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White House Wire to Conservatives 7/90 [OA 4425]
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Records of the White House Office of Speechwriting (George H. W. Bush Administration)
Mary Kate Grant Subject Files
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Speechwriting, White House Office of
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White House Wire to Conservatives, 7/90
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19
2
7
4
Derwinski Captive Nations hunch last week
get his speech
Readers Digest on Tmosara piece
Decolonization of the Soviet Union
THE WHITE HOUSE
Office of the Press Secretary
(Anaheim, California)
For Immediate Release
July 19, 1990
CAPTIVE NATIONS WEEK, 1990
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
A PROCLAMATION
The end of communist domination in Eastern Europe and
progress toward democratization and greater openness in the
Soviet Union are signs of a new era. Ideals we Americans have
long cherished and defended -- ideals of individual liberty and
self-government -- are triumphing in nations that once bore the
heavy yoke of totalitarianism. Human rights that were once
brutally suppressed are gaining increasing respect, and
political pluralism is replacing the tired dogmas of one-party
rule -- dogmas that have been thoroughly discredited time and
again.
With vigilance and unfailing moral resolve, we have made
great strides in our efforts to promote freedom and human rights
around the world. Tragically, however, there remain countries
where repressive ruling regimes continue to cling to ideologies
that are inimical to the ideals of national sovereignty and
individual liberty. In violation of international human rights
agreements and fundamental standards of morality, these regimes
continue to deny innocent men and women their inalienable
rights, including freedom of speech, freedom of movement and
assembly, freedom of the press, and the right to practice their
religious beliefs without fear of persecution.
Each July, as we celebrate our Nation's Independence and
give thanks for the blessings of liberty and self-government, we
also recall our obligation to speak out for captive peoples
around the world. During Captive Nations Week, we reaffirm our
support for peaceful efforts to secure their right to liberty
and self-determination.
As more and more government leaders around the world now
acknowledge, the God-given rights of individuals must be
recognized in law and respected in practice. Protecting the
rights and freedom to which all men are heirs is not only the
duty of any legitimate government, but also the key to real and
lasting peace among nations. That is one reason why, during
this Captive Nations Week, we do well to recall the timeless
words written by Thomas Jefferson shortly before his death in
1826 on the 50th anniversary of our Nation's Independence:
All eyes are opened, or opening, to the
rights of man. The general spread of the
light of science has already laid open to
every view the palpable truth, that the mass
of mankind has not been born with saddles on
their backs, nor a favored few booted and
spurred, ready to ride them legitimately, by
the grace of God. These are grounds of hope
for others. For ourselves, let the annual
return of this day forever refresh our
recollections of these rights, and an
undiminished devotion to them
more
(OVER)
2
The Congress, by Joint Resolution approved July 17, 1959
(73 Stat. 212), has authorized and requested the President to
issue a proclamation designating the third week in July of each
year as "Captive Nations Week. "
NOW, THEREFORE, I, GEORGE BUSH, President of the
United States of America, do hereby proclaim the week beginning
July 15, 1990, as Captive Nations Week. I call upon the people
of the United States to observe this week with appropriate
ceremonies and activities, and I urge them to reaffirm their
devotion to the aspirations of all peoples for liberty, justice,
and self-determination.
IN WITNESS WHEREOF, I have hereunto set my hand this
eighteenth day of July, in the year of our Lord nineteen hundred
and ninety, and of the Independence of the United States of
America the two hundred and fifteenth.
GEORGE BUSH
# # #
07/27/90 12:52
D)
P.02
Assistance to Eastern Europe
The United States is committed to assist the countries of
Eastern Europe making progress toward four objectives:
-
progress toward political pluralism, based on free and fair
elections and an end to the monopoly of the communist party.
-
progress toward economic reform, based on the emergence of
a market-oriented economy with a substantial private sector.
-
enhanced respect for internationally recognized human
rights, including the right to emigrate, and to speak and
travel freely.
-
a willingness to build a friendly relationship with the
United States.
Based on these objectives, U.S. government assistance to
Eastern Europe is currently proceeding on three fronts:
-
First, the SEED Act assistance authorized for Poland and
Hungary in November 1989.
Congress authorized $938 million over three years to
assist Poland and Hungary. Over $600 million is being
implemented in FY 1990 including:
-- $200 million for Poland's stabilization fund;
-- the Enterprise Funds for Poland and Hungary;
-- food totaling over $130 million to Poland;
-- medical supplies worth over $2 million;
- the regional environmental center in Budapest;
-- the EPA clean air and water programs in Poland;
-- help for labor market reforms in both countries;
-- the $1 million Farmer-to-Farmer program in Poland;
- over $4 million to assist priyate Polish farmers.
Second, election-related assistance for all of Eastern
Europe as authorized in Title II of the Panama Act.
Congress authorized the use of up to $10 million to
assist Eastern European countries holding elections.
The National Endowment for Democracy, using its core
organizations and others, has been awarded over $8.8
million thus far. One million dollars is being
provided to NED and USIA for the Fund for Independent
Broadcasting and Free Press.
And third, U.S. government agencies' efforts based on
existing budgetary authorization.
Recognizing the historic significance and opportunity
to assist the region, agencies have utilized existing
resources for programs, including:
07/27/90 12:52
2
P.03
-2-
--
EXIM Bank short- and medium-term financing in
Poland and all programs for Hungary;
--
OPIC insurance and finance, expected to total
over $250 million in FY 1990;
--
Commerce trade missions and programs for Poland
and Hungary;
--
USIA major exchange initiatives for Poland and
Hungary.
To normalize and expand economic relations the Administration:
-
Conferred GSP status to Poland and Hungary;
-
Concluded a bilateral investment treaties with Poland
and is discussing such agreements with Czechoslovakia
and Hungary;
I
Waived the Jackson-Vanik amendment for Czechoslovakia,
signed a trade agreement, supported IMF membership and
moved to inaugurate EXIM and OPIC programs;
-
And is currently reviewing trade relations with
Bulgaria and Romania consistent with the outcome of
elections in Romania and the upcoming elections in
Bulgaria.
U.S. interests in Eastern Europe are shared by our friends and
allies. Beginning with the Economic Summit in Paris last July,
we have supported a broad international effort through the G-24
countries.
The G-24 has gained commitments of $13 billion in
assistance, project financing, trade credits and guarantees
for Poland and Hungary alone. With U.S. leadership, the
Paris Club has agreed to reschedule $9.4 billion of
Poland's official debt. The G-24 has recently expanded its
efforts to include the other countries of Eastern Europe to
the degree they continue to engage in political and
economic reform.
In response to the dramatic events in Eastern Europe beyond
Poland and Hungary, the Administration introduced legislation
on March 7, "Eastern European Democracy and Free Market Act of
1990." The President's Initiative:
- Requests $300 million for FY 1991, including funding to
honor the SEED Act programs for Poland and Hungary and for
participation in the EBRD.
- Makes all the countries of Eastern Europe eligible for
assistance.
-
Provides for four major areas of assistance: support for
democratic institutions, training and technical assistance,
environmental assistance, and transitional economic support.
-
Contains no earmarks so as to permit the Administration to
coordinate assistance based on developments in the region,
the cooperative international effort, and requests from
host governments.
07/27/90 12:53
2
P.04
Addendum to FY 90 SEED Activities
0
In addition to the monies accounted for on the attached
status report prepared by AID, there are several other
large categories of assistance you should be aware of:
--
$200 million in Food Assistance to Poland and Romania
--
$182 million in EXIM pending and outstanding
preliminary commitments to Eastern Europe
|
$200 million is ready to be transferred when needed
for the Trade Credit Insurance Program
--
$40 million for the Overseas Private Insurance Program
($150 million if you include the value of OPIC
political risk insurance and commercial guarantees.)
--
$2 million for the Trade and Development Program
--
$2 million for Peace Corps activities
07/27/90 12:53
D2
P.05
older
U.S. ASSISTANCE TO EASTERN EUROPE
Short Term
-
$200 million of food aid to Poland and Romania in FY 90
-
DOD humanitarian assistance program has provided 97,000
pounds of surplus medical supplies to Hungary and Romania
this year. Similar deliveries are expected shortly in
Poland and Bulgaria.
Medium Term
I
Peace Corps volunteers will arrive in June in Poland and
Hungary to begin English language training programs; A
group of 40 volunteers is being recruited now to begin
enterprise development training in Poland in the fall.
-
SUNY/Albany received $500,000 for parliamentary training in
Hungary. That program is expected to begin next week in
Budapest.
-
The National Endowment for Democracy has received $8.2
million to support election activities, newly established
democratic institutions, non-governmental organizations,
and the establishment of independent free media in Poland,
Hungary, Czechoslovakia, Romania, Bulgaria, and Yugoslavia
($4.8 of these monies was specifically authorized to
support election-related activities in Czechoslovakia,
Romania, Bulgaria, and Yugoslavia.)
I
$1 million has been granted to Volunteers for Overseas
Cooperation and Assistance (VOCA) for farmer-to-farmer
training Poland. The first volunteers completed their
training; the second round is underway.
-
Ten young Polish managers arrived in the U.S. in January to
spend six months in business fellowship programs at U.S.
universities. (sponsored by USIA)
-
Department of Commerce has sponsored telecommunications and
electric power generation trade missions to Poland.
I
The $3.3 million appropriated for the Regional
Environmental Center and the Krakow Air and Water Quality
activities has been transferred to EPA. The Center expects
to open this summer and the equipment for the air and water
projects should arrive in Krakow by December.
-
OPIC investment mission to Poland, November 1989.
-
Conferral of GSP treatment for Hungary in November 1989 and
for Poland in January 1990.
07/27/90 12:54
2
P.06
- 2 -
-
USIA has reached an agreement to translate up to 12 books
into Hungarian and 10-12 books into Polish. Titles to be
translated include: "The Capitalish Revolution," "The
Liberal Tradition of America," and "The Federalist Papers."
-
A US political science professor is in Budapest -- under a
grant from USIA -- teaching at Karl Marx University.
1
Department of Commerce sponsored a U.S.-Poland Legal
Seminar in Warsaw May 8-9; U.S.-Hungary Legal Seminar in
Budapest May 11-12.
1
USIA has provided close to $450,000 for core collection of
books, subscriptions to American journals, English teaching
materials, and student advising materials to Poland,
Hungary, and Czechoslovakia through FY 89 year-end funds.
I
USIA and the Polish Foreign Ministry have signed an
agreement to establish an office for educational exchanges.
I
The American Chamber of Commerce established an office in
Budapest in November 1989.
-
USIA sponsored trips by Hungarian officials and opposition
party leaders to the U.S.
Long Term
-
The U.S. kicked off the $1 billion Polish Stabilization
fund with a contribution of $200 million in January.
5/24
-
The Boards for the Polish-American and Hungarian-American
Enterprise Funds have been named. The funds are-being were
transferred this afternoon. We expect them to be in a
position to make loans in the near future. (Poland: $45
million; Hungary: $5 million)
-
OPIC issued $150 million political risk insurance for
General Electric-Tungsram joint venture.
- OPIC is establishing an Eastern European Growth Fund to
raise capital to finance productive business enterprises in
Eastern Europe, thereby generating vital new economic
activity, private-sector growth, and employment
opportunities.
07/27/90 12:55
a
P.07
- 3 -
The President announced May 12 that EXIM Bank will provide
medium-term as well as short-term loan, guarantee and
insurance support for sales of U.S. goods and services to
Poland. EXIM is already open in Hungary, Yugoslavia, and
Czechoslovakia.
- Trade Development Program has had an ongoing program in
Yugoslavia since 1985. In July 1989 it initiated a program
in Hungary with a grant for a study of a project to
down-size an inefficient metallurgical complex at Miskolc
(MISKOLCH). TDP has also channelled $2 million of SEED
monies to Poland and Hungary to do a study of the
telecommunications sectors.
-
We have reached agreement in principle on participation in
the European Bank for Reconstruction and Development. 60%
of its resources will be devoted to private sector
signed
projects; 40% to public sector projects. Soviet borrowing
6/29
will be limited its paid-in capital subscription for the
first three years.
--
(Soviet subscription for the five-year pay-in period
will be roughly $702 million, of which 30% (or $210
million) will be paid-in. The upper limit on Soviet
borrowing for the first three years, therefore, will
be $210 million.)
-
Presidents Bush and Mazowiecki signed the Polish-American
Business & Economic Agreement on March 21. (Will-be was
submitted shortly to the Congress.)
1
USTR Carla Hills and Czechoslovak Finance Minister Barcak
signed the U.S.-Czechoslovak Commercial Agreement granting
MFN on April 12. (Not yet submitted to Congress.)
07/27/90 12:55
2
P.08
ENVIRONMENTAL ASSISTANCE TO EASTERN EUROPE
1. KRAKOW AIR AND WATER PROJECTS: Providing air pollution
monitoring equipment to improve regional monitoring capability
in the Krakow area and assisting with technical upgrades of the
city's drinking water supply. (EPA and AID)
STATUS: Air monitoring equipment to arrive early 1991. Water
project will be underway by late 1990 or early 1991.
2. REGIONAL ENVIRONMENTAL CENTER - BUDAPEST. Provide
technical assistance throughout Eastern Europe on environmental
institution building, clearinghouse functions, environmental
education, and other needed environment advice and
information. Seeking active participation by other
governments, multilateral organization, universities and
foundations, and business organizations. (EC has agreed Lo.
match our funding.) (EPA and AID, with assistance from DOE)
STATUS: We anticipate opening sometime this summer.
($100,000 transferred to EPA for design work on these two
projects. The rest of the money ($3,046,000) to be transferred
May 4, after the Congressional Notification expires.)
3. ENVIRONMENTAL TECHNOLOGY TRANSFER AND POLLUTION
PREVENTION. High level advisory committee, chaired by William
Ruckelshaus, to advise us on transfer of environmental
technology. (This is called the International Environmental
Technology Transfer Advisory Board, IETTAB) The Board will
have specific recommendations by fall 1990 on how EPA and other
government agencies can facilitate the transfer of American
environmental technology to Eastern Europe.
4. ADVICE ON ENVIRONMENTAL STRATEGIES. Bilateral meetings on
environmental policy issues.
5. CLEAN FOSSIL FUELS. ($$2 million authorized; $10 million
appropriated.) Retrofit an existing coal burning power plant
in the Krakow area and provide it with equipment to reduce air
polution. DOE and Polish Government have signed a Memorandum
of Understanding and are developing the technical
specifications to procure the equipment.
STATUS: AID has transferred $60,000 to DOE for design.
6. BOILER MANUFACTURING CAPABILITY INITIATIVE. DOE and Polish
officials have held preliminary discussions regarding the $20
million boiler manufacturing capability initiative authorized
in SEED I. ($20 mil authorized but nothing appropriated)
7. ENERGY CONSERVATION SEMINARS. DOE planning a series of
energy conservation seminars to be held in three major cities
in Poland this summer. Key officials and plant managers will
be invited to these seminars which will focus on some of the
U.S. energy conservation programs and technologies. If these
seminars are successful, they may be repeated in other East
European countries. (Stems from US/Polish S & T Agreement.)
07/27/90 12:51
T
P.01
DEPARTMENT OF STATE
OFFICE OF THE DEPUTY SECRETARY
Facsimile Transmission
Date: 7/27
Pages: 48 to 8
(incl. cover)
TO: Mary kate Frant
TEL: 456-2930 FAX: 456-6218
MESSAGE:
FROM:
Ambassador Robert L. Barry
TEL: 647-0695
FAX:
647-5372 = 2636
Captive Nations 1 7/25
Eiscu hower to RWR commemorate Cap Nats.
ceremony to nour courage
& those left not forgotten
Prior ones rededication - seedness
But Rev of 89 addressed stunning + thiling
very people we
action - controling own destimes
Poland t Hung netas we - pledged
one support - Austro Hung
border down - Wall etc
NATO Drab allees 4 long decades. lost
Am emptiness of dreams
Now celebrate This Rev of 89
Bold, brilliant hight of freedom
Dedicate now lights day their to would them
Poland, Hung this Crech intens
Celebrate those who all fill
present cermony
support those not get lsp
Latvia Lith } renew om inflag
support for
Estonia
long quest for self determ
must uninbe today the
desperate people we will never forget
examples 1
today Here several genations of these mindes
Let as prom to day That light
of liberty shines etc
+ that next Cap Nat day is
the last!
