Maritime Issues. Recent agreements negotiated with the USSR and Romania and the proposed agreement with Poland reflect an effort over the past three years to amend the port security program to provide equal treatment for all US ports and to facilitate commerce, commensurate with US national security requirements and consistent with reciprocity for US shipping. Similar changes in the program may be negotiated in the near future with other Warsaw Pact countries.
Claims agreements on behalf of US nationals or corporations with approved claims against Eastern European Governments have not been negotiated with Czechoslovakia, Albania or Eastern Germany. All of the countries except Albania have defaulted pre-war dollar bond obligations to the US citizens and only Yugoslavia and Poland have negotiated interim settlements. Export-Import Bank.
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The President has authority under the Export Expansion Finance Act of 9 to extend the facilities of the Export-Import Bank to communist countries if it is in the national interest. Double Taxation. In addition, we should discuss double taxation questions with the Eastern Europeans. This problem will become increasingly important as US firms conclude more sophisticated arrangements with Eastern European enterprises. Relevant Issues within the US Government a. Export Controls. The issue of export controls is related to any study of normalization of economic relations.
Nevertheless, it is clear that substantial increases in the levels of trade and investment can occur even if some export controls continue.
Johnson Act. The Johnson Act constitutes a disadvantage for American firms and if it were repealed the President would still retain authority necessary to control US -communist country economic and financial relations under existing legislation. The repeal or relaxation of legislative restrictions, including the Findley — Belcher Amendment, would give the President authority to use PL — programs in support of policy objectives in East Europe.
Generalized Tariff Preferences.
NSDM 86 of October 14, , 11 provides that communist countries except Yugoslavia would be excluded from the generalized preference system. Preliminary draft legislation authorizing generalized preferences gives the President the power to grant generalized preferences to those nations receiving MFN treatment and this flexibility should be sought in the final legislation. There should be continued US Government participation in these trade fairs as well as in specialized industry fairs and that this participation should be commercially oriented. Narcotics Controls. Treasury believes that among the non economic issues which the United States should raise with Eastern European governments where appropriate is the institution of stricter enforcement measures to curtail narcotics smuggling and terrorism.
The US should endeavor to assure the continued exchange of intelligence on narcotics and terrorism with the countries of this area. Conclusions and Alternatives. In order to advance the US interests defined at the beginning of the summary in the present day context of US -Soviet relations, it is important to maintain communication with both peoples and governments in the area and to treat the states of the area not as an undifferentiated bloc, but to the degree possible as sovereign states having historical roots and present interests distinct from each other and from those of the Soviet Union.
Responding to any inclination to reduce their dependency on the Soviet Union and increasing their economic and political ties with the West are at the heart of our East European policy. The US has not moved as far across the policy spectrum from economic confrontation to cooperation and engagement with Eastern Europe as have other Western countries largely because of the US -Soviet global adversary relationship.
Economic policy was in large part a function of US dissatisfaction with the state of its relations with the USSR as well as with other communist countries and their policies toward North Vietnam, North Korea, or Cuba. This recent coalescing of events has opened new policy options for the US in Eastern Europe. Consequently the US should plan a more active participation in the steadily growing economic relations between the countries of the area and the West both for political reasons and for the purpose of getting a larger share of the market.
In doing so, it should [Page 65] maintain a modest profile in the area, working towards non-economic objectives of normalized consular and cultural relations and broader links to the West without undue fanfare. This requires seeking from Congress at an early date Presidential authority to negotiate MFN with all the countries covered by the study which do not have it.
There are at least three concepts within which this process can occur, given the fact that we exclude any thought of trying to deal with the area through its rather ineffective, Soviet-dominated, multilateral economic institution—Comecon. These three approaches give varying degrees of emphasis to the pursuit of our political and strategic as opposed to our economic interests. Selective Economic Normalization as a Political Reward.
