Abstract
The “natural fit” in US-USSR agricultural relations realised in 1972 has grown, albeit unevenly, over the course of the decade: exports have become critical to the profitability of the American agricultural sector; imports have become critical to the attainment of Soviet consumption goals. In the future, however, this “natural fit” would seem to be more functional within an East-West multilateral trading context than within a US-USSR bilateral trading context.
The views expressed in this paper do not necessarily represent those of the Congressional Research Service or the US Congress.
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References
The relationship between Soviet grain imports and maintenance of domestic grain reserves has been discussed by Dr. Mikhail S. Bernstam in “Behind US Grain Sales to the USSR”, Defense and Foreign Affairs, September 1982.
See “International Recovery and Financial Stability”, the Congressional Record, July 25, 1983, p. H5520.
The international division of labour has long been a part of Soviet economic theory. Its application in terms of East-West trade — that is, pursuing a more general policy of importation of goods based on quality and cost, regardless of whether those items are produced domestically — has been more recent.
It should be noted that despite the predominance of the grain trade in Soviet-American agricultural relations throughout the 1970s, both countries early on became interested in the transfer of agricultural technology. During his trip to the USSR in 1972, Senator Humphrey found a broad interest among Soviet agricultural circles in US technology. See Hubert H. Humphrey and Henry Bellmon, Observations on Soviet and Polish Agriculture, November-December 1972: A Trip Report, Washington, DC, Government Printing Office, 1973, pp. 40–41. The following year the superphosphate agreement between the USSR and Occidental Petroleum was concluded. (Under that deal, Occidental was to build ammonia plants in the USSR, to import ammonia, and to export superphosphates back to the Soviet Union. This agreement is the largest bilateral deal between the two countries ($ 20 billion for 20 years).
Henry Kissinger popularised the notion of tying energy to food in US-Soviet bilateral trade, albeit his emphasis was on barter — some oil for grain on favourable terms. This exchange was presumably conceived as a bonus to the United States for providing the Soviets assured access to US grain supplies in the first Long-Term Grain Agreement negotiated in 1975.
Amendments to the Trade Act and Export-Import Bank Act in 1974 closed the official credit window to the USSR and blocked the use of credit for Soviet natural gas development. With the end of the development of a US-Soviet gas pipeline, the near-term prospects of balancing trade vanished.
For a discussion of the potential of Soviet agriculture, see D. Gale Johnson and Karen McConnell Brooks, Prospects for Soviet Agriculture in the 198Os, Bloomington, Indiana University Press, 1983.
The USSR imports quantities of grain from Australia, Argentina, Canada, Brazil, Hungary and the European Economic Community in addition to the US.
For a blueprint of the comprehensive plan for agricultural improvement see “O merakh po dal’ neyshemu povysheniyu tekhnicheskogo urovnya i kachestva mashin i oborudovaniya dlya sel’skogo khozyaystva, uluchsheniyu ispol’zovaniya uvelicheniyu proizvodstva i postavok ikh v 1983–1990 godakh”, Pravda, April 10, 1983, p. 1.
David Schoonover, “Overview: Agriculture and the Grain Trade”, in Soviet Economy in the 1980s: Problems and Prospects, Volume II, Washington DC, Government Printing Office, 1982, p. 4. See also: Anton Malish, “The Food Program: A New Policy or more rhetoric” in the same volume, pp. 41–59.
Planned increases in agricultural investment in 1983 over 1981 were distributed as follows: agricultural machinery and equipment (28 per cent); livestock raising and feed product (26 per cent); food industry (21 per cent); meat and milk industry (21 per cent); microbiology industry (59 per cent). Source: US Department of Agriculture, USSR-World Agriculture Regional Supplement: Review of 1982 and Outlook for 1983, May 1983, p. 16.
In the anniversary year of Karl Marx, it seems appropriate for the Soviet leadership to give more attention to comparative advantage, the second pillar of classical economics (the Labour Theory of Value being the primary link of Marx with classical economics). It is interesting to recall that David Ricardo argued for a policy of reliance on continental sources of corn on the grounds that England should import agricultural products produced better and more cheaply elsewhere and pay for them with income from the export of industrial goods that England produced better and more cheaply. The debate in England, leading to the repeal of the Corn Laws, also had to deal with the security problem of reliance on foreign sources just freed from the control of Napoleon.
“Soviets Looking West to Meet Priority Needs”, Business Eastern Europe, August 5, 1983, p. 245.
Ibid., p. 245.
Tom Sealy and Anthony Robinson, “An ICI Harvest on Soviet Farmland”, Financial Times, October 21, 1983, p. 1.
