U.S., Soviets soften chemical arms rhetoric Last week the U.S. submitted to the United Nations its latest report on the use of chemical arms in South­east Asia and Afghanistan. On the same day the Soviets offered a pro­posal to the Geneva Conference on Disarmament that they characterize as a major "concession" toward the drafting of a comprehensive chemi­cal arms treaty.

The U.S/s four-page report to the UN is marked by a softening of rhetoric and a lack of substantive information. Other than mentioning a positive biological sample from Kampuchea reported last August to the UN, the U.S. reports no new environmental or biological samples, or munition fragments positive for trichothecene toxins, the so-called yellow rain toxins. The U.S. does, however, say that it was unable to confirm a single chemical attack in Afghanistan in 1983. But it was able to confirm a marked decrease in the lethality of attacks in Southeast Asia during the past year.

In fact, the U.S. says that the symptoms reported for the casual­ties in Laos and Kampuchea are dif­ferent from those associated with trichothecene toxins. And for the first time, the U.S. notes that some deaths and illnesses reported in Laos may come from eating contaminat­ed food after toxic attacks. The U.S. says the signs reported from South­east Asia best fit the use of "as yet unidentified, nonlethal agent or agents."

One possibility, the U.S. conjec­tures, is the use of a powerful riot-control agent, which the U.S. in the past has said does not constitute a violation. Further, it would be very difficult to implicate the Soviet Union in the use of such an agent in Southeast Asia. The report makes no attempt to do so. In fact, it does not mention the Soviet Union in its description of the continued, if reduced, use of chemical weapons in Southeast Asia.

Also for the first time, the U.S. expresses its "deep concern" over reports of chemical warfare in the Iraq-Iran conflict. Unconfirmed re­ports in the European press indi­

cate that made-in-Iraq mustard gas is being used.

The Soviets made their new pro­posal in Geneva at the 40-nation Conference on Disarmament. They believe it could lead to "significant progress" on a complete ban of chemical weapons. The Soviet Union said it was "in principle" ready to accept continuous international in­spection of the destruction of chemi­cal weapons at "special" facilities.

At a recent press conference, President Reagan called the Soviet plan "a good sign." And U.S. offi­cials familiar with the ongoing ne­gotiations term it "significant and

The Conference Board has joined the ranks of those saying that next year could bring another slowdown in the economy if not an outright recession. In a report issued last week, the New York City-based business group said that "highly expansionary U.S. fiscal policy and massive budget deficits are setting the stage for potentially widespread economic problems as early as 1985."

The report analyzes economic con­ditions that have major implications, especially for capital-intensive in­dustries such as the chemical indus­try. The board's director of econom­ic policy research, Michael E. Levy, says, "An unsustainable imbalance in the U.S. economic policy mix, which dampened worldwide recov­ery and strained the financial re­sources of some heavily indebted developing countries in 1983, is being extended now through 1984 and into 1985. This imbalance cre­ates the potential for distress, if not in 1984, then possibly in 1985 and beyond."

The board report shows concern that the rapidly growing private sec­tor may have to compete for funds with near-record levels of federal borrowing as expansion continues. This is creating a potential "crowd­ing ou t" of private investment, which is important to sustain the recovery.

The report says that three major factors will delay the squeeze on business, but that all pose threats to

encouraging." But they are uncer­tain as to whether it resolves major differences on chemical stockpiles, for instance. In June 1982, the Sovi­ets said they would be willing to accept stockpile inspections on a quota basis, but they have yet to define what they mean by quota. Also, the new proposal leaves un-addressed many other verification problems. The Soviets are still unwilling, U.S. sources say, to iden­tify their production facilities for the first eight years of a treaty.

The U.S. is expected soon to offer a draft treaty to the Disarmament Conference. •

future growth and economic sta­bility:

• Improved corporate cash flow generated by the ongoing econom­ic expansion is being fattened by "supply side" tax cuts. But these short-term gains soon will begin to disappear.

• A slowing economic growth rate in early 1984 is expected to cause more accommodating Federal Reserve Board monetary policy, but this raises the prospect of increased inflation.

• The continuing movement of foreign capital into the U.S., which indirectly helps finance the deficits, is spurred by the strong dollar, the expectation of accelerating real growth later this year, and continu­ing high interest rates. However, this points to a worsening of al­ready large U.S. trade deficits.

Levy says that although "it is too early to predict the t iming and causes of the next economic disrup­tion, U.S. prosperity in 1985 and for years to come hinges on an in­creasingly fragile U.S. policy mix."

This policy mix, says the report, includes a large and stimulative structural budget deficit that raises both capital market pressures and inflationary expectations, Federal Reserve actions to keep interest rates high enough to control inflation but without triggering recession, an over­valued dollar that sustains and criti­cally depends on large inflows of for­eign capital, and a U.S. willingness to tolerate large trade deficits. D

Business group predicts slowdown in 1985

February 27, 1984 C&EN 7