Foreign Relations of the United States, 1946, General; the United Nations, Volume I

Lot 122: Box 22

Executive Committee on Economic Foreign Policy Document D–70/46, Washington, July 25, 1946

Washington, July 25, 1946

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Chapter VI

Intergovernmental Commodity Arrangements

Article 41

[General statement regarding intergovernmental commodity arrangements]¹

The Members recognize that in the relationship between production and consumption of some primary commodities there may arise special difficulties different in character from those which generally exist in the case of manufactured goods and that these special difficulties, if serious, may have such widespread repercussions as to jeopardize the effectuation of the general policy of economic expansion.

Article 42

[Special commodity studies]

1. Members substantially interested in the production, consumption or trade of a particular commodity shall be entitled, if they consider that special difficulties exist or are expected to arise regarding a commodity, to ask that a study of that commodity be made, and the Organization, if it finds that these representations are well-founded, shall invite the Members principally interested in the production, consumption or trade of that commodity, and may invite non-Members having a similar interest, to appoint representatives to a Study Group to make a study of the commodity.

2. The Study Group shall, in the light of an investigation of the root causes of the problem, promptly report its findings regarding the production, consumption and trade situation for the commodity. If the Study Group finds that special difficulties exist or are expected to arise, it shall make recommendations to the Organization as to how best to deal with such difficulties.

Article 43

[Commodity conferences]

If the Organization concludes that measures not involving the regulation of production, trade or prices are unlikely to operate quickly enough in solving the problem, it may convene an intergovernmental conference for the purpose of framing an intergovernmental commodity agreement for the commodity concerned, in conformance with the principles set forth in Article 45.

Article 44

[Objectives of Intergovernmental Commodity Agreements]

The Members agree that the regulation of production, trade or prices through intergovernmental commodity agreements is justified in the circumstances stated in Article 43 to achieve the following objectives:

1. To enable countries to find solutions to special commodity difficulties without resorting to unilateral action that tends to shift the burden of their problems to other countries.

2. To prevent or alleviate the serious economic problems which may arise when, owing to the difficulties of finding alternative employment, production adjustments cannot be effected by the free play of market forces as rapidly as the circumstances require.

3. To provide, during a transitional period, a framework for the development and consideration of measures, which will have as their purpose economic adjustments designed to promote the expansion of consumption or a shift of resources and manpower out of over-expanded industries into new and productive occupations.

Article 45

[Principles governing the institution of intergovernmental commodity agreements]

Members undertake to adhere to the following principles governing the institution of intergovernmental commodity agreements involving the regulation of production, trade or prices:

1. Any Member having a substantial interest in the production, consumption or trade of any commodity for which an intergovernmental commodity agreement is proposed shall be entitled to participate in the consideration of the proposed agreement. The Organization may invite the participation of non-Member countries having a similar interest.

2. Members agree not to enter into intergovernmental commodity agreements involving the regulation of production, trade or prices, except after:

a. investigation by the Study Group of the root causes of the problem which gave rise to the proposal;

b. determination, under procedures established by the Organization in accordance with paragraph 6 of Article 55, either:

1) that a burdensome surplus of the product concerned has developed or is developing in international trade and such burdensome surplus would, in the absence of specific governmental action to prevent it, be accompanied by widespread distress to small producers accounting for a substantial portion of the total output and that these conditions cannot be corrected by the normal play of competitive forces because, in the case of the product concerned, a substantial reduction of price leads neither to a significant increase in consumption nor to a significant decrease in production; or

2) that widespread unemployment, unrelated to general business conditions, has developed or is developing in respect of the industry concerned and that such unemployment cannot be corrected by the normal play of competitive forces rapidly enough to prevent widespread and undue hardship to workers because, in the case of the industry concerned, (i) a substantial reduction of price does not lead to a significant increase in consumption but leads, instead, to the reduction of employment, and (ii) the resulting unemployment cannot be remedied by normal reemployment processes;

c. formulation and adoption by Members of a program of economic adjustment believed to be adequate to insure substantial progress toward solution of the problem within the time limits of the agreement.

3. Intergovernmental commodity agreements involving the regulation of production, trade or prices in respect of other than primary products shall not be resorted to unless the Organization finds that exceptional circumstances justify such action. Such agreements shall be subject to the principles set forth in this Chapter, and, in addition, to any other requirements which the Organization may establish.

Article 46

[Principles and requirements of intergovernmental commodity agreements]

Members undertake to adhere to the following principles and requirements governing the operation of intergovernmental commodity agreements:

1. Such agreements shall be open initially to accession by any Member on terms no less favorable than those accorded to any other country party thereto and thereafter upon such terms as may be approved by the Organization.

2. Such agreements shall provide for adequate representation of Members substantially interested in the importation or consumption of the commodity.

3. In such agreements countries which are largely dependent for consumption on imports of the commodity involved shall, in determinations made relating to the regulation of prices, trade, stocks, production or other substantive matters, have together a voice equal to that of those largely interested in obtaining export markets for the product.

4. In order to minimize the need for production restriction such agreements shall provide, where practicable, for measures designed to expand world consumption of the commodity, consideration being given to the possible effect on competing products.

5. Such agreements shall, with due regard to the transitional need for preventing serious economic and social dislocation, make appropriate provision to afford increasing opportunities for satisfying world requirements from sources from which such requirements can be supplied most effectively.

6. Under such agreements the treatment with respect to the imports or exports of the commodity accorded by any participating country to any Member shall not, unless otherwise agreed by the Organization, be less favorable than that accorded to any other country.

7. Such agreements shall be designed to assure the availability of supplies adequate at all times for world consumption requirements at reasonable prices.

8. Such agreements shall contain provision for administration by Commodity Councils set up in accordance with the provisions of Article 47, except that in the case of existing agreements this requirement may be waived by the Organization.

9. Such agreements shall not remain initially in effect for more than five years. The renewal of an agreement shall be subject to the principles governing new agreements set forth in Article 45. At the end of each five years of the continuance of such an agreement the Organization shall prepare and publish a review of the operation of the agreement in the light of the principles set forth in Article 45. If the operation is found to have failed substantially to conform to these principles, and particularly if it is found not to have made substantial progress toward a solution of the underlying commodity problem, the Organization shall provide for termination of the agreement or for revision believed adequate to make it effective for that purpose.

10. Members agree that full publicity shall be given to any intergovernmental commodity agreement proposed or concluded, to the statements of considerations and objectives advanced by the proposing Members, to the operation of the agreement, and to the nature and development of measures adopted to correct the underlying situation which gave rise to the agreement.

Article 47

[Commodity Councils]

1. A Commodity Council shall be established under each intergovernmental commodity agreement involving the regulation of production, trade or prices of that commodity.

2. The voting membership of each Commodity Council shall consist of the representatives of the countries participating in the intergovernmental commodity agreement concerned, and voting power shall be determined in such a way that the participating countries which are largely dependent for consumption on imports of the commodity involved shall, in determinations made relating to the regulation of prices, trade, stocks, production or other substantive matters, have together a voice equal to that of those largely interested in obtaining export markets for the product.

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1. Brackets appear throughout Chapter VI in the source text.