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wt352nb1507

Committee II : Corrigendum to Document E/PC/T/C.II/3

United Nations Economic and Social Council, October 25, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

25/10/1946

official documents

E/PC/T/C.II/3.Corr.2 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/wt352nb1507

wt352nb1507_90210206.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.II/3. Corr.2 AND ECONOMIQUE 25 October 1946 SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Corrigendum to Document E/PC/T/C.II/3 On page 9, paragraph 4, line 2, after "lowest in the world insert:- there were other considerations also which prevented his country from agreeing to large scale........ Paragraph 5 on the same page should now read:- Quantative restrictions would definitely be needed for the purpose of economic planning. Paragraph 7, on page 14, line 2 should now read "domestic production" and consumption of domestic preduets should be encouraged previded they were not directed' specifically against particular member country.

GATT Library

yr646wj8596

Committee II : Corrigendum to document E/PC/T/C.II/54 (Draft Report of the Technical Sub-Committee)

United Nations Economic and Social Council, November 19, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

19/11/1946

official documents

E/PC/T/C.II/54/Corr.3 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/yr646wj8596

yr646wj8596_90210267.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/54/Corr.3 SOCLAL COUNCIL ET SOCIAL 19 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE Il CORRIGENDUM TO DOCUMENT E/PC/T/C.II/54 (DRAFT REPORT OF THE TECHNICAL SUB-COMMITTEE) Page 11, Article 11: Add at the end of the first paragraph, after "in which dumping may occur", the words "such as social or monetary dumping". Page 18, sub-paragraph (c): Add "Czechoslovakia" after the word "Netherlands". Page 23, Article 14: Add after the words "as practicable" at the end of the first sentence of Article 14, a new sentence reading as follows: "Czechoslovakia suggested for consideration whether the obligatory marks of origin should not be gradually abolished." Page 28, sub-paragraph (c): Delete sub-paragraph (c), beginning "Czechoslovakia: Prefers", since this reservation was not intended to refer to paragraph 1, but to paragraph 3 of Article 15. Page 34. sub-paragraph (a) of Paragraph (g): Add at the end of sub-paragraph (a), after the words "of Chapter IV", the following words: "such as state monopolies, etc." Thus, sub-paragraph (c) becomes superfluous.

GATT Library

pk664cw5626

Committee II. Corrigendum to document E/PC/T/C.II/7

United Nations ECONOMIC AND Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C.II/7 Corr.2 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/pk664cw5626

pk664cw5626_90210213.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C. II/7 Corr.2 30 October 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II CORRIGENDUM TO DOCUMENT E/PC/T/C.II/7 Page 2 first paragraph - Omit "agreed with the principle of tariff preference and" and substitute "tariff prefrences" for "them", so that the sentence would read: ..."proposed to deal with tariIf preference on a selective basis, i.e., by process of negotiations."

GATT Library

nx585bc0941

Committee II Corrigendum to E/PC/T/C.II/PV/8

November 9, 1946

Preparatory Committee of the International Conference on Trade and Employment

09/11/1946

official documents

E/PC/T/C.II/PV/8/Corr.1 and E/PC/T/C.II/PV/7-9

https://exhibits.stanford.edu/gatt/catalog/nx585bc0941

nx585bc0941_90220011.xml

GATT_156

RESTRICTED LONDON E/PC/T/C.II/PV/8/ Corr .1 9 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II CORRIGENDUM TO E/PC/T/C.II/PV/8 Page 24, line 8, after "vague general criteria" insert "left to the interpretation of individual members".

GATT Library

yf399yb6933

Committee II : Czechoslovak Amendment to Article 26 of the "Suggested Charter for an International Trade Organization of the United Nations"

United Nations Economic and Social Council, November 2, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

02/11/1946

official documents

E/PC/T/C.II/39 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/yf399yb6933

yf399yb6933_90210248.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.II/39 AND ECONOMIQUE 2 November 1946 ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II CZECHOSLOVAK AMENDMENT TO ARTICLE 26 OF THE "SUGGESTED CHARTER FOR AN INTERNATIONAL TRADE ORGANIZATION OF THE UNITED NATIONS" "1. If any member establishes or maintains a State enterprise, wherever located, which imports, exports, purchases, sells, distributes or produces any product or service, or if any member grants exclusive or special privileges, formally or in effect, to any enterprise to import, export, purchase, sell, distribute or produce any product or service, the commerce of each of the other members shall be accorded non-discriminatory treatment, as compared with the treatment accorded to the commerce of any country other than that in which the enterprise is located, in respect of the purchase or sale by such enterprise of any product or service. To this end, such enterprise shall, in making its external purchases or sales of any product or service, be influenced solely by commercial considerations, such as price, quality, marketability, transportation and terms of purchase or sale. "Representations made with respect to the operations of monopolies or state trading organizations shall be dealt with in conformity with Article 30 of this Charter." Note: The rest of Articles 26 and 27 to be left out of the Charter altogether.

GATT Library

dd899pr1974

Committee II. Draft report of the technical Sub-Committee

United Nations Economic and Social Council, November 16, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

16/11/1946

official documents

E/PC/T/C.II/54 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/dd899pr1974

dd899pr1974_90210266.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C. II/54 AND ECONOMIQUE 16 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II DRAFT REPORT OF THE TECHNICAL SUB-COMMITTEE General Narrative Statement 1. The Technical Sub-Committee held nine meetings which were the occasion for a thorough examination and exchange of views upon the provisions of the United States Suggested Charter relating to the items listed below: General Commercial Provisions: National Treatment on Internal Taxation and Regulation Freedom of Transit Anti-dumping and Countervailing Duties Tariff Valuation Customs Formalities Marks of Origin Publication and Administration of Trade Regulations- Advance Notice to Restrictive Regulations Information, Statistics and Trade Terminology Boycotts General Exceptions (to the Chapter on General Commercial Policy) 2. The Sub--Committee included delegates from all the countries represented on the Preparatory Committee. 3. In order to accelerate the proceedings, two rapporteurs - one from the French and one from the United States Delegation - were appointed at an early meeting of the Sub-Committee. Later on, a second team of rapporteurs - one from the Canadian and the other from the Netherlands Delegation - was appoinited. In the course of the work, the Netherlands and the United States Delegates in question departed and were replaced by rapporteurs from the Delegations for Belgium-Luxembourg ana the United Kingdom. LONDON E/PC/T/C. II/54 Page 2 4. The questions referred to the Sub-Committee were discussed in full at its meetings.. Delegations vere invited to send. in their views in vvriting through the Secretariat to facilitate the work of the rapporteurs. 5. The reports of the rapporteurs were considered by the Sub-Committée, which made amendments and comments. The final report of the Sub-Committee was submitted to the main Committee. LONDON E/PC/T/C. II/54 Page 3 COMMITTEE II - GENERAL COMMERCIAL POLICY TECHNICAL SUB-COMMITTEE'S CONFIDENTIAL REPORT TO THE DRAFTING COMMITTEE The meetings of the Technical Sub-Commmittee were the occasion for a thorough examination and exchange of views upon the provisions of the United States Suggested Charter for an International Trade Organization of the United Nations in reward to the General Commercial Provisions, namely Articles 9 - 17 inclusive, and the General Exceptions, Article 32. substantial degree of agreement among all members participating on the Preparatery Committee was reached on questions of the principles underlying these provisions. However, as was to be expected, there were numerous differences of opinion, and a number of reservations were made on account of national variations in the practice of detailed administration. For the benefit of the Drafting Committee,. the detailed views of the various. delegations and point. of agreement have been embodied.(in the form, so far as possible, of textual amendments) in this report. This report was prepared by the Rapperteurs of the Sub-Committee with the assistance of the Secretariat. LONDON E/PC/T/C.II/54 Page 4 COMMITTEE II TECHNICAL SUB-COMMITTEE Article 9: National Treatment on Internal Taxation and Regulation This Article was generally agreed to in principle by the Sub- Committee in that internal taxes and charges 'should not be used to afford protection to domestic products. However, some countries called attention to practices which might be contrary to this principle and suggesed reservation for further discussion thereof bilaterally or umple time for their climination. Several countries emphasized that contral governments could not in many cases control subsidiary -goverments in this regard, but agreed that all should take such measures as might be open to them to ensure the objective. It was felt felt national treatment could not be applied to the procurement by gornmenttal agencies of supplies for governmental use and not for resale. This problem was left to be dealt with by the Sub-Committee on Procedures when it Iiscussd Article 8 on General Most-Favoured-Niation Treatment. After considerable discussion in committee, and from written statements concrning this subject from Australia, Eelgium-Luxombourg, Brazil, France, India, Netherlands, Norway, Union of South Africa and the United Kingdom, the rapporteurs redrafted the Article as follows. (Comments,reservations etc., are after each para- graph of the new text.) Paragraph 1. "The products of any members country imported. into any other member country shall be exempt from internal taxes and other internal charges (oft any characer whatsoever) higher than those imposed directlyy or indirectly) on identical or similar products (of national origin.)" LONDON E/PC,/T/C.II/54 Page 5 (a) United Kingdom: After the word "taxes" delete "and" and insert "whether imposed directly or indirectly and from". After the word "iposed" delete directlyy or indirectly". (b) India: There should be no objection to a discriminatory internal tax if it is levied only for the purpose of raising revenue. (c) Norway: Reserves its Position as to measures necessary for mainta-ining a collon price level in the home market. (d) Cuba: Reserves its position as to measures necessary for the protection of infant industries in countries at an early stage of industrial development. Paragraph 2 "The produets of any member country imported into any other member country shall be accorded. treatment no less favourable than that accorded identical or siailar products of national origin in respect of all internal laws, regulations or requiraments affecting their sale, offerig for sale, transportation, distribution or use of any :kind whatsoever. The provisions of this pdragraph shah be understood to preclude the application of internal requirements restricting the amount or proportion of an impor-ed product pernitted to be mixed, processed, exhibited or used" (a) South Africa: Reserves its position. as to preferential rates for internai transportation granted to certain domestic products which do not compete with imported products. (b) Australia, Brazil, Belgoim-Luxembourg, Csehoslovakia, Netherlands, New Zealand and South Africa: Reserve their position as to discriminatory restrictions on mixing, exhibition or other use operated in lieu of allowable practices which would interfere more seriously with international trade. paragraph 3 "The members agee that neither internal taxes or other internal charges nor internal laws, regulations or requirements should be used to afford. protection directly or indirectly for any national product." LONDON E/PC/T/C.II/54. Page 6 (a> United Kingdaom: Add at the end "against an identical or similar product of f oreign origin". (b) South Africa: considers that the use of the words "internal laws, regulations or requirements" may be misconstrued as rendering e.g. Customs legislation and regulations undesirable, and suggests that, instead of the above mentioned words, the words "laws, regulations or requirements regarding internal taxation" be used. Paragraph 4.. "Each member agrees that it will talce all measures omen to it to assure that the objectives of this Article are nòt impaired in any way by taxes. charges, laws, regulations or requirements of subsidiary governments within the territory of the member government," (a) United Kingdom., Czechoslovakia and Norway: Insert a new paragraph 4 as follows: -"Nothing in paragraphs 2 and 3 of this Article, insofar as those paragraphs relate to internal regulations or requirements, shall apply to cinematograph films." .(b) New Zealand: Also makes a reservation as to its film hire tax, (Note: Under (a) above, if No.4 were inserted, 4 would become 5 and. 5, -6.) Paragraph 5. "The provisions of this Article shall not apply to the procurement by governmental agencies of supplies for governmental use and not for resale." (a) Australia, Belgium-Luxembourg, Brazil, Netherlandr, and Norway: Add a new paragraph providing for date of entry into force of this Article, or the period of notice before it becomes effective. LONDON E/PC/T/C, II/54 Page 7 Article 10. Freedom of Transit. In the discussion dealing with the Freedom, of Traffic in Transit, it was generally felt that air traffic should be exempted as a matter which is being dealt with by the Provisional International Civil Air Organization. A number of countries also felt that in the examination of this subject the provisions of the Barcelona Convention of the 20 April 1921, ought to be taken into consideration, and that the terms of any agreement reached on the subject should be carefully defined so as to leave no doubt as to the meaning of traffic in transit and its full implications. It was decided that paragraph 6 of the United States Suggested Article which gives the definition of "traffic in transit" should become the first paragraph. The suggested rearrangement of the United States Article by paragraphs is given below, with comments and reservations after each pagragraph. Paragraph 1. "Baggage and goods, and also vessels, coaching and goods stock, and other means of transport, shall be deemed to be in transit across the territory of a Member when the passage across such territory, with or without trans-shipment, warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete journey, beginning and terminating beyond the frontier of the Ifember across whose territory the transit takes place. Traffic of this nature is termed in this Article 'traffic in transit'. The provisions. of this Article shall not apply to air traffic in transit.' (a) It was decided that the word "Persons" should be deleted from this paragraph and Article, as the Charter is dealing with goods and services. Furthermore, the traffic of persons was subject to immigration laws and it was suggested that mother organ of the United Nations might deal with the question, but not the ITO. LONDON E/PC/T/C.II/54 Page 8 (b) India: Cannot agree unless the word "Persons" is retained at the beginning of this paragraph. (c) United States, Netherlands and Belgium-Luxembeurg obtained some, but not unaninous support for the suggesion that there be added at the end of tjos paragraph "In the application of zr:..h 2, 3 4 and 5 of is this Article, which are imported into any Member country shallj be considered ta be in transit if ' they are exported without having been released from customs supervision within that country even though the ultimate destination is not disclosed at the trip of importattion." Paragraph 2. There shall be freedom of transit through the Member countries via the routes most convenment for internationa transit for trIaffic in transit to or frm other Member countries." toxt of Artical 2 of the Parcelon Statute, annexed to the Barcelona Convention of 20 April 1921, which ends as followss: No nationality small be made which is basee on the nationality of persons the flage of vessels, the police of origin, departure, entry exit or destination, or any circumstances relating to the ownership, of goods or of vessels, coaching or goods, stock or other means of transport. in harder to -nsure the application of the provisions of this Article, contracting, states will allow transit in accordance with the customary conditions and reserves across their territorial waters. - (b) India: paragraph 1 should amended to read: "There shall be freedom of transit through Member - courtries for the products cf othter Members via such routes as may be open ta traffic in products of like kind and.quality of national origin," LONDON E/PC/T/C.II/54 Page 9 Paragraph 3. "Any member may require that traffuc in transit through its territory be entered at the proper custom house, but except in cases of failure to comply with applicable customs laws and regulations, such traffic coming. from or going to other member countries shall be exempt from the payment of any transit duty, customs duty, or similar charge and shall not be subject to any unnecessary delays or restrictions." (a) India: Reserved its position as to whether Article 32 (b) and (c) provide ample provision for the diversion of traffic in traffic from the most oonverment routes in emergency conditions, such as famine in a section of the country. It is understood that the words "or similar charge" means a charge impsed by the Government of the country whiich is similar to a transit duty or a customs duty, and not to a charge for transportation. (b) Australia: The words "or similar charge" should not be held to imply that traffic in transit shall be exempted from the- charges imposed alike on domestic and in transit traffic. (c) France: Delieves that the use of the language of Article 3 of the Barcelona Statute would clarify. this point. (d) India: Suggests an inconsistercy between paragraphs 3 and 4 in that the former forbids charges while the latter provides that charges shall be reasonable. (e) South Africa: Recommends that this paragraph be amened specifically to exclude charges for transportation, leaving this question to be treated solely in paragraph 5. paragraph 4. "All charges and regulations imposed by Members on traffic in transit to or from other memnrber countries shall be reasonable, having regard to the conditions of the traffic." LONDON E/PC/T/C. II/54 Page 10 (a) It is understood that the word "charges" in this pagraph includes charges for transpertaiton by Government-owned railroads or Government-owned ,nodes of transportation. Since this para- raph only provides that such charges shall be "reasonable", it is believed that question of prefential rail rates comes under paragraph. 5. Paragraph 5. "with respect to all charges, rules, and forma- lities in connection with transit, each member shall accordi to traffic in transit to or from any other member country treatment no less favourable than the treatment accorded to traffic in transit to or from any country." (a) Belgium-Luxemboury and the Netherlands: Call attention to the simplified treatment of traffic in transit along certain water routes as provided for by such international agreements . as the Rhine traffic a agreements and the Schelde Treaty. (b) South Africa:. Reserves its position because it grants preferential freight rates to the products of certain contigu- ous territories. Paragraph 6. "Each member shall accord to products. which have been in transit through any other member country treatment ne less favourable than that which would have been accorded to such produts had they been trarnsported from their origin to: their destination without going through such other member country." (a) It is understood that paragraphs 2 - 5 of this article cover the treatment to be given by a member country to products in transit through its territory between any other member country and any third country, and paragraph 6 covers the treat- ment to be given by a member country to products cleared from customs, within its territory after transit throgh any other member country. On the` basis- of this understading several delegates believed that paragraph 6 should be excluded from article 10 and forth. forth elsewhere. LONDON E/PC/T/C. II/54 Page 11 in the Charter because it does not deal with products in transit. Several reservations were made in the sense that countries should be allowed to maintain a requirement of direct consignument ("expedition directed ) in the case of goods admitted free, at reduced rates of duty or exempt from higher duties than the normal tarif f s. (b) United Kingdom: Notes that it will be dif icult, under this text, to maintain a differentiation bettween members and non-members. (c) China: Add the following: "Provided that the products which have been in transit can be identified at their destination to the satisfaction of local customs authorities as to their origin or country of export." (d) France, The Netherlands, Csechoslovakia and Belgium- Luxembourg: Raise the question as to wehat will be the position under the Charter of countries which have adhered to the Convention of Barcelona, as Article 10 of that Convention engages signatories not to include other. agreements on the subject of transit which would be inconsistent with the provisions of that Convention. Article 11. Anti-dumping and Countervailina Duties There was general consent among the majority of the countries in the discussions on Anti-duxping and Counttervailing Duties that circumstances might arise in which such duties may properly be applied. Some countres felt that the proposal should not be limited to duties as such but should permit the adoption of other counter measures and that there was also need of clarification of definition in view of the variety of circumstances in which dumping may occur, Comments and reservations after each paragraph are given below; LONDON E/PC/T/C. II/54 Page 12 Paragraph 1 "No anti-dumping duty shall be imposed on any product of any member country imported into any other member country in excess of an exported equal to the margin of dumping under which such product is being imported. For the purposes of this Article, the margin of dumping shall be understood to mean the amount by which the price of a a product exported from one country to another is less than (a) the comparable price charged for the like or similar product to buyers in the domestic market of the exporting country, or, (b) in the absence of such domestic price, the highest comparable price at which the like or similar product is sold for export to any third country, or, (c) in the absence of (a) and (b), the cost of production of the product in the country of origin; with due allowance in each case for differences in conditions and terms of sale, for differences in taxation, and for other differences affecting price comparability." (a) Belgium-Luxembourg and Netherlands: A number of countries favour the use of other measures than anti-dumping duties to offset price dumping. Belgium-Luxembourg and the Netherlandis suggest the addition of the words "and measures" in the title of Article ll and after the words "anti-dumping duty" wherever they appear in that Article. (b) It was. understood that paragraph 1 refers only to price dumping and that the term "anti-dumping duty" as used therein, refers only to an additional duty impposed for the purpose of offsetting such dumping; and that -"cost of production" should include. not only profit but all other elements entering into a normal selling price. (c) Netherlands and Belgium-Luxembourg: Scane such words as "or tax or other charge upon imports" should be added after the words "no anti-duaping duty!'. (d) Brazil: Heavier than counter-balancing duties or quantitative restrictions should be allowed in case of aggravated or sporadic dumping; it reserves its position as to paragraph 1. LONDON E/PC/T/C .II/54 Page 13 (e) Cuba: The first sentence should read "anti-dumping duties shall be imposed on any products of any member country at -least at the rate of", etc., and at the end, after "price comparability" there should be added "'including the regime of salaries and conditions of labour". (f) India: The definition of "margin and dumping" might be left to the ITO to help the different countries in arriving at a definition. (g) South Africa: The margin of dumping should. exceed a certain percentage, say fiver per cent, before anti-dumping duties may be imposed. France thinks the allowance should be ten per cent (c.f., the IMF position). (h) Australia: Paragraph 1 (b) should be amended as follows: "(b) in the absence of such domestic price, the highest comparable price at which the like product is sold for export to any and every purchaser in any third country in the ordinary course of commerce". (i) United Kinngdom: The definition of "margin of dumping" should allow for the addition of all pre-importation charges to the purchase price. Paramap 2. "No counteravailing duties shall be imposed on any product of any member country imported into any other Member country in excess of an amount equal to the estimated .tv or P - ascertained to have been granted, directly or indirectly, on the of such product in the country of origin or exoortation.' (a) The term "countervailing duty" was understood to mean; an additional duty imposed for the purpose of offsetting any or subsidy bestowed, directly or indirectly, upon the manufacture production or exportation of any merchandise, (b) Czechoslovakia: This paragraph should cover all hidden subsidies or refunds. LONDON E/PC/T/C. II/54 Page 14 (c) China: Add at the end: "In the event of preferential treatment being accorded by a country to certain countries to the exclusion of other member countries, no countervailing duty shall be imposed upon the products imported from such other member countries against subsidies which are granted by the latter to such products as compensation for covering the preferential margin" (d) Australia: Members should not make, by. law, the assessment of countervailing duties mandatory whenever a subsidy is granted, since some subsidies are permitted by Article 25 and it may not be desirable to countervail such subsidies. (e) Brazil: Quantitative restrictions or other punitive measures should be permitted. paragraph 3. "No product of any member country. imported into any othèr member country shall be subject to anti-dumping or countervailing duty by reason of the exemption of such product from duties or taxes imposed in the country of origin or exportation upon the like product when consumed domestically, or by reason of the refund of such duties or taxes." (a) Agreed as amended (by addition at the end of the words " or by reason of the refund of such duties or taxes".) Paragraph 4. "No product of any member country imported into any other member country shall be subject to both anti-dumping and counter- vailing duty to compensate for the same situation of dumping or export subsidization." No comment. Paragraph 5. "Each member undertakes that as a general, rule it will. not impose any anti-dumping duty or countervailing duty on the importation of any product of other member countries unless it determines that the dumping or subsidization, as the case may be, under which such LONDON E/PC/T/C. II/54 Page 15 Product is imported. is such as to injure or threaten to injure a domestic industry, or is such as to prevent the establishment of a domestic industryy" (a) Brazil: Paragraph 5 should be deleted. (b) Netherlands and Belgiui-Luxembourg: Delete the words "as a general rule" in the first line; the additional duties should be.assessed only if the dumping or subsidization is systematic, not merely occasional. (Several countries do not agree with this point of view.) (c) Czechoslovakia: Some guarantee against arbitrary action should be added to the paragraph. (e) Australia and South Africa: Delete 'the last:clause, "or is such as to prevent the establishment of a domestic industry". (e) France Substitute for this paragraph: "Each member country undertakes not to impose any anti- .dumping duty or countervailing duty on the importation of any product of other member countries unless they are in a position to prove: (a) that there exists a dumping, bounty or subsidy, as defined in paragraphs 1 and 2 of this Article. (b) that its domestic production has sustained grave injury from the dumping, subsidy or bounty. "The member. country against whom the measures laid down in this Article have been taken shall be able to lodge a complaint with the Organisation which will have to decide, after hearing the two states concerned, whether the measures complained of are justified or not." (f) Netherlands and Belgium-Luxembourg: agree in principlee with this amendment. LONDON E/PC/T/C. II/54 Page 16 General (a) United Kinrdom: Makes a reservation in that in its opinion all anti-dumping and countervailing duties should be prohibited. (b) South Africa and Australia: This Article should be expanded to permit the assessment of anti-dumping duties to offset "service dumping", e.g. use of' preferential or subsidized freight rates, and in the opinion of the former, exchange dumping also. (c) Australia: The criteria for the imposition of anti-dumping and countervailing duties should be established under the Charter after it becomes effective rather than in the Charter itself. The criteria should include: (i) A determination of actual or potential injury by an independent administrative authority. (ii) Optionial and not mandatory application of these duties. (iii) Appeal to the ITO by any member aggieved by any action of another member under this Article. (a) South Africa: Does not favour any requirement that anti- dumping duties canot be imposed until a central organizationn except their justification; an appeal to a central authority against their imposition should be allowed. (e) New Zealad Makes a reservation as to the immediate imposition of anti-dumping duties, although normally notice would be given. Article 12, Tariff Valuation On the subject of Tariff Valuation, all countries concerned agreed that it was necessary to work towards standardization, so fear as practicable, of definitions of value and procedures in determining the values of products subject to Customs Duties or other restrictions based or regulated in any way by value. They further agreed that this matter should be investigated by the International Trade Organization and they undertook to co-operate in that investigation. It was felt that it was necessary in the meantime .or each country to consider its own system to prevent the object in view being defeated by over-valuation and other LONDON E/PC/T/C. II/54 Page 17 administrative practices. Comments and reservations by paragraphs are given below: Paragraph 1. "Members undertake to work toward tne standardization, insofar as practicable, of definitions of value and of procedures for determining the value of products subject to customs duties or other restrictions based upon or regulated in any mannerr by value. Wth a view to furthering such co-operation, the Organization is authorized to investigate and recommend to members such bases and methods for determining the value of products as would appear to be best suited to the needs of commerce and most capable of widespread adoption." (a) It was understood that paragraph 1 relates to matters to be undertaken by the member countries under the International Organization at sore future date, whereas paragraph 2 relates to practices to be applied -imaediately after the Charter becomes effective and that both paragrapns should cover values for all ad valoren taxes and charges applicable to imported articles and should not be limoted to values for duty, the addition of customs duty being permitted as appropriate an determining domestic values. (b) Canada: Substitute "shall" for undertakee to" in the first line of paragraph 1. Paragraph 2. "The members recognize the validity of the following general principles of tariff valuation, and they undertake to give effect to such pranciples, an respect of aIl products subject to duty based upon or regulated by value, at the earliest practicable date:" (a) Canada: The preaLble to the paragraph should read: "The members recognize the validity of the following general, principles of tariff. valuation and they undertake to review their customs laws and regulations with a view to giving effect to such principles at the earliest practicable date, and shall report to the Organization from tume to time on the progress made. The Organization as authorized to request such. reports of members and to assist and co-operate with them in carrying out the provisions of this paragraph'. LONDON E/PC/T/C. Il/54 Page 18 (b) Australia: Members should not be required to review their laws for thu purpose of giving offect to the, principles set forth in sub-paragraphs (a), (b), (c) and (d), until a specific request for the reviw of a particular law or laws is made by another Member. (c) BelgiumLuxerabourg and Netherlands: A definite date, should be fixed for the coming into affect of this paragraph. (d) China and Canada proposed A transitional period. (e) France: No country should use a basis of tariff valuation which involves inquiries or investigations which are (i) inconsiderate of commercial interests involved (ii) likely to prejudice economic relations between exporting and importing countries, or which (iii) involve inquisitorial procedures or arbitrary methods. (f) Belgium-Luxembourg and Netherland: The Charter should specify more exactly a uaiform basis for determining values for dauty which may be summaried as follows: (i) The importer must submit to customers autherities alil bis private, documents relating to each importationl. (ii) Customs officers shall have the right to examine private records of importers . (iii) In case of litigation as to value, imporits shall not bec impounded but shall be released taothe importer, subject to adequate. provisions for securing the revenue: (Article 8 af the Gereva Convention of 1923).. (iv) Value litiga tion shall be tried specially before an independent tribunal of competent experts where the importer will be heard. (v) Fines may be imposed upon importers. for under-valutaion. LONDON E/PC/T/C. II/54 Page 19 Paragraph 2 (a). "The value for duty purposes of imported products shoulld be based on the actual value of the land of imported merchanaise on which duty is assessed, or the nearest ascertainable equivalent of such value and should not be based on the value of products of national orogin or on arbitrary or fictitious valuations". (a) United Kingdom : Substitut, the following for sub-paragraphs (a) and (d): "where an actual price of imported products is not accepted as the basis for deterrmining their value for duty purposes, their assessed value should not bc based on arbitrary or spurious valuations but should satisfy clearly defined and stable conditions which conform. with commercial usage. (b) France prefers the United States draft and asks especially for the maintenance of the words: "should not be based on the value of products of national origin", Paragraph 2 (b). "The value for duty purposes of any imported product should not includle the amount of any internal tax, applicable within the country of origin or expot from which the imported product has been rude exempt." (a) There was no objection to the general purpose of this paragraph. (b) United Kingdom: After the word. "export' add "to products of that class"; delete the words "made exempt" and substitute "relieved or made exerpt"., Paragraph 2 (c). "In converting the value of any imported product from one currency to another for the purpose of assessing duty, the rate of exchange to be used. should be fixed in accordance with prescribed standards to reflect effectively the current value of each currency in commerical transactions, and until the elimination of dual or multiple rate currenty may be soe fixed." London E/PC/T/C. II/54 Page 20 (a) There were questions as to whether the reference to :dull or multiple rates" contemplaes the differen rates commondly exiating at any one time for puarchases and for sales of currency. It was agreed that .this term applies only to cases in which two or 'oz rates for one currency are legally in general use, as where there is an "official" and a "free"' rate for the same currency at the s:ua time. (b) It was agreed that draffting of this paragraph ("and until....") it: not satisfactory (.United States and United Kingdom dissening). (c) Belgium: It. should be made clear that the rate of exchange to be used in each: case should bu in accordance with official regulations of the importing country. Only one rate for one country at one time shold be used .......... -: (d) France and Austrial: All refrence to dual or multiple rates should be eliminated. (e) France: The rate trust be the one fixed by payments agreements. (f) China reserves its position on this sub-paragraph. Paragraph 2 (d) "The basuz and methods for determining the value of products subject to duties regulated by value should be stable an should be published in full detail. in order that traders may be enabled to estimite, with a reasonable degree of certainty, the amount of duty likely to be imposed." . (a) United Kingdom: Deletion and au.ndment of paragraph 2 (a), as (b) Belgium-Luxembourg and Netherlands: Delete the end of this paragraph from the words:" and should be published..." Article 13. Customs Formalities - In conntection with Cusotoms Formalities, some countries felt that the Geneva Convention of 1923 effectively covered the subject. There was general agreement thatt subsidiary fees, charges and penalties should not bc used as indirect protection to domestic products. On the general Question of simplification, It was felt that the Internationl Trade Organization should continue the studios previously instituted by other bodies with a view to the elimination of unneccssary requirements. LONDON E/PC/T/C. II/54 Page 21 France observed that this Article would be unnecessary if all members adnered to the Geneva Convention of 3 November 1923, and would agree with the recommendations of the Economic Conference of 1927 (Report, paragraph 2 Custons Traffs, No.5). Belegium-Luxembourg, Czechoslovakia, Netherlands and the United Kingdom agreed. Comments and reservations by paragraph are given below: Paragaph. "The members recognize the principle that subsidiary fees and charges imposed on or in connection with importation or exportation should be limited in amount to the approximate cost of services rendered and should not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes. They also recognize the need for reducing the number and diversity of such subsidiary fees and charges, for minimizing the incidence and complexity of import and ex-ort formalities. and for decreasing and sumplifying import and export documentation requirements." (a) Netherlands and Belgium-Luxembourg: A definite period of notice should be stated for implementing the measures referred to in the first sentence.; Paragraph 2. "Members undertake to review their customs laws and reulations with a view to giving effect to the principles and objectives of paragraph 1 of this Article at the earliest practicable date and shall report to the Organization from time to time on. the progress made. The Organization is authorized to request such reports of members and to assist and co-operate with them in carrying out the. provisions of this paragraph." (a) Australia and South Africa: The obligation to review customs law and regulations should arise only on specific request of another member for review of a particular law or laws. LONDON E/PC/T/C. II/54 Page 22 Paragraph 3. "Greater than nominal penalties should not be imposed by any member in connection with the importation of any product of any other member country because of errors in documentation which are obviously clerical in origin or with regard to which good faith can be established. moreover, members shall remit any penalty imposed on or in connection with the importation of any product of any other member country if it is officially found that the penalty has been imposed because of nations .hich resulted from errors or advice of responsible customs officials." (a) France, Nethetrlands and Belgium-Luxembourg: It is undesirable t o appear to interfere with the independence of courts by specifying that only nominal panalties may be imposed. Therefore, Netherlands and Belgium-Luxembourg propose that paragraph 3 be revised and included only 1 a recommendation for the customs administrations in the protocol. (b) Metherlands and Belgium-Luxemibourg: Nominal penaltiess would be appropriate only for obv ous and accidental errors but not for serious cases of negligence, even although there is no evidence of bad faith. (c) Australia and United Kingdom: Delete the second sentence. (d) France suggests that paragraph 3 be replaced by the following draft, taken from the Geneva Convention of 1923 (Annex to Article. 14, - A6) and the Report of the Economic Conference 1927 (paragraph 2, No. 5). "It is desirable that States should refrain, so far as possible, from inflicting severe penalties for trifling infractions of Customs procedure or regulations. In particular, if an act of omission or an error has been committed which is obviously devoid of any fraudulent intent and which can easily be put right, in respect of cases in which LONDON E/PC/T/C. II/54 Page 23 the production of documents is require for the clearing of goods through the Oustos, any fine which may be imposed should be as small as possible so as to be as little burdensome as.possible and to have no character other than that of formal penalty, i.e. of a simple warning". It is recomended that importers or exporters may obtain a review. of (Oustoms penalties, in particular those applied in cases of obvious errors. (e) South Af rica considers paragraph 3 should be couched in more general, terms. Paragraph 4. 'The provisions of this Articie shah extend to subsidinary fees, charge, formalities of an requirements. relating to all customs matters, including: (a) Consular transaetions such as e-onsular invoices and certificates; (b) quantitattive restrictions; (c) Licensing (a) Exchange regulations; (e) Statistial services.; (f) Documents, documentation and certification; (g) Analysis and inspection; andi (h) Quarantine sanitatiosn and fumigration (plant, animal and human)". The addition ("such as consular invoices and certificates") to sub-paragraph (a) was generally agreed. Article 14. Marks of Origin There was concensus of opinion among countries that excessive requirements in connection with Marks of Origin should be avoided as far as practicable. It was felt generally that the complicated subject of exemptions from the requirements should be recommended for study by the ITO and that the particular interests of certain countries in protecting the regional or geographical marking of their distinactive products should also be considered by the Organaisation. LONDON E/PC/T/C. II/54. Page 24 Comments and reservations after each paragraph are given below: Paragraph 1. "The members agree that in adopting and implementing laws imd regulations relating to marks of origin, the difficulties and inconvenences which such ensures may cause to the commerce and industry of exporting countries should be reduced to a minium." No objection was made to this paragraph. Paragraph 2. "Each member shall accord to the products of each other member country treatment with regard to marking reguirements no less favourable than the treatment accorded like products of any third country." No objection was made to this paragraph. Paragraph 3. "Whenever administratively possible, members shall permit required parks of origin to be imposed at the time of importation. " (a) Australia, New Zealad and South Africa and others: The customs authorities ought not to be required to submit to what might be serious inconvenience in order to make up for the failure of exporters to comply with regulations aIready well know to them. Paragraph 4. "The laws and regulations of the members relating to the marking of imported products shall be such as to permit compliance without seriously a damaging the products, or materically reducing their value, or unreasonably increasing their cost." No objection was made to this paragraph. Paragraph 5. "The members undertake to work toward the uniform adoption of a sohedule of general categories of products which shall not in any case be required te be marked to indicate their origin. With a view to furtherang this work, the Organization is authorized to investigate and recomment to members descriptions of categories of products in respect of which marking requirements operate to restrict trade in a degree disproportionate to any proper purpose to be served." LONDON E/PC/T/C. II/54 Page 25 Above pagraph substituted by Committee in lieu of paragraph 5 of United States Charter. Paragraph 6. "No special duty or penalt shall be imposed by any member for failure to comply with the marking recuiremans prior to imortation unless corrective marking has been unreasonably delayed or false marks have been intentionally affixed or the required marking has been intentionally omitted." (a) Belgium-Luxambourg, Netherlands and New Zealand: Reserved their position on this paragraph. Belgium-Luxembourg, and Netherlands suggest difficulty will arise in taking "intention" into account. (b) Francè: Delebte paragraph 5 (coverel by Artice 13, paragraph 3). (c) Aditional Remarks: Belgium-Luxembourg, Netherlamds and France specified that a country must be able to prohibit the import, export and transit of foreign goods bearing markings which indicate that. these products were originally made in that county. The Committee was of the opinion that the examination of this question must be taken up in connection with Article 32, paragraph (g). There was a considerable amount of discussion about a possible extension of Article 14 to include a commitment by members to protect intheir country geographical, national or regional marks of origin (appellation d'origine). Ozchoslovakia, Cuba and Belgium-LuxembouIg raised similar proposals while other countries expressed the view that adequate safe-guardsr agaomst deveptive practices were provide miu-" Article 32, paragraph (g), and that no provision need be made for the matter in the present Article. United States False marks are prohibited in the United States by criminal law, and it is not necessary for customs regulations to deal with them. France, recognizing that Article 32, paragraph (g), gives authority to States to forbid importation of goods with false marks of origin, asked. members to commit themselves to prohibit importation, LONDON E/PC/T/C.II/54 Page 26 transportation, and sale of such products. France would not be able to accept Article 14 if this Article were, not completed in such way or at least if a precise explation were not contained in the Charter. The following addition to the Article is suggested:- "Members shalll afford, pursuant to their low laws, adequate protection to trade names and marks of origin and quality recognized and protected by domestic legislation in the countries of origin of the goods. "They shall,l for this purpose, transit to the Organization a list of such marks and trade names as are protected by their demestic legislation and for which they wish to secure protection in importing countries. "They undertake further to take part in a Conference called by the Organization to secure effective international protection for marks of origin". Article15. Publication and Administrition of Trade Regulations - Advance Notice of Restrictive Regulations. It was agreed that, as far as possible, prompt and adequate publicity should be given to change in laws and regulations affecting foreign trade. As to the suggestion that national tribunals of an independent charcter should be maintained or established to review or correct administrative customs actions, most countries felt that there was no need to tike any special measures for this purpose, as their existing systems seemed to be fiull and adequate compliance with the requirement. Belgium-Luxembourg and the Netherlands: Add to heading of Article "Maintenance or Establishment of Indeepend.ent. Tribunals". Comments and reservatiori are given water each of the paragraphs of this Article of the United States 'Suggested Charter below: LONDON E/PC/T/C. II/54 Page 27 Paragraph 1: "Laws, regulations, decisions of judicial authorities and administrative ruling of general application made effective by any member, pertaining to the classification or valuation of products for customs purposes, or to rates of duty, taxes or other charge, or to requirements, restrictions or prohibitions on imports or exports or on the transfer of payments therefor, or affecting their sale or distribution, or affecting, their warechousing, inspection exhibition, processing, Lixing or other use, shall be published promptly in such a mannerr as to enable traders and Governments to become acquainted with them. Agreements in force between the Government or a Governmental agency of any member country and the Government or a Governmental agency of any other country affecting, international trade policy shall also be published. Copies of such laws, regulations, decisions, rulings and agreements shall be communicated promptly to tne Organization. This paragraph shall not require any member to publish administrative rulings which would disclose confidential information, roede law enforcement, or othervise be nimical to the public interest." (a) Cuba: Insert "transportation and insurance" after the word "distribution". (b) France: This paragraph may replace Articles 4 and 6 of the Convention- of 3 November 1923 for the simplification of customs formalities, but it should je supplemented by (i) inserting the provisions of Article 5 of that Convention; (ii) inserting, the provisions of the Brussels Convention of 5 July 1890 as to publication or tariffs; (iii) providing for the setting up in each member State of an organization specially responsible for publicizing, within the country and abroad, the laws and regulations relating to foreign trade; and LONDON E/PC/T/C. II/54 Page 28 (iv) providing: for the setting up within the ITO of an office responsible for collection, analyzing and publishing as quickly as possible in. the usual languges laws, regsu- lations and decisions concernig, foreign trade and for collecting to ethenr periodically, in detailed studies, information concerning, the comparative regulations of member states on any given point. with regard to the last point (iv) it is suggested that ITO take over the international organization now exsting at Brussels and enlarge its functions as indicated above. (c) Czechoslovakia: Prefers thel language of Article 4 of the Geneva Convention of 1923. Paragraph 2: "Members shall adiminister in a uniform, imp impartial and reasonable manneor all laws, regultions., decisions anda rulings of the kind described in paragraph 1 of this Article. Moreover, they under- take to maintain, or to establish as soon as practicable, for the review: and correction of administrative action relating to customs matters, judicial or administrative tribunals which are in fact independent of the agencies entrusted with administrative onforcement, Finally, each Memeber will enforce all measures neocecssary to suppress and prevent the exaction of charges and. the prescription of requirements in respect of international trade which are not provided for in its published laws or regulations." It is understood that the " judicial or administrative tribunals" referred to in this paragraph need not be especially established to deal : exclusively with customs matters. (a) France: Delete the third sentence of the second paragraph and the following words of the second sentence: '"or the rcview and correction of administrative action relating to customs matters". Add at the end of this sentence " and which will have as their function LONDON E/PC/T/C. II/54 Page 29 to decide upon the legality and regularity of the measures taken by the administration and of the taxes or formalities imposed by the custom service;. (b) Belgium-Luxembourg and Nethrelands: It should b, required that the tribunals be estabIished within a specified time. (c) New -land: Administrative decisions can be appealed to the Minister of Customs and it is not considered necessary to set up a special tribunal. (d) United Kingdom: The second sentence should read: "Mortover, they undertake to continue, or to institute as soon as practicable, measures to ensure redress by administrative, judicial ar arbitrial procedure for those who may have been- prejudiced by any breach of this provision." Paragraph 3: "No law, regulation, decision or ruling of any Member effecting an advance in a rate of import or export duty or other charge under an established and uniform practice , or imposing a new or more burdensome requirement, restriction or prohibition on imports or exports or on the transfer of payments therefor, shall, as a general rule, be applied to products of any other member already en route at the time of publication thereof in accordance with pagraph 1 of this Article: Provided, That if and Member customarily exempts from such new or in- creased obligations products entered Dr withdrawn from warehouse for consumption, or cleared for export, during a period of thirty days after the date of such publication, such practice shall be considered full compliance with this pararaph. The` provisions of this paragraphj shall not apply to anti-dumping or countervailing duties." LONDON E/PC/T/C. II/54 Page 30 Australia, France, Belgium-Luxembourg, Netherlands, Canada, India, New Zealand, Norway, South Africa, Czechoslovakia and United Kingdom: are unable to accept this paragraph, Canada gives notice in case of an administrative ruling. General Belgium-Luxembourg, and Netherlands: It should be stipulated that Members will not use in their tariffs and trade agreements any specifications aiming, at indirect protection. Article 16 Information, statisties and Trade Terminology There was general acquiescence in the proposal that the Inter- national Trade Organization should be supplied with full statistical information as prompty as possible; but many countries felt that unless the demands were limited to reasonable proportions an intolorable burden might be imposed on them. This applied particularly to the smaller countries in which present statistical services are less fully developed than in others. A few countries also felt tht certain aspects of the matter, with all its implications were proper for study by the Inter" national Trade Organization, bearing in mind the work previously under- taken by the League of Nations in this field. This Article was generally agreed to in principle by the Committee which limited its consideration to customs statistics. Several countries called attention to the fact that similar ground is covered by: (a) the Brussels Convention of 29 December 1913 (establishment of international commercial statistics), (b) the Ceneva Convention of 14 December 1928 (economic statistics) , and that the aims pursued in the Charter as regards the standardization of international commercial statistics (paragraph la), the international comparability of these statistics (paragraph 4), the adoption LONDON E/PC/T/C. II/54 Page 31 of standard definitions (paragraph 6) and of standards (paragraph 7), carn only usefully be realized, insofar as the work undertaken by the League of Nations for the unification of tariff nomenclatures as resumed and successfully completed, since customs statistics can only be established from import particulars based on the terms of tariff nomenclature an each country. There was also a feeling that ample time should be allowed for the fulfilment of commitment to be undertaken an this Article and that those commentments should be studied by the Organization with a view to the reduction to a minimum of the statistics to be furnished regularly by members. It was felt, however, that a member wishing to contract ,out of the requirements of this Article should be required to give to the Organazation a detaled statement of its particular difficulties. Article 17. Boycotts "No member snall encourage, support or participate in boycotts or other campaigns which are designed to discourae, directly or indirectly, the consumption within its territory of products of other member countries on grounds of origin, or the sale of products for consumption within other member countries on grounds of destination. Moreover, each member shall discourage, by such means as may be available to it, such canpaings by subordinate jurisdictions within its jurisdiction." In princaple it was agreed that governmentally f financed or organized boycotts designed to discourage importation should be banned. The majority of the countries, however, were of the opinion that this ban should not apply to compaigns sponsored by any Government an support of products of its own national origin and not directed against the products of any specific country. LONDON E/PC/T/C . II/54 Page 32 For the word.. "political entities" in the last sentence of this Article the Committee agreed to substitute the words "subordinate jurisdictions`' Comments and reservations are givenn below: (a) United Kingdom:.Delete "other Member countries" in both places where it occurs in the Article and substitute "'another Member country" Delete the words "directly or indirectly". The object of this amendment is to zre that the ban on boycotts should not apply to campaigns sponsored by any Sovernmeat in support of products of its own national origin and not directed against the products of any specific country. The United States and Cuba dissented from this view . (b) Cuba and United States: Dissent from the above amendments, (c) India: Can only accept this principle as affecting boycotts specifically directed aginst a Member country with which India has trade treaty relations. (d) China: Feels that weaker countries should be allowed to resort to boycotts in self-defence. (e) Lebanon: Thinks boycotting may be justified for either political or moral resons. Article 32. General Exceptions to Chapter IV It was generally recognised that there must be ,General Exceptions such as those usually included in commercial treaties, to protect public health, morals, etc Certain countries, however, felt that the exceptions proposed should be reuced or extended, as the case may be, to meet the particular conditions existing in their countries,' "Nothing in Chapter IV of this Charter shall be construed to prevent the adoption or enforeement by any Member of measures (a) United Kingdom: The following words should be inserted in place of the preamble to the Article: LONDON E/PC/T/C. II/54 Page 33 The undertaking in Chapter IV of this Charter relating to import and export restrictions shall not be construed to prevent the adoption or enforcement by any member of measures for the following purposes, provided that they are not applied in such a manner as to constitute a means of arbitrary disermination between coL.--ies whee the same conditions prevail, or a disguised restriction on international trade. This amendment was generally accepted, subject to later review of its precise wordomg, particularly as to whether the scope of Article 32 should be limited to "import and export restrictions". Paragrah (a) necessary to protect public morals; Pararaph. (b) necessary to protect human, animal or plant life or health; Paragrarh (c) relating to fissionable materials; Paragraph (d) relating to the traffic in arms, arruunition and implements of war and to such traffic in other goods and materials as is carried on for the purpose of supplying a military establishment; Paragraph (e) in time of war or other emergency in international relations, relating to the protection of the essential security interests of a member; These paragraph. were generally accepted. Paragraph (f) relating to the importation or exportation of gold or silver; (a) India Accepts this paragraph in relation to gold, but considers that silver should be excluded as it is an ordinary commodity in worId commerce. Paragraph (g) necessary to induce compliance with laws or regulations wich. are not inconsistent with the provisions of Chapter IV, such as those relating te customs enforcement, deceptive practices, and the protection of patents, trade-marks and copyrights; LONDON E/PC/T/C. II/54 Page 34 (a) It was understood that the examples, in this paragraph are illustrative and de not exclude any others which are "not incon- sistent vith the provisions of Chapter IV (b) France, Belgium-Luxembourg, Netherlands: This paragraph should be amplified in the sense that a country must be able to prohibit the import, export, transportation and transit of foreign goods bearing marking which falsely indicates that those goods were produced in that country. (The Commitee thought that paragrarh (g) already covered this point). (c) Czechoslovakia and France: Hold that paragraph (g) applies to state monopolies. Paragraph (h) relating to prison-made goods; Paragraph. (i) imposed for the protection of national treasures of artistic, historic or archaeological value; These paragraps were generally accepted. Paragraph (j) relating to the conservation of exhaustible natural reseurces if such measures are taken ursuant to international agreements or are made effective in conjunction with restrictions on domestic production or consumption; (a) India: Suggests deletion from "if such measures" to the end of the paragraph. (b) New Zealand and Brazil: Support this view and the former also proposes to include the words "or other" before "resources" aince it considers the provision should not be limited to natural resources. Additional Canada suggests a new paragraph: (k) relating to the importation of goods, the manufacture of which is prohibited in the country of importation. This suggestion is supported by France. LONDON E/PC/T/C.II/54 Page 35 China: Suggests a new paragraph: Measures temporarily imposed to prevent, arrest or relieve conditions of social disturbance, natural calamity, or other national emergencies, provided that such measures are withdrawn as soon as the said conditions cease to exist. General India: Wishes to be allowed, for reasons of high policy, to discriminate against a member; it wishes to be allowed to do so either on a recommendation of the ITO.or on its own initiative, provided due notice has been given to the Organization and to every member conoerned. India accordingly reserves its position on this point. LONDON E/PC/T/C.II/54 Page 36 Concluding Remarks A point which arose on several Articles in this section was the definition of terms used therein as e.g. "like products", "similar products", "products of any Member country", "country of origin'. The Drafting Committee might consider the. desirability of including in this Section of the Charter an Article to contain definitions of these and other terms presenting any ambiguity or obscurity.

GATT Library

gb819fs6153

Committee II. Drafting Sub-Committee on state trading. : Fourth Meeting held on Friday, 15 November 1946 at 2 p.m

United Nations Economic and Social Council, November 16, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

16/11/1946

official documents

E/PC/T/C.II/52 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/gb819fs6153

gb819fs6153_90210264.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/52 16 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II DRAFTING SUB-COMMITTEE ON STATE TRADING Fourth Meeting held on Friday, 15 November 1946 at 2 p.m. Chairman: Mr. SHACKLE (United Kingdom) Later: Mr. JOHNSEN (New Zealand) DISCUSSION OF ADDENDUM TO DRAFT REPORT OF RAPPORTEUR (E/PC/T/C.II/W.57) 1. Article 26 Mr. KUNOSI (Czecholoavkia) said that imorters might go through state channels in the purchase of capital and reconstruction goods abroad, when no private capital wias available. Would that contingency be covered by Article 26 (2) ? Mr. HAWKINS (United States) The case of large purchases for public use, to which the Delegute for Czochoslovakia had referad, was not specifically covered in the Article. If reference to such purchases Was left out of the .Article entirely, the Article would apperar to sanction them. The Drafting Sub-Committee might, he suggested confine itself to recognizing the principle, vrithout trying to cover all the various aspects of the problem. He suggested the possible inclusion of some such clause as.: "In respect of purchases for public use, Members shall give fai and equitable treatment to the trade of other Members " to replace the clause "commercial considerations". Mr. TUNG (China) raise the question of purchases tiëd to loans. He thought "fair and equitable treatment" would best apply to such LONDON E/PC/T/C.II/52 Page 2 cases, Mr. HAWKINS (United States) said that the purchasing country could not be open to criticism in such circumstances. Mr. KUNOSI (CzechoslovaIia) thought that the principle of ron-discriminatory treatment should be emphasized in the field of loans, where political and other considerations were important. Mr. JOHNSEN (New Zealand) suggested the insertion of a new paragraph in the revised article 26 as paragraph 2, to cover the point under discussion. With the additions accepted by the Sub- Committee, the paragraph would read: "2. The foregoing provisions of this Article relate to purchases by state enterprises for resale. With respect to purchases by State enterprises for public use and not for resale, members agree to accord the imports from other members fair and equitable treatment having full regard to the relevant circumstances." Mr. TUNG (China) suggested the use of the clause "as far as practicable" following the word 'accord" in the fourth line of the paragraph: but it was the sense of the Sub-Committee that the addition would be redundant, the point being covered in the clause. "having full regard to the relevant cirounstances". In the discussion of paragraph 3 of the Rapporteurts Report it was brought out that the sole purpose of the inclusion of the word "produce" in the first sentence of paragraph 1, of Article 26 was to cover the case of some enterprise which, given a monopoly to produce certain goods, might have to make certain importations from abroad. In such circumstances, the only obligation imposed by the paragraph- would be that all foreign producers should be treated alike, i.e, "be accorded treatment no less favourable than that accorded to the LONDON E/PC/T/C.II/52 Page 3 commerce of any country other than that in which the enterprise is located, in respect of the purchase or sale by such enterprise of any product". In reply to an inquiry, Mr. HAWKINS (United States) suggested that by the omission of the word "produce", from the sentence, a producer even though his government exercised control of his enterprise, would not be obligated to apply the most--favoured-nation principle in his foreign purchases*. Mr, JOHNSON (New Zealand) asked whether the activities of three New Zealand manufacturers, who were licensed by the Government to make motor car tyres, but who operated as private traders, would be within the soope of the article. Mr. HAWKINS .(United.States) replied that, as the Government exercised no control over the organizations in that case, the article would not be applicable. He did not feel particularly strongly that the word. "produce" should, or should not. be retained in the Article, Its comission would, he thought, leave a question on which the Charter would be silent, and some confusion might result. Mr. KUNOSI (Czechoslovakia) pointed out that the general principles were covered elsewhere in the Charter. Mr. JOHNSEN (New Zealand) took the chair, Mr. TUNG (China) agreed to the retention of the word "produce" in the fifth line of paragraph 1 of the revised Article 26, as it appeared on page 3 of the Rapporteur's Report. paragraph 4. Agreed parazraph 5 The CHAIRMAN thought that. some change was required in paragraph 1 of Articlel2. to covr continued tariff preferences. He suggested LONDON E/PC/T/C.II/52 Page 4 the addition of the clause: 'Nothing in this Article shall prevent the application of preferences or discriminatory action permitted by other sections cf the Charter." Mr. HAWKINS (United States) was reluctantly prepared to accept the point; but he suggested the insertion of the words "customs treatment" in the clause "commercial considerations, such as price, quality, marketability, transportation, customs treatment, and terms of purchase or sale." State purchases, like private purchases, would be influenced by commercial considerations such as higher duties. the words "customs treatment" would cover duties and preferences, and would avoid direct reference to them. The phrase "customs treatment" would be broad enough to cover quota restrictions, if they were not abolished, and balances of payments. He would not object to the wording "differential customs treatment". The CHAIRMAN understood that the United Kingdom Delegate had discussed the subject, and had wording to suggest. it was agreed to consider the matter again when Mr. Shackle was present.. The CHAIRMAN inquired whether the final sentence of paragraph 1, which provided that information might be sought to deterinie whether operations of an enterprise were being conducted in accordance with the requirements of the paragraph, was necessary, in view of the provision for consultation included in Article 30. Mr. ARMSTRONG,Rapporteur, pointed out that the question had been considered in two previceus discussions, but that no conclusion had been reached, other than that the matter required further consieration. The sentence would require from a member operating a State enterprise information no more extensive in scope than that required by Article 15 LONDON E/PC/T/C. II/52 Page 5 with regard to customs and trade regulations where private trade was concerned. Mr. KUNOSI (Czechoslovakia) felt strongly that the same require- ments. with regard to information should be inposed on both private and state trading enterprises. There was often strict secrecy with respect to private enterprises. Mr. HAWKINS (United States) suggested that the Delegate for Czechslovakia might be disturbed about the implications of the last part of the sentence. Would he wish the last four lines of the Article deleted ? Mr. YOUNG (United Kingdom) pointed out that in Article 37 of Chapter V (Restrictive Business Practices) members were required to supply information regarding private firms. It was not unreasonable that a Government should be called upon to give similar information regarding state enterprises. The CHAIRMAN inquired whether Article 30 covered the point adequately, and suggested that most members would prefer to have it covered in Article 26 also. Mr. HAWKINS (United States) pointed out that Article 30 provided for "symathetic consideration" and consultation, which did not quite meet the case in the present instance. Mr.KUNOSI (Czechoslovakia) felt that the subject would be covered by the application of Article 30: but it seemed fairer to apply the principle to state enterprises in the same manner that it was applied to private enterprises, in order to avoid discrimination. Mr. HAWKINS (United States) said he would not be concerned, whether Article 30 was retained or cmitted. Mr. KUNOSI (Czechoslovakia) suggested that state enterprises should-not be treated differently; they were more subject to improper practices than private enterprises. LONDON E/PC/T/C.II/52 Page. 6 Mr. TUNG (China) suggested that military establishments were state enterprises, and should be excepted from the Article. The CHAIRMAN pointed cut that military establishments would be covered by sub-paragraph (a) of Article 32 (General Exceptions to Chapter IV). Mr. YOUNG (United Kingdom. felt that in the final sentence of paragraph 1 of Article 26 the inclusion of a provision for providing information regarding state enterprises was necessary. The term "specific and detailed information" was too precise. He suggested the deletion of the words "specific and detailed". The CHAIRMAN suggested that the verb "shall" should be clanged to "should" in the third lime of the final sentene (page 4 of Rapporteur's Report). Mr. KUNOSI (Czechoslovakia) favoured the insertion of the following sentence: "Representations made with respect to the operation of state trading or organizations shall be dealt with in conformity with Article 30 of the Charter." The Raportur was requested to review the various suggestions made by members of the Sub-Committee regarding the point. Mr. KUNOSI (Czechoslovakia) reminded the Sub-Committee that Mr. Augenthaler had suggested that exceptions should be made for state enterprises or monopolies for purposes of health, morals, or similar considerations, for religious enterprises which imported and sold religious articles, and for monopolies for fiscal purposes. Mr. HAWKINIS (United States) said that Mr. Augenthaler had been referring specificallly to monopolies for revenue purposes, such as the salt and tobacco monopolies which were considered under Article 27 The other monopolies to which the Delegate for Czechoslovakia.rafeered LONDON E/PC/T/C. II/52 Page 7 were covered by the general exceptions in Article 32. At the suggestion of Mr. KUNOSI (Czechoslovakia), it was agreed to delete the words "directly or indirectly" at the end of paragrph 2 of the article as revised in the Rapporteu's report.- 2. Article 27 Mr. KUNOSI (Czechoslovakia) wondered whether, under the provisions of the Charter, a tobacco monopoly in country . would be required to a buy tobacco from courtry B, where the price was lower than in country C, even though the peoople of country A, preferred the type of tobacco grownn in country C. Mr. HAWKINS (United States) replied that a monopoly could take a liking, for particular type of tobacco into consideration just as a private firm would do. Mr. KUNOSI (Czechoslovakia) observed that the tobacco monopoly of his country was an important source of government revenue. Would Czechoslovakia have to negotiate the reduction of that revenue ? Mr. HAWKINS (United States) replied that a country would not be required to grant a reduction of a particular margin, just as it would not be required to reduce a particular tariff. If it did reduce the argin, it would naturally expect to receive some benefit in return. Mr. KUNOSI (Czechoslovakia) was concerned, in the case of tobacco, about the requirement under article 27. that a rnonopoly should import such quantities as would satisfy the full domestic demand. Tobacco was a luxury. Mr. SHACKLE (United Kingdom) pointed out that the monopoly would only be required to supply the demand fer tobacco at the price margin which had been agreed upon. In the case of a particular product, such as tobacco, the country concerned might choose not to lower the price margin to an extent which would greatly increase domestic demand. LONDON E/PC/T/C.II/52 Page 8 There was considerable discussion of the "total cost" (7th line, page 5, E/PC/T/C.II/W.57) of a product imported by a monopoly, particularly in connection with the question as to whether "total cost" should incluse a margin of profit, a reserve against future losses, duty or distribution costs, There was also discussion of the relative advantages of using "total cost" or "landed cost" in calculation the margin to be negotiated. It was agreed to substitute the words "landed cost before any payment of duty" for the words "total cost" and to delete the words dutyy and" (lines 12 and 13, page 5, E/PC/T/C.II/;W.57) between the words "case for" and "internal taxes", What would be negotiated would be the margin between landed cost and the selling price; that margin might or might not include'a duty. It was agreed to retain the words "in the manner provided for in respect of tariffs under Article 18" which had been placed in brackets in the revision of the Article in the Rapporteur's Report (lines 2 and 3, page 5). It was agreed that there should be a provision similar in substance to that criminally included in the Draft Charter covering cases where new monopolies might be established in respect of products for which duties had been reduced. It vas felt that without such a provision it might be necessary to negotiate again the reduction of the margin of protection enjoyed by such products. That provision had been placed in brackets in the revision of the article in the Rapporteu's report (lines 16 - 20, page 5), Mr. SHACKLE (United Kingdom) thought that in that connection that such a newly established monopoly should be allowed a reasonable profit; if other members considered the profit unreasonable, they should have the right to complain to the ITO. LONDON E/PC/T/C.II/52 Page 9 It was agreed to retain the phrase "at the prices charged under such maximum margins" at the end of the Article. It was agreed, after some discussion, to retain the clause account being taken of any rationing of the product to consumers which may be in force at that time"in the last sentence covering the obligation of a monopoly to meet the full demand for a product (last two lines, page 5, of Rapporteur's report), It was agreed that the Rapporteur should redraft Article 27 in the light of the decisions which had beer reached and that the Sub- Committee should meet again to study the new draft. The Meeting rose at 6.30 p.m.

GATT Library

qg599dr7846

Committee II. Drafting Sub-Committee on state trading. Summary Record. : Second Meeting held on Saturday, 16 November 1946 at 2. 30 p.m

United Nations Economic and Social Council, November 6, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

06/11/1946

official documents

E/PC/T/C.II/53 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/qg599dr7846

qg599dr7846_90210265.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.II/53 6 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II DRAFTING SUB-COMMITTEE ON STATE TRADING SUMMARY RECORD Second Meeting hold on Saturday, 16 November 1946 at 2. 30 p.m. Chairman: Mr. JOHNSEN (New Zealand) 1. Discussion of Rapporteurt's Redraft of Article 26 Mr. YOUNG, Rapporteur, submitted the following revision of Article 26: "1. Ir any Member establishes or maintains a state enterprise, wherever located, which imports, exports, purchases, sells, or distributes any product, or if any Member grants exclusive or special privileges, formally or in effect, to any enterprise to import, export, purchase, sell,. distribute, or produce any product, the commerce of the other Members shall be accorded treatment no less favourable than that accorded to the commerce of any country other than that in which the enterprise is located, in respect of the purchase or sale by such enterprise of any product. To this end such enterprise shall, in making its external purchases or sales of any product, be influenced solely by commeroial considerations, such as price, quality, marketability, transportation, differential customs treatment, and terms of purchase or sale. Representations made LONDON E/PG/T/C. II/53 Page 2 by Members having an interest in the trade in any product with respect to the operations of state trading enterprises shall be dealt with in confrormity with Article 30 of the Charter. "2, The foregoing provisions of this Article relate to purchases by state enterprises for resale. With respect to purchases by state enterprises for governmental use and not for resale, Members agree to accord to imports from other Members fair and equitable treatmnnt having full regard to the relevant circumstances. "3, For the purposes of this Article, a state enterprise shall be uderstood to be any enterprise over whose operations a Member government exercises effective control' The CHAIRMAN suggested that the phrase "differential customs treatment" should be placed before the word "price" in paragraph 1, and that the word "other" should be placed before the word "terms". It was agreed that the second sentence of paragraph 1 should read: "To this end such enterprise shall, in making its external purchases or sales of any product, be influenced solely by commercial considerations, such as differential customs treatment, price, quality, marketability, transportation, and other terms of purchase or sale.". Mr. HAWKINS (United States) pointed out that the third sentence of paragraph 1, as stated in the revision, merely provided for consultation, whereas the intention was to make provision for obtaining necessary information. The following substitute sentence which he proposed was adopted; LONDON E/PC/T/C.II/53 Page 3 "The Member mintaining such state enterprise, or granting exclusive or special privileges to an enterprise shall make available such infomation as may be appropriate in connection with the consultation 'provided for in Article 30." It was agreed to adopt his suggestion that the word "the" should. be changed to "all" in the last line of paragraph 2, which would then read: . havingng full regard to all relevant circumstances" 2. Discussion of Rapporteur's Redraft of Article 27 Mr. YOUNG, Rapporteur, submitted the following revision of Article 27: "If any member (other than a Member subject to the provisions of Article 28) establishes, maintains or authorizes, formally or in effect, a complete or substantially complete monopoly of the importation or exportation of any procuct, such Member shall upon the request of any other Member or Members having an interest in trade with that member in the product concerned, enter into negotiations with such Mimber cr Members, in the manner provided for in respect of tariffs under Article 18, with regard to (a) in the case of an import. monopoly, the maximum margin by which the price for an imported product charged by the monopoly in the home market may exceed the total landed cost of such product, before payment of any duty, purchased by the monopoly from suppliers in Member states, or (b) in the case of an export monopoly,. the maximum margin by which the price for a product offered for sale by tile monopoly to purchasers in such Member states may exceed the prioe for such product charged by the monopoly in the home market, ater due allowance in either case LONDON E/EC/T/C.II/53 Page 4 for internal taxes and for transportation, distribution, and other expenses incident to purchase, sale or further prooessing, includinga reasonable margin of profit. For the purpose of applying these margins, regard may be had to average oosts and prices over a recent period of years. Members newly establishing any such monopoly in respect of any product shall not create a margin as defined above greater than the maximum rate of import duty (or, in the case of an export monopoly, greater than the maximum rate of export duty) which may have been negotiated in regard to that product pursuant to Article 18. With regard to any monopolized product in respect of which a maximum margin has been established pursuant to this Article, the monopoly shall , as far as practicable and subject to the other provisions of this Charter: (i) import from Member countries and offer for sale such quantities of the product as will be sufficient to satisfy the full domestic demand for the imported product, account being taken of any rationing of the product to consumers which may be in force at that time and (ii) in the case of an export monopoly, offer for sale to purchasers in Member countries quantities of the product to the fullest extent that can be made available. For the purposes of both (i) and (ii), demand shall be understood to be at the pricescharged under the maximum margins." Mr. KUNOSI (Czechoslovakia) - pointed out that the words "due allowance ... for internal taxes" covered cases when heavy internal taxes were imposed on products bought abroad and sold in the home market. But there was no comparable wording which would cover the case of the tobacco monopoly in Czethoslovakia. Under the simple operational syster of that moonopoly. which represents one of LONDON E/PC/T/C.II/53 Page 5 the most important items of state revenue, no tariffs or internal taxes were applied. But sinc no part of that revenue was actually collected as an internal tax, the draft Article would not cover that situation. Czechoslovakia would not want to complicate the operational system of its monopoly by imposing an internal tax for which "due allowanoe" would be given. If the special case of the tobacco monopoly was not covered in the Charter, Czechoslovakia's negotiating position would be weakened. It was agreed to add the following sentence to the Article: "In applying the provisions of this Article due regard. shall be had for the fact that some monopolies have been established and operated purely for revenue purposes". It was agreed to amend clause (a) in the first sentence of theArticle to read: "(a) in the case of an import monopoly, the maximum margin by which the price for an imported product charged by the monopoly in the home market may exceed the total landed cost, before payment of duty, of such product purchased by the monopoly from suppliers in Member states". Mr. TUNG (China) suggested that the word including" in the last phrase of the first sentence should be replaced by the word "and" so as to make it clear that "a reasonable margin of profit" would be one of the items for vvhich there would be "due allowance". `Agreed. It was agreed to revise the second sentence of the Article as follows: "For the purpose of determining these margins in respect of imports, regard may be had to average landed costs and selling prices over a recent period of years." LONDON E/PC/T/C.II/53 Page 6 It was agreed to revise the third sentence to read: "Members neawly establishing any such monopoly in respect of any product shall not create a margin as defined above greater than that represented by the maximum rate of import or export duty which may have been negotiated in regard to that product pursuant to Article 18." It was agreed to delete the last sentence of the Article and to amend the next to the last sentence to read: "With regard to any monopolized product in respect of which a maximum margin has been established pursuant to this Article, the monopoly shall, as far as practicable and subject to the other provisions of this Charter: (i) import from Member countries and offer for sale at the prices charged under the maximum margins such quantities of the product as will be sufficient to satisfy the full domestic demand for the imported product, account being taken of any rationing of the product to consumers which may be in force at that time and (ii) in the case of an export monopoly, offer for sale at the prices charged under the maximum margins to purchasers in Member countries quantities of the product to the fullest extent that can be made available for exportation." Mr. KUNOSI (Czechoslovakia) expressed appreciation for, the very fine work of the Chaiman. The meeting rose at 4.10 p.m.

GATT Library

fm651km6898

Committee II. Eighth Meeting. : Corrigendum to document E/PC/T/C.II/45

United Nations Economic and Social Council, November 11, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

11/11/1946

official documents

E/PC/T/C.II/45.Corr.1 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/fm651km6898

fm651km6898_90210256.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C. II/45.Corr.1 11 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II EIGHTH MEETING CORRIGENDUM TO DOCUMENT E/PC/T/C.II/45 Page 5, 3rd paragraph of remarks by Mr. PHILLIPS (Australia), substitute for second and third sentences the following: "There was need for some international supervision, however, since the restrictions imposed by one country would affect others. However, there had been in the past some tendency for more highly developed countries not always to appreciate fully Australia's difficulties." Page 5, 4th paragraph of remarks by Mr. PHILLIPS (Australia): insert "and to movements in exchange rates," after "controls" in first line. Page 6, 1st paragraph: delete "and the Fund" at end of sentence. Page 6, 2nd paragraph: substitute "method" for "type" in line 3. delete "to" and enclose in parenthesis the words "the manner in which it was applied" in line 4. Page 6, 5th paragraph: insert "say" between "period of" and "three years" in line 5. delete "United States"' at end of 6th line. Page 7, 1st line: delete "since" and insert in its place "if the Organization agreed that". Page 7, 2nd line: insert "needless" between "the" and "spread". LONDON E/PC/T/C.II/45.Corr.1 Page 2 Page 7, 4th paragraph: insert "necessarily" between "but not" and "to all" in the 2nd sentence, 3rd line. Page 7, 5th paragraph: delete "Should there not" and insert in its place "Specifically, Australia doubted whether there need" at beginning of 1st sentence. substitute "more" for "much" at end of last sentence, and add "than premature alterations" after "damage".

GATT Library

rs132hf8081

Committee II : Eighth Meeting Held on Thursday, 7 November 1946 at 10.30 a.m

United Nations Economic and Social Council, November 8, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

08/11/1946

official documents

E/PC/T/C.II/45 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/rs132hf8081

rs132hf8081_90210255.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED AND ECONOMIQUE LONDON E/PC/T/C.II/45 SOCIAL COUNCIL ET SOCIAL 8 November 1946 PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Eighth Meeting Held on Thursday, 7 November 1946 at 10.30 a.m. Chairman: Dr. COOMBS 1. Discussion of Questions Related to Quantitative Restrictions (Balance of Payments Provisions) and Exchange Control. Mr. HAWKINS (United States) said that the problem which had to be dealt with was that of ensuring that countries with balance-of- payments difficulties could impose quantitative restrictions without at the same time providing too much latitude. The United States draft of Article 20 was presented only as a basis for discussion; it was recognized that changes might be required. The basic provision of Article 20 was that countries with balance-of-payments difficulties could use quantitative restrictions. Until the end of 1949, or the middle of 1950, each member country would, be permitted to decide for itself whether quantitative restrictions were necessary to deal with balance-of payments difficulties. It would be required to consult, through the ITO, with other members, the commerce of which was affected by the restrictions. Quantitative restrictions could be continued after the transitional period to arrest a long continuing or large balance- of-payments deficit or, if the country had low monetary reserves, to forestall a large balance-of-payments deficit. The United States would be prepared to consider a modification of this point. Action LONDON Page 2 taken after the three-year period would be subject, however, to review of the ITO; the ITO would consult with the International Monetary Fund with respect to the balance-of-payments or monetary reserves of the country concerned. Sub-paragraph (c) of paragraph 3 of the Article provided a complaint procedure. The ITC would rule on complaints; if it ruled that the use of quantitative restrictions by a member was not justified, the complaining member could withhold trade benefits from the member using such restrictions. He feared that the drafting of paragraph 4 did not adequately carry out the intention. It was intended to provide that, where practicable, restrictions should be applied uniformly to all important products. But this was to be done as far as practicable; it was not a rigid rule. The important thing was that the member applying restrictions should have regard to the effects of such restrictions on other members. A member applying restrictions would at least permit importation of minimum commercial quantities of a product, of which another member was a principal supplier, or a product important to the economy of another member. The administration of such quantitative restrictions as were permitted was covered by Articles 21 and 22. Subject to certain exceptions, the Draft Charter provided that restrictions should be administered in a non-discriminatory way; the exceptions, set forth in Article 22, related in the main to problems of scarce or inconvertible currencies. He recognized the difficulties of applying restrictions in a non-discriminatory way during the immediate post-war period. He was willing to consider amendments or changes to those provisions relating to non-discrimination during the transition period. LONDON E/PC/T/C.II/45 Page 3 The basic provision of Section D on exchange control was that no exchage controls would be applied in connection with imports from other member countries. Paragraph 2 of Article 23 provided an exception for certain exchange controls imposed in accordance with certain provisions of the International Monetary Fund Agreement. But the Charter placed certain qualifications on provisions of the Fund Agreement having to do with the transition period. It substituted provisions for non-discrimination for provisions in the Fund Agreement covering the transition period. Mr. HELMORE (United Kingdom) felt that the matters under discussion were of extreme importance to the whole effort of the Preparatory Committee. Rapid introduction of quantitative restrictions due to balance-of-payments difficulties contributed greatly to the economic distress of the 1930's. The United Kingdom could understand both sides of the problem, since it was itself imposing restrictions for balance-of-payments reasons, and was at the same time suffering from restrictions applied by other countries. Provisions to be agreed upon for the ITO Charter should make possible a close working relationship between the ITO and the International Monetary Fund. Each organisation would have responsibilities; but they would be closely related. Paragraph 5 of the Annex to the United Kingdom's paper on quantitative restrictions to safeguard the balance of payments (E/PC/T/C.II/W.22) assumed that the two organizations would have common membership. From the point of view of expanding trade, there should be the least possible resort to quantitative restrictions on balance-of- payments grounds: but, where there was real need for such restrictions, it should be possible to apply them. Flexibility was important. If a country could not remove restrictions completely, there should be some provision for reduction of their intensity, where that was possible. LONDON E/PC/T/C.II/45 Page.4 The Charter should set forth certain guiding principles. Members should be allowed to decide, in the light of those principles, whether it was necessary to apply restrictions for balance-of- payments purposes. If the commerce of another country was injured, that country could make representations to the ITO, which would consider such representations in consultation with the Fund. The Fund should be responsible for determining facts about the balance- of-payments situation of a member, and drawing deductions from those facts, The ITO should have the responsibility for determining whether restrictions were injurious to another member. He called attention to the words (in paragraph 5 of the Annex of the United Kingdom document) "in a manner which unnecessarily damages its commercial interest." He emphasized the word "unnecessarily". He also placed emphasis on the words "or modified" in the last sentence of the same paragraph. The intensity of restrictions might be more damaging than the fact that restrictions existed. It was important that the objectives of the Charter should not be frustrated by exchange restrictions or competitive exchange depreciation. The position in that connection was largely governed by the Fund Agreement. Common membership in the ITO and the Fund would be most desirable, but might not be possible. It was important that members of the ITO should observe rules of the Fund relating to trade problems. Mr. NATHAN (France) said that, attaching (as he did) great importance to the achievement of the objectives of the Charter, he found a possible obstacle to that achievement in the fear which many countries had with respect to maintaining balance-of-payments equilibrium. He had been pleased by the United States Delegate's understanding of the complexities of the problem, and his wise approach to it. The drafts presented by the United States and the LONDON E/PC/T/C.II/45 Page 5 United Kingdom could serve as excellent bases for for discussion. France was not yet ready to agree to all of the provisions of either. But it should be possible, starting from the drafts that had been submitted, to work out suitable provisions. Mr. PHILLIPS (Australia) welcomed the general approach of the Delegates of the United States and the United Kingdom to the problem under discussion. Australia had had balance-of-payments difficulties, Foreign trade was very important to Australia's economy. Her exports of primary products were affected by fluctuations in the world market. Her imports included a high proportion of capital goods. A portion of available foreign exchange had to be used to service debts. Provisions of the Charter should not unduly restrict the power of members to protect their balance-of-payments and monetary reserve positions. There was need for international action, however, since the restriction imposed by one country might affect another. Australia had been affected by restriction imposed by other countries; and there were times when the other countries had not fully appreciated Australia's difficulties. Since the Fund restricted the resort to exchange controls, there should not be undue limitations on the use of quantitative restrictions. There was need for objective criteria with respect to the use of quantitative restrictions. If the action of a member complied with those crituria, such action should not be challenged by other members. Admittedly the definition of such criteria would be difficult; but it might not be impossible. An effort should be made. If it proved impossible at the present time, the Charter should provide for later determination of thus criteria. LONDON E/PC/T/C.II/45 Page 6 A country should be permitted to impose controls for balance- of-payments difficulties, even if criteria were not met; but in such a case there could be investigation by the ITO and the Fund. He wondered whether the expression "in a manner" appearing in the first sentence of paragraph 5 of the Annex to the United Kingdom draft referred to the type of administration of a quantitative restriction to the manner in which it was applied or to the fact that it had been imposed. He felt that there should be provision for the extension of the transition period in cases of individual members which continued to face difficulties. It should be possible to use discriminatory quantitative restrictions during the transition period. He supported the United Kingdom suggestion that there should be provision for investigation by the ITO and the Fund of causes and remedies of balance-of-payments disequilibrium leading to widespread use of quantitative restrictions. There would be countries having almost permanent balance-of- payments difficulties because of programmes of rehabilitation or of industrialization. Perhaps the Charter should provide that the ITO could permit such countries to use quantitative restrictions for a period of three years, with extension of the period where necessary. That would amount to an extension of the United States' provision permitting the use of quantitative restrictions to fore- stall balance-of-payments difficulties. Austral agreed in general with the principle of non- discrimination in the application of restrictions. But the exceptions outlined by the Delegates of the United States and the United Kingdom were reasonable. Another exception might be included which would permit discrimination against countries LONDON E/PC/T/C.II/45 Page 7 failing to maintain employment, since indiscriminate restrictions would involve the spread of balance-of-payments difficulties to third countries. The questions under discussion were very closely related to the problems of maintaining full employment and a high level of demand. He agreed generally with the United States' draft provisions on exchange control, and was glad that the United States was willing to reconsider the question of discriminatory restrictions in the transition period. Rights granted in the Fund Agreement should not be curtailed. Australia did not feel that there should be a provision for common membership in the Fund and the ITO. Members of the ITO must be subject to certain provisions of the Fund, but not to all of them. Should there not be provisions with respect to changes of exchange rates ? Improper use of the right to alter exchange rates was less likely than improper use of quantitative restrictions. Reluctance to alter exchange rates during the inter-war period caused much damage. Mr. LUTHRINGER (International Monetary Fund) made a statement He said that even before the days of the Bretton Woods Conference a common feeling had prerailed among those who were charting the course of the Fund and the Bank that the twin brothers (as the late Lord Keynes had named them) would need a third brother to assist in the common task of serving humanity in its endeavour for economic security and for an ever rising standard of life. The representative of the countries taking part in the Bretton Woods Conference had included in the final Act a resolution No. VIl, which recognized that the complete attainment of the objectives of the Agreement could not be realized through the Fund LONDON E/PC/T/C.II/45 Page 8 and the Bank alone. It recommended accordingly the countries of the world to reach agreement as soon as possible on ways and means whereby to "reduce obstacles to international trade, and in other ways promote mutually advantageous international economic relations .... and facilitate by co-operative effort the harmonisation of national policies of member states designed to promote and maintain a high level of employment and progressively rising standards of life." An International Trade Organization, as envisaged by the Charter before the Conference, would help to fulfil that function, and would not only be of great assistance to the member nations, but would also facilitate considerably the work of the Fund. The objectives of the two institutions were the same; only their labour was divided. It was understandable, therefore, that so many provisions were found in the proposals of the Charter, which referred to the Articles of Agreement of the IMF and were complementary to them, particularly in sections C and D of Chapter IV of the proposed Chapter. The aims of those sections, namely, the eventual elimination of quantitative trade and exchange restrictions, was also one of the aims of the IMF. The IMF had noted accordingly with interest the methods by which the Conference was proposing that the member countries with the help of the ITO should endeavour to do away with some of the destructive features of quantitative trade restrictions. That clearly was an arduous task: and without a parallel policy in the field of international financial relations that purpose would be doomed from the outset. When the Articles of Agreement of the IMF were drafted, it was realized that the Fund would start its operations soon after hostilities had ended, at a time, namely, when member nations would be endeavouring to reconstruct their economies, and would be LONDON E/PC/T/C.II/45 Page 9 contending with economic problems of unprecedented magnitude. It was felt that under such conditions the member countries during a transition period should have considerable freedom in protecting their monetary systems while trying to fit their national economies into the overall pattern of the world economy. It was because of these considerations that Articles XIV of the Articles of Agreement was adopted. Article XIV was thoroughly discussed at Bretton Woods; and many member, nations felt that they would need that much freedom of action before assuming the obligation not to impose restrictions of the making of payments and transfers for current international transactions. Yet even that Article did not mean complete freedom for the member countries to impose exchange restrictions or maintain them for a longer period than conditions warranted. Exchange restrictions imposed by members under Article XIV were to be under constant scrutiny by the Fund. The Agreement required Members to withdraw restrictions as soon as their balance of payments position was stabilized; and the Fund itself could make representations to a member that conditions were favourable for the withdrawal of restrictions. Where the fund found that a Member persisted in maintaining restrictions inconsistent with the purposes of the Fund, it could declare the member inelibible to use the Fund's resources. These provisions of the Articles of Agreement would enable the Fund to play an active role in avoiding undue prolongation of the transition period. At the same time the Articles of Agreement were sufficiently flexible to take account of the particular circumstances of countries which might be facing unusually difficult reconstruction problems. LONDON E/PC/T/C.II/45 Page 10 Proposals by the present Conference, which might have the effect of restricting the right of members of the Fund under the carefully safeguarded provisions of Article XIV of the Fund Agreement, should in the opinion of the IMF be approached with considerable caution, and with full recognition of the complexity of the problems of the reconstruction period. On the other hand, it would seem advisable to provide generally equivalent safeguards with respect to quantitative trade restrictions that might be imposed during the transition period for balance-of- payments reasons. Unless there was a reasonable correspondence between the transition features of the Fund's Articles of Agreement and the proposed Charter of the ITO, sofaras action was based on balance-of-payments considerations, there might be an unfortunate impediment to the contribution which the Fund could take, even during the transition period, to the expansion and balanced growth of international trade. It was perhaps of even greater importance that, once the transition period was past, action authorized under the Charter for balance-of-payments reasons should be in harmony with the policy and operations of the Fund. Since the subject matter of the present Conference concerned so largely restrictions on trade, it was perhaps easy for observers like the IMF to get the impression that possibly a disproportionate emphasis was being placed on the use of trade restrictions as a means of preventing disequilibrium or restoring equilibrium in the balance-of-payments. Undue reliance on the use of trade restrictions for such purposes, particularly when associated with provisions which permitted counter measures of the same character by injured countries, did of course carry a very real LONDON E/PC/T/C.II/45 Page 11 risk of an attempt to restore equilibrium on the basis of a contracting volume of world trade, which night result in harm to all and benefit to none. There were other measures of adjustment which were lass dangerous from that standpoint. One of the purposes of the Fund, as stated in Article I of the Fund' s Agreement, was to give confidence to members by making the Fund's resources available to them, and so providing them with opportunity to correct balance-of-payments maladjustments without resorting to measures destructive of national and international prosperity. Another method of adjustment in appropriate circumstances and under proper safeguards was the adjustment of the value of a country's currency. It was the hope of the Fund that, once the transition pariod was past, most balance-of-payments difficulties could be met without resort to restrictive devices. Countries would of course be expected to make reasonable use of third gold and foreign exchange reserves to tide over temporary difficulties: but those reserves would be supplemented by the members' quotas in the Fund, which in the aggregate totalled $ 7,600 millions. If the balance-of-payments deficits were due to temporary causes, the use of reserves and quotas in the Fund might be all that was required. If the deficits weer due to more fundamental causes, corrective action would be needed. But it was the purpose of the Fund to avoid corrective action of a sort that would be destructive of world prosperity. Deflationary measures which threw men out of work, or measures which restricted world trade, were stars that should be taken only as a last resort. He did not suggest that it was incorrect or unnecessary to provide for the use of trade restrictions for balance-of-payments purposes. But he felt that, in view of the specific contribution which the Fund was intended to provide for the solution of those LONDON E/PC/T/C.II/45 Page 12 problems, the mehanism which the Conference was designing should ensure that, before resorting to quantitative restrictions, members had adequately explored the other safeguards and measures available to them for meeting balance-of-payments difficulties. It was the view of the Fund that it would be both undesirable and impracticable to attempt to define by formulas or specific criteria the precise kind of balance-of-payments disequilibria or monetary reserve conditions which would justify quantitative restrictions on imports. Those were complex matters. Each case should be considered in the light of its particular circumstances. It had been found to be impracticable to define fundamental disequilibrium in the Articles of Agreement. There was not even in the. Articles a definition of balance on current account, although there was a listing of specific items which without limitation were to be considered payments on current account. It was the view of the Fund that the establishment of precise criteria was so complex as to be impracticable, and that vague general criteria left to the interpretation of individual members would invite confusion and inapproriate use. The alternative would appear te be that the ITO should request the Fund to decide as to whether the balance-of-payments and reserve position of a country were such as to warrant the restriction of imports, and similarly to consult with the Fund as to the progressive relaxation and removal of those restrictions, as balance-of-payments and reserve difficulties were eased. It would seem desirable in the post-transition period that consultation should precede the adoption of such restrictions as would be required in the case of exchange control measures authorized by the Fund under Article VIII of the Fund Agreement. If that was not regarded as feasible, there should at least be automatic and full consultation immediately LONDON E/PC/T/C.II/45 Page 13 after restrictions were imposed, and the restrictions should be regarded as tentative until after ITO approval. Unless there was close liaison along those lines, they might well be confronted with a situation in which two international agencies would be operating in, or permitting member action in, the monetary and balance-of-payments sphere under conflicting criteria and policies. Dr. SPEEKENBRINK (Netherlands) said that there was need for a flexible formula for the transition period which would take into account the difficulties of war-ravished countries. The Netherlands agreed with the spirit of Article 20, but he wanted to clarify his country's position on two points. He pointed out that balance-of-payments equilibrium was attainable on different levels. Thus it might be possible to attain equilibrium at that price of unemployment at home. The Netherlands Delegation wanted to interpret balance-of-payments equilibrium in such a way that a satisfactory level of employment could be maintained. His second point related to the words currentt account" as used in article 20 of the Charter. Article 19 of the Fund Agrement dcfining current transactions included payments of moderate amount for amortization of loans or for depreciation of direct investments. The Netherlands Government had been obliged to take up considerable foreign exchange credits for rehabilitation purposes. The majority of those credits were at short or medium term, and a considerable part of them would have to be redeemed during the transitional period. Hence the Netherlands was compelled to consider the redemption of those loans as current obligations, thus giving a wider interpretation to the equilibrium on the current account; the last clause of Article 19 of the Fund Agreement seemed to open that possibility. LONDON E/PC/T/C.II/45 Page 14 Mr. LOKANATHAN (India) emphasized that balance-of-payments difficulties were closely related to internal economic and social problems. The balance-of-payments did not give any indication of what the basic problems were. Industrialized and less developed countries had very different balance-of-payments problems. Use of quantitative restrictions did not provide a satisfactory solution to balance-af-payments problems. It might postpone solutions of problems. It might aggravate them. The United States Charter did not give adequate attention to the use of such resources as were available to certain countries. Some countries had to plan ahead so as to make most effective use of their exchange resources, reserving there for the import of certain types of goods. He attached great importance to the question of the transition period. The length of the period would be different for different countries, and a greater degree of elasticity should be provided for. India would have to give attention to her own position as the question of quantitative controls of a disconnected type were considered. He asked if an arrangement whereby India gave preferential treatment to British goods in order to utilize quickly her sterling balances would be permitted under provisions of the Draft Charter. Mr. KERCKOVE d'HALLEBART (Belgium) pointed out that Articles 20 to 24 of the Charter raised a problems for countries which were members of the Fund. In the transition period there might be some difficulties with respect to responsibilities assigned to the Fund and the ITO. Full explanations were necessary. He wanted an explanation of the relation of Article 23 of the Charter to Article XIV of the Fund Agreement. He agreed with the Netherlands Delegate that the balance of payments was not a clear enough criterion; the conslusions of LONDON E/PC/T/C.II/45 Page 15 Committee I should be taken into account in provisions of the Charter covering the use of quantitative restrictions in connection with balance of payments difficulties. Mr. LOPES RODRIGUES (Brazil) thought that countries should be permitted to impose quantitative restrictions for balance-of- payments reasons, 1. When there was a balance-of-payments deficit, 2. When such a deficit was likely to develop, or 3. When monetary reserves were low. With respect to the first two cases mentioned, restrictions should not be permitted if the country had high exchange reserves, or if the International Bank or the Fund could provide means to cover the deficit. With respect to the third case mentioned, restrictions should not be permitted, if the Bank or Fund could compensate for the lack of reserves. Exceptional exchange reserves accumulated during the war should not be included in the computation of exchange reserves, since such exceptional reserves would bu used for imports necessary for the maintenance of the real capital of the country. He suggested that less-developed countries should be permitted to reserve part of their exchange receipts on current account for purposes of industrial development, and to impose such restrictions on imports as would allow selection of imports in accordance with the requirements of their development programmes. If the Brazilian proposals were aceepted, there would be no need for special provisions for a transition period. Brazil agreed with the remaining provisions of Article 19. Mr. DEUTSCH (Canada) thought that there must be appropriate remedies for balance-of-payments difficulties. The criteria for the use of those remodies should include both the question of the LONDON E/PC/T/C.II/45 Page 16 movement in the balance-of-payments and the state of the country's monetary reserves. The American draft did not give sufficient consideration to the latter. The United Kingdom draft on the other hand did give the state of monetary reserves proper emphasis, and was preferable to the American draft in that respect. He doubted whether objective criteria, as had been suggested by Australia could be agreed upon at that stage. Some discrimination in the use of quantitative restrictions on balance-of-payments grounds during the transition period was inevitable. There should be no major departure, in this respect, from what had been agreed upon at Bretton Woods. He was glad that the United States was willing to reconsider the provision requiring non-discrinination with respect to products. There should not be a rigid requirement against non-discrimination on products. The American draft had no provisions regarding exchange depreciation. That matter could not be left open. If members of the ITO, which were not members of the Funda had complete freedom in that respect, Fund members would be at a disadvantage. Common membership in the Fund and the ITO would be the simplest solution. If that was not practicable, the Charter should include appropriate provisions concerning exchange control and exchange depreciation. - Mr. AUGENTHALER (Czechoslovakia) said that Czechoslovakia generally favoured the United Kingdom proposals. It should be understood that monetary reserves meant reserves in convertible currencies. With some countries unemployment was the only alternative to trading with countries having inconvertible currencies. No country was the master of its commercial policy, since all were influenced by their geographical and economic environment and by the policies of the countries with which they trade. A country LONDON E/PC/T/C.II/45 Page 17 trading with countries having conetary difficulties, or countries maintaining controls, would find it impossible to remove entirely its own controls. Solutions to the problems under discussion might be more feasible at the plenary Conference. By then each country would be able to see which other countries were ready to remove their restrictions. Rules had to be flexible enough to allow each country to meet its own particular problems. Mr. TUNG (China) said that except for the provisions on the transition period, China was in general agreement with Article 20. It was not realistic to set a fixed date by which countries were expected to have reached equilibrium. Why should not the transition be considered at an end, when balance-of-payments equilibrium was achieved, or when the monetary reserve was adequate? China intended to propose a never Article entitled "Restrictions to Facilitate industrial Development." Mr. JOHNSEN (New Zealand) felt that it was the individual member which should determine whether or not it was in balance-of- payments difficulties. Rules should be flexible enough to allow each member to safeguard its legitimate interests. There would be constant pressure on New Zealand s supplies of foreign exchange. Safeguards were necded. A country should be allowed to utilize to the maximum effect such funds as were available to it. Whatever criteria were laid down should not be too restrictive. Mr. MELANDER (Norway) reserved his statement. The CHAIRMAN submitted the discussion. It had been generally agreed that quantitative restrictions should be permitted to overcome balance-of-payments difficulties. It was generally agreed that the country concerned should, in the LONDON E/PC/T/C.II/45 Page 18 first instance, decide whether or not balance-of-payments difficulties necessitated restrictions. A number of countries had pointed out that rehabilitation or development programmes might cause a continuous tendency toward balance-of-payments difficulty, and that selection of imports might bc necessary to prevent such a difficulty. There seemed to be general agreement that members should have the right to make complaints, if others imposed restrictions unwisely or in an injurious manner, The Australian Delegate thought that there should be no right of complaint; if the restrictions complied with certain objective criteria. Attention had been drawn to the difficulty of defining such criteria. It had been generally agreed that there should be a transition period, though there was difference of opinion as to its length. There appeared to be agreement with the general principle of non-discrimination in the administration of restrictions, though different views were expressed concerning the exceptions to the general rule. There seemed to be agreement with the exceptions relating to scarce and inconvertible currencies. It had been suggested that discrimination might be permitted, subject to ITO approval, where restrictions were imposed because of balance-of-payments difficulties derived from a failure of effective demand in other countries. There seemed to be agreement that the ITO and the International Monetary Fund should work together closely, but a number of problems required study. There was the question of possible common membership in the two Organisations. If that was not feasible, there was the problem of inserting certain additional provisions in the Charter. LONDON E/PC/T/C.II/45 Page 19 It was agreed to refer Articles 19, 20, 21, 22, 23 and 24 to a drafting committee consisting of representatives of the United States, the United Kingdom, France, Brazil, Australia and India. The representative of the International Monetary Fund would be invited to participate in the work of this Committee. The CHAIRMAN said that the drafting committee would have before it the draft provisions submitted by the United States and the United Kingdom, as well as statements submitted by various other countries. The Sub-Committee would prepare a report which would be submitted to Committee II. The meeting rose at 12.55 p.m.

GATT Library

gy790ww0221

Committee II : Eleventh Meeting held on Wednesday, 20 November 1946 at 3 p.m

United Nations Economic and Social Council, November 20, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

20/11/1946

official documents

E/PC/T/C.II/56 and E/PC/T/C. II/54/REV. 1-58

https://exhibits.stanford.edu/gatt/catalog/gy790ww0221

gy790ww0221_90210271.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED AND ECONOMIQUE E/PC/T/C.II/56 SOCIAL COUNCIL ET SOCIAL 20 November 1946 PREPARATORY COMMITTEE OF THE INTERNTIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Eleventh Meeting held on Wednesday, 20 November 1946 at 3 p.m. Chairman : Dr. COOMBS (Australia) 1. Continuation of Consideration of the Provisions of the Report of the Technical Sub-Committee. Article 9 (continued) The CHAIRMAN stated that the Secretariat had consulted the Rapporteur of the Procedures Sub-Committee with respect to the wording of paragraph 5. It had been amended to accord with the decision of the Procedures Sub-Ccmmittee, and might be adopted without further change. Article 9 was adopted. Article 10 Mr. MORTON (Australia) stated that his Delegation had submitted moments with respect to paragraph 6. The fact that he made no. verbal objections was not to be construed to mean that he had none. The CHAIRMAN said that comments such as those to which Mr.ZPZ3il had referred would be forwarded with the Report of the Technical Sub-Committee to the Drafting Committee. Article 10 was adopted. LONDON E/PC/T/C. 11/56 Page 2. Article ll Mr. Van KLEFFENS (Netherlands) suggested that the following clause be added to the end of paragraph 1: "including margins corresponding with subsidies granted in accordance with or pursuant to Article 25, paragraph 3 of this Charter." Corresponding wording should be added to paragraph 2. In response to a point raise by the Delegate of France, he said that his suggestion was put forward in connection with arrangements made in relation to commodity agreements. Mr. LÀWRENCE (New Zealand) indicated that paragraph (b) of the report relating to paragraph 1 of the Article would not be satisfactory to the New Zealand Delegation. He felt that paragraph 2 of the Article should contain some reference to shipping or freight concessions. He was submitting comments on those: subjects. Article ll was adopted. Articlee 12 Mr. MORTON (Australia) called attention to a typographical error in paragraph 2 (c) (page 19 of E/PC/T/C.11354). The words "rates of exchange either one or more than one rate for each dual- or multiple-" should proceed the words "rate currency may be so fixed." in the last line of the paragraph. The CHAIRMAN said the correction would be made. Article 12 was adopted. LONDON E/PC/T/C. II/56 Page 3 Article 13 Mr. RHYDDERCH (United Kingdom) said that paragrarph (c) of the cemments regarding paragraph 3 of the Article did not accurately reflect the views of the Sub-Committee. It had been agreed by all but the Delegate of the United States that the final sentence of paragraph 3 should be deleted. Article 13 was adopted. Article 14, Mr. NORTON (Australia) suggested that, in paragraph (a) of the comments regarding paragraph 3 of the Article, the reference to "Australia, New Zealand and South Africa and others" be changed to read "Australia, New Zealand, South Africa and the majority of other Delegations", since a large number of, Delegations had supported the comment. Mr. LAWRENCE (New Zealand) said that the New Zealand Delegation would submit comments on paragraph 3 with particular reference to the term. "serious inconvenience". He wo ld also subimit a statement with regard to geogaphical marks of origin. Article 14 was adopted Article 15 Article 15 was adopted. Article 16 Article 16 was adopted. Article 17 Mr. TUNG (China) withdrew the comment in paragraph (d) (page 32). Mr. DIMECHKIE (Lebanon) wished the comment of his Delegation paragraph (e) ) to read: LONDON E/PC/T/C. II/56. Page 4 "Boycotts are not usually carried out for economic , but for political reasons. Therefore, they do not fall within the competence of the Preparatory Committee. - The Article should be deleted." Article 17 was adopted. Article 32 Mr. OFTEDAL (Norway) referred to the statement, on page 53, that the amendment had been acoepted subject to later review of its precise wording". Would it be desirable to submit precise wording now? The CHAIRMAN suggested that the wording should not be discussed. Any witten proposal submitted would, of course, be passed on to the Drafting Committee. Article 32 was adopted. Concluding Remarks Adopted The CHAIRMAN stated that, subject to the corrections made and the, comments submitted by Delegations, the report of the Technical Sub-Committee was adopted. He thanked the Sub-Committee, its Chairman and Rapporteurs, for the valuable work done in studying the difficult and complex problems presented to then. 2. Message to Committee II from Joint. Committee on Industrial Development The CHAIRMAN read the following message from the Joint Committee on Industrial Development: "In the light of recommendations regarding industrial and general economic development which the Joint Committee is making to the Preparatory Cemmittee, the Joint Committee requests Committee II to make a provision in Article 18 of the Chapter dealing with Commercial Policy, so that the Organization and other Members should, when considering the contribution which a Member can make to a LONDON E/PC/T/C. II/56 Page 5 reduction in tariffs, the into account thé height of' the tariff of that member, member and the need, if any, of that member to use protective measures in order to promote industrial and general economic development. "The Joint Committee also requests that in article 20 provision should be made to cover the position of a member who, as a result of its plans for industrial development or reconstruction, anticipates that its accruing international monetary resources will be inadequate to finance the needed imports of goods, for example, capital goods, for the carrying out of such plans unless it imposes regulations restricting the import of certain classes of goods, for example, consumer goods. It was agreed to refer the first paragraph of the message to the Procedures Sub-Committee, and the second paragraph to the Sub-Committee on Quantitative Restrictions and Exchange Control, and to ask the two Sub-Committees to take the requests into account in their deliberations, and to report to Committee II on the .action taken. Mr. NEHRU (India) asked whether any method of determining the height of tariffs had been suggested. If not, the phrase was worthless. The CHAIRMAN said the point could properly be dealt with by the Sub-Committee on Procedure. The attention of the Sub-Committee would be dramn to it. 3. Quantitative Restrictions Mr. VIDELA (Chile) suggested consideration of the question of a truce to quantitative restrictions. The CHAIRMAN thought the point was one for the Sub-Committee on Quantitative Restrictions in the first instance. It was agreed to refer the suggestion to the Sub-Committee on Quantitative Restrictions for consideration and report back to the Committee. 4. Suggestion for Immediate Consideration of the Report of the Procedures Sub-Committee Mr. KUNOSI (Czechoslovakia) suggested that the committee should begin its consideration immediately of the report of the Procedures Sub- Ccmmttee. It was an important and lengtly report. which should recedve full LONDON E/PC/T/C.II/56 Page 6 consideration by all Delegations before theoy left London on the conclusion of the Preparatory Committees Session. He had seen a copy of the Sub-Committee's draft report, Which was in process of being completed. Would it not expedite the work of Committee II, and avoid duplication of the discussion which must take place, if the full Committee began its discussion there and then, rather than wait until the Sub-Committee's report had been brought to finality? Mr. SPEEKENBRINK (Netherlands), Chairman of the procedures Sub-Committee, explained that the Sub-Committee was discussing the mémorandum relating to tariff negotiations, and that observers from all Delegations had been invited to attend the meetings of the Sub-Committee. He felt it would be unwise to submit the Sub-Committee's report in draft form, since substantive changes were in the process of being made. The report of the Sub-Cammittee was in two parts, one relating to the draft Articles referred to it for consideration, and the other a memorandum relating to the tariff negotiations in the Spring. It was agreed that the first part of the report should be completed by the Sub-Committee, and should be available for distribution by 7.30 p.m. on Wednesday, 20 November, as Document No. E/PC/T/0.II/57. The memorandum to be distributed on the following day (Thursday, 21 November). Both the report and the memorandum to be considered by the full Committee at its meetings on Friday, 22 November, beginning at 10.30 a.m. The meeting rose at 5 p.m.

