INTELLIGENCE MEMORANDUM PROBABLE EFFECTS OF MOST FAVORED NATION TREATMENT ON SOVIET EXPORTS TO THE UNITED STATES

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600030051-2
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 26
• Document Creation Date: December 22, 2016
• Document Release Date: October 21, 2011
• Sequence Number: 51
• Publication Date: May 1, 1970
• Content Type: IM

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Intelligence Memorandum
Probable Effects of Most Favored Nation Treatment
On Soviet Exports To The United States
ER IM 70-51
May 1970
~onfidentiaF-
Copy No.
45
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GROUP 1
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended;
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.,
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CONFIDENTIAL
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
May 1970
INTELLIGENCE MEMORANDUM
Probable Effects Of Most Favored Nation Treatment
On Soviet Exports To The United States
Introduction
Trade by the United States with the USSR is a
.small fraction of both US and Soviet foreign trade.
It is inhibited by many diverse factors, among
other things by more stringent export controls
and credit terms than those of our Western allies
on the export side and by lack of most favored
nation (MFN) treatment, on the import side. A
recurring theme in Soviet propaganda is the neces-
sity for the United States to end its discrimina-
tion by restoring MFN treatment to the USSR,
thereby enabling the latter to earn more in this
country and, consequently, to increase Soviet
imports from the United States. This memorandum
traces the development of US-Soviet trade since
the US revocation of MFN treatment of Soviet goods
in 1951, and assesses the likely impact of the
restoration of MFN status to the USSR.
Background
1. Current US legislation denies MFN status
to imports from most Communist countries including
the USSR. Soviet goods are subject to the high
rates established by the Tariff Act of 1930 and
are denied the substantial reductions from these
rates negotiated since 1934. MFN treatment was
first extended to the USSR in 1935; in accordance
Note: This memorandum was produced eoZeZy by CIA.
It was prepared by the Office of Economic Research.
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U()N 1'1 L)LLN'.1'IAL
with the Trade Agreements Extension Act of 1951
it was withdrawn from the USSR and other ommunist
(;ountries and has not been restored to the USSR to
date.
11 2. In addition to the denial of MFN treatment
to the USSR, other actions arising from the cold
war and the Korean conflict served to reduce the
volume of US-Soviet trade. The True Agreements
Extension Act also called for the embargo of
several varieties of Soviet furs.* The Foreign
Assets Control regulations of 1950, forbidding US
commercial arid financial transactions with the
Communist Far East, also barred so-called Chineso.-
type goods sold by the USSR as presumptively of
Chinese origin,, such as bristles. Moreover, the
United States stopped buying Soviet crabmeat be..
cause it was found that this product, was produced
by slave labor.** During this period the volume
and composition of US 'imports from the USSR were
also affected by reduced Soviet shipments of
manganese and chrome ores and asbestos, apparently
in retaliation for US export controls imposed in
1949. US imports from the USSR fell sharply after
1948, as indicated in Table 1.
3. The exti,.nt of the decline in US imports
from the USSR attributable to the withdrawal of
MFN treatment does not appear to have been as
significant as other factors. As indicated in
Table 2,,_furs were duty free and the decline in
impc~rta~, was attributable to the embargo; US imports
of manganese and chrome ore had fallen to zero
before the withdrawal of MFN treatment (the latter
is duty free). In fact, the only item of signifi-
cance which was apparently affected by the with-
drawal of MFN treatment was tobacco. Many com-
modity imports which declined or disappeared by
1952 were either duty free, or the differential***
between the 1930 and the MFN rates was negligible
or nonexistent. The revocation of MFN treatment
* The furs are ermine, fox, kolinsky, mink,
marten, Muskrat, and weasel.
* Rescinded in 1961?
The term differential as used in this memo-
randum means the differential between the 1930
(Hawley-Smoot) rates and the MFN (GATT) rates.
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Table 1
US Trade with t e USSR
Million Us $ 1
Year
Exports
Imports 1
1948
27.9
86.8
1949
6.6
39.2
1950
0.8
38.3
1.01
Neg1. 1
27.4
1952
Negl.
.16.8
1953
Negl. f
10.8
1954
0.2
11.9
1955'
0.3
17.1
1956
3.8
24.5
1957:
4.5
16.8
1958
3.4
17.5
1959
7.4
28.6
1960
39.3
22.6
1961
45.6
23.2
1962
20.2
16.1
1963
22.9
21.2
1964
146.7
20.7
1965
45.2
42.6
1966
41.7
49.6
1967
60.2
41.2
1968
57.5
58.4
a. Derived from US data, rounded to Ae, nearest
$100,000.
b.? .Including re-exports.
0. P.0.B., general imports.
d. Less than $100,000.
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Table
US Imports from the USSR
Value in Million US $
1948 1949 1950 1951 .1952 1930 MFN bI
Total of 86.8 39.2 38.3 27.4 16.8
Sausage casings 0.9 1.1 1.0 0.7 0.5 Free Free
Caviar, not boiled 0.3 0.4 0,3 0.3 0.3 30 30
Crabmeat in airtight
containers 0.4 1.0 2.3 -- -- 22.5 22.5
Furs, undressed 39.0 23.9 19-.9 :?..1 12.0 Free Free
Embargoed furs 9.1 5.7 6.3 7.7 .. 0.1 Free Free
Furs, dressed and
manufactured 1.7 1.3 1.3 1.4 0.3 35 17.5.