See: Serge Schemenann, “US Agricultural Show Opens in Moscow Park”, New York Times, October 18, 1983.
“US Agribusiness Show to Focus on Soviet Needs”, Business Eastern Europe, July 22, 1983, p. 229.
This term was first used by former Secretary of Commerce Peter G. Peterson in reference to energy. See Peter G. Peterson, US-Soviet Commercial Relationships in a New Era, Washington DC, Department of Commerce, August 1972. For a critical view see: John P. Hardt, George D. Holliday, Young C. Kim, Western Investment in Communist Economies, prepared for the Subcommittee on Multinational Corporations, Committee on Foreign Relations, US Senate, Washington DC, US Government Printing Office, August 5, 1974.
The Wheat Boards in Canada and Australia have an active role similar to Export Khleb. Export Khleb controls the execution of Soviet import policy by negotiating specific grain purchases with private US multinational corporations.
The US Government’s relationship with the agricultural private sector — multinational grain trading companies — is more of a partnership than is the case with other commercial sectors. But the private grain trading companies negotiate the contracts. The US Government sets minimum and maximum trading levels that serve to promote levels of overall trade and protects the grain trade from American governmental intervention, e.g., embargoes.
The approximate estimates are based on yearly Soviet purchases of 9 MMT and 12 MMT of wheat and corn only. If soybeans or soybean meal were substituted for wheat or corn imports then these estimates must be adjusted. (1 MMT of wheat would sell for approximately $ 135 million while 500,000 tons of soybeans or soybean meal — the equivalent of 1 MMT of wheat or corn — would sell for about $ 120 million.) These are preliminary estimates of the authors based on information obtained from the USDA.
The USSR currently has long-term grain agreements with Argentina (4.5 MMT) Canada (5 MMT), Brazil (1.44 MMT), Hungary (.88 MMT) and India (.64 MMT). Unlike the other agreements, the Indian agreement does not run for five years. (See Appendix II).
Vladimir Treml estimated the calorific value of Soviet food imports and related items to the average calorie intake of the Soviet people as an alternative measure of the growing Soviet dependence on imports free of distortions introduced by prices. He concluded that in 1981 about one-fifth of the food consumed by the Soviet population was imported. Although 1981 was a bad weather year, he did not think it atypical. See Vladimir G. Treml, “Soviet Foreign Trade in Foodstuffs Measured in Calories 1970–81”, unpublished manuscript, prepared for the panel on issues in East-West Trade at the 22nd annual meeting of the Southern Conference on Slavic Studies, Atlanta, October 1983.
The Export Administration Act (EAA) of 1979, like its predecessors the Export Control Act of 1949 (the Battle Act) and the Export Administration Act 1969 (amended in 1974 and 1977), establishes the basis of US trade policy with the East. Under this Act, export licensing to Communist countries is regulated in accordance with US national security interests, American foreign policy objectives, and, to a lesser extent, limitations on domestic supplies, i.e., “short supply”. “Contract sanctity” for grain exports provided by the LTA (Article II) as well as by domestic legislation is not assured fornon.grain agricultural trade. Therefore, non-grain agricultural trade may be interrupted for foreign policy reasons. Such a foreign policy issue was the Korean plane incident of September 1, 1983. However, despite strong pressures from the Congress to embargo the grain trade, the Reagan Administration decided not to abrogate the LTA.
These bills would have amended the 1979 Trade Act by eliminating the requirement that the President receive formal assurances from a “nonmarket” country that would allow for freer emigration before waiving the freedom of emigration provision for normalised tariff and credit status. Thus, the President could determine on his own whether or not to extend MFN and credits to a particular country. Furthermore, the waiver period would be extended from one to as much as five years. Representative AuCoin introduced a second bill, H. R. 1908, similar to the first, except that his bill required the President’s waiver to remain in force for only one year initially and thereafter for five year intervals.
Also addressed in the Stevenson and AuCoin bills was the issue of Export-Import Bank (Eximbank) loan ceilings to the Soviet Union. These bills could have changed these ceilings as they now exist under the Export-Import Bank Act from a limit of $ 300 million for the USSR to a general ceiling of $ 2 billion.
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© 1985 Wiener Institut für Internationale Wirtschaftsvergleiche (WIIW) / The Vienna Institute for Comparative Economic Studies
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Hardt, J.P., Gold, D.L. (1985). Agricultural Trade: USA and USSR. In: Saunders, C.T. (eds) East-West Trade and Finance in the World Economy. East-West European Economic Interaction. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-06074-0_11
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