GATT Library

hj373qq9746

Committee II : Fifth Meeting Held on Wednesday, 30 October 1946, at 3 p.m

United Nations ECONOMIC AND SOCIAL COUNCIL, October 31, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

31/10/1946

official documents

E/PC/T/C.II/36 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/hj373qq9746

hj373qq9746_90210244.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies RESTRICTED LONDON E/PC/T/C.II/36 CONSEIL 31 October 1946. ECONOMIQUE ORIGINAL: ENGLISH ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Fifth Meeting Held on Wednesday, 30 October 1946, at 3 p.m. Chairman: Dr. COOMBS 1. Continued Discussion of Quantitative Restrictions. The CHAIRMAN said that the Committee's discussions on quantitative restrictions at its previous meeting had revealed divergent views. New Zealand desired to use quantitative controls as a continuing instrument of economic policy because of the special nature of her international and developmnt problems. other countries had indicated preference for continued use of quantitative restrictions in order to maintain price control measures during the post-war period or in cases where quantitative controls were less restrictive than other forms of restrictions producing the same degree of protection. H.E. Mr. AUGENTHALER (Czechoslovakia) queried, with reference to Article 19 of the United States draft charter, whether any country would be entitled to Daintain import restrictions on commodities subject to state monopolies. He referred to the monopolies applicable to tobacco, explosives, salt, raw spirits, and saccharin which his country maintained as a method of indirect taxation. Unrestricted imports would defeat the purpose of the monopolies in question. He agreed with the delegates of Australia and Canada that import and export restrictions imposed because of price control could not be abolished. LONDON E/PC/T/C.II/36 Page 2. He requested the United States delegate to explain more fully the meaning of sub-paragraph (c) or paragraph 2 of Article 19 relating to restrictions necessary to the application of standards fcr classification and grading of products. The present wording left openings to abuse of the provision. Article 21 of the draft charter, since it embodied references to administrative methods, might lead to conflicts and disagreements, and publicity to the extent proposed in the Article night lead to pressure for greater restriction of imports. He therefore proposed the substitution of the following Article: "Article 21. Nondiscriminatory Administration of Quantitative Restrictions. 1. No prohibition or restriction shall be imposed by any member pursuant to this Section on the importation of any product of any other member country, or on the exportation of any product destined for any other member country, unless the importation of the like product to all third countries, respectively, is similarly prohibited or restricted. 2. Any member imposing such quotas allots a share of the total quantity or value to any other country having an important interest in the trade in the product with respect to which an allotment has been made, shares based upon the proportion of the total quantity or values supplied by such member countries during a previous representative period, accounrt being taken insofar as practicable of any special factors which may have affected or which may be affecting the trade in that product. 3. No conditions or formalities shall be imposed which would prevent anry member member country from fully utilizing the share of any such total quantity or value which has been allotted to it. The provisions of this paragraph shall also apply to any tariff quota established or maintained by any member. 4. In the case of import restrictions the member imposing the restrictions shall provide, upon the request of any other member who was trading with the respective countries in the product concerned during a previous represertatIve period, as provided in paragraph 2, ahl relevant information as to the administration of the restrictions. LONDON E/PC/T/C.II/36 Page 3 5. with regard to restrictions imposed in accordance with paragraph 2 of this Article or under paragraph 2 (e) of Article 19, the selection of a representative period for any product and the appraisal of any special factors affeeting the trade in the product shall be made intially by the Member imposing the restriction: Provided, That such Member shall, upon the request of any other Member having an important interest in the trade in that product, or upon the request of the organization, consult promptly with the other Member or with the organisation regarding the need for an adjustment of the base period selected or for the reappraisal of the special factors involved." Vicomte du PARC (Belgium) reminded the Committee that his delegation had submitted a statement concerning quantitative restrictions (E/PC/T/C.II/26) in the first part of which it had indicated its adherence to the principle o? suppression of quantitative restrictions, and in the second part of which it had suggested a sub-paragraph (o) of paragraph, 2 of Article 19. The contribution of the Belgo-Luxembourg Economic Union to the lowering of tariff barriers would be the tariff reduction resulting from the contem- plated customs union with the Nettherlands. Equivalent sacrifice should be made by other countries. He rcad the following substitute sub-paragraph (e) of paragraph 2 of Article 19: "Import quotas on agricultural products, imported in any form whatsoever, when such quotas become necessary because of price depreciation on the domestic market due to the combined effects of national production and the importation of a particular commodity. Quotas many be applied as soon as price depreciation reaches the point -here sales on the domestic market are effected below the normal price. By normal price is understood that which covers the cost price of domestic production." Domestic regulation. in any field, particularly agriculture, was extremely difficult in Belgium, and policy could. not be planned sufficiently far in advance to permit the application of the restrictions suggested by the United States Draft Charter in clause (i) of the sub-paragraph mentioned. Moreover, Belgium could not accept clause (ii) of the sub- paragraph, because there did not exist there sufficient differentiation between groups of population to permit the selection of "certain groups of domestic consumers" as envisaged in the clause. LONDON E/PC/T/C.II/36 Page 4 Mr. LOKANATHAN (India) was gratified to find that the views expressed in the document presented by India to the Committee on the subject of quantitative trade restrictions had found a large measure of support in the Committee. Quantitative restrictions could not be dispensed with entirely by countries with regulated economies but could be used constructively as instruments for trade expansion. India was embarked on a programme of planned or regulated economy, and could not dispense with quantitative trade controls. He objected to the distinction made between tariffs and Quantitative restrictions; both were equally valid instruments of commercial policy in certain circumstances. India could not avoid the use of quantitative controls entirely. They would be necessary to maintain some priority in th, use of foreign exchange. However, India was prepared to agree: that provision be made for prior consultation with the International Trade Organization before the imposition of quantitative controls; that the principle of non-discrimination be applied as provided in the Charier; and that the criterion for permitted controls would be a test showing that their effect was expansion rathr than restriction. He agreed that some provision should be included in sub-paragraph (e) of paragraph 2 of Article 19 for import restrictions necessary to support price control measures. India was commttee to the maintenande of prices of primary commodities as a measure, of national policy, and might need to impose restrictions for that purpose. He objected to the.concluding sentence of sub-paragraph (e) on the ground that there was no justification for imposing so rigid a rule for binding the ratio between imports and total domestic production. Because exporters had alternative markets, the incidence of such a rule would bear more heavily on producers for the domestic market than on exporters. LONDON E/PC/T/C.II/36 Page 5 Mr. TUNG (China) could not agree that the adjustment of tariff rates alone would afford sufficient protection for an under-developed country. It was imperative that such a country should regulate its trade by the application of simple quota or tariff quota systems during a defined transitional period. China also had to restrict imports of non-essential products in order to conserve foreign exchange. The application of a system of licences was therefore regarded as justifiable and indispensable. Selective restrictions, if judiciously applied, would not affect total imports, but would merely change the composition of imports. A transitional period during which an under-developed country might resort to "reasonable measures of quantitative restrictions, should not be limited by any specified date; nor should it be determined by monetary reserves or balances of payments. He proposed that a transitional period of industrial development should be extended until: (a) fifty per cent of the wage-earning population were employed in modern industrial enterprises concerned with production nd distribution; or (b) fifty per cent of the national income was derived from modern enterprises of industry, trading, and finance. The Chinese deletion interpreted clause (i) of sub-paragraph (e) of paragraph 2 of particle 19 to mean that, if a member nation had to adopt import restrictions on any agricultural product for the reason stated in the clause, it could not reduce the ratio existing between total imports and domestic production in the representative period chosen. If that interpretation was correct, the Chinese delegation regarded the clause as imposing grave handicaps on the development of an under-developed LONDNO E/PC/T/C.II/36 Page 6. country. The price structure of agricultural products in such countries affected standards of living, and determined the success or failure of industrialization. A government should be free to take appropriate measure to regulate production and consumption, in order to stabilise prices of agricultural products, and to maintain a balance between manufactured goods and foodstuffs and raw materials. Many factors affected the quantity and kind of agricultural imports; and no agricultural country could accept a fixed ratio between imports and domestic production as included in the elau The clause should be revised so as not to imply any restraint on the right, of all member governments to make qualitative o:: quatitative adjustments of their agricultural imoprts. Mr. SPEEKENBRINK (Netherlands) agreed with the United States delegate that quantitative restrictions were objectionable, as they restricted trade and could be used in a very discriminatory way. Referring to the stipulation in Article 19 that quantitative restrictions right only be used for the purpose of reconstruction until 1 July 1949 with cortain exceptions, he pointed out that it was most unlikely that the Netherlands or the Netherlands Indies would have regained a normal economic position by that date. His country was unable to abide by the rigid rules contained in Article .19, because it could only obtaini essential industrial commodities by bilateral agreements. The Netherlands Government had set up Government monopolies of the import and export of agricultural products, which had never been discriminatory, but had been necessary to prevent social disturbances. Agriculture in the Netherlands depended on the import of raw materials, and 30 per cent of the population were engaged in agriculture. Ar--,o ;vuc;Lti'/ could not possibly be completed by 1 July 1949. Ho disagreed with the clause in Article 19, 2e: "or (ii) to remove a temporary surplus of the like domestic product by makign the surplus available to certain groups of domestic consumers......." LONDON E/PC/T/C.II/36 Page 7. He also asked for clarification of the phrase "like products" in the same sub-paragraph. He drew the attention of the Committee to the memorandum by the Netherlands delegation (E/PC/T/C.II/21), in which it was suggested that the provisions of the Draft Charter were not sufficient to safe- guard, after the transitional period, the interests of countries which relied more on a system of quantitative restrictions than on high tariffs. No harm must be caused to other countries by quantitative restrictions; but, until agreements had been reachaed on tariff reductions, le must reserve the Netherlands position in regard to quantitative restrictions. M.r. STEEN (Norway) advocated the abolition of quantitative restrictions but asked for clarification of the phrase "conditions of distress" in Article 19, paragraph 2b, and, secondly, of the phrase "standards for the classification and grading of commodities" in Article 19, paragraph 2c. Mr. SHACKLE (United Kingdom) stated that in general, except in order to safeguard balances of rayments which would be discussed later, and in connection with the transitional periods for reconstruction, quantitative restrictions were injurious both to the countries employing them and to other countries. That was due to their rigidity and their arbitrary and unpredictable character. Tariffs were obstacles to trade, but did not preclude competition. Quantitative restrictions on the other hand were unsurmountable barriers; and, if generally applied, would mean the end of any hopes for the expansion of world trade. It would be impossible for the United Kingdom, for example, to increase exaports to balance external accounts, as that would mean restriction of imports, and the effects of that would be disastrous to world economy. The draft text might be amended; but strongly supported it. LONDON E/PC/T/C. II/36 Page 8 In Article 19, paragraph 2(c), standards for the classification and grading or commodities should be laid down, so that not only domestic, but also foreign, products could compete. He suggested that these standards should also be agreed internationally, as proposed in Article 16 paragraph 6. Article 19, Paragraph 2(e), should be applied to fisheries as well a to agriculture, and also to agricultural products for manufacture. Variations of price and yield. were even more frequent in fisheries, which were mainly carried on by small producers and needed government protection. He strongly deprecated the application or the Article to manufactured products. In Article 21, paragraph 2, he thought that a representative period should not be taken as the test of non-discrimination. He preferred the concept or commercial considerations as contained in Article 26 of State Trading. In Article 22, he felt that some re-drarting was necessary in connection with the question of the balance of payments, which was to be discussed at a later date. The CHAIRMAN called upon the United States delegate to answer questions put during the above discussion. Mr. HAWKINS (United States) in answer to the Lobanese delegate, replied that it would be possible under Article 52 for the ITO to make. provision for regional preference arrangements in particular cases. Several delegates had asked for a definition of the phrase "like product". This phrase had been used in the most-favoured-nation clause of several treaties. There was no precise definition, but the Economic Committee of the League of Nations had put out a report that "like product" meant "practically identical with another product". He recommended that the ITO should study, this question. However, in Article 19, paragraph 2(e) "like product" did not mean a competing product. LONDON E/PC/T/C.II/36 Page 9 Article 19, paragraph 2 (a) should be extended to provide for the mintenance of war-time price control by a country undergoing shortages subsequent to the war. An international agreement between countries having surpluses was provided for under the exceptions regarding the liquidation of surpluses (Article 19 2a (ii). He agreed with the United Kingdom delegate that the wording of Article 19, paragraph 2 (c) should be amended. The sub-paragraph as it was originally drafted permitted abuse. Before commenting on the Redraft of ArticIe 21 proposed by the Czechoslovakian delegate, he required first to consider it closely, and suggested that the Drafting Sub-Committee should undertake this task. The suggestion of the Belgian delegate for an exception to be made to allow restrictions to maintain domestic prices of agricultural products at profitable levels, would have the drastic effect of allowing any extent of restriction on the import of agricultural products. He sympathized with the Netherlands delegate, when he admitted that the period of tranition until 1 July 1949, as proposed in Article 19, paragraph 2 (a), might not be sufficient for the reconstruction of some countries' normal economy. He would readily consider any concrete suggestions on this subject. However, he pointed out that the Aarticle provided for extension of the transitional period. In reply to the Norwegian delegate, the phrase "conditions of distress" did not mean economic distress but referred to shortages of crops, etc. in cases .such as famine. He agreed with the United Kingdom delegate that Article 19, paragrah 2 (c) should not be extended to manufactured goods. LONDON Page 10 The CHAIRMAN stated that the question of quantitative restriction appeared to be one of the difficult problems confronting the Committee. There appeared to be some fundamental differences of opinion between the various delegations, according to the attitude of their respective governments ta the ways of regulating airports. All delegates appeared to agree that reconstruction justified the imposition off irm priorities in the selection of goods for imports, but some delegates felt that these provisions were insufficient. The New Zealand, Chinese and Indian delegates had recommended that the less developed countries should have the right to select imports and establish priorities, until such time as their industry was developed. It had been suggested that exceptions to the use of quantitative restrictions should be extended to: (a) maintain the effective continuance of wartime price controls; (b) provide for the effective conduot of State monopolies; (c) maintain the price stability of primary products; (d) take the place of subsidies and tarifs in cases where quantitative restrictions would prove less restrictive while affording the same degree of protection. It was difficult to see principles on which to base a reconciliation of the fundamental difference of opinion. He urged delegations to modiy their requirements in regard to quantitative restrictions so as to admit a compromised reconciliation. In view of the fact that the work of the Committee was so much in arrears, he proposed the immediate establishment of a Drafting Committee to deal with quantitative restrictions. Mr. SHWCKLE (United Kingdom) and Mr. BARADUC (France) proposed that the Drafting Committee should not begin its work until the Commiittee had discussed the question of balance of parents provisions pointing out that many of the present difficulties bright be solved as a result of the way the problem of balance of payments was decided. LONDON E/PC/T/C.II/36 Page 11. The Committee agreed to postpone the setting up of a Sub-Committee on the question of quantitative restrictions, until the Committee had discussedl Article 20 of the Draft Charter on Restrictions to Restore Equilibrim in the Balance of Payments. 2. Discussion of State Trading Mr. HANKINS (United States) outline Section F of the Draft Charter relating to State Trading. Articles 26, 27 and 28 were not complicated to explain, but would be more difficult to apply. Under Article 26 the rule of nondiscrimination applied to state trailing in the same manner as the most-favoured-nation principle applied to duties. The obligation pursuant to this Article of a country engaged in state trading was to make its purchases in accordance with commercial considerations, i.e. to the best advantage. The rule included no explanation, because it seemed desirable only to state the principle. Its application in concrete circumstances would permit the development of a body of rules, which would define and amplifyt the principle. Article 27 referred to state monopolies of individual products such as those mentioned by the Czechoslovak delegate, namely, tobacoo, salt, or any other product on which a state might establish a monopoly. The article was a counterpart, in relation to state traling, of the Article providing for reductions in duties where trade was handled by private business. The margin between the price paid for an imported product and that at which it was sold to consumers measured the degree of protection accorded to the domestic producer. The margin corresponded to the import duty, and was subject to negotiation in the same manner. The same principle applied to export monopolies, the margin being between the buying price at home and the resale price abroad. The margin in that case was aralagous to the export duty. LONDON E/PC/T/C.II/36 Page 12 Article, 28 referred to complete state monopoly of all import trade. It provided that total imports should not be less than an established amount, which would be subject to pariodic adjustment. The analogy for this type of state trading was found in the articles providing for reductions in duty and other trade barriers relating to trade handled by private enterprises. Mr. LOKANATHAN (India) requested the United States delegate to comment on the last sentence of Article 27. Mr. HAWKINS (United States) said the purposes of the sentence was to prevent the withholding of supplied from the market in order to defeat the purpose of the Article. Mr. VIDELA (Chile) was in agreement in principle with Article 26, provided it was understood that a state enterprises motivated entirely by commercial considerations, might fix different prices in different markets without such action being regarded as discrimintaroy. He suggested that the Drafting Committee take that point into consideration. Mr. STEEN (Norway) agreed in general with Article 26, but observed that the rules regarding price policy for products imported under state monopolies of individual products, as suggested in article 27, did not seem applicable under present conditions. For many years Norway had had two large state monopolies, for grain and wine. The griain monopoly conducted its business on a commercial basis, but as a purchaser of domestic grain had to remain free to fix sale prices in order to maintain Norway's production and a stable price for breed. The wine monopoly had long-established trading relations with the countries of Southern and South-Western Durope, involving imports of wines and spirits and exports of Norwegian products. The practice could be modified only if other stipulations of the Draft Charter were agreed to, and if the wine-exporting countries became members of the International Trade Organization. LONDON E/PC/T/C.II/36 Page 13 Norway had to keep a free hand in order to continue long-estatblished restrictions on the sale and prices of wines and spirits,. restrictions which were imposed in connection with internal conditions. Mr. SHACKLE (United Kingdom) was in general agreement with Articles 26 and 27As drafted, Article 26 applied to goods and services. He suggested the advisability of limiting the application of the Article to goods, since the consideration of servious, such as shipping, would expand the Committee's task considerably. He suggested the substitution of the phrase "effective control" for the phrase "a substantial measure of control in paragraph 2 of Article 26, in order to avoid ambiguity. The margins referred to in Article 27 should be subject to negotiation in the same manner as tariffs - negotiation about what bright be called most-favoured-nation margins and also about preferential margins. The reference in Article 27 to the protected margin was stated as the differerence between the price at thich an imported product was offered for sale to the monopoly by foreign suppliers and the price for an imported product charged by the monopoly in the home market. In the Proposals which the, United States issued in December, 1945, the protected margin was stated as the difference between the landed price and the selling price. The United Kingdom preffered the latter definition It would be necessary to take an average price over a period of time in order to arrive at a suitable margin, in order to avaid administrative difficulties. A reasonable period might be three years. Exceptions should be made in cases where a system of rationing still prevailed, and also where it was necessary to restrict imports for balance of payment reasons. LONDON E/PC/T/C.II/36 Page 14 Mr. LOKANATHAN (India) asked if the "commercial considerations" allowed for bulk purchase an a long-term basis, and also for the granting of extra facilities which provided incentive to purchase. Mr. DEUTSCH (Canada) agreed in principle to Section E of Chapter IV of the Draft Charter. He agreed with the necessity for averaging in the determination of margin, which otherwise were impossible to operate. In reference to the United Kingdom's statement that it was not always possible to meet full domestic demand in the prescribed margins, he pointed out that the converse applied to Canada meeting full foreign demand. He thought that a state which completely monopolised the import trade could not carry out the provisions of Article 28. How could it negotiate an aggregate of purchase with all the member countries of ITO simultaneously or individually? ln view of such difficulties he suggested the deletion ,-L Articles 28. Mr. t`<;i`l- (Cuba) asked if the exceptions containing in Article 32 paragraph (o) covered the cases of states continuing, because of the shortage export monopolies and global sales established during the war. Mr. BX.l'Wi (South Africa) asked how this Section affected the agricul- tural Supply Boards set up under the South African Ministry concerned, which stabilised prices and authorized importation of commodities to help the development of agriculture. Secondly, how did this Stection affect South African State Railways, which had been established on commercial lines? Mr. AUGENTHALER (Czechoslovakia) stated that he preferred to reserve his opinion on this Section until the next meeting, as he had not come prepared to discuss it. He asked how Article 27 affected the state mono- polies which had been established in Czechosloyakia since the middle of the 18th Century. How was it possible to negotiate a sales price, which constituted the taxation itself? Mr. SPEEKENBRINK (Netherlands) also wished to discuss this item later. He asked how the Netherlands state monopolies, to which he had referred earlier on during the present session, were affected. LONDON E/PC/T/C. II/36 Page 15 Mr. McCARTHY (Australia) thought that the Draft Charter made a very brave attempt to meet all the circumstances of state trading, but was too rigid. Members engaged in state trading should give an undertaking to do their utmost to abide by the principles of the ITO Charter. He pointed out the difficulties of the inclusion of provision for services as well as goods in this Section. Members should be able to examine the implication of long-term contracts. The ITO should be consulted when members were troubled by the state trading transactions of other members. He thought article 28 impracticable. He wished to investigate all the facts of this section further. Mr. JOHNSEN (New Zealand) thought that the phrasing of the first sentence of article 27 "such member shall enter into negotiations" should be brought in line with the wording of Article 18 "shall, upon the request of another member or members, enter into reciprocal and mutually advantageous negotiations." Mr. TUNG (China) asked if certain state Monopolies with fixed. prices set up by China during the war could continue under the provisions of Article 27. The Committee agreed to continue discussion on state trading at the next meeting. 3. Date of Next Meeting. Thursday, 31 October 1946, at 3 p.m. The CHAIRMAN suggested that the Sub-Committee on Procedures, Tariffs and Preferences should meet at 8 p.m. on Friday, 1 November 1946, simultaneously with the Joint Committee. The Meeting rose at 6.25 p.m.

GATT Library

dw443hc1678

Committee II : Fourth Meeting held on Tuesday, 29 October 1946 at 5 p.m

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C/.II/27 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/dw443hc1678

dw443hc1678_90210235.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRITCTED AND ECONOMIQUE LONDON E/PC/T/C/.II/27 SOCIAL COUNCIL ET SOCIAL 30 October l946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE COMMITTEE II Fourth Meeting held on Tuesday, 29 October 1946 at 5 p.m. Chairman: Dr. COOMS 1. Continued Discussion of articles 8 and 15 of the Suggested Charter Mr. ? (United States) made a statement concerning a number of niber of' questions rmembd by inererCommittee d rinubg u the previogsus meetin. e zid ethat thusen ast of paragraph 1 of Article 8 related tncec c 'rticle U reLate. solely to,and not to purchases of products.: to .u' ehas s ,rociucts. The laotedter senere ecovereda ` the prectg zn2nc f parcaaph 1. Rules th resO.c astog goveresale were includedrnmental puruh: zifer c inc:1uded in Article 26. countries. tied loans were o;:ig,eo7tiriu tied loaaiz ',ere not contrary t tholasat s1,epntencee of article 5 paragreph.,rvidud hat all countrixees re mgivenarrangemity to e'::nsi-ilr .trr=ngcnens. He e ntpoi sure view whetherr ,rom the oJ. oI -of the lending country, tiwctIotaens c-e consistent :;i h:prposes iofthe Charter. Thefa obaldigqation eto reatmeaccor awardingd ir n euitabl tnt in contracts alied to balogovernments where theth central aen loc jIrnts -:-ere thc centroal governmellynt as traditionlally or cestitutiona'able to contro: the local ergovernment. Although h could not spk decisively, he tnmhougwouldht tahat tohe United States Goverent be ble t control actions of states in this attur. Creoeywfn ogovernmental usempares procuring supplies su:to EorUacntal US 8, paragraph 1, and would be subject to the provisions of .Yrtil,:Th 1, and Article 9. e Cron cominis purchasing fcr -sal ;-.old covercd LONDON E/PC/T/C.II/27 Page 2 by article 26. The United States agreed çzrcd. tuggete s esled de1etionefwthcU mords "byaa or" ern tohe ed f the fsentence irsparagraphtof A itsn f roraphif 1irtacle- 9. Suab-gpartaphZL) pra?-t8*r2 in earticlee 3 ec-patdtriff prefearagraprenceAs ioeey., would mean Pr 2, .talu8 -d ir-ean in effect that tft prergornac, sswujcdt to nereota;iovulc b thse an existence on e1 July 19uly39 or wthsee of w1 Jlower. 1946 hichver as The 1939 hdatei recoegonzed ties abexateencccfe long-tbishc preTences; countries eferences would not be required to abandon them withoutatb!l-ndon then houi: reineavanr concefesesionsestablished since n return. Prernces Sbsiscld smnc; 1939 since that time would beor increases in tr . -c.o ' fThtlmile -e-d be .J1X>..A l . at&. If ?lef' ces h.d b'en reduced or - aboloisheed since 19, osac pr 'rncs couldnOt bS retoed te the previous level feoro mipurposes of negtiation. If thtCe'tee preferred, be willinghowever, te Unea 3teaco ;!e1u wilib g drop refoercc t 146 wlt vi(v- basefng neesotHe wiations on 1,939 prierenc Ii, .a cwillnig iteaaccept zrfereneesexîstngut he trim of negotiations as thae bass fu suhachw neotiîentns; if t'itue donc, references riateminingg aftera neiZitatns miZih be '1ahag Cs or hghte thon those of 1939. he da not tgue iati refereneces whîch ado b:en greed upOn bt had ner een puti into prrac c: hould be covered by thei exception an paragrap 2 of .rticle 8; these omdiff'red afrielong-estnllhed preereances in athi they ahdd'not crneueapattert nof trade nd hence did not constiitute a bass for negotiations. Teh eestoablisiit u peerionalmanent rioepre'erenco would probably creleate eehoand seduti hlO bos nid racetie volunme of world trade. Preferenaces pinswtituted as blisste toard the estahment of uld a custnl uhnion vovaldJ a:ve altie disvmt.ages of preferences LONDON E/PC/T/C.Il/27 Page 3 without any of the advantages of a genuine customs union, There was a wish that these preferences would not proceed beyond the transitional stage. The suggested Charter permitted the establishment of real customs unions, since the development of free trade areas contributed to the overall expansion of world d trade. The United States did not object in principle to open preferential conventions, but in practice it was doubtful whether such conventions would be truly open to all countries. Denial of most-favoured-nation treatment to goods produced by sweated labour mighthmt r -ake bad working conditwns '.orse by destroying the markets ofw low-aege arWidespread discrimination,irSas pre1d d2.scriainatior, restriicaltion of trade inLinternatînUfriction miLht result. Nations actually participawting in tariff negotiation ould dece 'ht'corstiued a "subAastan.ial rduction". !s mu value shuldd ngbcattwached . o bincl loirate a sto reducing a high one. Wiquestion wth respect ti th c with xvhardich had been ask rei reg; tofrom the ithholig of bednefitsg î1ountries whichh ia ot azre oto aequaogtaporiff rAcduticns prararaoh of -rtile 18), he ntenvisaged that ed out that it -vrtnvhmî tat Prearatory Conmiteremembers would negedotiatame tarheiff-reduction schule ong tmselves. Nations other than theg original eiegehteen, desirin to obtain bnfits provld ien tr'aharter,e -roudbe r-qu.iedt entcr ino similar negotiations for tariff reductions. Reductions already affected by the eightooeen dfcountries would rvid a standard by vvhich on intederim cntteei, pro6viwdcl r idn awrtlcl 5 a,oud jugSe vhher or naot henations other thn t oridginal eightieen coul fulfil ther obligationsArti. Prawgraph 3 of ?le 18 vs designed to ensure that ulfilled.;ationjF wucrc ulle Couresore direscoultlgy econceimirned S-ih vzprlurja considqeration otowhether q the uestion f thf q-uota-based preferences LONDON E/PC/T/C.II/27 should be subject to negotiation and not automatically abolished. A reduction in a peferential rate of duty would be t,- o' duty vould b; consistent with Arovided that an equivalent reduction wasXuivlent reduction M n the most-favoured-nation rate. Furthermore.-natieo vxrat* 1Ùrterre:, if the most favoured-nation rate was reduced by negotiation, ins reduced by negotiat2.o the prcferentinlr-Ltet also bea redeuced, provided thc.t ts main ofgreater referene v soet ixe.attwee thhe diffcrenc bct:e'e reeduaced ost-favourch-noion preferntial rate and tn 1939 -cfercntîal rate. le 8 Australia would not be ablelbaUr th:. Drov:sLîns o f' _rlia lould nDt be able to n;t-itt. tc ebt:inZ p-cf:rcncoas Yihicih had xtended tiao othr ipire euwitri.s but not to vusralîl. a rigid rule,rfh it ;eull nut ae vise te lay douxm a ri, negotiationn s. r main am triff reduction w.izh be confined i- tea to products of Ciplei p:rtîcîpatîns countries ter the princpa2lpliers. p the mnatter Ofposscb1ascalause-yrovidirgor remedial actionw i cases ,ere serious injury -, caused as a efresult ofA ai rution ind a prctence, lrtcl 29 as Drate&d ould. epared to tenot apple matter y. nnectionlk ;lould be te discusth'néiatter in coruiectirn }l thu eneral consideration of esc-Pecauses. He pointed out, however, Athat unr the prcvon of paraLraph2 of articl 55 the Conference could deteromiwn ticriteria =nd set up procedures fI \ivg obligations of :?urs undertaken in Chapter IV. Obligations concerning reduction of preerenecs wcre included in.Chapter IV. rtîle 8 an;3 r7pih 5 orticle 10 would prohibit the limitantion o root-'Peuredi-menaioa raes te diect sh-p t These provisiondes wre uldsound, since trao shoJalways use the most convenient and econmical routes. hoslovakia) asked, in coonection Mr. R (Czechoslovekia.) asked, in connectilon with the provisiwons for witariff reducicDn, hat the situation vuld be vh respect to countries îh unstabilizecurrencies. LONDON E/PC/TC.II/27 Page 5 Mr. HAWKINS (United States) referred to the functions of the International Monetary Fund. If there was a danger that tariff reductions would be upset by changes in the value of currencies, ancsa clamight use LieZibe a&eddd eo thl Cmhaartrsiiilojr to the provisions in the bilaeement of the United States, which would States, vhr.ould permit freateconsidduration oir rzg'tiofmcircumstances.s inithe liat oifcitAnces. whether the last sentence of paragraph tihz_ laSt serntCrEC, o01t.agrtoh 1o of Article would aip als to oif f cncessions to nataonoa ct.of the state a, thc contr.ct. aid that it would ti iad r. HJ (Ur.itedn.tes) z`' -vould not, and that tahe seentaence in st: on gnted most-Ifvorud-ntio, but niot national, Ieatint. .BLuC (rancaied othut Frlnce wold hv; te insist tt iated should be those of 1939. Althoughe ith celcenes riLrLdb those of ;t9. A.itIough ritories metrooltn f-r!.nXd t'lli. turra1toracs. lacked economf iariffc urangemniformity ther:vv.rloun typsoi`. toir:Me withinm tshat wasunnity 9s a rsult oi iueiysten t :s i19, is preference which were to the only bass for thu kinds orulhch ;rc te be subject to negotiation. r. D-IIKI(LbLanon)aeuprcaed the contention of the Urnitcd States tht hostilef econem blocsould develop out oI' reonal ofsysgitemls oefer precTrunces.he purposc± -aoJ. *_-eccs was to oping industries of lessgive a wdur ket for tus..ofp&ustîci lss industrialized on countrieniteds. He sagrei i thiu ion of the Uh States references and cuthe d ener but-;en pi-fns ':lid -_u.stoms unions was so Agcreaomnt as tow be a dafnrcnc and. c esannion vra no mncore than an extreee enrm ofi eferee. Regional prefureic would stiuuewere productiono zai rade. They v u eier ta adininier than cnustos uinfiionsi, anid did not avolve duiultls ;ah respect to sovereoignety, adPaniastration and O rçenue *eferential arrange- meaneints wlre neceissny asstablisheent m traminaL sage an he ee'l1shrment of a customs unedionates. The position tan by the Unitc:it-elegate would. leave undevoped countrau ondemned to poverty. LONDON E/PC/T/C.II/27 Page 6 Mr. SPEEKENBRINK (Netherllands) said that "open conventions" werewvere y important point. The Netherlands Delegation had sumitted amittea docuE/PC/T/C.II/20) in which they had put on record theirord thr opinion eferences should as a rle be limited 1nitc:d both in number ent. Assuming that the present Conference was successful in succesul in et of rules, he suggested that preferences in the r.ciccz n t participating couIitr given the possibility to expand, so as to bed, so ns s tbe n a reciprocal n a rccarrocal bincreasingan. încrea.,in number of States al stage and a ultimate and, to all countries. a-.icountries Should ible, the margins of preferences should be gradually s shou:Ld bel aua11y ately abolished, the only exception being a y c;:ception bemng a ned in the Charter.du in.d in i:ih Char gation accordingly suggested that the g;1y suggested thaLthe should sttory Coirttv should study the possibility of admitting hin the framework the of the charter, and should.hin th. irune\:oek oit-,r, .and should multilateral agreementsla estabmsh a s of e? ±-uJl.s nppli ctra1 agreements. The -u1es shoui& 3na ly acceptance by tim, -articipatincountries of the the ing o:: t;he Intcrnra tioiva1 Traâe 0rsganm ateon t'n International Court ci Justic in the settler:nof disutes. the Drafting a;jr.od to recfr zticlt 8 and 18 to thE Draftmng onur.ittxee or .rec ur., wfith tnho xoI)tion of question of nces:t.la\xox1 f reduction oi quota-bsed peicerunes: the latt r ,:;cie _i.cus.c3. by th countries concerned, i.e., United Statas, United wl:in1dom, Nu-; Ze coJlnd Au.ustralia and C, the hich countries wre to fting Committee.ttcr to Cormnitteca 1mr to the Draftinr; Coinrit. on the mostC.Ei (lirail) ful that Drazil s. vievr on tho mos-favoured- natioon provisions of the Charter had ba rudestoed by he Sub- Cc: oan Proccdurc:. Chairman of the Sub-CommitteeThe CHIMi N su-cstred that, if so, thc -Cormittoe should invite th:De(ce.Zatc of Brazilticipate in tha discussion of this ratte;r LONDON E/PC/T/C.II/27 Page 7 2. Discussion of Quartitative Restriction The CHAIRMAN suggested that the discussion should deal first with Articles 19, 21 and 22, and that questions concerning restrictions to restore balance of payments equilibirum (Article 20) should be postponed. He called on Mr. HAWKINS L'WKINS forwe veus. ofI the United States Dnlegatior. Mr. HAWKINS (Unieted Stats)a saied tht th basic provisions of the Charter with respect to quantitative restriction were inncluded i the first paragraph of Article 19. That paragraph prohibited the use of tivquantitae restriction. That general rule was soubject t a number of exceptions. Sub-paragraph (a) of paragraph 2 (Article 19) permitted quantitative restrictions during the post-war transitional wperiod, here such restrictions were necessary to provide for equitable distribution of short-supply items, or whewere neethey re dede to achive orderly liuition of surplus government stocks. Thus a government could keep out imports until surplukss stoc had beer edisposd of for the purposes of sub-paragraph (a)e. nTh trasitional period ewoulnd nd o. 1 July 1949, thnough i special circumstananwces d ith the concurrence of the ITO. it could be extended for successive nsix-moth periods. Sub-paragraph (b) of paragranph 2 i the same Article permwould it restrictions on exports to relieve serious connditios of distress caused by shortages of essential products. Sub-paragraph (c) would permit import or export restrictions or. sub-standard products.. Thus, a member could restrict exports in oorder t protect the reputation. of his products. Or it might keep out imports of sub-star-dard products in oorder t protect consumers. Sub-paragraph (d) inclnuded a exception mmfor coogditmey areents npurosuat t Chapter VI of the Charter. LONDON E/PC/T/C.II/27 Page 8 Sub-paragraph (e) would pemit restrictions on imports in cases where there were equivalent restrictions on domestic production. It would also permit import restritions in cases when a ''ost.'stctiLons ln C:wS.S 'Wntn a country making ilabtey suzplsesof cr;1ductalhlle to conmers free of cnarge or at reduced cost. s Artiadministration cle 21 rqcd4 mres'cr the ustratlorf such ciuantatative restrictions aspt ould be iitted uribedrder the excetion already descrabe Such restrictions shoumild e kministered in a non-discri.îtory marnner; to th end ea methods: member should use one of thrcene..s: ()w ica wcould establish a global quota anhvoul not be- llocated accoriding toi source r'supply. Actual aportatln could be left t trado&s wnowould choose thn: orce Of spply on the basis of comnrcial considerations; (b) it ig llccat?. goflo l quoa to sources OI supp on the bass of perioda past rorent-eaive IJd. It should u willing zo consult withwi intersted counhtries ;h respect to tn rehosepresentatve period cn; s(c) it cnould establiwhich wa licesinig system h ould not nvolve aet.rhea galeobal quot-or alloccca quot- ,mong sources of supply. porters In ths cassth iïLnoters would hoo3e the sources of supply on thne basasi of coFulnnec-omj r.derwntos. Puinformation vrld wibe maspede avalible na restt ito licences gracte. L the past. Article 22 providhed excieptimiions from tei no-dscrnation rule n tqhe admasraticstricitons.nofM cuaatative re-trton gqiembers would not be precluded fromimports applying restrictions on ort_ frm ar country the caurrlcy O 'hch hha been dcl:.redcMonetaryarce by tne Inernational ko nery und.' An cceapttiown l; aIso i-rided lforcLses hnerediscrimination maintaeannc eoulhd beom necessary:o e tetnan;anc ofe coiimon par valud of -he cumrrency ofi territoris having a comin quota a the Fund. Discrimnation wouowld beh peassable i orCioto loçi ofe useof inconvertible LONDON E/PC/T/C.11/27 Page 9 currencies. The purpose of the 31 Decemer 1948 time limit in connection with the latter exception was to prevent countries from accumulating such currencies. Reconsideration of that date would be possible under the provisions of paragraph 2 of Article 55; Mr. VIDELA (Chile) drew attention to the problem of definmng "like products" as specified in Articles 9 and 19. He also referred to the words "any agricultural product" in paragraph 2 (e) of Article 19. He felt that this provision would put the agricultural. countries at a grave disadvantage, and therefore, tentatively, proposed that the word "agricultural" be deleted. He was anxious to know whether the exception provided in sub-paragraph (a) of paragraph 2, Article-8 covered preferences based on quotas. It 'would help the discussion if it were made clear that that exception had nothing to do with quotas. The CHAIRMAN replied that sub-paragraph (a) of paragraph 2 of Article 8 referred to preferences in the form of tariff margins and not quotas. Mr. VIDELA (Chile) pointed out that a sub-committee was considering the generai question of using past representative periods as a basis for allocation of other actions. The delegate for South Africa questioned the desirability of prohibiting quantitative restrictions on the one hand and condoning then by including a long list of exceptions on the other. He pointed out in this connection that, since South Africa imposed restrictions on the domestic production of wine, it might under the provisions of the Suggested Charter restrict imports of raisins. If quantitative control were prohibited, many countries might turn to state trading in order to accomplish the same ends. Would that be desirable? LONDON E/PC/T/C.11/2727 geàg 10 . MCCARTHY (Australia) falt that the use of quantitative vo restrictions s necessary in connection witht he maintenance of effective price cone on- trolsAustralia. In some cases domestic prices might differ from fer rom world rices. If the domestic prices was lower export restrictions wouldtiDns rvuld to prevent undue depletion of domestic supplies. stic :ulci On the other domestic price was higher, restrictions would be strictions obe necessay tD ooding of the Australia market. an appropriate exception-pr:pritct excption ted in the Charter partiting the use of quantitativehc use of aucntitatve ction witht the anforcement of price controls.nunt of price contrDI -paragraph (d) paragraph of Article 10,dra:oh '2 oD ..rtic9, eption for commodity agreements in accordance Sreertents ir. accDrance vwith VI, he pointed out that a possible iintd -ut that r^ssib1s international l might be entered into outside of the frameworkred înto -Dutside :f th-- wvork ed to keep the question open until aftereeo the question o'en until aftr ies .sulttLtiDn with th :De r partie concerned. He felt th:t the provisions ve restrictions should be amended so as to ct!Dns should b, :raûndea so 0asa strictions for of qurnitativ_ restrictions for protective purposes in pecial caves. In s. c.ses a h1,lh protectile tariff right exclude aIl low some imports and perphapslower prices.so'.-.-ej i..pots .nà derh:xps lo prices. graph 2 of Article -ara*.rc Mh (e) :2 parwo:raph 2 :f ..rtic19, he ow serious loopholes. Froo;ording :.-ight lllD:: ScrlOU loohol For ex- teral restriction a inr u, îr.s gni?icr.r:t intzrn:.1 retrîct a country might. ts. He was simply raising the arg: on i:7.r.Drts. 11; J si-.-ply r-isinghe afting Committeei;ld bc cons1rdrd by the JDi3aI'ting Oo-Dzitt, ke Australia, had the ndicted thft C ld .. lil;e .-ustralia. h ad he me time as neighbouring pric_ cDtrols -..t the S.a.: tim! a:s nsighb3urnrg that in s were not Xn:iorciii such cDntrois. Hc iXît thLt considering the questiogn pof a past represrtctave period (.ticle 19, parararh2 (e)) consideration ghshul2bce-ient the tarif situation prevailin_ in ch ^ perioa. LONDON E/PC/T/C.II/27 Page 11 Mr. JOHNSEN (New Zealand) said that his delegation had submitted as &elevation ha i submritted a Wdocument (No. E/C/T/C.Il/22) .ich contained proposals for an addition to rticle 19 designed tzZoZer cou-nties: sch as Neow ealand. igh productivity and small gih In vie e Neofc alnntsJductivity ard srall population, only oa herelatmary industriesively sall proportion G-,' products af lirinofyndustries rted.were consumed ithin thccountry, thz oaaco baT; cxnpo-td. ot only by the As to her scon&iry industri.es, t:hmy i.nil bean liinitd hat many basic raw doiic-tic rtarlet, but .lso by tha ? *tthat rnLain basavi therefore heavyo b ir.nportud. h:er import recuira: ntz ;:erc thoref ore havy capital ered a ridc ran,¼ , v:hich included bGth consoumtior. lr.d captal goods. To provide f')r such rcquironicnto, s o.tioactv ry :rkui; i'or e products v;asential. d Nev Zcalnmd had a -er7 hig1à icv.-l ci' oves r.de - batil Thort chandiseexports - in rlolntion ao hiIoulation. In 193ion h. t--al ise om and trade per hea ofcpopul:\t-io:s t-vicc trbt of thc uniW.i inZdom times tht of the Unitt1 E; teS-. ormalThat gave a `irly cicar ir.di:-~.ti r or. N.;; -:.lanci ts. sensitivity to conuiùion: which _cteJ nor overz;l. n..rke enet It had aso becomiî rer-t thit. irn uer tcernployrnnt fr ification of her increasing population, there we reZ f`;r c' -f'rsn cf her econo. Twhe ecpe f orincrea2ccploynernt Jt1n v ndustris vras hineryalimited, ovng to the increased use of insravec rnu. Aemployment; : n endeavour hd tzbc adc t i'r.d faratrnucs fcaicym; and f suitablethe only scope i that direction -s th_ doveluz-t o;,Îondary industries. Theo consideration of quantitative or qualitaivaimpc. control ew Zealnd and involved two issues from the point of vi: ? Ncv' a11l1 countries in a similar position. ssible to Costs of primary producers should. be kpt nt .o. b1e to arkets> Itenable New Zealnd' prinry proiut: tocompete ir: ovse, x>rlke hich was therefore desrablcthat thlecost of Rmanufactariv;i gooClsch were LONDON E/PC/T/C.II/27 Page 12 used by such producers should not be inaflated through high tariffs. A tariff was an inflexible implement. Dniert. There could be no certainty as fect itse efcivencs, unless a high enough rate was fixed to ma-e it absolutelyy prohibitive.w Thats as undeirable, as some imports would have to be permiattemped as coactitive Fftor. urthermore, duties might have ptoe be aplid toa wider rgoange of ods than might be available alfrom loc industry. It wormally as not nmina1ly possible to alter the tariff to meet irccumstances of suz a nature. Another factfora in thwe use o triffs as the difficulty in deter- mining at the outset what easonable and awould prove a re ar.d a-dequate margin of protlso tosoection. That apNeplieao subsidies. The w Zeland delegation were of the qopiniont that the use of aualitaive regulation of imports as n aid to devdelopment of industry haimuch to comnnend it. ith resspof import ect-to the general uz cmcart control, the policy of mployment an dNew Zealandndards of was on of full mnent acnd imed stard.aXds of living. ng Aos a result, there ws a high levo G nCrding ,pe in the country, and a cdonseuent strong demalfor consu-:rn goois ofall classes, ammany of which were imp orted. At th sr time, under a.policy.f planned national development, large importations of industrial equipment and aterirs ad to be dai. Thciere waas little doubt that in the rcumstnces there would be constand it was ant pressure on overseas funds: t's therefore desirable to gmportsive priority to the more essential irts. Newr 'caland.sitivity to oversee conitions, her dependence on heavy import requirements made ita narrow range of exports, ci^e1C ort require-ents maie it neceassary for her to have constantly nvailzible Cosderable eimnt of . It overdse funds, o well as means to contra h poc-- t It wouli ot rols. be possiblew periodiclly to institute r;-Ove'Contr That vrou have too disturbing an effect on trae. hould e f't that any control exet1î 'er inMorts shoulderated ithd a view to expanding trade; i.e. al. unisavailable for that LONDON E/PC/T/C.II/27 Page 13 purpose should be expended on imports. Subject to that condition being observed, he considered that the maintenance of quantitative or qualitative regulation of imports was justified, and that provision should be made to that effect th.t eifect. He paoinartgea out th-Article p>rph 2 of Lrticla 21 provided that on the basis quotas be o.lloc.ate bsi of' aX past representative perod. Hle wonmderd why a.licensing systershould not also be based on a repres- entative period. r. eI'Yer11Ts Unite;States) ropicdthat in the case of licences the rnule of nona-doiscriinatioroperated ntzatically since the trader obtaineing the licence vuld bofree to purcurelehase on the basis of p ons.commercial conid(tiior dMr. aJOHNSEN (New Zc.n&)d tat New Zealand granted licences on the basis of a previous Period. M. MLVENS (nited Sat Newtates) said tho:caland wvasactually allocated awi global quota thin the meaning of the Charter. It was agremmied that the Coittee Wewould meet on dnesday, 30 October 1946. The meeting rose at 6.25 p.m.

GATT Library

tw634sw1005

Committee II. General commercial policy

United Nations Economic and Social Council, October 26, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

26/10/1946

official documents

E/PC/T/C.II/8 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/tw634sw1005

tw634sw1005_90210214.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/8 SOCIAL COUNCIL ET SOCIAL 26 October 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II GENERAL COMMERCIAL POLICY Remarks of the Polish Observer concerning ltem B of the Agenda According to the interpretation given by the United States representative of the provisions contained in Article 18 of the Charter suggested by the United States Government, the aim of the proposed tariff negotiations would consist in the lowering of the high tariff levels as well as in the stabilization of the lower ones. In this connection it should, perhaps, be reminded that, insofar as continental Europe is concerned, certain countries do not possess, for the time being, any tariffs expressed in a convertible currency, as their own currencies have not yet been stabilised. There are even cases when the perception of any custom duties (even those expressed in local and inconvertible currency) is temporarily suspended as a measure of facilitating the much needed imports. Some of these countries are both Members of the United Nations and signatories to the Agreement on International Monetary Fund. They are supposed to join the proposed international agreement on world trade. Their position in regard to the International Monetary Fund is regulated by the provisions of Article 20, Section 4(a) of the IMF Agreement. Having been, all of them, occupied by the enemy, they are given, in fact, the opportunity of deferring the notification of the par values of their currencies of a certain period after the beginning of the exchange transactions of the Fund. Thus, their tariffs are likely to remain for some time either suspended entirely (or partly) or, at any rate, not expressed in a convertible currency. LONDON E/PC/T/C.II/8 Page 2 This transitional period may go not only begond the date of the proposed tariff negotiations between the members of the Preparatory Committee, but, possibly, also beyond the day of the entry into force of the future trade agreement itself. But after having stabilized their currencies, the countries in question will be in need of either re- establishing their tariffs or of revising them in accordance with the new par values of their currencies. As in the meantime they may become signatories to the proposed agreement, their special situation should be met by means of including among those of the provisions of the future agreement which deal with the transitional period, some provisions referring to these particular cases. These provisions should probably include: 1. the right, for a signatory of the proposed agreement but at the same time availing himself of the exception contained in Article 20, Section 4(a) of the IF to introduce or to change his tariff after the entry into force of the new agreement; 2. if necessary, an undertaking concerning his future tariff negotiations corresponding to those proposed in Article 18 of the suggested United States Charter.

GATT Library

gv966jm4613

Committee II. General commercial policy : Agenda Provisionally Adopted on 18 October 1946

United Nations Economic and Social Council, October 18, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

18/10/1946

official documents

E/PC/T/C II/2 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/gv966jm4613

gv966jm4613_90210203.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C II/2. AND ECONOMIQUE 18 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II GENERAL COMMERCIAL POLICY AGENDA PROVISIONALLY ADOPTED ON 18 OCTOBER 1946 A. General Commercial Provisions: 1. General Most-Favoured-Nations Treatment 2. National Treatment on Internal and Regulation 3. Freedom of Transit 4. Antidumping and countervailing Duties 5. Tariff Valuation 6. Customs Formalities 7. Marks of Origin 8. Publication and Administration of Trade Regulations - Advance Notice of Restrictive Regulations 9. Information, Statistics and Trade Terminology 10. Boycotts B. Tariffs and Tariff Preferences : 1. Reduction of Tariffs and Elimination of Preferences C. Quantitative Restrictions : 1. General Elimination of Quantitative Restrictions 2. Restrictions to Restore Equilibrium in the Balance of Payments 3. Nondiscriminatory Administration of Quantitative Restrictions 4. Exceptions from Rule of Nondiscrimination D. Exchange Control : 1. Elimination of Exchange Restrictions in Relation to Current Commodity Transactions 2. Nondiscriminatory Administration of Exchange Restrictions E. Subsidies : 1. General Undertaking regarding Subsidies - Elimination of Export Subsidies - Exceptions F. State Trading : 1. Nondiscriminatory Administration of State-Trading Enterprises 2. Expansion of Trade by State Monopolies of Individual Products 3. Expansion of Trade by Complete State Monopolies of Import Trade LONDON E/PC/T/C II/2. Page 2 G. Emergency Provisions - Consultation - Nullification or Impairment : 1. Emergency Action on Import of Particular Products 2. Consultantion - Nullification or Impairment H. Relations with Non-Members : 1. Contractual Relations with Non-Members - Treatment of Trade of Non-Members I. General Exceptions : 1. General Exceptions J. Territorial Application 1. Territorial Application - Customs Unions - Frontier Traffic.

GATT Library

mp495kn0657

Committee II : General Observations of the Czechoslovak Delegation on the Aganda of Committee II

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/24 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/mp495kn0657

mp495kn0657_90210232.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/24 AND ECONOMIQUE 28 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II: GENERAL OBSERVATIONS OF THE CZECHOSLOVAK DELEGATION ON THE AGANDA OF COMMITTEE II A.1 General Most-Favoured-Nations Treatment: The Czechoslovak Delegtion is in agreement with the gereral formula of the most- fovoured-nation treatment as sugger ced ir Article 3, paragraph 1 of the Chater, and also requests the members of the Preparatory Committee to consider whether the definition of the most-favoured-nation clause as worked out by the League of Nations and alrealy included in most commercial treaties, would not seem better suited for the purpses of a general expansion of vvorld trade. A .2 - National Treatment of Internal Taxatior and Regulation: The Czechoslovak Delefsrion agrees with the provisions of Article 9 of the Charter. Czechoslovakia has always afforded equal treatment to importd goods with to internal taxation whatever their origin - has been. The Czechcslovsk Government has no intention of introducing legislation discriminatory as to internal taxtion of imported goods. With regard to the regulations governirg the pro- curement by governmetal agencies of supplies for public use-, other than for military establishants, the Czechoslovak Deleation feels that this exception shouil also apply to the supply of goods for either governmental establisments or establishments of local authori- ties which by their nature are public services, provided that equality of treatment is granted to all foreign competitors. LONDON E/PC/T/C. II/24. Page 2 A - 3 -Freedom of Transit: Czechoslovakia has always maintained the principles contained in Article 10 of the Charter . Aoreover, Czechoslovakia sigend and still adheres to the Barcelona. Corvahtion of 1929 which in some, respoce; is more elaborate and precise. It would be well worth while if the Committee cauld also deal with the question as to the relation batween a future Charter of international trade and the abave-mentiored conver- tion. In the opinion of the CzechosIovak Delegation the provisions of the Charter apply to the freecdom of transit by air as well. On the other side, however the Czechoslovak Delegation understands that the particular provisions of the Chartar do not concern the right of air navigation over national territory and the establishiment of air lines. This matter is competently dealt with by "PICAO", of which Czechoslova- kia. i a member. In connectior with Article, 10 the Czechoslovak Delegation wishes to emphasize the impertance of paragraph 3 of this Article providing for reasenable charges or traffic in transit. We, know from our awn- experience that post-war reconstruction of trade in. certain European. courtries is being retarded by excessive freight rates and various other abnormally high transport charges as imposed. at present, as, for instance, in Gerancy. A.4 -Anti-dumping and countervailing Duties: The Czechoslcovak Delegation fuels that the definition. of the Charter does not cover all cases of dumiping in general, and submits for the consideration of members the question whether also cases of an extraordirary influx of geods from one country to the other due to special go ermental or other .measures, like hidden subsidies or refunds, prolonged working hours or other unfavourable working condi- tions or which are due to a depreciation of currency not provided for by the Articles of Agreement of the Irternatioral Aonatry Fund should not be dealt with by the Charter. LONDON E/PC/T/C.II/24 Page 3 Ou the other band, the Charter ought to provide also a guarantee that unti-u^.u::r' and countervailing will not be The Caech `slovak Delegatior with. to, point out that the value of a product for inty purposes should be qu' to the sum of the pur- chase, price of what preduet in plance of its production plus all costs (packing, '2é, :.'"27. `t, insurance. and other charges) originating prior to the arrival of the preluct at cutatems territory of importing countrise. The basi for this valuantion Sheuldf be shown in the Custems fk:-.tiiti. s may in certain circumstances be loked upon is barriers r, foreign trald that sheuld be understimated Czecheslevakia is in favour of as much simplification as can be achieved through an international cenvention. The Czechoslovak Delegation is therefors in agreement with the provisions of Article 15 of the charter Moreover, it seems to us that this Article 2u__ uct not whole field of customs fomraclities in general, as comperal, for instance, with the Geneva Convention of 1925, Mearing in ai.L. that majority of Countriés represented at the preparatory Committee, adhere to the above-mentioned Convention, we submit that the provision of the Convention, duly revised or amended, should be incorperated in the Charter or it should be recommended to States who did not adhere to them that they should do so as soon possiole. A. 7-- Marks of Origin:: The Czechoslovak Delegation that it is very important that a product should be , protecred on the worll market against abuse Of regional marks of origin and that the sale of good under the name of another State ought to be regarded as urfair competition. We are LONDON E/PC/T/C.II/24 Page 4 wondering if it woul not be practicable to have a central register foe regional markes of which should be internatienally protected. On the other the Czchesolvak Delegation is of the opinion that obligatory marks of agrgin are a great impediment to international trade. Therefere it may seen advisuals to abolish obligatory maks of origin altogether and level it so the descretion of every mamer to emphasise the superior quality of its by marks of origin. A.8 - publication and Administration of Trals regulations - Advance Notice of Restrictive Regulations: The Czecholovak palagation agrees with paragraph 1 and 2 of Article 15 cf the Charter. Concerning paragraph. 3, we would prefer the provisions of Article 4 of the Ceneva Cenvention which merely aim at having such changes duly published in advance. As to some technical details the Czechelevak Delegation will be plansed to present its views in the technical subcommittee. A .9 - Iaformation Statistics and Trade Terminology As there are countries whose statisticasl service for budgetary and other ro.fsouz like shortage of specialists etc., is not yet develop- ed to such as extent as that of other courntries, the Czechoslovak Delegation would like to suggest that a provision be incorporated into the Charter advising the ITO to work cut a scheme of reasonable minumum basic statistical requirements wthich are absolutely necessary for the purraposes of the . Organization and to be supplid regularly by members. B.l - Tariff s and Tariff Preferences: It has always been the policy of Czechoslovakia to reach lower tariff rates by commierical agrements with other countries. .ry reduction of duties Was automatically applied to othar countries on a multilateral basis witht whem Czechoslovakia had existing commercial treaties and to whom she greanted most-favouredi-nations treatment. Czechoslevakia is today, as she always has been, in. favour of a policy envisageing a lowering of custons barriers and finds herself threfore LONDON E/PC/T/C.II/24 Page 5 in agreement with the precedure proposed in Article 18 of the Charter As to the practical appliconton of that produre the Czechoslovak Delegation would like to the following observations: (a) Negotiation concerming the re. auctions of custon duties should not be obligatory .t ;`;9S> two States concenred as there may be countries whose reciprecal trade has alway been, and for natural reasons is .r ct.\ to r -.i1 very small and hence not at all representative. (b) Negotations should concern primarily products typical and most representative in the commerce of the. respective two States. (c) The Czecheslovak Delegation assumes, having in mind that the future negotiation will be conducted at a time when probably many states will be in a position of uncertainty as to future developments, that the future schedule of custom. reductions wvould be. progressively enlarged by furthern bilateral negotiations, applied multilaterally to other .members by most-favoured-nation tretment (3) A sufficiently flexible provision should be included in the "Chartter" as to possible revisions of individual reductions granted. If no such previsions were made in the "Chartor' many stats would probably hesitate to grant reductions at the present moment, having in mind future changing conditions of their own economies the general economic development of the world and changing relations among its different economic regions. (e) It should also be borne: in mind that countries which have highens tariffs should grant greater reductions than low tariff countries. (f) The Czechoslovak Delegation assumes that countries having specific tariffs wouldl always have the chance , prior to the grantirng of reductions of bringing tariff protection. into harmony with its own exchanrge rate. We feel also that ITO should be entrust. with a continuation of all work concerning the tunifiction of tariff nomenelature.. LONDON E/PC/T/C.II/24 Page 6 C and D - Quan titative Restrictions and Exchange Control; The Czechcslovak Delegation feels that it should be a common endeavour of all countries to remove raiUllv all quantitative restrictions. Hewever, it seems to us for practical `'*S`Ol impossible that all countris could arrive at the state of a complete elimination of these restrictions simultaneously, because this depends to a great extent on the economic and financial conditions and development of the counties concerned, and on conditions Of commercial policy pre- vailirng in those countries which are predominant as Czecheslovakia's commercial and financial partners. Czechoslevakia does not intend to maintain quantitative restrictions for any other rasons but for the safeguarding of the equilibrium of her balance of payments. Since a substantial part of Czechoslovakia's foreaign trade was done with countriess with inconvertible currurcies, and since there are some industries in Czechoslovakia whose prolucts cannot be markettd elsewhere, it follows that due to a considerable shortage of convert- ible-currencies, these must be used ccnoznicnJLly and primarily for reconstruction. purposes is well as for the purpose of fulfilling obligations of a financial character. It seems to us, therefore, that an elimination of quantitative restrictions, .going hand in hand with the procedure as foreseen in Article XIV of the Articles of Agreement of the Interrationral Monetary Fund, would be more appropriate. Thus the various provisions of the Charter concerning the elimination of quantitative restrictions should, especially as to time limits and other conditions run parallel with the provisions of Article XIV of the above-mentioned agreement. Moreover the elimination of exchange' restrictions should preecede the complete elimination of quantitative restrictions by a period which might afford to the State concerned a. certain breathing space so as to enable it to accumulate; a certain amount of monetary reserves and to prevent a short-term disturbance of its balance of payments due to a sudden abolition of the rest of the quantitative restrictions still in force. LONDON E/PC/T/C.II/24 Page 7 Ozechosiovakia endeavours evenr at present to hinder her imports and exports as little, as possible. It may be mentioned in this connection that the importation of most of the raw materials (about forty per cent of total imports) is practically free, as the control of it is maintained only for the-purpose of registratior of payments obligatopms. F.2 - Exparsior of Trade 'by State. monopolies of f Individual Preducts: The provisions of Article 27 should in the opinion of the Czechoslovak Delegation not apply to those govermental monopolies which in certain countries traditionlly have a financial character i.e. have been introduced as a suitable method of indirect taxation. Otherwise the country concerred would be cempelled to change the monopoly into another form of indirect taxation which would be an admiministrative problem of considerable difficulty. H. Relations with Nen-members: The Czechoslovak Delegation feels that it would be extremenly disastrous if the création of ITO would mean the formation of conflict- ing eccnomic blocs. we feel that each country should be entirely free to decide if and how far it could grant to some: non-members countries advantages which it grants in accordance with the Charter to meaber countries. The Czachoslovak Delegation is fully convinced that if some country is willing to grant these advantages to one or more non-member countries, that this cannot be regaraded as being in contradiction to the purpses and objectives of ITO; on the contrary, it might help to enlarge the scope of the priniciples agreed upon in the Charter to those countries which for some reansons which are unknown to Czechoslovakia, would not be inclined to acceptt the provisions of the Charter of course, it will re ain the desire of Crecheslovakia that Stetes as possible should become membrs of ITO.

GATT Library

sc709qm5852

Committee II : Interim Statement of the Chinese Delegation Regarding Article 8: General Most-Favoured-Nation Treatment

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C.II/31 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/sc709qm5852

sc709qm5852_90210239.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/31 AND ECONOMIQUE 30 October 1946 ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II INTERIM STATEMENT OF THE CHINESE DELEGATION REGARDING ARTICLE 8: GENERAL MOST-FAVOURED-NATION TREATMENT In view of the great importance of the unconditional most-favoured- nation principle to China's future trade relations with other countries, this Article is still under careful study in all its aspects by the Chinese Government. We would, therefore, like to postpone a final definition of our attitude in this matter. Meanwhile, we would like to seek some clarification, for drafting purposes, of the second sentence of Paragraph 1 , Article 8, relating to the "awarding of governmental contracts for public works". In our opinion this sentence should be so clearly worded as not to imply any restraint on the freedom of action on the part of the member government concerned. If the phrase "fair and equitable treatment" in this sentence means "same opportunity of bidding", as was explained by the United States Delegation at the fourth meeting of Committee II, then that sentence should be so revised as to convey clearly this meaning.

GATT Library

yv998yj9495

Committee II : Memorandum of the Chinese delegation of the question of "Tariff and Tariff Preferences"

United Nations Economic and Social Council, October 27, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

27/10/1946

official documents

E/PC/T/C.II/13 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/yv998yj9495

yv998yj9495_90210221.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/13 AND ECONOMIQUE ORIGINAL: ENGLISH 27 October 1946 SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II MEMORANDUM OF THE CHINESE DELEGATION OF THE QUESTION OF "TARIFF AND TARIFF PREFERENCES" The Chinese Government has all along maintained a single-stardard customs tariff universally applicable to our trade with all treaty nations. Its tariff schedule has been one of the lowest among existing tariff systems in the worla. In spite of the fact that Chira is economically and-developed and has been war-torn for eight years, she is prepared to make some selective reductions in the import duties on certain capital goods and indispensible materials that would serve to expedite her progress in industrialization. But on the other hand, an adequate messure of tariff protection must be given to various agricultural products and certain types of infant industry that vital to her national economy. We, therefore, prepose to provide for China, as well as for other under- developed countries, a "Transitional period of Industrial Development" during which we may impose or maintain a ressonable maesure of protective tarrif, to be gradually reduced with the advancement of industrialization. This "Transitional Period" should not be limited to any prefixed date but shall be determined in in accordance with the following, standards of industrial development respectively attained by various countries concerned: (a) When fifty per cent of their wage-carrring population are emplyed in modern industrial enterprises of production and distribution or (b) when fifty per cent of their national income is derived from modern enterprises of industry, trading and finance. LONDON E/PC/T/C.II/l3) Page 2 As regards the question of "Tariff Preferences", the Chinese Delegation hold the view that any system of preference constitutes a serious setback to the principle of the most-favoured-nation cause and tends greatly to limit its validity. We are aware of the fact this system has its historical origin and special reasons for its adoption, and that its immediate elimination would entail great difficulties on the part of the nations which have adopted it. Nevertheless, it cannot be denied that a special sphere is thereby created to the disadvantage of the nations which lie outside of this sphere. It is the traditional policy of China to accord unconditionally th, most-favoured-nation treatmet to its treaty nations. As it does not appear that all nations participating in this Committee would be ready to give up without compensation their preferences and as several delegations have also intimated their advocacy of regional preference, the Chinese Delegation, therefore, finds it imperatively necessary to declare that China, under these circumstances, reserves the right to adopt at any time similar measures until such time as when all nations stand ready to accept the most-favoured-nation clause without qualification. (Signed) CHI-LING TUNG W.W. CHOW K. S. MA

GATT Library

ck805nr3236

Committee II : Ninth Meeting held on Friday 15 November 1946 at 10.30 a.m

United Nations Economic and SOCIAL COUNCIL, November 15, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

15/11/1946

official documents

E/PC/T/C.II/51 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/ck805nr3236

ck805nr3236_90210263.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/51 SOCIAL COUNCIL ET SOCIAL 15 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Ninth Meeting held on Friday 15 November 1946 at 10.30 a.m.. Chairman: DR. COOMBS (Australia) 1. Statement by Representativ of the International Chamber of Commerce Mr. PHILLIPS, President of the American Chamber of Commerce in London, speaking as the representative of the International Chamber of Commerce, said that he represented, and spoke on behalf of, the leading trade, industrial and financial Organizations of thirty-one countries. To give a true consensus of opinion of all those interests, based upon his Organization's machinery of consultation and investigation required a great deal more time than had been at its disposal. It was most difficult to keep up with the rapid progress of the Preparatory Committee, and therefore almost impossible to interpret the views of the International Chamber of Commerce in terns of what had been decided by the several Committees and Sub-Committees. The International Chamber of Commerce's brochure No. 101, together with supplementary suggestions circulated as document E/PC/T/9 of 8 November 1946, represented the Considered policy of the International Chamber as so far defined by its Council. The most complex sections of the work of the Preparatory Committee were the commercial policy provisions of the future International Trade Organization Charter. The most valuable contribution the International Chamber could make to the Committee's work would be at a later stage, with its representatives could go through Article by Article the LONDON E/PC/T/C. II/51 Page 2 provisions agreed upon at the Committee's meeting. That would be done as soon as the Conference documents were published. The Chamber hoped to have available before the next meeting of the Preparatory Committee, or before the International Conference, a detailed commentary stating the views of world business on the proposals elaborated by the Government experts. He proposed, therefore, to concentrate on a few general aspects of the subject, in the hope that some of his remarks would be useful in the final drafting. Governments might later find that the political and economic difficulties from which most countries of the world were suffering might turn out to be an insurmountable obstacle in the way of adopting a really deteiled Charter covering all possible confingencies. The International Chamber feared that might be so, when it first studied the admirable Proposals put forward by the United States Government. The Chamber felt that the intention was perhaps too ambitious for the present state of the world. There appeared to be two alternatives. One was to agree upon a simpIe statement of objectives defined as precisely as possible, allowing merely in general terms for countries at present unable to realize those objectives to catch up at a later date. The other alternative was to work out everything in great detail, allowing for each country's individual problems and idiosyncrasies. The International Chamber of Commerce favoured the former alternative, mainly because it felt that the inclusion of every country's particular emergencies might make agreement possible in words, only to be nullified in acts later. The International Chamber had undoubtedly been worried by the number of detailed exceptions, and in some cases permanent exceptions, to the general principles of the proposed agreement. Obviously there would be little point an discussing matters at great length, if the resulting agreement was to be merely a reflection of what already LONDON E/PC/T/C.II/51 Page 3 existed without effecting any fundamental change. That was what the International Chamber of Commerce feared. Perhaps the Preparatory C0mmittee had succeeded in avoiding the dilemna. Another point, upon which the Chamber had placed great emphasis, was the need for translating international co-operation into practical terns. It seemed to the Chamber that a practical test of whether people really meant something by expressions of willingness to co-operate would lie in their willingness to accept some forn of international arbitration for disputes with other countries. If given Country was authorized by the Charter to do something in certain specified circum- stances and acted accordingly, and some other country held that the justifying circumstances did not actually exist, it was not enough to have a mechanism of investigation, or even of investigation coupled with some fonn of samction. There must be a reade..s to accept the decision of some imparialt international body. It seemed to the Chamber that the only way in which this could be achieved would be by the prior acceptance in the Charter itself of international arbitration as a recognized system of Settling at least those disputes which did not involve matters of essential policy for the countries concerned. The members of the International Chamber of Commerce would certainly be unanimous in their approval of the r,-ns. - -. present Conference to the most-favoured-nation clause. In the original Proposals of the United States Government, there was almost no reference to that valuable instrument of achieving non-disermination and multilateralis. That had now been remediced; and the International Chamber would merely urge that the exceptions to most-favoured-nation treatment provided in the Charter should be as few as possibIe and as clearly defined as possible. He desired in concluding to express his appreciation of the unfailing kindness and courtesy he had received from everybody connected with the Conference, and to pay a very special tribute in that respect to the extremely hard worked Secretariat. LONDON E/PC/T/C.II/51 Page 4 The members of the International Chamber of Commerce in all countries locked to the Corference with very great hope and with the most profound wishes for its success. Its failure would be an international disaster; and, if the Chamber could in any way contribute to staving off that disaster, the Conference could be sure of the Chamber's unstinted collaboration. 2. Statement by Representative of the World Federation of Trade Unions Mr. DURET, representative of the World Federation of Trade Unions, said that theWorld Federation of Trade Unions attached great importance to the questions being discussed by Committee II. He stressed the importance of provisions for a transition period. Imediate application of the long term provisions of the proposed Charter, without adequate regard for the transitional problems of less developed and war ravished countries, might have serious consequences. Such action might endanger efforts to secure stabilization of the balance of payments and carry out full employment programmes. It might make it difficult to reduce the disparity between the more and the less developed countries. He hoped, therefore, that a broad meaning would be given to the provisions for a transition period. With respect to provisions for a transition period, he urged: (a) A definition of the precise conditions in which countries might claim the applications in their favour. of transition provisions: (b) A detailed list of the exemptions from general obligations which might be granted to such countries: (c) Regulations to govern the relations between countries enjoying the "transitional status" and countries not granted such status: (d) A detailed definition of the conditions that wculd bring the transitional status to an end: LONDON E/PC/T/C.II/51 Page 5 (e) A statement as to the body responsible for deciding whether a country was in a transitional period, the extent of the special privileges to be granted, and the date when the special privileges were to be terminated. He asked whether countries would be able to preserve their economic sovereignty during the transitional period. He thought that the individual countries themselves would be most capable of deciding what measures would be appropriate to achieve full employment and stabilization of demand. The WFTU was made up of the trade union movements of a number of countries, some of which were taking part in the Conference while some were not. The Organization wanted to know, therefore, what the relations would be between members and non-members. It also asked what measures could be taken by the ITO to includce non-members to join. Use of sanctions and penalties would be dangerous, and might lead to the growth of competing economic blocks and international tension. With respect to the provisions on state trading in the Draft Charter, the WFTU wished to know: (i) What were the "commercial considerations" provided for in Article 26, and how those provisions would ensure stability of production and the development of new fields of production in the different countries: (ii) Why the obligation to publish the amount of foreign purchases in advance was imposed solely on countries having a state monopoly of foreign trade: (iii) Whether the "commercial considerations" provided for in Article 26 excluded reciprocal planned exchanges of goods, and whether such reciprocal exchanges would be considered discriminatory, if they were open to third countries. It was necessary for countries with planned LONDON E/PC/T/C.II/51 Page 6 economies to co-ordinate their policies with other such countries in order to facilitate much needed economic development. Article 26 seemed to penalize them. (iv) Whether Article 27 would require a state trading enterprise to import or export at fixed prices until the home or foreign market was saturated. The WFTU wondered whether states had sufficient power to ensure that the discriminatory policies which they renounced would not in fact be applied by powerful private organizations. If not, what Methods could be applied? The WFTU also asked what provision would be made for the conclusion of long term international agreements for the maintenance of full employment. Development of new industries might be impossible if time was not given, and stability was not provided, by such agreements. Article 8 (on most-favoured-nation treatment) seemed to imply that fundamental differences in production potential would not be taken into account. Was that so? Where there were differing levels of economic development, equal rights might not provide equal benefits. It was indispensable that countries carrying out full employment programmes should be able to protect themselves from deflationary depressions in economically powerful countries devoted to the policy of economic liberalism. Countries with planned economies should not have to suffer the consequences of depressions for which they were not responsible. The WFTU and tens of millions of workers were following the work of the Conference with great interest. It was hoped that international economic relations would be facilitated by the work of the Conference, and that the conclusions reached would alleviate the effect of depressions. The Conference should give adequate consideration to the differing economic positions of the different countries. The meeting rose at 12.50 p.m.

GATT Library

dx571dz3749

Committee II : Observations by the Delegate of China on Articles 10, 11, 12 and 32 of the United States Draft Charter

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C.II/35 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/dx571dz3749

dx571dz3749_90210243.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/35 AND ECONOMIQUE 30 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL : ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II OBSERVATIONS BY THE DELEGATE OF CHINA ON ARTICLES 10, 11, 12 AND 32 OF THE UNITED STATES DRAFT CHARTER Freedom of Transit (Article 10 - paragraph 5) We are in agreement with the provision in this paragraph except that at the end we would like to propose to add a proviso, namely: "Provided that the products which have been in transit can be identified at their destination to the satisfaction of local customs authorities as to their origin or country of export. " On Countervailing Duties (Article 11 - paragraph 2) In this paragraph (Article 11 - paragraph 2) we propose that the provision be amplified to include the following: "In the event of preferential treatment being accorded by a country to certain countries to the exclusion of other member countries, no countervailing duty shall be imposed upon the products imported from such other member countries against subsidies which are granted by the latter to such products as compensation for covering the preferential maregin". On Tariff Valuation (Article 12 - paragraph 2a). We have no objection to the principle embodied in the provision of this paragraph, We deem it imperative, however, that during the period of transition adequate allowance should be accorded to the countries in which monetary stability has not yet been achieved. We wish also to reserve our decision on the question of "actual value" prescribed in paragraph 2c of this Article. LONDON E/PC/T/C.II/35 Page 2 On General Exception' -(Article 32) We propose to add the following-, as exception (f): "(Measures) temporarily imposed to prevent, arrest, or relieve conditions of social disturbance, natural calamity or other national emergencies, provided that such measures areasurSs arc vthdraw' as soon as the said conditions case to exist.

GATT Library

ym927ck3779

Committee II. Procedure Sub-Committee. : Second meeting Held on Wednesday 30 October 1946 at 10.30 a.m

United Nations Economic and Social Council, October 31, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

31/10/1946

official documents

E/PC/T/C.II/W.4 and E/PC/T/C. II/W/2-31

https://exhibits.stanford.edu/gatt/catalog/ym927ck3779

ym927ck3779_90210289.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOIMC CONSEIL LONDON ECONOMIQUE 31 October 1946 E/PC/T/C.II/W.4 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II PROCEDURE SUB-COMMITTEE Second meeting Held on Wednesday 30 October 1946 at 10.30 a.m. Chairman: Dr. SPEEKENBRINK (Netherlands) Discussion of most-favoured-nation treatment The CHAEIRMAN welcomed Mr. Paranagua (Brazil) as an expert on most-favoured-nation treatment. He drew the Committee's attention to the new text of the last sentence of paragraph 1 of Article 8. Mr. PARANAGUA (Brazil) was not prepared to press the Brazilian amendment. At the same time be was not without apprehension as to the possible danger of passive resistance of members within the organization who would not comply with obligations. He felt also that it would be unfair to accord the same treatment to non-signatories as to sigatory nations. That was why he had suggested amendments (E/PC/T/C.II/6) providing for three main categories of agreements. The CHAIRMAN said that so far the Committee had been disposed to adhere to the United States version of the most-favoured-nation clause in, its discussions. Should that clause be altered? Mr. PARANAGUA (Brazil) wanted to be sure that countries which had not signed the Convention would not benefit by it. The CHAIRMAN understood that according to the existing terms of the Charter such nations would not benefit, even if another text were adopted, the principle of the Charter being that only members could benefit. LONDON E/PC/T/C.II/W.4 Page 2 Mr. ALAMILIA (Cuba) understood the Brazilian Delegate was concerned that the clause, in its present state, made no distinction between nations applying most-favoured-nation treatment and those who did not apply it, He believed that four classifications of members should be made: 1. Signatory members who applied .the. clause. 2. Members who had signed the Charter, but had not fully applied its provisions. 3. Countries which had not signed the Charter, but had applied the clause. 4. Countries which were not signatories, and did not apply the clause. The Charter provided for all the above cases. Mr. PARINAGUA (Brazil) cited the following example to clarify his argument: Supposing the United Kingdom, France, Belgium and Holland were to sign an agreement reducing import tariffs on motor vehicles by twenty per cent, the United States, which was not a signatory, would nevertheless receive the benefit from this agreement, as a result of the most-favoured-nation clause. The CHAIRMAN presumed the Brazilian representative was referring to open conventions. Mr. HAWKINS (United States) said that there were three main classes of countries to be considered in connection with the most- favoured-nation provisions, namely: (a) Members of the Preparatory Committee who would carry out Article 18 by negotiating mutually satisfactory tariff reduction schedules vrith other countries of the Preparatory Committee. It was hoped that the seventeen countries, which were widely representative, would agree to such tariff reduction schedules, thus setting a standard by which it LONDON E/PC/T/C.II/W4 Page 3 could be judged what othercountries might be expected to do. Here there was no problems with respect to the most-favoured-natïon principle. (b) Other countries who would be entitled to most-favoured- nation treatment, if they negotiated tariff reduction schedules with any of the seventeen countries. Previous negotiations conducted by the seventeen would have established a standard for concessions which would have to be granted. (c) Non-member countries which would not receive the benefits of the most-favoured-nation clause Members could not extend the benefits of the Charter to non-members through bi-lateril agreements with such non-members. Mr. SHACKLE (United Kingdom) thought it logical that members should not extend most-favouled-nation advantages to non-members. It was only fair that nations not accepting obligations should not receive benefits. Open conventions entered into by three or four countries would probably reflect the peculiar circumstances of those countries; and therefore it might be difficult in practice for others to join. Thus there would be danger of division, within the organization. Since it would be difficult to formulate conventions really acceptable to a large number of countries, open conventions vvere not a wise course. The CHAIRMAN saw; three main difficulties requiring attention. First, there was the problem of open conventions. Then there was the question of non-members; and finally there was the question of how old established commitments with non-members could be terminated after the negotiations among the seventeen countries. Mr. HAWKINS (United States) felt that Article 31, dealing with relations with non-members, raised difficult and important problems, which it might be easier to handle, after it was know which countries LONDON E/PC/T/ C.II/W.4 Page 4 would remain outside of .the organization. The Preparatory Committee might consider it advisable not to adopt Article 31 at the present time. Instead it might submit Article 31 as a draft for consideration by the full Trade Conference. At the time of the Conference it would be more definitely known which countries were likely to stay out of the orgardzation. His suggestion was purely tentative. Mr. ALAMILLA (Cuba) thought that present consideration should be restricted to application of the most-favoured-nation clause to member countries. Mr. McKINNON (Canada) thought that the suggestion of the Cuban Delegate would greatly restrict the range of the discussions. He would like the discussion of the treatment to be accorded to precede consideration of the question of who was entitled to receive it. Mr. ALAHILIA (Cuba) said that Cuba agreed with paragraph 1, Article 8. His suggestion that discussion should be narrowed at the moment was intended to make possible the clarification desired by the Brazilian Delegate. Cuba would be glad to proceed to other matters, if the Sub-Committee so desired. Mr. LECUYER (France) wondered whether the Sub-Committee should attempt to deal with Article 31. Perhaps it should se discussed in the main Committee (Committee Il). The discussions of the Sub-Committee should be limited to relations between members. Paragraph 1 of Article 8 set forth the most-favoured-nation pinciple in its unconditional form. France supported the unconditional form, since conditional most-favoured-nation treatment was inconsistent with the purposes of the Charter. The CHAIRMAN agreed that discussion should be limited to relations between members. A letter might be written to the Chairman of Committee Il, suggesting that that Committee should tiscuss the procedure for consideration of Article 31. Mr. SHACKLE (United Kingdom) thought that limitation of LONDON E/PC/T/C.II/W.4 Page 5 discussion to relations among members, as suggested by the Cuban Delegate, would not unduly restrict the scope of the discussion. It would be possible to discuss relations between members reducing tariffs and members not reducing tariffs. The discussion might include the proposed obligation of member countries to extend to other member countries benefits which had been accorded to non-members. He thought that the application of most-favoured-nation treatment to members could be based on paragraph 1 of Article 8. Mr. VIDELA (Chile) said he would have comments to make on paragraph 1 of Article 8, after agreement had been reached on procedure. He supported the Cuban Delegate's suggestion. Mr. HAWKINS (United States) proposed to limit the discussion to Article 8 and to directly related questions. The Chairman would rule whether subjects were directly related to article 6. He further suggested that delegates should present any proposed amendments to the Secretariat, and that the Secretariat should call the Committee's attention to any written amendments. Such amendments should be discussed in the order of the subject matter of Article 8. Actual drafting to be done by the Secretariat. The CHAIEMAN had one objection to that suggestion. At the last meeting agreement had been reached on the first sentence of paragraph 1 of Article 8. He felt it would be advisable to finish the discussion of that sentence before going on to other topics. Mr. PARANAGUA (Brazil) repeated that he was not insisting on the adoption of his proposed amendment. He had only wanted to make his point of view clear. He felt that the present provisions would tend to paralyse the Charter to some extent. He pointed out in that connection that some countries, particularly American countries, applied very general agreements without providing for. specific tariff reductions. Negotiated, specific tariff reductions were more common in Europe than on American countries. LONDON E/PC/T/C.II/W.4 Page 6 Brazil, like France, was prepared to agree in principle with the general provisions of the most-favoured-nation clause. He pointed out the similarity between the provisions of the most-favoured-nation clause in the Charter and those incorporated in the League of Nations draft of 1929. From a juridical point of view the League of Nations draft was periect; and he suggested accordingly that it should be adopted. The CHAIRMAN felt that the question of which text was to be adopted did not fall within the province of the Committee. Mr. HAWKINS (United States) felt that a question of such importance could not be decided in an off-hand way. Many changes had occurred in the world since the League of Nations document was drafted. New measures, such as exchange taxes, were not covered by the League of Nations text. He thought it would be necessary to ascertain what subject matter each text covered before deciding which of the two texts was to be adopted. The CHARMAN thought that experts should be asked to make a study of the matter, and report their findings to the Committee. Mr. PARANAGUA (Briazil) argued that, as the clause in the League of Nations draft had been accepted by many nations, and had been reproduced in commercial conventions, the Committee should choose between the draf ling in the Charter on the one hand, and the League of Nations draft (brought up to date by the inclusion of new subjects) on the other. lr. VIDELA (Chile) seconded the Brazilian proposal. Mr. SHACKLE (United Kingdom) felt that there was no substantial difference between paragraph 1 of Article 8 of the Charter and the leaguee of Nations draft. He suggested asking the Secretary to study the question, and prepare a paper on any differences which the Committee might like to discuss. The CHAIRMAN stated that the Secretary was prepared to do so, LONDON E/PC/T/C.II/W.4 Page 7 and would welcome assistance from members. Mr. Mc.KINNON (Canada) thought that further discussion of the second sentence of paragraph 1, Article 8, should be postponed until it had been decided whether the American or the League of Nations wording would be used at the beginning of the paragraph. The CHAIRMAN pointed out that the Technical Sub-Committee was waiting for the Sub-Committee on Procedures to consider the second sentence. He thought discussion of paragraph 2 of Article 8 should follow consideration of paragraph 1. Mr. SHACKLE (United Kingdom) suggested that the United States draft of the most-favoured-nation clause should be accepted provisionally so that the Committee could continue with its work. There was little chance that any important difference in substance would be found in the American and League,of Nations wording. The CHAIRMAN suggested that he might consult with the Secretariat concerning the agenda for the next meeting. In response to a suggestion that Article 9 should be discussed in the Sub-Committee on Procedures, the Chairman said that he would discuss the suggestion with the Chairman of Committee II. It was agreed that the Chairman should call another meeting of the Sub-Committee for Friday night or Saturda.y morning. The meeting rose at 12.35 p.m.

GATT Library

hc625jr3631

Committee II : Proposals by the Cuban Delecation. (Quantitative Restrictions)

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/18 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/hc625jr3631

hc625jr3631_90210226.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C. II/18 AND ECONOMIQUE 28 October 1946 SOCIAL COUNCIL ET SOCIAL ENGLISH ORIGINAL: SPANISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II PROPOSALS BY THE CUBAN DELECATION (QUANTITATIVE RESTRICTIONS) The Cuban Delegation proposes:- (a) That the following paragraph be added to paragraph 2 of Article 19 of the Charter: "(f) Temporary restrictions on the importation of any product intended to protect, for a definite period, a new industry in countries which have not not completed their industrial development." (b) That the following words be emitted from Article 20 of the Charter, paragraph 3, letter C, nultbaate line, after the word "Chapter": "the suspension of which the Organization does not recommend against. " and to introduce the following additional paragraph:- "The Member who has brought the matter before the Organization may proceed in the same mannner if the Organization has not given its decision within three months of the matter being placed before it by the Member." (c) That the following 'new paragraph be inserted after the word "product" in the 13th line of paragraph 2, Article 21 of the Charter: - "The representative period which would serve as a basis for the fixing of quotas should be based on the years in which import trade in the member state establishing the systern of quotas has not been restricted by quantitative measures, high tariff protection or other trade barriers.

GATT Library

yb943dw1670

Committee II : Proposals Submitted by the Cuban Delegation to Sub-Committee 1

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/16 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/yb943dw1670

yb943dw1670_90210224.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/16. 28 October 1946. AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II PROPOSALS SUBMITTED BY THE CUBAN DELEGATION TO SUB-COMMITTEE 1 According with the statement made in the Meeting of Committee II held on Friday, 25 October, the Cuban delegation proposes: (a) That after paragraph 1 of Article 8 of the suggested Charter, and before paragraph 2, be inserted a new paragraph, which shall be numbered 2, that reads as follows: "In order that any member may enjoy the most favoured import tariff granted to another member, it shall be neccessary that any such member maintains wages, working conditions and social insurance benefits for its labours similar to those of said other member". (b) That at the end of former paragraph 2, which according to our amendment (a) now will become paragraph 3, the words "and shall be subject to the process of elimination pursuant to the provisions of Article 18" be deleted. (c) That a new paragraph, which will be numbered 4, be added after paragraph 3, reading as follows: "4. The preferences to which paragraph 3 (now numbered thus as a result of our amendment (a) refers can only be reduced or eliminated by the proceeding established in Article 18, as long as the treaties or conventions which created such preferences remain in force, if the country which enjoys such preferences gives its consent for their reduction or elimination". (d) That at the end of sub-paragraph (a), paragraph 1, of Article 18, after the word "preferences", be added the following words: "except as determined in paragraph 4 of Article 3". LONDON E/PC/T/C.II/16. Page 2. (c) That at the and of sub-paragraph (b), paragraph 1, of Article 18, the following words be added; "Provided: The situation of any member with respect to the member enjoying the most-favoured-nation import tariff is that contemlated in paragraph 2 of Article 8". (f) That at the end of paragraph l, Article 18, (as modified by our previous amendments) a new sub-paragraph, (c), be added, reading as follows: "(c) The relative real level of tariffs rates of each country in relation to hte rates of other members, shall be appraised, taking into consideration the special situation of thosecountries which are in the early stages of their industrial development The letter countries shall be permitted to maintain at an adequate level those rates directed to protect certain items of their agricultural and industrial production showing in their internal commerce an index indicative of being basic products in treir economics, or which are essential to maintain high levels of employment and real income".

GATT Library

mk154vg0654

Committee II. Quantitative restrictions. : Observations by the Brazilian Delegation

United Nations Economic and Social Council, November 7, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

07/11/1946

official documents

E/PC/T/C.II/44 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/mk154vg0654

mk154vg0654_90210254.xml

GATT_156

RESTRICTED United Nations Nations Unies LONDON E/PC/T/C.II/44 7 November 1946 ECONOMIC CONSEIL ORIGINAL: ENGLISH AND ECONOMIQUE SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II QUANTITATIVE RESTRICTIONS Observations by the Brazilian Delegation 1. The Brazilian Delegation believes that countries should be permitted to impose quantitative restrictions on imports, for balance- of-payments reasons, in three cases: (a) when such country actually has a deficit in its balance of payments. (b) when there is an evident probability that such deficit may develop in the near future (c) when a country has very low monetary reserves. 2. Such restrictions should, however, not be permitted unless (a) in respect of the first two cases foreseen above, a country does not possess high exchange reserves or (b) the international organization (Fund or Bank) cannot supply or guarantee to supply the necessary means (i) in respect of the first two cases foreseen above, to cover such existing or probable deficit and (ii) in respect of the third case foreseen above, to compensate for the lack of reserves. 3. The Brazilian Delegation further proposes that in the computation of exchange reserves exceptional reserves accumulated during the war should not be included, as they represent, in the main, imports necessary for the maintenance of the real capital of a country, which such country was unable to make during the war. LONDON E/PC/T/C.II/44 Page 2 4. The Brazilian Delegation further more suggests that countries in early stages of industrial development, should be permitted to reserve part of their exchange receipts on current account for the purpose of industrial development, and to be permitted to impose such restrictions on imports which, without restricting total imports, allow of the selection of imports in accordance with the requirements of industrial development. 5. The Brazilian Delegation believes that there would be no need for special provisions as to balance-of-payments restrictions during the post-war transitional period, if the present proposals should be accepted by the committee. 6. The Brazilian Delegation wishes to express its full agreement with the remaining provisions of Article 19 of Section C of the American draft charter.

GATT Library

gj845db2695

Committee II. Quantitative restrictions. : Suggestions by the New Zealand Delegation

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/22 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/gj845db2695

gj845db2695_90210230.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED AND ECONOMIQUE LONDON E/PC/T/C. II/22 SOCIAL COUNCIL ET SOCIAL 28 October 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTARNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II QUANTITATIVE RESTRICTIONS Suggestions by the New Zealand Delegation The following sub-paragraph is suggested for addition to paragraph 2 of Article 19 of the United States Druft Charter. Quantitative Restrictions Article 19. Paragraph 2 - addition of' sub-paragrarh (f) The provisions of paragraph l of this article shall not extend to the following: (f) Quantitative control of imports on a seleectîve basis applied by countries. (1) Which are heavily dependent on a high lovel of imports and exports, and (2) Which are in need. of à diversificaton of their economies in order to achievé anc maintain full employment, and (35) Which have a local market 5o small in relation to the productive capacity of an officient manufacturing industry in the product or products concerned as to leave efficient local production ùnduly threatened with injury in the absence of such control. Provide. (1) that members shall notify the Organization (a) as to the extent and nature of such control. (b) as to the anticiated effct of the control on the quantity of the products imported into their territory. (c) as to the conditions asking the control necessary, and (J.) as to the reasons why a tariff or a subsidy would not be an appropriate instrument to meet such conditions. Ànd Provided (2) that in any case in which it is determined that serious injury to the trade of any member is caused or threutened by the operation of any such LONDON E/PC/T/C. II/22 Page 2 control, the member impesing thé control shall undartake to, discuss the rnatter with other member or members concerned or with the Orgasnization. And Provided (3) that members availing themselves of the provisions of this paragraph undertake that total importsshall not be reduced, as a result of such control, below the level which could reasonably be expected in the absence of control.'

GATT Library

rq722dd4213

Committee II. Remarks of the police observer. : On Item 6.3 of the Provisional Agenda (doc. E/PC/T/C.II/2.)

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/17 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/rq722dd4213

rq722dd4213_90210225.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/17 28 October 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II. REMARKS OF THE POLICE OBSERVER On Item 6.3 of the Provisional Agenda (doc. E/PC/T/C.II/2.) It is to be expected that the discussion on item 0.3 of the Provisional Agenda will develop along the lines suggested by Article 21 of the suggested United States Charter. The following remarks are destined to contribute, if possible, to some clarification of the different aspects of this most difficult and controversial problem. 1. It would seem obvious that, in the opinion of the authors of the Charter, Article 21 on non-discriminatory administration of the quantita- tive restrictions should apply to the whole of Section O. of Chapter IV. of the Charter, i.e. to Article 19 and to Article 20. In other words, the proposed rules of non-discrimination of quantitative restrictions cover, both, restrictions imposed or maintained in order to deal with special situation within the country concerned (Article 19 paragraph 2 a-e) and those destined to restore equilicriam of the balance of payments (Article 20). In this record case they should apply during the transition period (Article 20 paragraph 2) and, in exceptional circumstances, cater such a period article 20 paragraph 3). It seems then to follow from the forgoing that the non-discrimination rules contained in Article 21 of the suggested Charter are to be applied to all quantitative restrictions imposed or maintained at any time, with the only exceptions mentioned in Article 22 and referring to Article VII. and Article XX Section 4 (g) of the International monetary Fund, to the utilization for imports of non-convertible currencies, to the distribution of commodities in short supply and to the future inter-governmental commodity agreements. LONDON E/PC/T/C.II/17 Page 2 2. Article 21 paragraph 1 makes, moreover, a distinction between the three types of quantitive restrictions, i.e. quotas, licensing, systems and "other non-quota methods." It appears, finally, that the authors of the charter intend to give preference to the use of quotas as against the two other systems of restrictions. 3. It should, perhaps, be reminded that, as far as continental Europe was concerned, two different types of quantitative restrictions destined to achieve two different aims have been used during the inter-war period and, in particular, during, the 'thirties. They are: (a) the system of import and export prohibitions consisting in an over-aIl prohibition of imort or export of a given commodity; on the basis of such on over-all measure bilateral agreements have been negotiated with countries which were the most interested in imports or experts of the prohibited comodity and "contractual quotas" have been fixed, on reciprocal basic, thus lifting partly the prohibition; these quotas had very different characteristics from those dealt with in the suggested United States charter; in fact, thcy consisted in a series of bilateral quotas allotted to different countries in accordance with the extent of concessions granted by each of then on the basis of reciprocity; thus, no "global quota" for any of the prohibited commodition could have been established, as the number of partners to these bilateral agreements and the extent of mutual concessions granted by any of them varied in accordance to the situa- tion; moreover, the establishing of a "global quota" was the more superfluous that the whole system was destined not to protect the home market but to defenl and to -restore the equilibrium of the balance of payments of the country conccrned; the "contractual quota" could be larger or smaller in accoredance with partner's concessions in the same or in another field of the current account of the balance of payments; if the concessions were largo cnough to restore or to better the situation of the bilateral balance of payments between the country concerned and its partner, the imports of the prohibited LONDON E/PC/T/C.II/17 Page 3 commodity could even increase above the level existing before the introduction of the prohibition; (b) the system of quotas (in the meaning of the suggested United States Charter) introduced in Western Europe since 1931 and destined exclusively to protect the homs market (chiefly those of agricultural products) from being sub:rre, by the much increasing imports from several primary producing and agricultural countries where the breakdown of prices was particularly it should be noted that, at least at that time, the Western European countries which used this system of restrictions were not faced by any threat of disequilibriun in their balance of payments; on the other hand, the increasing competition of the cheap foreign imports made it necessary to protect the rentability of their own preductions; the burdensome surplus of imports in any of the commodities concerned could be fairly easily established beforchand and, thus, a "global quota" of future imports fixed with a fair accuracy; there was no necessity for any bargaining with any of the exporting countries, as the measure was purely defensive; thus, the allotment of import shares within a given quota to the most interested partners could be (and, in fact, was) established on basis of a general criterion (the, so called, "repres- entative period"); the result of the measure was always the expected drop in imports of the commodity concerned. 4. This experience of the past might, perhaps, serve as basis for the future provisions of the international agreement concerning the rules of world trade. It may be, for instance, safely assumed that the non- discrimination provisions of Article 21 of the suggested Charter can perfectly well apply to this kind of quantitative restrictions which are embodied in Article 19 paragraph a-e, as the nature of these "home market restrictions" seems to suit very well the provisions concerning the establishment of "global quotas'', their proportionate allotment to different countries etc. On the other hand, the application of LONDON E/PC/T/C. II/17 Page 4 Article 21 to the "balanic of payments restrictions" under Article 20 would seem rather doubtful. 5. The chief aim in restorin equilibrium of a balance of payments is to eliminate its deficit. This deficit is defined in Article 20 paragraph 3 (a) by means of referring to Article XIX (i) of the International Monetary Fund. Under the provisions of this last Article, the deficit in question is defined as the deficit on current account of the balance of payments this account being formed by its different component parts such as: (a) all payments due in connection with foreign trade, other current business, including services, and normal short-term banking and credit facilities; (b) payments due as interest on loans and as net income from other investments; (c) payments of moderate amunt for amortization of loans and for depraciation of direct investments; (d) moderate romittances for family living expenses. 6. If the provisions of Article 21 are to apply to quantitative restrictions destined to restore equilibrium of a balance of payments, it would mean that the authors of the Charter are envisaging this restoration only by means of restricting payments in connection with imports. It would appear, however, that there are many other ways of achieving the same aim and this because of the various character of payments forming the current account of a balance of payments. In this connection distinction should be. made between the period of transition as defined in Article 20 paragraph. 2 and the subsequent period mentioned in paragraph 5 of the same Article. 7. During, the period of transition (which, by the way, should be defined rather along the lines embodied in Article XIV Sections 2 and 4 of the International Monetary Fund) it -...st be assumed that exchangle controls and trade restrictions will remain in force in a great number of countries. LONDON E/PC/T/C.II/17 Page 5 Normal .trade relations will be hampered, exchenge of services reduced to a small scale, interests on loans left unpaid, credit facilities (even on short-term operations) cither suspended or, at last, only reluetantly admitted. There seers, therefore, to exist a vast field where different countries may have the opportunity to improve, by means of bilateral arrange- ments with their most important partners, the global value of payments on their current account, thus contributing to a partial restoration of their trade under these difficult and abnormal conditions. By combining, in a bilateral way, the imports and exports of goods with exchange of services tourism, transit, shipping operations, etc.) and with other payments on current account a complete stagnation of international trade in the most stricken parts of the world can be avoided. The primary condition of such operations must, however, consist in a suspension of the non- discrimination rule in regard to quantitative restrictions, as, naturally, all these deals cannot be made on the basis of the most-favoured-nation principle. Thus, during the transitional period, the choice seems to be either to abandon any hope for a gradual restoration of world trade in the most disintegrated economies of the world or to admit bilateral opera- tions, even if they are based on certain discriminatory practices. 8. Much can be said in favour of such "unorthodox" operations not only from the realistic but also from the purely theoretical point of view. In a "note on employment policy and foreign trade" presented to the Preparatory Committee by the Secretariat (doc. F/PC/T/W.2.) we read on page 10: "As regards structural changes, bath exports and imports may be subject to adverse fluctuations, whereas cyclical changes will originally affect only the volume of exports. In bath cases, however, the policy of the country may be to restore the balance of payments by decreasing imports and increasing exports compara - tively to the amount that would have taken place in the absence of intervention." This remark seems perfectly well founded. In fact, the restoration of equilibrium of a balance of payments is not mecessarily connected with LONDON E/PC/T/C.II/17 Page 6 a cut in imports (which is the only result of the application of rigid quotas) but also with an increase in exports, all kinds of crcdit opera- tions, additional export of services etc. Governmental intervention should, indced, operate on bath sides of the current account and not be limited solely to the decrease of expenditure. This, of course, is only possible when a more elastic system is applied in administering quantitative restrictions. 9. A special remark should be made, finally, concerning the situation during the peries subsequent to the transitional stage. Here, of course, the field for bilateral operations in view of restoring equilibrium of a balance of payments will be far more restricted. As, in most of the countries of the world, exchange controls and quantitative restrictions will, at that time, disuppear, elements for deals concluded on a bilateral basis will become soarce. This will not mean, however, that the only way to use, during that period, quantitative restrictions allowed under Article 20 paragraph 3 of the suggested Charter, will be that of cutting imports by means of quotas. There seem to exist at least two ways for other operations, not necessarily involving, a shrinking of international business of a country, as expressed in its current account of the balance of payments. These two operations which can take place during a period when the majority of the countrium of the world will restore a more free system of trade, are tied loams and bulk purchases. It does not seem noces sary to enter, at this stage of diacussion, into a more detailed analysis of the two (and, possibly, other) possibilities. 10. The purpose of this paper is to rove that a governmental inter- vention with the aim of restoring equilibrium of a balance of payments cannot be restricted sololy to the use of quotas (in the rmeaning given them by the suggested United States Charter). It would appear, moreover, that some kind of a more elastic system (bilateral quota agreements or LONDON E/PC/T.C.II/17 Page 7 licences) are, in fact, more or less inherent to an action undertake to protect the aquilibrium of a balance of payments, unless, of course, the only internationally approved way of such a protection would consist in cutting imports of goods withcut any attempt to maintain or to increase - in spite of the protective measures - the global value of exchanges on

GATT Library

ww216qm8328

Committee II. Report of the joint drafting Sub-Committee of Committees II and IV on subsidies on primary products

United Nations Economic and Social Council, November 21, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

21/11/1946

official documents

E/PC/T/C.II/61 and E/PC/T/C. II/58-65/ADD. 1

https://exhibits.stanford.edu/gatt/catalog/ww216qm8328

ww216qm8328_90210281.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL CONSEIL ECONOMIQUE ET SOCIAL LONDON E/PC/T/C.II/61 21 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE Il REPORT OF THE JOINT DRAFTING SUB-COMMITTEE OF COMMITTEES II AND IV ON SUBSIDIES ON PRIMARY PRODUCTS Nations Unies LONDON E/PC/T/21 Page 2 PART I The Sub-Committee included Delegates for China, Czechoslovakia, New Zealand, the United Kingdom and the United States of America. It met twice under the chairmanship of Mr. MOCARTHY (Australia). Mr. SCHWENGER (United States) functioned as rapporteur. LONDON E/PC/T/21 Page 3 PART II 1. In general the intention cf Article 25 of the United States Draft Charter is to give members whose interests are prejudiced by subsidization the right to a full international consideration of their case, to oblige subsidizing. members to participate in such consideration and to provide for limiting subsidization so that ats prejudicial effects may be reduced. 2. As concerns primary products, the Article recognizes that, when trade is distorted by the special difficulties which make necessary the provisions of Chapter VI, the procedures of that Chapter rather than those of this Article should apply. 5. In view of the fact that export subsidies are recognized as being more likely to distort trade than so-called "domestic" subsidies, the Article looks toward the early elimination of the former in most cases but merely to the limination of the latter. Nevertheless, it is emphasized that the Article envasages gradual rather than sudder modifications of subsidies an cases where such modification calls for substantial economic and social adjustment in the affected. member countries. 4. The following changes are proposed in Article 25 of the Draft Charter: (a) Wherever the Charter has words such as "injury to the trade of a member"; at as proposed to say prejudice to the interest of a member". It is felt that this wording will an practice faciliate application. (b) The word "limiting" an the last sentence of paragraph 1 is used in a broad sense to indicate maintaining the LONDON E/PC/T/21 Page 4 subsidiation at as low a level as possible, and the gradual reduction an subsidization over a period of time where this is appropriate. (c) The words added at the end of the second sentence of paragraph 2 are designed to make it clear that payments to producers from the proceeds of domestic taxes from which export products are exempted are looked upon as "domestic" rather than export subsidies. The added words, and the sentence to which they are attached, are essentially explanatory of part of the first sentence of paragraph 2. (d) The substitution of the phrase "a complete analysis of the practices in question end the facts justifying them" for the words "an explanatory statement", in the fourth sentence of paragraph 2 is associated with a discussion of possible results of the determination mentioned in the following sentence. It was felt that under certain circumstances some export subsidies might be justified as being consistent with the objectives of the Charter. (e) It is suggested that the Drafting Committee consider whether it is necessary to retain the cross reference clauses beginning, "Except as provided" at the beginning of paragraph 1. (f) It was considered whether the words "the like product" in the first sentence of paragraph 2 could be construed in such a way as to permit escaping the provisions of this paragraph in cases when the exported product differs slightly from a product sold in the domestic market. It was decided, however; that this would be a case falling under the terms of Article 30 and thus that the measure, whether or not LONDON E/PC/T/21 Page 5 in conflict with the terms of Chapter IV of the Suggested Charter, would imply nullification or impairment of the Chapter. The subsidizing member would, therefore, be obliged to give sympathetic consideration to the views of other interested members and, assuming good faith, the problem could probably be solved. The implications of qualifying words, such as "the like or similar product", might be considered by the Drafting Committee. (g) The new paragraph 3 would render it possible for interested members, in consultation with the Organization, to operate a domestic stabilization scheme for a primary product if the stabilized domestic price is at times below the export price and if, through effective production controls or otherwise, the scheme operated so as not to prejudice the interest of members. Some delegations thought that this was implicit in paragraph 2 and that the explicit exemption under paragraph 2 might render it more difficult to apply paragraph 2 so as to cover other legitimate exceptions. Accordingly empty square brackets were added at the end of the new paragraph to indicate that suggestions may be forthcoming to cover other exceptional cases. (h) The new sub-paragraph (a) of the renumbered paragraph 4. indicates that the consultative procedure of Chapter VI with reference to primary products in the case of which special difficulties may arise may be applied when subsidies on such products call for determination by consultation under the terms of paragraph 1 or 2 In this connection and in relation to the provisions of the original paragraph 3 of the Draft Charter, it is suggested that the Drafting Committee LONDON E/PC/T/21 Page 6 considers Article 25 in connection with Chapter VI and with Article 55, paragraph 6, with a view to simplifying the texts in question. They are intended to provide: (1) a uniform type of consultative procedure for dealing with primary commodities in the case of which special difficulties may arise either in the initial period of transition or thereafter, and (2) an adequate consultative procedure for dealing with non-primary products according to the general intentions of Article 25 expressed in the opening sentence of this report. (i) One delegation announced that it would reserve its position regarding the provisions of sub-paragraphs (b) and (c) of (the renumbered) paragraph 4. (j) One delegation expressed the opinion that the Interim Draft Committee should consider the provisions in Article 11 of the United States Charter in connection with Article 25. It felt specially that Article 11- should, in about the same way as paragraph 2 (a) of Articlee 19 does for quotas, provide for the legitimation of subsidies, if these were accepted after consultation by interested members. LONDON E/PC/T/21 Page 7 APPENDIX Article 25. General Undertaking Regarding Subsidies - Elimination of Export Subsidies - Exceptions 1. Except as provided in paragraphs 2 and 4 of this Article, if any member establishes or maintains any subsidy, including any form of income or price support, to the domestic producers of any product, which operates to increase the exports of suchy product from, or to reduce the imports of such product into, the territory of the member, such member shall notify the Organisation in writing as to the extent and nature of the subsidization as to the anticipated effect of the subsidzation on the quantity of the product imported into and exported from the territory of the member, and as to the conditions making the subsidization necessary. In any case in which it is determined that serious prejudice to the interest of ay member is caused or threntened by the operation of any such subsidization, the member granting such subsidisation shall undertake to discuss with the other member or members concerned, or with the Organization, the possibility of limiting the subsidization. 2. Except as provided in paragraph 4 of this this Article, no member shall grant, directly or indirectly, any subsidy on the exportation of any product, or establish or maintain any other system which results in the sale of such product for export at a price lower than the comparable price charged for the like product to buyers in the domestic market, due allowance being made for differences in conditions and terms of sale, for differences in taxation, and for other dfferences affecting price comparability. The preceding sentence shall not be construed to prevent any member for exempting exported products from duties or taxes imposed in respect of like products when consumed domestically or from remitting such duties or taxes LONDON E/PC/T/21 Page 8 which have accrued; the use of the proceeds of such duties or taxes to make payments to domestic producers would be considered as a case under paragraph 1 of this Article. Members shall give effect to the provisions of this paragraph at the earliest practicable date, but in any event not later than three years from the day on which this Charta enters into force. If any member considers itself unable to make the provisions of this paragraph effective in respect of any specified product or products upon the expiration of such period, such member shall, at least three months before the expiration of such period, give to the Organization a notice in writing to that effect, accompanied by a complete analysis of the practices in question and the facts justifying them and on indication as to the extension of the period desired. It shall then be determined whether such period should be extended for the member desiring an extension in respect of the product or products concerned. 3. A system for the stabilization of the domestic price of a primary product, which sometimes results in the sale of the product for export at a price longer than the comparable price charged for the like produce to buyers in the domestic market, may be determined by the Organization not to be a subsidy on exportation under the terms of pragraph 2 of this Article if it has at times resulted in the sale of the product for export at a price higher than the comparable price charged for the like product to domestics buyers and if the system is so operated, either because of the effective limitation of production or otherwise, as not to unduly stimulate exports or otherwise seriously prejudice the interest of other members. 4. (a) In any case of subsidization of a primary commodity, wheter falling under paragraph or paragraph 2 of this Article, if a member considers that its interest is seriously prejudiced by the subsidy or if the member granting the subsidy considers LONDON E/PC/T/21 Page 9 itself unable to comply with the provisions of paragraph 2 within the time limit laid down thereim, the difficulty may be deemed to be a special difficulty of the kind referred to an Chapter VI, and in that event, the procedure laid down in that Chapter shall be followed. (b) If it is determined that the measures provided for in sub- paragraph (a) of this paragraph have not succeeded, or do not promise to succeed, within a reasonable period of time, in removing, or preventing the development of, a burdensome world surplus of the primary product concerned, the requirements of paragraphs 1 and 2 of this Article shall cease to apply in respect of such product as of the effective date of such determination and shall not be re-applied in respect of such product until a date determined in accordance with procedures approved by the Organization. (c) Notwithstanding the provisions of paragraphs 2 and 4 (b) of this Article, no member shall grant any subsidy on the exportation of any primary product which has the effect of acquiring for that member a share of world trade in that :product in excess of the share which it had during a previous representative period, account being taken insofar as practicable of any special factors which may have affected or may be affecting the trade in that product. The selection of a representative period for any product and the appraisal of any special factors affecting the trade in the product shall be made initially by the member granting the subsidy; Provided, That such member shall, upon the request of any other. member having an important interest in the trade an that product, or upon the request of the Organization, consult promptly with the other member or with the Organization regarding the need for an adjustment of the base period selected or for the re-appraisal of the special factors involved. 5. Any determination required by or appropriate to the operation of this Article shall be made under procedures established by the Organization an accordance with Article 55:6.

