In the late '60s and early '70s the General Electric Co. negotiated agreements with eight big European and Japanese companies to provide the equipment and technical know-how for building sophisticated gas turbines and compressors for pipelines.
For GE the agreements were a shrewd piece of corporate diplomacy. They enabled the giant U.S. electrical company to head off possible competition in the turbine business from the foreign firms, to take advantage of cheaper labor overseas and, indirectly, to obtain access to government subsidies and financing abroad.
But these same agreements, and others like them, are now providing the Reagan administration with a lesson in the limits of its power in an international economy dominated by multinational companies and held together by a web of intricate relationships that crisscross national boundaries.
European governments have rejected an attempt by the administration to stop the licensed affiliates and subsidiaries of GE and other U.S. companies from delivering equipment for the Soviet natural gas pipeline to western Europe.
Last month the administration "blacklisted" the French subsidiary of Dresser Industries of Dallas when, acting under French government orders, it shipped pipeline compressors to a Soviet port. The Dresser subsidiary was barred from receiving any further equipment or technology from the United States. Also blacklisted were Creusot-Loire, a major French firm, and Nuovo Pignone Engineering Co., an Italian company.
The dispute has been described as the hottest confrontation between the United States and its European allies since World War II. Yet in its own way, the quarrel is testimony to the stunning success of postwar American policy in building commercial bridges all over the world in the interest of economic interdependence.
Although it is still possible to speak of "American" companies such as GE and Dresser, the oil and natural gas industry, which is at the center of the current controversy, shows how ambiguous the national identity of most big companies has become.
During the last 20 years, American, Canadian, Japanese and European players in this industry have been linked by myriad technology transfers, licensing arrangements, acquisitions and mergers across borders, all of which complicate the Reagan administration's task.
"The internationalization of the economy -- which the U.S. spearheaded -- has rendered obsolete old ideas of economic warfare," said Richard J. Barnet, coauthor of "Global Reach," a study of multinational corporations. "You can't find targets any more, and if you aim at a target you often find it's yourself."
In his view, this economic and financial interdependence is "greater and of a different kind than anything we've had in the past."
Reagan administration officials acknowledge that this has created a frustrating range of problems for policy makers.
"Basically we're in an impossible situation," said one senior White House aide. "You don't want to get rid of the advantages of this international economic system, but if you try to exercise control for foreign policy reasons, you cut across sovereign frontiers."
"It's difficult for governments to take an action, make it stick and make it effective," another official said. The multinationals "can orchestrate pressure on foreign governments because of this network of relationships. . . . It certainly is extensive."
Until World War II, even large companies tended to be closely identified with one country.
But consider the internationalization of one of the most "American" of all firms, General Electric, in just one key sector: energy-related products.
According to a study on "Technology and Soviet Energy Availability" published last year by the congressional Office of Technology Assessment (OTA), GE has provided licenses for building compressors, gas pipeline turbines, automation equipment and compressor stations to Nuovo Pignone of Italy, Mitsubishi Heavy Industries and Hitachi of Japan, Mannessmann and AEG Telefunken of West Germany, John Brown Engineering of Great Britain, and Thomassen Holland of the Netherlands.
OTA said all these "manufacturing associates" have worked with GE on gas turbines, with GE supplying rotating parts, Mannessmann supplying engineering and design, and the other companies supplying stationary parts and compressors to GE specifications.
This had advantages in the 1970s when the U.S. government prohibited the export of high performance pipeline turbines to Moscow, but did not object to the sale of turbines from Europe.
OTA identified 36 U.S. companies manufacturing oil and gas equipment with divisions, subsidiaries or licensing arrangements in Japan, Canada or Europe. The equipment included such items as valves, submersible pumps, digital display systems, blow-out prevention controls and pipeline coolers.
OTA also found that 55 U.S. companies have exported, or contracted to export, energy-related equipment to the Soviets since 1975. The roster includes such firms as IBM, Control Data, Ingersoll-Rand, and Cooper Industries.
But the problems of enforcing the sanctions have been vastly complicated by the network of licensing agreements from U.S. firms to foreign affiliates, or vice versa, that have been entered into during the last two decades.
The interdependence works two ways. According to the OTA report, for example, Cooper Industries has provided licenses for centrifugal compressors to the now-blacklisted firm, Creusot-Loire of France, as well as to Kawasaki Heavy Industries of Japan.
But Creusot-Loire also supplies components to some U.S. companies, the Commerce Department learned last week. Under the wording of the U.S. blacklist order, the French company would be forbidden to deliver these components if their manufacture required any new American technical data.
"The way things are now we can't even take their phone calls," one U.S. businessman said.
Howmet Turbine Components Corp., of Greenwhich, Conn., a U.S.-based, French-owned company, is a particularly graphic example of the complexities of enforcing sanctions in today's interrelated business world.
Howmet is an old American company that got its start making artificial hip joints early in the century. It now makes high-performance blades for turbine rotors, utilizing complex alloys and esoteric manufacturing processes (such as forming the blades in a vacuum) to minimize metal fatigue.
In 1975 it was acquired by the giant French aluminum company, Pechiney Ugine Kuhlmann. Then, in 1979, Howmet acquired a French subsidiary, Microfusion, which also makes rotor blades.
Microfusion has been a regular supplier of the blades to Alsthom-Atlantique, a French firm licensed by GE to produce turbine rotors. If the French government orders Alsthom-Atlantique to produce rotors for the Soviet pipeline in violation of the U.S. sanctions, Microfusion could find itself caught in the middle.
It might also be ordered by the French government to supply blades to Alsthom, even though its French-owned American parent company instructed it not to do that.
But whether it could make the blades without Howmet's technical help is another question.
In today's "high tech," computerized manufacturing processes, technology transfer does not end with the issuing of a license or the exchange of engineering blueprints. It can also involve daily phone calls to deal with minor "glitches" and problems. And this is what the Reagan administration wants to stop in the case of blacklisted overseas subsidiaries and licensees.
Further complicating the picture is the fact that Howmet also operates a British division, Misco, which supplies blades to John Brown Engineering, the company that is building turbines for the Soviet Union utilizing GE rotors and GE technical know-how.
In effect, business analysts say, the Nixon administration invited the Soviet Union to join the western economic and financial system with the detente policy launched in 1972, and undoing the ties that subsequently developed is proving difficult to do.