Bristles 0.2 0.3 0.1 Negl. 0.8 3 1
Feathers, crude 0.1 0.1 0.2 0.1 0.1 20 -20
Animal hair, unmanu-
factured 0.5 0.4 0.4 0.1 0.3 Free Free
Licorice root 0.2 0.4 0.4 0.4 0.5 Free Free
Essential or dis-
tilled oils 0.3 0.3 .0.7 0.2 0.2 Free-30 Free-10
Tobacco, cigarette
leaf, unstemmed 2.1 1.9 2.5 5.3 Negl.' 41 15
Cotton linters and
cotton waste 2.5 1.0 1.7 1.4 1.0 Free Free
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US Imports from the USSR
(Continued)
Value in Million US $
Tariff Rate a/
(Percent)
1948
1949
1950
1951
1952
1930
MFN
Asbestos,
factured
unmanu-
2.0
0.2
0.1
0.2
--
Free
Free
Diamonds,
not set
cut but
u.8
0.5
0
2
--
--
10
.
8-10
Manganese ore
8.2
3.8
2.1
0.1
--
32
8
Chrome ore
14.0
3.9
2.2
--
--
Free
Free
Platinum group
metals
1.8
--
1
0
0
3
--
.
.
Free
Free
Glycerine, crude
--
0.4
0
9
2
0
--
3
Potassium chloride,
crude
0.8
--
.
0.6
.
Free
1
Free
Other goods
10.5 d/
1.6
2.8
0.4
0.7
N.A.
N.A.
a. Tariff rates are expressed as ad valorem equivalents for items on which
specific duties are imposed.
b. Tariff rates in effect prior to the Kennedy Round reductions.
c. Totals refer to general imports. Commodity data are based on US imports
for consumption.
d. Including US vessels returned to the United States, valued at
$7.9 million.
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thus contributed to the decline of US-Soviet trade
but evidently was not the most important factor on
the import side.*
Development of US Imports from the USSR Since 1952
4. US imports continued to fall in 1953 to
about $11 million, their lowest postwar level,
They increased little until 1965, although US
exports rose significantly after 1959. Variations
in trade appeared to have been as much a function
of politics as of economics. US exporte rose
following Khrushchev's visit in 1959, but trade
fell following the 1962 Cuban crisis. The growth
in US-Soviet trade after 1964 coincided with US
"bridge-building" efforts but also came at a time
when the USSR intensified its export efforts to
pay for massive imports of wheat. By 1968, US
imports from the USSR reached their, highest level
in two decades when they were valued at $58 million.
In terms of the US share of total. Soviet exports
to the industrial West,** however, the 2% occupied
by the United States in 1968 was well below the
share it occupied in 1948 -- 21%.
5. There were a number of changes in the
commodity composition. of US imports from the USSR
since 1952. Furs no longer were the most important
category after 1954. Benzene and platinum group
metals emerged as the most significant; after 1958
chrome ore reappeared. All of the above commodities
are imported into the United States duty free and
are thus not subject to tariff discrimination. By
1963 benzene disappeared from the US import list
and platinum group metals became the most important
category of US imports from the USSR and remain so
to date. US imports of Soviet gem diamonds are
now increasing. Not all U81 imports from the USSR
fall into the nondiscriminatory tariff category.
Several new commodities appeared in the late 1960s
where the 1930 rates are higher than the MFN rates,
such as titanium, nickel, and glass. Thus far,
however, the value of such imports has been small.
The drop in US exports reflected sharply reduced
shipments of US machinery to the UFSH.
Industrial West, developed West, and West are
lLsed interchangeably throughout this memorandum.
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6. Since the revocation of MFN treatment, US
imports from the USSR have been either duty free
or, if dutiable, the rates have been generally
low or not significantly different from MFN rates.*
Duty-free goods entering the United States from
the USSR in 1968, for example, accounted for about
85% of total US imports from the USSR (see Table 3).
These goods fall largely in the categories of raw
materials and semimanufactures, the same categories
which dominate Soviet exports to the industrial
West as a whole.
7. Soviet exports to the industrial West have
increased more or less steadily since 1958 in
contrast to. the development of Soviet exports to
the United States. Soviet exports to the West
exceeded $2 billion in 1968, about three times
the level of 1958. Most of the commodities that
the USSR exports to other developed Western coun-
tries are not exported to the United States, partly
because of denial of MFN treatment but also because
of US embargoes, quota restrictions, lack of
demand, and other reasons. If the United States
granted MFN treatment to the USSR and lifted
sanctions imposed on Soviet goods at the height
of the cold war, such as the embargo on furs, the
USSR probably would attempt to expand exports of
some of the commodities now being exported to
other countries in the West as well as goods ex-
ported to the United States prior to 1952.**
Possible Soviet Exports to the United States
Machinery, Equipment, and Consumer Goods
8. Soviet exports would fall largely into the
categories of raw materials and semimanufactures,
as is the case for the West as a. whole. Soviet
manufactured goods are generally of poor quality
and noncompetitive in the West. The USSR has had
negligible success in marketing machinery and
equipment in Western Europe and Japan. Of the
* Even before the US withdrawal of MFN treatment
.from the USSR, duty-free or low-duty goods were
predominant in US imports from the USSR, although
not to the extent that they have been since 1951.