GATT Library

gs967pk2333

Committee II : Report of the Sub-Committee on quantitative restrictions and exchange control

United Nations Economic and Social Council, November 21, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

21/11/1946

official documents

E/PC/T/C II/59 and E/PC/T/C. II/58-65/ADD. 1

https://exhibits.stanford.edu/gatt/catalog/gs967pk2333

gs967pk2333_90210277.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL 21 November 1946 AND ECONOMIQUE LONDON E/PC/T/C II/59 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Report of the Sub-Committee on Quantitative Restrictions and Exchange Control PART I The Sub-Committee included Delegates for Australia, Brazil, France, India, the United Kingdom and the United States of America. It met seven times under the chairmanship of Dr. H. C. Coombs (Australia), Mr. Meade (United Kingdom), and later Mr. Gunter (United States) functioned as Rapporteurs. LONDON E/PC/T/19 Page 2 PART II Article 19 General Elimination of Quantitativie Restrictions 1. There was wide agreement with the proposal for a general rule against the use of import and export restrictions and prohibition, the rule being subject to exceptions for the use cf restrictions in specified circumstanses and under speciafied conditions. 2. The work of the Sub-Committee was based on the assumption that the problem of ensuring adequante support for industrial development, which was the subject of study by the Joint Committee of Committees I and Il, would be adequately covered in other Articles. 3. There was wide agreement for the view that during a post-war transitional period it should be permissible to use such restrictions for the equitable distribution of products in short supply, for the maitenance of war-time price control by countries undergoing shortages as a result of the for, for the orderly liquidation of temporary surpluses of Government-owned stocks and of industries which were set up owing to the exigencies of war, but which it would be uneconomic to maintain in normal times. These last two exceptions would be subject to consulta- tion with other interested Members; and all these exceptions would be limeted to a specified post-war transitional period, which might, however, be subject to some extension in particular cases. LONDON E//PC/T/19 Page 3 4. There was wide agreement for an exception to the general rule against export restrictions or prohibitions so as to enable a country to take temporary action to relieve critical shortages of foodstuffs or other essential products. 5. There was also wide agreement for an exceptional use of restriction to apply standards of classification and grading of commodities in inter national commerce, subject to safeguards against their misuse for the purpose of giving disguised protection. 6. Consideration was given to the suggestion that there should be an exception permitting import restrictions on agricultural or fisheries products (i) to accompany measures restricting the domestic production or sale of like products and (ii) to remove a temporary domestic surplus by means which involved selling that surplus at prices below the current market price to certain groups of domestic producers. There was wide agreement for the view that a clause on these lines was desirable; but one Delegation proposed that the exception should not be confined to agricultural and fisheries products in order to give similar protection to agricultural or underdeveloped countries. There was wide agreement for the view that any supplies of the product which were on route at the time at -which public notice was given of the restrictions should not be excluded, though they might be counted against any quotas in the importi country. It was generally agreed that this point should be covered in this Article unless it were already adequately met in Article 15. It was suggested that restrictions imposed under this exception should not be imposed on sensonal commodities at a time when similar domestic products were not available; and it was generally agreed that this suggestion might usefully be further considered at the next meeting of the Preparatory Committee. There was wide agreement for the view that LONDON E/PC/T/19 Page 4 restrictions on imports imposed to match a restriction on domestic production should not be such as to reduce the proportion of imports to domestic production below the level which might otherwise have been expected to rule, it bein necessary to judge the situation not only in the light of the position at a previous period but also in the light of any changes in condiitions which might have occurred since that date. The view was, however, expressed that such a rule might weigh unduly on the domestic producers, since the exporters in other countries might be able more readily to find alternative markets. 7. The suggestion was put forward by two Delegations that the exception in the case of agricultural products should be widened by permitting restrictions on imports without restrictions on home production so as to maintain domestic prices at a level sufficient to cover domestic costs of production or so as to enable a domestic surplus to be cleared. After discussion there was general agreement that such proposals would extend the scope of the exception to an undesirable degree. 8. Some Delegations put forward the suggestion that the wording of the exception in the case of agricultural products should be changed so that the words "for instance" would be inserted after the words "to remove a temporary surplus of the like domestic product". Other Delegations felt that this suggestion would permit an undesirable expansion of the exception and therefore opposed the suggestion. 9. There was general agreement for the use of restrictions or prohibi- tions on private trade in order to protect the position of State trading enterprises operated under other Articles and for the use of import or export quotas imposed under inter-governmental commodity agreements con- cluded under this Charter. LONDON E/PC/ T/19 Page 5 10. The suggestion was also nude that it should be permissible to use import restrictions, under proper safeguards, as an anti-dumping measure in those cases of intermittent dumping in which import duties did not provide a suitable instrument of control. After consideration it was generally agreed that as far as the establishment of new industries are concerned, the position should be sufficiently covered by proposals of the Joint Committee of Committees I and II. In respect of the threat of intermittent dumping to established industries there was wide agreement with the view that the position was probably already adequately covered under Article 29; but cne Delegation remained uncertain whether this was in fact the case. 11. It was suggested that export restrictions should be permitted for the preservation of scarce natural resources even if there were no restric- tion on domestic consumption, as would be required under Article 32 (j). while it was recognized that there might be cases in which such action would be unobjectionable, the view was widely expressed that such an excep- tion, unless subject to sufficient safeguards, might unduly restrict access to raw materials. It was generally agreed that the point might usefully be further examined at the next meeting of the Preparatory Committee. 12. It was suggested by one Delegation that restrictions on exports should be permissible for the safeguard of living standards, for the facilitation of industrial development and for the stabilization of domestic prices so as to achieve a balanced development of the national economy, and that import restrictions should be permissible for the enforcement of governmental measures to regulate domestic production, distribution and consumption so as to maintain a dynamic equilibrium between the diverse economic activities of a nation in the process of industrialization. After discussion of these suggestions, there was LONDON E/PC/T/19 Page 6 wide agreement in the Sub-Committee that these proposals were already adequately covered in the proposals of the Joint Committee of Committees I and II on industrial development and by the proposals made by the Sub- Committee in regard to the use of import restrictions under Article 20 to safeguard the balance of payments. These latter proposals are in lino with a request received from the Joint Committee that provision should be made to cover the position of a Member who, as a result of its plans for industrial development or reconstruction, anticipates that its accruing international monetary resources will be inadequate to finance the needed imports of capital goods unless it imposes regulations in respect.of certain classes of consumer goods." 13. Some Delegations announced that they might propose an addition to Article 19:2 to include another exception in the following terms: "Import restrictions for the purpose of economic development as a protective measure provided that they are less restrictive in their effect than other forms of protection and provided that they are in conformity with the criteria laid down for the purpose by the Organization." Other Delega- tions considered that this point was sufficiently met in the Draf t Charter relating to Industrial Development. Some of these indicated they might wish to reconsider their attitude to that Chapter, if such an addition were made. LONDON E/PC/T/19 Page 7 Article 20 Restrictions to safeguard the Balance of Payments 1. There was general agreement for the view that it should be per.:±issible for a 'country to restrict imports when such restriction was necessary to siferguard its external financial position, particularly in view of the fact that in many cases there will be domestic employment, reconstruction, development or social policies which result in increases in the demand for imports. It was recognized that in many cases policies of internal reconstruction and develooment might be an essential factor in restoring equilibrium to a counnty' s balance of payments on a sound and lasting basis. 2. Consideration was given to the best method of ensuring that such a safeguard should be available for the protection of a country's external financial position without giving freedom for the unnecessary use of import restrictions. There was wide agreement with the view that countries should undertake to observe certain principles in the use of such import restrictions, ana that, since the fundamental objective was to safeguard a country's external financial position, these principles should be based upon movements in the country's monetar- reserves. Import restriction, it was suggested, should only be newly imposed or intensified in so far as was necessary to stop or to forestall the imminent threat of a serious decline in monetary reserves or, in the case of a Member with very low monetary reserves, to achieve a reasonable rate of increase in its reserves. LONDON E/PC/T/19 Page 8 3. There are, however, many factors to which due regard must be paid in interpreting any such ruIes. There may be special non- recurrent movements of funds affecting a country's reserves; a country may have special credits outside its monetary reserves which it might be expected to use to a proper extent and at a proper rate to meet a strain on its external position; a country which has high reserves may, nevertheless, have high future commitments or probable drains upon its resources to rneet in the near future. All such factors would have to be taken into account in interpreting movements in a country's reserves. 4. It was generally agreed that there should be an under- taking to remove or to relax restrictions on the same general principles, as a country's external financial position improved. 5. It was also generally agreed that, in order to avoid unnecessary damage to the commercial interest of other Members, import restrictions imposed to safeguard a Member's external financial position should not be carried to the point of total exclusion of any particular class of goods. 6. Consideration was given to the relations which should exist between Members and the Organizat:on in order to ensure that Members should, on the one hand, not be able to abuse the application of import restrictions on these grounds, but should, on the other hand, have some certainty that they could apply them when necessary. For these purposes, it was generally agreed that there would have to be arrangements for consultation between the Members and the Organization for complaint to the Organization, and ultimately for the Organisation to recommend the withdrawal or modification of restrictions if these were being improperly applied. LONDON E/PC/T/19. Page 9 7. In this whole process of consultation, review and recommendation, the Organization, it was recognized, would have to keep in the closest contaot with the International Monetary Fund. The Fund is the specialized agency which deals with the financial aspects of balance of payments problems; and the use of import restrictions to safeguard the external financial position of Members could only be properly considered by the Organization if, at every stage, it invited the Fund to participate in its consultations. 8. It was widely agreed that a first stage in this process should be consultation as to the nature of a country's balance of payments difficulties, the various corrective measures which may be available, and the possible effects of such measures on the economies of other Members. It was thought that a Member which was considering the imposition of restrictions for the first time should as a general rule undertake such consultations before imposing the restrictions and, in cases in which previous consultation was impracticable, should undertake such consultations as soon as possible after imposing the restrictions. The Organization should, it was generally thought, be able to initiate consultations with any Member which was already imposing restrictions on these grounds; and should, in any case, always initiate such consultations with any Member which found it necessary substantially to intensify its restrictions. It was thought that the Organization should, within two years of its institution, review all restrictions existing at its institution and subsequently maintained on the grounds of safeguarding Members' external financial positions. LONDON E/PC/T/19 Page 10 9. Many Members which may find it necessary to impose restrictions to safeguard their external financial position may wish to obtain some security that the restrictions which they are applying or intend to apply will not be challenged or that if their external position should become sufficiently difficult they wouId be able to impose restrictions which would not be challenged. For this reason, it was generally agreed, a Member should have the right to obtain the previous approval of the Organization for restrictions which it was already applying or intending to apply, so that it could not be challenged by another Member when it applied them. It was generally considered that such previous approval should relate to the general extent, degree and duration of the restrictions and should not prevent another Member thereafter from bringing a complaint to the Organization that the restrictions were being applied in a manner which unnecessarily damaged its commercial interests. 10. Similarly, a Member might seek the previous approval of the Organization not in relation to any actual restriction which it was already applying or intending to apply but in relation to the contingent future conditions which, if they occurred, would justify it in applying restrictions. For example, it might be agreed between the Member and the Organization that the Member could not in any circumstances during an agreed period ahead be reasonably expected to allow its monetary reserves to fall below an agreed figure. 11, It was widely agreed that it should be open to any Member to bring a cormplaint to the Organization that another Member was applying restrictions when they were unnecessary to safeguard its external financial position or that it was Page 11 LONDON E/PC/T/19 doing so in a way which unnecessarily damaged the commercial interests of the complaining Member. In this case the Organization, if it were satisfied that the complaining Member had made out a prima facie case that its commercial interests were adversely affected, should consider the complaint. It should have power after consultation with the International Monetary Fund to recommend the withdrawal or modification of the restrictions; and if the Member in question failed to withdraw or modify them appropriately such other Members of the Organization would be released from such obligations towards the Member in question as the Organization might specify. The Organization should, however, not be able to recommend the withdrawal or general relaxation of restrictions in so far as it had given previous approval for them; nor should at be able to do so on the grounds that the Members' external financial difficulty could be avoided by a change an the Members domestic employment, reconstruction, development or social policies. 12. It was generally agreed that a Member imposing restrictions on balance of payments grounds should be permitted to select imports for restriction in such a way as to promote its domestic employment, reconstruction, development or social policies. 13. It was generally agreed that if there were a persistent and widespread application of restrictions 0n these grounds , there should be a procedure whereby the Orgnization in consultation with the International Monetary Fund should initiate discussions LONDON E/PC/T/19 Page 12 with the Members to consider whether other measures might not be taken by the countries with favourable or those with unfavourable balances of payments or by the Economic and Social CounciI or any appropriate intergovernmental specialized agencies to remove the underlying disequilibrium. 14. It was generally agreed that the principles and procedures for restricting imports under private trade to safeguard a Member's external financial position should be applied mutatis mutandis to the restriction (to a greater extent then would otherwise be permisible) of imports by a Statee trading organization. It should, however, be proveded that the disclosure of information which would hamper the commercial operations of such a State trading organization would not be required. 15. There was general agreement for the view that in the early years after the war the Organization, in the functions proposed for it under this Article and under Article 22, should pay due regard to the difficulties of post-war adjustment with which the Members would be confronted in varying degrees. 16. The Sub-Committee had referred to it a request of the Joint Committee of Committees I and II "that in Artice 20 provision should be made to cover the position of a Member who, as a result of its plans for industrial development or reconstruction, anticcipates that its accruing international monetary resource will be inadequate to finance the needed impoorts of capital goods unless it imposes regulations in respect of certain classes of consumer goods". This LONDON E/PC/T/19 Page 13 point is met in the draft text of Article 20 which is appended to this report. Under paragraph 2 (a) a country could apply quantitative import restrictions to anticipate the i..1ainent threat of a serious decline in its monetary reserves. Moreover, it is there suggested that in interpreting this principle due regard should be had to any comitments or other circumstances which may be affecting a country's needs for reserves. It follows that a country which was threatened with a serious decline in its reserves and which had heavy external payments to meet in the near future could protect its external financial position by import restrictions. 17. In paragraph 1 of the draft Article 20 it is recognized that "Members may need import restrictions as a means of safeguarding their external financial position ...... particularly in view of their increased demand for the imports needed to carry out their domestic ...... development ...... policies"; and in paragraph 5 (e) of the draft Article 20 it is laid down that "the Organization ... shall not recommend the withdrawal or general relaxation of restrictions on the grounds that the existing or prospective balance of payments difficulties of the Member in question could be avoided by a change in the Member's domestic..... development ...... policies". Thus it is clear that a Member could not be required to modify its domestic development plans on the grounds that they imposed a strain on its balance of payments and thus made control of imports necessary. 18. In paragraph 4 of draft Article 20 it is expressly laid down that "a Member may select imports for restriction in such a way as to promote its domestic .... development .... policies", so that a Member could if necessary restrict the import of consumer goods without restricting the import of capital goods. LONDON E/PC/T/19 Page 14 19 The Draft Article would, however prevent a .Member from applying restrictions if its foreign exchange resources were sufficient for it to finance all types of imports. In other words, the Member would be permitted under Article 20 to restrict only to the extent necessary to safeguard its monetary.reserves. Up to this point it would have to admit imports of one class or another. Members would also be under an obligation not to apply any restrictions of a selective character in a manner which unnecessarily-damaged the commercial interests of other 20. Many of the problems which have been examined by the SubCommittee in connection with this Article and with Articles 22 and 23 are necessarily of very direct concern to the International Monetary Fund and, to a less extent, to the International Bank for Reconstruction and Development. Trade restrictions applied to safeguard external financial resources will inevitably be of common interest to the International Trade Organization and to the International Monetary Fund. In particular, since it is generally agreed that trade restrictions should be avoided whenever possible, the question arises of the possibility of alternative means under the procedures of the Fund and the Bank: for meeting a disequilibrian in balances of payments. 21. In considering these problems the Sub-Committee has been much helped by the benefit of the views of the observers from the Fund and the Bank. It is generally felt that it would be of great assistance to the work of the Preparatory Committee if the Fund and the Bank could be invited to study the Draft Articles 20, 22 and 23 appended to this report so as to be in a position to put their considered views on these issues before the next meeting of the Prepatoray Committee. LONDON E/PC/T/19 Page 15 22. One delegation suggested to the Committee that there should be amendments providing for (1) broadening the criteria under which restrictions could be imposed for balance-of-payments reasons, (2) eliminating the provision for complaints by members against such restriction maintained by other Members, and (3) the use of quantitative restrictions as a means for creating favourable conditions for the industrial development of an economically undeveloped country. It was generally agreed that these proposals to some extent had been met in this Chapter and in the Chapter on Industrial Development. It was generally agreed that further changes would expand the use of quantitative restrictions too far. LeL-t, C U Article 21 Non-discriminatory Administration of Quantitative Restriotions 1. There was wide agreement with the proposal that there should be a general rule for non-discrimination in the use of quantitative re- strictions, the necessary exceptions to this general rule being listed in the subsequent Article. 2. In applying the principle of non-discrimination to import restrictions it was generally agreed that the following represented a desirable set of principles which should also apply to tariff quotas: (a) Wherever possble a global quota should be fixed in advance for the importation of the product in question; (b) Where (a) is not practicable, restrictions might be applied by import licenses without a global quota; (c) whether issued within a global quota or without a global quota import licenses or permits should, in general, not tie the import to a particular source of supply; (d) Where (c) is not practicable, the restrictions might take the form of a quota allocated among the various sources of supply. In this case the general principle should be to allocate the quotas on commercial principles such as price, quality and customary sources of supply. These commercial principles might ba applied in principle in either of two ways: (i) Agreement might be sought between the exporters which had a substantial interest in supplying the product. (ii) Where (i) is not reasonably practicable, reference should be made to shares in a previous representative period, due account being taken of special factors which may have affectcd the trade in the product. The Member should make the initial decisions about the shares of the quotas under (ii) but should be prepared to enter into consultations .about adjustments; LONDON E/PC/T/19 Page 17 (e) No conditions should be imposed such as to prevent any Member country f rom making full use of its share in any quota. 3. It was generally agreed that Members should undertake to supply adequate information about the administration of their import restrictions. In cases in which import licenses were used, information should be supplied at the request of any Member having a substantial interest in the trade about the administration of the licenses and about the licenses granted, but there should be no obligation to reveal the names of importing or supplying Ih Where quotas were fixed, public notice should be given in advance of the size of the quota; and where the quota is allocated among supplying countries all Members having an interest in supplying the product should be given prompt notice of the shares of the various countries in the quotas. LONDON E/PC/T/19 Page 13 Article 22 Exceptions from rule of non-discrimination 1. It was generally agreed that there must be the following exceptions from the general rule of non-discrimination in the application of quantitative restrictions: (a) Members should not be precluded from the imposition of restrictions which have the equivalent effect of the exchange restrictions which a country could impose under Article VII Section 3(b) of the articles of Agreement of the International Monetary Fund scarce currencies clause). (b) A group of territories which have a common quota in the International Monetary Fund should be able to impose restrictions against imports from other countries in - rer to protect their common monetary reserves. (c) Members should be able to assist, by measures not involving a substantial departure from the general rule of non-disorimination, a country whose economy has been disrupted by war; but this freedom should have a closing date, 31 December 1951. (d) Some element of discrimination in import and export restrictions may be needed in order to carry out inter-gervernmental commodity agreements under the commodity policy provisions of the Charter or in order to apply the restrictions which have been suggested for the post-war transitional period to ensure an equitable distribution among consuming countries of products in short supply (See paragraphs 3 and 9 of the report on Article 19). 2. A more difficult problem arises in the treatment of inconvertible currencies. It is generally agreed that the objective is to establish multi-lateral trading over as wide an area as possible and that for this purpose it is desirable that currencies should become convertible as soon as is safely possible. But so long as some currencies remain inconvertible there is difficulty in reconciling the full application of the principle LONDON E/PC/T/19 Page 19 of non-discrimidination with the courses of action which are imposed upon Members by their external financial situations. This difficulty is of course fully recognized, as far as exchange restrictions are concerned, in the provisions of Article XIV of the Articles of Agreementt of the International Monetary Fund. The problem here is to make appropriate provision for this difficulty in the trade field, 3. The nature of the difficulty may be conveniently expressed by considering the position of Member A which has a favourable balance of payments with Member B which has an inconvertible currency. This favourable balance can be settled only by: (a) Accumulation by A of inconvertible balances of B's currency or by a loan to B in A's currency, or (b) an increase in A's imports from B; or (c) a reduction of A's exports to B. 4. If A is unable or unwilling to make the appropriate loan under (a) and if the costs of B are too high to enable A to accept B's exports without infringing the rule of non-discrimination, the only possibility is a reduction in A's exports to B. It has been argued that A can always avoid this difficulty by selling the exports which could otherwise have gone to B to countries with convertible currencies and there was general agreement that where the majority of countries had convertible currencies, this would normally be the case. It has been argued, on the other hand, that countries which normally conduct a large proportion of their trade with countries whose currencies are inconvertible, might be obliged to restrict their trade substantially because of the limited import capacity of countries with convertible currencies, and that consequently. the additional purchase of imports frorm country B, even on a discriminatory basis, might be less restrictive of world trade than the full application of non-discrimination. It was furthermore agreed that any provisions made with this general problem should also cover the problem of balances of inconvertible currencies accumulated before the entry into force of the Charter. LONDON E/PC/T/19, Page 20 5. It was agreed that in any case MeMbers should be entitled to attach conditions to their exports such as would be necessary to ensure that an exporting country would receive for its experts its own currency or the currency of any member of the International Monetary Fund specified by the experting country and thus avoid the danger of being, in effect, compelled to accumulate balances of inconvertible currency. 6. It was generally agreed that there must be some provision also to deal with the corresponding import problems, but it was felt that there were serious dangers in a wide exeption from the rule of non-discrimination even during the post-war transitional period. If such a period were at all prolonged, it would permit the establishmnnt of bilateral patterns of trade and discriminatory practices generally which would effectively prevent the development of multilateral trade which is a central objective of the Charter. It was argued that such arrangements .would tend to become self-perpetuating and that their possibility would, in effect, delay the achievement of sound and lasting equilibrium in the balances of payments of the countries with inconvertible currencies and would thus postpone for an indefinite period their ability to make their currencies convertible. On the other hand, it was argued that if countries with inconvertible currencies had to face the full rigour of international competition, they would be forced to restrict their imports from all sources to a degree which would seriously impair their prospects of recovery, and it was further argued that the existence of same proyision to unable countries with convertible currencies to apply discriminatory restrictions in special circumstances-would encourage countries with inconvertible currencies to take the risk of accepting convertibility at an earlier stage than they would have otherwise been prepared to do. 7. It was generally agreed that a solution of the difficulty could be found by permitting discriminatory import restrictions under two conditions, both of which would have to be fulfilled. LONDON E/PC/T/19. Page 21 (a) that the discrimination should increase the Members total imports above the maximum level which would be possible in the absence of the discrimination. The intensity of the import restrictions which a a Member is permitted to impose under Article20 is determined by the pressuree upon its monetary reserves. This fixes the amount of imports which it can affeord from countries with convertible currencies. The purpose of this condition is to ensure that a Member will purchase as much as it can afford from these sources, and that it wculd not be permitted to discriminate unless this would enable it to secure additional imports from countries with inconvertible currencies. It would thus be impossible for a Member to decrease its total imports from countries with convertible currencies by discriminatory restrictions. (b) that the discrimination should either correspond to exchange restrictions permissible under the Articles of Agreement of the International Monetary Fund or should carry with it the approval of the Organization in agreement with the International Monetary Fund, which is the inter-governmental specialized agency which is competent in this field. The Member would not be entitled to impose disoriminatory import regulations which did not have equivalent effect to exchange restrictions permitted tc the Member under the Articles of Agreement of the International Monetary Fund, or under the terms of a special exchange agreement between the Member and the Organization (see paragraph 5 of the report on Artice 23) if the Member were not imposing exchange restrictions it would be able to impose discriminatory import restrictions in special circumstances only with the prior approval of the Organization in agreement with the Fund 8. In view of the advantages which may be expected to accrue to the trade of aIl countries from the other provisions of the Charter, it was general considered appropriate that the discriminatory element in any trade restrictions applied under this provision (or exchange restrictions having equivalent effect) LONDON E/FC/T/19 Page 22 should, from the outset, be liable to be withdrawn or modified if the Organization, after consultation with the International Monetary Fund, fund that they were being applied inconsistently with the exception provided under this Article or in a manner which discriminated unnecessarily against the trade of another Member. It should, however, alvvays be possible for a Member to seek the Organization's priorapproval for its action and in this case it would not be open to challenge to the extent to which such approval was given; where the Member was not imposing exchange restrictions, this prior approval would be obligatory. 9. It was suggested to the Sub-Committee that if there were an abrupt or serious decline in effective demand by one or more Members, the imposition of non-discriminatory import restrictions under Article 20 by other Members might in some cases be sore injurious to world trade than discriminatory restrictions, and that provision should be made in this Article for permitting such discriminations if the Organization considered that this general situation existed and warranted their application. After consideration, it was agreed that the Organization would have adequate powers under the revised Article 30, taking into account paragraph(F) of Chapter III on Employment Provision, to meet this contingency. 10. A main objective of the Organization is to achieve the earliest possible elimination of all discriminations which restrict the expansion of world trade. The difficulties which the article is designed to meet may be hoped to narrow very considerably as an increasing nuaber of Members accept the obligations of Article e VIII, Sections 2, 3 and 4 of the Articles of Agreement of the International Monetary Fund. It is therefore generally agreed that the provisions sub-paragraphs l(d) (iii) ana (iv) of this Article should be reviewed when three-quarters of the Members of the Organization have made their currencies convertible, or in any event, not later than the end of 1951. LONDON E/PC/T/19 Page 23 Article 23 Exchange Arrangements 1. The problem of foreign exchange arrangements in relation to the Organization is a question of great importance, since commercial obligations can be fundamentally affected by such matters as exchange control, exchange depreciation, multiple exchange rates, etc. The International Monetary Fund is the specialized agercy which has been instituted to deal with these matters, and it is desirable as far as possible to avoid overlapping functions between it and the Organization. Where trade matters and exchange matters inevitably overlap it is desirable that there should be the maximum consultation and co-operation between the Fund and Organization. 2. It was agreed that the problem would be much simplified if all Members of the Organization were also Members of the International Monetary Fund. The Committee came to no decision on the question of requiring common rnembership, however, as some of the delegations felt it may well be necesssary to allow freely for independent Membership of the Organization and the Fund. 3. Consideration was therefore given to the question whether special provision should not be made for a country which wished to become a Member of the Organization without becoming a Member of the Fund. It was generally recognized that some such provision might prove to be necessary, but it was though that examination of this issue could usefully wait until the probable Membership of the Organization and of the Fund became clearer. 4.. It was widely agreed that if the general principle were adopted that Members of the Organization should also be Members of the Fund, opportunity must nevertheless be left for a Member of the Organization to exercise the right which it would have under the Articles of Agreement LONDON E/PC/T/15 Page 24 of the International Monetary Fund to withdraw at short notice from the Fund - a right which would be compromised if a Member of the Organization were required to be a Member of the Fund, and ware not free to withdraw from the Organization at short notice. 5. It was generally considered appropriate that any Member of the Organization whch was not also a member of the Fund should not have full freedom in exchange matters, since by exchange arrangements it might frustrate its trade obligations. There was a wide measure of agreement for the suggestion that such a Member should enter into a special agreement with the Organization in exchange matters whch would provide that the purposes common to the Organization and the Fund would not be frustrated as a result of action in exchange matters by the Member in question. In such cases the Organization would accept the opinion of the Fund whether action by the Member in question in exchange matters was permissible under the terms of the special exchange agreement; and the Member would undertake to provide the Organization with the information necessary for reaching such a decision. LONDON E/PC/T/ 19 Page 25 APPENDIX The following are the texts of the Articles which the Sub-Committee puts forward for Consideration Article 19 [General Elimination of Quantitative Restrictions] 1. Except as otherwise provided elsewhere in this Charter, no prohibition or restriction, other than duties, taxes or other charges, whether made effective through quotas, import licenses or other measures, shall be imposed or maintained by Member country, on the importation of any product of any other Member country, or on the exportation or sale for export, of any product destined for any other Member country. 2. The peovisions of paragraph 1 of this Article shall not extend to the following: - (a) Prohibitions or restrictions on imports or exports imposed or maintained during the early post-war transitional period, which are essential to (i) the equitable distribution among the several consuming countries of products in short supply, whether such products are owned by private interests or by the Government of any Member country, or (ii) the maintenance of war-time price control by a country undergoing shortages subsequent to the war, or (iii) the orderly liquidation of temporary surpluses of stocks owned or controlled by the Government or any Member country or of industries developed in any Member country owing to the exigencies of the war which it would be uneconomic to maintain in normal conditions: LONDON E/PC/T/19 Page 26 Provided, that restrictions under (iii) of this sub-paragraph may be imposed by any Member only after consultation with other interested Members with a view to appropriate international action. Import and export Prohibitions and restrictions imposed or maintained under this sub-paragraph shall be removed as soon as the conditions giving rise to them have ceased and, in any event, not later than 1 July 1949: Provided, that this period may, with the concurrence of the Organization, be extended in respect of any product for further periods not to exceed six months each. (b) Export prohibitions or restrictions temporarily imposed to relieve critical shortages of food-stuffs or other essential products in the exporting country. (c) Import and export prohibitions or restrictions necessary to the application of standards for the classification and grading of commodities in international commerce. If, in the opinion of the Organization, the standards adopted by a Member under this sub-paragraph are likely to have an unduly restrictive effect on trade, the Organization may request the Member to revise the standards, Provided that it shall not request the revision of standards internationally agreed under paragraph 6 of Article.16. (d) Export or import quotas imposed under inter-governmental commodity agreements concluded in accordance with the Provisions of Chapter VI. (e) Import restrictions on any agricultural or fisheries product, imported in any form, necessary to the enforcement of governmental measures which operate LONDON E/PC/T/19 Page 27 (i) to restrict the quanitities of the like domestic product permotted to be marked or prudeced, or (ii) to remove a temporary surplus of the like domestic product, by making the surplus available to certain groups of domestic oonsumers free of charge or at prices below the currrent market level. Any Mermber imposing restrections on the importation of any product pursuant to this sub-paragraph shall give public notice of the total quantity or value of the product plitte& to be imported .::Y` nr4 specified period and of any change in Such quantity or value [provided that any supplies of the product in question which were on route at the time at which public notice was given shall not be excluded but may be counted, so far as practicable, against the quantity permitted to be imported in the period in question.] Moreover, any restrictions imposed under (i) of this sub-paragraph shall not be such as will reduce the total of imports relative to the total of domestic.prdduction, as compared with the proportion which might reasonably be expected to rule between the two in the absense of the restriction. In determininig this proportion the Member shall pay due regard to the Proportion prevailing during a previous representative period and to any special factors which any have or may be affecting the trade in the product concerned. The Member shall consult with any other Members interested in the trade in question, who wish to initiate such consultations. (f) Import and export prohibitions or restrictions imposed on priivate trade for the purpose of establishing a new or maintaining an existing monopoly of trade for a State trading enterprise operated under Articles 26, 27 and 28. LONDON E/PC/T/19 Page 28 Notes on Article 19 1. One Delegation desires that the words "agricultural or fisheries" should be removed after the words "Import restrictions on any" at the beginning of 2 (e). 2. The words in square brackets in 2 (e) should be retained only if the matter is not fully covered in Article 15. LONDON E/PC/T/19 Page 29 Article 20 [Restrictions To Safeguard the Balance of Payments] 1. Members may nedd import restrictions as a means of safeguarding their external financial position and as a step towards the restoration of equalilbrium on sound and lasting basis, particularly in view of their increased demand for the imports needed to carry out their domestic emploument reconstruction, development or social policies. Accordingly ro .:. -L tust:n& s the provisions of Article 19; Members may restrict the quantity or value of merchandise permitted to be imported innofer as this is necessary to safeguard their balance of payment and..- ;L n*:t:-y .r -rves. The use of import restrictions under this paragraph shall conform to the conditions and requirements set out in paragraphs 2, 3 and 4 of this Article. 2. Members undertake to observe the following principles in the use of such restrictions:- (a) To refrain from imposing new or intensifying existing restrictions except to the extent necessary (having due regard to any special factors which way be affecting the level of the Member's reserves, to any commitments or other circumstances which may be affecting its need for reserves or to any special credits or other resources which may be available to protect its reserves) (i) to stop or to forestall the imminent threat of a serious decline in the Level of monetary reserves, or (ii) in the fas -of a Member with very Iow monetary reserves to achieve a reasonable rate of increase in its reserves. LONDON E/PC/T/19 Page 30 (b) To eliminate the restrictions when conditions would no longer justify the imposition of new restrictions under sub- paragraph 2 (a) of this Article and to relax them progressively as such conditions are approached. (c) Not to carry the imposition of new import restrictions or the intensification of existing restrictions under paragraph 2 (a) of this Article to the point at which it involves the .complete exclusion of imports of any class of goods. 3. (a) Any Member which, while not imposing restrictions under paragraphs1 and 2 of this Article, is considering the need for the imposition of restrictions, before imposing such restrictions (or, in conditions in which previous consultation is impracticable, as socn as possible after imposing such restrictions) shall consult with the Organization as to the nature of its balance of payments difficulties, the various corrective measures which may be available, and the possible effects of such measures on the economics of other Members. The Organization shall invite the International Monetary Fund to participate in the consultations. No 2Member shaIl be required during such discussions to indicate in advance the choice or timing of any particular measures which it may ultimately determine to adopt. (b) The 0rganization may at any time invite any member which is imposing import restrictions under paragraphs 1 and 2 of this Article to consult with it about the form and extent of the restrictions, and shall invite a Member substantially LONDON E/PC/T/19 PAge 31 intensifying such restrictions to consult accordingly within thirty days, Members agree to participate in such discussions when so invited. In the codduct of such discussions the Organization shall conssult the International Monetary Fund and any other appropriate lnternational specialized agencies, a. particular in regard to the alternative methods available to the Member in question of meeting its balance of payments difficulties. The Organization under this sub-paragraph shall, wthin two years of its instituation, review; aIl restrictions excisting at its institution and subsequently maintained under paragraphs 1 and 2 of this Article. (c) Any Member applying or intending to apply restrictions on imoorts under paragraphs 1 and 2 of this Article may, if it so desires, consult with the Organization with a view to obtaining the previous approval of the Organization for restrictions which it intends to maintain or to impose or for the maintenance or imposition in the future of restrictions under speciefied conditions, The Organization shall invite the International Monetary Fund oa participated in the consultations. As a result Of such consultations, the Organization may approve in advance the maintance, imposition or intensification of import restrictions by the Member in question insofar as the general extent, degree and duration of the restrictions are concerned; and to the extend to which such approval has been given, the action of the Member imposing restrictions shall not be open to challenge under paragraph F (d) of this Article insofar as it relates to conformity witn paragraphs 1 and 2 of this Article. LONDON E/PC/T/19 Page 32 (d) Any Member which considers that any other Member is applying import restrictions under paragraphs 1 and 2 of this Article in a manner inconsistent with the provisions of paragraphs 1 and 2 of this Article or of Articles 21 or 22, or in a manner which unnecessarily damages its commercial interest, may bring the natter for discussion to the Organization; and the Member imposing the restrictions undertakes to discuss the reasons for its action. The Organization shall, if it is satisfied that there is prima facie case that the complaining Member's interests are adversely affected, consider the complaint. It may then, after consultation which the International Monetary Fund on any matter falling within the competence of the international Monatary Fund, recomend the withdrwal or modification of restrictions which it determines are being applied in a manner inconsistent with the provisions of paragraphs 1and 2 of this Article or Articles 21 or 22, or in a manner which unnecessariy damages the commercial interests of another Membar. If restrictions are not withdrawn or modified in accordance with the recommendation of the Organisation within sixty days, such other Member shall be released from such obligations incurred under this Charter towards the Member applying the restrictions, as the Organization may specify. (e) The Organization an reaching its decision under sub-paragraph 3 (d) of t'his Article shall not recommend the withtdrawal or general relaxation of restrictions on the grounds that the existing or pros- pective balance of payments difficulties of the Member in question could LONDON E/PC/T/19 Page 33 be avoided by a change in that Member's domestic employment,oyrent, reconstructieonp, devloment or social polMimcies. grebers aee, horver, thatr in caying out smuch doisltice poicic they will pay due regatd to -he need to resture andnd -rn lasqulibriumlibriu in their ba oncesoments.xuc:ntv 4g In -iving effect to the restrictioms on irmorts iunosed -ider this Jrticle, a Member may smlect i;ports for restriction in wuch a iay as to promote its doeeploymsm.Plo2ent, ruconstrtctvelopment-riient or social policies; bMember SImbcrashall lloid a unnecesmage toage tb mme cor.rercial interest. of oemberMbr nd will aacept mn invitation to conwilt .-atother Member wmth}l hich eoonsidrs itsests inter to be aged.so dazGd. 5 If there is persistwideent and spread application of quantitative import restrictions under theis Artiacl, indicting the eoxiastence f general disequilibrium which is restricting international trade, the Organiallzateion sh sek conswultation ith the International Monetary Furd. The Orgamisation nay then in cillaborat'ion thwoughout vith the International Monetary Fund, initiate discussions to whonsider xether other megsures mi^ht not be taken, either by those cwuntries *hose balanyes of prnments a-e urder pressure or by those cwuntries vhose ba-payments ri Vrr.ns are tending to be elleptionahly favourable, or by pny app[inter-gte jterntgovernmetal agency or agoencmoies] t reve the underlying causes of the disemqMumilibriu ebers agree twhat they ill tscer in such discussions. 6. Throughout this section the phrase quantitatmive iport restrictions" includes the restriction of imports by State trading Organizations to an extent greater thaan tht wwhich ould bme perissible under article 27 of this Char[ter, provided thaMt no ember shall be required to disclose informawtion hoich wumld haper the commercial operations of such a State trading Organization]. LONDON E/P/T/1 9 Page 34. 7. Members recognize that in the early years of this Charter all Members will be confronted, in varying degrees, by problems of economic adjustment resulting from the war, During this period the Organization shall, when required to take decisions under this Article or under Article 22, take full account of the difficulties of post-war adjustment Which face the Members concerned. Notes on Article 20 1. The words in square brackets in paragraph 5 are intended to cover the Economic and Social Council of the United Nations as well as the inter-governmental specialized agencies. 2, The words in square brackets in paragraph 6 should only be retained if the matter is not adequately covered in the Articles dealing with State treading organizations. LONDON E/PC/T/19 Page 35 Article 21 [Non-Discriminatory Administration of Quantitative Restrictions] 1. Subject to the provisions of Article 22, no prohibition or restriction shall be applied by any MembJer pursuant to this Section on the miportation of any productof a ny otherM meber, country, or on the exportation of anyproduct d &ùct &estined for anyM mhr }leaber country unless the imporotation f the odlike pruct of all third countries, or the exortatione of thclike proo duct tell tounthird ccies,m is si-larly prohibited or restricted. 2. In pursuance of the principle set forth in paragraMemph 1, bers undertake in applying import restrictions to observe the provisions contained in the folloubwiang s-pragrphs:- (ea) icever practicagble, _obatJ qucls (whether allocated aonzsupplgyinr ountries or not) should be fixed, and notice gven of theirmou ait in accordancwe vth supb-;gralaeh 3(b) of this Article. (b)w here global quotas are not practicable,m iport restrictions ay be applied bym ïanso c minort licences without a global quota. (c)Im potr licences or permits whichm ay be issued in connectionw ith miport restrictions (whether or notw ithin the imits of?global quotas) shall not; save for purposes of operating , quotas allocated in accordance with sub-pararaph 2(d), require or provide that the licence or permit be utilized for the importation of the product concerned from a particular country or source. (d) In cases here these methods of licensing are found impracticableble or unsuitable, tMember he i&iauber concerned may apply the restrictionms in the for of a quotama allocated ong supplying countries. e In that evnt, the shares of Mtmhe various eber supplying countries should in princimple be deterinend in accordace LONDON E/PC/T/19 Page 36 with commercialci:.l cnsidzerations, such g e. s price, quality and mustonary sources of supply. For the purpose of appraising summercial cial considerations,Member a the ber -Applying the restrictions maym seewk agreeent ith respect to the allocation of shares in the quota withMem all other bers having a substantial interest in supplying the product concerned. In cases where this method is not reasonably pracMtmical, the eber concerned shoulMemd allot to ber countries having a substantial interest in supplying the product, shares based upon the proportions of the total quantitoy or value f the product supplied by such member countries during a previous representative period, due account being taken of any special facmtors which ay have affected or be affecting theh trade in te product. (e) No conditions or formalitiesmpo shall be isedd which woul pMemrevent any ber mcountry fro utilizing fully the share of any such total quaantity or vlue which has been allotted to it. 3. (a) In clicences ass where aport licences are issued in connection with Membiaportrestrictions, the [r applying the restriction shall provide, Memberupon the request of any r having an interest in the trade in the product concerned, all relevant information as to the administration of the restriction and as to the import licences granted over a past recent period and on the distribution of such licences aong supplying countries; provided, however, that there shall be no obligation to supply information as to the naes of impmorting or supplying firn. (b) In the case of iaort restrictions involving the fixing of quoltas (whamether or not alocated ong supplying countries), the Member applying the restrictions shall give public notice LONDON E/PC/T/19 Page 37 of the total quantity or value of the product or products which will be permitted to be imported during a specified future period, and of any change in such quantity or value. (c) In the case of quotas allocated among supplying , auplyinz countries, atphe Mgember plyin the restrictiomn shall prm alloptly infori other mgbers havin, n interest in supplying the product concerned, oef the shars ian the quot, by quantity or value, currently allocated to the vparious suplying countries. 4 g With reard to restmporictions ised in awccordance ith sub- paragraph 2 (dA) of this rnticle orparag uder sub-raph 2 (e) of Article 19, the selection of a representative period for any product and the apparaisal of ny special factors affectidng the trae in the product sheall be mad initialMely by the mbger imposin the restriction: rovided that esuch lMimbc shah upon the request of aMny other irber having substantial interest in supplying; that product, or upon the request of the Organization consult wpromptly ith the other Member or with the Organization rewarding the need for man adjustent of the base peereiod selctd or for the r e-l oappraisa f the aspecial fctors involved. 5. The provisionsAr of this lticle shal applyari to any tff quota establmaiished or ntanained by y Member. LONDON E/PC/T/19 Page 38 Draft Article ft Aj.-rticl 22 ieptlon from the ru-distermination.] nationn! 1, The provisions of this Section shall not preclude: (a) restrictions witeh equivalnt effect to exchange restrictions authorized under Article iVII, Secton 3 (b) of the Articles of Agreement of the InterMnational onnetary Fud; (b) prohibiteions or rstrictions in accordance waith sub-pragraphs 2 (a) (i) or 2 (d) of Article 19; ( conditionhs attacnig to exports which are rnecoessa-ota nsure that an exporting coueinty recves for its experts its own currency or then currercy mMof anyember of the International Monetary Fund specifede by thcexporting country; (d) restricitions n accordance with Articlei 20 whch either: () are appliedrwi otheneen conLtewntly vth ArticIe 21 against mports f.om other countries by a group of territories with cono quota in the InternationaMl iieta-r ndFurior (ii) assisit n the pioerd uintl 31 December 3191, by amesurens ot invoilvng substantiadl eparture from ther povisnios of Article 21, a country whose economy has been diusrpted by war, or, both(iii) provide Mea mber with additionalmp iorts above the maximum total ofmp iorts icwhh it could afford in thei lght of the coitions indns lIn paragraph 2 of Artiicl 20 ,f itis estrîctions ercconsistient wît Article 21, ad (iv) have eqluiwaent effect to exchange restrictionis wh:h are peitted to thaMt ibber underh tnrtieeAetclof Agreement of the Internation Ma<netaryF Pnd or under the trmei of any special exhange cnre areeimeicn mwin.-ay have been made between tmhe Meber and the Organisation undeir eArtcIs 23: Providead thtme a 0hi Mbewcho is nt imposing ireistrcotons ne paymnts LONDON E/PC/T/19 Page 39 and transfers for current international transactions may apply import restrictions under Section (iii) of this sub-paragraph in special circumstances and only with the prior approval of the Organization un agreement with the International Monetary Fund. 2. If the Organization finds, after consultation with the International Monetary Fund on matters within the competence of the Fund, that import restrictions or exchange restrictions on payments and transfers in connection with imports are being applied by a member an a discriminatory manner inconsistent with the exceptions provided under this Article or an a manner which discriminates unnecessarily against the trade of another member, the Member shall within in sixty days remove the discriminations or modify them as cispefied by the Organization: Provided, that a Member may, if at so desires, consult with the Organization to obtaiin ts previous approval for discriminations, under theo prcedure set forth in Article 20, paragraph 3 (c), and to the extent that such approval as given, the discriminations shall not be open to challenge underi ths paragraph. 3. When thrqee-uarters of the Members of the Organization have accepted the obligations of Article VIII of the Articles of Agreement of the International Monetary dFun, but an any evenet rbfoe 31 December 1951, the Organization shall rewvie the provisioons f this Article, an consultation with the InternationMal onetary Fundi,h wt a view to the earliest possiblei elmination of discriminations under sub-paragraphs 1 (di) (ii) and (iv) ofi ths Articwle hich restrict the expansion of world trade. LONDON E/PC/T/19 Page 40 Draft Article 23 (To replace articles 23 and 24 of the United States Draft Charter) [Exchange Arrangements]rangu.m,çts/ 1.i The Orgalnzation shalr seek co-opeation with the Fund to the end that the Forgud zand the ymaiation ma-pursue a co-ordinated policy wi.h xregard to echange questions within the competence of the Fund and questions of quantiictions tative roetr r omther trade easures within the competence of te Organization. 2. Meembers agre that they ewill not sek by exchange action to frustrate the purpioses of t,hs Charter and wthat they ill not seek by trade action to frusturate the prposes of theof a Artmicles ' .ge.nent of the International Monetary Fund. 3t. a Iin tordempositionr o vod he i of trade restrictions and discrimin- ationhs gethechroughs excan tnique, anda in order to void the danger of coindiction between the flictinga jurst\:en t. OrganizLtion and the International Moexchange netary F,und i me matter. Members of tlhe Organisation shall iso utndertake membrh4 f -he nterna-tioal Monetar[ty Fund; Provided15 hat any country wjhich ies lling to 'on tho rganwilling nization but is us-ng to join the International Monetary Fund may become a Member of the Organization if alit enters aintom na spci-exchange--reenr withc the Organization whio ould become part ndec is obligations uizehis Charter, and provided further hthat a Mebero owf tn Organizatic vich ceases to be a Member of the Internatidonal Monetary Fun shall forthwith enter into a special exwchangee agreement ith th Organization, which shall then become part of its obliigations under ths Charter. 4. A special exchange agreement between a Member and the Organization- unr paragAraph 3 of this. ticle must provide to the satisfaction of the Organization, in collaboratwion througheout ith the Intrnational Monetary Fnd, that the purposes common to the Organization and the Fund will not be frustrated as a result of action in exchange matters by the Member in question. LONDON E/PC/T/19 Page 41 5. A Member which has made a special exchange agreement under paragraph 3 of this Article-undertakes to furnish the Organization with such information as it may require, within the general scope of Article VIII, Section 5, of the Articles of Agreement of the International Monetary Fund, in order to carry out its functions relating to this special exchange agreement. 6. The Organization shall seek and accept the opinion of the International Monetary Fund whether action by the Mernber in exchange matters is permissible under the terms of the special exchange agreement and shall act in collaboration with the International Monetary Fund on all questions which may arise in the working of a special exchange agreement under this Article. Note on, Article 23 With respect to the words in square brackets in paragraph 3, referece should be made to paragraphs 2 and 3 of the report covering this Article.

GATT Library

cc394jc1895

Committee II. Report of the Sub-Committee on subsidies on manufactured goods

United Nations Economic and Social Council, November 21, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

21/11/1946

official documents

E/PC/T/C II/60 and E/PC/T/C. II/58-65/ADD. 1

https://exhibits.stanford.edu/gatt/catalog/cc394jc1895

cc394jc1895_90210280.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL 21 November 1946 LONDON E/PC/T/C II/60 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II REPORT OF THE SUB-COMMITTEE ON SUBSIDIES ON MANUFACTURED GOODS PART I The Sub-Committee which included Delegates for India, the United Kingdom and the United States, met once informally. PART II The Sub-Committee had before it the documents relating to subsidies, distributed in Committes II, as well as a document (E/PC/T/C.I & II/W.6) submitted by the United States Delegate at a meeting of the Drafting Sub-Committee on Industrial Development in connection with a proposal that the existing provisions of the United States Draft Charter be altered so as to provide leeway for the use of measures to assist developing industries under certain circumstances. It is pointed out in the last-mentioned document that Article 25 of the Draft Charter "would permit, without serious qualification, the use of governmental subsidies for the purpose of establishing and expanding a manufacturing industry". The requirements laid down in Article 25 in respect of such subsidies, it is stated, are moderate and few: 1. If the subsidy does not reduce imports no requirements are, made. 2. If the subsidy does reduce imports the only requirement - subject to what is said below - is that it be reported to the International Trade-Organization together with an indication LONDON E/PC/T/20 Page 2 concerning the probable effect of the subsidy and the reason why it is necessary. 3. Even if the subsidy should cause serious injury to international trade the only requirement is that the members granting it discuss with members whose interest is seriously prejudiced the possibility of limiting the subsidy. In view of these f acts no change in Article 25 cf the Draf t Charter was considered necessary.

GATT Library

bt466bt9611

Committee II. Report of the Technical Sub-Committee

United Nations Economic and Social Council, November 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/11/1946

official documents

E/PC/T/C.II/54/Rev.1 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/bt466bt9611

bt466bt9611_90210269.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/54/Rev.1 SOCIAL COUNCIL ET SOCIAL 28 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II REPORT OF THE TECHNICAL SUB-COMMMITTEE General Narrative Statement 1. The Technical Sub-Comittee net nine times under the chairanship of Senoir VIDELA (Chile). The meetings were the occasion for a thorough exaimination and exchange of vierws upon the provisions of the United States Suggested Charterr relating to the items listed below: General Commercial Provisions: National Treatment on Internal Taxation and Regulaltion Freedom of Transit Anti-dumping and Countervailing Duties Tariff Valuation Customs Formaities Marks of Origin Publication and Administration of Trade Regulations- Advance Notice to Restrictive Regutlations Infomation, Statistics and Trade Terminology Boycotts General Exceptions (to the Chapter on General Commercial Policy) 2. The Sub-Commiittee included delegates from all the countries represented on the Preparatory Committee. 3. In order to accelerate the proceedings, two Rapportours - one from the French and one from the United States Delagation - were appointed at an early meeting of the Sub-Committee. Later on, a second team of Rapportours - one from the Canadiàn and the other from the Netherlands Delegation - was appointed. In the course of the work, the Netherlands and the United States Delegates in question departed and were replaced by Rapportour from the Delegations for Belgium- Luxembourg and the United Kingdom LONDON E/PC/T/C. II/54/Rev. 1 Page 2 4. The questions referred to the Sub-Committee were discussed in full at its meetings. Delegations were invited to send in their views in writing g through the Secretariat to facilitate the work of the Rapporteurs. 5. The reports of the Rapporteurs were considered by the Sub-Committee, which made amendments and comments The final report of the Sub- Committee was submitted to the main Committee and approved as a working document. LONDON E/PC/T/C. II/54 Rev.1 Pase 3 COMMITTEE II - GENERAL COMMERCIAL POLICY TECHNICAL SUB-COMMITTEE'S CONFIDENTIAL REPORT TO THE DRAFTING COMMITTEE The meeting of the Technical Sub-Comittee were the occasion for a thorough examination and exchange of views upon the provisions of the United States Suggested Charter for an International Trade Organization of the United Nations in regard to the General Commercial Provisions, namely Articles 9 - 17 inclusive, and the General Exceptions, Article 32. A substantial degree of agreement among all members participating on the Preparatory Committee was reached on questions of the principles underlying these provisions. However, as was to be expected, there were numerous differences of opinion, and a number of reservations were made on account of national variations in the practice of detailed administration. For the benefit of the Drafting Committee, the detailed views of the various delegations and points of agreement have been embodied (in the form, so far as possible, of textual amendments) in this report. This report was prepared by the Rapporteurs of the Sub-Committee with the assistance of the Secretariat. Special note: All parenthetical statements noted by an asterisk (+) vere received after the first draft of this report was circulated and were not discussed or considered by the committee. LONDON E/PC/T/C. II/54/Rev. 1 Page 4 COMMITTEE II TECHNICAL SUB-COMMITTEE Article 9: National Treatment on Internal Taxation and Regulation This article was generally agreed to in principle by the Sub-Committee in that internal taxes and charges should not be used to afford protection to domestic products. However, some countries called attention to practices which might be contrary to this principle and suggested reservation for further discussion thereof bilaterally or ample time for their climination. Several countries emphasized that central goverments could not in nany cases control subsidiary governments in this regard, but agreed that all should take such measures as might be open to them to ensure the objective. It was felt that national treatment could not be applied to the procurament by governmental agencies of supplies for governmental use and not for resale. This problem was left to be deult with by the Sub-Committee on Procedures when it discussed article 8 on GeneraI Most-Favoured-Nation Treatment. After considerable discussion in committee, and from written statements concerning this subject from Australia, Belgium-Luxenbourg, Brazil, France, India, Netherlands, New Zealand, Norway, Union of South Africa and the United Kingdom, the Rapportours redrafted the Article as follows. (Comments, reservations etc., are given after each paragraph of the never text.) Paragraph 1. "The products of any member country imported into any other member country shall be exempt from internal taxes and other internal charges (of any character whatsoever) higher thin those imposed (directly or indirectly) on identical or similar products (of national origin.)" LONDON E/PC/T/C.II/54/Rev.1. Page 5 (a) United Kingdom After the word "taxes" delete "and" and insert "whether imposed directly or indirectly and from". After the word imposed" delete "directly or indirectly". (b) India: There should be no objection to a discriminatory internal tax if it is levied only for the purpose of raising revenue. (c) Norway: Reserves its position as to measures necessary for maintaining a common price level in the home market. (d) Cuba: Reserves its position as to measuress necessary for the protection of infant industries in countries at an early stage of industrial development. Paragraph 2 "The products of any member country imported into any other member country shall be accorded treatment no less favourable than that accorded identical or similar products of national original in respect of aIl internal laws, regulations or requirements affecting their sale, offering for sale, transportation, distribution or use of any kind whatsoever. /The provisions of this paragraph shall be understood to preclude the application of internal requirements restricting the amount or preportion of an imported product permitted to be mixed, processed, exhibited or used." (a) Australia, Brazil, Belgium-Luxembourg, Czechoslovakia, Netherlanads, New Zealand and Scoth Africa: Reserve their position as to discriminatory restrictionson Mixing, exhibition or other use operated in lieu of allowable practices which would interfere more seriously with international trade. (b) South Africa. Reserves its position as to preferential rates for internal transportation granted to certain domestic products which do not compete with imported products. Also desires to be associated with New Zealand (above in (a)) in the reservation on the assembly of motor vehicles, and with respect to groundnuts. LONDON E/PC/T/C. II/54/Rev. 1. Page 6 (c) Australia (Amend by addition of the following words at the end of the paragraph:- "Unless it is demonstrable that such requirements are less restrictive or less onerous in operation than other permissible practices, such as tariffs and subsidies, of all of which matters the Organization shall be the judge.) (d) New Zealari: (Suggested that the matter should be considered in the light of any provision which might be made respecting industrial development and that in the meantime consideration might -be given to the making of provision whereby any member which employs the procedure referred to should notify ITO and agree to discuss the natter with it or with interested members.) Paragraph 3 "The members agree that neither internal taxes nor other internal charges nor internal laws, regulations or requirements should be used to afford protection directly or indirectly for any national product." (a) United Kingdom: Add at the end "against an identical or similar product of foreign origin", (b) South Africa: considers that the use of the words "internal laws, regulations or requirement;" may be misconstrued as rendering e.g. Customs legislation and regulations undesirable, and suggests that, instead of the above mentioned words, the words "laws, regulations or requirements regarding internal taxation" be used. (c) New Zealand: Makes same suggestion for this paragraph as in 2 (d) above. Paragraph 4. "Each member agrees that it will take all measures open to it to assure that the objectives of this Article are not impaired in any way by taxes, charges, laws, regulations or requirements of subsidìary governments within the territory of the member government." LONDON E/PC/T/C. II/54/Rev. 1 Page 7 (a) United Kingdom, Czechoslovakia and Norway: Insert a new paragraph 4 as follows: "Nothing in paragraphs 2 and 3 of this article, insofar as those paragraphs relate to internal regulations or requirements, shall apply to cinematograph films." (b) New Zealand: Also makes a reservation as to its film hire tax. (Note: Under (a) above, if No. 4 were inserted, 4 would become 5 and 5, 6.) Paragraph 5. "The provisions of this Article shall not apply to the procurement by governmental agencies of supplies for govern- mental use and not for resale." (a) Australia, Belgium-Luxembourg, Brazil, Netherlands and Norway: Add a new paragraph providing for date of entry into force of this Article, or the period of notice before it becomes effective. Article 10. Freedom of Transit. In the discussion dealing with the Freedom of Traffic in Transit, it was generally felt that air traffic should be exempted as a matter which is being dealt with by the Provisional International CiviI Air Organization. A number of countries also felt that in the examination of this subject the provisions of the Barcelona Convention of the 20 April 1921 ought to be taken into consideration, and that the terms of any agreement reached on the subject should be carefully defined so as to leave no doubt as to the meaning of traffic in transit and its full implications. It was decided that paragraph 6 of the United States Suggested Article which gives the definition of "traffic in transit" should become the first paragraph. The suggested re-arrangement of the United states Article by paragraphs is given below, with comments and reservations after each paragraph. LONDON E/PC/T/C.II/54/Rev.1 Page 8. Paragraph 1. "Baggage and goods, and also vessels, coaching and goods stock, and other means of transport, shall be deemed to be in transit across tho territory of a Member when the passage across such territory, with or without trans-shipment, warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete journey, beginning and terminating buy and the frontier of the Member across whose territory the transit takes place. Traffic of this nature is termed in this Article 'traffic in transit'. The provisions of' this Article shall not apply to air traffic in transit." (a) It was decided that the word "Persons" should be deleted from this paragraph and article, as the Charter is dealing with goods and services. Furthermore, the traffic of persons was subject to immigration laws and it was suggested that another organ of the United Nations night deal with the question, but not the ITO. (b) India: Would like to consider further the proposal to delete the word "Persons" from the paragraph. (c) United States, Netherlands and Belgium-Luxembourg obtained some, but not unanimous support for the suggestion that there be added at the end of this paragraph. "In the application of paragraphs 2, 3, 4. and 5 of this Article, goods which are imported into any Member country shall be considered to be in transit if they are exported without having been released from customs supervision within that country even though the ultimate destination is not disclosed at the time of importation." Paragraph 2. "There shall be freedom of transit through the Member countries via the routes most convenient for international transit for 'traffic in, transit to or from other Member countries." ( a) Belgium-Luxembourg, France and the Netherlands: Prefer the text of Article 2 of the, Barcelona Statute, annexed to the LONDON E/PC/T/C.II/54/Rev.1. Page 9 Barcelona Convention of 20 April 1921, which ends as follows; No distinction shall be made which is based an the nationality of persons, the flag of vessels, the place of origin, departure, entry, exit or destination, or any circumstances relating to the ownership of goods or of vessels, coaching or goods, stock or other means of transport. In order to ensure the application of the provisions of this Article, contracting states will allow transit in accordance with the customary conditions and reserves acrosss their territorial waters. (b) India: paragraph 1 should be amended to read: "There shall be freedom of transit through Member countries for the products of other Members via such routes as may be open to traffic in products of like kind and quality of national origin." Paragraph 3. "Any member may require that traffic in transit through its territory be entered at the proper custom house, but except in cases of failure to comply with applicable customs laws and regula- tions, such traffic coming from or going to other member countries shall be exempt from the payment of any transit duty, customs duty, or similar charge, and shall not be subject to any unnecessary delays or restriction. (a) India: Reserved its position as to whether Article 32 (b) and (c) provide ample provision for the diversion of traffic in transit from the most convenient routes in emergency conditions, such as famine in a section of the country. It is understood that the words "or similar charge" mean a charge imposed by the Government of the country which is similar to a transit duty or a customs duty, and not to a charge for transportation. LONDON E/PC/T/C.II/54/Rev.1 Page 10 (b) Australia: The words "or similar charge" should not be held, to imply that traffic in transit shall be exempted from the charges imposed alike on domestic and in transit traffic. (c) France: Believes that the use of the language of Article 3 of the Barcelona Statute would clarify this point. (a) India Suggests an inconsistency between paragraphs and 4 in that the former forbids charges while the latter provides that charges shall be reasonable. (e) South Africa: Recommends that this paragraph be amended specifically to exclude charges for transportation, leaving this question to be treated solely in paragraph 5. Paragraph 4. "All charges and regulations rc:'ed by Members on traffic in transit to or from other member countries shall be reasonable, having regard to the conditions of the traffic. (a) It is urderstood that the word "charges" in this paragraph includes charges for transportation by Government-owned railroads or Government-owned modes of transportation. Since this paragraph only provides that such charges shall be reasonable" it is 'believed that the question of preferential rail rates comes under paragraph 5. Paragraph 5. "With respect to all charges, rules, and formalities in connection with transit, each member shall accord to traffiic in transit to or from any other member country treatment no less favourable than the treatment accorded to traffic in transit to or from any country." (a) Belgium-Luxembourg and the Netherlands: Call attention to the simplified treatment of traffic in transit along certain water routes as provided for by such international agreements as the Rhine traffic agreements and the Schelde Treaty. (b) South Africa: Reserves its position because it grants preferential freight rates to the products of certain contiguous territories. LONDON E/PC/T/C. II/54,/Rev. 1 Page 11 Paragraph 6. "Each member shall accord to products which have been in transit through any other member country-treatment no less favour- able than that which h could have been accorded to such products had they been transported from their origin to their destination without going through such other member country." (a) It is understood that paragraphs 2 - 5 of this Article cover the treatment to be given by a member country to products in transit through its territory between any other member country and any third country, and paragraph 6 covers the treatment to be given by a member country to products cleared from customs within. its territory after transit through any other member country. On the basis of this understanding, several delegates believed that paragraph 6 should be excluded from Article 10 and set forth elsewhere in the Charter because it does not deal with products in transit. Several reservations were made in the sense that countries should be allowed to maintain a requirement of direct consignment ("expedition directe") in the case of goods admitted free, at reduced rates of duty or exempt from higher duties than the normal tariffs. (b) United Kingdom: Notes that it will be difficult, under this text, to maintain a differentiation between members and non-members. (c) China: Add the following: "Provided that the products which have been in transit can be identified at their destination to the satisfaction of local customs authorities as to their origin of country or export." LONDON E/PC/T/C.II/54/Rev.1 Page: 12 (d) France, The Netherlands, Czechoslovakia and Belgium- Luxembourg: Raise the question as to what will be the position under the Charter of countries which have adhered to the Convention of Bareelona, as Article 10 of that Convention angages signaturius not to conclude other agreements on the subject of transit which would be inconsistent with the provisions of that Convention. (e) Australia: (Amend by the addition at the end of the paragraph of the following sentence: Any member country shall, however, be free to maintain its existing requirements of direct consignment (expedition directe) in respect of any goods in regard to which such direct consignment is a requisite condition for entry of the goods at concessional rates of duty, or has relation to the country's prescribed method of valuation for duty purposes.") Article 11. Anti-dumping and Countervailing Duties There was general consent among the majority of the countries in the discussions on Anti-dumping and Countervailing Duties that circumstar-ces might arise in which such duties may properly be applied. Some countries felt that the proposal should not be limited to duties as such but should permit the adoption of other counter measures and that there was also need of clarification of definition in view of the variety of circumstances in which dumping may occur, such as social dumping. Comments and reservations after each paragrah are given below. LONDON E/PC/T/C.II/54/rev.1 Page 13 Paragraph 1. "No anti-dumping duty shall be imposed on any product of any member country imported into any other member country in excess of an amount equal to the margin of under which such product is being imported. For the purposes of this Article, the margin of dwaping shall be understood to mean the amount by which the price of a product exported from one country to another is less than (a) the comparable price charged for the like or similar product to buyers in the dormestic market of the exporting country, or, (b) in absence of such domestic price, the highest comparable price at which the like or similar product is sold for export to any third country, or, (c) in the absence of (a) and (b), the cost of production of the product in the country of origin; with due allowance in each case for differences in conditions and terms of sale, for differences in taxation, and for other differences affecting price comparability." (R) Belgium-Luxembourg and Netherlands: A number of countries favour the use of other measures than anti-dumping duties to offset price dumping. Belgium-Luxembourg and the Netherlands suggest the addition of the words "and measures" in the title of Article Il and after the words "anti-dumping duty" wherever they appear in that Article. (b) It was understood that paragraph 1 refers only to price dumping and that the tern "anti-dumping duty" as used therein, refers only to an additional duty imposed for the purpose of offsetting such dumping, and that "cost of production" should include not only profit but all other elements entering into a normal selling price. (c) Netherlands and Belgium-Luxembour: Some such words as "or tax or other charge upon imports" should be added after the words "no anti-dumping duty". (a) Brazil: Heavier than counter-balancing duties or quantitative restrictions should be allowed in case of aggravated or sporadic a.sint; it reserves its position as to paragraph 1. LONDON E/PC/T/C.II/54/Rev.1 Page 14 (e) Cuba: The first sentence should read "anti-dumping duties shall be imposed on any products of any member country at least at the rate of", etc., and at the end, after "price comparability' there should be added a including the regime of salaries and conditions of labour". (f) India: The definition of "margin of dumping" might be left to the ITO to help the different countries in arriving, at a definition. (g) South Africa: The margin of dumping should exceed a certain percentage, say five per cent, before anti-dumping duties may be imposed. France thinks the allowance should be ten per cent (c.f., the IMF position). (h) Australia: Paragraph 1 (b) should be amended as follows: "(b) in the absence of such domestic price, the highest comparable price at which the like product is sold for expert to any and every purchaser in any third country in the ordinary course of commerce". (i) United Kingdom: The definition of "margin of dumping" should allow for the addition of all pre-importation charges to the purchase price. (j) Australia: (Wherever the words "like or similar product" occur, the words "or similar" be indicated in square brackets, leaving consideration to be given to the price at which the like product is sold. Paragraph 1 (b) of Article 11 to be amended to read:- "(b) In the absence of such domestic price, the highest comparable price at which the like product is sold for export to any and every purchaser in any third country in the ordinary course of commerce." It is recommended to the Drafting Committee to include provisions to enable member countries to protect themselves against other forms of dumping, such as freight dumping and dumping by depreciation of currency). LONDON E/PC/T/C.II/54/Rev.1 Page 15 (k) New Zealand: (Heading (b) would not be acceptable to New Zealand. In the absence of a domestic price power of assessment rests with the Minister of Customs-vide E/PC/T./C.II/W.15 - insert new sub-paragraph - also under (i). New Zealand provides that dumping (or countervailing) duties may be applied in respect of special concessions (railway or shipping freight, subsidy, special bounty, rebate, or otherwise) allowed taken or granted having a prejudicial or injurous effect), Paragraph 2. "No countervailing duties shall be imposed on any product of any member country imported into any other memeber country in excess of an amount equal to the estimated bounty or subsidy asvertained to have been granted, directly or indirectly, on the Production or export of such product in the country of origin or exportation." (a) The term "countervailing duty" was understood to rnean an additional duty imposed for the purpose of offsetting any bounty or subsidy bestowed, directly or indirectly, upon the manufacture, production or exportation of any merchandise. (b) Czechoslovakia: This paragraph should cover all hidden subsidies or refunds. (o) China: Add at the end: "In the event of preferential treatment being accorded by a country to certain countries to the exclusion of other member countries, no countervailing duty shall be imposed upon the ,products imported from such other member countries against subsidies which are granted by the latter to such products as compensation for covering the preferential margin." (a) Australia: Members should not make, by law, the assessment of countervailing duties mandatory whenever a subsidy is granted, since some subsidies are permitted by Article 25 and it may not be desirable to countervail such subsidies. (e) Brazil: quantitative. restrictions or other punitive measures should be permitted. LONDON E/PC/T/C.II/54/Rev.1 Page 16 Paragraph 3. "No product of any member country imported into any other member country shall be subject to anti-dumping or countervailing duty by reason of the exemption of such product from duties or taxes imposed in the country of origin or exportation upon the like product when consumed domestically, or by reason of the refund of such duties or taxes." (a) Agreed as amended (by addition at the end of the words "or by reason of the refund of such duties or taxes".) Paragraph 4. "No product of any member country imported into any other member country shall be subject to both anti-dumping and counter- vailing duty to commpensate for the same situation of dumping or export subsidization. " No comment. Paragraph 5. "Each member 4 undertakes that as a general rule it will not imposed any anti-dumping duty or countervailing duty on the importation of any product of othèr member countries unless it datermines that the dumping or subsidization, as the case may be, under which such product is imported, is such as to injure or threaten to injure a domestic industry, or is such as to prevent the establishment of a domestic industry." (a) Brazil: Paragraph 5 should be deleted. (b) Netherlands and Belgium-Luxembourg: Delete the words "as a general rule" in the first line; the additional duties should be assessed only if the dumping or subsidization is systematic, not merely occasional. (Several countries do not agree with this point of view) (c) Czechoslovakia: Some guarantee against arbitrary action should be added to the paragraph. (a) Australia and South Africa: Delete the last clause, For is such as to prevent the establishment of a domestic industry". (t) France: Substitute for this paragraph: LONDON E/PC/T/C.II/54/Rev.1 Page.17 "Each member country undertakes not to impose any anti- dumping duty or countervailing duty on the importation of any product of other member countries unless they are in a position to prove: (a) that there exists a dumping, bounty or subsidy, as defined in paragraphs 1 and 2 of this article. (b) that its domestic production has sustained grave injury from the dumping, subsidy or bounty. The member country against whom the measures laid down in this article have been taken shall be able to lodge a complaint with the Organization which will have to decide, after hearing the two states concerned, whether the Measures complained of are justified or not." (f) Netherlands and Belgium-Luxembourg: Agree in principle with this amendment. General (a) United Kingdom: Makes a reservation in that in its opinion all anti-dumping and countervailing duties should be prohibited. (b) South Africa and Australia: This Article should be expanded to permit the assessment of anti-dumping duties to offset "service dumping", e. g. use of preferential or subsidized freight rates, and in the opinion of the former, exchange dumping also. (c) Australia The criteria for the imposition of anti-dumping and countervailing duties should be established under the Charter after it becomes effective rather than in the Charter itself, The criteria should include: (i) A determination of actual or potential injury by an independent administrative authority. LONDON E/PC/T/C.II/54/Rev.1 Page 18 (ii) Optional and not mandatory application of these duties. (iii) Appeal to the ITO by any member aggrieved by any action of another member under this Article. (d) South Africa: Does not favour any requirement that anti- dumping duties cannot be imposed until a central Organization accepts their justification; an appeal to a central authority against their imposition should be allowed. (e) New Zealand: Makes a reservation as to the immediate imposition of anti-dumping duties, although normally notice would be given. Article 12, Tariff Valuation On the subject of Tariff Valuation, all countries concerned agreed that it was necessary to work towards standardization, so far as practicable, of definitions of value and procedures in determining the values of products subject to Custor.s Duties or other restrictions based or regulated in any way byr value. They £Ùrther agreed that this matter should be investigated by the International Trade Organization and they undertook to co-operate in that investigation. It was felt that it was necessary in the meantime for each country to consider its own system to prevent the abject in view being defeated by over-valuation and other administrative practices. Comments and reservations by paragraphs are given below: Paragraph 1. "Members undertake to work toward the standard- ization, insofar as practicable, of definitions of value and of procedures for determining the value of Products subject to customs duties or other restrictions based upon or regulated in any manner by value. With view to furthering such co-operation, the Organization LONDON E/PC/T/C.II/54/Rev. 1 Page 19 is authorized to investigate and recommend to members such bases and methods for determining the value of products as would appear to be best suited to the needs of commerce and most capable of widespread adoption." (a) It was understood that paragraph 1 relates to natters to be undertiken by the member countries under the International Organization at sone future date, whereas paragraph 2 relates to practices to be applied immediately after the Charter becomes effective and that both paragraphs should cover values for all ad valorem taxes and charges applicable to imported articles and should not be limited to values for duty, the addition of customs duty being permitted as appropriate in determining domestic values. (b) Canada: Substitute "shall" for "undertake to" in the first line of paragraph 1. Paragraph 2. "The members recognize the validity of the following general principles of tariff valuation and they undertake to give effect to such principles, in respect of all products subject to duty based upon or regulated by value, at the earliest practicable date:" (a) Canada: The prsamble to the paragraph should read: "The members recognize the validity of the following general principles of tariff valuation and they undertake to review their customs laws and regulation with a view to giving effect to such principles at the earliest practicable date, and shall report to the Organization from tine to time on the progress made. The Organization is authorized to request such reports of members and to assist and co-operate with them in carrying out the provisions of this paragraph". (b) Australia and South Africa: members should not be required to review their laws for the purpose of giving effect to the principles set forth in sub-paragraphs (a), (b), (c) and (d), until a specific request for the review of a particular law or laws is made by another member. LONDON E/PC/T/C.II/54/Rev.1 Page 20 (e) Belgium-Luxembourg, Czechoslovakia and Netherlands: A definite date should be fixed for the cording into effect of this paragraph. (d) China and Canada proposed a transitional period. (a) France: No country should use a basis of tariff valuation which involves inquiries or investigations which are (i) inconsiderate of commercial interests involved (ii) likely to prejudice economic relations between exporting and importing countries, or which (iii) involve inquisitorial procedures or arbitrary methods. (f) Belgium-Luxembourg and Netherlands: The Charter should spocify more exactly a uniform basis for determining values for duty which may be summarized as follows: (i) The importer must submit to customs authorities all his private documents relating to each importation. (ii) Customs officers shall have the right to examine private records of importers. (iii) In case of litigation as to value, imports shall not be impounded but shall be released to the importer, subject to adequate provisions for securing the revenue (Article 8 of the Geneva Convention of 1923). (iv) Value litigation shall be tried specially before an independent tribunal of competent experts where the importer will be heard. (v) Fines may be imposed upon importers for under-valuation. Paragraph 2 (a). "The value for duty purposes of imported products should be based the actual value of the kind of imported merchandise on which duty is assessed, or the nearest ascertainable equivalent of such value and should not be based on the value of products of national origin or on arbitrary or fictitious valuations". LONDON E/PC/T/C.II/54/Rev.1 Page 21 (a) United Kingdom: SubStitute the following for sub-paragraphs (a) and (d): "Where an actual price of imported products is not accepted as the basis for determining their value for duty purposes, their assessed value should not be based on arbitrary or spurious valuations but should satisfy clearly defined and stable conditions which conform with commercial usage." (b) France prefers the United States draft and asks especially for the maintenance of the words: "should not be based on the value of products of national origin". Paragraph 2 (b). "The value for duty purposes of an product should not include the amount of any internal tax, applicable within the country of origin or export, from which the imported product has been made exempt." (a) There was no objection to the general purpose of this paragraph (b) United Kingdom: After the word "export" add "to products of that class"; delete the words "made exempt" and substitute "relieved or made exempt". (c) Australia: (This paragraph to be amended to read:- 2. ''Members undertake, on receipt of a request from another interested member country, to review any Customs Laws and/or Regulations the subject of the specific request, with a view, to giving effect etc. balance of paragraph 2 as per original draft). Paragraph 2 (c). "In converting the value of any imported product from one currency to another for the purpose of assessign duty, the rate of exchange to be used should be fixed in accordance with prescribed standrds to reflect effectively current value of each currency in commercial transactions, and until the elimination,of dual or multiple rates of exchange either one more than one rate for each dual- or multiple - rate currency may be so fixed," LONDON E/PC/T/C.II/54/Rev.1 Page 22. (a) There were questions as to whether the reference to "dual or multiple rates" contemplates the different rates commonly existing at any one time for purchases and for sales of currency. It was agreed that this term applies only to cases in which two or more rates for one currency are legally in general use, as where there is an "official" and a "free" rate for the same currency at the same time. (b) It was agreed that drafting of this paragraph ("and until...") is not satisfactory (United States and United Kingdom dissenting). (c) Belgium: It should be made clear that the rate of exchange to be used in each case should be in accordance with official regulations of the importing country. Only one rate for one country at one time should be used. (d) France and Australia All reference to dual or multiple rates should be eliminated. (e) France: The rate must be the one fixed by payments agreements. (f) China reserves its position on this sub-paragraph. Paragraph 2 (d) "The bases and methods for determining the value of products subject to duties regulated by value should be stable and should be published in full detail, in order that traders may be enabled to estimate, with a reasonable degree of certainty, the amount of duty likely to be impsoed". (a) United Kingdom: Deletion and amendment of paragraph 2 (a), as above. (b) Belgium-Luxebourg and Netherlands: Delete the end of this paragraph from the words: "and should be published..." Article 13. Customs Formalities In connection with Customs Formalities, some countries felt that the Geneva Convention of 1923 effectively covered the subject. There was general agreement that subsidiary fees, charges and penalties should not, be used as indirect protection to domestic products. On the general question of simplification, it was felt that the International Trade LONDON E/PC/T/C. II/54/rev. Page 23 Organization should continue the studies previously instituted by other bodies with a view to the elimination of unnecessary requirements. France observed that this Article would be unnecessary if all members adhered to the Geneva Convention of 3 November 1923, and would agree with the recommendations of the Economic Conference of 1927 (Report, paragraph 2 Customs Tariffs, No.5). Belgium-Luxembourg, Czechoslovakia, Netherlands and the United Kingdom agreed. Comments and reservations by paragraph are given below: Paragraph 1. The members recognize the principle that subsidiary fees and charges imposed on or in connection with importation or exportation should be limited in amount to the approximate cost of services rendered and should not represent an indirect protection to domestic products or a taxation of imports or exports for fiscal purposes. They also recognise the need for reducing the number and diversity of such subsidiary fees and charges, for minimizing the incidence and complexity of import and export formalities, and for decreasing and simplifring import and export documentation requirements." (a) Netherlands and Belgium-Luxembourg: A definite period of notice should be stated for implementing the measures referred to in the first sentence. Paragraph 2. "Members undertake to review their customs laws and regulations with a view to giving offect to the principles and objectives of paragraph 1 of this Article at the earliest practicable date and shall report to the Organization from time to time on the progress made. The Organization is authorized to request such reports of members and to assist and co-operate with them in corrying out the provisions of this paragraph." (a) Australia and South Africa: The obligation to review customs law and regulations should arise only on specific request of another member for review of a particular law or laws. LONDON E/PC/T/C.II/54/rev.1 Page 24 Paragraph 3. "Greater than nominal penalties should not be imposed by any member in connection with the importation of any product of any other member country because of errors in documentation which are obviously clerical in origin or with regard to which good faith can be established, Moreover, members shall remit any penalty imposed on or in connection with the importation of any product of any other member country if it is officially found that the penalty has been inposed because of actions which resulted from errors or advice of responsible customs officials. " (a) France, Netherlands and Belgium-Luxembourg: It is undesirable to appear to interfere with the independence of courts by specifying that only nominal penalties may be imposed. Therefore, Netherlands and Belgium-Luxembourg propose that paragraph 3 be revised and included only as a recommendation for the customs administrations in the protocol. (b) Netherlands and Belgium-Luxembourg: Nominal penalties would be appropriate only for obvious and accidental errors but not for serious cases of negligence, even although there is no- evidence of bad faith. (c) Australia, Netherland and United Kingdom: Delete the second sentence. (d) France suggests that paragraph 3 be replaced by the following draft, taken from the Geneva Convention of 1923 (Annex to Article 14, - A6) and the Report of the Economic Conferernce 1927 (paragraph 2, No.5). "It is desirable that States should refrain, so far as possible, from inflicting severe penalties for trifling infractions of Customs procedure or regulations. In particular, if an act of emission or an error has been committed which is obviously devoid of any fraudulent intent and which can easily be put right, in respect of cases in LONDON E/PC/T/C.II/54/Rev.1 Page 25 which the production of documents is required for the clearing of goods through the Customs, any fine which may be imposed should be as small as possible so as to be as little burdensome as possible and to have no character other than that of a for.l penalty, i.e, of a simple warning". It is recommended that importers or exporters may obtain a review of Customs penalties, in particular those applied in cases of obvious errors. (c) South Africa considers paragraph 3 should be couched in more general terms. Paragraph 4. "The provisions ot this Article shall extend to subsidiary fees, charges, formalities and requirements relating to all customs matters, including: (a) Consular transactions such as consular invoices and certificates; (b) Quantitative restrictions; (c) Licensing; (d) Exchange regulations; (e) Statistical services; (f) Documents, documentation and certification; (g) Analysis and inspection; and (h) Quarantine sanitation and fumigation plant, animal and human)". The -addition ("such as consular invoices and certificates") to sub-paragraph (a) was generally agreed. Article 14. Marks of Origin There was a consensus of opinion among countries that excessive requirements in connection with Marks of Origin should be avoided as far as practicable. + It was felt generally that the complicated subject of exemptions from the requirements should be recommended for study by the ITO and that the particular interest of certain countries in protecting the regional or geographical marking of their distinctive products should also be considered by the Organization. (Czechoslovakia suggested for consideration whether the obligatory marks of origin should not be gradually abolished). LONDON E/PC/T/C. II/54/Rev. 1. Page 26 Comments and reservations after each paragraph are givèn below: Paragraph 1. "The members agree that in adopting and implementing laws and regulations relating, to marks of origin, the difficulties and inconveniences which such measures may cause to the commerce and industry of exporting countries should be reduced to a minimum." No objection was made to this paragraph. Paragraph 2. "Each member shall accord to the products of each other member country treatment with regard to marking requirements no less fanvourable than the treatment accorded like products of any third country." No objection was made, to this paragraph. Paragraph 3. "Whenever administratively possible, members shall permit required marks of origin to be imposed at the time of importation." (a) Australia, New Zealand and South Africa and others: The customs authorities ought not to be required to submit to what might be serious inconvenience in order to make up for the failure of exporters to comply with regulations already well known to them. Paragraph 4. "The laws and regulations of the members relating to the marking of imported products shall be such as to permit compliance without seriously damaging the products or materially reducing their value, or unreasonably increasing their cost." No objection was made to this paragraph. Paragraph 5. "The members undertake to work toward the uniform adoption of a schedule of general categories of products which shall. not in any case be required to be marked to indicate their origin. With a view to furthering this work, the Organization is authorized to investigate and recommend to members descriptions of categories of LONDON E/PC/T/C. II/54/Rev.1 Page 27 products in respect of which marking requirements operate to restrict trade in a degree disproportionate to any proper purpose to be served." Above paragraph substituted by Committee in lieu of paragraph 5 of . United States Charter. Paragraph 6. "No special duty or penalty shall be imposed by any member for failure to complay with the marking requirements prior to importation unless corrective marking has been unreasonably delayed or false marks have been intentionally affixed or the required marking has been intentionally omitted." (a) Belgium-Luxembourg, Netherlands and New Zealand: Reserved their position on this paragraph. Belgium-Luxembourg and Netherlands suggest difficulty will arise -in taking "intention" into account. New Zealand: (Several delegates expressed the view that failure to affix required marks of origin before importation, being either wilful. or negligent disregard of existing laws, night well continue to be subject to some penalty). (b) Australia: (c) France: Delete paragraph 5 (covered by article .13, paragraph 3) (d) Additional Remarks: Belgium-Luxeabourg, Netherlands and France specified that a country must be able to prohibit the import, export and transit of foreign goods bearing markings which indicate that these products were originally made in that country. The Committee was of the opinion that thé examination of this question must be taken up in connection with Article 32, paragraph (g). There was a considerable amount of discussion about a possible extension of Article 14 to include a committee by members to protect in their country geographical, national or regional marks of origin (appellation d'origine). Czechoslovakia, Cuba and Belgium-Luxembourg raised similar proposals while other countries expressed the view that LONDON E/PC/T/C.II/54/Rev. 1 Page 28 adequate safeguards against deceptive practices were provided under Article 32, paragraph (g), and that no provision need be made for the matter in the present Article. United States: False marks are prohibited in the United States by criminal law, and it is not necessary for customs regulations to deal with them. France, recognizing that Article 32, paragraph (g), gives authority to States to forbid importation of goods with false marks of origin, asked members to commit themselves to prohibit importation, transportation, and sale of such products. France would not be able to accept Article 14 if this Article were not completed in such a way or at least if a precise explanation were not contained in the Charter. The following addition to the Article is suggested:- "Members shall afford, pursuant to their own laws, adequate protection to trade names and marks of origin and quality recognized and protected by domestic legislation in the countries of origin of the goods. "They shall, for this purpose, transmit to the Organization a list of such marks and trade names as are protected by their domestic legislation and for which they wish to secure protection in importing countries. "They undertake further to take part in any Conference called by the Organization to secure effective international protection for marks of origin". Article 15. Publication and Administration of Trade Regulations - Advance Notice of Restrictive Regulations. It was agreed that, as far as possible, prompt and adequate publicity should be given to change in lairs and regulations affecting foreign trade. As to the suggestion that national tribunals of an independent LOIDON E/D/TI/Cd.II/54/Rev.1 Page 29 character should be .a'ntained or established to review or correct administrative custom. actions, most countries felt that there was no need to take any special zi-easures for this purpose, as their existing systems seemed to be full and adequate compliance with the requirement. BeLiua-Luxeab.our2 and the Netherlands: Add to heading of Article maintenance e or Establish.tent of Independent Tribunals". Coeiaents and reservations are given aiter each of the paragraphs of this Article of. the United States Suggested Charter~ below: Paragraph 1:' "Laws, regulations, decisions of judicial authorities and administrative rulings of general application. ade effective by any iadaber, pertaining to the classification or valuation of products for custo.æ purposes, or to rates of duty, taxes or other chIrges, or to requirements, restrictions or prohibitions on i-mports or exports or on the transfer of pay=onts therefor., or affecting their sale or distribution, or affecting their ivarehousirig, inspection, exhibition, processing, -.ixing or other use, shall be published praiptly in such a manner as to enable traders and Govern-aents to'become acquainted with the.i. ggrcea-ents in force bet-<een the Governaent or a Governaental agency of any.2cmber country and the Government or a Governaental agency of aiy other country affecting international trade policy shall also be published. Copies cf such lavis, 'regulations, decisions, rulings and agreements shall be co:.iunicated -,rc-ap±ly to the Organization. This paragraph shal lnot require any ze:aber to publish administrative rulinzs which would disclose confidential'inforaation, iripede law enforcement, or otherwise be inimical to the public interest." (a) Cuba: Insert -"tra.nsportation and insurance" after. the word "distribution". (o) France: This paramrarh .ay replace articless 4 and 6 of the Convention of 3 Novaeber 1923 for the siiaplificàtion of customs for3alities, but it should be supplemented by LONDON E/PC/T/C.II/54/Rev. 1 Page 30 (i) inserting the provisions of Article 5 of that Convention; (ii) inserting the provisions of the Brussels Convention of 5 JuIy 1890 as to publication of tariffs; (iii) providing for the setting up in each member State of an Organization specially responsible for publicizing, within the country and abroad, the laws and regulations relating to foreign trade; and (iv) providing for the setting up within the ITO of an office responsible for collecting, analyzing and publishing as quickly as possible in the usual languages laws, regulations and decisions concerning foreign trade and for collecting together perisdically, in detailed studies, information concerning the comparative regulations of member states in any given point. With regard to the last point (iv), it is suggested that ITO take over the international organization now existing at Brussels and enlarge ïts functions as indicated above. Paragraph 2: "Members shall administer in a uniform, ïmpartial and reasonable manner all laws regulations, decisions and rulings of the kind described in paragraph 1 of this Article. Moreover, they undertake to maintain. or to establish as soon as practicable, for the review and correction of administrative action relating to customs matters, judicial or administrative tribunals which are in fact independent of the agencies entrusted with administrative enforcement.: FÎnally, each Member will enforce all measures necessary to suppress and prevent the exaction of charges and the prescription of requirements in respect of international trade which are not provided for in its published laws or regulations." LONDON E/PC/T/C. II/54/Rev. 1 Page 31 It is understood that the "judicial or administrative tribunals" referred to in this paragraph need not be especially established to deal exclusively with customs matters. (a) France: Delete the third sentence of the second paragraph and the following words of the second sentence: "for the review and correction of administrative action relating to customs matters". Add at the end of this sentence "and which will have as their functions to decide upon the legality and regularity of the measures taken by the administration and of the taxes or formalities imposed by the customs service." (b) Belgium-Luxembourg and Netherlands: It should be required that the tribunals be established within a specified time. (c) New Zealand: Appeals against administrative decisions can be made. to the Minister of Customs and it is not considered necessary to set up a special tribunal. (d) United Kingdom: The second sentence should read: Moreover, they undertake to continue, or to institute as scon as practicable, measures to ensure redress by administrative, judicial or arbitral procedure for those who may have been prejudiced by any breach of this provision." paragraph 3: "No law, regulation, decision or ruling of any Member effecting an advance in a rate of import or export duty or other charge under an established and uniform practice, or imposing a new or more burdensome requirement, restriction or prohibition LONDON E/PC/T/C.II/54/Rev .1 Page 32 on imports or exports or on the transfer of payments therefor, shall, as a general rule, be applied to products of any other Member already en route at the time of publication thereof in accordance with paragraph 1. of this Article: Provided, that if any Member customarily exempts from such new or increased obligations products entered or withdrawn from warehouse for consumption, or cleared for export, during a period of thirty days after the date of such publication, such practice shall be considered full compliance with this paragraph. The provisions of this paragraph shall not apply to anti-dumping or countervailing duties." Australia, France, Belgium-Luxembourg, Netherlands, Canada, India, New Zealand, Norway, South Africa, Czechoslovakia and United Kingdom: are unable to accept this paragraph, Canada gives notice in case of an administrative ruling. General Belgium-Luxembourg, and Netherlands: It should be stipulated that Members will not use in their tariffs and trade agreements any specifications aiming at indirect protection. Article 16 Information, Statistics and Trade Terminology There was general acquiescence in the proposal that the International Trade Organization should be supplied with fuIl statistical information as promptly as possible; but .any countries felt that unless the demands were limited to reasonable proportions an intolerable burden might be imposed LONDON E/PC/T/C. II/54/Rev.1 Page 33 on their This applied particularly to the smaller countries in which present statistical services are less fully developed than in others. A few countries also felt that certain aspects of the, matter, with all its implications were proper for study by the International Trade Organization, bearing in mind the world previously undertaken by the League of Nations in this field. This Article was generally agreed to in principle by the Committee which limited its consideration to customs statistics. Several countries called attention to the fact that similar ground is covered by: (a) the Brussels Convention of 29 December 1913 establishment of international commercial statistics), (b) the Geneva Convention of 14 December 1928 (economic statistics), and that the ai-us pursued in the Charter as regards the standardization of international commercial statistics (paragraph la), the international comparability of these statistics (paragraph 4), the adoption of standard definitions (paragraph 6) and of standards (paragraph 7), can only usefully be realized, insofar as the work undertaken by the League of Nations for the unification of tariff naaanclatures is resumed and successfully completed, since customs statistics can only be established from import particulars based on the terms of tariff nomenclature in each country. There was also a feeling that alple time should be allowed for the fulfilment of commitments to be undertaken LONDON E/PC/T/C.II/54/Rev.1 Page 34 in this Article and that those commitments should be studied by the Organization with a view to the reduction to a ofini-a of the statistics to be furnished regularly by members. It was felt, however, that a member wishing to contract out of the requirements of this Article should be required to give to the Organization a defailed statement of its particular difficulties. Article 17. Boycotts "No member shall encourage, support or participate in boycotts or other campaigns which are designed to discourage, directly or indirectly, the consumption within its territory of products of other member countries on grounds of origin, or the sale of products for consumption within other member countries on grounds of destination. Moreover, each member shall discourage, by such means as may be available to it, such campaigns by subordinate jurisdictions within its jurisdiction." In principle it was agreed that governmentally financed or organized boycotts designed to discourage importation should bc banned. The majority of the countries, however, were of the opinion that this ban should not apply to campaigns sponsored by any Government in support of products of its own national origin and not directed against the products of any specific country. LONDON E/PC/T/C. II/54/Rev. 1 Page 35 For the words "political entities" in the-last sentence of this Article the Committee agreed to-substitute the words "subordinate jurisdictions". Comments and reservations are given below: (a) United Kingdom: Delete other member countries" in both places where it occurs in the Article and substitute "another member country". Delete the words "directly or indirectly". The object of this amendment is to ensure that the ban on boycotts should not apply to campaigns sponsored by any government in support of products of its own national origin and not directed against the products of any specific country. The United States and Cuba dissented from this view. (b) Cuba and United States: Dissent from the above amendments. (c) India: Can only accept this principle as affecting boycotts specifically directed against a member country with which India has trade treaty relations. (d) China: Feels that weaker countries should be allowed to resort to boycotts in self-defence. (e) Lebanon: Thinks boycotting may be justif ied for either political or moral reasons. (f) Australia: Amend by addition of an additional sentence reading: - "Provided that a campaign in support of the use or consumption of products of national origin or manufacture, and not directed against the products of any specific country, shall not be deemed to be a breach of this undertaking." Article 32. General Exceptions to Chapter IV It was generally recognized that there must be general exceptions such as those usually included in commercial treaties, to protect LONDON E/PC/T/C. II/54/Rev.1. Page 36 public health, morale, etc. Certain countries, however, felt that the exceptions proposed should be reduced or extended, as the case may be, to meet the particular conditions existing in their countries. "Nothing in Chapter IV of this Charter shall be construed to prevent the adoption or enforcement by any member of measures' (a) United Kingdom: The following words should be inserted in place of the preamble to the Article: The undertaking in Chapter IV of this Charter relating to import and export restrictions shall not be construed to prevent the adoption or enforcement. by any member of measures for the following purposes, provided that they are not applied in such a manner as to constitute a means of arbitrary discrimination between countries where the same conditions prevail, or a disguised restriction on international trade. This amendment was generally accepted, subject to later review of its precise wording, particularly as to whether the scope of Article 32 should be limited to. "import and export restrictions", Paragraph (a) necessary to protect public morals: Paragraph (b) necessary to protect human, animal or plant life or health: Paragraph (c) relating to fissionable materials: Paragraph (d) relating to the traffic in arms, ammunition and implements of war and to such traffic in other goods and materials as is carried on for the purpose of supplying a military establishment: Paragraph (e) in time of war or other emergency in international relations, relating to the protection of the essential security interests of a member: These paragraphs were generally accepted. LONDON E/PC/T/C. II/54/Rev.1 Page 37 Paragraph (f) relating to the importation or exportation of gold or silver: (a) India: Accepts this paragraph in relation to gold, but considers that silver should be excluded as it is an ordinary commodity in would commerce. Paragraph (g) necessary to induce compliance with laws or regulations which are -J`e :,:':sistent with the provisions of Chapter IV, such as those relating to customs enforcement, deceptive practices, and the protection of patents, trade-marks and copyrights: (a) It was understood that the examples in this paragraph are illustrative and do not exclude any others which are "not inconsistent with the provisions of Chapter IV", such as state monopolies. (b) France. Belgium-Luxembourg, Netherlands: This paragraph should be amplified in the sense that a country must be able to prohibit the import, export, transportation and transit of foreign goods b xrf.- wring which falsely indicates that those goods were produced in that country. (The Committee thought that paragraph (g) already covered this point). Paragraph (h) relating to prison-made goods: Paragraph (i) imposed for the protection of national treasures of artistic, historic c: 3_ value: These paragraphs were generally accepted Paragraph (j) relating to the conservation of exhaustible natural resources if such measures are taken pursuant to international agreements or are made effective in conjunction with restrictions on domestic production or consumption: (a) India: Suggests deletion from "if such measures" to the end of the paragraph LONDON E/PC/T/C. II/54/Rev.1 Page 38 (b) Nevi Zealand and Brazil: Support this view and the former also proposes to include the words "or other" before "resources" since it considers the provision should not be limited to natural resources. Additional Canada suggests a new paragraph: (k) relating to the importation of goods, the manufacture of which is prohibited in the country of importation. This suggestion is supported by France. China: Suggests a new paragraph: Measures temporarily imposed to prevent, arrest or relieve conditions of social disturbance, natural oalaiity, or other national emergencies, provided that such measures re withdrawn as soon as the said conditions cease to exist. General India: Wishes to be allowed, for reasons of high policy, to discriminate, against a member; it wishes to be allowed to do so either on a recommendation of the ITO or on its own initiative, provided due notice has been given to the Organization and to every member concerned. India accordingly reserves its position on this point. Concluding Remarks A point which arose on several Articles in this Section was the definition of terms used therein as e.g. "like products", similar products", "products of any member country", country of origin". The Drafting Committee might consider the desirability of including in this Section of the Charter an Article to contain definitions of these and other terms presenting any ambiguity or obscurity,

GATT Library

qx477td0970

Committee II. Report of the Technical Sub-Committee

United Nations Economic and Social Council, November 22, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

22/11/1946

official documents

E/PC/T/C.II/64 and E/PC/T/C. II/58-65/ADD. 1

https://exhibits.stanford.edu/gatt/catalog/qx477td0970

qx477td0970_90210284.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/64 AND ECONOMIQUE 22 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II REPORT OF THE TECHNICAL SUB-COMMITTEE PART I General Narrative Statement 1. The Technical Sub-Committee met nine times under the chairmanship of Senor VIDELA (Chile). The meetings were the occasion for a thorough examination and exchange of views upon the provisions of the United States Suggested Charter relating to the items listed below: General Commercial Provisions: National Treatment on Internal Taxation and Regulation Freedom of Transit Anti-dumping and Countervailing Duties Tariff Valuation Customs Formalities Marks of Origin Publication and Administration of Trade Regulations- Advance Notice to Restrictive Regulations Information, Statistics and Trade Terminology Boycotts General Exceptions (to the Chapter on General Commercial Policy) 2. The Sub-Committee included delegates from all the countrics represented on the Preparatory Committee. 3. In order to accelerate the proceedings, two Rapporteurs - one from the French and one from the United States Delegation - were -appointed at an early meeting of the Sub-Committee. Later on, a second team of Rapporteurs - one from the Canadian and the other from the Netherlands Delegation - was appointed. In the course of the work, the Netherlands and the United States Delegates in question departed and were replaced by by Rapporteurs from the Delegations for Belgium- Luxembourg and the United kingdom. E/PC/T/C.II/64 LONDON Page 2 4. The questions referred to the Sub-Committee were discussed in full at its meetings. Delegations were invited to send in their views in writing throught the secretariat to facilitate the work of the Rapporteurs. 5. The reports of the Rapporteurs were considered by the Sub- Committee, which made amendments and coments. The final report of the Sub-committee was submitted to the main Committee. LONDON. E/PC/T/C.II/64 Page 3 PART II (Summary intended for inclusion in the report of Committee II) A substantial degree of agreement among aIl Members participating on the Preparatory Committee was reached on questions of the principles underlying these provisions. However, as was to be expected, there were numerous differences of opinion, and a number of reservations were made on account of national variations in the practice of detailed administration. Complete reconciliation of views was not possible to the extent that agreed text for these Articles could be prepared within the tire at the disposal of the Committee. A greater degree of unanimity might have been possible if adequate tire had been allowedd. In addition, many of the Delegates' suggestions were merely drafting points and it was felt that these should be dealt with by the Drafting Committee which meets in New York in January , 1947. The substance of the discussions is given below. Article 9: National Treatment on Internal Taxation and Regulation This article was generally agreed to in principle by the Sub- Committee in that internal taxes and charges should not be used to afford protection to domestic products. However, some countries called attention to practices which might be contrary to this principle and suggested reservation for further discussion thereof bilaterally or ample time for their elimination. Several countries emphasized that central governments could not in many cases control subsidiary governments in this regard, but agreed that all should take such measures as might be open to them, to ensure the objective. It was felt that national treatment could not be applied to the procurement by governmental agencies of supplies for govermental use and not for re-sale. This problem was left to be dealt with by the Sub-Committee on Procedures when it discussed Article 8 on General most-Favoured-Nation Treatment and it was agreed that the following paragraph should be: added to this article: "The provisions of this Article shall not apply to the procurement by LONDON E/PC/T/C.II/64 Page 4 governmental agencies of supplies for governmental use and not for re-sale.' Article 10. Freedom of Transit In the discussion dealing with the Freedom of Traffic in Transit, it was generally felt' that air traffic should be exempted as a matter which is being dealt with by the Provisional International Civil Air Organization. A nunber of countries also felt that in the examination of this subject the provisions of the Barcelona Convention of the 20 April 1921, ought to be taken into consideration, and that the terms of any agreement reached on the subject should be carefully defiled so as to leave no doubt as to the meaning of traffic in transit and its full implication. It was decided that paragraph 6 of the United States suggested Article which gives the definition of "traffic in transit" should become the first Paragraph. Article 11 Anti-dumping and Countervailing Duties There was general consent among the rnajority of the countries in the, discussions on Anti-dumping and Countervailing Duties. that circumstances might arise in which such duties may properly be applied. Some countries felt that the proposal should not be limited to duties as such but should permit the adoption of other counter measures and that there was also need of clarification of definition in view of the variety of circumstances in : which dumping may occur. Article 12. Tariff Valuation on the subject of Tariff Valuation, all countries concerned agreed that it was necessary to work towards standardization, so far as praoticable of definitions of value and procedures in determining the values of products subject et Customs Duties or other restrictions based or regulated in any way by value. They further agreed that this matter should be investigated by the International Trade Organization and they undertook to co-operate in that investigation. It was felt that it was necessary in the meantime for each country to consider its own system to prevent the object in view being defeated by ever-valuation and other administrative practices. LONDON E/PC/T/C.II/64 Page 5 Article 13. Customs Formalities In connection with Customs Formalities, some countries felt that the Geneva Convention of 1923 effectively covered the subject. There was general agreement that subsidiary fees, charges and penalties should not be used as indirect protection to domestic products. On the general question of simplification, it was felt that the International Trade Organization should continue the studies previously instituted by other bodies with a view to the elimination of unnecessary requirements. Article 14. Marks of Origin There was a consensus of opinion among countries that exces- sive requirements in connection with marks of Origin should be avoided as far as practicable; It was felt generally that the complicated subject of exemptions from the requirements should be recommended for study by the ITO and that the particular interest of certain countries in protecting the regional or geographical marking of their distinctive products should also be considered by the Organization. Article 15. Publication and Administration of Trade Regulations - Advance Notice of Restrictive Regulations It was agreed that, as far as possible, prompt and adequate publicity should be given to change in laws and regulations affect- ing foreign trade. As to the suggestion that national tribunals of an independent character should be maintained or established to review or correct administrative customs actions, most countries felt that there was no need to take any special measures for this purpose, as their existing systems seemed to be full and adequate compliance with the requirement. LONDON E/PC/T/C.II/64, Page 6 There was general acequisecence in the proposal that the International Trade Organization should be supplied with full statistical information as promptly as possible; but many countries felt that unless time demands were limited to reasponsable proportions an intolerable burden might be imposed on them. This applied particularly to the smaller countries in which present statistical services are less fully developed than in others. A few countries also felt that certain sapects of the matter,with all lts implications were proper for study by the Inter- national Trade Organization, bearing in mind the work previously undertaken by the League of Nations in this field. This Article was generally agreed to in principle by the Committee which listed its consideration to customs statistic.. Several countries called attention to the fact that similar ground is covered by: (a) the Brussels Convention of 29 December 1913 establishment of international commercial statastics), (b) the Geneva Convention of 14 December 1928 (economic and that the aims pursued in the Charter as regards the standardization of international commercial statistics (paragraph la), the international comparability of these statistics (paragraph 4), the adoption of standard definitions (paragraph 6) and of standards (paragraph 7), can only usefully be rerlized, insofar as the work undertaken by the League of Nations for the unifacation of tariff nomenclatures as resumed and successfully completed, since customs statistics can only be established from import particulars based on the terms of tariff nomenclature an each country. There was also a feeling that ample time should be allowed for the fulfilment of commitments to be undertaken an this Article and that LONDON E/PC/T/C.II/64 page7 those commitments should be studied by the Organization with a view to the reduction to a minimum of the statistics to be furnished regularly by members, It was felt, however, that a member wishing to contract out of the requirements of this Article should be require to give to the Organization a detailed statement of its particular difficulties. Article 17. Boycotts In principle it was agreed that governmentally financed or orgaized boycotts designed to discourage importation should be banned. The majority of the countries, however, were of the opinion that this ban should not apply to compaings sponsored by any Government in support of products of its own national origin and not directed against the products of any specific country. For the words "political entities" an the last sentence of this Article the Committee agreed to substitute the words "subordinate jurisdictions". Article 32. General Exceptions to Chapter IV It was generally recognized that there must be General Exceptions such as those usually included in commercial treaties, to protect public health, morals, etc. Certain countries, however, felt that the exceptions proposed should be reduced or extended, case the case may be, to meet the particular conditions existing an their countres. Concluding Remarks A point which arose on several Article in this Section was the definition of terms used therein as e.g. "like products","similar products", "products of any Member country", "country of origin". The Drafting Committee might consider the desirability of including in this Section of the Charter an Article to contain difinitions of these and other terms presenting any ambiguity or obscurity.