THE
HERITAGE
LECTURES
The Rule of Law
271
in the
Soviet Union:
A Necessary
Framework for
Democratic
Reform
By Dick Thornburgh
The
T
Heritage Foundation
The
Heritage Foundation
The Heritage Foundation was established in 1973 as a nonpartisan, tax-exempt policy
research institute dedicated to the principles of free competitive enterprise, limited govern-
ment, individual liberty, and a strong national defense. The Foundation's research and study
programs are designed to make the voices of responsible conservatism heard in Washington,
D.C., throughout the United States, and in the capitals of the world.
Heritage publishes its research in a variety of formats for the benefit of policy makers, the
communications media, the academic, business and financial communities, and the public
at large. Over the past five years alone The Heritage Foundation has published some 1,000
books, monographs, and studies, ranging in size from 953-page government blueprint,
Mandate for Leadership III: Policy Strategies for the 1990s, to more frequent "Critical
Issues" monographs and the topical "Backgrounders" and "Issue Bulletins" of a dozen
pages. Heritage's other regular publications include the SDI Report, U.S.S.R. Monitor,
Heritage Foundation Federal Budget Reporter, Business/Education Insider, Mexico Watch,
and the quarterlies Education Update and Policy Review..
In addition to the printed word, Heritage regularly brings together national and interna-
tional opinion leaders and policy makers to discuss issues and ideas in a continuing series of
seminars, lectures, debates, and briefings.
Heritage is classified as a Section 501(c)(3) organization under the Internal Revenue
Code of 1954, and is recognized as a publicly supported organization described in Section
509(a)(1) and 170(b)(1)(A)(vi) of the Code. Individuals, corporations, companies, associa-
tions, and foundations are eligible to support the work of The Heritage Foundation through
tax-deductible gifts.
Note: Nothing written here is to be construed as necessarily reflecting the views of The
Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress.
The Heritage Foundation
214 Massachusetts Avenue, N.E.
Washington, D.C. 20002
U.S.A.
202/546-4400
The Rule of Law in the Soviet Union:
A Necessary Framework for Democratic Reform
By Dick Thornburgh
Whether or not the present 28th Communist Party Congress in Moscow is, as some pre-
dict and more hope, a true precursor to the "withering away of the Party," the extraordinary
debate which is taking place in that forum parallels in important ways President
Gorbachev's stated desire to create a "law-based state" - a Soviet Union founded on the
rule of law.
Heritage Analyst Leon Aron has identified the creation of "a government vested with au-
thority and having enough legitimacy to administer the very bitter pill of radical economic
reform. as the central and most urgent issue of Soviet politics today."
It is my view, in the context of recent exchanges between the Department of Justice and
our Soviet counterparts, that the rule of law provides the only basis upon which such a gov-
ernment can eventuate from the upheaval under way in the Soviet Union and in Eastern Eu-
rope.
Our October 1989 trip to the Soviet Union - the very first by a sitting United States Attor-
ney General - occurred at the very beginning of the Supreme Soviet's effort at institutional
reform and enabled us to open an historic, and continuing, dialogue on the rule of law and
human rights.
It was a remarkable experience. At the invitation of Soviet Minister of Justice, Venyamin
F. Yakovlev, we met for a week with Soviet leaders in the fields of law enforcement and the
administration of justice - ministers, jurists, law students, even the Chief of the K.G.B., Vla-
dimir Kryuchkov. Our agenda was a full one, devoted to topics central to what makes our
democracy work: our Bill of Rights, our federal system, the principle of separation of pow-
ers, with its checks and balances, our two-party political process - all from that curriculum
of liberties we teach (but don't always learn) in our basic high school civics courses.
Placing in Context. And I have to credit our Soviet hosts, even at that early juncture,
with a bold exercise in pursuing political discussions which were open and free-ranging, cov-
ering everything from our mutual interest in stopping international terrorism to their obliga-
tion - as we see it, and they increasingly recognize it - to allow freer emigration of Soviet
Jews. But our talks still took place within an historical legal context that must be under-
stood if their present difficulties are to be fully recognized, or ever surmounted.
To summarize abruptly a great deal of history, Soviet justice derives from three legal tra-
ditions: customary law among the peasantry, the imperial law of the Czars, and, much later,
the Romanist law of civil codes. Customary and imperial law have had by far the over-
whelming impact, creating a government of men above the law, from the Mongols to the bo-
Dick Thornburgh is Attorney General of the United States.
He spoke at The Heritage Foundation on July 10, 1990.
ISSN 0272-1155. ©1990 by The Heritage Foundation.
yars to the Czars and beyond. Various formal codifications of imperial law did appear. But
the operative legal power was still vested in what we commonly know as the ukase. "A proc-
lamation of a Russian Czar," as Webster's says, "having the force of law."
Subordination of Law. This violently changed - yet did not really change - when the Bol-
sheviks came to power. Initially Lenin abolished imperial law, along with private property,
and set up the people's courts. Judges were instructed to follow the decrees of the revolu-
tion - or their "socialist conscience." Later, Lenin and his successors moved to keep author-
itarian sway over the courts by what became known as "telephone justice." Party officials
frequently rang up judges, who then ruled in particular cases according to what the Party
told them to do. The ukase had been reduced, by 20th century technology, to a phone call.
The legalistic way was prepared for Stalin's Moscow show trials during the Great Terror
and, thereafter, the habitual subordination of the law to Party interests.
Against this unpromising background, so-called new thinkers in the Soviet Union have
now embarked upon what appears to be a truly idealistic and laudable attempt to establish
the rule of law - - or in Gorbachev's words, a "law-based state." Could it actually happen?
So often you hear it optimistically said: remember that Mikhail Gorbachev was trained as a
lawyer. Yes, but so was Lenin.
The chances are certainly there - as we saw during that week, and continue to see as we
visit with Soviet officials and lawyers, both here and in the Soviet Union. Indeed, we are pre-
paring for a return visit by Minister Yakovlev next month to extend our dialogue on democ-
racy. But chances of success in this endeavor must always be measured against the long fa-
tigues of history - the institutional neglect and political disrespect for what we know as the
rule of law.
What is really missing is what might be called a "legal culture." Time and again, for exam-
ple, we found an almost naive belief that all that was needed was to pass the correct stat-
utes, to get the right laws on the books to create a "rule of law." We did our best to try to
disabuse them of this legalistic and somewhat simplistic notion. Laws on the books, we ex-
plained, must be conscientiously obeyed and impartially enforced within a structure, and
through a process, recognized and acknowledged by all - citizen and bureaucrat alike.
The rule of law works in a democracy, we pointed out, because of the supremacy of the ju-
diciary, because men adhere to a government of laws, and act to see that the laws are en-
forced, in such ways that no man is above - or below - the law.
Practical Questions. Happily, the very things the Russians found most curious about our
democracy let us discuss those practices in our law that really make our democratic process
work. Our Ambassador to the U.S.S.R., Jack Matlock, reports this phenomenon is common
- as Soviet citizens seek him out to gain insight into the functioning of the most basic of
American institutions. Soviets quiz him on remarkably practical questions. If the Russians
are writing a law on the press, they might query, for example, "How do Americans treat
libel law? What can your press say? What can it not say?"
One of the first, most insistent questions I was asked by nearly everyone was, inevitably, a
constitutional one: How does your federal system work? How did you weld together the sep-
arate states as the United States? How do you keep things from falling apart through inces-
sant struggles between the national government and 50 different state governments?
2
Obviously, they are worrying about the unrest among their own republics. You only need
look at the independence movements in Lithuania and the other Baltic states - as well as
similar secessionist rumblings in the Republic of Russia under Boris Yeltsin and, most re-
cently, in Uzbekistan - to understand their anxiety. They are also looking to us for ways, if
you will, to deal with their own diversity.
Emphasizing Due Process. We gave them a very pragmatic answer to these inquiries. We
did our best to explain, "Look, this is the way we do it, but the central thing about our sys-
tem is its accommodation to change. Most of the mechanisms and components of our gov-
ernment are designed to accommodate change. And mastering that process is going to re-
quire far more than just the passage of new laws by the Supreme Soviet." It is going to take
a commitment to the lawful, democratic process, and we tried to emphasize legal process -
due process of law - even over substantive rights, as the true safeguard of the people's liber-
ties.
Again, they asked-us often, and in much confusion, about the separation of powers. The
idea of deliberately building in a tension between separate branches of government - our
concept of checks and balances - was extremely puzzling to them and, to some, utterly in-
comprehensible. Accustomed to their own monolithic system, they would have to struggle
hard to understand, for example, Justice Brandeis's observation that we adopted the separa-
tion of powers in 1787 "not to avoid friction, but by means of the inevitable friction incident
to the distribution of government powers among the [branches], to save the people from au-
tocracy."
We called attention to their own guarantees of civil rights under the Soviet constitution.
There they are, all fully documented, like our own Bill of Rights. Only there is also the care-
fully worded escape clause: "Civil rights shall be protected by law - Just as our rule of law
would hold, but with this kicker. " - Except as they are exercised in contradiction to their
purpose in socialist society in the period of communist construction."
That, of course, admits the ubiquitous specter of Party tyranny. Attempts are being made
to toss this offensive language off the train by the new thinkers. But it's not litter down the
tracks of history yet. And still to come is the real test as to whether the Soviet courts them-
selves can and will act to protect the people's rights. In short, will respect for legal process
eliminate the prior abuses of "telephone justice"?
True reform must reach down into the legal culture itself, and create an inherent respect
not only for individual rights, but for legal procedure and due process. In a statement be-
fore the Communist Party Congress last Monday, K.G.B. Chief Kryuchkov affirmed this ele-
mental truth:
We cannot speak in favor of the universal development of democracy
and at the same time refrain from speaking in favor of law and order,
and the supremacy of the law. A society which allows the law to be
mocked is a diseased society
Fine words indeed, but one problem is that much of the motivation for legal reform is
coming from a different direction altogether.
3
The Soviets face one great, dire urgency - besides national unrest - and that is their econ-
omy. To survive, they must enter the free world marketplace. To do that, they realize they
must position themselves to recognize - and take advantage of - the rules of free com-
merce. The rule of law is the fundamental prerequisite for turning away from a command
economy - to a market economy.
Respect for Contracts, Property. One of the Soviets' principal reasons for their great in-
terest in the rule of law is just that - they have an immediate and pressing need to jump-
start their participation in the world economy, to attract foreign know-how and investment.
To do that, they realize they must display the predictability and stability that can only
emerge from a body of commercial law which, in turn, respects the sanctity of contracts
and, yes, recognizes property rights as well. Fear of abrogation of contract rights or expro-
priation of investments can stunt otherwise attractive commercial and industrial initiatives.
This is one reason why property rights have been so hotly debated in the Soviet Union. A
young reformer, whom my wife and I met last year, Ilya Saslavski, is involved in a property
battle which typifies the disputes taking place on a local level across the Soviet Union.
Saslavski, an elected member of the Congress of Peoples' Deputies, who is visiting here this
week, has announced the take-over - for ordinary families - of an apartment building built
for the Party elite. Though the controversy will be settled in court, such a confrontation
would never have been attempted were Saslavski not assured of a favorable hearing from a
pro-reform judge. The action taken by Saslavski is but one manifestation of the myriad cri-
ses arising as local leaders vie for power in the communist system which has an endemic an-
tagonism to property rights reform.
On the very day we visited the Supreme Soviet - a semi-democratically elected legisla-
ture, and a developing seat of power - debate on the subject of property rights went on
seemingly endlessly, and with very good cause. The Soviet Constitution says that property
belongs to the state alone. But might such state property be legally leased to cooperative,
joint ventures? And how does a Soviet citizen without ownership "act like an owner," as
Gorbachev has instructed, or even enjoy "something close to ownership" as espoused by
Boris Yeltsin? As we watched, the late Dr. Andrei Sakharov, among others, rose to voice
his objections to the government's bill. Finally, two bills, partially in conflict, were sent off
to a commission for a further massaging, which continues to this day.
Adept legal accommodation can also be seen in the liberalization of their emigration poli-
cies. We are convinced they are now doing their legal utmost to facilitate the issuance of em-
igration visas - as a new exodus follows hard upon a rise in anti-semitism in Russia - but,
here again, their interest is not wholly altruistic. They would like to meet the strictures of
our Jackson-Vanik legislation in order to secure the most-favored nation status that would
much enhance their prestige in world markets.
Still, we must be convinced - as in so much else undertaken in the name of Soviet legal
reform - that not just the letter, but the spirit, of the law has taken root in the Soviet Union.
That is the essence of the agreement reached between Presidents Bush and Gorbachev dur-
ing the recent summit, that any trade agreement remains contingent upon legislative action
by the Supreme Soviet in support of free emigration. We are, in short, watching to see that
4
opportunities to emigrate are institutionalized in law and practice, and are not just episodic,
in the present uncertain flux of Soviet democratization.
All that being said, at the same time, I do not want to downplay their efforts to achieve
the rule of law, or underestimate the modern-day difficulties of democratization. Two hun-
dred years ago, we could call upon our English, common law heritage, and an American
over-abundance of legal talent, to create our written Constitution, even in crisis. Also, we
were then only four million, relatively homogeneous Americans, mostly concentrated on
the Atlantic Coast - not 290 million multi-cultured Soviet citizens, spread across eleven
time zones. Moreover, our Constitutional Convention deliberated in secret - not under
glasnost. Imagine, if you will, George Washington on worldwide television, in the midst of a
currency crisis, trying to suppress Shay's Rebellion, letting Vermont and New Hampshire
pursue Yankeeism in their own way, negotiating with Quaker Solidarity, while trying to cut
an arms deal with the British and French to put a cap on heavy frigates. George Washing-
ton, you will recall, said not one single word while presiding at Philadelphia.
The Soviets suffer all the drawbacks of history, including their own, most recent, flawed
history. But do they now recognize these flaws, particularly in law, and do they sincerely
want to counter them by establishing, for example, an independent judiciary - an institution
they have never known, from Czarist times forward? The ultimate answers to those ques-
tions are unknown, but there are a few signs of an incipient legality. They have doubled judi-
cial salaries, formerly below the average wage. And - good news to the Soviet law students I
addressed at Moscow State University - they are allowing lawyers to charge real fees - in-
stead of a scale of meagre fixed fees (plus money under the table) - and are taking steps to
allow them actually to represent their clients.
Judicial Review. They have also been struggling to establish a rudimentary mechanism
for judicial review - not unlike our Supreme Court, but far less august and lawfully empow-
ered. A constitutional oversight committee is to review the constitutionality of Soviet law -
in a sharp break with the past. But there are strict limitations upon their powers. The com-
mittee is advisory only, and it can rule on Soviet federal law, but not on the laws of the sepa-
rate republics. In one curious anomaly, if any Soviet law is found to violate human rights -
presumably as defined by the United Nations Charter - the committee is empowered to de-
clare said law unconstitutional. There is much confusion over how the constitutional over-
sight committee will actually operate - let alone, legally prevail. What is needed - as Profes-
sor John Hazard of Columbia Law School says - is another John Marshall to arrive on the
scene and guide their deliberations.
So there appears to be a will to a rule of law, if still much wandering in pursuit of untried,
democratic ways. Going for such high stakes means that it is far too early to determine their
chances of success. But I do remind you of two highly successful, post-war experiments in
democratic reformations: Germany and Japan. Again, there are large differences in na-
tional circumstances - whole histories, wartime sufferings, other relevant factors. But we
have seen the political adaptability of West German democracy overcome many obstacles
from the totalitarian German past, and witnessed - sometimes to our chagrin - the Japan-
ese experiment's continuing, modern triumph over centuries of emperor-worship. And both
experiments were undertaken in similar adversity: by an undone people - even a conquered
people - in economic extremis, at a moment of deep disillusionment with their own society.
5
Could something far different, yet alike, happen again? For the sake of world harmony, we
can hope so, while also providing whatever encouragement is possible.
One final, positive observation. In 1979, when I visited the Soviet Union as a state gover-
nor, I found each official session invariably opened with an almost obligatory denunciation
of the United States and our system of government. Ten years later, nearly every meeting
with our counterparts began with a litany of woes - their recitation of the shortcomings of
their system - and an almost wistful yearning for more knowledge about how our democ-
racy works.
So I come away from my most recent visit to the Soviet Union - and our subsequent con-
tacts with their legal delegations - well aware that Soviet justice does not yet embody what
we know as the rule of law, but convinced that patience and example, and even some advo-
cacy, might help certain determined Soviet officials to establish their own rule of law.
Like everybody else's democratic experiment, it will have to be attempted and achieved
within their own society. If ever we needed dramatic reinforcement of that truth, it has
come from the recent elections in Eastern Europe. On the one hand, East Germany has all
but reunited with West Germany after its first free parliamentary election in four decades.
