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

149. Information Memorandum From the Acting Assistant Secretary of State for European and Canadian Affairs (Simons) and the Acting Assistant Secretary of State for Economic and Business Affairs (Lamb) to the Deputy Secretary of State (Whitehead)¹

Washington, December 12, 1986

SUBJECT

• Romania to Lose GSP Benefits

Romania’s status as a beneficiary country under the U.S. Generalized System of Preferences (GSP) program will be terminated early next year. An interagency recommendation to this effect will soon go to the President; his decision will be announced in the Federal Register by January 5.

When informed of this prospect, the GOR told Ambassador Kirk that the decision would be seen as a political act contrary to the spirit of your Bucharest discussions,² and that it would damage bilateral relations. Officials have hinted that Romania would respond.

Romania has had GSP since the program’s inception in 1975. Unlike Most Favored Nation status, which is the normal basis of trade among nations, GSP is an advantage that we and other industrialized countries grant to many “developing” countries to enable them to diversify their exports. Based on 1985 figures, we estimate that about $58 million in trade would be affected by Romania’s loss of GSP.

In 1984, Congress amended the law governing the GSP program, making eligibility for GSP benefits contingent upon a country’s actions in affording internationally recognized workers’ rights to its workers. As required (and spurred by complaints by the AFL/CIO and others about practices in a dozen countries, including Romania), an interagency group has been reviewing the status of all beneficiaries under the new GSP legislation. Most of the countries which do not meet the new workers’ rights criterion will still be able to preserve GSP benefits by demonstrating that they are “taking steps” to improve the situation. Given the nature of the regime in Romania, there is no way the GOR can convincingly show that it is moving toward Western standards of rights for workers. While application of the workers’ rights provision may be waived in the national economic interest, the interagency group agreed that there is insufficient basis for such an action.³

1. Source: Department of State, Records of the Deputy Secretary’s Office, 1982–1993, Lot 95 D 334, Romania. Confidential. Drafted on December 5 by Schlamm; cleared by John Pitts (EUR/EEY), Lang, Wenick, Leonard Lange (EB/OT/ODC), David Gossack (EB/ODC), and Elliott Hurwitz (E). Schlamm initialed for all of the clearing officials. A stamped notation at the top of the memorandum reads, “J.C.W. has seen, Dec 15, 1986.” Another stamped notation indicates that it was received on December 12 at 4:26 p.m.
2. See Document 148.
3. Whitehead wrote beneath the final paragraph, “In my view, this is a bad decision and goes against our overall interests. Is it too late? Can it be reviewed? JCW.” In a December 15 note to Whitehead, David Weiss wrote, “Per your question as to whether the GSP issue can be reviewed, see my memo to you (attached). Essentially, it has already been reviewed once, and we’d be likely to lose again in any further review. DW.” (Department of State, Records of the Deputy Secretary’s Office, 1982–1993, Lot 95 D 334, Romania) Weiss’s memorandum is attached but not printed.