US, Soviets Turn Summit Snags to Progress

Trade pact between superpowers sets the framework for a new economic and political relationship; signals desire for stability

IF the arms-control accords signed in Washington on Friday represent old business from the age of confrontation and containment, the trade agreement signed the same day sets the framework for a new, different era. ``It's really the first step into the new relationship,'' says Jim Montgomery, former assistant secretary of state and now executive director of East-West Forum, a Washington thinktank.

``It is perhaps only symbolic economically, but politically it is extremely important,'' says Stanislav Shatalin, a member of the Soviet President's Council and a top-ranking economic adviser.

The trade pact is among the prizes Mr. Gorbachev carries with him back to the Soviet Union today - after his brief stopovers in Minneapolis and San Francisco.

Once it runs its legislative course, the measure will cut tariffs on Soviet goods by 80 to 90 percent, define property rights, establish channels for repatriating ruble profits and settling international disputes, and otherwise help normalize commerce.

Just hours before the agreement was signed on Friday, it looked increasingly unlikely to emerge from political discord between the two countries over Lithuanian independence.

In the end, President Bush chose his signals. Instead of a signal of concern over Lithuania, he decided on a signal that US-Soviet relations would move forward into the post-containment era.

He handed Gorbachev what appeared to be the top two Soviet priorities at this summit - the outline of a strategic weapons treaty and a trade agreement.

The top American priorities - conventional arms cutbacks in Europe, Soviet acceptance of a united Germany's membership in NATO - little visible progress.

Gorbachev has been quite conscious of the Soviet Union's relative weakness at this summit. Without acknowledging it directly, he has warned the US repeatedly not to try to take advantage of Soviet problems, not to ``dictate'' or ``go fishing in troubled waters.''

But he made it clear that American support was important to changing the Soviet economy, and he used Soviet weakness as a prod.

``Does the United States want a Soviet Union which is weak, torn by complexes and problems and turmoil? Or do you want a dynamic Soviet state that is open to the outside world . . .?'' he asked congressional leaders during a meeting Friday morning.

President Bush had answered that question, in effect, a week earlier, when he said that America's chief enemy in post-Cold War Europe had become uncertainty and instability. The signing of a trade agreement is another answer that cultivates stronger ties to the West rather than isolates the Soviets.

For Gorbachev, the agreement should boost confidence in economic reforms that increasingly lack credibility.

The whole range of steps the West can take to help the Soviet Union move to a market economy - easing credit and export controls, for example - depend ``psychologically and politically'' on a US-Soviet trade agreement, Mr. Montgomery says.

The agreement is by no means a done deal, however. It must pass both houses of Congress with a majority vote.

That lays the groundwork for its most important element, most-favored-nation (MFN) tariff treatment for imports from the Soviet Union.

The president must grant MFN status, and Congress can block it with a resolution.

As with a regular bill, the President can veto and Congress can override the veto.

The obstacles to passing the agreement and winning MFN status for the Soviets have become increasingly clear.

Six months ago at the Malta summit, the trade deal appeared certain. Then Soviet pressure on Lithuania began straining superpower relations.

On May 1, the Senate voted 73 to 24 to urge Bush not to sign a trade agreement until sanctions against Lithuania were lifted and the Kremlin began negotiating Lithuanian independence.

In early May, the White House began signaling through background press briefings that Soviet pressure on Lithuania was endangering the administration's own support of the trade agreement.

For reasons that still aren't clear, the Kremlin pulled a bill to liberalize emigration from its legislative calendar just before the summit.

The emigration law is a condition of granting the Soviets MFN status.

Without the law, and with pressure still on Lithuania, the administration was not interested in signing the trade bill.

On Friday morning, congressional leaders told Gorbachev that the trade bill could not pass without some Soviet softening toward Baltic independence.

The congressmen explained that they were under political pressure from constituents on the issue.

``We're not linking trade to the Baltic problem,'' Senate Minority Leader Bob Dole (R) of Kansas explained afterward. ``We're just trying to explain the political realities.''

Nevertheless, Bush signed the bill later that day. He is likely to wait until the Soviets pass the emigration legislation, and perhaps longer, before submitting it to Capitol Hill.

The chief value of the agreement is as a major go-ahead signal for international investment in and commerce with the Soviet Union.

``MFN may bring a dollar and a quarter off the price of a bottle of vodka,'' says William Butler, a London-based lawyer retained by a Soviet economic commission, ``but the real value is the signal that the water is fine'' for foreign investors.

Ernst Winter, Vienna-based editor of a new newsletter for Soviets on North American enterprises and a former United Nations development official, says that he believes US trade will begin affecting the Soviet economy in as little as two years - even if the current Soviet leadership tries to slow it down.

``The pressure from below is enormous,'' he says.