Genscher’s Second Major Coup in Helsinki Negotiations Imminent: U.S. Set To Retreat On An East-West Economics Conference

(Washington, D.C.): Barring immediate
intervention by President-elect George
Bush and Secretary of State-designate
James Baker, the United States is about
to yield to accomodationist pressures
from West German Foreign Minister
Hans-Dietrich Genscher to hold a major
East-West economics conference in early
1990. The conference will be co-sponsored
by Soviet Bloc countries. This dramatic
concession will likely have severe
consequences for Western security.
Moreover, it stands in stark contrast to
long-standing U.S. opposition to a
similar North-South economics conference.

Senator DeConcini, co-chairman of the
Congressional Helsinki Commission, along
with other members, has consistently
opposed this economics conference.

Such a step should immediately be set
aside pending an opportunity for
high-level review by the incoming
Administration and the Congress.

Facts and Discussion:

• The United States has long
  opposed an FRG/Czech proposal for
  a conference on East-West
  economic and financial issues.
• The US made a modest
  effort over the past
  several months to push a
  follow-on environmental
  conference as an
  alternative.
• It has been learned, however,
  that Secretary Shultz has decided
  to accede to Genscher’s demands
  despite well-founded U.S.
  reservations.
• As a result, the Conference on
  Security and Cooperation in
  Europe (CSCE) member nations are
  poised to agree to begin an
  economics conference to be hosted
  by the Bonn government as early
  as March, 1990.
• While the United States did
  succeed in scaling back the West
  German proposal somewhat (for
  example, conference participation
  will not be at as senior a
  political level, as desired by
  the FRG; there will be no
  follow-on session in
  Czechoslovakia; and COCOM
  controls will not be on the
  formal agenda), the emerging
  framework for this conference is
  rife with dangers for Western
  security interests.
• Indeed, the odds are
  great that a
  “runaway”
  process has been
  initiated which could
  lead to the dismantling
  of NATO’s most important
  economic and financial
  security programs.
• Although Secretary Shultz
  reportedly made the decision to
  accept the FRG conference
  initiative early last week and
  immediately informed Bonn, other
  alliance partners were not
  officially notified for several
  days.
• Canada, for one,
  reportedly remains
  opposed to the
  conference.
• The modalities for the conference
  are still under discussion
  between the U.S. and the FRG. So
  far, it has been agreed that:
• The conference will last
  three weeks (instead of
  the five weeks envisioned
  in the original
  proposal);
• there will be no
  final report;
• at least four
  substantive working
  groups will be
  established:
• energy and raw
  materials conservation
  (potentially of great
  strategic benefit to the
  USSR)
• environmental
  protection
• agro-industrial
  production (possibly
  including biotechnology
  and other sensitive
  technologies high on the
  list of technologies
  whose transfer to the
  Soviet bloc is proscribed
  by COCOM)
• and machinery for
  production of
  “durable and
  non-durable consumer
  goods” (which will
  afford the USSR and the
  FRG still other
  opportunities to attack
  NATO’s COCOM controls)
• The U.S. apparently has also
  agreed to a fifth working group
  governing East-West financial
  relations at the urging of the
  FRG.
• Topics would include
  financial instruments in
  East-West trade offered
  by the banking sector
  (such as bonds),
  bank-to-bank cooperation,
  and even ruble
  convertibility.
• Further details are not
  yet available, but if the
  fifth working group is
  established it would
  represent a major new
  breakthrough for
  Genscher’s payola
  approach to Ostpolitik,
  sometimes referred to as
  “Economic
  Genscherism.”
• This conference is, accordingly,
  a dubious — if not highly
  dangerous — enterprise for,
  among others, the following
  reasons:

Security: It comes at a time
when the West should be using its
economic and financial leverage to press
for genuine, fundamental reforms in the
Soviet system, not bailing out that
system. The Senate has overwhelmingly
adopted two resolutions since June, 1988
regarding the urgent need for the
Administration to achieve coordinated
alliance policies on the national
security dimensions of credit flows and
guarantees to Soviet Bloc countries and
their client States.

• The proposed conference
  could easily undermine
  progress toward this
  goal. It could also
  jeopardize signed
  alliance agreements
  which, in effect, prevent
  undue West European
  dependency on Soviet
  natural gas supplies in
  the 1990’s and
  twenty-first century.
• U.S. taxpayers are likely
  to encounter a
  multi-billion dollar
  annual cost in additional
  defense and foreign
  assistance spending
  should the next
  Administration fail to
  secure alliance
  cooperation in these
  policy areas.

Precedent: Even if the outcome
of the first conference appears
innocuous, there are bound to be
follow-on conferences at which the
Soviets would be able to exercise more
influence over the agenda — and the
results.

Negotiating Leverage: Even at
this first conference, the Soviets are in
a strong position to “whipsaw”
Western countries who often come to the
table with separate and competing
agendas.

Sovereignty: The United States
is making a strategic error in agreeing
to negotiate its policies in a forum in
which non-NATO countries can influence
strongly the policy outcome. These are
matters that should remain in the NATO or
U.S.-Soviet context.

Dilution of Process: The CSCE
negotiations are designed to achieve a
balanced outcome in human rights, arms
control, and political and economic
cooperation.

• Historically, it has
  proven exceedingly
  difficult to maintain
  alliance discipline on
  insisting on real and
  parallel progress in all
  three areas.
• In particular, Western
  governments are
  susceptible to pressures
  (from the Soviets,
  domestic constituencies
  and Bonn) to accelerate
  economic and financial
  concessions even in the
  absence of what should be
  required progress in
  these other areas.

North-South Relations. The
high-debt less-developed countries (LDCs)
and developing countries would be
justifiably angry in regarding this
development as an effort by the OECD
countries to tilt the international
economic and financial playing field in
favor of the Soviet Bloc — leaving the
LDCs and developing democracies even
further out in the cold during the
1990’s.

• Almost all Soviet Bloc
  borrowers already receive
  substantially lower
  interest rates and more
  generous terms and
  conditions on loans from
  Western banks than, for
  example, Latin American
  debtor nations, not to
  mention government
  guaranteed credits.
• The U.S. will pay the
  biggest political price
  for this lopsided
  approach because most of
  the large debtor nations
  are located in our
  hemisphere.

Indeed, the decision
to proceed with the
East-West economics
conference begs the
question: Where do U.S.
economic and political
priorities lie — with
our massive economic
interests in Latin
America or in bailing out
failed Warsaw Pact
economies?

Does the U.S.
government now favor a
parallel North-South
economics conference?

Conclusion:

This major economic initiative comes
in the immediate aftermath of the
astonishing U.S. acquiescence to Soviet
and allied pressure to hold a CSCE human
rights conference in Moscow in 1991 —
another Genscher priority. Such an
economics conference would greatly
advance the Soviet economic and financial
offensive toward the West at a time of
seriously inadequate alliance policies on
the critical security dimensions
involved. The extent to which
Secretary-designate Baker was involved in
this decision is unknown, but it is
doubtful that he was uninformed — as
some reports indicated concerning the
human rights conference decision. The
Bush Administration wisely postponed
jumping into a new round of START
negotiations pending a comprehensive
reassessment. Given the similarly high
stakes, it should do likewise concerning
future economic and financial relations
with Soviet Bloc countries and their
client states.