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

150. Telegram From the Embassy in Romania to the Department of Commerce¹

252.

Bucharest, January 13, 1987, 1408Z

SUBJECT

• Romanian Ministry of Foreign Trade’s Response to Withdrawal of GSP Benefits.

REF

• A. 86 State 401397²
• B. State 476³
• C. Bucharest 91.⁴

1. (C) Summary. On January 10, SCO was called in to the Ministry of Foreign Trade (MFT), where he was handed a letter from MFT Ilie Vaduva to Secretary Malcolm Baldrige on USG’s decision regarding GSP. The letter asked for the Secretary’s assistance in retaining GSP benefits for Romania. It does not mention or defend worker rights in Romania, but claims that GSP eligibility should be determined by Romania’s developing country status and provisions of the U.S.-Romanian trade agreement. A MFT official commented that termination of GSP benefits will force Romania to reduce U.S. imports. The official claimed that Romanian imports of U.S. goods had grown “dramatically” during 1986, but this trend will not continue if GSR were withdrawn. Concerning the upcoming session of the Joint American-Romanian Economic Commission (JEC), the official conveyed GOR’s views that the U.S. delegation would be chaired by Secretary Baldrige instead of Under Secretary Bruce Smart. This would demonstrate the high level of the session and the importance given by the USG to support and expand bilateral trade. The official added that if chairmanship of the JEC U.S. delegation was not at the highest level, the demonstrated lack of interest would affect bilateral trade negatively. MFT also asked for USDOC’s confirmation of the proposed dates of March 18–19 for the JEC session. Recommendation: A letter from Secretary Baldrige (by telegram), endorsing Under Secretary Smart and the proposed dates, and showing personal interest in bilateral trade, would help if sent promptly. End summary.

2. (U) On Saturday, January 10, SCO was called in to MFT where he met with Director for North America Ion Chioveanu and U.S. Desk Officers Valeriu Ruset and Vladimir Ciobanasu. Chioveanu presented SCO with a letter from MFT Vaduva to Secretary Baldrige on withdrawal of GSP benefits from Romania. Chioveanu said Ambassador Gavrilescu had been instructed to present a similar message to Secretary Baldrige during the week of January 12.⁵

3. (U) Following is the letter’s unofficial translation provided by MFT. The original was pouched to USDOC.

Begin text.

Quote

Bucharest, January 9, 1987

His Excellency

Mr. Malcolm Baldrige

Secretary of Commerce of the United States of America

Excellency,

I fully appreciate your efforts towards promoting the expansion of economic relations between Romania and the United States. This is why I am writing you again in connection with the intention of the American authorities to exclude Romania from the list of GSP eligible countries, under the scheme of the United States. As a result, Romania would be practically the only developing country to be deleted from a list that comprises 140 developing countries and territories enjoying preferential treatment. This would be in contradiction not only with the understandings in force between our two countries, concerning the expansion of our bilateral relations and international cooperation, but also with the statements made by a number of personalities representing the American administration with respect to the expansion of relations between the two countries.

Romania’s exclusion from that list would be an act of discrimination tantamount to non-recognition of Romania’s developing country status, which would be contrary to the provisions of the Romanian-American trade agreement of April 2, 1975 (Art. 1.3) and to the fundamental UNCTAD principles which call for non-reciprocity and non-discrimination in the extension of tariff preferences.

It is my firm belief that the reason for this exclusion reveals a regretable interpretation of the Romanian realities. At the same time, it raises many questions in connection with the capacity of the United States to further encourage the development of Romania-United States economic relations irrespective of the differences between the political and social systems in our two countries.

You will agree with me that from this point of view, Romania’s exclusion would represent a serious setback from the efforts we have so far made, on both sides, in order to ensure the necessary conditions for the expansion of Romanian-American economic relations.

