Bush Promises Hungary Easier Trade Terms

President Bush, in a measure intended to lend badly needed U.S. financial support, announced Monday that Hungary will be granted two major trade concessions as it undertakes extensive political and economic reforms.

Bush told a news conference here that the Central European nation will be granted permanent Most Favored Nation status--which gives favorable trading positions to the United States’ major trading partners--and that it will be added to the list of nations given permanent permission to ship exports to the United States duty-free.

The President’s announcement--reflecting the sharp relaxation in East-West tensions and the political and economic shifts that are opening up Hungarian society--was made at the State Capitol of Montana at the end of a visit marking the state’s centennial celebration.

With East-West relations dominating the President’s agenda this week, Bush also said at the news conference that his Administration is working on strategic arms control proposals “that I think will capture the imagination of the Soviet Union.”

He added that “I do not see any insurmountable stumbling blocks” to such an agreement.

He will meet Thursday at the White House with Soviet Foreign Minister Eduard A. Shevardnadze. Secretary of State James A. Baker III then will continue the discussions with the Soviet official later in the week in Wyoming.

The President repeated earlier statements that it is premature to talk about a summit conference with Soviet President Mikhail S. Gorbachev--a meeting that officials have indicated might take place within coming months.

“It’s time to talk about a productive, constructive meeting of the foreign ministers in Wyoming,” Bush said. “I feel under no rush on that subject” of a summit.

He also said that the new status for Hungary does not move forward prospects of the Soviet Union being granted such trade concessions.

Commerce Secretary in Hungary

As Bush made his announcement on Hungary, Secretary of Commerce Robert A. Mosbacher was visiting Budapest. The heavily centralized Hungarian economy is not as efficient as traditional market economies, and many competing countries already have the trade preferences that were granted to Hungary on Monday.

While Hungary last week opened its borders and allowed unlimited emigration by East Germans to Austria on their way to West Germany, Bush said that his decision on trade concessions for Budapest was “in the mix before those dramatic happenings.”

On Monday, he formally notified Congress of the shift. The President already had said that Hungary would be the first East European nation to get permanent Most Favored Nation status, but he linked the move to passage by the Hungarian Parliament of legislation codifying its newly relaxed attitude toward East Bloc emigration.

Mosbacher said in Budapest that the actual shift could occur in October if the Parliament acts on the emigration laws this month.

The commerce secretary also said that Bush has submitted legislation to Congress that would extend the Overseas Private Investment Corp. program to Hungary, under which U.S. guarantees would be given to private U.S. companies investing there, and to create a $256-million private enterprise fund, to aid in the establishment of private business there.

In 1988, Hungary exported $321 million worth of goods to the United States. Of that, about $110 million would be eligible for duty-free status. The Commerce Department estimates that full duty-free status under the Generalized System of Preferences would enable Hungary to increase exports to the United States by about $32 million.

The permanent Most Favored Nation status is not likely to have an immediate financial impact, however, because Hungary already has such status on a temporary basis. It is expected to improve the availability of export financing and export credits, because it would give investors greater certainty about the U.S.-Hungarian trade relationship.

“The dedication and diligence of the Hungarian people is quickly transforming the economic system into a more productive and competitive posture,” Bush told the news conference from the floor of the Montana State Senate.

The sudden movement of thousands of East Germans through Hungary to West Germany has put renewed attention on the prospects for the reunification of Germany, divided since the end of World War II.

While such a step is “a matter for the Germans to decide,” Bush said, “I do not think we should view that as bad for Western interests.”

“I think there’s been a dramatic change in post-World War II Germany,” Bush said. “And so I don’t fear it. . . . There is, in some quarters, a feeling, well, (to) reunify Germany would be detrimental to the peace of Europe . . . some way, and I don’t accept that at all--simply don’t.”

The President also said that the United States will be able to accommodate all the Soviet Jews who have already applied for admission to this country, but he maintained that Washington must keep limits on immigration--despite the suddenly relaxed Soviet attitude toward it.

“We have got to have an overall immigration policy that keeps the control of our demographics in our hands,” Bush said. For more than a decade, U.S. officials have repeatedly pressured their Soviet counterparts to allow unlimited emigration.

“The climate is better” in the Soviet Union, Bush said, but he added that he is unable to say that no threats remain to Jews and others seeking the freedom to leave.

Asked whether he had any message for narcotics traffickers who might be targeting members of his family, or other Americans, Bush said: “I take a rather dim view of it.

“I know there’s speculation on this,” he said. “But there is no hard intelligence evidence of such targeting. Clearly, any such action would, I think, just bring down the total wrath of the American people and the American government.”

“I’m not afraid. I have great confidence in the selflessness and in the thoroughness of the intelligence community and of the Secret Service,” he added.

‘No New Trend on Hostility’

On other matters, Bush said:

-- There is no “federal statute that is going to take care of” the sort of racial incidents that have occurred recently, and there is no “new trend of racial hostility” emerging in the United States.

-- That a measure narrowly approved by the House Ways and Means Committee last week to cut the capital gains tax rate from a maximum of 33% to 19.6% should be enacted into law. “We’ll fight for it on the (House) floor,” Bush said. The House is expected to vote next week on the proposal.

-- He sees no need to expand his ban on imports of semi-automatic assault weapons to cover the sale and manufacture of such weapons in this country. Referring to the massacre of seven people by a gunman firing an AK-47 semi-automatic rifle, in Louisville, Ky., Thursday, Bush said that it is “very hard to legislate against aberrational behavior.”

Earlier, Bush announced that beginning next year, the Environmental Protection Agency and the Peace Corps will join forces to train a corps of volunteers.

“As part of their standard preparation for duty, Peace Corps volunteers will be trained by the EPA to deal with a full range of environmental challenges: Water pollution prevention. Waste disposal. Reforestation. Pesticide management,” Bush said in a speech here.

“Armed with greater knowledge about our environment, our Peace Corps volunteers are going to help spread the word in the developing world. They’ll work to stop pollution before it starts--and ensure that economic development and environmental stewardship go hand in hand.”

Staff writer Art Pine in Washington contributed to this story.

HUNGARY-ISRAEL TIES--Budapest and Jerusalem restored relations. Page 13.