On the other hand, Romania seems to have reverted to a government-sponsored vigilan-
tism in the streets following the electorate's return to office of former communists.
Rule of Law. We cannot count upon constitutionalism simply to arise as virtue triumphant
from the totalitarian ruins of Europe. Even where constitutionalism seems likely to prevail,
the rule of law will be formalized differently by the Czechs, or the Poles, or the Hungarians
- and most certainly, by the Russians. Nobody else but their own judges, lawyers, ministers,
and citizens can evolve the judicial fairness and institute the legal restraint that underpin
any rule of law. And it is only inherent respect for the law - such as we have seen people
steadfastly demanding in the open squares and open parliaments and newly open societies -
that will bring to a tolerable end the last vestiges of tyranny in these formerly closed com-
munist monoliths.
In sum, only the rule of law can provide a sturdy bridge over the yawning political chasm
between upheaval and democracy.
And we will know it when, and if, it appears. By the human rights the rule of law protects,
by the governmental powers it limits, by the judicial independence it preserves. We will
know it, constitutionally, when we see it. After more than two hundred years of experience
and experiment on our own - who better to judge its emergence elsewhere?
6
The T Backgrounder
Heritage Foundation
No.
The Heritage Foundation
214 Massachusetts Avenue N.E. Washington, D.C. 20002 (202)546-4400
762
March 29, 1990
HOW AMERICA CAN HELP BALTIC INDEPENDENCE
The Baltic peoples' struggle for independence is entering its decisive
phase. For now, the spotlight is on Lithuania, where Mikhail Gorbachev's
show of force is an attempt to frighten into submission that country's
democratically elected government. In the wings, ready to move to stage cen-
ter, are the independence movements of Estonia and Latvia.
The crisis in Lithuania is forcing Washington to make some hard decisions
about the Baltic states. For a half-century, of course, the United States has
supported the restoration of their independence. This support was largely
rhetorical and cost little; it had virtually no effect. Now, the U.S. can make
good on its decades of promises and declarations. This the U.S. must do - in a
firm and direct, but measured way.
At this critical moment in the history of the Baltic republics, George Bush
should extend official recognition to the new democratic government in
Lithuania and tell Gorbachev that Moscow will pay a heavy price if it uses
force against Lithuania and the other two Baltic states.
Illegally Annexed. The case for America supporting Baltic independence is
overwhelming: America never has accepted Moscow's rule over the Baltic
states. Estonia, Latvia, and Lithuania were independent and sovereign states
after their independence was recognized by the Soviet Union in 1920 and by
the international community. But as the result of a secret treaty between
Adolf Hitler and Joseph Stalin in August 1939 - the infamous "Hitler-Stalin
Pact" - the Baltic states were occupied and annexed by Moscow in 1940. This
annexation was not recognized by the U.S., and the Hitler-Stalin Pact at last
was declared illegal by the Soviet Parliament on December 28, 1989.
American policies to help the Baltic republics must not be an ad hoc
response to the dramatic, exhilarating, and frightening events there. Instead,
the policies must rest on a foundation of sound principles applying beyond Es-
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an
attempt to aid or hinder the passage of any bill before Congress.
tonia, Latvia, and Lithuania to all the Soviet nationalities and their desires for
independence and self-determination. These are:
Principle #1: The U.S. supports Baltic independence.
Principle #2: The U.S. very strongly favors the peaceful achievement of in-
dependence.
Principle #3: The U.S. will impose an appropriate penalty on Moscow if it
prevents, by intimidation or force, peaceful independence of the Baltic
republics.
Principle #4: The U.S. will understand sympathetically if the Baltic states
must use force to counter Moscow's intimidation and force, but the U.S. will
not be able to provide help for such Baltic use of force other than American
verbal expressions of solidarity and sympathy.
Principle #5: The U.S. will reward Moscow appropriately for allowing the
Baltic republics to become independent peacefully and similarly will reward
Moscow for allowing other Soviet nationalities to achieve independence or
lf-determination peacefully.
Principle #6: The U.S. seeks no unilateral gain in the matter of Baltic inde-
pendence nor does it seek to exploit the matter to harm the Soviet Union.
Translating these principles into policy, the Bush Administration should:
Warn Moscow not to use force against the Baltic states, making clear
that a crackdown will seriously impair U.S.-Soviet relations. Gorbachev
hopes to revive the Soviet economy with help from the West. Moscow must
realize that using force against the Baltics will torpedo such help.
Grant official recognition to the new democratic Baltic governments
once they establish their sovereignty and request U.S. recognition. The U.S.
should appoint ambassadors to each republic and upgrade the existing Baltic
diplomatic missions in the U.S. from legations to full-fledged embassies.
Ask Congress to exchange parliamentary groups with each Baltic
republic. These exchanges could be part of a series of linkages between Con-
gress and the Baltics' new parliaments, which would demonstrate American
support for the new democracies, help end their psychological isolation from
the West, and assist their reestablishment of effective legislative powers. Con-
gress should also invite Lithuania's President Vyautas Landsbergis to address
a joint session.
Include these countries in U.S. foreign aid packages to Eastern
Europe. The Baltic states are part of Eastern Europe, and the U.S. should
treat them as such. Even small amounts of U.S. assistance would help them
enormously.
Make Soviet military occupation of the Baltic states a conventional
arms control issue. The U.S. and its NATO allies must make clear to Mos-
cow that an agreement on conventional force reductions will not confer any
right on the Soviet Union to station its forces in the Baltic states and also
2
declare that any future negotiations will address the issue of the Soviet
military occupation of these countries.
Encourage international organizations, such as the United Nations,
the International Monetary Fund (IMF) and the General Agreement on
Tariffs and Trade (GATT), and such European organizations as the Council
of Europe, to admit the Baltic states as full members. The Baltic states are
recognized as sovereign countries by much of the international community
and deserve to be members of the United Nations just as they were of the
League of Nations. The IMF and its sister organization the World Bank pro-
vide credits to member governments. The GATT is a broad-based grouping
of countries dedicated to removing trade barriers. Membership in each will
assist the Baltic states in quickly joining the international economy.
Insist that this fall's session of the Conference on Security and
Cooperation in Europe (CSCE) discuss Baltic independence. The forthcom-
ing CSCE meeting is being held at Soviet request to review the broad range
of political and security issues in Europe. It is the best forum at which to dis-
cuss the issue of Baltic independence as it will be attended by every
European country except Albania, as well as the U.S. and Canada. The Baltic
states should participate in this meeting on an equal basis with the other
European states.
Press America's Western allies to take similar actions to support the
Baltic states.
The Baltic independence movements offer the U.S. the opportunity to as-
sist the orderly dissolution of the Soviet colonial empire. With their emphasis
on a peaceful and negotiated path to independence, the Baltic states offer
Moscow a chance to address its imperial crisis before it explodes. Their suc-
cess could be a model for resolving peacefully other phases of what could be
the enormously dangerous problem of Soviet decolonization. U.S. support
for this process would strengthen those Soviet leaders who understand that
Moscow's use of force to suppress the nationalist movements almost surely
would lead to disaster and prolonged conflict. Conversely, U.S. and Western
inaction regarding the Baltic republics' strivings for independence would
make it easier for those in the Kremlin who would use force to suppress all of
the nationalities.
THE ORIGINS OF INDEPENDENCE
Estonia, Latvia, and Lithuania have long and illustrious histories. Although
Lithuania was a major power in Eastern Europe in the 16th and 17th cen-
1
turies, ruling over territories stretching from present-day Poland to Ukraine,
each Baltic state has suffered repeated conquests. They became part of the
1 Although common American usage places "the" before Ukraine, Ukrainians assert that this derives from
Moscow's claim that Ukraine is a region of Russia, not a nation unto itself.
3
Russian Empire when Peter the Great took them from Sweden in the Great
Northern War in 1718. They and the other peoples conquered by Moscow
remained a part of that Empire until the disintegration of central authority in
the Russian Revolutions of 1917.
Independence Recognized. During the Russian Civil War, which broke out
in early 1918, several of the subject peoples of the Empire - the Baltic states,
Finland, Georgia, Poland, Ukraine, and other areas in Muslim Central Asia -
seized their opportunity to escape and declared their independence from
Russia. By 1921, however, Ukraine and Central Asia and most other states
had been reconquered by the Red Army. Poland and the Baltic republics
were not. Moscow eventually renounced all claims to Estonia, Latvia, and
Lithuania and recognized their full independence in treaties signed on
February 2, August 11, and July 12, 1920. respectively. The U.S. recognized
all three on July 28, 1922.
After independence, these countries managed an uneasy coexistence with
their giant neighbor. On August 23, 1939, however, Nazi Germany and the
Soviet Union signed the Hitler-Stalin Pact, which divided Eastern Europe be-
tween them. The Pact's secret protocols allotted Estonia and Latvia to Mos-
cow; Lithuania went to Germany. The Pact was modified in 1940 to give
Lithuania to the Soviet Union in exchange for some of Moscow's share of
recently conquered Poland. The Soviet Union moved quickly to take control
of the Baltic states. Treaties allowing Soviet forces to be stationed on their
soil were forced on Estonia, Latvia, and Lithuania on September 28, October
5, and October 10, 1939, respectively. These were soon followed by outright
Soviet military occupation and an overthrow of the independent govern-
ments. Rigged elections were held producing communist-dominated parlia-
ments, which on July 21, 1940, voted to equest annexation to the Soviet
Union. The Stalinist terror hen descende with full force in the summer of
1940, and tens of thousands of people were imprisoned, executed, or sent to
the Gulag in Siberia.
Washington responded by extending to the Baltic states its policy of refus-
ing to recognize the forcible seizure of territory by the fascist powers. This
was the origin of the "non-recognition policy" by which the U.S. continues to
treat the Baltic states as independent and does not officially recognize their
incorporation into the Soviet Union.
Brave Resistance. Although the countries conquered by the Nazis and
Japanese were liberated at the end of World War II, the Soviet Union, as one
of the victorious powers, kept the territories it had seized. These included
Moldavia, western Ukraine, eastern Poland, parts of southern and eastern
Finland and, of course, the Baltic states. Armed partisans in western Ukraine,
the Baltics, and some other territories, bravely resisted Soviet occupation for
nearly two years, but largely were crushed by 1947.
As relations between the West and the Soviet Union deteriorated, the U.S.
non-recognition policy toward the Baltic states was adopted by other
countries. The NATO nations, for instance, refused to recognize the
legitimacy of the Soviet takeover of the Baltic states. Even Britain went along
4
with the U.S., despite London's traditional policy of recognizing the authority
of whichever government exercises control over a particular territory, which
in the case of the Baltic states should have been the Soviet Union. The only
Western countries to recognize the Soviet annexation of the Baltic states are
Finland and Sweden.
Complicated Policy. The U.S. non-recognition policy is complicated. On
the one hand, Washington refuses to recognize as legal the annexation of
these countries into the Soviet Union and continues to grant official status to
their pre-war diplomatic legations in the U.S. On the other, Washington offi-
cially recognizes neither any exile government nor the current governments
of these republics.
Each Baltic diplomatic mission in the U.S., known as legations, draws its
support primarily from the exile communities in the U.S. and abroad. Stasys
Lozoraitis, chargé of the Lithuania legation, and Anatol Dinbergs, chargé of
the Latvian legation, have their missions in Washington; Ernst Jaakson,
chargé of the Estonian legation, is in New York City.
THE BALTIC STATES TODAY
Estonia, Latvia and Lithuania are small in territory and population.
Estonia's population is approximately 1.6 million, of which only around one
million are ethnic Estonians, with approximately 40 percent of the population 2
now consisting of Russian-speaking immigrants who have arrived since 1940.
Almost half of Latvia's population of 2.6 million is composed of these im-
migrants. Only 20 percent of Lithuania's 3.7 million people are non-
Lithuanian, but this minority is growing rapidly, doubling in the 1980s. Their
combined territories would fit comfortably within Oregon.
The Baltic republics are the most economically advanced region in the
Soviet Union; by Western standards they are backward. Their main industries
are metallurgy, shipbuilding, and food processing, and are extensively in-
tegrated into the Soviet command economy.
The integration of the Baltic states into the Soviet economy has im-
poverished these countries. The Heritage Foundation was told by several Es-
tonian economists in Tallinn that, whereas Estonia and Finland had com-
parable standards of living in 1940, Finland's now is several times higher than
that of Estonia; by some measures Finland is fifteen times higher.
2. "Russian-speaking" need not denote persons ethnically Russian. Many of the immigrants belong to other
Soviet ethnic groups, such as Ukrainians and Armenians. Their use of Russian as a common language is due to
the Soviet policy of promoting Russian among ethnically mixed populations. Few immigrants learn the local
languages in the Baltic republics.
5
Estonia
Latvia
Lithuania
Estonian Soviet Socialist
Latvian Soviet Socialist
Republic of Lithuania
Official Name*
Republic
Republic
Capital
Tallinn
Riga
Vilnius
Area (sq. miles)
17,413
24,590
25,174
Population
1.6 million
2.7 million
3.7 million
60% Estonian
54% Latvian
79% Lithuanian
Ethnic Composition
40% Russian
33% Russian
7% Polish
and other*
13% other
5% other
Religion
Estonians and Latvians are traditionally Lutheran. Lithuanians and Poles are
Roman Catholic; Russians, Ukrainians, and Belorussians are Orthodox.
Paper, shipbuilding,
Shipbuilding,
Shipbuilding, textiles,
Major Industries
shale oil and gas
metallurgy, and timber
and chemicals
* On March 11, 1990, Lithuania changed its name to the Republic of Lithuania from the Lithuanian Soviet Socialist Republic.
Estonia and Latvia are expected to follow in the near future.
** Ukrainian, Belorussian, Armenian, Jewish, among others.
THE RISE OF THE BALTIC INDEPENDENCE MOVEMENTS
Despite severe persecution by Moscow, the Baltic peoples have preserved
strong national identities. Increasing concern over the enormous ecological
harm caused by Soviet industrial pollution and growing interest in their inde-
pendent cultures sparked a rapid growth of Baltic nationalism in the 1980s.
Sparking it too were the mounting numbers of Russian-speaking immigrants,
sent to the Baltics by Moscow to secure its political control. Between 1940
and last year, approximately 400,000 such immigrants made their way to Es-
tonia. The prospect of becoming minorities in their own countries created a
sense of urgency among the native Baltic peoples, feeding the fires of
nationalism.
Gorbachev's reforms also spurred Baltic action. He relaxed censorship and
permitted non-communist organizations to operate more freely. Because
they are culturally the closest to the West of the Soviet Union's nationalities,
and thus more directly influenced by Western ideas, the response to these
new freedoms was deepest and most immediate in the Baltic states. Much of
Estonia, for example, receives Finnish television.
Umbrella Groups. With the relaxation of repression, a number of cultural
and environmental organizations were formed in the Baltics. Typically they
grouped themselves under Popular Front umbrellas. The most well known is
6
the Popular Front in Lithuania, called Sajudis, the Lithuanian word for
"movement." The Popular Fronts were controlled at first by the Republic's
Communist Parties, but gradually established their independence and be-
came increasingly committed to political autonomy for the Baltic states. Non-
communist and more overtly nationalist organizations such as the Lithuanian
Freedom League and the Estonian National Independence Party played im-
portant roles in pushing the debate in these countries rapidly in that direc-
tion. These organizations openly advocated complete independence from
Moscow.
1989: Prelude to Independence
As the nationalist organizations gained momentum throughout last year,
the drive toward independence accelerated. Despite intimidation by the com-
munist authorities, Sajudis candidates won 36 of the 39 seats for which it com-
peted in the March 26, 1989, elections to the U.S.S.R. Congress of People's
Deputies. The Lithuanian Communist Party won only four seats.
The increasing strength of Sajudis and other organizations like the
Lithuanian Freedom League forced the communist government in Lithuania
to make radical reforms. The Lithuanian constitution was amended on May
18 to state that Soviet law is valid in that republic only if ratified by the
Lithuanian parliament. On that date, the parliament also passed a "Declara-
tion of Lithuanian State Sovereignty" proclaiming that Lithuania had been an-
nexed forcibly by the Soviet Union and had never surrendered its
sovereignty.³
A commission established by the Lithuanian Supreme Soviet or parlia-
ment on August 22 to examine the Hitler-Stalin Pact and its secret protocols
ruled that these had been "invalid from the moment of their signing" and,
more important, that Lithuania's incorporation into the Soviet-Union there-
fore was illegal. A law was enacted in November that restricts Lithuanian
citizenship to those who were citizens prior to the Soviet annexation, and to
their descendants. Others can apply for citizenship after a ten-year residency.