** There is a precedent in the case of Poland.
Restoration of MFN treatment to Poland in 1960
apparently stimulated Polish exports to the United
States to a considerable extent.
7 _
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Table 3
US. Imports from the USSR and Applicable Tariff Rates a/
Million US $
Prior to
1930
Kennedy
MFN Rate
1958
1963
1968
Rate
Round
1968
Total. impozztdi
17.5.
21.2
58.4
Sausage casings
0.1
0.1
Negl.
Free
Free
Free
caviar.
0.2
0.2
Negl.
30
30
27
Shrimp, shellon
0.1
Free
Free
Free
Hides and skins, except furs
--
--
0.2
Free
Free
Free
H
Furs, undressed
6.3
6.8
4.6
Free
Free
Free
Furs, dressed
Negl.
Negl.
0.1
25
5h
4h
Cotton linters.and cotton
waste
0.6
0.5
0.7
Free
Free
Free
Bristles
0.2
0.2
0.5
0.6
0.2
0.1
..Animal hair, unmanufactured
0.1
Negl
Negl
Free
Free
F
Licorice root
0.3
0.7
.
0.5
Free
Free
ree
Free
Chrome ore
--
3.5
7.3
Free
Free
Free
Ash and residue-bearing
nonferrous metals c/
-
1.3
Free-40
Free-20
Free-18
Platinum
1.8
2.5
1.3
Free
Free
Free
Palladium
0.9
4.0
21.0
Free
Free
Free
Rhodium
1.6
2.4
-Free
Free
Free
Silver bullion and.other
platinum subgroups
0.6
Free
Free
Free
Nickel and nickel alloys,
unwrought
1.3
2
1 -
Free
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Table 3
US Imports from the USSP. and. Applicable Tariff. Rates a/
(Continued)
Percent
MFN Rate
Prior to
1930
Kennedy
MFN Rate
1958
1963
1968
Rate
Round
1968
-Titanium, unwrought, waste.
and scrap c/
--
0.9
25
20
19/
Benzene
5.9
--
--
Free
Free
Free
Naphthalene
Pyridine
0.5
0.2
--
0.1
Free
Free
Free
Free
Free
Free
Sodium chromate and dichromate
--
0.8
24
24
21
Drawn or blown glass, unworked
Negl.
Negl
1.3
38-71
19-36
19-36
Plywood, without a ; face
finish
--
Negi.
0.2
40-50
15-17
13-15
Diamonds, upset, unstrung
--
0.2
10.3
10
8-10
7-9
Emeralds and other precious
stones, uncut
--
--
0.6
10
3-8
2-7
Metalcutting machine tools,
excluding-gear-cutting
--
0.1
30
12-15
1015-13
Other
0.4
0.8
2.3
N.A.
N.A.
N.A.
a -Rates are given in ad valorem equivalents for items subject to specific duties.
`0. Hounded to the nearest $100,000.
c. Tariffs on nonferrous scraps and waste (except for copper) were suspended or a
-temporary.basison 30 June 1964. The suspensions subsequently have been renewed
and are effective through 30 June 1971.
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total of $2.1 billion in exports to the developed
West in 1968, for example, exports of machinery
and equipment were valued at $55 million,;of which
$14 million went to the captive Finnish market.
The greatest Soviet success in this category has
been metalcutting machine tools which were valued
at $11 million in 1968. US imports of Soviet
machine tools have averaged about $150,000 annually
since 1966. The current tariff differential 'is
considerable and more might be sold with MFN treat-
ment. Soviet hydrofoils might also find a substan-
tial market in the United States (the current US
tariff differential between the 1930 and MFN rates
for pleasure craft is significant and will increase
as Kennedy Round reductions are implemented), but
there are some indications of Soviet supply diffi-
culties. The USSR also sells a few million dollars
worth of passenger cars in Western Europe. Limited
sales success in Western Europe and lack of sales
in the United States are a function of quality;
the US tariff differential is small.
9. Soviet manufactured goods of the consumer
variety also suffer generally from poor quality.
Soviet exports of such goods to the developed West
in recent years have averaged about $30-$40 million
annually. An important commodity in this category,
cotton textiles, would not be affected by provision
of MFN treatment to the USSR, however, because of
US nontariff restrictions on imports. MFN treat-
ment might bring in more Soviet carpets and watches
than the few thousand dollars' worth now being
imported from the USSR. Soviet exports of carpets
to the West totaled some $3 million in 1968, and
of watches and clocks, about $5 million. The
major consumer, item exported by the USSR to the
West is undressed fur. Such exports typically
come to $50-$60 million annually, the United
States buying about 10% of the total. There are
no US duties on undressed furs, but, as noted
above, seven specific types are embargoed. It is
assumed that this embargo would be dropped if MFN
treatment were given to the USSR and an additional
several. million dollars worth of Soviet furs might
be imported annually as a result. There is a higher
1930 tariff rate on dressed furs, but Soviet dressed
skins have virtually no market in the West, pre-
sumably because of the quality factor.
