Developments in U.S. economic relations with Romania and Hungary

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Developments in U.S. economic relations with Romania and Hungary
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Table of Contents
    Front Cover
        Page i
        Page ii
    Foreword
        Page iii
        Page iv
    Letter of transmittal
        Page v
        Page vi
    Table of Contents
        Page vii
        Page viii
    Introduction
        Page 1
        Page 2
    Romania
        Page 3
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
    Hungary
        Page 17
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
    Back Cover
        Page 23
        Page 24
Full Text




94th Congress }
2d Session I


COMMITTEE PRINT


DEVELOPMENTS IN U.S. ECONOMIC RELATIONS

WITH ROMANIA AND HUNGARY


REPOR

OF A )


CONGRESSIONAL SJI)Y MISS1
~JAN4
ruRsUANT *

H. Res. ". .' $
AHORIZING THE COMMITTEE 01 1IN
RELATIONS TO CONDUCT THOROUGH STf15I AND IN-
VESTIGATIONS OF ALL MATTERS COMING WITHIN THE
JURISDICTION OF TE COMMITTEE


AUGUST 4, 1976







Printed for the use of the Committee on International Relations


U.S. GOVERNMENT PRINTING OFFICE


WASHINGTON : 1976














COMMITTEE ON INTERNATIONAL RELATIONS


THOMAS E. MORGAN, Pennsylvania, Chairman


CLEMENT J. ZABLOCKI, Wisconsin
WAYNE L. HAYS, Ohio
L. H. FOUNTAIN, North Carolina
DANTE B. FASCELL, Florida
CHARLES C. DIGS, JR., Michigan
ROBERT N. C. NIX, Pennsylvania
DONALD M. FRASER, Minnesota
BENJAMIN S. ROSENTHAL, New York
LEE H. HAMILTON, Indiana
LESTER L. WOLFF, New York
JONATHAN B. BINGHAM, New York
GUS YATRON, Pennsylvania
ROY A. TAYLOR, North Carolina
MICHAEL HARRINGTON, Massachusetts
LEO J. RYAN, California
DONALD W. RIEGLE, JR., Michigan
('A RDISS COLLINS, Illinois
STEPHEN J. SOLARZ, New York
HELEN S. MEYNER, New Jersey
DON BONKER, Washington
GERRY E. STUDDS, Massachusetts


WILLIAM S. BROOMFIELD, Michigan
EDWARD J. DERWIN8KI, Illinois
PAUL FINDLEY, Illinois
JOHN H. BUCHANAN, JR., Alabama
J. HERBERT BURKE,Flor
PIERRE S. Du PONT, Delaware
CHARLES W. WHALEN, JR., Ohio
EDWARD G. BIESTER, JR., Pennsylvania
LARRY WINN, JR., Kansas
BENJAMIN A. GILMAN, New York
TENNYSON GUYER, Ohio
ROBERT J. LAGOMARSINO, California


M.&xuq A. CZR-NECK, Cief ofStaff



SUBCOMMITTEE ON INTERNATIONAL TRADE AND COMMERCE
JONATHAN B. BINGHAM, New York, Chain


DONALD M. FRASER, Minnesota
ROY A. TAYLOR, North Carolina
DON BON KER, Washington
GERRY STUDDS, Massachusetts


EDWARD G. BIESTER, JR., Pennsylvania
CHARLES W. WHALEN, JR., Ohio


R. RooER NAJAK,, 3uhomwztee Staff omiutant
THOMAs E. POIPOVIC, Mhsorty Subcommittee Staff Consu~ant
SUSAN GusTArsoN, Staff Aso~t
V-'roa C. JoHwsQII, Re8earch Assietafd

(11)






















FOREWORD


HoUsE OF REPRESENTATIVES,
COMMlTTEE ON INTERNATIONAL RELATONs,
Washington, D.C., July 30, 1976.
This report has been submitted to the Committee on International
Relations by a special study mission to Romania and Hungary which
visited those countries May 28-June 1, 1976.
The findings in this report are those of the special study mission
and do not necessarily reflect the views of the membership of the full
Committee on International Relations.
THOxAS E. MORGAN, Chaimmzn.
(I)
















LETTER OF TRANSMITTAL


JULY 30, 1976.
Hon. THOMAS E. MORGAN,
Chairman, Committee on International Relations, U.S. House of
Representatives, Washington, D.C.
DEAR MR. CHAIRMAN: Transmitted herewith is a report of a special
study mission I conducted as chairman of the Subcommittee on Inter-
national Trade and Commerce to Romania and Hungary between
May 28 and June 1, 1976.
The purpose of this mission was to evaluate the role of trade in
our relations with these East European countries, and to assess pros-
pects and obstacles for future trade. In particular, I undertook to
examine the impact of U.S. export control programs, most-favored-
nation status (in the case of Romania), and requirements of the Trade
Act of 1974 and the Helsinki Agreement on Security and Cooperation
in Europe upon United States-Romanian and United States-
Hungarian trade prospects.
The views expressed in this report do not necessarily represent
those of the entire subcommittee. I hope, however, that this report
will prove useful to the committee and to the Congress in evaluating
the policies of detente with East Europe of which trade is an impor-
tant manifestation, and in making legislative decisions on trade, such
as proposed renewal of most-favored-nation status for Romania which
will come before the Congress shortly.
Sincerely,
JONATHAN B. BINGHAI,
Chairman,
Subcommittee on International Trade and Commerce.































CONTENTS

Page
Foreword ------------------------------------------------------III
Letter of transmittal-v
Introduction--------1
Romania_ -- 3
Cultural opportunities and exchanges-....... ..........-4
Emigration and humanitarian problems--6
Trade and the economy-10
Conclusions and recommendations------------------------- 15
Hungary- -17
Conclusions and recommendations--21
(vn)



















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INTRODUCTION


This report contains the observations of a congressional study mis-
sion to Romania and Hungary conducted by Representative Jonathan
B. Bingham, chairman of the Subcommittee on International Trade
and Commerce, accompanied by R. Roger Majak, staff consultant to
the subcommittee. The purpose of the study mission's inquiries during
the visit was to gain new information on U.S. foreign and economic
relations with these nations and to follow up earlier studies of United
States-Romanian and United States-Hungarian trade made by sub-
committee members Edward G. Biester, Jr., of Pennsylvania, and
Charles W. Whalen, Jr., of Ohio, during a study mission conducted
early in 19750'
The visit of the study mission to Romania, at the invitation of the
Gover ent of Romania, coincided with" the approaching first anni-
versary of the United States-Romania trade agreement which led to
the granting of most-favored-nation (MFN) status to Romania. The
study mission was officially hosted in Romania by the Grand National
Assembly-the Romanian parliament.
During his 2-day (May 28-29) stay in Romania, Chairman Bingham
discussed trade and related issues with the following Romanian leaders
and officials:
Mr. Nicolae Ceausescu, President, Socialist Republic of Romania;
Mr. Nicolae Giosan, President, Romanian Grand National Assembly (legis-
lature) ;
Mr. George Macovescu, Foreign Minister, Socialist Republic of Romania;
Mr. Corneliu Manescu, Chairman, Commission for Foreign Policy and Inter-
national Economic Cooperation of the Grand National Assembly;
Mr. Nicolae M. Nicolae, State Secretary, Ministry of Foreign Trade and Inter-
national Economic Cooperation (and ambassador-designate to the United States);
and
Moses Rosen, Chief Rabbi of Romania.
In addition to attending meetings with Ceausescu, Giosan, Rosen,
and Manescu, Mrs. June Bingham met with Madame Maria Groza,
member of the National Council of Women and of the Grand National
Assembly. The discussion centered on the status of women in Romania.
Prior to the chairman's arrival, subcommittee staff consultant Majak
participated in preparatory discussions with Romanian foreign trade
and consular officials, and with U.S. Embassy personnel and Ameri-
cans living in Romania. Majak also met with Mr. Gheorghe Badescu,
director of the Romanian Consular Service, and with the Honorable
Gheorghe Trandafir, mayor of the city of Constanta, and Capt. Nicolae
R. Moise, director of the Port of Constanta, for detailed discussions
of trade problems and prospects.
The granting of MFN to Romania has sparked hope and interest
among other East European countries for similar trade agreements
and status. Chairman Bingham's brief visit to Hungary (May 30-31)
followed by only a few weeks an extended visit by the highest ranking
Hungarian official to visit the United States since the end of World
War II-Deputy Prime Minister Gyula Szeker. During his visit the
1 For a report of this earlier study mission, see "Soviet Bloc Trade Hopes: Reactions
to the Trade Act of 1974", Print of the Committee on International Relations, 94th
Cong., 1st sess., U.S. Government Printing Office, June 28, 1975.
(1)
74-288-76----2






