Conferees listening to panelists in Woodrow Wilson School auditorium
John Simpson ’66
Exploring the connection between politics and economics in East-West trade...

Like all unsigned articles in PAW, this account was written by the editor. It is based on the reporting of James T. Barron ’77, vice president of the University Press Club and Princeton correspondent for the New York Times. – Editor (1976).

About a week before President Ford announced that he had dropped the term “détente” from his vocabulary, some 75 prominent political scientists, economists, and businessmen met at Princeton’s Woodrow Wilson School to discuss what the word has meant for East-West trade. Although there were almost as many different definition of the word as participants in the two-day conference on “The Business of Détente,” nearly everyone supported the continued pursuit of rapprochement. “You can’t be against détente – you can’t be in favor of bigger and better tensions among nations,” observed Hans J. Morganthau of the New School for Social Research, who nonetheless argued that the label has not brought any fundamental changes in the political realities of Soviet-American relations.

Morganthau’s view was supported in part by George F. Kennan ’25, this year’s Woodrow Wilson Prize winner (see facing page). “Ever since the creation of the Soviet government,” said the former ambassador to the U.S.S.R. and Yugoslavia, “the Soviet-U.S. relationship has been a complicated one embracing many elements of antagonism or competitiveness, whatever you want to call it, but also embracing certain other elements of possibility for collaboration, for useful and constructive trade, contacts, and activities.” For various reasons, he explained, “In the early 1970s these possibilities for constructive collaboration were somewhat widened…and the Nixon Administration, I think wisely, took advantage of that situation to negotiate a whole series of bilateral agreements, of limited significance, but not wholly insignificant either.”

The problem, Kennan continued, was that détente was oversold. There was never, in his opinion, “a proper reason for supposing that there was going to be anything in the nature of a basic change in Soviet policies, Soviet aims, or Soviet practices in the world at large.” Consequently, he said, “I am rather disturbed to see this reaction of skepticism and even in some cases of anger, of a sort of unrequited love, of disappointment…not only in this country but in Western Europe.” Chiding those who have interpreted the Soviet involvement in Angola as evidence of a new effort to achieve world domination, he contended that “the Soviet government has by and large responded to its world environment, according to its lights, rather than trying very hard to create it. And I think that this response in recent years has been basically defensive.”

Kennan, who is now 72, pointed out, “This is, after all, an old regime. The average age of the top five men in the Kremlin is surely the same as my own, and I think that in a way I can understand them .I remember that Goethe, in the second part of Faust, has a marvelous line where Mephistopheles says, ‘Remember the devil is old, one must be old to understand him.’ If they feel anything like I do, especially on the eve of a Party Congress, they are not engaged in making great plots to dominate the rest of the world.”

Hans Morganthau saw no fundamental change
John Simpson ’66
While terming the Soviet in Angola “a very foolish thing,” Kennan suggested that Moscow was probably surprised by the reaction it provoked in the U.S., since “for 30 years everybody who could among the big powers had been supporting factions in Africa – this is old hat.” In any event, he rejected the notion that it represents “a betrayal of the understandings of détente.” Kennan, who revisited the Soviet Union last November, said, “Things seemed to me to be so much better than they were in earlier years when I served there; I found nothing I don’t regard as a slow improvement…I see no reason why we should not continue to try to make the best of those pockets of our relationship where constructive action is possible.”

Zbigniew Brzezinski, director of the Research Institute on International Change at Columbia University, agreed with Kennan that Americans generally misunderstood the nature of détente and their unrealistically high expectations contributed to the subsequent reaction against it. He also agreed that U.S.-Soviet relations combine competitive and cooperative elements, but he stressed that both sides have historically gone through alternating phases of more or less offensive and defensive postures toward each other. And he argued that the Soviets, too, have changed their attitudes toward détente:

“Détente began as a mutual accommodation of an essentially defensive type. It was to some extent an interruption in this rhythm of alternate phases of offensiveness and defensiveness in the relationship between the parties, or so it appeared…In the course of the last two years, there have been increasing signs that on the Soviet side détente is being reinterpreted to mean not essentially a defensive but an increasingly offensive relationship. In other words, it is not a movement away from détente to a new phase of assertiveness – offensiveness producing a clash – but rather an attempt to infuse détente with offensive political content, using détente to precipitate or legitimate qualitatively important political change.