This was intended to discourage further immigration into Lithuania.
Gorbachev Rebuffed. Desperate to shore up its rapidly declining
popularity, the Lithuanian Communist Party withdrew from the Communist
Party of the Soviet Union (CPSU) on December 20. Gorbachev and other
senior Soviet leaders rushed to Lithuania to persuade the Lithuanian com-
munists to reverse their decision. They were rebuffed and encountered in the
capital of Vilnius a demonstration of 300,000 Lithuanians demanding inde-
pendence.
Events in Estonia and Latvia followed similar courses. Although estab-
lished only in October 1988, the Popular Front of Latvia captured three-
fourths of the seats in the following March's elections for the Soviet Congress
3 "Lithuania Declares Its Sovereignty," Report on the USSR, Volume 1, No. 22, June 2, 1989.
7
of People's Deputies. Since only 50 percent of the population is ethnically
Latvian, this overwhelming victory demonstrated that the independence for-
ces embraced even great segments of the large Russian-speaking population.
The Popular Front's official program was amended on October 8, 1989,
declaring independence for Latvia to be its official goal. 4
Two Estonian Parliaments. The political situation in Estonia is more com-
plex than in Latvia or Lithuania. Two popularly elected Estonian parliaments
now exist, each claiming to represent the republic. The elections this March
18 for the Estonian Supreme Soviet produced a Popular Front-dominated
government committed to independence. But a wholly separate parliament,
the Congress of Estonia, had been created in non-official elections this
February 24; it was organized by a movement known as the Estonian
Citizens' Committees.
The Citizens' Committees were established by a number of parties, the
most important of which is the Estonian National Independence Party led by
Tunne Kelam. Through enormous effort, the Citizens' Committees organized
the February 24 elections for the Congress of Estonia, in which approximate-
ly 600,000 out of a population of one million ethnic Estonians participated.
The voting was restricted to those Estonians in the republic and abroad who
could prove Estonian citizenship at the time of the Soviet takeover in 1940,
or who are descended from those who were citizens at that time. Those who
have come to Estonia since then are considered to have settled illegally as a
result of the Soviet occupation. They have been told that they will be able to
apply for Estonian citizenship at a future date.
Occupation Government. The Citizens' Committees maintain that the
Republic of Estonia destroyed by the Soviet takeover in 1940 continues to
have a legal existence and that the Congress of Estonia now represents it. In
addition, they contend that the present political system in Estonia, including
the Supreme Soviet, is a creation of the Soviet occupation and is therefore il-
legitimate. Given the cooperation between the independence forces in both
legislatures, it is possible that the new Estonian Supreme Soviet will dissolve
itself and recognize the authority of the Congress of Estonia, creating a chal-
lenge to Soviet authority by dismantling all institutions of Soviet rule in the
republic.
The Estonian Supreme Soviet has already taken a step in this direction,
passing a resolution last November 12, 5 declaring Estonia's forcible annexa-
tion by the Soviet Union null and void.
4 "Estonia," Report on the USSR Volume 1, No. 52, December 29, 1989.
5 Ibid. In so doing, it also called into question its own legitimacy as a creation of that same takeover.
8
THE KREMLIN'S REACTION
The Kremlin opposes the Baltic independence movements and threatens
reprisals if defiance continues. The Soviet Communist Party's Central Com-
mittee has warned that continued assertions of Baltic nationalism "could be
disastrous" and could "call into question the viability of the Baltic peoples."
The Kremlin also threatens that independence could bring economic dis-
aster. During his January trip to Lithuania, Gorbachev said repeatedly that
Lithuania could not survive without access to Soviet raw materials and
markets. Indeed all of Lithuania's oil and natural gas come from the Soviet 6
Union, and its industries are tightly integrated into the Soviet economy.
Coupled with Moscow's stick has been a small carrot, promising com-
promise short of independence. Thus the Soviet parliament on November 28
granted the Baltic states economic autonomy, transferring some economic
decision-making from Moscow to the republics. Under this arrangement,
Moscow is to retain control of defense and "heavy" industries (cement, steel,
transportation) while the republics would take control of agriculture, con-
sumer, and construction industries. So far, however, Moscow has exploited
the legislation's ambiguities to prevent the transfer of real economic power to
the Baltic states. The Heritage Foundation was told by Ojars Blumbergs,
chief economic advisor to the Popular Front in Latvia, that his country has
had to "fight for control over every enterprise" promised to it under the
economic autonomy laws passed by Moscow.
Moscow's Roadblocks. The Soviet government, meanwhile, routinely
declares the legislation of the Baltic governments unconstitutional. Example:
on August 16, 1989, the Soviet Congress of People's Deputies struck down
the election law passed by the Estonian Supreme Soviet and ordered it to
amend Estonia's constitution. Example: despite Article 72 of the Soviet con-
stitution, which gives each republic an unrestricted right to secede from the
U.S.S.R., the Soviet Congress of People's Deputies is considering a law to
make secession very difficult, if not impossible. The Soviet government also
claims that it should be compensated for purported investments in the Baltic
economies if the republics secede; Lithuania's bill would be $33 billion.
A greater danger to Baltic independence was created by Gorbachev's as-
sumption of vastly enhanced presidential powers this March 13. He now can
suspend the elected parliaments of the republics and declare a state of emer-
gency and rule by decree. Thus, to the extent that the Soviet constitution is
valid in the Baltic states, Gorbachev now has the legal authority to remove
the governments of the Baltic republics and impose rule directly from Mos-
cow. He used this authority last week when he ordered more Soviet troops
6 Ann Sheehy, "Gorbachev's Arguments Cut Little Ice with Lithuanians," Report on the USSR, Volume 2, No.
6, February 9, 1990.
9
into Lithuania, and he may use it yet to impose his direct rule over that
country.
BALTIC INDEPENDENCE AND THE SOVIET IMPERIAL CRISIS
The Baltic independence movements are part of a broader crisis in the
Soviet Union. Of all the problems facing Moscow, including the economic,
none is more serious than the increasing demands for self-determination by
its many subject nationalities. The independence movements in the Baltics
are only the furthest advanced of these nationalist forces and have counter-
parts in Georgia, Moldavia, Ukraine, and among most of the Soviet Union's
ethnic groups.
The Ukrainian nationalist organization Rukh did exceptionally well in the
March 4 elections for the Ukr aian parliament, capturing an unexpected 30
percent of the seats. The Supreme Soviet of Georgia declared on March 9
that the forcible Soviet annexation of that country in 1921 was illegal. The
Muslim republics, especially Azerbaijan, are increasingly defiant of Moscow.
Moscow understands that the Baltic states' moves toward regaining their in-
dependence are only the first in a series of challenges to Soviet rule by the
non-Russian nationalities.
Important Precedent. An explosive situation is developing as Moscow at-
tempts to retain control. The temptation to use military force to restore
Soviet authority, as in January's crackdown in Soviet Azerbaijan, likely will
grow as the nationalities increasingly defy Moscow. Ultimately, this problem
can best be solved by granting greater freedom to the nationalities. At a
February 5 to 7 meeting of the Soviet Communist Party's Central Committee,
Gorbachev discussed a possible Treaty of Union in which economic and
political power would be decentralized; only sketchy reports of this have
been made public. 7 One idea would extend to all of the Soviet Union's fifteen
republics the same economic autonomy that has been granted to the Baltic
states. If the Soviet leadership is serious about addressing the nationalities'
demands for greater self-determination through a new Treaty of Union, a
peaceful and negotiated path to Baltic independence could provide Moscow
with an important precedent for avoiding the looming violent showdown with
its subject nationalities.
Although a Soviet military intervention temporarily might crush Baltic in-
dependence, such force surely could not be dispatched against all the
U.S.S.R.'s nationalities. Explained Sergei Odarich, a leader of the Ukrainian
nationalist organization Rukh, on March 21: "Against little Lithuania he
could still find a pretext to send in troops. But against the [50 million] Uk-
rainian people, this is impossible. ,,8
7 "Moscow Offers Republics Freedom Under New Treaty," The Financial Times March 21, 1990.
8 "Nationalist Party in Ukraine Vows to Push Independence," The Washington Times, March 22, 1990.
10
PROMOTING BALTIC INDEPENDENCE
While the U.S. cannot affect the process of Baltic independence directly, it
can devise policies aimed at ensuring that it occurs peacefully. These policies
must rest on a foundation of solid principles that include:
Principle #1: The U.S. supports Baltic independence.
Principle #2: The U.S. very strongly favors the peaceful achievement of in-
dependence.
Principle #3: The U.S. will impose an appropriate penalty on Moscow if it
prevents, by intimidation or force, peaceful independence of the Baltic states.
Principle #4: The U.S. will understand sympathetically if Baltic states must
use force to counter Moscow's intimidation and force, but the U.S. will not be
able to provide help for such Baltic use of force other than American verbal
expressions of solidarity and sympathy.
Principle #5: The U.S. will reward Moscow appropriately for allowing the
Baltic republics to become independent peacefully and similarly will reward
Moscow for allowing other Soviet nationalities to attain independence or self-
determination peacefully.
Principle #6: The U.S. seeks no unilateral gain in the matter of Baltic inde-
pendence nor does it seek to exploit the matter to harm the Soviet Union.
U.S. support for Baltic independence would strengthen the hand of those
in the Kremlin who oppose using force against the nationalities. They could
argue that the use of force would guarantee a loss of Western support for
perestroika and do nothing to solve the underlying problems that are causing
the problems in the first place. U.S. support for Baltic independence also
would signal to Moscow and the nationalist movements that Washington sup-
ports a peaceful and cooperative approach to self-determination, assuming
Moscow refrains from using force.
For the U.S. to do nothing while Baltic peoples seek independence would
only make matters worse. Gorbachev surely is watching Western actions and
statements closely. He surely does not want a rupture in good relations with
the West because the economic revival of his country depends on Western
cooperation. Counseling Gorbachev that this cooperation will be jeopardized
if he represses Baltic independence movements with force should encourage
his restraint. To translate the Six Principles into policy, Bush should:
Warn Moscow against the use of force against the Baltic states.
Washington must make clear to Moscow that a Soviet crackdown in the Bal-
tics will result in an abrupt downturn in its relations with the U.S. and the
West as a whole. This warning should be communicated both publicly and
privately by Bush and the Congress. The Administration has been toughening
its public signals to Moscow, most notably Secretary of Defense Richard
Cheney's March 25 statement that a Soviet military intervention would have
"a significant negative impact" on U.S.-Soviet relations.
11
The U.S. should warn Moscow that the use of force against the Baltic states
would result in a number of costs to the Soviet Union, especially relating to
Moscow's attempts to increase economic cooperation with the West. Such a
warning could give the Baltic states additional leverage against Moscow and
encourage the Kremlin to settle this problem peacefully.
Among the costs that Bush should say that he will impose are:
1) Postponement of the promises made at the Malta Summit. These in-
cluded expanding U.S.-Soviet technical cooperation, lifting U.S. restrictions
on export credits and guarantees, negotiating a bilateral investment treaty
and supporting Soviet observer status at the General Agreement on Tariffs
and Trade (GATT) talks.
2) A call upon the United Nations to condemn the Soviet action in the Bal-
tics just as the U.N. condemned the Soviet invasion of Afghanistan.
3) Suspension of U.S.-Soviet scientific exchanges.
4) Opposition to Soviet membership in the International Monetary Fund,
World Bank and other international organizations.
Formally recognize the Baltic states as independent. For half a cen-
tury, the U.S. has maintained that Estonia, Latvia, and Lithuania were forcib-
ly and illegally incorporated into the Soviet Union and has demanded that
the Soviet Union restore their independence. It rightly refused to deal with
the unelected communist governments of these countries that followed the
Soviet annexation. Now that these countries are becoming free and
democratic, the U.S. should not ignore their requests for recognition. the U.S.
should impose three conditions for recognition: The governments in the Bal-
tic states must be democratically elected; the governments formally must
declare or reassert their independence; the governments must request U.S.
recognition.
Lithuania meets all three conditions. The democratic forces under the
Sajudis banner won over two-thirds of the seats in the February 24 elections
for the Lithuanian parliament. A government headed by President Vytautas
Landsbergis, the leader of Sajudis, was established and independence was
declared on March 11 by a parliamentary vote of 141 to 0. Requests for
Western recognition followed immediately. Estonia and Latvia seem to be
following these steps rapidly. In the two republics' March 18 parliamentary
elections, the Popular Fronts in both republics won a majority of the seats.
Each has established governments expected to declare formal independence
shortly.
The Bush Administration has added a fourth condition for U.S. recogni-
tion: that these governments be in full and effective control of their territory.
This is not unreasonable as long as it is not used as an excuse to avoid recogni-
tion. The words "effective control," however, are ambiguous and should be
clearly defined.
12
Include these countries in the U.S. assistance package for Eastern
Europe. The SEED (Support for East European Democracy) Act of 1990, to
help Poland and Hungary, will be expanded this year to all of Eastern
Europe. This measure has been dubbed SEED II. Independent Estonia, Lat-
via, and Lithuania will be part of Eastern Europe and should be entitled to
participate in SEED II's programs as are Eastern Europe's other countries.
Among other things, this would make them eligible for loans to private
entrepreneurs, give their governments access to credit, and provide them the
technical assistance to clean their environment, improve their farm economy,
and launch small businesses.
The Baltic states especially need assistance establishing centers for busi-
ness education and managerial expertise. Their future depends on their creat-
ing a free market economy quickly; yet they have little experience with
capitalism and insufficient resources to hire experts from abroad. America
can help them establish business schools and take other measures to speed
free market reforms. No U.S. assistance, however, should be funneled
through Soviet organizations without the consent of the Baltic governments.
These governments, for example, may authorize the U.S. to deal with Soviet
banking, customs, and other organizations.
Ask Congress to exchange parliamentary groups with each Baltic
republic. Congress has a very important role to play in providing symbolic
and material support to Lithuania especially if Bush is unable to grant recog-
nition to Lithuania in the near future. By exchanging official delegates with
the new Baltic parliaments, Congress could demonstrate highly visible
American support for the new democratic governments. Such a connection
would help to end the psychological isolation these countries feel and could
also be used to provide the new parliaments with assistance on establishing
their legislative authority. Congress should also invite President Landsbergis
to address a joint session.
Make Soviet military occupation of the Baltic states a conventional
arms control issue. At the Vienna talks on an East-West treaty on Conven-
tional Forces in Europe (CFE), the U.S. and its NATO allies should declare
that nothing in the agreement implies recognition of any Soviet right to sta-
tion its forces in the Baltic States, and declare their intention to make this oc-
cupation subject to any follow-on negotiations on reducing conventional for-
ces. Soviet forces in the Baltic region total nearly 200,000. Given the official
congratulations by Czechoslovakia and Poland to Lithuania's declaration of
independence, it is possible that several of Moscow's current Warsaw Pact al-
lies would make a declaration on the Baltics like that of NATO. U.S.
diplomats quietly should ask East European governments if they are willing
to join the West in issuing such a statement.
9 The Military Balance, 1989-90 London: International Institute for Strategic Studies, pp. 38-39.
13
Press international organizations to admit the Baltic states as mem-
bers. The U.S. should press the United Nations, the General Agreement on
Tariffs and Trade (GATT) organization, the International Monetary Fund
(IMF), and other international organizations to admit the Baltic republics as
full and independent members. The U.S. should encourage the West
Europeans to admit the Baltic states into European and regional organiza-
tions like the Council of Europe, established in 1948 as an organization of
European parliamentary democracies. The Council already has invited the
new democracies of Hungary and Czechoslovakia to join.
Press for Baltic independence to be on the forthcoming CSCE con-
ference agenda. Due to convene this fall, though the date and place are not
settled, the Conference on Security and Cooperation in Europe (CSCE) is a
gathering of nearly all the countries of Enrope plus the U.S. and Canada.
Convened at Moscow's insistence, it will cuss current developments in
Europe, like German reunification, expanded economic cooperation, and
military security. Added to the agenda should be Baltic independence. The
Americans, Europeans, and Soviets could discuss the removal of Soviet
troops from Baltic territories, the restructuring of the Baltic states' economic
ties, and the impact of independence on regional security. Since CSCE in-
cludes every European state except Albania, which has refused to participate,
the U.S. should insist upon Baltic participation.
