INCOMPATIBLE BUSINESS PARTNERS?

Beyond the policy barriers, misunderstanding and lack of compatible business practices between the United States and the Soviet Union compound the problems that stand in the way of trade expansion.

Consider for example, the following operational features of U.S.-Soviet trade:* U.S. firms frequently relegate responsibility for Soviet trade to European affiliates or distributors, thereby losing opportunities for direct contact and the benefits of direct exchanges. This often leads to distorted country-of-origin trade information. This lack of direct contact is especially true for medium- and small-sized firms.

The Soviet foreign trading organizations with restricted authority to reach out are comfortable dealing with middlemen and intermediaries who serve a useful function, but who are sometimes of questionable repute. This practice exacerbates the lack of business confidence and creates an aura of mystery and intrigue, which attracts con men.

* A Soviet practice of petty gift and favor giving, combined with bureaucratic privileges and allowances to government officials, is difficult for outsiders to understand. This leads to subtle corruption that can be frustrating to businessmen.

Conversely, Western ethics codes governing possible conflict of interest between public non-profit and private business activities are not clearly understood by the Soviets, nor, on occasion, by Americans.

* A Soviet misconception that large firms constitute the "ruling circles" of the United States, and consequent over-reliance on their influence in changing U.S. trade policy vis-a-vis the Soviet Union. Now, moreover there is also a void created by attrition of the involved corporate moguls of the detente period. The new breed of corporate leaders are preoccupied by problems and opportunities elsewhere.

Partly as a result of placing priority of big deals with big firms, smaller business transactions that might, in the aggregate, be more beneficial to the Soviet economy, have been ignored. Here again, insulated domestic ministries and enterprises are not aware or easily permitted to introduce innovations and state of the art equipment on a smaller scale.

* To bid on contracts, U.S. firms invest heavily in proposal preparation to meet Soviet standards. This requires detailed design, engineering, equipment specifications and pricing breakdowns. Since the Soviets usually do not pay upfront for proposal preparation and bidders are kept in the dark, many firms are vulnerable to "whipsawing" and compromising technology and know-how.

In one case a $2.5 billion integrated plants proposal requested by the Soviets involved tens of thousands of man-hours to prepare. After more than three years of meetings, "delegation" visits and toasts to everlasting friendship, the project was whittled down to a $300,000 technology agreement and finally rejected.

* The Soviets fear the United States is an unreliable supplier, because of policy interference, such as inconsistencies in export control regulations, and because of experiences of off-spec, beyond shelf-life and inferior quality deliveries. The latter can be attributed to over-aggressive bidding, one-shot deals and the practice of purchasing without technical assistance and start-up provisions.

In another case in the 1970s, a U.S. chemical engineering firm won a contract by underbidding its nearest competitor by 30 percent only to find themselves in financial difficulty and consequent inability to meet deadlines and performance requirements.

* The Soviets traditionally have disregarded the opportunities for exporting to the United States, denying purchasers proper access to the system and remaining inflexible about redesigning products, modernizing plants, etc. Flexibility could bring the Soviet enterprises out of their insulated domestic slumber and enable them to enter the world marketplace. China, Romania and Hungary, for example, have not ignored U.S. importers and have developed a broad business constituency for continuation of their MFN status.

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