THE TRILATERAL PROCESS

The report which follows is the joint responsibility of the three principals.

Although only the principals are responsible for the analysis and conclusions, each has been assisted by an associate author. Working with Henry Kissinger has been William Hylland, Editor of *Foreign Affairs* and former U.S. Deputy Assistant to the President for National Security Affairs. Working with Valéry Giscard d'Estaing has been Sir Julian Bullard, who in 1988 stepped down as British Ambassador to the Federal Republic of Germany and retired from the diplomatic service. Sir Julian discussed ideas for the report with European members of the Trilateral Commission assembled for their regional meeting in Oslo at the beginning of October 1988. He also consulted with Trilateral members and experts during visits to Madrid, Lisbon, Brussels, The Hague, Copenhagen, Rome, Bonn and London. The associate author working with Yasuhiro Nakasone was Professor Hiroshi Kimura of the Slavic Research Center at Hokkaido University. Several other persons on the Japanese side also assisted Mr. Nakasone as members of a study group which met a number of times in the course of the project. Particularly helpful in this study group were Seizaburo Sato, Professor of Political Science at the University of Tokyo, and Tadashi Yamamoto, Japanese Director of the Trilateral Commission and President of the Japan Center for International Exchange (JCIE). Charles Morrison, Senior Research Associate at JCIE and Special Assistant to the President of the East-West Center in Hawaii, provided valuable drafting assistance.

The principals and associates, along with the leadership of the Trilateral Commission, held discussions with Mikhail Gorbachev and other Soviet leaders in Moscow on January 16-18, 1989. The Trilateral side is very grateful to the Presidium of the Supreme Soviet of the U.S.S.R. for so ably serving as host for our delegation.

The work on this project began with a series of bilateral meetings among the principals in the spring and summer of 1988. The principals and associates met together in London on September 20-21, 1988, to discuss the thrust of the report and the upcoming trip to Moscow. Further bilateral discussions ensued before the principals and associates gathered again, in Paris on January 15, 1989, just before departure for Moscow. Several additional meetings among the principals took place in March 1989. The current draft was finalized at an authors' meeting in Paris on April 8.

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AUTHORS' FOREWORD

East-West relations have entered a new phase. Changes in the Soviet Union's domestic and foreign policies have already affected the climate of East-West relations and, in some areas, its substance. Mikhail Gorbachev's new policies suggest new approaches to the future of the Soviet Union's domestic system, its foreign policies, and East-West relations. It would be a mistake, however, to analyze or to devise policies in terms of a single personality; to be lasting they must take into account the fundamental necessities facing the Soviet Union and the opportunities before the democracies.

We have prepared this report in the belief that our countries face a challenge that will shape the future of international relations for several decades. So far, our countries have not reached a consensus on the significance of this challenge, on the degree to which it reflects a lasting change in Soviet policies, or even on our own attitudes in relation to it.

Some believe that, until much more has changed in the Soviet Union, the industrial democracies should wait prudently on the sidelines or continue the same general policies they have pursued since World War II. Others argue that the Soviet threat has changed so completely that the existing defense and political arrangements can be dramatically altered.

Based on our collective experience of dealing with the Communist world, discussions with present Soviet leaders including Mr. Gorbachev, and studies by experts in the West, we believe that our countries have a rare opportunity to change the nature of East-West relations in ways beneficial to the West, provided they develop a clear agenda and strategy. On the other

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hand, passivity or -- worse -- a posture of delayed and uncoordinated reaction to Soviet initiatives would enable the Kremlin to define the East-West agenda and serve primarily Soviet interests.

Few would contest that our countries have a profound stake in developments inside the Soviet Union. For more than four decades, protecting our national security and the freedom of other peoples from Soviet expansionism has placed a tremendous burden on our countries and occasionally on our relationships with each other. During this period we have had to live with the threat of devastating conflict. We take pride in the fact that defenses have been maintained and military conflict deterred.

