603 



ness to provide the same trade and credit arrangements other indus- 

 trial nations have had with the U.S.S.R. for some years. Revision of 

 export controls, restrictive tariffs, and credit constraints will raise the 

 potential for hard-currency earnings (i.e., dollars), and credit ar- 

 rangements in the joint ventures will influence Soviet decisions to 

 import and ability to expand commercial relations. 



NEW SOVIET EMPHASIS ON TECHNOLOGICAL CHANGE AND MATERIAL 

 INCENTIVES STIMULATES TRADE PROSPECTS 



The increased Soviet interest in improved economic relations with 

 the United States results from an apparent reordering of Soviet prior- 

 ities. Reordered priorities appear to favor technological change and 

 an improvement in the availability of desirable consumer goods to the 

 Soviet workers and peasants. 



In bringing about technological improvement, energy, especially as 

 supplied by oil and gas, plays a central role. In the development of 

 the rich Siberian resources, Soviet trade with the United States can 

 be expected to expand as to both imports and exports : imports of tech- 

 nologically advanced petroleum and gas extraction, transmission, and 

 processing facilities, and exports of the natural gas and oil produced. 

 Likewise, imports of products such as breeder stock and feed lots 

 which permit Soviet animal husbandry to borrow from U.S. agri- 

 business are singularly designed. to increase meat output, which in 

 turn may facilitate improvement in labor productivity. Few products 

 represent as clear a means of absorbing increased money wages as 

 meat. 



DEFENSE AND CONTROL VERSUS ECONOMIC GROWTH AND PROFESSIONAL 



PERFORMANCE ARE SOVIET CHOICES 



The extent to which priorities have been or will be reordered turns, 

 in large part, on how much of the Soviet output goes to defense and 

 on the volume of Soviet trade with other nations. If the Soviet leaders 

 view new strategic systems as characterized by rapidly rising costs 

 and very modest benefits — a post-summit view expressed by Dr. Henry 

 Kissinger — then civilian claimants will probably do better in receiv- 

 ing shares of Soviet economic growth. If, in contrast, the Soviets ap- 

 pear to follow the view expressed by others that the arms race will 

 continue and accelerate in those areas not specifically limited by the. 

 SALT agreements, then the reordering of priorities may further 

 strengthen the priority of defense outlays, as in the 1960s. Without 

 change in the traditional defense priority, increases in Soviet-U.S. 

 economic relations may be largely dependent on modest shifts of trade 

 and other activities from other industrial nations to the United States. 

 Only upgraded civilian requirements will generate significant new 

 import needs and provide a basis for releasing resources for export. 



COST TO SOVIETS OF SUPPLYING RAW MATERIALS TO EASTERN EUROPE 



IS HIGH AND RISING 



A potential for significant improvement in Soviet export capabili- 

 ties to the West, especially in petroleum and natural gas. lies in a 

 possible shift away from the current and projected supply to Eastern 



