136. Telegram From the Embassy in Yugoslavia to the Department of State0
519. Policy. Petric has emphasized to us great importance his government attaches to strong statement by President at time signing of Trade Expansion Act indication administration’s dislike of Congressional action denying MFN treatment to Yugoslavia. This was central point that emerged from general discussion between him and Jones1 9 October concerning implications of recently concluded Trade Expansion Act and appropriations bill.
While noting with interest press reports on final provisions appropriations bill, Petric focused his attention on MFN. He recalled hope expressed by Foreign Secretary Popovic in Washington that aid would not be needed much longer. But without MFN future US/Yugoslav economic relations plainly insecure. PL 480 would not alone provide secure basis. Trade was foundation of sound economic relations and it was denial of MFN treatment under the Trade Expansion Act that was of immediate and deep concern to his government. He then went on to make following principal points:
- 1.
- This government could not understand our handling Yugoslavia legislatively as if it were member of Warsaw Pact. While he did not make point explicitly he implied that coupling of Poland and Yugoslavia showed lack of understanding of fundamentally different position these two governments bear to Soviet Bloc. He posed rhetorical question several times, “do you want to push us into the Bloc?” There was, he asserted, a basic misconception in US of Yugoslavia’s independent posture and of its relations with Soviet Bloc.
- 2.
- His Foreign Minister had been led to believe in Washington, as had Yugoslav Embassy there, that MFN provision was under control and that it would be deleted in final stages of legislation. It came as great surprise to find things turning out otherwise. We pointed inter alia to situation that had developed with respect to Cuba, the strong feelings within our country on this issue, and how it added to the administration’s legislative difficulties. In noting this Petric said his government had been quite correct on Cuban problem. Noting in passing but without elaboration that his government was unhappy over Barin Drzic case, he said Yugoslav carriers had standing orders not to transport anything of dubious character to Cuba and that he had specific knowledge of [Page 286] cases where Yugoslav carriers had declined to carry such material although sought to do so by Western shippers. His government, he concluded, would be sensitive on problems of free trade and free navigation with Cuba.
- 3.
- While no action had been taken on matter yet, entire MFN subject was under active review by his government. At the moment it was waiting to see if the President would make strong statement at time of signing Trade Expansion Act making it clear administration saw differently from Congress on Yugoslav problem and denial of MFN privileges. His government needed such public statement so that its own people could understand there is basic difference of view in US on this matter so crucial to Yugoslavia. Petric noted with satisfaction recent articles by Walter Lippmann and Chalmers Roberts as well as editorials that have appeared in the US press. But what was needed was short of Presidential statement that he described. To this he clearly attached the utmost importance. He reverted back to it repeatedly. When we expressed surprise that there should be any doubt in anyone’s mind on where administration stood on this issue, Petric said record was clear until about two weeks ago when first real trouble was encountered with MFN clause during final stages of negotiation. Since then the administration had made no clear-cut public statement that was helpful to Yugoslav Government. In looking to future, we recalled to Petric some of points made by Secretary Rusk to Valdimir Popovic recently as measure of desire to deal with MFN problem promptly and constructively. We noted that in any event it presumably would be twelve months after notification before tariff rates would actually change and the interval afforded both of us opportunity to deal with problem constructively. Petric quickly pointed out that effective date of rate changes was less important than present psychological impact. In anticipation of abrogation of MFN treaty, commercial and trading circles would now be more diffident about doing business with Yugoslavia and her credit position was likely to be adversely affected. Moreover, voice of US Government would now carry less weight with Western European circles in those forums such as OECD and EEC where US had been helpful on Yugo-slavia’s behalf in past. Western Europeans could point to our own actions and call into question whatever influence we might now try to exert. Meeting concluded with Petric’s observing that appropriate public statement by administration was essential first step to any constructive action on problem and that in absence such statement his government could only assume Congressional action represented administration as well as Congressional attitude toward Yugoslavia.