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.