We do not expect to reduce these burdens substantially overnight. Mr. Gorbachev cannot wish away the fundamental differences in systems, outlooks and interests that have separated the Soviet bloc from the non-communist world. Nor should our leaders expect this. Change will come slowly and ambivalently. In the meantime, our countries will have to remain strong and vigilant. A successful transformation to a more peaceful East-West relationship is not guaranteed. New foundations for East-West relations, if they are to be solid, must be built arduously -- brick by brick.

Our report is divided into the following sections:

### Soviet Trends:

#### General

#### Domestic reforms

#### Foreign policy

### The Trilateral Agenda:

#### The strategic relationship

#### Regional conflicts

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SOVIET TRENDS

General

Our assessment of the Soviet Union is based on two premises. First, the pressures for change in Soviet domestic and foreign policies reflect a crisis of the Communist system and not simply the personal preferences of a particular Soviet leader; second, the relaxation of East-West tensions in the late 1980's is qualitatively different from earlier periods of detente.

In Mikhail Gorbachev the Soviet Union has found an exceptional leader, quite unlike any of his predecessors. In his personal style and flair, Mr. Gorbachev has embraced reform more quickly and comprehensively than another leader might have done. We are persuaded, however, that it is the objective necessities confronting the Soviet Union which establish both the need for change as well as its direction. Were Mr. Gorbachev to leave the scene, these realities would probably sustain his general course and direction, albeit at a slower pace and with a less ebullient style.

For any Soviet leader would have had to try to revitalize the economy and overcome the persistent social malaise. Similarly, the deployment -- contrary to Soviet expectations -- of U.S. intermediate nuclear forces in Western Europe in response to the Soviet military build-up, the extended crisis in Poland, the long dispute with China, the chilly relationship with Japan, and the failure of Soviet military intervention in Afghanistan -- have combined to impose a reappraisal of Soviet foreign policy.

Our countries need to define a strategy based on a correct assessment of the necessities propelling the Soviet Union toward sweeping domestic reform

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and reduced confrontation with the West. We believe that these changes are
likely to occur more quickly under Mr. Gorbachev's continued leadership
than they would were his known political rivals in charge.

At the same time, quite different equilibria between economic and
political reforms could occur. Conceivably, accelerated effort to meet popular
aspirations for improvement in standard of living could be compensated by a
reinforcement of central political authority, on the Chinese pattern.

The new Soviet diplomacy has an unprecedented sweep. It addresses
not only the standard military issues, but political and regional concerns. In
addition to arms control issues, the Soviets have sought accommodations in
some regional conflicts, notably Afghanistan. The combination, if
implemented, amounts to a new concept of security. The West can do no less
than develop its own coherent policy and security agenda.

Mr. Gorbachev has stated in public, and has reaffirmed to us, his belief
that if it is to carry out its domestic reform program, the Soviet Union needs
to improve its relations with the outside world. The high priority given to
domestic reform in the Soviet agenda is, in fact, of greater significance for our
countries than whether or not these reforms actually succeed. For the priority
of domestic reform, if nothing else, deflects energies from the traditional Cold
War agenda.

The importance of the reform program derives in part from the crisis
of confidence that is so evident in the Soviet Union today. Past Soviet leaders
had little doubt about the ultimate superiority of the socialist economic
system; despite the large gap between Soviet and Western living standards,
they believed that it was only a matter of time before Communism caught up
to and surpassed the advanced capitalist countries. The collapse of this hope

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-- reinforced by the daily comparisons afforded by instantaneous global communications -- rendered unavoidable the change of course introduced by Mr. Gorbachev. Even two years ago, when perestroika (restructuring) was just starting, there was great expectation that the economy would quickly respond to the reforms envisaged by Mr. Gorbachev. As it turned out, the difficulties of implementing the reform program, its complexity, and the long lag between reforms and concrete results were greatly underestimated.