Encourage America's Western allies to take the same measures. The
effects of U.S. support for Baltic independence would be magnified greatly
were it part of a united Western effort. This requires Washington's leadership
in supporting the Baltics and coordinating a joint Western response. The U.S.
also should encourage its allies to link improved economic ties with Moscow
to a peaceful transition to independence in the Baltic states. Washington,
however, should not make its own actions conditional on a united Western
front.
CONCLUSION
For half a century, America has pressed the Soviet Union to restore inde-
pendence to the Baltic republics. And for half a century, these rhetorical
demands were easy to make because there was little danger that there would
be any need to act on them.
Now, largely through their own courageous efforts, the peoples of Estonia,
Latvia, and Lithuania have taken the first decisive steps toward restoration of
their independence. They have held democratic elections under often adverse
conditions and delivered a solid mandate to their new governments to move
toward independence. These governments reflexively and understandably
have turned to the West as new members of the international democratic
community and requested recognition and assistance. So far, the response has
been meek.
14
Preventing Force. Moscow is demonstrating its intention to suppress the
Baltic states, certainly by heavy-handed intimidation and possibly by force. It
is before force is used that America must move to prevent it.
Gorbachev, almost beyond doubt, prefers to avoid force. Given his desires
to improve his image in the West and to secure the benefits of friendlier rela-
tions, he surely favors economic and political coercion to bring the Baltic
states to heel. The new Baltic governments are prepared for an extended
period of negotiation with Moscow and believe that they can survive the dif-
ficult times ahead. They are confident that the Soviet leadership ultimately
will recognize that there is no alternative to negotiation.
It is in the West's interest that Gorbachev and the Soviet leadership reach
this conclusion as quickly as possible. The West can help to even the odds be-
tween the Baltics and the Soviet Union by coming down clearly on the side of
those struggling to achieve the goals that Western democracies warmly in-
voke. If the West keeps the Baltics at arm's length, Moscow is likely to con-
clude that the West will tolerate a crackdown for the sake of maintaining
good relations with the Soviet Union.
U.S. Leadership. The U. S. role on Baltic independence is critical. No other
Western country is likely to offer open support. The U.S. thus should grant
formal recognition to the new democratic governments, include the Baltics in
U.S. foreign assistance programs for Eastern Europe, warn Gorbachev that
his use of force will torpedo his good economic and political relations with
the U.S., support the admission by the Baltic states to international organiza-
tions, raise the issue of Baltic independence at this year's upcoming CSCE
meeting, and coordinate a common Western approach on this issue.
The U.S. must formulate a policy that will encourage Moscow and the
Soviet nationalities to address the problems of self-determination in a peace-
ful and negotiated manner. To do this, Washington should construct a pack-
age of incentives and penalties for the Soviet Union which clearly lays out the
actions the United States is prepared to take to ensure that a cooperative ap-
proach produces benefits and a resort to force results in substantial costs.
Pushing A Peaceful Path. With their emphasis on a non-violent and
negotiated approach to indepencence, the Baltic republics could serve as an
important precedent for addressing the problem of the Soviet nationalities.
By supporting their peaceful struggle for independence, the United States
can help to push the process of Soviet decolonization along a peaceful and or-
derly path. What is at stake is the future of the Baltic republics, the hopes of
the other Soviet peoples striving for freedom, and the possibility that the
Soviet Union can shed its repressive past and emerge as a responsible and
trustworthy member of the community of nations.
Douglas Seay
Policy Analyst
15
CHRONOLOGY
February 2, August 11,
July 12, 1920
The Soviet Union recognizes independence of Es-
tonia, Latvia, and Lithuania, respectively, and
renounces all claims on their territory.
July 28, 1922
U.S. grants diplomatic recognition to the Baltic
republics.
August 23, 1939
Hitler-Stalin Pact signed, dividing the Baltic states
and Eastern Europe between Nazi Germany and the
Soviet Union.
Sept. 28, Oct. 5,
Oct. 10, 1939
Moscow forces Estonia, Latvia, and Lithuania to sign
treaties permitting Moscow to station its troops on
their territory, respectively.
June-July 1940
Moscow replaces independent Baltic governments
with communist-controlled "People's Governments."
Mass deportations of Baltic citizens to Siberia and
Soviet Gulag begin.
July 21, 1940
People's Governments in each republic ask for incor-
poration into the Soviet Union and nationalize all
land and industrial enterprises.
June 22, 1941
Nazi Germany attacks its Soviet ally and occupies
the Baltic states.
1944-1947
Baltic forces fight to prevent reincorporation into
the Soviet Union, but are defeated by Soviet military.
Nov. 18, 1988;
July 28, May 18, 1989 Estonia, Latvia, and Lithuania declare sovereignty
16
March 26, 1989
Democratic forces win majority of Baltic seats in
elections for the Soviet Union's Congress of People's
Deputies.
August 22, 1989
Lithuanian Supreme Soviet declares Hitler-Stalin
Pact and Lithuania's incorporation into the Soviet
Union illegal and invalid.
August 23, 1989
Two million people participate in the "Baltic Way," a
human chain stretching from Tallinn through Riga to
Vilnius in a demonstration of Baltic solidarity and a
popular commitment to independence.
November 12, 1989
Estonian Supreme Soviet declares 1940 Soviet an-
nexation to be null and void.
December 20, 1989
Lithuanian Communist Party votes to separate from
the Communist Party of the Soviet Union.
December 28, 1989
Soviet Congress of People's Deputies rules Hitler-
Stalin Pact illegal and invalid but refuses to strike
down the treaties incorporating the Baltic states into
the Soviet Union.
February 24, 1990
Estonian Citizens' Committees hold elections for
Congress of Estonia which represents the Republic
of Estonia destroyed by the 1940 Soviet takeover.
February 24, 1990
Sajudis candidates sweep elections for Lithuanian
Supreme Soviet, winning two-thirds of the seats.
March 11, 1990
Lithuanian Supreme Soviet forms a government,
declares independence, and asks for negotiations
with Moscow.
March 18, 1990
Independence forces win elections for Estonian and
Latvian Supreme Soviets.
March 25, 1990
Estonian Communist Party votes to separate from
the Communist Party of the Soviet Union, after a six-
month transition.
17
Bob Hutchings NSC 5732
NATO Summit
Captive Nations sidebar - looking forward
- Ken tuster 647-8931
Bob Berry State. 647-0695 Karen Voker
Memorandum
RUSH!
The
Herîtage Foundation
214 Massachusetts Avenue N.E. Washington, D.C. 20002 (202)546-4400
7/13/90
Number
274
THE SOVIET COMMUNIST PARTY CONGRESS
REFUSES TO JOIN THE NEW REVOLUTION
The 28th Extraordinary Congress of the Communist Party of the Soviet Union, which ended in
Moscow this week, dispels the last hope that the Party can be reformed. The Party could have
joined the reform movement. It did not. Soviet President Mikhail Gorbachev could have resigned
as the General Secretary of the Communist Party and led the Soviet Union down the path of accel-
erated free market and democratic reforms. He did not. By staying on as Party chief he chose to re-
main at the helm of a ship that surely is sinking. By refusing to surrender the Party's power and im-
mense wealth, the Congress has guaranteed further civil unrest and, possibly, has moved the coun-
try a few steps closer to civil war.
In sharp contrast to Gorbachev's clinging to his red Party membership card, Boris Yeltsin, the
Chairman of the Supreme Soviet of the Russian Republic, resigned publicly from the Party. This
was followed almost immediately by resignations from the Party by the mayors of Moscow and
Leningrad. The result of these dramatic actions is that a national opposition to the Soviet
Communist Party is coalescing around Yeltsin. Ever more clearly, the lines are being drawn and
the sides are being taken in what could be a gargantuan (and perhaps bloody) battle for control of
the Soviet Union.
The Congress allowed the Party Stalinists to blow off steam by declaring their hatred of
capitalism and democracy; beyond this it accomplished very little. Refusing to weaken its grip over
the economy and national security, the Party rejected demands to remove Party organizations from
workplaces, the armed forces, the police, and the KGB. The Soviet communist hardliners even
ruled out a token concession of cosmetic change: they balked at changing the name of the Party
from "communist" to "socialist" or "democratic socialist," as did all communist parties of Eastern
Europe last year.
Rejected by the People. The Party's resistance to free markets and democracy flies in the face of
Soviet public opinion. According to a poll conducted last month by the Siberian newspaper
Sibirskaya Gazeta and quoted in the newspaper Moscow News on June 24, the Party's "Draft
Platform" for the Congress is overwhelmingly rejected by students and workers. Workers are the
most disillusioned, with 79 percent saying they do not support the Platform "at all." Another poll,
cited by the popular newspaper Literaturnaya Gazeta on June 27, reveals that the Party's authority
is rated "almost non-existent" and "non-existent at all" by 57 percent of young workers and
students. Most telling of all, according to a Moscow News poll released on July 5, only 19 percent of
the respondents say they would vote for the Communist Party in multi-party elections.
For a political party supported by less than one-fifth of the population, to insist on ruling is a
sure recipe for violent civil unrest, particularly if demonstrations are allowed and a political
opposition is permitted to organize further. Perhaps the most telling sign of coming civil strife is
the rapid politicization of the labor movement. A year ago the Soviet miners struck for soap, shoes,
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an
attempt to aid or hinder the passage of any bill before Congress.
meat and milk (most of which is yet to be delivered to them). This year, their 24-hour warning
walk-out of July 11 is far more radical. They demand, for example, that the government resign and
the Party give up control of shops and factories, the army, and the KGB. The slogans held aloft by
the striking miners in Kuzbass in southwestern Siberia this week attest to their alienation from
communism. Placards and banners read: "Leninism is an ideology of darkness; "72 years of lies";
and "The armed forces and the people are one - without the Party!"
Notwithstanding the Congress's resistance to deeper reforms, Mikhail Gorbachev put in a
masterful tactical performance at the Congress. He weathered the attacks by such hardliners as
Egor Ligachev, got himself elected to the top post again, prevented an open split between the
social-democratic and Stalinist wings of the Party and, to his credit, offered a passionate, if belated,
defense of the reforms. "There is no way of bringing yesterday back," he said, and that "no
dictatorship, if someone has this crazy idea, can resolve anything."
Judging Gorbachev. The many speeches of Stalinist hardliners at the Congress made Gorbachev
look progressive, even radical. But the pressing question today is not how Gorbachev compares to
party hardliners like Ligachev, but how fast he moves to satisfy the popular demands for a
legitimate democratic government and a working economy. While not denying Gorbachev's role as
an instigator of political reform in the Soviet Union, the time has come to judge Gorbachev not by
how well he conducts intra-party maneuvering, but by how well he responds to the hopes of the
society at large.
A democratic alternative to Gorbachev, in fact, already exists and is growing stronger every day.
A democratic reform caucus called the "Inter-regional Group" was formed last year within the
Soviet Congress of People's Deputies to press for more radical reforms. Free market and
democratic reformers gained control of the Moscow and Leningrad city councils in democratic
elections last spring. And on May 29, Boris Yeltsin was elected Chairman of the Russian
Republic's Supreme Soviet.
A leading Soviet democratic activist, Yuri Afanasiev, put it best in Literaturnaya Gazeta on
July 4: "The today's world sees that Marxism-Leninism is dead, that the ideas of communism can
no longer provide an alternative to Western democracy A real perestroika will not start until the
Party becomes aware of all its sins against the people and relinquishes power." Gorbachev's true
test as a political reformer and leader of the revolution occurring in the Soviet Union today will be
his ability to break his life-long association with the Communist Party, step over its political dead
body, and finally allow the country to have what it desperately needs and wants: an
institutionalized multi-party democracy and the end of the state's economic monopoly. He has very
little time left. The revolution he started is leaving him behind.
Leon Aron, Ph.D.
Salvatori Senior Policy Analyst in Soviet Studies
The
Herîtage Backgrounder Foundation
214 Massachusetts Avenue N.E.
Washington, D.C. 20002
(202)546-4400
Number
4/9/90
133
A U.S.-MEXICO FREE TRADE AREA:
PROMOTING BILATERAL PROSPERITY
(Updating Backgrounder No. 694, "U.S.-Mexico Economic Ties," March 6, 1989.)
Throughout this century, Mexico has been a very poor country compared to the United States.
Since its default on its foreign debts in 1982, Mexico has suffered through a period of increased
economic instability and decline. Now the governments of the U.S. and Mexico are discussing a
plan that could revitalize Mexico's economy and at the same time make the U.S. more competitive.
This plan is to establish a Free Trade Area (FTA), similar to that created between the U.S. and
Canada in 1988 and between the U.S. and Israel in 1985. An FTA requires both countries to drop
all tariffs and many non-tariff barriers to bilateral trade. Such an arrangement with Mexico would
build on that country's significant progress in recent years toward trade liberalization and would
offer the best hope for Mexico to join the ranks of the world's prosperous countries. The Bush Ad-
ministration should give this project top priority by beginning a study on its benefits to U.S. busi-
nesses and briefing Congress regularly on FTA progress.
A U.S.-Mexico FTA makes enormous economic sense. The U.S. is Mexico's principal trading
partner, last year absorbing $25 billion, or around 60 percent, of Mexico's exports and providing
$27.2 billion, or 65 percent, of Mexico's imports. Mexico, America's third largest trading partner,
behind Canada and Japan, receives 6 percent of U.S. exports and sells America 6 percent of its im-
ports. Bilateral trade between the two countries should be even greater. But Mexico's severe restric-
tions on imports and foreign direct investments, added to government overregulation of the
economy and ownership of many enterprises, have created tremendous economic waste, with
resources allocated to inefficient industries. This has kept productivity, job opportunities and, there-
fore, real purchasing power and living standards low. This system, of course, has been a major con-
tributor to Mexico's debt problem.
Mexican Progress. In recent years the government of Mexico has tried to reverse these policies.
In 1986 Mexico joined the General Agreement on Tariffs and Trade (GATT), the international ar-
rangement designed to open markets. As a result of membership, Mexico has cut import tariffs and
eliminated most import licenses. A special framework agreement signed with the U.S. in 1987 al-
lows the two countries to deal more quickly with bilateral trade disputes.
The U.S. and Mexico began their preliminary talks this January on establishing an FTA. But
negotiating an FTA is a long, cumbersome, contentious process. Washington and Ottawa worked on
the U.S.-Canada FTA for two years, Canada already having spent several years in research. Since
Mexico is poorer than the U.S., it has more to gain from an FTA. Greater Mexican imports of cer-
tain American food products would benefit Mexican consumers directly. The competition from
U.S. firms would create incentives for the Mexican government to privatize inefficient state-owned
enterprises and for Mexican businessmen to channel capital and labor into more productive in-
dustries. If an FTA substantially liberalized U.S. direct investment opportunities in Mexico, Mexico
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an
attempt to aid or hinder the passage of any bill before Congress.
would obtain much needed capital for its businesses. Finally, greater access to the U.S. market for
Mexican business would provide greater business opportunities for Mexicans and a greater selec-
tion of affordable goods for American consumers.
Special Breaks. A preview of the FTA benefits is found in the special U.S.-Mexico arrangement
popularly known as the maquiladora system. Under this program, which gained momentum in the
last decade, U.S. firms can establish wholly owned factories in Mexico, typically near the U.S.-
Mexican border. Permitting Americans to own factories outright is an exception to the usual
Mexican limit of 49 percent foreign ownership. The owners can import, duty free, capital equip-
ment, components and raw materials for their operations. The final products must be exported. The
U.S. for its part, gives special tariff breaks to imports manufactured from American-made com-
ponents. This maquiladora system employs an estimated 350,000 Mexicans. Some 100,000
Americans work at jobs in the U.S. to supply these facilities. Many U.S. companies have transferred
parts of the manufacturing process to Mexico, making U.S. companies more competitive.
Some opponents of an FTA argue that while such an arrangement might work well for countries
at similar stages of economic development, for example, between the U.S. and Canada, an FTA be-
tween a poor country and the U.S. would not work. Yet arguments from critics on both sides of the
Rio Grande betray fundamental misunderstanding of the issue. Some Mexicans fear that their
country, with a Gross National Product only 3 percent the size of America's, will not be able to com-
pete with the rich and technologically sophisticated U.S. Some Americans fear just the opposite,
that American enterprises will be unable to complete with low Mexican wages. Both fears are un-
founded. History shows that each economy would be helped by freer access to the other.
An FTA also would address another concern of many Americans: illegal immigration. It is under-
standable that Mexicans who are denied economic opportunities in their own country seek their for-
tunes in the North. As an FTA provides greater employment opportunities for Mexicans in their
own country, it removes some of the incentive for Mexicans to go North illegally and would be a
magnet to attract back home many Mexicans now working in America illegally.
