Center Cheers AFL-CIO Opposition To Soviet Membership In EBRD

As the AFL-CIO today paid formal tribute to the late Jay Lovestone — an individual whose personal contributions during years of service as the head of the International Department to the struggle for individual freedoms and economic opportunity in the face of communist oppression are legendary — the Center for Security Policy applauded the organization’s most recent stand on behalf of the principles with which Mr. Lovestone was so long associated.

On 6 April, AFL-CIO President Lane Kirkland in a letter to Secretary of State James Baker expressed strong opposition to Soviet membership in and borrowing privileges with the European Bank for Reconstruction and Development (EBRD). This bank is to be capitalized at $12 billion and is intended to aid in the resuscitation of East European economies. The European Community of twelve nations will hold 51% of the membership shares; the United States will hold only 10%.

"The AFL-CIO’s position on this issue shows that Jay Lovestone’s principles and vision are still very much alive in the trade union movement," said Frank J. Gaffney, the Center’s director. "The AFL-CIO is entirely correct in objecting to the funneling of scarce U.S. taxpayer funds to the Soviet Union — a country which has yet to hold free and fair national elections; which has yet to implement fundamental, systemic reforms leading to a free-market economy; which is actively threatening the freedom aspirations of Lithuania; and which continues to fund activities directly inimical to Western interests."

Mr. Kirkland correctly states in his letter that, "Any arrangements for U.S. participation in an EBRD that includes the USSR would, at this time, send the wrong signal to Soviet authorities of business as usual. Under any circumstances, the AFL-CIO has a strong principled objection to the use of any contributions to EBRD for the USSR. Such taxpayer financial assistance to a non-democratic government means the diversion of resources that should instead be available for the emerging democracies of Poland, Hungary, Czechoslovakia, and the Republic of Lithuania." (Emphasis added. The full text of the Kirkland letter to Secretary Baker is attached.)

Unfortunately, despite these well-founded concerns, the United States agreed with its allies on Monday in Paris to join 41 other nations, including the Soviet Union, in the creation of the EBRD on very different terms than those called for by the AFL-CIO, the Center for Security Policy and leading members of Congress, such as Senator Robert Kasten (R-WI).

As a result, the Soviet Union will not only be a participant in all bank decisions, including the selection of bank fund recipients, it will enjoy borrowing privileges. In the first three years of the bank’s operations, the Soviet Union may borrow up to six percent of the bank’s loan portfolio. Consequently, the USSR will be able to use its paid-in capital of $216 million (only 30% of which will be required in actual contributions with the balance callable) to borrow significantly greater funds.

Treasury Under Secretary David Mulford, who led the U.S. delegation, stated in a Washington Post interview yesterday that "Everyone is happy to have the Soviet Union as a member and that it has agreed to restrict its demands on the bank so that it doesn’t dominate the flow of resources."

Ironically, Mulford’s statement and Treasury’s agreement to Soviet membership and lending privileges at the EBRD, runs directly counter to the views of President Bush who unequivocally opposed Western lending to the Soviet Union in an interview with National Public Radio on March 17, 1990. The president said that "This concept that we ought to go loaning money or giving money to the Soviet Union now, I don’t accept that…I don’t think that’s in America’s interest, and I don’t think it’s needed to encourage reform and perestroika and glasnost in the Soviet Union…..[The Soviet Union] has a long way to go before sound loans can be made there."

The Center agrees with the President’s stated opposition to lending to the Soviet Union, in general, and with the AFL-CIO’s sensible position against Soviet participation in the EBRD, in particular. It calls on the Congress to take a close look at less problematic means — including the use of existing institutions like the World Bank — of promoting redevelopment in those East European nations that are committed to radical transformation of their political and economic systems and that have held free and fair national elections.