The Soviet Union we saw in January of this year was much more somber. The optimism of past years has vanished; we found a new, more realistic, awareness of the enormous difficulties the Soviets face merely to achieve growth, much less to begin to close the gap with the capitalist democracies. This backdrop of pervasive pessimism impels Mr. Gorbachev to reinvigorate the Soviet economy by accelerating restructuring. This dilemma rather than some abstract pacifist philosophy is driving the Soviet leader to reduce tensions in international relations. He has every incentive to reduce the share of military spending in Soviet GNP and to seek beneficial economic relationships, including foreign investment, with the non-socialist countries.

## Domestic Reforms

After four years in power, Mr. Gorbachev's economic program has in our view created a great deal of turmoil without achieving much in substance. Even relatively minor reforms have evoked a backlash; for instance, the freedom to form cooperatives has been opposed by conservatives and significant parts of public opinion on the ground that they foster unjustifiable inequality and excessive privilege. And the offer of long-term agricultural leases to private farmers has not generated an adequate number of candidates willing to accept the offer, because of a preference of many for the safer, more

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familiar and less demanding position of salaried employees on a collective farm or simply because of the fear that this policy could be reversed. And the more fundamental and wrenching reforms of price structure and convertibility of the ruble have not even been attempted. Although Mr. Gorbachev overcame a conservative reaction last year, many of the reforms are still opposed by large segments of the Soviet administration, and at the top the struggle over the direction of future Soviet policies continues. In the meantime, the nationalities problem has become acute, notably in the Baltic states and Armenia.

Thus, the Soviet leader faces several dilemmas. Economic reforms require decentralization of power. Yet, at the beginning, decentralization creates new confusion and reduces the leadership's ability to control the direction of change. More crucially, decentralization challenges the very legitimacy of the Soviet style of socialism based on highly centralized authority. Glasnost is intended to win popular support for the reforms, but at the same time provides the intelligentsia with an opportunity to criticize the slow pace of perestroika and to dispute specific aspects of the reform program. Thus, perestroika is under attack from conservatives, for whom it goes too far, and from intellectuals, for whom it does not go far enough.

The recent elections in the Soviet Union illustrate this ambivalence. The results were helpful to Gorbachev by weakening a number of conservative opponents to his reforms. At the same time they demonstrated a restiveness with the slow pace of economic progress, that weakens the Communist Party, and turns the demands for accelerated economic improvement into the dominant feature of Soviet political life. Dissatisfaction with perestroika is therefore likely to take the form of demand

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for more dramatic economic changes rather than for a return to traditional
communist pattern.

Finally, the reforms can only show results for the average Soviet
citizen in the long term, while entrenched interests are hurt immediately by
necessary adjustments. As in China, price reform is a prerequisite for the
success of the reform program but, in the near term, is politically explosive.
The mounting threat of inflation will add supplementary arguments to
postpone the reforms.

These dilemmas make the implementation of Gorbachev's reform
program difficult and risky. At the same time, the Soviet Union's stake in it
is enormous since it is fundamentally an effort to sustain superpower status
into the 21st century and to achieve a level of economic development at least
not too distant from those of the U.S., EC, and Japan. It is now obvious that
the road to success will be long and very difficult. The absolute prerequisite is
a radical transformation of the Soviet system that will bring the USSR closer
to Western concepts of market economics and democratic institutions. That is
the definition of perestroika which the present authors support.

Foreign Policy

The domestic reform program generates the "new thinking" in Soviet foreign
policy in two important if somewhat contradictory ways.

* On the one hand, in conversation with us and in his public speeches, Mr. Gorbachev explicitly links the need for "predictability" in foreign relations to the Soviet Union's need to concentrate on the domestic agenda: "Our foreign policy is today, to a greater extent than ever before, determined by domestic policy, by our interest in concentrating our efforts on

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constructive activities aimed at improving our country. And that is why we need a lasting peace, predictability and constructive new international relations."