“The reasons for this shift are manifold: It may involve some disappointment over the fact that American-Soviet trade did not mature and grow as perhaps had been hoped. It may involve a disappointment over the failure of the Soviet side to obtain access on a very large scale to American credits. But I strongly suspect that it is rooted in a more wide-ranging analysis of the state of the world today and of the relative balance of power between the parties in this fundamentally competitive, though also partially accommodating, relationship.”

Morganthau took a much harder line, characterizing the relationship between the U.S. and the U.S.S.R. as “antagonistic” rather than merely “competitive.” In their use of détente, he said, “The Russians have repeated a technique which they have perpetrated time and again in concealing their concrete political and military purposes behind certain morally positive generalities to which no right-thinking man can take exception.” As a “propagandistic device,” he added, détente “quite effectively has morally disarmed the West.” Instead of abandoning the word, however, he urged that it be properly understood to mean nothing more than “the mutual recognition that atomic war cannot be regarded as an instrument of national policy to promote and protect the mutually irreconcilable positions of the two superpowers.”

Perhaps the most outspoken critic of détente at the conference was Richard N. Perle, a member of Senator Henry M. Jackson’s staff who serves on several Senate committees and concurrently is working for a Ph.D. at Princeton. He accused Moscow of having an interest in being accommodated but an unwillingness to accommodate, and of single-mindedly pursuing its own unilateral advantage. “I think the result of this extended series of negotiations has been one-sided,” he said. “In none of these agreements has the United States come out ahead.”

Yet Marshall D. Shulman, who is Adlai E. Stevenson Professor of International Relations and former director of the Russian Institute at Columbia University, warned against overreacting to the misapprehensions caused by the inflated rhetoric that came out of the Moscow Summit of 1972. He offered two reasons why it is in the U.S. interest to reduce tensions as much as possible in its relations with the U.S.S.R. First, he noted, “The Soviet Union is not the simple touchstone of our foreign policy.” Rather, the central problem for the U.S. is to reverse the “very powerful disintegrative trends in the world which threaten to increase the degree of anarchy, violence, and chaos in the international environment in which we live.”

Accordingly, Shulman continued, it should be the aim of the U.S. “to contribute to the extent we can toward strengthening the international system, the codification of international law, and civilized practices among nations in order to create a world environment in which the kind of society we want to have can endure. In a situation of international chaos, violence, and anarchy, it would be very difficult to preserve the kind of values that we cherish, profess, and sometimes partially realize. Now it seems to me self-evident that if we and the Soviet Union are locked into a relationship of high tension, it is going to make every one of the problems we face in the world more difficult, more unstable, and raise the risks.”

Second, Shulman said, “There is much too much complacency in this country and elsewhere about the danger of nuclear war…My feeling is that the drift in recent years in the quantity of weapons and the kind of weapons that have been developed and that are now being developed has had the effect of increasing the instability of the strategic military balance and the likelihood of a situation arising in which – without intending it – the two countries could find themselves locked into a confrontation in which the possibility of moving from a conventional military engagement to a nuclear engagement no longer seems as remote as it may have a decade ago.” The avoidance of nuclear war, Morganthau pointed out, remains the Administration’s official rationale for pursuing détente.

If détente has not effect significant changes in diplomatic relations, it has brought a dramatic increase in East-West trade. International trade, of course, is not conducted in a vacuum, and the connection between the economic and political dimensions of détente was the main theme of the conference. At the opening session, Peter B. Kenen, director of Princeton’s International Finance Section and chairman of the parley, posed four fundamental questions: Should economic power be brought to bear on diplomatic relations? Is there a congruence between the legitimate interests of individual companies doing business abroad and the broad foreign policy objectives of the U.S.? Since dealings between American business and Socialist countries involve relations between private entities on the one hand and foreign governments on the other – inherently asymmetrical in their nature – should the power and authority of the U.S. be drawn in to make those relationships more symmetrical? And, finally, do closer economic relations between the U.S. and the Socialist countries require modifying the way we conduct our own business affairs? As might be expected, there was considerable disagreement among the participants on these issues.