.10. Food items generally account for the
largest share of Soviet consumer goods exports to
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the developed West, averaging about $140 million in
1967-68. About one-fourth is grain which has no
market in the United States. Another one--fourth
consists of vegetable oil. Significant tariff
differentials exist between the 1930 rate and the
MFN rate for most vegetable oils, and additional
Soviet exports to the United States might be forth-
coming. Roughly another one-fourth consists of
fish and fish products, but less than a half million
dollars worth is imported by the United States from
the USSR. The chief item in this group currently
imported by the United States from the USSR is
shrimp which comes in duty free and would not be
affected by MFN treatment. Other Soviet special-
ties such as crabmeat and caviar have a tariff
differential that began in 1970, but up to now have
not been subject to tariff discrimination. Vodka
nets the USSR less than $100,000 in the United
States. The 1930 duty is four times that of the
MFN duty and presumably considerably more vodka
would come into the United States with MFN treat-
ment.
11. The major Soviet export to the developed
West is petroleum which was valued at more than
$500 million in 1968 and accounted for almost one-
fourth of total Soviet exports to the West. There
is a tariff differential on both crude oil and oil
products, but in the event that MFN treatment is
provided, quota restrictions would keep all Soviet
oil out of the United States except for residual
fuel oil. Small quantities are, in fact, now being
imported from the USSR -- about $1 million worth
in 1969.E Given the growing demand in the United
States for residual fuel oil with low sulfur content,
imports of such oil from the USSR might increase
substantially. However, with the extraction prob-
lems the USSR is now having and existing export
commitments, including those to hard currency
countries, substantially increased sales to the
United States may not be forthcoming. Coal and coke
provide the USSR with about $100 million in earnings
from industrial Western countries, but the United
States imports only $3.5 million annually, largely
from neighboring Canada.
The 1930 duty added about 9% to the Soviet price.
With MFN treatment, the duty would have added
2% to 4%.
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Wood and wood products
12. Softwood lumber is a major Soviet export
item to the West, earning the USSR about $140 mil-
lion in 1968. Currently the 1930 duty is ten times
higher than the MFN rate; by 1972 the M.FN rate will
be zero under the Kennedy Round reductions, the
1930 rate remaining at $4 per 1,000 board feet (bf).
At the present time, virtually all of the $500 mil-
lion in softwood lumber imported by the United
States comes from Canada, a dependence which may
be as much a function of custom and convenience
~:s of price. It is doubtful, however, that the
USSR will be able to compete, given the cost of
transporting the lumber, unless prices rise to the
unusually high levels of late 1968 and early 1969.*
Moreover, Soviet exports of softwood lumber to the
industrial West have declined in recent years,
reflecting supply constraints, among other factors.
The USSR can expand output to meet growing export
demand only if substantial investment in the lumber
industry is made. At present, however, such invest-
ment is likely only under special arrangements with
other countries, such as the Soviet-Japanese timber
project in Siberia. Value-added items such as ply-
wood might have more success than lumber; in fact,
the United States began to import some Soviet ply-
wood in 1967 and imports reached about $150,000 in
1968. Soviet exports of plywood to the West have
averaged about $15 million annually in the last
few years. Soviet exports of pulp to the West are
small -- about $12 million in 1968. Pulp is duty
free in the United States but imports from the
USSR have'not yet materialized.
't Official US statistics showed that the price of
"17 representative" types of softwood lumber, f.o.b.
West Coast, reached $116 per 1,000 b f at the end of
1968 and increased further to roughly $140 per
1,000 bf in March 1969 before prices declined. The
current price is between $70 and $80 per 1,000 bf.
The Soviet t'.o.b. price (unit value of exports) for
exports to the United Kingdom was about $80 per
1,000 b f in 1968. The UK c.i.f. price of softwood
imports (heavily weighted by Soviet lumber) in 1968
was more than $100 per 1,000 bf and about 10% higher
in 1969.
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Cotton
13. Cotton fiber is traditionally a major Soviet
export to the industrial West. In recent years
the value of such exports has exceeded $100 million.
There is no US duty on cotton under 1-1/8" staple
length but there is a significant differential for
longer staple cotton. US imports of cotton, however,
are subject to quota restrictions which effectively
keep out Soviet cotton. Less than $1 million in
cotton linters and waste (duty free) are imported
into the United States from the USSR annually,
apparently of the type not subject to restrictions.
Ores and metals
14. Soviet exports of metallic ores and concen-
trates to the industrial West average about $50 mil-
lion annually. These exports consist principally
of chrome, manganese, and. iron ores. Chrome ore
is duty free and Soviet exports to the United
States were resumed eight years after the USSR
discontinued exports of chrome and manganese ores.
