November 26, 1963
PAGE 22748
DEBATE ON TRADE WITH SOVIET UNION
Mr. MUSKIE. I thank the Senator from Alabama for yielding to me.
Mr. President, the issue before us today is whether we shall permit private individuals to sell wheat or other commodities to Soviet bloc countries on normal commercial credit terms. S.2310, with or without the Mundt amendment, would withdraw from commercial banks, active in world trade, the opportunity to use the Export-Import Bank guarantee program in commercial transactions with the Soviet Union -- and other Soviet bloc countries. It would, from all indications, kill the proposed sale of surplus wheat or other commodities to the Soviet bloc.
The first question we must ask ourselves is whether we consider the proposed sale of U.S. wheat and flour to the Soviet Union and East European countries as being in the best interests of the United States.
The following seem to me to be pertinent considerations:
First. We have wheat "running out of our ears" -- wheat which we do not need. We have 1.2 billion bushels of surplus wheat in storage, for which we are paying millions of dollars a year in storage costs. This year's crop will be in excess of 1 billion bushels. This is nearly double our annual requirement.
Second. We have a balance-of-payments problem which imposes a severe drain upon our gold supply. A sale of wheat for dollars would help us ease this problem.
Third. Other countries in the West, including Canada and West Germany, among others, have sold wheat or wheat flour to the Soviet Union.
Fourth. In selling wheat to the Soviet bloc, we would be exchanging wheat which we do not need for dollars, which we do need.
On balance, therefore, it seems to me that it is in the national interest to have private traders sell wheat and wheat flour to the Soviet bloc for dollars -- including either cash or short-term or medium-term commercial credit terms.
Yankee traders have always recognized that a trade is a two-way proposition. We do not make one unless there is an advantage in it for us. In this case, as I see it, the advantage to us more than offsets the fact that wheat sales will ease the current wheat shortage of the Soviet Union. I believe that the sale will point up, for all the world to see, the success of American agriculture, compared with the bankrupt Soviet agricultural system.
Moreover, as the First National City Bank of New York put it in its recent newsletter:
Trade among the nations, to mutual advantage, is a good way to keep rivalry on a peaceful basis.
The question raised by S. 2310 is the degree of risk involved in the negotiation of commercial credit arrangements with the Soviet Union and its allies.
It is clear that no one seriously questions the role of credit in international trade -- except as it may involve the Soviet bloc.
Credit is playing a larger role in international trade each year, as it is in our domestic economy. Our exporters are finding that without credit arrangements, they cannot compete with foreign operators. As a result, there has been a growth in the number of U.S. banks active in world trade.
In their trade financing transactions, our banks rely on the recently established Foreign Credit Insurance Association made up of over 70 private casualty and property insurance companies and the U.S. Government's Export-Import Bank for insurance and guarantees. These devices serve to protect financial houses and exporters from the commercial and political risks inherent in foreign trade. They are comparable to Government owned or supported export guaranty institutions in other countries.
THE ROLE OF THE EXPORT-IMPORT BANK
The Export-Import Bank has served for more than 29 years as the Government's only agency dedicated solely to the financing of the foreign trade of the United States. Its present scope and form of organization date from 1945, when the law under which it now operates was enacted.
In performing its function of aiding and facilitating the foreign trade of the United States, the Bank finances or guarantees the payment of medium term commercial export credits extended by exporters or commercial banks and in partnership with private insurance companies offers short-term and medium-term export credit insurance.
It makes long-term loans to finance the purchase of U.S. equipment, goods, and related services for projects undertaken by private enterprises or governments abroad.
Emergency credits are also provided to assist other countries in maintaining the level of exports from the United States when they experience temporary balance-of-payments difficulties.
Mindful of the expressed desire of the Congress and in full accord with the American emphasis on private enterprise, the Bank avoids competing with private capital, and seeks private participation in its loans. It lends and guarantees only where it finds reasonable assurance of repayment.
The matter of export credit guarantees is of critical concern to American exporters and, in effect, to our free enterprise system. These must be available, or our exporters are simply precluded from competing with foreign trade interests.
Without these guarantees in normal foreign trade channels, we leave the field to foreign merchants, and our system of free enterprise suffers.
I quote from the final report of the Committee on Commerce of the U.S. Senate, prepared by its special staff on the study of U.S. foreign commerce, pursuant to Senate Resolution 243, 86th Congress and printed on June 26, 1961; from page 218:
None of the competitive factors confronting the American exporter in foreign markets is more crucial than his ability to offer his product on attractive credit terms. Very often this makes the difference between closing a transaction and losing the business to a competitor in another country.
In its interim report in April 1960, the committee's foreign commerce study staff analyzed this problem in terms which bear repeating here:
Considerable confusion appears to have arisen from the failure to distinguish clearly between export credit, or financing, and export credit guarantees, which are essentially a form of insurance. The distinction is graphically illustrated by the fact that the two functions are separately performed domestically by banking institutions on the one hand and insurance institutions on the other. Traditionally, the commercial banking function is concerned with the extension of loans at prescribed interest rates to individual borrowers in specific cases; the insurance function is to protect the insured against loss from any one of a variety of causes in return for a premium. This basic difference in purpose suggests an equally basic difference between banks and insurance companies both in psychology and in administration; and the difference should be taken into account in considering the establishment of improved export credit guarantee facilities.