Under these circumstances, one may expect that the achievement of our common goal, a total trade volume of 2 billion dollars in the shortest possible time, and the growth of Romanian imports from the United States, which, in keeping with the provisions of our understandings, can be achieved only if Romanian exports can grow accordingly, will be adversely affected. It is my conviction that such a measure will be detrimental to the business climate that should prevail between the two countries, if these goals are to be accomplished. Note. Post correction. Translation of the last sentence should read as follows: I am convinced that this measure will not help create the appropriate conditions and most favorable climate required by the business communities of our two countries for accomplishing these objectives. End correction.

In this connection we would appreciate if you would use your influence as Secretary of Commerce with the White House and Congress, and Chairman for the American side in the Romanian-American Joint Commission, so that Romania would continue to be included on the list of GSP beneficiary countries. Note. Post correction. Translation of this sentence should read as follows: In this connection, we would appreciate it if as Secretary of Commerce and Chairman of the American side of the Romanian-American Joint Commission, you would use your influence with the White House and Congress so that Romania would continue to be included in the list of GSP beneficiary countries. End correction.

I am positive that your intervention, which I do hope will be very successful, will be consistent with your untiring efforts towards the steady promotion of Romanian-American economic relations, in the mutual benefit of our two countries.

Sincerely,

Ilie Vaduva

/S/

Unquote

End text.

4. (C) Comment. It is worth noting that the letter does not mention or defend worker rights in Romania. Instead, the GOR has taken a different tack, by claiming that GSP eligibility should be determined by Romania’s developing country status and provisions of the 1975 U.S.-Romanian trade agreement. The agreement’s article 1.3 mentioned in the letter stated only that “Romania, as a developing country, could be eligible for treatment accorded to developing countries”. A participant in the 1975 negotiations, currently in Bucharest, recalls that the U.S. side explained at the time that the U.S. could make no binding commitment on GSP, a unilateral program for which eligibility was established by law. We sould not be surprised, however, that GOR should recall our intention to include Romania in GSP. End comment.

5. (C) After reading the letter to SCO, Chioveanu said that President Reagan’s decision to terminate Romania’s GSP benefits must have been prompted by a new witch-hunt against communist countries. He added that the GOR felt insulted to be put at the same level with Nicaragua for determining GSP eligibility. Nicaragua and Romania were so different as nations that for the GOR it was unthinkable that they would be placed “in the same bag”. Furthermore, Romania and the U.S. were supposed to have a special relationship.

6. (C) Chioveanu urged SCO to expedite transmittal of the message to USDOC, so that Secretary Baldrige may be able to act and assist Romania in retaining GSP. The Secretary has always been supportive of positive U.S.-Romanian trade relations and should again demonstrate his goodwill in this case. The GOR views termination of GSP as a hostile act which could affect bilateral trade relations in general. Politics and different social systems should not interfere in our relationship, added Chioveanu.

7. (C) Using guidelines in Refs A and B, SCO replied that the President’s decision on Romania’s GSP eligibility was based on worker rights requirements of U.S. laws. He elaborated on the reasons which led to USG’s decision and reminded Chioveanu of their meeting on January 6, when the factors leading to the President’s decision were discussed in great detail (Ref C). He stressed that it had been an interagency recommendation and USDOC was not the sole agency involved in this process.

8. (C) Chioveanu told us that since USDOC was responsible for foreign trade, it was the appropriate agency to safeguard GOR’s commercial interests in our bilateral trade relations. He added that termination of GSP will cause a reduction in Romanian exports to the U.S. since some Romanian goods will become less competitive on the U.S. market. Consequently, Romanian earnings from exports to the U.S. will decrease, thus forcing Romania to reduce U.S. imports. A case in point, said Chioveanu, was the recent offer of Noble Trading/Drummond Co. to sell 250,000 tons of coking coal to FTO Metal Export Import (see septel).⁶

9. (C) SCO responded that no linkage exists between termination of GSP and a slow-down in Romanian imports from the U.S. Should the GOR choose to connect U.S. imports to continuation of GSP benefits, this will create a very unfavorable climate in our bilateral trade relations, especially for the upcoming JEC session to be held in Bucharest. It would also have serious repercussions during congressional hearings later this year on extending Romania’s MFN status. He added that now, with the low value of the U.S. dollar, U.S. goods and services were very competitive and it would be to the GOR’s advantage to import U.S. products such as coal and agricultural commodities. It would mean good business sense for the GOR to go ahead with the Noble Trading Drummond coal transaction.