The United States has been importing $6-$7 million in
chrome ore annually from the USSR in recent years
and the USSR now accounts for about one-third of
US imports, but about three-fourths of high-grade
chrome ore imports.* The USSR has not resumed
exports of manganese ore to the United States and
the latter now has ample sources of supply which
provide the United States with high-grade ores.
The significant tariff differential may also have
influenced the USSR to refrain from exporting
manganese to the United States.** Iron ore is
duty free but Soviet iron ore, whose quality is
not among the best, has never been shipped to the
United States. As with manganese ore, principal
US sources haire been developed by US capital. The
tariff differential for scrap is small and US
imports from all sources are negligible -- $13 mil-
lion in 1968. MFN treatment would provide little
impetus to Soviet exports to the United States.
More than 46% of chromic oxide content.
The MFN tariff duty on manganese ore is tem-
porarily suspended; the 1930 rate of 14 per pound
of manganese content is equivalent to a 50% ad
valorem tariff based on average US import prices
in 1969.
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CONFIDENTIAL
15. The USSR reports exports of metals to the
industrial West of about $200 million annually,
roughly divided between ferrous and nonferrous
metals.* Pig iron, the principal item of Soviet
exports of ferrous metalp to the West, has fallen
off in recent years, amounting to about $40 million
in 1'968. There is a significant tariff differen-
tial on pig iron, but MFN treatment would probably
stimulate Soviet exports** very little because of
the small quantities imported by the United States
from all sources. The USSR also exports some
sheet steel to the West, chiefly in primary forms.
Exports to the Vest in 1968 amounted to about
$12 million. Total US imports ,~un into the hundreds
of millions of dollars annually. The 1930 rate is
twice that of the MFN rate, and assuming a supply
capability, small quantities might be imported
from the USSR if MFN treatment is granted. Some
ferroalloys might also be imported from the USSR.
US tariff rates for these items vary, but in
general there is a substantial differential. US
imports in 1968 were only $50 million; Soviet
exports to the West ware approximately $13 million.
16. Official Soviet statistics indicate that the
USSR exported $117 million in nonferrous metals to
the West in 1968, but this figure probably excludes
exports of platinum group metals. The United
States is a major buyer of Soviet platinum group
metals, principally palladium. US imports of these
mata]s in 1968 were about $120 million of which
roughly $25 million originated in the USSR. The
USSR accounted for about 40% of US palladium
imports in that year, but only about 3% of platinum
ii.4ports. The USSR produces more than half of the
world's supply of platinum and the US demand for
platinum is expected to rise inter alia, because
of the need for plat? f?um to produce high octane
gasoline that would not release significant amounts
of pollution into the air. Because Soviet exports
The state value of exports of metals understates
actual ehie?,mente bccausc Soviet a porta of sore non-
ferrous metals, particularly those of the platinum
group, are not recorded in Soviet trade statistics
publications.
** The $1 million in US imports of Soviet pig iron
in 1965 resulted in a dumping complaint.
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CONFIDENTIAL
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CONFIDENTIAL,
of platinum have tended to be sensitive to price
movements, increasing US demand and prices might
attract more Soviet platinum.
17. Other noteworthy Soviet exports of non-
ferrous metals to the industrial West include
aluminum, nickel, titanium, and copper (primary
forms, scrap or sponge). The tariff differentials
for these metals are not significant and, in any
case, have not kept Soviet nickel and titanium out
of the United States. Soviet exports of titanium
sponge to the United states have increased and were
valued at more than $1 million in 1969 -- more than
10% of US imports. The US Tariff Commission has
found that the titanium has been sold at dumping
prices and further shipments have been hold up
pending notification of penaltLos by the US Treasury
Department. Soviet exports of nickel to the United
States began in 1968, apparently in response to
higher prices. US imports of Soviet nickel were
valued at about $1.3 million in 1968 and increased
to more than $4 million in 1969. The tariff dif-
ferential added about 2% to the cost of the nickel.
Supply limitations have thus far restricted the
amount of Soviet copper sold in the industrial West
(none exported to the United States) and these
limitations are expected to continue for some time.
Aluminum imported by the United States originates
chiefly in Canada, but there are numerous marginal
suppliers, including Poland (which is granted MFN
treatment). The tariff differential in significant
for unwrought aluminum and the granting of MFN
treatment might lead to US imports of small quan-
tities of aluminum from the USSR.* The USSR exports
about $30 million annually to the Went.
Nibi'ZZanaouv Lts'f
18. The USSR sells about $80 million in
chemicals and fertilizers to the West annually,
chiefly,oasic chemicals and fertilizers rather
than advanced products such as plastics. Few Soviet
chcMi "1s are s ported to t ha Un1tEd :States
Benzene (duty free) was once a major Soviet export
to the United States, but the USSR now exports
Sii gkant t(s;n of Soviet aluminum. scrap and
waste have been imported by tho united tats in
the past.
