840.50/2–145: Telegram

The Ambassador in the United Kingdom ( Winant ) to the Secretary of State

1109. Hawkins and Penrose had a conversation yesterday with Liesching, Eady, Robbins, Shackle, and Miss Kilroy (a senior Board of Trade official) on the United Kingdom position on cartels.

The United Kingdom officials summarized the present position of United Kingdom official thought on the subject as follows. For some years the United Kingdom Government has encouraged large units in the interests of efficiency. This process will have to continue but it is now recognized that it carries with it dangers of monopolistic developments. Government policy has been stated in paragraph 54 of the White Paper on employment policy, 6527 of 1944, and legislation will be necessary to implement that statement. Such legislation will involve inquiries into the operations of British firms involved in cartels. It is doubtful whether time can be found for the legislation in the remaining life of the present Parliament. An investigation is being made into the patents and designs acts.
There has been a real change of opinion on the subject and in policy in Great Britain. It is now generally agreed that the dominating aim must be expansion of trade and that restrictive cartels hamper trade. It is also agreed that restrictions that are international in scope are a subject in themselves and go beyond questions of domestic monopoly.
However, United Kingdom officials believe that the time is not ripe for drastic and inflexible treatment. Their impression is that United States legislation on monopoly is difficult to administer even after long experience and has been toned down by considerations based on practices. They think that attempts at world application of such legislation would be difficult and dangerous and that in the present stage of international development an experimental approach must be adopted.
They favor the establishment of machinery for international consultation within an international trade organization. This consultative body would deal with complaints that the general purposes of [Page 18] the commercial convention were being frustrated by restrictive operations of private interests. On request it would ask governments to make investigations of operations of firms within their territories that might be parties to restrictive measures of international scope. It would not have judiciary powers and there would be no formal commitments to accept rulings from it but there would be mutual agreement and obligation to take such measures as are practicable to maintain the purposes of the convention. There would be no code of rules laid down a priori. Each case would be considered on its own merits. Precedents would be built up which could be appealed to. The cardinal sin would be that of frustrating the purposes of the commercial convention and thus hindering the flow of international trade. Investigations would be made in the light of the principles not only of the articles of the convention but also of the preamble, and the object would be to check international practices of private enterprises that would tend to evade these principles.
United Kingdom officials said they were anxious that we should realize that United Kingdom is not so cartel ridden as is popularly supposed in some quarters. They estimate that three-quarters of their exports have not been and are not likely to be subject to any form of restrictive agreements and that only 16 percent were covered by monopoly agreements.
They said that United Kingdom could not consider the establishment of any separate body dealing with international cartels outside the international trade organization and that provisions relating to international cartels as well as those relating to commodity agreements should be included within the general commercial convention and not made the subject of a separate convention.
We criticized the United Kingdom position on a number of points and urged further consideration of points set out in tentative United States official papers. However, as this would be familiar ground we have confined our message to an elucidation of the present position of United Kingdom officials.