The terms of the debate were set by Brzezinski, who is a former member of the Policy Planning Council of the State Department and the current director of the Trilateral Commission, an organization of public figures from North America, Western Europe, and Japan, which was formed in 1973 to develop joint policies on matters of common concern. He presented his case as follows:

“There is a danger that the present international context might prompt the Soviet leaders to redefine détente in more assertive terms. The Soviet leaders might well conclude that the present ‘general crisis of capitalism,’ as well as internal differences in the United States, might permit the pursuit both of the policy of accommodation with the United States as well as the policy of effecting politically important changes in different parts of the world. Under these circumstances, the United States policy of deliberately promoting the expansion of U.S.-Soviet trade has to be critically re-examined, and a more direct connection established between U.S.-Soviet trade and U.S.-Soviet political accommodation.

Zbigniew Brzezinski advocated ‘calibration’
John Simpson ’66
“Moreover, even under more normal circumstances, there is the danger that the highly pluralistic character of the American economy and the highly centralized character of the Soviet economy will enable the Soviet side to extract more advantages from U.S. -Soviet trade than should be the case in a more reciprocal relationship. Accordingly, legislation should be considered for the creation of a joint legislative-executive organ which would monitor closely and oversee American-Soviet trade from the standpoint of the American national interest.”

What Brzezinski proposed was that U.S. “calibrate” its trade with the U.S.S.R. – that is, directly link it to political accommodations – to ensure that the benefits of détente become “more truly reciprocal than they have been for the last several year.” While conceding that this undertaking would be extremely difficult, given the plurality of the American private enterprise system, he contended that it was necessary to bring about a greater symmetry in dealings with the Communist nations, which themselves use trade as a political tool. And though he felt that economic leverage alone was not sufficient to promote systemic change within the Soviet Union, he thought it could be used to obtain some adjustment of Soviet policies one external and strategic issues, such as the creation of global grain reserves or further SALT agreements.

Perle not only supported Brzezinski’s proposal, but advocated using economic pressure – such as the granting or withholding of trade credits and Most Favored Nation status – to influence internal Soviet policies. He argued that the failure of the so-called Jackson amendment to bring about freer emigration of Jews from the U.S.S.R. did not prove that this approach could not work if it had the full support of both the executive and the legislative. Shulman, however, saw the Jackson amendment experience as evidence that Moscow would not yield to foreign attempts to intervene in its internal affairs. He suggested that economic leverage should be used only to encourage Soviet restrain in international crisis situations – and preferably be applied in cooperation with Western Europe and Japan. At the same time, he concurred that more national coordination is desirable: “In many instances individual firms have really been whipsawed by the play of a centralized Soviet trading organization with separate and competing units. And this is clearly disadvantageous to the businesses from their own viewpoints but also…from the point of view of national policy.”

Kennan, recalling his experience in negotiating the first American-Soviet trade agreement in the early 1930s, noted: “We were faced then with the task – and it was more difficult then than it is today – of trying to make clear to our government and to our business and journalistic communities that Most Favored Nation treatment did not have the same meaning when it was extended by a country which had a governmental trade monopoly as it did in other cases, and that you couldn’t rely on it to have any appreciable effect on your exports to that country. For this reason we designed those first annual trade agreements in such a way that the Soviet government undertook to maintain a given level of purchases in the United States. And it was understood that if their purchases fell below that level annually, the extension of Most Favored Nation treatment would be withdrawn.

“It seemed to me a quite sound way of getting around the asymmetry which Mr. Brzezinski was talking about. I think we still need something like that. But I would point out in connection with what Mr. Perle said that I believe at the time Mr. Jackson’s amendment was in the works, our trade with the Soviet Union was…highly favorable, and in this situation I would not have seen any reason for withdrawing Most Favored Nation treatment…It should be related to the realities of trade and not to the political atmosphere.”

With regard to credit, on the other hand, Kennan maintained that a different standard applied. He had recommended against the extension of credit to the U.S.S.R. in the 1930s, he recalled, because “we had no official information as to the size of the gold reserve or the foreign currency holdings of the Soviet government, nor did we know what its earlier obligations were. Perhaps it is a sign of the Scottishness of myself that it seemed to me highly unsound to go lending large sums of money to someone about whose financial situation we knew so little.” Despite 30 years of commercial dealings with the Soviets, he said, the U.S. still does not have sufficient information to justify extending major credits.

