14. Memorandum of Conversation1

SUBJECT

  • U.S.-U.S.S.R. Trade, et cetera

PARTICIPANTS

  • U.S.S.R.
    • Mr. Aleksey Nikolayevich Kosygin, First Deputy Chairman of the Council of Ministers of the USSR
    • Viktor G. Bakayev, Minister of Merchant Marine
    • Yergeny A. Mikolinsky, Senior Captain of the General Administration of the Ministry of Merchant Marine (Interpreter)
  • U.S.
    • Clarence D. Martin, Jr., Under Secretary of Commerce
    • James J. Reynolds, Assistant Secretary of Labor
    • Joseph Kahn, President, Trans Eastern Associates, New York
    • Alfred Segal, Traffic Manager, American Trading and Production Corporation, New York
    • Martin I. Goodman, Maritime Administration
    • Raymond E. Vickery, Department of Agriculture
    • David Henry, Deputy Director, Office of Soviet Union Affairs, Department of State
    • William D. Krimer, Interpreter, Department of State
    • Richard E. Funkhouser, American Embassy, Moscow

Following an initial exchange of greetings and introductions Deputy Chairman Kosygin asked Under Secretary Martin how his visit to the U.S.S.R. had gone. Mr. Kosygin said that he had been informed by Ambassador Dobrynin that the Delegation was interested in visiting other ports such as Novorossiysk, Klaipeda, etc., and that he had no objection and had issued the necessary instructions.

Mr. Martin replied that he had come to the USSR in order to expedite the wheat deliveries from the United States to the USSR and that all problems which he had come to discuss had been satisfactorily resolved. He expressed his gratitude for the efficient and cordial manner in which Mr. Kosygin’s ministers, Messrs. Bakayev and Patolichev, had cooperated in solving these problems.2 Mr. Martin pointed out that since the Delegation’s arrival in Moscow on Monday afternoon it had [Page 36]not wasted any time but had been busy from morning until late at night. The visit to Odessa had been most interesting and useful, and the hospitality accorded the Delegation, as well as the technical information furnished, could not have been any better. He repeated that all major problems had been solved. In reply to Mr. Kosygin’s invitation to stay on and visit the Great Kremlin Palace, Mr. Martin said that he was now anxious to return to Washington so that the problems at that end could be handled expeditiously.

Mr. Kosygin said that he admired American businessmen’s efficiency and that Soviet businessmen too were quite efficient, that unfortunately Americans did not know them too well, in fact knew very little about the Soviet Union, its great productive capacity in machine building, and that, while the present wheat deal did constitute a beginning, actually very little trade was being carried on between the United States and the USSR.

When Secretary Martin pointed out that in 1963 this trade had increased by 23% over the preceding year, Mr. Kosygin stated that this was still a mere trickle. Why could not this trade be expanded further in the same manner as had been done between the USSR and the United Kingdom, the Federal Republic of Germany, Italy, Japan, and many other countries. He was surprised at the fact that the American press and even government representatives, as well as business circles took the position that the Soviet Union did not have anything to sell to the United States. If the two leading powers in today’s world, leading in industry, technology, science, etc., could not trade with each other, how did they expect to trade with countries of Africa, Asia, etc. It seemed to him that one of the main reasons for this lack of trade was American lack of information about Soviet industrial capacity. He cited the following examples: The USSR was furnishing machinery to many European countries but would like to receive similar machinery orders from the United States. Another aspect of trade which was being largely ignored was trade in licenses (i.e. patents and know-how). He thought that a great deal could be done in this respect, but the USSR was not interested in one-way trade only, a balance had to be established which would make such trade profitable to both sides. He understood very well that neither the United States nor the USSR were in the philanthrophy business, trade had to be mutually profitable. Therefore, the United States and the USSR should work together. This, of course, involved long-term agreements such as had been concluded by the USSR with many other countries; it further involved credits. The Soviet Union was also selling machinery on credit to its customers.

At this point Mr. Martin, turning to Assistant Secretary Reynolds, told Mr. Kosygin that Mr. Reynolds handled labor problems in the United States Government and invited Mr. Reynolds to speak. Mr. Reynolds [Page 37]said that if Mr. Kosygin was interested in some of the details of the United States economy, he would like to tell him something about it. United States production was at an all-time high with a gross national product of almost 600 billion per annum. Nevertheless, the United States had certain problems such as unemployment of 4.1 million or 5.6% of our total labor force. The United States Government had recently put through a tax cut in the amount of 11 billion dollars in the expectation that it would result in increased investment on the part of consumers. In this manner our Government hoped to increase our gross national product by 35 billion dollars, and thereby recoup the losses in tax revenues. Approximately 7 billion of the total tax cut would wind up in the hands of working people. In addition, our Government was taking steps to retrain people who had been displaced by automation. Mr. Reynolds estimated that some 30,000 to 35,000 jobs per week were being eliminated by automation so that retraining was an important measure to combat further unemployment. He stated that in the United States people were now working an average of 42 to 42 1/2 hours per week, that the Government was opposed to a reduction of work-week hours, but that unless the United States managed to solve the unemployment problem in other ways, it might eventually have to consider a reduction of work-week hours.