GATT Library

dv981hc7483

Committee II : Seventh Meeting Held on Friday, 1 November 1946 at 3 p.m

United Nations Economic and Social Council, November 2, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

02/11/1946

official documents

E/PC/T/C.II/38 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/dv981hc7483

dv981hc7483_90210246.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.II/38 AND ECONOMIQUE 2 November 1946. SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Seventh Meeting Held on Friday, 1 November 1946 at 3 p.m. Chairman: Dr. COOMBS 1. Postponement of Discussion of Quantitative Restrictions and Exchange Control Provision in Relation to the Protection of Balance of payments The CHAIRMAN said that, in accordance with the request of several delegations, he proposed to postpone consideration of the subject until the following week. Several delegations were in process of examining the views already expressed; and possibly modifications would be made which would facilitate the work of the Committee. 2. Emergency Provisions of Draft Charter, Articles 29 and 30 Mr. HAWKINS (United States) said that the purpose of Article 29 of the Draft Charter was to give flexibility to the commitments undertaken in Chapter IV, in order to permit signatory countries to deal with temporary emergency situations. To safeguard the right given, the Article provided for notification and consultation before a country might take the action specified. It also provided that a country might take the action desired even though general agreement was not reached. Article 30 of the Draft Charter included a general obligation for consultation among member countries regarding any undertaking coming under Chapter IV of the Draft Charter. At the same time it gave member countries a right to complain against action taken by another member country where such action did not comply with the letter or spirit of the agreement and comprised the right to take compensating measures. LONDON E/PC/T/C.II/38 Page 2. H.E. Mr. AUCENTHALER (Czechoslovakia) was in full agreement with the text of both Articles of the Draft Charter. He suggested that, since Article 30 related also to state trading, Article 26 might be limited to a statement of the principle of non-liserimination as applied to state trading Details would then be covered by Article 30. Mr. SHACKLE (United Kingdom) recognised the necessiy for including escape provisions, but was apprehensive lest the wide latitude given in Article 29 of the Draft Chartr might impair the value of the Charter or undermine confidence in its effectiveness. There would be less necessity for provisions permitting withdrawal or modification of concessions, if those concessions were made subject to revision periodically to meet changing conditions, perhaps at the end of three years. He suggested that the scope of the Article shlould be more narrowly drawn. It now covered tariffs, subsidies, quantitative restrictions, state trading, and other aspects of commercial policy; and it was difficult to see how the Article would work out in practice. In the case of tariffs, the operation of the Article might lead to higher rates than those in effect prior to the agreement. what would it mean with respect to quantitative restrictions? How could the previous treatment be defined? One method of emergency action with respect to tariffs might be to limit the withdrawal of a concession to a specific quantity of imports. The inclusion of quantitatiye restrictions in the Article might be construed as recognition of the use of such restrictions for protective purposes. The United Kingdom delegation wished the scope of the Article to be limited to emergencies in the tariff field and to preferences, since in that field equally serious disturbances to established trade might result from sudden reductions in preferences. LONDON E/PC/T/C.II/38 The United Kingdom delegation would suggest a wording to that offcat. He doubted the possibility of giving prior notice or intention to take emergency measure. When such measures were necessary, they often had to be taken immediately; and prior notice would be likely to accel, erate the rate of importation and defeat the object of the action. He did not oppose the requirement for notice and consultation, nor the measures related to the unjustifiable use of emergency action. Article 30 was needed; and he was in agreement with the substance and the drafting of the Article. Mr. VAN DE KERCHOVE D'HALLEBAST (Belgium) said that article 29 was contrary to the fundamental principles which underlined the Draft Charter. it left every member free to suspend any obligations undurtaken in Chapter IV. This might cause harrn to national products relying on competition. He suggested that it might be left to the International Trade Organization to determine whether any member should take the action provided for in Article 29. He agreed in principle with Article 30. Mr. SPEEKENBRINK (Netherlands) agreed in general with Articles 29 and 30. He thought it would be difficult to restrict the Articles to tariff reductions,and agreed United Kingdom that the require- ment for the giving of prior notice was not practicable. Mr. NEHRU (India) favoured Aticles 29 and 30 in principle, but agreed with the United Kingdom delegate that long prior notice was not possible. He wished preferences to be included. He did not agree with the United Kingdom delegate that the scope of article 29 should be narrowed to exclude quantitative restrictions. He had no comment on Article 30. LONDON E/PC/T/C.II/38 Page 4 Mr. McKINNON (Canada) asked for clarification of the conclulding clause of paragraph 1 of Article 29. Did it mean that any rate of day might be chosen? Mr. HAWKINS (United States) replied that it did. Mr. J0HHSEN (New Zealand) supported the viewes of the United Kingdom delelgte that preferences should be considered in Article 29. Mr. MELANDER (Norway) doubted the wisdom of the exceptions outlined in paragraph I of Article 29: they seemed to detraqct from the Draft Charter. If exception were necessary, they should be strictly defined. Mr. NATHAN (France) had no remarks to make regarding Article 30. The French delegation favoured as much consultation as possible. With regard to article 29, he understood that Committee V was considering conditions under which members might ask for modification or their obligations, and suggested the necessary for consultation on the subject between Committees II and V before the discussion could procced. The CHAIRMAN suggested that Committee V was concerned only with the procedural aspets of the operation of theescap clause, and he referred to Article 55, paragraph 2, as being relevant in that connection. He would discuss the subject with the Chairman of Committee V and inform the Committee if necessary. That led to a subject to which he directed the Committee's attention, nearly, the fact that Committee I was concerned with employment problems and the maintenance of employment, economic activity and effective demand. It had been proposed in that Committee that if a country were adversely affected. because effective demand failed to be maintained, there should be some provision for review of the obligations pursuant to Chapter IV. That was a subject to which the Committee should direct its attention after Committee I had concluded its consideration of the subj ect. LONDON E/PC/T/C.II/8 Page 5 He also thought clarification should be sought, possibly through consultation with Committee V, of the reference to "in exceptional circumstances" in paragraph 2 of Article 55, Did that refer only to the provisions set forth in Chapter IV, or to circumstances not specifically mentioned in the Draft Charter? Mr. McCARTHY (Australia) mentioned, for the information of the Sub-Committee, that the Australian delegation desired that preferences and reductions in margins should be negotiated in the same manner as tariffs. Mr. SPEEKENBRINK (Netherlands) said, with reference to paragraph 4 of Article 50, that it was important to provide for an international body to settle disputes, perhaps the International Court of Justice. The CHAIRMAN noted the subject for discussion at an appropriate time. Mr. HAWKINS (United States) commented on a number of points raised in the preceeding discussion. In reply to a suggestion of the United Kingdom delegate that a provision for a review of tariff commitments after a stipulated period (three years) might be substituted for Article 29, he pointed out that the Article provided only for temporary relaxation of commitments, not for a permanent revision. He sympathized with the United Kingdom delegation' s suggestion that quantitative restrictions should not be included in Article 29, but felt that aIl Chapter IV obligations should be included in it. Tariff preferences, to which the Australian delegate referred, would be obligations pursue to Chapter IV and hence covered by Article 29. Compensating withdrawal of concessions was included in the Article to prevent abuse of its provisions. LONDON E/PC/T/C.II/38 Page 6. The Draft Article stipulated that notice of withdrawal of concessions must be given "as far ir advance as may be practicable", but since no time limit was indicated, there was leeway for emergency situations A question which needed consideration in connection with Article 55 paragraph 2 was whether it would be possible to have provisions becoming operative before the procedures envisaged in that Article could be set up. The CHAIRMAN said there was general agreement as te the need for provisions for emergency action. There was some doubt regarding the scope of the provision. Should. it be limited to specific parts of Chapter IV or cover the entire Chapter? The majority of countries felt that provisions should apply to all forms of protective action. The question of prior notice might be solved by the United States suggestion that no specific period of notice should be stated. There were no other basic issues. The subject was referred to the Sub-Committee on Procedures, Tariffs and Preferences. 3. Discussion of Section J of the Draft Charter, Territorial Application The CHAIRMAN called upon the United States delegate to explain the Section. Mr. HAWKINS (United States) stated that Section J, which consisted of Article 33, dealt with the important technical matter of territorial application. Paragraph 1 laid down that the provisions of Chapter IV should apply to all the separate customs territories of any member, for example to the Virgin Islands, which were a customs territory of the United States, and also to the customs territory of the United States itself. LONDON E/PC/T/C.II/35 Page 7 Paragraph 2(a) referred to facilities for frontier traffice, in cases where a frontier ran through a city, etc.; but sub-paragraph (a) did not relate to regional preference arrangements. The area afffeted by this provision was usually limited to a distance of 15 kilometers from thee frontiers. Paragrarph 2(b) laid down that customs unions were desirable, provided that they did not cause any disadvantage to outside countries, in comparison with their trade before the customs unions were effected. This also was a standard clause in all commercial treaties. Paragraph 3 was self-explanatory. Paragraph 4 defaned a customs territory. Only territories where tariffs were fully assimulated could be considered customs territories under the provisions of this article. Mr. SPEEKENBRINK (Netherlands) pointed out in reference to paragraph 1 that the Netherlands were in a state of evoluation in regard to the status of their oversen territories. Accordingly, he was uncertain what effect this paragraph would have on the future relations between the Netherlands and the oversea territories. In reference to paragraph 2(b) he wished to know whether the new tariff rate on each product had to be below the average of the rates of the constituent territories prior to the formation of the union. He state that pagragraph 4 was too rigidly defined, it took a long time to conclude arrangements for a customs union. He suggested the use of the wprd "ultimately" in this paragraph so as to allow an interim period for the preparation of a customs union. Mr. NATHAN (France ) stated that the French delegation represented both France and the French overseas dominions and Indo-China, which had recently been granted dominion status. He seconded the proposal of the Netherlands delegate that an interim period should be provided for in this article to allow for the preparation of customs unions. LONDON E/PC/T/C.II/38 Page 9 Mr. HAWKINS (United States) agreed with the Netherlands delegate that it was not possible to decide what effect this Section would have on the relations between the Netherlands and the Netherlands Overseas Territories, until the new status of the latter was agreed upon. The phrase "on the whole' in paragraph2 (b) di not mean that an average tariff should be laid down in respect of each individual product, but merely that the whole level of tariffs of a customs union should not be higher than the average overall level of the former constituent. territories. He agreed that it was reasonable to provide for an interim period to allow the establishment of a customs union, but only after it had been definitely agreed to establish such a customs union. There should be no rigid application of the most-favoured-nation clause in such interim periods. However, in regard to the Indian delegate's proposal that an exception should be rnade to the application of the most-favoured-nation clause in cases where regional preference might lead to a customs union, he doubted whether a custorns union would always eventuate in such cases. The CHAIRMAN stated that there were some problems of principle in connection with this Section; but most of the problems were technical, and arose from the complexity of relationship in political sence. There was a very great variety of relationships, ranging from Colonial dependence to practical independence except for the recognition of a common sovereign. It appeared that it was the general feeling of the Committee that the provisions of this Section were reasonable, but that they should be drafted so as to take into consideration their effect on the different political relationships. LODNON E/PC/T/C.II/38 Page 8. Mr. SHACKLE (United Kingdom) thought that the stipulation that the tariffs of the constituent territories should be averaged in the case of customs union would be difficult to apply. He suggested that this average should be weighed in accordance with the respective volumes of trade of the constituent territories. He was not satisfied with the wording of paragraph 4; the words "so that all tariffs and their restrictive regulations of commerce as between the territories of members of the union are substantially eliminated" should be drafted so as to allow the establishment of cities, not fer protection, but for the raising of revenue. Mr. McCARTHY (Australia) asked that the preovisions in this Article should be so drafted as to allow the systyem of tariffs between Australia and the islands under her suserainty to continue in its present form. Mr. VAN DE KERCHOVE D 'HALLEBAST (Belgium) requested that the points raised by the French and Netherlands delegates to dealt with. Mr. NEHRU (India) pointd out that Article 33 as at present drafted, would apply certain Indian States, such as Kashmir, because it was "not under the jurisdiction" of the Indian Government. He suggested a new sub-paragraph (c) to Parargraph 2 to cover regional arrangments: "Advantages accorded by members to adjacent countries, such provision to be consistent with the principles of the ITO." Mr. BRENMAN (Union of South Africa) felt that the definition included in Paragraph 4 was too regid. In South Africa's customs union with North Rhodesia, the levels of the respective tariffs were the same, but the structure cifferent, and there was division of the revenues according to the properation of the volume of trade, South Africa-was contemplating again a customs union with Southern Rhodesia, and he also insisted that an interm period should be provided for to allow the establishment of such customs unions. Such pried might be either five, ten or fifteen years. LONDON E/PC/T/C.II/38 Page 10 The Committee agreed to refer the Section on territorial application to the Sub-Committee on Procedures, Tarif 's and Preferences for drafting. 4. Date of Next Meeting The Committee agreed. (a) to postpone the date of the next meeting, previously fixed for Saturday, 2 November 1946, until such time in the following week when the Members concerned had informed the Chairman that they were prepared to discuss Item of ( Quantitative Restrictions) of the Provisional Agenda, in so far as balance of payments provisions were concerned; and (b) to fix a meeting of the Sub-Committee on Procedure, Tariffs and Preferences at 10.30 a.m. on Saturday, 2 November- l946, in addition to the meeting fixed for 8 p.m. 1 November 1946. The meeting rose at 4.40 p.m.

GATT Library

qk494qs1707

Committee II : Sixth Meeting held on Thursday, 31 October 1946 at 3 p.m

United Nations ECONOMIC AND SOCIAL COUNCIL, November 1, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

01/11/1946

official documents

E/PC/T/C.II/37 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/qk494qs1707

qk494qs1707_90210245.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.II/37 ECONOMIC CONSEIL 1 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Sixth Meeting held on Thursday, 31 October 1946 at 3 p.m. Chairman: Dr. COOMBS I. DISCUSSION OF STATE TRADING Mr. AUGENTHALER (Czechoslovakia) emphasized the great variety of state monopolies or state trading enterprises and the variety of economic conditions with which they were designed to cope. Some provided means of collecting indirect taxes. Othersprotected con- summers against price fluctuations or small producers from severe competition. Others were instituted for security purposes. Because such monopolies or state enterprises in many cases closely reflected particular kinds of internal economic systens, it would be difficult to write provisions into the Charter in the absence of certain im- portant countries. Since the problem-required treatment, however, Czechoslovakia was prepared to agree with the first part of Article 26, providing that monopolies should operate on the basis of commercial corsidera- tions. Articles27 and 28 shoul be deleted. At a later date, the basic principle provided in Article 26 could be suppemented with more detailed provisions. Czechoslovakia has certain old monopolies serving the purpose of internal taxation or national security. These monopolies are conducted on commercial lines and Czechoslovakia cannot negotiate about the prices they charge since this would mear negotiating about State revenue. E/PC/TC.II/37 Page 1 The nationalized industries, representing seventy per cent of the , country' s indutsry, fall neither under State monopolies nor under State trading companies. They conduct business along commercial lines and pay taxes; nonce, they do not fall under the provisiona of Articles 26 -- 28. In respect of the suggestion of the Delegation of Czechoslovakia that Article 27 and 28 be deleted, .Mr. 11.sKII'S (United States) felt thas there should. be some provision in the Charter whereby obligations analogous to these pzovided in Article 18, should be undertaken with respect to State trading companies. He agreed with the suggestion of the United Ningdom that Article 26 should not cover servies. Payment of different prices for products purchased from different supplying countries would not necessarily be inconsistent with the provisions of the Charter. It was natural for prices to vary. He agreed with the United Kingdoin suggestion that landed. prioes rather than the pricesat which the product is offerde for sale should be used in deteraining the margin by which the purchase. price exceuded the sale price. (Article 27) He agreed that it was not administ- ratively feasible to compute margins on the basis of individual con- signments. If an average price were used in such computations, the period over which prices were averaged should not be too long. It should be such as to reflect price changes. Wiith respect to the lust sentence of Article 29, the United States would be agreeable to a qualification which here would take into account problems relating to the enfocement of rationing and prices control. The obligation to supply full demand was subject to the same excep- tions that applied to quantitative restrictions (Articles 19 and 20). With respect to the question mether a State trading organization of a member enforcing rationing and price control could restrict exports he suggested that the some provisions which had been agreed LONDON E/PC/T/C.II/37 Page 3 to in regard to quantitative restrictions might apply. A :State enterprise might charge different prices in different foreign markets, if this was done for purely commercial considerations. Whether or not long term . bulk purchase contracts were consistent with Article 26 would depend on: 1. the amount purchased and 2. the length of the contract. If thre contract was for all or a amjor part of the members' needs, say for one year, there would be room for question; in such a case, it would be likely that there would d be Some suppliers in other countries able to meet the prices involved, who would be excluded. If the contract was for five or ten years and during that time the competitive position of other suppliers improved, such other suppliers would be execluded; in such a case, ha falt there would be a violation of Article 26. While he agreed that Article 28 invelved practical difficulties, he would be reluctant to delete it until there had been discussion with the countries .most concerned. some Article of this kind was needed to permit participation by countrias with complete foreign trade monopolies in the undertakings of the Organization. The question had been asked othether gavernment agencies which appeared to be more lika control boards than actual monopelies, would be covered by the Charter, and whether activities of such boards would be consistent with the Cherter. He wisheld a particular opport- unity to discuss this queston with the Delegates for South Africa, the Netherlands and China before attempting to answer those questions. The CHAIRMAN pointed. out the difficulties of drafting provisions with respect to state trading enterprisa in view of the limited experience of members of the, committee in these matters. There seemed to be the general feeling that the committee should not try to reach actual decisions with respect to those provisions of the Charter. It had been suggested that clauses with respect to complete state monopolies should be deleted. Another suggestion was, that draft LONDON E/PC/T/C.II/37 Page 4 provisions should be included without aetual aceptance as a basis for subsequment discussions with the countries most concerned. There were difficulties in the cases of monopolies the purpose of which was to collect revenue and in the case of control boards. State trading was a relatively new field; and it would not be fensible co give very detailed treatment to it in the absenes of the countries most concerned. It had been suggested that rules with respact to state trading might be worked out in later negotiations. It was agreed that the provisions of state trading should be referred to a Drafting Committee consisting of the United Kingdom, the United States New Zealand, China and Czecheslovakia with the understanding that the United States, the Natherlands and South Africa should first study the question of control boards. Mr. DEUTSCH (Canada) said that to United States' answers to Canada's questions were satisfactory for present purposes. II. DISCUSSION OF RELATIONS WITH NON-MEMBERS Mr. HAWKINS (United States) said that the principle included in Article 3 was not a new one. For fifteen years or more there had been discussion of multilateral agreements and the common view was that such agreements sheuld incluJd a provision along the general lines of Article 31. Such provisions denying, benefits to non-members would, of course, involve difficulties, such as these that would be involved in term- inating existing commirments with non-members. He suggested that an Article along the lines of Article 31 might be submitted to the world trade confernce as a draft. Such a procedure would mean that the committee would not actually adopt the Article: but it would be dis- cussed at the full World Trade Conference, by which time it would be known which countries were likely to join the organization and which were not. If all countries entered the organization, Article 13 would not present any problems. LONDON E/PC/T/C. II/37 Page 5 Dr. SPEEKENBRINK (Netherlands) sail the tariff reductions negotiated at the Spring meeting would be incororporated in a protocol which should go into effect at once or in any Case before the meeting of the World Trade Conference. If decisions as to relations with non-members were postponed, there would be no rùles as to which nations would. be entitled to the benefits of the tariff reluctions, Mr. DEUTSCH (Canada) suppored the suggestion of the United States Delegate that the decision with respect to Article 31 be postponed unril the meeting of the world Trade Conference. The CHAIRMAN said that pending decision by the World Trade Conference as to provisions for relations with non-members, the benefits of tariff reduction by the eightcen members of the Preparatory Committee would be extended temporarily to all members of the Unite Nations. There was no need. for immediate decision. The question before the committee was whether the Article should be let in its present form for submission to the World Trade Conference as a draft. Mr. VIDELA (Chile) drew attention to the. difficulty of terminating existing conventions -with non-members. The matter had been discussed at the marning meeting of the Technical Sub-Committee. Mr. HARKINS (United States) saidi that the suggasted Charter would postpone termination of existing, commitments for one year. Hence negotiations coud proced on the assumption that benefits would be generalized. Mr. AUGENTHALER (Czechoslovakia) said that Czchoslovakia had no objection to paragraph 1 of Article 31. Only thirty to thirty - five per cent of Czechoslovakia's foreign trade. was with Preparatory Committee' members. of countries with which a majority of her trade was conducted did not jain the ITO, Czechslovakia. would be faced with a dificult problemi. Article 31 mignt be interpreted as a threat employed to force other countris to join. The document LONDON E/PC/T/C.II/37 Page 6 adopted by the Proparatory Committee should not include any sanctions. Mr. SHACKLE (United kingdom) did not think the Article could be withdrawn. Since the suggested Charter had already been widely published, leaving out article 31 now might give thc impression that there were doubts as to its success. The general provisions of the Charter did not presen any indicate problem so far as application to non-memnbers was concerned. Tariff reductions presented a problem which might wait until the next year, but it could not be postponed beyond that. There were three alternative courses before the committee: (a) The Charter might require tnat advantages be withheld from countries not accepting the obligations of membership. That might necessitate termination of certain existing commitments. It would be extremely difficult to establish any satisfactory basis for commercial relations with non-memberrs. (b)' It might be to individual members to decide what advantages would be extended to non-members. That course might reduce the incentive to join the Organization. Powerful non- members might force agreements with members, and the Organization might be endangered. (c) Individual members might be allowed to extend privileges to non-members if the ITO agreed, after studying the effects which such action would have on other members. That could be considered as a compromise position. The incentive to join the Organization would be weakened. He suggested that the Committee might include two alternative drafts for consideration by the forthcoming Conference. One would be like the present Article 31; the other; along the lines of the compromise course of action ((o), above) which he had set forth. He emphasized that a country should not be considered a non-member until it had had a reasonable opportunity to join. Mr. LOKANATHAN (India) thought thai consideration of relations with non-members should be postponed. Presentation of alternative LONDON E/PC/T/C.II/37 drafts could not be helpful. At present it was not even known whether all of the members of the preparatory Committee could accept the obligations of membershp. Reduction of trade barriers was valuable in itself, regardless of whether the countries involved were members or non-members. At present the Committee should only indicate that the question of relations with non-members would be considered Mr. STEYN (South Africa) supported the statement of the Delegate of the United Kingdom that a nation should not be considered d a non- member, until after it had had a reasonable opportunity to join. the CHAIRMAN said that the Committee might: (i) Submit Article 31 subsstantially in its priesent form to the World Trade Conference as a tentative draft, (ii) present alternative prosposals as suggested by the United Kingdom Delegate, or, (iii) Include no provision now but hold the question over until a later stage. The committee agreed to ask the Delegate for the United Kingodm to draft a report on the question of relations with non-members, review- ing the difficulties involved and taking into account the desirability of postponing a decision till a later date. The United Kingdom Delegate would of course consult with members of other delegations and would submit his report to the Committee. III. DISCUSSION OF SUBSIDIES Mr. HAWKINS (United States) said that the first paragraph Of Article 25 of the Charter would obligate members to report to the ITO on types of subsdies to be established or maintained, including any form of income or price support to the domestic producers. In general, direct subsidies to producers would be permitted. However, in cases where scricrs injury to the trade of any member was caused or tareatened by such subsidization, the member granting such subsidization would undertakeing discuss with the member concerened, or with the Organization, LONDON E/PC/T/C.II/37 Page 8 the possibility of limiting the subsidization. Export subsidies, including any system which resulted in the export of a product at a price lewer than the domestic price, would was, or was likely to become, a burdensome world surplus. In such cases members would be called upon to consult with each other in order to adopt suitable means for the increase of consumption or the reduction of production, or the conclusion of a commodity agreement. Should the measures provided for in sub-paragraph 3 (1) of Article 25 not succeed in removing the development of a burdensome world surplus, obligations regarding subsidies would cease to apply. One of the main features of the United States proposals on subsidies was that direct subsidies to producers would be permitted. The United States Delegation felt that subsidies were preferable to import restric- tions of tariffs. Subsidies kept prices down and demand up. They were expansionist rather than contractionist measures. As the provisions of Article 25 were closly related to commodity agreements, he suggested the setting up of a joint sub-committee of members of Committees II and IV to deal with the question. Mr. MCCARTRY (Australia) agreed with the suggestion to set up a joint sub-committee to study the question. The great objection to subsidies for primary products was that they had the effect of stimulating production, thus glutting the world market. Australia did not mind what form of support was given to the producers, as long as it had not an adverse effect on the world market. Many difficulties were due to subsidies being given by importing countries. He could see no validity to the distinction between production and export subsidies, as both gave price support, and the incidence could be the same in both cases. LONDON E/PC/T/C.II/37 Page 9 The relation of subsidies to primary products was such that it bore on commodity agreements; and, when a country found it necessary to interfere with the flow of trade, it was a sign that a commodity agree- ment was needed. Tariffs and subsidies both supported prices. If such devices did not adversely affect world markets, he saw no reason why they should not be allowed. Mr. PARANAGUA (Brazil) said that, with regard to subsidies, Brazil had to follow a policy differing from that laid down in the United States Charter. It was difficult for countries largely dependent on export trade to draw a line between export subsidies and production subsidies. Subsidies could create great difficulties for the smaller country, which would not be able to stand the competition of larger countries, especially from a financial point of view. It was for this reason that Brazil was strongly opposed to the granting of any kind of subsidies. Mr. VIDELA (Chile) accepted the general principle laid down in the United States Charter, but confessed to some doubt as to the definiition of the word "subsidy" as applied to export prices which were lower than comparable prices on the domestic market. Mr. FRESQUET (Cuba) stated that Cuba's position was the same as that of Australia. Mr. VIDELA (Chile) said that Chile was 10,000 miles from markets where its commodities were sold. Subsidies had to be paid if Chile was to compete on the world market; the export price would not be the same as the domestic price. Mr. MCCARTHY gave a further example to show that an expert subsidy could have the same incidence as a production subsidy. Mr. MCKINNON (Canada) said that the harm inherent in export sub- sidies was greater than was the case with production subsidies. Production subsidies had the advantage that they could not generally be used as extensively as expert subsidies, Canada's views with respect to subsidies were generally the same as those of the United States. LONDON E/PC/T/C.II/37 Page 10 Mr. LOKANATHAN (india) distinguished between agricultural products and manufactured goods in his discussion of subsidies. In the case of manufactured goods, India favoured production subsidies, though poorer countries would find difficulties in financing them. Export subsidies were not as desirable as production subsidies. In the case of agricultural products, use of production subsidies by poorer countries had unifortunate effects on poorer countries. Hence production subsidies should not be used for agricultural products. Mr. SHACKLE (United Kingdom) felt that export subsidies were worse than production subsidies, particularly when countries used them to get a large share of the world market than they would rightfully have, and then asked for a commodity agreement to preserve that share. Mr. TUNG (China) was generally in accord with Article 26. Coun- tries should not use subsidies unduly to increase their share of world markets. It should be considered fair to use export subsidies where goods had to compete in preferential markets. He suggested the follow- ing amendment to paragraph 2 of Article 11: "In the event of preferential treatment being accorded by a country to certain countries to the exculsion of other member countries, no countervailing duty shall be imposed upon the products imported from such other member countries against subsidies which are granted by the latter to such products as compensation for covering the preferential margin." Dr. SPEEKENBRINK (Netherlands) pointed out difficulties involved in trading with countries with unstabilized currendies and high prices. The Netherlands Government levied a duty when exporting goods to such countries and used the proceeds to subsidies imports from such countries. This type of subsidy should be allowed. Under the Netherlands monopoly system, an average price was found for agricultural products. In its imports, the monopoly did not dis- criminate. If the average price were 100 guilders and the products LONDON E/PC/T/C.II/37 Page 11 were imported at 85 guilders, the importer would have to pay the difference of 15 guilders. Mr. MCCARTHY spoke of the relation of the subsidy provisions to stabilization programmes. He said that a country might fix a domestic price of 120s on a product in order to avoid fluctuations. The expert price be higher than the domestic price at same times and lower at others. lf the export price were higher, the arrangement would not be inconsistent with the subsidy provisions. Would it be consistent with such provisions if the export price were lower? Mr. JOHNSEN (New Zealand) said that his Delegation had submmitted a document (E/PC/E/C.II/25) on this question. They were anxious to ensure tht guaranteed price schemes would not be ruled out by the provisions of the Charter. Producers would be guaranteed a price for their products, determined in relation to costs of production, and other factors affecting their position. Any amount received in excess of the guaranteed price would be placed in a fund on which any industry could draw in the event of its being faced with difficulties, such as a fall in oversea prices. Such a scheme could be operated by an industry with or without government sponsership. Its object would be to build up a general reserve for use in special cases. The necessity to give producers economic stability, especially in a country like New Zealand, which relied so much on exports of a few primary products, would be generally recognized. The advantage of such a scheme to world trade, as a whole, was also apparent as it would cushion the effect on the world market of any reduction in overseas demand for such primary products, by keeping up the spending power of producers and maintaining a demand for consumer goods, which it would be necessary to import. From the point of view of considering guaranteed prices in relation to export prices, in order to determine whether there was any measure LONDON E/PC/T/C.II/37 Page 12 of subsidization, he felt that that could only be considered over a reasonable period. Prices of commodities were subject to fluctuation, not only as between shipments, but also from season to season. Mr. HAWKINS (United States) said that he was not yet prepared to discuss the points made by the Delegate for Australia. With respect to the Netherlands system for maintaining an average price for agricultural products, he said that, if the system were used to build up domestic production and to exclude exports, paragraph 1 of Article 25 would require the Netherlands to consult with the Organization or with the other members concerned. The United States had foreseen that a country might use export subsidies to build up a larger market, and then seek to conserve that market through a commodity agreement. Sub-paragraph (c) of paragraph 3 of Article 25 was intended to put a limit on that practice. In summarizing the discussion on subsidies, the CHAIRMAN said that there seemed to be general Agreement that subsidies were more desirable than tariffs or quotas. Poorer countries might have difficulty in employing them. Expert subsidies were more harmful than production subsidies. Special problems with respect to primary products, especially when subsidies were used to stabelize the income of producers in exporting countries. The subject of subsidies was closely related to that of commodity agreements. The nature of the subsidy was not necessarily a sufficient criterion of whether or not it injured other countries. Perhaps new criteria were needed. He suggested that the United states , the United Kingdom, and India should prepare an outline report on the use of subsidies with respect to manufactured products. He suggested that the Chairman should be authorized to consult with the Chairman of Committee IV about a possible jint committee to consider the use of subsidies with respect to primary products. The proposed membership of the joint committee LONDON E/PC/T/C.II/37 Page13 could be submitted to the committee for approval at the next meeting. Mr. FRESQUET suggested that the Australian Delegate should be in- cluded on the joint committee. It was agreed that the committee would meet on 1 Novomber 1946 at 3 p.m. The meeting rose at 6.10 p.m.

GATT Library

fy347zx4892

Committee: II. Statement by George F. Luthringer observer for International Monetary Fund

United Nations Economic and Social Council, November 7, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

07/11/1946

official documents

E/PC/T/C.II/43 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/fy347zx4892

fy347zx4892_90210253.xml

GATT_156

RESTRICTED LONDON United Nations Nations Unies E/PC/T/C.II/43 7 November 1946 ECONOMIC CONSEIL ORIGINAL: ENGLISH AND ECONOMIQUE SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE: II STATEMENT BY GEORGE F. LUTHRINGER OBSERVER FOR INTERNATIONAL MONETARY FUND Mr. Chairman, Thank you very much for your courtesy in permitting us to part- icipate in these important deliberations of the Conference. We are vitally interested in its success. Even before the days of the Bretton Woods Conference, a common feeling prevailed among those who were charting the course of the basic instruments of the Fund and the Bank that our twin brothers - as the late Lord Keynes named them - will need a third brother to help in the accomplishment of the common task of serving humanity usefully and successfully in its endeavour for economic security and for an ever rising standard of life. The representatives of the participating countries of the Bretton Woods Conference included in the final Act Resolution Number VII which recognizes that the complete attainment of the purposes and objectives of the Agreement cannot be realized through the instrumentalities of the Fund and the Bank alone, and recommended to the countries of the world that they reach agreement as soon as possible on ways and means whereby they may best "reduce obstacles to international trade and in other ways promote mutually advantageous international economic relations - ... and facilitate by co-operative effort the harmonization of national policies of member states designed to promote and maintain a high level of employment and progressively rising standards of life". LONDON E/PC/T/C.II/43 Page 2. We believe that an International Trade Organization as envisaged by the Charter this Conference is is constructing will help to fulfil this function and by grappling with the problems entrusted to it, will be not only of great assistance to the member nations, but also considerably facilitate the work of the Fund. The objectives of the two institutions are the same, only our labour is divided. It is understandable, therefore, that so many provisions are found in the proposed Charter, which refer to the Articles of Agreement of the IMF and are complementary to them particularly in sections C and D of Chapter IV of the proposed Charter. The aims of these sections, namely the eventual elimination of quantitative trace and exchange restrictions, is also one of our aims, Mr. Chairman, and we note with interest the methods by which this Conference is proposing that the member countries with the help of the ITO should endeavour to do away with some of the destructive features of quantitative trade restrictions. We know that this is a hard and arduous task. We also realize that without a parallel policy in the field of international financial relations, this purpose would be doomed from the outset. When the Articles of Agreement of the IMF were drafted, it was realized that the Fund would start its operations soon after hostilities had ended, at a time when member nations would be endeavouring to reconstruct their economies and would be contending with economic problems of unprecedemed magnitude. It was felt that under such conditions the member countries should during a transition period have considerable freedom in protecting their monetary systems while trying to fit the ir national economies into the overall pattern of the world economy. It was because of these considerations that Article XIV of the Articles of Agreement was adopted. This Article was thoroughly discussed at Bretton Woods and many member nations felt that they would need this freedom of action before assuming the obligation not to impose restrictions on the making of payments and LONDON E/PC/T/C.II/43 Page 3. transfers for current international transactions. Yet even this Article, Mr. Chairman, does not mean complete freedom for the member countries to impose exchange restrictions or maintain them for a longer period than conditions warrant. Exchange restrictions imposed by members under Article XIV will be under constant scrutiny by the Fund. The agreement requires members to withdraw restrictions as soon as their balance of payments position is stabilized, and the Fund itself can make representations to a member that conditions are favourable for the withdrawal of restrictions. If the Fund should Find that a member persisted in maintaining restrictions inconsistent with the purposes of the Fund, it could declare the member ineligible to use the Fund's resources. These provisions of the Articles of Agreement will enable the Fund to play an active role in avoiding undue prolongation of the transition period. At the same time the Articles of Agreement are sufficiently flexible to take account of the particular circumstances cf a country which may be facing unusually difficult reconstruction problems. Proposals considered by this Conference which might have the effect of restricting the right of members of the Fund under the carefully safeguarded provisions of Article XIV of the Fund Agreement, should in our opinion, be approached with considerable caution and with full recognition of the complexities of the problems of the reconstruction period. On the other hand, it would seem advisable to provide generally equivalent safeguards with respect to quantitative trade restrictions that may be imposed during the transition period for balance of payments reasons. Unless there is a reasonable correspondence between the transition features of the Fund's Articles of Agreement and the proposed Charter of the ITO, so far as action is based on balance of payments considerations, there may be an unfortunate impediment to the contribution which the Fund can make, oven during the transition period, to the expansion and balanced growth of international trade. LONDON E/PC/T/C.II/43 Page 4. It is perhaps of even greater importance that, once the transition period is passed, action authorized under the Charter for balance of payments reasons be in harmony with the policies and operations of the Fund. Since the subject matter of this Conference concerns so largely restrictions on trade, it is perhaps easy for observers like ourselves to get the impression that possibly a disproportionate emphasis is being placed on the use of trade restrictions as a means of prventing disequilibrium or restoring equilibrium in the balance of payments. Undue reliance on the use of trade restrictions for these purposes, particularly when associated with provisions which permit counter-measures of the same character by injured countries, do of course carry a very real risk of an attempt to restore equiIibrium on the basis of a contracting volume of world trade which may result in harm to all and benefit to none. We respectfully urge that there are other measures if adjustment which are less dangerous from this standpoint. One of the purposes of the Fund, as stated in Article I of the Funds Agreement, is to give confidence to members by making the Fund's resources available to them and thus to provide them with opportunity to correct balance of payment maladjustments without resorting to measures destructive of national and international prosperity. Another method of adjustment in appropriate circumstances and under proper safeguards is the adjustment of the value of a country's currency. It is the hope of the Fund that once the transition period is past most balance of payments difficulties can be met without resort to restrictive devices. Countries will of course be expected to make reasonable use of their gold and foreign exchange reserves to tide over temporary difficulties, but these reserves will be supplemented by the members' quotas in the Fund, which in the aggregate total $7,600 million. If the balance of payments deficits are due to temporary causes, use of reserves and quotas in the Fund may be all that is required. If the deficits are due to more fundamental causes, corrective action will be needed. It is the purpose of the Fund, LONDON E/PC/T/C.II/43 Page 5. however, to avoid corrective action of a sort the will be destructive of world prosperity. Deflationary measures that throw men out of work or measures that restrict world trade are steps that should be taken only as a last resort. We do not argue, Mr. Chairman, that it is incorrect or unnecessary to provide for the use of true restrictions for balance of payments purposes. We do feel, however, that in view of the specific contribution which the Fund is intended to provide to the solution of these problems, the mechanism which you are designing here should assure that before resorting to quantitative restrictions members will have adequately explored the other safeguards and measures available to them for meeting balance of payments difficulties. It is the view of the Fund that it would be both undersirable and impractical to attempt to define by formula or specific criteria the precise kind of balance of payments disequilibria or monetary reserve conditions which would justify quantitative restrictions on imports. These are complex matters. Each case should be considered in the light of its particular circumstances. It was found to be impracticable to define fundamental disequilibrium in the Articles of Agreement. Thre is not even in the Articles a definition of balance on current account although there is a listing of specific items which without limitation are to be considered payments on current account. It is the view of the Fund that the establishment of precise criteria is so complex as to be impractical and that vague general criteria left to the interpretation of individuals members will invite confusion and inappropriate use. The alternative would appear to be that the ITO should request the Fund to make a finding as to whether the balance of payments and reserve position of a country were such as to warrant the restriction of imports, and similarly to consult with the Fund as to the progressive relaxation and removal of these restrictions as balance if payments and reserve difficulties were eased. It would seem desirable in the post-transition LONDON E/PC/T/C.II/43 Page 6. period, that consultation precede the adoption of restrictions as will be required in the case of exchange control measures authorized by the Fund under Article VIII of the Fund Agreement. If this is not regarded as feasible, there should at least be automatic anl full consultation immediately after restrictions are imposed, and the restrictions should be regarded as tentative until after ITO approval. Unless there is close liaison along thus lines we may well be confronted with a situation in which two international agencies will be operating in or permitting member action in the monetary and balance of payments sphere under conflicting criteria and policies.

GATT Library

qv385nt1573

Committee II : Statement by the Czechoslovan Delegate on Article 21 of the United States Draft Charter

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C/.II/30 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/qv385nt1573

qv385nt1573_90210238.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C/.II/30 30 October 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II STATEMENT BY THE CZECHOSLOVAN DELEGATE ON ARTICLE 21 OF THE UNITED STATES DRAFT CHARTER 1. No prohibition or restriction shall be imposed by any member pursuant to this Section on the importation of any product of any other member country, or on the exportation of any product destined for any other member country, unless the importation of the like product to all third countries, respectively is similarly prohibited or restricted. 2. Any member imposing such quotas allots a share of the total quantity or value to any other country having an important interest in the trade in the product with respect to which lhchc an allotment has been made, sharees basd upon the proportion of the quatotalantity or values supplied bymember such mbtr countries eduringaepresentative pr-vius rcpresentativz period, account bein taken in so fXr as practicable of any special facteores iich may ha'ùaeffacudor iwhch may ba ffecting the trade in that product. 3. No coneditions or foromalitis shall be impsed which would prevent any mber country from fully utilizing the share of any such total wquantity oeer value hich has bn eallotted to it. Th provisions of this poaragraph shayll als apply to an tariff quota established or maintained by any member. 4. In the case of impoert restrictions th member imposing the restrictions shall provide, upon the erequest of any othr member who was trading with the respective co entries in the product concerned during a previous representative period as provided in paragraph 2, aIl relevant LONDON E/PC/T/C.II/30 Page 2 information ation as to mi ad&i.nistratlon of the restrictions. 5. ith regard to restrictions imposed in accoerdanciwith paragraph 2 of this article the selection of a representative period for any product and the appraisal of any special facetors ffecting thee trad in the product shall be made initially b memberyim theraposing the restriction: Provided. That member shallsuch .shial, uon thCe anrequstof' .My other membermp having an iortant interest in the tradein that product, or uepon the requst of the organization, consuwilt promptly th the othewir member or th the organisation eregarding th need for an adjustment of the base period selected or for the reappraisal of the special factors involved.

GATT Library

pq781yr8493

Committee II. Sub-Committee for general commercial policy articles 9 - 17 and 32. : Note of the Delegations of the Netherlands and of the Belgian- Luxembourg Economic Union Concerning General Commercial Policy (Articles 9 - 17 and 32)

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C.II/32 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/pq781yr8493

pq781yr8493_90210240.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/32 AND ECONOMIQUE 30 October 1946 ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUB-COMMITTEE FOR GENERAL COMMERCIAL POLICY ARTICLES 9 - 17 AND 32 Note of the Delegations of the Netherlands and of the Belgian- Luxembourg Economic Union Concerning General Commercial Policy (Articles 9 - 17 and 32) The Delegations of the Netherlands and the Belgian-Luxembourg Economic Union are of the opinion, that, generally speaking, it will be of great interest to the international trade when the stipulations implied in articles 9 - 17 Inclusive are accepted. The delegations feel that the acceptance of these Articles will assist in great measure in the disappearance of undesired barriers of international trade and will prevent similar measure occuring in future. This is in particular the case with those stipulations which are directed against various forms of indirect protection. The delegations are of the opinion that - even in case of different opinions about the desirability of direct, open, protection - in any case indirect protection is an undesirable and dangerous phenomenon. The delegations are confident that a general agreement will be obtained ?? the release of methods of indirect protection. In this line of thought they hold a positive view towards the proposals made. The Articles mentioned give rise to a number of questions and lead to some special remarks. Reserving the completion of these Articles in course of discussion and to making more concrete proposals later on, the following remarks are brought to the attention of the Sub-Committee. LONDON E/PC/T/C.II/32 Pagee 2. he delegations are of the opinion that with the stipulationsi stipoul-Ltions of chapter IV thee measuros to tak against indirect protection are not exapplies empresaly to the well known wsusted. This th. .:clJo. 1 n phenomenon of aiffs; in this w too broad specificatin oX a:r2n this u:ay also the value eodiminished and moreoverehd f the ost-feourcd- tion cle can bc cnishcd and morDover uty is due.durz rila1;s v.difficult ti stat c;hat import-dut, is dJue hich *elegations gropcsGC to add a stipula tion in virtue of whi ;cer.nue«rs ..il obliged to renounce in future other specifieations ods as well rasn;ab'lv har.::onizini; ;;ith th nature Of th, &oods as ell a;s in autononlic lerislitions i:' iin treaties and ot international stingments, and further mnor to aini at the abolishing) of e:zistin unreasonable specificrtions. rticle 15 rc] tcs to th. publication of utipul,,tions concerning the international tradc; l-ck cf thc nEcessary publication can the for. an irdirct protectio-ii. Thhe z effc;ct is eivC!l by tlC eateading oe custoi= rc;ultiorts and othcr sticulations in a. grut number of separate nd obscure rgEul.zions, that thcy &re practically in:caessiblc .ond incoiprehcnsible for non-inidrs. The delegations crosoo= t:nt ra.îmbcrs ou-ht to plud3- thcnselvcs to com within due course to a codification ? cu.:: toL regulati1-e ina other to be icndic.tcd rnu1ations conccr:iir. intrn-tienaIl tracde I is also to bcraco!±ricnJa;i to insurt iri the dr;7ft chaX definition of the sui.cns.u "oriinc". . te the comnreheDs "ori4inc" it s gnerally agrt upon mentioning :ho gathered in extracted ; th, product have .n gatlhered in, e:tracted or produced. For products subUecz to the fabrication in vnrieus countries, the molloç.ingmdqinition '.:a adopted in 1931 by the Coiite Econoiicue d' la Socictc dcs Na;tions: LONDON E/PC/T/C.II/32 Page 3 "ln the case of goods undergoing manufacturing ocis unaergoinr anuinucturing processes in sevewhral countries, the country in ich the final processing is the carried out shal bep considXr1 ecountry of origin rovided and economically that te p1rocCeS Lx iOiVe and conoluicoaly justified. A lves eprocess shuil, dceined textelsivt :-nich ieS essential conversion eof the product, rethz such conversion be eff±ced in or out of bond." This wording my serve as a base for the discussion of the n adoption of a gntal definition of orij- whlch avoid, as much as possible, uncertainty. But, sing the considerable differences eexiastinsg in the custon regulations o?thd oaou3 ountries, this deofinition should not contlyain an bligatDy character and will on1 be appalicable in cae O' bsence of special crangements in the national leislations. framework A speecial stud to be lade in the ?rork o thc Organisation rth a vievo oxrwiniliZ thc priiples, according to vhich the various definitions adopted by the countries on the matter of country ppliance of the of export o thuere-cha.ndise1iance the customs tariffs and the elabdoration o thueconorn statistics coull b unified. A ghenral stipulation is to be addo, tLa any differences of ompinions concerningndirect any easure forrng an unlawful. irirect protection, can b suLmitted for an arbitrary college, to be indicated. ' l.aI= 1, Thme expression "the production of any embers" is vague; seen in connection ith the exoession in Article 9 "products of national origin" and in a vie of A'ticle 8, this expression apginparently signifies: "products orially in the country of a marksmember". th reference to the rernade by the French Delegate'i the dmCommittee re Article 8, it isacoeeting of 25 October of the2ôo re-rtiele 8, it is LONDON E/PC/T/C.II/32 Page 4 proposed that the rule of Article 9 shall be applicable on products originally in and consigned from the country of any member. 2. The question arises whether any government in order to save foreign exchange, dictating the mixing of benzine (petrol) with benzol originally from the national industry is violating Article 9, 1. There night be countries, which have issued mixing commands as a part of all the stipulations in the interest of the maintenance of the agriculture. It is not to be considered that such a measure, when once a protection is accepted, is to be prohibited, while indirect. protection is out of the question. 3. The first paragraph - in contradiction to the second - states that existing- stipulations will have to be abolished. This needs a very careful examination of the natural legislations, moreover because in many cases stipulations are conceled more or less. It will be necessary to state a term in which all members will have to supply the modifications. The sudden abolition of certain stipulations cancels the protection which has existed during a great number of years. The query presents itself whether or not the possibility must be given in such cases to maintain the existing protection in a form of import duties - in an open form - be it wholly or partially. 4. What is the meaning of the expression "competitive products". ARTICLE 10 1. The question has still to be answered, which will be the most desirable relation between the Charter on the one side and on the other side the agreement of Barcelona regarding transit and the agreement of Geneve of 1923, into which agreements argreata Arcat number of countries hve entered. The quearises also stion *Cs ealEs ifi is uscful to have several internationaledocuments conecrning the samr subjects. LONDON E/PC/T/C.II/32 Page 5 2. In any case it is to be recommended to expressnod to eoxmembersress that the rmerbers vri1 poseitively facilitaate frwe, transit and tht beteen the members of the Chartwer, no dwiiscrakeimination hatever ll t place, neither on the ground of the nationalitey ofg persons for of th fla of the vessels, nor of the places of eorigin or exportation tc. one and the othera in e spirift of anAd usprovided io, by Lri.ce 2, first paragraph of thnae statute of Barcelo. 3. The fourth paerstood ra graph is to be undruooa as.not contradictory to the apmalities plication of sialified forrlities for transit - whether embersor notg froror to zebers or non-r-iers - lonr certain rivers and roads, suchgreements, accordin to existin_international a.Zionts, as the Rhnr-Traffic-agreennts, Scholttrcatyand others. 4.i The question arises whether these defintions appose a preferment rege, at the import of cods frorl rtain countries only to be ampplied hen thge goods are directly irorted - - erZ without transhipcoent oer bmeming bored - into third c-ntrics(lnbrs). icld e5. Hivve rch the withdefinition o.tle 6 is in accordan *-ith those deata in rticle 1 of the Statute of Barccona, it is to be observed: (a) that in a definition of transit in principle the formal criterium is to be inserted that the goods remain. under customs custody. Goods answering to the definition, but omhich are not being brouSt under custcLcustody, or which hayve be'en releasd froncustouscustodv, an!t e considered as being on "traffic in transit. LONDON E/PC/TC.II/32 Page 6 (b) that the definition does not take sufficiently into consideration those goods whose destination in transit by arrival in the country is not yet definite, which, for example being bonded, in a warehouse, the destination for transit is then decided. It ought to be ascertained that such consignments will be considered as "traffic in transit". (c) that the mentioning of persons" in paragraph 6 is not very clear, as all foregoing rules are only dealing with goods. ARTICLE 11LRTICT1E i' The proposals contained the stipulations thwat members ill place themselves under the obligation "to suscribe to a general definition of the circumestwances undr hich anti-dumping and countervailing duties ymay prper4 be'applied to products imported. from other members". Article Il o-f thee drafparagraphoParchartrragr«aph 1 and 2 contains some stipulations which concern the amount of such "duties" while the fourth paragracumph under certain cirstances excludes cumulation of those. "duties". The third paragraph contains a stipulation concerning inter- diction of levying thesew duties in relation ith freedom of internal taxes. The fifth paragraph is the most important stipulation for execution of the line of thoughts ofw the,, proposals". Hoever it is recommended to cancel in article 11, paragraph five the words "as a geneeral rule", as, ther is no reason in levying anti-dumping and countervailing duties, if there is no him armor threatening for h "to injururee or threaten to injo" fo. a domestic industry or a danger that the establishment of a domestic industry is to be prevented. Furthermore it is better tdo require that the inustry must be seriously injured and thanat smuuch a result or dger st be proved by the importing country. LONDON E/PC/T/C.II/32 Page 7 In order to give further execution to the above mentioned stipulation of the proposals"' article 11 may be completed by a stipulation that one can only speak of commercial icrcial umping vwhen there is a systematical manner of acting. For practical reasons it could feurther b stated that the asale in foreign country, when only sme apercentzes low;r than the normalw price vlel not bc considermed as duping. 2, Underm anti-duping measuresm, other easures thean "deutis" ar to be considered. ecommended It ims rcndcdtoe liait aso tho application ofe thoes other mcsurc. 3. Tghe third pararaph might be interpretedm. that the sae applies if by export not exemption but restitution of the duties or taxes mentionkeed therein tas place. 42. so in this paragraph the expression "prodmumct of any rlir" neds prfecisely deinimetion as air at in Articles 8 and 9. .ARTICLE 12 w1. Agcknoledgin that the Article gives valuable rules as to the definition nof valeue agd concrnin tnahe determition of the value ith whiceha the Delcrioans efullye crec- fhc are o? the opinion that in connectioe with thc proceeuremof doter.ination of the value, more concrete indian tions cn be given eithew in the ;ording of the arti cle oommen receiizedaeion. Thcy therefore suggest the llcae.ing linos as a basis for discussion: The declaration of the importersehas to bc supported by ail justificating documents (invoices, buying contracts, offers, copies amd confirDations of orders, etc.) ms e custos authoritiegein char,c of the control on the declaratioe haghte ohc rih ta acquaint themselves with the bo!s, correspondence and other documeeceents connc wvth ethe trad of merchandise. LONDON E/PC/T/C.II/32 Page 8 In case 3SC of litigatioe tmy ncay be given n"maielevce" of the merchandise on the conditionis lawd donA in reticl 8 of the Conventionne sigd in Geneva on the 3 November 1923. The contest will be brought beefor a tribunal independent of the two parties and which alizes spcilizinges itt1inc suchlike dispute and consists of eaxperts on gricmmerce ulture, coccrce or industry, acespective cosrding to the rspctve dizpu.te. The importer ill bcgiven the opportunity to explain his pointe of iew booro:tsamc autority. If the value dhans been considere insufficient, fines may be imposed upon the debtor. If the dcdelaration is codnsiled correct .naif the interested party states tehat afr loss has ben sufed, this question may be investigateed in order to ascrtaemin whether an indificatiori has toa be granted in. cse the meerchandise has eben unduly retaind by the custoi authorities witheing out the de'tor b'ng in a possibility of acquiring "manilevee". The Goveerens haàv to taka ll measures to accelerate the decisions. 2. Taking into consideration that in seaxeveral countries ts on the valuem other thean custo deuties (xcise dutis, expert duties, etc. ) are imposed updon importation an upon exportation and furthermore in order to express that this stipulation eonly concerns taxs upon importation or exporgftation, it is suested the first paragraph after "custom du:ties" should read taxes or other restrictions imposed on or in. connection with iemportation or exprtaotion based up on r regulated. on any manner by value. 3. It has to be exapected that with number of countries the abanaon- mentjected of the esystem retur in t sz;cond parangraph will dependpora similar LONDON E/PC/T/C.II/32 Page 9 abolitions in other countries. Therefore it is recommended to include in the beginning of the second paragraph fixed date or a date to be fixed by an appropriate institution. 4. It occurs that in the second paragraph under (d) the words following on "stable" are superflueus next to Article 15. ARTICLE 13 1. - The question is to be answered which relations between Charter and the Agreement of Geneva of 1923 relating to customs-regulations is the most desirable. 2. In the same line of thought as is expressed in Article 12 under paragraph 3 it is recommended to fix a certain date for coming to an agreement, concerning the execution of measures as stated in the first phrase of article 13, or to stipulate that a date will be fixed by an appropriate committee. For the measures mentioned in the second phrase of Article 13 first paragraph - these being of more formal nature - the regulation of the second paragraph could remain valid, whereon this phrase as the first sentence of the second paragraph could be inserted. 3. According to the opinion of the Netherlands and Belgium Delegations the stipulations of the third paragraph relating to cases of "good faith goes too far. "Good faith" only excludes intention (delus) and in cases of negligence (culpa) a "normal penalty" is not always sufficient. Only in cases of an obvious and accidental error there can be given "a nominal penalty". Although the Delegations agree with the principle pointed out in the third paragraph, it appars to the Delegations that this stipulation has to be taken as a recommendation for the treatment, in practice of the customs-administration - as this is indeed the case in the Netherlands and Belgium (Luxembourg) - and not as stated an article 13 as a juridical rule, to which the individuals interested could appeal before the tribunals. Cancelling the third paragraph of Article 13 will, moreover, ameliorate the structure of Article 13. LONDONq E/PCTi/C.II/32 Page 10. 4. "Products of any othermember-country" r (paragraph 3): refer to remarks 1 ad Article 9. RTICLE 14.L 1. It sz rmzarked tait this Article relates to the so called "arrque d'orgjine", viz. those emkarks,w-hicha'ccordng- to teo law, has to be fieud ongroos2. This stipulation does not relaeL to regulations concerning the m:port, export or transit or cmmnodities providdcw.ith alse marquese naionals e andwhich hclh stipulatares -rc derccnWd ie ordcr to prothet tluetradc :gainst deloympetition.ion, 2. Explanation is asked of themptionmpti mentioned in the fifth paragrapheundcr (h). 3. Thaim of "o- ention" intentionallynalme) r*ntioned in paragraph .6mseers to oe serve.vie. CLE 15 1. The us.eul stipulation of thuesecond pcaaçgcph second phrase is not cover ed by the headin-g This hueading should be completed. The stipulation is of such inoportance and essential that it is proposed to dra- up the expression, "as soon as possiblee, more exactly as proposed for Article 15, first paragraph. 2. A d tird Tparagrapnraoh. che imrcurstances in a country ceq rüQuire the execution, without hesitatiof , o certmeasuresain Leasures, viz. "prohibitions, restrictions on imports or expoerts or fin th: transer ofe epayments thr- fore". The appliecatdion of th ol stipulation on the import of goods which, ere already "en rouwte',d meets :th Ufficulties, especially when a voyamge lasts soe week.is also e Ita e- noe'qutible, nor reasonable to tgreat certainn oods arrivig ian a countryt,m t the hsame ie as oter goods, eously than those other goods. er atn :enorc sl than ose other goccis. IMoreovcsr, inland price LONDN E/PC/T/C.II/32 Page 11 regulations are being brought into accord with the latest taxes, so that application of the lower taxes on goods which were there already "en route", gives an unwarranted advantage to the owners. Furthermore the expression "en rout" is a very vague and gives rise to misusedsuse. As yet there are objections for accepting this third paragraph. RTICLE 16 It is mrecomended, for the question of nomencalture -w as ell as for tariffs or as for statistics - to proceed on the already preparatwory ork of Geneva. ARTICLE 17 The question arises if the article defends the supporting of actionmis aing at buying "national products". ARTICLE 32 1M. anmy ties the stipulations "to protectmal ani or plant life or health" are misused for indirect protection. It is mmereconded to insert a clawuse hich prohibits expressly to direct smuch easures that they constitute an indirect protection or, in general, to use these measures to attain resulwhts, ich are irreconsilable with the aim of chapters IV, V or VI.

GATT Library

gp869yb2790

Committee II. Sub-Committee on procedure. Addition to report of Sub-Committee procedures

United Nations Economic and Social Council, November 20, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

20/11/1946

official documents

E/PC/T/C.II/57/Add.1 and E/PC/T/C. II/54/REV. 1-58

https://exhibits.stanford.edu/gatt/catalog/gp869yb2790

gp869yb2790_90210273.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/57/ AND ECONOMIQUE Add.1 20 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUB-COMMITTEE ON PROCEDURE ADDITION TO REPORT OF SUB-COMMITTEE PROCEDURES Article 29. Emergency Action on Imports of Particular Products 1. If, as a result of unforeseen developments and of the effect of the obligations incurred under or pursuant to this Chapter, any product is being imported into the territory of any Member in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers of like on similar products (or, in the case of a product which is the subject of a concession with respect to the preference, to producers an a turrtory whch receives or received such preference), the Member shall be free to withdraw tle concussïon, or suspend the obligation, in respect of such product, in whole or in part, or to modify the concession to the extent and for such time as may be necessary to prevent such injury. 2. Before any Member shall take action pursuant to the provisions of paragraph 1 of this Article, it shall give notice in writing to the Organization as far in advnce às may be practioable and shall afford the Orianîzation, an the other Members hiving a substantial interest as exporters of the product concerned, an opportûnity to consult with it respect of the proposed action. In critical and exceptional circumstances such action may be taken provisionally without prior consultation: LONDON E/PC/QII/57/Add. 1 Page 2. Provided, That consultation shall be effected immediately following upon the taking of such action. If areement among the interested Members with respect to the action is not reached, the Member which proposes to take or contnue the action shall, nevertheless, be free to do so, and if such action is taken or continued the other affected Members shall then be free, not later than sixty days after such action is taken, to suspend, upon the expiration of sixty days from the date on which written notice of such suspension is received by the Organization, the application to the trade of the Member taking such action, of such substantially equivalent obligations or concessions under this Chapter the suspension of which the Organization does not recommend against. In serious cases the Organization may authorize an affected Member to suspend concessions or obligations in addition to those which may be substantially equivalent to the action originally taken. Article 30 Consultation - Nullification or Impairment. 1. Each Member will accord sympathetic consideration to, and will afford adequate opportunity for consultation regarding, such representations as may be made by any other Member with prospeet to the operation of customs regulations and formalities, quantitative and exchange regulations, state-trading operations, sanitary laws are regulations for the protection of human, animal or plant line or health, and generally all matters affection, the operation of this Chapter. 2. If any Member should consider that any othur Member has adopted any measure, whether or not it conflicts with the terms of this Charter, or that any situation has arisen, which has the effect of nullifying or impairing any object of this Charter, the Mermbers concerned shall give sympathetic consideration to such written representations or proposals as may be die with a view to effecting a satisfactory adjustment of the LON\DON Page 3 matter. 'If no such adustment can - effected the matter may be referred to the Organization, which shallt after investigation, and if necessary after consultation witlh the Economic and Social Council of the United Nations and any other appropriate international specialized agencies, make appropriate recommendations to the Members concerned. The Organization, if it considers the case serious enough to justify such acton,may authorise a Member or Members to suspend the application to any other Members or Members of suh specified obligations or concessions under this Charter as may be appropriate in the circumstances, If such obligations or :Y:nSe- S are in,fact suspended, any affected Member shall then be ffee not later than sixty day after. such action is taken, to withdraw from the Organization upon on the expiration of sixty days from the date on which written notice by the (Organization such withdrawal is received. Article 8. C- General Most--Favoured--Nation Ttreatment 1. Wiîth respect: to customs duties and charges of any kind imposed on or in connection with iz...Y»' or exportation or imposed on the international transfer of payments for imports.or experts, and with respect to the method of levying such duties and charges, and with respect to all rules and formalities in connection with importation or exportation, and with respect to all matters affected by the provisions relating to national treatments in Article 9, any advantages favour, privilege or immunity granted by any Member country to any product originating in or destined for any other county; shall be accorded. mediately and unconditionally to the like, product originating, in or destined for all other Member countries. 2. The provisions of paragraph 1 of ths Article shall now be, construed to require the elimination of any prefrences in respect of customs duties and other charges imposed on importation which do not exceed the preferences remaining after the negotiations comtntemplated in Article 18, and wwhich fall within the descriptions set forth in (a) (b) or (c), below: LONDCN E/PC/T/C. II/57/Add. 1 Page 4. (a) Preferences in force exclusively between territories comprising on 1 July 1939 a commonwealth or nations or in respect of which there existed on that date common sovereignty or relations of protection or suzerainty. Each MIember to which this provision applies shall provide a list of such territories, which lists shall be incorporated in an- annex to this Charter. (b) Preferences in force exclusively between the United States of America and the Republic of Cuba. (c) Preferences in force on 1 July 1946 exclusively between neighbouring countries. Article 18. Reduction on Tariffs and Elimination of Preferences, 1. Each Member, other than a Member subject to the provisions of Article 28, shall, upon the request of any other Member or Members, enter into reciprocal and mutually advantageous negotiations with such other Member or Members directed to the substantial reduction of tariffs and other charges on imports and exports, and to the elimination of import tariff preferences. These negotiations shall proceed in accordance with the following rules: (a) Prior international commitments shall not be permitted to stand in the way of negotiations with respect to tariff preferences, it being understood that action resulting from such negotiations shall not require the mdification of existing internatioal obligations, except by agreement between the contracting parties or, failing that, by termination of such obligations in accordance with their terns. (b) All negotiated reductions in most-favoured-nation import tariffs shall operate automatically to reduce or eliminate margins of preference. (c) The binding or consolidation of low tariffs or of tariff-free treatment shall in principle be recognized as a concession equivalent in value to the substantial reduction of high tariffs or the eliminations of tariff prefrences. LONDON E/PC/T/C. II/57/Add.1 Page 5 2. Each Member partcipating in negotiations pursuant to paragraph 1 of this Article shall keep the Organization informed of the progress thereof .and shall tranmit; to the Organization a copy of the agreement or agreements incorporating the results of such negotiations, 3. If any Member considers that any other Member has failed,within a reasonable period of tme, to fulfill its obligations under paragraph 1 of this Article, such.Member may refer the matter to the Organization, which shall investigate the matter and make appropriate recommendations to the Members concerned. The Organization, if it finds that a Member has, without sufficient justification, having regard to the provisions of the Charter as a hole, failed to negotiate with such complaining Member in accordance with the requirements of paragraph 1 of this Article, may determine that the complaining Member, or in exceptionial cases the Members of the Organization generally, shall, notwithstanding the provisions of Article 8, be entitled to witihold fromth trade of the other Member any of the tariff benefits which the complaining the complaining Member, or the Members of the Organization generally, as the case may be, may have negotiated pursuant it paragraph 1 of this Article. If such benefits are in fact withheld so as to result in the application to the trade of the other Member of tariffs higher than would othervrise have been applicable, such other Member shall then be free, within sixty days after such action is taken, to withdraw from the Organizàtion upon the expiration of sixty days from the date on which- written notice of such withdrawal is received by the Organization. The provisions of this paragraph shall in accordance with the provisions of Article 56. Article 33 Territorial Application of Chapter IV - Customs Unions Frontier Traffic. 1 , The provisions of Chapter IV shall apply to the customs territories of the Member countries. If there are two or more customs territories under the jurisdiction of any Member, each such customs territory shall LONDON E/PC/T/C. II/57/Add. 1 Page 6 be considered as a separate Member country for the purpose o interpreting the provisions of Chapter IV. 2. The provisions of Chapter IV shall not be construed to prevent (a) advantages accorded by any Member country to adjacent countries in orader to facilitate frontier traffic; or (b) the formation of a union for customs purposes of any customs territory of any Member country and any other customs territory: Provided, that the duties and other regulations of commerce imposed by any such union in respect of trade with other Member countries shall not on the whole be higher or more stringent than the average level of the dutiess and regulations of commerce applicable in the constituent territories prior to the formation of such union, 3. Any Member proposing to enter into any union-described in paragraph 2 (b) of this Article shall consult with the Organization and shall make available to the Organization such information regarding the proposed union as will enable the Organization to make such reports and recommendations to Members as it any deem appropriate. 4. The Members recognize that there may in exceptional circumstances be justification for new preferential arrangements requiring an exception to the provisions of Chapter IV. Any such exception shall be subject to approval by the Organization pursuant to paragraph 2 of Article 55. 5. For the purpose of this Article a customs territory shall be understood to mean any area within which separate tariffs or other regulations of commerce are maintained with respect to a substantial part of the trade of such area, A union of customs territories for customs purposes shall be understood to mean the substitution of a single custome territory for two or more customs territories, so that all tariff s and other restrictive regulations of commerce as between the territories of LONDON E/PC/T/C. II/57/Add. 1 Page 7 Members of the union are substantially eliminated and substantially the same tariffs and other regulations of commerce are applied by each of the Members of the Union to the trade of territories not included in the union.

GATT Library

wq876tj7174

Committee II. Sub-Committee on procedure. Multilateral Trade-Agreement negotiations. : Procedures for Giving Effect to Certain Provisions of the Proposed ITO Charter by Means of a General Agree- ment on Tariffs and Trade Among the Members of the Preparatory Committee

United Nations Economic and Social Council, November 21, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

21/11/1946

official documents

E/PC/T/C.II/58 and E/PC/T/C. II/54/REV. 1-58

https://exhibits.stanford.edu/gatt/catalog/wq876tj7174

wq876tj7174_90210276.xml

GATT_156

United Nations Nations Unies ECONOMIC AND SOCIAL COUNCIL CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C.II/58 21 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II. SUB-COMMITTEE ON PROCEDURE MULTILATERAL TRADE-AGREEMENT NEGOTIATIONS Prooedures for Giving Effect to Certain Provisions of the Proposed ITO Charter by Means of a General Agree- ment on Tariffs and Trade Among the Members of the Preparatory Committee. REPORT OF SUB-COMMITTEE ON PROCEDURE TO COMMITTEE II LONDON E/PC/T/C.II/58 Page 2 INTRODUCTION The Preparatory Committee has agreed to recommend to the governments concerned that the committee sponsor tariff and preference negotiations among its members to be hold in the spring of 1947. This agreement is sot forth in the Committee's resolution of . Upon the completion of these negotiations the Preparatory Committee would be in a positions to complete its formulation of the Draft C:` rter and approve and recommend it for the consideration of the general international conference on trade and employment; and the general international conference would be in a position to adopt the Charter because of the assurance afforded as to the implementation of the tariff provisions. PROPOSED NEGOTIOTIONS AMONG MEMBERS OF PREPARATORY COMMITTEE The results of the negotiations among the members of the Preparatory Committee wll need to be fitted into the framework of the Internatioral Trade Organization after the Charter has been adopted. The negotiations must, therefore, proceed in accordance with the relevant provisions of the Charter as already provisionally formulated by the Preparatory Committee. In the light of these provisions, the comments and explanations which follow may be useful as a guide to the negotiations. General Objectives An ultimate objective of the Draft Charter, elaborated in Article 18, is to bring about the substantial reduction of tariffs and the elimination of tariff preferences. The negotiations among the members of the Preparatory Committee should therefore be directed to this end, and every effort should be made to achieve as much.progress toward this goal as may be practicable in the circumstances, having regard to the provisions of the Draft Charter as a whole. LONDON E/PC/T/C.II/58 Page 3 CENERAL NATURE 0F NEGOTIATIONS The Draft Charter, in Article 18, provides that tariff negotiations shall be on a "reciprocal" ana"mutually advantageous" basis. This means that no country would d be expected to grant concessions unilaterally, without action by others, or to grant concessions to others which are not adequately counterbalanced by concessions in return. The proposed negotiations are also to be conducted on a selective, procuet-by-product basis which will afford an adequate opportunity for taking, into account the circumstances surrounding each product on which a concession may be considered. Under this selective procedure a particular product may or may not be made the subject of a tariff concession by a particular country, If it is decided to grant a concession on the product, the concession rny either take the form or a binding of the tariff against increase or a reduction of the tariff. If the tariff on the product is reduced, the reduction may be made in greater or lesser amount. Thus, in seeking to obtain the substantial reduction of tariffs as a general objective, there is ample flexibility under the selective procedure for taking into account the needs of individual countries and individual indus tries. The same considerations and procedures would apply in the case of import tariff preferences, it being understood that; in accordance with the principles set forth in Article 8 of the Draft. Charter relating to most-favoured-nation treatment, any preferences remaining after the negotiations may not be increased. The various observations in this report regarding the negotiation of tariffs and tariff preferences should be read as applying (mutatis mutandis) to the negotiation of state trading rnargins under Article 27 of the Draft Charter. LONDON E/PC/T/C.II/58 Page 4 GENERAL RULES TO BE OBSERVED IN NEGOTIATIONS Paragraph 1 of Articlee 18 of the Draft Charter sets forth the following, self-explanatory, rules to be observed during the negotiations. "(a) Prior International commitments shall not be permitted to stand in the way of negotiations with respect to tariff proferences, it being understood that action resulting from such negotiations shall not require the modification of existing international obligations except by agreement between the contracting parties or, failing that, by termination of such obligations in accordance with their terms. (b) All negetiated reductions in most-favoured-nation import tariffs shall operate automatically to reduce or eliminate margins of preference. (c) The binding or consolidation of low tariffs or of tariff-free treatment shall in principle be recognized as a concession equivalent in value to the substantial reduction of high tariffs or the elimination of tariff preferences." MISCELLANEOUS RULES OF GUIDANCE There are a number of additional questions which should be borne in mind in preparing for the proposed tariff negotiations among the members of the Preparatory Committee: Base Date for Negotiations Article 8 of the Draft Charter, as developed by the Preparatory Committee, would except from the most-favoured- nation provisions of the Charter preferences "which do not exceed the preferences remaining after .. .negotiations." This means that all margins of preference remaining after negotiations would be bound against increase. Also, as explained. above, Article 18 requires that reductions of most-favoured- nation rates of duties shall operate "automatically" to reduce or eliminate margins of preference. LONDON E/PC/T/C.II/58 Page 5 In order to determine what residual preferences shall be bound against increase under Article 8, and in order to dotermine what references shall. be reduced or eliminated automatically under Article l8, it is necessary to establish a date which will fix the height of the proferences in effect prior to the negotiations. It would be desirable for such purposes tc fix a single date, common to all the countries participating in the negotiations. However, the discussions during the first session of the Preparatory Committee indicate that the establishment of a common date presents certain difficulties and may not be practicable. It is therefore suggested that immediatey following the close of the first session of the Committee each member of the Committee concerned should inform the Secretariat of the United Nations as to the date which it proposes to use as the base date for negotiations with respect to References. The Secretariat will promptly inform the other members. The base datefor negtiations established by any country granting preferences should hold good for its negotiations on all products with all other countries members of the Preparatory Committee, and should not vary from country to country or from product to product. Avoidance of New Tariff Measures It is imporant that members do not effect new tariff measures prior to the negetiations which would tend to prejudice the success of the negotiations in achieving progress toward the objectives set forth in Article 18, and they should not seek to improye their bargaining position by tariff or other measures, in preparation for the negotiations. In cases where it is necessary to convert a specific tariff to an an 'ad valorim tariff, the substitution should not have as a consequence an increase of the protective incidence of the tariff. LONDON E/PC/T/C. II/58 page 6 Principal Supplier Rule It is generally agreed that the negotiations should proceed on the basis of the "principal suppler" rule, as defined in this paragraph. This means that each country would be expected to consider the granting of tariff or preference concessions only on products of which the other countries, members of the Preparatory Comrnmittee, are, or are likely to be, principal suppliers. In determining whether, on the basis of the . "principal supplier" rule, a product is to be included in the negotiations, reference should be had not merely to whether a particular member of the Preparatory Committee is, or may become, a principal supplier, but to whether the members of the Committee, taken as a whole, supply, or are likely to supply, a principal part of the product in question. In other words, if a principal part of total imports of a particular product into a particular member country is supplied by the other members of the Preparatory Committee taken together, then the importing member should, as a general rule, be willing to include that product in the negotiations, even though no single other member of the Committee, taken by itself, supplies a principal part of the total imports of the product. In estimating the future prospects of a member, or the members taken together, to become a principal supplier of a product, consideration should be given to the probable disappearance of ex-enenemy countries as suppliers of certain products and of the changes in the currents of trade created by the war. Form of Tariff Schedules It is contemplated that the tariff negotiations among the members of the Preperatory Committee would be multilateral, both in scope and in legal application. LONDON E/PC/T/C.II/58 Page 7 Thus, there would result from the negotiations a total Of aixteenx sohedules of tariff concession, each schedule setting forth a description of the products and of the maximum (concession) rates of duty thereon which would be applicable an respect of the imports into a particular country. In tals way each member of the Committee would be contractually ontitled, in its own right and independently of the most-favoured-nation clause, to each of the concessions in eacn of the schedules Of the other members. The multilateral form of the tariff schedules agreed to among the members of the Prepsaratory Commîttee as designed to prrovide more stability than has existed ln the past under bilateral tariff agreements, to assure certainty of broad action for the reduction of tariffs, and to give to countries a rignt to tariff concessions on particular products which such countries might wash to obtain, but could not obtain under bilateral agreements because of their relatively less important positions as a supplier of the product concerned. The multilateral form also gives expression to the fact that each country stands to gain when another country grants tariff reductions on any product, even though primarily supplied by a third country x If the princples indicated in Article 28 of the Draft Charter should prove acceptabe to the USSR, those may a addition, be a sehedule relating to an undertaking by the USSR to purchase annually products valued at not less than an aggregate amount to be agreed upon. LONDON E/PC/T/C. II/58 Page 8 Status of Preferential Rates of Duty The formulation by each member of the Preparatory Committee of a schedule of tariff colicessions which would apply to all other members raises a question as to the method of relating to such schedules preferential rates of duty which .have been negotiated as well as preferential rates on products for which most-favoured-nation rates have been negotiated. There appear to be two methods which might be followed: 1. Such preferential rates might be incorporated in the multilateral schedules, qualified by the requirement that they apply only to the products of the countries receiving preferred treatment. 2. Such preferential rates might be incorporated in separate schedules which would apply only to the preferred countries. *It should be left for the courtry concerned to determine which of the two methods indicated above it desires to follow. However, a single scheduale containing both most-favoured-nation and preferential rates would seem to facilitate the work of both traders and governments. PROCELURES FOR CONDUCTNG NEGOTIATIONS AMONG THE MEMBERS OF THE PRAPARATORY COMMITTEE It is believed that the tariff negotiations among the members of the Preparatory Committee can best be conducted in four stages: 1. First Stage. Each .member should transmit to each other member from which it desires to obtain tariff concessions, as soon as possible and preferably not later than 31 December 1946, a preliminary list of concessions which it proposes to request of such other member. This list should set forth for each product concerned (a) an indication of the existing rate of duty (where known ) (b) an indication of the requested rate of duty. Thirty copies of this list should be sent simultancously to the Secretariat of the United Nations, which will transmit one copy to ench of the other members of the Preparatory Committee. LONDON E/PC/T/C. II/58 Page 9 In order to facilitate the negotiations, each member of the Preparatory Committee should transmit to the Secretariat of the United Nations, as soon as possible and preferably not later than 31 December 1946, thirty copies of its customs tariff showing the rates of duty currently applicable. The Secretariat will promptly transmit one copy to each of the other members of the Committee. 2. Second Stage. At the opening of the second session of the Preparatory Committee, each member should submit a schedule of the proposed concessions which it would be prepared to grant to all other members .in the. light of the concessions it would have requested from each of them. 3. Third Stage. Notwithstanding the multilateral character of the negotiations, it will usually be found that only two or three countries will be directly and primarily concerned in the concession on a particular product, and that the interest of other countries, although material, will be secondary. It is therefore proposed that the third stage of the negotiations will ordinarily . .st of discussions on particular products between two, or possibly three or four countries. For the purpose of engaging in such negotiations, therefore, each country should to the extent practicable have separate groups of persons competent to negotiate with each of the other countries with which important-negotiations are likely to be conducted, LONDON E/PC/T/C.II/58 Page 10 The number of negotiating groups required by each country will of course tend to vary wth the scope of its trade relations. In the case of large trading countries having important trade relations with most or all of the other members of the Committee, a larfe number cf negotiating groups will be required. In the case of countries having less extensive trade relations, a smaller number of negotiating groups will be sufficient. In any event the timing of negoitiations between. particular groups will need. to be scheduled, and in order that the United Nations Secretariat may have adequate notice to prepare for such scheduling it would bo desirable for each member of the Committee to notify the Secretariat, as far in advance as may be practicable, of the number of negotiating groups which the member proposes to send to the negotiating meeting, and of the country or countries to which cach nagotiating roup relates. 4. Fourth stage. The progress of the nogotiations should be subject to general review by, the Committee as a whole periodically duriag the negotiations and also ln the final, stage. General review by the Committee as whole will enable each member to assess the benefits which it is likely to receive from the series cf negotiations in the light of its total contribution, and will offset the tendency toward limibing concessions which results from a comparison of benefits exchanged between two countries alone. LONDON E/PC/T/C. II/58 Page 11 It is clear that the general review by the Committee as a whole cannot take the form of a detailed examination by the Committee of each concession. Rather, the Committee would review the general level of tariff reduction achieved, as indicated in summary reports. At the same time, each number should be entitled to receive, on request, detailed information as to the status of negotiations on particular products between other members in order that it it may be in a position to assert in interest in such negotiations. In order'that the negotiations may proceed in an orderly fashion, it is desirble that a Steering Committee be established as soon as the various delegations have assembled at the meeting. RESULT OF THE NECOTIATIONS If the tariff negotiations proceed successfully along the lines set forth above, there should emerge from. the negotiations a tariff schedule for each member, each schedule containing concessions granted'to all of the other members in their own right. These schedules might be identified as follows: LONDON E/PC/T/C.II/58 Page 12 Name of Country Schedule Australia Belgo-Luxembourg-Netherlands Custems Union, Belgian Congo and Netherlands Overseas Territories Brazil Canada Chile China Cuba Czechoslovakia France and French Union India New Zealand Norway Syro-Lebanese Customs Union Union of South Africa Union Of Soviet Socialist Republics United Kingdom and the overseas territories for Which it has international responsibility. United States Schedule I Schedule Schedule Schedule Schedule Schedule Schedule Schedule Schedule Schedule Schedule Schedule Schedule Schedule II III IV V VI VII VIII IX X XI XII XIII XIV Schedule XV + Schedule XVI Schedule XVII Note: Separate, or possibly sub-divided, schedules may be necessary in the case of certain countries in order to provide adequately for certain overseas territories. GENERAL AGREEEMT ON TARIFFS AND TRADE Once agreed upon, the tariff schedules resulting from the negotiations among the members of the Preparatory Committee cannot easily be held in abeyance pending action by the. general international conference on trade and employment and the adoption of the Charter by national legislatures. + If the principles indicated in Article 28 of the Draft Charter should prove acceptable to the USSR, this schedule would relate not to tariff concessions, but to an undertaking to purchase annually products valued at not less than an aggregate amount to be agreed upon. LONDON E/PC/T/C.II/58 Page 13 It is therefore proposed that the tariff schedules be incorporated in an agreement among the members of the Preparatory Committee which woud also contain, either by reference or by reproduction, those general provisions of Chapter IV cf the Charter considered essentiel to safeguard. the value of the tariff concessions. These provisions would include Article 8 of the Charter relating to most-favoured- nation treatment; Article 9 relating to national treatment on internal texation and regulation; Articles 19 through 22, relating to quantitative restrictions; Articles 23 and 24, relating to exchange restrictions; Article 26, relating to equality of treatment by state trading enterprises; Article 29, relating to emergeney action on imports of raprticular products; Article 30, relating to nullification or impairment; and such other related provisions as may be appropriate. The Genera. Agreement should contain a provision under which the signatory governments could make any adjustments in the Agreement which say be desirable or necessary in the light of the action taken by the International Conference on Trade and Employment on the Draft Charter. A draft outline of the General Agreement on Tariffs and Trade is attached. The Drafting Committee provided for in the Resolution of the Preparatory Committee of should be instructed to consider this outline and to prepare a more complete draft for the consideration of the Preparatory Committee at its meeting in Aprîl. The General Agreement on Tariffs and Trade should be signed and made public at the close of the tariff negotiations. The Agreement should be legally independent of the Charter and should. be brought into force as soon as possible after its signature and publications. LONDON E/PC/T/C.II/58 Page 14 Countries should be free to withdraw from the agreement, at the end of three years or thereafter on giving sixth months prior notice. This will provide an opportunity for a review of the agreementt and any adjustment of the tariff schedules which may be considered desirable, The agreement should confoem in every way to the principles laid down in the Charter and should not contain any provision which would prevent the operation of any provision of the Charter. The tariff concessions granted under the agreement should be provisionally generalized to the trade of other countries pending the consideration by the International Conference on Trade and Employment of the question whether benefits granted under the Charter should be extended to countries which do not join the International Trade Organization and which therefore do not accept the obligations of Article 18.. CREATION OF PROVISIONAL AGENCY PENDING ESTABLISHMENT OF INTERNATIONAL TRADE ORGANIZATION Certain of the provisions of the General Agreement on tariffs and trade, for example those incorporating Article 29 of the Charter (emergency action on imports of particular products) and Article 30 of the Charter (nullification or impairment), will require for their successful operation the existence of an international body. It is proposed, therefore, that the members of the Preparatory Committee which make effective the General agreement on tariffs and trade should create a provisional international agency for this purpose. This provisional agency would go out of existence upon the establishment of the International Trade Organization, LONDON E /PC /T /C.II/58 ,Page 15 RELATION OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE TO THE INTERNATION TRADE ORGANIZATION AFTER THE ORGANIZATION IS ESTABLISHED The draft Oharter as now formulated provides in Article 56 that the countries which make effective the General Agreement on Tariffa and Trade shall constitute the original members of the Interim Tariff Commietse.to be set up within the International Trade Oranization after the International Conference on Trade and Employment haa met and the Organization has been established. The Interim Tariff Committee would have the function of determining whether (with respect to any negotiations subsequent to those culminating in the Generale Agreement on Tariffs and Trade) any Member of the Organization failed to live up to ite obigations regarding tariff negotiations and, under paragraph 3 Of Article 18 of the Charter, of anthorising complaining Members to withhecld tariff benefits from offending Members. The following points should be noted with regard to this function: (a) A Member of the Organizaition may be admitted to membership in the Committee wher the Member has completed. tariff negetiations comparable in scope or effect" to the negotiations already completed by the original members of the Committee. Thus, what is achieved by way tariff' action in the General Agreement on Tariffs and Trade become the standard to which Members of the Orgnization will be expected to conform in order to obtain membership on the Interim Tariff Committee. In applying this standard the Committee should have regard to the provisions of the Chartar as a whele. LONDON E/PC/T/C.II/58 Page 16 (b) Since it is Agreed that the original members of the Interim Tariff Committee will hay taken adequate steps to- ward fulfilment of the tariff obligations of the Charter in respect of negotiations among themselves (See Article III of the draft General Agreement on Tariffs and Trade), the Committee may not authorize one original member O; tl Committe to with- hold tariff concessions fromn another original member of the Committee. This would be Without prejudice, of course, to any decisions reached, under the auspices od the Organization, regarding a seond series of tariff negotiations among the members of the Committee. (c) Members of the Interim Tariff Committee must, in nego- tiations with Members of' the Organizatrion which are not members of the Committee be prepared to consider concessions on products of interest to the latter which were not dealt with in the original negotiations. Befusal to negotiate on such products might warrant a legitimate complaint. Accordingly the Committee could in such cases authorise a Member of the Organization which is not a member the Committee to with- hold tariff benefits from a member of the Committee. However, the extent to which a member of the Organization which is not a member of the Committee. might withhold tariff benefits from a member of the Committee would be limited only to tariff concessions which the former had already made pursuant to Article 18 and general tariff penalties could not be applied. It should be pointed out that the Organization, us distinct from the Committee could authorise an original member of the Committee to withhold benefits from another original member of the Committee under certain other provisions of the Charter. LONDON E/PC/T/C. II/58 Page 17 (d) The authority of the Committee would in all cases be limited to granting permission to a Member of the Organization to withhold tariff benefits from another Member; in no event could the Committee compel a Member to withhold benefits. 2. Procedure for Broadening Membership in Interim Tariff Committee through Additional Tariff Negotiations. Procedures must be developed for assuring, by negotiation, action for the reduction of tariffs a the elimination of preferences by Members of the Organization which are not parties to the General Agreement on Tariffs and Trade and hence would not be original members on the Interim Tariff Committee. The following alternative procedures are suggested for consideration: (a) The original members of the Interim Tariff Committee would negotiate separate bilateral agreements with Members of the Organization which are not members of the Committee, and the latter would negotiate such agreements between themselves. The Committee .would judge as to when a particular country had completed enough such agreements to entitle it to membership in the Committee. (b) A Member of the Oraganization which is not an original member of the Committee might Offer to negotiate with the Committee a multilateral schedule of concessions similar in scope and legal application to the schedules appénded to the General Agreement on Tariff s and Trade concluded among the original members of the Interim Tariff Committee; and the original members of the Committee would agree to amend the multilateral schedules appended to the Genera Agreement on Tariffs and Trade to the extent necessary to assure appropriate LONDON E/PC/T/C . II/58 Page 18 concessions on products of which the country not a member of the Committee was principal supplier. Whatever prooedure is adopted, due weight should be given in the negotiating process to concessions already made as a result of prior negotions. LONDON E/PC/T/C. II/58 Page 19 TENTATIVE AND PARTIAL DRAFT OUTLINE GENERAL AGREEMENT ON TARIFFS AND TRADE The governments in respert of which this Agreement is signed; Having been named by the Economic and Social Council of the United Nations to prepare, for the consideration of the United Nations Conference on Trade and Employment, a draft Charter for an international Trade Organization of the United. Nations; Having, as the Preparatory Committee for the Conference, recommended to the Conference the provisions of such a Charter, the text of which is set forth in the Report of the Preparatory Committee dated , 1947; and Being desirous of furthering the objectives of the Conference by providing an example of concrete achievement capable of general- ization to all countries on equitable terms; Have, through their respective Plenipotentiaries, agreed as follows: Article I 1. During the life of the Agreement each signatory Government shall make effective in respect of each other signatory government the provisions described below of the draft Charter for an Inter- national Trade Organization of the United Nations recommended in the report of the Proparatory Committee dated _ 1947: (a) Article 8, relating to .most-favoured-nation treatment; (b) Article 9, relating to national treatment in respect of the internal taxation and regulation of trade; (c) Articles. 19 through 22, inclusive, relating to quan- titative restrictions on trade; (d) Articles 23 and 24, relating to exchange restrictions; LONDON E/PC/T/C.II,/58 Page 20 (e) Article 26, relating to the application of the most- favoured-nation principle to trading by the state; (f) article 29, relating to emergency action on imports or particular products; (g) Article 30 (to the. extent that nullification or impairment of and object of this Agreement may be involved). 2. Functions entrusted to the proposed International Trade Organization under any of the provisions of the draft Charter incorporated in this Agreement by virtue of paragraph 1 of this Article shall, pending the establishment of the Organization, be carried out by a provisional international agency consisting of delegates appointed by the signatory governments. Article Il with regard to Articles 18, 27 and 28 of the draft Charter, which relate to negotiations for (a) the reduction of tariffs and the elimination of tariff preferences and (b) parallel action by state-trading enterprises, the signatory goveraments declare that they have, by virtue of Article III of this Agreement, taken this step towards fulfilment of the obligations of these Articles in respect of themselves and that they stand ready- in conformity with the spirit of these Articles, to undertake similar negotiations with such other governments as may desire to become members' of the proposed International Trads Organizàtion. Article III Each signatory government shall accord to the commerce of the customs territories of the other signatory governments the treatment provided for in the appropriate Schedule annexed to this Agreement and made an integral part thereof. LONDON E/PC/T/C.II/58 Page 21 (This Article would set North the general exceptions provide for in Artiacle 32 of the draft Charter) Article V (This Article would reproduce the provisions of article 33 of the draft Charter ralating to territorial application) (This Articel would permit revision of the Agreement, by agreement amoong the if necessry or desirable in order to take account of change's in the Charter effected by the International Conference, on Trade and Employment) Article VII (This Article would provide for the entry into force of this Agreement, its duration, and its termination. The Agreement would remain initially in force for three years. If not terminatad at the end of the three-year, pariod which would require six months' prior notice) . it would remain in force thereafter, subject to termination on six .months' notice). NOTE: In addition, there ould be a number of purely technical or legal provisions.

GATT Library

bv601xk8609

Committee II. Sub-Committee on procedures. : 4th Meeting held on 2 November 1946 at 10.30 p.m

United Nations Economic and Social Council, November 4, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

04/11/1946

official documents

E/PC/T/C.II/41 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/bv601xk8609

bv601xk8609_90210250.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/41 4 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUB-COMMITTEE ON PROCEDURES 4th Meeting held on 2 November 1946 at 10.30 p.m. Chairman: Mr. SPEEKENBRINK (Netherlands) 1. Introduction The CHAIRMAN welcomed the presence of Dr. COOMBS, Chairman of Committee II. 2. Election of Rapporteur The CHAIRMAN proposed that the Sub-Committee elect a rapporteur, in accordance with the views expressed at the previous meeting. Mr. HAWKINS (United States) proposed Mr. Leddy (United States). The Sub-Committee elected Mr. LEDDY (United States) as Rapporteur, it being understood that he would be considered an expert official of the Sub-Committee, and that Mr. Hawkins (United States) would have no responsibility for the duties undertaken by Mr. Leddy in his capacity as Rapporteur. 3. Continuation of Discussion of Parargraph 2 of Article 8 of the Drat Charter. Exceptions to the Application of Most-Favoured- Nation Treatment. The CHAIRMAN reminded the Sub-Committee that they had left open the last sentence of paragraph 1 of Article 8, until the Rapporteur had prepared his report. He proposed the continuation of the discussion of paragraph 2, beginning with the first sentence as far as the date "1 July 1939", which had caused considerable comment at the previous meeting. LONDON E/PC/T/C.II/41 Page 2 He suggestied that the Sub-Committee should keep in view page 9 and 10 of the Summary circulated by the Secretariat on 27 October 1946. Mr. SHACKLE (United Kingdom) recalled that he had already suggested that the date laid down in regard to the consideration of preferences, should be changed to the date of the Tariff Agreement to be concluded next year. It was unrealistic to choose a date as far back as 1 July 1939. The Meeting should consider preferences at present in force, and the effect which the coming Agreement would have on such preferences. Mr. LECUYER (France) pointed out that he had already explained why he preferred 1 July 1939; but he had no strong objection to other dates being used in the case of the countries. Mr. VDELA (Chile) secazded the United Kingidom Delegatels proposal, as it was in accordanace with his own previous proposal. Mr. ADARKAR (India) strongly supported the proposal that the date of the agreement should be substituted for 1 July 1939. Mr. HAWKINS (United States) thought that, if the date of Agreement was substituted for 1 July 1939, it would mean that any preference increased after 1 July 1939 would be bound to be used as a basis of negotiation for theé agreements to be made next spring. He suggested that preferences increase or established since 1939 were in the nature of wartime measures, and would overweihgt the preference side of the balance in the coming negotiations. He did not however wish to treat the point as if it were an issue of major importance. Mr. McKINNON (Canada) enquirer if the Sub-Committee was discussing document (E/PC/T/C.II/10), i.e. the amendment of paragraph 2 proposed by the United Kingdom Delegation. He was prepared to discuss the propsed amendment: but he could not commit himself to any date at all, until he had consulted his Government. LONDON E/PC/T/C.II/41 Page 3 Dr. COOMBS (Australia) pointed out that the Sub-Committee ought to know exactly what new preferences had been established. In australia there had been no important change since 1939; but in the case of Canada preference margins had been greatly increased. The Sub-Committe should come to an understanding that the countries concerned should adopt dates, viz. either 1 July 1939, or the date of agrement, or an intermediate date, to serve as a fair basis for negotiation. Mr. McKINNON (Canada) agreed that the facts should be made known. Canada's two most important trade agreements were with the United Kingdom the United States. During the war Canada had suspended entirely, or greatly reduced, preference rates for the United Kingdom. Canada had further suspended the operation of most-favoured-nation rates during the war. In neither case had these changes been rescinded. In view of the highly artificial position of Canadian tariffs in the last seven years, he refused to commit his country to any date. But he was prepared, after consultation with his Government, to say that Canada would probably wish to fix a date for the negotiation of agree- ments in regard to preferences at some period intermediate between the extrerne dates of 1 July 1939 and the date of agreement. Further he pointed out that the phrase in the United Kingdom amendment "legislation in force" would raise very great legal difficulties, as some preferences had been established by Parliament and some by the Executive. The CHAIRMAN pointed out that there, were clearly two points of view. The French Delegate wished to retain the date 1 July 1939, since agreements made as a result of the war should not count. For example, the Nethrlands and Belgium had removed all customs duties at the present moment, for the sake of furthering reconstruction, but would not wish to negotiate a Tariff agreement on that basis. Secondly, the Delegates of the United Kingdom and Canada preferred the date of the Triff Agreement. He therefore proposed that there should be a tariff truce until the conference on tariff agreements met and that LONDON E/PC/T/C.II/41 Page 4. the date by which the subject of preferences should be negotiated should be laid down as 1 July 1939 or any date up to the date of agreement, provided that no important preference changes had been made during the war contrary to the principles contained in the Draft Charter. Mr. ADARKAR (India) pointed out that not all preferences established since 1939 were the resuIt of abnormal conditions due to the war. The arrangement India had made with Burma prior to the Japanese invasion was not due to the war but the rsult of Burma having previously form- ed part of India until 1937. Mr. SHACKLE (United Kinigdom) suggested that Dr. COOMBS' proposal could best be put into effect by adding the allowing clause at the end of sub-pararaph (b) of his amendmennt (E/FC/T/C.II/10) as follows: "or at any other date, which may be agreed between particular negotiat- ing countries". The CHAIRMAN stated that the customs union arrangement between the Netherlands and Belgium during the war should also be validated; that was why he had proposed the wording "not contrary to the principles contained in the Draft Charter". Dr. ALAMILLA (Cuba) stated that there were three ways of making exceptions to preferences, (a) to restrict preferences to be considered to those in force before 1 July 1939 (b) to restrict preferences to be considered to those in force on 1 July 1946 provided such preferences had not been increased above the level of 1 July 1939 and (c) which he suggested as the most efficacious, to leave the date open until the agreement of tariff rates, and then not to take into account those which could be considered to have been established as a result of abnormal conditions due to the war, but to make a list of those which should be validated. Mr. LECUYER (France) suggested that the United Kingdom draft might be accepted. That would eliminate the necessity of dealing with dates, which could be left as matter for negotiations. LONDON E/PC/T/C.II/41 Page 5 Mr. SHACKLE (United Kingdom) explained that he was interested in having tariff schedules appended to the Charter. The result would be that modifications of preference would be safeguard by agreement between the negotiating countries. There might have to be modification of the suggested paragraph to indicate that additional schedules were to be appended. It was a matter of drafting. Mr. HAWKINS ( United States) agreed with the Canadian Delegate that any date chosen for inclusion in the Article should be fixed on the basis of facts. He had definite objection to the use of the effective date of the Charter, because it would permit increases in preferences for purposes of negotiation, i.e. "padding". In the case of using the date of Agreement the negotiators might be subject to public criticism. He suggested that the Sub-Committee was seeking flexibility, and in so doing was possibly approaching a solution to the problem. He had attempted to make a draft on the lines of the United Kingdom suggestion, but had approached the problem from a different point of view. He would prefer to retain the late of 1 July 1939 in the sentence, but to add "'due account being taken by the countries concerned of special conditions arising out of exceptional wartime circumstances." (The wording was not definitive.) Difficulties would occur with any date used; but the matter was subject to agreement. The use of the United Kingdom formula plus a date would leave: consideration of the bases of preferences to negotiation. Mr. VIDELA (Chile) reminded the Sub-Committee that the Chilean proposal had still to be considered . Chile had agreements involving :preferences with Peru (1941) and France (1946). LONDON E/PC/T/C.II/41 Page 6 Mr. ALAMILLA (Cuba) stated that his rernarks took particular account of the, problem mentioned by the Chilean Delegate. That problem would be solved, if the effective date of the Charter were chosen. Mr. McKINNON (Canada) asked the meaning of the words "are limited`' at the end of the first paragraph of the United Kingdom Delegation' s alternative draft. Mr. SHACKLE (United Kingdom) was prepared to accept the wording sugetssted by Mr. HAWKINS with the possible substitution of the words "due account beinig taken by the negotiating countries of special situations that have arisen since that date" for the words "due account being taken by the countries concerned of special conditions arising out of exceptional wartime circumstances. " Replying to the Canadian Delegate's inquiry, he said that his Delegation's draft implied a complete invitation of permited preferences from every point of view. Mr. McKINNON (Cunada) said that the words "are limited" might be interpreted to mean "shall not exceed". Since they referred to bound or fixed margins of preference, he would have to reserve his Government's position on paragraph (a). Mr. SHACKLE (United Kingdom) said he would not be adverse to changing the words "are limited" to "shall not exceed" or "do not exceed", and to the removal of the word "to" before the words "the margins of preference" in both paragraphs (a) and (b). In answer to a question by the Delegate for India, Mr. SHACKLE (United Kingdom) said that the question of date did not arise in paragraph (a). Mr. ADARKAR (India) indiated that the paragraph would be acceptable to India. Mr. HAWKINS (United States) reiterated that what the Sub-Committee was seeking was flexibility. The difficulties of LONDON E/PC/T/C.II/41 Page 7 using any date were insuperable. He suggested leaving out the date in the United Kingdom formula, and using instead - his wording was again not definitive - the following phrase "date to be that which may be agreed upon between the particular negotiating countries concerned." That seemed to avoid the difficulties which would arise from the use of a specific date. He suggested the following alternative draft of paragraph (b) of the United Kingdom proposal: (b) in the case of all other items, the margins of preference in force in the territories concerned on the date agreed by both negotiating countries." He suggested that a formula might be worked out by the Rapporteur after examination of aIl views expressed. Mr. ALAMILLA (Cuba) suggested the deletion of certain clauses from paragraph 2 of the United States Draft article and the insertion of the words "reduction of" after the words "to processes of". The paragraph would then read: "2. The provisions of paragraph 1 of this article shall not be construed to require the elimination of any preference in the rate of ordinary airport customs duty which falls within the descriptions set forth in (a), (b) or (c), below, and shall be subject to processes of reduction or elimination pursuant to the provisions of Article 18." Dr. COOMBS (Australia) suggested that the word "and" before "shall be subject" should be changed to "but". Mr. VIDELA (Chile) agreed with the suggestion of the Cuban Delegate. Mr. ARDARKAR (India) thought it would be better not to combine consideration of a redraft of parargraph 2 of the United States Draft Article with the question of including a date in the paragraph. LONDON E/PC/T/C.II/41 Page 8 Mr. LECUYER (France) inquired whether a common date would be appliable to all exceptions, or whether a new date would be discussed in connection with each exception. Mr. VIDELA (Chile) suggested that the use of the words "in force" in the Chilean proposal covered the date. Mr. HAWKINS (United States) offered the following clause in substitutions for the words "which does not exceed the preference in force in any member country on 1 July 1939": "which does not exceed that preferences in force in any member country an dates to be agreed upon between countries concerned": He hoped that would clarify the paragraph, and save further discussion on a point to which the Sub-Committee had devoted so much time. Mr. ALAMILLA (Cuba) agreed to the suggested clause, but reminded the Sub-Committee that he wished the words "reduction or" to fallow "to processes of" in the penultimate line of the paragraph. The words reductionn" and "elimination" appeared in Article 18, and should bath be used in pragraph 2 of Article 8. The CHAIRMAN pointed out that article 18 reads "reduction of tariffs" ana "elimination of references". Mr. ADARKAR (India) was quite prepared to accept the formula stated` by Mr. Hawkins (United States), but reserved his position on the eventual form of paragraph 2. If a date was mentioned, the advantages of flexibility under the United Kingdom draft would be lost. That draft officer greater advantages to India. The CHAIRMAN suggested that the Rapporteur be asked to prepare a draft paragraph, based upon the-Sub-Committee's discussion, for consideration at the next meeting. LONDON E/PC/T/C.II/41 Paze 9 Mr. McKINNON (Canada) suggested that, since the Rapporteur would not be in a position to consideration of the subject prior to the next meeting; the Secretariat should be requested to make available to the varicus delegations by 11 a.m. on Monday, 4 November 1946, a draft of the paragraph on the basis of the Sub-Committee's discussion. It was agreed that Mr. Hawkins (United States) and Mr. Alamilla (Cuba) should prepare the draft for the Secretariat. 4. Next Meeting of the Sub-Committee Monday, 4 November 1946, at 5 p.m. The meeting, rose at 12.55 p.m.

GATT Library

ms549vh1474

Committee II. Sub-Committee on procedures. : First Meeting Held on Menday, 28 October 1946 at 11 a.m

United Nations Economic and Social Council, October 29, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

29/10/1946

official documents

E/PC/T/C.II/25 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/ms549vh1474

ms549vh1474_90210233.xml

GATT_156

United Nations Nation Unies RESTRICTED LONDON ECONOMIC CONSEIL AND ECONOMIQUE E/PC/T/C.II/25 29 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUB-COMMITTEE ON PROCEDURES First Meeting Held on Menday, 28 October 1946 at 11 a.m. Chairman: DR. CCOMBS (Australia) Later: Mr. SPEEMTENPRINK (Netherlands) 1. Introductory remarks by the Chairman The CHAIRMAN stated that the work of the Sub-Committee at the initial meeting would be devoted to questions of procedure and to the study of the most-favoured-nation clasuse; that tariffs and preferences would be discussed by the Sub-Committee later, following on the general consideration of those subjects by Committee II, when that was complete. He referred to the summary of views expressed by various delegations in topics of interest to the Sub-Committee, and suggested that additional material might be included in the summary as a result of the Sub-Committee's discussions, 2. Election of Chairman The CHAIRMAN stated that the work of the Sub-Committee in its relation to Committee II would be facilitated, if there could be close liaison between the respective Chairman, and suggested the election of Mr. SPEEKENERINK (Netherlands), Vice-Chairman of Committee II, as Chairman of the Sub-Committee on Procedures. The Sub-Committee elected Mr. SPEEKENBRINK as its Chairman unanimoulsy. LONDON E/PC/T/C.II/25 3. Discussion of Arst Secters of Parameters 1, Article There followed a discussion of the best method of procedure for the Sub-Commitee's work. Mr. HAWKINS (United States) inquired whetehr it was the intention of the Sub-Committee to use Article 8 of the Charter suggested by the American delegation as the basis for discussion and to proceed by examining amendments to the American draft. The CHAIRMAN indicated that he considered such procedure preferable but that additional suggestions be welcomed. Mr. LEOUYER (France) asked whether the United States proposal was substentially different from the most-favoured-nation clause as evolved by the League of Nations. He asked also whether the preference to governmental contracts for public works should not be considered separately The CHAIRMAN proposed, on the basis of the general discussion, that the ensuing discussion be based upon paragraph 1 of Article 8 of the United States draft proposal, excluding the last sentence, and that other subjects, such as quantitative restrictions, be considered at subsequent meetings. He pointed out that it was the duty of the Sub-Committee first to discuss the general principle of non-discriminatory treatment and later to consider exceptions, which were still under discussion by Committee II. Mr. HAWKINS (United States) explained that the United States draft text of the most-favoured-rnation clause was based upon the standard text of the League of Nations clause, with certain minor variations. As an example of the variation, he pointed out that the phrase "with respect to all matters relating to internal taxation or regulation referred to in Article 9", which appeared in the United States draft, did not appear in the League of Nations clause. The United States draft also included a reference to "the international transfer of payments", which did not appear in the League of Nations clause. LONDON E/PC/T/C.II/25 Page 3 Mr. McM (Canada) asked whether the draft most-favoured-nation clause submitted by pr had been considered. The Canadian delegation preferred to use the United States as a basis for consideration. The Sub-Committee agreed that paragraph 1 of Article 8 of the United States draft proposal, excluding the last sentence, should be recommended to Committee II for acceptance. 4. Discussion of Second Sentence of Paragraph 1, Article 8 Regarding Public Works The CHAIRMAN referred to the extensive discussions which had taken place with respect to the extension of the most-favoured-nation clause to public works. The sub-committee should decide what change should be made in the proposal by the United States delegation. Mr. McKIMMON (Canada) pointed out that the Canadian delegation had no objection to the reference of "governmental contracts for public works" in the setence under discussion, or to the clause "including laws and regulations governing the procurement by agencies of supplies . for public use other than by or for the military establishment", as it appeared in Article 9. It was his suggestion, however, that similar wording should be used in both Articles. He suggested the following. substitiute for the second sentence of paragraph 1, Article 8 of the United States draft:- "The principle underlying this paragraph shall also extend to purchases by governmental agencies other than for military establishments." He added that perhaps "purchase by governments" would suffice? He suggested the need for defining the phrase "governmental agencies", and thought that the phrase "fos administrative use" might also be added. He rested his proposed sentence as follows, reminding the Sub-Committee that it was not his intention to submit precise wording: "The principle underlying this paragraph shall also extend to laws and regulations covering purchases by governments or governmental agencies other than for the military establishments." LONDON E/PC/T/C.II/25 Page 4 Mr. SHACKLE (United Kingdom) agreed in general wtih Mr. McKINNON's remarks. He referred to the ambiguity of the term "public works" and suggested that anotherterm, possibly "purchases by governments", be used to indicate its application to goods only and not to services. As a second point, he referred to the necessity for defining "governmental", and pointed out that it might be construed to refer to a contral government, to state or provincial governments. or even to local or municipal governments. It was difficult to insure observance of regulations by legal governments in practice, and he felt that it would be wise to confire discussions to a central government. He added that in British Commemealth countries preferences were extended to supplied from Commonwealth countries, and these should not be wiped out by a general provision. Limits should be defined. He said that what he had in mind was governmental pruchases and not state trading. The line of distinction be whether the goods were for resale. If not for resale, they would be covered in Articles and 9; if for resale, in the Articles referring to state trading. The CHAIRMAN suggested the following wording to meet the points made by the United Kingdom delegate: "The principle underlying this paragraph should also extend to laws governing purchase of goods not for resale by central governments other than for the military establishment." Mr. ALAHILLA (Cuba) stated that if consideration was given to the rewording of Article 8, to include the clause from Article 9, he would wish to coment, Cuba law provided that when national and foreign products are offered in the Cuban market at the same price and under comparable conditions, Cuban products must be preferred. If exceptions were made in purchases for military establishments, an exception should be made here to cover his point. The CHAIRMAN stated that this kind of exception could be discussed later. LONDON /T/C.II/25 Page 5. Mr. VIDA IChile) wished to discuss tied loans. Tied loans had an important bearing on the question of most-favoured-nation treatment. The CHAIRMAN suggested that the Sub-Committee should (a) frame a new sentence to the place of the last sentences of Article 8. paragraph 1, (b) discuss any extention to the Provisions made in the newly framed sentences, and (c) add any necessary exceptions. Mr. ADARKAR (India) welcomed the Chairman's suggestion. He agreed that the word "governmental" should apply only to central governments, but suggested it should also be limited to state-owned or state-controlled enterprise, and should government sponsored companies. Mr. . '">.çur;r^ (;:-'n .8U-! :ir.;tlU suggested that the word "regulations" should not be used; sequently the question of relsale was boun up with the problem of excluding state monopolies. Governments when making purchase were often not in the position of knowing whether they would eventually resall those purchases. A cross reference to the provisions of Articles 26 and 27 would suffice. Mr. HAWKINS (United States) remarked that most-favoured-natins treatment should also apply to the awarding of government contracts. But it could not be applied to governmetns purchases with the same precision which was possible in the case fiscal measures. That was why the phrase "fair and equitable treatment" had been used in the Draft Charter. He agreed with the new text proposed by the Canadian delegate; but suggested that additional provision should be made for fair and equitable treatment in awarding governmental contracts. Mr. VIDHELA (Chile) agreed with the United States delegate. Mr. McKINNON (Canada) suggested that the new text should be extended by the following clause:: "and also in the respect of awarding contracts for public works, when fari and equitable treatment shall be awarded to members of the ITO" LONDON E/PC/T/C.II/25 Page 6 Mr. ADARKAR (India) remarked that contracts for public works should not be understood to include contracts for defence works. Mr. McKINNON (Canada) agreed with the addition of the phrase "not for resale"; otherwise it would be necessary to make a cross reference to Articles 26 and 27. Mr. HAWKINS (United States) thought that the phrase "not for resale" would be in accrd with the idea of fair and equitable treatment; but why distinguish between goods for resale and goods not for resale? Mr. SHACKLE (United Kingdom) maintained that there was a case for making a distinction, because there would be a rather different set of rules for tariff protection and preference in cases of goods for re-sale and in cases of goods not for re-sale. Mr. VIDELA (Chile) recalled the Chinese delegate's proposition at the meeting cf the Comiittee to delete the last sentence of Article 8 paragraph 1. He suggested that this subjet might best be dealt with in articles 26 and 27. Mr. HiAWKIN (Unitue States) said that the word regulationss" had bee purposely used in the Draft Charter taoprevent discrimination; and to omit the -ord regulationss" at that point would imply disregard of the la referred to in article 8. Many countries, including the United States of ;Aerica, had laws favouring local purchases, which would be affected by the proposal. Dr. wALAMILLA Cuba) agreed that article 8 should deal with the application by one nation of most-favoured-nation treatment to all foreig: rembers of the International Trade Organization. He suggested that it should be stipulated that most-favoured-nation treatment should azppy to the awarding of contracts, to purchases by governnmens and te lawB and regulations governîingsuch purchases. The meeting açgree to instruct the Secretariae, in consultation with the members concerned, teomake a new draft of the last sentence of LONDON E/PC/T/C.II/25 Page 7 paragraph 1, article 8 of the Draft Charter, taking into consideration the amendments proposed during the course of the above discussions, for consideration at the next meeting of the Sub-Committee. 4. Date of Next Meeting Wednesday 30 October 1946 at 10.30 a.m. The meeting rose at 12.50 p.m.