Economic Powerhouse. A Mexican FTA would be another step in creating the North American
FTA, stretching first from Canada to Mexico and then eventually including the democratic
countries of the Caribbean and Central America. This would create the world's economic power-
house, dwarfing Japan and towering over even a united European market.
The Mexican economy continues slowly to overcome the economic difficulties of the last decade.
And a U.S.-Mexican FTA will take some years to negotiate and implement. Because of its protec-
tionist past, many Mexicans do not understand fully the benefits to their country of an FTA and are
suspicious of such an arrangement. The Bush Administration therefore has proceeded quietly and
cautiously in its discussions with Mexican officials; it should continue in this manner. The White
House also, however, should begin preparing the ground for future formal negotiations. It should
instruct the Department of Commerce or the U.S. Trade Representative's Office to begin a study of
the benefits to American firms of an FTA. In addition, it should begin regular discussions and brief-
ings with key Members of Congress on progress in trade talks with Mexico, so that Congress will be
well informed when the issue comes before it.
In an FTA there are not winners and losers. Both countries win. Therefore the leaders of both
countries should be congratulated for entertaining this bold and mutually beneficial initiative and
encouraged to continue to secure open markets for both countries.
Edward L. Hudgins, Ph. D.
Director, Center for International Economic Growth
The Backgro
From
Heritage Foundation
No.
The Heritage Foundation
214 Massachusetts Avenue N.E.
768
David Mason
May 14, 1990
PREPARING FOR A POST-CASTRO CUBA
INTRODUCTION
Fidel Castro surely is nearing his last days as the self-described "maximum
leader" of Cuba. As dictator of the sole remaining communist dictatorship in
the Western Hemisphere, he faces unprecedented domestic and international
pressures that could topple him before George Bush finishes his first term as
President. Internationally isolated, Castro is quarreling with his financial
benefactor, Soviet leader Mikhail Gorbachev, and he is under fire from the
United Nations for human rights abuses. He also is presiding over a collaps-
ing economy and is plagued with rising internal unrest.
The question, therefore, is not whether Castro will fall but when he will. As
such, the United States must begin preparing now for Castro's departure.
First, Washington should tighten U.S. restrictions on trade with Cuba to ex-
pedite Castro's demise and encourage America's Western allies to further iso-
late him. Second, and more important, the U.S. should craft a strategy to help
revive a free and prosperous Cuba once he is gone.
Bankrupt Police State. Castro's popular image as a romantic revolutionary
leader has been replaced by growing international recognition of Cuba as an
economically and morally bankrupt police state. Cuba's long-standing trade
partners in Eastern Europe are rejecting barter deals with Havana in favor of
cash trade with the West. Castro's political survival depends on the $6 billion
in annual military assistance and economic subsidies from the cash-starved
Soviet leadership, which has abandoned former German dictator Erich
Honecker and other communist allies in Europe. This aid to Cuba increasing-
ly is becoming a casualty of Moscow's internal economic crisis and of rising
resentment among Soviet legislators toward foreign aid.
The case for continuing Washington's policy of economic pressure against
Castro is overwhelming. U.S. economic and political isolation of Cuba is gain-
Note: Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an
attempt to aid or hinder the passage of any bill before Congress.
ing momentum as many Eastern European and such Third World nations as
Morocco and Panama are rejecting Castro's pleas for diplomatic and finan-
cial support. Castro continues to assault .S.interests abroad and deny
human rights and economic progress at home. At a time when the Soviet offi-
cials openly question Moscow's economic aid to a repressive Cuban regime,
Washington should not replace Moscow as Castro's economic lifeline.
U.S. policies to help facilitate Cuba's transition to democracy should rest
on the foundation of consistently applied principles and objectives. First,
Washington should follow a seven-point program to hasten Castro's political
demise. The U.S. should:
1) Increase U.S. economic pressure against Castro. U.S. restrictions on
tourism and trade with Cuba limit Castro's support for revolutionary move-
ments by undermining Cuba's economic vitality and hasten Cuba's transition
to democratic capitalism. Washington should increase economic pressure on
Havana by closing loopholes in the U.S. trade embargo against Cuba.
2) Establish clear incentives for Moscow to cut aid to Cuba. Washington
should deny Soviet access to U.S. technology, securities markets, and trade
credit programs unless Moscow cuts its military and economic aid to Havana
in a verifiable way.
3) Seek Western cooperation in isolating Cuba economically. Washington
should encourage Canada, Britain, Japan, and other industrial consumers of
Cuban sugar, seafood, and other goods to find alternative suppliers in Central
America and the Caribbean like Barbados, the Dominican Republic, and
Jamaica.
4) Encourage Western nations to press for political reform in Cuba. Bush
should ask the Western allies to focus international attention on human rights
abuses in Cuba and to call for a referendum in Cuba on the legitimacy of
Castro's rule.
5) Challenge Castro's political influence in Latin America. Bush repeated-
ly should call on Latin leaders to denounce human rights abuses in Cuba and
to reject Havana's bid to join the Organization of American States.
6) Set specific conditions for normalization of U.S.-Cuba relations. These
conditions should include: the establishment of democratic institutions in
Cuba, removal of restrictions on emigration, reduction of the Cuban armed
forces, and a halt to Castro's export of revolution.
7) Offer a clear economic and political alternative to Castro's "Socialist
Paradise." The Bush Administration should use Radio Marti and TV Marti -
stations operated by the U.S. Information Agency which broadcast news and
entertainment programs to Cuba - to inform the Cuban people about the
potential benefits of U.S. economic aid and cooperation with a democratic,
market-oriented Cuba.
2
Planning for a Free Cuba
CUBA
Once U.S. conditions for nor-
Area: 44,200 square miles, about the size
malization are met by a post-
of Pennsylvania.
Castro government, Washington
should move quickly to help revi-
Population: 10.4 million.
talize Cuba. To promote
Capital: Havana, population 2,013,000.
democracy and economic develop-
ment in a post-Castro Cuba, Bush
Military: Regular Armed Forces, 162,000;
should:
Reserves 165,000; Territorial Militia
Troops, 1.2 million; State Security, 85,000.
1) Help private commercial and
Cuban-American groups prepare
Ethnic Groups: 51% Mulatto, 37% white,
programs to promote market-
11% black, 1% Chinese.
oriented development in Cuba.
Work Force: Agriculture, 25%. Industry
Bush should order U.S. Com-
and commerce, 47%. Services and
merce Department and U.S. Agen-
government, 28%.
cy for International Development
studies of Cuba's needs and estab-
Economy: Agriculture. Main crops: sugar,
lish a Cuban Development Coun-
tobacco, cereals, citrus fruits. Major
cil to organize U.S. financial and
industries: food processing, sugar milling,
business support for economic
petroleum refining, electric power,
development initiatives in a free
chemicals, cement.
Cuba.
Exports (1987): $5.4 billion, mainly: sugar,
2) Develop an emergency relief
petroleum, nickel, shellfish, tobacco.
program for a free Cuba.
Exports by major area: U.S.S.R., $3.9
Washington should prepare a U.S.
billion; Eastern Europe, $818 million;
emergency aid plan that will give
non-Communist countries, $606 million.
Cuba the hard currency to pur-
Major non-Soviet bloc trade partners:
chase such critical imports as food,
China (PRC), Spain, Japan, France,
farm machinery, and oil, assist
Canada.
private voluntary relief programs,
Imports (1987): $7.6 billion, mainly:
and cover the transition costs to a
petroleum, machinery, manufactured
free market in a post-Castro Cuba.
goods, foodstuffs, chemicals. Imports by
3) Press for Cuban debt relief.
major area: U.S.S.R., $5.5 billion, Eastern
Washington should encourage
Europe, $1.1 billion; non-Communist
Western government creditors to
countries, $938 million. Major non-Soviet
cancel or write down their portion
bloc trade partners: Spain, Argentina,
of Cuba's $6.8 billion debt.
Japan, China (PRC), West Germany.
4) Lift U.S. economic sanctions
against Cuba.
5) Begin negotiating a U.S.-
Sources: U.S. Central Intelligence Agency, "The
Cuban Economy: A Statistical Review," ALA
Cuba free trade agreement to
89-10009 (April 1989); International Monetary
stimulate economic growth in
Fund, Direction of Trade Statistics Yearbook,
both countries.
Washington, D.C. (1989); Jaime Suchliki, The
Cuban Military Under Castro (Miami, Florida,
University of Miami Press, 1989); U.S. Central
Intelligence Agency, World Factbook (1989).
3
6) Help train Cubans in business and market economics by creating and
subsidizing academic exchange and business internship programs.
7) Establish criteria to measure Cuba's progress toward a free market
economy. Examples: cutting taxes, deregulating the private sector, and estab-
lishing foreign investment and private property rights.
THE ECONOMIC DECLINE OF CASTRO'S CUBA
Faced with a withering communist bloc and increasing political isolation
from the international community, Fidel Castro vowed on March 16, 1990,
that his rigid brand of communism "is our policy [and] there can be no other
way."1
Cuba's economy is paying a heavy price for Castro's rigidity. No country in
Latin America can match the extensive and rapid economic decline suffered
by Cuba during Castro's reign. Before Castro took power in 1959, Cuba
ranked third in per capita income among Latin American nations, behind
only Argentina and Venezuela. Today after 30 years of socialism and more
than $45 billion in Soviet economic aid, Cuba's per capita income of less than
$1,500 ranks in the bottom half of nations in Latin America. 2
Cuba: Bangladesh of the Caribbean
Havana is now suffering its worst economic nightmare since the 1959
revolution that brought Castro to power. Castro's campaign, begun in 1986,
to stop Gorbachev-like reforms and to "rectify errors and negative [capitalist]
tendencies" has accelerated Cuba's economic decline. Cuba's export earnings
have dropped 17 percent since 1986. Cuba had a $1.2 billion budget deficit in
1988, nearly twice that of the year before, and roughly twice the U.S. deficit
as a share of GNP. Cuba's per capita income has declined 4 percent since
1986, and economic production, excluding sugar, fell by 2.4 percent last year.
Cuba's hard currency reserves, or cash on hand, dipped to a mere $78 million
1 "Castro Says Cuba Will Stay the Course," Washington Post, March 17, 1990, p.21.
2 Robert A. Packenham, "Capitalist vs. Socialist Dependency: the Case of Cuba," Journal of Interamerican
Studies and World Affairs, Spring 1986, p. 76. See also, Wharton Econometric Forecasting Associates, "Cuban
Economy Project, Volume I: Construction of Cuban Economic Activity and Trade Indexes," Philadelphia,
November 1983, p. 1.
4
last year - roughly one-sixth of the cash reserves in famine-prone
Bangladesh, and only one-eighth of Cuba's cash reserves in 1947. 3
Inefficient Production. Cuba has little industrial base, while agricultural
production is limited to sugar, tobacco, and citrus crops. In fact, Cuba's
economy is more reliant on sugar production than at any time in this century.
Sugar production ac-
counted for 80 percent of
Soviet Sugar Subsidies
Cuba's exports between
to Cuba
1920 and 1959. By 1986,
sugar represented 82 per-
Cents per pound
50
cent of total Cuban ex-
ports. Sugar exports are
40
Cuba's only significant
30
source of hard currency
earnings and represent its
20
only means for servicing
10
its $6.8 billion debt to
Western lenders such as
0
1959
1965
1970
1975
1980
1985
1986
1988
Japan and Sweden.
Castro's sugar plantations
World Sugar Price
Soviet Price
remain inefficient and un-
Heritage InfoCharl
productive. Cuba's sugar
Sources: Jose L. Rodriguez, "Las relaciones economicas
harvest in 1960, Castro's
Cuba-URSS, 1960-1985" Revista del CIEM, No. 17 (1986):
first full year in power,
25. International Monetary Fund, "International Financial
was 5.95 million metric
Statistics," 1988.
tons. By 1987 it had
reached 7.2 million tons, an average annual growth rate of less than 1 per-
cent. By contrast, Brazil's annual sugar harvest grew from 2.8 million metric
tons in 1958 to more than 8.5 million metric tons in 1987. 4
What is worse, Cuba must produce roughly 12 million metric tons of sugar
- nearly twice the total 1989 harvest - to cover outstanding sugar contracts
with international sugar brokers, East bloc countries, mainland China, and
Japan.
3 U.S. Central Intelligence Agency, "The Cuban Economy: A Statistical Review," ALA 89-10009 (April 1989);
Comite Estatal de Estadisticas, "Anuario estadistico de Cuba" (Havana: 1982, 1986); National Bank of Cuba,
Informe Economico Trimestral (Havana: March 1989); U.S. Department of Commerce, "U.S. Relations with
Cuba: A Statistical Survey," HF 3075. U49 (August 1975). The Economist: Foreign Report, "Castro's coming
crisis," December 21, 1989; Dr. Jose Luis Rodriguez, "Sluggish Production," Cuba Business (London),
December 1989.
4 U.S. Central Intelligence Agency, The Cuban Economy: A Statistical Review, ALA 89-10009 (April 1989), pp.
7-9; U.S. Department of Commerce, "U.S. Relations with Cuba: A Statistical Survey," HF 3075. U49 (August
1975).
5
Cuba's tourist industry is also in deep trouble. Three decades ago, Cuba
welcomed nearly 400,000 foreign visitors annually; only half this number
visited Cuba in 1988. Cuba earned a meager $120 million from tourist trade
last year. By contrast, Jamaica's tourist trade earned $553 million last year.
Only one 5 big-city tourist hotel has been built in Cuba since Castro came to
power.
Debt Capital. Cuba has the highest per capita debt of any nation in Latin
America. Cuba's $6.8 billion debt to Western lenders is 150 times greater
than her 1959 debt total of $45.5 million. The Soviet government journal Iz-
vestia reported on March 1 that Cuba's debt to the U.S.S.R. had reached $24
billion. Cuba's total foreign debt is $30.8 billion and its per capita foreign
debt of nearly $3,000 is nearly three times that of Mexico. Havana's refusal to
honor its debt obligations to Western government lenders since July 1986 has
severely restricted loans to Cuba. The National Bank of Cuba in 1988
reported "an overall absence of credits, particularly medium-term credits. ,,6
Cuba's economy cannot function without continued Soviet and East
European economic and technical assistance. Aid from the Council for
Mutual Economic Assistance (COMECON), the Soviet-led trading bloc of
ten communist countries, includes subsidized purchases of Cuban sugar, nick-
el and tobacco products, and exports to Cuba of oil and manufactured goods,
and economic development grants. Moscow alone has provided over $45 bil-
lion in economic assistance and $14 billion in military aid to Cuba since 1960.
This is roughly one-third of Cuba's gross national product over that period.
Moscow gave an estimated $6 billion in economic and military assistance to
Cuba last year. Nearly ten thousand Soviet and East European bureaucrats in
Havana help manage the Cuban economy in accordance with the Soviet
Union's five-year economic plan. Cuba-U.S.S.R. trade represents 75 percent,
and Eastern 7 Europe-Cuba accounts for 12 percent, of Cuba's total trade turn-
over.
Castro VS. Perestroika
Castro has bitterly attacked Gorbachev's political and economic reforms.
Not only has Castro condemned perestroika as "contrary to the principles of
Marxism-Leninism," since last August he has banned the distribution of Mos-
5 U.S. Department of Commerce, "U.S. Relations with Cuba," pp. 32-33; Europa World Factbook, 1989
"Cuba: Statistical Survey" (N.Y.: Europa Publications Ltd., 1989) p. 806; "Cuba's Economic Woes," Christian
Science Monitor, April 4, 1989, p.1.
6 Economist: Foreign Report, op. cit. p. 2; U.S. Congress, Joint Economic Committee Report, "East-West
Trade: The Prospects to 1985," 97th Congress, 2nd Session, 1982, pp. 107-110.
7 U.S. CIA, The Cuban Economy, pp.23-28; Carmelo Mesa-Lago, "The Economy of Cuba: a Two Decade
Appraisal" (Albuquerque, New Mexico: University of New Mexico Press, 1981) p. 86.; and U.S. Defense
Intelligence Agency data.
6
cow News, the self-
Soviet Aid To Cuba
proclaimed flagship of
$ Billions
reform in the U.S.S.R., claim-
5
ing that it is more subversive
than information from
4
Western news sources.