2

Deputy Prime Minister frequently mentioned Hungary's interest in
MFN status with the United States. and in expanding trade prior to
any such Lieakthrough in United States-Hungarian relations.
Following briefings by U.S. Embassy personnel, the study mission
met with the following Hungarian officials:
Mr. Janos Nagy, Deputy Minister of Foreign Affairs, Hungarian People's
Republic; and
Mr. Istvan Torok, Deputy Minister of Foreign Trade, Hungarian People's
Republic.
The study mission wishes to thank the officials of the U.S. Commerce
and State Depaiments in Washington and abroad, as well as rep-e-
sentatives of the Governmelnts of Romania and Hungary, who assisted
with the mission's program and activities. Particular thanks are due
Harry G. Barnes, Jir., U.S. Ambassador to Romania, James Comell.
political officer of the U.S. Embassy in Bucharest, Mr. Corneliu
Maneseu, Chairman, and Mr. Gheorghe Petricu, Counselor, Commis-
sion for Foreign Policy and International Economic Cooperation of
the Romanian Grand -National Assembly, and Mr. Clayton Mudd,
Charge d'Affaires, and Mr. F. Brenne Bachman. commercial attach.
U.S. Embassy in Budapest, for their assistance and support of the
miSSIOn.






ROMANIA


The first year of MFN trade relations with the United States
appears, on the -whole, to have enhanced Romania's ability to pursue
a foreign policy relatively independent of the Soviet Union and other
East European countries, and to have somewhat tempered-but by
no means reversed-Romanian emigration policies and practices.
Romania is the only nation to have received most-favored-nation
(MFN) status from the United States under the new procedures and
policies contained in the Trade Act of 1974.2 On April 2, 1975-just
3 months after enactment of the Trade Act-Romania initialed a trade
agreement with the United States which, subject to congressional
approval, provided for mutual granting of MFN. The House and
Senate adopted resolutions endorsing the agreement on July 28 and
July 25, 1975, respectively-the House by a vote of 355 to 41, and
the Senate 88 to 2. T[he trade agreement entered into force August 31
1976, during the visit of President Ford to Romania.
Since the congressional action approving MFN for Romania, formal
commercial relations between the two countries have continued to
improve. The general upward trend in total trade that began in 1970
has been sustained. In June 1976 the two countries signed a maritime
agreement codifying procedures and mutual arrangements for the
treatment and handling of ships, cargoes. and seamen. A bilateral
fishing agreement has been under negotiation, but must now be re-
negotiated to meet new requirements for such agreements set by the
Fisheries Conservation and Management Act of 1976 (Public Law
94-265). Agreement has also been reached providing Overseas Private
Investment Corporation (OPIC) insurance for U.S. investments in
Romania. A long-term agreement on economic, industrial, and tech-
nical cooperation that would commit both governments to the goal
of expanding and diversifying trade by improving practical trade
conditions is currently under negotiation.
As a "nonmarket" economy, Romania faces special requiremients
and procedures for maintaining most-favored-nation status under
section 402 of the act. Section 402 (the "Jackson-Vanik" amendment)
sets freedom of emigration as a condition of MFN. but authorizes the
President to waive that requirement if doing so will "substantially
promote the objectives" of freedom of emigration from a nonmarket
economy country, and if the President has received assurances that
the emigration practices of a country will "lead substantially to the
achievement" of freedom of emigration.
On April 24, 1975, President Ford issued such a waiver for the
Socialist Republic of Romania. On June 2, 1976, lie recommended to
Congress that this waiver be extended for an additional 12 months
from July 3, 1976. Congress has up to 105 calendar (lays to approve
or disapprove this waiver extension under Trade Act actionn 402(d).
The assertion most often heard these days from Romnanian public
officials is that Romania is a "developing nation" whose foreign and
domestic policies are heavily influenced by the need for rapid growth
2 Poland and Yugoslavia were accorded MEN by the United States in I9); when Congress
in effect. repealed a provision of the 1962 Trade Expansion Act that withheld MEN from
those two countries.
(3)







and technological development. Romania has joined and participated
.actively in the "Group of 77" developing nations, and has shown
recentt interest in joining the Lome group of nonalined nations.
Though it does not fall within the category of "most severely
affected nations," Romania does share some characteristics with
countries generally rewarded as "developing." Its per ita GNP
is the lowest in Eastern Europe, and is only slightly higher than that
of Greece. About 40 percent of the labor force is employed in the agri-
,cultural sector-a proportion common to developing countries
though this high proportion is rapidly declining. In recognition of
its developing-country characteristics, President Ford declared
Romania eligible for "generalized trade preferences" desi ed to assist
exports of developing countries as authorized by the Tade Act of
1974. The European Community has granted similar preferences.
Like some other developing countries with relatively small popu-
lations, Romania faces a severe shortage of labor-especially skilled
labor. To help meet the labor requirements of its ambitious develop-
ment program. the Romanian Government actively encourages popu-
lation growth. Large families are publicly applauded; birth control is
discouraged and abortion is illegal; financial an(l other incentives are
offered to encourage couples to produce at least three children. The
following table shows current Government subsidies offered to families
on the basis of the number of children they produce.
ROMANIAN CHILD SUBSIDIES
[In lei per month-Conversion rate: $1 =20 lei]
1st child 2d 3d and more
Family income Urban Rural Urban Rural Urban Rural
Up to 1,500 lei. 150 100 160 110 180 130
1,501 to 2,000 lei -------------------- 120 70 130 80 150 100
2,01 to2,500 100 50 110 60 130 g
2,501 to 3,000 lei--------------------------------------100 50 110 60
3,001 to 4,000 le --- 100 50
Over 4,000 lei ----------------------- (1) . ) () (1- (9
I No allowances granted.
Source: Government of Romania.
CPULTRAL OPrR TUNITS, AND ExC1LAxo
The study mission was impressed by the cultural diversity of
Romania and ihe extent to which the Government encourages and
even nurlures such diversity. Cultural diversity is a characteristic
shared by Romania and the Iinited States, and should serve as a basis
for xmmon understanding and affinity between the two countries.
At the saime time. however, we noted some disappointing atipeets of
United States-Eomanian cultural relations.
As pointed out by the report to Congress of the United States Advi-
sory Commission on international Educational and Cultural Affairs,
the United States and Romania have a cultural exchange agreement
which goes beyond both the Helsinki agreement and our bilateral
agreements with other East European countries. That agreement calls
for reciprocalnd exchanllre prograiiis for, among e other things, perform-
Ingy rs n schrwiolars. Most niotbly we exelig increasing
number1(ITs Of sch-olars with Ronaii under the Fulb6right-H1ays Act.