CONFIDENTIAL
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UUN111VLNTIAL
only small quantities to the Went and the United
States imports very little. Small amounts of Soviet
sodium chromate and dichromate (no differential
until 1970) are imported by the United Staten
(about half of the $2 million imported from all
sourced in 1968). Of the fertilizorn exported by
the USSR, potassium fertilizorn are important but
those are duty free in the United Statlln and none
have come from the USSR thus far.
19. US import statistics indicate that there
have been no tobacco imports from the USSit since
the revocation of Mf'N treatment.* The tariff dif-
forential in significant, but MRN treatment to
the USSR may not generate exports of Soviet tobacco
to the United Statesi only a few million dollars
worth are exported by the USSR annually Soviet
flat glass has been imported by the United Staten
for several years- The tariff differential in
significant and MFN treatment may result in larger
exports= the United Staten now accounts for half
of total Soviet exports. Soviet crude anbenton
has not been exported to the United Staten Wince
it was cut off in 1951. It in duty free but US
interests control the sources of supply in Canada,
which accounted for more than 90% of 05 imports in
1969,
20. Gem diamonds might be the Soviet Union's
best friend. They have become a significant hard
currency earner for the USSR in recent yearn, with
total exports exceeding $1 S0 million in 1969. Mont
go to the United Kingdom but, about $10 million
worth are imWDrted by the United Staten annually.
The tariff differential was of little aivniii.cat'ce
itil 1970 when the $F rate fell to 5SI-7% com-
pared with the 1930 rate of 10W." The extension of
i treats nt, therefore, could result in ita+ re nee
in Soviet diatond exports to the United States
ILLEGIB
CONFIDENTIAL
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CONFIDENTIAL
Probable Impact on US Imports from the USbR
21. The restoration of MFN troatmet.t to the
USSR (and the removal of other import restrictions
directed against the USSR) would not in itself
clear the way for a significant volume of Soviet
exports to the United States. An indic4.ted above,
the commodities which earn the USSR nul:,rita.ntiai
quantiti.ea of hard currency in other devb.leped
Western countries would be largely excluded from
the United gtatea because of quota restrictions
(oil and cotton), lack of US import demand (coal
and coke), or because the Soviet product would not
be competitive in terms of price without evoktriq
complaints of dumping (softwood lumber). The out-
look is mixed with renpect to Soviet ot?en and
metals. Soviet exports of ores are necrligible and
the United Staten already importn Soviet chrome
ore which comes in duty froe. Soviet txportn of
steel are also email and the US market for pic
iron is limited. in the nonferroua metaln category,
the United Staten now imports aubatantial quantities
of Soviet platinum group Metals duty free. Copper
and aluminum are ponnible cabdidatea for US imports
from the USSR, but Soviet exports to the West are
not largo. The tariff differential on nickel in
small and US imports from the USSR have been riving.
22. Incretrnta in US imports from the USSR re=
aulting from the provinon of All treat,ront would
be the reault of small incroanen of a number of
c0=04 i t \c .. a !eg. a.t, ;;may iinCsy candildtii.Ca
tlfa!~d. t` .
for expansion would be diamonds, certain furn, wood
pr uctg` r+`- an-do ii-I. +rod-U a.a, -:4.4.m. Plate
glans, and a few connuzor stems ouch an carpetirng.
Inc:eaned I rtn of Soviet hydrofoils fight alno
be forthcoming. The outlook for renidual fuel oil
is uncertain. Current im ortn from the USSR ate
on the order of SI-S2 Pillion annually. it the
USSR can supply lo-w-sulfur fuel oil, expansion to
S to 10 tituen that amount in possible in a few
years' tips.
23. Aside from the limited tS demand for Soviet
coltien, there ate other factors which might
irde the growth of Soviet exports to the United
State. Thus, the entry of Soviet goods Into the
US market which will have to be achieved in sore
cases by eha irfg prices below the prevailin; market
7 =
CONFIDENTIAL
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 Declassified in Part - Sanitized Copy Approved for Release 2011/10/31: CIA-RDP85T00875R001600030051-2
CONVIDEN' '1A11
p;cicon might evoke complaints of dumping either by
domestic producers or by foreign competitors.*
Other factors which would limit the growth of
Soviet exports to the West are the hostility of
many Americans toward Soviet-made products and
the reluctance of many US firms to deal with the
USER. In addition, there in the demonstrable
lack of Soviet ability to sell manufactured goods
in highly developed markets such an exist in the
United Staten an well as in other developed Western
countries. Finally, there exists a genuine fear
or the part of many in the United Staten of be-
coming dependent on Soviet supplies. The signifi-
cant proportion of US imports of high-grade chromite
now coming from the USSR in a case in point.
24. c'o dollar value can be ertimatod for Soviet
exports to the United Staten following restoration
of MFN treatment. The current level of S50-$60 tril-
lion is two to three tlm:'n higher than five years
earlier without benefit of MF?1 treatment, but most
of this growth resulted from larger Soviet exports
of duty-free goods. A growth of similar proportions
in the next five yearn with MFU etatun appears to be
reasonable. In any event, there seems little like-
lihood that there will be any quick growth in
Soviet exports to the United States, an annennment
also made recently in an article on Soviet-A rican
trade by a high Soviet foreign trade official.