* On the other hand, because Mr. Gorbachev's domestic freedom of maneuver is limited and highly susceptible to failure, he tends increasingly to look for successes in foreign policy as compensation. This tempts him to weaken, if not break, the links between the United States and its allies in Western Europe and Asia, and in general to push the United States back to the Western Hemisphere. This strategy must be resisted by the democratic countries.

In pursuit of the first strand of this policy -- that of genuine accommodation -- Mr. Gorbachev's new approach has challenged some of the fundamental precepts of traditional Soviet and even of imperial Russian foreign policy. He has stated that Soviet security cannot be achieved at the price of the insecurity of other countries. The value of a massive build-up of strategic weapons as a political strategy has been challenged in debates within the Soviet Union. The traditional reliance on a huge number of troops and massive conventional superiority is being questioned even in senior military circles. This change of attitude is evident in the Soviet withdrawal from Afghanistan and the pressure placed on Vietnam to withdraw its forces from Cambodia. It is unprecedented that the Soviet Union should have accepted the risk of the collapse of a Communist government in Afghanistan.

The decision to reduce Soviet troop strength by 500,000, which Gorbachev announced before the UN General Assembly in December 1988, is probably designed to reduce the enormous budget deficit and above all to

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modernize the swollen Soviet armed forces. Nevertheless, it should be
welcomed as a first step towards reciprocal and equitable reduction of
conventional forces.

In pursuit of the second strand of Soviet policy, there are still major
areas where Soviet policies are challenging the United States and its allies.
For example, in our discussions with Soviet leaders, it was clear that the
Soviet Union is not yet willing to implement in Eastern Europe the principle
of non-intervention that Mr. Gorbachev proclaimed before the United
Nations and that of equal relationships which he seems to be practicing with
respect to China. The Soviet Union has also proved unwilling to recognize
Japan's claim to the "Northern Territories" occupied by the USSR. It
continues to support regimes hostile to the United States in the Western
Hemisphere.

The USSR will remain a major military power in Eurasia. So long as
its relative military advantages persist, the threat of force will remain a
significant factor in international relations. The democracies have a common
interest in resisting the strategy of pushing the United States back to the
Western Hemisphere. For were it to prove successful, the Soviet Union
could then use its central geographic position to weaken and divide its
neighbors one by one. Certain aspects of current Soviet policy, especially in
Europe, are consistent with this long-term objective.

Thus, the democracies must learn to deal with Gorbachev's style,
which is to flood the Western decision-making process with a rapid series of
unilateral moves, some of them involving genuine concessions, others
relying largely on psychological warfare. If real progress is to be made,
Western policy must winnow the real concessions from the propagandistic
overtures, and respond on two levels: the substance, and the public relations

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aspect. We must develop our own initiatives and policies and put forth our
own ideas that reflect what our countries understand by a peaceful world and
which reflect the aspirations of our people for progress and democracy.

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THE TRILATERAL AGENDA

The Strategic Relationship

A new strategic dialogue between East and West is taking shape. It has been given impetus by the signing of the INF treaty, the convocation of negotiations on conventional weapons and forces in Vienna, and the progress made between the United States and the Soviet Union in the negotiations on the reduction of strategic weapons.

A common theme in this new dialogue is the desirability of achieving substantial reductions in some categories of weapons and forces. Mr. Gorbachev has adopted this theme; it was his ostensible rationale for agreeing to the zero option in the INF talks. He has also proposed the elimination of short-range nuclear weapons in Europe; at Vienna his delegation has proposed a three-stage reduction of conventional forces and major weapons systems to levels well below NATO's current posture; and he has announced a unilateral reduction of 500,000 in armed forces, including the withdrawal of tanks and tank divisions from Eastern Europe as well as the reduction of forces in East Asia.

We also note that various Soviet spokesmen, echoing Gorbachev, speak of adopting "defensive" defense and the criterion of "reasonable sufficiency" to measure their forces -- suggesting the possibility of a major shift in Soviet military doctrine. All of this remains to be tested in negotiations and in the actual disposition of forces as well as military practice, rather than by wishful thinking.