Romanian Government treatment of Americans residing in Romania
under these exchange programs and agreements, however, could be
improved. in particular, we noted that American scholars who have
become romantically involved with Romanian women and applied for
permission to marry them and return with their Romanian wives to"
the United States have been subjected to many of the same hardships
and cruel pressures described iii greater detail in this report under
"Emigration and Humanitarian Problems."
We noted disturbing evidence of a tightening of controls and policies
regarding passports for Romanian scholars and cultural leaders wish-
ing to participate in cultural exchange programs or to travel abroad tor
pursue scholarly or cultural. interests. One result of this tightening
has been that Romania has generally failed to fill all available positions
for study and cultural visits in the United States. But the problem
appears to extend to Opportunities for cultural contact for Romanians
with the outside world in general.
Finally, despite the fact that the United States-Romanian Cultural
agreement includes provisions for availability of U.S. publications.
in Romania, We found the supply and distribution of American news-
papers, for example, inadequate. Even in the hotels frequented by
Americans, availability of the Herald Tribune published in Paris was
scant and irregular. We saw no evidence that any effort is made top
make any American publication widely or conveniently available even
to interested tourists, let alone Romanians.
Romanian officials generally explain these matters on two grounds:
(1) Shortage of foreign exchange, and (2) concern about a "brain
drain" from Romania.
Romania has real problems in both these areas, and its desires to
conserve its limited hard currencies and to retain its most talented and
educated people are understandable. Such goals, however, must be
achieved within the framework'of its bilateral and international com-
mitments, and more flexible policies in these areas are needed. While
some defections of highly trained Romanians have occurred in recent
years, the current policies seem to constitute something of an over-
reaction, and to be proving counterproductive. Tighter policies with,
respect to passports for temporary travel and cultural visits to Westerrm
countries, for example, seem to have driven some intellectuals to seek
to emigrate permanently.
The study mission did not have sufficient opportunity to investigate,
in detail the claims made by some American-based ethnic groups con-
cerning discriminatory suppression within Romania of Hungarian and
other minorities. U.S. Embassy officials, however, generally fel't that
while some discrimination may occur, allegations of "cultural geno-
cide" leveled by American groups are exaggerated. Some diplomats
suggest that, while undoubtedly sincere in their beliefs, such groups
may'unwittingly play into the hands of nations that would benefit from
dissension within Romania and disruption of United States-Romaniaii
relations. Reports of oppression the study mission heard from ilndi-
viduals associated with the majority ethnic group in Romania
(Romanians), from Jews, and even from resident Americans were
much the same as those cited by American-11ungarian groups as evi-
dence of discrimination against Hungarians, giving support to the






judgment of Embassy officials that the Hungarian minority is not
substantially better or worse off than any other group in Romania.
There is basis, nevertheless, for further close attention by Congress
and U.S. officials to the treatment of minorities by the Romanian
Government. Romania is a signatory of the U.N. Covenant on Civil
and Political Rights, which reads, in part, as follows:
In those States in which ethnic, religious, or linguistic minorities exist, person,;
belonging to such minorities shall not be denied the right in community with
the other members of their group, to enjoy their own culture, to profe,s and
practice their own religion, or to use their own language.
Furthermore, the Helsinki agreement states:
The participating States on whose territory national minorities exist will
resl)et the right of persons belonging to such minorities to equality before the
law, will afford them the full opportunity for the actual enjoyment of human
rights and fundamental freedoms and will, in this manner, protect their legitimate
interests in this sphere.
Within the context of U.S. concern for basic human rights in for-
inmilating policies and relations with respect to all nations, substantial
evidence of "cultural genocide" or other discriminatory suppression
of minorities would seen to require a reappraisal of expanding United
States-Romaian relations. The study mission found no such evidence.
but believes this aspect of United States-Romanian relations merits
more detailed attention.

EMIGRATION AND HUMANITARIAN PROBLEMS
Romanian officials continue to contend that Romania has no emigra-
tion problem. They readily admit that, as a developing country, their
policy is to discourage emigration. They continue to regard the "free-
dom of emigration" requirements of the Trade Act of 1974 as an in-
trusion into their internal affairs. These views were vigorously reaf-
firmed by President Ceausescu and echoed by other officials.
I)espite these policies, Romanian officials recognize the reality of
the Jackson-Vanik amendment and reaffirmed their readiness and con-
tinuing policy to act affirmatively on "humanitarian problems" which
tii4ght le eased by emigration. Their record on this, however, is mixed.
Figures on the solution of humanitarian cases involving emigration
from Romania show an crease in the nulnber of Romanians per-
initted to join families in the united States, but a leveling off or slight
decline in the number of Jewish Romanians emigrating to Israel.
TradItionally, lomania has implemented rather liberal policies of
(.1mifgration for Jews wishing to settle in Israel. About 400,000 Jews
have left Romania since the end of World War II-over 100,000 of
th.m in recent years. Romania remains the only East European coun-
ty maintaining diplomatic ties with Israel. In 1972, then Prime
Minister Golda Meir itade an official visit to Romania. Since then,
Iespite simul t anieis efforts to improve Rolmanian-Arab relations (in-
'ltling, a tri) earlier this .year by President Ceausescu to Cairo),
l(oitiaian trade a1(t general relations wNth Israel have continued to
grow and inil)rOVe.
aian ,Jewishl emnigratiom to Israel actually declined in 19T in
(o"lparlsJn to tlle previous 3 years, though the rate of departures in
the last half of 1975 (after approval of MFN) approached the high
rates of 1973 and 1974.







Romanian Jewish emigration to Irael
Calendar year:
1971 1... -, 650
1972 ------------------------------------------------- 2,650
1973 -------------------------------------------------3, 700
1974 ------------------------------------------------- 3, 700
1975 (1,585 in last half of 1975) ---------------------------2, 140
Source: Government of Romania.
Romanian figures show departures of Jews for Israel in the first 6
months of 1976 as substantially higher than the same period in 19751
though considerably lower than the last. 6 months of 1975. A total of
510 people emigrated from Romania to Israel from January to June
(inclusive) of 1975, while Romanian officials claim 1,192 people have
departed for Israel in the first 6 months of 1976.
Assuming the rate of departures achieved in the first 5 months of
1976 continues, 2,200-2,400 will depart for Israel in 1976--slightly
more than in 1975. No reliable figures were available for the number
of people approved for emigration to Israel who have not yet departed
and who, therefore, constitute the immediate pool of individuals from
which emigration in the remainder of 1976 will flow. Romanian offi-
cials claim, however, that 1,093 new cases have been approved for
emigration to Israel in the first 5 months of 1976.
The study mission found no evidence that Romanian officials di-
rectly manipulate or control departures of emigrants once exit visas
are approved, despite charges that this is done. Departures, therefore,
probably vary from month to month mostly on the basis of the per-
sonal consideration of the emigrants. Emigration tends to be relatively
low in May and June, for example, apparently because families with
children tend to prefer to wait until school is out before leaving. In
recent years, departures have generally been greatest from July
through October. If that tendency holds for 1976, total emigration for
the year could exceed current projections.
What is more worrisome about Jewish emigration from Romania
than any of the figures is the processing of new applications and the
impact of application procedures upon the lives of the individuals
concerned. Romanian officials reported that new applications for emi-
gration to Israel, as well as other countries, are declining. Though no
precise figures were available, U.S. Embassy officials also expre$sc(l
the view that applications for emigration to Israel are fewer than in
recent years.
Romanian officials explain this apparent decline on the basis of the
diminishing size and changing composition of the Jewish community
in Romania. With so many Jews having emigrated, those remaining.
they say, tend to be older, more established, and less likely to wish to
leave. Tensions and general conditions for living in Israel are also
said to discourage potential applicants.
Such arguments undoubtedly have some validity. But it is also the
case that emigration application procedures have, in the past i'ear.
been modified in ways that seem further to complicate and discourage
migration.
The creation in December 1975 of local commissins to screen
and "counsel" prospective applicants for em.iiration is the most dis-
turbing change in procedures. The commissions, composed of local
3 U.S. State Department figures show emigraUon from Rloimania to Irael as 1,064 in the
first half of 1976.






