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

142. Memorandum From Secretary of State Shultz to President Reagan¹

Washington, May 21, 1986

SUBJECT

• Determination to Extend Jackson-Vanik Waiver Authority

The Jackson-Vanik general waiver authority and the separate waivers for Romania, Hungary, 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 Romania, Hungary, 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. The Trade Act requires that you transmit to Congress each year a determination that the authority for these waivers be continued. Under Section 402 (d) (5) of the Trade Act, a determination concerning extension of the waiver authority must be transmitted to Congress by June 3. If not, the existing waivers for Hungary, the PRC, and Romania 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.

MFN treatment and the bilateral trade agreements are very important components of our overall bilateral relationships with Hungary, the PRC, and Romania. A termination of MFN eligibility would seriously set back our relations without any corresponding benefits for us. Failure to renew MFN would deprive us of an effective instrument which we have used to promote freer emigration. It would also set back our efforts to ensure equitable treatment for U.S. companies in these markets and to protect our firms’ industrial property rights. Loss of MFN would lead to a very significant drop in levels of bilateral trade and would result in these countries’ treating U.S. firms as suppliers of last resort, with significant damage to our export sales.

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. 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 continued MFN for Hungary and the PRC. Continuation of Romanian MFN has become politically controversial, and will face strong opposition from some quarters on the Hill this summer.

Romanian MFN has continued to produce impressive emigration performance, the criterion for continuation of MFN established by the Jackson-Vanik Amendment. In ten years of Romanian MFN, we have facilitated the departures of over 160,000 people to the FRG, U.S., and Israel. In 1985, more than 17,000 Romanians departed legally for these three countries, and Romanian emigration this year is likely to approach that figure. As for many years, this flow continues to exceed the total legal emigration from the Soviet Union, Bulgaria, Czechoslovakia, Hungary, and Poland combined. We have also used MFN informally, and with limited success, in promoting forward movement on Romanian human rights and religious issues.

In addition to the emigration criteria for MFN under the Jackson-Vanik Amendment, some members of Congress have introduced legislation to suspend or withdraw Romanian MFN based on the country’s policy and practices on religious liberties. Romania’s record on these issues is repugnant, and we continue to press strongly in particular for an end to abuses of the country’s small Protestant minorities such as church demolitions and denial of free distribution of Bibles. It should be noted, however, that Romania’s general attitude toward religion compares favorably with that of the Soviet Union. Romania is experiencing a major religious revival which our influence has helped to sustain. Despite concerted efforts by the authorities, including bulldozing of a half-dozen fundamentalist Protestant church buildings in recent years, discrimination against smaller denominations, and prohibitions against the distribution of Bibles, American influence is being felt. The Romanians have looked the other way as religious groups receive millions of dollars annually in Western material support, and Baptist seminarians are trained underground.

The granting of MFN status has given U.S. companies the ability to sell over $2 billion in U.S. goods since 1975. Trade with the U.S. and other Western countries has helped Romania to maintain a greater degree of economic independence from the Soviet Union.

The West German and Israeli Governments have advised us of their support for extension of MFN to Romania.

For the above reasons, I have concluded that U.S. interests are best served by continued granting of MFN to Romania.

To keep maximum pressure on the Romanians to improve their performance, I recommend two further steps. First, I suggest that the report which accompanies your determination to continue Romanian MFN for another year contain a strong statement of our concerns on religious rights issues. Second, I recommend that you send a private letter to President Ceausescu (Attachment 4)² which describes the risk to a carefully balanced policy benefitting Romania which his unresponsiveness to our concerns on religious rights has created and warns that our policy, which makes possible the extension of MFN to Romania, may not be sustainable in the absence of the GOR’s taking meaningful steps to address our concerns.

RECOMMENDATIONS:

— That you execute the attached Determination, approve the attached Extension of Waiver Authority, and transmit both documents to Congress by June 3.³

— That you approve the attached letter to Romanian President Ceausescu.

1. Source: Reagan Library, Paula J. Dobriansky Files, Country File, Romania—MFN (Most Favored Nation) EE (9). Confidential.
2. Printed as Document 144.
3. All attached but not printed.