A second consideration, Kennan added, is that “in recent years they have given, as we all know, aid – mostly military but also other aid – to the tune of literally billions of dollars to other countries and very often to countries whose policies are not in our view conducive to a favorable development of prospects for peace and stability in the world. Now to lend large amounts of money to a government which is doing that seems to me to be financing things that we do not particularly want to finance. I think they might well be asked, if they need credits, that they put to a more constructive use some of the money they have expended for those other purposes.”

Kennan supported the idea of creating a “single authority” to oversee all business dealings with the Soviet Union as being preferable to the present arrangement where more than 20 different offices and agencies are involved in various ways. But he was less favorable to having it be a joint body of the executive and legislative, since “the President after all is charged with the conduct of foreign policy in this country. It seems to be a clear responsibility of his to see that dealings with a foreign trade monopoly serve the national interest.”

Nonetheless, Kennan emphasized, “I do not think that our government should attempt to exploit [business] deals for political purposes.” Trade, he insisted, is different from aid, which may quite properly have political strings attached. “When an experienced American firm, and experienced most of these firms are, enters into negotiations with the Soviet trade monopoly and concludes a given deal with it, we have very good reason to expect that in 999 out of 1,000 cases it know what it is doing, that it knows its own business and what it ought to get for it in concession, and that it stipulates this in a contract…

“I was brought up to believe that a normal business transaction of this nature, once voluntarily concluded, and correctly fulfilled, would so to speak liquidate the obligation, and that neither side afterward would have any sort of residual obligation to the other side arising from it. It would not seem imaginable to me that we should expect to sell, so to speak, the same goods twice, once for a commercial price and after that for a political price as well.”

Besides the question of principle, Kennan doubted the practicality of trying to use trade to influence Soviet policy. “If the matter concerns what they regard as their internal affairs, or what Mr. Brzezinski defines as systemic change, I don’t think they are very likely to yield, because governments don’t like to yield to things under pressure, and especially not the things that relate to their internal affairs.” In addition, he said, “There is very little that they might want to get form us which, if denied, they cannot get in other ways – either by changing their own priorities at home in research and industrial production, or by dealing through third countries.”

Morganthau took a similar position: “I do not believe that you can manipulate American foreign trade in such a way as to be politically responsive to the needs of American foreign policy. What you must do is look behind the phraseology, the rhetoric, at the realities of international relations and use as best we can the limited advantages trade with the Soviet Union may give us for the protection and promotion of our national interests.”

The businessmen at the conference reacted strongly to the imputation by some of the academic participants that American companies run the risk of being “out-negotiated” by the socialist states. Rejecting the view that U.S. government protection is needed “for we babes-in-the-woods businessmen and bankers going up against the Russian bear,” Alfred R. Wentworth, senior vice president of the Chase Manhattan Bank, pointed out that his Communist customers “also feel we’re doing them in.” While conceding that “earlier margins were not as attractive as they are now,” largely because of economic conditions at the time and the fact that “Soviet loans were done at the market,” he contended that the U.S. stands to benefit substantially from expanded trade with what he described as its “largest undeveloped export market” in the word today.

“It is important for the United States to be competitive at this critical time,” he explained. “Once, for instance, a Swedish or a French airways control system is in place, new orders for modernization and expansion of that system almost automatically flow to the original supplier. While we may deny importing countries normal trade relationships on grounds of internal freedoms, other exporting countries have not been as moralistic, or perhaps naïve, and have obtained or are obtaining a competitive edge over the United States.” To even the score, he urged increasing Export-Import Bank commitments to the East Bloc, whose credit standing and debt structure he judged “excellent.”

Robert J. McMenamin, an International Harvester Company vice president who has personally negotiated nearly $250 million in exports of U.S. products, expressed disappointment that most of the political scientists left the conference before the session at which the businessmen presented their views. He cautioned that academics may be getting a distorted picture of American trade with the East. “I suspect that the people who are outspoken about a lack of profit or a lost deal are those who for some reason lost,” he said. “Whereas those who are successful are like the gambler at the gambling table: he takes his winnings and quietly goes home.” Due to legal and competitive considerations, he added, “No American company can stand up and talk too much about its profits on particular transactions.” But he allowed that his own firm “has made very highly satisfactory deals in the Soviet Union and elsewhere in Eastern Europe.”