8

party officials and "community representatives," interview ndividuals
who indicate an interest. in leaving Romania. Often friends and rela-
tives are also interviewed. This screening of potential applicants not
only adds to the processing time for emigration, it brings community
pressure and informal sanctions to bear upon individual who show
interest in leaving. While the commissions have no formal powers
other than to recommend to central government officials whether pass-
ports and exit visas should be granted, in fact they may delay or
even veto applications by failure to pass them on for further
processig .
According to Romanian officials, these commissions were established
primarily to "counsel" young people seeking to marr for rs and
leave Romania. Officials claim that with the increase in foreign tourists
visiting Romania each year. increasing numbers of young Romanian
women have been lured into marriages with foreigners and then aban-
doned or abused once they are abroad. The best informa n available,
however, indicates that the commissions interview all potential appli-
cants for emigration. not just young marriage candidates.
1976 emigration from Romania to Israel and the United States
Departures for Departures for
Israel United States
amm ry--------------------------------------295 75
February -------------------------------------330 73
Marci ---------------------------------------157 164
April -----------------------------------------72 131
May -----------------------------------------127 73
Jue ----------------------------------------211 (1)
Total --------------------------------- 1,192 516
In addition. 1.093 exit visas have b1en approved for Israel in 1976; 467 exit visas
approved for other countries.
'Figure niot available at time of publication.
Source : Government of Rtomiania.
In contrast to the trend in emigration from Romania to Israel,
applications for emigration to the United States are reported increas-
ing4 and the trend in emigration to the United States has risen sharply,
as indicated by the following figlores:
Immigration visas issued by U.S. Embassy Bucharest
Fiscal year:
19 70t( ----- -------- ------------------------------------------------ 372
1 K71----------------------------------------------------------- 62
1972 ------------------------------------------------------
1973 ---------------------------------------------------------357
19714 ----------------------------------------------------------- 511
1975 ------------------------------------------------------------- 328
------------------------------------------------------------ 1,428
Sotrc : 3i. I)vpariitn ik t of Saise.
For tir0 e estimate 5D.000 Jews remaining in Romania. there con-
tinues to be colnsi(erahle religious and cultural freedom. While there
are no Iebrew schools, Hebrew classes are offered and freely avail-
all to interestel students. A Jewish theater flourishes in Bucharest.
Restaurants rn by the Jewish comllulnity provide kosher meals to
2.50 people a day. Twice a month 10,000 copies of perhaps the only
I brew newspaper ill Europe are printed in Bucharest and distributed








in Romania and elsewhere; 16,000 pocket calendars and "giides' to
Judaism" are published and efrculated each year.
Despite this activity, the Jewisi community in Romania is 'a shrink-
ing one. In 1948, there were 600 rabbis in Romania. Now there are only
three. No new rabbis are being trained because of lack of candidates'.
Lack of kosher butchers poses an even greater practical problem. The
few such butchers who remain in Romania must travel from com-
munity to community, making adherence to traditional dietary laws
difficult for many, Jews.
Looking beneath the aggregate figures of Romanian emigration,
it must be said that the procedures for resolving "humanitarian"
problems involving emigration are themselves far from humane. The
procedures are exceedingly complex. Long delays are common. In
many instances these delays provide opportunity for intense pressures
to be brought to bear upon the individuals concerned to change their
minds about emigrating.
Political imprsonment is said to have ended in Romania. But fear of
it persists. While it is not the stated policy of the Government to
remove people who apply to emigrate from their jobs, many applicants
do, in fact, lose their jobs when they apply to emigrate. They may
not be fired outright. But, for example, they may suddenly be told
they are to be transferred to a job involving "classified" projects.
Since work on such projects can preclude or complicate emigration,
applicants will often refuse to take such classified jobs, and thus find
themselves without work.
Similarly, government investigators and members of local screen-
ing commissions may encourage neighbors and friends of applicants
to spurn them, leaving applicants as social outcasts until they actually
are able to emigrate. Property owners are required to sell their homes
and possessions at artificially low prices. Children of prospective
emigrants may lose their positions in school-sometimes long before
permission to emigrate is granted or families are actually ready to
leave.
The information provided applicants during the often long process
of consideration of applications is scanty. Delays are not explained,
and rejections and approvals alike are often handed down without
explanation, adding to impressions that the decisions are capricious
or politically inspired. Lacking knowledge of the status and location
in the bureaucracy of their applications at any given time, applicants
are unable to address problems that may arise or even reassure them-
selves that their cases are being given due consideration. Bureaucratic
mistakes and "lost" files can result in months or years of delay without
discovery or remedy, although Romanian law strictly prohibits ob-
struction of decisionmaking by government officials. Final decis-ins
on many humanitarian cases appear to be made within the Council of
State.
Some instances were noted of (elatively quick approvals by Ro-
manian officials of applications for emigration to the United States
for individuals clearly ineligible for admission to the United States
under our immigration laws. Whether such actions are deliberately
designed to ridicule U.S. immigration laws is uncertain. Romanian
officials did, however, mention the strictness of U.S. immigration laws
and the fact that some Rtomanians approved for emigration to the
United States have been subjected to hardship by complicated U.S.






10


iminigration policies and procedures. The study mission rended those
officials, however, that whereas freedom of emigration. is guaranteed by
the Universal Declaration of Human Rights to which both the United
States and Romania have subscribed, no such international guarantee
or commitments exist with regard to immigration.
The net result of the.e Romanian procidures-and to a lesser extent
the immigration procedures of host countries-is considerable anxiety,
hardship, and pain for those who seek to emigrate. The longer the time
between application and departure, the greater the potential suffering.
While official Government policies impose no sanctions or losses of
rights upon prospective enugrlants in fact and practice, anyone who
applies to leave Romania is likely to find himself and his family at
least temporarily isolated and deprived of basic opportunities and
necessities of life.
TIhADE AND THE ECONOMY
Despite Romania's considerable need for costly technology, trade
between the United States and Romania actually declined in the first
year of MFN, with preliminary figures indicating that the balance of
trade in recent months has shifted slightly in favor of Romania for
the first time virtually in the history of United States-Ronanian trade
relations.
Both the drop in trade and the shift in the balance, however, appear
to he temporary and to indicate no significant long-term change in
trade patterns and benefits.
UNITED STATES-ROMANIA TRADE
[in millions of U.S. dollars]
1976 (1st
quarter
preliminary
1972 1973 1974 1975 figures
U.S. exports (total) -------------------- 69.1 116.5 277.1 189.3 43.04
Manufactured goods ------ ......... 18.5 31.7 108.6 56.9 -_- -
Other gods ..50.6 84.8 168.5 132.4
U.S. imports (ttal) ... a.... ........ 31.5 55.7 130.5 133.0 45.12
Total trade turnover_ . 10.6 172. 2 407.6 322.8 88. 16
U.S. trade balance ......... +37.6 +60.8 +146.6 +56.3 -2.08
Source: U.S. Department of Commerce.
Roinanian officials explain the 1975 drop in total trade volume in
sterns of unusually large Riomanian purchases in 1974, including sev-
eral American aircraft and large amounts of food commodities neces-
sitated by crop lose due to severe droughts. These lare Purchases
were made possible by the sale of oil to the United States during the
Ar1ab oil embargo, which R01o'ania was able to provide even though
iu]h of its crtide was pirclastd from the Middle East.
Substantial U.S. impots of Romanian fuels and related materials
continued into 197,. but Iloinunian imports of iianifadured goods
id aricultural product frm th United States dropped shIIPly
restoring the trade balance in 1975 to a level more in line with that of
earlier years (though still favorable to the United States)
Total I united States-Romanian trade was slightly lower in the first
qu er of 1976 than for the same period in 1975. R'omanian pur-






