The New Trade Drive

Western capitalists have lately become so eager to deal with the Communists that the question of trade has taken on a new dimension: instead of merely selling goods, Western businessmen are sending whole factories and generous credits eastward. Western Europe is leading the trend, but last week the U.S. also shuffled itself into some important East-West deals.

Secretary of State Dean Rusk announced the first two contracts to be negotiated under the U.S.'s recently signed trade treaty with Rumania. Firestone Tire & Rubber will put up a $40 million synthetic-rubber factory, and Universal Oil Products will build a $10 million cracking plant in the oil-rich country. At the same time, a couple of U.S. companies were close to closing the largest commercial agreement ever negotiated between the U.S. and East Germany. If the $13 million deal goes through, Standard Oil of Ohio will supply the processes for an East German synthetic-textile plant, and Litwin Engineering of Wichita, Kans. will build it.

Pepsi for Communists. East Germany, whose Stalinist warts long made it a wallflower in the eyes of Western businessmen, is being wooed by everyone from the torrid Latins to the cool Scandinavians. In the past two months it has signed new trade pacts with France, Denmark and Italy. France, in fact, is aiming to overtake West Germany as the biggest dealer with Communism. Two months ago, Finance Minister Valery Giscard d'Estaing signed a treaty to double trade with Russia to $700 million over the next five years; next month he will talk to Bulgaria.

West German businessmen, who lifted their East-West business well above $1 billion last year, grumble that they could have done even better if their government had allowed them to offer long-term credits as other Western Europeans have begun to do. German tycoons have raised such a howl that the Cabinet promises to re-examine its tough line later this month. And Britain, which opened the gates to easy credit last year by giving the Czechs up to twelve years to pay for two fertilizer plants, hailed another breakthrough last week. It won its first order to build ships for Red China--two fast cargo vessels that will cost $7,000,000.

While the Communists want Western goods, they are even more interested in buying the technology that capitalism produces so well. Western businessmen, in addition to turning handsome profits on the sale of plants and processes, gain entree to the East for sales of other goods. Moreover, if Eastern Europe's drift toward capitalism continues, the Communists may be willing some day to let Western businessmen invest in the East. On the upper levels of the Hungarian government, there was talk last year of inviting Conrad Hilton in to build and manage a hotel in Budapest. Though that idea fell through, at least four of the satellite countries are negotiating with Pepsi-Cola. The Communists want to buy Pepsi's franchises, but it is still possible that U.S. companies might buy into bottling plants behind the Iron Curtain.

The Carrot. Cyrus Eaton Jr., son of the U.S. industrialist who has long championed trade with the East, has opened a Cleveland-based company called Tower International to help arrange and finance deals between the U.S. and Iron Curtain countries, has already signed up as a sales agent for Hungary. The U.S. now favors such deals instead of frowning upon them, hoping to use U.S. trade as a carrot to lure the satellites closer to the West.

In his State of the Union speech, President Johnson said that the Government "is exploring ways to increase peaceful trade with these countries." What the U.S. intends to do is: 1) permit the sale of such currently embargoed U.S. items as petrochemical plants and sophisticated metalworking machinery, 2) permit loans for up to five years, and 3) cut tariffs by treating most of the satellites as "most favored nations," as Yugoslavia and Poland are already treated. Washington economists figure that if the U.S. should decide to do all that for Russia--as more and more U.S. businessmen would like--its exports to the Soviets could rise from last year's $25 million to more than $300 million by 1970.

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