GATT Library

df619nm4853

Committee II. Sub-Committee on procedures. : Third Meeting Held on Friday 1 November 1946 at 8 p.m

United Nations Economic and Social Council, November 4, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

04/11/1946

official documents

E/PC/T/C.II/W.12 and E/PC/T/C. II/W/2-31

https://exhibits.stanford.edu/gatt/catalog/df619nm4853

df619nm4853_90210291.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON E/PC/T/C.II/W.12 AND ECONOMIQUE 4 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUB-COMMITTEE ON PROCEDURES Third Meeting Held on Friday 1 November 1946 at 8 p.m. Chairman: Mr. SPEEKENBRINK (Netherlands) 1. Introductory Remarks by the Chairman The CHAIRMAN said that the target date for the conclusion of the work of Committee II had been set for 15 November, and that of the Sub-Committee on Procedures for 10 November. The work of the Sub-Committee would therefore have to be accelerated. 2. Discussion of Most-Favoured-Nation Treatment The CHAIRMAN drew the Committee's attention to two documents prepared by the Secretariat. The first of these was a comparison between paragraph 1 of Article 8 of the Charter and the League of Nations clause on general most-favoured-nation treatment. The second document was a paper on multilateral clauses, which was adopted. by the league of Nations, and. which denied the benefits of open-end conventions to countries which did not assume the obligations. Mr. HAWKINS (United States) felt that the difference between paragraph 1 of Article 8 of the Charter and the League of Nations clause was so small, that it became solely a question of style of drafting. Mr. SHACKLE (United Kingdom) considered the first part of paragraph 1 of Article 8 of the Charter more precise than the LONDON E/PC/T/C.II/W.12 Page 2 League of Nations clause. It also dealt with taxes on exchange, and he therefore proposed its adoption, subject to amendments.' The Committee agreed to use the United States drafting. The CHAIRMAN hoped that the delegates had had time to study the document on government contracts circulated by the Secretariat. It proposed the following re-draft of the last sentence of paragraph 1 of Article 8: "the principle underlying this paragraph" (shall apply to purchases from. other member countries of goods for the use of Central Governments, and) "shall extend, to the awarding by such Governments to nationals of other member countries on contracts for public works in respect of which each member shall accord fair and equitable treatment to the commerce cf the other members". Mr. SHACKLE tentatively proposed the inclusion of a new article to deal with the subject matter covered in the last sentence of paragraph of Article 8 of the Suggested Charter and the question cf governmental procurement of supplies for public use which had been one of the subjects dealt with in paragraph 1, Article 9. He felt that these matters should. not be dealt with in twc separate articles. He therefore proposed. the insertion of a new article, consisting of two paragraphs, on the following lines: "1. The principles underlying Articles 8 and 9 shall alse extend to the purchases by members, and the awarding by them. of contracts for the supply, of goods for the use of their contral governments and. the organs and enterprises of their Central Governments which are not .intended for resale either in their original state or after processing." The provisions of paragraph 1 of this Article would. not involve (a) any obligation with references to purchases for military establishment, or LONDON E/PC/T/C.II/W.12 Page 3 (b) preclude the grant by members of preferences of a reasonable amount to domestic supply, purchases by Central Governments for their own use, and in cases of members within one of the groups of territories referred to in Article a (2). His suggested Article made no reference to contracts for public works. The awarding of contracts for public works involved: (i) the question of services; (ii) the Question of the supplying of goods. He thought that the Charter should be confined to the treatment of goods, and that the question of services should not be entered into at all. The treatment of goods was covered. His proposed paragraph was confined to Central Governments only, in order to ensure equitable treatment. Otherwise some countries would have greater obligations than others. His suggested amendment dealt with non-commercial purchases. The question of commercial purchases was dealt with under paragraphs 26, 27 and 28 of the Charter. Mr. VIDELA (Chile) said that he was not prepared to discuss the amendment proposed by the United Kingdom. The text of the amendment had only just been distributed, and he had not had time to study it. In order to give delegates time to study the United Kingdom proposal, it was agreed to postpone discussion of the proposal until a later date. Mr.. ADARKAR (India) suggested that the most-favoured-nation clause should. be extended to provide that each member nation would accord flair and. equitable, treatment within its own borders to business men of other memberr nations engaged in commercial activities. Mr. HAWKLNS (United. States) had no objection to the granting of fair and equitable treatment to business men of other member nations; but he questioned whether such a provision. should be included in the LONDON E/PC/T/C.II/W 12 Page 4 Charter. Inclusion of such a provision might lead to discussion of many other complicated establishment matters. The Charter should. be limited in the main to treatment accorded to goods. paragraph 5 of Article 50 provided that the Organization night-make recommenda- tions with respect to international agreements concerning establishment. Mr. LECUYER (France) and Mr. GUERRA (Cuba) agreed that it would not be wise to extend the provisions of the Charter to the complex field of establishment. It was generally agreed that establishment should not be covered by the mest-favoured-nation clause. Mr. ADARKAR (India) said that he would accept the view of the Committee. In response to a question asked by Mr. PARANAGUA (Brazil), Mr. HAWKINS (United States) said that coastal trade was not covered. by Article 9. Provisions of that Article were restricted to treatment of goods, and did not relate to treatment of shipping facilities. Nothing in the Article would obligate a member to allow other members to participate in its coastal trade. Mr. GUERRA (Cuba) said that Cuba wculd present an amendment to Article 8 at the next meeting. The amendment could. be inserted. at the end of the Article, and did not require discussion at the present meeting. Mr. VIDELA (Chile) reminded. the Sub-Committee that Chile had proposed. an amendment to paragraph. 2 of Article 8 which would. add. an exception, known as the "bordering countries clause" to the exceptions already listed in that paragraph. Preferences in force between bordering countries should not be treated on a different basis front the preferences covered by sub- paragraphs (a) and. (b) of paragraph 2, Article 8. He spoke of the LONDON E/PC/T/C.II /W.12 Page 5 history of these bordering countries' preferences, and pointed. out that the "bordering countries clause" had been inserted in various agreements stil' in force. Chile would. be agreeable, if the Charter made no exceptions whatsoever for existing preferential arrangements. But, if any pre erences were to be excepted, tho preferences ef bordering countries should be excepted also. Mr. HAWKINS (United. States) pointed out that inclusion of an exception for preferences of bordering countries in paragraph 2 of Article 8 would. have only a temporary effect. It was envisaged that the preferences excepted by paragraph 2 would be eliminated. by negotiations. Such excepted preferences were of long standing; and it was felt that the nations concerned should receive some benefit in return for giving them up. He wondered. if the point made by the Delegate for Chile would. be not by the inclusion of a now sub- paragraph (c) (after sub-paragraph (b) of paragraph 2), excepting "other long-established. preferences new in force affecting in important degree the economies of the countries concerned". At a later date a drafting committee could. list the specific preferences falling within that general category. Mr. ADARKAR (India) said that the United Kingdom's revision of paragraph 2 recognized only existing preferences, based mainly y on political. considerations, and ignored possible future preferences based on economic factors. The industrialization of small countries bordering on India might be impossible, if the products of such countries did not receive preferential treatment in the Indian market. Such regional preferences would likewise be excluded. under .the wording of the amendment which the United States Delegate had. suggested in response to the proposal cf the Delegate for Chile. Where it would. not be convenient to make such regional LONDON E/PC/T/C.II/W.12 Page 6 preferences open to other countries, it should not be necessary to do so. The CHAIRMAN felt that the Committee should andeavour for the present to consider general categories of exceptions. Mr. VIDELA (Chile) said that a special Sub-Committee was considering the question of excepting quota-based preferences. Pending receipt of that Sub-Committee's report, adequate considera- tion of the extension of exceptions for preferences. would not be possible. The exception proposed by Chile should be treated. on the same basis as the exceptions already listed, regardless of whether the exceptions listed under paragraph 2 were temporary or permanent in their effect. Chile (he repeated) would be agreeable, if the Charter provided for the automatic elimination of all preferences. The CHAIRMAN suggested that the Sub-Committee should try to work out formulas for general classes of exceptions, but in such a way as to take into account the specific proposals for exceptions which had. been made by various countries. After the forthcoming tariff negotiations, which would reduce or eliminate certain preferences, there could be discussion of possible exceptions for such preferences as remained. Mr. HAWKINS (United States) agreed with the CHAIRMAN's suggestion that proposed exceptions should be classified. He thought that the Sub-Committee should first consider the temperary exceptions, which would be included in paragraph 2 of Article 8. It could then consider the suggested permanent exceptions, such as: exceptions for regional preferences, for open-end. agreements, and other permanent preferences. The Sub-Committee could subsequently consider other questions such as the dates used in paragraph 2. The CHAIRMAN said that the views of the United States Delegate LONDON E/PC/T/C.II/W.12 Page 7 were the same as his own. Mr. GUERRA (Cuba) thought that the permanent exceptions should. be considered before the temporary exceptions, since the feeling of the Sub-Committee with respect to permanent exceptions might affect Cuba's position in regard to temporary exceptions. Mr. LECUYER (France) noted the close relationship between the proposed permanent exceptions and the general subject of regional agreements. Mr. HAWKINS (United States) said. he had suggested that the discussion of temporary exceptions should come first, because these were dealt with in paragraph 2 of Article 8 Permanent exceptions would logically be considered in connection with Article 33. If temporary exceptions were considered. first, the Delegate for Cuba could reserve his position. Mr. GUERRA (Cuba) said that he would be agreeable to the discussion of temporary and permanent exceptions in the order suggested. by the United States Delegate on the understanding that Cuba could. reserve her position. In response to a question by Mr. VDELA (Chile), Mr. HAWKINS (United States) said that he would be willing to comment further on the Chilean proposal for a "bordering countries clause" at the next meeting. Mr. VIDEIA (Chile) said that he would not be able to commit his Delegation at the meeting on the following day. He would. have to reserve his position. It was agreed to discuss temporary exceptions at the next meeting on 2 Novemaber 1946. The CHAIRMAN suggested that at the next meeting consideration should be given to the appointment of a rapporteur. The meeting rose at 10.55 p.m.

GATT Library

gw413zj5718

Committee II. Sub-Committee on State Trading. Report of Sub-Committee on State Trading to Committee II

United Nations Economic and Social Council, November 21, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

21/11/1946

official documents

E/PC/T/C.II/62 and E/PC/T/C. II/58-65/ADD. 1

https://exhibits.stanford.edu/gatt/catalog/gw413zj5718

gw413zj5718_90210282.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL LONDON E/PC/T/C.II/62 AND ECONOMIQUE 21 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUB-COMMITTEE ON STATE TRADING REPORT OF SUB-COMMITTEE ON STATE TRADING TO COMMITTEE II PART I The Sub-Committee consisted of Delegates for China, Czechoslovakia, New Zealand, the United Kingdom and the United States. It met six times under the Chairmanship of Mr. SH ACKLE (United Kingdom), and Mr. JOHNSEN (New Zealand). As Rapporteurs functioned Mr. ARMSTRONG (United States), and later, Mr. YOUNG (United Kingdom). PART II Non-discriminatory Administration of State Trading Enterprises. The provisions of article 26 of the Draft Chartr were, on the whole deemed acceptable to the Sub-Committee on State Trading, subject to the .modifications indicated below. 1. It was considered that this Article - in conformity with certain others in that Charter - should be modified so as to refer to goods only. Hence the words "or services" were deleted in the first paragraph. 2. In paragraph 1 of Article 26 the words "distribute or produce" in the first sentence have been placed in square brackets for the reason that certain Delegations consider that it should be possible for a Member government to confer exclusive or special privileges upon certain types of enterprise, e.g., for carrying on certain types of manufacture, without at the samse time exercising effective control over the trading operations of such enterprise. In order to make their point of view clear these LONDON E/PC/T/22 page 2 Delegations wish to add in square brackets "and exercises effective control over the trading operations of such enterprise,". Other Delegations, however, consider that in such circumstances it would be prepare that the government confering the exclusive or special privileges should assume the responsibility of exercising effective control over operations effecting, the external trade of such enterprise. 3. The illustrative examples of "commercial considerations" by which the State Trading enterprise of a Member State should be guided in ful- filling its obligation of non-discriminatory administration. were supplemented to include differentiall customs treatment . 4. Attention was paid to the nature of the "specific and detailed inforation" which the member maintaining a State enterprise was required to provide by the terms of the Drafit Charter in order to make possible a determination whether the traing operations of the enterprise fulfilled the requirements of paragraph 1. It was argued that such enterprise should not be called, upon to provide more information than a private enterprise trading under the same or similar conditins Accordingly, the last sentence of paragraph 1 was amended so as fall in line with the provisions of Article 30 of that Charter. 5. Since paragraph of Article 8 of the Draft Charter had been amended by deletion of the provision relating to governmental contracts, it was felt necessary to insert a new paragraph in Article 26, dealing with the subject. A distinction was made as between governmental purchases for resale which are covered by this paragraph, and purchases for governmental use and not for resale. The discussion on this latter point was prompted by the consideration that in some countries purchases of industrial and other equipment of various types from abroad might well be effected through the medium of State enterprise and that, while it might be difficult in certain circumstances to observe the rule of "commercial considerations" for such purchases, it was at least necessary LONDON E/PC/T/22 Page 3 to provide that the rule of fair and equitable treatment" should apply but that in applying it full regard should be given to all relevant circumstances. The question was raised whether purchases on the basis of the so-called "tied loans" would be considered to conform with this rule. The view was generally held that a country receiving a loan would be free to take this loan into account as a "commercial consideration" when purchasing its requirements abroad. The position of countries making such "tied loans" was another question. 6. Two changes were made in the definition of a State enterprise in the last paragraph of this Article. For greater clarity, the words "directly or indirectly" were deleted and the words "effective control" were substituted for the term "a substantial measure of control". 7. small Sub-Committee composed of representatives the Netherlands the Union of South Africa, and the United States considered the question of Marketing Boards. It was agreed that when such Boards buy or sell they would come under the provisions relating to State trading. Where they lay down regulations governing private trade their activities wouId be covered by the relevant Articles of the Draft Charter. The report of the Sub-Committee on Marketing Boards was noted by the Sub- Committee on State trading with the understanding than the Marketing Boards was confined to Boards established by express governmental action. Expansion of Trade by State Monopolies of Individual Products. The principle underlying Article 27 of the Draft Charter, being the counterpart of paragraph 1 of Article 18 of that Charter, was considered generally acceptable by the Sub-Committee. The changes which were recommended and which are listed below serve mainly two purposes - first, to provide a more accurate basis for the determination of the "negotiable margins" and secondly, to take into account the special nature of fiscal monopolies. LONDON E/PC/T/22 Page 4 1. The references to Article 28 of the Draft Charter in the first sentence was provisionly removed (See Article 28 below). 2. The term "landed cost, before payment of any duty, of such products purchased by the monopoly from suppliers in Member states" was substituted for the wording of (a) of that Article reading "the price at which such product is offered for sale to the monopoly by foreign suppliers," since it was considered that a mere offer did not provide a firm basis for the calculation of the margin. A similar change was made in (b) in respect of experts. Moreover since in certain countries imports by State monopolies are subject to customs duty, it was considered appropriate to choose a definition which, while taking into account all costs up to the moment of entry, excluded duties and other charges (e.g. internal taxes, transportation and distribution). it was generally agreed., however, that it would be open to countries to negotiate, if they wished, a margin representing the difference between the total cost of a product, (i. e. including internal taxes, costs of distribution and transportation etc. and, where appropriate, profit) and the monopoly's first hand selling price in the home market. 3. It was considered that, when calculating the margin under (b) of Article 27, allowence should be made for a margin of profit; that margin, however, should not be so excessive as to restrict the volume of trade in the product concerned Accordingly, the words "a resonable margin of profit" were added. 4. It was considered appropriate that,- in applying the margin determined by negotiation, landed costs and selling prices might be averaged over a recent period of years, and a sentence to that effect was added. 5. In view of the changes likely to be made by other Sub-Committees in the articles of the Draft Charter (in particular in relation to Quantitative Restrictions and to "escape clauses") it was felt advisable to delete the reference to Chapter C of the Draft Charter and to LONDON E/PC/T/22 Page 5 substitute therefor the words subject to the other provisions of this Charter". The sentence was further notified so as to permit of account being taken, in the case of imports, of rationing of the product to consumers, and in the case of exports, of the quantities available for export. 6. Attention was paid to the special position of monopolies operated for revenue purposes. It was contended that their profits (and consequently the margins between their "landed costs" and selling prives) had to be regarded as a form of internal taxation. A new paragraph (2) was added to cover the case of such monopolies. Expansion of Trade by Complete State Monapolies of Import Trade Although Article 28 of the Draft Charter was not discussed as to substance, it was decided that it should remain provisionally as it appears in the Draft Charter, subject to possible consideration at a later stage. LONDON E/PC/T/22 Page 5 APPENDIX Article 26 - Non-discriminatory Administration of State Trading Enterprise 1. If any Member establishes or maintains a state enterprise, wherever located, which imports, exports, purchases, sells. or distributes any product, or if any Member grants exclusive or special privileges, formally or in effect, to any enterprise to import, export, purchase, sell, [distribute, or produce] any product, [and exercises effective control over the trading operations of such enterprise] the commerce of the other Members shall be accorded treatment no less favourable than that accorded to the commerce of any country otherthan that in which the enterprise is located in respect of the purchase or sale by such enterprises of any product. To this end such enterprise shall, in making its external purchases or sales of any product, be influenced solely by commercial considerations, such as price, quality, market- ability, transportation, and other terms of purchase or sale, and also differential cistoms treatment. The Member maintaining such State enterprises or granting exclusive or special privileges to an enterprise shall make available such infor information as may appropriate in connection with the consultation provided for in Article 30. 2. The foregoing provisions of this Article relate to purchases by State enterprises for re-sale. With respect to purchases by State enterprises for governmental use and not for re-sale, Members agree to accord to the commerce of other Members fair and equitable treatment having full regard to all relevant circumstances. 3. For the purposes of this Article, a State enterprise shall be understood to be aey enterprise over whose operations a Member government exercises effective control. LONDON E/PC/T/22 Page 7 Article 27 - Expansion of Trade by State Monopolies of Individual Products 1. If any Member [other than a Member subject to the provisions of. Article 28] establishes, maintains or authorizes, formally or in effect, a complete or substantially complete monopoly of the importation or exporta- tion of any product, such Member shall, upon the request of any other Member or Members having an interest in trade with that Member in the product concerned, enter into negotiations with such Member or Members, in the manner provided for in respect of tariffs under Article 18, with regard to: (a) in the -case of an import monopoly, the maximum margin by which the price for an imported product charged by the monopoly in the home market my exceed the landed cost, before payment of any duty, of such product purchased by the monopoly from suppliers in Member States, or (b) in the case of an export monopoly, the maximum margin by which the price for a product charged by the monopoly to purchasers in such Member States may exceed the price for such product charged by the monopoly in the home market, after due allowance in either case for internal taxes, transportation, distribution and other expenses incident to purchase, sale or further processing, and a reasonable margin of profit. For the purpose of applying these margins regard may be had, in respect of imports, to average landed costs and selling prices of the monopoly and, in respect of exports, to average prices charged by the monopoly for exports and sales in the home market respectively, over recent periods. Members newly establishing any such monopoly in respect of any product shall not create a margin as defined above greater than that represented by the maximum rate of import or export duty which may have been negotiated in regard to that product pursuant to Article 18. LONDON E/C/T/22 Page 8 With regard to any monopolized product in respect of which a maximum margin has been established pursuant to this Article, the monopoly shall, as far as practicable and subject to the other provisions of this Charter - (i) import from Member countries and offer for sale at prices charged within such maximum margins such quantities of the product as will be sufficient to satisfy the full domestic demand for the imported product, account being taken of any rationing of the product to consumers which may be in force at that time, and (ii) in the case of an export monopoly, offer for sale to purchasers in Member countries at prices charged within such maximum margins quantities of the product to the fullest extent that they can be made available for exportation, 2. In applying the provisions of this Article, due regard shall be had for the fact that some monopolies are established and operated solely for revenue purposes. LONDON E/PC/T/22 Page 9 [Articl 28. Expansion of Trade by Complete State Monopolies of Import Trade. Any Member establishing or maintaining a complete or substantially complete monopoly of its import trade shall promote the expansion of its foreign trade with the other Members in consonance with the purposes of this Charter. To this end such Member shall negotiate with the other Members an arrangement under which, in conjunction with the granting of tariff concessions by such other Members, and in consideration of the other benefits of this Chapter, it shall undertake to import in the aggregate over a period prodcuts of the other Members valued at not less than an amount to be agreed upon. This purchase arrangement shall be subject to periodic adjustment.]

GATT Library

gs225gy6464

Committee II. Subsidies. : Suggestion by the New Zealand Delegation

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/23 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/gs225gy6464

gs225gy6464_90210231.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/23 28 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT SUBSIDIES Suggestion by the New Zealand Delegation The following clause is suggested for addition to Article 25 of the United States Draft Charter: Subsidies Article 25 - addition of paragraph 5 5. Paragraphs 2 and 3 of this Article shall not be construed to prevent members from operating schemes designed to stabilize returns to primary producers over a period of years: provided, that the level at which returns to producers is stabilized over a period of years is not so high in relation to world price levels in the commodity concerned over the same period as to constitute an infringement of the objectives of the charter; and provided, that the members operating such scheme shall, upon the request of any other member having an important interest in the trade in that product, or upon the request of the Organization, consult promptly with the other member or with the Organization regarding the possibility of seeking solution on a multilateral basis of the particular problems involved.

GATT Library

rc442tk3984

Committee II. Suggested addition to Draft Report of the Sub-Committee on procedure (E/PC/T/C.II/57). : Suggested for insertion on page 6 of E/PC/T/C.II/57 immediately before the paragraph headed "Z. Changes recommended in Article 18"

United Nations Economic and Social Council, November 22, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

22/11/1946

official documents

E/PC/T/C.II/57/Add.2 and E/PC/T/C. II/54/REV. 1-58

https://exhibits.stanford.edu/gatt/catalog/rc442tk3984

rc442tk3984_90210274.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/57/Add.2 AND ECONOMIQUE 22 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUGGESTED ADDITION TO DRAFT REPORT OF THE SUB-COMMITTEE ON PROCEDURE (E/PC/T/C. II/57) Suggested for insertion on page 6 of E/PC/T/C.II/57 immediately before the paragraph headed "Z. Changes recommended in Article 18" "The Committee considered the question of the treatment of certain preferential arrangements existing under international agreements but not effected by the normal method of the difference in rates of duty. In these special circumstances they recommend that the matter should be dealt with by a provision in a protocol to the Charter or (pending the conclusion of the Charter) to the general agreement on tariffs and trade to the effect that the Member applying these arrangements shall be entitled to continue them or equivalent measures pending either: 1. an arrangement under Chapter VI, if the Member countries concerned desire that product should be made the subject of such an arrangement, or, 2. some other arrangement regarding the matter between the Member countries affected. The Committee agreed further that only a very limited number of commodities feIl under this heading and that the countries concerned should establish the facts about them so that this recommendation on the subject could be taken into account in the forthcoming negotiations." + This addition was presented in Committee II by Mr. Helmore (United Kingdom). It is understood that it resulted from consultation among the Delegates for Australia, Canada, New Zealand, the United Kingdom and the United States who, by decision of Committee II on 29 October 1946, had been asked to consider the question of the negotiability of preferences in the form of quotas. (Document E/PC/T/C. II/PV/4 page 26).

GATT Library

dw421kd9108

Committee II : Suggested addition to report of the Sub-Committee on quantitative restrictions and exchange control

United Nations Economic and Social Council, November 23, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

23/11/1946

official documents

E/PC/T/C.II/59/Add.1 and E/PC/T/C. II/58-65/ADD. 1

https://exhibits.stanford.edu/gatt/catalog/dw421kd9108

dw421kd9108_90210279.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/59/Add.1 AND ECONOMIQUE 23 November 1946 ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTARNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUGGESTED ADDITION TO REPORT OF THE SUB-COMMITTEE ON QUANTITATIVE RESTRICTIONS AND EXCHANGE CONTROL Suggested for insertion as paragraph 14 in the Report on Article 19 (E/PC/T/C.II/59, page 6): "The Committee considered the question of the treatment of certain existing preferential arrangements which were established under inter- national agreements but not effected by the normal method of a differ- ence in rates of duty. In these special circumstances they recommend that any such arrangements remaining after the negotiations contemplated for April 1947 should be dealt with by a provision in a protocol to the Charter or (pending the conclusion of the Charter) to the General Agreement on Tariffs and Trade to the effect that the member applying these arrangements shall be entitled to continue them or equivalent measures, pending either: (a) an arrengement under Chapter VI, if the member countries concerned desire that the product should be made the subject of such arrangement, or, (b) some other arrangement regarding the matter between the member countries concerned. This document replaces that concerning a suggestion of an addition to the Draft Report of the Sub-Committee on Procedures made in Document E/PC/T/C.II/57/Add. 2 which was presented in Committee Il by Mr. Helmore (United Kingdom); it resulted from consultation among the Delegates for Australia, Canada, New Zealand, the United Kingdom and the United States who, by decision of Committee II on 29 October 1946, had been asked to consider the question of the negotiability of preferences in the form of quotas (see Document E/PC/T/C.II/PV/4, page 26). LONDON E/PC/T/C.II/59/Add.1 Page 2 The Committee agreed further that only a very limited number of commodities fell under this heading and that the countries concerned should. establish the facts about. them so that this recommendation on the subject could be taken into account in the forthcoming negotiations. It was further recognized that the concessions or lack of con- cessions in respect of the items concerned would, for purposes of assessing the results of the negotiations, stand on the same footing as concessions or lack of concessions in respect of particular tariff or preference items."

GATT Library

yx914wn8925

Committee II. Summary record of technical Sub-Committee. : Seventh Meeting held on Friday 8 November 1946 at 10.30 a.m

United Nations Economic and Social Council, November 11, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

11/11/1946

official documents

E/PC/T/C.II/48 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/yx914wn8925

yx914wn8925_90210260.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.II/48 ECONOMIC CONSEIL 11 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II SUMMARY RECORD OF TECHWICAL SUB-COMMITTEE Seventh Meeting held on Friday 8 November 1946 at 10.30 a.m. Chairman: Mr. VIDELA (Chile) Discussion of Anti-dumping and Countorvailing Duties The CHAIRMAN summarised the questions before the Sub-Committee. There was the question of whether Article Il should cover both goods and services or only the former. The United Kingdom f elt that the Charter should not cover services. Shipping questions would be dealt with by another conference. Their was the question of whether the price at the time of exportation or at the time of importation should be used in calculating the margin of dumping. Dumping by means of devaluation and dumping based on a low standard of living in the producing country were also problems which had to be considered. The problem of devaluation as a means of dumping might be dealt with by the International Monetary Fund. Another Committee was considering matters relating to low standards of living. Mr. JOHNSON (United States) said that the discussion had shown that there there four type of dumping: price, service, exchange and social. Article 11 permitted measures to counteract the first type. It would obligate members not to impose anti-dumping duties with respect to the other three types. It seemed to be generally agreed that exchange dumping was a question for the Fund to consider. Social dumping was a matter for consideration by the Committee studying industrialization. Service dumping was not under consideration by other committees or organizations; and views of E/PC/T/C.II/48 Page 2 Delegations on this matter should be submitted to the Rapporteurs for inclusion in their Report. There seemed to be general agreement (except on the part of the United Kingdom) that price should be defined in terms of the circumstances in the exporting country rather than the importing country. There was a possible exception in the case of branch houses. The question of injury, on the other hand, should be determined on the basis of circumstances in the importing country. The CHAIRMAN remarked that the statement of the United States Delegate that price should be defined in terms of circumstances in the exporting country clarified the intention of a definition which the United States had submitted to the World Conference in 1933. He thought that the question of subsidies should be left to the .Sub-Committee appointed to consider the subsidy provisions of the Charter. Mr. JOHSON (United States) presumed that the Sub-Committee referred to by the Chairman would discuss what subsidies might be allowed rather than the question of vvhat subsidies might be counteracted. The Technical Sub-Committee was free to consider, in correction with Article 11, the application of duties to countervail the effect of subsidies. The CHAIRMAN called attention to two resolutions of the Congress of Empire Chambers of Commerce: "The Federation is of the opinion that the Governments of the various parts of the Empire should take powers, where these do not already exist, to protect national industries against imports of goods or services from other countries which, by reason of depreciated exchanges, bounties, subsidies, or other artificial circumstances, may be sold at prices deterimental to the industries of the country or other parts of the Empire." "The Congress is aware that the conditions of labour and wages in some foreign countries do not give a fair competitive opportunity to Empire producers, and consequently that when this is the case, duties should be adjusted to counteract the effect of these conditions." LONDON E/PC/T/C.II/48 page 3 He also referred to a statement by Sir Stafford Cripps with respect to the damaging effects of low priced Japanese goods. Japanese prices had been low because of low labour standards, exchange manipulation, and the use of subsidies. Sir Stafford Cripps had said that it was the policy of the United Kingdom to eliminate unfair competition of that kind wherever it existed by all possible means. Mr. LE BON (Belgium) said that there was a tendency to describe any unfair practice as dumping it would be better to limit the use of the term dumping to the practice of selling abroad at lover prices than in the home market. He thought that the heading of the Article should refer to "anti-dumping measures" instead of anti-dumping duties". Mr. ROUX (France) asked the United States Delegate whether an importing country could be permitted to impose countervailing duties, when the exporting country had granted subsidies in a manner not in- consistent with the Charter. Mr. JOHNSON (United States) agreed with the Delegate for Belgiurm that the word "dumping' should not be used to include all unfair competitive practices. Not all unfair practices should be deaIt with in Article 11. Since paragraph 1 of the Article dealt with price dumping, and paragraph 2 with duties imposed to counteract subsidies, it would not be wise, he thought, to limit the heading of the Article to "anti-dumping measures". In response to the question of the French Delegate, he said that article 11 would permit countervailing duties to prevent injury, even though the subsidy granted by the exporting country was justified under provisions of the Charter. The Sub-Committee considering the use of subsidies might not agree with that provision. LONDON E/PC/T/C.II/48 Page 4 Mr. LOPES RODRIGUES (Brazil) wished to supplement the views already submitted by the Brazilian Delegation. He felt that anti-dumping duties could not be used successfully to defend a member against intermittent dumping, as distinguished from permanent during. In the case of intermittent dumping, a member should be permitted to use quantitative restrictions to restrict the imports of a commodity subject to dumping to the quantity which would be imported if the commodity were not subject to dumping. The provisions of Article 29 were not adequate to meet that situation. Because of the seriousness of permanent dumping, a member should be permitted to take punitive measures, as well as protective measures, against it. The Brazilian Delegation felt that the definition of the margin of dumping in peragraph 1 was open to criticism. It reserved its position with respect to that definition. With respect to paragraph 2, he felt that the same punitive and protective measures as had ben succested concerning dumping should be applicable in the case of export subsidies, Brazil agreed with paragraphs 3 and 4, but thought that paragraph 5 should be deleted as likely to lead to useless controversies. He had no objection to the Belgiam proposal to extend the expression "anti-dumping duties" to anti-dumping measures". But he was dubious as to the possibility of defining what was meant by "measures" within the meaning of this Article. Mr. MORTON (Australia) thought that, where a subsidy was involved, freight dumping should be covered by Article 11. Otherwise dumping practices in shipping would be dealt with by another agency. LONDON E/PC/T/C.II/48 Page 5 He was not sure that all problems with respect to exchange dumping could be handled by the Fund. Not all ITO members would necessarily be members of the Fund. If Australia did not join the Fund, she ought to be free to take necessary measures to counteract dumping by exchange depreciation. He was glad to note that the United States Charter did not permit anti-dumping or countervailing measures, unless a domestic industry was injured. But it would be dangerous to permit anti-dumping or counter- vailing measures in cases where dumping or subsidization was "such as to prevent the establishment of a domestic industry", since countries might resort to such measures, when actually there was little likelihood that a domestic industry would ever be established. He agreed with France that the actions permitted in the Article should be optional, not mandatory. He suggested that part (b) of the definition in paragraph 1 should be amended to read: "(b) in the absence of such domestic price, the highest comparable price at which a like or similar product is sold for expert to any or every producer in the ordinary course of commerce". He thought that the term "cost of production", as used in part (c) of the definition in paragraph 1, should cover a normal percentage or profit. Mr. JOHNSON (United States) noted that on the one hand Brazil did not think that proof of injury should be required (paragraph 5), while on the other hand Australia thought that injury should be proven. The Article as drafted required proof of injury. Such proof was desirable, in his opinion; otherwise countries might abuse their right to impose anti-dumping or countervailing duties. The amendment proposed by Brazil, which would permit the use of quantitative restrictions as an anti- dumping measure, should be considered by the Sub-Committee which had been appointed to study the provisions of the Charter concerning quantitative restrictions. LONDON E/PC/T/C.II/48 Page 6 He doubted whether advantage could be taken of the provision that anti-dumping and countervailing measures could be used to counteract dumping and subsidies that prevented the establishment of a domestic industry. Abuse of that provision would be the subject of complaints to the ITO. He recalled the measures which had been employed by Germany to prevent the establishment of chemical industries in other countries. The question of a percentage of dumping that would not be injurious would be taken care of by the requirement that injury must be proven. It would be a matter of national policy to determine what amount of dumnping constituted an injury. Generally he had no objection to the .ustralian amendments to parts (b) and (c) of the definition in paragraph 1, though the specific wording of the amendment to (b) might cause trouble so far as the United States was concerned. In this connections he reminded the Sub- Committee of the problems which had arisen in the United States with respect to interpretation of the expression "freely offered for sale". He would go even farther than the Australian Delegate had gone in amending (b) so as to include not only profit but also all other elements entering into a normal selling price. The CHAIRMAN at this point introduced Mr. Walter GARDNER, Chief of the Balance of Payments Division of the International Monetary Fund, who took his seat at the table. Mr. GARDNER was prepared to answer any questions the Sub- Committee might wish to put to him. LONDON E/PC/T/C.II/48 Page 7 Mr. JOHNSON (United States) said that on the general issue as to whether Article 11 related only to price dumping, and not to other forms of dumping such as exchange dumping, the attitude of the United States and of the authors of the Draft Charter was that questions of dumping other than price dumping came within the competence of organizations other than the Sub-Committee. MR. GARDNER, International Monetary Fund, agreed Clearly, he said, a country which was not a member of the International Monetary Fund could not be expected to conform to its statutes. Members of the Fund on the other hand were bound to conform to its statutes; and the statutes prohibited all forms of monopolist practices in connection with currency and multiple monopolist practices in particular. An alternative possibility, which had been suggested, was to have a single excehange fluctuation rate. But the question of exchange fluctuations was de, lt with in a different manner by the statutes of the Fund. Under the statutes of the Fund, each country was left a certain freedom of action in the matter of its exchange rates, subject always to observance of the limits set by the statutes of the Fund. Minipulation of the exchange rate up to ten per cent was free. But any change of more than ten per cent required the assent of the Fund; and there was provision for penalties against any member of the Fund acting in defiance of the Fund in such a case. Mr. JOHNSON (United States) said that it did not so much matter whether an importing country was a member of the Fund. The point was, whether the exporting country was. An exporting country might play a conspicuous part in international trade without being a member of the Fund. LONDON E/PC/T/C.II/48 Page 8 Mr. GARDNER, International Monetary Fund: "Quite" Mr. CHERRY (Union of South Africa) said it was clear from Mr. Gardner's remarks that there were loopholes for dumping on the part of countries which were not members of the Fund. Again, a country which was a member of the Fund might receive the approval of the Fund to a depreciation of its exchange by more than ten per cent. Such a depreciation of its exchange might well constitute a menace to the industry of another country, and justify anti-dumping measures on the part of the latter. Mr. GARDNER, International Monetary Fund, replied that there were loopholes, and two only. The first was, as Mr. Cherry had pointed out, the fact that there were countries not belonging to the Fund. The existence of a loophole in that connection could not be denied. The second loophole envisaged by Mr. Cherry was equally real: but its scope was limited. It was possible, but very unlikely, that the Fund would ever authorize the depreciation of the exchange of a country to an extent involving a menace to the industry of another country. The aim of the Fund was the maintenance of equi- librium in the trade balances and in the balances of payments of all countries: and it would be wholly inconsistent with that aim if it were ever to lend itself to facilitating the dumping of any particular trade product. The CHAIRMAN thanked Mr. Gardner for his explanations. Mr. GARDNER thereupon withdrew. Mr. JOHNSON (United states), in reply to the Belgian Delegate's proposal to substitute the words "Anti-dumping measures" for "Anti- dumping duties" in the heading of article 11, did not think the change would have any practical effects, unless more far-reaching LONDON E/PC/T/C.II/48 Page 9 changes were made in the rest of the Article. Paragraph 1, for example, prohibited anti-dumping duties on products imported above a certain margin. To substitute the word "measures" for "duties" in that passage would be meaningless, unless the Article went on to specify what measures were, and what measures were not, allowable: and he hoped the Sub-Committee was not proposing to recast the whole of the Article in that sense there and then. Mr. LE BON (Belgium) answered that it was the heading of the Article to which the Belgian Delegation took exception. The heading as it stood suggested that the only way or coping with dumping was by imposing duties. That was not the case. Export duties could always be met by countervailing duties: but dumping could not always be met by the mere position of duties. But his proposal related only to the problems of dumping. He did not propose to change the word "duties" in the expression "countervailing duties". He wanted the heading to read: "Anti-dumping measures and Counter- vailing duties". Perhaps Mr. JOHNSON would leave the wording of the heading until the Sub-Committee had completed its consideration of the text of the Article. It would then be easier to core to an agreement as to the wording of the heading. Mr. JOHNSON (New Zealand) said that Document W.27 appeared to ignore entirely Document W.15 in which the views of the New Zealand Delegation were expressed. The contents of W.15 might be summarized as follows: Anti-dumping duties cold be imposed in New Zealand in the case of transport concessions, certain specific subsidies and the like, where there was a danger of such concessions proving injurious to New Zealend industry. But he would describe such duties as "countervailing" rather than "anti-dumping" duties. LONDON E/PC/T/C.II/46 New Zealand accepted paragraph 1 of Article 11 except insofar as the provision with regard to the effect on the domestic market of "like or similar products" was concerned. In that connection, New Zealand had her own point of view, as outlined in document W.15, and had indicated that in case (b), she proposed to maintain it. Should a third party adopt the same attitude, New Zealand (like Australia) might raise objections. As regards the cost of production, New Zealand agreed with the other delegations that the element of profit should be included in the text of the article. Mr. van den BERG (Netherlands) said that the Netherlands Delegation was in general agreement.with the text of Article 11, but was not against certain alterations or additions. He was at one with the Belgian and Brazilian Delegates in thinking that there should be some mention in the Article of anti-dumping "measures" other than anti-dumping duties. But he agreed with the United States Delegate that it was difficult to see how to embody the addition in the text of the Article. In paragraph 1 for example, the margin of dumping" could not be the same for anti-dumping measures as it was for anti-dumping duties. The very important provisions of paragraphs 3 and 5 were equally applicable to anti-dumping measures and to anti-dumping duties, whereas paragraphs 1, 2 and paragraohs also 4., were applicable only to duties. In paragraph 5, he would like to add the word seriously" before the word "injuries" in the two places where the latter occurred. But he confessed that "injure" and "seriously injure" were somewhat vague expressions; and he would welcome any more precise wording. He would omit the words "as a general rule" in paragraph 5 as watering down the contents of the paragraph. LONDON E/PC/T/C.II/48 Page 11 He had certain questions to put to the United States Delegate. Where an importing country imposed anti-dumping measures or duties, did it rest with the importing country to justify such measures or duties ? Or did it rest with the exporting country to impugn them ? Was it to the Organization, or to an international tribunal, that the defence or attack should be submitted'? Those questions were left unanswered in the Article as it stood. But they called for an answer. He did not propose to go into the question of subsidies. But he thought it right to make some reference to the system of agricultural monopolies prevailing in the Netherlands. He did not admit that there was any conflict between the operation of those monopolies and paragraph 2. But he was ready to explair how they operated, if Mr. Johnson would like him to do so. Mr. JOHNSON (United States) did not think it necessary or helpful to discuss the Netherlands system of subsidies. He had some information in regard to certain of those subsidies: and he might say that the United States had imposed countervailing duties against some of them. These duties had been imposed under the existing law of the United States. But article 11 would affect the existing law: and the United States would have to recensider the question of the extent of the "injury' caused in the case in question. It might be possible to meet the wishes of the Belgian Delegate, though perhaps not those of the Brazilian Delegate, by changes in paragraphs 3 and 5 on the lines suggested by the Netherlands Delegate. That would entail Further changes in paragraph 4. LONDON E/PC/T/C.II/48 Page 12 As regards Document W.15, he was concerned to explain, in justification both of the French Delegation and of himself, that there had been no neglect on their part. It was true that Document W.15 was dated one day earlier than W.27: but it had not reached the Rapporteur's hands before he drew up his Report. Mr. CHERRY (Union of South Africa) said he had intended to raise the question of exchange dumping: but he had already been answered by the representative of the International Monetary Fund. Mr. NEHRU (India) agreed in general with Article 11: but there were two or three points on which he was doubtful. As regards countervailing duties the law of India was more or less in accord with the provisions of the article. As regards anti-dumping duties there was no Indian legislation. India had suffered from price dumping in the past, e.g. at the hands of Germany: but in the absence of legislation it had been difficult to do anything to counteract it. India herself, so far as he was aware, had never practised dumping in any form. He wondered if it was really necessary to define the "margin of during" in the Article. The principle of no anti- dumping duties beyond the margin of damping was sufficiently clearly established. As however there were obviously doubts as to the meaning of dumping", would it not be possible to draft the Article in such a frorn that the International Chamber of Commerce could subsequently intervene, and help the different countries to arrive at a definition of "dumping" which met their requirements? LONDON E/PC/T/C.II/48 Page 13 Sub-paragraph (c) of paragraph 1 stipulated that "in the absence of (a) and (b) cost of production in the country of origina" should be the determining factor. It was not difficult to imagine circumstances in which (a) and (b) would not operate. A country might seek to prevent the production of a particular product in all other countries. To that and it would exploit the consumers at home as well as abroad. How in such a case determine the cost of production? Take again the case of a country dumping its products in another country. Suppose that those dumped products prevented the establishment of an industry in the other country: and suppose also that it was impossible to prove that the prices charged to consumers in the other country were not less than those charged in the home country. How then was the cost of production of the product in question to be determined? Cost of production was a highly complex conception, very difficult either to determine or to define. He would welcome any light on the subject on the part of States interested. He accepted the principle of pragraph 5: but he would like to ask the United States Delegate whether the expression "domestic industry" was applicable to all industries - i. t. agricultural, as well as manu- facturing industries. The cotton industry, for example, might be menaced by cotton subsidies in the exporting countries. Mr. JOHNSON (United States) felt that there was general recognition on the part of delegates of the pressing need for a definition of the expression "margin of dumping". There had been so many different interpretations of the expression in the past: and some of them were inconsistent with the aims and objects of the Charter. LONDON E/PC/T/C.II/48 Page 14 The case of what might be called all round dumping had been put by the Indian Delegate: And he had very properly argued that its solution defended on the definition of the cost of production, The cost of production , as hithorto considered by the Sub-Committee, represented the cost of material and labour, plus the profit and other elements entering into the normal price of the product. The element of profit was dealt with by the Draft Charter in the following way. In the first place, the Chrter took the general profit realized by all manufacturers of a given product. There was no question of like or similar products, but of the general type of products. In the second place, the Charter took the minimum profit of eight per cent in cases where there was no other means of caculating the profit. The United Nations did not admit that parties producing for sale at prices below the cost of production could in any case be actuated by altruistic motives. The Indian Delegate had asked whether manufacturing industries were liable to injury, and (if so) whether they had any protection, under paragraph 5. He arswered that agricultural production was injured where there was agricultural dumping; but he could not see that cotton-growers were injured by dumped lace. He was afraid the Sub-Committee was going rather too far into detail in the matter of establishing the meaning of "injury". Mr. NEHRU (India), interposing, asked whether, if one considered that products were being dumped in a country, one was entitled to enquire in the dumping country as to the cost of production: and, if so, how would the cost of production be established? LONDON E/PC/T/C.II/48 Page 15 Mr. JOHNSON (United States) answered that the point was one that had escaped him. who indeed was to establish the cost of production? The United States had its own agents in certain countries, whether customs officers or other reporting agents. There had been no particular difficulty up to the present in determining the "cost of production" through those agents. He might add that the United States had never asked a foreign government for information, which might be injurious to traders. In certain countries, where industry was less developed, United States importers were invited to require information from the suppliers. But the United States government in such cases was always at pains to check the accuracy and bona fides of the importers. Mr. LE BON (Belgium) asked if the United States Delegate agreed that the burden of proof rested with the countries imposing anti- dumping duties. Mr. JOHNSON (United States) agreed with the Netherlands Delegate that the normal procedure would be to place the burden of proof on the party complaining. But he could not say what the Organization would lay down in that connection. The point was one of policy, not of procedure. As to the proposal to omit the words "as a general rule", he had no objection to their omission, if delegates preferred an unqualified statement. Mr. ROUX (France) summarized the attitude of the French Delegation, as set out in Document W.27 (English text 'page 5, French text page 6). LONDON E/PC/T/C.II/46 page 16 1. Anti-dumping and countervailing duties were not justified except in cases of serious injury to the national industry of, the country imposing them. He would prefer to read "domestic production" for "domestic industry" in that connection. 2. The burden of proof (justification) should rest with the country imposing the anti-dumping or countervailing duties. 3. The complaint should be made by the party suffering because of the said duties. France accordingly was for the maintenance of paragraph 5, as amended under the French proposal He noted that the Belge-Luxembourg Delegate, the Netherlands Delegate, and the Delegate of Australia shared his view. As regards the cost of production, the Australian Delegate had proposed to include the element of profit in the definition of the expression in paragraph 1: and Mr. Johnson had suggested an even wider formla. He entirely agreed with Mr. Johnson. The "margin of dumping" should, he thought, be defined, and defined as accurately as possible. The Australian proposal for a margin of five per cent had unfortunately not met with the approval of the United States. He himself had been in favour of the Australian proposal, and would even have suggested a margin of ten per cent. Mr. JOHNSON (United States) was not prepared to decide whether a margin of five per cent or ten per cent implied "injury". He might have his own opinion on the subject: but he could not speak for the United States. Mr. HOW BEN (China) thought that the subsidies to which paragraph 2 related should not be treated as a form of countervailing duties. but rather as a form of preferential rates. LONDON E/PC/T/C.II/48 Page 17 Mr. JOHNSON (United States) said that the Chinese proposal amounted to this, that, where an exporting country had no preferential advantages, it should be entitled to subsidize its means of transport, in order to give its products in the importing countries the same benefit as the latter accorded under a proferential system to the products of another exporting country. He doubted whether there was any justification for including any reference in the Charter to that particular case. It was a case for consideration in connection with the general subject of subsidies. Mr. HOW BEN (China) took no exception to Mr. JOHNSON's attitude: but he wished the Chinese Delegation's remarks to be recorded in the minutes of the meeting. Mr. JOHNSON (United States) gave notice of a United States amendment to Document E/PC/T/W.28. The meeting rose at 12.30 p.m. LONDON E/PC/T/C.II/48 Page 18 COMMITTEE II SUMMARY RECORD OF TECHNICAL SUB-COMMITTEE Seventh Meeting (Continued) held on Friday & November 1946 at 8 p. m. Chairman: Mr. MORTON (Australia) 1. Consideration of the first instalment of the Rapporteurs' Preliminary Report Mr. JOHNSON (United States) stated that the Rapporteurs had received suggestions for three amendments to their draft Report. The first of these was to enable the Rapporteurs to take into consideration the fact that Committee Il had agreed on the question of treat;nent of Governmental purchases in article 8 and 9. The second was to make good the regrettable omission of the Indian Delegation' s remarks on discriminatory internal taxes. The third was to include the United Kingdom Delegation' s suggestions on the proposed change of wording. He asked whether the Sub-Committee approved the substance of the Report, subject to the three amendments being made. Mr. DRONKERS (Netherlands) asked whether the amendment submit- ted by his delegation had been included in the Report. Mr. JOHNSON (United States) pointed out that the Technical Sub-Committee was only concerned with general provisions, and not with specific points. Was the Netherlands Delegate prepared to leave the consideration of the question raised in his proposed amendment to the appropriate Committee? LONDON E/PC/T/C.II/48 Page 19 Mr. DRONKERS (Netherlands) agreed to do so. Mr. LAURENCE (New Zealand) asked whether the Indian amendment regarding internal taxation would cover the point raised earlier by the New Zealand Delegation on New Zealand's internal tax on the rental of imported films. Mr. JOHNSON (United States) replied that the tax in question would not be covered by the Indian amendment. Mr. SIN (Canada) wanted delegations to have an opportunity of studying the Report before approving it. They could then submit their observations in writing. The CHAIRMAN agreed with the suggestion. The purpose of the present discussion was to ascertain whetherr the method of reporting adopted by the Rapporteurs was acceptable to the Sub-Committee. The Technical Sub-Committee approved the method adopted in the drafting of the report, and agreed to submit their written observations to the Rapporteurs. 2. Discussion of paragraph 2 (c) of Article 12. Mr. JOHNSON (United States) stated that the discussion on paragraph 2 (c) of Article 12 on 1 multilateral exchanges had not been concluded. In order to avoid a long discussion on the subject, he asked whether any delegation would object to, or consider redundant, the addition of a provision that no country should be permitted to apply a rate of exchange other than the official rate permitted by its laws. Mr. ROUX (France) pointed out that some importing countries, whose foreign exchange was controlled, would in certain cases resort to the unofficial rate of exchange. He thought it would be advisable to delete the latter part of paragraph 2 (c) of Article 12 from the words "and until the elimination of dual or multiple rates" to the end of the paragraph. It was not within the province of the Technical Sub-Committee to deal with that question, which should be refereed to the financial experts. LONDON E/PC/T/C.II/48 page 20 Mr. MORTON (Australian) supported the French Delegate's suggestion to delete the latter part of paragraph 2 (c). Mr. JOHNSON (United States) ,jointed cut that without the last clause of paragraph 2 (c), or at lest without freedom of action as indicated therein, it would be impossible for countries with multiple rates of exchange to confirm to fixed actual values for duty. The CHAIRMAN tought that an average rate of exchange could be struck in confomity with paragraph 2 (c). Mr. LE BON(Belgium) thought that the present text could be retained, if the word official" was inserted before the words "dual or multiple". Mr. JOHNSON (United States) said that more than one official rate of exchange existed in his country. Mr. RODRIGUES (Brazil) considered that the question of more than one rate of exchange would not arise, as the Monetary Fund would not permit it. Mr. JOHNSON (United States) reminded the Sub-Committee that the Monetary Fund had expressly provided for a period during which, multiple rates of exchange would be permitted. Mr. ROUX (France) said that, if he had correctly understood the Begiun Delegate, the only rate of exchange would be the official one, which would apply not only to customs for the purpose of assessing duty, but to all transactions. He suggested that the views of the Sub-Committee on the matter should be recorded, and that the Drafting Committee, assisted by the financial experts, should be asked to find a suitable formula acceptable to all delegations. Mr. JOHNSON (United States) proposed the following addition to paragraph 2 (c) of Article 12: "The rate of exchange to be used for customs purposes in transactions between one member country and another country may be fixed, or regulated, by bilateral agreement between theme" LONDON E/PC/T/C.II/48 Page 21 That addition would not change the sense of the paragraph. The feeling of the Sub-Committee was that the reference to multiple rates of exchange in paragraph 2 (c) of Article 12 was not satisfactory. 3. Discussion of Article 14 - Marks of Origin Mr. LE BON (Belgium) stated that he had no objections to Article 14 in principle, but he had some detailed amendments to suggest. There must be no obligation to accept for importation goods with a false mark of origin. Therefore it must be laid down that mark of origin meant every mark other than a false national mark, whether applied in the country of importation or elsewhere. Mr. JOHNSON (United States) felt that the proposal of the Belgian Delegate was in no way in conflict with the provisions of Article 14. It had not been incorporated in that Article, as the legislation in the United States against false marks of origin was a cart of criminal law and not part of the United States Customs regulations. Mr. SIM (Canada) pointed out that the Belgian Delegate's proposal was adequately covered in paragraph (g) of Article 32 - general exceptions - in which "deceptive practices" were specifically mentioned. He drew the Sub-Committee's attention to E/PC/T/C.II/W.30, in which the Rapporteurs had assembled the views submitted the viewes submitted by the various delegations and their detailed amendments. He felt that the Sub-Committee had given its general support to Article 14, Some members might wish to ask for clarification of sone points, but detailed technical items should be considered by experts in the light of the needs of each country. He pointed out thatI Article 1!F followed almost in entirety the United States Act on marks of origin. LONDON E/PC/T/C.II /48 Page 22 Mr. JOHNSON (United states of American) stated that Article 14 conflicted with the United States regulations on marking insofar as the latter (a) did not eempt samples from marking and (b) did require marking before importation of products such as cutlery, which meant hardship to the importer. The United States had introduced laws on marking more than fifty years ago. in 1930. after much actual experience, Congress had agreed to certain exceptions to these regulations in order to ease difficulties of administrator and international exchange. Consequently, the United States regulations on rnarking were very comprehensive. Mr. ,p, (United Kingdom) thought that technical questions included in Article 1 should be left for the consideration of the appropriate body of the ITO and the Sub-Committee should recommend accordingly. Further, a recommendation should be included in the Report to the effect that governments should enter into bilateral negotiations with a view to the simplification of marking regulations. There was not sufficient time for delgations to recouncile their views on highly technical matters of that nature. He was prepared to submit a draft on the lines of his suggestion for consideration at the next meeting. That was the line adopted in Article 12 on tariff valuation. In Article 12, the first paragraph laid down that members should undertake to work towards standardization, vihereas paragaph 2 laid down geenral principles. In reply to the United States Delegate, he stated that his proposal was limited to paragraph 5, which dealt with technical items. Mr. LE BON thought that as the Sub-Committee represented a body of customs officials, many useful points would result from immediate discussion of paragraph 5. Mr. NEHRU (India) was in complete agreement with principles of Article 14, but felt that technical consideratiorn ought to be referred to the technical body which would be set up by the ITC. LONDON E/PC/T/C.II/48 Page 23 If the meeting proceeded to discuss paragraph 5 in detail, he would be forced to make a reservation in regard to sub-pragraphs (c), (d), (g) and (i) of pagragraph 5, as in his opinion they were not practicable under the existing conditions of world trade. Mr. JOHNSON (United State) thought the adoption of the United Kingdom Delegate's proposal was appropriate. He anticipated that many delegations would be compelled to make more extensive reservations than those made by the Indian Delegate. The CHAIRMAN asked if any delegation objected to the United Kingdom Delegate's proposal. Mr. JOHNSON (New Zealand) requested the deletion of the New Zealand statement in E/PC/T/C.II/W.30 .which had been attributed to his Delegation in error. Mr. SIM (Canada) deprecated the suggestion that the report should merely refer Article 14 to the appropriate body of the ITO. He recommended members to erter into bilateral negotiations in regard to marks of origin regulations. He felt that useful amendments, such as that of the Czechoslovakian Delegation in regard to protection of geographical or regional marks, should be retained in the Report. It was wrong to put an untimely end to paragraph 5. Paragraph 5 should be left open for liter discussion. The CHAIRMAN remarked that all useful observations obviously ought to be brought to the notice of the body that would deal with technical consideration of marks of origin. Mr. JOHNSON (United States) stated that the proposal was not to put an untimely end to paragraph 5, but to substitute a paragraph on the lines of Article 12, paragraph 1. LONDON E/PC/T/C II/48 Page 24 Mr. ROUX (France) drew the attention of the Committee to his suggestion in E/PC/T/C.Il/W.30 that "the Draft Charter be completed by a provision, which would protect marks of geographical or regional origin, particularly as regards wine, cognac and cheese The Czechoslovakian and Cuban Delegates (E/PC/T/C.II/W.33) had made similar proposals. it was essential for France that her products of high quality should be protected from fraud by the international safeguarding of national and regional marks. There was particularly severe legislation in France against fraud in that connection. He believed that the question had recently been discussed in Copenhagen. He wished to associate himself with the remarks of the Belgian Delegate in regard to false marks of origin. Mr. LE BN (Belgium) stated that all the exemptions anticipated in paragraph 5 had already been applied in Belgium. He asked for clarification of sub-paragraph (h). Mr. JOHNSON (United States) replied that paragraph (h) had bean inserted in accordance with the regulations on marking in force in the United States. His experience had been that second- hand goods were often not marked, as they had not originally been intended for export. Twenty years old" had been arbitrarily selected as a fair and reasonable standard of determining what goods could be treated as second-hand. Mr. BAYER (Czechoslovakia) pointed out that Article 14 only dealt with marks of origin that were obligatory for the benefit of the importing country. Czechoslovakia was fortunate in having no regulation insisting on marks of origin on good for importation. He agreed that the appropriate body of the ITO should be entrusted with the enlargement of the technical details of Article 5. LONDON E/PC/T/C.II/48 Page 25 The more regulation on marks of origin on goods for importation were simplified, the better. But he was of the firm opinion that Article 14, should also lay down that regional marks of origin should be accorded appropriate protection. He referred to his proposals contained in E/PC/T/C.II/W.24. At the very least a recommandation should be added to the Charter to the effect that the ITO should consider the question of fair treatment of regional marks of origin. Mr. CEERIO (Cuba) stated that the inclusion of provisions for the protection of resional marks of origin was of paramount importance to his country, which had been blessed by naturo in that it produced. some products not produced elsewhere. Paragraph 5 might well be referred to a competent technical international body. Mr. JOHNSON (United States) pointed out that the French, Czechoslovak and Cuban proposals were for the expansion of Article 14 by the introduction of a new subject. Article 14 was laid down to regulate requirements, and contained nothing about prohibitions. Insofar as the internal administration of the United States was concerned the proposals in question related to trademark registration regulations rather than to customs regulations, except insofar as the latter regulated the protection of trademarks. Was Article 14 the proper place to introduce such proposals? It appeared that some countries were asking other members to adopt their domestic rules. The proposals were not improper: but it would be very difficult to obtain agreement to their inclusion in the Draft Charter. Mr. CHERRY (South Africa) wished to associate himself with the Australian reservation in E/PC/T/C.II/W.30, insisting "that goods must be properly marked before shipment when proper notice has been given of requirements." He suggested. that the word "possible" should be replaced by the word. "advisable", or by desirable". LONDON E/PC/T/C.II/48 Page 26 The phrase "whenever administrative possible" might mean that customs officials would be compelled to mark articles to a degree of inconvenience that would not be practicable. He agreed with the Belgium-Lexembourge and Netehrlands Delegations that "penalties may justly be imposed for carelessness as well as intention to defraud". He agreed with the Canadian Delegate that the pertinent remarks on paragraph 5 should be retained in the Report. Mr. JOHNSEN (New Zealand) also supported the Australian Delegation in insisting "that goods must be properly marked before shipment when proper notice has been given of requirements." He proposed accordingly the omission of paragraph 3. That would not nullify the effect of Article 14. He agreed with the United States Delegate that the protection of registered trade marks was a questionn quite distinct from the question of marks of origin, and ought to be dealt with elsewhere. Mr. ROUX (France) reiterated his insistence on the importance of safeguarding geographical and national marks of origin. It was not only a question which affected customs; and it should be considered independently of customs. National sovereignty had not been put forward as a reason against reducing trade barriers. Why should it be put forward as a reason against protecting regional marks of origin? He felt so strongly on this subject that he could not assent to Article 14, unless provision was made for the protection of regional and national marks of origin. Mr. JOHNSON (United States) replied that the French Delegate had not put the right complexion on his reasons for not including provision for the protection of regional marks of origin in Article 14. LONDON E/PC/T/C.II/48 Page 27 He draw the attention of the three delegates, who had objected to paragraph 3; to paragraph 6 of Article 14 and paragraph (g) of Article 32, which provided safeguards against all the dangers they had anticipated in the interepretation of paragraph 3. He further pointed out that since 1938, when the United States had altered the uniform penalty for products not properly marked and had introduced a system whereby individual consideration was given to the marking of products at the time of impertation into the United States, there had been no increase in the failure to mark goods or attempts at fraudulent practice. There were firms in the port of New York which contracted to nark imported products. The CHAIRMAN, speaking in his his capacity Australian Delegate, remarked that effect could be given to the New Zealand Delegate's proposals on prior marking before importation by substituting the word "should" in place of the word "shall" in paragraph 3. He added that, although some delegations were of the opinion that protection of regional markings should not be dealt with in Article 14, the Rapporteurs would no doubt include in their Report the observations made on this subject. 14. Date of Next meeting The date of the next meeting was fixed for monday 11 November 1946, at 10.30 a.m. The agenda to be: (a) Consideration of the Report of the Rapporteur on the discussion of the precious meeting. tb) Discussion of Article 15 - Publication and Administration of Frade Regulations. (o) Discussion of Articles 13 and 16 jointly. on behalf of the Sub-Committee, Mr. SIN (Canada) and Mr. ROUX (France) thanked Mr. Johnson for his valuable contribution to the work of the Sub-Committee, and wished him a pleasant, journey home on 11 November 1946 The meeting rose at 11.5 p.m.

GATT Library

tj865dp6888

Committee II. Summary records of the Meetings. : Second Meeting held on Wednesday 23 October 1946 at 11 a.m

United Nations Economic and Social Council, October 24, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

24/10/1946

official documents

E/PC/T/C.II/3 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/tj865dp6888

tj865dp6888_90210204.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C . II/3 ECONOMIC CONSEIL 24 October 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAI COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT Second Meeting held on Wednesday 23 October 1946 at 11 a.m. Chairman Dr. COOMBS (Australia) 1. Discussion of the Future Work of the Committee The CHAIRMAN announced that an outline of work (E/PC/T/C II/W.1) had been prepared by the Chaiman and the Secretamat, În consultation with hends of` some of the dedegation, and that it had beer. distributed to members of the Commitee. The outline was based on the principle. that dedefgations should have an opportunity to give the general views upon such item before it was referred to drafting committees. After the general discussion, the chief items would be discussed in greater detail. Drafting committees would be set up to prepare a report which be reviewed by the Committee. Mr. KUNOSI (Csechoslovnkia) agreed with the proposed outline of work, provided that general discussion was the first item. The CHAIRMAN indicated that general discussion was the first item on the outline. LONDON E/PC/T/Ç II /3 Page 2 Mr. NEHRU (India) asked about the form of the report which would be prepared by the drafting commiittee. The CHAIRMN suggested that consideration of the form of the repoet be postponed. The meeting accepted the proposed outline of work. 2. Discussion of General Principles affectinng most-Favoured-Nation Treatment, Tariff Preferences, Ouantitative Restrictions, Exchange Control and Subsidies Mr. HAWKINS (United States) falt that in accordance with the resolution of 18 February of the Economic and Social Council, the main objective of the Preparatory Commiittee should be the drafting of a convention. In drafting the convention. first attention should be eiven to the more basic 'questions, particularly tariffs and tariff preferences and quantitative restrictions. Exchange control and subsidies should :also receive earliy consideoration. He proposed that the charter should provide for negotiations betweem members for tariff reductions anl the elimination of preferences. The Urited States falt that the charter should prohibit the use: of quantitative restrictions except under specified conditions. In special cases where quantitative restrictiens were pormitted, they sheould be administred in a non-diseriminatory manncr. Exceptions from the rule of non-discrimination should be provided with respect to problems caused by scarce or inconvertible currencies. Provisions for the reduction of tariff s cculd not be incorporated in the charter as drafted at the present meeting. He expressed the hepe of the United States that members of the Preparatory Committee could meet next Spring to carry on actual negotiations for tariff reductions. The Provisions for the reduction of tariffs would thon be on the same oasis as other provisions in the charter. The draft charter could then be submitred to the Internationa Trade Conference; and the tariff negotiations which had taken place among the eighteen countries would provide a standard by which to judge what other nations joining the organization would be expected to do. LONDON E/PC/T/CII/3 Page 3 He felt that the Praparatery .Committee should approve the draft charter for submission to the International conference at the and of the proposed spring. Thus general obligations with respect to quotas and non-tariff trade barriers would be approved only after satisfactory tariff schedules had been formulated. Exchange restrictions and quantitative restrictions were altarnative method for dealing with belance-of-payments difficulties. The United States felt that rules with respect to one of these metheds should in general apply to the other also. Direct subsides to domestc producers were usually not harmful to trade, and should in most cases be penmit:ed. Export subsidies, on the other hand, were harmful to trade and sheud be abandoned, except under agreed circumstances and rules. Subsidies might be considered by Committee IV. Mr. ALPHAND (France) expressed the interest of his Government in the expansion of international trade and its sympathy with the general aims of the suggeted charter. The French Government had alrendy announced its plans for a low tariff system. But there was need for development of economically young countries, .while others such as France, had to adjust and modernize their production. In that connection he stressed the importance of a transitional period. In the interests of conserving exchange for essetial imports. of achieving balance-of-paryments equilibrima, and of rehabulitating and modernizing, her economy, France would during this period want to continue to resort to quantitative restrictions. Such import controls would be progressively relaxed by thres main stages, the third of which would find France prepared. to follow the provisions of the charter. He felt that instead of setting fixed time-limits for the transitional period, the charter should lay dewn criteria as to when the use of quantitative restrictions should be abandoned in each country. LCNDON E,PC/T/C. II/3 Page 4 He foared that the suggested charter might be too ambitious. He emphasized the need for talking the traditional pattern of trade into realistic account in considering the provisions of the charter. He felt that careful consideting should be given to the possibility of certain strong econoqmic units not joining the International Trade Organization, and to the provisions concerning the relations of momber countries with non-member countries. He expressed the hope that his statement of general considerations would enable the Corrmittee to follow the French proposals when they were discussed. He wendered wheother it was possible to reconcile provisions for reduction of trade barriers with the policy of concluding commodity agreements. The French Delegation felt that the cha-ter must br brought into line with reality. France would collaborate to that end. Mr. TUNG (China) indicated that China would support general programmes directed toward the expansion of world trade. He emphasized the importance of a transitional period, particularly in relation to the problem of industrial development. He felt that the transition provisions of the charter were not rcalistic, since they involved fixed time periods or were based on the foreign exchange positions of the countries involved, and did not give adequate consideration to the actual progress of industrial development. He suggested that a country might be considered industrialized, and its transition accomplished, when thirty per cent of its population was employed in, or when fifty per cent of its national income came from, modern industry and distribution. He felt that until such stages were reached, individual countries should have the right to maintain adequate protection for their industries. In cases where such protection was maintained it should be gradually reduced; LONDON E/PC/T/C.II/3 Page 5 it should be non-discriminator and lt Should be used only the purpose of furthering industrialisation. It should in short be administered in such a way as to minimise its effect on the cemmerce of other countries. Mr. VIDELA (Chile) said that the Childen Delagation regarded the suggested charter is an admirable basis for discussion. He proposed in his remarks to make certain general observations oil specific points which would be amplified in later discussions. With' regard to Article 6 concerning most-favoured-nation treat- ment, the Chilean Delegation accepted paragraph l: but paragraph 2 did not include a generalised exception for particular advantages accorded by American republies to neighbouring countries. Such an excerction had been provided for in trade agreements signed by various American republics, and favoured by the Pan-American Conference it Montvideo and he therefere suggested its incerporation in paragraph 2 of Artile 8. He suggested a clearer definition of the term "boycott in Article 17. He stated his view that, in certain circumstances, a rafusal to reduce tariffs by; a member of the International Trade Organization. refetrred to in paragraph 5 of Article 16, might be justified, and suggested the inclusion cf' a list Of "justifiable' circumstances in the paragraph. With regard to Article 20, he expessed the view that the country opposing exchange reserictions imposed by another country in order to establish equalibrium in its balance of payments should be under obligation to prove that the restrictions were unjustafied. The reference to subsidies in Article 25 should be clarified to indicate whether direct or indirect subadies were referred te an each case. difinition of "State trading enterprises" was needed in ArticIe 26: the term; "entereprises in -whose operation a member government exercises directly or indirectly a substantial measure of ,,- _ '__ .^nn - ..'T1 of thé 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~; LONDON E/ PC/T/C .11/3 Paze 6 suggested charter callied for further precision. MR. KUNOSI (Czechoslovakia) spoke of the importance of trade as a means of increasing the standard of living. Restricted access to raw materials was an obstacle to trade expansion, In studying ways and means of trade expansion, due recognition should be given to the problems of maintaining full employment and accomplishing economic rehabilitation, and also to the serious effects that the German occupation had had on the economy of Czechoslovakia. He indicated that Czechoslovakia was suffering from a lack of raw materials, exechange, and gold. He cmphasized the necessity of overcoming the special difficulties arising from the war. He falt in that conneetion that the ength of the transitional period provided for in the charter would depend on the understanding and help which war-ravished areas would receive from areas which werc not occupied during the war. Czechoslovakia did not aim at economic self-sufficiency. He thought that the problemss of reducing trade barriers and dealing with foreign exchange difficulties were closely related and would need to be dealt with simultaneously. At present Ozechoslovakia had to use its limited foreign exchange for essentials rather than lIuxuries. In some cases, because of her inability to extend credit, Ozechoslovakia had. to receive goods in payment for exports. The International Trade Organization would be attractive to more countries, and consocquently stronger, if differing economic structures and levels of development were taken into consideration in its charter. He felt that the sanctions proposed in the draft charter were too severe and inflexiblee in view Of the special problems faced by countries formerly occupied by the enemy. There was for instance, the problem which would be faced by countries having substantial trade with countries outside of the. International Trade Orgonization. LONDON E/PC/T/C. II,/3 Page 7 He felt that the !-eflJa Conventions might appropriately be studied in connection with the drafting of the charter. Czechoslovakia intended to reduce duties; but having to trade with countries applying ad valorem rates she .woula have to adjust her tariff rates in accorddance with the shaged value of the crown. Countries with high tariffs should give greater tariff reduction than low-tariff countries. Provisiorns of the charter concering exchange control should be consistent .with the programe of the International .monetary Fund. Czechcslovakis's nationalized iniduatry was trading on the same basis as private enterprises. Mr. PARANACUA (Brazil) arguea that non-discriminatior and application of the; most-favoured-natior. principle did not necessarily result in genuine reciprocity owing to the differences in the tariff systems of different countrics. A country with a double tariff might be committed to a policy of tariff reductions and to the exten- sion of advantags of its conrventional tariff accruing under bilateral agreements to all couutries, without reiceiving comparable advantages from countries with autonomous tariffs which were free to raise their tariffs. He recommended, therefore, that reciprocity should be considered more important then non-discrimination, and that tariffs should be negotiatad on multilateral rather than a bilateral basis. Discussion of tariff preferences should be basad on facts and realities, taking into account the; .economic reasons for pre- ferential arragnemnts. With respect to quantitative restrictions, Brazil's position would reflect her desire to make use of a limited amount of foreign exchange to finance essential imports, paticularly machinîery, rather than. luxuries. The meeting rose at 12.40 p.m. LONDON E/PC/T/C. II/3 Page 8 COMMIITTEE II Continuation of the Second Meeting Hold on Wednesday-, 25 October 1946 at 3.0 p.m.. 1. Continuation of Document on General Princiîles Affecting A.1., B, C D and E of the Provisional Agenda. MR, McKINNON (Canada) stated thAt it was not his intention to make a fomal statment, although he had many detailed Points of principle to put forward at sub-committee level, firstly because the items to bc decided .were numerous and complex and .suld therefore take tine, and seccondly because he did not wish to appear to freeze his position and thus preclude elastic discussion of points in sub-committees. He agreed with the United States dalegate that it was the Commiittee's task to propane a draft convention, in conformity with the instructions of the Economic and Social Council, He also agreed to the procedure proposed by the'United States Delegation, but suggested the establishment of not more than four sub-commiittees.. MR. FRUSQUET (Cuba) stated that his country had consistently* maintained tariffs which were among the lowest in the world. But Cuba had so greatly suffered in the past from trade restrictions such as high tariffs, quotas and internal subsidies in other countries that the national income from exports had. fallen to the level of thirty years previously. This meant that vital imports had to be curtailed, and this again affected the trade of other countries. Cuban exports alone, evon anlarged to the utmost, .would not suffice to provide for the economic development of the country. Cuba needed to develop her agriculture and her. internal industry to reach the desired standard of living. Therefore Cuba could not lightly abandon her spocial trade relations without definite assurance of an equal or better economic position in the future. However there was plenty of room in the Draft Charter for accommodation of the different but not contradictory interests of all nations. LONDON E/PC/T/C. II/3 page 9 Therefore Cuba greatly welcomed the present opportunity of making international trade more free, which in its turn would lcad to friendly relations in international politics. Mr. NEHRU (India) stated that he did not intend to make a long stetement, as a document setting out in full the viewis of the Indian Delegation had already been circulated among the Committee. He agreed that the Committee must draw up a draft convention, but suggested that it could undertake this task more profitably in a few months ' time. In regard to tariff reduction, India.'s average tariff (thirty- three per cent) was among the lowest in the world; but his country was not strong enough to agree to the proposals on tariff. reduction. Nor, in view of the state of industrial development, could it be specified-which industries needed tariff protection. He suggested that the question of tariff reductions should be taken up after the establishment of the International Trade Organization. Quantitative restrictions should be renounced except for the purpose of economic planning. In reference to the statement of the Czechoslovak Delegate, to the effect that his country was in great need of access to raw materials, he pointed out that India, to the same extent, needed access to capital goods. Mr. DINECHICIE (Lebanon) welcomed the United States proposal and expressed his intention of co-operating fully in th, attainment of the desired goal. He pointed out, however, that the approach to the attaînment of such a goal might not be the same in a highly industria- lized country as in a country which is under-developed. Although the American proposals had foreseen such differences, they recognized the advantages of protection in certain cases. These proposals needed, however, more elaboration and he felt sure that especially the smaller under-developed countries. could help to define situations in which protection would be justified. LONDON IE/PC/T/C. II/3 Page 1 0 He felt that not only tariff protection, but also tariff prefreness, might be necessary for the development of industry in certain cases of less advanced countries. For the development of modern industry large markets were required and the population of many small nations was not large dnou~-h to providc such markets. A. possible solution would be for small nations of certain regions whose economics are complementery to form customs unions. He believed that if the objective of tarff prefence was to develop the industry Of a group of less developed countries, it would not only be legitimate but highly desirable. It would, therefore, be unwise to limiit the maintenance of existing preferences or to sot an arbitrary date after which no preference would be allowed. Lebanon, he said, with most of the other Arab countries, formed part of the Ottoman Empire before the first world war, which made their economies .inter-depenent. That was, therefore, now a strong tendency to co-ordinate their Economic development, a stop which he thought would be welcomd by the United Nations. He further considered Article 17 the oharter .was redundant. Mr. BRENNAN (South.Africa) saia that he had intended to make a statement; but, as the Canadian and Indian Delegates had brought out so clearly all the points he was going to make, he merely wished to associated himself with their statements. Mr. JOlNSENl (New Zealand) stated that New Zealand was in accord with the general objectives of the proposals. Conditions affceting overseas trade, he said, .were of special interest to his country, as her conomic structure was bound up very closely with overseas trade. He thought it essential that the rules which might ultimately be decided upon. to provide a common basis for the conduct of inter- national trade-, should take Cognisance of the economic position of all countries. LONDON E/PC/T/C . II/3 Page 11 He felt that the existing propesals did not make sufficientt provision for countries like Now Zealand ,which are industrially unde-- developed, and the economy of which is dependent on the exportation of a comparatively narrow; range primary products. He considered it would be necessary for such countries to diversify their economies and to provide for a policy of full employment by dovelopment of secondary industries. With respect to the devolpment of secondary inducustries, he thought that tariffs and subsidies might net provide the most effectivr or practicable means :of achieving the objective. and suggested that in such circumstances Prevision should be made to allow of other methods, such as quantitative restrictions. He felt that countries such as that of New Zealand, which are se dependent on exports, might have to regulate imports threugh exchange control in order to safeguard their position. MR. SHACKLE (United Kingdom) said it was well known that his country had expressed basic agreement with the Unîted. States proposals for exapansion of World Trade and Employment The draft charter was based on that document, but deviated from. it in some respects and therefera he would have some amendments to make. Although due allowance should be made for the special conditions existing in certain countries, the intentions of the draft charter should not be frustrated by undue multiplication of .exceptions. What was necessary was a general parallelism of obligatîons in multilateral agreement. He had. suggestiens to make in regard to particular points of difficulty. He agreed to the proposed estzablishment of Sub-Committees but not to excessive sub-divison. LONDON E/PC/T/C. I I/3 Pagu 12 Mr. BRUNAES (Norway), stated that the Norwegîan delegaton agreed in princple to the draftt charter in regard to general commereial policy. It appeared that, althcugh most delegstions agrred in principle with the draft chater, almost all of that suen far-reaching resevations that the general principles would not be applicabl to them. Norway too had been oecupied , and might therefore make similar reservations. But the suggested reservations did not solve the problem. The aims of the International Pinctary Fùnd and the International Bank for Reconstruction and Development would make it possible for occupîed ccuntraes, and also the less developed countries, to import goods in excess of their exports. This would lead to expansion of preduction and international, trade, and thus to a higher standard of living, ln .all occuntries. This method was possible under acceptance of the principles of general commercial policy outlined in the draft charter. If, howwer, the existing restrictions on trade and forcign exehange were maintained, there would result an equalibrium on a low level iunsead of an expansive economy. Mr. VIDEULA (Chile) anncunced that an amended version of his speech made that morning would be circulated. Mr. HAWKINS (United States of Amrica) in reply to the Czechoslovakiar DeIegte stated that many provisions, for example, those on quintitative restrictions, in the. drraft charterter had taken the convertions of the League of stations into account. The CHAIRMAN (spcaking in his eapacîty as Australian Delegate) stated that on the one hand adequate provision must be made for the expansion of effective demani ana for economic development of the' resources Of the less developed countries.- Disequilibrium must be corrected by expansion rather than by contraction. LONDON E/PC/T/C .II/3 Page 13 The right of countries to protect their domestic economy from the effects of falling world demand must be recognized. A proper balance must be maintained between these legitimate requirements and the reduction of barriers to free the flow of goods between countries. Australia was willing to enter into negotiations for tariff reductions, and also periodically to consider the revision of tariffs by unilateral action. Protectionist mcasures might be legitimized to the extent of qualitative standards. These standards must be established, and revised from time to time. Rules for good behaviour in trade should recognize the necessity of correcting balance of payments discequilibria by economic expansion. The CEAIRMAN, in summing up the discussion, drew attention to certain general principles that appeared to emerge: (a) There might have to be a transitional period during which obligations would have to be accepted. progressively. (b) There might have to be considered the graduation of obligations according to the stage of economic development. (c) Sanctions might have to be entrusted to the decisions of the International Trade Organization itself. (d) Provision'might have to be made for regional arrangements (based on geographical rather than political relationships). 2. Discussion of Frinciples affocting, Gcneral Commercial Provisions (A: 2 - 10 of the Provisianal Agenda) MR. HAWKINS (United States) stated that he considered that as Items A: 2 - 10 were highly technical they should be discussed by specialists. These administrative measures could be operated with the same effect as tariffs or quotas. For example, measures in regard to marks of origin could be so strict that imports would be greatly reduced. LONDON E/PC/T/C. II/3 Page. 14 It was for the experts ;who were going to examine these points to decide how these measures should be dealt with in the, various countries, to ensure that they should not involve disguised pro- tection, and to simplify the passing of goods through customs. Mr. PARANAGUA (Brazil) stated that the League of Nations had arrarged several conventions in regard to these items, and he proposed that the principles contained in these connentions be used as a basis for amplifying the draft charter. In reard to national treatment he suggested that Article 9 be completed by making provision. for port dues, navigation, etc. Mr. Mc:KINNON (Canada) stated that many excellent conventions had been adopted in the past, but they were not all put into effect. It was possible that some articles approved at this Conference might require subsequent legislation and therefore policy considerations underlying, these items should be kept in mind. M. BARADUC (France) thought that the definitions in the draft charter were not precise enough or sufficiontly related to eoonomic reality. Therfore he proposed thatt more precise regulations should be laid down with reference to most-favoured-nation treatment, dumping and marks of origin. Mr. NEHRU (India) asked why the most-favoured-nation treatment considered in the draft charter dealt only with trade in goods, and not with the rights of business men, etc. Boycott was not a technical question but rather a question of principle. He felt that campaigns to stimulate domestic production should be encouranged. provided they were not at the expense of other member countries. Mr. SHACKLE (United Kingdom) thought that the aim of the Committee was to deal with the treatment of goods, and that it was therefore undesirable at this stage to go into matters such as' foreign. nationals and taxation. LONDON E/PC/T/C . II/3 Page 15 3. Organization of work of the Committee The Committee agreed to set up a Sub-Committee consisting of delgates for Canada, Chilc, France, India, the United Kingdem and the United States of America, to exaumine the question of procedure, especially with regard to tariff negotiations, and to submit their report to the Committee The date of the incoting was tentatively fixed for the afternoon of Monday, 28 October 1946. Another Sub-Committee vvas set up to deal with questions connected with general commerciral provisions of a technical nature (iterms A. 2 - 10 and I of the Provisional Agenda). It would consist of delegates from all member countries; the deletates representing each country might be changed according to the nature of the items, considered. The working instructios of this Sub-Committee were: (a) To have in mind. the prevention of the use of administrative practices for the purpose of disguised protection: (b) Attempt to establish standard of behaviour to facilitate the movement of goods according to the spirit of the Charter: (c) To consider existing conventions and work previously carried. out in this field. It was suggested that the Joint Body on Industrial Devalopment should hold a meeting on the morning of Saturday, 26 October 1946. 4. Date of next Meeting Friday, 25 October 1946 at 11 a.m. The meeting rose at 5.45 p.m.

GATT Library

yp002jw4959

Committee II. Technical Sub-Committee. : Comments of the French Delegation on Articles 9 to 16 and 32 of the Proposed Charter of International Trade of the United Nations

United Nations Economic and Social Council, October 26, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

26/10/1946

official documents

E/PC/T/C.II/12 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/yp002jw4959

yp002jw4959_90210218.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON AND ECONOMIQUE E/PC/T/C.II/12 26 October 1946 SOCIAL COUNCIL ET SOCIAL English ORIGINAL: FRENCH PREPARATORY COMMITTE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE COMMENTS OF THE FRENCH DELEGATION ON ARTICLES 9 TO 16 AND 32 OF THE PROPOSED CHARTER OF INTERNATIONAL TRADE OF THE UNITED NATIONS A2 - Article 9 of the Charter - Internal Taxes 1. National treatment should be interpreted as not precluding, should the case arise, the levying on imported goods of internal taxes, calculated with the aid of forfeits or non-discriminatory adjustments arising out of the necessities of customs or fiscal technique. 2. This Article embraces, besides internal taxes, measures which do not come under the heading Customs (sale and operations taking place after release of goods from Customs). However most bilateral treaties contain a clause, by which no distinction is made between national and imported goods, in the sale, the offering for sale and the circulation of these goods as far as the regulation of free trade is concerned. 3. In particular, the question of the acquisition of imported goods by governmental organizations (other than the army) for public needs, lies outside the scope of discussions on customs; it should apparently be referred to the second Sub-Committee or to the Committee responsible for drawing up Article 8. 4. Paragraph 2 in its present form seems to permit foreign States to exercise an unjustifiable control on the internal fiscal legislation of a member-country. The meaning of this paragraph should be more clearly defined. LONDON E/PC/T/C.II/12 Page 2 PROPOSALS Articles 9 - 1 1. Internal taxes on consumption, circulation, manufacture, handling, excise, tolls or other measures which apply to goods imported from a number-country of the Organization cannot, under any pretext, be applied to them in a higher degree or on more onerous terms than to identical or similar national products, subject to forfeits or non-discriminatory adjustnents arising out of the necessities of customs or fiscal technique. 2. The members undrtake not to institute or maintain internal taxes on the products of other member-countries the object of which might be a disguised form of protection for national production. 3. In the regulation of trade not subject to State monopoly or to an institution of the same nature, and especially in sale, offering for sale, circulation and consumption, no distinction should be made between national. products and products imported frorn member- states.+ A3- Article 10 of the Charter - Freedom of Transit I The question arises of whether it might not be better to refer purely Lnd simly to the Barcelona Convention of the 20 April 1921 on freedom of transit, ana the Geneva Convention of the 3 November 1925 for the simplification of customs foralities (Article 2). 2. If the Amerîcan text is preferred as a basis of discussion, it seems: (a) that the definition of transit in paragraph 6 should be transferred to the head of Article 10. (b) that paragraph 5 should be set apart for special study; +Numbers 1 and 2 correspond to the text of the report of the Economic Conference of 1927, Part 2 (Trade), pargraph III (trade policy), No. 2. LONDON E/PC/T/C.II/12 Page 3 the question of the measures taken by certain states for facilitating direct relations with countries of origin, and for allowing their porst to hold adequate stocks doe not, in fact, appear in the original programme of the Tehnical Committee (questions of originand source). PROPOSALS 1. Separate paragraph 5. 2. Put paragraph 6 at the beginning of the Article. A4 - Article 11 of the Charter - Anti-dumping and Countarvailing Duties, 1. Paragraph 5 prescribes that these duties should not be applied unless the -ndustry of the importing country sustains or is threatened with injury. Furthermore it should be a question oIf a serious ilnljury sustained by the importing country, and the existenco of this injury should be proved by the latter. 2. When an anti-dumping tax or a countervaling, duty is applied to a number country, the letter should be able to appeaL to a court dependent on the Intiernational Trade Organization and before which the imrporting country should be obliged to prove tho exisence of the dumpingm or of a subsidy, as well as the gravity of the injury sustained by it. PROPOSALS Draft paragraph 5 as follows: 5. Each member country undertakes not to impose any anti-duming . duty or countervailing duty on the importation of any product of other member countries unless they are in a position to prove: (a) that there exists, dumping, bounty or susidy as defined in paragraphs 1 and 2 of this Article (b) that its domestic industry has sustained grave injury from the dumpirg, subsîdy or bounty. LONDON E/PC//T/C. II/12 Page 4 The member country aginst hom the measures laid down in this Article have been taken shall be able to lodge a complaint with the Organization which will have to decide, after hearing the two states concerned, whether the measures compained of are justified or not. A5 - Article 12 of the Charter - Tariff Valuation (Customs Value) The French Delegation has no objection to formulate against this text; it takes note of the fact that the member countries zbandon the notion of value on the internal marlket of the importing country. The French Government is ready. for lts part, not to rake use of the power that the law gives it to take into account the value thus defined. It may be remembered that the repor of the Economic Conference of 1927, part - (trade), paragraph II (customs tarifis), number 4, recommends: . . "that all systems of enquiry or investigation into the application of dutuies "- d valarem" should be established and organized with all the consideration due to the commercial interests in question and to the maintenance of cordial economic relations between the nations, all enquiry or research involving inqquisitorial procedures or arbitrary methods being duly dismissed." A6 - Article 15 of the Charter - Customs Formalities The French Delegation records that those questions were the object of a special agreement signed at Geneva on the 5 November 1925. It appears right that this text should be accepted by all the inember countries. The Economic Conference of 1927 contains, in part 2 (trade), in paragraph II, (customs tariffs), number 5, several complemetary recommnendations. In particular, the provisions of these two documents of 1923 and 1927 should be substituedfor paragraph 3 of Article 13 of the proposed Charter. French-legislation does not allow the tribunals to take into account any intention or good faith in a matter of fiscal or customs offences, but it gives the LONDON A/PC/T/C.ii/12 PAGE 5 administration power which in practice it frequently exercises. to reduce the penanalties to neminal fines or even to suppress the fineV`:n to SUù-pi-'3s thc fial_ :a1taT th: a1in thAi c os> of altogether in the case of a mistake made by the declarer or infringements committed as a result of mistaken instruction given A7 - Article 14 of the Charter - Marks of Origin 1. Concerning the marks requiredon imported products, the French Delegation asks for the suppression of paragraph 6 the provisions of whichare covered by paragrapg -5 of Article 13. It concerns, in fact, a particular unfringment of customs legislation. 2. On the other hand the French Delegation considers that Article 14 as it is drafted does not apply to those provisions appearing in French legislation forbidding the application on foreign products of marks or signs of such a nature as to make it appear that they are of French origin or from any other country thanthe real country of origin. It is a question here, in fact, of from of o unfair competition and fram asto the character of the merchandise for sale. The import, the transit, warehousing and even the simple traffic of products with false makings is forbidden by French law; these provisions should be regarded as sacro cant. 3. These provisions should be compared with those which are the subject of the Madrid arrangement of the 14 April 1891, revised at Washington on the 2 Jun, 1911 , and at the, Hague on the 6 November 1925, and of the Union agreement of Paris, revisedat theuoseis the 14 December 1900, at Washington and the hagueat the dates given above. It would be desirable for all the member countries in the Organization to undartake to protect in their territory the marks of origin of othermember countries. LODON E/PC/T/C.II/12 Page 6 4. Prompted by this same desire to riou the moral standard of International trade by forlddinu dishonest prmetices the French Delegation considers it essential to protect marks of :o?'UDh±c or regionalorigin, particularly as regard wine, cog.rLcs, Rcciucfort cheese etc.. It reserves the right to propose a text in this connection. 6 - :Article 15 of the Charter - Publication and administration of Trade.dRegulations 1. Publicity: The provisions of this paragraph may usefully replace those of Articles 4 and 6 of the Convention of November 1923 for tIhe simplification of cusions foe:2Liic:s. But it seems that it would be necessary to supplement them: (a) by recalling the provisions of Article 5 of the same dociment (Codification of customs * Ui and taxes). (b) by recalling the measures provided for by the liruzsels Convnetion of 53 July 189O - on the o iu:v.icu of custom tarffs of all countries. (c) by the setting up an each member state of an organization specially responsible for publicising, within the country and abroad, the laws and regulation relating to foreign trade. (d) by the setting up within the ITC of an office responsible for collecting, analysing and publishing as quickly as possible in the usual languages laws, regulauci as and decisions concerning foreign trade and for collecting together periodically , in detailed studies, information concerning the comparative regu;ations of member states on any given point. 2. Independnet i nals: It seems that the second sentence of this paragraph should be deleted, for the tribunals provided for in the precedings sentence evidntly have assigned to then the repression of the abuses referred to, The end of the second sentence mght be worded thus from the wordsfor the review of'": LONDON E/PC/T/C.II/12 Page 7 "and which will be responsible for deciding upon the legality and regularity of the measures taken bt the administration and of the texes or formalities imposed by the customsservice." 3. The French Delegation considers that the provision prposed is too abosolute in character and goesinto useless detail on the measures which it is the duty of each state to take in this matter. Generally speaking, it can be admitted that gods which are on route at the Jmoment when an increase of tariff or any other restrictive measure occurs escape the new provisions, subject to the production of convincing justifications bythose concerned. However cases exist where the public authorities are obliged to apply without delay ceritain measures essential for the safe- guarding, of the country: raising of duties on certain essential agricultural,. products, threat of war or fmine, or also - and this case has been noted by the authors of the Charter - dumping and similar measures . As to the conditions of application.they are not to be defined in the Charter. A9- Article 16 of the Charter - Information, Statistics andTrade Terminology . 1. The FrenchDalegation recalls that question was the subject of (a) the Brussels Convertion of 28 December 1943 (estaLl. ;-. of an international commercial Statistcs). (b) the Genevn Convention of 14 December 1926 (economic i s.i 2. Moreover it points, out that the aims pursued. by the authors. of the Charter as regards the standardization of international commercial statistics (paragraph 1 a). the international comparability of these statistics (paragraph 4), the adoption of standard definitions (paragraph 6) and of standards (paragraph 7), can only usefully be realised, insofar the works undertaken by the League LONDON E,/PC/T/C. II/12 Page 8 of Nations for the unification of tariff ncrnen;clatures is resumed and successfully completed, for customs statistics can only be established fron the checked declarations of those liable, which are based on the terms of tariff nomenclature in each country. 3. Finally, the technical sub-committee will doubtless consider that it has not to make any decision on those provisions of article 16 which are not related to customs statistics: subsidies (paragraph 1 b), balance of payments and prices (paragraph 3), control of exchange (paragraph 2 end). Section 1. Article 32 of the Charter - General Exceptions. The French Delegation has no particular objection to make. As regards paragraph h, it points out that French legislation makes no provision for any prohibition with regard to prison-made goods, since it has no penalties for social dumping.

GATT Library

wj501mq1193

Committee II. Technical Sub-Committee. Corrigendum to document E/PC/T/C.II/42

United Nations Economic and Social Council, November 7, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

07/11/1946

official documents

E/PC/T/C.II/42 Corr.1 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/wj501mq1193

wj501mq1193_90210252.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.II/42 Corr.1 AND ECONOMIQUE 7 November 1946 ENGLISH SOCIAL COUNCIL ET SOCIAL ORIGINAL: FRENCH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE CORRIGENDUM TO DOCUMENT E/PC/T/C.II/42 On page 8 of the English text, elevan lines from the bottom of the page, substitute for Mr. ROUX's remarks the following speech: M. ROUX (France) felt that there was no need to make amendments to paragraph 5 but it should be placed on record that in the absence of information on the various national legislative systems, delegations were not in a position to make recommendations on this point. This matter should be put before the Drafting Sub-Committee which would then be able, in due course, to examine the problem in greater detail. At all events, the French Delegation must point out that while some countries give preferential treatment only to goods transported directly from the country of origin to the country of destination. Other countries, including France, require the same conditions for the application of discriminatory tariffs in general and for the application of most-favoured-nation treatment in particular. It is therefore incorrect to say that the question only arises in the case of imperial preferences and duties ad valorem. It arises in exactly the same way in connection with the application of the most-favoured-nation clause.

GATT Library

nz120kq8774

Committee II. Technical Sub-Committee. : Eighth Meeting Held on Monday 11 November 1946 at 10.30 a.m

United Nations Economic and Social Council, November 12, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

12/11/1946

official documents

E/PC/T/C.II/49 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/nz120kq8774

nz120kq8774_90210261.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/49 12 November 1946 SOCLAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE Eighth Meeting Held on Monday 11 November 1946 at 10.30 a.m. Chairman: Mr. VIDELA (Cuba) 1. Adoption of Agenda The CHAIRMAN proposed the following Agenda: (a) Discussion of Article 15. (b) Discussion of Article 16. (c) Discussion of Article 13. (d) Discussion of Article 32. The Agenda was adopted. 2. Discussion of Article 15 - Publication and Administration of Trade Regulations - Advance Notice of Restrictive Regulations Mr. OFTEDAL (Norway) objected to the requirement in paragraph 2 of Article15 for the establishment of independent judicial or administrative tribunals for the review and correction of administrative action relating to customs matters. In Norway, decisions regarding customs matters could be referred to higher administrative officers or to the ordinary courts, which were in fact wholly independent of agencies entrusted with the administration of customs matters. The syste. had worked satisfactorily for many years, and any attempt to introduce in Norway the procedure con- templated. by the paragraph would be considered a backward step. Moreover, Norway could not establish more than one such tribunal, which would create difficulties for complainants in distant parts of the country. LONDON E/PC/T/C.II/49 Page 2 It would be difficult for Norway to comply with the provision of paragraph 3 providing for the non-application of tariff changes to goods in transit. All tariff changes upon efective upon decision of the Norwegian Parliament, a system which had been fully satisfactory. The difficulty would be to ascertain positively that goods had been on route. He would pefer to have paragraph 2 deleted, and paragraph 3 amended to exclude the reference to goods in transit. Mr. SIMS (Canada) suggested that in the absence of Mr. JOHNSON (United States), the United Kingdom Delegate Mr. RHDDARCH should be asked to serve as Rapporteur, with the assistance of Mr. HINAEDY (United States) The United Kingdom Delegation would be in a better position than others to provide the facilities necessary to complete the amount of work involved in preparing the Report of the Rapporteurs. Mr. RHYDDERCH (United Kingdom). accepted the post of Rapporteur. Mr. Le BON (Belgium) said that Belgium imposed such import duties as were in force at the time customs documents were submitted to the Belgian customs authorities. To exempt from the requirement, in the event of changes in rates of duty, goods which were in transit on the effective date of the change would create administrative difficulties. Such an exception would also cause discrimination against importers of merchandise from nearby countries in relation to importers of merchandise f ro more distant countries. Paragraph 3 made no reference to the treatment to be accorded to in- transit merchandise in the event of reduction in duties. Belgium applied the same treatment in either event, and that avoided discrimination. He referred to the document concerning Articles 9-17 and 32 submitted by the Delegations of the Netherlands and of the Belgian-Luxembourg Economic Union (E/PC/T/C.II/32) for additional comments , regarding Article 15. LONDON E/PC/T/C.II/49 Page 3 Mr. BONNE (France) said that the views of the French Delegation had been stated clearly in the Report of the Rapporteurs (E/PC/T/C.II/W.41) Mr. CHELRY (South Africa) observed that in his country appeals from decisions of customs authorities might be make to higher officials within the customs administration and to courts of law. It would be difficult for South Africa with its small tax-paying population to extend. its judicial system to provide an independent tribunal to consider customs matters. An official of the United States Government visiting Pretoria before the opening of the Preparatory Committee meeting had stated to South Africa officials that in his opinion paragraph 2 did not necessarily envisage a separate judicial or administrative tribunal for the consideration of customs ratters, provided the ordinary judicial system of a country was quite independent of customs administration. Increased import duties became affective immediately in south Africa. That was so in order to prevent evasion of increased import duties by importers who migt hold large stocks of merchandise in bond. If the effective date of d-aty increases was delayed, the Government's budget would be affected. But dumping duties were not imposed or in-transit shipments. Mr. BAYER (Czechoslovakia) stated that the views of his Delegation were included in the Report of the Rapporteurs (E/PC/T/C.II/W.41). He called attention to a mistake in a reference to an article of the Geneva Convention of 1923. It should have been Article 4, not Airticle 7. Mr. NEHRU (India) could not comment on Article 15 in detail, because it was still under considerations by his Government. But he foresaw certain difficulties, if the Article was adopted as drafted. He agreed that the principle stated in paragaph 1 was sound; and he was prepare to accept it. LONDON E/PC/T/C.II/49 Page 4 He was prepared to recommend his Government to give careful consideration to the optionn of the requirement for an indepenent judicial or administrative tribunal. Here again he felt the principle to be sound. But serious administrative difficulties would result, if India was to exempt goods in transit from increased import duties. He reserve his position on paragraph 3, until further consideration could be given to it. He was not clear as to the purpose of paragraph 3, Mr. MORTON (Australia) saw no cause for objection to paragraph 1 of Article 15. Australia had a Tariff Board, to which appeals could be made on customs natters after they had been reviewed within the customs. administration. Any effort to impose a special tribunal on small countr would be injustifiable. Australian law specified that duties applied to goods at the time of import, i.e. at the time a vessel entered port to discharge cargo. Australia could not consider a change in its laws to conform to the requirement of paragraph 3. The greatest concessions Australia could make on that point would be to continue tne present practice of applying to goods in transit the reduced rate of duty or duty-free status temporarily applicable, for particular reasons, to goods normally subject to high rates of duty. Mr. LOPES RODRIGUES (Brazil) said that his country had always followed . the principles set forth in Article 15. A Board of Appeals, composed of officials of the Treasury Department and business men, had been established in 1932, and any decision of the Board might be taken to the courts. Brazil permitted a period of ninety days before the enforcement of increased rates of duty. However, the new Constitution of Brazil permitted the immediate imposition of dumping duties if necessary. LONDON E/PC/T/C.II/49 Page 5 Mr. SIMS (Canada) called the attentions to the word "or" in the clause of paragraph 2 providing for the maintenance or establishment of "judicial or administrative tribunals". The drafters of the paragraph undoubtedly had both types in mind. There was no problem of compliance with the paragraph, if a country had a procedure whereby customs decisions could be referred to the courts for adjudication. Since 1932 Canada had had an independebt tribunal for customs matters, which had in practice worked satisfactorily. Decisions could be obtained more cheaply under an independent tribunal. Canada also had provision whereby any case involving a customs dispute could be taken to a Tariff Board at the request of an importer. in a country where provision was made for appeals from decisions. of a first appraiser to senior customs officials, the necessity for an independent tribunal was not so obvious. An independent tribunal was a necessity in other countries. Most countries had a system whereby tariff changes were made at specific times of the year. Canada could not support any requirement other than for the immediate effectiveness of new rates. In the special circumstances relating to trade with the United States it would be particularly difficult to ascertain when goods were actually en route. He felt that it would be necessary to qualify paragraph 3 to provide that administrative rulings by customs officials should not have the etfect of increasing duties on merchandise in transit. Mr. KENNEDY (United States), in response to queries regarding paragaph 2, stated that in his opinion. it did not require the. establishment of tribunals exclusively for customs purposes. The United States had a Customs Court; but its higher court was the Court of Customs and. Patents Appeals. LONDON E/PC/T/C.II/49 Page 6. Mr, PHYDDERCH (United Kingdom recorded his objection to the requirements in paragraph 2 for the Meeting up of independent customs tribunal in view of the possible doubt as to the meaning of the paragraph. He felt that increased rates of duty should be made effective immediately. How would paragraph 3 operate with respect to decreases in import duties? He pointed out that importens in the United Kingdom could take advantage of a law which permitted them to add increases in duties to prices. He felt that other countries had similar provisions. He agreed with the Delegate of Belgium that exempting goods in transit from advances in duties would discriminate against imports from nearby countries. He suggested the deletion of paragraph 2. Speaking as Rapporteur, Mr. SIM (Canada) inquired whether his under- stunding was correct that the Sub-Committee desired its Rapporteurs, in their report regarding paragraph 2, to indicate recognition of a distinction between judicial and independent tribunals. The CHAIRMAN announces that Mr. John M. LODDY, an Adviser to the United States Delegation, would attend the Sub-Committee's next meeting to explain that point. The discussion of Article 15 would be concluded at that time. Mr, OFTEDAL (Norway) wished Norway's views regarding Article 15, as included in Document -E/PC/T/C. II/9, to be included in the Rapporteurs' Report. 3. Discussion of article 16 - Information, Statistics, and Trade Terminilogy Mr. LOPES RODRIGUES (Brazil) said that Brazil would submit information to the Organization as rapidly as possible. It was at present impossible to indicate how long it would take to prepare such information. Mr. NEHRU (India) reserved his position. He thought that india would in general agree with the principles set forth in the Article, but but had not been possible to study the provisions in detail. LONDON E/PC/T/C.II/49 Page 7 Mr. BONNE (France) said that France generally favoured the provisions of the Article, He emphasized the importance of uniform nomenclatue. In that connection he felt that the recommendations of the Brussels and Geneva Conventions should be followed. Statistics should follow the systems used in the League of Nations "Statistics of International.Trade". He did not feel that countries should be called upon to give statistics on such things as prices, subsidies, and quantitative restrictions. Mr. Le BON (Belgium) said that Belgium and the Netherlands agreed with the statement of the French Delegate. Mr. CHERRY (South Africa) thought that the requirements proposed in the Article were admirable in theory; but they might be difficult to carry out in practice, since they would require administrative reorganization and expansion of the civil service. He assumed that to words "so far as practicable" in paragraph 2 might be interpreted as an escape clause. Since South Africa's tariff classi- fication was not detailed it might be more useful in the particular case of South Africa to use the statistical classification Of the South African Customs Administration. He wonderd whether paragraph 6 would require the use of standard weights and easures. That would be a difficult problem. He thought. that the last clause of the second sentence of paragraph 7 night be interpreted as an escape clause. South Africa had not been able to revise its customs classification nomenclature in accordance with the League of Nations on "International Customs Nomenclature" (1934), since the list set forth in that report was too detailed. South Africa- had, on the other hand, revised its statistics nomenclature in accordance with the League of Nations" "Minimum List of Statistics." He agreed with the French Delegates that statistics on such things as prices and balance-of-payments should not be required. LONDON E/PC/T/C.II/49 Page 8 Mr. BAYER (Czechoslovakia) with the main principles of the Article. The ITO ITO would have to have adequate materials and statistics for its work. But he feared that the Article required too much. Personnel or budgetary problems might make it difficult for some countries to comply with the Article. He suggested that the ITO should work out reasonable minimum requirements, in co-operation with officers of the League of Nations. Mr, LAWRENCE (New Zealand) pointed out, in connection with sub- paragraph (a) of paragraph 1, that New Zealand had little transit trade and did not record transit-trade statistics. With reference to pararaph 2, he said that New Zealand's system of statistical reports generally provided more detailed information than would be the case if reports were based on tariff classifications. The proposed requirement that statistics should reveal the operation of restrictions would be impracticable, since restriction often varied in the course of a year. He thought that the problem of differences in weights and measures would arise in connection with paragraph 6. Mr. BAYER (Czechoslovakia) hoped that a uniform system of nomenclature could be worked out. He felt that the work of the League of Nations with respect to customs nomenclature had been excellant and that it should be continued.. 4. Discussion of Article 13 on Customs Formalities Mr. MORTON (Australia).. took exception to the requirement in paragraph 2 that Members should review their customs laws and regulations. It would, be sufficient to require that a Member should review particular laws or regulations which other Members considered restrictive of trade or otherwise objectionable. In the forthcoming tariff negotiations a law or regulation affecting a particular item might be reviewed. LONDON E/PC/T/C.II/49 Page 9. Mr. LOPES RODRIQUES (Brazil) said that except for some reservations with respect to paragraph 3, Brazil was in general agreement with the Article. Mr. NEHRU (India) wondered whether paragraphs 1 and 4 of the Aarticle were consistent. The former provided that fees and charges should be limited to the cost of services rendered. The latter provided a long list of fees to be covered by the provisions of the Article. Specific duties (used in connection with ad valorem duties) could not be limited to the cost of administration. India would have to reserve its position pending clarification of the scope of the definition in paragraph 4. Mr. RHYDDERCH (United Kingdom) thought that the provisions of the Article should be in closer conformity, wit the Customs Formalities Convention of 1923. It should be made clear that fees for consular invoices were included under "consular transactions" in paragraph 4. Mr. DONNE (France) thought that the drafting committee meeting in January shuld refer to the Geneva Convention. France had signed that Convention and had tried to comply wit it. Other countries should subscribe to the principles set forth in the Convention. Paragraph 1 should foresee ultimate agreement with respect to customs formalities. The drafting in the 1927 Convention was better than that of Article 13 of the Charter. With respect to paragraph 3, he pointed out that French law did not allow courts to consider intention of good faith; courts could only examine the actual facts of the case. But penalties were reduced or suppressed when errors were committeed by the customs authorities. Mr. le BON (Belgium) said that Belgium and the Netherlands had already expreased their views in document E/PC/T/C.II/32, The Geneva Convention of 1923 provided guidance for the drafting of provisions of the Charter on customs formalities. LONDON E/PC/T/C.II/49 Page 10 In the case of errors (paragraph 3) penalties should be reduced to "theoretical fines", which would have the effect of discouraging further errors. But there should be no fine in the case of an error caused by the advice of a customs official. There should be a clear statement of what was meant by clerical errors. Mr. CHERRY (South Africa) thought that the last sentence of paragraph 1 (Article 13) and the requirements for statistics in Article 16 were not consistent. If more statistics were required, it would probably be necessary to increase, rather than diminish, documentation requirements. He supported the suggestion of the Australian Delegate with respect to paragraph 2. South Africa did not oppose the two principles set forth in paragraph 3; but the spelling out of those principles in detail might invite abuse. The provision that there should not be greater than nominal penalties was reasonable. But the question arose as to what constituted a clerical error. Cases might arise where there would be doubt whether the error was purely. clerical. The second sentence of paragraph 3 might cause customs administrations to instruct customs officials not to give advice. He suggested a more general wording for paragraph 3 along the follow- ing lines: "Customs officers shall not take advantage of customs legislation to be unduly restrictive or obstructive and all border line cases shall be treated with due consideration and sympathy." LONDON E/PC/T/C.II/49 Page 11. There should be provision that if the trade of one country was hampered by restrictive customs practices of another, the former country would be entitled to introduce similar practices against the latter. Mr. BAYER (Czeschoslovakia) said that Czechoslovakia generally favoured the principles embodied in the Article. Customs formalities of other countries had hindend Czechoslovakia's exports. He thought that article 13 did not cover all formalities that should be considered. ITO Members should adhere to the Geneva Convention, or the provisions of that Convention should be, included in Article 13. The ITO should conduct research with respect to customs formalities and work out uniform documents (e.g. consular invoices). Incorporation of the Geneva Convention in Article 13 would not be difficult since a majority of countries already adhered to the Convention. Mr. RHYDDERCH (United kingdom) agreed with the Delegate of South Africa with respect to the inconsistency between paragraph 1 (Article 13) and Article 16. He agreed with the Australian and South African Delegates with respect to paragraph 2, and with the South African Delegate concerning paragraph 3. The United Kingdom remitted fines when customs officers had been in error. The last sentence of paragraph 3 should be deleted. Mr. MORTON (Australia) supported the United Kingdom Delegate with respect to the deletion of the second sentence of paragraph 3. Australia did not impose penalties, if errors had been caused by incorrect advice of customs officials. He was sure that other countries would exercise good judgment in that matter. The Sub-Committee agreed to meet on Wednesday, 13 Novemer 1946 at 10.30 a.m. to complete the discussion of Articles 13, 15 and 16 and to discuss Article 32. Mr. HUTCHINS (Secretary) suggested that the Chairman of the Procedures Sub-Committee should be invited to attend the next meeting. The meeting rose at 12.30 p.m.