11

chases from the United States, particularly in the agricultural area,
were sharply lower, and U.S. imports of Romanian goods were more
than twice the first quarter 1975 level due primarily to large fuel
purchases.
Perhaps the most significant development in Romanian trade is the
continued expansion of trade with Western countries in relation to
trade with the Warsaw Pact nations. Romania continues to participate
in the pact, and in the Council for Mutual Economic Assistance
(COMECON). It has, however, resisted efforts to subordinate Ro-
inanian economic development to supranational economic planning by
COMECON. In 1973 it became the first member of COMECON to
conduct more than half of its trade with non-Communist countries.
As the following figures indicate, Romanian trade with Western
countries continued to exceed trade volume with Communist countries
in both 1974 and 1975. Figures for Romanian trade in 1975 with
Communist and Third World countries are not yet available. The
industrialized West, however, accounted for about 30 percent of total
.Romanian trade in 1975-about the same as in 1974. Of this Romanian
trade with the industrial West, the U.S. share was 10.8 percent in
1975-slightly below the exceptional 1974 figure (13 percent), but
well above the more normal 1973 figure (6 percent).
FOREIGN TRADE
[in millions of U.S. dollars]
1970 1971 1972 1973 1974 1975
Total: 1
Exports ----------------------1,851 2, 101 2, 599 3,738 4,874 5,332
Imports ----------------------- 1,960 2,103 2,616 3,505 5,144 5,332
Communist countries:
Exports ----------------------1,075 1, 197 1,451 1,854 1,919 (2)
Imports----------------------1,057. 1, 132 1,351 1,581 1,817 (2)
The Third World:
Exports ---------------------- 225 235 322 579 1,645 (2)
Imports----------------147 156 220 424 1,516 (2)
Industrial West:3
Exports- -- 550 669 826 1,305 1,310 1,408
Imports-- ---------------- 756 815 1,045 1,500 1,811 1,778
United States: 4
Exports ----------------------66.4 52.5 69.4 116.6 277.1 189.3
Imports ---------------------- 13.4 138 31.5 55.9 130.5 133.0
Total trade ------------------- 79.8 66.3 100.9 172.5 407.6 322.3
I Because of rounding, components may not add to the totals shown.
Figures not available at time of publication.
3 Including Australia, Austria, Belgium, Canada, Denmark, Finland, France, Iceland, Italy, Luxembourg, Netherlands,
tNew Zealand, Norway, Sweden, Switzerland, United Kingdom, United States, and West Germany.
4Source: Department of Commerce-1967-73: Bureau of East-West Trade "Quarterly Report Under Export Adminis-
tration Act"; 1974 and 1975: Bureau of East-West Trade "U.S. Trade Status with Socialist Countries."
Source: U.S. Department of Commerce.
The study mission noted increased efforts by Romania to expand
trade with other developing countries-a move which should further
enlarge the proportion of Romanian trade conducted with non-
Communist countries.
With only one quarter (fourth quarter, 1975) of final post-MFN
trade figures available, however, it is probably too soon to assess the
impact of MFN on United States-Roinanian trade relations. Distor-
.tions in trade caused by trade deferrals in anticipation of the grant-
ing of MFN and other factors make conclusions particularly difficult.






12


It is cear that U.S. fuel oil imports from Romania J sharply
(frorm$16 million to $61 million) in the first quarter a the grnt-
ing of MFN, that U.S. imports of higher priced goods-seem to have
increased, and that (as already noted) the balance of trade shifted
narrowly in Romania's favor in the first quarter of 1976. But the
extent to which MFN may be responsible cannot yet be
Romanian officials point out that Romania continues to have press-
ing need for expensive technology from the United States, suggesting
that the trade balance between the two countries is likely inthelong
run to continue rather heavily to favor the United note
that several large purchases of U.S. goods are min t which, in
themselves, would probably restore the trade balance solidly in favor
of the United States.
Two factors raise uncertainty about that prognosis. First, large
U.S. agricultural exports to Romania have contributed importantly
to the balance of trade favorable to the United States. Romania, how-
ever, is an agricultural nation with potential for ving self-
sufficiency in agriculture in the near future. While it not yet ful-
filled that potential, due in part to recent floods and droughts, it might
soon do so.
Second, Romania is placing heavy emphasis on entering into long-
term joint cooperation arrangements witli American firns, many such
arrangements including provisions under which American firms agree
to "buy back" some or all of the products of the venture. Several major
agreements of this kind have already been entered into with American
firms, and more are being sought. Continued emphasis on such arrange-
inents could substantially increase the volume of Romanian exports to
the United States.
Should both these developments-agricultural self-sufficiency and
expanded exports based on "buy-back" agreements--occur simultane-
ously, there would seem to be a real possibility of a long-term balance
of trade in Romania's favor despite its need for American technology
and manufactured goods.
The fact remains, however, that Romania is a country on a crash
program of development and industrialization. Its development goals
are the most ambitious in Eastern Europe. For 1976-80, it plans each
year to increase national income by about 10 percent, industrial output
over 10 percelit, investment 12 percent, real income 6-6.5 percent, and
overall economic growth 9-10 Percent. Foreign trade is slated to
expand by 18 percent in 196 alone, 33-34 percent of national income is
earmarked for reinvestment-the highest accumulation rate in Eastern
Eu rop~e... .
Industrialization is the major emphasis of these development plans.
By 1980, it is planned that 72 percent of the population wil be engaged
inl nonagricultural work. Industry will receive the lion's sre of new
investments, both domestic and fore"g], Ivth particular projected
growth in investments in construction and installation of productive
facilities for exportable goods.
To achieve this industrial growth-and to increase efficiency and
1 rodIucti vity-continued extensive investment and technical coopera-
tioti from other countries will berequred.
This emphasis on Mdustrialization ievitably means continued belt-
tightening for the Romanian consumer, Consumer goods output is
projected to growv 35-37 percent in the next 5 years, but mostly on





