Gaffney To Congress: Vote For ‘Tallinn Process,’ Not Moscow Center’s ‘Common Economic Space’

In testimony before the House Ways and Means Committee today, Frank J. Gaffney, Jr., director of the Center for Security Policy, urged that the U.S.-Soviet Trade Agreement be "returned to the President with a request that new trade negotiations be immediately initiated with those former Soviet republics engaged in urgent democratic and free-market institution building."

Gaffney warned in prepared remarks that the effect of congressional approval of the present Trade Agreement would be "to align the United States with the reconfigured, post-coup Soviet center over a policy of direct and differentiated relations with reformist republics":

"The development of decentralized trade and credit relationships between the United States (and other G-7 nations) and the democratically elected reformist republics is virtually inevitable in the period ahead. Attempting to retard this positive evolutionary process by stop-gap measures such as the present trade agreement with a reconfigured union will probably only result in increased estrangement and desperation on the part of the most independent republics.

 

 

"If the United States provides a blanket MFN to the entire former USSR, we actually dilute our leverage to encourage reforms through a well-crafted incentive system — one that would be more conducive to U.S. trade and investment and that would offer real hope for the Soviet people."

 

That Congress confronts just such a stark choice has been made clear by the new agreements reached in Tallinn, Estonia late last week by 13 of the 15 republics of the former USSR. According to the Financial Times of London (see attached article), these agreements represent a strong rejection of the center-dominated economic plan being promoted by Gregory Yavlinsky and open "the prospect of two distinct economic unions emerging, one based in Moscow and a second with headquarters in Tallinn." It reflects "growing fear among the non-Russian republics that Mr. Boris Yeltsin’s White House — the Russian parliament — is as great a threat to their sovereignty as the Kremlin."

The FT reports that the Ukraine’s Minister for Privatization, Volodymyr Lanovy, expressly rejected the Yavlinsky model as "another effort to force upon us a single financial and monetary system." The participants in the Tallinn Process agreed instead to:

• "discuss division of the Soviet Union’s foreign debt and gold, diamond and hard currency reserves at their next meeting three months from now";

 

• "negotiate new inter-republic trade contracts";

 

• "drop the ruble as the internal trading currency as soon as the republics introduce separate currencies";

 

• consider "a Ukraine suggestion to create an interstate clearing-bank, which would establish exchange rates between republican currencies."

The Center for Security Policy believes that these important economic developments are further evidence of the real prospects for a devolution of power from the center to the republics. Such a devolution — which is still being resisted by Gorbachev, Yavlinsky and others who remain tied to Moscow center and key Western governments and business interests — is the single best hope for transforming the threat posed in the past by Soviet military power and securing economic freedom for the people of the former USSR.

Copies of Gaffney’s testimony may be obtained by contacting the Center.