Upturn expected in U.S. trade with U.S.S.R. and Eastern Europe

UPTURN EXPECTED IN U.S. TRADE WITH U.S.S.R. AND EASTERN EUROPE

Improved Debt Situation Could Presage Higher Import

Positive signs outweigh negative ones for U.S. trade growth with the U.S.S.R. and Eastern Europe in the year ahead. U.S. exports of corn and wheat to the Soviet Union should rebound, and prospects and good for sales of various types of manufactures. Although East European financial ills are continuing, they appear to be on the mend. U.S. government plans to participate in major trade events in Eastern Europe this year should also encourage new sales.

U.S. exports to Eastern Europe fell off noticeably starting in 1982 as the area drasticallyredeced its imports to deal with sizeable hard-currency debt. In 1983, U.S. shipments of feedgrains to the U.S.S.R. also declined, following a better Soviet harvest. Trade should pick up again in 1984 as most East European contries have imporoved their financial positions, and the Soviet Union has obligated itself to buy more American grain.

In late 1983, the U.S.S.R. signed a new long-terms grain agrement with the United States, calling for annual Sovet purchases of at least nine million tons, 50 percent more than the minimum it was committed to buy under the old agreement. At current prices, that means that deliveries of grain alone will increase this year by some $500 million over the 1983 level.

Projects for expanding economic output in both Eastern Europe and the U.S.S.R. should trigger more purchases of manufactured goods from the West, the United States included. Areas of particular opportunity are in machinery and materials related to energy, machine tool, chemical, and agricultural production. New possibilities may also exist for western firms to participate in joint engineering and architectural projects in third countries.

For Eastern Europe, the value of purchases in the West will depend primarily on financing. Most East European countries showed marked improvement in their hard-currency debt situation in 1982 and 1983, largely through draconian import cuts. Whether these measures can be continued into 1984 and beyond without crippling production in industries dependent on imports, remains to be seen. If they can, they will put the East European countries in a better position to repay their remaining debt and resume importing from the West on a larger scale.

A number of positive developments in Eastern Europe show that the countries are eager to boost their trade with the West. Both Poland and Romania are planning to expand their trade this year. Hungary has launched important projects for agricultural mechanization and irrigation, as well as for energy diversification, relying on western funds and procurement.

Bulgaria has initiated plans for a roundtable discussion on trade with American firms, scheduled May 1984, to build its U.S. trade contacts.

Some negative circumstances may dampen U.S. trade possibilities with certain East European countries. The German Democratic Republic plans reduced trade and investment growth in the face of continuing economic stringencies, and will probably be looking for fewer U.S. products. Czechoslovakia, too, shows sluggish economic performance, and moreover has perceptibly increased its trade with the U.S.S.R. and other East European nations to the detriment of the West. Having approached the limits of its coal-exporting potential, Poland faces the question of how much it can expand its earning capacity to pay for its ambitious projected import growth.

The Department of Commerce plans to be visibly present in Eastern Europe in 1984 to promote trade opportunities. In the spring, the Department will provide facilities for U.S. firms participating in major trade fairs at Budapest and Leipzig, and in the fall it will stage exhibits at the main annual trade fairs in Romania, Bulgaria and Czechoslovakia. If the results of the U.S. business participation in the "Agribusiness- USA' exhibit in Moscow in 1983 are any indication, 1984's events in Eastern Europe might result in additional sales opportunities for American firms.

Table: U.S. Trade with East Europe (including U.S.S.R.)

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