US Urged to Help Reformers More

Near-term result of economic shift away from communism is likely to be hardship. EASTERN EUROPE

THE Bush-Gorbachev Summit at Malta coupled with the less publicized US Presidential Economic Delegation to Poland this past weekend signify the first concerted effort by the administration to address rapid changes in the Soviet Union and Eastern Europe. But presidential and Cabinet-level policies are largely geared toward the long-term, after reform has resulted in a decided change away from the centralized decision-making and administered prices of communism toward free enterprise.

Advocates of an active US policy say Washington is responding with too little, too late. Unless the US is at the forefront of reform, promoting and investing in its future, its chances for success may be lost.

They point to heightened public expectations in the Soviet Union, Poland, and elsewhere that are not being met by noticeable quality of life improvements. The public's patience may snap, they say, with added pressures of severe unemployment and fewer subsidies - all costs of economic reform.

The Bush administration seems to be holding back immediate help - including eased trade and export restrictions, official loans, insurance and guarantees and cofinancing.

At Malta, Bush spoke of lowering the US tariffs on Soviet goods by granting Moscow most-favored nation trade status, and of the possibility of extending US export credits and guarantees. But he made it clear that these would not occur until the Soviets codify liberal emigration policies, and probably not before the next summit, scheduled for next summer.

The US Presidential Economic Delegation to Poland returned to Washington on Dec. 2 after negotiating agreements ranging from cooperation in telecommunications to the dispensing of urgently needed food aid. Secretary of Agriculture Clayton Yeutter led the group, included Secretary of Commerce Robert Mosbacher, Secretary of Labor Elizabeth Dole and Michael Boskin, chairman of the White House Council of Economic Advisors.

The common thread in their comments concerning Poland's plan for economic reform is the gravity of the task. In the coming months, Poland's Solidarity-led government intends to strip the state of overburdened, inefficient enterprises, slash subsidies by 50 percent, and accelerate privatization.

Administration officials have been wary about the success of reforms. While the government recognizes that Western help is essential to Soviet and East European success, it places as much, if not more emphasis on self-help, an economist with the Department of Treasury comments.

``Presumably, the Warsaw Pact's reduced spending on exorbitant military programs will provide funds originally diverted from programs germane to economic rejuvenation - such as heavy industries, transportation, and communications,'' he says.

The emphasis of the $938 million aid package ($852 million is earmarked for Poland) approved by Congress in November underscores the long-term aim of lawmakers and Bush Administration officials to help lay the groundwork for domestic competition, investment, and private ownership.

The aid bill passed by Congress ``doesn't address the short-term aspect very well,'' says Rep. Lee Hamilton (D) of Indiana, who chairs the Joint Economic Committee responsible for a two-volume report on economic reform in Eastern Europe published in October.

``As a government we are behind the curve in our involvement in Eastern Europe. We've taken a back seat to the European Community, and it's due to our own constraints on resources. I've heard witness after witness testify before the committee that the US just doesn't have the money to support reforms. I see this as a real constraint on our ability to lead the world - because we don't have deep enough pockets.'' Mr. Hamilton sees ``ideological hang-ups'' as a basic reason for the Administration's inertia.

Hamilton says the ``urgency in Poland is tremendous ... International aid is so important during the many months before any of the reforms take place.''

Sen. Joseph Lieberman (D) of Connecticut has called on Treasury Secretary Nicholas Brady to authorize a $1.2 billion bridge loan ``to tide the country over until funds from international sources arrive next year ... Poland desperately needs a cash advance to keep it people fed, housed, clothed and employed in the harsh winter months ahead.''

The Washington-based Center for Privatization, headed by Paul Elicher, led an Agency for International Development delegation to Poland in November, among the first of its kind.

Noting the need to make progress, fast, Mr. Elicher says that Poland's agricultural sector, ``is where the best can be accomplished quickly in privatization'' because competition exists. ``It's the one exception to pervasive state ownership.'' All of the Poles' bank deposits and money under the mattresses ``couldn't buy 10 percent of the state-owned enterprises,'' he says.

Hamilton says that US support should be gauged to the extent of the reforms, he says. If they are reversible, then so is US support.

``A very important aspect of our aid to Poland and Hungary is conditionality,'' he stresses, indicating that the East European nations must institute reforms as a quid pro quo for Western help. Regarding East Germany, ``political reforms are just coming into view, and there is nothing with respect to economic reforms. Rather than playing a role, the US should defer to West Germany ...''

Concerning the Soviet Union, Hamilton says the US is not prepared to subsidize or send assistance. ``We have to say to the Soviets, `For us, Central America is a key test.'''

Sen. Richard Lugar (R) of Indiana, flipping through the pages of a report issued by Poland's Ministry of Finance, says its weighty plans for reform are complicated even in the long term. And there is no guarantee for success. Should the Poles become overwhelmingly dissatisfied with Warsaw's efforts, speculates the senator, the Communists could regain power with an ``I-told-you-so reponse.''

Senator Lugar emphasizes that political and market-oriented changes must take hold ``before our economic assistance an investment makes sense.'' Referring to the visit of Polish Finance Minister Leszek Balcerowicz to Washington this past September, where the newly appointed minister asked the US and other Western nations for $1 billion for Poland's stabilization program, Lugar draws an analogy.

``What if Violeta Chamorro [the Nicaraguan opposition's presidential candidate] wins in Nicaragua, and [President Daniel] Ortega remains in control of the army and other sectors [as former President Wojciech Jaruzelski, a Communist, does in Poland]. If she came to Washington to ask for economic assistance, do you think we would give it to her, knowing that Ortega still maintains significant control?'' he asks.

A Monitor series explores the reaction in the US government and private sector to the reforms in East Europe and the Soviet Union. What are the risks and opportunities?

Monday - The viability of US-Soviet joint ventures has been questionable so far, but the biggest one yet has just been signed.

Tuesday - Constraints at home have US companies worrying that they will lose out on trade with the Soviet Union and Eastern Europe.

Today - The Bush administration's cautious posture on East Europe's reforms is the result of prudence - or does it result from ``ideological hang-ups?''