13


the basis of increased domestic investment and productivity making
maximum use of domestic materials.
While the living standards of Romanians have continued to im-
prove, and are probably better now than ever before, they are still
well below those of most other East European countries. Domestic
consumption has generally been sacrificed to free resources for
rapid industrial development. This continues to be the case. Much of
the loss to the Romanian economy from the severe flooding of the
Danube basin in 1975, for example, has been recovered by further
cutbacks in domestic consumption of fruits, vegetables, and other
domestically produced consumables which were exported to raise
needed foreign exchange. The results were temporary shortages of
these and other goods in Romanian shops, but also extraordinarily
rapid recovery f rom the bulk of the flood damage to the economy.
The study mission found no evidence of intense consumer dissatis-
faction such as has erupted from time to time in recent years in
Romania. On the contrary, as reported by Congressman Biester based
upon his visit to Romania in the spring of 1975, the study mission
found living standards and supplies available to consumers adequate,
though rather sparse in comparison to most of the rest of Eastern
Europe.
Romanian trade has long been financed by private credits from
United States and European banks. In 1971, the President- designated
Romania eligible for U.S. Export-Import Bank financing, and several
major projects have received such financing, including a $23.9 million
bearing factory sale approved at the close of 1975. Several other major
projects are currently under consideration by Eximbank.- In 1972,
U.S. investments in Romania became eligible for Overseas Private
Investment Corporation (OPIC) guarantees.
The scope and ambitiousness of the Romanian development pro-
gram, however, and the growing level of its foreign debts, have raised
hopes of obtaining low-interest loans from the United States under.
the foreign assistance program. Romanian officials are fully aware of
the legislative prohibitions currently in effect against assistance to
Communist countries, and the study mission reminded them of this
problem.
The new (1976-80) Romanian 5-year plan includes several large
capital projects for which its officials seem particularly interested in
foreign assistance loans. These include construction of a nuclear power
plant and of a 60-kilometer canal linking the primary Romanian
(Black Sea) Port of Constanta with the upper Danube River (by-
passing the shallow Danube delta).
The study mission reviewed with Romanian officials the current
wariness in Congress of approving foreign sales of nuclear plants
because of increasing problems of weapons proliferation and diversion
of nuclear materials. Unlike some other developing countries that
have embarked upon nuclear development programs, however, Ro-
mania is both a signatory of the Non-Proliferation Treaty and a
member of the International Atomic Energy Agency (IAEA).
The planned Constanta-Cernovoda Canal, combined with projected
expansion of the Part of Constanta, promises to add significantly to,
Romania's development trade potential. It would shorten the route
to the Black Sea by 380 kilometers, and would eliminate the need
to transfer goods by rail or smaller barge to the deeper portions of






14


the Danube. It would substantially increase the efficiency and capac-
ity of the Port of Constanta, and upon completion of a projected
canal linking the upper I)anube and the Rhein in southern tGermany
would become a vital link in a significant direct shipping line from
the North Sea to the Black Sea.
The study mission reminded Romanian officials, however, that recent
changes in the U.S. Foreign Assistance Program mandated b- Con-
gre cal for less funding of massive technological projects like the
J.oinanian nuclear power and canal projects, and greater use of for-
eign aswsistance grants and loans for "intermediate technology" and
humanitarian assistance to the poorest population groups within the
poorest nations. Romanian officials noted, in response, that many of
the hundreds of projects in their new 5-year plan are smaller ones
involving interm-lediate technology, and indicated that their interest in
foreign assistance loans is not limited to the larger capital projects.
As noted earlier, Romania, while a developing nation in many re-
spects, does not fall within the category of the "most severely affected
nations." It was not clear whether any Romanian projects would
(ualify for U.S. developmental assistance even if current legislative
restrictions on foreign assistance loans to Communist countries were
removed.
Romanian officials expressed frustration with delays and denial
of projected imports of American goxls and technology due to U.S.
expolr controls. They indicated that in a number of instances they
had turned to sources in Western Europe for products which they
wished to purchase front the United State' but for Which export fi-
(enses had been unduly delayed. They expressed hope that changes
could be made in the export licensing process that would ease such
problems, particularly with respect to transfers of U.S. twhnology
by firms with which Romnania has or will have joint venture agree-
ments.
U.S. Enibassy officials expressed sympathy with the Romanian view
0m export controls. pointing out that there have been no known in-
4 wes of dlivension of goods or technology to military uses or to other
(lomnrnunist nations by Roiania. The Rolmanians contend tluLt miany!
4if the goods and tecln]olgy on which U.S. export licenses are delayed
or denied are easily available in Western Furop10 sometimes frM
nl~sid rie of American col)a iies. Embassv officials also pointed
,iit that unlike other East European countries, there is no Soviet.
military presence in Romnania.
T'he study mission noted, however, that Soviet technical advisers and
officials have extensive Mcess to Roimanian industrial site,. American
)usi neS1nen involved in joint cooperation a rranqgements with Ro-
maian firnis rpo'te(l that Soviet visitors are frequently broulit
t lr ough plants on tomr The study mission advised Ro1:a1ian officials
tlhat. while irrenit con ressional review of exlport control laws and
pr idures could res11lt in somewhat greater flexibility to take account
(if differences among (omnIunist counties, and that efforts would be
made to streamliine and speed up the decision process, no changes
were likely in the basic case-by-case approach to export controls em-
iloyed by the United States and its COCOM partners.






15


CONCLUSIONS AND RECOMMENDATIONS
(1) Despite only slight improvements in emigration figures since
the granting of MFN to Romania and continued use of procedures
that pose unfortunate hardships on applicants, Romanian officials
nevertheless appear to be making a good faith effort to meet their
international commitments to act upon and solve humanitarian prob-
lems. Particularly in light of the favorable record of emigration to
Israel and the United States that Romania has achieved over the last
30 years, and the importance of MFN for continuation of the bravely
independent foreign policy Rornania has pursued, the Congress should
renew MFN as recommended by the President for an additional year
provided emigration figures, as expected, take an upturn in July and
August.
(2) The State Department should initiate serious efforts to reach
a clear agreement and understanding with the Government of
Romania concerning the handling of humanitarian problems involv-
ing Americans residing in Romania under cultural exchange programs.
Such an agreement could serve as a basis for more acceptable handling
of all humanitarian cases involving Americans.
If the United States is to continue to send some of its brightest and
most responsible young people to study in Romania, and to accept
Romanians of similar quality for study and travel in the United
States under such programs as Fulbright-Hays, a mutual understand-
ing ought to exist between the two Governments to accord humani-
tarian requests involving these people particularly prompt and
sympathetic processing. Requests for permission to marry. for example,
should not be subjected by Romanian officials to the long (lelavs and
negative pressures applicable to marriage requests from tourists visit-
ing Romania for short periods. If such aii understanding cannot be
reached and implemented through informal negotiations, the Congress
should consider adding such a stipulation to the legislation autho'izilig
cultural exchange programs.4
(3) The study mission concurs with and wishes to reemphasize the
recommendation of the U.S. Advisory Conmmission oi Internatio n.al
Educational and Cultural Affairs that the U.S. Government should
reinstitute a program which would permit Eastern European pub-
]ishers, booksellers, and film distributors to purchase American media
p products with their own currencies. Romanian buyers would be able
to pay the U.S. Government for such materials in local currency.
The U.S. Government would then reimburse the U.S. seller in
dollars. Romanian currency accumulated under such a progr-.am iigilt
then be used for Embassy and other U.S. Government expenses in
Romania. By relieving the Romanian Governlnent of the need to
devote scarce hard currency to the purchase of American periodicals
and-publications, such a program could be expected to increase distri-
bution of such publications throughout Romana ulder ex1st*njr cul-
tural agreements and thereby increase their availabilit- to interest(
travelers and Romanian citizens. If necessary. Congress s-old enact
legislation authorizing such a program.
SThe eases of two Fuilbriht seholar-- seeking pwrmiiin to imarrv Riomnn* women
were discussed s;peifically by the study ission with ihi ItonUmnia oficiakl The*U
applications have sine be'en approved. but only after delays if 1mvre than a r hi ,awh
eae. While the study mission is. of course. gratified by the action of tl- !,ntmanai;n i
Government in these and other case-. they only illustrale further the need for areeuient
on more appropriate handling of such matters.





