Cold War: A Deal in Wheat?

In his famed threat to capitalism in 1956, Nikita Khrushchev thundered “We will bury you.” He has since insisted that Communism would win in an economic rather than a thermonuclear sense. But last week Khrushchev had to seek U.S. help to prevent his own economy from being buried. A Soviet trade mission asked to buy about $170 million’s worth of U.S. wheat.

Faced with a bitter harvest for the fourth year out of the last five, the Soviets have been shopping for wheat in every major Western market. Two weeks ago they ordered about $500 million’s worth from Canada, and last week $100 million’s worth from Australia. They also dropped broad hints that they wanted to buy from the U.S. With that, top U.S. wheat dealers formed a negotiating team whose spokesman was Burton Joseph, president of Minneapolis’ big I. S. Joseph Co., Inc. The team went to Ottawa, got a bid from the same Soviet traders who had dealt with Canada. The Russians were in such a hurry that they wanted the U.S. wheat shipments to start by Oct. 1.

Sticking on Subsidies. At first blush, a U.S. wheat sale seemed like a good idea. It would cut the nation’s 1.2 billion-bushel wheat surplus—if only by 75 million or 100 million bushels. It would narrow the U.S.’s $5 billion deficit in the balance of payments—if only by a small fraction. A.F.L.-C.I.O. President George Meany, an opponent of any deal with the Reds, was for this one. So was Commerce Secretary Luther Hodges. So were Senate Foreign Relations Committee Chairman J. William Fulbright, Senate Agriculture Committee Chairman Allen Ellender and House Agriculture Committee Chairman Harold Cooley. Even Barry Goldwater told a New Jersey audience: “I’m going to surprise you, but if our allies sell wheat to the Russians, maybe we should too. It’s in the nature of the American people to help hungry people.”

The Administration was eager to close the deal. But it had several bushels of problems. The Soviets like to pay only 25% down for their wheat, and the rest over 18 months. But U.S. law forbids credit sales to countries that have defaulted on their debts to the U.S., as the Soviets did on their lend-lease debt to the tune of $800 million. Beyond that, the U.S. taxpayer would be subsidizing the sale: to make up the difference between the high-propped U.S. price of about $2.30 and the world market price of about $1.75, the Government pays U.S. wheat exporters 550 or so per bushel. Congress wrote into the Agriculture Act of 1961 a “policy” opposing sales of subsidized commodities to “other than friendly nations.”

Russia would certainly qualify as other than friendly. But Administration lawyers were looking for a legal loophole. One possibility: instead of having farm exporters sell from their current crop, at high-propped prices, the Government would sell directly from its surplus, at world prices.

Push for More. The Administration figured that a wheat deal could lead to considerable thawing in the cold war, and was weighing various initiatives that could stem from it. A top White House aide sat down with a reporter and listed some of the points being debated in the White House:

» Should the U.S. try to extract a political price for the wheat? In return for U.S. help in keeping Russian bellies full, perhaps Khrushchev could be talked into a promise not to launch any new cold war adventures for a while.

» Should the deal be used as a starter to bigger East-West trade? > Should the U.S. try to replace Russia as the chief supplier of wheat to the satellites?

» Should the Administration run the political risk of feeding the Communists just before an election year?

With all the questions came a few second thoughts. Two of the biggest U.S. wheat dealers dropped out of the Ottawa negotiations at week’s end, said they wanted to dicker separately with the Russians. Even enthusiastic supporters of the deal conceded that much more was needed to really solve the farm-surplus and the gold-outflow problems. But a big U.S. wheat sale would have some advantages. Most of all, it would dramatically demonstrate to all the world the sorry economic state of Communism in Russia. The evidence is already visible in Leningrad and other Russian cities, where long queues form in front of bakeries to buy bread.