314. Minutes of a Policy Review Group Meeting1
SUBJECT
- East German Claims Issues (C)
PARTICIPANTS
-
State
- Roz Ridgway
-
Treasury
- Robert Cornell
-
DOD
- David Wigg
- Stanley J. Kwieciak
-
Commerce
- Alan Moore
- Frank Vargo
-
OMB
- Wayne Arny
-
CIA
- George Kolt
- [name not declassified]
-
USTR
- Michael Smith
- David Weiss
-
EPC
- William Maroni
-
White House
- Colin Powell
-
NSC
- Stephen Danzansky
- Nicholas Rostow
- Nelson Ledsky
- Alison Fortier
- Eric Melby
Minutes
Colin Powell opened the meeting by asking Roz Ridgway to bring the PRG up to date on the U.S.-GDR claims negotiations. (C)
[Page 978]Roz Ridgway reviewed the history of the claims negotiations. Her remarks followed the points made in the memo at Tab A. (C)
Mike Smith said that USTR was willing to be as helpful as possible given its obligation to follow a consistent trade policy. However, it was Yeutter’s opinion that State’s proposal to combine claims and trade negotiations would be a violation of U.S. policy. He saw five problems with State’s proposal:
- (a)
- it would in effect give limited MFN access to a limited section of the U.S. economy. This would set a precedent difficult to resist;
- (b)
- linking payments of credits and trade concessions would be political dynamite;
- (c)
- the GDR has plenty of money to pay the claims;
- (d)
- only State favors the trade component of the proposed package;
- (e)
- State and Commerce has so far failed to come up with anything substantive on the trade side (i.e. business facilitation or import commitments). (C)
Mike Smith continued that USTR would be guided by any political decision by the Economic Policy Council. While the U.S. does make tariff concessions to U.S. industry this is never in response to a request from a foreign government. (C)
Colin Powell asked Mike Smith whether the U.S. Ambassador to the GDR had not had authority to suggest a payments/trade package? (C)
Mike Smith responded that he did not know about the events of 1983/84. However, the GDR had not offered anything of substance on the trade side. USTR would have to defend the package before Congress and could not if all the GDR offered was business facilitation. (C)
Alan Moore said he did not entirely agree with Mike Smith on the trade policy argument but he did agree with the bottom line. The issue was highly political and highly volatile. He thought the Administration should first discuss the issue with the Hill before going back to the GDR. (C)
Moore said Commerce had reviewed informally product categories the GDR had submitted. There were probably some products the GDR could sell in the U.S. which, while competing with U.S. goods, would not cause an outcry from U.S. industry. However, the GDR would have to commit to increasing imports from the U.S.; a business facilitation agreement would not be sufficient compensation from allowing increased access for GDR goods into the U.S. (C)
Robert Cornell said Treasury shared the views of USTR and Commerce. He was skeptical of the package on trade policy grounds and cautioned that a politically acceptable deal might not make good trade policy sense. (C)
[Page 979]George Kolt said that the CIA felt the GDR’s desire for a claims agreement was driven by its economic needs. The GDR was concerned with industrial obsolescence and a desire of easing COCOM restrictions. It was seeking telecommunications technology, computers and earth-moving equipment. (C)
Kolt alluded to GDR training for Third World nationals, including terrorists. He said the GDR had done little to ease U.S. concerns on human rights. Finally, he felt that money was not an issue, that the GDR had sufficient funds to pay the claims. (C)
David Wigg remarked that from DOD’s perspective, differentiation would set an unfortunate precedent. (C)
Colin Powell then asked Roz Ridgway to respond to the views expressed around the table. She said she had talked with many people on the Hill including Rostenkowski, Gilman, Bereuter, Frenzel, Lantos and Packwood.2 While aware of what the Administration is doing, Congress wants to see the whole package (U.S. claims, Jewish claims, trade package) before committing itself. Were a package to be put together, it would be called up on the Hill by Congressional interest groups which had already seen, and approved, it ad referendum. She added that the GDR knew that the U.S. could not guarantee the GDR dollar amounts of trade in the U.S.; the U.S. could just provide opportunities. Commenting on the CIA presentation, she said the GDR had never raised COCOM or computers with the U.S. (C)
Bill Maroni remarked that there was a near consensus in the TPRG that the issue was a non-starter. He suggested bringing it to the TPRG and then the EPC. (C)
Mike Smith said that USTR has asked State, following the TPRG discussion, to see if the trade package could be sweetened. However, he felt the whole concept needed to be vetted at appropriately high levels as the precedent would return to snap us. He reiterated that the U.S. could not give the GDR tariff concessions in return just for business facilitation.
Colin Powell asked, hypothetically, whether we would pursue trade discussions with the GDR if there were no claims at issue? (C)
Roz Ridgway responded that we probably would. We had lost trade valued at $1 billion. In her view, the U.S. could not say to the GDR that there could be no improvement in relations unless the claims were paid first. The U.S. did not have any leverage to take that position. (C)
[Page 980]Nelson Ledsky reviewed the history of our recognition of the GDR in 1974. Amb. Hartman3 had told the GDR there could be no improvement unless the claims were paid first. The U.S. had walked away from this position when we began talking about consular relations, etc. The GDR operated on the principle it could escape paying its share of the claims. Ledsky believed the U.S. could tell the GDR it had to first pay the claims and then a new relationship could be discussed. He thought the GDR would be receptive if the U.S. told the GDR that we would be willing to move forward once it had named a figure for the U.S. and Jewish claims. (C)
Mike Smith said the problem was one of linkage, explicit or implicit, between the payment of claims and the granting of trade concessions. Were the GDR to pay the claims, USTR would have no problem beginning trade negotiations on their own merit. (C)
Colin Powell summed up the meeting by stating there was a great reluctance on grounds of principle to have any linkage between claims and trade although the U.S. negotiator seemed to have been empowered to suggest such a linkage. Were the GDR to put numbers down in the draft claims agreements, then there would be opportunities to move forward. Even if linkage were acceptable to the Administration, it would be tough to sell on the Hill as the draft package was not balanced. He said State should tell the GDR that the U.S. would not agree to linking the claims and trade issues. (C)
Roz Ridgway said she had already told the GDR that the deal was off. However, she firmly believed the U.S. could not go back to the status quo ante. The U.S. had issues it needed to discuss with the GDR, such as narcotics, and it could not wait until the GDR paid the claims. (C)
Colin Powell responded that we should surgically separate the claims issue from any discussion of trade. Pay the claims and then trade could be discussed. (U)
[Page 981]- Source: Reagan Library, Office of the Assistant to the President for National Security Affairs, 88900640. Confidential. The meeting took place in the Situation Room. No drafting information appears on the minutes.↩
- Representatives Daniel D. Rostenkowski (D–Illinois), Benjamin A. Gilman (R–New York), Douglas K. Bereuter (R–Nebraska), William E. Frenzel (R–Minnesota), Thomas P. Lantos (D–California), and Robert W. Packwood (R–Oregon).↩
- Reference is to Arthur Hartman, Assistant Secretary of State for European Affairs from January 1974 until June 1977.↩
- Confidential.↩