GATT Library

fx569rh7414

Committee II. TEchnical Sub-Committee. : Fifth Meeting Held on Wednesday 6 November 1946 at 10.30 a.m

United Nations Economic and Social Council, November 6, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

06/11/1946

official documents

E/PC/T/C. II/W/2-31 and E/PC/T/C. II/W/2-31

https://exhibits.stanford.edu/gatt/catalog/fx569rh7414

fx569rh7414_90210293.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED AND ECONOMIQUE LONDON E/P/T/C.11/W.31 SOCIAL COUNCIL ET SOCIAL 6 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE Fifth Meeting Held on Wednesday 6 November 1946 at 10.30 a.m. Chairman: Mr. VIDELA (Chile) 1. Discussion of Article 12 on Tariff Valuation Mr. JOHNSON (United States) said that it was not the intention of paragraph 1 to achieve immediately a uniform system of valuation. Its intention was rather that members should agree to work in that direction. The CHAIRMAN observed that the understanding that there would be a transitional period would make a solution of problems, concerning valuation less difficult. Mr. J0HNSON (United States) explained that there would be a transition period between the time when the Charter mas formulated and the time when the member countries accepted the Charter in accordance with their various constitutional processes. It might be a year .before members .would have ratified the Charter. But it would take longer than a year to work out a uniform valuation system. The CHAIRMAT agreed that it would take more than a year to deal with the highly technical matters involved in changing valuation procedures. Mr. NEHRU (India) understood the purpose of paragraph 1, sentence 1, to be that members should agree to a general principle, and then proceed to work out the application of that principle under the guidance of the ITO (second sentence). LONDON E/PC/T/C.II/W. 31 Page 2 Mr. LAWRENCE (New Zealand) presumed that the transition would not actually begin, until the organization put forth recommendations at a date subsequent to the signing of the Charter. Mr. KEMP (Canada) pointed out that a reduction of customs duties, negotiated next Spring, might be affected by the establishment of new bases for valuation. How was that problem to be dealt with? Mr. JOHNSON (United States) thought that the views expressed by the Delegates of India and New Zealand, with which he entirely agreed, were the best answer to the Canadian Delegate's question. Problems of the type raised by the Canadian Delegate would no doubt have to be solved at a later time by the ITO. The CHAIRMAN asked if the one-year transition referred to by the United States Delegate was contemplated in the Charter. Mr. JOHNSON (UJnited States) replied that no Article of the Charter specified how long the transition would last. It was his own opinion that one year might pass between the formulation of the Charter and the time when it would go into effect. That was a consequence of the existence of national laws .governing the acceptance of an instrument such as the Charter. The CHAIRMAN said that his question with respect to the transitional period related to all technical matters under consideration by the Sub- Committee. The point was one which required study. He had understood that members would be given one year within which to denounce conventions in conflict with the Charter. Mr. van den BERG (Netherlands) agreed with the views of the Indian Delegate with respect to the first sentence of paragraph 1. The Netherlands and Belgium had submitted suggestions with respect to procedures, which he wished to see covered by the Sub-Committee's Report. LONDON E/PC/T/C. lI/W.31 Page 3. Mr. RHYDDERCH (United Kingdom) was glad there was no intention to establish a uniorm system of valuations immediately. What was needed was a code of behaviour or ethics which would be applicable to the different systems. The United Kingdom would support its own systeun of valuation. United Kingdom exporters had complained about practices of other countries with respect to (a) determination of "usual wholesale quantities", (b) reclassification of items so as to raise duties, (c) requirements to reveal secret information about their products. The CHAMIRAN thought the Sub-Committee should give sufficient time to the discussion of differences between the provisions of Article 12 and the present practices of the different countries in the matter of valuation. Mr. JOHNSON (United States) thought there should be discussion of the general principles to be embodied in the code of ethics applicable to valuation. Mr. KEMP (Canada) imagined it would not be easy to separate the discussion of general principles for a code of ethics from the discussion of particular situations. A compilation of valuation methods of various countries would be helpful in connection with preparations for the tariff negotiations in the spring. The provisions of the Charter with respect to tariff valuation were not precise. The Charter provided that actual value should be the baais of valuation, and such a provision might merely be used to justify existing systems. But it was more likely that the Charter did not intend to leave the question of methods of valuation entirely to the countries concerned. LONDON E/PC/T/C.II/W.31 Page 4 The examples which he would give of valuation problems were drawn from Canada s experiences in trade with the United States. He did not wish to give the impression that the United States was more open to criticism than any other country, Very often the difficulties arose in consequence 'of legislation rather than administration. The United States had three or four alternative methods of valuation, two of which required the use of values in the United States as part of the basis of valuation. Would adoption of the Charter require elimination of those two methods? If there were many transactions in the product to be valued, the ( smaller transactions were oten used as a basis for detemining value rather than the larger ones. The advantages from large transactions were thus eliminated. In some cases the valuation was based on the price of goods "freely offered for sale". Sometimes goods were not "freely offered for sale" but were sold through limited distribution channels. Sometimes the effect was that the price at which goods were "freely offered for sale" was interpreted to mean the price at which the retailer sold the goods to the consumer - not the price at which the goods were offered by the manufacturer or the wholesaler. That was a practice which operated to increase the protection of domestic products. Value was sometimes determined on the basis of the value in foreign markets. But there was variation in foreign markets; and the value determined might as a result be high in some' cases. Under the United States regulations a penalty was incurred, if the declared valuation was lower than the appraised. valuation. But if the declared valuation was higher than the appraised valuation, the customs duty had to be paid on the basis of the declared valuation. LONDON E/PC/T/C.II/W.31 Page 5 There had been cases of changes of classification with respect to a product, after a treaty or trade' agreement had been entered into, which affected that product. In order to avoid frustration of the provisions of treaties or trade agreements, there might be acceptance of the view that there should be no changes of classification after an agreement or treaty had been entered into. There had been long administrative delays in connection with questions of valuation. There were cases where goods destined for a seasonal market had been held up, pending administrative action with respect to valuation, until the season was over. How could there be assurance against such delays? Arrangements to permit immediate entry of goods upon payment of bond, in cases where there were administrative delays, were not helpful, since traders could not calculate their prices for future shipments. Sometimes the importer or the exporter was not willing to accept the risks involved in agreeing to accept a future valuation. Sometimes the administrative authorities informed port authorities that a court ruling with respect to valuation should be applied only to the shipment involved in the court case and not to future shipments, since the government wished to raise a new court case. Sometimes customs authorities required confidential information with respect to formulas, costs, etc. without agreeing not to divulge that information. For example customs officials had asked for the chemical formula of a phammaceutical product. Rather than give the information, the exporter decided to abandon the market. He thought there should be some assurance that tariff concessions would not be frustrated by valuation practices of the types he had described. LONDON E/PC/T/C.II/W.31 Page 6 The CHAIRMAN observed that requirements to give formulas of pharmaceuticals might be necessary to the enforcement of health regulations. M. le BON (Belgium) requested an explanation of paragraph 2, sub- paragraph (c), of Article 12. It was his view that the conversion rate should be the official rate as defined by the exchange office in the importing country. - Mr. JOHNSON (United States) remarked that the difficulties mentioned by the Canadian Delegate' should be avoided, if possible. If they could be avoided, customs administrative staff's could eventually be reduced to a minimum. The primary purpose of administrators of customs laws in the United States was to achieve uniformity .and certainty. Hardships. would inevitably occur in specific cases which did not fit a pattern. In answer to the enquiry of the Canadian Delegate as to whether the adoption of Article 12 would require the United States to abandon any practices relating to present bases of valuation, he said that the Draft Article had been prepared in the light of United States experience. It would require the United States to abandon one basis, and to modify another basis, of valuation. "Actual value" was not "arbitrary or fictitious value". United States law required that valuation should be determined on the basis of usual wholesale quantity in the country of expert. That was in practice determined by -judicial decision, and not by administrative practice. No certain uniform result could be prescribed by 'statute. As an example he cited imports into the United States of bàllbearings from Sweden. The Swedish market was relatively small, and usual wholesale quantities were therefore very small. Quantities sold to the United States were much larger. Nevertheless the smaller wholesale quantity of the country of origin would govern the valuation. LONDON E/PC/T/C.II/W.31 Page 7 Mr. KEMP (Canada) pointed out that judicial decisions might have combined to bring about certain conditions, which other countries would regard as being in conflict with the Charter. Could anything be done in. such circumstances? Mr. JOHNSON (United States) replied that the Charter provided for consultation between members, and for adjustment of inconsistencies through an International Trade Organization. He referred particularly to ArticIe 30. Mr. KE MP (Canada) asked whether the situation brought about by United States lews and decisions was in conformity with the proposed Charter. Mr. JOHNSON (United: States replied that the United States did not expect the Charter to aliminate every complaint of every exporter or importer against the customs administration of member countries. It was hoped that the objectives would be substantially met by the statement of ethical principles embodied in paragraph 2 of Article 12. Mr. KEMP (Canada) reverted to the example cited previously by Mr. JOHNSON of ball-bearing exports from Sweden. If it happened that ball-bearings were sold in Sweden in lots of 1, would that be acceptable as a basis for duty valuation? Swedish exporters would be at a serious disadvantage in competing with a United States manufacturer of ball- bearings who could sell in large quantities. Would the Charter clarify that cause for dispute? Mr. JOHNSON (United States) replied that it was thought the Charter would eliminate that point, although it would not remove all other causes of complaint. Mr. MORTON (Australia) asked whether, in the example of the ball-bearings, an importation by the Ford Motor Company would be valued on the basis of the "usual wholesale quantity" in the country of origin. Mr. JOHNSON (United State) replied that that was the position at the moment, but it would cease to be so under legislation now contemplated. LONDON E/PC/T/C.II/W. 31 Page 8 The United States requirement for duty valuation based on goods being "freely offered for sale" was the subject of many judicial decisions. In his opinion, the decision had carried the law far beyond its original purposes. The United States proposed that values should be based on the usual course of trade, including customs restrictions on values now eliminatedl the courts. Mr. RHYDDERCH (United Kingdom) referred to the reclassification of items which served to raise import duties even after those duties had been bound by agreement. The United Kingdom tariff guarded against such a situation. He felt there should be no question of difficult cases which required submission to Customs Courts in the United States. He asked if the statement of the United States Delegate regarding "actual value" meant "actual price charged under any conditions". If that was the meaning, it would be contrary to the United Kingdom legal definition of value, and he could not accept it. He suggested a formula to meet the difficulty, namely the deletion of sub-paragraphs (a) and (d) of paragraph 2 and the substitution of, the following as sub-paragraph (a): "Where an actual price of imported products is not accepted as the basis for detemining their value for duty purposes, their assessed value should not be based on arbitrary or spurious (or fictitious) valuations but should satisfy clearly defined and stable conditions which conform with commercial usage". Mr. JOHNSON (United States) defended United States practice in imposing penalties for under-valuation and for giving no allowance for over-valuation. Those were administrative devices which ensured importers' co-operation with customs officials. Where no gross negligence or intention to defraud was evident, penalties for under-valuation were remitted. Ample opportunity was afforded importers to avoid overvaluation. LONDON E/PC/T/C.II/W. 31. Page 9. There were two aspects of the question of change in classification after the giving of a concession under a trade agreement. The first was a real change in classification. He cited as an example the concession on fresh endive in the trade agreement between the United States and the Belgo-Luxembourg Customs Union, which was accorded on the basis of an understanding that the proper classification was "fresh vegetables not specially provided for". An importer brought an action to show that the product of Belgium was crude chicory dutiable under a different classification at a lower rate. The importer's action was sustained, and the product re-classified. A change in classification also resulted from a difference of opinion between customs administrative officers and importers. That difference of opinion would always exist, and the right to exercise it could not easily be withheld. Administrative delays in determining tariff valuations were evils to recognize. They existed because customs officials did not have all the necessary facts immediately on hand. He had proposed legislation whereby an importer could choose between having goods valued immediately or awaiting a correct and proper valuation. The legislation included a provision for an undertaking by the importers not to contest the value established. That legislation was not favoured by traders and he knew of no other proposal to make. Mr. KEMP (Canada) referred to a Treasury Decision that had been rendered after six years. Could nothing be done to prevent such undue delays? Mr. JOHNSON suggested that the Canadian Delegate should examine the cases in which delays had occurred. He would find that the importer and his attorneys were really responsible for such delays. LONDON E/PC/T/C.II/W.31. Page 10. 2. Next Meeting of Sub-Committee Thursday 7 November at 3 p.m. The Chairman indicated that the United States Delegate would continue his replies to questions asked during the meeting. The meeting rose at 1 p.m.

GATT Library

xr244dk7342

Committee II. Technical Sub-Committee. : First Meeting Held on Monday, 28 October 1946 at 3 p.m

United Nations Economic and Social Council, October 29, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

29/10/1946

official documents

E/PC/T/C.II/W.2 and E/PC/T/C. II/W/2-31

https://exhibits.stanford.edu/gatt/catalog/xr244dk7342

xr244dk7342_90210288.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL LONDON RESTRICTED AND ECONOMIQUE E/PC/T/C.II/W.2 29 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE First Meeting Held on Monday, 28 October 1946 at 3 p.m Chairman: Mr: VIDELA (Chile) The CHAIRMAN opened the meeting by welcoming Dr. SPEEKENBRINK (Netherlands), Chairman of Committee II, who had kindly offered to. assist him in his many duties as Chairman of the Technical Sub- Committee. 1. Records of the Technical Sub-Committee The CHAIRMAN proposed that a restricted circulation of the records of the meetings of the Technical Sub-Committee should be made to members of the Sub-Committee, as well as to members of other interested Committees. The proposal was adopted. 2. Discussior of the Agenda The Committee proceeded to discuss the provisional agenda. Mr. CHERRY (South Africa) suggested that discussion of items A.3 and A.10 of the provisional agenda should be postponed till a later date, suitable notice of which should be given in order to enable his alternative delegate to replace him. Mr. MORTON (Australia) felt that items A.2 to 10 of the provisional agenda could be discussed in their present sequence, provided that the Delegates were given one day's notice. LONDON E/PC/T/C.II/W. 2 Page 2 Mr. RHYDDERCH (United Kingdom) supported the Australian proposal. Vicomte du PARC (Belgium) reminded thc Committee that it had been previously suggested that Delegates should hand in their suggestions to a Rapporteur, who would prepare a resume, in English and French, of the various points of view and proposed amendnents, in order to expedite the work of the Sub-Committee. He felt that one Rapporteur would be unable to deal with The volume of work, and suggested the appointment of two, or possibly three, Rapporteurs. The CHAIRMAN agreed with the Belgian representative's suggestion. Mr. NEHRU (India) thought that only points upon which agreement of disagreement existed should be reported, leaving the draftting to a late date. Mr. ROUX (France) and Mr. JOHNSON (United States) were appointed as Rapporteurs to the Technical Sub-Committee. The CHAIRMAN pointed out that the Sub-Committee had before it documents submitted by the Australian, Brazilian, Frenci Indian, Norwegian, South African, and United Kingdom delegations, which should provide ample material for discussion. He then called on Mr. JOHNSON (United States) to give his views in explanation of the separate Articles. 3. General discussion of National Treatment on Internal Taxation and Regulation. Mr. JOHNSON (United States) said that A.2, which was the first item on the proposed Agenda, was Article 9 of the Charter. This Article had been discussed in the main Committee (Committee II) where it had been tentatively agreed to delete the words "by or" in order to limit the provisions of the Article to goods used by the Government itself. In other words these provisions would not apply to goods purchased by governmental agencies for re-sale. Mr. ROUX (France) thought that a separate Article should be provided in the Charter to cover all matters concerning purchases 1 LONDON E/PC/T/C.II/W.2 Page 3 by governmental agencies. He felt that this would be preferable to having such provisions included in several parts of the Charter. The CHAIRMAN stated that the Drafting Committee of the Sub- Committee on Procedure was drafting on public purchase provisions, and that rapporteurs of the Technical Sub-Commiittee could always consult with the said Drafting Committee. He suggested that the present discussion should not include consideration of the question of purchases by governmeental agencies. This procedure was agreed. Mr. ROUX (France) asked the United States Delegate to explain paragraph 2 of Article 9 of the Charter concerning internal taxation. Mr. JOHNSON (United States) replied that paragraph 2 of Article 9 stated the principle that taxation should not be used for protective purposes. The member government would be under an obligation not to use taxes for such purposes, and would endeavour to keep states and lower governmental units from so doing. Mr. RODRIGUEZ (Brazil) agreed with the principle set forth in paragraph 2 of Article 9. Brazil, he said, had internal taxes which appeared to be discriminatory, since the tax on a finished domestic product was lower than the corresponding tax on an imported product. Such discrimination was more apparent than real, however, since the raw and semi-finished materials used in or in connection with, the manufacture of the domestic product were likewise taxed. In short, a domestic product might be taxed in several ways, while an imported product was only subject to one tax. He stressed the difficulties of countries like Brazil which were dependent for revenue on widespread consumption tacxes. But Brazil would follow the United States lead as far as possible. Mr. SIM (Canada) drew attention to an apparent contradiction between paragraphs 1 and 2 of Article 9. The first would apparently LONDON E/PC/T/C.II/W.2 Page 4 prohibit different treatment of domestic and foreign goods with respect to internal taxation and regulation. The second appeared to condone present differences of treatment. He understood the American Delegate to have said that the second paragraph related mainly to secondary goverrments over which the central government lacked authority. He asked the American Delegate if his understanding was correct. Mr. JOHNSON (United States) said that it was. Mr. SIM (Canada) added that Canada agreed that internal taxes should not be used for protection. Mr. NEHRU (India) understood that paragraph 1 of Article 9 would apply mainly to merber (central) government, while paragraph 2 would apply to state, provincial, or local governments. He spoke of the difficulty of determining what was, or was not, a "like product' within the meaning of paragraph 1. Would for example whisky manufactured in India and whisky imported into India be considered as like products ? He agreed fully with the principle that internal taxes should not be impose for the purpose of protection; but he felt that there should be no objection to such discrimination, if its purpose was the raising of revenue. He felt that the Article should be amended in such a way as to take this distinction into account. Mr. JOHNSON (United States) said that the Delegate for India had correctly understood the different applications of paragraphs 1 and 2. With respect to the problem of defining "like products", he felt that there would have to be a developments of "case law". In the case put by the Delegate for India, he would say that, if there was a substantial difference in the prices of domestically produced and imported whiskies, a difference which had not been caused by discriminatory taxes, it might be fair to consider that the two LONDON E/PC/T/C.II/W. 2 Page 5 whiskies were not like products. An amendment on the lines suggested by the Indian Delegate would, in any case, be quite proper, if the Committee agreed. Mr. VAN DEN BERG (Netherlands) said that he had not interpreted paragraphs 1 and 2 in the same was as the American Delegate had, It had seemed to him that both paragrapha dealt with obligations of both central and local governments. He f elt that competitive products were not the same as like products. If a country produced product A, but not. product B, the two products being similar but not the same, it might wish to place an internal tax on B so as to protect A. The purpose of paragrapth 1, as he understood it, was to prohibit higher taxes on imported products than on like domestic products, while the purpose of paragraph. 2 was to guard against the more concealed types of discriminatory taxation. Mr. JOHNSON (United States) said that the practices described by the Netherlands Delegate would be prohibited by the two paragraphs of the Article. Competitive articles should not be charged higher taxes to prevent their importation. Of course, it would be hard to determine whother A and B were, or were not, competitive. The purpose of the two paragraphs was to provide, in so far as possible, against internal taxation being used as a means of protecting domestic industries. He pointed out that in several countries it would be constitutionally impossible to control the actions of states and other lower taxing authorities. Hence paragraph 1 could not have the full scope which the Netherlands Delegate attributed to it. Mr. ROUX (France) was surprised at the interpretation which had been given to paragraph- 2. The distinction between national and lowen governmental units did not seem to be apparent in the LONDON E/PC/T/C.II/W.2 Page 6 two paragraphs. The second paragraph appeared to be based on the decision of the 1927 Economic Conference that internal taxes should not be used to protect domestic products from competition of foreign products. If such a provision was to be included in the Charter, it should cover all governments, central and local. By a series of examples he emphasized the complexities which were involved. In the case of coffee Brazil, which produced coffee, could not impose a higher tax on imported coffee than on domestically produced coffee. If Czechoslovakia, which produced no coffee, were to impose an internal tax on coffee, it would have the same effect as a customs duty. France could not impose a tax on coffee, unless it placed a similar tax on chicory, a competitive product. Therefore he felt that the Charter should follow the principle that no tax should be imposed on foreign products unless similar products were produced domestically. There should be no distinction between levels of government. If such distinctions had to be accepted, the national government should be prohibited from charging higher taxes on foreign products than on domestic products. Local govérnments should not be permitted to impose new discriminatory taxes; and an end should be made of all existing discriminatory taxes. Mr. RHYDDERCH (United Kingdom) said that the United Kingdom agreed generally with Article 9, but felt that the wording of the first sentence of paragraph 1 should be extended to refer to "internal taxes and other internal charges imposed on, or in connection with, like products ...." He suggested that the word "exhibition" should be deleted from paragraph 1 of Article 9. Films had to be dealt with on a different basis from other goods because important factors, other than purely commercial, were involved. Films should. be dealt with in separate LONDON E/PC/T/C.II/W.2 Page 7 bilateral negotiations. Mr. MORTON (Australia) described measures which the Australian Government had taken with respect to alcohol and tobacco. Australia required that imported petrol should be mixed with alcohol, produced domestically from wheat. Tobacco manufacturers, whose products contained fifteen per cent of Australian tobacco could import foreign leaf tobacco at a lower rate of customs duty, He asked the United States delegate whether these practices would be considered inconsistent with the provisions of Article 9. Mr. JOHNSON (United States) said that the requirement that domestically produced alcohol should be mixed with imported petrol would constitute a violation of Article 9, since it would reduce the part played by an imported. commodity in the domestic economy. The practice of inducing tobacco manufacturers to mix domestic with foreign tobacco was not so objectionable as the regulation concerning mixing alcohol with petrol; but it was inconsistent with the objective of Article 9, if not directly contrary to its terms, since it was an effort to interfere with the use of a foreign product. Mr. JOHNSEN (New Zealand) said that New Zealand did not discriminate against foreign goods. He felt that the wording of paragraph 1, preventing internal taxes "higherr than those imposed on like products of national origine", would cause difficulties with respect to New Zealand's film (cinema) rental tax. The former import duty on foreign films had been given up and replaced by a system o? imposing an internal film rental tax. The wording of paragraph 1 would require the abolition of the tax, since New Zealand had no domestic film industry. Furthermore, Empire films. had enjoyed an internal tax preference, which paragraph 1 would automatically eliminate altogether; and New Zealand could not obtain any concessions in return for giving up the preference. LONDON E/EC/T/C.II/w. 2 Page 8 He described regulations in his country with respect to the mixing of domestic products with imported products (tobacco, wool packs, unassembled automobiles). He felt that these regulations were not restrictive of trade, and that there should be an exception to the, last sentence of paragraph 1 permitting regulations of this type, providing that the country imposing them consulted with the International Trace Organization. The CHAIRMAN suggested that the rapporteurs, with the help of the Secretariat, should analyse the proposals submitted by various delegations and the discussion which had taken place, and prepare two summaries - one to deal with questions in connection with the general principles set forth in Article 9, the other to cover the problem of exceptions from the general principles. Any further written statements of delegations should be submitted by the evening of 29 October. Dr. SPEEKENBRINK (Netherlands) felt that the experience of the Sub-Committee on Procedure had shown that summaries of the type suggested by the Chairman would be extremely useful. The Chairman's suggestion was agreed to. Mr. CHERRY (South Africa) agreed with the principle of non- discrimination in internal taxation. He asked whether the term "transportation" as used in paragraph 1 of Article 9 referred to facilities, rating, or both. There would appear to be some overlapping with paragraph 4 of Article 10. He said that South Africa had special arrangements with contiguous areas whereby traffic going to such areas got special treatment. Effectuation of the requirements of article 9 with respect to transportation would vary in different countries, according to vrhether reailways were state-owned or privately owned. LONDON E/PC/T/C.II/W.2 Page 9 He called the attention of the Committee to the existence of discriminatory sea freight rates, under which similar goods were carried equal distances at different rates, according to the zones of transit. Sometimes higher rates were charged for relatively short distances. He hoped the Sub-Committee could suggest ways to bring about more equitable rating. It was understandable that a central government might not be able to control taxation practices of state and local governments. He noted that paragraph 2 was intended to stop local governments from applying further discriminatory taxes; he wondered, however, how the central government could prevent local governments from imposing future discriminatory taxes if it was unable to persuade them to terminate old ones. That was a very important problem, because discriminatory imposition of internal taxes might nullify a tariff reduction. Mr, RODRIGUES (Brazil) felt strongly that the special problems of less developed countries ought to be taken into consideration in the provisions of the Charter with respect to internal taxation. Brazil had regulations on the subject of mixing, the purpose of which was to increase the production of domestic products. He did not feel that such requirements were undesirable in cases of certain basic products. The last sentence of the first paragraph of Article 9 wvas too far- reaching and should be replaced by sone simpler provision, which would take the special problems of undeveloped countries into consideration. Mr. VAN DEN BERG (Netherlands) said that the delegations of the Netherlands and Belgium-Luxembourg agreed with the principle embodied in Article 9. There was need -for exceptions in the case of certain regulations concerning mixing and films. The essential was that the provision should be really reciprocal. If states or local governments within a federal state could retain and maintain existing discriminations, other nations would not really be gettiing LONDON EC/T/C.II/W. 2 Page 10 reciprocal treatment. If possible, all discriminations, whether by central, state, or local governments sould be dealt with on the same basis. If this was impossible, state and local governments should certainly be prevented from establishing new discriminations. He felt that the Charter should provide a time limit, within which members would be required to abolish discriminatory taxes and practices. Since some countries had depended hitherto on internal taxes for the protection of domestic industries, he wondered whether such taxes could not be replaced by new or increased import duties. The expression "products cf any Member country" at the beginning of paragraph 1 did not seem to him quite clear. He thought it might be replaced by the expression "products originating in a Member country." There was also need of clarifications in Article 8. The French delegation had already proposed new wording for Articles 8 and 9. Mr. ROUX (France) pointed out that the purpose of the French proposal, referred to by the Netherlands' Delegate, was to limit the benefits of most-favoured-nation treatment te goods actually originating in Member countries, and to prevent such treatment from being accorded to goods which, while having their origin in non-member states, were trans-shipped from member states. France had suggested the requirement of a certificate of origin. The CHAIRMAN suggested that at its next meeting the Sub-Committee should finish its discussion of Item A-2 of the agenda; and proceed with the discussion of A-3 and A-4. It might also be possible to discuss the provisions of Article 9 with respect to regulations governing purchases by goevernmental agencies. After considerable discussion of possible ways of speeding up the work of the Sub-Committee, it was agreed to proceed, as had been suggested by the Chaiman, and to meet again on 31 October 1946 at 10.30 a.m. The meeting rose at 6.50 p.m.

GATT Library

yz079vm7860

Committee II. Technical Sub-Committee. : Fourth Meeting Held on Tuesday, 5 November 1946 at 3 p.m

United Nations Economic and Social Council, November 6, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

06/11/1946

official documents

E/PC/T/C.II/42 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/yz079vm7860

yz079vm7860_90210251.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.II/42 ECONOMIC CONSEIL 6 November 1946 ORIGINAL: ENGLISH AND ECONOMIQUE SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE Fourth Meeting Held on Tuesday, 5 November 1946 at 3 p.m. Chairman: Mr. VIDELA (Chile) 1. Discussion of Article 10 of the Suggested Charter Mr. JOHNSON (United States) said that it had been suggested that paragraph 5 of Article 10 should be separated from the rest of Article 10 for purposes of discussion on the grounds that that paragraph did not deal directly with the question of transit. He felt however that the paragraph should be discussed in connection with Article 10. Mr. ROUX. (France) thought that discussion of paragraph 5 should be postponed, since it covered matters not falling within the subject of transit. Paragraph 5 dealt with the question of treatment to be accorded to products by the importing country after transit had been completed. It was agreed to discuss the provisions of Article 10 in the order in which those provisions had been dealt with in the report of the Rapporteurs (E/PC/T/C.II/W.11). Mr.NEHRU (India) said that the principle underlying article 10 was that there should be no discrimination as between traffic of domestic products and foreign products in transit. He suggested that paragraph 1 should be amended to read: "There shall be freedom of transit through member countries for the products of other members via such routes as may be open to traffic in products of like kind and quality of national origin." LONDON E/PC/T/C.II/42 Page 2. Mr. JOHNSON (United States) said that the amendment proposed by the delegate for India would greatly limit the scope of the paragraph. Mr. NEHRU (India) asked for a definition of the expression "routes most convenient." Mr. JOHNSON (United States) replied that the expression would be interpreted in accordance with the basic principle of the Charter which was non-discrimination. The question of protection for national interests could best be dealt with in Article 32. Mr. ROUX (France) pointed out that under the Barcelona Convention if a particular means of transportation was not available there would be no obligation to provide it. Mr. Van Den BERG (Netherlands) thought that the provisions of Article 2, paragraph 1, of the Barcelona Convention, signed by twenty- five countries, should be inserted in the Draft Charter. Mr. JOHNSON (United States) suggested that the suggestion of the Netherlands (and Belgium) should be referred to the drafting committee. Specific enumeration was a drafting matter. Mr. Van Den BERG (Netherlands) replied that he was concerned about matters of principle, not just drafting. The Suggested Charter had made no mention of the Barcelona principles of non-discrimination and facilitating traffic. Mr. JOHNSON (United States) called attention to the table in the Rapporteur Report which compared the provisions of Article 10 with those of the Barcelona Convention. The Sub-Committee might report to the main Committee (Committee II) that certain delegates had proposed inclusion of provisions similar to those of the Barcelona Convention. At the request of the Delegate for India, Mr. Van Don BERG (Netherlands) read a list of nations adhering to the Barcelona Convention. Mr. RHYDDERCH (United Kingdom) felt that there was no reason for concern if the Charter did not override or abrogate the Barcelona Convention. LONDON E/PC/T/C.II/42 Page 3 The CHAIRMAN suggested that some general reference to the Barcelona Convention might be made in the first paragraph of Article 10. Mr. JOHNSON (United States) felt that the Sub-Committee should record the views of the various Delegations. The drafting committee would take such views into account. Mr. Van Den BERG (Netherlands) thought that inclusion of the Barcelona principles would make the Charter more complete and precise. He hoped that the Sub-Committee could agree to the principle of incorporating as many of the Barcelona principles as were agreed to into the Charter. The Delegates for France, Belgium, Czechoslovakia, and Cuba supported the position taken by the Delegate for the Netherlands. It was agreed that the matter should be left to the drafting committee, which would give due consideration to the desire of the Netherlands, France, Belgium, Czechoslovakia, and Cuba that principles of the Barcelona Convention which were generally agreed to should be incorporated into the Charter. Mr. MORTON (Australia) said that he assumed that the expression "or similar charge" in paragraph 2 did not include harbour dues or wharfage rates. Mr. JOHNSON (United States) said that the expression referred to by the Australian Delegate relating to transit charges and not to charges imposed in connection with arrival. Matters of port handing were outside the scope of paragraph 2. It was not the intention to give a special preference or exemption to transit merchandise. Mr. CHERRY (South Africa) asked whether a stamp duty on a transit bill of entry would be prohibited. He thought this point should be made clear in paragraph 2. Mr. ROUX (France) pointed out that Article 3 of the Barcelona Convention did not permit any confusion on this point. It permitted LONDON E/PC/T/C.II/42 Page 4. taxes only to cover the cost of administration. Mr. NEHRU (India) wondered whether paragraphs 2 and 3 were consistent; the former provided that traffic in transit should be exempt from various taxes and charges; the latter, that charges should be reasonable. Mr. JOHNSON (United States) said that paragraph 2 related to special taxes on transit activities. Paragraph 3 related to normal charges (e.g. charges of state-owned railways) and charges imposed to meet costs cf administration. Mr. NEHRU (India) said that India collected a customs deposit on goods in transit at the time such goods entered the country; the deposit was refunded when the goods left the country. Was that permissible under paragraph 2? Mr. MA (China) asked if a high transportation charge on goods in transit would be considered reasonable, under paragraph 3, if the charge was no higher than that charged on the transportation of domestic goods. Mr. JOHNSON (United States) said that it was conveivable that a rate on goods in transit might be considered unreasonable even if it was no higher than the rate charged on domestic goods. But in most cases it would be difficult to maintain that a rate was unreasonable, if it was no higher than that applied to domestic goods. Mr. JOHNSEN (New Zealand) was surprised that the United States Delegate had interpreted "all charges" to apply to freight rates of government-owned railways. Mr. JOHNSON (United States) said that paragraph 3 would clearly prevent unreasonable discriminatory rates on fareign goods in transit. Non-discrimination would generally be the best test of reasonableness. Mr. ROUX (France) thought that the Article should provide, as the Barcelona Convention did, that tariffs should be such as to facilitate transit. LONDON E/PC/T/C.II/42 Page 5 Mr. CHERRY (South Africa) said it should be made clear tht all the charges referred to in paragraphs 2 and 3 were transit charges. Mr. JOHNSON (United States) replied that the objective of the Charter was to eliminate trade restrictions, and that therefore paragraph 3 should be applicable to transportation charges by government-owned railways. In unreasonable charge, even if non- discriminatory, would obstruct trade. Mr. Van Den BERG (Netherlands) agreed with the United States Delegate. He pointed out (in connection with paragraph 4) that there were certain conventions relating to simple formalities with respect to goods in transit through the Netherlands and from Germany to the sea. The Charter should not suspend or modify these conventions. Mr. JOHNSON (United States) replied that, if traffic over the particular routes in question was open to products of aIl countries on the same terms, regardless of whether it was, or was not, likely that other countries would take advantage of such terms, there would be no conflict with paragraph 4. Mr. CHERRY (South Africa) said that South Africa had presented a reservation with respect to that paragraph in paper W.9. Mr. MORTON (Australia) thought that paragraph 5 should be considered in connection with the discussion of the most-favoured- nation provisions of the Charter and the question of the terms "country of origin" and the "country of exportation." Mr. MA (China) suggested the following amendment at the end of paragraph 5: "Provided that the products which have been in transit can be identified at their destination to the satisfaction of local customs authorities as to their origin or country of export." Otherwise, China was agreeable to the basic principle of the paragraph. Mr. SIMS (Canada) thought that the point ot the Chinese Delegate. LONDON E/PC/T/C.II/42 Page 6 was well taken. Because of the provisions of paragraph 6, there might be considerable delay before goods finally arrived at the importing country. That might cause considerable administrative difficulty. Canada extended a preference to British goods which were shipped direct to Canada. He asked whether that preference would be reserved for negotiation. Mr. ROUX (France) thought there could be no agreement on paragraph 5 at present because of the differences in the legislation and admin- strative regulations of the various Member countries. The question should be referred to the drafting committee. Mr. MORTON (Australia) said that in view of existing preferential arrangements Australia could not agree to paragraph 5, unless it was understood that the goods in question had not entered into the commerce of a third country. Mr. JOHNSEN (New Zealand) supported the position taken by the Australian Delegate. Goods could be considered in transit, for purposes of preferences, only if they were originally destined for the importing country. Mr. JOHNSON (United States) described the "foreign trade zone" at New York. When goods entered the zone, there was no requirement that their ultimate destination should be disclosed. He asked the Australian and New Zealand Delegates whether goods, which had been in the zone, would be considered to have entered the commerce of the United States? Mr. MORTON (Australia) answered in the affirmative. Under Australian practice, it had to be established that it was the intention to ship the goods to Australia by the most convenient route, if possible on a through bill of lading. To set preferential treatment, goods had to be in the process of transit from the tire of their exportation. Mr. RHYDDERCH (United kingdom) said that the position of the United LONDON E/PC/T/C.II/42 Page 7. Kingdom was very similar to that of Australia. Mr. SIES (Canada) also supported the answer which the Australian Delegate had given to the question asked by the Delegate of the United States. Mr. JOHNSEN (United States) outlind the present practice of the United States with respect to the question of origin: 1. For purposes of granting most-favoured-nation treatment, the United States recognized the origin of the goods, regardless of where the goods had been; 2. With respect to the according of preferential rates to Cuban products, the United States recognized Cuban origin if the goods hadn't entered the commerce of a third country; 3. With respect to valuation of goods for duty, the United States applied the same doctrine of origin as had been described by the Australian Delegate. Mr. MORTON (Australia) said that the Australian direct transit requirement applied only to the preferential arrangements. Mr. JOHNSON (United States) suggested that the Sub-Committee should draft a report on paragraph 5 of Article 10, to be submitted to the drafting committee of the Conference next Spring. The report should state that paragraph 5 in its present form presented special difficulties for countries with preferences and for countries having ad valorem'bases for determining valuations for duty. If the same procedure was adopted with regard to paragraph 6 of Article 10, it should be remembered that that paragraph provided the definitions for paragraphs 1 - 4 of the Article. Suggestions made with respect to paragraph 6 would thus be relevant to paragraphs 1 - 4. . Mr. NEHRU (India) said that he had not yet received a reply to his question with respect to paragraph 2. In his opinion the Sub-Committee should confine its consideration to general principles. LONDON E/PC/T/C.II/42 Page 8 Mr. Van Den BERG (Netherlands) said that the Netherlands had preferential arrangements which gave rise, in connection with the transit provisions of the Charter, to difficulties much the same as those already described by the Delegates of Australia, Canada, New Zealand, and the United Kingdom. Mr. JOHNSON (United States) in reply to the question asked by the Indian Delegate, said that the Indian requirement for a customs deposit did not violate the spirit of paragraph 2. Mr. MORTON (Australia) thought that problems raised in connection with paragraphs 5 and 6 related only to the administration of preferential arrangements. The difficulty might be met by adding the following clause to paragraph 6: "Nothing in paragraphs 5 and 6 of this Article shall be interpreted to preclude the right of any Member to determine the procedure for the entry of goods under existing preferential arrangements." The CHAIRMAN felt that the Sub-Committee should not try to draft specific amendments. He did not think that further discussion of paragraph 5 was necessary. Mr. JOHNSON (United States) suggested that Delegations might wish to submit written statements of their views with respect to the paragraph; such views would be covered in the Sub-Committee's report. Mr. ROUX (France) agreed that the report of the Sub-Committee should indicate that there were differences of view with respect to paragraph 5. Mr. NEHRU (India) said that the specific reservations of the Indian Government with respect to the deletion of the word "persons" from paragraph 6 had not been recorded in the report of the Rapporteurs. Mr. JOHNSON (United States) said that the draft report had been prepared before the change of procedure had been agreed upon by the Heads of Delegations. Mr. SIMS (Canada) assumed that it would be reported that the LONDON E/PC/T/C.II/42 Page 9 Sub-Committee had agree that the word "persons" would be deleted from paragraph 6. The CHAIRMAN said that the report should indicate that the Delegate for India had reserved his opinion. Mr. JOHNSON (United States) said that in view of the agreed change of procedure, the Rapporteurs would prepare a new report to take the place of the present one. Mr. LOPES RODEIGUES (Brazil) called attention to the words "and other means of transport" in paragraph 6, and said that consideration should be given to the fact that another organization had responsibilities with respect to aviation. Mr. JOHNSON (United States) understood that the Sub-Committee would recommend unanimously that aircraft should be excepted from Article 10. 2. Discussion of Article 17 on Boycotts Mr. JOHNSON (United States) stated that the Rapporteurs had prepared a report on Article 17, summarising the various points of view of the Delegations. That report had not yet been circulated. Several countries had asked whether Article 17 was intended to forbid governmental support of campaigns to encourage the use of somestic products. He said that the Brazilian, Norwegian, Netherlands and Belgian Delegations thought that campaigns to promote the buying of national products should not be objected to. Lebanon considered boycotts for political or moral reasons justifiable, and Chile wanted cases which might be considered as boycotts to be more clearly defined. Australia would not agree with Article 17, unless it was clearly indicated that the prohibition was only against Government action towards support of boycotts. India thought that boycotts would only prevail under a rigidly controlled import system. India would not accept this portion of the United States proposal, unless it was confined to boycotts directed against the state with which it had trade relations. Mr. MORTON (Australia) felt that the term "political entities", as LONDON E/PC/T/C. II/42 Page 10 used in Article 17, was not clear. He doubted whether any government should be asked to take measures to discourage campaigns by such vague groups as "political entities" Mr. JOHNSON (United States) explained that what was meant by that expression was subsidiary governments. Mr. SIM (Canada) thought that that was a matter for the Drafting Committee, as it arose throughout the Charter. Mr. Van Den BERG (Netherlands) asked whether a national campaign to encourage national production would be contrary to Article 17. Mr. JOHNSON (United States) replied that he was sure that the intention of Article 17 was to preclude governmental support of 'buy domestic" campaigns. Mr. SIM (Canada) felt that in that case there would be general dissent from the Article. He had understood the intention of the Article to be to prevent governmental support of campaigns for discrimination against any particular country. He wanted to know if a government could keep a law on its statute books, the effect of which was to advocate buying domestic". Mr. JOHNSON (United States) replied that the question was answered in Article 9 of the Charter tits reference to "laws and regulations governing the procurement by governmental agencies of supplies for public use". Mr. LOPES RODRIGUES (Brazil) did not think the Charter ought to prohibit campaigns of the type prevalent in Brazil, which emphasized the value of domestic products. Mr. MORTON (Australia) askcd if a "Use More Wool" campaign would be interpreted as an effort to boycott foreign cotton goods. Mr. JOHNSON (United States) replied that governmental support of a campaign directed to induce consumers to use domestic wool instead of foreign cotton would be contrary to the Charter. Mr. MA (China) expressed his personal view that weaker countries LONDON E/PC/T/C.II/42 Page 11 should be allowed to resort to boycotts as a means of self-defence. Mr. CHERRY (South Africa) said that South Africa desired to reserve her position. Mr. JOHNSON (United States) stated that, as the Sub-Committee was so strongly in favour of permitting governments to support "buy domestic" campaigns, a report to that effect should be submitted to Committee II. Mr. CEBERIO (Cuba) was in agreement with the Article as drafted. He supposed that Article 17 only provided that governments should not encourage "buy domestic" campaigns. Governments would not be required to suppress spontaneous boycotts. Mr. JOHNSON (United States) agreed with the Delegate of Cuba. He did not think that any government would be required to take steps to suppress spontaneous or private boycotts. The Sub-Committee agreed that a report should be drafted indicating that the Sub-Committee was of opinion, Cuba and the United States dissenting, that government support of campaigns to promote consumption of domestic products should not be prohibited under Article 17. 3. Date of next meeting The Committee agreed to hold its next meeting on Wednesday, 6 November, 1946, at 10.30 a.m. The meeting rose at 6.10 p.m.

GATT Library

dn745qb7720

Committee II. Technical Sub-Committee. : Ninth Meeting held on Wednesday, 13 November 1946 at 10.30 a. m

United Nations Economic and Social Council, November 13, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

13/11/1946

official documents

E/PC/T/C.II/50 and E/PC/T/C. II/48-54/Rev. 1

https://exhibits.stanford.edu/gatt/catalog/dn745qb7720

dn745qb7720_90210262.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/50 13 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE Ninth Meeting held on Wednesday, 13 November 194.6 at 10.30 a. m. Chairman: Mr. VIDELA (Chile) 1. Discussion of Article 13 The CHAIRMAN called upon Mr. Sim (Canada), Rapporteur of the Technical Sub-Committee, to answer questions cn the Rapporteurs Report on item A/6 of the provisional agenda, covering Article 13 (Customs Formalities). Mr. SIM (Canada) said that several Delegates had suggested that Article 13 should be reviewed in the light of the Geneva Convention of 1923 on Customs Formalities. The Frerch Delegate had even contended that the Article would be superfluous, if all countries were to adhere to the Convention. There was general agreement that subsidiary fees and charges should not be used as indirect protection for domestic products. The Netherlands Delegate and the Belgo-Luxembourg Delegate had proposed that a definite date should be fixed for implementing the measures referred to in the Article. Australia and New Zealand had suggested that countriesshould not be required to review the whole of their customs procedure, except in cases where a specific request from another Member country for the review of a particular law or laws was made. Several Delegates had objecteced any international agreement to impose penalties for clerical errors or, errors not involving bad faith. LONDON E/PC/T/C.II/50 Page 2 They did not wish to undertake a binding obligation which might prove embarrassing to their officials. There was general disagreement with the second sentence of paragraph 3 on the grounds that a government could not be held. responsible for the acts of its servants. The Brazilian Delegate had requested more detailed information on the question of subsidiary fees and charges. The United Kingdom Delegate had raised a qustion regarding Consular transactions; and the Australian and Canadian Delegates had proposed to omit the final sentence of paragraph 3 of Article 13. Mr. KENNDY (United States) wished to insert the word "subsidiary" in paragraph 4. The paragraph would then read: "The provisions of this Article shall extend to subsidiary fees, charges, formalities ..." As to paragraph 4(a), the term "Consular transactions" covered Consular invoices and all other documents involving the payment of fees. He had no Objection to a further definition of the words "Consular transactions", should that be desired. He thought the principle underlying the last sentence of pragraph 3 of Article 13 was sound. The United States Delegation would not agree to the deletion of that sentence. Mr. RHYDDERCH (United Kingdom) considered the last sentence of paragraph 3 thoroughly dangerous, and pressed for its deletion. He would be satisfied with paragraph 4(a), if a further definition of the words "Consular transactions" was included. Mr. MORTON (Australia) supported the United Kingdom Delegates proposal to delete the last sentence of paragraph 3. Should it be deemed necessary to retain that sentence, he suggested that the word "should" should be substituted for the word shall. LONDON E/PC/T/C.II/50 page 3 He thought that customs laws and regulations should be review- ed only where representations had been made by a Member country. Mr. CHERRY (South Africa) agreed with the Australian Delegate' s suggestion regarding customs laws and regulations. He thought that paragraph 3 of Article 13 should be couched in more general terms. The Sub-Committee agreed to the deletion of the last sentence of paragraph 3 of Article 13, the United States Delegate dissenting (The United States Delegate was for the retention of the above- mentioned sentence, but vas prepared to accept the substitution of the word "should" for "shall".) Mr. LE BON (Belgium) drew the attention of the Committee to the first sentence of paragraph 3 of Article 13. He asked for a revision of the sentence, as he considered the words "good faith" to be dangerous. 2. Discussion of article 32 - General Exceptions to Chapter IV The CHAIRMAN welcomed the presence of Dr. Speekenbrink, Chairman of the Procedures Sub-Committee and Mr. Leddy, Rapporteur of the Procedures Sub-Committee. Mr. ROUX (France), Rapporteur of the Technical Sub-Committee, drew; the attention of the meeting to E/PC/T/II/W.20 in which had been clearly set out the views submitted in writing by the various Deleates in regard to Article 32. He pointed out that the BraziIian proposal that "the Charter should not apply to frontier traffic or in the cse of Custoins unions" was a question related to the applica' tion of most-favoured-nation treatment. As French Delegate, he wished to associate himself with the contention of the Netherlands and Belgian Delegates that "exceptions such as (b) are often used for indirect protection". LONDON E/PC/T/C.II/50 Page 4 The CHAIRMAN suggested that the Brazilian preposal should be dealt with under Article 33, which did not come within the competence of the Technical Sub-Committee. Dr. SPEEKENBRINK (Chairman of the Procedures Sub-Committee) urged the meeting to keep in mind the provisions of articles s 29; 30 and 55, paragraph 2, during its discussion of Article 32. Secondly, he urged the meeting to differentiate between temporary and permanent exceptions to Chapter IV. The proposals of the Chinese Delegation were for temporary exceptions, and as such ought to be dealt with under article 29, or better, Article 55, paragraph 2. The proposal of the Netherlands and Belgian Delegates should be discussed in connection with the provisions of Article 30. In regard to the Indian proposal, he thought that the ITO should only regulate the exchange of goods. In reply to Mr. Johnsen (New Zealand), he said that final decision on Article 19, paragraph- 2, had not yet been reached. Mr. JOHNSEN (New Zealand) pointed out in reference to sub- paragraph (j) of Article 32 that it would not be advisable to differentiate between natural and manufactured products that were exhaustible. A country might have valid reasons for desiring to curtail the exportation of manufactured products in short supply, Article 30 certainly provided for Members entering into negotiations in regard to that matter; but he felt that it should be specifically laid down that no Member country should be compelled to export both manufactured and natural products which it wished to conserve for domestic purposes. It was obvious that no country would restrict its export trade except for valid reasons. He there- fore proposed to amend the wording of sub-paragraph (j) to read - "relating to the conservation of exhaustible natural or other "resources..." LONDON E/PC/T/C.II/50 Page 5 Mr. GANGULI (India) reminded tho meeting of his suggestion that there should be allowances for abnormal measures for political reasons to meet unexpecte-d contingencies. He could not agree that India's efforts to attain autonomy should be shackled. In reference to sub-paragraph (f) he questioned. whether silver should be excepted. in the same way as gold. Unless silver became a currency basis again, it remained an ordinary commodity. As such it ought not to be included in the list of exceptions. He proposed the deletion of sub-paragraph (j). He felt that his country might have to conserve for domestic use its exhaustible and scarce resources, ever if such a measure was not "pursuant to international agreements", or was not "mace effective in conjunction with restrictions on domestic production or consumption". Mr. SIM (Canada) agreed with Article 32 in general, but thought that another sub-paragraph should be added to except measures "relating to the importation of goods, the manufacture of which is not permitted in the importing country." He reminded the meeting that the Rapporteurs' report on Article 14 referred to the exceptions contained in Article 32 as covering the proposals of the French, Cuban, and Czechoslovakian Delegates for the protection of national and regional marks of origin. He himself felt that such protection was adequately provided for in sub-paragraph . (g), but suggested that this was the right time for other Members to comment on this subject. LONDON E/PC/T/C.II/50 Page 6 Mr. CHERRY (South Africa) felt that the exceptions laid down in sub-paragraph (b) were rational but were open to wide abuse, and technical advantage might be taken of these exceptions so as to result in a form of protection. He was not prepared to contradict the statement of the Chairman of the Procedures Sub-Committee that the provisions of Article 30 dealt adequately with this question; however he thought that provision to prevent abuse of these exceptions ought to be included in Article 32. Mr. LEDDY (Rapporteur of the Procedures Sub-Committee) stated that one of the main objectives of article 30 was to prevent evasion of the provisions of Chapter IV. If a Member country used the exceptions of sub -paragraph (b) as a means of protection, Article 30 provided that another Member right make representations to the ITO and so obtain satisfaction. It was almost impossible to draft exceptions which could not be abused, if good faith was lacking. The League of Nations had adopted. an Article on the lines of article 30, precisely because they had been unable to formulate exceptions which would exclude all possibility of abuse. Mr. LOPES RODRIGUES (Brazil) was willing that his suggestion that the Charter should not apply to frontier traffic or in the case of custons unions should be dealt with under Article 33.- He agreed with the Netherlands and Belgian proposal contained in E/PC/T/C.II/W.20. He seconded the New Zealand Delegate's proposal for the addition of the words "or others" in sub-paragraph (j). LONDON E/PC/T/C.II/50 Page 7 Mr. RHYDDERCH (United Kingdom) agreed that it had been the practice in international agreements to include such exceptions as those laid down in Article 32, but only exception to provisions on import prohibitions and restrictions. The exceptions of Article 32 covered a far wider field. In order to prevent abuse of the exceptions of Article 32 he proposed that the following sentence should be inserted as an introduction: "The undertakings in Chapter IV of this Charter relating to import and export restrictions shall not be construed to prevent the adoption or enforcement by any Member of the following measures, provided that they are not applied in such a manner as to constitute a means of arbitrary discrimination between countries where the same conditions prevail, or a disguised restriction on international trade. He deprecated the suggestion of the New Zealand Delegate that the exception contained in sub-paragraph (j) should be widened to include manufactured products. Dr. SPEEKENBRINK (Chairman of the Procedures Sub-Committee) and Mr. BAYER (Czechoslovakia) agreed to the introduction to Article 32 proposed. by the United Kingdom Delegate, and also to his remarks in regard to sub-paragraph (j). Mr. LE BON (Belgium) agreed with the United Kingdom Delegate, but thought it would suffice to lay down that Member countries must not use the exceptions as a means of economic protection Mr. JOHNSEN (New Zealand) agreed with the introductory sentence proposed by -the United Kingdom Delegate, but pointed out that its adoption would make it all the more necessary to extend sub-paragraph (j) to include manufactured products. LONDON E/PC/T/C.II/50 Page 8 Mr BAYER (Czechoslovakia) interpreted the exceptions contained in sub-paragraph (g) as demonstrative, and therefore covering measures relating to state monopolies as measures not inconsistent with the provisions of Chapter IV. As the maintenance of such monopolies was materially recognized and fully dealt with in Section F of Chapter IV, he merely wished to make this formal statement during the discussion of Article 32. Mr. LEDDY (Rapporteur of the Procedures Sub-Committee) thought such interpretation correct. Mr. ROUX (France) agreed with the Czechoslovakian Delegate's statement on monopolies, and pointed out that the Canadian Delegatets suggestion that an extra sub-paragraph be added to include measures "relating to the importation of goods, the manufacture of which was not permitted in the importing country" covered the point. He commented on the relation of Article 32 to Articie 14. The Report on Article 14 dealt with three different questions: (a ) the Charter itself and where it was necessary to have Marks of Origin, (b) the reservation of the absolute right to refuse products falsely marked, and (c) the reference to Article 32 in regard to protection of national and regional Marks of Origin, Neither Article 14 nor Article 32 sub-paragraph (g) covered specifically such protection. Article 32 dealt only with exceptions in which certain restrictive measures were allowed. Therefore, althought was possible for a country under the provisions of Article 32 (g) to protect national and regional Marks of Origin, he felt that Article 14 was the correct place to include the French proposals on the protection of national and regional Marks of Origin, as such proposals did not constitute exceptions to the provisions of Chapter IV. LONDON E/PC/T/C.II/50 Page 9 Mr. GANGULI (India) thought it advisable to include both "natural and other exhaustible resources" in sub-pararaph (J), but reminded the meetingg that his own suggestion had been for the deletion of the whole of sub-paragraph (j). Dr. SPEEKENERINK, Chairman of the Procedures Sub-Committee, remarked that the exceptions contained in sub-paragraph (j) had always been found useful in deliberations of the Frecedures Sub- Committee. However, rather than extend sub-paragraph (j) to such an extent as almost te nullify the provisions of Chapter 4, it would be preferable to delete it, and leave: Article 55 to cover the cases at present provided for in sub-paragrarh (j). Mr. LEIDY, Rapporteur of the Procedures Sub--Committee, in reply to the Canadian Delegate, agreed that the words "deceptive practices" in sub-paragraph (g) -were broad enough to cover cazes of false mark- ing. He felt that the Sub-Committee would need to study very care- fully the implications of the Canadian- Delegate's proposal to include as exceptions "measures relating to the importation of goods, the manufacture of which is not permitted in the importing country". Mr. MORTON (Australia) asked what provision -the Canadian Delegate proposed in regard countries prohibiting the importa- tion of products, the manufacture of which was permitted in the importing country. Mr. LEDDY, Rapporteur of the Procedures Sub-Committee, suggested the approval in principle of the introductory sentence to Article 32 proposed by the United Kingdom Delegate, subject to further study of the wording. The present wording should be checked to ensure that it did not run counter to provisions laid down elsewhere. LONDON E/PC/T/C.II/50 Page 10 He enquirerd if it was agreed to deal with the Chinese Delegate's observations contained in E/PC/T/C.II/W.20 under Articles 55 and 29. Mr. MA (China) replied that he could only deal with the question after consultation with the Chinese representative on Committee V. The meeting rose at 12.50 p.m. LONDON E/PC/T/C.II/50 Page 11 COMMITTEE II. TECHNICAL SUB-COMMITTEE The Ninth meeting (continued) held on Wednesday, 13 November 1946 at 3 p.m. Chairman: Mr. VIDELA (Chile) 1. Discussion of Proposed Amendment to Article 32. Mr. II (China) referred to the amendment to Article e 32 proposed by the Chinese Delegation. That amendment proposed to provide an exception for measures "temporarily imposed to prevent, arrest or relieve conditions of social disturbance, natural calamity, or other national emergencies, provided that such measures are withdrawn as soon as the said conditions cease to exist." The Netherlands Delegate had susggested that the Chinese proposal should be dealt with in connection with Article 55. But the Chinese Delegation felt that their amendment should be included in Article 32. They did not wish to create difficulties for the Conference. The exception, for which the amendment provided, would benefit-other countries as -well as China. China would not necessarily make use of the right which the amendment would provide. China wished to co-operate with all nations in efforts to reach the objectives set forth in the Charter. But China had difficulties, difficulties (as he believed) of a temporary nature, which made it necessary that China should have time in which to make certain adJustments. This need for time was reflected in a number of suggestions made by the Chinese Deleation with respect, to various Articles of the Charter. He was confident that China would overcome its difficulties, as she had done at many times durin- her long history. China had always followed the "golden mean" and would not go to extremes. LONDON E/PC/T/C.II/50 Page 12 It would not be possible in cases of emergency to follow the procedures envisaged in paragraph 2 of Article 55. Accordingly China pressed for consideration of the Chinese amendment in connection with Article 32. The CHAIRMAN asked whether the Provisions of Article 29 would meet the Chinese requirements. Mr. MA (China) reiterated that the Chinese proposal should come under article 32. whether the Sub-Committee accepted, or rejected his proposal, he wanted it to be recorded in the Sub-Committee's Report. The CHAIRMAN indicated that under the new procedure which had been accepted the Chinese proposal would be included in the Report. 2. Discussion of the Report of the Rapporteurs on Article 114. The CHAIRMAN asked whether the Committee wished to discuss the Report of the Rappqrteurs on Article 14 (E/PC/T/C.II/W.46). Mr. SHACKLE (United Kingdom) did not feel that it would serve any useful purpose to revive discussion of the Article. He suggested. that, if delegates desired changes in or addition to, the Report, they should submit their suggestions in writing to the Rapporteurs. Mr. ROUX (France) said that the French Delegation had. submitted an amendment to Article 14. Since it had been submitted only recently, it was understandable that the Rapporteurs had not been able to embody it completely in the Report. LONDON E/PC/T/C.II/50 Page 13 The last paragraph of the Report did take some note of the French position; but -that paragraph was confusing in that it dealt with two separate matters. The first of these, relating to the deliberate -use of false names, should properly be dealt with in Article 32. The second, relating to protection of geographical or regional marks of origin, should be dealt with in Article 14. He hoped the Report would take that distinction and the French proposal into account. The CHAIRMAN felt that the matter of protection of regional and national marks of origin should be dealt with through bilateral negotiations rather than in the Charter. Alternatively, it might be considered by a special conference on trade marks. He referred to his own past study of the problem, and gave a number of examples to illustrate the complexities which were bound to arise in the consideration of the protection of regional and national marks of origin. Mr. RHYDDERCH (United Kingdom) agreed that the matter was one for bilateral agreements. Mr. ROUX (France) pointed out that France had agreed to protect the names of certain Portugese wines. He thought that there should be a provision in the Charter encouraging fair practices with respect to regional and national marks of Origin. He could not admit that the question should be dealt with in bilateral agreements rather than in the Charter. The, whole purpose of the Charter was to deal with trade matters on a multilateral rather than a bilateral basis. At least the principle of protection of names of origin should be incorporated into the Charter, even though the formulation of more specific provisions might have to be postpened. LONDON E/PC/T/C.II/50 Page 14 Mr. SIM (Canada), although expressing sympathy for the French position, felt that it would not be feasible to work out provisions for effective protection of names of origin in the Charter, Accordingly he supported the view of the United Kingdorn Delegate: but he thought at the same time that the Report should give due emphasis to the Prenchposition. Mr. BAYER (Czechoslovakia) associated himself with the views of the French Delegate. If Article 14 of the Charter dealt only with obligatory marks of origin, and not with regional and national marks of origin, it would not be complete. The CHAIRMAN agreed with the Canadian Delegate that the views of the Delegates for France and Czechoslovakia should be put on record, The Report of the Rapporteurs was approved for submission to Committee II, with the understanding that it could be amended so as to include a statement of the views of France and Czechoslovakia. 3. Discussion of Rapporteurs' Report on Article 17, Boycotts. Mr. RHYDDERCH (United Kingdom) Rapporteur, asked whether the Report on Article 17 (E/PC/T/C.Il.43) expressed the delegates' views correctly. Mr. MORTON (Australia) said that the Report was in accordance with his understanding, of the discussion, except in the last sentence. It was his recollection that Mr. Johnson (United States) had stated that the phrase "political entities" referred only to local or subsidiary governments. He (Mr. Morton) suggested that the sentence should read: "The phase 'political entities' was clarified in the sense that only action boy local or subsidiary governments is contemplated in this sentence." Mr. Sim (Canada) said that Mr. Johnson had suggested that the phrase subordinatee jurisdictions" should replace "political entities" in order to make the meaning completely clear. LONDON E/PC/T/C.II/50 Page 15 Mr. MORTON (Australia) indicated that he was satisfied with that change. Mr. OFTEDAL (Norway) said that the Report met the views of the Norwegian Delegation. 4. Discussion of Rapporteurs' Report or article ll, .Anti-dumping and. Countervailing Duties The following corrections and amendments were made in the Report on Article 11 (E/PC/T/C.II/W.47): Proposal by the Delegate of New Zealand - Page 3 Line 16, substitute "reserved" for "insured". Line 17, insert "immediately" after "duties", Proposal by the Delegate for India - Page, 4 Line 18 substitute "Trade Organization" for "Chamber of Commerce" Line 19, add the following sentence water "definition.": "India also referred to the difficulty of ascertain- ing costs of production for purposes of anti-dumping." Proposal by the Delgate for South Africa - Page 4 Line 31, delete the phrase "to ten per cent". Proposal by the Delegate for France- Page 4 Line 32, the sentence beginning on that line to read: "France thinks the allowance should be ten per cent (of the IMF position)." Mr. LE BON (Belgium) desired to make a change in the Summary Record of the Sub-Committee's meeting of 8 November 1946 (E/PC/T/ C.II/48). On page 9, lines 11 and 12, the term "export duties" should be changed to "drawbacks". LONDON E/PC/T/C.II/50 Page 16 5 Discussion of Rapporteur's Report on Article 12, Tariff Valuation. Mr. MA (China) asked the Rapporteurs to add to their Report (E/PC/T/C.II/W.52) the statement that the Chinese Delegation reserved its position with respect to sub-paragraphs (a) and (c) of paragraph 2 of Article 12. Its views had been stated in E/PC/T/C.II/35. Mr. JOHNSEN (New Zealand) proposed to omit the reference to New Zealand in line 22 of page 2 of the Report. He further wished to amend the sentence beginning on line 13 of page 4 so as to read: New Zealand uses an assessed domestic value in the country of export, where no other value can be ascertained.;' Mr. HUTCHINS, Secretary, stated that the Delegate for India wished the reference to india to be omitted in line 22 of page 4. of the Report. The CHAIRMAN suggested that, as soon as French-speaking Delegates had had an opportunity to review the Reports on Article 12 (E/PC/T/C.II/ W.52) and Article 11 (E/PC/T/C.II/W.47) in the French, they should immediately call the Rapporteurs ' attention to any changes they desired to make. 6. Discussion of Sub-Committee's Report to Committee II. and Next Meeting of Sub-Committee. Mr. RHYDDERCH (United. Kingdom) said he had told Dr. Coombs, Chairman of Committee II, that the Technical Sub-Committee would complete its work at the-present meeting and that its final report would be completed by monday, 18 November. That would entail a great deal of work by the Rapporteurs,. including the review of all reports submitted by the various Delegations. Mr. SIM (Canada) felt that thc Rapporteurs had fairly represented the various points of view which had been brought out in the discussions, and suggested that the Vice-chairman of the Technical Sub-Committee should work with the Rapporteurs in the preparation of the Report. LONDON E/PC/T/C.II/50 Page 17 Mr. CHERRY (South Africa) asked whether the Sub-Committee would have an opportunity to review the Report before it was submitted to Committee II. Mr. RHYDDERCH (United Kingdom) felt it would be more satisfactory if members of the Sub-Committee had an opportunity to see the final draft which h the Rapporteurs would prepare for Committee II. It was therefore agreed to meet on Friday, 15 November, at 3 p.m. 7. Votes of Thanks At the suggestion of the CHAIRMAN, it was agreed to send. a telegram or letter to Mr. JOHNSON (United States) to express the thanks of the Sub-Committee for his contribution to its work. Mr. SIM (Canada) proposed, and Mr. MA (China) seconded, a vote of thanks to the CHAIRMAN, and paid tribute to his splendid work in presiding over the meetings of the Sub-Committee. The meeting rose at 6 p.m.

GATT Library

ww972mn6996

Committee II. Technical Sub-Committee. : Second Meeting held on 31 October 1946 at 10.30 a.m

United Nations Economic and Social council, October 31, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

31/10/1946

official documents

E/PC/T/C.II/W.5 and E/PC/T/C. II/W/2-31

https://exhibits.stanford.edu/gatt/catalog/ww972mn6996

ww972mn6996_90210290.xml

GATT_156

United Nations Nations Unies ECONOMIC AND SOCIAL COUNCIL CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C. II/W.5 31 October 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE Second Meeting held on 31 October 1946 at 10.30 a.m. Chairman: Mr. VIDELA 1 Adoption of Agenda The CHAIRMAN stated that the Agenda for the Sub-Committee consisted of: (a) Further consideration of Article 9. National Treatment of Internal Taxation and Regulation. (b) Consideration of article 10. Freedom of Transit. (c) Consideration of Article 11. Anti-dumping and Countervailing Duties. The Sub-Committee, adopted this Agenda. 2. Further Consideration of Article 9. National Treatment of Internal Taxation and Regulation The CHAIRMAN called upon the Rapporteur to make his report. Mr. ROUX (France), the Rapporteur of the Technical Sub-Committee, stated that: (a) The rapporteurs had met on 30 October 1946, and considered all available meterial. An earlier meeting was impossible because the Secretariat had not received material LONDON E/PC/T/C. II/W. 5 Page 2 from delegations or the summary report from the precis writers. In view of the comprehensive character of the summary report of the Sub-Committee meeting on 28 October 1946 (document E/PC/T/C. II/W. 2), the rapport eurs had no further surgery of the Committees discussions. (b) The rapporteurs had prepared a new draft of Article 9, which they believed reflected the views,expressed at the Sub-Committee meeting of 28 October 1946 and the written views submitted by several delegtions, and which seemed to be generally acceptable and consistent with the objectives of the priparatory meeting. (See and of report). (c) As directed by the Sub-Committee all references to government purchasing,of supplies was omitted from the draft on the assumption that this would be restored Later or covered elswhere. (d) The Netherlands Delegate as well as the Delegates of Australia and Brazil, had proposed that a period of time should be followed for suppression of discriminatory practices now applied by member governments. No such provision was included in the draft because it was believed that the period before an affective charter came into force should be ample for this purpose. (e) Brazil had proposed that more simple language be used. It was believed that the committee discussions fully justified the further expansion of Article 9 as 'submitted by the rapporteurs. (f) Numerous special exceptions proposed by various delegates in committee discussions or in the presentations of written LONDON E/PC/T/C/.II/W.5 Page 3 views had been carefully considered and excluded from the draft for various reasons, primarily because it was believed that the statement of general ,principles should not be obscured by exceptions most of which were, of a minor character and many, directly inconsistent with the apparently accepted purpose of the Preparaxtory Committee. Also excluded was the suggestion of severl delegates that the ITO be empowered to sanction special exceptions. The French proposal to except state monoplies, for example, was omitted because provisions relating to state monopolies more properly bolonged to another section of the Charter. (g) Particular consideration had been given to the insertion at the end of the suggested new praragraph 2 of the following exceptions: (i) the exhibition of imoported cinema films may be permitted to such extent as may be nccessary to protect national cultural objectives in the importing country. (ii) requirements that particular imported. products be combined or mixed with particular domestic products may be enforced only to such extent as may be necessary to promote the developmeont of a basic industry in the importing country, and only if an adequate counter-benefit, such as a reduction in, or exemption from, customs duty, be afforded the imported product to which the requirement applies. It was believed that exception (i) apparently being of interest to only one country, could best be accomplished, if LONDON E/PC/T/C. II/W. 5 Page 4 finally insisted upon, by a reservation, and that (ii) was inconsistent with the objectives being considered by the Sub-Committee and would introduce internal matters into the field of tariff bargaining. (h) The rapporteurs had drafted the new Article 9 to express more clearly and concisel;y the contents of paragraph 2 of Article 9 as it appeared in the Draft Charter, and to emphasize the point that the lack of control of a central government over subsidiary governments within its territory was not to be used as an escape front the obligations of such central government. The draft was as follows:- ARTICLE 9 NATIONAL TREATMENT ON INTERNAL TAXATION AND REGULATION 1, The products of any member country imported into any other member country shall be exampt from a internal taxes and other internal charges of any character whatsoever higher than those imposed directly or indirectly on identical or similar products of national origin. 2. The products of any member country imported into any other member country shall be accorded treatment no less favourable than that accorded identical or similar products of national origin in respect of all internal laws, regulations or requirerments affecting their sale, offering for sale, transportation distribution or use of any kind whatsoever. The provisions of this paragraph shall be understood to preclude the application. of internal requirements restricting the amount prproportion of an imported. product permitted to LONDON E/PC/T/C,II/W. 5 Page 5 be mixed, processed, exhibited or used. 3. The members agree that neither internal taxes or other charges nor internal laws, relations or requirements should be used to afford protection directly or indirectly for any national product. 4. Each member agrees that it will take all measures open to it to ensure that the objectives of this Article are no impàired in any way by taxes, charges laws, regulations or requirements of subsidiary governments with the territory of the member government. Mr. JOHNSON (United States) pointed out that owing to difficulties in obtaining the exact equivalent in the French translation, the rapporteurs had used the phrase "directly or indirectly" in their new draft of Article 9 in place of the phrase "in connection with", suggested by the United Kingdom Delegate. The CHAIRMAN thanked Mr. ROUX (France) and Mr. JOHNSON(United States) for their report. He suggested that the Sub-Committee should adjourn for a few minutes to consider the report. Mr. MEHRU (India) asked that the memorandom of the Indian Delegation (E/PC/T/C.Il/W.3) circulated that during, should be withdrawn as he intended to circulate a revised version. Mr. VAN DEN BERG (Netherlans) and Mr. ROUX (France) urged postponement of this item until the next meeting, so that the Sub-Committee might have time in which to consider the report of the rapporteurs,. The Sub-Committee agreed to postpone consideration of Article 9 - National Treatment on InternaI Taxmtion and Regulation - until the next meeting, it being .understood that it would be placed first on .the agenda of that meeting. LONDON E/PC/T/C.- II/'W. 5 Page 6 3. Article 10 - Freedom of Transit Mr. VAN DEN BERG (Netherlands) stated that he and also other delegates had submitted written proposals on this subject. Provided the rapporteurs took these documents into consideration, he would not reiterate his proposals at the present meeting. Mr. CHERRY (South Africa) welcomed this suggestion, but wished to bring out particular points, which were not containd in the document that he himself had submitted. The Sub-Commiittee proceded to discuss paragraph 1 of Article 10. Mr. NEHRU (India) accepted the general principles of the paraggraph. However he thought that the phrase "routes most convenient for international transit" should be more clearly defined, as the present draft appeared to lay down that such transit rust go by direct route, oven when famine or flood required the use of alternative routes. He suggested the phrase "by routes open to like kind of domestic products" which would maintain the principle of non-discrimination between domestic and foreign products. Mr. JOHNSON (United States) thought that the language of paragraph 2 clearly did not imply the maintenance of transit against human necessities. The wording "by routes open to like kind of domestic products"would not provided for non-discrimination in regard to products not produced in the country of transit. He suggested thaat an explanatory note to paragraph 1 on the lines of the Inaian Delegate's suggestion might best be appended to the Article. Mr. RODRIGUES (Brazil) strongly supported the first five paragraphs of Article 10, but reserved his position until paragraph 6 had been discussed. LONDON E/PC/T/C. II/W.5 Page 7 Mr. SIM (Canada) proposed, in accordance with the French member's original suggestion, that the Sub-Committee should first discuss paragraph 6 and then take: the first five paragraphs in order. Paragrfaph 6 gave a definition of what constituted u c - in transit, and it vas only logical to discuss that definition first. Mr. ROUX (France) said that his proposal was merely in regard to form, as the definition came first in the Barcelona Convention. Mr. VAN DEN BERG (Netherlands), Mr. MORTON (Australia) and Mr. JOHNSEN (New Zealand) seconded the proposal of the Canadian Delegate. The Sub-Committee proceeded to discuss paragraph 6 of Article 10. Mr.. LOPEZ RODIGUES (Brazil) asked if the word "vessels" applied to aircraft. Mr. JOHNSON (Uniteed States) replied that the phrase "other means of transport" covered aircraft; however, he suggestud that all reference to air transport should be deletcd from this paragraph, as a United Nations Organization, PICAO, had already been established to deal with this subject. He further pointed out thât paragraph 6, of Article 10 had been taken in entirety from the Barcelona Convention. Mr. Si, (Canada) agreed that reference to air transport should be excluded from ,Article 10. He further su ggested the deletion of the word persons". The Charter dealt vvith goods, and reference to persons was out of place in that connection. Mr. VAN DEN BIRG (Netherlands), Mr. MORTON (Australia) and Mr. JOHNSEN (New Zealand) also urged the deletion of the word persons". The transit of persons and also their bagage should LONDON E/PC/T/C. II/W. 5 Page 8 be governed by the immigration laws of the countries concerned. The present wording would mean that countries would have to grant freedom of transit to criminals etc. Mr NEHRU (India) asked if there was an international convention dealing with the transit of persons. Mr. JOHNSON (United States) answered that he knew of no convention dealing with persons and their baggage. He had no strong objection to the deletion of the words "persons-and their baggage but suggested that this phrase be retained, as it nerely guaranteed protection of persons and their bagage, which would help countries ; with a tourist trade, and the exceptions in Article 32 provided for the protection of public normals, health and security from criminals etc. Mr. LOPEZ RODIQUES (Brazil) agreed with the Unitdd States Delegate. The title of Article 10 expalined the reason for including persons; the Article dealt with freedom of transit,. not with the movement of population. Mr. TUNG (China) supported the New Zealand Delegate on the ground that freedom of movement for persons and baggage was provided for in commercial treaties, and both therefore should be specified in the Charter. l. ROUX (France) feIt that the question of baggage was the important one he would agree to exclude the referonce to persons from the Article. Baggage was goods passing through a country, whether accompanied or not. He must insist upon the inclusion of the reference to baggage. Article 1 of the Barcelona Convention mnentioned ''freedom of transit", and Article 5 provided ae follows:- LONDON E/PC/T/C. II/W. 5 Page 9 "No Contracting State shall be bound by this Statute to afford transit for passengers whose admission into its territoriesis forbidden other on gounds of public health or security, or as a prcaution against disensee of animals or plants. Each Contracting State shall: be entitled to take reasonable precautions to ensure that persons are really in transit, as well as to ensure that ,passengers in transit are in a position to complete their journey." Mr DANNEVIG (Norway) asked that copies of the Barcelona Convention should be distributed among members of the Sub-Committee. Mr. NIEHRU (India) supported the request of the Norwegian Delegate. Some countries might the wods represented by baggage, but take measures to prevent the entrafce of persons. The point involved was an important question of principle; and both persons and baggage should be mentioned in the Article. He queried whether "baggge'' and "goods" were identical terrs, and suggested that the inclusion of baggage, coupled with the exclusion of persons, might raise administrative difficulties. Mr.MORTON (Australia) supported the United States Delegate. The word "persons" might have been included with the perfectly Iigitinate object of precludin, the continue. imposition by some countries of a poll tax on persons in transit. Every country was is .protected against the entry.of undesirable persons. The inclusion or deletion of the word was not of great moment. Mr. ROUX (France) had no objection to the inclusion of the word "persons", since it was used in the Barcelona Convention. He suggested that the Sub-Committee should ask the rapporteurs to LONDON E/PC/T/C. II/W.5 Page 10 draw up a compaison between the United States Draft Article and the Barcelona Convention. That was the procedure adopted. by the Sub-Committee on Procedures. Mr. JOHNSON (United States) pointed out that Article 32 (g) provided adequate, safeguardsto covers legislation relating to immigration, health, public safety, etc. Mr. DANNEVIG (Norway) and Mr. BAYER (Czechoslovakia) pressed the request that the rapporteurs should be asked to corporate the texts of the Draft Article and the BIrcelon Convention, for lnter study by thé Sub-Committee. Mr. RHYDDERCH (United Kingdom asked whether the adoption of Article 10 would in effect cancel the Barcelona Convention. The CHAIRMAN suggested that all should keep) in mind the fact that the Sub-Committee was only preparing the present subject for inclusion on the. agenda for the Conference in.1947. Mr. VAN DEN BERG (Netherlands) felt that a comparison of the two texts vvould be useful. They should be identical to avoid different intrpretations. The CHAIRMAN suggested that the question of the relation of the Barcelona Convention, as well as ther international conventions, to the proposed Charter of the International Trade Organization was one which should be reffred to the Plenary Committee or to the Committee composed of the Chairman of the five Committees. The United States in presenting the Draft Charter for consideration probably expected that it would supersede conventions already in force. The suggeestion before the Sub-Committee was whether the rapporteurs should be requested to coment on the subject. LONDON E/PC/T/C. II/W.5 Page 11 Mr. JOHNSON (United States).bhought that consideration of the subject was not a proper function other of the rapporteurs or of the Sub-Committee. It was the function rather of the drafters of the Charter next year and of cach signatory country. `The rapporteurs might compare the two toxts. He doubted the wisdom of doming more, It would set a bad precedent. Mr. TUNG (China) suggested that the freedom of movement of persons should be covered by laws and commericial treaties. If used in the Article the reference to persons might be misconstrued. It should be defined carefully. Mr. ROUX (France) felt that a comparison of the two texts would be useful. It might be countended that signatories of the Baroclona Convention could not adhere to another convention on the same subject. If the references were identical it was possible that no difficulty would occur. The CHAIRMAN called attention to the general exceptions provided for in Article 32(d), and pointed out that persons were not included. He suggested that the word "persons' might be removed from paragraph 6 of Article 10, or added to Airticle 32(d). were persons excepted in other parts of the Draft Chartur? Mr. JOHNSON (United states), replying to the Chinese Delegate, pointed out that Article 32(e) afforded complete opportunity for the adoption of all measures regarded as necessary for the protection of national interests in time of war or other national emergency. Mr. TUNG (China) felt that the article, as at present worded, would permit the right of transit by a foreign military force. Mr, SIM (canada) sugested that the references to a militairy force gave point to his suggestion for dropping the reference to LONDON E/PC/T/C. II/W. 5 Page 12 persons in the Article. As technical experts on customs matters and related subjects, the Sub-Committee would be going far afield if it continued to discuss a term so anomalous in a commercial convention. He suggested that the word be dropped in order to shorten the debate. The CHAIRMAN, speaking as the Delegate for Chile, referred to the transit arrangement his country had with Bolivia, and reserved his Governrent's right to consider parraph 4 of Article 10 in the light of that arrangement. Mr, JOHNSON (United-States) sugested the deletion of the word "persons", since the only purpose of the United States in including it in the Draft Article, and the only interest of the Sub-Committee in retaining it, was to make paragraph 6 conform with the related Article in the Barcelona Convention. The CHAIRMAN, spenking as the Delegete For Chile, referred to the difficulties which might arise in connection with requirements for special in-transit documents for persons, and seconded the proposal of the United States Delegate. Mr. NEHRU.(India) reserved the right to return to the question of other safeguards for persons. Mr. BAYER (Czechoslovakia) asked that the rapporteurs should be directed to compare the draft text with the Barcelona Convention, and ascertain to what extent the latter could be included in the draft text, Mr. ROUX (France) pointed out that bath Bolivia and Chile had signed the Barcelona Corrention, and referred to the provision therein for the contracting of regional agreements relating to transit, If the draft text was more restrictive, signatory LONDON E/PC/T/C, II/W.5 Page 13 countries would have to renounce the Barcelona Convention. Mr. JOHNSEN (New Zealand) understood the Delegate for India as recording his dissent to the omission of the word persons. He, (Mr. Johnson) for his part, was in favour of omitting the word. The omission would not change the sense of the Article materially. The Article was intended as a statement of the fact that goods are in transit when they follow a certain procedure,. After several further general remarks, the CHAIRMAN declared the discussion closed. He asked for a vote by a show of hands on the proposal by the Indian Delegate that Iconsideration of Article 10 should be postponed until the respective Delegations has had time to compare the wording of the Draft Charter with other international conventions. There were two votes in favour of this proposal. The CHAIRMAN asked the Sub-Committee to vote by show of hands on the proposal of the United States Delegate that the word "persons" be deleted from paragpaph 6. There were nine votes in favour of this proposal, and three against. Mr. VAN DEN BMG (Netherlands) asked that the Sub-Committee should vote on whether the rapporteurs should compare the draft text with the Barcelona Convention and other international conventions. The CHAIRMAN. replied that there existed a general agreement to refer the whole question to the rapporteurs for comparison with the Barcelona Convention. In answer to the. Delegate for India, he replied that members could raise the question of the inclusion of the word "persons" in the draft text at a later meeting, 4.. Date of Next Meetine of the Sub-Committee Monday 4 November 1946. The meeting. rose at 1.10 p.m.

GATT Library

kg935ct6419

Committee II. Technical Sub-Committee. : Sixth Meeting held on Thursday, 7 November 1946 at 3 p.m

United Nations Economic and Social Council, November 8, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

08/11/1946

official documents

E/PC/T/C.II/46 and E/PC/T/C. II/38-48

https://exhibits.stanford.edu/gatt/catalog/kg935ct6419

kg935ct6419_90210257.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.II/46 ECONOMIC CONSEIL 8 November 1946 ORIGINAL: ENGLISH AND ECONOMIQUE SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE Sixth Meeting held on Thursday, 7 November 1946 at 3 p.m. Chairman: Mr. VIDELA (Chile) 1. Adoption of Agenda The following Agenda was adopted: (a) Report of rapporteur of Sub-Committee on Procedures regarding Article 9 of Draft Charter. (b) Continuation of Discussion of Article 12 of Draft Charter. (c) Discussion of Article 11 of Draft Charter. (d) Discussion of Article 15 of Draft Charter. 2. Report of Rapporteur of Sub-Committee on Procedures regarding Article 9 of Draft Charter Mr. LEDDY, rapporteur, submitted the Report of the Sub-Committee on Procedures regarding Article 9 of the Draft Charter. He said that the Sub-Committee on Procedures, at the request of the Technical Sub-Committee, had considered the national and most- favoured-nation provisions of Article 9 and 8, respectively, relating to governmental purchases for public use, and had agreed that Article 9 should be modified to exclude such purchases. For the portion of the first sentence of the Article reading: "...including laws and regulations governing the procurement by governmental agencies of supplies for public use other than by, or for, the military establishment." LONDON E/PC/T/C.II/46 Page 2 the Sub-Committee on Procedures proposed to substitute: "....except laws and regulations governing the procurement by governmental agencies of supplies for governmental use and not for re-sale." The change of "for public use" to "for governmental use" was intended for clarification. The feeling cf the Procedures Sub-Committee on the subject of the proposed amendment was that the mere omission of the clause would leave doubt as to the intention of the Article, and that more specific reference to the matter was indicated and essential. 3. Continuation of Discussion of Article 12 of the Draft Charter Mr. JOHNSON (United States) continued his replies to Delegates' queries. The Canadian Delegate, he said, had fairly stated the United States practice of applying only to the particular case in litigation a decision of a Customs Court, which did not seem to interpret customs legislation in a manner allowing of the adoption of the decision as a principle. But the understanding of the Canadian Delegate that the United States Government delayed the application of a court decision was not correct. The cnly purpose cf the practice was to permit stability of the law, not to attain any particular result. A customs administrator did not say that a decision was inconsistent with legislation. He merely said that it was doubtful whether the decision was in accord with facts which could be established, or with other controlling and pertinent precedents. The right of appeal envisaged in the practice was a fundamental and desirable principle of United States law. To destroy it would cause irreparable injury. Importers in the United States availed themselves of the opportunity twenty tines to the Government's one. LONDON E/PC/T/C.II/46 Page 3 There were further factors which had to be taken into consideration in connection with the requirement for disclosure in customs documents covering shipments into the United States of information regarded as confidential. United States laws, wisely or unwisely, applied varying rates of duty in relation to the proportions of certain materials included in the product, e.g. to the amount of coper in Swiss watches, or of tungston in high grade steel tools from the United Kingdom and Sweden. To prevent the necessity for destructive analysis of imported products, sworn statements were required from importers. The disclosure of sources of supply was no doubt open to objections and he appreciated the dissatisfaction of exporters with such require- ments. But these requirements were not designed to stifle trade. They could be attributed, at least in part, to the desire of the United States to achieve accuracy, uniformity and certainty in its valuation of imported merchandise. He could not answer the query of the Canadian Delegate as to how far reciprocal agreements would be frustrated by reclassification of tariff items. He personally did not believe that any such agreements had been frustrated up to the present. The proposed Charter would no doubt require changes in United States statutory law. It s not the intention of the drafters of the Suggested Charter to impose on other countries a finalized document drawn to United States requirements, although it was of course true that the Charter had been prepared on the basis of United States experience. The important consideration was whether the comments of Delegates indicated dissatisfaction with Article 12, and whether they had any amendments to suggest. LONDON E/PC/T/C.Il/46 Page 4 Mr. KEMP (Canada) said that his purpose in raising the points he had mentioned was to indicate major difficulties in order to enable the United States to decide how they might be met. The delays in customs administrative procedure to which he had drawn attention, were not merely judicial delays. They were delays of everyday practice. As an example, he mentioned a shipment of summer dresses from Canada to the United States; which was delayed at the frontier because of administrative considerations until the summer season had passed, with the result that the exporter sustained a loss. The porter believed that the customs administrative delays had been intetitional, the motive being the protection of United States manufacturers. He himself did not necessarily endorse that view: but it was a view held by Canadian exporters. Mr. JOHNSON (United States) replied that, as every customs administrative officer present would recognize, the case cited was a case of an obstinate importer who refused to comply with regulations. The importer could have posted a bond upon the payment of a nominal fee to a Private company - not a government agency - which would have permitted him to import his merchandise. Turning to the request of the Belgian Delegate for an explanation of sub-paragraph (c) of paragraph 2 of Article 12, he explained that under official United States procedure the actual market rates of foreign currencies were publicly proclaimed. Several countries had two or more rates in general commercial use: and it was only right that recognition should be given to all rates utilized in order to conform to any undertaking to fix duties on actual values. An official or arbitrary rate might not reflect a transaction accurately. The United States proposes to seek authority to use an average rate, which would continue to permit the "accuracy, uniformity and certainty" so greatly desired by the United States in its Customs administration. LONDON E/PC/T/C.II/46 Page 5 Another United Nations Organization had undertaken to eliminaten multiple rates of currenncy as soon as possible. Sub-paragraph (c ) would apply only until multiple rates were eliminated. Mr. RHYDDERCH (United Kingdom) reverted to the question of the reclassification of tariff items subject to reciprocal agreements. There was, he said, no agency in the United States mid-way between customs appraisers and the customs courts, to which an appeal could be made from a decision of the appraisers. Mr. JOHNSON (United States) replied that there was no formal administrative body for that purpose; but importers had an opportunity for administrative consideration through the Collectors of Customs, the Commissioner of Customs, and the Secretary of the Treasury, an opportunity to which they frequently had recourse. Mr. RHYDDERCH (United Kingdom) stated, with respect to the requirement for revealing confidential information in customs documents, that such information was given in confidence in the United Kingdom, and was not revealed to competitors. Mr. JOHNSON (United States) thought he had dealt with that matter earlier: but He would return to the subject again, if the United Kingdom Delegate was not satisfied after perusal of the Minutes of the meting. The United Kingdom Delegate had asked whether the reference to value in Article 12 meant the price paid. It did not. Price was not value. Mr. CHERRY (South Africa) stated that South African tariff valuation was based on the current domestic value, defined as either (1) the market price at which such, or similar, goods were freely offered for sale in the country of export in the usual wholesale quantities, or LONDON E/PC/T/C.II/46 Page 6. 2. the free on board cost, whichever was the higher. In the conversion of currencies for the purpose of assessing duty, South Africa used the telegraphic transfer rate. The problem of multiple currencies was not a problem of buying rate versus selling rate. The selling rate was used to arrive it the free-on-board cost, and the buying rate to arrive at the current domestic value. Imports into South Africa sometimes required analysis but the law prohibited the divulging of confidential information. Results of such analyses were published for customs authorities only. The last sentence of paragraph 1 of Article 15 of the Draft Charter, "This paragraph shall not require any member to publish administrative rulings which would disclose confidential information, impede law enforcement, or otherwise be inimical to the public interest" seemed to cover that point. Mr. JOHNSON (United States) remarked that in the United States currency conversion rates were proclaimed every three months. If the rate varied more than five per cent from the proclaimed rate, cable transfer rates were used. Mr. RHYDERCH (United Kingdom) pointed out that the last sentence of paragraph 1 of Article 15 referred only to the disclosure of confidential information by a government. Mr. NEHRU (India) said that India had three alternative methods of arriving at duty valuation 1. Values based on invoice values, supported by documents presented by importers. 2. Values base on the market price. That was not the market price of national goods, but of like goods in the country of origin. LONDON E/PC/T/C.II/46 Page 7 3. Values based on tariff valuation. That was an arbitrary method, but was found convenient for certain types of goods. The actual value of imports over a six-month period was averaged to arrive at the "nearest ascertainable value". In his opinion, the foregoing methods fell within the terms of sub-paragraph (a) of paragraph 2, which required actual value" or nearest ascertainable value". If that opinion was confirmed, he was prepared to accept the sub-paragraph. he last part of the sub-paragraph, reading "and should not be based on the value of products of national origin or on arbitrary or fictitious valuations", seemed unnecessary. Mr. JOHNSON (United States) agreed that there was same redundancy in sub- paragraph (a) of paragraph 2, but felt it was merely a matter of drafting. He was not prepared, without much study and analysis, to pass judgement on the three alternative methods of valuation referred to by the Delegate of India in relation to the Draft Article. Two questions might be asked: 1. Were the values arbitarily arrived at? There appeared to be a wide possibility for this. The United States had four methods; but the order of their basic use was clearly specified. 2. Would not "fair value" rather than actual value" more accurately describe the third method described by the Delegate of India? The most he (Mr. JOHNSON) was prepared to say was that the three methods might not be, but probably were, in accord with the Charter. Mr. LAWRENCE (New Zealand) referred to Document E/PC/T/C.II/W.15, in which his Delegation's position was set forth. He directed the attention of the Rapporteur to the request for interpretation of the words "of the kind" in sub-paragraph (a) of paragraph 2. LONDON E/PC/T/C.II/46 Page 8 Mr. van. den BERG (Netherlands) stated that the practice of determining dutiable value in the Netherlands Indies was contrary to Article 12. Because of special circumstances relating to certain merchandise, customs authorities could not evaluate it. The Director of Finance established a valuation in accordance with information received over a past period; and all merchandise was imported at that valuation for a period of three months. Every Delegation had accepted the principle embodied in paragraph 1 of Article 12. Would it not be useful to complete it by adding a reference to taxes and charges other than customs duties? Mr. JOHNSON (United States) said that the basis for determining value used in the Netherlands East Indies seemed identical for practical purposes with that described by the Delegate of India. His own comment on it was therefore the same. He doubted whether serious complaint would arise because of it. It seemed to be a fairly fixed and stable system. Regarding the suggestion that taxes other than customs duties should be referred to in paragraph 1, he said that the United States considered all taxes levied on imported merchandise in customs custody to be customs duties no matter what they might be called. Every tax would have to be considered either an internal tax or a customs tax or duty. Mr. van den BERG (Netherlands) said that in such a case a more exact tern should be used. . All taxes imposed on imports by the Netherlands were not necessarily customs duties. Mr. ROUX (France), replying to the remark of the Netherlands Delegate, observed that the valuation upon which customs duties were assessed did not include the amount of the duties, whereas the evaluation for import taxes and internal taxes referred to in Article 9 did include the amount of the duties LONDOON E/PC/T/C.II/46 Page 9 He was in agreement with the Belgian Delegate's views on sub-paragraph (c) of paragraph 2 of Article 12, which in his view required redrafting. He pointed out that Article 12 contained no exact definition of customs value either in paragraph 1 or paragraph 2, where reference was made only to actual value. But there were two points upon which he gathered the United States was willing to amend its legislation, namely, the exclusion of the taxable value of domestic taxes repaid when goods were re-exported, and the abandonment of the idea of assessing values on the basis of prices prevailing on the home market of the country of destination. If the United States withdrew the second provision and that which prohibited the fixing of arbitrary values, Article 12 would for all practical purposes disappear. That was of importance to France, which was in the process of converting its tariff system to an ad Valorem basis, and had adopted an effective and flexible system of customs valuation. The application of that definition would differ in accordance with the undertakings given by other members and the date and method of their being put into effect. The same question arose in relation to enquiries made abroad with a view to curtailing valuations. Mr. JOHNSON (United States) remarked that the United States was at the present time strongly of the opinion that the Charter should indicate in every necessary and reasonable way that tariff valuation should not be based on the values of products of national origin or on an arbitrary LONDON E/PC/T/C.II/46 Page 10. Mr. MORTON (Australia) pointed out that the whole purpose of Article 12 was to suggest that members should undertake to work towards an understanding. It proposed to leave to an international organization the working out of the method best suited to the requirements of commerce. with reference to sub-paragraph (a) of paragraph 2, he thought that any value not in accord with domestic value must be arbitrary. It would be difficult to ascertain the exact value of foreign merchandise unless supported by documents. He suggested the omission of the word "arbitrary". Mr. JOHNSON (United States) imagined that Delegates had a general knowledge of the meaning of "arbitrary value". Mr. MORTON (Australia) referred to the question of royalties. The assessment would have to be arbitrary in that case. Mr. JOHNSON (United States) thought the Sub-Committee might reasonably include in its report a suggest n that "other taxes and charges" should be added to paragraph 1. Mr. LOPES RODRIGUES (Brazil) stated that except in a few cases no ad valorem duties were charged by Brazil. Nevertheless, the Brazilian Delegation recognized the importance of the tariff valuation suggestion made by the United States. He thought the principle should also be applied to consumption taxes, which Brazil imposed on imported merchandise. Brazil would try to impose ad valorem duties in accordance with the provisions of the Charter. Mr. MA (China) said that China must reserve its position with respect to sub-paragraphs (a) and (c) of paragraph 2 of Article 12, until it had achieved monetary stability. He pointed out that the reference to LONDON E/PC/T/C.II/46 Page 11 sub-paragraph (b) in the Report of the Rapporteurs on A-5 of the Provisional Agenda (E,/PC/T/C.II/W.16 - page 4) was incorrect. His Delegation was quite in agreement with the principles of Article 12; but his country required time for adjustment. Mr. JOHNSON (United States) pointed out that one point upon which the Rapporteurs required guidance was still before the Sub-Committee for consideration - namely, the suggestion by the Canadian Delegate that Article 12 should included a stipulation that members should review their customs laws. He felt that the undertaking in paragraph 2 to give effect to the general principles of tariff valuation would necessitate the review of laws. In fact, every Article of the Charter would entail review by members of their customs laws. Mr. SIM (Canada) suggested the inclusion of a stipulation in Article 12 similar to that in Article 13, paragraph 2, to the effort that members should undertake to give effect to the principles of tariff valuation at the earliest practicable date. Mr. JOHNSON (United States) pointed out that similar wording was included in paragraph 2 of Article 12. Mr. BAYER (Czechoslovakia) suggested that a specific time-limit should be included in Article12, as it was in other Articles, for the completion of the obligation undertaken. Mr. van den BERG (Netherlands) agreed with the Delegate of Czecho- slovakia that a definite date would be helpful. Mr. JOHNSON (United States) saw no objection to the Sub-Committee recommending the inclusion of a definite date to the drafting committee next spring: but he did not think it advisable to recommend a specific date, which could not be fixed without exhaustive study. 4. Discussion of Article Il In general comment on the Report of the Rapporteurs (E/PC/T/C.II/W.27) summarising the written views of various Delegations regarding Article 11 LONDON E/PC/T//C.II/46 Page 12 of the Draft Charter, Mr. JOHNSON (United States) said that the only observation submitted regarding countervailing duties was to the effect that dumping duties were imposed to offset foreign subsidies. In the United States draft of Article 11 the term "anti-dumping duties" was used to refer to duties imposed to offset dumping practices, by which goods were sold to the importing country at less than their fair or reasonable value. "countervailing duties" were used to offset subsidies granted by governments or private organizations in exporting countries. Mr. lc BON (Belgium) suggested the necessity of defining the word "dumping". Mr. JOHNSON (United States) said that the definition of "dumping", as understood by the United States was indicated in the definition of "margin of dumping" including in paragraph 1 or Article 11. If the price actually paid in a transaction was less than that indicated under (a), (b) or (c) of paragraph 1, it was a case of dumping. Mr. MORTON (Australia) thought other forms of dumping, such as those brought about by cheap prices, cheap freight or depreciated currencies, should be included in the term. Mr. JOHNSON (United States) said that cheap freight was regarded as a "subsidy". Mr. MORTON (Australia) replied that iron ore shipped as ballast, freight free, from Australia to England was not regarded as subsidized freight by Australia. Mr. JOHNSON (United States) said that exchange or depreciated currency dumping was a subject for consideration by another organization of the United Nations. It had been omitted from the United States draft for that reason. LONDON E/PC/T/C.II/46 Page 13. 'Social dumping" in the form of prison or sweated labour, or different standards of living might also be included in the term "dumping" but social duming was very difficult to define. It might be well, for practical purposes, to limit consideration to the general concept, and leave the more nebulous problems for later development. In practice in the United States, special problems of that kind between countries were frequently dealt with by means of bilateral agreements. The prohibition by the United States of imports made by convict labour was one slight recognition of the problem of "social duping". Mr. MORTON (Australia) said that Australia had not imposed dumping duties for fifteen years but he felt that a country should be at liberty to do so in cases not covered by Article 11. Mr. RHYDDERCH (United Kingdom) said that the United Kingdom did not impose dumping duties; and he had no definition available. The CHAIRMAN remarked that he recalled having seen a definition of dumping of British origin. Perhaps it had been prepared by the International Chamber of Commerce or the Federation of British Industries. He suggested reference to some definition in addition to that given by the United States. Possibly there was a definition by the League of Nations. Mr. le BON (Belgium) suggested that a definition should embody the concept of systematic dumping, and should not relate to a specific sale. Dumping, to be "dumping", should involve noticeable harm to the importing courntry. Mr. BAYER (Czechoslovakia) asked whether the Charter would cover a case in which a country shipped goods to another at a much lower price than that charged by a country which had originally supplied the market. Could the country originally supplying the market take steps to regain its market under the anti-dumping provisions of the Charter? LONDON E/PC/T/C.II/46 Page14 Mr. JOHNSON (United States) said it could not. The essential element of injury set forth in Article 11 would not exist. Answering the Delegate of Belgium, he suggested that sporadic dumping was act to be more injurious in particular cases than systematic dumping. The latter type would eventually establish a new price level, and therefore would cease to be dumping. However, the suggestion indicated a difference of opinion, which might receive the Sub-Committee's consideration. Mr. CHERRY (South Africa) thought that anti-dumping duties should be controlled by a competent national body, and should be reviewed before imposition. The national body should not be required to submit to supervision by an International Trade Organization. He observed that the South African definition of dumping was based upon that price at which goods were sold. A sales dumping duty was imposed when goods were apparently sold at a loss. The present Draft Charter did not provide for such a situation. While the International monetary Fund would deal with the question of depreciated currencies, some elasticity seemed to be required in the Charter. South Africa permitted a margin of five per cent in the selling price, If the difference in cost of imported and domestic goods was less than five per cent, no dumping duties were charged. South Africa had practioally eliminated dumping duties. He was apprehansive lest the lack of a time-limit in the concluding clause of paragraph 5 should prevent the International Trade Organization from forcing a country to remove an anti-dumping duty. Mr. LAWRENCE (New Zealand) submitted information with regard to the basis for the imposition of anti-dumping duties found in New Zealand customs laws: 1. If the actual selling price of the goods to an importer in New Zealand was less than the current domestic value of such goods determined in accordance with the provisions of the Act. LONDON E/PC/C.II/46 Page 15 2. If the actual selling price of the goods to an importer in New Zealand was, in the opinion of the Minister of Customs, less than the cost of production (including a reasonable profit) of similar goods in the country of origin or in the country of exportation to New Zealand as at the tine of such exportation. 3. If at any time it appeared to the minister that the payment of any dumping duty was being evaded or avoided by the importer of any good, otherwise than or the sale or in any other manner, he might determine the actual selling price of the goods, the cost of production, or the current domestic value thereof. New Zealand reserved the right to impose anti-dumping duties at any time, but would normally give notice of intention to impose them. Mr. JOHNSON (United States) pointed out that the definition of dumping in paragraph 1 of Article 11 differed in one important respect from the practices of various countries as revealed by the discussion. The last clause of the paragraph specified that due allowance shouldbe made in each case "for differences in conditions and terms of sale, for differences in taxation, and for other differences affecting price comparability". Such differences were not ordinarily recognized in establishing valuation for duty purposes. Mr. OFTEDAL (Norway) asked how the cost of production, specified in clause (c) of paragraph 1, could be ascertained if dumping was suspected. LONDON E/PC/T/C.Il/46 Page 16 Mr. JOHNSON (United States) emplained that "cost of production" was a statutory term in United States tariff laws. It was determined by the United States customs authorities by the same proceadure as that by which all values in a country of exportation were determined, namely, by reference to data submitted in a consular invoice. If those data were not sufficient, further information would be sought either by correspondence or by a personal visit to the manufacturer by an investigator. The concept of "cost of production" envisaged in United States customs law was not that envisaged in th field of accountancy. In United States customs law it meant what the value would be, if a normal value was constructed by determining costs of material, labour, overheads and profit. He agreed with the CHAIRMAN that a proper definition of the term as essential. Mr. RHYDDERCH (United Kingdom) reiterated the views of the United Kingdom Delegation set forth in the Report of the Rapporteurs on A-4 of the provisional Agenda (E/PC/T/C.II/W.27) that anti-dumping duties should be prohibited. If they were permitted, they should be calculated on a c.i.f. basis. 5. Next Meeting of Sub-Committee Friday, 8 November, at 10.30 a.m. The agenda to include a continuation of the discussion of Article 11, and the initiation of discussionn of articles 15, 14 and13 of the Draft Charter. The meeting rose at 6 p.m.

GATT Library

hw210xw4986

Committee II. Technical Sub-Committee. : Third Meeting Held on Monday 4 November 1946 at 10.30 a.m

United Nations Economic and Social Council, November 4, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

04/11/1946

official documents

E/PC/T/C.II/W.14 and E/PC/T/C. II/W/2-31

https://exhibits.stanford.edu/gatt/catalog/hw210xw4986

hw210xw4986_90210292.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.II/W.14 AND ECONOMIQUE 4 November 1946 ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II TECHNICAL SUB-COMMITTEE Third Meeting Held on Monday 4 November 1946 at 10.30 a.m. Chairman: Mr. VIDELA 1. Adoption of Agenda The CHAIRMAN proposed the following Agenda: (a) Report of Rapporteurs on A-2 of Provisional Agenda - Article 9. (b) Report of Rapporteurs on A-3 of Provisional Agenda - Article 10. (c) Discussion of A-4 of Provisional Àgenda, - Àrticle ll. The agenda was adopted. 2. Future Procedure of Sub-Committee - The CHAIRMAN drew attention to suggestions regarding the Report of the Preparatory Committee made at the Third Meeting of Heads of Delegations (E/PC/T/DEL/3Rev. 1). Part One of the report would- consist of a general narrative statement of the Preparatory Committee's discussions, and would set forth the main principles upon which there had been general agreement,. and call attention to conflicting views. Part Two would be for the general guidance of the Drafting Committee. It would specify-points upon which general agreement had been reached, and present alternative suggestions in the case of divergent views. LONDON E/PC/T/C.II/W.14 Page 2 There would be an Appendix in the form of a Draft Charter, including those parts of the United States draft upon which there had been general agreement, any amendments or additions proposed or agreed upon, and any alternative draft clauses. The amendments, additions and alternative draft clauses in question would reflect the suggestions included in Part Two of the Report. The form of Report envisaged by the Heads of DeIegations would necessitate a change of procedure in the work of the Sub-Committee. In view of the deadline of 15 November 1946 for the completion of Committee II's work, it would be necessary to establish a deadline for the Sub-Committee's work. It was agreed that the Sub-Committee should, without setting a specific date, endeavour to f inish its work not later than 12 November. Mr. JOHNSON (United States) said that the appointment of two additiona Rapporteurs would be desirable, if the Sub-Committee's work was to be completed within the period suggested. The Nomination of the Delegates of the Netherlands and Canada as additional Rapporteurs was approved.. Mr, van den BERG (Netherlands) accepted the appointment, subject to his being replaced in the near future by the Delegate of Belgium, who Would then represent both the Netherlands and Belgiun on the Sub-Committee. It was apgeed that the Rapporteurs should decide among themselves as to the order of their work. To facilitate the work of the Sub-Committee pursuant to the new procedure suggested by the Heads of Delegations, it was agreed that the Rapporteurs' reports, based upon views of all delegations submitted in writing, and upon discussions within the Sub-Committee, together with any dissenting views, should be submitted to Committee II as the report of the Sub-Committee. Written views to be submmitted to the Rapporteurs within 24 hours, and all written suggestions submitted to be circulated by the Secretariat to all members of the Sub-Committee. LONDON E/PC/T/C.II/W.14 Page 3 3. Further Discussion of Article 9 Mr. JOHNSON (United States) reviewed the draft report of the Rapporteurs with regard to Article 9. All reference to government purchasing of supplies was omitted from the redraft of the Articlee submitted by the Rapporteurs. It was the understanding of the Rapporteurs that there had been general agreement in the Sub-Committee with the views expressed in the redraft of the Article, subject to the following expression of dissent: The Delegates of the Netherlands, Belgium, Australia and Brazil proposed that a period of tine should be permitted for the discard of discriminatory practices by those member countries which applied them: The United Kingdom delegate reserved his position regarding the exhibition of imported cinema films. The Delegate of South Africa reserved his position regarding preferential rates for internal transportation of certain domestic products: as to which reservation he (Mr . JOHNSON) said he might remark that the products in question did not apparently compete with imported products. The Delegate of New Zealand reserved his position regarding mixing and processing requirements. The Delegates of Brazil, Australia, and South Africa believed that such restrictions shoild not be prohibited, where' adequate counter-benefits were assured, or where it could be established that they did not interferer with import trade to a greater extent than permitted forms of protection; The Delegate of India believed that discriminatory internal taxes should not be prohibited if they were for revenue. The comments of the Delegation of Australia, distributed as E/PC/T/C.II/40, were included in the Rapporteurs' report. Mr. van den BERG (Netherlands) reserved his position regarding mixing and processing requirements. LONDON E/PC/T/C.II/W.14 Page 4 Mr. LOPES RODRIGUES (Brazil) reserved his position regarding mixing and processing requirements. His country could not ignore its requirements in that connection. They constituted the only way of encouraging the development of the domestic production on a number of basic products such as alcohol and petroleum. Mr. JOHNSEN (New Zealand) indicated that the Rapporteurs' report on Article 9 did not correctly reflect the position of his Government. He wanted to make clear that the present form of the Article was not acceptable. The CHAIRMAN pointed out that the report under consideration was a dreft report, open to amendment. Mr. JOHNSON (United States) enquired if the Sub-Committee agreed that the general draft of the report together with the reservations, which he had indicated above, should be submitted to Committee II. He explained that the new draft had only beer, included in order to elucidate the original text of Article 9. He added that the report would also draw the Committee's attentioA to the fact that the subject of government purchases had been omitted from the new draft of Article 9. Mr. NEHRU (India) supported the inclusion of the new draft of Article 9 in the report to Committee II. The new draft was far more clearly and concisely worded than the original. The CHAIRMAN pointed out that this proposal was not strictly in accord- ance with the procedure just established. However, if' the new draft of Article 9 was included in the report, that would not establish a new prece- dent in dealing with subsequent articles. Mr. SIM (Canada) recalled that several delegations at the previous meeting had made a reservation as to further observations they proposed to make, after they had had time to consider the text of the new draft. He himself had two observations to make. LONDON E/PC/T/C.II/W.14 Page 5. First, he pointed out that, although it had been agreed to exclude any reference to public works in the Article, the phrase "any kind whatsoever" in paragraph 2 of the new draft appeared to cover the subject of public works. Secondly, he deprecated the phrase "each member agrees that it will take all measures open to it" in paragraph 4. The acceptance of such a commitment would mean that the Canadian Government would be legally bound to exercise in this ccnnection the right of veto, which had been established for dealing with important constitutional matters. Mr. JOHNSON (United, States) thought that the Sub-Committee would agree to the present wording of Paragraph 2. It cevered supplies for Government.. use, but only in cases not covered elsewhere in the Draft Charter. He agreed that paragraph 4 stipulated the use of the Canadian Government's right of veto. He therefore proposed that the Canadian delegate should submit in warining a claus c,- provision for an exception in that particular case. Mr. JOHNSEN (New Zealand) understood paragraph 2 of the Rapporteurs' report. to imply that the new text of Article 9 reflected the views expressed in the Sub-Committee. In his opinion that was not the case. He did not consider that the views of the Sub-Cormmittee were truly reflected in that statement. Mr. JOHNSON (United States) explained that only the new text of Article 9 and the reservations made by the various delegates, not the preliminary statements; would be forwardad to the Committee. Mr, RHIDDERCH (United Kingdom) could not accept the present wording of the reservation in regard .to films. He did not want his proposal to be represented as an expression of issent. He would prefer a note to the Article to say it did not apply to films, There were cultural, as weIl as commercial, considerations to be taken into account in the case of films. Incidentally, what was described as a United Kingdom reservation was, he understood, supported by France: Czechoslovakia, Portugal and New Zealand. LONDON E/PC/TC.II/W.14 Page 6. Mr. MORTON (Australia) associated himself with the reservation. It was because he did so that he had used the word "exhibited." in the first paragraph of his memorandum (E/PC/T/C.II/40). Mr. -an den BERG (Netherlands) said he proposed to submit written suggestions to the Rapporteurs in regard to article 9. In the meanwhile he had, two questions of principle to raise, Was it permissible to replace by direct protection in the form of customs duties an indirect protection which was subject to removal under the provisions of paragraph 2 of the Article? Secondly, he asked for explanation of the phrase "country of origin". He thought that the concept of "country of exportation" should be taken into consideration by the Rapporteurs. Mr. JOHNSON (United States) replied that elsewhere in the Charter it was laid down that there was no restriction on replacing indirect restrictions by direct restrictions, provided such replacement was in accordance with the provisions of the ITO. He explained that the two phrases "country of origin" and "country of exportation" were used throughout trie Draft Charter with different meanings In general he accepted the definition of the League of Nations; but that definition could not be applied in every case. Again, there were great difficulties in defining the phrase "country of exportation" by reason of the problems arising in connection with bonded. warehousing. It should be one of the first tasks of the ITO to establish definitions. in such cases. Inasmuch.as protection against discrimination should be applied to all imported goods, whether directly or indirectly imported, he felt that the phrase "country of origin" was the better expression. Mr. MORTON (Australia) and Mr. RHYDDERCH (United. Kingdom) stated that in all matters involving eligibility for preference rates their Governments insisted on direct importation, paying due regard however to present shipping difficulties. LONDON E/PC/T/C.Il/W.14 Page 7 Mr. ROUX (France) said the subject was at once difficult and complex owing to the different laws in force in different countries. The League of Nations had never successfully solved. the problem. It was not, in his opinion, a problem on which the Sub-Committee was competent to pronounce. He proposed accordingly to leave the matter of definition to the ITO. Mr. LOPEZ RODRIGUES ('Brazil) referring to the phrase "all measures open to it" in paragraph 4 of the new draft, pointed out that in federal countries like Brazil the constitution of the central government did not allow it to enforce acceptance by the state governments of every commitment undertaken by the central government. Secondly, he wished to associate himself with the reservation made by the United Kingdom delegation in regard to films, if Article 9 meant that Brazil would not be able to continue the practice of insisting on the inclusion of a short national film in all cinema programmes. Mr. JOHNSON (United States) replied that the phrase "all measures open toeit" meant all measures legally possible and would not. require any action inconsistent with a national constitution. He thought that the Brazilian general reservations in regard to Article 9, already covered the Brazilian delegate' s point on the subject of national films; but he would welcome any further detailed reservation. Mr. TUNG (China) suggested that the example of the Bretton Woods agreement should be followed, and a chapter should be added to the Draft Charter giving definitions of such phrases as "country of origin" and "similar products", and that this suggestion should be brought to the notice of Committee Il for recommendation to the Preparatory Committee. Mr. JOHNSON (United States) thought that the Sub-Committee should limit itself to the Articles placed before it by Committee. II; but he suggested that members should submit to the Rapporteurs a list. of phrases used in those Articles vvhich they thought needed defining, and that such definitions should be laid down by the Drafting Committee to meet the following January. LONDON E/PC/T/C. II/W. 14 Page 8 Mr. JOHNSEN (New Zealand) thought that no decision should be made. in regard to definitions until the Sub-Committee had completed its Agenda. The Sub-Committee agreed: (a) to instruct the Rapporteurs to draw up their report on Article 9 in accordance with the opinions expressed by the respective delegations; (b) that all phrases of Articles 9 to 17 needing definition should be referred to the Drafting Committee to meet in January. 4. Future Schedule of Meetings The next meeting was tentatively fixed for Tuesday 5 November 1946 at 3 p.m. and a further meeting on Wednesday 6 November 1946 at 10.30 p.m. The meeting rose at 12.55 p.m.