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Such initiatives strike a responsive chord in Western public opinion and contribute to pressures to reduce defense expenditures. They generate a debate about which categories should be given priority in reductions -- tactical nuclear or conventional -- and how far the West can go in reducing its nuclear forces without weakening its defense and deterrent capacity. In the background there is the older debate about the role of arms control in safeguarding security, and the linkage between arms control and geopolitical issues. There is in addition an unfortunate tendency to treat defense and arms control as alternatives rather than as complementary issues.

Our analysis of the strategic situation is based on three premises:

(1) The pressure for reductions in the Soviet Union reflects in part economic necessity, that is to say the impossibility of meeting the economic goals of perestroika under conditions of an arms race. This is all the more true because until now the democracies have proved resilient enough to maintain a rough military balance at whatever level was required.

(2) In part Soviet moves may reflect a strategic design: the Soviet leaders may believe that the central geographic location of the Soviet Union and its superiority in conventional forces and mobilizable reserves confer on it an inherent advantage in any program of arms reductions.

(3) Nevertheless, the democracies should welcome making arms reduction a central theme of the East-West dialogue *provided* they keep in mind that reductions are not an end in themselves. What made the start of reductions possible was the willingness of the democracies to maintain an adequate deterrent posture. What will sustain the process of reductions is the willingness to ensure that at every level of reductions, deterrence is

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maintained and preferably strengthened. Such a concept of "deterrent disarmament" must meet two strict criteria: first -- to restate the basic concept -- Western deterrence must be maintained with no less credibility or capacity than *before* each stage of reductions; and, second, the capability for a conventional defense must not be weakened, and preferably should be strengthened, as a result of force reductions on both sides.

In order to apply these criteria, the new balance of forces must be carefully assessed before and during every stage of the arms control process. Such a concept of security, reconciling reductions, deterrence and defense for each foreseeable level of reductions, has yet to be defined. It is one of the most urgent tasks before our governments and must be geared to the political, economic and military circumstances likely to prevail in the 1990's. The political evolution of Europe, to be discussed later, must be a central feature of such a concept.

In developing a new concept of security, some of the following issues will have to be addressed:

* The terms of a strategic arms agreement must produce a more stable strategic relationship than would be the case in the absence of agreement. Any reduction of strategic arms must be accompanied by efforts to generate public and Congressional and parliamentary support for programs that might be required for survivability, such as mobile missiles or more submarines.

* Conventional arms control is now broadly accepted in the West. Yet current conventional imbalances and underlying geographic realities are highly favorable to the Soviet Union. These imbalances, moreover, have

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become far more critical in the wake of the removal of important nuclear forces under the INF agreement. It is essential for the democracies to determine what reduced level of conventional NATO forces is compatible with a conventional defense no less effective than at the present. All governments have an obligation to ensure that their defense efforts not fall below such a minimum level in the course of reductions -- a difficult challenge in conditions where Soviet proposals will be at least partially designed to reduce Western forces beyond an acceptable military minimum.

* The relationship between further nuclear arms reductions and conventional arms control must be carefully evaluated. Gorbachev has singled out nuclear weapons and is pressing in effect for denuclearization -- or at least for the denuclearization of Central Europe -- an idea that appeals to some segments of Western public opinion. Yet it is in our view incompatible with deterrence. Moreover, another START agreement could be reached well before any conventional arms agreements can be completed. It is our view, however, that the final stages of its implementation should await completion of a conventional arms control agreement.

* The political impact of conventional force reductions in Europe -- both Eastern and Western -- will be profound. It must be related to the process of West European unification, the various ideas of a Common European House currently in vogue in Europe and the role of the United States in such a design.

