TRANSMITTAL OF CIA/RR CB 63-54, SOVIET MACHINERY OFFERED TO BRITAIN (CONFIDENTIAL)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001600250001-6
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 12
• Document Creation Date: December 20, 2016
• Document Release Date: October 24, 2006
• Sequence Number: 1
• Publication Date: June 20, 1963
• Content Type: MF

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CONFIDENTIAL
Current Support Brief
SOVIET MACHINERY OFFERED TO BRITAIN
CIA/RR CB 63-54
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
Department of State review
completed CONFIDENTIAL
GROUP 1
Excluded from automatic
downgrading and
declassification
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This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Sees. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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SOVIET MACHINERY OFFERED TO BRITAIN
Early in May the USSR offered to sell to the UK types of machinery,
and, in particular, specialized machine tools, that the UK presently buys
from Western producers. This move by Soviet officials, which if suc-
cessful would modify the traditional flow of machinery, was made to a
British trade delegation seeking to expand Anglo-Soviet trade and was in-
tended to answer British complaints that trade is limited by the lack of
desirable Soviet goods offered for export.
The Soviet offer of machinery included a reduction in prices, resale
rights, and the assurance of reliable deliveries through long-term con-
tracts. However, immediate prospects for large exports to the UK are
not bright, because the quality of Soviet equipment now offered has not
been proved competitively in that market. Two of the types of machine
tools specifically offered for sale, copying millers and jig borers, do
not meet Western standards of quality. Moreover, some of the equip-
ment in which the USSR sought to arouse interest is still scarce in the
Soviet economy. It is therefore doubtful if more than nominal quantities
of such equipment would be released for sale outside the Communist
Bloc at this time.
A British trade delegation, headed by Lord Ebbisham (Vice Chairman
of the London Chamber of Commerce), spent 10 days in Moscow early in
May endeavoring to implement the current Anglo-Soviet trade agreement.
This agreement, covering the period 1 January 1963 to 30 June 1964,
provides quotas for an expansion of Soviet sales of machinery to the UK
to a probable maximum value of about $11 million. I/ Although Anglo-
Soviet commodity trade shows an over-all favorable balance for the USSR
in 1961, the UK imported from the USSR machinery and equipment valued
at $183, 000 and exported to the USSR machinery and equipment valued at
about $77 million. 2/ The pact includes provisions for Soviet sales of
machine tools valued at $2.6 million (similar sales in 1961 were valued
at only $78, 000). Other Soviet machinery products listed in the agree-
ment include earthmoving equipment, cranes, tractors, mining machinery,
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textile machinery, equipment for the food industry, bearings, and radio
and electronic components. This list is remarkable because it contains
many categories normally imported by the USSR. For this reason, it
would be surprising if either the value or the commodity quotas were
implemented by Soviet deliveries.
The British delegation visited Soviet plants, inspected Soviet equip-
ment offered for sale, and discussed with Soviet officials a number of
problems affecting trade relations between the two countries. J. B.
Scott of the British delegation reported that his group was shown a num-
ber of machines that in their opinion were "at least the equal of those
imported into Britain. " 3/ Two machines specifically mentioned were
metalcutting machine tools, a copying miller and a jig borer. This was
the first time that this equipment has been offered in Western markets
by the USSR. The UK now imports jig borers from Switzerland, whose
jig borers set the standard of quality for the world. Soviet jig borers
rank far below those of Swiss manufacture in quality. Likewise, the UK
imports copying millers from the US, whose product greatly excels that
of the USSR. In fact, East German and Czechoslovak jig borers, now
available through British dealers, also are superior to the Soviet ma-
chines, and a Polish copying miller, also available in the UK, is at
least the equal of its Soviet counterpart.
It is possible that the USSR may have a competitive advantage in
price, which may be as low as two-thirds of the prices of comparable
US and Swiss equipment. When allowance is made for differences in
quality, however, it is unlikely that the Soviet price advantage would be
decisive. It should be noted in addition that the British market for spe-
cialized equipment such as jig borers and copying millers is very lim-
ited. In 196Z the UK imported 41 "boring" machines from Switzerland, 4/
of which it is probable that only a few were jig borers. The UK also
imported only nine copying millers from the US in that year. 5/
It is not entirely surprising that the USSR singled out machine tools
for display, for the USSR has placed great emphasis on the development
of a comprehensive line of metalworking equipment as part of its cam-
paign to catch up with the US in indust.iial production. Soviet production
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of metalcutting machine tools in 1962 was officially reported as 176, 000,
about four times the US output of comparable equipment. Jig borers,
for example, are produced in five locations, including a recently con-
verted plant in Moscow. Other types, such as lathes, drilling machines,
and grinders, are in some cases produced in serial production. Some
of these types can meet more closely the technological standards as well
as the prices of conventional Western machines. As the Soviet domestic
demand for this equipment is more nearly accommodated, the USSR prob-
ably will investigate further the prospect for foreign exports. In this
sense the present Soviet offer to sell machine tools in a sophisticated
Western market may be the forerunner of more serious overtures to be
expected in the future.
The Ebbisham delegation discussed in some detail other factors
hindering the implementation of the current trade pact. British com-
plaints about the nonavailability of Soviet goods were met by a series of
counterproposals that indicate the willingness of the USSR to take steps
to expand mutual trade. The Soviet officials proposed that the two coun-
tries conclude a long-term trade agreement and stated that reliable de-
liveries of Soviet goods would then be assured by making provision in
Soviet production plans for the agreed types and quantities of equipment.
The Soviet interest in expanding trade with the UK was emphasized
further by a willingness to extend reexport rights to the British and by
an offer to sell some machines not previously offered in foreign markets.
The Soviet proposals, which are attractive on the surface, give
evidence of new avenues of Soviet policy as well as the continuing Soviet
need for British plant and equipment. For example, the offer to extend
reexport rights to the British would have the practical effect of estab-
lishing certain British firms as machinery agents for the USSR and would
facilitate sales of Soviet machines in markets not now cultivated by the
USSR. The Soviet offer to extend production runs of machinery and equip-
ment to provide additional machines for Western markets implies that
the USSR is prepared to adjust production planning and ultimately invest-
ment plans to provide for some Soviet participation in the world market
for producer goods.
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The British delegation also reported that Soviet regard for British
products was still great, and the statements of the delegation revealed
that the USSR was especially interested in chemical equipment and other
capital goods -- "such as factories. 6/ Of this interest the head of
the British delegation remarked, "We should seize the opportunity ...
we need the business. " The delegates were reminded by Khrushchev,
however, that current trade "would have expanded if Britain had granted
the USSR longer credits. " 7/
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