GATT Library

zg797jp1013

Committee II : Tenth Meeting held on 19 November, 1946 at 2.30 p.m

United Nations Economic and Social Council, November 20, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

20/11/1946

official documents

E/PC/T/C.II/55 and E/PC/T/C. II/54/REV. 1-58

https://exhibits.stanford.edu/gatt/catalog/zg797jp1013

zg797jp1013_90210270.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.II/ 55 ECONOMIC CONSEIL 20 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Tenth Meeting held on 19 November, 1946 at 2. 30 p. m. Chairman Dr. COOMBS (Australia) 1. Submission of the Report of the Tecbnical Sub-Committee Mr. VIDELU (Chile), Chairman of the Technical Sub-Committee, described the work which had gone into the preparation of the Report. For two weeks the Sub-Committee had carried on its work in accordanoe with the procedure originally agreed upon. Since 4 November it had worked in accordance with the new procedure adbpted by the Heads of Delegations. Had the original procedure been maintained, it would have taken several months to draft a Report. The Sub-Committee had decided not to divide its work among small drafting Committees because of language difficulties and thé interest of all delegations in all of the subject matter referred to that Sub-Committee. Hence the Sub-Committee had not produced draft Articles. He thanked the various delegations for the splendid work of their representatives on the Technical Sub-Committee. Mr. ROUX (France), Rapporteur of the Technical Sub-Committee, commented on each of the Articles dealt with in hte Report. He indicated that he would endeavour to bring out, as objectively as possible, the general trend of the Sub-Committee's discussions. LONDON E/PC/T/C.II/55 Page 2 In the case of the problems raised in Article 9, it was not enough to guarantee the different nations most-favoured-nation treatment; they must be granted national treatment. One question raised was the levying of internal taxes or duties other than customs duties, which necessarily affected imported products as well as domestic products. The other question was that of the industrial and commercial regulations applicable to such products once they were out of bond. The principle set forth in the Charter was unchallenged, but difficulties arose in its application, either by reason of the apparent discriminatory nature of the various measures called for by particular situations, or as a result of the difficulties which certain countries - particularly federal states - experienced in securing the application of these regulations by their local authorities. Article 10, following the 1921 Barcelona Convention, on which it could with advantage be more closely modelled, asserted-the principle of freedom of transit. The authors of the Charter had found it nécessary, at that juncture, to raise the delicate question - which arose also in connection with Article 8 - of the tariff rate to be applied to products imported through the territory of a third country. On account of the widely differing regulations existing and the insufficiency of information available on that point, the Sub-Committee was unable for the time-being to do more than propose the retention of the practices in force in various countries. Article 11, dealing with measures designed to counter dumping and subsidies, showed the tendency of the United States, author of the Suggested Charter, to modify its own legislation in accordance with its proposals. The text appeared for the most part satisfactory and precise. It might, however, be improved by safeguarding states against the ill-considcred application of those measures which, if applied without due deliberation, might well harm international goodwill. LONDON E/PC/T/C.II/55 Page 3 In Article 12, dealing with tariff valuation, similar tendencies on the part of the United States could be observed. But in so con- troversial a matter it was not possible to formulate detailed regula- tions, and the Committee was inclined to favour the omission from the Article of anything other than general principles. Article 13 dealt with the simplification of customs formalities and condemned indirect protection. The final drafting of the text would be helped by the work of the League of Nations on which the Committee's work might well be based to a largrer extent. On the other hand, Article 14, dealing with marks of origin, raised a series of problems which had not before been very fully considered. Again the wisest course appeared to be keep to general principles. In connection with article 14 the Sub-Cemmittee had to face the important and delicate question of the protection required by several countries for the time-honoured trademarks of a geographical type covering certain goods of worldwide repute. The question at issue was whether it might be wise to round off the Charter by an explicit mention of that question. article 15 on the publication of customs regulations was also related to problems which had already been considered at Geneva. General agreement was secured; but it seemed advisable to, deal cautiously with matters of internal fiscal dispute, and inadvisable to regulate too closely the temporary measures to be applied in favour of consinments already 'en route' when tariffs were increased or fresh restrictions imposed. A similar measure of agreement was reached regarding the statistical information called for in Article 16, provided that progress by degrees could be considered sufficient compliance, and that the material difficulties experienced by some countries would be taken into account. LONDON E/PC/T/C.II/55 Page 4 Article 17, dealing with boycotts, had fower technical implications. The Sub-Committee attempted to define the idea as fully as possible. The Cornmittee's last task was the examination of article 32 containing a list of the general exceptions to Chapter IV of the Charter. The Sub-Committee reviewed the list in the light of the principles put forward by Article 13. It felt that it was necessary to make it clear that the provisions of Article 32 should not be used as a cover for unjustifiable discriminatory practices or for practices designed to secure indirect protection. In connection with many of the Articles reservations were expressed which were so wide in scope that they might be applied to the Charter as a whole. Those reservations related to:- (a). the necessity to make progress by degrees and to allow time for the putting into force of the obligations undertaken by States; (b) the special position of federal states, of countries not yet highly industrialized and of countries in the process of re-establishing their financial or political position; (c) the possibility of consulting the Organization before a particular measure was decided upon or afterwards, at the request of a member state which considered that it had suffered prejudice. The Report was a piece of work done in good faith; it was presented in all humility by men of good will, who were accustomed to dealing with realities and who desired to put forward plans capable of practical application in the existing conditions, rather than to state abstract principles or to propose ambitious new departures. LONDON E/PC/T/C.II/55 Page 5 The Rapporteurs asked for the confidence of the Committee, and begged it not to re-open the techical discussions. He concluded by praising the work of the Sub-Committee's Chairman, Mr. VIDELA, and of Mr. JOHNSON, the United States Delegate. 2. Discussion of Possible Action taken with respect to the Report of the Technical Sub-Committee The CHAIRMAN said that the Technical Sub-Committee, in adhering to the general procedure, had reported differences of opinion but had done little to reconcile such differences. He asked the Committee whe ther it wished to initiate further efforts to achieve some measure of agreement, or whether it wished to accept the Report as it was. Any agreement which might be reached would lighten the task of the Drafting Cammittee Meeting in January. Mr. MORTON (Australia) pointed out that the question should be approached from the point of view of helping the January Drafting Committee. The various countries would not be able to send customs experts to the Meeting of the Drafting Committee as they had done in the case of the present Meeting of the Preparatory Committee. He suggested that where an amendment had been actively advocated by a group of countries and where such an amendment had not been actively opposed by more than a few countries, that amendment should be adopted for inclusion in the draft Articles. Such amendments would be adopted only if there was a reasonable amount of agreement. That would involve further work; but such work would probably be worth while. LONDON E/PC/T/C.II/55 Page 6 Mr. HANKINS (United States) thought that there were two alternatives before the Committee: (a) It might remain in session in order to explore possibilities for agreement. Three or four days of concentrated work would probably he necessary. The United States would be willing to participate in such an effort, but other countries might not find it feasible. (b) It might approve the Report as a working paper and submit it to the Januay Drafting Committee. If this were done, the Report should not be published. The Articles of the Charter, to which the working paper would relate, could be printed in square brackets so as to indicate that they had not been agreed upon. The United States would be agreeable to either course of action. Mr. KUNOSI (Czechslovakia) thought that the second of the alternatives suggested by Mr. Hawkins would be most practicable. He did not think that the Preparatory Committee could accomplish more in the direction of obtaining agreement at the present time. The various delegations could report to their governments. The governments conoerned could re-exanmine their positions with a view to reconciling differences. Mr. FRESQUET (Cuba) supported the second of the alternatives suggested by the United States Delegate. LONDON E/PC/T/C.II/55 Page 7 Mr. Van KILEFFENS (Netherlands) did not think that the January Drafting Committee would be qualified to deal with matters of substance. Therefore it would be helpful if some degree of agreement could be reached at the present meeting of the Preparatory Committee. Mr. MOXINON (Canada) felt that inasmuch as it would take fouR or five weeks to go through the Report with a view to reaching agreement, he would support the second proposal of the United States Delegate. Since the New York Drafting Committee would not be a policy Committee it would need the help of policy experts. Mr. CHERRY (South Africa) said that the South African Delegation was anxious to do its part in order to lighten the work of the January Drafting Committee. But it was possible that after reporting to their Governments the various delegations would be able to withdraw their reservations at the spring meeting of the Preparatory Committee. The report of the January Drafting Committee might of necessity be substantially the same as the report of the Technical Sub-Committee. South Africa would be agreeable to either course of action, Mr. JOHNSEN (New Zealand) asked whether the Rapporteurs and the Committee could go through the report again with the purpose of finding the points on which there had been fairly general agreement. It would be difficult for the January Drafting Committee to reconcile differences of opinion since it would not be a policy committee. It would be difficult to make policy experts available for the January meeting. Matters on which agreement could not be achieved at present might be held over for the second Preparatory Committee Meeting in the spring. LONDON E/PC/T/C.II/55 Page 8 Various delegations might then be in a better position to reach agreement. He support the proposal that further efforts to reach agreement should be made at the present time. Mr. LE BON (Belgium) supported the second United States proposal. Further efforts at present would not be worth while. Mr. SHICKLE (United Kingdom) felt there was an indispensable minimum of subjects of interest to the Committee upon which decisions should be reached prior to the tariff negotiations in the Spring, if those negotiations were not to be unduly delayed. Those subjects included tariff valuations, tariff classification, anti-dumping measures, and national treatment in internal taxation and regulations. There must be agreement on certain matters, if it was desired to avoid evasion of the concessions to be considered during the negotiations. He made one reservation in that connection with respect to national treatment, namely in respect of the exhibition of films. It was axiomatic that countries would insist upon reserving a proportion of their home market for domestic films. That was not strictly an economic matter. It involved cultural and other aspects of national life. Though theoretically a subject for national treatment, the question of films should at present be dealt with in bilateral argeements. The League of nations had done considerable work in the matter of freedom of transit and customs formalities. It would be unfortunate if that work was not studied, and reviewed with an eye to its incorporation in the Committee s work. LONDON E/PC/T/C.II/55 Page 9 He proposed the appointment of a small Drafting Sub-Committee to consider the subjects to be dealt with prior to the tariff negotiations, and the minimum of provisions falling within the province of those subjects. The Drafting Sub-Committee could report to the Committee within a short time. It might consist of five representatives of the United States, Australia, Canada, France and Czechoslovakia respectively. He was not suggesting that it should attempt to reconcile the divergent views regarding the various Articles considered by the Technical Sub-Committee, but merely that it should specify the subjects to which consideration must be given prior to the tariff negotiations next Spring. Mr. LOKANATHAN (India) supported the second alternative proposed by the United States Delegate. The area of agreement within the Technical Sub-Committee was not wide. If the Drafting Committee in New York tricd to reconcile the divergent. views, it would have to have technical assistance from various countries - which (he understood) was not within its terms of reference. Mr. KAFKA (Brazil) supported the second alternative proposed by the United States Delegate. Could the Drafting Committee be instructed to reconcile divergent views and to deal with matters of substance? Mr. KUNOSI (Czechoslovakia) wondered whether some of the differing points of view and reservations made in the report of the Technical Sub-Committee were not the result of its members having been technical experts. Would not the Drafting Committee try to reconcile the divergent points of view? LONDON E/PC/T/C.II/55 Page 10 The CHAIRMAN recalled that the Heads of Delegations had not authorized the Drafting Committee to concern itself with reconciling differences of opinion. Its function was to prepare neater, more accurate, and more consistent drafts of Articles generally agreed upon. At the same time, if it perceived that differences in drafts were more apparent than real, it could forward them to the second meeting of the Preparatory Committee in April with explanatory notes and comments. In that sense, and to that extent, the Drafting Committee could reconcile divergent drafts. Mr. HAWKINS (United States) felt that the tariff negotiations in the Spring would be very difficult, and that an additional burden should not be placed upon the negotiators of having to formulate provisions dealing with the various subjects upon which agreements had not been reached. The CHAIRMAN pointed out that the Committee had before it a number of concrete proposals, which he summarized as follows: (i) The Committee could review the Technical Sub-Committee's report, and seek to obtain from each delegation a brief and precise statement of fundamental issue's. In that way it might be possible to obtain a majority agreement on a number of problems. The dîfficulty with that proposal would be the necessity for re-opening discussions, and continuing the work of the Committee for a longer period of time. (ii) The Committee might approve the report of the Technical Sub-Committee as a working document. Relevant draft clauses could be included in the publïshed documents in square brackets; and the remainder of the report could be referred to the Drafting Committee, leaving it to the latter to seek a basis for agreement in April. LONDON E/PC/T/C.II/55 Page 11 That would mean that the work so far donc would have the approval of Committece II. (iii) The Committee could appoint a small Drafting Sub-Committee to go over the Sub-Committee's report and select those items upon which it was essential to have agreement before the tariff negotiations in April, and in the light of further consideration possibly to reach a greater measure of agreement. The remainder of the items, on which no reconciliation appeared possible, could be referred to the Drafting Sub-Committee for consideration and recommendation to the Preparatory Committee at the April meeting. He felt that the suggestion to entrust the Drafting Sub-Committee with the work of reconciling divergent views would involve a type of work which had not been envisaged in its terms of reference. In response to a question by the Delegate for India, he said that all proposals by the Drating Sub-Committee would be tentative, as all similar suggestions were for the purposes of the meeting. Mr. MCKINNON (Canada) pointed out that only ten Articles had been referred to the Committee for consideration, and that the five Articles which the United Kingdom Delegate regarded as essential probably covered the most important part of the field of the Committee's consideration. Could a new Sub-Committee expect in a few days to reach agreement on subjects which had been the object of close study for several weeks? Mr. OFTEDAL (Norway) doubted whether a Drafting Sub-Committee could accomplish more than the Technical Sub-Comrnittee. The Draft Charter had been reviewed in Norway, and very little objection was found to any portion of it. Many of the differences in views expressed in the Sub- Committee's report might be due to the technical nature of the Articles considered, and objections might be withdrawn upon consideration by government representatives at home. Thus, national representatives on the Drafting Committee might be able to withdraw objections referred to in the report. LONDON E/PC/T/C.II/55 Page 12 He supported the proposal of the United States Deletate that the report should be submitted as a working document for the Drafting Committee. Mr. MCKINNON (Canada) took the chair. Mr. KAFKA (Brazil) felt that the proposed small Drafting Sub- Committee would be unable to prepare an effective report. Its recommendations would be hedged about by too many reservations. It the Technical Sub-Committee' s report was to be submitted to the Drafting Commiittee with a view to its reconciling the diver- gent view expressed therein, the teras of reference of the Drafting Committee would have to be changed. Could the Heads of Delegations reconsider their decision? Mr. LE BON (Belgium) supported the Canadian Delegate. A long discussion would result if a new sub-committee was appointed. Mr. NATHAN (France) supported the suggestion that the Sub- Committee's report should be adopted as a working document, and sent to the Drafting Committee. Mr. van KLEFFENS (Netherlands) favoured any attempt to reduce the number of Articles upon which there was dispute. If the report was adopted as a working document, would a delegate be permitted to make changes or corrections? He wanted an addition to the discussion on Article 11 (page 15 of E/PC/T/C.II/54) to the effect that the Netherlands Delegation felt there should be a provision to make it impossible for an importing country to impose countervailing or anti-dumping duties on the grounds of subsidies permissable under terms of the Charter. Mr. LAWRENCE (New Zealand) pointed out that the Sub-Committee's report did not reflect the general opinion of its, members with respect to paragraph 3 of Article 13 (page 22 of the report). Only the United States Delegate favoured the retention of the final sentence of the paragraph. LONDON E/PC/T/C.II/55 Page 13 The CHAIRMAN said he would insist upon a change in the report, if at any point it did not reflect the views of his own Delegation, Mr. KUNOSI (Czochoslovakia) reiterated his view that nothing yould be gained by the appointment of a small Drafting Sub- Committee. There might be chance of agreement among the members of the Sub-Committee, but other delegations would surely reserve their positions, He assumed that delegations would have full opportunity to make comments and corrections with regard to the report. The CHAIRMAN assured him that all commetns received had been handed to the Rapport and would be added to the report. He then called for a vote on whether the Committee should attempt to reach a greater area of agreement by extending the time of its deliberations. The proposal was rejected. Mr. VIDELA (Chile) pointed out that, when the Technical Sub- Committee began its work, the proposal was made that small Drafting Sub-Committees should consider specific Articles. The proposal was rejected because each delegation wished for an opportunity to consider each Article. If that occurred among members of the Technical Sub-Committee, how could the Committee expect agreement on the basis of study given by a small Sub- Commiteee, consisting possibly of persons who had not served on the Sub-Committee? Dr. COOMBS resumed the Chair. Mr. KUNOSI (Czechoslovakia) thanked the United Kingdom Delegate for proposing that Czechoslovakia should serve on the small Drafting Sub-Committee. Since Czechoslovakia had few, if any, alterations in the Draft Charter to propose. It would be more suitable for the United Kingdom Delegate to serve. LONDON E/PC/T/C.II/55 Page 14 Mr. NEHRU (India) felt that any constructive attempt to lessen the area of disagreement would be worth while, and no serious harm would be done by the appointment of a Sub-Committee. But the Indian Delegation was not prepared to commit itself in any way; Mr. MORTON (Australia) believed that a five-member Sub-Committee would represent the views of only five delegations. A report from such a committee would not carry the problem further than the original report of the Rapporteur. The CHAIRMAN said that the following questions were before the Committee; (1) The question whether. the report was to be approved as a working paper for submission to the Drafting Committee. (2) The question whether an. effort should be made to reach more agreement than was reflected in the present report. The two courses cf action were not inconsistent; and either one or both might be adopted. In the event of its being decided to make further efforts to reach agreement, there was the question whether that task should be referred to a small Sub-Committee, or whether it should be referred back to the Technical Sub-Committee. Mr. KUNOSI (Czechoslovakia) asked whether a decision of the Preparatory Committee to adopt the Sub-Committee's report as a working paper would be referred to at all in the report of the Preparatory Committee which was to be made public. The CHAIRMAN answered in the affirmative. Mr. NEHRU (India) asked what would be published with respect to Artticles 9 -15. LONDON E/PC/T/C.II/55 Page 15 The CHAIRMAN said that the report of the Technical Sub- Committee, as it had been submitted, attributed specific views to specific countries. Hence, pubication of the report in that form would probably not be appropriate. He did now know whether the Articles as drafted by the United States would be published in square brackets, or whether there would be a blank space in the published Draft Charter. Sîince the same question would arise in connection with other Articles, it should be left to the Heads of Delegations to decide the matter. The CHAIRMAN called for a vote on the first of the questions which he had outlined. It was agreed that the report of the Technicla Sub-Committee if approved, should be submitted to the Drafting Committee as a working paper. The CHAIRMAN called for a vote on the following Resolution: It is resolved that an attempt should be made within the next two days to reach tentative agreement on draft Articles on minimum provisions related to matters covered by the report of the Technical Sub-Committee, with which it is importans to deal before the second session of the Preparatory Committee. The Resolution was rejected. Mr. SIM (Canada) explained that the report, which had been prepared by five Rapportours, represented a sincere effort to encompass the problems to be covered. It would be unrealistic to believe that a worthwhile job could be done in twenty four of forty eight hours by another greup, however competeat. That explained his vote against the Resolution. LONDON E/PC/T/C.II/55 Page 16 3. Consideration of the Provisions of the Report of the Technical Sub-Committe General Narrative Statement (At beginning of Report, E/PC/T/C.II/54) Agreed Technical Sub-Committee's Confidential Report to the Drafting Committee Agreed Article 9 Mr. MORTON (Australia) pointed out with respect to paragraph 2 (b) that a number of countries had reserved their position. He had prepared wording for an additional clause for the last sentence of paragraph 2 which he thought would make it possible for those countries to withdraw their reservations. The CHIRMAN suggested that the Australian suggestion should be submitted in writing for incorporation in the report. Since it had been agreed not to try to reconcile differences of opinion, the recommendation would be set forth as representing the view of the Australin Delegation. Mr. CHERRY (South Africa) said that South Africa's reservation referred to in paragraph 2 (b) had originally related to mixing of motor spirits. South Africa also reserved its position with respect to the assembly of motor vehicles. LONDON E/PC/T/C.II/55 Page 17 Mr. TUNG (China) asked whether the phrase "procurement of governmental agencies for supplies for governmental use" in paragraph 5 included supplies for public works contracts. The CHAIRMAN suggested that the Secretariat should find out whether the provisions of the report with respect to paragraph 5 were consistent with the decision of the Procedures Sub-Committee on governmental purchases and report back to the Committee. Agreed It was agreed that the Committee should meet at 3 p.m. on 20 November 1946. The meeting rose at 6.15 p.m.

GATT Library

rj715vw1422

Committee II : Thirteenth Meeting Held on Saturday, 23 November 1946 at 10.30 a.m

United Nations Economic and Social Council, November 25, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

25/11/1946

official documents

E/PC/T/C.II/66 and E/PC/T/C. II/66

https://exhibits.stanford.edu/gatt/catalog/rj715vw1422

rj715vw1422_90210287.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C. II/66 AND ECONOMIQUE 25 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE II Thirteenth Meeting Held on Saturday, 23 November 1946 at 10.30 a.m. Chairman: Dr. COOMBS (Australia) 1. Discussion of Report of the Sub-Committee on Quantitative Restrictions and Exchange Control (E/PC/T/C. II/59) Draft Article 20 (page 29) Mr. HAWKINS (United States) suggested the deletion of the words "select imports for restriction' in the second line of paragraph 4, and the substitution of the words "may distinguish between products on the grounds of essentiality". That. minor drafting change would clarify the.. sentence. The CHAIRMAN preferred to keep the words ''select imports for restriction", and add the words "on the grounds of essentiality". Mr. HAWKINS (United States) said that the Chairman's wording vvould meet his point. Mr. VIDELA (Chile) and Mr. TUNG (China) indicated their preference for the original wording. Who was to decide the question of "essentiality"? The CHAIRMAN thought it was clear from the text of the Article that the Governmnt applying the restrictions had the right to decide what constituted essential products. Mr. VIDELA (Chile) and Mr. TUNG (China) agreed to accept the revised amendment, provided the interpretation given by the Chairman was put on record. Agreed. LONDON E/PC/T/C II/66 Page 2 The CHAIRMAN suggested the removal of the square brackets in the tenth line of pararaph 5, and the substitution of an asterisk to indicate that Note 1 on page 34 referred to the phrase "inter-governmental agency or agencies. Agreed. Mr. TUNG (China) pointed out that the Delegation of China had suggested amendments to article 20 in document E/PC/T/C. II/W. 49. He reserved the right to refer again to the proposed amendments either in the Interim Drafting Committee or at the Second Meeting of the Preparatory Committee. The CHIRMAN said that the amendments proposed by the Chinese Delegation had been considered by the Sub-Committee; and he felt that several of the had been covered in the draft Article. He pointed out that the viewis of the Chinese Delegation were mentioned in the Sub- Committee's Report on the Article (page 15). The Secretariat would take note of the Chinese Delegate's reservation. Article 20 was adopted. subject to the reservation by the Chinese Delegate. Report or. Article 20 (page 7) Mt. HELMORE (United Kingdom) proposed the addition of the following phrase to paragraph 12: "in accordance with its own judgment as to the essentiality of the products concerned." That would clarify the Report in the sense of the point which the Chinese Delegate had raised. Agreed. The CHAIRMAN proposed the addition of the words "on grounds of essentiality" follovving the word "restriction" in the second line of LONDON E/PC/T/C. II/66 Page 3 paragraph 18, to bring the report into line with the change made in paragraph 4 of the draft Article. Agreed. The report on Article 20 was adopted. Draft Article 21 (page 35) Mr. JOHNSON (New zealand) proposed to add the followving clause to sub-paragraph (e) in view of the difficulties which would arise in the administration of quantitative restrictions unless a time limit was imposed: "subject to importation being made within the prescribed period to which the quota relates."' Mr. MORTON (Australia) supported the amendment. Mr. HELMORE (United Kingdom) agreed with the idea of the amendment, but envisaged the possibility of a quota being established without a specific time limitation. He suggested the following revised amendment "subject to importation being made within any prescribed period to which the quota may relate." *Mr. KUNOSI (Czechoslovakia) said that a large part of the trade of Czechoslovakia was with countries which had inconvertible currencies, and as such could not become members of thé International Monetary Fund. The only way Czechoslovakia could obtain payment for its exports to those countries would be by buying from them. Did Article 21 cover such cases, or should he propose an amendment to cover them? The CHAIRMAN pointed out that the Sub-Committee had dealt with that subject in Article 22. He suggested that the discussion should - be postponed until article 22 was considered. article 21, with the-amendment to paragraph 2(e), was adopted LONDON E/PC/T/C. II/66 page 4 Report on Article 21 (page 16) The CHAIRMAN stated that paragraph 2 (e) would require amendment to bring it into line with the change made in the draft article. Agreed. The report on Article 21, with the necessary amendment, vvas adopted. Draft Article 22 (page 38) Adopted. Report on Article 22 (page 16) It was agreed, at the suggestion of Mr.HEIMORE (United Kingdom), to change the words Member A'' and member B" to "Country A" and ``Country B" respectively. Mr KUNOSI (Czechoslovakia) said that he would not raise objections at the present meeting to the provisions relating to trade with countries having inconvertible currencies. After his Government had had an opportunity to study the provisions of article 22, it might have proposals to make. The report, has amended, was adopted. Draft Aticle 23 (page 40) Adopted. Report on Article 23 (page 23) Mr. GUNTER, Rapporteur, submitted the following paragraph for inclusion between paragraphs 2 and 3 of the report: "It was agreed that Members should undertake not to seek by exchange action to frustrate the purposes of this Charter, nor to seek by trade action to frustrate the purposes of the Articles of Agreement of the International Monetary Fund." The new paragraph would be paragraph 2, and the numbers of the original paragraphs 2, 3, 4 and 5 would be changed to 3, 4, 5 and 6 respectively. LONDON E/PC/T/C. II/66 Page 5 He also suggeste that the following sentence be added at the end of paragraph 3 (or paragraph 4 if the paragraphs were re-numbered as suggested): "Pending this further examination, the draft Article 23 in the Appendix to this Report has been expressed in a very which implies that Members of the Orgarmization would in general be expected to be Members of the Fund, but that means could be provided for non-Members of the Fund to join the Organization." The Report on Article 23 and the additions submitted by the Rapporteur were adopted. Draft Article 19 (page 25) Mr. TUNG (China) pointed out that the Chinese Lelegation considered that the exception provided in paragraph 2 (b) was to narrow and that it had offered an amendment to broaden it. The CAI RMAN said that the Chinese proposal was considered in paragraph 12 of the report on Article 19 (page 5). The Sub-Committee had felt that the substance of the Chinese proposal had been embodied in other sections of the Charter. Mr. TUNG (China) replied that the draft Articles presented in the Report of the Joint Committee did not meet the Chinese position. The long procedure envisaged would prevent effective emergency action He wished to reserve his position. Mr. MELANDER (Norway) questioned the wisdom of including an exception along the lines of that set forth in paragraph 2 (e), If the paragraph was included, the words "or fisheries" should be deleted. Mr. SHACKIE (United Kingdom) thought that the words should be retained. :Excess supplies of fish were likely to develop. If a country took action to-relieve such a surplus, that action could not be effective unless the country could restrict imports. LONDON E/PC/T/C.II/66 Page 6. Mr. VIDELA (Chile) raised the question of whaling. His country had an important whaling industry. He had previously reserved his position with respect to the words "agricultural or fisheries". He seconded the proposal of the ITox-zeSian Delegate that the words "or fishing" should be deleted. He proposed that in addition the word "agricultural" should be deleted. Mr. TUNG (China) said that hie had previously suggested that paragraph 2 (e) should be amended to read: "Import prohibitions or restrictions on specific agricultural, mineral, or manufactured products, imported in any form, necessary to the enforcement of governmental measures which operate to regulate production, distribution and consumption of like domestic products, with a view; to maintaining a dynamic equilibrium between the diverse economic activities of a nature in the process of industrialization." At present, however, he wished to join the Chilean Delegate in pressing for the deletion of the words agricultural or fisheries". He proposed, in addition, the deletion of the last three sentences of' paragraph 2 (e). -The Norwegian proposal for the deletion of the words "or f'isharies" was rejected. Mr.MELANDER (Norway) and Mr. VIDELA (Chile) reserved their positions. The Chilean proposal that the words "agricultural or fisheries" should be deleted was rejected. Mr. VIDELA. (Chile) and Mr. TUNG-. (China) raserved their positions. The CHAIRMAN pointed out that paragraphs 6 and 7 of the report on Article 19 (page 4) wvere relevent to the Chinese proposal that the- last three sentences of 2 (e) should be deleted. LONDON E/PC/T/C. II/66 Page7 Mr. V.N KLETIERTS (Netherlands) suggested that the drafting committee should be instructed to improve the cording of the last three sentences of 2(e) so as to avoid misinterpretation. The proposal that the last three sentences of 2(e) should be deleted was rejected. Mr. TUNG (China) reserved his position and requested that the report should indicate that China had recommended specifically the deletion of those sentences. The draft Article was adopted, with the understanding that the reservatioons which had been made would be set forth in the report on the Article. Report or Article 19 (page 2) -Mr. MELANDER (Norway) asked that a sentence should be added in paragraph- 6 (after the clause "There was wide agreement for the view that a clause on these lines was desirable', lines 6 and 7 of the paragraph) to the- efect that one Delegation doubted the wisdom of including an exceptioon along the lines of paragraph 2(e) in Article 19 and that if such an exception was, nevertheless, included, the words "or fisheries" should be deleted. The suggestion of thé Norwegian Delegate was agreed to The CHAIRMAN pointed out that, in accordance with reservations which had ben made, the clause of paragraph 6 beginning "but one Delegation proposed that the exception....." should be amended so as to indicate that more that one delegation took the position; described. The CHAIRMAN suggested, and. MR. TUNG (China) agreed, that the Chinese proposal for the deletioh of the last three sentences of paragraph 2(e) of the article should be included in paragraph 7 of the report on that Article. LONDON E/PC/T/C.II/66 Page 8 Mr MELADER (Norway) suggested that the words "there was general agreement" in line 6 of paragraph 7 should be replaced by the words "it was felt ". The sugestion of the Norwegian Delegate was agreed to. The CHAIRMAN indicated that the wording of the last part of paragraph 12 of the report would be amended to bring it in line with the message whichwas actually recied from the Joint Committee. In the absence of the Indian Delegate, at was agreed to postpone consideration of paragraph 13. Paragraphs I - 12, as amended, of the report on Article 19 were adopted. 2. Consideration of the Report of the Sub-Committee on Quota Preferences Mr. SHACKLE (United Kingdom) reported that the Sub-Committee on Quota Preferences had met several times and had agreed to recommend that the following should be inserted- as paragraph 14 in the report on Article, 19: "The Committee considered the question of the treatment of certain existing preferential arrangements vwhich were established under international agreements but not afected by the normal method of a difference in rates of duty. In these special circumstances they recommend that any such arrangements remaining after the negotiations contemplated for April 1947 should be dealt with by a provision in a protocal to the Charter or (pending the conclusion of the Charter) to the General Agreement on Tariffs and - Trade to the effect that the Member applying thee arrangements shall be entitled to continue them or equivalent measures, pending either: "(a) an arrangement under Chapter VI, if the Member countries concerned desire that the product should be made the subject of such an arrangement, or, LONDON E/PC/T/C. II/66 Page 9 "(b) some other arrangement regarding the matter between the member countries concerned. " The Comittee agreed further that only a very limited number of commodities fell under this heading and that the countries concerned should establish the facts about them so that this recommendation on the subject could be taken into account in the forthcoming negotiations. It was further recognized that the concessions or lack of concessions in respect of the items concerned would, for purposes of assessing the results of the negotiations, stand on the same footing as concessions or lack of concessions in respect of particular tariff or preference items. He asked that it should be recorded in the verbatim report that it was the understanding of the United Kingdom that the commodities concerned were: beef, mutton, lamb, bacon, and processed milk, imported into the United Kingdom from Commonwealth or other sources. Mr. JOHNSON (New Zealand) supported the recommendation of the Sub-Committee. Mr. KUNOSI (Czechoslovakia) opposed the recommendation. The recommendation of the Sub-Committee on Quota Preferences was agreed to. Mr. JOHNSEN (New Zealand) said that the New Zealand Delegation had not had time to give adequate study to the documents which had been considered by the meeting. He was sure that it was not intended that commitments should be made at present and that the reports had been, accepted purely as a basis for further consideration and discussion. Mr. TUNG (China) associated himself with the view expressed by the Delegate of New Zealand. The meeting rose at 1.10 p.m. LONDON E/PC/T/C. II/66 Page 10 COMMITTEE II The Thirteenth Meeting (continued) held on 23 November 1946 at 3 p.m. Chairman: Dr. COOMBS (Australia) 1. Consideration of paragraph 13 of Part II of the Reportof the Sub-Committee on Quentitative Restrictions and Exchange Control Mr. LOKANATHAN (India) stated that his Delegation considered that quantitative restrictions were a legitinate from of protection. He had intended to propose an amendment to article 19; but, as he understood that the question of quantitative.restrictions would be discussed by the Preparatory Committee on Trade and Employment at its Second Session, he was prepared to approve paragraph 13 of Part II of the Report on the understanding that the matter would be discussed at a later date. Mr. EIMMRE (United Kingdom) wondered whether the following amendment would satisfy the Indian Delegate: to delete the second part of the last sentence but one from the word "this;', and the whole of the last sentence, so as to read other Delegations considered that the procedure in question was appropriate.; He also proposed the insertion between the words "announced that" and "they" of the following: "some Delegations announced that, because they considered that the procedure laid down in the Draft Charter on Econonic Development needed further examination, they might propose an addition" ..... The paragraph was adopted, as amended. The Report on Quantitative Restrictions and Exchange Control was adopted as amended for inclusion in the Report of Committee II to the Preparatory Committee. LONDON E/PC/T/C.II/66 Page 11 2. Consideration of the Report of the Sub-Committee on Subsidies on manufactureded Goods The Report was adopted for inclusion in the Report of Committee II to the Preparatory Committee, subject to certain editorial changes necessary to bring it into conformity with the Report on Subsidies and primary products (E/PC/T/C.Il/61). 3. Consideration of the Report of the Joint Drafting Sub-Committee of Committees II and IV on Subsidies on Primary Products -Part was adopted with one-amendment to substitute"Netherlands" for "New Zealand' in line 2. Part II Paragrarh 1 adopted without amedment. Paragraph 2 adopted with one amendment by United Kingdom Delegate to read: ....... "the special difficulties referred to in Chapter VI ......" Paragraphs 3 and 4, adopted without amendment. Appendix Paragraph 1 adopted without amendiment. Mr. SHACKLE (United Kingdom) suggested asking the Drafting Committee to consider the possible inclusion of the words "or of closely competitive products" between "such product" and "from" on line 4- Agreed. Paragraph 2 Mr. LOCKANATHAN (India) felt that three years was too long a period. He suggested that a period of one year was as long as circumstances warranted. Mr. HAWKINS (United States) agreed with the Indian Delegate's views, but stated that he would be unable to commit himself on the matter without consultation with his Governnent. He therefore asked that the consideration of the question be postponed till the Drafting Committee stage was reached. LONDON E/PC/T/C. II/66 Page 12. Mr. TUNG- (China) said that at the present stage of her econoinic development China, still found it necessary to rely on agricultural and mineral products to make up the principal items of her export trade. In view of the increaasing foreign demands. for certain commodities, the Chinese Government had spared no efforts to standardize the quality of such commodities, and to enlarge the capacity and reduce the cost of their production, so as to give the world markets a more regular and plentiful supply at reasonable prices. To keep up those standards in future, China would have to adaopt or retain such measures as subsidies or price support. Such measures would have the effect not only of safeguarding the employment of a large section of the Chinese population, and of ensuring, steady and Ooocioal supplies for the international markets, but also of increasing China's exchange resources to pay for her imports, and thereby serving to bring about her balance of international payments. As such, they were, conductive to the achievement of the main aims of the proposed International Conference on Trade and Employment; and their application should not, therefore, be limited by any fixed date, but should be free of any restraint based on the date of any previous representative period. The Chinese Delegation would therefore like to place on record the following two-point reservation on article 25 of the United States Draft Charter: -"(1) the adoption or maintenance of subsidies or similar measures to promote the production or exportation of certain special commodities in a Member-Country, which has suffered from a chronic adverse balance of payments, should be allowed until such time as its equilibrium in the balance of payments will have been actually attained, when the question of such measures may be re-considered through consultation by the countries concerned. LONDON E/PC/T/C.II/66 Page 13 "(2) the share of any such special export in world trade, whether or not acquired as a result of the use of subsidies or similar measures, should not be subject to limitation by its share in world trade during any previous representation period, except when it is proved to be part of a burdensome world surplus." The CHAIRMAN suggested the addition of a note at the end of the Report, stating that some Delegations felt that the period of three years was too long, and that the question should be left open for further consideration. The Committee agreed with this proposal and adopted paragraph 2 without amendment. Paragraphs 3, 4 and 5 adopted without amendment. The Report on subsidies in relation to primary products, and the relevant articles were adopted as amended, for inclusion in the Report of Committee II to the Preparatory Committee. 4. Consideration of the Report of the Sub-Committee on State Trading The Committee proceeded to consider the report of the Sub-Committee on State Trading (E/PC/T/C.II/62). Part I was adopted. Part II, Section on non-discriminatory administration of state trading enterprises was adopted, subject to'the amendment of the word "that" in the last line of paragraph 4, to read "the". Section on expansion of trade by state monopolies of individual products. Mr. MELANDER, (Norway) wished to reserve his position generally in regard to article 27. LONDON E/PC/T/C. II/66 Page 14 Mr. VIDELA (Chile) stated that these existed an apparent contradiction between Article 26 and Article 27, sub-paragraph (b). Article 27, sub-paragraph (b), sectwied to nullify what was set out an Article 26. It was quite clear to the Cnilean Delegation that an enterprise coming under the category of a state enterprise could for commercial considerations set different levels of prices in different markets. However, paragraph 27 (b) did not allow a home market price to be cut for commercial considerations because of the height of the maximum margin to cover freign and insurance. At the present stage he did not wish to elaborate a provision to cover this contingency, but requested thant his point be brought to the attention of the Interim Drafting Committee for its consideration the following January. Mr. SHACKLE (United Kingdom) explained that there was no compulsion to have an export margin. Paragraph 27 (b) merely made provision for something equivalent to an export tax in cases of a state export monopoly. The Section wasf adopted with the addition of a new paragraph, "7. One Delegation wished to preserve its position generally in regard to this Article". The Section on expansion of trade by complete state monopolies of import trade was adopted subject to the deletion of the words "subject to possible consideration at a later stage", Appendix containing a new draft of Articles 26, 27 and 28. Mr. TUNG (China) referring to the phrase "for governmental use and not for resale" un paragraph 2, Article 26, stated that the Chinese Delegation accepted the phrase only on the understanding that supplies for "governmental use" included supplies for administrative uses, supplies for public warks and all other types of government supplies which are not for resale. Mr. SHACKLE (United Kingdom) thought that paragraph 5 of the part of the report dealing wath Article 26 implied the Chinese Delegate's interpretation of the pnrase "for governmental use and not for resale". LONDON E/PC/T/C.II/66 Page15 The appendix was adopted subject to an amendment of paragraph 1 of Article27 whereby the clause in sub-paragraph (b) beginning "after due allowance ..." should form a new paragraph, and also that the sentence in the following paragraph beginning "members newly establishing .. ." should start a new paragraph. The report of the Sub-Committee on state trade was adopted as amended for inclusion in the report of Committee II to the Preparatory Committee. 5. Consideration of the Report (E/PC/T/C.II/64) on the Work of the Technical Sub-Committee for Inclusion in the Published Report of Committee II. Mr. HAWKINS (United states ) referring to Part II of the Report on the work of the Technical Sub-Committee for inclusion in the published Report of Committee II, thought that the first two paragraphs would suffice and the inclusion of the summary in regard to the individual Articles would only prejudice the work to be done on the other Report of the Sub-Committee (E/PC/T/C.II/54), which was the working Document 'for the Interim Drafting Committee. The Report was adopted for inclusion in the published Report of Committee II subject: (a) to the addition of the words "and approved as a working Document" to the last sentence of paragraph 5 of Part I (b) to the amendment of the second sentence of the second paragraph of Part II to read "A greater degree of unanimity might have been possible if more time had been available". (c) to the deletion of the last sentence of paragraph 2 of Part II "the substance of this discussion is given below" and of -the rest of the Report thereafter. LONDON E/PC/T/C.IIi/66 Page 16 5. Consideration of Report on Relations with Non-Members Mr. SHACKLE (United Kingdom) stated that, in preparing the Report on relations with non-.Members (E/PC/T/C. II/W. 40), he had endeavcured to make the Report self-explanatory. He drew the attention of the Committee to paragraph 5, in which he had laid down what he had described as the three possible lines of action open to the Committee. After some discussion, the Committee agreed: (a) in the Report to the Preparatory Committee, to quote the United States Draft Article on Relations with non-Members, and to say that it considered that this was a matter to leave open for consideration at a later stage. (b) in the Appendix containing the new draft Articles, merely to insert the heading "Article on Relations with Non-Members", and under this heading a note stating that the matter was left open until a later stage. 6. Documents of Comittee II It vas agreed to instruct the Secretariat to refer formally to the. Interim Drafting Committee all such Committee II documents as might prove useful in the deliberations of the Interim Drafting Committee. 7. Farewell Amenities The CHAIRMAN expressed, to the several Sub-Commiittees, their Ohaimen and their Rapporteurs, the thanks of the Cammittee for their labours. Mr. HAWKINS (United'States) on behalf of the Committee, expressed his admiration of the able chairmanship of Dr. COOMBS, and thanked him .or the way in which he had guided the Committee to the successful conclusion of its task. Mr. VIDELA (Chile) paid tribute to the work of the Chairman and of the Secretariat. LONDON E/PC/T/C. II/66 Page 17 The CHAIRMAN thanked the Delegates for their kind congratulations. His task had been made easy by the genuine spirit for co-operation and assistance shown by all members of the Committee. He announced that the Committee was adjourned sine die. The meeting rose at 5.55 p.m

GATT Library

zx419sp1908

Committee III Note of the Secretariat on Amendments and Observations dealt with by the Study Sub-Committee of Committee III

United Nations Economic and Social Council, November 6, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

06/11/1946

official documents

E/PC/T/C.III/13 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/zx419sp1908

zx419sp1908_90220050.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C. III/13 6 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III NOTE OF THE SECRETARIAT ON AMENDMENTS AND OBSERVATIONS DEALT WITH BY THE STUDY SUB-COMMITTEE OF COMMITTEE III The following amendments and observations have been received by the Secretariat and have been the subject of the discussions and deliberations of the Study Sub-Committee of Committee III: Number Abbreviated Title C. III/SC-I/1 Joint Draft of Article 34 C.III/SC-I/2 McGregor Draft of Article 34 (4 November 1946) C.IIl/SC-I/3 Brazilian Amendment to Article34 (E/PC/T/C.III/10) C.III/SC-I/4 Mulherkar Revision of Article 34 and 35 C.III/SC-I/6 Belgian Revision of Articlie 34 C.III/SC-I/7 Revision of Article 35 (Joint Draft: Messrs Mulherkar, Terrill, McGregor) C.III/SC-I/8 McGregor Revision of C.III/SC-I/7 C.III/SC-I/9 McGregor Revision of C.III/SC-I/1 C.III/SC-I/10 First McGregor Revision of Article 35 C.III/SC-I/11 Mulherkar Revision of Article 35 C.III/SC-I/12 McGregor Revision of Article 37 C.III/SC-I/13 Czechoslovak Amendment to Articles 34 through 40 (E/PC/T/C.III/7) Observations by Australian Delegate United Kingdom Draft (E/PC/T/C.III/9) Session of Study Sub-Committee at which discussed Throughout all Sessions Fifth Session. Fourth and Fifth Sessions Third Session Third Session Third and Fourth Sessions Third Session Fourth and Fifth Sessions Second Session First Session First Session Fifth Session Third Session Second Session Throughout all C.III/SC-I/14 C.III/SC-I/15

GATT Library

tj988ds8432

Committee III Restricted Business Practices Suggested Addition to the Agenda : Submitted by the Brazilian Delegation

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C.III/4 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/tj988ds8432

tj988ds8432_90220040.xml

GATT_156

United Nations Nations Unies ECONOMIC AND SOCIAL COUNCIL CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C.III/4 30 October 1946. ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III RESTRICTED BUSINESS PRACTICES SUGGESTED ADDITTION TO THE AGENDA Submitted by the Brazilian Delegation The Brazilian Delegation proposed that the following addition be made to item 1:- "(c) With reference to the economic development of the less industrialized countries. "

GATT Library

qj337zv6211

Committee III Restrictive Business Practices : Czechoslovak Amendment to United States Draft Charter Articles 34 - 40

United Nations Economic and Social Council, November 1, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

01/11/1946

official documents

E/PC/T/C.III/7 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/qj337zv6211

qj337zv6211_90220043.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.III/7 1 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III RESTRICTIVE BUSINESS PRACTICES CZECHOSLOVAK AMENDMENT TO UNITED STATES DRAFT CHARTER ARTICLES 34 - 40 The Czechoslovak delegation proposes the following amendments to Article 34 - 40: 1. That Article 34, number 1, be amended: "Members agree to take appropriate individual and collective legal measures to prevent business practices among commercial enterprises which restrain competition, restrict access to markets or foster monopolistic control in international trade, and which thus have the effect of frustrating the purpose of the Organization to promote expansion of production and trade and the maintenance in all countries of high levels of real income. The term 'commercial enterprises', as used in this Chapter shall mean all persons and entities conducting business, including such entities in which there is a government interest as well as agencies of governmental trade on commercial principles". 2. That Article 35, number 4, be amended: "Then it deems that a complaint deserves further examination, request information and data from the Government, in which jurisdiction are the restrictive business practices". 3. That to Article 35, number 7, be added: "Prepare and publish reports concerning complains, findings thereon, recommendations, and actions taken on such recommendations in agreement with the Government in which jurisdiction are such entities". LONDON E/PC/T/C.III/7 Page 2 4.That Article 36, umber 1, be amended: "The Organization is authorized to request to information from. Member at request of any Member of the United Nations or specialized agency of the Unied Nations, relating to business practices which may restrain competition,restirct access to markets or foster monopolistic control in interntional trade, and, where appropriate, to make recommendations for acton by the Members." 5. That to Chapter V be added a new article: "International Registration of Restrictive Business practices. A Register of Restrictive Business Practices shall be established by the Organization. In order to conduct this Register, the Organization is authorized to request infomation from members relating to business practices described in Article 34, number 2, (a) to (f)".

GATT Library

hp900qj4024

Committee III Restrictive Business Practices Draft Chapter on Restrictive Business Practices : (Submitted by the United Kingdom Delegation)

United Nations Economic and Social Council, November 2, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

02/11/1946

official documents

E/PC/T/C.III/9 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/hp900qj4024

hp900qj4024_90220045.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.III/9 AND ECONOMIQUE 2 November 1946 SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT RESTRICTIVE BUSINESS PRACTICES DRAFT CHAPTER ON RESTRICTIVE BUSINESS PRACTICES (Submitted by the United Kingdom Delegation) The attached United Kingdom Draft on Restrictive Business Practices attempts to cover in a consistent manner the whole field and, although a composite draft article of a general character corresponding to Article A of the attached has been considered and accepted by the Committee as a basis for discussion, the United Kingdom Delagation have thought that it will be usefuI to retain Article A for the present purpose in order that their draft on this subject can be seen as a whole. LONDON E/PC/T/C.III/9 Page 2 ARTICLE A General Statement regarding Restrictive Business Practices The members recognize that:- 1. it is essential that the action taken by the governments of Members in furtherance of the objects of this Convention should not be neutralized by the actions of private commercial enterprises; 2. certain restrictive business practices in international trade are capable of having harmful effects on the expansion of production and trade and the maintenance in all countries of a high and stable demand for goods and services in general which it is the purpose of the Organization to promote; and 3. among the practices which are capable of having such harmful effects are combinations, agreements and other arrangements which:- (a) fix prices or terms or conditions to be observed in deaIing with others in the purchase or sale of any product; (b) exclude enterprises from any territorial market or field of business activity, allocate or divide any territorial market or field of business activity, allocate customers, or fix sales or purchase quotas; (c).boycott or discriminate against particular enterprises; (d) limit production or fix production quotas; (e) suppress technology or invention, whether patented or unpstented: (f) extend the use or rights under patents, trademarks or copyrights to matters not properly within the scope,.or to products which are not the immediate subjects of the authorized grant. LONDON E/PC/T/C.III/ 9 page 3 ARTICLE B Policy towards and Procedure for dealing with Restrictive Business Practices 1. Members agree that they will take all possible steps to ensure that commercial enterprises within their jurisdiction do not enage in practices having such harmful effects. 2. Members agree that the Organization should be empowered:- (a) to receive and consider written complaints from any member (or, with the permission of the member, from commercial st .: rises within its jurisdiction who allege that their interests are affected) that a private internationational combination, agree- ment or arrangeent is having or is having or is likely to have harmful effects on the objects of the Organization as stated above, and to notify members of complaints received; (b) when it thinks there is there is a case for enquiry, to call upon provide full information relative to such a any comme s;i~I~nt bc -ses -: e such r ce tetenced fr(e) to arrange conference of Member State compians or foocomplaints or for purposes of general consultation reeMembe- a- t c3. Membrs agree to consider to what extent caunu be mtal accord can be mutual accord assist each otherc recommendations underecp,,emdatopms id LONDON E/PC/T/C. III/9 Studies relating to Restrictive Business Practices 1. The Organization shall be authorized:- (a) to conduct studies, either on its own initiative or at the request of any member, relating to (i) types of restrictive business practices in international trade; (ii). conventions, laws and procedures relevant to such practices, and to request information from members in connection with such studies; (b) to make recommendatoins to members concerning such conventions; laws and procedures as are relevant to their obligation under this convention. 2.Members agree that the duties laid on the Organization by the foregoing paragraph any by Article B should be discharged through the machinery set up in Article G of the Convention and the Executive Board. ARTICLE D Obligations of Members In order to implement the preceding Articles in this Chapter, each member undertakes to: 1. Furnisk to the Organization, upon its request and as expediticusly as possible and to the fullest extent feasible, information called for by the Organization in pursuance of Article 3 (2) (b), provided that information of a con- fidential character affecting national security or production technique may be withheld. To this end, each member shall carry out such investigations within its own jurisdiction as may be necessary and practicable. 2. Consider any recommendations made by the Organization for appropriate remedial measures in accordance with Article B (2) (b), with a. view to taking all steps possible in accordance with their particular systems of law and economic Organization to carry cut the recommendations of the Organization. 3. Report as requested by the Organization in pursuance of Article 3 (2) (c). 4. Take part in conferences upon the request of the Organization in accordance with Article B (2) (e). 5. To consider to what extent they can furrish information requested by the Organization in pursuance of Article C, such : - .t e . easonble withheld.i , rmtnit&t~ b- nresnably LONDON E/PC/T/C.III/9 Page 6 ARTICLE E Continued effectiveness of domestic measures against Restrictive Business Practices Any act or failure to act on the part of the Organization shall not preclude any member from enforcing any national statute or decree directed towards preventing monopoly or restraint of trade. LONDON E/PC/T/C. III/9 Page 7 ARTICLE F Exceptions to Provisions of this Chapter Tne Procedures and undertakings expressed in this Chapter shall 1. intergovernmental commodity agreements meeting the requirements of [Cnapter VI] of [this Convention]; 2. the international agreements excepted in [Article 49] of [this Convention]; or , transportation, aviation, shipping, teIecommunications and other services. LONDON E/PC/T/C.III/9 Page 8 The Commission on Business Practices shall have the following functions:- 1. to receive and consider written complaints concerning restrictive business practices in international trade, as provided in Article B (2) (a); in accordance with Article 3 (2) (b) to prescribe and call for information relative to such complaints and to notify members of complaints received; to request data, conduct hearings, report on its investigations to the Executive Board and make any recommendations which it may think fit; to request reports from members on the action taken as a result of recommendations made to them by the Executive Board and to prepare reports for publication by the Executive Board in accordance with article B (2) (d); 2. to arrange special consultative conferences between particular members and to assist in arranging consultations as requested by members relative to particular complaints, as provided in Article B (2) (e), and to forward reports or recommendations by such, conferences to the Executive Board; 3. subject to the approval of the Executive Board and pursuant to Article C, to conduct studies relating to business practices which restrain competition, restrict access to markets or foster monopolistic control in international trade; or relating to international conventions or national laws and procedures designed to carry out the objectives of Article B or to those which may affect such objectives, and to make recommendations when appropriate to the Executive Board for action by members; ~~ ( LONDON E/PC/T/C. III/9 Page 9 atcr an;te 4 t adnie ohe ExBoard as to informmation and otherd other materials to be obtrined foom memboers or thcr scurbes in the discharge of thes dutiel ponsibilities of Commission;ties of acilitate inter-governmental araangements for the the internatil exchangengon a non-discriminatery basisis , of tecnclogical information not involving narnio.al srity.yql

GATT Library

fx076ht8289

Committee III Restrictive Business Practices Memorandum on chapter 7 of the United States : Submitted by the Indian Delegation

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C.III/5 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/fx076ht8289

fx076ht8289_90220041.xml

GATT_156

RESTRICTED United Nations Nations Unies LONDON E/PC/T/C.III/5 30 October 1945 ECONOMIC CONSEIL ORIGINAL: ENGLISH: AND ECONOMIQUE SOCAIL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III RESTRICTIVE BUSINESS PRACTICES Submitted by the Indian Delegation As explained in the general statement made by the Indian delegation at the 3rd meeting of Committee III, the Draft Charter is an improvement on the original United States Proposals, as it has widened the scope of the Charter by including "Services" under clause 2 (a) of Article34. There is also a reference to "Any territorial market or field of business activity" in clause 2(b). This means that Article. 34 will not cover "commodity trade" but also "services ancillary to trade" such as shipping, banking and insurance. While this is legitimate interpretation of Article 34, as the Indian delegation has pointed out, under Article 40(2), which deals with exceptions, cartel agreements or understandings amongst private firms "concerning railway transportation, aviation shipping and telecommunication services" are to be outside the scope of the understandings contemplated under chapter V. This is unsatisfactory on logical and other grounds. In India national enterprise has all along suffered under the operation of these private agreements and understandings, particularly in the realm of shipping, banking and insurance. With the operation of shipping rings, Indian national shipping has been shut out entirely, and it does not carry even one per cent of its overseas trade; insurance of its overseas trade covered by Indian Insurance Companies is not accepted by Shipping Companies, and as such it has to move under the protection of non-Indian Insurance concerns, and so is the case with Banking. These are essential services required in the movement of LONDON E/PC/T/C.III/5 Page 2. international trade - and expansion and development of such trade - which depends upon the scope allowed for the country's national services Iike shipping banking and insurance. Since the whoIe position requires to be fully clarified in an unambiguous manner we suggest the following amendments:- 1. The first 3 lines of sub-paragraph 1 of Article 34 should read as under: " 1. Members agree to take appropriate individual and collective measures to prevent commercial enterprises from following practices which restrain competition, restrict access to markets or foster monopolistic control in the field of international commodity trade or services ancillary thereto such as shipping, banking and insurances and which thus have the effect of frustrating the purposes of the organization..." 2. Under Article 40 which provides for exception to the provisions of Chapter V, sub-clause. (c) or clause 1 should read as under: "(c) International agreements concerning railway transportation, aviation, shipping and tele-communication services. " We suggest that the intention of sub-clause (c) of Article 40 should be to exempt from the operation of Chapter V only agreements or understandings which are reached at an international level, on the initiative of United Nations Economic and Social Council "concerning raliway transport, aviation, shipping and tele-communication services.'' Agreements or understandings reached between private commercial enterprises in respect of these services should not be treated as exempted under Article 40. The same Principle should apply to understandings privately arrived at amongst commercial enterprises with regard to banking and insurance. 3. We suggest that fresh sub-clauses (d) and (e) be inserted under cause 1 of Article 40 as follows:-- " (d) Agreements or understandings amongst commercial enterprises concerning technological assistance, manufacturing processes and/or patent rights; or LONDON E/PC/T/C.III/5 Page 3. " (e) Agreements or understandings entered into by manufacturers either with their own government or with domestic primary producers for the restriction of exports of raw materials in the interest of domestic industries." 4. The object of inserting sub-clause (d) is to exempt certain individual arrangements which commercial enterprises in an industrially under-developed country may have to arrive at with foreign commercial enterprises with a view to securing essential technological assistance, "Know-Hows", certain manufacturing processes and/or use of certain patent rights which may be necessary for the effective utilization of their resources. 5. The exemption sought for these agreements shouId only be continued till a suitable and effective machinery is devised by the ITO. for securing such assistance to industrially under-developed countries, in a fair and equitable The exemption suggested under (e) is really meant for ensuring that in certain cases manufacturers in a country should he able to arrive at certain standing arrangements either with their government or with domestic primary producers to restrict the export of the raw materials in the interest of domestic industries. We are anxious that such understanding should not be treated as a restrictive business practice.

GATT Library

sj092br6596

Committee III Restrictive Business Practices : Suggested Revision of Article 34 of the United States Draft Charter

United Nations Economic and Social Council, November 2, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

02/11/1946

official documents

E/PC/T/C.III/8 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/sj092br6596

sj092br6596_90220044.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.III/8 AND ECONOMIQUE 2 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III SUGGESTED REVISION OF ARTICLE 34 OF THE UNITED STATES DRAFT CHARTER Joint (so-called McGregor) Draft 1. Members agree to take appropriate measures, individually and through the Organization to prevent in international trade, restrictive business practices which restrain competition, limit access to markets or foster monopolistic control whenever such practices have harmful effects on the expansion of production and trade and the maintenance in all countries of high levels of real income. 2. Without limiting the generality of paragraph 1, members agree that the practices listed in paragraph 3 below, when they are engaged in or are made effective by (a) an international combination agreement or other arrangement among commercial enterprises, including such an arrangement among private commercial enterprises and public commercial enterprises (i.e. agencies of government conducting trade or in which, there is a government interest); or (b) one or more commercial enterprises which possess substantial control of international trade, in a particular area or generally, in one or more commodities, shall be subject to investigation if they appear to have such harmful effects. LONDON E/PC/T/C .III/8 Page 2 3. The practices referred to in paragraph 2 are as follows: (a). fixing prices or terms or conditions to be observed in dealing with others in the purchase, sale or lease of any product or service; (b) excluding enterprises from any territorial market or field of business activity allccating or lividing any territorial market or field of bussiness activity, allccating customers, or fixing sales or purchase quotas; (c) ycotting or diseriminating against particular enterprises; (d) limiting production or fixing production quotas; (e) suppressing technology or invention, whether patented or unpatented; (f) extending the use of rights under patents, trade marks or copyrights to matters not properly within the scope, or to products or services which are not the immediate subjects of the authorized grant. The provisions of this Section shalI not apply to arrangements falling under (a) and (b) provided such arrangements are only a part of regular marketing arrangements between a particular enterprise and its distributors with respect to its own products and are not designed to reduce competition between that enterprise and its competitors.

GATT Library

rt165mh6028

Committee III Restrictive Business Practices Summary Record of the Eighth Meeting : Held on Monday 11 November 1946 at 4.0. p.m

United Nations Economic and Social Council, November 14, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

14/11/1946

official documents

E/PC/T/C.III/16 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/rt165mh6028

rt165mh6028_90220053.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.III/16 ECONOMIC CONSEIL 14 November 1946 AND ECONOMIQUE ORGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III RESTRICETIV BUSINESS PRACTICES SUMMARY RECORD OF THE EIGHTH MEETING held on Monday 11 november 1946 at 4.O. p.m. Chairman: Mr. DIETERLEN (Frarce) I. Letter of 7 November 1946 from the President of the International Chamber of Commerce to the Executive Secretary THE CHAIRMAN stated that he had spoken with. Mr Phillips, President of the International Chamber of Commerce, regarding a letter which the Chamber had sent to the Executive Secretary on 7 November 1946 It appeared that the Chamber' s vies regarding restrictive business practices were similar to those of the Committee. Therefore, Mr. Phillips considered it unnecessary for him to consult with the Committee. The CHAIRMAN regretted that he had been unable to see M. Duret, Representative of the World Federation of Trade Unions. He suggested, however, that the Secretariat might invite M. Duret to discuss with Mr. Gonzalez any problems pertaining to the Committee' s work.. 2. Discussion of the Rapporteur's Draft of the Final Report of Committee III Restrictive Business practices ) to the Preparatory Committee of the, International Conference on Trade and Employment (E/PC/T/C. III/W.4) The CHAIRMAN continued that the Rapporteur and his Advisers had prepared a draft of the final report of Committee III. This contained the three following parts: I. History of the Committee' s work; II. Instructions to the Drafting Committee; and III. Revised text of Chapter V of the United States Draft Charter. LONDON E/PC/T/C. III/16 Page 2 An Appendix would be added, containing the reservations made by delegations. Mr. WYNDHAM-WHITE (Executive Secretary) explained that the Heads of Delegations expected that Parts I and II of the Committee's report would be published,. but that Part IIII would not. For that reason, Part II of E/PC/T/C.III/W.4 should be expanded, so that it would present a clearer picture of the Committee' s work. Mr. HAKIM (Lebanon) suggested that Part II should contain a summar of the principles upon which the Committee had agreed. Mr. WILCOX (United States) felt that the present discussion regarding the form of the Final Report was inappropriate for Committee III. Decision as to the form of the Final Report would have to be tak by the Heads of Delegations. He himself would have no objection to th publication of Part III. If Part III were not published, however, he thought it would be inadvisable to publish Part II. Mr. SUETENS (President of the Preparatory Committee.) requested a f moments in which to explain to the Committee the form that its Final Report should take. It should be in three parts, similar to those which . .h, it already d contained. The Heads of Deligations had decied that Partsit ars II sI Iho be pud incsh,ed buthatt ys bPIII sto ld phItu It tna.hI pe r' !p e hit omthat Mr. HIM'AKss gugestio n sho ld befoolldwea s greasrd expsionon of ParII.t It should be borne in mind, however, thath te fatinggCommMtMe isou l dbe p emitted .ota ter -te text when necessary although if a Committee unanimously agreed upon a text, the Drafting Committee would probably make few changes. Mr. LEENDERTZ (Netherlands) said that he had made a reservation in regard to patents (Cf. Article 34, 3, f, of Rapporeteur's Draft). He had also made a suggestion concerning the advisability of referring oomplai to the International Court of Justice. He would like these observation included in the Report. LONDON E/PC/T/C. TII/16 Page 3 Mr. NAUDE (Union of South Africa) said that in the Report the South African Delegation as reported as supporting the Indian Delegation' s reservation in regard to services, insofar as it related to shipping. He requested that his reservation be deleted. Mr. HOLMES (United Kingdom ) observed that nw Part I reference was made to restricted documents. Since this portion would probably be published, it would be advisable to delete these references. Mr. MONTEIRO DE BARROS (Brazil) requested that his remarks relating to services be altered and that a statement regarding public enterprises be added. As Mr. MCGREGOR was to be temporarily absent, Messrs. WILCOX (United: States) and HOIMES (United Kingdom) were requested to revise the text of Part II of the Comittee' s report, for Mr. MCGREGOR'S consideration upon his return. The CHAIRMAN explained that he had to return to France, and expressed his regrets at leaving before the Committee's report was completed. Mr. WILCOX (United States), speaking for the Committee , expressed his appreciation for the CHAIRMAN's skill and fairness in conducting the sessions of Committee, and for the great contribution which he had made to the successful conclsion of its work. Mr. HOLMES (United, Kingdom). seconded this. The CHAIRMAN tanked the Committee and the Secretariat for the co-operation they had given him. The meeting rose at 5.47 p.m.

GATT Library

gc396gw6427

Committee III Restrictive Business Practices Summary Record of the Seventh Meeting : Held on 8 November 1946 at 3-0 p.m

United Nations Economic and Social Council, November 12, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

12/11/1946

official documents

E/PC/T/C.III/15 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/gc396gw6427

gc396gw6427_90220052.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C. III/15 SOCIAL COUNCIL ET SOCIAL 12 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III RESTRICTIVE BUSINESS PRACTICES SUMMARY RECORD OF THE SEVENTH MEETING held on 8 November 1946 at 3-0 p.m. Chairmans M. DIETERLIN (France) Discussion on Draft of Chapter V submitted by the Rapporteur of Committee III and the Advisers Appointed by the Committee The CHAIRMAN hoped that general agreement would be reached , and that the draft would be unanimously accepted. The agreement of Members did not engage the Governments they represented. Mr. WILCOX (United States) said that the present draft was a generally ;----t i s CL.- .s acceptable synthesis of Memebers opinions,. although he regreted it was not ,. r- ' d'- as strong as he had desired. It. was none the less a practicable appoach .......... - to the problem, and he hoped Members would agree with him in accepting it. Mr. HOLIES (United Kingdom) declared his acceptance of the draft. There had been a mistake he present draft had been incorrectly copil from some earIier version, whereas the intention had.been to include the text of document E/PC/T/C.III/12 with minor alterations. --,'' '- - Mr. LESUYER (France) regret that the draft erred on the side f ra erred o' s ineffectiveness. It had however contrived to avoid conflict with existing Legislation. It had this to be said for it that it provided a . _- -.- r. precise reference to existing Iegislation regarding restrictive buiness, practices. It also facilitated intervention by the ITO. He supported the draft as it stood. Mr. McGREGGR (Canada), speaking as Rapporteur, explained.that the. draft was a synthesis of view-points. He thanked those Members who had made concessions. LONDON E/PC/T/C. III/15 Page2 He then went through the draft (E/PC/T/C. III/W. 2) in detail pointing out items amended deleted and inserted in comparison with the previous tentative revision (E/PC/T/C. III/12). Mr.NAUDE (South Africa) asked why paragraph 1(c) of Article 40 of the Draft Charter had been eliminated. The CHAIRMAN replied that the item in question, dealing with "service had been deemed outside the scope of Committee III. Mr.ARENDT (Belgium-Luxembourg) accepted the draft in Principle with certain reservations. He asKed the Rapporteur why the words "or are like. to have" had been omitted in Article 35 paragraph 2. Mr. McGREGOR (Canada) replied that the words quoted had been omitted by typographical error. Mr. LEEMDERTZ (Netherlands) expressed his general approval of the dra subject to reservations concerning "and public commerciaI enterprises" in paragraph 2(a) of Article 34 and the words "or are likely to have" in paragraph 2 of Article 35. Experts would need to be consulted concerning the "rights under patents, trade marks or copyrights" in paragraph 3(f) of Article 34.He suggested that the international Court of Justice might be the body to implement the provisions of the latter part of paragraph 1(b) of article 37, but this was a point that would be raised later. The CHAIRMAN asked Mr. LEENDERTZ whether he desired his suggestion to be included in the report or whether he wished it to be discussed at a later meeting of the Preparatory Comittee. Mr. LEENDERTZ (Netherlands) preferred the second alternative. Mr. WILCOX (United states ) considered the question of "state monopolies" largely academic. In the context the expression did not signify monopoly within the individual state but a state-owned monopoly of world trade, of which no exampIe at the moment existed. The question had arisen as to whether to include agreements between stated-owned enterprises in different countries in the present draft or in Article 26. The present draft was more appropriate for dealing with this problem, as it applied to any conspiracy between commercial enterprises whether public, private or mi LONDON E/PC/T/C. III/15 Page 3 The phrase "or are likely to have" was a necessary inclusion, because it envisaged the possibility of lodging a complaint at the inception of a cartel. If the phrase were deleted, no complaint could be lodged until harmful effects had been experienced. Mr. McGREGOR (Canada) agreed with Mr.WILCOX'S last point.Members had the opportunity of taking preventative, rather than remedial, action. In his capacity of Rapporteur he suggested that the word "conventions" in Article 36 paragraph I should be amended to read "Charter". Mr. MULHERKAR (India) affirmed that Chapter V would be meaningless, so far as he was concerned, if the problem of "services" were excluded and he, reserved the position of India on this point. Regarding paragraph 4 of Article 35, he asked whether a Member could submit information on his own inititative or only by specific request " from the ITO. MR, McGREEGOR (Canada) replied that Members were able to submit information on their own initiative. Mr. TORRAS (Cuba) agreed with the draft in principle, but made a reservation regarding the treatment of "services". Mr. HONTEIRO de HARROS (Brazil) Likewise agreed with the draft in principle. He suggested that cartels should be publicly registered with the ITO. He made reservations concerning "commercial enterprises" in Article 34 paragraph (2) and (b) and also concerning the probIem of "services".-; .' , - - ssible to demand thee to The C- t t Z. it- w, lgadeandte / level, since no registration am,~stto,n- ocrtls gio.,h ii etinal.gi lraton t existeNTEIRO dHd BARRTOSoMr. MOt'ie suggMr. Me tIRh ate, LR.NTMOo - submit his ideas regarding a possible registration system-_ . AmmDrthla,ri) stted ha migh prefer the inclusion of> shipping services in Chapter V. r. GGZAE Chile) expressed his agreement with the draft, with the reservation thast he wa not alrtogethe satisfied with the omission of services Mr. ELSTAD (Norway) had no general objections to the draft althoug he would like to have had a paragraph included concerning the registration of the enterprises specified in Article 34 paragraph 2(a) and (b). Mr. FLETCHER (Australia) considered the draft an improved and workable document, but felt that it was impossible to give a considered opinion on all its practical implications in a short tirme. Mr. HAU (China) stated that he was in agreement with the draft. Mr. HAKIM (Lebanon) also accepted the draft, although he would have desired stronger provisions regarding the control of cartels. Mr. SOBOL (Czechoslovakia) accepted the draft in principle Mr. LAURENCE (New Zealand) accepted the draft as an improvement of the United States text but made, certain reservations. The CHAIRMAN, summing up, said that all Delegates except Mr. MULHERKAR had accepted the revised draft of Chapter V. He had observed in the course of debate that certain problems were common to Committee III and other Committees and therefore suggested that a Sub-Committee should be established for liaison purposes. Mr. THILTGES (Belgium-Luxembourg) Proposed as Members of the Sub-Committee: - Mr. Wilcox (United States) . vV1LCCCS/ Mr Holmes (United Kingdom) Mr. Gonzalez (Chile) Mr. Hau (China) Mr. LECUYER (France) proposed Mr. THILTGES (Belgium-Luxembourg) as a fifth Member. This was agreed. The meeting rose at 5.50 p.m.

GATT Library

ww434fq1595

Committee III Restrictive Business Practices : Tentative Revision by Sub-Committee of Articles 34-39 of the United States Draft Charter

United Nations Economic and Social Council, November 4, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

04/11/1946

official documents

E/PC/T/C.III/12 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/ww434fq1595

ww434fq1595_90220049.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC/T/C.III/12 AND ECONOMIQUE 4 November 1946 ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III RESTRICTIVE BUSINESS BY SUB-COMMITTEE OF TENTATIVE REVISION BY SUB-COMMITTEE OF ARTICLES 34-39 OF THE UNITED STATES DRAFT CHARTER Article 34. Policy Toward Restrictive Business Practices 1. Members agree to take Appropriate measures, individually and through the organization to prevent in international trade, restrictive business practices which restrain competition, limit access to markets or foster monopolistic control whenever such practices have harmful effects on the expansion of production and trade and the maintenance in all countries of high levels of real income, or on any of the purposes of the organization as set forth in Article 1. 2. Without limiting the generality of paragraph 1, members agree that the practices listed in paragraph 3. below, when they are engaged in or are made effective by: (a) an international combination agreement or other arrangement among commercial enterprises, including such an arrangement among private commercial enterprises and public commercial enterprises (i.e., trading agencies of government or enterprises in which there is a government interest); or (b) one or more commercial enterprises; LONDON E/PC/T/C.III/12 Page 2 when such commercial enterprises, individually or collectively, possess effective control of international trade, in a particular area or general in one or more commodities, shall be subject to investigation, in accords with the procedure provided by the subsequent Articles of this Chapter, i they appear to have or to be likely to have such harmful effects as are described in paragraph 1 of this Article. 3. The practices referred to in paragraph 2 are as follows: (a) fixing prices or terms or conditions to be observed in dealing with others in the purchase, sale or lease of any product (or servic (b) excluding enterprises from any territorial market or field of business activity, allocating or dividing any territorial market or field of business activity, allocating customers, or fixing sales or purchase quotas; (c) boycotting or discriminating against particular enterprises; (d) limiting production or fixing production quotas; (e) suppressing technology or invention, whether patented or unpatented; (f) extending the use of rights under patents, trade marks or copyrights to matters not properly within the scope, or to products or services which are not the immediate subjects of the authorized grant. Article 35. Procedure with Respect to Complaints Members agree that the organization shall. I. Arrange, if it considers such action to be justified, for particular members to take part in a conference requested by any member who consider that any specific practices exist which have or are likely to have the effect described in paragraph 1 of Article 34. LONDON E/PC/T/C. III/12. Page 3. 2. Consider each written complaint which any member may submit, or which any persons or business entities or other organizations within the members jurisdiction may submit with the permission of such member, that any practices have or are likely to have the effect described in paragraph 1 of Article 34. The organization shall prescribe the minimum information which should be included in each such complaint. 3. Call upon each member concerned to obtain statements in reply from the commercial enterprises within its jurisdiction which are affected, and such information from any member as the Organization may deem necessary; and then determine whether further investigation as justified. 4. lf it is considered that further investigation is justified, notify all members of each such complaint; call upon the complaint or any member to provide such information releva it to the complaint as it may deem necessary; and conduct or arrange for hearings at which any member, and the parties alleged to have engaged in the practice, will have opportunity to be heard. 5. Review aII information and come to its findings whether the practices in question have the effect described in paragraph 1 of Article 34. 6. Report to all members the findings reached and the information on which such finding are based; and if it finds that the practices have had the effect describes in paragraph 1 of Article 4, call upon each member concerned to take, in accordance with the member's laws and procedures, every possible action to prevent the continuance or recurrence of the practices and to effect the abrogation and termination of agreements or arrangements which provide for such practices. 7. Call upon all members concerned to report fully the action they have taken to achieve these results. LONDON E/PC/T/C.III/12 Page 4 8. Prepare and Publish, as expedidiously as possible after inquiries have been completed, reports on all complaints dealt with under paragraph 4 of this Article, showing fully the findings reached, the information on which such findings are base, and the action which members concerned have been called upon take; provided, that publication of such reports may be withheld if it deems this course justified. 9. Report to all members, and make public if it is deemed desirable, the action which has been taken by the members concerned to achieve the results descrbed in paragraph 6 of this Article. Article 36. Studies Relating to Restrictive Business Practices The organization shall be authorized to: 1. Conduct studies, either on its own initiatiive or at the request of any member, relating to (a) types of restrictive business practices in international trade; (b) conventions, laws and procedures such as those concerning incorporation, company registration, investments, securities, prices, markets, fair trade practices, trade marks, copyrights, patents and the exchange and development of technology, in so far as they are relevant to such types of restrictive business practices, and to request information from members in connection with such studies; 2. Make recommendations to members concerning such conventions, laws and procedures as are relevant to their obligations under this Convention; 3. Arrange conferences, when requested by members, for purposes of general consultation on any matters relating to restrictive business practices. LONDON E/PC/T/C.III/12 Page 5 Article 37. Obligations of Members In order to implement the preceding articles in this Chapter each member undertakes to: 1. Take all possible steps by legislation and otherwise: (a) to ensure that private and public commercial enterprises within its jurisdiction do not engage practices which have the effect described in paragraph 1 of Article 34; and (b) to prevent the continuance or recurrence within its jurisdiction of any practices which the organization finds to have had such effect. 2. Establish procedures to deal with complaints, conduct investigations, prepare information and reports requested by the organization, and generally to assist in preventing practices which have the effect described in paragraph I of Article 34; these measures to be taken in accordance with the particular system of law and economic organization of the member concerned. 3. Conduct such investigation as may be necessary and practicable to secure information calIed for by the organization or to prevent practices which have the effect described in paragraph 1 of Article 34. 4. Furnish to the organization, as promptlly as possible and to the fullest extent feasible, such information as is called for by the organization under paragraphs 3, 4 and 7 of ArticIe 35 and under paragraph 1 of Article 36; provide that confidental information affecting nationaI security or production techniques may be withheld. 5. Report, as called for by the organization under paragraph 7 of Article 35, the action taken, independently or in concert with other members, to implement recommendations made by the organization under paragraph 6 of Article 35. LONDON E/PC/T/C.III/12 Page 6 accordance with paragraph 3 of Article 36. Article 38. Supplementary Enforcement Arrangements 1. Members may, by mutual accord, co-operate with each other in prohibitive, preventive or other measures for the purpose of making more effective any remedial order issued by a duly authorized Agency of any member in furtherance of the objectives of this Chapter. 2. Members participating an such co-operative actions shall notify the organization. Article 39. Continued Effectiveness of Domestic Measures Against Restrictive Business Practices Any act or failure to act on the part of the organization shall no preclude any member from enforcing any national statute or decree directed toward preventing monopoly or restraint of trade.

GATT Library

cg764mv4627

Committee III Revision of Article 54 of United States Draft Charter Proposed by the Brazilian Delegation

United Nations Economic and Social Council, November 2, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

02/11/1946

official documents

E/PC/T/C.III/PC and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/cg764mv4627

cg764mv4627_90220046.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED AND ECONOMIQUE LONDON E/PC/T/C. III/ PC SOCIAL COUNCIL ET SOCIAL 2 November 1946 ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III REVISION OF ARTICLE 54 OF UNITED STATES DRAFT CHARTER PROPOSED BY THE BRAZILIAN DELEGATION To the Secretary, Committee III. The Brazilian delegate, after examining the new draft of Article 34 and its subsections, submitted by the Canadian delegate, Mr. McGREGOR: 1 . expresses his approval of the new text of paragraph 1; 2. is also in agreement with the draft of paragraph 2; with the exception of the final phrase ("shall be subject to investigation if they appear to have such harmful effects" ). On this point, Brazil considers well founded the conclusions drawn by the delegates of Norway and Lebanon who considered it would be of use to name the organization responsible for such investigation and to define the action which should be taken to eliminate practices which have been decIared harmful; 3. proposes the following amendments (a) to incorporate in the text of paragraph 3, sub-paragraph (a) the words: "and particularly dealing with the practice of dumping" Brazil advances the following arguments in support of this proposal:- It would be of use to make express reference to dumping among the practices mentioned in paragraph 3. If dumping is to be condemned. even when carried cut by single firms (which is the exception) it sems evident that it is much more dangerous when carried out by combinations of firms. Such express reference moreover would have the advantage of LONDON E/PC/T/C. III/10 Page 2 emphasizing that dumping runs counter to the spirit of the Charter we are about to adopt. This would be a valuable declara tion since the United States Suggested Charter, although it mentioned dumping, does not in so many words condemn it. The charter deals with dumping only in relation to the measures which may be taken against it and the extent to which these measures can be considered legitimate, which might be interpreted as a tacit admission of the legality of dumping; (b) to incorporate in paragraph 3, a futher item, (g), to read as follows :- "resulting directly or indirectly in the obstruction or delay of economic development in countries in the process of industrialization". Brazil proposed that this question be dealt with under Paragraph 1 (c) in the agenda (See Doc. E /PC/T/C.III/4). In view of the opinions expressed by the United Kingdom delegate, in the committee meeting held on wednesday, 30 October, it was agreed to incorporate this point in the text of Article 34 and its sub-sections, where its inclusion seems more appropriate. Monteiro de Barros.

GATT Library

fn905nc0051

Committee III Summary Record of Meetings : Second Meeting held on Wednesday, 23 October, 1946 at 3 p.m

United Nations Economic and Social Council, October 24, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

24/10/1946

official documents

E/PC/T/C.III/2 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/fn905nc0051

fn905nc0051_90220038.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL AND ECONOMIQUE RESTRICTED LONDON SOCIAL COUNCIL ET SOCIAL E/PC/T/C.III/2 24 October 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III Summary Record of Meetings Second Meetting held on Wednesday, 23 October, 1946 at 3 p.m. CHAIRMAN: Mr. DIETERLIN (France). 1. Requests from the ICC and WFTU for representation. The CHAIRMAN Proposed, that the Secretariat invite the International Chamber of Commerce and the World Federation of Trade Union to submit in writing their views on questions upon which they wished to consult the Committee. When these views had been received the question could be considered further. This was agreed. 2. General Statements of Members. MR WILCOX (United States) explained that the chapter on restrictive business practices in the charter had been included for the following reasons:- (a) Reducing barriers to international trade and dispensing with government-imposed quotas would be useless if these barriers could still be established by private enterprise. Cartels were sometimes more restrictive in this respect than tariffs or quotas. (b) Public regulation of the flow of trade was a matter of public policy. Cartels, however, were private arrangements concluded irrespective of the interests of public policy. LONDON E/PC/T/C.III/2 Page 2 (c) Cartels tended to establish prices higher than competitive prices. This meant fewer goods, less consumption and less employmet. Monopoly was prejudicial to expanding employment and also hindered business enterprises from meeting new situations. Monopoly also resulted in smaller shares of the fruits of labour going to the producer of materials and the worker. (d) Cartels put the brake on industrialization of undeveloped areas because:- (i) If agreements existed which set high minimum prices for equipment, this equipment would be more difficult to obtain. (ii) Past experience had shown that cartels prevented the development of new competitive industries by various processes, e.g. deliberate dumping or boycott. (iii) Cartel agreements sometimes formed obstacles to obtaining patent rights and technological aids for new industries. (e) The chapter on cartels was an essential complement to the chapter or commodity arrangements. He therefore proposed that an international agency be establish- ed to consider complaints regarding restrictive business practices and to recommend appropriate action. No action would be taken by this agency until a bona fide complaint was lodged. After the lodging of a complaint a public hearing would ensue, arguments for and against being considered . The agency would then recommend appropriate action. By these means an international code of business conduct sanctioned by public opinion would be built up. He concluded by emphasizing that to be effective this agency must be given definite powers and be regarded seriously. ~~~~:j S. Of E/PC/T/C.III/2 Page 3 ~ s :D 7 e n. - nc..l_ -_ --'7 -'x; -.o --S -', Z'_ .:. <soe .- . D ^e~e.->_ t- -.- ' -.. e~w_ ~r s--s dispense with some of -. - ^ '.: / - 7. -O '-e-.s S r-*-; ' 'S-2--@'- -_r: .S_^- sirc-! ~:,.:n- _J o ,. _> ins. -e" s that it was difficult to decide that one particular practice was injurious '.' i x::.. ls :ro . .,ustra1.i:.r The Australian Goernment had frequently advised incipient industries to enter into private arrangements with experienced overseas manuacturers with a view to increasing production and efficiency. Were these arrange- mants to be classed as restrictive and hence suppressed, one of objectivies of the charter - industrial development - would be contravened. He believed the American proposals would imply a greater supervision and suppression than was necessary , but stated that his attitude, based at present on little experience of the subject, would take a more definite shape in the light of future discussions. agreements might under given circumstances help to attenuate crises, protect individual producers and the interests of small nations They could, if properly organized, Prorote social peace by adapting supply to demand. and by stabilizing prices, production and consequently empolyment. He found the word "carteI" inadequate and ursatisfactory, because it could only be applied toa limited number of intermediary arrangements between the simple "gentlemen's agreement" and the "trust". International agreements might be defined as arrangements aiming at the co-operation of the industrial and commercial enterprises of various nations with a view to improving production and markets, suppressing certain general costs, seeking new outlets, regularizing rates of exchange and competition and developing technical progress. These ains were surely compatible with the purposes of the proposed International Trade Organization. LONDON E/PC/T/C.III/2 Page 4 An econemically unjustified reduction of supply below the normal level of consumption.: - , - - - 4 --.e h.........r.... w: vX- _' _-nJu An excessive rise in prices. Boycotting producers or consumers, particularly when this tendeb to restrict access to food supplies Unjustified dicrimination against certain producers and/or consumers . Monopolizing technical inventions and natural resources . Agreements were, on the other hand, justifiable when they sought to protect individual interests threatened by unbridled competition, economic crises and international disorder. Such agreements tended to increase production, improve quality, ensure harmonious distribution of manufactures, and even to bring about collaboration with consumers. He was aware that industrialization had reduced prices. Industries had to be assured of a good regular output. Many in- and social crisis. Nations with small home markets, dependent on international markets, suffered extremely from cut-throat cometition and dumping by other nations because the former generally had reduced custom tariffs of a fiscal nature. He stated that the form which international commercial agree- ments assumed did not matter provided that these agreements were not of a secret nature. He-beIieved such industrial agreements were permissible if they had the following aims:- (I) Synchronising supply and demand (2) Riegl.ar zingpPricef'lucunations 3( Pnromotign techiccalprogres s rnational Steel agreement. - _~-S1 3 OT 21 'an2S.' C ene S ,. I _ -.- -=O;: 3 - r ~~~3 z: tii-* - ''"_n - - zr az u o -, 4- -- 1ZCS XOCC~ a2i-:'hen they Restrictive business practices were exceedingly valuable when they aimed at obviating out-threat competition and stabilizing reasonable prices. Such practices did not suppress fair competition. In periods of boom they acted as a tolerating factor whilst in crises they were a means of recovery The chief aim of the ITO, nambly social security though Stable empolyment and remuneration, presupposed a certain stabilitvy of production. He believed that business agreements could play an ; r2~~n nsaimer. important part in realizing this aim. Luxembourg desired thiat commercaI agreements be controlled. He believed that national legislation must provide for the prevention and suppression of abuses arising out of commercial agreements. Mr. DU PARC (Belgium) supported the views of Mr. BASTIAN (Luxembourg). He also supported the sections of the suggested charter dealing with amployment and international trade. He believed for more cases could be quoted to show commercial agreements had a salutary effect than could be quoted to show the opposite effect. National and internatioal supervions to ensure such agreements were beneficial was necessary. He believed commerciaI agreements were primarily defensive rather than aimed.at exaggerating prices and generally in the nation' s interest as they tended to stabilize prices, promote increased consumption and production.He quoted from the statistics of steel, coke, cement and other cartels. He was very conscious of potential abuses in the cartel system and maintained that protective legislation must obtain in each country. In Belgium a draft law providing as follows had been tabled:- LONDON E/PC/T/C. III/2 Page 6 1. Arrangements made in connection with national combines aiming at establishing joint economic regulation must be registered. 2. Every nation l combine of major importance to the country's economy must submit to the administration copies of the appropriate documents. 3. Evey combine or national enterprise participating in an international combine must give notice to the administration of its participation therein. 4. The administration may impose on any industry regulations supported by a majority of that industry. 5. An absolute majority of the industry concerned must be in favour of the combine and it must be in the general interest. Mr. MONTERO DE BARROS FILHO (Brazil) stated that legislative action had been taken in his country to punish restrictive practices and to free competition, in order to safeguard the national economy. Article 148 of the new Brazilian Constitution approved on 18 September last stated:- The abuse of economic power will be punished, whatsoever form it may take including trusts or groupings of individual enter- prises, which aim to dominate national channels of trade, to eliminate free competition and to arbitrarily increase their own profits." His country, which was in process of developing economically, had the best of reasons to distrust the effect of these practices on their national economy. Brazil was therefore generally in agreement with the United States proposals, and put forward some suggestions in connection with Articie 38 of the suggested charter for an international trade organization for the considera- tion of the Committee. The adoption of these principles in the project would bring into the international plane laws which had already been included in the Brazilian Code. He reserved the right to return to the subject and to put forward additions or modifications LONDON E/PC/T/C.III./2 Page 7 in the proposed text. MR. McGREGOR (Canada) stated that the business of Committees II and IV was the removal or reduction of restrictions imposed by Governments. The task of Committee III was the removal of restrictions imposed by pravate business interests. Private international combinations had prohibited or limited exports and imports, and imposed quantitate restrictions in the same manner as Governments. It was not suggested that all restrictions imposed by private combinations affected injuricusly the country subject to these restrictions, but such private power to impose injurious restrictions should be subject to some effective control. Competition within cartelized industries was inadequate, nor could substitute commodities be depended on. Potential competition was not a sufficient deterent and Government action to safeguard the interests of the consumer had proved no safeguard against injury by powerful groups operating outside its jurisdiction. His Government assumed that other Governments represented would be sympathetic to a policy of joint action to curb private restrictivie business practice, and it was his Governments sincere hope that in their considration of private barriers to trade, they would be as successful as the other Committee in devising meassures which would achieve the common objective. He referred to the word. "cartel" which one English writer had defined as "no longer an economic term but an epithet of approbrium". If the use of the word "cartel" was to be avoided, he considered more accurate the phrase "private international unduly restictive business practices. The Canadian attitude was opposed to privat international agreements which were unduly restrictive, and emphasis was laid on the word "unduly". ^ a-'. ^ -: r-' ._ -- ;;ha 1e .^.ti =R- W--. .-^ .-e^-^i-. W 2 - ton~e s of a , 1 were C ;_ a -n d zer ca for the n as nC of, tn.he Ccom.ittea. T.h r-ocrt reco..er.ed. that the ve=rne.nt of 0 <a should gi its suonort to the est:-'Jlisnmemmt of eI.' - tr.ti aency to a.eal tith cartels, Tis -S;7- hi shawn. thhat some o- the Z. -_.ris e:;^-e. st:-tede t ha _ -o2.22 ^ arket fv7or ce .22 Oc bs longed. to scme foreignorcducer. CO.tsiders h'lad ided. ths r:;;d-c qualities of goods Canada could import and the quantities and prices. Tariff reductions to attract other suppliere would have been ineffective, sice taese s uiers had agreed to stay out of the ,zeardaaian m-arket -, atre. fo- ^ ononoly In cther areas. 2Lhcugh such a monopoly was offensive to Canadian laws no action could be taken in the courts, as the. azreements had bieen made by fcreigners domiciled outside Carada. S -nilariy Cara - manufac--cters *-d n ceer. free c e:cmort certain z-ods because of *azre oments -.- confined them to the C _.1S It las his hcre that the .atir.s re--esnted --;oUd carnmne tl prevent such practices. ie considered the intnrnatni-al cv-tel to be an imported product that should be put on the prohibited list and other nations could rely on Canada to do her utmost to implement the terms of any inter-government agreement to restrain such poloicies LONDON in securing uniformity of interpretation by even a majority of the the fitable to one country would be highly obnoxious to ano zontcountry which suffered from it. The organization would hav c-aavoid too rigid a formula which would defeat its own purposes a :.^would be unerforceable. He thought what by building up a kind international oascase law in this field in they would gradually ieve a reasonably clear-cut definition of -; what all agred ould be -roprohibitd. They would then have a body law that would be en- forcene able cause ottfhe backing of -ubpublic opinion Persornaill :h --wasrimpressed he degree of unanimity ncappare anamong representativesThey all recogniZez that reprehensible things h;had een done by cartels; but they rocecognized no less th contributions they had made tc ocientific research ^-and e stabil- ization of industries. It was tntheir aim to atta properl restrictive practices, and he considered 40ojoint forts could eliminate such zrapractis :. His Government would nto favour registration of cartels and areezegreements, nzsucgh a measure would amount to licensnsg their activities. Hle defined the attitude of Canada as one of lively interest in the problem with a desire for more lizht:-e. Hhought that any internation- caonvertiorthanra as agreed should provide adequate measures for exa=L-raminatio alleged offences arxdndequate measures for redress henew offences had been proven. AIs he .was in 4aoaur of other positive preventive measures to restrict the acquisition and exercise of -cwow by private international -oungsepsre wthere were indications that such power would be used to frustrate the objectives of the organization. Canada would give -w<-aa andnd w w-holehearted support to any policy which concentrated oan buses of cartelization, anwd hich represented an orgerized effort to prevent practices of inter- national combination omonopolies, which were unduly e or unreasonably restrictive. ThM meeting rose at, 6.0p.mm

GATT Library

pv264xf2530

Committee III Summary Record of Meetings : Third Meeting held on Thursday, 24 October 1946 at 10.30 a.m

United Nations Economic and Social Council, October 25, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

25/10/1946

official documents

E/PC/T/C.III/3 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/pv264xf2530

pv264xf2530_90220039.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON AND ECONOMIQUE E/PC/T/C.III/3 SOCIAL COUNCIL ET SOCIAL 25 October 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE III SUMMARY RECORD OF MEETINGS_ Third Meeting held on Thursday, 24 October1946 at 10.30 a.m. Mr. GONEALEZ (Chile) stated that, in pre-war years, when world production of certain commodities had resulted in surpluses which constituted a danger to the stability of world economy, Chile had worked satisfactorily and had stabilized markets at low prices. He feared that inter-governmental agreements providing for participation of consuming countries couId be successful only after a long period of over-production, when surpluses had become excessively burdensome. feared that inter-governmental agreements providing for participation *-el nn ber ormeementould become efucchioeme agrfsetv, ova ciis ofer- promight affectducttain commodities withn sder -al the attendant ldiffcutnese internal to thomy of the country concerned andmeconofuntry concerned and to ts foreign trade. aZrsgtain amendsted thould be madeata ecemrametmni hitmmb .e in Chater V ofCharter the United States Draft erCicle 40, of coopns V imight be toended oo ins usCha,icsmi bf Tammdmue agrreempents cooncecommrniing tansortatin , uncation and other services provided tey conform to the standards set by the ITO. - i wa- - c j - i , -s 't _ r _ _1 S:_.t_ _ _ Sf _e .._ sevcr.< sh se , rcab. <; ..u..... _e .-.z . .c :rw_ L in. the_ catSor __of .cz estricti- e "'.,:'2 n -_- js practice_ '-'_'-S 's-- '_Z tZ^ ov iC a- . o.,.vS "_. :_:-W r E -.:._- n: -~~ :-.: 17 S r:- , C ,I - 4 a v_.s -Ur _ s ay w_\ s _ .- - v >' -siabe-1 . 2S=' 22 -'--;'*- Jfet of _3_retv CrCc prctce .~ is h r1ecsz~ .- (Cba)~z LSto.tei th although Cuer. -.-~l, h --~ai. lit' =QC -C :)rlat e sw,.-.cu_ d rcocnie;-d...... . ............. ul Wr _ 1 -non . t^ sucn ............... thre ce-'s byc:ristel i; -"- eher. C-resrics. in sc --ocess zr nctc i rirstaliza thveyr- i Q ...n >t ui 1 itais s . her. b-asic o- ort:, zaLtQy tobaccos Sc-norily, they -_-il creoL einte st cC h;..er_ -.ncr-s' DI erc-,__int ^nrevent.er of thes _ orftie ofl ,- C.-suban.ct mCeehL e.ncl rd in, -. of -e rre te eice. ;cr esas a~cs establishi lng rules ..:-nic~r -n t |s whi.ery: f;C-dZ qW.ealiX6-ng a witeacs= ai -e .s- as out torvharth.n the tbs a des ti-a lar _LeL ino rteste- fe threat ts ctices. GMLRXere (t tbai The s>tteeent of- W the Caca --o -la nilge as a basis fo:r the f ctzlit -, -f i tisy fantrry c-_ncen -'f'eo- s -n nr~ee WIys bgC:rXCls, arn-I;_ rsrci-v- business -:rC-t-ics-s First., ,--Icy 1cd inzoisc-d :Z-1avvt _ FCr b-&Z'5 ax-zots, -iz-ljY `tCb-cco. Secondly, `1-hc in.~'¢s creczed t-_cst, of :^e- 6- DorrsE Ta~ir l_;- in to-I-e sphe~re of s ri^es Qri4w-ct-iv ar-ra M>cm-n, .,s n-c antr buted t- -4 thc pr1event4-on, of' t'he1 f'rtir., of a Cu'C-,n -..ech-^ *ardne- . ge interoreted -t-e _eC7 p-nsas as es tblisll^ rule's ami maLCkdnezy- l-r9't dleawg -r-;_.t-h ea-c-11 spaec-f ic casc as. -ut L, f#t.t~ax3 r, C-the bazis Trc ore Stri:Zeent. Ta'e stat';eni 'o th C~ ^a.radaunDereat- --igrnt be used. .az -a basis L"o thWe ofWzlc satisfat&n v, crete measures. ~~~~~~~~~~~~~~-<:e )>. cS 1r.BkOL had caoslovakia) explained that Czech¢slovaea a1d tvken legai actin asarl as 12,4 to ccn-irol te activ-ties of ca,-tes. alsTparticipating in domestic required naaticnCi-,attinz r dcmnestic and international cartels to register such cartels with the government and to fr-Bysh Lnfoxnaticn on their activities. 3Y virtue of this law the Stativities Intervern directly in cartel acivli-t:a ard could abolish cartelsCwhich jeopkiaized the public interest. zechoslova had regulated thegislavities of cartels by domestic lgisla-tion, and has nowv ready to partacapatewouldnternational institutions which ;iuld gave the same guarantee.. Mr. LECUYrprisingce) stated that it was not su-Lrasing that difference of opinion existed, as regards the virtues of industrial agreementsfr Obvzously, a highly industrialized country would view them in a diffeializedgat froz a wall, less industraalizea orea. It -as =perative, however to te.rmnte those abuses which h=a been perpetrated. im all countridualby anivate concerns, both indivdually -rd in combination. Me. 2rench, delegation had no hesitation in condemning those practices which could be termed aislcyal. He noted in this connection, however, that the 7raft Charter included act only cartel activity but also restrictive action Iy combines, trusts, and business arrangements of all kinds. Thh 3rench delehation, he contaz ed, Lad noticed trat the original United States Ptorosals had been directed towards practices that might be condemned famtumal~y thereas the Charter presuted that certain practices weie .estrictive unless proven otherwNse- The French Penal Law which should permit France to terminate such abuses was not strong. He hoped however, that the suggestions made by the Canadian delegation would enable international code of uniform treathent to be established. The Frenci nelexation would accept the .jmerice tezt as a basis of discussion but felt that the existence of agreements in themselves should not be condemned. atmention shouecidingiven to their airs, before dcc- d d whether their practices -s7e restrictive. LONDON E/PC/T/C.III/3 Page 4. MR. MULHERKAR (India) pointed out that the Indian delegation was in general agreement with the objective of curbing unfair and restrict business practices which were pursued by certain cartels and trusts. I might be necessary, however, for undeveloped countries to secure technological assistance by individual arrangements with foreign manufacturers, and, insofar as these arrarngements did not conflict with the objectives of the ITO they should not be defined as unfair or restrictive practices. In the interests of domestic industries it might also be necessary for national or goverrnments of such countries to enter into standing arrangements for the restriction of exports of raw materials. He thought that such practices would not be interpre as unfair or restrictive. The development of certain services was essential to the expansion of internationally trade. He urged, therefore, that the prohibitions Ohapter V of the Draft Charter be extended to include restrictive activities followed by "railway transportation, aviation, shipping and telecommunications services, banking, and insurance." MR. HAKIM (Lebanon) stated that he was in full agreement with the proposals of the United States Government and would welcome a strength of the provisions contained in the proposed Charter for the regulation, control, and, where necessary, elimination of restrictive business practices. Private restrictive practices attempted to maintain monopol profits and, unless regulated, were detrimental to consumers, especially to the less developed countries which consumed these products. In smal undeveloped nations private organizations had tended to hamper producti and limit the sale of industrial products. This in turn had restricted the development of industry. These private organizations were so power that small countries had little protection against them. The inherent dangers were political as well as economic. International co-operation for control of such private arrangements might achieve limited results. It would, however, have a greater chance of sucess than action by individual Governments. MR. LAURENCE (New Zealand) explained that his country had had little experience in analyzing the acitvities of commercial enterprises which operated in the international sphere. It was, however, in agreement with proposals which would have the effect of removing undesirable business practices from international trade. It would be difficult to set out in the Charter criteria for defining restrictive business practices; the present provisions of the Draft Charter might have to be altered in this respect. The proposed international organization would facilitate the king of action against certain cartel activities by diffusing a wider knowledge of restrictive business practices, and formulating specifications for a satisfactory code of conduct. He considered it satisfactory that the powers of the Draft-Charter were directed against practices rather than organizations, and would accept the terms of the United States Charter as the basis for the committees MR. LEENDERTZ (Netherlands) stated that his delegation agreed that abuses which arose from cartel practices should be suppressed; but this did not signify that cartels were objectionable in principle. He considered that by international co-operation the advantages of the cartel system could be retained and the disadvantages removed. In certain instances cartels had been beneficial, had resulted in the stability of prices, constant employment, and the prevention of over- production. The work of cartels had permitted research, the sharing of patents, and various other benefits. - the present time, when many countries were hard-hit, it would be unwise to throw away a well-treated means of preventing unfavourable developments. Cartels should not be forbidden on principle but allowed under certain rules. Their practices should be supervised, and complaints should be examined. The supervision of cartels was no new matter for the Netherlands. Commencing in the 30's legislation had been introduced which provided ; .Lgirezistoaticn anpervision of r oncartels, and Nhe Ietherlands rnment .re hpp amcointed observers eporto-,c oe thoir activi.ies, In the NetherlaEds .ant Irdies thegi le-solatin had caused the creation of several cartels. This experience showed hos Gcvernment was fully rrepared to co-operate wihe te COrganization tp swrer-ise castelS. This he thought it was necessary for all statos oc oc sc. Parallel legislation in variooun ccntries wobuild. pd ur an international jurisprudence, which would enable the creation of an organization based op excerience of vhe oaricus countries. From the negnixnig this organization wouldibe -p a -osition tv ad-ise and assiit .nter alia olving vi; differences whmigich ht arise. In those cawes Where differencer we_e irreconcilable, reference might be made to the International Court of Jusl.ice_ .MELANDER orwayNcry) stated that the chapter of the suggested Charter with which, thme Comittee was dealing contained some provisions of h ic;was r,- doub.ful ge a=reed that the Charter would have to make provisions dealing with restrictive business practices of an internatlona> character. Government acceptaofe _2 rulesgon ,eneral commerciol pclicy doul be rendered ineffec,ivej immconrercial enterprises operating through cartels could share markets, allocate qsotaz etc. However the provisions of Dhe 3raft Charter seemed to take it for granted that practically any kind of restrictive combination for amentrten in international trade would have the effect ompha.±ering the expansion. of world trade and production. He agreed that certain forms of restricti combination had proved and would prove on the contrary beneficial to the expansion of international trade. E/PC/T/C.III/5 Page 7. LONDON In 1926 Norway had passed a law which declared illegal only such cartels or combinations as were unduly restrictive. This system hader. haa well in Norway. The task of the international organization shouldtion souli bp only to -ernational arragements which were undulyh were ;2y restrictiveed the purpose of the Organization. 'r- - zhe that all international combinations should be registered 1 .bhtld. bed with the organizthan be in a wotter postion in be t - to consider cc=lainzts. Subject to th seNorwegeiandelegation 'r - delez~at-ir. thought the proposalsnited submittGovernment were well suited tomr .;ere -wVell sd. to serve as a basis for the discussitn ofNthe Committee. La.er -orway would d ke f'rthmr coments -'d. subggestedndments to the suzges _d Charter. Ar A UIE (S ith Afrieca) stated twrhatit was ncessary to ite into the Charter control ofw coimpols. However it as j ossibie to lay down hat all cartels wnre necessCommitteecshould dth. Z:',t"t__ <o;i direct _ts attention to cartels whiih were unduly restrictave. No legislatior, n so far beenricaroduced in South Af iCa by which the suggestions madc in tbe irafe Cnarter could 'caimplamerted but the Government waz consideringPending investigation. ?r.in. these investigations, possibly no legislation could be introduced. Mr*l Hies (United K<ngdom)Kk said that the Irited ngd.m's views had been expressed in a Chapter in the Prorosals put forward by the United States in jcember of last yearo. There was also a jcnt statement by the two Governments, who were in full agreement pr all the importart Points ccutained in he Proposals and had'accepted them as a basis of international aiscussion. There would be little purpose inlremoving governmenta3 barriers to the flow of tre, if privately negotiatwed. rrangements betsvn industries in dwifferent countries ere allowed to take their place. There must, therefore, be some procedure for dealingu with restrictive bsiness practices wherthey operated mcontrary Intertao the ain of the itaonal LONDON E/PC/T/C.III/3 Page 8. Trade Organization. To the extent that such practice interfered with those aims they must be condemned. A consultative procedure within the proposed international trade organization was therefore necassary in order to study particular cases and determine their economic and commercial effects. Consultative procedure rather than judicial proceduree applying a legal code was what was required. If any particular practices was found to produce invariably ill effects, the organization would then be in a position to propose the general prohibition of this practice. There were some difficulties connected with this problem. The problem of restrictive business practices was an internal one for each country, as well as an international one for the organization; and in the past different countries had adopted different attitudes. In some countries cartels had been allowed, and laws for compulsory cartelization had been passed, while in others all restrains of trade of any kind had been prohibited. The United Kingdom neither encouraged or ccndemned cartels. The Committee in considering the subject would have to bear in mind variations in the legal background against which the problem appeared The CHAIRMAN stated that before giving a summary report of all the idea which had been expressed at the meeting, he would like a little time for reflection. He was at the entire disposal of those delegates who might -wish to speak to him on Particular points which were important to them, and he proposed to get into contact with certain of the delegates After these conversations he would consult with the Secretary in order to ~ ~. roedig . . I lay dawn tie pr seedings or the next stage of their .ork. E;would.be grateful if delegates would senxio: he Secretary any .- . osuggestions on the text which they wouldd hae to prepare later. M-heting rose at 12.35 p-m. .