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* A concept of "deterrent disarmament" must finally seek to resolve the debate over strategic defenses. Since President Reagan's original announcement of SDI, the focus of criticism has been on the broad goal of an invulnerable defense which, if at all achievable, is decades away. But there has been no thoughtful examination -- in the United States or in the Alliance -- of intermediate options, for example, to defend American ballistic missile sites, or Allied populations against small-scale attacks. It would be a fateful decision to forego defense altogether and leave populations open to any level of nuclear attacks.

In sum, the strategic and security relationship between East and West needs to be redefined. Arms control, whether regional or strategic, remains extremely important. But it must be related to the goals of larger security and foreign policy. It must be pursued in a manner that increases the opportunities for political accommodations, and in this regard, as discussed in the next sections, the role of Europe will become exceedingly important. Thus, we favor a policy of parallelism in which reductions are closely linked to a concept of a strong defense at every level and of the opportunities to make progress on political issues.

## Regional Conflicts

Until recently, there has been an absence of a sense of urgency in resolving regional conflicts or in linking them closely with other aspects of East-West relations. Yet history shows that tensions arise more frequently as a result of political conflict than due to weapons deployments. Moreover, prolonged conflict or tensions in such areas -- Korea, Indochina, the Middle East, and Central America -- represent a human tragedy of immense proportions. The

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settlements in Afghanistan and Angola and the progress made in Cambodia
are hopeful developments.

The inevitable transformations in the global balance are not likely to
occur without crises. And US-Soviet relations will be central to maintaining
the peace. These looming transformations should receive systematic
attention, for in the long run they will have even more far-reaching
implications than arms control or trade.

One such challenge (discussed in the next section) concerns the
emerging new relationship between Eastern and Western Europe.
Conventional arms control negotiations will inevitably reopen the question
of the political future of Eastern Europe and so will the process of reform in
the Soviet Union. So far, the Soviet Union has tied its military security to
regimes in Eastern Europe whose instabilities create their own momentum.
This represents a long-term danger even for the Soviet Union. We will deal
in the section on East-West relations in Europe with our views on how to
transform political relationships in Europe.

We cannot expect to eliminate all local conflicts, but our countries
should seek to encourage peaceful change. At the same time, one of the
important tests of a new East-West relationship is whether the Soviet Union
is willing to forego the temptations of exploiting local conflicts.

## The Future of Europe

It has long been recognized in the West, and by many in Eastern Europe too,
that the relationship with Moscow imposed on these countries after World
War II was artificial and, in the long run, unsustainable. Communism could
not satisfy the material needs of Eastern Europe, still less its cultural and
political aspirations. Post-World War II history is replete with efforts by East

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European countries to change this unnatural relationship by revolution or by
more subtle means designed to avoid a Soviet counteraction.

Gorbachev's perestroika constitutes an admission that the communist
Soviet economic system has not worked for the Soviet Union, hence even
less for Eastern Europe; glasnost implies that this fact can and must be openly
admitted. The economic inefficiency and challenge to the legitimacy of the
ruling communist parties are more starkly evident than ever. This
underlying reality is the cause of growing ferment.

Our countries face a dilemma in their policies toward Eastern Europe.
We are committed to see progress toward enabling the peoples of Eastern
Europe to determine their own future. But we do not wish to provide a
pretext for new Soviet intervention that would set back the
evolution toward liberty in Eastern Europe and strengthen more
conservative forces in the Soviet Union. Clearly, we should continue to
stress the differences between democracy in the West and the way political
systems actually function in the East. We should give support to any
movement toward market economies and democratic institutions. We
should continue a strong effort to break down the barriers to the freer flow of
people and ideas across the center of Europe. And we must insist on the
removal of the so-called Brezhnev Doctrine which has been used to justify
Soviet military intervention in Eastern Europe.

Mr. Gorbachev's phrase, "a common European House" ignores the
fundamental differences between Western Europe, Eastern Europe and the
Soviet Union. On one level, we can recognize in this phrase the desire for a
more open and peaceful pattern of relationships, a framework provided for in
the Helsinki Final Act and other CSCE documents. In that sense, there is
scope for collaboration in some practical areas. Environmental problems,