A New Kind of Trade War

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The U.S. sanctions had prohibited the sale of military-related goods and the extension of loans or credit for reasons other than food or humanitarian needs. U.S. makers of engines, engine parts and electronic devices saw their exports to India fall from $297 million in 1997 to $97 million a year later. Similarly, exporters of construction, transportation and mining equipment experienced a drop in exports to Pakistan from $129 million to $38 million. "It'll take six months to be able to reinitiate contact with the agencies" that were under sanction, says Frank Folmsbee, sales and export manager for Aries Electronics, a Frenchtown, N.J., maker of electronic components. Aries (with $25 million in annual revenue from manufacturing and export sales) lost approximately $3 million a year as a result of the sanctions.

New momentum in international trade may have awakened a great bear. In July, Secretary of the Treasury Paul O'Neill visited Russia, which he found to be a changed place. President Vladimir Putin, he said, had made great progress welding disparate, warring fiefdoms into one administration, an achievement reflected in the Kremlin's ability to con-duct potentially fruitful trade negotiations.

Russia, a great, sentimental hope for corporations through the mid-'90s, looks increasingly serious about its WTO bid and is beginning to undertake the legal reforms necessary for membership. Could the former Soviet republic be a touchstone for advancements on a global scale? Russia's stock market capitalization, about $50 billion, still only approaches that of the United Parcel Service, and what passes for a recession in the U.S. would be a great achievement for Russia. Progress there is incremental, but, some say, palpable. "We're working, in a determined way, to bring to reality some of the things we'd worked individually on for a decade without very much success," O'Neill recently told members and guests at the annual dinner of the National Foreign Trade Council--a consortium of U.S. companies promoting free trade that was founded in 1914.