1589 



Following the passage of important new legislation in 1974-75, 

 it is clear that the Congress has reassigned itself a continuing role in 

 trade, Government finance, and export control. The executive depart- 

 ment must now make detailed reports to the Congress on the bases 

 for its actions and, in many specific instances, receive explicit con- 

 gressional approval. In other cases, prenotification of Congress permits 

 nullification of executive action by Congress. 



EXPANSION OF TRADE AS ELEMENT OF DETENTE 



One of the major aims of the policy of East-West detente pursued by 

 the Nixon-Ford administration was a rapid expansion of commer- 

 cial relations between the United States and the Soviet Union, People's 

 Republic of China, and the countries of Eastern Europe. East-West 

 commercial ties have been deliberately promoted by the past and cur- 

 rent administrations and the governments of the non-Communist 

 world as a means of easing international tensions. Trade promotion 

 in the East has been more related to perceived economic need. The 

 linkage of commercial relations to political goals in U.S. policy toward 

 the East is not new: precedents were set by President Kennedy's 

 approval of large-scale sales of wheat to the Soviet Union in 1963 and 

 later by President Johnson's policy of building bridges to the Com- 

 munist world. However, neither of the earlier more limited attempts 

 succeeded either in achieving a major expansion of U.S. trade with 

 the East or attaining significant political gains. 



In 1970, U.S. trade with Communist countries was at a very low 

 level: trade turnover (exports plus imports) totaled $579 million 

 ($388.4 million with the East European countries, $191 million with 

 the Soviet Union, and practically no trade with the People's Republic 

 of China). From 1971-1976, trade turnover expanded rapidly and in 

 1976 was $4.7 billion. The Soviet Union has accounted for the largest 

 share of U.S. trade turnover with the East ($2,527 million in 1976), 

 while the Eastern European countries collectively accounted for $1,836 

 million and the P.R.C., $337 million. Despite the rapid increase, the 

 total impact of trade with the East on U.S. balance of trade and do- 

 mestic employment and income has been modest. In 1976, East-West 

 trade accounted for only about 2 percent of total trade turnover and 

 about 31/2 percent of total U.S. exports. 



PAST U.S. LEGAL RESTRICTIONS 



Various U.S. legal restrictions have constituted an important reason 

 for the past low level of U.S. trade with Communist countries. Three 

 of the most important restrictions — denial of most-favored-nation 

 status (MFN), restrictions on U.S. Government credits, and export 

 controls — were reviewed by the 93d Congress. The importance of 

 MFN and Government credits (particularly Export-Import Bank 

 credit) lies in the difficulty that Communist countries have in paying 

 for their imports from the West. For example, the United States had 

 a balance-of-trade surplus in its trade with the Soviet Union of $1.6 

 billion in 1975 and $2.1 billion in 1976. Denial of MFN contributes to 

 this imbalance because higher tariffs tend to drive up the prices of 

 Communist countries' exports and thus reduce their ability to sell in 

 the U.S. market. Restrictions on Government credits have denied 