8
3
Castro is playing a risky
2
game. Political pressure is
mounting inside the Soviet
1
Union to cut the costly sub-
0
sidy programs to Castro. Ex-
1980
1981
1982
1983
1984
1985
1986
1987
1988
amples: Andrei Kortunov, a
Economic
Military
member of the U.S.S.R. In-
stitute of the U.S.A. and
Heritage InfoChart
Sources: U.S. Defense Intelligence Agency, "The Cuban
Canada, last December 10 is-
Economy: A Statistical Review," #ALA 89-10009 (April
sued a scathing critique of
1989). Carmelo Mesa-Lago, The Economy of Socialist
Soviet military and economic
Cuba, Albuquerque, New Mexico: University of New
aid to Cuba, calling it a waste
Mexico Press, 1981.
of money. Three days later,
Sergei Lavrov, Deputy Chief of the Foreign Ministry's International Affairs
Department, announced that Moscow's foreign aid program was under
review. Then on March 7, Moscow News published a strident condemnation
of Castro's Brezhnev-style communism, and on April 8, Pravda cited Castro's
hostility to glasnost and perestroika as justification for a Soviet revision in aid
priorities toward Cuba.
Kremlin Cutback. Castro already is feeling the effect of Moscow's waning
interest in Cuba. The Soviet Union and Cuba are currently negotiating an
economic assistance plan which is likely to reduce substantially Moscow's cur-
rent $4.5 billion annual economic aid program for Cuba. A Soviet delegation
headed by Leonid Abalkin, Vice President of the Soviet Council of Ministers,
arrived in Havana on April 17. He informed Castro that a new economic
cooperation accord will not be for five years as before, but probably for two
years. Abalkin also said that Soviet sugar subsidies (roughly four times the
market price for sugar since 1986) must be reduced to levels closer to the cur-
rent world price of $280 per ton. If this happens, Havana's earnings from its
only significant cash crop will plummet and Cuba will be forced to cut pur-
chases of critical imports such as food, machinery, and spare parts. Internal
pressures against Castro's rule will grow.
Moscow's desperate cash shortage and economic restructuring programs
also have reduced Moscow's interest in subsidized trade with Havana. As a
result, last November the U.S.S.R. signed its first long-term sugar import con-
8 "Cuba Bans Two Liberal Soviet Publications," Washington Post, August 5, 1989, p.11; and FBIS-Soviet
Union, 89-237, December 15, 1989, p. 39.
7
tract with a non-Cuban supplier, the Queensland Sugar Board of Australia,
and contracts for purchases of sugar from Brazil and Thailand are also being
negotiated. The Soviet Union meanwhile failed to deliver promised wheat
and grain shipments to Cuba in the first two months of this year. Now that in-
dependent Soviet enterprises have the right to trade directly on foreign
markets, they are more likely to seek cash 9 trade and reject barter arrange-
ments preferred by cash-poor Havana.
Soviet oil shipments to Cuba also are declining in volume and increasing in
cost. Cuba's hard currency earnings from the resale of oil imported from the
U.S.S.R. dropped from $621 million (or roughly 40 percent of Cuba's total
hard currency earnings) in 1985 to zero in 1989. According to data published
last year by the Central Bank of Cuba, Moscow cut its shipment of subsidized
oil to Cuba by $200 million in 1989. Given that Soviet oil production fell by
350,000 barrels per day last year and is expected this year to drop another
500,000 per day, Cuba is likely to experience even more painful reductions in
subsidized Soviet oil shipments to Havana.
Eastern Europe VS. Cuba
Economic liberalization in Eastern Europe will damage the Cuban
economy. New reform-minded governments in Eastern Europe need hard
currency to purchase consumer goods, pay interest on foreign debts, and
finance their transition toward free market economies. They therefore need
cash payments for their exports, not the barter trade deals with cash-starved
Cuba. The new Soviet and East European emphasis on cash trade will under-
cut Cuba's export market and cause shortages of food and industrial goods in
Havana.
Moscow had required East bloc nations to help prop up the Cuban
economy by purchasing Cuban sugar at prices roughly three times the market
rate of 8 cents per pound in 1988. Emerging democracies in Eastern Europe
could save roughly $400 million this year by purchasing sugar from cheaper,
more reliable producers in Barbados, the Dominican Republic, and Jamaica.
Reform-minded East European enterprises are already changing the way
they do business with Cuba. Hungary's leading bus manufacturer, Ikarus,
boosted prices for bus spare parts by 20 percent in September 1989, making
them unaffordable for Havana. As a result, parts shortages have disabled
most of Havana's mass transit system. Further, Poland and East Germany
failed to honor agreements with Moscow this year to transport Cuban citrus
goods to the Soviet Union. These emerging democracies are pressing Mos-
cow to pay in scarce hard currency for the use of their freight vessels.
Moreover, while COMECON countries in Eastern Europe allow their curren-
cies to fall to their market value to make their exports more competitive,
9 John Attfield, "Will It Harm Cuba?" Cuba Business (London) December 1989, p. 5-7.
8
Cuba refuses to do so. Cuba's over-valued peso thus makes Cuban exports
more expensive and less attractive to East European and Western consumers.
Recent political trends in Eastern Europe are certain to accelerate Cuba's
economic decline. President Vaclav Havel of Czechoslovakia pledged to U.S.
congressional leaders in February to remove the Cuban diplomatic mission
from the Czech embassy in Washington and phase out aid to Cuba as soon as
Czech elections are completed in July. Said Polish Solidarity leader Lech
Walesa last November concerning the impact on Cuba of changes in the East
bloc: "[the ,,10 Cuban exiles in Miami] should start packing their bags for
Havana.
CASTRO'S INTERNATIONAL AND DOMESTIC ISOLATION
Isolated increasingly from the Soviet bloc, Castro has attempted to mend
political fences with the international community. He said in February that
he welcomes any efforts by Latin American nations to readmit Cuba to the
Organization of American States. He invited Pope John Paul II last January
to visit Havana in December 1991.
Despite these efforts, Castro is dismissed by Latin leaders as a fading
Stalinist relic. During a news interview last October, for instance Costa Rican
President Oscar Arias called Castro "a Caribbean Kim II-Sung [the com-
munist dictator of North Korea]." Arias even suggested that Gorbachev cut
off oil shipment and subsidies to Castro. 11
Castro's international allies on the left are vanishing rapidly as well. The es-
tablishment of democracy in Nicaragua forced the departure in April of
Cuban military and intelligence personnel from that country. This effectively
has eliminated Castro's access to the airfields, harbors, and guerrilla supply
routes on the Central American mainland. The ouster of former Panamanian
strongman General Manuel Noriega will mean that Cuban fishing fleets
operating from Panamanian ports no longer will be able to smuggle arms to
Marxist terrorists in El Salvador. The Cuban dictator also relied on commer-
cial front companies in Panama to obtain illegally U.S. advanced technology
and other goods worth $100 million each year. With Noriega gone, this, too,
will stop.
10 Comments by Lech Walesa during a visit to Poland in November 1989 by a delegation from the Cuban
American National Foundation. See also, Alfred Padula, "Is Cuba Next?" Times of the Americas, November 28,
1989, p.1.
11 "President Arias Comments on Castro's Isolation," Hamburg DPA, December 29, 1989; in
FBIS-LAT-90-001, January 2, 1990 p. 3.
9
Calling for a Plebiscite. The glare of international publicity on Castro's bru-
tal dictatorship has further isolated Cuba. More than 100 Latin American and
European intellectuals, including Poland's Lech Walesa and Peruvian
novelist Mario Vargas Llosa, issued a petition last Januaury 1 calling on
Castro to hold a plebiscite on the legitimacy of his rule. Then, the United Na-
tions Human Rights Commission (UNHRC) voted this March 6 to condemn
the Castro regime for harassing and imprisoning human rights advocates in
Cuba and to continue U.N. investigations of Cuba's human rights abuses.
Joining in this vote of condemnation were Hungary and Bulgaria, while
Poland and 12 Czechoslovakia, non-voting UNHRC members, co-sponsored the
resolution.
Internal Dissent
Castro sits on a powder keg of popular resentment. Romania's spontaneous
public rejection and overthrow of dictator Nicolae Ceausescu last year may
be a preview of what could happen in Cuba. According to the U.S. Coast
Guard, the number of Cuban "boat people" sailing to Miami on rafts and
small boats rose from 27 in 1986 to 391 in 1989. Roughly fifteen organized
dissident groups have formed in Cuba since September 1988. Among the
most influential are the Cuban Committee for Human Rights and the Cuban
Commission for Human Rights and National Reconciliation. Castro has
responded to unrest in Cuba by increasing repression while appealing to
popular nationalism and devotion to romantic revolutionary ideals. The
Cuban Communist Party launched a campaign on February 17 to "revitalize"
the 80,000 Committees for the Defense of the Revolution, or neighborhood
spy organizations. It also vowed to "perfect the political and institutional sys-
tem of the nation." Castro has imprisoned over thirty leaders of human rights
groups since September 1988.
Long Knives in Havana. Bureaucratic elites in the Cuban Armed Forces
and Interior Ministries, or secret police, are the key to Castro's political sur-
vival. The Cuban Armed Forces, headed by Fidel's hard-line brother Raul
Castro, controls nearly 500,000 regular and reserve troops and 1.2 million
civilians in so-called Territorial Troop militias, or political-military organiza-
tions, which work to foster loyalty to the Communist Party and its policies.
The secret police apparatus has roughly 85,000 employees.
Castro fears that reformist factions within the army or secret police could
become rivals to his apparent successor, Raul Castro. Fidel staged widely
publicized trials in July 1989 which led to the execution of four high-level
12 More than 100 U.S. Congressmen have urged Bush to award the Presidential Medal of Freedom to
Armando Valladares U.S. Ambassador to the UNHRC and a former political prisoner in Castro's prisons, for
his efforts to foster international condemnation of Castro's human rights abuses.
10
military officials, including Cuba's most highly decorated Army hero, Major
General Arnaldo Ochoa Sanchez. The charges: drug trafficking, corruption,
and "betraying the revolution." Ochoa, however, surely was not eliminated
because of alleged drug trafficking. According to U.S. Customs and Drug En-
forcement Agency officials, drug shipments continue at a steady pace through
Cuba, despite Castro's alleged drug crackdown. Rather, as Raul Castro
demonstrated in his frequent criticisms of Ochoa, the Castro brothers viewed
the popular general as a threat to Raul's succession. 13
THE EFFECTS OF U.S. SANCTIONS AGAINST CASTRO'S CUBA
According to Castro, the July 1963 U.S. trade embargo, which prohibits vir-
tually all financial and trade transactions with Cuba, has caused "mountains
of difficulties and obstacles" for Cuba's economy.
14
U.S. sanctions have deprived Castro of an estimated $750 million worth of
annual imports from the U.S. The denial of U.S. agricultural technology and
equipment forces Cuba to rely on less advanced, low-quality supplies from
COMECON nations. By trading with countries almost exclusively outside the
Western Hemisphere, Cuba must cover the costs of transporting sugar and
other goods to the U.S.S.R. and Eastern Europe rather than to the U.S.
These freight costs already have prompted East bloc countries to reduce
trade with Cuba.
Draconian "Peace." Cuba's limited access to U.S. markets and flagging
trade ties with East bloc countries have accelerated Cuba's economic decline
and caused Castro to cut public spending. He warned Cubans in a March 6
speech that the government may soon impose an austerity plan, termed a
"special time of peace," that will eliminate social spending programs, impose
draconian limits on bread, clothing, corn, meat, and milk, and move un-
employed Havana laborers to work in the countryside.
By limiting Cuba's hard currency export earnings and economic develop-
ment, U.S. sanctions have curtailed Castro's ability to finance mischief
abroad. Moscow has spent more than $60 billion since 1963 to sustain its
beleaguered military outpost in the Caribbean. Yet, Cuba has never been
13 Fidel also attempted to bolster Raul's position as Defense Minister by selecting Army General Abelardo
Colmme Ibarra (a "Raulista" who served as a commander in Raul's Second Front unit in 1958-59) to replace
Interior Ministry chief Jorge Abrantes Fernandez.
14 Cited in, Jorge L. Mas Canosa, "Towards a New U.S.-Cuba Policy," Cuban American National Foundation,
monograph series No. 24, p.21. The success of U.S. sanctions in limiting Castro's freedom of action contrasts
sharply with brief U.S. efforts to promote economic and political cooperation with Cuba. Washington imposed a
partial trade embargo against Cuba in October 1960 after Castro: stopped cash payments to U.S. oil suppliers in
November 1959, began importing oil from Soviet suppliers, and nationalized U.S. oil companies in August 1960.
Castro responded to increased U.S. trade with Cuba in 1975 by placing Cuban combat troops in Angola.
President Carter's easing of U.S. trade restrictions was followed by Cuban military involvement in Ethiopia and
the 1980 Mariel boatlift.
11
more poorly equipped to finance terrorism and export revolution. Without in-
creased aid from cash-starved Moscow, Castro cannot maintain his commit-
ments supporting Marxist allies in Angola and El Salvador.
To ease his economic
Cuba's Hard Currency Debt
isolation, and thus
$ Billion
enable him to export
7
revolution, Castro has
6
recruited new trade
partners. Beijing signed a
5
commercial agreement
4
with Havana last Decem-
ber. It will increase
3
bilateral trade to nearly
2
$500 million this year.
1
Castro also is pursuing
deals that will expand
0
1974
1975
1976
1977
1978
1979
1980
1984
1985
1987
1989
trade with Albania and
Heritage InfoChart
North Korea. Several
Sources: "Foreign Report," The Economist (London),
Western nations - most
December 21, 1989; The Europa World Yearbook, 1989, Vol. I,
notably Argentina,
(New York: Europa Publications Ltd) p. 805.
Canada, France, Britain,
Japan, Spain, and West Germany - have boosted trade with Havana. Cuban
exports to the Western industrial nations increased by 20 percent to $581 mil-
lion in 1988 and increased by more than $200 million in the first quarter of
1989. Japan is Cuba's largest democratic trade partner. Cuba-Japan trade
totalled more than $250 million last year. Japan swaps machinery, rubber
manufactures, transport equipment, steel, and other goods for Cuban sugar
and seafood. Japan also is Cuba's leading creditor. Cuba owes roughly $1 bil-
lion to Japanese government and commercial creditors.
15
ACCELERATING CASTRO'S DEPARTURE
Havana's economic crisis and growing political isolation offer Washington
the rare opportunity to oust this hemisphere's last Soviet client. To achieve
this, George Bush should launch a seven-point program that would:
1) Increase U.S. economic pressure on Havana.
Economic failure has been the chief catalyst of democratic reform
throughout the Soviet bloc. Cuba is particularly vulnerable to U.S. economic
pressure because the Soviet Union and East European countries have already
signaled a cutback in subsidized trade with Havana. Washington could in-
crease the pressure by closing a loophole created on August 21, 1975, which
15 Roger Robinson, "Forging an Economic Security Policy toward Cuba," address to the Seventh Annual
Congress of the Cuban American Foundation, June 12, 1989, p. 3.
12
undermines the 1963 U.S. trade embargo against Cuba. It allows foreign sub-
sidiaries of U.S. businesses to obtain licenses for trade with Havana. The U.S.
Treasury has granted more than 1,236 licenses since 1982 allowing U.S. com-
panies to trade with Cuba (only 43 applications were denied). Last year, Cuba
received goods worth more than $300 million, more than one-quarter of
Western exports to Cuba, from U.S. companies based in Argentina, Britain,
Switzerland, and other Western nations. U.S. trade embargoes against North
Korea, Vietnam, and Cambodia make no such exceptions for U.S. foreign sub-
sidiaries. Bush should vigorously support legislation that would reimpose the
1963 U.S. embargo and thus prohibit U.S. firms and their subsidiaries abroad
from trading with Cuba.
2) Establish incentives for Moscow to cut aid to Cuba.
Economic concessions to the Soviet Union should be linked to significant
and fully verifiable reductions in Moscow's military and economic aid to
Cuba. Unless this aid is cut, the U.S. should:
Oppose granting credits to the U.S.S.R. through the U.S. Export-Im-
port Bank, which provides credit guarantees, direct loans, and loan in-
surance to countries purchasing goods from the U.S.;
Oppose Soviet membership in the Overseas Private Investment Cor-
poration, a U.S. agency that provides credit guarantees to U.S. busi-
nesses investing abroad;
Prevent Moscow from raising money by issuing bonds in U.S. securities
markets;
Require, as one condition of U.S. membership in the newly-formed
European Bank for Reconstruction and Development (EBRD), that
the Soviets cut substantially their aid to Cuba.
3) Foster Western cooperation in isolating Cuba economically.
