The Cost of Giving Up Jackson-Vanik

By Roger W. Robinson Jr.
The Wall Street Journal, 12/13/90

With the waiver of the Jackson-Vanik amendment yesterday afternoon, the Bush administration made a strategic blunder on a par with its untimely wooing of Saddam Hussein earlier this year.

In the case of Iraq, the U.S. government provided billions of dollars in taxpayer-guaranteed credits — ostensibly for the purchase of grain — just months before Saddam swallowed Kuwait. Now, the administration has decided to give a similar sweetheart deal to another questionable regime: Mikhail Gorbachev’s. While the Soviet leader has not demonstrated the kind of heinous behavior evidenced in Baghdad — although signs of a military crackdown in coming days may signal a change there — his government has not delivered the kind of systemic economic reform that President Bush just this July insisted was a precondition for such American largess.

The amount of the subsidy is not yet clear. It will likely come in the form of $1 billion to $3 billion in government-guaranteed farm credits, restored access to U.S. Export-Import Bank loans, equal tariff treatment on Soviet imports and possible investment insurance. The Soviets have publicly requested about $2 billion. But Sen. Robert Dole (R., Kan.), an influential friend to U.S. agriculture, has gone them one better by recommending the immediate disbursement of some $3 billion in farm-related loan guarantees alone.

The White House is still holding its cards close to its chest. And the administration is suggesting this is just a temporary deal to help the Soviets through their "winter of discontent." But in fact, there is every reason to believe the initiatives that will follow the Jackson-Vanik waiver will evolve into the equivalent of permanent entitlement programs.

It is doubly unfortunate that clearing the way for Soviet access to this gravy train has meant the abandonment of a key element of trade and human rights policy. In 1974, Sen. Henry Jackson pioneered a new concept: linking trade status to a respect for fundamental human rights. Thanks to the Jackson-Vanik amendment, trade served as one of the principal levers that helped the nations of Eastern Europe. Free emigration, a Jackson-Vanik condition, played a direct role. The most striking example of this was East Germany: The repressive Honecker regime could not withstand the hemorrhage of its best and brightest and so was compelled to permit the radical reforms that led to the new democratic Germany.

In what is likely to be a doomed effort to shore up Mr. Gorbachev, Mr. Bush is now dispensing with Jackson-Vanik until next June as an explicit reward for Soviet cooperation on the crisis in the Gulf. For three reasons, this is a mistake for both the Soviet people and the U.S.

First, this step relieves any pressure on the Soviet Union to accord its people what Henry Jackson called "the touchstone of all human rights," the right to emigrate. In recent years, the Soviet Union has considerably loosened emigration for some groups, mainly ethnic Germans and Soviet Jews. But it has welshed on its repeated promise to codify emigration as a legal right. In the absence of fundamental reform, millions more Soviets are being denied the opportunity to seek better lives elsewhere, as East Germans did with such beneficial results in their country. At a time when evidence of an incipient and possibly brutal crackdown is becoming unmistakable, this U.S. policy shift could prove disastrous.

Second, the White House flip-flop on Jackson-Vanik means sluicing money into a still unreformed command economy. This is a tantamount to knowingly investing taxpayer resources into a project as foolhardy as America’s S&Ls. Indeed, some bankers even refer to the Soviet Union as the "Red Bear S&L." In any case, it could make earlier losses stemming from late-1970s loans to the Gierek regime in Poland pale by comparison.

Third and perhaps most significant, large-scale U.S. and Western financial assistance will retard, not catalyze, fundamental reform in the world’s second-biggest economy. Through this step, the White House is strengthening central authorities in Moscow at the expense of democratic forces in the 15 Soviet republics. The U.S. is signaling — whether wittingly or not — its acceptance of the recentralizing policies of Mikhail Gorbachev.

In waiving Jackson-Vanik, the Bush administration is subordinating more deserving and more needy recipients of American taxpayer aid — starving Africans and the struggling democracies of East Europe come to mind, or even America’s own homeless. Worse yet, in so doing the administration is permitting the Soviets to avoid rearranging their priorities. This gives them no incentive, for example, to make massive shifts from their still-bloated military-industrial sector to improve their citizens’ quality of life.

In fact, the Jackson-Vanik decision smacks of an unfortunate convergence of interests. U.S. agriculture and business interests are eager to jettison Jackson-Vanik so as to transfer to the taxpayer the risk of doing business with the Soviet Union while retaining the profits. The White House wants to make a political statement of support for Mr. Gorbachev. For his part, Mr. Gorbachev wants unencumbered access to Western resources, which are essential to sustain his unreformed economy.

The U.S. will surely regret abandoning the principled approach to human rights and trade policy embodied in Jackson-Vanik if in the next few weeks or months blood spills in the Soviet Union.

Mr. Robinson heads RWR Inc., an international consulting firm in Washington. Frank J. Gaffney Jr. of the Center for Security Policy contributed to this article.