Foreign Relations of the United States, 1948, Western Europe, Volume III

840.50 Recovery/4–1348: Telegram

The Acting Secretary of State to the Embassy in France

secret
us urgent
niact

Washington, April 13, 1948—9 p. m.

1212. Cere 12. 1. Changes described in Rece 56¹ to agreement quoted Rece 42¹ satisfactory.

2. Re non-discrimination and MFN it was believed Jackson–Labouisse phone talk April 9 covered points Rece 47 and 53.²

3. Omission specific ref. non-discrimination acceptable in view present text Art. 6 (Rece 56) for reasons cited fourth para Rece 53.

4. Re MFN for occupied areas: (a) Brit and French have in fact opposed agreeing at every stage though not on merits, including at Geneva, Havana re ITO and GATT³ and in London. Every postponement narrows area for negotiated solution and forces us into position of insisting on inclusion in bilaterals. Dept committed to making strongest efforts to obtain agreement to non-discrimination re trade occupied areas on reciprocal basis since US would find most difficult to assist countries discriminating against trade of areas largely dependent on US support.

(b) Issue goes far beyond occupied areas as it represents fundamental question of type of commercial policy CEEC countries will pursue and is test of sincerity their belief in general principles expressed in CEEC document and of extent to which they are willing to implement those principles. This is not essentially a GATT problem nor can it be solved through GATT since most ERP countries are not parties to GATT. There was no understanding on our part that MFN occupied areas issue had been postponed to July meeting GATT countries.

(c) You should make clear to Brit French and others that failure to include MFN in multilateral agreement will not enable them to escape MFN obligation to occupied areas for we intend to insist strongly on inclusion in bilaterals.

(d) Re Lintott’s point that MFN provision would mean that GATT countries would have to extend GATT concessions to non-GATT ERP countries without receiveing concessions in return. This point has some validity. Concessions at Geneva, however, were generally made on basis principal supplier rule, that is, country A made concessions on those commodities of which country B was principal supplier to country A. To extent that concessions were made on this basis, significance of concessions to non-GATT countries which were not principal suppliers of commodities in question is reduced. GATT countries, even if they should extend such concessions to non-GATT countries, retain bargaining power vis-à-vis latter in future tariff negotiations since latter would be interested in obtaining concessions on items of which they are principal supplier. U.S. practice is to generalize all concessions made in trade agreements to countries not party to agreement provided latter do not discriminate against U.S. U.S. has generalized to non-GATT countries concessions it has put into effect under GATT. There is nothing in GATT to prohibit such generalization of concessions to non-GATT countries.

5. If efforts to obtain change in agreement fail, make strong effort to have recorded interpretative note like note re 12(B) that Art. 6 means parties accept objective of achieving MFN between all parties as rapidly as possible.

6. If impossible to obtain any action without precluding signing April 16, you should make clear to all that US intends to interpret Art 6 as described in para. 5 above and will judge performance of mutual aid undertakings accordingly.⁴

Lovett

1. Not printed.
1. Not printed.
2. Rece 47, not printed, but telegram 53 is 1813 from Paris, April 7, 1948, p. 413.
3. For documentation regarding the United States position at these conferences, see Foreign Relations, 1947, volume i , and ibid., 1948, volume i.
4. Ambassador Caffery reported in telegram 1964 from Paris (Rece 60), April 14, 1948, not printed, that the substance of part four of Cere 10 had been communicated to CEEC representatives Lintott, Baraduc, and Spierenburg, who continued to maintain their previous arguments. They proposed the inclusion in the CEEC minutes of a text which, in effect, supported the principle of MFN trade, but which in reality postponed its achievement. Caffery concluded that: “inclusion of above text in minutes seems better than nothing and should help to prevent discrimination against Germany which US can, in fact, prevent by following policy outlined in Cere 12 paragraph six.” (840.50 Recovery/4–1448)

   The relevant interpretative note inscribed in the minutes of the Working Party, and “noted” by the Committee of Alternates in its final meeting on April 15 (C.E.E.C. document Minutes/Alternates/7, enclosure to Paris despatch 599, April 22, 840.50 Recovery/4–2248), reads:

   “1. Interpretative Note on Articles 4 and 6 (18th Meeting)

   “In discussion on the United States proposal for an additional clause in Article 6 dealing with most favoured nation treatment, the members of the Working Party agreed that the intention of Articles 4 and 6 of the Convention is to achieve as soon as possible amongst themselves (and also in relation to non-participating countries) a multilateral system of trade on most favoured nation basis consistent with the provisions of the Havana Charter. Taking into account the present position of the various participating countries in relation to the G.A.T.T. and the Charter, and other circumstances, a complete achievement of this objective will not be immediately possible but the members of the Working Party agreed that Article 4 provides for the immediate object of maximising trade between the participating countries, on a basis of full and equal co-operation between all the Members of the Organisation.” (C.E.E.C. document C.E.E.C. (2)44 (Revise), Paris, 15th April 1948, enclosure 16 to Paris despatch No. 560, April 16, 1948, 840.50 Recovery/4–1648).