586 



its programs may play a particularly important role in future Soviet- 

 American trade. 97 Eximbank extends direct credits and serves as guar- 

 antor and insurer only when private financial institutions are unable 

 or unwilling to do so. As some private institutions may balk at dealing 

 with Soviet foreign trade enterprises because of inadequate credit 

 worthiness information or because of general unfamiliarity with the 

 Soviet economy, frequent Eximbank participation may be required. 



The Eximbank extends credits at a favorable rate of interest — cur- 

 rently 6 percent on direct loans to foreign borrowers. This practice 

 has raised some controversy over whether such credits are a form of 

 export subsidy. 98 The question of whether the Soviet Union should 

 continue to receive such low-cost credits is certain to be an important 

 issue when Congress is asked to extend the Eximbank's franchise. 

 (It is currently authorized to operate through June 1974.) 



That the Eximbank, with its present resources, can fill all Soviet 

 credit needs is unlikely. Its current overall operational authority is 

 $20 billion, and its largest exposure to any single country is about $1.3 

 billion. 99 Soviet negotiators have indicated that they hope to attract 

 huge sums of American capital — far more than Eximbank could pro- 

 vide — for projects in the Soviet Union. 100 Such large-scale financing 

 is available only from private institutions in the United States. Fur- 

 thermore, no Government program is available for insuring large, 

 long-term capital investments in the Soviet Union. Government pro- 

 grams such as those of the Overseas Private Investment Corporation 

 are denied to the Soviet Union, unless a Presidential waiver is granted, 

 by Section 620(f) of the Foreign. Assistance Act of 1961 as amended 

 (22US.C.2151 etseq., 1970). 



Despite these problems, the removal of restrictions on Eximbank and 

 private credits represents a major step toward improved U.S. -Soviet 

 economic relations. The Soviet Union is expected to run heavy deficits 

 in its balance of trade with the United States, and U.S. credits 

 will be needed to help finance them. Soviet trade with most other 

 Western industrial countries has followed a similiar pattern: imports 

 from these countries have continually exceeded exports in recent years, 

 and liberal credit policies have been necessary. If U.S. exporters are 

 to compete effectively with other Western exporters to the Soviet 

 Union, large amounts of credits will have to be made available. 



Shipping Arrangements in U.S.-Soviet Trn<]( 



Various shipping regulations have been issued by U.S. Government 

 agencies in their administration of legislative restrictions on commerce 

 with the Soviet Union. Department of Commerce Transportation 

 Order T 1 regulates the transport by U.S. ships or aircraft of certain 

 controlled commodities (even though originating in a foreign port) to 



07 While the Eximbank's operations have generally been credited with Increasing the 

 level of U.S. exports, this view was disputed in a 1072 article. Sec Douglas R. Bolii. "Export 

 Credit Subsidies and D.S Exports: An Analysis of the U.S. Eximbank," in V S. Congress. 

 Joint Economic Committee. The Economics of Federal Subsidy Programs. 92d Cong.. 2d 

 sess.. 1972. pp. 157 175, For a contrasting view, see Howard S Piquet. The Export-Impori 

 Bank of the United states: An Analysis of Some Current Problems. (Washington, D.C. : 

 National Planning Association, 1970). 



'"■See articles bv Bohl and Piquet, Ibid. Also see Congressional Record. Jan. 23. 1973, 

 pp. Si 1 70 S1188 



»» Peterson Report (1972). op. cit.. p. 20. 



100 Ibid., p. 20. 



