138. Telegram From the Embassy in Hungary to the Department of State1

1164. For EUR only. Subject: Secretary Hartman’s Visit to Budapest. Ref: State 081127.2

1. Following are Crown and MFN portions of Hartman-Nagy discussions as excerpted from airgram forwarded to Department (reftel).

2. The Crown

A) Nagy said U.S.-Hungarian relations were now almost normal. Both sides are willing to discuss any matter arising concerning the two countries. The general atmosphere is good. Many questions have been settled between the two countries. We have indeed come a long way. He noted the exchange of high-ranking officials between the two countries and stressed that Hungary wishes to continue to normalize relations.

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B) Nagy gave a tactful history of Hungarian patience with respect to the Crown. He said that during the past year the Hungarian Government, from some things that had been said and how they had been said, looked at U.S. remarks as something akin to a promise to soon return the Crown. To raise a warning signal would be foolish, even nonsensical, but still, Nagy said, time is running out. He hoped resolution of this problem would not take too long because, given the present state of U.S.-Hungarian relations, people in high places might not understand and might lose their patience.

C) Secretary Hartman agreed with Nagy’s positive assessment of American-Hungarian relations. He said the new administration had not yet addressed such problems as the Crown but this is understandable in view of the many pressing international and domestic problems it has had to cope with at the outset. With respect to the Crown, Hartman said the generally improving relations between Hungary and the U.S. should be helpful. He added that the U.S. is aware of the importance that Hungary attaches to this issue.

3. MFN

A) Even more than the question of MFN, Hungary, according to Nagy, is worred about the long-term reliability of the U.S. as a trading partner. Trade union pressures and congressional action continually threaten existing trade arrangements, so much so that Hungarian exporters are afraid that, once they enter into a business relationship with the U.S., the rules of the game will change. This is too risky for the constructive development of trade relations. Then, of course, there is the time limitation on any commercial agreement between the U.S. and Hungary.

B) With respect to trade, Secretary Hartman said it would be worthwhile to talk to one another about current problems to see whether there are means to deal with them. He called attention to the free trade philosophy of the new administration and referred briefly to the President’s recent decision on the importation of shoes which should permit the continued development of Hungarian shoe exports to the U.S. Nagy asked Secretary Hartman what he meant by his proposal that Hungary and the U.S. discuss economic matters. There is a Hungarian proposal on the table, he said. The U.S. should withdraw its exception under Article 35 of the GATT. What does the U.S. wish to do now? Nagy contended further that U.S. law does not forbid withdrawing the GATT reservations. Hartman said that the whole question of MFN and GATT would have to be looked into on his return to Washington.

  1. Source: National Archives, RG 59, Central Foreign Policy File, D770126–0793. Confidential; Priority.
  2. In telegram 81127 to Budapest, April 11, the Department instructed Hartman to excerpt and transmit to the Department the sections of his discussions with Nagy dealing with the Crown of St. Stephen and MFN status. (National Archives, RG 59, Central Foreign Policy File, D770125–1097)