Once the distinction has been clearly drawn, however, the dilemma of the American exporter is evident. Stated briefly, and at some risk of oversimplification, it is this: In order to compete with producers in Western Europe and Japan, the U.S. producer must offer his overseas customer payment terms as favorable as those offered by his competitors. In order to do so, he must be able to finance his export transactions. But because of certain hazards peculiar to the export trade, primarily of a political nature, commercial banks are often disinclined to accommodate him. For the same reason, most domestic insurance companies will not assume the risk on such transactions.
In most countries of Western Europe and Japan these export risks are met through a relatively simple system of guarantees under which the exporter is, in effect, insured by a government or government-backed institution against loss on his export sales. Armed with this insurance, he can obtain financing in normal commercial channels with a minimum of delay.
In the United States, the Export-Import Bank is the only institution corresponding to the government or quasi-government export guarantee institutions of other countries.
It should be noted that European nations have found in commercial transactions with the Soviet bloc there has been no problem on repayments. A check with English, French, and West German credit institutions reveals not one default on a trade credit transaction with the Soviet bloc.
This is not a case of relying on good faith; it is a situation in which the Soviets realize they must meet their obligations or else be cut off from western trade.
It is a fact that the Soviet Union always has tried to evade normal trade negotiations and contracts. It is also a fact that in the proposed wheat transactions, the Soviet Union has been backed into a corner by the United States and other free world nations. We have insisted that they meet conditions established by us, and enter into contractual arrangements that are the essence of free enterprise.
Shipments of grain to the Soviet Union, and to other East European countries, will be handled by the private grain trade on a normal commercial sales basis.
The Soviet Union is not being given any special consideration: there is no exception to the rule on these contractual arrangements.
In fact, the conditions announced by President Kennedy for the granting of export licenses to ship the grain are far more rigid and more rigorous than arrangements made with other nations for agricultural commodities. The President announced that 25 percent of the total cost would be in cash -- the same as for the arrangement entered into by Canada. Recent terms on cotton exports to Austria, to Hong Kong and to Japan with 18 months terms to Austria, 12 months to Japan, and 12 months to Hong Kong required no cash at all.
The PRESIDING OFFICER. The time yielded to the Senator from Maine has expired.
Mr. SPARKMAN. Mr. President, I yield 2 additional minutes to the Senator from Maine.
The PRESIDING OFFICER. The Senator from Maine is recognized for 2 more minutes.
Mr. MUSKIE. I thank the Senator from Alabama.
Mr. President, the wheat deal, like all trade, is a two-way street. The advantages flow both ways. From our point of view there is an advantage worth getting.
The credit terms we are talking about, including the guarantees, are normal in international commercial transaction. The experience of other Western countries indicates that the extension of such terms to the Soviets is justified by their credit record.
More important than any of these considerations, valid as they may be, is the part this transaction may play in the policy toward the Soviet Union which was so eloquently stated by President Kennedy in his address at the University of Maine, on October 19, 1963, from which I quote:
The United States and the Soviet Union still have wholly different concepts of the world, its freedom and its future. We still have wholly different views on so-called wars of liberation and the use of subversion. And so long as these basic differences continue, they cannot and should not be concealed, they set limits to the possibilities of agreement, and they will give rise to further crises, large and small, in the months and years ahead, both in areas of direct confrontation -- such as Germany and the Caribbean -- and in areas where events beyond our control could involve us both -- areas such as Africa, Asia, and the Middle East.
In times such as these, therefore, there is nothing inconsistent about signing an atmospheric nuclear test ban, on the one hand, and testing underground on the other, about being willing to sell to the Soviets our surplus wheat while refusing to sell strategic items; about probing their interest in a joint lunar landing while making a major effort to master this new environment; or about exploring the possibilities of disarmament while maintaining our stockpile of armaments.
For all of these moves, and all other elements of American and allied policy toward the Soviet Union, are directed at a single, comprehensive goal -- namely, convincing the Soviet leaders that it is dangerous for them to engage in direct or indirect aggression, futile for them to attempt to impose their will and their system on other unwilling peoples, and beneficial to them, as well as all the world to join in the achievement of a genuine and enforceable peace.
While the road to that peace is long and hard, and full of traps and pitfalls, that is no reason not to take each step we can safely take. It is in our national self-interest to ban nuclear testing in the atmosphere so that all our citizens can breathe easier.
It is in our national self-interest to sell surplus wheat in storage to feed Russians and Eastern Europeans who are willing to divert large portions of their limited foreign exchange reserves away from the implements of war. It is in our national self-interest to keep weapons of mass destruction out of outer space -- to maintain an emergency communications link with Moscow -- and to substitute joint and peaceful exploration for cold war exploitation in the Antarctic and in outer space.
No one of these small advances, nor any of them taken together, can be interpreted as meaning that the Soviets are abandoning their basic aims and ambitions. Nor should any future, less friendly Soviet action -- whether it is a stoppage on the autobahn, or a veto in the U.N., or a spy in our midst, or new trouble elsewhere -- cause us to regret the steps we have taken. Even if those steps themselves should be undone -- by the violation or renunciation of the test ban treaty for example, or by a decision to decline American wheat -- there would still be no reason to regret the fact that this Nation had made every reasonable effort to improve relations.
For without our making such an effort, we could not maintain the leadership and respect of the free world. Without our making such an effort, we could not convince our adversaries that war was not in their interest. And without our making such an effort, we could never, in case of war, satisfy our own hearts and minds that we had done all that could be done to avoid that holocaust of endless death and destruction.
Mr. President. I submit that to carry out the spirit of that policy, S.2310 should be defeated.