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The concept of rewarding by means of trade and economic benefits those countries of Eastern Europe which demonstrate independence of Soviet guidance in ways useful to US objectives originated in a context of a restrictive US and Western attitude aimed at denial not only of strategic and military assets to Soviet dominated areas, but of economic potential as well in a period Berlin blockade, Korean War of military and political confrontation. This concept which originated in aid to Yugoslavia three years after the Tito —Stalin break also underlay the granting of MFN and the substantial PL — sales to a post Polish Government which in church and agricultural affairs had taken clear steps away from the Soviet model.
It has underlain decisions to extend flood relief aid, ExIm Bank facilities, and OPIC facilities to the Romanians as they developed their independence of numerous Soviet foreign policies. Its impact, however, in this more recent period has been diminished by the change during the s in Western attitudes toward trade with Eastern Europe.
Most Western European countries have rapidly increased trade with Eastern Europe while the US has been alone in refraining from normalization, largely because of Congressional action inspired by the Vietnam situation.
In light of the changed East-West trade attitudes in Europe, the question arises whether this concept may no longer be particularly useful in dealing with the more closely controlled Eastern European countries. These states can hope to mitigate Soviet controls only very gradually. It is basically not in our interest nor in the interest of stability in Europe, to stimulate them to any other course.
These countries: Czechoslovakia, Hungary, Poland, Bulgaria, and the GDR are the ones which now will benefit most from the improved East-West trade climate, and with which the potential annual percentage trade growth is greatest in conditions of economic normalization. Given the fact that we are continuing our economic normalization with Poland, which at present hews closely to the Soviet foreign policy line, a policy of using economic normalization to reward the others for increased foreign policy independence of the USSR appears anomalous in a period of US — USSR [Page 66] economic normalization.
There are still ways, over and above economic normalization—i. We will adjust ourselves to whatever pace and extent of normalization these countries are willing to sustain. Economic Normalization Primarily for Economic Interests. This concept is based on the assumption that the best way to exert U. Economic normalization should be broadly construed to include bond settlements and nationalization claims, as well as consular conventions. It should not include cultural and scientific exchange agreements, which should ordinarily be negotiated separately and should stand on their own merits.
The concept of economic normalization for its own sake suggests that whatever economic leverage we have—and it should not be exaggerated—should be used to obtain reciprocal economic advantages and not normally for bargaining on unrelated issues. It is consistent with the greater weight now being accorded the economic aspects of our relations with the USSR. This concept, like Concept 2, also accepts the utility and timeliness of responding to East European bids for economic normalization.
It aims to use the leverage provided by these bids to obtain not only the financial settlements, commercial agreements, and consular pacts envisaged in the second approach, but also, where lacking, other non-economic [Page 67] desiderata such as cultural and scientific exchanges agreements, better Embassy conditions, improved access to the host government, and an overall improvement in the climate of relations and movement of persons.
This concept accepts some delay in reaching economic normalization agreements in the cases where non-economic issues are more numerous i. It is based on the assumption that final normalization can occur only when MFN can be granted, that Presidential authority to negotiate MFN is probably at least seven or eight months away, and that during this seven or eight month period countries sincerely desirous of reaching economic normalization will meet us at least halfway on outstanding non-economic issues.
Commerce and Treasury are doubtful that our economic leverage is great enough to achieve all these objectives and believe that such an approach might jeopardize the reciprocal economic advantages we hope to achieve. They believe that many of our non-economic objectives can be pursued separately with mutual benefit to both parties. Four options for such negotiations with each country under any of the above concepts were examined with a clear awareness that some options were more appropriate to one policy concept or to one or more countries than to others: 1.
Comprehensive Package for Early Immediate offer to negotiate a package settlement of all outstanding issues. Pros Cons EE eagerness for normalization. Legislative authority for MFN and thus comprehensive package in doubt. More to show Congress. One part can stall whole package. Reach agreements roughly in order of political priority. Loss of political advantages of less obvious approaches than comprehensive package. Non-economic benefits. Possibly unfavorable EE reaction to linkage of economic and noneconomic issues.
Takes maximum advantage of present opportunity.
Related Eastern Europe: A Geography of the Comecon Countries
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