrict the ex-port of military significant technologies,every effort is made to do so without inter-fering wi th peaceful trade. The problem isnot the policy, which is straightforward

enough, but the fact that there are almostno mil itarily significant technologies that dono t also have import an t peaceful uses. Theadvanced computers employed to improvenuclear warhead design or carry out real-time command and control functions in anair defense system also have extensive com-mercial and scientific uses. Hence it is almostimpossible to draw up a list of goods ortechnologies whose embargo would inhibitweapons development without includingitems that, in most cases, would be used onlyfor peaceful purposes.

Th is is why export control decisions tendto be determined on a case-by-case basis. Acommodi ty will probably not be banned ifit is appropriate to its stated civil use andif the likelihood of its diversion to militarypurposes or its potential military contribu-

tion is slight. Given the closed nature ofCommunist societies, and in particular thesecrecy with which they shroud their mili-tary sector, such judgments are not easy tomake.

How effective are present export controls,

and h ow well have they worked in the past?It is unrealistic to expect that a system ofexport restrictions can prevent the USSR fr omeventually acquiring any level of technologythat the West has developed. Inadvertentleakage, clandestine acquisition, and indige-

nous development wil l combine to assure thatthis eventually takes place. The process can-not be halted; i t can on ly be retarded. Thusthe true measure of the effectiveness of con-

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trois over technology is ho w long the catch-up process takes. On that basis, the presentsystem scores well, for in a number of criticaltechnologies, the United States has consist-ently maintained a lead of two to five yearsover the USSR, and in some cases the marginis even wider.

Nevertheless, there has been some discus-sion recently of ways to improve the regula-to ry system. Export controls over the di-rect release of technology from the UnitedStates to the Communist world are now al-most complete. By comparison, restrictions

on releases from the United States to non-Communist countries are much more lenient.If it is true that critical U.S. technology isreaching Communist nations through non-Communist intermediaries, national securityconsiderations would seem to require more

effective management of releases to friendlycountries. In fact, in 1977 the Departmentof Defense proposed that export controls beextended to cover the release of critical tech-nologies to all destinations. A potentialproblem is that this blanket approach maynot allow technology transfers that strength-en collective security, contribute to weap-ons standardization or interoperability, andmaximize returns on U.S. investment in re-search and development.

Yet limits could be established on thenumber and type of experts providing train-ing or technical assistance, the durat ion andlocation of such training or assistance, andthe number of personnel to whom trainingor assistance could be given. The precisedetails would doubtless vary with the par-ticular technology involved, but in everycase the central concern would be with thesefactors.

The problem of technology transfer is akno t ty one wi th many ramifications. Be-sides national security, there are other im-portant issues,

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