Office of the Historian

317. Telegram From the Embassy in Yugoslavia to the Department of State1

8560.
Belgrade, October 24, 1981, 1135Z

SUBJECT

  • Letter for Secretary Baldrige.
1.
(C—Entire text).
2.
Dear Mr. Secretary:
I am just completing a slightly more than 1 week tour of Eastern Europe, which has included stops in Budapest, Bucharest, Sofia, and Belgrade.2 I am concerned by what I have found in several capitals—thus this letter to you.
3.
In short, I found confusion in our Embassies over what our export policy toward Eastern Europe is, strong feelings that DOD and parts of Commerce are out to torpedo virtually all sales to the area, and frustration that our people abroad cannot seem to get support in Washington when they protest the policy. The situation in Bucharest is not good, despite your own visit there;3 in Sofia practically nothing is moving, but I don’t care much, given Bulgaria’s total devotion to its Soviet masters; in Hungary, a country truly trying to change its internal system, the situation is close to disaster. I asked Ambassador Bergold to give me his analysis, which he did. Let me quote some of the more compelling parts: (Begin quote)
1.
On the export side, I cannot identify a single license approved for Hungary under the Reagan administration. On the contrary, almost forty cases on the Videoton firm have been returned without action. [less than 2 lines not declassified] It is true that Data Products and Control Data Corporation have exported already to Hungary all of their not very sophisticated technology and we are really talking in these cases only about the equivalent of hammers and saws. If we wish to make a point to the Hungarians on Videoton, it seems to me it should be fairly explicit and isolated to this firm. It is not in our interests, as laid out in our policy statements, to find one possible instance where the wall between civilian and military production may have been breached and use that to destroy our whole economic relationship with Hungary. But that is what is happening.
2.
In other export cases, two years ago IBM convinced four Hungarian entities to let them x-ray the firms and institutes—thereby learning all details of those entities over the past year and a half in the expectation of installing a 4341 series of computerized management. These licenses were denied, but as other Eastern European countries had obtained the 4331 series, this was offered, approved by the U.S. Committee, and sent to COCOM for action. Our information is that DOD, using its veto this time ex post facto, has recalled these cases from COCOM. While I was in Budapest, the U.S. representative of Eli Lilly appeared to announce their joint venture with Babolna state farm on mixed feeding for livestock, which is being wiped out by a denial, because there is included a rudimentary fermentation process DOD regards as dangerous for bacterio-logical warfare. Eli Lilly is already in the process of lateraling off this sale to the German firm Hoechst, so the Hungarians will get the technology but not to the benefit of the U.S. balance of payments. Similarly, U.S. Steel edged in under a German firm to do the casting software for the new steel mill in Miskolc. That license [Page 993] also is being denied on Defense grounds and the business goes back to the FRG. The French will benefit to the tune of about 400,000 dollars on the turndown of the Alcoa Aluminum shelter case. The denial of Dunegan-Endevco materials testing equipment will pass business to the Italians as well as other Europeans and the Japanese. The record goes on and on, to the point where the only differentiation left, given grain and pipelaying tractors, is in favor of the Soviet Union over their one colony that seeks to be most like us.
3.
The import side is even worse. You are, I know, familiar with the Raba trailer axle anti-dumping case. In this case, the preliminary judgement is set at such unrealistic levels, even by the terms of the preliminary itself, that Eaton is put in the position of questioning whether the legal fees, pursuing the case in behalf of its Hungarian partner through the available remaining steps, are worth the value of the depressed business. Rockwell and now other U.S. firms seek to maintain the high levels of the preliminary judgement in order to destroy Raba, reputedly the most efficient producer of the U.S.-design trailer axles, as a factor in the U.S. market. There is not another market for this design. Unless Commerce can effect a suspension agreement between the parties in the next few weeks, we will have delivered a crushing blow to the very firm which is at the leading edge of the free enterprise movement in Hungary. Such an action contrasts sharply not only with the differentiation but also with the President’s recent pre-Cancun statements about free and fair access to the Ameican market. (End quote)
4.
Frankly, Mr. Secretary, if my impressions are even close to accurate, something needs to be done, and fast, either to begin to move export licenses or to change our policy declarations and let people know we simply aren’t interested in selling to communists, no matter how independent-minded they might be. I frankly prefer the former solution, and suspect you do as well.
5.
I readily admit I may not know all the details of export license turndowns. There may be legitimate reasons, at least in some of the cases. But I do think the situation is worth a good hard look.
6.
I would like to ask for an opportunity to meet with you shortly after I return to Washington (about November 1) to go over the above. I would plan to ask Ambassador Bergold to return from Budapest for the meeting, since he knows the horrifying details better than I.5
7.
I would be grateful if your office could let my secretary know what time would be convenient.

Many thanks,

Lawrence S. Eagleburger

Anderson
  1. Source: Department of State, Lawrence S. Eagleburger Files, 1967–1984, Lot 84 D 204, Munich, Budapest, Bucharest, Sofia, Belgrade, Brussels, Bonn, London, October 13–29, 1981. Confidential; Immediate; Exdis. Sent for information to Budapest.↩
  2. Between October 13 and 29, Eagleburger visited Munich, Budapest, Bucharest, Sofia, Belgrade, Brussels, Bonn, and London.↩
  3. Baldrige visited Bucharest May 14–15. See footnote 3, Document 76.↩