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

106. Memorandum From Secretary of State Shultz to President Reagan¹

Washington, February 19, 1983

SUBJECT

• Termination of MFN for Romania

The Romanian Government has begun implementation of the education repayment decree, which requires that emigrants repay in convertible currency the cost of their education and training beyond the tenth-grade level before they may leave Romania. Foreign Minister Andrei has confirmed to Ambassador Funderburk in Bucharest that the decision to implement is formal and irrevocable. Romania’s actions are incompatible with the purpose and spirit of Section 402 of the Trade Act of 1974 (the Jackson-Vanik Amendment). In your letter to President Ceausescu of December 1, 1982,² you said that implementation of the decree would result in the loss by Romania of its Most-Favored-Nation (MFN) tariff status and of its eligibility to participate in United States Government credit and guarantee programs.

An interagency group has considered the question of how and when to terminate Romania’s MFN and other benefits. There is general agreement that the preferred course is for you to announce in the near future that if Romania continues its implementation of the education repayment decree, you will take the necessary action under the law to terminate the Jackson-Vanik waiver for Romania, thereby terminating MFN and other benefits, effective June 30, 1983. In addition, it is recommended that, as part of your annual Jackson-Vanik recommendation to the Congress (necessary to continue MFN and other benefits for Hungary and China) in early June, you recommend continuation of your underlying waiver authority with respect to Romania for an additional year beginning July 3. This action would permit you to reinstate, with Congress’ concurrence, Romanian eligibility for MFN and other benefits should the Romanians cease enforcing the decree and provide satisfactory assurances of improvements in their emigration procedures.

This proposed course of action would demonstrate the Administration’s decisiveness while giving us flexibility on the possible future restoration of MFN and other benefits. The June 30, 1983 date for termination of MFN and other benefits is designed to provide time for the approximately 200 American firms importing products from Romania to adjust to the impact of the loss of MFN, and to give the Romanians an opportunity to reflect on their action and possibly decide to reverse or modify their decision.

Termination of MFN will require the suspension or termination of only the relevant part of our 1975 Trade Agreement with Romania. The Agreement provides for this possibility if the Romanians concur during consultations. If they do not, we can and will terminate the entire agreement. We intend to begin consultations with the Romanians promptly following your announcement.

Before your announcement, we should inform the Israelis, Germans, Romanians, and the GATT membership of your decision; we will also at some point need to consult formally with the Romanians as required by the bilateral Trade Agreement. In doing so, we would seek to induce our key Allies to bring their own pressure to bear on the Romanians on the reasonable grounds that a reduction by $200 million or more in Romanian exports to the U.S. will diminish Romania’s ability to pay its debts to all its creditors. If you approve our proposed course of action, we will begin those discussions immediately. I propose that you make your announcement on or about February 23. I am attaching a proposed text.³

Commerce, USTR, and Treasury have been consulted and concur fully.

RECOMMENDATION:

— That you announce your intention to terminate the Jackson-Vanik waiver for Romania effective June 30, 1983, if the education repayment decree remains in force as of that date, but to seek continuation of your waiver authority for an additional year beginning July 3.⁴

— That you approve our informing Israel, the Federal Republic of Germany, other key Allies, Romania, and the GATT membership of our intention to terminate MFN and related benefits for Romania.⁵

1. Source: Reagan Library, Executive Secretariat, NSC Country File, Europe and Soviet Union, Romania (01/10/1983–03/01/1983). Secret.
2. See Document 100.
3. Not found attached. Reagan made the statement on March 4. (Public Papers: Reagan, 1983, Book I, p. 329)
4. Reagan checked and initialed the “Approve” option.
5. Reagan checked and initialed the “Approve” option.