Growth will be stow in coming, mu Ch an in the cane
of Poland to wh,m mr,; treatment was restored in 1960.
ILLEGIB
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COAFI1)1 NI' 'I A1,
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 Declassified in Part - Sanitized Copy Approved for Release 2011/10/31: CIA-RDP85T00875R001600030051-2
CONF'IDEN'.t,'IAL
Conclusions
25. The revocation of MFN status for the USSR
in 1951 was only one of several reasons for the
decline in US imports from the USSk in the early
postwar period. Cold war actions, including the
Soviet termination of exports of manganese and
chrome ores to the United States and the US embargo
on certain furs from the USSR, also contributed.
Few items were, in fact, affected by the change
in tariff status because most of the Soviet products
imported by the United States were duty free or
were not otherwise subject to tariff discrimina-
tion. Since that time most Soviet goods exported
to the United Staten have fallen into these two
categories.
26. If MPN treatment iri restored to the USSR,
it in assumed that goods now subject to US tariff
discrimination, but which are currently sold to
other devolopea countries of the Went, would be
candidates for export to the United States. The
major Soviet exports to the industrial West,
including crude oil, cotton, and softwood lumber
among others, probably would not be exported to
the United Staten, however, because of quota
restrictions, lack of US demand, supply conatraintn
in the USSR (such an softwood lumber), or Soviet
inability to compete in price without evoking
dumping charges. Those items which might be
included in expanded Soviet exports to the united
Staten would be an much a mixture as now, nuch an
diamonds, furs, w od products, hydrofoils, fish,
vodka, and other item.
27. Any expansion of 4ovint exports following
restoration of MF1 ntatun would hot be i jmediate.
Aside from the fact that it will take time to
explore the US market, there are other irlpedinentg
to the growth cif Soviet oxportn to the United
Staten, including gone public hostility to soviet
pivuiict An A a '4aiuCcbr
It:? by r- M+any u5 iii= to handle
Soviet goods. entry of Soviet goodn into the US
market will be achieverl in none canes by nhadin
prices below those then prevailing, and dumping
charges may result. There in also a fear anon
many that the United States night bece)ne dependent
on Soviet supplies. The most significant inped1nent
of all, however, may be the inability of the Soviet
traders to compete in the highly sophisticated US
market.
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CONI?IDt*N IAL
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8 sts of Selected Goods d the USSR to the Developed West and US Imports of These Goods
r" the /bra in 1968, and Applicable US Tariff Rates
Kennedy Pound Staged
a/
CO
aod3 t
USSR US
!
y
1930
Prior to KR
1970
1972
Exports Imports
)*stalcutting and warkirg machine to)l.o
301-40%
121-200
81-140
60-101
11
166
Psss+enger cats. naw
101
6.5%
4.50
31
5
2
782
Ships, pleasure zra.ft b/
251-451
40-200
2.51-140
21-100
13 f
,
19
Crude oil e( (gat)
Secidus1 fuel oil l
sl)
0.5c
0.1250-0.25c
0.1250-0.250
0.125C-0.250
401
1,203
g
Gasoline and die:eol fuel d/ (
al)
0.50
2
0.125C-0.250
0.1250-0.250
0.1250-0.250
68 e/
803
g
.Sc
1.250
1.25C
1.25C
120
10
Asbestos, crude
Free
Free
Free
Free
16
73
Asbesttres worked
40%
81
5.51
4%
n
r
2
MsngaAe.sae are f/ (lb of xa cant)
lc
0.22C
0.170
0.120
.
.
6
46
Ch r cerr ore
Free
Free
Free
Free
21
18
Iron ore
i
Free
Free
Free
Free
17
454
F
g iron (toot) q,/
$1.25
20C
$0
Free
40
30
Ferrous scrap (tsrt) q,/
Free-750
Free-37.SC
Free-260
Free-180
16
13
Sheet steel
200
101
90
9%
12
632
Tltaaltme, w vrow)ht, and waste
and scrap
250
201
18.51
181
n.r
10
ltsgnssius, lucludes waste and scrap
1001
401
280
201
.
5 3
Copper. cue (1)i of Cu corst)
4C
1.70
1.1C
0.30
15 228
A.IcsaIAM. unwroo+)ht (lb)
7C
2.5C
1
7c
2C
1
32
*lclkel, unwroughtt
(lb)
3C
Free
.
Free
.
Free
167
17 e/ 201
Lead, unwrowght )t/
(ib of Pb coat)
2.1250
1.06250
1.06250
1.06250
2 - 82
Zinc, ua'rought K/
t1b)
1.750
70
0
7C
0
xartferroas scrap S/
Free-1000
.
Free 406
.
Free-280
0.7C
Free-20%
2 76
n.r. 56
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Applicable US Tariff Rates
MFN: Kennedy Round Staged Rates
Consoda ty
1930
Prior to KR
1970
1972
USSR
gxports
us
imports
Plstinrs group oati-ls
Of which:
P1 atinUM
Free
Free
Free
Free
n.r.