16


(4) The Congress should review U.S. immigration laws to assure
(a) that no unnecessary restrictions are imposed upon the entry of
Romanians into the United States once such pemns obtai n permission
from the Romanian Government to emigrate, and (b) that every effort
is made to minimize delays and hardships stemming from U.S. immi-
gration requirements for Romanians seeking to enter the United States
under such conditions.
(5) The Comimittee on International Relations should undertake
a thorough review and reevaluation of legislative provisions prohibit-
ing U.S. foreign assistance to Communist countries to determine
whether it would be advisable to authorize limited aid in the form of
low-interest loans to developing nations such as Romania.
() The Committee on International Relations should strengthen
1roi -Ion of the Export Administration Act that permit differentia-
tion among Communist countries in the application ofepor controls,
and should consider measures to further reduce the list of Commodities
suIbject to tighlit controls. Such measures could, in the view of the study
Im-ssion, substantially increase direct U.S. exports to Romania with-
(ut jeopardizing U.S. national security by reducing the time required
fur licensing.








HUNGARY


As Congressman Charles Whalen, Jr., a member of the suibcom-
mlttee,. Teported after his visit there in April 1975, HungarY has re-
sisted entering into trade negotiations with the United States that
could lead to mutual granting of most-favored-nation status in light
of the Soviet Union's rejection of section 402 (the "Jackson-Vanik
amendment") of the Trade Act of 1974. While that provision was
di rectedat the Soviet Union's restriction of Jewish emigration, it also
applies to Hungary.
Hungarian officials, following the lead of the Soviet Government,
continue to regard section 402 as "an intrusion" into Hungary's do-
mestic affairs, even though Hungary's record and practices With m-
spect to emigration and resolution of international humanitarian
problems appear to come close to meeting the requirements of the
Jackson-Vanik provision. Even if Hungary were exempted from the
terms of section 402., its leaders feel that so long as other Socialist gov-
ernments, including particularly the Sviet Union, continue to be
subjected to this requirement, Hungary cannot proceed to a "most-
favored-nation" relationship with the United States.
Despite this continued impasse on the matter of MFN, significant
positive development have occurred in bilateral trade relations be-
tween Hungary and the United States:
-Several large cooperative ventures between American and Hun-
garian firms are in final stager of negotiation or have act ally
been entered into, including a $100 million contract between
Steiger Tractor Co., a subsidiary of International Harvester
and the Raba Co. of Hungary for the production of tractors
and tractor components. Similar agreements are being nego-
tiated for production of bus transmissions, shoes, and integrated
circuits-all with "buy back" provisions under which some of
the products of the cooperative arrangements will be returned
for sale in the United States. These agreements have been
reached despite high tariffs imposed by Hungary on incoming
capital goods and rather high U.S. tariffs on some of the prod-
ucts to be exported to the United States.
-Hungary has also taken steps as one official put it, to "put our
claims problem behind us." In 1973, Hungary agreed to make
availabk to the United States the sum of $18.9 million to cover
settlemint of all remaining claims by American citizens against
the Government of Hungary. Those claims are now being re-
viewed by the Foreign Claims Settlement Commission pursu-
ar-t to Public Law 93-460. and must be certified and paid not
later than May 15, 1977. The commendable efforts of the Hun-
garian Government to act in a positive manner on the matter
of outstanding debts and claims raises the prospect that Hun-
gary may soon join an elite group of nations which have settled
all debts with the United States--a distinction which cannot
be claimed even by some of our friends and allies in Western
Europe.
(17)






18

-A Hungarian-American Economic Council has been formed
by the Hungarian and U.S. International Chamber of Com-
merce to explore and promote bilateral trade opportunities.
-Progress is being made in negotiations of a cultural and scien-
tific agreement with Hungary that would serve as a framework
for government-to-government cooperation in such areas
agriculture, health, the environment and transportation. Some
differences, however, remain, including dispute over the dura-
tion of the agreement. Hungarian officials preferring a longer
term, and the United States a shorter one.
-The two governments have also agreed in principle to negotiate
an agreement eliminatim double taxation-a useful but largely
symbolic step toward more normal trade relations.
Regard less of these developments and continued expressions of in-
terest by Hungarian officials in MFN with the United States, Hun-
garian trade remains heavily oriented toward the Communist world.
While Hungarian interest in MFN was a major theme of Deputy
Prime Minister Gyula Szeker's remarks during his visit to the United
State s in May, the issue was mentioned in the context of changes
desired by the Hungarians in the provisions of the Trade Act of 1974.
The study mission advised Hungarian officials (as did Congrss man
Whalen during his visit to Hungary) that the new (95th) Congres
may review the Trade Act of 1974, but major changes in provisions
hindering MFN for Hungary seem unlikely.
Hung"ar possess few natural resources aside from its farmland,
aiid must import all of its oil and iron ore. as well as other critical
commodities. The bulk of Hungary's energy and raw material needs
are met by the Soviet Union. This relationship, in turn, increases
hungar'S' involvement in COMECON-the mechanism through
which the Soviet Union distributes many of the goods it supplies to
Ea-t Europe.
As indicated by the following table, the Soviet Union and t.beCEMN
countries accounted in 1975 for 65.1 percent of total Hungarian trade
volume, while Iunjzalry's major non-CEMA trading partners ac-
(ounte(d for only 17.." percent. The Soviet Union alone accounted for
more than one-third of total trade volume.
HUNGARY'S TRADING PARTNERS,t 1975
CEMA countries Non-CEMA countries
Balance
Balance (million
Percent, (million Prcent. U.S.
total trade forints) Val trade dollars)'
U.S.S.R 36.8 -1,165 West Germany-_ 6.3 -1S0
East Germany .......... 10.5 -596 Italy ........ 3.2 +17
Czechnslovakl. ------------ 7.9 -234 Austria ------- 3.1 -124
Poland 5.0 -250 Yugoslavia --,. 17 +42
Romania -------- 3.2 -716 France...- 1.6 -63
Bulgaria ------- I ,5 -116 Iraq ... .... 1.4 -21
I Ranked by total trade (imports plus exports) in devisa forints, fob.
I Approximate due to exchange rate approximations.
Source: State Department analysis of Government of Hungary figures.
II 197 ILuigarv suffered a $I11 billion trade deficit-a substantial
()Ii for a ('omtIN where foreign trade countss for 40 percent of the
(NP. Trade defies witl WVestern trading p-artners are common.






