Foreign Relations of the United States, 1981–1988, Volume X, Eastern Europe

44. Memorandum From Secretary of State Shultz to President Reagan¹

Washington, May 26, 1987

SUBJECT

• Determination to Extend Jackson-Vanik Waiver Authority

The Jackson-Vanik general waiver authority and the separate waivers for Hungary, Romania, and the People’s Republic of China (PRC) will expire on July 3 unless, by June 3, you transmit to Congress a determination to extend this waiver authority. The waivers for Hungary, Romania, and the PRC and the related trade agreements establishing nondiscriminatory trade treatment continue to be important elements in our overall relations with Eastern Europe and the PRC.

Section 402 of the Trade Act of 1974 prohibits the granting of Most-Favored Nation (“MFN”) treatment, the granting of government financing or credits, or the conclusion of trade agreements, with any non-market economy country which imposes restrictions on emigration. The Jackson-Vanik Amendment authorizes the President to waive these prohibitions if he determines that waivers will promote the objective of freer emigration from the country concerned and if he receives appropriate assurances from that country. Under Section 402 (d) (5) of the Trade Act, you must transmit to Congress by June 3 a determination that the authority for these waivers be continued. If not, the existing waivers for Hungary, Romania and the PRC and your authority to extend MFN to those countries will lapse on July 3, and basic elements of our bilateral trade agreements will be placed in jeopardy.

Under the terms of the Jackson-Vanik Amendment, no Congressional action is necessary to make the extensions effective. The one-house veto provision formerly applicable under the statute is constitutionally invalid as a result of the Supreme Court’s 1983 decision in Chadha.² We have assured the Congress, however, that we will continue to observe the statute’s requirements for Presidential determination and reporting.

Our consultations with Congress indicate there is little opposition to renewal of MFN for Hungary and the PRC. Continuation of Romanian MFN is politically controversial, and is encountering strong opposition from some quarters on the Hill. On April 30, the House adopted an amendment to the Omnibus Trade Bill (H.R. 3) to suspend Romania’s MFN status for six months due to growing concern over Romania’s human rights practices,³ particularly those concerning religious liberties and, more recently, the treatment of the ethnic Hungarian minority. Similar suspension action is possible in the Senate.

The decision on Romanian MFN renewal gets tougher each year. The human rights situation there is abysmal, and economic conditions are steadily deteriorating as the regime drives to pay off its external debts at great human cost. I share the deep frustration with this unsavory regime that has led to the movement in Congress to terminate MFN.

We have just concluded a thorough review of the costs and benefits of granting MFN to Romania, during which we considered whether the time has come to send a clear message to the Ceausescu Government by cutting off MFN. But consideration of the human factor leads me to recommend MFN renewal for another year. The key fact is that the MFN relationship, and the MFN relationship alone, has given the United States sufficient influence to help a substantial number of people in that distressed country.

Romania has responded positively to the Jackson-Vanik emigration criterion that other communist countries, like the USSR, Czechoslovakia, and Bulgaria, have rejected. Since Romania received MFN status in 1975, over 170,000 people have emigrated to the U.S., FRG and Israel. In 1986, more than 15,000 Romanians departed legally for these three countries.The Romanian Government does not recognize the basic human right to emigration. It permits people to leave solely to obtain trade benefits, and emigration approvals fluctuate as it seeks to manipulate our MFN review process. The number of approvals for emigration to the U.S. was lower last year than the year before, and we are not certain what the final figure will be this year. But the essential fact is that emigration continues to be substantial, and it is our influence that has made it possible.

I fully understand the concerns of Congressional critics who have introduced legislation to suspend or withdraw Romanian MFN on more general human rights grounds. Here again, however, it is the MFN relationship that gives us the ability to press for improvements.

With the influence afforded by MFN, we have been able to raise issues of concern to minorities, secure the release from prison of some religious believers, and obtain assurances regarding the preservation of certain churches and synagogues scheduled for demolition and approval for others to be replaced or renovated. We also have been able to push successfully for the printing of Protestant Bibles, something which had not happened in Romania since the 1920’s.

Some have suggested that terminating or suspending MFN would induce the Romanians to increase emigration and to be more responsive to our other human rights concerns. On the contrary: it is clear that without MFN, our influence and capacity to work effectively on these issues would be virtually eliminated. The Romanians have made it clear that emigration to the U.S. would be halted completely if MFN is withdrawn. There are about 3,000 people still in Romania who are eligible for admission to the U.S. because of family ties or other reasons, and our capacity to help them would be gone.

In addition, regardless of whether MFN were terminated or merely suspended, Ceausescu would view our action as a personal insult and retaliate in order to save face. There is reason for concern that such retaliation would be directed against those groups and individuals he saw as “responsible” for criticism of Romania in the U.S.—would-be emigrants, religious groups, political dissidents, and others. Privately, Romanian religious leaders told us recently that they fear the impact on their communities if MFN were lost.

The humanitarian factor is central to our decision, but there are other considerations as well. In line with the Administration’s policy of differentiation among the Eastern European countries, MFN serves as a sign of recognition of Romania’s independent foreign policy actions. Romania continues to limit its participation in Warsaw Pact activities and resist Soviet efforts to tighten CEMA integration. Post-Reykjavik,⁴ Ceausescu publicly opposed the Soviet position linking SDI with an INF agreement. We have been able to exploit this limited independence through our bilateral contacts, including annual port calls by our Sixth Fleet ships, exchanges of high-level visits, and consultations on counter-terrorism, arms control and regional issues. While the Romanians do many of these things for their own reasons, MFN is a means of encouraging them to move in ways useful to us.

We have been running a trade deficit with Romania at about a 3.5 to 1 ratio, but for some years we had a surplus, and over the entire MFN period the result essentially is balanced. Trade with the U.S. and other Western countries helps Romania to maintain a greater degree of economic independence from the Soviet Union than other communist countries. Loss of MFN would cost the U.S. $250 million per year in lost export opportunities over the next few years; up to 5000 U.S. jobs would be lost as a result. Although some Congressmen have argued that cutting Romanian imports would create U.S. jobs, in fact that demand would simply be filled by imports from other nations. Secretary Baldrige and USTR Yeutter both support renewal of Romanian MFN.

Foreign policy and trade considerations aside, I continue to come back to the humanitarian element. Romanian MFN remains a useful tool enabling us to help substantial numbers of people. The costs of withdrawing it would be high, and would be borne by precisely those individuals and groups in Romania which we seek to assist. We should and will continue to press the Romanians hard for sustained improvements in performance on emigration and other human rights issues, but the capacity to do so successfully depends on MFN renewal.

For the above reasons, I have concluded that U.S. interests, including the emigration objectives of Jackson-Vanik, are best served by continued granting of MFN to Romania, Hungary and the People’s Republic of China.

RECOMMENDATION

That you execute the attached Determination, approve the attached Extension of Waiver Authority, and transmit both documents to Congress by June 3.⁵

1. Source: Reagan Library, Nicholas Rostow Files, Romania. Confidential.
2. Reference is to Immigration and Nationalization Service v. Chadha, 462 U.S. 919 (1983).
3. See footnote 8, Document 151.
4. Reference is to the Reykjavik Summit between Reagan and Gorbachev, October 11–12, 1986.
5. A transmittal message, report to Congress concerning the extension of waiver authority, and a Presidential Determination are attached but not printed. President Reagan signed the transmittal message on June 2; see Public Papers: Reagan, 1987, Book I, pp. 600–603. The Romanian Ambassador was informed of the extension that day; see Document 154.