Red Trade Blunders Benefit the U.S.

IN the worldwide trade-and-aid war, U.S. shortcomings and mistakes are well known, thoroughly publicized. But is the Russian economic-aid program to underdeveloped countries an overwhelming success? Last week, as Soviet Premier Khrushchev granted $250 million in credits to Indonesia and rode through the streets of Kabul, Afghanistan, freshly paved from Soviet aid funds, the Russians' score seemed high. In some cases it is--e.g., Egypt's Aswan Dam, Cuba's sugar contract for 1,000,000 tons a year. But the overall Soviet-bloc record includes many a blunder. Even more important, by following the basic pattern of foreign aid laid down by the U.S., the Russians have been forced to follow a path of frustration and bad Marxist economics. By sponsoring aid projects and raising the economic standards of underdeveloped nations, the Reds are working toward eliminating the discontent that fosters Red revolutions. In the long run, says the Library of Congress' Russian Expert Leon Herman, the Reds are actually working toward the U.S. ideal that successful economic development can be achieved in a non-Communist society.

Because Soviet-bloc projects are offered on a hit-or-miss basis, the Reds often make costly mistakes. Some examples :

P: In Indonesia, the East Germans finished a sugar mill two years behind schedule only to find that it was a beet-sugar mill and the rollers were not heavy enough to crush Indonesian cane sugar.

P: In Burma, a luxury hotel twelve miles outside Rangoon has become a white elephant because it has no air conditioning and is too far out of town for the Western travelers for whom it was designed.

P: In 1958, the Russians dumped 18,000 tons of tin into a saturated world market, hoping to create price chaos. But Malaya, Bolivia and Indonesia, which depend heavily on tin exports, complained bitterly, forced the Reds to halt their dumping.

Pitched to a splashy one-shot approach, the Soviet bloc has often fallen far short on quality, failed to back its goods. When Indonesia bought 4,000 Russian jeeps as part of a $100 million credit, the landed cost of the vehicles was $4,000 each, higher than U.S. Jeeps ($3,100) or Japanese ($2,500).

The Red jeeps had windshield frames that buckled under the tropical heat, glass with ripples, and tires that wore out after 5,000 miles. Russian diesel motors sold in Argentina held up for fewer than three years. And when drilling machines ordered by a Brazilian firm from Poland arrived in bad condition the Poles ignored all claims.

Although the Russians insist that their aid is offered without any strings attached, they crack the whip whenever it suits their purpose, e.g., "postponement"' of credits to Yugoslavia after the split with Marshal Tito. Often the terms of Red aid packages are such that underdeveloped nations are shortchanged. The Russians tacked artificially high price tags (in rubles) onto the goods they bartered in return for Egyptian cotton. Then they resold the cotton to West Germany, Switzerland and other regular Egyptian customers, at a 10% discount.

Cuba faces a similar threat from inflated Red prices and dumping in its agreement to sell the Russians 1,000,000 tons of sugar a year outside of its normal world quota. Warns one economist: "Much of what we call Soviet aid is in fact deferred barter."

Since the Soviet-bloc aid program started in 1955, the Reds have offered $3.8 billion to 20 of the free world's underdeveloped nations, v. $5.7 billion for the U.S. ($32 billion total to 55 countries since 1948). One of the prime tests of the success of the programs is the international trade they have generated, for it is trade that underdeveloped nations really want.

In 1959, U.S. foreign trade with these 20 nations, exclusive of aid credits, was an estimated $1.6 billion, v. $800 million for the Soviet bloc. The result, says Russian Expert David Granick in his new study. The Red Executive (Doubleday; $4.50), means that "we are far and away ahead in the game of trade and likely to remain so." The prime reasons for the U.S.'s advantage are that the Russians are 1) still concerned with becoming economically self-sufficient, and 2) running into serious trouble pricing their goods for world markets. Since the Red economy has no free market to establish the value of goods, Soviet prices, says Granick, "can scarcely be taken as a proper guide for Soviet foreign trade operations." At present, the Russians "can seldom be sure if a given sale was at a favorable price or was really a case of unprofitable dumping." Thus, the inherent organizational problems of a planned economy are a severe disadvantage to the Russians in international trade. As even the U.S. has found out, no nation, no matter how big or no matter how rich, can long afford an unfavorable balance of trade.

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