19

But for the first time in 1975, Hungary suffered a trade deficit as
well with its CEMA trading partners-both deficits probably a result
of rising raw materials prices in both the West and the Communist
world, and delay by Hungarian officials in raising prices of Hungar-
ian products to reflect increased costs.
Hungary's growing indebtedness has caused its leaders serious con-
cern. Hungary, by necessity, has been a pioneer among socialist coun-
tries in tapping Eurocurrency and Eurobond markets in obtaining
loans from oil-rich Arab countries. It is believed to have borrowed
$'50 million in the Eurocurrencv market in 1975 alone. Although its
credit rating remains strong, based on conservative borrowing and
an exemplary record of repayment, its ability to import is impaired
since an increasing portion of stagnant dollar account export earn-
in!s will be needed to service debts rather than pay for imports.
HUNGARY'S TRADE BALANCE: EAST AND WEST
Ruble trade (millions of devisa Non-ruble trade (millions of
forints) devisa forints)
Balance Balance
imp-rts Exports Balance (millions Imports Exports Balance millionss of
(f.o.b.) (f.o.b.) (cif) of rubles) (f.o.b.) (f.o.b.) (cif) U.S. dollars)
Devisa forints, 1973----- 21,684 2;, 909 +3,670 +281 15, 008 16,660 +987 +108
Devisa forints, 1974_____-25, 436 27, 157 +1,083 +83 24, 712 20,377 -5. 322 -582
Devisa forints, 1975 ..... 37, 285 33, 109 -4,823 -373 23, 314 19, 750 -4, 728 -531
Commercial forints, 1976
( mo.) ------------ 19, 810 17, 847 -2, 206 -62 21,359 15, 347 -5, 709 -137
General notes: Based on Hungarian statistics. It seems most meaningful to examine trade results on a rublefnon-rub'e
basis. However, trade with CEMA countries does not necessarily take place in rubles and this factor must be taken into
account. For all practical purposes, non-ruble trade means convertible currency trade.
Foreign exchange rates: The "devisa" rate was a statistical tool only, and did not correspond to commercial or non-
commercial exchange rates. This concept was abandoned Jan. 1, 1976. The rubleiforint rate was 1 ruble/13.04 forints for
the period covered. The U.S.$ forint rate was U.S. $119.15 forints in 1973 and 1974; U.S. $1/9.06 forints in January-Feb-
ruary 1975 ahd U.S.$118.51 forints from March-December 1975. Since Jan. 1, 1976 the commercial rate (averaging U.S.-
$1/41.6 forints, 1 ruble /35.6 forints) has been used.
Source: State Department analysis of Government of Hungary figures.
While Hungarian foreign policy is heavily influenced by the Soviet
Union, life within Hungaly gives the appearance of greater freedom
than is the case within the Soviet Union and most other East European
nations. The study mission's visit, for example, included Ascension
Sunday-a major Roman Catholic holiday. The churches were filled
to overflowing with worshippers, young and old, as well as tourists
with no evidence of government interference.
Hungarian officials point proudly to the fact that each year 150,00)
tIungarians who left the county since World War 1I cotie back to
visit-30,000 such visitors from the United States last year. The policy
of the Government is to encourage such visits, and American Eimbassy
officials report "very few" instances of harassment. Tlios thalt have
occurred have been remedied through consultations between United
States and Hungarian officials.
Travel by Hungarians to the West. and access in huingary to foreign
books and publications, seems relatively free.
No detailed information was available as to whether-and to what
extent-visas for some hngarian expatriates who wish to visit Hun-
gary may be rejected. Some such restrictions on visits to Hungary may
still exist, however. particularly with respect to applications from
West Germany, where niny o the Hungarian refugees who most
strongly opposed the Communist government now reside.








The:Pesent (Fifth) Hungarian 5-yer plian (1976-8O) all both
for coiitiaRed dntra nation of commercial and investment misior r
miakix, g and 45 to 50 percent increase in foreign tra4 N ch of this
increase, however, is likely to be in the export area, a imports by
Hungary from dollar areas are projected to increase by 3 to 40
percent.
"For. a Jong time to come," one Hungarian official told the studv
m ssion the Socialist countries will buy nmore thantb*-an sell M
the U.S., Officials suggested that an improved atmosphere for trade
with thoe Inited States could result in a trade volume between el
two countries 5 to 6 times what it now is (1975 United St 4L ungary
trade volume was $111.8 million). Because of Hungary's recent trade
deficits however, the current 5-year plan calls for caivful controls
of imports, suggesting that any projected expansiou of ,United States-
Hungarian trade is predicated especially on expanded export of Hun-
garian goods to the Unied States.
The 60-percent increase in exports to hard currency markets pro-
jected in the current Hungarian 5-year plan siems'rather optimistic
sin Hungary will first need new equipment and production processes
in order :to build up its export capacity suffiiently fo meet this goal.
Much of this production equipment and knowhow must come from
developed :Western countries,_ and will have to be fiipanced with hard--
currency loans. While this reqnirement repres~ets'an opportunity for
American exporters, lack of MFN and export finmucing' through the
Export-Import bank suggest that U.S. business will be at a consider-
ble di'Sad vant age In relation to West German and Japa- e firms In
mieltin this need...
The crdWn of St. Stephen continues to be an obstaczieto improved
United States-Hungarian relations-both political and economic. The
historic crown of Hungary's first Christian King and the Hungarian
coronation regalia were given to elenelits of the US. rly at the
end of World War II by members of the ungr'ian Crown Guar.
They have been held under appropriate bsafegurs' y the United
States ever since.
Opponents of tle Communist government of Thiungary, including
many elements of ungarian-American organizations. have opposed
returning the crown to 1Hungary until it can be returned to a non-
Comm-unist government. The United States, however, co-nsiders the
crown to be the property of the Itungarian people, and places no par-
ticular conditions on its retm-n.
Hungarian officials noted their strong desire to have the crown
returned to Hungary. The ancient palace of Buda: which dominates
the oldest section of Budapest overlooking the Danube has been re-
stored and would presumably be the resting place for the crown when
it is returned. This suggests that the Hun1grian Government will
prefer to give the crown a somewhat more secular symbolism than it
r As Conimressrnan Whaleli noted in his report on lUiwary. the Ulited States imposes
tariffs on imports from ln %ry at the Smoot-flitwly 19!'0) rate. In retalftllon,
JTuntwry impoKes rates on incoming Americon goods higher thau the rates applicable
to competing Western European goods.
Some socialist v mrernimnts, of course, eondet and control forelgn trade directly.
Under such centralized s.oinlist systems, riayment of tariffs would nvov tie government
cllecting, in effect, from itself a meaninoless formalltv having little rea I Impact on
trade. In Hungary, however, trading firms, while technically state-owned, hav. substantial
xn menaewt autonomy. Pro fit records and goals are maintained for all dirms, atl tafiiffs
are actually paid monthly by Importing firms to the Government of *Tungary. Under such
a defentralized system, high tariffs (-a affect trade lu a manner .tmUar to teir efect
In capitalist systems.


20








has had in the past. Nevertheless, the Catholic majority of Hungary
who consider the crown a major religious as well as political symbol
would presumably have full access to it.
CONCLUSIONS AND RECOMMENDATIONS
(1) In view particularly of the positive efforts of the Hungarian
Government to settle all U.S. claims against Hungary, the United
States should willingly explore and pursue in a forthcoming manner
any limited agreements which might facilitate trade or generally
improve United States-Hungarian relations until such time as negotia-
tion of a broad trade agreement including provision for MFN is
feasible.
(2) Any cultural and scientific agreement that may be entered into
with Hungary should be limited initially to no more than 2 years to
facilitate its early review in conjunction with review of the imple-
mentation of the Helsinki agreement and of total United States-
Hungarian relations.
(3) The Congress should urge the executive branch to return the
crown of St. Stephen to the people of Hungary. Such action would
be based on the principle that the crown rightfully belongs to them.
It would also be, an appropriate response to settlement of all U.S.
financial claims against Hungary. It would hopefully encourage fur-
ther cultural and religious identity among the Hungarian people
in the spirit of the Helsinki agreement. The planned 1977 review of
the implementation of that agreement would seem a suitable oppor-
tunity to arrange and carry out the return of the crown.







































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UNIVERSITY OF FL

3 1262 0140