10. (C) Chioveanu responded that Romanian imports from the U.S. could only grow in relationship to increased Romanian exports to the U.S. He said that Romanian imports of U.S. goods has grown “dramatically” during 1986, but if GSP benefits are terminated, this trend will not continue.

11. (C) SCO replied that Romanian exports to the U.S. surpassed imports at a ratio of three to one. In 1985, Romanian exports to the U.S. totalled 951 million dollars, while U.S. exports to Romania amounted only to 208 million dollars. In 1986, Romanian imports of U.S. goods increased during the first quarter and reached 182 million dollars by July, but during January-July Romanian exports to the U.S. already totalled 524 million dollars and by the end of the year may have reached 1985 levels. Thus Romanian exports to the U.S. are way ahead of imports, and the GOR has sufficient dollars generated from exports to the U.S. to finance increased imports of U.S. goods. As far as Chioveanu’s claim of increased Romanian imports of U.S. goods is concerned, U.S. statistics reflect only a modest increase. SCO would be glad to exchange trade statistics with MFT, a proposal he has made many times in the past, but without results. Chioveanu said GOR trade statistics will be provided only during the JEC session.

12. (C) Concerning JEC, Chioveanu added, the GOR was aware that Under Secretary Smart would lead the U.S. Delegation. With all due respect to Smart, said Chioveanu, the GOR still would like for Secretary Baldrige to chair the U.S. Delegation. This would demonstrate the high level of the session and the importance given by the USG to support and expand bilateral trade. In fact, the GOR hoped that both the Secretary and Under Secretary would attend the JEC session. Chioveanu added that that he had also raised this issue with USDOC officials during his recent trip to Washington.

13. (C) SCO responded that Under Secretary Smart’s leading the U.S. Delegation had no relationship to the interest shown by the USG in the JEC. This interest remains high. Secretary Baldrige does not like to travel. That is the reason for his not heading the delegation. Chioveanu retorted that this is inaccurate, during the past year the Secretary had traveled to Moscow, Punta del Este, and Beijing. So why not Bucharest? Especially now, since Romania was threatened with losing GSP benefits, it would be appropriate for the Secretary to attend JEC to show USG’s high level of interest in maintaining and increasing U.S.-Romanian trade and economic relations. He added that if chairmanship if the JEC U.S. Delegation was not at the highest level, it would demonstrate USG’s lack of interest in Romania and, consequently, bilateral trade could be affected in a negative way.

14. (S) Chioveanu then asked that USDOC confirm soonest whether it agrees with the dates of March 18–19 proposed by MFT for the JEC session. SCO promised that he would forward without delay MFT Vaduva’s message and Chioveanu’s request.

Clarke

1. Source: Department of State, Records of the Deputy Secretary’s Office, 1982–1993, Lot 95 D 334, Romania. Confidential; Immediate. Sent Immediate for information to the Department of State.
2. Telegram 401397 to Bucharest, December 31, 1986, conveyed Reagan’s decision that Romania was no longer eligible for GSP. (Department of State, Central Foreign Policy File, no film number)
3. Telegram 476 to Bucharest, January 1, provided the results of the GSP general review. (Department of State, Central Foreign Policy File, D870004–0517)
4. In telegram 91 from Bucharest, January 7, the Embassy relayed the Ministry of Foreign Trade’s argument that the GSP decision was made based on a misunderstanding of workers’ rights in Romania. (Department of State, Central Foreign Policy File, D870015–0980)
5. Not found.
6. Telegram 8025 from Bucharest, November 4, 1986, outlined the terms of the contract for coking coal. (Department of State, Central Foreign Policy File, D860840–0118)