Mr. Kosygin pointed out that, while unemployment did not exist and never would exist in the USSR, Soviet workers at the present time were working 7 hours a day for 5 days and 6 hours on Saturday. The work week had been and was now being reduced, indeed some factories had already gone to a 5-day 40 hour week, but this kind of a change involved a loss of 1 hour per week or a total of 52 hours a year. He said that in the Soviet Union wages had not as yet reached a level mentioned by Secretary Reynolds earlier ($2.46 per hour average industrial wage), but that there were many free services and benefits which the Soviet worker received in addition to his wages; for example, extremely low rent (as a matter of fact the Soviet housing industry was being run at a loss, subsidized by the government budget), free medical care, hospitalization, vacations, sanitoriums, etc. Education was completely free regardless of the student’s family origin. He pointed to a decree of the Council of Ministers which was being published today permitting pensioners to resume work without losing all of their pension. He stressed that the Soviet trade unions played a most active part in the management and economic and political life of the country. He pointed to the fact that Soviet wages were gradually being increased without a corresponding increase in prices.

Mr. Reynolds stated that for the past several years the United States had maintained a fairly stable economy in a monetary sense; the wholesale price level had risen only .5% since 1957, while the retail price level [Page 38]had been rising at an average rate of .1% per month. Our economy was at an all time high, we had added 100 billion dollars to the national product just in the last three years. As to the social and medical services, Mr. Reynolds pointed out that we consider it to be better for private industry to assume responsibility for workers welfare. There were 60 billion dollars in pension funds which were being used to supplement the Federal Government pensions a retired worker receives. The United States had free and independent trade unions which would this coming summer be involved in negotiations with the automobile industry. The latter had had several very good years, producing 7 million cars last year, and the unions now wanted a larger share of the profits. But no one would benefit if both wages and prices increased proportionately. Therefore the Government was interested in maintaining stability of prices.

Mr. Kosygin stated that Soviet trade unions were even more free and independent, so much so in fact that if he did not do a good job the trade unions would not permit him to take a vacation. He went on to say that the Soviet Union had no intention of producing as many autos as the United States, that in the USSR production would be concentrated on buses and large taxi pools. When Minister Bakayev pointed out that taxis were very cheap in the USSR, Mr. Kosygin laughingly said that just the same Mr. Bakayev did not use taxis but had his own car. He pointed out that in Siberia, for example, the weather of 30–40 degrees below C. in winter presented special problems for automobiles. He had a great deal of respect for the productivity of American industry but had to point out that in some fields of Soviet industry productivity was very high; a specific example was steel: 80 million tons of steel had been produced last year at low cost by a continuous casting process which was being utilized more and more. He said that a group of American businessmen had expressed interest in purchasing the licenses for this process, but apparently nothing had come of it even though such licenses had been sold to other Western countries. He went on to mention the chemical industry, stating that in 1965 the USSR would produce approximately 35 million tons of chemical fertilizer which would be equal to the quantity produced in the United States. As for Soviet agriculture, natural conditions in the Soviet Union were more difficult, making it harder to equal United States agriculture in productivity per man. Chairman Khrushchev had a great deal of admiration for American agriculture and had become something of a specialist in it.

Secretary Martin pointed out that the Delegation included a representative of the United States Department of Agriculture, Mr. Vickery, and that he had a great deal of wheat for sale. To this Mr. Kosygin replied that Mr. Vickery apparently worked with one hand only, [Page 39]selling, but did not use his other hand for buying; he repeated that trade must be a two-way road.

The discussion turned to scientific exchanges and to the late President Kennedy’s proposal of a possible joint expedition to the moon. Mr. Kosygin said the USSR and United States should not only go to the moon together but also live here on earth together. Mr. Kosygin for a third time repeated his desire to see increased U.S.-U.S.S.R. trade with a long-term trade agreement and credits and stated that it was not enough to say that all political problems must be solved before trade could be increased. Improvement in political matters and in trade should be parallel. In closing the conversation after another exchange of compliments, Secretary Martin repeated his thanks for the cooperation and hospitality which had been shown his Delegation by various Soviet Government officials.3

  1. Source: National Archives and Records Administration, RG 59, Central Files 1964–66, FT USUSSR. Unclassified. Drafted by Krimer and Henry on March 9. The conversation was held in Kosygin’s office at the Kremlin. A summary of the conversation was transmitted in telegram 2814 from Moscow, March 6. (Ibid., INCO-WHEAT 17 USSR-US)
  2. A memorandum of Martin’s conversation with Patolichev on March 3 is ibid., FT 4 USUSSR.
  3. On March 12 Kohler reported that Kosygin had made the same points to him on increasing trade with United States during a conversation at the Tunisian Embassy. Kohler commented that the Soviets appeared particularly interested in expanding U.S. purchases of Soviet goods that might allow increased Soviet purchases of U.S. machinery. (Telegram 2847 from Moscow; ibid., FT 1 USUSSR)