As Cuba enters a more competitive trade relationship with former com-
munist regimes in Eastern Europe, Havana's economic and political security
will depend increasingly on Western trade. Nations outside the Soviet bloc,
most notably Canada, Japan, and West Germany, have bolstered Castro's
cash-starved regime by increasing their annual imports from Cuba by $500
million since 1986.
Washington should encourage Canada, Colombia, Japan, Mexico, Peru,
and other Western consumers of Cuban sugar and seafood to shift their im-
ports of these goods from Cuba to Barbados, the Dominican Republic, Costa
Rica, and other democracies in Central America and the Caribbean. This
could be done by having these countries join the U.S. in an economic security
agreement limiting trade with Castro. The International Energy Agency
Agreement, signed by the U.S. and Western European countries in May 1983
to limit Western European reliance on Soviet natural gas, could serve as a
model for this agreement. Just as U.S. negotiators persuaded Western allies
to diversify their sources of natural gas and limit purchases from the U.S.S.R.
13
to roughly one-fourth of their total natural gas consumption, the Bush Ad-
ministration should press Canada, Britain, Japan, and other countries to halt
trade credit and other short-term loans to Castro's Cuba and to limit their
purchase of Cuban sugar.
Washington should also demonstrate that Western allies will pay a price if
they undermine U.S. efforts to isolate Castro by trading with Havana. The
U.S. Trade Representative has allocated quotas for 1990-1991 that set the
amount of sugar that nations can export to the U.S. Several recipients of U.S.
sugar quotas, such as Canada, Mexico, and Peru, also buy sugar from Cuba
that may be resold to the U.S. U.S. trade officials should inform these nations
that their quotas will be reduced by the amount of their annual sugar imports
from Havana.
4) Encourage Western nations to press for political reform in Cuba.
Bush should encourage Western governments to make improvements in
economic and diplomatic ties to Cuba dependent on Cuba holding an interna-
tionally supervised plebiscite, modeled after the 1989 referendum on
General Augusto Pinochet's rule in Chile. Bush, too, should continue to
focus international attention on Cuba's human rights abuses. Washington
should refuse to participate in next year's Human Rights conference in Mos-
cow unless the agenda includes discussion not only of Castro's harassment of
human rights monitoring groups and individuals in Cuba, but also of the need
for a national plebiscite on the political legitimacy of his regime.
5) Challenge Castro's political influence in Latin America.
Bush should strongly urge member nations of the Organization of
American States to reaffirm a resolution, signed at Punta del Este, Uruguay,
on January 31, 1962, which bars Cuba from the OAS for exporting revolution
and adopting a Marxist-Leninist government which is "incompatible with the
inter-American system." Before entering the OAS Castro should be required
to close terrorist training camps in Cuba; dismantle Americas Department in-
telligence operations, which directs intelligence operations against the U.S.
and Central American democracies; and halt military aid to the FMLN ter-
rorists in El Salvador.
6) Establish conditions for normalization of U.S.-Cuba relations.
As communist Cuba's economic decline proceeds, Havana will try to ex-
tract economic benefits from the West. This should be resisted. At the post-
Malta Summit press conference last December 3, Bush ruled out any discus-
sion of normalized relations with Havana "until we see a free Cuba, self-
determination and [Cuban] people deciding what they want." U.S. economic
assistance and diplomatic cooperation should be withheld unless the Cuban
government:
Establishes a multi-party democracy, freedom of assembly, and a politi-
cally independent judicial system;
14
Reduces military forces in Cuba to parity with neighboring Caribbean
nations;
Frees political prisoners and grants amnesty to individuals charged with
political crimes against the state;
Disbands "Committees in Defense of the Revolution" which spy on and
terrorize the Cuban population;
Removes all restrictions on Cuban emigration;
Withdraws military forces from Angola and Ethiopia and stops arming
FMLN terrorists in El Salvador;
Ceases its role in assisting drug shipments to the U.S;
Allows information from abroad, not just Western cash and technology,
to flow freely into Cuba.
7) Offer a clear economic and political alternative to Castro's "Socialist
Paradise."
Armed with a balanced view of Western institutions and the potential
benefits of renewed economic ties to the U.S., the Cuban people represent
the most potent threat to Castro's survival. TV Marti and Radio Marti are es-
sential for informing Cubans of the benefits of democracy and market-
oriented reforms and for outlining the U.S. alternative to Cuba's dependency
on the Soviet Union. Funding for Radio Marti and TV Marti, therefore,
should be continued. 16
The Bush Administration should use Radio Marti and TV Marti to inform
the Cuban people of the U.S. plans for Havana once Castro is gone. This mes-
sage should stress not only that Castro's revolution is reversible, but that
Washington is eager to restore traditional ties of economic and diplomatic
cooperation with a free Cuba. Promises of U.S. aid to a post-Castro Cuba
should include assurances of Havana's access to such vital raw materials as oil
and such emergency assistance as food and medical supplies. The Cuban
people should be told that Washington will respect a free Cuba's right to
forge its own foreign policy and alliances. And Washington should promise
protection from Soviet reprisals or subversion, much as U.S. military and
economic aid to El Salvador bolsters President Alfredo Cristiani's
democratic government.
REBUILDING POST-CASTRO CUBA
To ensure that the U.S. is ready for Castro's departure, planning should
begin now. Washington's assistance plan for the reconstruction of a free Cuba
16 Although the Castro regime has jammed TV Marti since it began a 90-day trial broadcast on March 27, the
TV program carried clearly in the city of Holguine, east of Havana, and other areas outside the capital.
15
should promote private investment and economic opportunity; it should not
be a U.S. government bailout. Once Castro is gone, Washington should pur-
sue a seven-point policy to promote a free market economy, demilitarization,
and democracy. It should:
1) Help private commercial and Cuban-American groups prepare
programs for market-oriented development in a post-Castro Cuba.
Bush should order the U.S. Agency for International Development and the
Department of Commerce to begin studies of Cuba's agricultural, financial,
and other development needs, and of opportunities for American businesses
to develop trade relations.
Bush should help the Miami-based Cuban-American community, with its
population of roughly one million, to apply their substantial financial resour-
ces, commercial expertise and political influence in Washington to promote
the rapid reconstruction of Cuba. Cuban exile leaders, U.S. economists and
members of the Free Cuba Commission formed by Florida Governor Bob
Martinez are already developing plans to exploit opportunities for economic
development in a free Cuba. 17 To assist them, Bush should form a Cuban
Development Council, comprised of Cuban-American and other U.S. invest-
ment bankers and business leaders who would advise a post-Castro govern-
ment on how to make the transition toward a free market. This panel would
allow Cuban Americans and Cuban officials to get better acquainted with the
American financial and investment community and thereby facilitate U.S.
foreign investment and joint ventures in Cuba.
2) Create an emergency relief program for Cuba.
Once Castro falls, rapid delivery of emergency aid to Havana will be neces-
sary to avoid political and economic instability. Cuba's cash reserves, now
below $100 million, cannot buy the chemicals, farm machinery and fertilizers,
industrial machinery, spare parts, oil, and other goods necessary to keep
Cuba's economy running. U.S. emergency aid to Cuba also should help cover
the transition costs to a free market. Such costs include replacement of the in-
flated currency (pesos) issued by the Castro government with a new, stable
currency backed by hard currency reserves and unemployment compensation
for displaced government bureaucrats.
U.S.-supplied funds intended for the purchase of foreign oil should be ear-
marked for Latin American oil producers such as Venezuela and Mexico, not
Soviet suppliers. This would reduce Cuba's dependence on Moscow and help
the new government forge political and economic ties in the Western Hemi-
17 Florida Governor Bob Martinez appointed a Free Cuba Commission last February to study the potential
effects of Castro's ouster on state trade, tourism, and immigration. A program developed by Arthur Laffer,
Victor Canto and Milton Freidman which was commissioned by Jorge Mas Canosa, chairman of the Cuban
American National Foundation, reportedly includes recommendations to establish a flat tax rate of 10 percent
and eliminate the Cuban Central Bank.
16
sphere. Food, clothing and medical supplies are also high priorities. Pentagon
and U.S. National Guard personnel could transport non-perishable foods and
supplies donated by private individuals and groups.
Bush also should create a Cuban Relief Council (CRC). This would be an
umbrella group consisting of private voluntary organizations (PVOs)
registered with the U.S. Agency for International Development to plan, coor-
dinate, and run emergency relief and technical assistance projects for Cuba.
Members could include such private relief organizations as American
Schools and Hospitals Abroad, Catholic Relief Services, and the Internation-
al Executive Service Corps. The Cuban Relief Council could solicit non-U.S.
government funding for PVOs and coordinate efforts within the Miami-based
Cuban exile community to provide emergency food, clothing, and medical
and technical assistance to post-Castro Cuba. A model for this is the
European Relief Council, directed by Herbert Hoover in 1920. A Cuban
Relief Council employing 5,000 relief workers would cost AID roughly $70
million.
A large portion of emergency U.S. aid should be devoted to revitalizing
Cuba's agricultural sector. Only 60 percent of Cuba's sugar output is mechani-
cally harvested, and nearly 30 percent of the land available for harvest
remains idle. An emergency fund will be needed to purchase new farm
machinery, fertilizers, herbicides, and sugar refining equipment. To assist in
this effort, roughly $33 million in Cuban government funds frozen in U.S.
banks since 1963 by the U.S. government should be released as soon as a new
post-Castro government is established.
3) Press for Cuban debt relief.
Cuba's per capita foreign debt of almost $3,000 is three times that of
Mexico's. Washington should urge Soviet and Western government creditors
to negotiate an arrangement with the new Cuban regime that would cancel or
write down the Cuban foreign debt and would promote debt-equity swaps by
commercial lenders. Debt-equity swaps allow foreign investors to take over
or buy a country's debt at a discount rate, after which the investor exchanges
the debt for equity in state-run enterprises. U.S. businesses could encourage
development of a private sector in Cuba by trading their share of the roughly
$1.8 billion worth of U.S.-owned assets confiscated by the Castro government
for an equity stake in a newly created Cuban Development Fund. This Fund
would buy state-owned electricity, food processing, and other industrial
enterprises at a discount and sell them to workers in these enterprises or
other domestic investors accepting pesos, which are over-abundant, as partial
payment for the enterprises.
4) Lift U.S. economic sanctions against Cuba when conditions for nor-
malization have been met.
Once the Cuban government establishes a multi-party democracy, begins
free market reforms, and stops exporting revolution, Washington should lift
the 1963 U.S. trade embargo. It also should designate Cuba as a beneficiary
of the U.S. Caribbean Basin Initiative. This would suspend or liberalize
17
American import restrictions on goods imported from that region. Finally,
Washington should remove restrictions, imposed in 1982, on American busi-
ness in and tourist travel to Cuba.
Washington best can help Cubans help themselves by opening the U.S.
market to Cuban goods. Once Cuba is free, the Bush Administration strongly
should urge the Congress to reduce U.S. tariffs and non-tariff restrictions on
imported textiles, clothing, leather goods, and shoes. U.S. sugar quotas for
Cuba should be increased to give Havana greater access to the U.S. market.
Cuba's sugar quota should be restored to pre-Castro levels. The 1960 U.S.
sugar quota allowance for Cuban exports (3.2 million metric tons) accounted
for roughly 35 percent of the U.S. sugar market.
5) Establish a framework for U.S.-Cuba free trade negotiations.
Washington should build on progress toward a U.S.-Mexico Free Trade
Area agreement by beginning negotiations with the new Cuban government
to eliminate barriers to trade and investment in agriculture, telecommunica-
tions, textiles, and the tourist industry. Negotiations should also focus on
protecting foreign investment, intellectual property, and technology rights in
both countries. The U.S.-Mexico trade negotiations begun in November 1987
could serve as a model for trade talks with Havana and help lay the founda-
tion for a North American Common Market. Removal of all tariff and many
non-tariff barriers between the U.S. and Cuba would create new jobs, in-
crease consumer purchasing power, and channel resources to productive
enterprises in both countries. U.S. trade ties are crucial to economic develop-
ment in Cuba. Before the 1959 revolution, the U.S. provided 70 percent of
Cuban imports and bought 67 percent of the island country's exports. U.S. ex-
ports 18 to a post-Castro Cuba would likely exceed $500 million in the first
year.
6) Help train Cubans in business and market economics.
The U.S. should assist American universities, management training busi-
nesses, and Miami-based Cuban American enterprises to bring Cuban
entrepreneurs, students and faculty to the U.S. for instruction in business and
management in the U.S. and send American business school faculty members
to teach both entry-level and advanced courses in business management and
free market economics in Cuba.
Washington should create and help subsidize a U.S.-Cuba entrepreneur
training program to recruit promising individuals from Cuba to work in
Cuban-American and other U.S. businesses as trainees and interns.
Graduates of this one-year training program could be hired as managers of
Havana-based subsidiaries of Cuban-American businesses or as partners in
U.S.-Cuban joint ventures. This program would introduce Cubans to the enor-
18 Opportunities for U.S.-Cuban Trade, Johns Hopkins School of Advanced International Studies, Baltimore,
June 1988, p. 14.
18
mous pool of business talent in the Cuban-American community while foster-
ing mutually beneficial trade ties between U.S. and Cuban businesses.
Bush should propose that Congress fund a U.S.-Cuban advisory committee
to give technical advice to newly-formed commercial enterprises in Cuba. It
would be made up of representatives from the new Cuban government and
Cuban American businessmen and bankers; it could be managed by the U.S.
Agency for International Development. This team would investigate how to
promote local banking and capital markets through deregulation and
economic reforms in Cuba. Credit will be crucial for creating small busi-
nesses involved in fishing, food processing, and textile manufacturing in
Cuba.
7) Establish free market criteria for long-term U.S. aid to Cuba.
U.S. assistance to a free Cuba could provide a framework for more efficient
and productive U.S. aid programs throughout Latin America. Washington
should measure the success of U.S. aid to Cuba by setting specific market-
oriented objectives. Such criteria include cutting taxes, deregulating Cuba's
private sector, lifting restrictions on foreign investment, guaranteeing security
of private property and contract, and selling state-owned enterprises. U.S.
AID officials should press for Cuban land reform that would put individual
farmers and businessmen, not state agencies, in control of agricultural
production and distribution. Washington should urge Havana to adopt an
Agricultural Land Act which would issue land titles to private owners and per-
mit victims of Castro's land confiscation programs to purchase state-owned
farmland at a discount. This Act should also eliminate price controls and
promote privatization of state monopolies that produce, transport, or market
agricultural goods.
CONCLUSION
For nearly three decades, American economic and political sanctions have
limited Castro's freedom of action and forced the Soviet Union to pay a sub-
stantial price for using Cuba to promote its imperial ambitions. These policies
are paying off. Castro's economy is in a tailspin. Castro is internationally iso-
lated from friend and foe alike. And he is beginning to face political opposi-
tion at home.
Washington has nothing to gain by normalizing trade and diplomatic rela-
tions with Castro's Cuba and thus easing the pressure on Castro to introduce
democratic, free market reforms. U.S. normalization of relations with Cuba
would signal Washington's acceptance of Cuba's military adventures and en-
courage Latin American leaders to seek accommodation with the Castro
regime. Castro is not developing a more moderate political system but rather
a more ruthless police state that will continue to support international ter-
rorists and narcotics traffickers.
Instead of making concessions to Castro, this hemisphere's last commuist
dictator, Washington should tighten U.S. restrictions on trade with Cuba and
19
encourage its Western allies to isolate the Castro regime economically and
diplomatically. As Cuba enters a more competitive trade relationship with
emerging democracies in the Soviet bloc, Castro's political survival will re-
quire increased trade and economic assistance from the U.S. and other
Western nations. Washington should not resume full diplomatic and
economic relations with Havana until the Cuban people break free from
Castro's revolutionary commitment to foreign aggression and single-party
rule. Bush can accelerate Castro's demise by using Radio Marti and TV Marti
to define clearly the U.S. assistance plan for Castro's successors.
Promoting Economic Opportunity. Once Fidel Castro and brother Raul
Castro are removed from power, Washington should offer an economic aid
program to reduce Cuba's dependence on trade with Moscow and to promote
private investment and economic opportunity. Bush should assist efforts by
Miami-based Cuban-Americans with commercial expertise and financial
resources to rebuild a free Cuba.
Castro's political fall not only may remove the most potent threat to
security in the Western Hemisphere, but also may enable a new, free Cuba to
become the anchor for a stable and prosperous Latin America. If Bush takes
action now, his first term could include the first anniversary of a democratic
post-Castro Cuba.
Thomas E. Cox
Policy Analyst
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