Foreign Relations of the United States, 1969–1976, Volume XXIX, Eastern Europe; Eastern Mediterranean, 1969–1972

204. Memorandum From the Presidentʼs Assistant for National Security Affairs (Kissinger) to President Nixon¹

Washington, March 2, 1971.

SUBJECT

• U.S. Economic Relations with Romania

The Under Secretaries Committee has examined a dozen steps we could take to give substance to your commitment to President Ceausescu to increase U.S.-Romanian economic relations,² which Ceausescu emphasized in his last visit. The Committee believes there are two major issues which hold the key to whether we shall be able to do so—U.S. extension of most-favored-nation treatment (MFN) to Romania, and Export-Import Bank credits to Romania.

Romania has pushed very hard for most-favored-nation tariff treatment. It is also much interested in Export-Import Bank credits, which the Fino Amendment forbids to countries trading with North Vietnam. You have just decided in the broader East-West trade context that the Administration would not now take initiatives in these areas,³ however, and none of the agencies proposes seeking authority for Romania alone. They believe that singling out Romania via special legislation would irritate Eastern Europe and embarrass Romania, and I agree; the Romanians apparently share this view as well.

You also decided that we not vigorously oppose Congressional initiatives on these issues, however, so you may get an opportunity to do something on them for Romania anyway. Senator Mondale⁴ has already proposed a bill to drastically limit the Fino Amendment, and it could pass. When the Administration testifies on the bill on March 8, our spokesman could announce that, should the bill pass, we would plan to use the authority only for Romania. There is also a Javits/Mondale/Harris⁵ bill which would authorize you to extend MFN treatment to the Communist countries, but it is part of a larger trade bill which is unlikely to go anywhere in the near future.

On the smaller actions, the Committee rejects several as either insignificant or too contradictory to our general policies to merit adoption:

• —a further change in the export control category for Romania;
• —granting of beneficiary status for Romania under our generalized preference scheme, when and if authorized by Congress, before we have given her MFN status;
• —immediate relaxation of our balance of payments controls on U.S. capital flows to Romania, by categorizing her as a lower income country instead of a Communist country;
• —establishing Romania as an eligible source for procurement under our limited untying of U.S. foreign aid, by treating her as a lower income country rather than as a European country;
• —authorization of a sugar quota for Romania.

The Committee does propose some smaller measures:

• —Our support, though not sponsorship, of Romanian efforts to enter the IMF and IBRD, provided Romania makes some progress in setting outstanding dollar bond claims;
• —new Romanian air negotiations, provided Romania shows some sign of compromise;
• —seeking Romanian eligibility for PL–480 Title I sales.

The first two of these are unexceptional, but require no decision by you now. The third could only be done by our seeking changes in legislation to eliminate the prohibition of sales to countries whose ships trade with Cuba; this would be good Romanian policy, but it would indicate a slackening of our Cuban embargo and I do not suggest it.

I agree with the Committeeʼs recommendation, except for this Cuba issue and its rejection of a change in the export control category for Romania, which is based upon a judgment that: the trade effects would be small since only 180 items are involved; we already accede to most requests for licenses for Romania; some of the items involved are of security interest; and, most importantly, the maintenance of our export controls on technical data are required to avoid significant security risks vis-à-vis the USSR.

I believe that the Committeeʼs recommendation under-emphasizes the favorable political effect of our placing Romania in the same export control category as Yugoslavia, which in fact you indicated to Ceausescu you would do in at least some areas, at least for goods. The Committee presents an option of treating Romania equal to Yugoslavia on exports of goods, but maintaining intact the data controls. The only objection to such a change is that it could allow some “strategic” goods to reach Romania—such as the hydro-cracking plant which you authorized late last year anyway.⁶ And, even with the change, we would still maintain controls on the same 600 items controlled by other COCOM countries and some 375 items which we control unilaterally. The strategic risk thus appears minimal, and offset by the foreign policy gain. The Romanians know we have this review under way, and will be quite disillusioned if it results in no new step at all—hence I recommend this modest step on export controls.

Recommendation

That you decide now on two new steps for Romania: (a) that Administration spokesmen, in testifying on Congressional initiatives to authorize Export-Import Bank transactions in Communist countries, indicate that the Administration would now use such authority only for Romania, and (b) that you decide to set up a new export control category to equate Romania with Yugoslavia for exports of U.S. goods, while maintaining the present controls on exports to Romania of U.S. data.

Approve⁷

Disapprove

Other

1. Source: National Archives, Nixon Presidential Materials, NSC Files, NSC Institutional Files (H-Files) Box H–270, Under Secretaries Decision Memorandum, U/DM 1–19, U/DM 14. Confidential. Sent for action. A notation on the memorandum indicates the President saw it.
2. See Document 202.
3. See Document 23.
4. Senator Walter F. Mondale (D–Minnesota).
5. Senators Jacob K. Javits (R–New York) and Fred R. Harris (D–Oklahoma).
6. See Document 14.
7. The President initialed the approval option. Kissinger informed Richardson of the Presidentʼs decisions in a March 9 memorandum. (National Archives, Nixon Presidential Materials, NSC Files, Box 703, Country Files—Europe, Romania, Vol. III Jul 1970–Dec 1971)