54
Palladium
free
Free
Free
Free
n.r.
47
Ahodius
Free
Free
Free
Free
n.r.
9
Mnsana
Free
Free
Free
Free
2
7
Naphthalana
Free
Free
Free
Free
3
1
Potassi as fertilizors
Free
Free
Free
Free
17
70
8odins cT-r ate and dichromate (lb)
1.750
1.750
1.20
0.87C
3
2
Glass, drawn or blown, not
colored if (lb)
1.50-2.8C
0.7C-1.4C
0.7C-1.4C
0.70-1.40
1
41
Softwood lumber (11)00 bf)
$4
25C-$1
100-400
Free
137
494
Plywood
151-201
101-201
7.51-101
16
39
Woodpulp. sulfate mnd sulfite
Free
Free
Free
Free
12
360
Cotton fiber, staple
under 1-1/0 in (lib)
staple
Cotton fiber
102 k1
,
over 1-1/9 in (lb)
TO
1.750-3.5C
1.75-1-3.5t
6
Cotton linters and waste
natural
Raw silk
Free
Free-351
Free
Free-14i
~.Free
lee
Free-9.5%
Free
Free-7i
1
Negi.
9
18
,
Silk wastes, natural
Free-50%
Free-20t
Free-14%
Free-101
3
1
Bristles (lb)
3C
10
0.750
0.750
3
8
?us, undrtmd
Free
Free
Free
Free
54
103
furs, dressed I/
25%-40%
5.5%-20f
3.5%-141
2.5%-10%
1
12
cigarette leaf, urstcamed (lb)
Tobacco
35C
12.750
12C
11.50
6
122
,
Sunflower seeds Mb)
2C
0.80
0.550
0.40
16
n.r.
Sunflower oil, not edible (lb)
4.50
1.70
1.20
090
.
Negl.
Sunflower oil. e4iible (lb)
4.5C + 20%
1.8C + 81
1.20 + 5.5%
.90 + 41
0
Shrirp, shell on
Free
Free
Free
112
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 M
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Coeaodity a/
Killion US $
MFN: Kennedy Round Staged Rates
USSR us
1930 Prior to KR 1970 1972 Exerts imports
Canned crabaeat
22.58
22.5%
15.5%
11%
15
5
Caviar
30%
30%
21%
15%
4
1
Refined sugar m, (lb)
1.281-1.990
0.430-i9.66t
0.430-0.660
0.431-0.660
5
640 n/
Vodka (gal)
$5
$1.25
$1.25
$1.25
Negl.
n.r.
Cotton fabric, not bleached,
not colored of (lb)
100 + 41.5%
50 + 27.5%
4.280 + 23.6%
3.80 + 21%
8
75
Carpeting
30%-90%
7%-45%
6%-30%
5.5%-22.5%
3
63
Watches p/
24%
14%
14%
14%
5
63
Clocks and clock movements p/
115%-134%
58%-74%
40%-52%
28%-37% 1
19
Cameras, still
20%-45%
12%-25%
8%-17%
7.5%-12.5%
2
49
Gen stones, cut but not set
Of which:
Diamonds, not over 0.5 carat
10%
8%
5.5%
4%
182
over 0.5 carat
Diamonds
10%
10%
7%
5%
43
,
Emeralds
10%
3%
1%
Free
9/
11
Rubies and sapphires
10%
8%
5.5%
4%
10
a. For commodities subject to specific or compound (such as specific plus ad valorem) duties, the unit on
which the specific duty is based is given.
b. Ships for commercial use are not subject to US tariffs.
c. Including ships for commercial use.
d. Except for residual fuel oil, imports of crude oil and oil products are subject to quotas.
e. 1967 exports; not identified in 1968 Soviet statistics.
f. MFN duty (but not 1930 duty) on manganese ore was suspended on a temporary basis on 30 June 1964; rene:.ed
annually, this suspension is due to expire on 30 June 1970.
g. Plus additional duties based on the content of alloying matericLs.
h. Quotas provided for certain items effective 21 November 1965.
i. In some eases duty has been temporarily suspended.
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0
0
Z
Z
ra
r
 M
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J. MFM duty temporarily increased to 1.3 to 2.4 per Zb effective 21 January 1967.
k. Length of staple not specified; US imports of cotton ar. subject to quotas.
Z.. Excludes fure_from_ailver, black, or platinum fox; the 1930 tariff is 50% and the MFA rate is 37.5%
m. Imports of cane and beet sugar are subject to quota under the Sugar Act of 1948. At present, there
is a temporary additions? duty of 0.530 per lb; unless extended, the tax will terminate on 30 June 1972.
q. The USSR does not indicate its total exports of precious stones, but provide; only partial data. Most
precious stones are exported to the United Kingdom but are not specifically identified.
y.
on watches has been increased temporarily to 213. - -
based on the type of watch or clock likely to be imported by the United States from the USSR The MFB dui
p. The US tariff schedule on watches`.!--nd clocks is very complex.- Tariff rates given here are estimates
n. Includes unrefined sugar.
o. Imports of cotton textiles are subject to quotas.
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