840.50/4–2145: Telegram

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

4118. ReEmb’s 1376, February 8 and preceding messages in the series. Yesterday Penrose discussed informally with Liesching, Eady, Robbins and Shackle some aspects of the draft convention on commercial policy.76 The discussion of agricultural aspects of the subject has been postponed to a date when Fergusson and Steere are able to be present.

We took up as fairly closely connected aspects of the subject the questions of revenue duties, infant industries and defense industries. We expounded again in detail the position in the draft convention with respect to revenue duties and stressed both the wide openings for countries with inadequately developed taxation machinery to raise revenue by such duties and also the provision (article II section 2) against attempts at concealed protectionism under the guise of revenue duties. Finally we strongly pressed the United Kingdom officials to accept these proposals as adequate for revenue needs and not to seek exceptions for revenue purposes in the provisions for reducing existing tariffs and preventing the imposition of new tariffs.
Eady and Liesching asked what would be the procedure for obtaining compliance with article II section 2 and expressed the [Page 34] opinion that a general impairment clause might be invoked to bring complaints [compliance?] regarding actions out of harmony with that article.
The discussion then turned to infant industries. We stressed our preference for the use of subsidies for this purpose rather than tariffs and other protective measures and referred to the openings for raising revenue mentioned in paragraph 1 above, but indicated that if formidable pressure was brought to bear at a trade conference in favor of an infant industry exception in respect of tariffs we might be able to agree to it if adequate safeguards could be established. We considered however (a) that attempts should be made without delay to draft safeguarding provisions for expert examination, and (b) that it would probably be better to hold back such provisions in reserve for use if a strong demand arose for them at the conference.
United Kingdom officials expressed satisfaction at the points in the first part of the preceding paragraph but strong opposition to point (b). They maintain that India and other countries in an early stage of industrialization would be alienated at the outset if no provision were put forward for an exception of infant industries in the initial tariff proposals, and after considerable discussion they were still unwilling to modify their view. We do not think their position is sound and will return to it in subsequent discussions but we wish to point out that the question should be examined both in Washington and London, not simply in relation to a draft convention but also and perhaps in the first place, in relation to a draft statement of principles which should form the basis of the agenda of a future United Nations conference. Since such a statement would be less detailed than the draft convention which would have to be worked out subsequently, there may be room for some compromise between our view and that of the United Kingdom. However, though the present attitude of United Kingdom officials is unfavorable we suggest that it would be advisable to press them at least to accept among such principles a statement recommending the use of subsidies wherever practicable instead of tariffs for infant industries.
We questioned the United Kingdom officials closely on their conception of the precise form in which an infant industry exception to the tariff provisions could be drawn. They referred to the practice in some countries of requiring industrial applicants for tariffs to justify their claims to infant industry protection before a tariff board but they consider that it would be impracticable to apply this procedure internationally or to require the initial agreement of the international trade organization to each case of infant industry protection.
After a long discussion in which it was clear that their views were very tentative, it appeared that their preference is for (a) the specification [Page 35] in the convention of general rules to govern infant industry protection, and (b) provision for appeals to the ITO77 if the rules appear to be infringed in particular cases.
As to the rules the most concrete suggestions were that there should be a “tapering” formula providing for tariff protection over a limited period not to exceed a fixed ceiling which would be lowered in successive stages during that period, and that the criterion of eligibility for such protection should be fixed in terms of the percentage of supplies coming on the domestic market from domestic producers. For example an industry might qualify as an “infant” if it produced no more than X per cent of domestic supplies. This procedure would of course leave the way open for temporary protection of many infants with little or no prospects of survival to maturity. The only condition would be that the industry should not be too grown up when it applied for protection. This was acknowledged by the United Kingdom officials. They consider that it would be administratively impracticable to lay down rules for discriminating among the prospects of claimants to the status of infancy and they regard a considerable infant mortality rate as unavoidable.
The main function of the ITO would be to determine whether there was any infringement of the formula in respect to the height and period of protection.
The position of the United Kingdom officials on defense industries was encouraging on the whole. They appear unwilling to leave the subject to be covered only by our proposed provision for general exception in article 28 paragraph (h) of the draft convention.78 Liesching thinks that that provision would be interpreted by other countries as referring merely to cases of economic sanctions. But they all expressed themselves vigorously against any wide definition of defense industries and emphasized the danger that the flood gates would be opened unless defense industry protection were confined to a very narrow range of products. Eady spoke strongly in favor of restricting defense industries to those producing specific armament products such as guns, armor plating and tanks. He thinks it would be disastrous to allow defense protection to be applied to the engineering industry as a whole, or even to the production of trucks. Robbins and Eady consider that adequate infant industry provisions will facilitate the acceptance of a narrow definition of defense industries. Liesching said that United Kingdom officials have not yet obtained the views of the services on this budget.
A further discussion will take place next Tuesday.79 Please bring this message to the attention of Hawkins.
  1. Draft Multilateral Convention on Commercial Policy, October 1944; not printed.
  2. Reference is to the proposed International Trade Organization.
  3. The section of the Draft Convention referred to reads: “Nothing in this Convention shall be construed to prevent the adoption or enforcement of measures … (h) undertaken in pursuance of obligations for the maintenance of international peace and security. …”
  4. April 24. The next discussion actually took place on April 26; see telegram 4319, April 27, 9 p.m., from London, p. 41.