Seven major U.S. companies have joined forces with the Soviets to produce everything from crackers to computer disks in a consortium that will market capitalist products in a socialist economy.
In addition, U.S. industrialist Armand Hammer announced Wednesday a joint venture under which he will build two plastics factories in the Ukraine.U.S. Commerce Secretary C. William Verity and a group of about 400 American business leaders are in Moscow this week for meetings with Soviet leader Mikhail S. Gorbachev and other officials about the possibility of expanding trade between the superpowers.
Several agreements have been announced already, and the businessmen say the climate for broader cooperation has warmed considerably in recent months.
James H. Giffen, president of the new American Trade Consortium involving the seven companies, said this week's activity could lead to an unprecedented volume of U.S.-Soviet trade.
Giffen, who also is president of The Mercator Corp., attributed the trade successes to "the improved political atmosphere" following Soviet leader Mikhail S. Gorbachev's visit to the United States in December.
Both governments began campaigning for expansion of commercial ties after the Washington summit, the businessmen said.
The Soviets are actively seeking joint business projects with capitalist countries to help improve the quantity and quality of consumer goods and to earn convertible foreign currencies to pay for grain and other imports.
Few U.S. companies had been able to put together joint ventures. While there is huge demand among Soviets for consumer goods and services, they have only rubles to spend, which cannot be converted by the Western businesses seeking to take home their profits.
But on Monday, Honeywell, Inc. announced a joint venture to supply automated production controls for Soviet fertilizer factories, and on Tuesday Roma Food Enterprises of Piscataway, N.J., began selling pizza in Moscow from a mobile van.
Hammer's $200 million plastics plant deal was the second joint venture he has announced recently, and the companies forming the new consortium claim their efforts will result in a network of projects to make goods for both Soviet and foreign markets.
"This is not aid, this is trade," said Giffen. "What we're after is profit."
No joint-venture agreements have been completed by the consortium yet, and Giffen declined to say how much they expect the trade volume to be worth once the individual deals are put into writing.
RJR Nabisco vice chairman Robert J. Carbonell said his company is negotiating with the Kremlin to produce cookies and crackers, breakfast cereals and cigarettes in the Soviet Union, and Ford Motor Company vice president Alexander J. Trotman said his company is talking about producing cars, light trucks and parts at Soviet plants.
By forming a consortium, the businesses are effectively matching the Soviet bureaucracy, which groups various government industries and agencies together to put together joint ventures with foreign firms. But the consortium arrangement also gives the companies more flexibility in financing their projects.
Because Soviet rubles are not convertible, foreign companies entering into ventures with the Soviets have to devise ways of either earning hard currency or taking their share of the proceeds out in Soviet commodities.
Giffen confirmed that by pooling the individual joint ventures under one umbrella, some of the deals could produce goods solely for the Soviet market but take out hard-currency profits from the export sales of the other companies.
He declined to give details of the financing arrangements until the joint ventures are signed.