Both McMenamin and Harold B. Scott, who is president of the U.S.-U.S.S.R. Trade and Economic Council, stressed that American business with the East Bloc still has a long ways to go. “It is in fact no big deal for us or them,” said Scott. “We have a much smaller share of the market than Western Europe or Japan.” He observed that the total annual export of U.S. manufactured foods to the U.S.S.R. is less than one week’s sales for General Motors.

Recounting the development of the Soviet-American trade relationship since 1971, when it was conceived as a small apolitical effort from which both parties might mutually benefit, Scott noted that the turnover of key personnel and shifts among agencies on the American side “sounds almost like a Kremlin scene.” The various political complications, he said, “are all legitimate issues, but they are infringing, wearing down the trade and economic relationship, imposing a burden that is too great for it.” Consequently, in Scott’s view, the Soviets have begun to doubt whether the U.S. really wants to carry on trade. He quoted a French friend of his as saying, “The Americans boil the water and the Europeans drink the tea.”

As for Brzezinski’s proposal, Scott exclaimed, “Now what the hell does calibration mean to a businessman? Are you going to calibrate a sale to the Soviets – you can sell $80 million but you can’t sell $100 million? Are you going to say, “January you can go over, but February you can’t’? Are you going to say, ‘This crowd over here can do business, but that crowd over there can’t’?” If the burden of trying to deal under heavy government control becomes too onerous, he warned, business may decide it is not worth the trouble and turn to other foreign markets.

“We’re getting this enormous encroachment on the business scene simply because the Soviets do it. Hell, we can handle their system with out system – we don’t need another bureaucracy to counter theirs. Then we’ll get the same problems they have. We have this elasticity, this flexibility – that’s our advantage – don’t mess it up. If you add the same bureaucracy that they have, it’s very tough… Let’s go over there and make some friends, and above all let’s enjoy our relationship. It may be like porcupines making love – you might have to do it very carefully – but let’s enjoy it. It does work.”

Marshall Shulman warned of disintegrative trends
John Simpson ’66
The economists, by and large, held the middle ground between the political scientists and businessmen. Alec Nove, a veteran of Britain’s Board of Trade and now director of the Institute of Soviet and East European Studies and the University of Glasgow, challenged many of the basic assumptions of both the theorists and the practitioners. On the one side, he asserted that most Soviet trade decisions are essentially economic in nature with little political content, and on the other, that the East is already running into balance of payments problems, forcing it to hold down imports and seek to expand exports. In a series of reductio ad absurdum arguments, he noted, “The view that we ought not to supply them with that which they most urgently need” leads logically to “a trade policy which in the last analysis supplies them only with those items that they do not want.” While describing himself as “not in the least starry-eyed about the impact of trade on international politics,” he concluded that “probably the thing to do is relax and make some profits out of it.”

Nove clashed with Marshall I. Goldman, an economics professor from Wellesley College, on the question of whether the U.S.S.R. benefits more than the U.S. from their mutual trade. Goldman felt Moscow gets a bargain on high-technology products from the U.S. because it doesn’t have to pay a proportionate share of their development costs; Nove insisted that so long as the producer was making a profit (from sales he would not otherwise enjoy), the benefit was mutual. Nonetheless, Goldman advocated the promotion of more East-West trade and thought it helped to ease Soviet-American tensions. “Trade generally doesn’t guarantee good political relations,” he said, “but poor trade will be destructive of political relations.” At the same time, he emphasized the importance of convincing the American public that “we are not being taken advantage of.”

In this context, Carl Kaysen, an economist who is director of the Institute for Advanced Study, cited the dictum of David Ricardo that inevitably “the smaller of two trading partners will reap the greater gain.” Even so, he said, any additional return the U.S. gets on already-developed technology is to its benefit. Looking to the long term, he added, it is also in the U.S. interest to promote “goulash Communism” in the U.S.S.R. as opposed to the more militant variety.

On balance, the economists supported the optimism of the businessmen about the possibilities of East-West trade, which Wentworth called “an imperative of our time.” As he put it, “What we are observing is a very important development – the desire of the Soviet Union to emerge as a world economic power, with all its benefits and hopefuly all of its responsibilities, after so many years of inward-looking political and economic isolation…This development will take place with or without the assistance of the United States, and we had better learn to assist this great power if indeed we are to maintain our position as the other leader on the world scene.”

This was originally published in the March 8, 1976 issue of PAW.