GATT Library

fx826yy5573

Committee III Summary Record of Sixth Meeting : Held on 6 November 1946 at 10.30 a.m

United Nations Economic and Social Council, November 6, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

06/11/1946

official documents

E/PC/T/C.III/14. and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/fx826yy5573

fx826yy5573_90220051.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL E/PC/T/C. III/14. AND ECONOMIQUE ORIGINAL: ENGLISH 6 November. 1946. SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT Summary Record of Sixth Meeting held on 6 November 1946 at 10.30 a.m. Chairman: Mr. GONZAIEZ (Chile) Mr. FLETCHER (Australia) stated that the Heads of Delegations meeting at 11.00 a.m. would prevent the attendance of certain members at the present session of Committee III. He therefore proposed that the present meeting be adjourned until a later date. Mr. McGREGOR (Canada) appealed to the members not to permit the present draft to be whittled down to a point where it would be ineffective in preventing harmful practices in international trade. In general, members had shown an earnest desire to move in this direction, but there had been some signs of holding back from reasonable provisions when it appeared that they might affect commercial enterprises within a particular country's jurisdiction. He referred to Article 35, paragraph 6, and Article 37, paragraph 1, under which each member was expected merely to do its utmost to prevent harmful business practices and its utmost to terminate angreements which were responsible for such practices. Lukewarmness at this stage would have grave consequences because any convention so drafted would be an ineffective document. The. CHAIRMAN supported Mr. McGREGOR' s remarkes, commending them to the attention of members. He repeated Mr. FLETCHER' s statement and proposed that the meeting be adjourned until 7 November 1946 at 3.00 p.m. The meeting rose at 11.00 a.m.

GATT Library

pr272qt3835

Committee III Summary Report : Ninth Meeting held on 16 November 1946 at 11 a.m

United Nations Economic and Social Council, November 16, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

16/11/1946

official documents

E/PC/T/C.III/19 and E/PC/T/C.III/1-19

https://exhibits.stanford.edu/gatt/catalog/pr272qt3835

pr272qt3835_90220055.xml

GATT_156

United Nations Nations Unies ECONOMIC AND SOCIAL COUNCIL CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C.III/19 . 16 November1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL COMMITTEE! '- ON TRADE AND EMPLOYMENT _I. COMMITTEE III SUMMARY REPORT Ninth Meeting held on 16 November 1946 at 11 a.m. Chile)GONZALZ (Chile)L J. 1. Chairman's.Report on the Drafting Sub-Committee and Liaison Sub-Committee Meetings The CHAIRMAN described how the documents tabled for discussion, namaly the Final Report (E/PC/T/C.III/17 ) and the Specific Instructions to the Drafting ComWittee (E/PC/T/C.III/1.5) had come to be drafted in their present form. It had been decided av a meeting of the Head of Delegations that the final reports of Working Committees and of the Preparatory Committee as a whole should be drawn up as follows: Reports should be un two parts destined for publication ldhe first part houk deal with the. history of the Committee's work; the second shouldI amaIgamate Parts I and III so that under each heading of the agenda the principles discussed in the Committee were presented, followed by the agreed draf text, amendments, revisions, additidons and suggestions submitted by delegations, but without attributing reserfatioanns to any speciic delegation. Delegations making reservations, additions, etc., should be specified by name a separate document witheld from general publication. LONDON 3/PC/T/C.III/19 Page 2 There was only one change in the text of the draft which was formerly contained in the third part of the Report, namely the addition of Article H, corresponding to the former Article 65 of the Draft Charter. The Liaison Sub-Committee, in co-operation with Committee V had decided to recommend to the latter Committee a revised text of Article 65 and to incorporate it into the final report of Committee III. The new text represented a compromise between the Draft Charter, a text submitted by theUnited Kingdom, and a re-draft by the United States. 2. Debate on the Final Report of Committee III (E/PC/T/C.III /17) Mr. PERRILL (United States) moved the adoption of the Report with such modification as might be adopted at the present meeting. Mr. HOLMES (United kingdom) suggested the addition of the following sentence after the word "production techniques" in Section 4 of Part II: ''' .i-,'elertrhowvw, tht there- shold be. som provision in this obligatimembon of ers to fish sucrh infomation wereby t., legitimate business interests of particular eesntersarsould. b safeguarded, as far as feasible, from possible i whjnjurich might arise if detainfgled ormation -or, cl-ali ito the hands of theirmp citoet os orher ot v f priLate." pes -, - -: rThe C ES greed& tha- thesuggestion of Mir. LM ( -& ingdo;.ng aoit: of principe, might be a useful maddtition, but suggestedw iat iragh be inserted as a ne praaph at the end of Section 4 e- M.-GOMr.R OLMES(Canada) aKgred& wih ! H.:0nited Xingom) rmaand also with the Chain riegarding the place of nsertion. LONDON E/PC/T/C.III/19 Page 3 The CHAIRMAN"Tr:_T instructed th Secr-etaritak .me2:e the insertion. RRILLIUMr. t ('ni'd States) suggestedwe th;" rds 'ns conferences" should be added toh the eadings of Section 2, pagend 9, dr of Aticle B, a0oge e Adgeec MrERR. LTIUnL (ited States) haxpd eerienceod sme dconousin when reading thep Reort, and suggesteartd P II should be fdrated to include the tewxt ith appropriate notes in one section and the eostion in other section. Mr. NAUDE (South Africa), refering to the omission of services, suggested an explanatory preface or note night be published explaining the grounds for this omission. The CHAIRMAN recalled that the General Notes on page 18 included an observation on services. Mr. QURESHI (India) said that, if reasons were given for the omission of services, the reasons for their inclusion as stressed by his colleagues should also be published. Mr. GUERRA. (Cuba) felt that the publication of such notes would entaiL a detailed report on the discussions of Committee III concerning services. Mr. MCGREGOR (Canada) suggested that a general reference to the subject of services rather than separate references by individual Committees shoud be made, as services were to be dealt with by the Preparetory Committee as a whole. Mr. WYNDHAM-WHITE (Executive Secretary) suggested that a written statement could be made to the Plenary Committee when the general report on Committee IlI was submitted. The Meeting adopted the Final Report (E/PC/T/C.III/17) and the Specific Instructions to the Drafting Committee (E/PC/T/C.III/W.5). LONDON E/PC/T/C.III/19 Page 4 3. Closure of the Meeting The CHAIRMAN thanked all delegates, and especially the Rapporteur and his colleagues, for their tireless efferts and co-operation. He contrasted the approved Final Report with the for true international co-operation against harmful business practices had been achieved.He pronounced the closure of the Final Session of Committee III. The Meeting rose at 11. 55 a.m.

GATT Library

ck982xj2796

Committee IV Existing International Commodity Arrangements

United Nations Economic and Social Council, November 18, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

18/11/1946

official documents

E/PC/T/C.IV/16 and E/PC/T/C.IV/1-19

https://exhibits.stanford.edu/gatt/catalog/ck982xj2796

ck982xj2796_90220079.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.IV/16 18 November. 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE IV. EXISTING INTERNATIONAL COMMODITY ARRANGEMENTS The Secretariat has obtained information regarding certain existing international commodity arrangements and the following memoranda have been distributed to members of the Committee. SUGAR: Copy of Cmd. 5461 "International Agreement regarding the Regulation of Production and Marketing of Sugar". 1937. A memorandum from the International Sugar Council on "The International Sugar Agreement of 1937". Dated TEA:*he .ner a s.;Za- ...ee.e "Memorandum on the operations of the International Tea Committee in relation to the Proposals for consideration by an International Conference on Trade and Employment". International Tea Committee 1946. TIN: OM x.noanz on the-ihntsZrntin.Tn Copy of Cmd. 5461 "International Agreement regarding the Regulation of Production and Marketing of Sugar". 1937. A. Lowinger. Novermber 1946.n7 ~ ~ Contol Agreements 1931-46.grner-, . o-es: L. _ :.. ..oveber 1 9L6. A statement on developments since 1944 has been circulated e;;i~v s¢ _ ioe'.viont rcer~or-aleet ratef~o~ Members of the Committee have also been supplied with copies International Tea Committee 1946. Of a- ?ro tosa Ca 0o at VoC Fooa S.a rO-~IC)S -~Z:- O: -na. w .............................................. ,

GATT Library

ng937gq5290

Committee IV Inter-Governmental Commodity Arrangements : Rubber

United Nations Economic and Social Council, November 16, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

16/11/1946

official documents

E/PC/T/C.IV/15 and E/PC/T/C.IV/1-19

https://exhibits.stanford.edu/gatt/catalog/ng937gq5290

ng937gq5290_90220078.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.IV/15 AND ECONOMIQUE 16 November 1946 SOCIAL COUNCIL ET SOCIAL ORGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE INER-GOVERNMENTAL COMMODITY ARRANGEMENTS RUBBER The following statement regarding international rubber arrangements since April 1944, has been obtained from the London Rubber Secretariat, and is circulated for the information of members of the Committee. 1. The International Rubber Regulation terminated on 30 April. 1944, and from that time until September 1944, no International arrangements for rubber were in existence except the Combined Rubber Board in AMerica which allocated the limited suppliles of natural rubber on a voluntary basis to Allied and Neutral countries and whose work terminates at the end of this year. 2. In August 1944, talks were held in London between delegations representing the United States, the Netherlands and the United Kingdom to find out whether any satisfactory machinery could be devised for continuing consultation between the three governments on rubber problems. 3. As a result of these talks it was announced on 23 September 1944 that representatives of the governments of the Netherlands, the United Kingdom and the United States would meet from time to time as an informal Rubber Study Group with the following m-- terLrs of reference: (a'Tpheha gromeuttsil e tifrom me to time to discmonuss com il piroter.arm-snegp fdrotht 0ructufion, man-cture and use of rcuer crdneh._i yt.et cnd reclaimed. LONDON E/PO/T/C.IV/15 Page 2 (b) studies will be initiated and possible solutions to rubber problems will be considered. However, the Group as such will not formulate and transrit recommedations to the participating governments although the latter will be kept rully informed of the proceedings of the Group through their representatives. (c -Arrangements will-be made for other interested governments to be kept informed of the studies made and of the results of the discussion so far as practicable. (d) The Rubber Study Group continue to function during such Period as in the opinion of each of the articipating governments,it continues to serve the purposes for which as designed. The Rubber Study Group has since been enlarged by the inclusion of the French Government. 5. The group has held two meetings, the first in Washington in January 1945, and the second, at which France joined the Group for the first time, in London in November 1945. A third meeting wiil be held shortly at the Hague.. 6. up to date the Group has devoted its attention and discussions mainly to studying the world rubbers supply demand position has kept non-member governments fully informed of the result of its studies and deliberations, and it has published commurigues explaning its set up and objectives and giving a general summary of its conclusions. It should be emphasized that the Group as at present composed as an informal body whose main function is to provide a forum for discussion and .exchange of ideas, that it has no powers of joint recommendation and that it has no connection whatsoever wiith the old International Rubber Regulation scheme, which, as already stated,came to an end en 30 April1 1944 LONDON E /PC/T/C.IV/15 Page 3 7. The personnel of the Secretariat of the International Rubber Regulation Committee were taken over by the British Government May 1944, and became the Rubber Intelligence Branch of the Colonial Office. Then the Rubber. Study Group was set up it was decided for. the time being not to establish a special secretariat for the Group but that the Group should rely on facilities at the .disposal of the participating Governments. Accordingly the American Government made their on arrangemets and the British and Dutch Goverments (joined later by the French Government) set up the personnel of the Rubber Intelligence Branch of the Colonial Office as the London Rubber Secretariat: this Secretariat works under a Directing Committee consisting of four members of each of the three governments and its main function are to collect statistical and other information regarding rubber and rubber substitutes and to make such studies as are referred to it by the Rubber Study Group and by the Drecting Committee.

GATT Library

qq510bg7296

Committee IV Inter-Governmental Commodity Arrangements : Third Meeting Tuesday, 22 October 1946 at 11 a.m

United Nations Economic and Social Council, October 21, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

21/10/1946

official documents

E/PC/T/C.IV/3 and E/PC/T/C.IV/1-19

https://exhibits.stanford.edu/gatt/catalog/qq510bg7296

qq510bg7296_90220067.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C.IV/3 21 October 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE IV INTER-GOVERNMENTAL COMMODITY ARRANGEMENTS Third Meeting Tuesday, 22 October 1946 at 11 a.m. Hoare Memorial Hall 1. Correspondence from world Federation of Trade Unions. 2. Further discussion on general aspects of commodity arrangement policy. 3. Consideration of Provisional Agenda as amplified in light of general discussion. 4. Other business. 5. Date of next meeting. Nations Unies

GATT Library

gv037hd5216

Committee IV Summary Record Inter-Governmental Commodity Arrangements : Third Meeting Held on Tuesday, 22 October 1946 at 11.00 a.m

United Nations Economic and Social Council, October 23, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

23/10/1946

official documents

E/PC/T/CIV/5 and E/PC/T/C.IV/1-19

https://exhibits.stanford.edu/gatt/catalog/gv037hd5216

gv037hd5216_90220069.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON ECONOMIC CONSEIL E/PC,/T/CIV/5 ECONOMIQUE 23 October 1946 ORIGINAL: ENGLISH AND SOCIAL COUNCIL ET SOCIAL RNATIORNATONALCONFERENCET I M C E l TAIT IVV SUKROYREORD INMEN- A0*RIEMTODITYMMMENS ITS NGD MEETI Held on Tuesday, 22 Oct4ober 11.96 at 1.00 a .m n :MChairmar. J .R.C .E RELMOR 1. Letm tter ofrohe Wrrld Fn of Teddeeatiora Unions dnsiiratio given wasa n to --etter received the orldWNrld Ftien of ao-ontUnions rrade egarding participatiotn ino he wrk of vs coeoumittoit. Itas a wgre eodeetgt aget to the Secraetttriaa t:t this letter should. be handled in the same way as that from the Internatil Coamnahbof Coer mmerce. 2. General Duiscssiof Con ommod ity Arrangements Policy (ticonn ued mfroc sdeoen mnetig) GUERRA ((wCumaphemphasized. te imporetace o i price stability. It was desirable to use commoditt arrangements to prevent the development of disequilibrium between supply and demand of certain,y ; aenand. of certain p between the the ITO andtheauotheritiestro;uctsc-h: bowec-- es angements hould aesuch as to allowb.m-nisterin& c:oo&o~.ilty flexibility mmidnty agreeme the cooints. nRh (Far eimaust a tlaty must be crti. tacbi-itv production, tradee and consumption of basic products.ervtined -n the nsu. p-duucts. Theing df etailed ggourgge-or he mak-. oaeements suTeste in the . Chawasrter ris-y t os-mq aIt quiwa n- o sec_u:regtble trea tment as bnetwensumenproducer ad coer. LONDON E/PC/T/CIV/5 Page 2 Mr. BALA (Czechoslevakia) emphasized the necessity to make arrangements for commodities in short supply. He hoped that provision would be made for all nations to have access to raw materials essential for economic expasion, and that surpluses would be met by higher consuption rather by restriction of production. He recommended that there should be a permanent orgaization to deal not only with question of allccarting production and consumption, but, also with the provision of financial help to states which could not otherwise participate in the expansion of consuption Mr.MELANDER(Norway) thought that intrernational commodity arrangements should be regarded as an exception to the proposed rules relating to general commercial policy. They should only be applied in very special circumstances. H.e suggested that intead of creating special Commidity Councils the ITO itself could administer inter- governmental commodity agreements: this would make for better coordination Mr. CHANG (China) supported wider measures than those proposed in the United States Draft Charter. He referred to the problem of synthetic products and considered that if possible the synthetic and. natural preduct, for example, natural silk and rayen, should be studied as one categery. 3. Statement by Representative of FAC At this stage an invitation was extended to Mr LOUWED, representative of FAC ,to make a statement. He referred to the aims FAC and to the long term proposals diiscussed at the Copenhagen Conference in Septeber. The FAO had made certain suggestions regarding World Food Board , and these would be examined shortly in Washington Estimates had been prepared of the increases in production of particular commodities which would be needed by 1960 to achieve adequate standared of world. consumption. It was an agreed principle of FCO that agricultural LONDON E/PC/T /CIV/5 prices should be at level which was fair to both consumer and producers. the FAO might be regarded as a permanent "Study Group" for agricultural commodities. He thought the need for some of commodity organization might srise soon and suggested that any temperary arrangement should Information regarding existing Commodity Arrangementsgcen-,s agreed to invite the existing international organizations1 i zons th wheat, sugar,rubber,tin and tea to submit short memoranda short me heir work and any suggestions that might help the Committee.! c- co ent of Agenda Sub-Committee S-dt -> 0 greed to set up a sub-committee to consider the draft agendathv draft ht of the general discussion. This sub-committee sh =zn consist of the Chairman and delegates of Australia,Cuba,France, Netherlands and United States. It was arranged that the sub-committee should meet at 3 p.m. the same afternoon. 6.Next Meeting It was agreed that the next meeting of Committee IV should be held on Thursday 24 October 1946 at 3 p.m.

GATT Library

zm089kf2225

Committee IV Summary Record : Ninth Meeting held on 20 November 1946 at 5 p.m

United Nations Economic and Social Council, November 23, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

23/11/1946

official documents

E/PC/T/C.IV/20 and E/PC/T/C.IV/19-20 + E/PC/T/C.IV/PV/1-4

https://exhibits.stanford.edu/gatt/catalog/zm089kf2225

zm089kf2225_90220084.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEII LONDON AND ECONOMIQUE E/PC/T/C. IV/20 23 November 1946 SOCIAL COUNCIL ET SOCLAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE IV SUMMARY RECORD Ninth Meeting held or. 20 November 1946 at 5 p .m. CHAIRMAN: Mr. J.R.C. HELMORE 1. Representation at FAO Conference The CHAIRMAN reported that the Food and Agriculture Organization had asked whether the ``unborn" International Trade Organization would like representation at their Conference now taking place in Washington. As five of the delegation represented at the Conference were proceeding to washington, it was decided that it was not necessary to designate one particular person to represent the Preparatory Committee, and the Executive Secretary was authorized to reply to this effect. 2. Discussion of Reort The CHAIRMAN then proposed a detailed discussion of the revised report of Committee IV (Document E/PC/T/17), and called upon the Rapporteur to give a brief description of the report paragraph by paragraph. Paragraphs 1 to 6 on pages 1 and 2 were approved. Paragraphs 2, 3 and 4 on pages 3 and 4 were approved. The CHAIRMAN was authorized to insert a further sentence in paragraph 5 , if the Norwegian Delegation required amplification of the sentence concerned with international fisheries conventions. Paragraph 6 was approved. LONDON E/PC/T/C.IV/20 Page 2 In the last sentence but one of paragraph 7, after "paragraph 2", it was agreed to insert the words "of the United States Draft Charter". Paragraph 8 was approved. In paragraph 9, after the word "that" in line 15, the Committee added the words: "without prejudice to the rights of the countries referred to in the preceding sentence to an appropriate voice". Paragraphs 10 and 11 were approved. In the second Iine of paragraph 12 the word "trade" was replaced by the words "export and import''. At the end of paragraph 13 it was decide to replace the words "verbatim report of the meeting of Committee IV" by "discussion of the Committee on this matter". Paragraphs 14 and 15 were approved. In the first sentenes in paragraph 16 it was decided to omit the word "initially", and to insert at the end of the second sentence the words ``subject to renewal". At the end of paragraph 17 it was agreed to insert the words ``of the United States Draft Charter''. In the sixth line of paragraph 18 the word "continual" was cerrected to "continued". Paragraph 19 was approved. In the third line of paragraph 20 the word ``applications" was altered to "application" . In paragraph 21 the word "vital" was corrected to read "vitally" and "a" was inserted between the words "to make" and "recommendation". In paragraph 22 the word "appends" was replaced by the words "agreed to", and the word "thereon" was deleted. Paragraph 23 was approved. In paragraph 24 the word. "attached" was altered to "appended". Subject to these changes, the report was approved. LONDON E/PC./T/C. IV/20 Page 3 The CAIRMAN referred briefly to the "Draft Resolution to Preparatory Committee relating to inter-governmental consultation and action on commodity problems prier to establishment of the International Trade Organization", which had been approved by the Committee, with the exception of one delegation. He said that this document would be circulated separately to the Preparatory Committee. The CHAIRMAN also asked the Committee to authorize the Secretariat to make such editorial changes in the text of the report as might be necessary before publication. 3. Thanks to Chairman, Rapporteur and Secretariat. Frofessor de VRIES (Netherlands) thanked the CHAIRMAN for his guidance of the work of the Committee was largely due to him that the Committee had reached such a considerable degree of unanimity. He also thanked the Secretariat for the extremely hard work which they had put in. Mr. QURESHI (India) endorsed these remarks. The CHAIRMAN said that any light which had shone from the Chair was only a reflection of the wisdom of the delegates. He would like to be associated with the Gratitude which had been expressed for the work of the Secretariat. Mr. GUERRA (Cuba) wished to thank the "Rapporteur" for the excellent text which he had prepared. 4. The Meeting rose at 6.20 p.m.

GATT Library

hx605gb8183

Committee Structure

United Nations Economic and Social Council, October 17, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

17/10/1946

official documents

E/PC/T/EC/4 and E/PC/T/EC/1-5 E/PC/T/EC/PV. 2/1-3/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/hx605gb8183

hx605gb8183_90210011.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies RESTRICTED E/PC/T/EC/4 LONDON 17 October 1946 CONSEIL ORIGINAL: ENGLISH ECONOMIQUE ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE STRUCTURE In the light of the discussion at the Third Executive Session of the Preparatory Committee on 16 October, the Committee structure as proposed by the Secretariat in paper E/PC/T/W.11 was amended and established as follows: Committee I - Employment, Economic Activity and Industrial Development. Committee II - General Commercial Policy. Committee III - Restrictive Business Practices. Committee IV - Intergovernmental Commodity Arrangements. Committee V - Administration and Organization. It should be noted that the Preparatory Committee agreed that the question of "international agreements relating to industrial develop- ment" should be considered both by Committee I and II, these Committees deciding for themselves whether to discuss the points involved jointly or in sub-committees. Note 1. The Preparatory Committee accepted the principled at all members of the Committee should be represented on each off hese five Committee Note 2. It is proposed that Committees I and II would not meet simultaneously; a similar procedure will be adopted so far as possible in respect of Committee II and Committee IV.

GATT Library

fd231hr6079

Committee V Administration and Organization

United Nations Economic and Social Council, October 30, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

30/10/1946

official documents

E/PC/T/C.V/7 and E/PC/T/C.V/1-18/CORR.1

https://exhibits.stanford.edu/gatt/catalog/fd231hr6079

fd231hr6079_90220101.xml

GATT_156

United Nations Nations Unies ECONOMlC CONSEIL RESTRICTED AND : ECONOMIQUE LONDON E/PC/T/C.V/7 SOCIAL COUNCIL ET SOCIAL 30 October 1946 A . - ~~~~~~~~~~~~~~~ORIGINAL: ENGLISH PREE'.LZCO-L-1:TT THE1N2PR2E ON TRE EIPLYMT 001TE RGANIADTION,-QT,21N ,N Mr. L.R. ED 0000MINISTEnitd SttaCes) hi=~-. L. & _ The tmhird meeting of Comittee V omf the PreparatoryComittee of the International Conference on Trade and Employment, took place at 10.30 a.in Convocationm all, Cmhniurch House, Westrier, on Tuesday, 29 October 1946. ThemHAIM1 mmittMMnethe Co..ree'sher consideration of i8tems 78b, a tand r of he Povisional AgPe/n/Ccc.vVda /T./2). After thammitt the Cotee might devote its attention to items 8(c), (),n(e), (g), nd (h), a (i). He proposedd hat a sd mall alhc0 Comittee be appointee, to exame ine thiarious points raised at the previous meeting in relation to the United states text with a view to reconcileing thm as far as poossible imn oa coprmise draft, and to report back toom the Cmittee for its consideration and approvny dal. Aele dgationesiringm etto comn further on Articles 68-72 of the suggested Charter could do so at the present meeting. The Committee would then take up Articles 73, 74, 75, 77, 78 and 79 of the Suggested Charter. LMES (Ur. ~UntiewoKngdwoom)re mved whether paragraph 2 of' Article 71 was to be considered as being sin it final form. He saw rtno paicular object ign sining out food and agriculture, and thought that the second part of the first sentence might usefully be om.itted After discussion, it was agreed that the question should be considered by the Smub-Comittee. LONDON Page 2. Mr. PIERCE (Canada) wished to raise the question of the preservati and transfer of pension rights and other benefits of persons joining the staff of ITO but was not clear whether it should be brought up under Article 70 or at a later stage. He hoped that the Sub-Committee would consider including in the text a provision instructing the Director- General to negotiate with member governments with a view to safeguardin such rights. The Secretary, Mr. BRUCE TURNER, drew attention to paragraph 2 of article 70. The 'whole question of pension arrangements had been given much attention by the United Nations, and a comprehensive scheme including -detailed proposals f cr the preservation of pension rights is to be submitted by the Secretary-General to the present session of the I General Assembly in New York. This scheme involving the establishment of a commcn pensions fund, under a centralized administration, had been. drain up by a group of experts in consultation with the various specialized agencies aIl of whcrn had agreed in principle with the desirability of the closest possible collaboration in these matters, . Mr. PALTHEY (France) thought that the terms of paragraph 2, Article 70 need not be included in the Charter itself. They would be more appropriately incorporated in the Agreement to be conlcuded with the ~~~~~~~~~~~~~~~~~~~~~~L United Nations. . number of .thr delegates, however, urged the retention of this Aparagraph, rg. BURr (.stralia) su~esting that in general. conditions, of service in the ITO should be exactly the same as those in the Secretriat osf the United Nationz with the greatest possible facilities"' for interchang of staff. LONDON E/PC/T/C.V/7 Page 3 H. E. Nr. COLBON (Norway) proposed that in the fourth line of paragraph 72 the phrase "from among the members of the organization" be inserted after the word "appointed"; the sentence would then read "These persons may be appointed from among the members of the organization, without regard to their nationality." Mr. PLERCE (Canada) thought if the staff were restricted to nationals of the ITO, there could not be complete interchaenge of personnel with the United Nations, since the latter might include a larger number of member governments. In his view, preference should perhaps be given to members of the ITO but nationals of other United Nations Numbers should not necessarily be excluded. H. E. Mr.COLBAN (Norway) saw no objection in principle to Mr.Pierce's suggestion. It was difficult to consider the problem as a whole until the exact form that ITC was to take was more definitely known. Mr. SCHWENGER (United States)explained that the drafters of the Suggested Charter had considered the point at some length, but had not taken into account the solution proposed by the Delegate for Canada. It had been thought desirable to leave open the possibilities of recruitment in exceptional case from outside the United Nations. Mr. DAO (China), reverting to Article 70, suggested that the drafting committee might consider the inclusion of the text of Article V1, Section 6 of the UNESCO Constitution. He also proposed the addition of the phrase "in accordance with regulations approved by the conference" after the word "service" in paragraph 1 of Article 70. Mr. HOUTMAN (Belgium) while expressing thanks for the great trouble whh the State Department of the United States of America had taken in translating the Suggested Charter into French, thought that revision of some of the. terms employed as necessary. The Belgian delegation desired to make certain-reservations with respect to the French text as at present translated. LONDON E/PC/T/C.V/7 Page 4. Mr. BURY (Australia) expressed the hope that in connection with paragraph 2 of Article 68, there would be a maximum integration of budgetary arrangements between the ITO and the United Nations. There being no further comments on Items 7, 8a and 8b, the CHAIRMAN - moved that the Committee take up consideration of item 8c of thee aAgnd, which corresponded to.Article 73 of Sthe uggested Charter. In the absence of any comment, he assumed that the suggested text was agreed to. CTAhRMe HIAN then asked the Committee to poass n to the consideration of Article 8d of the Draft Agenda, which corresponded to Article 74 of the Suggested Charter. r. PALTHEY (France) suggested that some provision be made in Article .74. for special privileges and immunities equivalent to those afforded diplomatic personnel to be granted to the chief officials of the ITO. The Secretary, Mr. BRUCE TURNER, said that the United Nations were at present engaged in negotiations, with the United States as host Government awnd ith other Member Governments of the United -Nations as to the whole question of immunities and privileges. The Secretary-General was under instructions from the Assem blyto consult with specialized agencies in this matter withv ewa i to ensuring a reasonable degree of uniformity and c-ordination in the arrangements made for all international organizations. -1e nmeiaime, therefore he suggested it: might be wise to formulate' <ny Ppo.isons-o-n t his subject in genera rather than specific termd Artile7 4. was identical with a simialr paragraph in the Charter oF thes United Nations, and was substantially the same as that in the Costititinos do UNESCO and the Wo rd Health Orgirnzat in. then aske4t he commiteee qt psat AIrtal e 75. Mr. HOLMES (United Kingdom) was of the opinion that this Article. was of very great importance, though final decision thereon could not. be taken at this stage.' The Article appeared to be based on Articles 108 and 109 of the United Nations Charter, but he desired to know what would be the position of countries finding themselves in a minority. It might possibly be intended that this should be decided by the Conference in accordance with the rules to, be adopted under paragraph 2 but the point did not appear to be specifically covered. H. E. Mr. COLBAN (Norway) desired to know what exactly the phrase "of fundamental alterations in the objectives of the Organization" meant. In so far as new obligations on membors were concerned, he was of course in agreement; but he suggested that the Committee would be on a much safer ground if their did not anticipate any such contingencies. Mr. BURY (Australia) contended that if the ITO were. to succeed, it must be able to adjust itself to changes in economic circumstances and to changes in the climate of economic thought. The Organization must be so constituted as to allow it to effect constitutional changes of a minor kind without undue difficulty. H. E. Mr. COLBAN (Norway) was entirely in favour of flexibility in matters of less concern, but he did not like the idea of a two-thirds majority being able to bring about fundamental alterations. Mr. HOUTMAN (Belgium) suggested that if the phrase "as envisaged in Article 1. of the Charter" were inserted at the end of the fourth line of Article 75, the point of the Delegate for Norway would be met. Mr. ALAMIL (Cuba) asked for clarification of the meaning of this Article. He understood the last phrase of paragraph 1 of Article 75 to mean -that the obligations would have effect for all the members when approved by two-thirds' majority. The words that followed "and thereafter for each remaining member on acceptance by it" he understood to mean that these LONDON. . E/PC/T/C.V/7 Page 6 amendments would not affect the position of a minority member until,it had accepted them. That was an important point in the light of Article 79, which provided that a member could not leave the Organization until after, the expiration of one year. He felt that a fundamental amendement should only be obligatory on a minority member, provided that it was accepted by him when he was still a member of the Organization. Mr. NAUDE (South Africa) thought that Article was one on which most of the delegates would prefer to think a little more. Any change in the Charter's present provisions regarding voting - for example, the adoption of a system of weighted voting as in the case of the Bask and Fund - might have an important bearing on the procedure to be adopted governing amendements. Mr. VAN TUYLL (Netherlands) al alterations sughgested that fundamental alterations might be of different kinds. They might entail a further contribution to the purposes of the Organization or a different point of view which members desired stressed. What action should the two-thirds majority of members take towards the non-accepting minority? What work should be done when the-views of the two-thirds majority and those of the minority cannot be reconciled Mr. KELLOG(United States) in reply, explained that the article had been based on a similar Article int the UNESCO Constitution. It was generally felt that it was the best compromise solution. It did not seem possible to bind a minority to fundamental changes in their obligations. Mr. ALAMILLA (Cuba) therefore assumed that the minority would not be bound by any votes of the two-thirds majority. Mr. HOLMES (United Kingdom) desired information upon the position H. E. Mr. COLBAN (Norwy) thought it might fnally be necesasary to provide for amendments becoming effective upon. apptoval by a. two-thirds-by- mjority vote subject to rthei nnoot invlvig imthe uposnitio owf ne - obligations umpon embers. Ien them evt u sa cht.a stn utisino ahrigte full Conference would' then discuss it end' bynim unaous vote adoaap .. new -' V; r , IOw Charter, those not agreeing to thebe nmem new Charter, ceasing to bers of the Organization. It would be impossible to have, inthe same: Organization, members onfo. an entirely different oting: Mr. SCHENG:R (United States) replied tArhat the drafters of the iicles; had this dilemma in mind; it had,however, been difficult to find any formula which would E~ the Charter sufficiently adaptable .to meet the critical situation which was now being env isaged. The purpose ofthe Article was to provide the necessary mechanism by which changes could be maj without any serioheusor interruption of t n'al functions of the Orgeization He thought that it was improbable that any amendment would C reatly change the Organization as to prompt many members to contemplate withdrawal rather than acceptannmce of the amendmt. It had been enticipated- that by the time two-thirds of the Organization had acceptaed an t, mendmen it would be well towards becoming unanimously accepted. Mr. PIERCE (Canada) suggested that mm the Drafting Coittee might bear in mind that while a situation where different members have accepted different omaoobl,igations is awds- it is olenot necessari:ntlable as long as the fundamenthal purpose is sared by all members. He also proposed that the word "majority" in parag7raph 2, Article 5 be changed to the word "votes". The CHtIhbued that article 76omi had bromeen raommlttet'ns theittee resent considearation, ah it wads uso boui a with other parts of the Charter still under considerations He proposed therefore that them Committee conmsider ite 8g of theiir provisonal agenda,f rwhich reered to 7ticle 7y " LONDON E/PC/T/C.V/7 Page 8 Mr. DAO (China) was of the opinion that the drafting of Article 19 of the United Nations Charter was preferable to that of Article 77, in that it vas more precise. Mr. VAN TUYLL (Netherlands) thought that the difference was due to the fact that article 19 of the United Nations Charter came under the heading of Voting., whereas Article 77 of the Suggested Charter came under the heading of Contributions of Members. Mr. BURY (Australia) suggested that the apportionment of each member's share should be defined by the phrase "in the same proportions as in the United Nations Charter". Mr. HOLMES (United Kingdom) thought that it would be more desirable to suggest that the same principles of apportionment as adopted by the United Nations be applied. The exact proportion of contributions might be different inasmuch as the membership of the United Nations and the ITO at an early stage might be different. Mr. ALAMILLA (Cuba) said that Article 77 dealt with the position of a member who did not contribute; he thought that the real point at issue would better be discussed under article 55, and suggested that it be deferred until then. The CHAIRMAN agreed with this point of view, and added that the drafting Committee might perhaps change the title of Article 55. At this point, the CHAIRMAN concluded the discussion of Article 77. He now proposed to appoint a Sub-committee of limited membership. It was unnecessar to add that any delegation so desiring could take part in the delinerations of the Sub-committee, but he. thought that the smaller the Committee, the sooner would its work be finished. He proposed that the Committee consist of the Delegates of. Australia, China, Cuba, France,- Norway United States and the United Kingdom. He invited H.E. Mr. COLBAN (Norway) to accept the chairmanship of the Sub-committee. Mr COLBAN, , ,,. ..D . '.0': however, in view of other commitments falt unable to accept and it was LONDON E/PC/T/??/7 Page. accordingly left to the Sub-Committee to elect its own Chairman It was decided that the next meeting. of Committee' V would take: place after the Sub-Committee had met, probably on: Tlhursday or Friday next. , , The meeting rose at 12.45 p.m.

GATT Library

qt709jd7533

Committee V Administration and Organization

United Nations Economic and Social Council, October 26, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

26/10/1946

official documents

E/PC/T/C.V/4 and E/PC/T/C.V/1-18/CORR.1

https://exhibits.stanford.edu/gatt/catalog/qt709jd7533

qt709jd7533_90220098.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.V/4. CONSEIL 26 October 1946 ECONOMIC ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT7 OMMITTEET V DMINISTRATION AND ORGANIZATIOND Z-.TION Chz~irR. ?EDMINSTER Dl .INeIE (Unitcd States) ThMe secgnd eetin2 of ComomitteePV f the rreparatoiy Committee of the International Conference on TrEde -ymd 2mploarent, took place at 3 p.m. in Convocation Hall, Churc Wesumse, '.Tctinster, on Friday 25 9Oc.tober 146 The SeMr. BRUCE TURNER, CE TtfLJMunderstood thatdelegatesn r.ele rtess would like cCopies of the hartee of the Unitod Nations, together with the Constitutions of certain specialized agencies which have already been set up. HoTould circulated these documents, but regretted that a certain number of theem were not yt avilahjble in Fren. In reply to a Mr. SCH?ENGER 1r. SChUEERC (United States) as teo -hether th technical assistants prmmint the Coiarttee would be entitled toGHAIRMAN speak, the assumedm that twould mittee uvld be repa-ed to follow arrangements made in the other Committwees, under Tich technical weassistants reoentitled tG speak should they be called upon to do so. In the absence of any coAgent, the ;,,nda as submitted by the United States delegation at ethe giwst Metinr iaproviccepted =ovsionally on the understanding that it could be amended or added to at any time at the pleasure of the Committee. LONDON E/PC/T/C.V./4 ;. . Page 2 The CHAIWLvtefly reported the remarks he had made the previous day aw the Meeting of Heads of Delegations Aith reference to the form in which the work of Comnittee V might ultimately emerge. Since no- * objection was expressed to the suggestions made as to the manner in which the work of tAIRMANCormittee might be arranged, the CH IJ proposed that, in accordance wiiE/ the proc3 ure outlined in Document :,PC/T/C.V/., the Committee should first take up item 7 of its Provisional Agenda, relating to the Secre tariat. He thought that better processwould be made if the Cor.ittee ;re te be=r in -ind that all decisions at thi. stage were of a provisional natures Mr. ILWIK (India), referring to Erticle 69 of the suggested Charter thought that the appointment of the Deputy Directors-General might, in view of their great responsibility, be subject to the approval of the Executive Board. Mr. COLF.N (Norvay) drew attention to the fact that the United Nations were setting up many new international organizations, each wdth large secretariats. It would be helpful to know whether proper provision was being made for the necessary co-ordination of the acti.ities of these various secretariatsO Lack of such co-ordination was liable to involve governments in unduly heavy expenditure through unnecessary duplication and Overlapping of secretariat services and act, vities. He Tworld be glad, therefore if the Secrtaxiat could give the Committee.as much information as possible as to the extent to Which such co-ordination had been provided for in the case of those *international secretariats already established or in the course of *establishment. The importance of ensuring the fullest possible co-ordination between the International Trade Organization and the, -onomic and Social Couxiilitself, was also stressed. Steps which the Conili igt be taking at a high level to deal with problems similar *. to those withhich the ITO will be confron?ted was a consideration whic} ~c ion\ : ' :i't::, . LONDON E/PC/T/C.V/4 Page 3 7.'i.1 ' borne is mind in .c_ tois canpectizn. With reference to the s of the c4puty Di_eItorsc-eneral, he e would beliinc?lned to give irector-General a more ; isiionitomn than that provided for e united states draft. I . t;Jc&. .:.'It would be sufficient if the Secretariat the Director-Generald > such )ecfa-Gomand _vah staf as nay be required". saw -I'ta J ( n cer,h. in difficulty in teapplication of r *-ragraph )-ra' i' e Depurectors-General might be led to feel that their ,ir poweerewree deriveomfrmo the Charter rather from the Director-General cr-Gnesra himse.lf. The mifficul meimght beme t e after the provision for appoionm fo' a tintent byt he Director- ticle 69, par. 1) "az 1), " and responsible Ato him". l,ternatively ference to 4- -Dthe 2ep Dirctors-General might be omittede, t. iDector-General rre meely bai eauthorsied tpoapopiepudpueties to esent on Commissions or for such other trrzpurposes as he saw fit. EURY (Australia) strongly ;-_z i s-heren:Lg13- supported teh views expressed by the .n~--' -,-te f:-;is Gverment hoped to see veryvmuch closer he economic eCcati~cof.t :..-^-- ;'c~se-tio*ol .heUntited Nations 'erretar2at ^n5TO.teSe.nota'iat of the IOT than onw exists between the United ations, on the one hand.and such specialized organizations as a T.= o .-J heon the &ther, T- risk oinconsistent policies be.. rs'.woube grereatly ince ased organizations having related reponsibilities, set up secretariats entirely ssecretexiatIs entirely independently of each are sr,ticuDarl if they are separated geographically. He was also -i-1--`2 »_ 1 ty f fing adequate staff for these oa;aersationo,eSinr.ergni' m only a very liummited nwbe of individuals =e ble, ilaubl~- seemed desirable that they should be used as much as possby le , each organizatiWon. "hile in the main, the Secretariat of thwoe dITO ul function independently, some of its personnel, ulparticarle cony rnthowscheed it more general subjects, might in pracetice b freely inter-changeable with the central Secretariat of the Unitioed Natns. LONDON E/PC/T/C.V/4 Page 4 Mr. HOUTKAN (Belgium-Luxembourg) considered that there were two possible concepts of. Articles 67-69: either there might be a Director- General with very wide powers in which case there should be fewer Deputy Directors-General - perhaps two would be sufficient, one speaking French and the other English. Alternatively, there should be several Deputy Directors-General who would be the intermediaries between the Director- General and the different Commissions at least four of which were now envisaged. Mr. PALTHEY (France) supported the views expressed by the Norwegian and Australian.Delegates. He was of the opinion, however, that the question of Secretariat organization should be deferred until the probable structure and functions of the organization and its commissions were more definitely determined. He felt that the Committee should first take up the question of relationships between the ITO and other international agencies including particularly the Economic and Social Council and the International Monetary Fund. He did not believe that sufficient progress had been made in the other committees to provide a framework within which Committee V could consider at this stage other aspects of its Agenda. As regards Article 67, he agreed with the previous speakers who had suggested that any reference to the number of Deputy Directors-General should be omitted. It would be sufficient if the Charter provided for a Director-General and a certain number of Deputy Directors-General assisted by-the necessary staff. Dr. NAUDE (South Africa) considered it impossible to come to any conclusion now about the number of Deputy Directors-GTneral required. He submitted that the question of co-ordination of inter-secretariat activities depended to a large extent on where the organization would have its headquarters. ..t:i. a s,.., . t.: LONDON E/PC/T/C. V/4 Page 5 Mr. DAO (China) was in general agreement with the views expressed as to the number of Deputy Directors-General. Until the Organization had been set up, it would be hard to envisage the amount of work involved. He suggested that the Charter should provide for the maximum amount of flexibility in this connection, with reference to Article 68, he thought it advisable to leave the question of the eligibility of the Dircctor-General for reappointment for subsequent determination when his term of office has been decided. He also drew attention to the fact that no provision was made in Article 70 for due regard being paid to the question of equitable geographical distribution in the selection of staff - a consideration which had figjured prominently in the United Nations Charter. Mr. SCH???GER (United States) in answer to the points raised, said that his Government was deeply concerned with the question of the co-ordination of the various organizations which had been or were to be set up, and discussions on the subject were now taking place in New York. addedde- that the reference in Article 67 to three or more Deputy Dirtc,ors-General was linked up with paragraph 2 of Article 69, and wdesignedcie to ensure that the Sccretariat should be organized in corresponding fashion to the work of the various morrissions, so that each of themm Coissions could be directly in touch wiath presonsible official of the Secretariat. His delegation, would, however, be quite prepared to consider an alternative word.ing Mr. COLBAN (Norway) was uneasy a.t the idea of Deputy Directors- General being put in change of each of them Comisniors. This might tend to lessen the responsibility of the Director-General to whom there should normally be ready access. He felt it would be best to leave it to the Director-General to arrange his staff according to hi??? vieviews and in the light of experience. This was the manner in which the Secretariat of the League hadebecn organized with LONDON E/FC/T/C. V/4 Page 6 notable success. Subject to possible reconsideration, he considered that the second paragraph of Article 69 might be ommitted and the formula suggested by the French delegate provisionally accepted. Mr. PIERCE (Canada.) was wholly in favour of the fullest co- ordination of the various international secretarits for the purpose of securing resultant economies in money and personnel, although it was impossible to determine here and now to what extent this co- ordination could be effected. On the other hand, he did not think it would help in the least for the Committee to defer its discussion until the reports of the other Comrnittees were available. It appeared to him that the points raised could be met by leaving the position flexible, following the example of the United ??tions, and giving the Director-General full authority and ??PLE scope to meet the uncertain requirements of the future, at the sale time instructing him to have the closest regard for the possibility of co-ordination with the secretariats of other international organizations. Mr. VAN TUYLL (Netherlands) stated that it was at present impossible to foresee the amount of work which will fall to the lot of the new organization; and that provisions relating to staff and secretariat arrangerments should therefore be as flexible as possible. He endorsed the idea that there should be a reasonable measure of centralization as between the United Nations and specialized agencies with respect particularly to staff concerned with conferences and general services. The difficulties which had been mentioned would be satisfactorily met if the Director-General were authorized to appoint his staff in accordance with regulations approved by the Conference and if the Conference were to instruct him to maintain contact with the Secretary-Genral of the United Nations in the matter of appointments. LONDON E/PC/T/C .V/4. Page 7 Mr. MALIK (India) supported the Delegate from Canada in his desire to proceed with the task of deciding how the Secretariat of the ITO should be organized. His delegation would also strongly support the views expressed concerning.the necessity of co-ordination. It might be possible to refer this matter to the appropriate.body of the United Nations which, he understood, already had the matter under consideration. He also strongly supported the view put forward by the Delegate of China in connection with the need for equitable geographical representation in the Secretariat staff. He quite agreed that efficiency came first, but, especially in the higher grades of the Secretariat, adequate geographical representation should be assured. Mr. CLI??ARD (New Zealand) thought that the discussion had been interesting and instructive, but that, as it was not yet known precisely what shape the future organization would take, it was too early to enter into any very great detail. Mr. SCH??ENGER (United States) in answer to a question from Mr. BURY (Australia) as to the use of the word "may" as opposed to "shall" (in the second sentence of Article 72, relating to appointment of personnel without regard to their nationality)', replied that it had been desired to give the maximum amount of freedom to the Director-General whilst at the same time establishing the principle which this particular sentence was designed to express. Mr. MERINO (Chile) entirely agreed that there should be co-ordination between the internationl secretariats. ?ith regard to the desirability of equitable geographical-distribution, he suggested that paragraph three of Article 101 of the Charter of the United Nations be added to Article 70 of the suggested ITO Charter. This would meet the points raised by the Delegates for China and India. LO?DO? E:/PC/T/C .V/4 Page 8 Mr. HOUT??? (Belgium) suggested that the point was already covered by paragraph two of Article 70. ?doption of the proposal made by the Chinese and Indian delegations, he considered, would be inconsistent with the wording and spirit of Article 72 of the United States text. The representatives of India, China and Norway expressed disagreement with the views of the Belgian representative and urged that the full text of paragraph 3 of ?rticle 101 of the United Nations Charter should be incorporated in any draft ITO Charter. ..3 a condition to which all member governments had agreed it should be given general application, it was argued to all United Nations organizations. Mr. SCH?ENGER (United States) explained that there was no intention on the part of those responsible for drawing up the United States Draft Charter of departing from the principle contained in Articles 10O and 10l of the Charter of the United Nations. ?rticle 70 of the United States text dealt only with members of the secretariat. ?rticle 72, however, applied to two separate groups of personnel (a) to Secretariat members and (b) to members of the various Commissions to be created. He added that it was also intended to emphasize as strongly as possible the paramount consideration of securing the highest standards of efficiency., competence and integrity. ?t the same time, it was the feeling of the . United States delegation that having regard to the international character of the organization and its relations with Member states, a representative | selection of Secretariat personnel would certainly be assured. It might be' be that consideration should be given during the drafting stage to the manner in which the provisions in the United Nations Charter regarding geographical representation could be incorporated in the draft ITO * Charter without seriously modifying its present general arrangement. LONDONiO1WON i/P.C//4T/C VA Page 9 U. P (E3CE(Canada) suggested that in connectwion 4th Article 68, paragraph 1, it would be wise to permit the Conference if it should find it advisable, to delegate othe pwer of appointing the Director- General to the Executive Board. He furthegr sugested that consideration should also be given to the possibility of having the Director-General act as ex-officio non-gvotin Chairaman of thc Exeautive B.ard This would vnvolVe a modificationarf p agraphArti2, tcle 68 and of paragraph 2 of Lticle 59. MUr. BARY (ustralia) supporteed ath ltter proposal of' the Canadian Delegate wbutop asf the opinion that there should be no delegation by the Conference with resptect o the appmentoint of the Director-General, particularly if his authoriwty -os tc be enhanced by making him ex-officio Chairman of the Executive Board. HOLMESGUZE (United Kingdom) thought tthe it; question whether the Director-General should be ex-officioirCharman of Ethe xecutive Board required consideration. As a snervat of the organization, it might not always be very appropriate for him to assume this function. h would also like too kn' why, in paragraph 1 of Article 71, agreements were to be cconedlud by tDheeircctoeneralral end approved by the Confere, ,ee whreias n paragra? ph of the same Article, arrangements were to be entered into by, thxec Eeutivea B.ord MrCHWENGER. S (United States) askeerd pmission for his alternat Mr.e,KELLOGG, to reply to tphe oint raised by the delegate from the UnitKed ingdom. Mr. KELLOGLOGG replied that paragraph 1 of Article 71 referred to formal dmocuents in the nature of treaties concluded between the UnitNed ationsdana the Organization, approval of which by the Conferenwe Tas essent.aL. Paragraph 2 and the following paragraph referred to less decisive and less formal arrangemenws *ith other special- ized organizations hagin- related responsibilitiew, .hich merely involved day to day worlkig relationships. In reply to the points raised by the delegate fNorwayor; concerning Article 69, he agreed that it LONDON E/PC/T/C-V/4 Page 10. might be possible to interpret the provisions of this Article as in some sense limiting the powers of the Director-General. The objects, however, had been precisely the reverse; without paragraph two, as it stood, the Commissions, and similar bodies, would be operating without any direct formal relationship with the Secrctariat. It was felt that the Director- General should, under the Charter, have the right to be authoritatively represented in the Commissions, through Deputy Directors-General appointed by him. Mr. COLB?N (Norway) agreed with the views of the United Kingdom Delegate regarding the possibility of the Director-General presiding over the Executive Board. He explained that in suggesting the ommission of paragraph 2 of Article 69, he had in mind a slight alteration of paragraph 2 of ?rticle 68 by including a reference to meetings of Commissions as well as to meetings of the Conference and Executive Boards. Mr. HOUTMAN (Belgium-Luxembourg) proposed that in order to avoid any possible contradiction between paragraphs 1 and 2 of Article 71, the agreement to be concluded by the Director-General with the United Nations should be subject to the approval of the Executive Board as well as of the Conference. He inquired why special emphasis was apparently laid on food and agriculture in paragraph 2 of Article 71 and suggested that relations between the ITO and the International Monetary Fund should be given equal recognition. The UNITED STATES representative replied that Chapter VI of the suggested Charter dealt with Commodity ?rrangements and it was felt that considerations associated with the problems of food and agriculture were closely bound up therewith and that there should, therefore be a specially close relationship between FAO and, the work of the Commodity Commission, The representative of CHINA-agreed that if the Charter were to make special reference to FAO similar reference-should also be made to the Bank and Fund.. .: .: - -. LONDON E/PC/T/C .V/4 Page 11 In reply to a question from Mr. DAO (China) Mr. KELLOGG (United States) stated that the "specific tasks" referred to in paragraph 3 of Article 71 covered such studies and researches as certain non-governmental organization might conveniently undertake at the request of the organization. In reply to a further question as to the purpose of paragraph 4 of Article 71, the United States representative explained that there were in existence certain international inter-governmental organizations whose work in the field of trade might be taker. over by the new ITO. He instanced as examples though without necessarily implying that such organizations would be absorbed, the Bureau for Publication of Customs Tariffs at Brussels and the organization concerned with trade-marks with headquarters at Berne. The CHAIRMAN stated that he had allowed the discussion to range over a wide field so that the delegates could express their opinions freely. In order to expedite consideration of the various points that had been raised, he proposed that the Secretariat be instructed to sort and assemble the various suggestions that had been made, so that they might be put on the Agenda for the next meeting. The Committee could then take them up, one by one, in relation to the various paragraphs of the suggested Charter. Mr. CLINKARD (New Zealand) urged that discussion of detail be avoided and that the Committee endeavour, while the other Committees were sitting, to view the position as a whole. He suggested that the Committee should go through its Agenda as rapidly as possible concentrating on those items on which some progress. might be made and avoiding discussion of details in view of the fact that it would be necessary to go over its work again when the other Committees are finished. On the suggestion of the CHIRMAN, it was agreed that the next meeting of the Committee should be held as early next week as could be conveniently arranged.

GATT Library

nc015xy8501

Committee V Administration and Organization : Memorandum by the Secretariat

United Nations Economic and Social Council, October 27, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

27/10/1946

official documents

E/PC/T/C.V/5 and E/PC/T/C.V/1-18/CORR.1

https://exhibits.stanford.edu/gatt/catalog/nc015xy8501

nc015xy8501_90220099.xml

GATT_156

RESTRICTED United Nations Nations Unies LONDON E/C/T /C .V/5 27 October 1946 CONSEIL ORIGINAL: ENGLISH ECONOMIC AND ECONOMIQUE SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE V ADMINISTRATION AND ORGANIZATION Memorandum by theSecretariat In accordance with the Chairman's instructions, the Secretariat has attempted to summarize and to classify in relation to the relevant Articles and paragraphs of the Suggested ITO Charter, the proposals made by various delegations in the course of nthe Committee 's general discussion, at its second meetings, of items 7, 8a and 8b of the Provisional Agenda, relating respectively to the Secretariat. Relations with Other Organizations and Intrnational Responsibilities of Personnel. Before listing the specific suggestions put forward, it might be noted that much of the discussion was concerned with the following broad propositions: - 1. That are detailed consideration of such questions as the organization of the Secretariatl is premature and should be deferred until more is known of the structure and functions of the Proposed Organization and the nature and extent of the responsibilities with which its staff is likely to be entrusted The view was also expressed, however, that no useful purpose would be served by sucmeh deferment and that whilst in some respects the position would have to be left open, thermae were many points on which fairly definite conclusions night be reached, even at this stage. 2. That, in general, provisions relating manner to the in Which the Secretariat should be organized should be LONDON E/PC/T/C. V/5 Page 2 as flexible as possible, particularly Ath reference to the number, status and powers of Deputy Directors-General, and that, as a corollary, the Director-Gencral should be given all the .authority and freedom. of action needed for the carrying cut of his responsibilities and for meeting "the uncertain requirerments of the future." Steming from this preposition, there were a series of specific proposals relating to the appointment and powers of the Director-General and his deputies. 3. That in ccnformity with the stipulation contained in the United Nations Charter, there should be express provision for recruitment of Secretariat personnel on as vide a geographical basis as possible, subject to the paramunt consideration of securing the highest standards of efficiency, competence and integrity. The view was also expressed, however, that articlee 72 of the Suggested Charter was in fact intended to give recognition to this principle. 4. That in the interest of economical and efficient admin- istration and for the purpose of avoiding inconsistencies and perhaps conflicts at the policy level, it is of paramount importance to ensure that proper provision is made for the co-ordination cf all the various international secretariats now being built up or in contemplation; and that, in the case of the ITO, it is necessary to ensure that such co-ordination is affected: (a) with other international organizations, including the United Nations, in order to avoid unnecessary duplication of administrative services and facilities; and i, 0, ; ''; ";X LONDON E/PC//T/C .V/5 Page 3 (a) with the Economic and Social Council itself, in order te avoid unnecessary duplication of work on identical ?? closely related problems. This preposition appeared to command general support. It did not, however, give rise. to specific preposals involving amendment of the relovant provisions of the Suggested ITO Charter but was held to be a matter about which further information should be secured and to which further considera- tion should be given. The following detailed suggestions relating to Articles 67 to 72 of the Suggested Charter were made during the Committee's initial discussion of items 7, 8a and 8b cf the Provisional Agenda. The amendments proposed to. Articles 67 and 60 (paragraph 2) were in most cases consequent on a desire to avoid any reference to. a specific number of Deputy Directors-General. It is suggeested, therefore, that they be dealt with jointly. Certain of the changes proposed in paragraph 1 of Article 69 and in paragraph 2 of Article 68 are of a similarly consequential nature . They are accordingly arranged in an order which it is hoped will best facilitate their further consideration. Artcles 67 and 69 (paragraph2) 1. Preposed by the Delegates of Norway and Canada: That the words "three or more Deputy Director-General", in Article 67, and the whole of paragraph 2 of Article 69, be omitted. This proposal was linked by the Delegate of Norway with proposal No. 6, below, and by the Delegate of Canada with proposal No. 24. 2. Proposed by the Delegate of France: That the words "three or more" in Article 67 be amended to read "a certain number of". LONDON E/PC /T/C .V/5 Page 4 3. Proposed by the Delegate of Belgium: That the number of Deputy Directors-General provided for in Article 67 be either (a) limited, to two ( one English specaking and one French speaking); or (b) increased to four (to correspond to the number of Cornmissions , envisaged). Article 69 (Paragraph 1) 4. Proposed.by the Delegate of Canada: That the Director-General should have pcwer to appoint Deputy Directors-General. to represent him on Commissions or for such other purposes as he may see fit. This proposal was linked with proposal No. 1, above. Alternaltively it was: 5. Propcsed by the Delegate of Canada: That the words "and responsible to him" be added, after the provision for the appointment, by the Director-General, of' Deputy.Diroctors-General (in order to make it clear that the powers and responsibilities of the latter flow from the Director-General and not from the Charter itself). Article 68 (paragraph 2) 6. Proposed by the Delegate of Norway: That the- words "and of the Commissions of the Organization" be added at the end ef the first sentence. : This proposal was linked wlth proposal No. 1, above. Article 69 (paragraph1) 7 . Proposed by the Delegate of India: That appointments (of Deputy Directors-General) should be ~eptiimns =, (al) shoul b sctub3mtheoapp oval to f ~otjExece i e3ttaBoard.: LONDON E/PC/T/C.V/5 Page 5 Article 68 (paragraph 2) 8. Proposed by the Delegate of Cannada: That considoration on should be given to the possibility of having, the Director-General act as ex officio .on-voting Chairman of the Executive Board. This suggestion is linked with paragraph 2 of Article 59 which provides for the Executive Board annually to elect its Chairman. 9. Proposed by the Delegate of Canada: That, in organizing his Secretariat, the Director-General should be required. to have the closest regard to the importance cf providing for effective co-ordination with the secretariats of the United Nations and other international organizations. Article 68 (paragraph 1) 10. Proposed. by the Delegate of Canada: That the Conference should be authorized to delegate the pcwer if appointment of the Director-General to the Executive Board, should it consider such delegation advisable. 11. Proposed by the Delegate of China: That no decision regarding the Director-General's eligibility for re-appointment should be made until such time as his term of office his been fixed. Articie 70 (paragraph 1) 12. Proposed by the Delegates of China, India, Chile and Norway: That a further sentence be added as follows: "Due regard shall be paid to the importance of recruiting the staff on as wide a geographical basis as possible . ( in conformity with Article 10, paragraph 3, of the United Nations Charter). 13. Proposed by the Delegate of the Netherlands: LONDON E/PC/T/C. V/5 Page 6 That the appointment of the staff and the fixing of its terms and conditions of service, by the Director-General, should be in accordance with regulations approved by the Conference. Article 71 (paragraph 1) 14. Proposed by the Delegate of Belgium: That the Agreeinent to be concluded by. the Director-General with the United Nations, should be subject to the approval of' the Executive Board. Article 72 15. Proposed by the DeleGate of' Australia: That the word 'may"' in the second sentence should. be changed to "shall". (The sentence in question has reference to appointment of personnel without record to their nationality.)

GATT Library

mq436vg1573

Committee V Corrigendum to Document E/PC/T/C.V/15

United Nations Economic and Social Council, November 20, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

20/11/1946

official documents

E/PC/T/C.V/15/Corr.1 and E/PC/T/C.V/1-18/CORR.1

https://exhibits.stanford.edu/gatt/catalog/mq436vg1573

mq436vg1573_90220110.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies RESTRICTED CONSEIL LONDON ECONOMIQUE E/PC/T/C.V/15/Corr.1 20 November 1946 ORIGINAL: ENGLISH ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENE ON TRADE AND EMPLOYMENT COMMITTEE V CORRIGENDUM TO DOCUMENT E/PC/T/CV/15 Page 6 line 12 delete sentence commencing "Should a. Matter and interest. "Maters having political consequences would be considered by the Board after the Commissions had made their recommendations. The Board would contain politioal. representatives competent to deal with such matters." CIL

GATT Library

bx850ks6186

Committee V Eighth Meeting : Held on Wednesday, 6 November 1946 at 3 p.m

United Nations Economic and Social Council, November 7, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

07/11/1946

official documents

E/PC/T/C.V/20 and E/PC/T/C.V/19-31

https://exhibits.stanford.edu/gatt/catalog/bx850ks6186

bx850ks6186_90220116.xml

GATT_156

United Nations Nations Unies RESTRICTED: N ; . . ~~~~LONDON ECONOMIC P CONSEIL E/PC/T/C.V/20 7 November 1946 AND ECONOMIQUE ORIGINAL: ENGLISH SOCIAL COUNCIL ET SOCIAL PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMEN COMMITET EV Eighth Meeting Held o nWendesday, 6 November 1946 at 3 .pm. Chairman: rM. L. R. EDMINSTER (United Statse) The CHAIRAMN reimnded the Comntitee that a ful ldiscussion o.t he voting provisiosn of the Charter had been postponed pending receipt of a United Kingdom proposal on this subject. This proposal had since been circulated and he therefore called on the Unite dKingdom Delegate to open teh debate. Mr. OHLSME (United Kingdom) explained the contents of the United Kingdom Mmeorandum ihch hadb een kept sa brief as possibel as it was ocnsidered that the task fo rwoking out a scheme for weighted voting, should this be agreed to in principle, could appropriately be undertaken by the Drafting Committee htat would be ste up at the edn of the present seasion. His Delegatnio's vie a ws thta in consid-irng the weight to be given to the viesw of each member, du eregard umst be paid to the extent to whir hmembers of the organization participated in international trade since that was the true criterion of their itnerests in an organization of the kind proprosed.h Wile the principle of oen state one vote might have much to commend it on the gruonds of mere simplicity, the nature of the field which the International Trade Organization will cover was such as to lend itself very appropriately to a certain functional recognition. The Memorand umcalled attention to the provisions made in LONDON E /IC/T/C .V / 20 Page 2 the earlier United States' proposals whereby a certain number of seats on the Executive Board would be reserved permanently for certain countries - a provision which was not incorported in the present Draft Charter. The memorandum called attention also to the corresponding provisions that are to be found in tihe conventions or agreements establishing other international organizations of a character similar to that of the proposed ITO. The manner in which the United Kingdom proposal might be given effect to was suggested in very general terms which he did not feel needed elaboration at this stage. He desired, however, to suggest that under the United Kingdom proposal, the position of countries who felt that their economic potentialities as well as their actual share in international trade should be given due recognition had been adequately provided for by the suggested periodic review. Account would thus be taken from time to time of any marked changes which may have taken place in the relative contributions of the various members to world trade. Mr. TAIT (Observer for the International Labour Office), said that the constitution of the ILO provided that, of the sixteen Government representatives eight should be appointed by the members of chief industrial importance. Six of the government representatives on the governing body must represent non-European states. The criteria for determining the economic importance of states had caused certain difficulties; but they were not insuperable. At the first meeting of the International Labour Conference in 1919 a list had been improvised by the organizing committee. Certain excluded states had protested, and the question had come before the Council of the League of Nations. With the assistance of expert advice, detailed criteria had been worked out in 1922 and had been applied until 1934, when one of the eight states of chief industrial importance had resigned, and two more states of indubitable industrial importance had been admitted. As one or two states hitherto regarded as of LONDON E/PC/T/C.V/20 Page 3 chief industrial importance would have to retire, the question came again under review. In 1935 the Governing Body had drawn up a set of criteria which, with one modification introduced in 1940, were still valid: 1. The scale of contributions to the League of Nations established by the Assembly of the League on the basis of national wealth. 2. A criterion based on the table of the industrial importance of states prepared from statistics compiled by the League Secretariat for its Index of World Production. 3. The table of the volume of foreign trade, both exports and imports, prepared from the statistics compiled by the League Secretariat. 4. Total figures of the occupied population. The above criteria had been adopted in spite of some protests, but the situation had been made easier by the secession of Germany, Italy and Japan, so that states which had lost their seats regained them. A vacancy had occurred in 1944, but the war had made it impossible to apply. the criteria; a provisional appointment had been made on the understanding that the whole list would be reviewed as soon as circumstances allowed. This formula had permitted the reservation of quasi-permanent seats for the states of chief industrial importance while avoiding complete rigidity. No other formula which would achieve these results had been devised. In answer to a question by Mr. COUILLARD (Canada), Mr. Tait added that the Governing body had decided, on the advice of the committee of experts, that the weighting of the four criteria should be in the proportion 3-3-3-1. LONDON E/PC/T/C.V/20 Page 4 Mr. SABAL (Brazil) opposed the British memorandum. Article 53, he said, conserved the democratic principle of the equality of nations, the very foundation of international relations and law. To make the criterion of a country's interest in the organization its participation in inter- national trade was not just. Countries whose participation was limited might take as keen an interest as the great commercial powers; indeed, in the initial phase of commercial expansion a keener interest, since they will have a greater desire to increase their capacity to buy and sell abroad. More- over, it it not always the economically powerful who suffer most when trade is seriously contracted; more often the under-developed countries were the ones most seriously affected because of their vital dependence on international exchange. To grant special privileges in the organization to a few powers would be detrimental to the very spirit of co-operation which it is the purpose of the organization to foster. Organizations such as the Bank and the Fund which had already adopted a weighted voting procedure were essentially different in character from the proposed ITO. His Delegation believed too that any voting system based on the volume of trade or on national income would present serious difficulties. It was hoped, therefore, that the proposal as set forth in the Uniited States Draft Charter would be adopted without change. Mr. KELLOGG (United States) explained that the United States Government had refrained from inserting a proposal for weighted voting into Article 53 because, first of all, they had considered that the democratic principle should apply. As the French Delegate had previously pointed out, a small country might be as seriously involved in a question before the Organization as a large one. They had also followed the precedent of the United Nations Charter, which allowed only one vote to each Member in the Assembly. To meet certain special requirements Article 35 (2) and (8) provided for a two-thirds instead of a simple majority. Similarly, in connection with the commodity agreements special provisions had been included to Page 5 LONDON E/PC/T/C.V/20 safeguard the position of those countries most directly concerned. His Government had also been much influenced by the difficulty of finding a formula acceptable most potential members of the Organization, which, it was felt, ought to have as broad a membership as possible. Similar considerations accounted for the omission of any provision for permanent seats on the Executive Board: in accordance with the democratic principle, no such special provision had been made in connection with membership of the Economic and Social Council; while again it had 'been found that almost all proposed formulae were likely to be unacceptable for one reason or another to a great any countries who it was hoped would become members of the Organization. Mr. QURESHI (India) expressed complete agreement with the views of the United States Delegate. His Delegation supported the principle of one country one vote irrespective of its size or importance. Acceptance of this principle would create goodwill and trust, and would ensure for each country due respect for and protection of its interests. At the same time, while his Delegation would be reluctant to change its position in this matter, it would be prepared, should there be any strong support for some alternative system. to give it their careful consideration. The criteria suggested by the United Kingdom, however, would not be entirely acceptable, since undue weight would be given to certain small interests while much larger interests would be neglected. The ILO criteria seemed to be more satisfactory, although if the principle of equal voting were to be abandoned, the criterion which should be given the greatest weight, from the democratic point of view, should be population. National weaIth would be a preferable criterion to national income, but there were a number of other considerations that would need to be taken into account. The proposals contained in the United States Draft Charter, however, were the most fair and equitable. LONDON E/PC/ T/C .V /20 Page 6 Mr. BURY (Australia) stated that in general his country strongly supported the principaI of one country one vote in all international gatherings. They were quite prepared, however, to examine alternative proposals and i it is could be shown that a weighted system which took account of the different degrees of inserted in and dependence on international trade of different countries would be more just and equitable, his Delegation might modify its views on this issue. Turning to the criterion suggested by the United Kingdom Delegate, he considered that substantial weight should be given to the first criterion mentioned since this would ensure that no nations voice was so small that it would not count for something. The second criterion was clearly of major imortance if any system of weighted voting as to be adopted. In the opinion of his Delegation, however, national income would be a very unsuitable criterion to apply in the case of the ITO. Decisions should not be weighted in favour of a country whose national income may be large but whose international trade is relatively small. On the other hand if a country had both a large national income and a proportionately large international trade its position would be safeguarded by virtue of the weight given to the second criterion suggested by the United Kingdom. He proposed that if the weighted system was to be considered, a third criterion should be the relative import- ance of international trade to individual countries. In the case of certain countries, any substantial collapse of trade can paralyze the whole of their economic life. The position of such countries would be the more serious if they were liable to be overborne in international counsels by countries that are much less dependent on international trade. As Mr. Wilcox had said in his opening speech, the strangulation of trade would necessitate for the United States a difficult readjustment; for others it would spell catastrophe Mr. BENDA (Czechoslovakia) said that in the opinion of his Delegation, which fully adhered to the principle of one State one vote, the Conference should be a democratic body responsible for the broad policy of ITO. Its system of voting should conform to the accepted principles and to the practice for assemblies or conferences of other international organizations. The introduction of any alternative system of voting would necessitate modification of other agreed Articles of the Charter. Moreover, since for certain decisions qualified majorities are necessary, a weighted system of voting based on such criteria had been suggested, would possibly endanger the interests of less developed countries who would be easily outvoted. On the question of membership of the Executive Board, his Delegation considered that the great Powers should have permanent seats, as on the Security Council. The criteria for determining a "great Power" should not be purely Commercial. Mr. MERINO (Chile) reserved the right to express his Delegation's opinion after it had consulted its government. His government had accepted the invitation to attend the Conference on the basis of the United States Draft Charter and the British proposals changed that basis fundamentally. He did not believe that his Delegation would be able to accept them. Mr. PARANGUA (Brazil) said that the ITO would not be a political organization nor would it be of the same character as some of the others that had been mentioned. The ITO had judicial functions, and in every court each judge had an equal vote. A weighted vote would handicap the organization from the beginning and disappoint many countries. The rule of a two-thirds majority would be a sufficient guarantee that no important decision was taken against a large trading country. Mr. MORAN (Cuba) declared that his Delegation supported the principle of equal voting as put forward by the United States. LONDON E/PC/T/C .V/20 Page 8 Mr. DAO (China) said that his Dlelegation always supported the principle of one member one vote. In his opinion, however, a system of weighted voting might be admissable if it could be established that the obligations assumed by some members will be greater than those assumed by others and that there is a common standard which can be measure with some degree of accurace and by which the importance of the contributions made by different members to the work of the organization might be assessed. His Delegation, however, seriously doubted whether the British proposals were practicable. The suggested criteria were variable from year to year and the methods of estimation were vitally different from one country to another. Both on absolute and relative terms, the obligations imposed on members under the Suggested Charter wrere identical. His Delegation, therefore, were in favour of the voting provisions as drafted. Baron VAN TUYLL (.Netherlands) reserved his Delegation's position. Mr. HOUTMAN (Belgium), also desired to reserve the position of his Delegation pending consultation with his Government. H. E. Mr. COLBAN (Norway) recalled that at a preovious meeting he had expressed general agreement with the French Delegate's statement in favour of an equal vote for everybody in the Conference of ITO. In his personal opinion, it was imperative that the great trading powers should have a special position on the Executive Board. With respect to the majority (i.e non-permanent) members of the Board, he would like to see a system of rotation introduced. Mr. COUILLARD (Canada) said that on a first impression he would be inclined to support the United Kingdom proposal, namely that a system of weighted voting should apply in the Conference. Representatives of the major countries should enjoy a strength reflected from their economic power, in the LONDON E./PC/T/C.V/20 Page 9. Conference, rather than on the Board. He did not understand clearly what the British proposals intended for the Board, and would reserve for the time being his Delegation's view so far as Board voting was concerned. The membership of the Organization should be on as wide a basis as possible, and should be based on functional principles. Once a member has adhered to the principles of the Charter, of this specialiszed agency, its voice in the Conference should be proportioned to its real importance, its interest in and contribution towards, the objectives of the Organization. The formula for assessing the relative weights should certainly be reviewed periodically. Alternatively, it might be based on a running three-Year average, beginning with a base period probably immediately pre-war. Mr. NJJDE (South Africa) saw the issue as a question of whether the varying interest and contribution of the members should be recognized. The term "democracy" was often misapplied; the organization would not be democratic if its Executive Board had permanent seats on it. The United Nations was not a democratic body; the veto vitiated the whole principle of democracy. The responsibility and leadership of countries varied widely and must be considered. The British criteria invited further exploration. An immediate final decision would be most unwise. The Drafting Committee might well devise criteria that would satisfy all members while incorporating in the Charter the concept underlying the Uinited Kingdom proposals. Mr. PARANAGUA (Brazil) pressed for an immediate decision on the proposal. The CHAIRMAN pointed out that a majority of members had already indicated a preference for the system of one country one vote, and nothing would be gained by a show of hands. The discussion was quite preliminary and tentative. He suggested that those members who had favoured some kind of weighted voting or who had at least indicated a willingness to consider it, should constitute themselves a small LONDON E/PC/T/C.V/20 Page 10 sub-committee to prepare an alternate draft provision. It was not essentiall that this issue be resolved at this meeting of the Preparatory Committee. Mr. PALTHFY (France) proposed as a compromise that Article 53 should be left as it stood, that permanent members should be admitted to the Executive Board and that the provisions of the Charter should be carefully re-examined with a view to safegaurding the vital interests of certain States by providing for a two-third majority vote on more important The CHAIRMAN u:ggstedn that t am,gh be b et to let teh .matter f cv tino in the Cnfedence rest for the t-Lmeb .ng and to =orcede to a si_s n o rAticle 75. aMr.OCL B N(rNoway) srupprtde theC.hairman' sproposal that ethose who saw mrit in t he nUitde -- gd.e mom shoulid conider it further maanngn-hsmselve and, that th eoC mvtte econa:heil should take up Article 57. Me'ticle 57 eExucitve oB d - Me wW2.. ealeak LAURENCE (Newn d thro)kremaaredtthataameust consist of atmemFirfbLesnum ts,hatbua Zrec 78 t(3hceletr. h) aCer be broumightght into foyf r rmce mew bers, h.-h iin wecnt t would inot e csseblo to ive ecezt to pafraprat 1 Afgartpicle o57. rOMEILU niHOLMteES(egomoia)Kin ,)tued tht .rms.igtw bed a dmded irmttinheptnt arg td to be conttiud byssmi 6.ter a munber co rred.4n to themebr em..i ber ber ofingin tn Charter igntoh force. I URA (ur. BURia) conAussidered the provision of permanent seats on theboard for the prinpa trading nacitilons unnecessary, for he could not ervisageeh.ntbein gt haeumtomatically re-elected.I the Conf erenIce faied-o re-eechltn thetfuert ohm the gar;eoicn would bOega bztleoak. In his Deleat'ons view, gtemoebrphi ohf e Bomar 3ssdpoh bed neahruer twntVfor was74hoyped that it all the United Nationndae sevel s a eresl ld jo~ jthrgwuhtnztion. e IO r the elit-o onf memberes, idue regard shold be paid to audeuagoSecricqal tr geepreosentation. Mr.QURESHI (India) agreed, and suggested twenty as a fitting number. Specific reference should be made in the Charter to the necessity of adequate geographical representation on the Board * . 1r. COGI (Canada) desired provision to be made for the attendance of members of the Organization other than members of the Board at its meetings when matters especially affecting them were discussed. Article 31 of the United Nations Charter left in doubt, the conditions under which non-members might attend the Security Council; and as a result their participation had been restricted. That error should not be repeated in the Charter of the Organization. It was his Delegation's intention to suggest the inclusion of a paragraph on the following lines:- "Any member of the Organization who is not a member of the Executive Board shall be invited to send a representative to any meeting of the Board called to discuss a matter of particular and substantial concern to that member. Such representative shall, for the purpose of such discussions have all the rights of Board members, except the right to vote. H.D. Mr. COLBAN (Norway) said he disliked the provision making retiring members eligible for immediate re-election. He preferred a reasonable rotation. A Board of fifteen or even eighteen, with an organization of forty-five or fifty members, should provide for reasonable rotation and this, in turn, would ensure geographical distribution. He would favour some such wording as: "the executive Board shall consist of fifteen members of the organization elected by the Conference, five of who shall be eligible for immediate re-election." In practice, that would mean that the leading commercial powers would be assured of permanent seats. Mr. QURESHl (India) maintained that, if permanent seats were to be nrovided, they must be equitably and fairly distributed, with regard to the importance of the commercial powers and to geographical representation. If no provision were to be made for permanent seats, election should be free and without reservation. It would be most objectionable to enact that five members only should be re-elected, and to ask representatives of smaller powers not to stand. To provide for the automatic re-election of the major powers would be equally undesirable. LONDON E/PC/T/ C.V/20 Page 12 Mr. HOUTMAN (Belgium) suggested that the same principles, mutatis mutandis, should be applied as in selecting the personnel of the Secretariat. Mr. PALTHEY (France) agreed with the Norwegian on the desirability of providing for permanent membership combined with rapid rotation of the non-permanent seats. Mr. HOLMES (United Kingdom) suggested that discussion of both permanent seats and voting should be adjourned partly because two delegations wished to consult their governments and partly becuase the Committee needs more time to study the British memorandum. He did not consider that the accusations directed against the United Kingdom of being undemocratic, in submitting its proposals, were soundly based. It was not reaIly democratic, for example, to suggest that theUnited Kingdom and all the various territories associated with her, many of which enjoyed very effective autonomy in the matters covered by the Charter, should have only one vote in a highly specialised organizations such as the ITO. He thought, however, that the best procedure would be to continue the discussion on a later occasion after further thought had been given to the United Kingdom proposals and to the points that had been raised in the course of the morning's debate. The Committee adjourned at 6.00 p.m.

GATT Library

km851hc3581

Commlttee II : Proposals Submitted by the Cuban Delegation to Sub-Committee 2

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/15 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/km851hc3581

km851hc3581_90210223.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON AND ECONOMIQUE E/PC/T/C. II/15 28 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATION CONFERENCE ON TRADE AND EMPLOYMENT COMMlTTEE II PROPOSALS SUBMITTED BY THE CUBAN DELEGATION TO SUB-COMMITTEE 2 The Cuban delegation propose the following amendment to articles 9, 11, and 15 of the suggested Charter presented by the delegation of the United States of America. Amendments to Article 9 Paragraph 1 of article 9 should be drafted as follows: 1. The products of any member country imported into any other member country shall be exampt from internal taxes and other internal charges higher than those imposed on like products of national origin, and shall be accorded treatment no less favourable than that accorded like products of national origin in respect of all internal laws, regulations or requirements affecting their sale, transportation. or distribution or affecting their mixing, processing, exhibition or other use. Laws and regulations governing the procurement by governmental agencies of supplies for public use should also be included in the foregoing regulation with the following exceptions: (a) those acquired by or for the military establishments: (b) national products offered in same conditions of the foreign products whenever previous regulations establish that in such case the national product should be preferred. The provisions of this paragraph shall be understood to preclude the application of internal requirements restricting the amount or proportion of an imported product permitted to be mixed, processed, exibited or used. The rulings of this paragraph 1 cannot be interpreted as to prevent member nations in the early stages of their industrial; development for giving protection to infant industries. LONDON Page 2 Amendment to Article 11 At the end of paragraph 1 of article 11, after the phrase "and for other differences affeting price comparability", the following phrase should be addee, separated by a comma: "including the regime of salaries and conditions of labour " Amendment to Article 15 In the first part of paragraph 1 of article 15, after the word distribution", the following words should be added: "transportation and insurance" The parts underlined are the contents of the amendments. LONDON E/PC/T/C.II/15 Page 3 To: Committee II, Sub-Committee 2 THE CUBAN DELEGATION TO THE PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT Proposes: That two new paragraph be added to article 14 (Marks of Origin), namely : - The Member agree to take measures, to protect the legitimacy and to insure recognition for the marks or means intended to guarantee the origin of the natural or manufactured products of the Member countries, by prohibiting designations or marks which might give rise to errors or confusion in the identification of the legitimacy and origin of the product to be used for other similar products not originating in the country which exports them under the protection of its marks and geographical denominations. No Menber may use for its natural or manufactured products geographical designations corresponding to another Member, not even when such denominations are accompanied by qualifying terms, such as "class", "type", "style", or any other analegous terms which might be interpreted, in the judgment of the Member thereby affected, as a false indication of origin.

GATT Library

ym827pz1639

Common services for the United Nations and the specialized Agencies which might be provided by the United Nations Secretariat

United Nations Economic and Social Council, November 9, 1946

United Nations. Economic and Social Council, Preparatory Committee of the International Conference on Trade and Employment, and Committee V

09/11/1946

official documents

E/PC/T/C.V/23 and E/PC/T/C.V/19-31

https://exhibits.stanford.edu/gatt/catalog/ym827pz1639

ym827pz1639_90220119.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.V/23 AND ECONOMIQUE 9 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT COMMITTEE V COMMON SERVICES FOR THE UNITED NATIONS AND THE SPECIALIZED AGENCIES WHICH MIGHT BE PROVIDED BY THE UNITED NATIONS SECRETARIAT (Note By The Secretariat): In a memorandum distributed on 20 October (Document E/PC/T/C.V/6), the Secretariat promised that it would make available, for the information of the Committee, a brief summary of the arrangements already made for administrative and technical co-ordination between the United Nations and the Specialized Agencies, together with an indication of the plans which the United Nations has under consideration in this connection. The following statement received from the New York Headquarters of the United Nations, is therefore brought to the attention of interested Delegations. The Report of the Preparatory Commission to the First General Assembly suggested that, to avoid duplication and unnecessary expenditure, certain common services for the United Nations and the Specialized Agencies might be set up. Discussion has already been initiated between the United Nations and existing Specialized Agencies in an attempt to establish common ground on the questions of recruitment of personnel and administrative and financial procedures, which form the bases of any such common services. There have also been discussions among information exerts as to how the public agencies may best be utilized. Such arrangements are consistent with the draft agreements between the United Nations and its Specialized Agencies. A division has been set up to assist the United Nations and the Specialized Agencies in the planning and co-ordination of their Conferences. Such assistance would refer to physical and personnel LONDON E/PC/T/C.V/23 Page 2 arrangements. These would include: the use of conference halls, committee rooms and supplementary offices for the holding of international conferences at the Headquarters of the United Nations and at Geneva, the provision of interpreters, verbatim reporters, documents staff, translators and such other staff as are necessary for the running of a Conference, the use of transport and accommodation services of the United Nations Secretariat. A system of communications between Headquarters of the United Nations, United Nations Offices and Member States, is now being developed. These channels will, of course, be placed at the service of all Specialized Agencies, if they so desire. It is possible that regional and branch offices of the United Nations may be set up in a number of cities of the various continents. Wherever the location of such offices is convenient to the Specialized Agencies, it is hoped that office accommodations and other facilities may be put at their disposal, subject to adequate arrangements. The Library of the League of nations, one of the assets which has now been handed over to the United Nations, and such other libraries as the United Nations may establish or acquire, will always be available for the use of the Specialized Agencies. Existing United Nations purchase and supply facilities will be available to aid Specialized Agencies in buying equipment and supplies, wherever this can be done without expanding the present establishment. The Division of Purchase and Supply is making studies necessary to the preparation of standard specifications for equipment as a basis for price concessions. Such concessions will be available to the Specialized Agencies on items purchased though the United Nations. It is thought that by establishing such common services as have been referred to above, unnecessary duplication and interference would be avoided as between the United Nations and the Specialized Agencies, and the necessary economy and efficiency would be best secured.

GATT Library

tr189sj1533

Commssion Mixte du Development Industriel : Projet de Chaptire presente à titre provisoire et officieux par la Délégation des Etats-Unis

United Nations Economic and Social Council, November 12, 1946

United Nations. Economic and Social Council, Commission Préparatoire de la Conférence Internationale du Commerce et de l'Emploi, and Preparatory Commission of the International Conference on Trade and Employment

12/11/1946

official documents

E/PC/T/C I II/15 and E/PC/T/C.I/13-20

https://exhibits.stanford.edu/gatt/catalog/tr189sj1533

tr189sj1533_92290383.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL E/PC/T/C I & II/15 AND ECONOMIQUE 12 November 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL:ENGLISH DU COMMERCE ET DE L'EMPLOI COMMSSION MIXTE DU DEVELOPMENT INDUSTRIEL Projet de Chaptire presente à titre provisoire et officieux par la Délégation des Etats-Unis. Developpoment Economique Article 1. Importance du développement économique. Les Etats Membres reconnsaissent que le développement industriel et le développement economique général de tous les pays et en particulier de ceux dont les resources sont encore relativement peu exploitas, anéliorer. les possibilities d'ocploi, augmontera la productivity de la Main-d'oeuvre, accro±tra la dende de products et de services, contri- buere à la stability 6ccnrortique, accroîtra les 6ch¢nges inteimationaux et rehaussero. le niveau du revenu réel, consolidant ainsi les liens internationauxc d'entente et d'accord. article 2. Plans de. Dévelopvement E¢onoi ic a . Les Etats Memibres reconnaissent que les programs inclus d=ns les plans de développement économiaue devront Atre judicieusarmnt conçus, mutuellement hIawwnieux et efficaCcemnt coordonnés. 2. Les Etats ià,2:bres siengagent à coopérer p.= V'intere4dia.re du Conseil éconoMique et -social des Nations Unies et des institutions spécia- lisces internationals approprides, à l'lo.bQration des plans et des E/PC/T/C.I & II/15 French Page 2 programmes destinés à favoriser le développement industriel et le développement économique géneral. 3. A la demande de tout Etat Merabre, l'Organisation la conseil- lera au sujet de ses plans dc développement économiqàe et de ses possibilités, elle lui fournira une aide technique poup l'aider à réaliser ses plans et exécuter ses programmes. àrticle 3. Accès aux .moyens de dévelopment économique 1 Les Etats.Membres reconnaissent que le progrès du dévelop- pement économique est fonction de la disponibilité des capitaux et des biens de production, de l'avancement de la technique, des aptitudes professionnelles des travailleurs et de la compétence des directeurs.. 2. Les Etats Membres décident de ne pas imposer d'obstacles exagérés qui empêcheraient les Etats Membres d'accéder, à des condi- tions commerciales, aux moyens dont ils ont besoin pour développer leur économie. Ils décident ern outre de coopérer, par l'intermédiaire des institutions internationales ap propriées, en vue de fournir ces moyens. 3. Les Etets Membre s s'engagent à traiter les autres Etats Membres, les organisations ou les personnes qui leur fourniront des moyens servant à leur développement économique conforméent ax dispositions des -engageemnts internationaux qui sont actuellement en *vigueur ou qui seront contracts en vertu du paragrapae 5 dé l'?rticle 50 ou de toute autre façon, et, en gererag., a n'iMposer aucun traite- ment exagéré qui s'avérerait préjUdiciable aux intérgts de ces "'tres Etats Xembres, organizations ou perso=nes. E/PC/T/C.I & II/15 French Page 3 4. L'Organisation recevra par l'intemédiaire de tout Etat Membre lésé ou avec la permission de celui-ci, les plaintes dés organi- sations ou personnes qui relèvent do sa juridiction, mèntionnant que des mesures praises par un autre Eta.t eombre sont incompatibles avec les obligations qu'il a contractées en vertu des paragraphes 2 et 3 du present article. Lorsqu'il s'agit d'une plainto de cette nature, l'Organisation peut inviter, à son gré, les pays Membres intéressés Ai négocier en vue de parvenir à un accord satisfaisant pour les deux parties et employer ses bons offices à cette fin. Artcile 4. Aide gouvernementale au Dévelopment Economique 1. Les Etats Membres recozimaissent que, dans le cas de oertai- nes industries, ilp.peut ttre nécessaire de faire appel à une aide gouzvernemei.tale sp.éciale destinée à en faciliter 1'établissemrnt, et que cet1e aide pourri légitimement préndre le. former de siubventions ou de mesures de protection . Ils reconnaissent également qul'un recours déraisonnable aux. subventions ou aux mesures de protection grèveraît in:dOment leur propre êc.onomie imposerait au commerce intez'nzional des restrictions injustifiées et pourrait 8tre de nabL.e à susciter d'inutiles difficultés d'adaptation aux économies d'autres psys. Ils décident, en eonséquence, que cette aide sera sour,43c à des normes déterminées, qu'elle sera modérée dans son cbif . JUicieuse dans son application et limitée dans sa durée, et qu'elle de-Ta htre également compatible avec les dispositions de la précen-e Charte qui s'y rapportent* E/PC/T/C.I & II/15 French Page4 2. Si un Etat iembre désire, dans lVintèrtt de son programme de dévelorpapent, avoir recours à des fbrmes d'aide gouvernementale qui peuvent être contraires avec l'une qucloonque des obligations qui lui incumbent er. vertu de la Charte, il en informera l'Organization et lui ocmuniquera tous les a-gurents en faveur de là conclusion selon laquolle l'industrie en question peut à juste titre. recevoir une aide spéciale L'Organisation étudiera alors le cas, en pregnant pour base les disposi- tions du present chapitre, ainsi que tout critère qu'elle pourra fixer, en tenant compte du niveau de développement économique atteint par l'Etat Membre demandeur et les possibilités 'u rendement final de l'indus- trie en question et elle adressera a l'Etat lembre des reoc andations sur la former que cette aide devrait prendre. Si l'aide reco=mandée est en opposition avec toute obligation incombant à l'wtat Membre en vertu de la présente Charte, 19Organisation pourra, avec l'approbation des Etats lMeIres dont le co=crce serait essentiellement touché, délier portiel2lcment des obligations en question l'Etai Membre demandeur, Toute dérogation de ce genre sera accordée pour une période déterminée p=r l'Organisation, sous reserve, après exaLlen.

GATT Library

dw582bs5980

Correction of Symbol

United Nations Economic and Social Council, October 17, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

17/10/1946

official documents

E/PC/T/3, E/PC/T/1-4, and E/PC/T/W/13,14

https://exhibits.stanford.edu/gatt/catalog/dw582bs5980

dw582bs5980_92290009.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies LONDON CONSEIL E/PC/T/3. 17 October 1946 ECONOMIQUE ORIGINAL: ENGLISH ET SOCIAL PREPATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT CORRECTIONT OF SYMBOL The attached. document, entitled "U.S. PROPOSALS ON RULES OF PROCEDURE", should bear the synbol "E/PC/T/3, as above. No working paper has yet been issued under the symbol "E/PC/T/W,13".

GATT Library

hm755sn7548

Corrigenda du Document E/PC/T/C.I II/6. Procès-verbal de la séance de la Commission mixte (Ière et 2ème Commission)

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council, Commission Préparatoire de la Conférence Internationale du Commerce et de l'Emploi, and Preparatory Commission of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C .I II/6 Corr.1 and E/PC/T/C.I/15-18-E/PC/T/C.I/1-12

https://exhibits.stanford.edu/gatt/catalog/hm755sn7548

hm755sn7548_92290373.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C .I & II/6 Corr. 1 28 October 1946 French ORIGINAL : ENGLISH COMMISSION PREPARATOIRE DE LA CONFERENCE INTERNATIONALE DU COMMERCE ET DE L'EMPLOI. Corrigenda du Document E/PC/T/C.I & II/6. Procès-verbal de la séance de la Commission mixte (Ière et 2ème Commission) première page, première ligne, lire : DOREMAN au lieu de DORFMANN et, ligne treis, lire : HILGERDT au lieu de HILGART

GATT Library

gm539jg0998

Corrigendum au Document E/PC/T/C. I II/3. Procès-Verbal de la première réunion commune de la lère et 2ème Commission

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council, Commission Préparatoire de la Conférence Internationale du Commerce et de l'Emploi, and Preparatory Commission of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.I II/3 Corr. 1 and E/PC/T/C.I/15-18-E/PC/T/C.I/1-12

https://exhibits.stanford.edu/gatt/catalog/gm539jg0998

gm539jg0998_92290367.xml

GATT_156

Nations Unies AND SOCIAL COUNCIL RESTRICTED LONDON E/PC/T/C.I & II/3 Corr. 1 28 October 1946 French ORIGINAL: ENGLISH COMMISSION PREPARATOIRE DE LA. CONFERENCE INTERNATIONALE DU COMMERCE ET DE L'EMPLOI Corrigendum au Document E/PC/T/C. I & II/3. Procès-Verbal de la première réunion commune de la lère et 2ème Commission Page 1, 2ème et 6ème paragraphes substituer M. HEIMORE à M. MARQUAND CONSEIL ECONOMIQUE ET SOCIAL

GATT Library

xw794br0090

Corrigendum au Document E/PC/T/II/12 : IIe Commission Comite Technique

United Nations Economic and Social Council, October 26, 1946

United Nations. Economic and Social Council, Commission Préparatoire de la Conférence Internationale du Commerce et de l'Emploi, and Preparatory Commission of the International Conference on Trade and Employment

26/10/1946

official documents

E/PC/T/C.II/12/Corr.1 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/xw794br0090

xw794br0090_90210219.xml

GATT_156

United Nations Nations Unies RESTRICTED LONDON E/PC/T/C.II/12/Corr.1 ECONOMIC CONSEIL 26 October 1946 AND ECONOMIQUE French SOCIAL COUNCIL ET SOCIAL COMMISSION PREPARATOIRE DE LA CONFERENCE INTERNATIONALE DU COMMERCE ET DE L'EMPLOI Corrigendum au document E/PC/T/II/12 IIe COMMISSION COMITE TECHNIQUE A2 - Article 9 de la Charte - Taxes Interieures Page 1, 3e ligne du texte francais, remplacer les mots: "calculés à de forfaits", par les mots: "sure la base de taux convenus". RESTRICTED LONDON E/PC/T/C.II/12 Corr.1 26 October 1946 ORIGINAL: ENGLISH Corrigendum to E/PC/T/II/12 COMMITTEE II TECHNICAL SUB-COMMITTEE A2 - ARTICLE 9 of the Charter - Internal Taxes. Page 1, line 3 of the English text Delete: "calculated with the aid of forfeits or ....." and substitute: "on the basis of agreed amounts or of ....."

GATT Library

ky452cz8334

Corrigendum to Document E/PC/T/2 - Suggested Rules of Procedure

United Nations Economic and Social Council, October 17, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

17/10/1946

official documents

E/PC/T.2 Corr.2, E/PC/T/1-4, and E/PC/T/W/13,14

https://exhibits.stanford.edu/gatt/catalog/ky452cz8334

ky452cz8334_92290007.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL LONDON TrdTf~~~~~~~~TTg 2E/PC/T.2 Corr.2 ECONOMIQUE 17 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL COMMERENCE ON TRADE AND EMPLOYMENT CORRIGENDUM TO DOCUMENT E/PC/T/2 - SUGGESTED RULES OF PROCEDURE 1. At the Second Preparatory Committee Executive Session held on 16 October, 1946 rules were adopted to enable observers from Members of the United Nations, not represented on the Preparatory Committee, to attend meetings, and to enable representatives of specialized inter-governmental agencies to attend meetings and, in certain circumstances, to participate. 2. Consequential upon the adoption of these rules an amendment to Rule 47 of the Rules of Procedure becomes necessary. It is suggested, therefore, that this Rule should be redrafted as follows: Rule 47 Verbatim records of public meetings shall be available to the public. The verbatim records of private meetings shall be available to all Members of the United Nations and to specialized inter-governmental agencies.

GATT Library

vb840kf8837

Corrigendum to Document E/PC/T/2 - Suggested Rules of Procedure

United Nations Economic and Social Council, October 15, 1946

United Nations. Economic and Social Council

15/10/1946

official documents

E/PC/T/2 Corr.1, E/PC/T/1-4, and E/PC/T/W/13,14

https://exhibits.stanford.edu/gatt/catalog/vb840kf8837

vb840kf8837_92290006.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL E/PC/T/2 Corr.1 AND ECONOMIQUE ORIGINAL ENGLISH SOCIAL COUNCIL ET SOCIAL COTTIGENDUM TO DOCUMENT E/PC/T/2 - SUGGESTED RULES OF PROCEDURE 1. The following corrections of typographical errors should be made in the suggested Rules of Procedure: (a) the word "Vice-Chairman" in the second sentence of Rule 6 should be changed to "Vice-Charmen"; (b) the article "a" should be inserted before the word "Chairman" in Rule 7. 2. It is suggested that Rule 57 be amended by adding the words "by agreement" after the word "may". 3. Incertion of the following rule after Rule 53 is suggested: "A chairman of a committee or a vice-chairman acting as chairman shall participate in the meetings of the committee as such and not as the representative of a member. The committee shall permit another representative to represent that member in the meetings of the committee and to exercise the member's right of vote".

GATT Library

fy608zk1563

Corrigendum to Document E/PC/T/C.I/7 : Summary Record of Second Meeting (Part Two)

United Nations Economic and Social Council, October 24, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

24/10/1946

official documents

E/PC/T/C.I/7.Corr.1 and E/PC/T/C. I/1-15

https://exhibits.stanford.edu/gatt/catalog/fy608zk1563

fy608zk1563_90210187.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON E/PC/T/C.I/7.Corr.1. AND ECONOMIQUE 24 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT CORRIGENDUM TO DOCUMENT E/PC/T/C.I/7 SUMMARY RECORD OF SECOND MEETING (PART TWO) 1. Pages 2 and 3. The report of the speech of Mr. MEADE (United Kingdom) is amended to read as follows: "Mr. MEADE (United Kingdom) said that his Government was committed to undertake measures for the purpose of maintaining full employment - by which he meant "a high and stable level of demand for goods and services in general" - and would accept an international commitment to this effect. The United Kingdom was in a very special and peculiar position. Though a great depression within its borders would adversely affect many other countries, the United Kingdom would itself be very vulnerable to a world depression. To provide against the possibility of an international policy of full employment not being competely successful, certain safeguards would be necessary. As the Canadian Delegate had indicated, some such safeguards already existed. For example: (a) Control of capital transfers. (b) A country's right under the International Monetary Fund to depreciate its currency if it were in a fundamental disequilibrium, a right which would not be available to a country whose balance of payments was favourable. (c) Restrictions on imports to restore equilibrium in the balance of payments as provided in the proposals for an international Trade Organization. LONDON E/PC/T/C.I/7.Corr.1. Page 2 (d) Scarce currency clause of the Articles of Agreement of the International Monetary Fund to which reference is also made in the United States proposals. The additional safeguards suggested by the Australian Delegate should be carefully considered. Attention should also be paid to these elements of international action directly aimed at full employ- ment and in this connection the following possible measures might be examined: (i) Positive action in commodity policy to stabilize the demand for primary products. (ii) Possibility of timing of international arrangements for economic development in the interests of employment policy. (iii) International synchronization of internal credit policies. (iv) Use of international resources to enable countries adversely affected by depressions elsewhere to maintain their demand for foreign goods and services." 2. Page 3 The name of the Delegate for the Union of South Africa is Mr. STEYN.

GATT Library

zc648ym0659

Corrigendum to Document E/PC/T/C.II/12/Corr.1

United Nations Economic and Social Council, November 5, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

05/11/1946

official documents

E/PC/T/C.II/12/Corr.2 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/zc648ym0659

zc648ym0659_90210220.xml

GATT_156

United Nations Nations Unies ECONOMIC AND SOCIAL COUNCIL CONSEIL ECONOMIQUE ET SOCIAL RESTRICTED LONDON E/PC/T/C.II/12/Corr.2 5 November 1946 ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONL CONFERENCE ON TRADE AND EMPLOYMENT CORRIGENDUM TO DOCUMENT E/PC/T/C.II/12/Corr.1 The above Corrigendum should be cancelled and replaced by the following text: COMMITTEE II TECHNICAL SUB-COMMITTEE A2 - Article 9 of the Charter - Internal Taxes and substitute: "on the basis of agreed amounts or ...". Page 1, line 3 of the Eaglish Text Delete: "calculated with the aid of forfeits or ...."

GATT Library

dc392nh5034

Corrigendum to document E/PC/T/C.V/30

United Nations Economic and Social Council, November 23, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

23/11/1946

official documents

E/PC/T/C.V/30.Corr.1. and E/PC/T/C.V/19-31

https://exhibits.stanford.edu/gatt/catalog/dc392nh5034

dc392nh5034_90220127.xml

GATT_156

. . I United Nations ECONOMC AND SOCAL COUNCIL Nations Unies CONSEIL ECONOMIQUE ET SOCA RESTRICTED LNDON E/PC/er.T1/C.V/30. o . 23 November 1946 ORIGINA: ENGLSSH PEMMITPEE ARFTORY COLERNATIONAL At'NFERENCEO'THU ADINCO1ON TRZ ZDEN 'LOYTT Corrigendum to document E/PC/T/C.V/30 Delete third loine frm the end on page 7 to the second line on page 8, inclusive, and inserto the fllowing:- "Delegates would have a better appreciation ofn the Uited Kingdom proposals, as thedy stoo and as conditioned by the suggestions of certain other Delegations, if they could be translated into such concremte ters. The afternoon' s discussion had shown that certain criticisms of the arguments which had been advanced in their favogur, e.. the analogy owf the eighted voting adoprted fo the International Monetary Fund and the International Bank, were not well founded."

GATT Library

kr288nh4730

Corrigendum to E/PC/T/C II/PV/2. Committee II : Verbatim Report of the Second Meeting held on Wednesday 23 October 1946

October 26, 1946

Preparatory Committee of the International Conference on Trade and Employment

26/10/1946

official documents

E/PC/T/C.II/PV/2/Corr.1 and E/PC/T/C.II/PV/1-4/CORR.1

https://exhibits.stanford.edu/gatt/catalog/kr288nh4730

kr288nh4730_90220003.xml

GATT_156

RESTRICTED LONDON E/PC/T/C.II/PV/2/Corr.1 26 October 1946 ORIGINAL: ENGLISH. PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT Corrigendum to E/PC/T/C II/PV/2. COMMITTEE II. Verbatim Report of the Second Meeting held on Wednesday 23 October 1946. Page 33, lines 20 - 29. The fourth sentence of the third paragraph should read : "Certainly we shall have amendments to propose, and this morning quite a number of those who spoke indicated that they would have amendments to propose; but it does not follow that there will not be whole sections of the United States draft in its present form which will pass through the Committee stage, perhaps unamended; they may be almost entirely unobjectionable in form and in substance; and to the extent that they are and to the extent that we are able to agree on them, we are to that extent writing sections of some thing that might ultimately be a charter." Page 64. lines 20 and 21: Delete "the adoption of" after the word "cases"; Page 64, line 24 : Delete "adoption of a" before the word "type."

GATT Library

rk888tv2687

Corrigendum to E/PC/T/C.II/3. Committee II. : Summary Record of Meetings: Second Meeting held on Wednesday, 23 October 1946

United Nations ECONOMIC AND Social Council, October 25, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

25/10/1946

official documents

E/PC/T/C.II/3.Corr.1 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/rk888tv2687

rk888tv2687_90210205.xml

GATT_156

United Nations ECONOMIC AND SOCIAL COUNCIL Nations Unies RESTRICTED LONDON CONSEIL E/PC/T/C.II/3 .Corr. 1 ECONOMIQUE 25 October 1946 ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATION CONFERENCE ON TRADE AND EMPLOYMENT Corrigendum to E/PC/T/C.II/3 Committee II Summary Record of Meetings: Second Meeting held on Wednesday, 23 October 1946 Page 4, lines 4 - 6 from end. The fourth sentence of the summary of Mr. Tung's remarks should read: "He suggested that a country might be considered fairly industrialized and its transition accomplished when fifty per cent of its population are employed in modern industrial enterprises of production and distribution or when fifty per cent of its national income are derived from modern enterprises of industry, trading and finance". Page 9 (last paragraph). The name of the delegate for Lebanon :!a ~~~L~~DIMBCHKIE. ~ ~

GATT Library

kt434st1817

Corrigendum to E/PC/T/C.II/3. Committee II. Summary record of Meetings. : Second Meeting held on Wednesday, 23 October 1946

United Nations Economic and Social Council, October 28, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

28/10/1946

official documents

E/PC/T/C.II/3.Corr.3 and E/PC/T/C. II/1-23

https://exhibits.stanford.edu/gatt/catalog/kt434st1817

kt434st1817_90210207.xml

GATT_156

United Nations Nations Unies RESTRICTED ECONOMIC CONSEIL LONDON AND ECONOMIQUE E/PC/T/C.II/3. Corr.3 28 October 1946 SOCIAL COUNCIL ET SOCIAL ORIGINAL: ENGLISH PREPARATORY COMMITTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT Corrigendum to E/PC/T/C.II/3 Committee II Summary Record of Meetings Second Meeting held on Wednesday, 23 October 1946 Page 4, line 6 from end: Insert "wage-earning" before the word "population".

GATT Library

tf127wh1708

Corrigendum to E/PC/T/C.II/38

United Nations Economic and Social Council, November 5, 1946

United Nations. Economic and Social Council and Preparatory Committee of the International Conference on Trade and Employment

05/11/1946

official documents

E/PC/T/C.II/38/Corr.1 and E/PC/T/C. II/24-38/CORR. 1

https://exhibits.stanford.edu/gatt/catalog/tf127wh1708

tf127wh1708_90210247.xml

GATT_156

United Nations Nations Unies ECONOMIC CONSEIL RESTRICTED LONDON AND ECONOMIQUE E/PC/T/C.II/38/Corr.1 SOCIAL COUNCIL ET SOCIAL 5 November 1946 ORIGINAL : ENGLISH PREPARATORY COMMlTTEE OF THE INTERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT CORRIGENDUM TO E/PC/T/C.II/38 On page 8, second paragraph, read: He drew attention to the point that the last sentence of paragraph 4 of the Article, While requiring only the "substantial" elimination of internal restrictions between territories forming part of the union, would apparently require complete uniformity in the external tariff etc. of the union. He felt that here again it might be advisable to stipulate only for "substantial" uniformity; since there were cases in which territories forming, for practical purposes, parts of a customs union charged rather different revenue import duties, though their protective duties were identical.