Foreign Relations of the United States, 1949, National Security Affairs, Foreign Economic Policy, Volume I

560.AL/1–2749

The Chargé in the United Kingdom (Holmes) to the Secretary of State

restricted

London, January 27, 1949.

No. 139

Sir: I have the honor to refer to the Department’s Circular Airgram dated December 20, 1948,¹ requesting current reports on any steps taken by the United Kingdom Government toward acceptance of the ITO Charter.²

Reduced to its crude essentials the British position, as conveyed to me informally on more than one occasion by the President of the Board of Trade,³ maintains that the United Kingdom will take action on the Charter as soon as the United States has accepted it. Only yesterday Mr. Wilson repeated this, adding that any British measure would certainly be passed by Parliament, even if a three-line whip were necessary.

Officials of the Board of Trade, with whom I discussed the matter this afternoon, expressed this basic intention in somewhat more involved terms. Stephen Holmes⁴ read to me from his statement before the Havana Conference at the time of British agreement to sign it, in which he indicated that he was authorized to sign the draft Charter but that the ability of British Ministers to recommend its acceptance by Parliament would depend on future developments, including some circumstances beyond British control, particularly the balance of payments position and Britain’s trading position with other countries. (In other words, no ECA assistance,⁵ no ITO Charter.) The subject has also been mentioned in Parliament, when the President of the Board of Trade indicated that the question of accepting the Charter had not been considered by Ministers since the end of the Havana Conference, but that if circumstances were favorable a recommendation might be made to Parliament at some future date.

With Stephen Holmes I discussed the problem of timing, which may be of considerable importance. The Board of Trade would be particularly grateful if the Department could indicate in a general way how it is proposed to fit the Trade Agreements Act⁶ and the Charter legislation into the calendar of the 81st Congress.⁷ Taking into account what we already know of important legislation which will have to be considered, it was my guess that the Charter might be acted upon in late May or early June, especially since the Trade Agreements Act must be passed before June 30 and I should think that the Trade Agreements program and the Charter might have to be considered by Congress at the same time. If American action on the Charter were taken in June the British would then bring it up promptly in London, where Parliament will be in session throughout July.

In general the Board of Trade officials feel that we should proceed more or less in unison with the Charter legislation, although the British must be a step behind. It is understood that in the United States an act of Congress will be necessary, in view of Charter provisions which require some modification of existing legislation. In Great Britain no legislation will be necessary and it is contemplated that action will be taken by presenting a resolution to both Houses of Parliament, followed by a debate lasting not more than two days in each House. If it would assist the Department in its relations with Congress the British might be able to time their action so that Congress would have assurance of a British intention to act promptly. For example, as soon as the American legislation is reported out of committee the British might introduce their resolution, although the debate and the approval would have to be timed to follow definitive favorable action by Congress.

Stephen Holmes indicated that the debate in Parliament would inevitably be lively, particularly on the question of preferences, since there is a hard core of Conservative opposition to the Charter commitment limiting the right to grant preferences. He also suggested that quantitative restrictions for undeveloped territories might be an issue likely to be aired. He doubted much British interest in the investment article.

Another question arising out of the Charter is its relationship with the Financial Agreement.⁸ I indicated that we have been having some inter-Departmental discussions about this, and that there is some opinion in Washington which favors automatic supersession of Article 9 by the relevant Charter provisions, in order to avoid opening up the Financial Agreement to Congressional action.⁹ Holmes questioned the legal basis for this, although he recognized the desirability of handling the problem in this way. I told him that we have not yet taken a definite position in the matter, and that the problem is now under examination by legal experts in the Treasury and in the Department. The British would very much like to know the result promptly, and hope that they will be informed through their Embassy in Washington.

It would be appreciated if the Department would forward its comments on the substance of this despatch, with particular reference to the question of timing, in order that the Board of Trade may be prepared to take appropriate action in good season.

Respectfully yours,

For the Chargé d’Affaires ad interim:

Don C. Bliss

Counselor for Economic Affairs

1. Not printed.
2. For documentation on the formulation of the Charter for the International Trade Organization at the United Nations Conference on Trade and Employment which met at Habana, Cuba, November 21, 1947–March 24, 1948, see Foreign Relations, 1948, vol. i, Part 2, pp. 802 ff. For texts of the Habana Charter, see United Nations Doc. ICITO/1/4 (a document of the Interim Commission of the International Trade Organization set up by the Final Act of the Habana Conference), or Department of State Publication 3117 (Commercial Policy Series 113), 1948, entitled Havana Charter for an International Trade Organization and Final Act and Related Documents (Washington: Government Printing Office, 1948).
3. Harold Wilson.
4. Stephen L. Holmes, Second Secretary, British Board of Trade.
5. For documentation regarding U.S. assistance to the OEEC countries through the Economic Cooperation Administration (ECA), see vol. iii, pp. 352 ff.
6. The Trade Agreements Extension Act of 1948 was due to expire June 30, 1949. A renewal of the Presidential authority to negotiate trade agreements was considered by the Administration to be a matter of priority, in terms of the conduct of U.S. commercial policy within the multilateral negotiating framework of the General Agreement on Tariffs and Trade.
7. The U.S. Executive had chosen not to submit the Habana Charter to the Congress in 1948 for several reasons, including the setting of a higher priority on other legislation considered to be more urgent, such as the European Recovery Program. Also a difficult political climate obtained in the second session of the 80th Congress.
8. For documentation on the negotiations at Washington leading to the conclusion of the Anglo-American Financial Agreement of December 6, 1945, see Foreign Relations, 1945, vol. vi, pp. 1 ff.; for text see 60 Stat. (pt. 2) 1841, or TIAS No. 1545.
9. Section 9 of the Financial Agreement, entitled “Import Arrangements”, provided that “If either the Government of the United States or the Government of the United Kingdom imposes or maintains quantitative import restrictions, such restrictions shall be administered on a basis which does not discriminate against imports from the other country in respect of any product.…” ( ibid., pp. 1843 and 1844) This had the effect in 1946–1948 of freeing U.S. trade from British discriminatory restrictions but at the same time of making more difficult Britain’s export and foreign exchange problems. Relevant provisions of the Habana Charter would permit discrimination under certain circumstances, for which the British trade situation seemed to qualify in 1949.