560.AL/5–1149: Telegram

The Chairman of the United States Delegation (Willoughby) to the Secretary of State

secret
urgent

Unnumbered. For CP only. Following is text of memo received from South African delegation. Observe utmost secrecy in handling in [Page 674]accordance with our unnumbered telegram May 7. Repeat to Cape-town if Department thinks desirable.

  • “1. Union Government propose publish 15 May, or soonest thereafter, their regulations announcing details new scheme for physical import control which is to be introduced as from 30 June, next.
  • “2. These regulations will provide, briefly, that after 30 June, no goods may be imported into Union without a permit issued in terms new scheme. Exceptions in respect of this rule will be allowed for:
    • “(1) Sterling goods shipped before 31 May and
    • “(2) non-sterling goods ordered under existing non-sterling quotas and in respect of which acceptance orders by suppliers was confirmed to Union banks by 30 June.
  • “3. Under new scheme, it proposed compile an estimated South Africa’s earnings hard currency after taking into account any payments to be made hard currency areas in respect of invisible items. To arrive this figure, we would take South Africa’s total earnings hard currency from visible and invisible exports plus its current gold production and deduct therefrom any portion its gold output which may be needed to maintain its statutory reserves as well as certain figure which to be set aside to cover South Africa’s purchases from hard currency countries goods other than those referred to in paragraph 4 below as category A goods.
  • “4. This amount ‘hard currency’, as calculated last paragraph, will be distributed between various classes essential goods (category B goods) and licenses will be issued for import of such goods on fully nondiscriminating basis from any source whatsoever. It anticipated that both hard currency and sterling and soft currency countries will secure share of category A business.
  • “5. Goods outside category A will formally be prohibited, but this restriction will be relaxed on following lines:
    • “(a) Imports from hard currency sources will be permitted to extent of amount hard currency specifically set aside for such purchases out of total calculated in terms paragraph 3 above. (Figure set aside will be adequate enable hard currency exporters of category B goods keep their goods before South African consuming public).
    • “(b) Imports from sterling and soft currency countries will be permitted to extent sterling and soft currency resources available Union after taking into account any payments to be made to sterling and soft currency countries in respect of invisible items.
    • “(c) Nonessential goods maintained prohibited list and completely prohibited from all sources. This restriction, however, will be relaxed in course of time to extent that South Africa’s balance of payments will allow Union Government to do so.
  • “6. Payment for all purchases from hard currency countries will, naturally, be made in appropriate hard currency which will be obtained, as may be necessary, by sale gold. Not intended settlement individual transactions in Category A goods from sterling and soft currency countries should be made in gold, but, since whole of accruals sterling and soft currencies to South Africa will be absorbed by imports [Page 675]in terms paragraph 5 (b) above, any amounts required Category A purchases in such countries will necessarily have to be obtained by sales gold. Assuming, therefore, no abnormal capital movements take place, effect will be same as if individual transactions were settled in gold.
  • “7. Anticipated that initially soft currency countries will include all countries outside Western Hemisphere with exception of Switzerland and Belgium. Position Belgium is, however, still being examined.
  • “8. Proposed take action indicated paragraph 5 in accordance provisions of Annex J GATT.”1

Since above memo received Working Party held secret meeting at which South Africa without reference to memo, outlined verbally and very briefly to Working Party substance of paragraphs 1, 2, 3, 4, 5 (a) and 5(b), omitting reference to “token import” provisions in paragraph 5 (a). Stated would present further information soonest though implied this might not be before publication. Statement also implied that memo may not be exact terms of restrictions. Working Party will meet this p. m. to state views of delegates and contracting parties will meet secretly tomorrow. Information in Deptel 87 most useful and USDel will take position based thereon. Also will express doubts about usefulness of prior consultation based on fragmentary information (i.e., the information given to the Working Party orally by South Africa). Further comment follows.

Willoughby
  1. On March 24, 1948, at their First Session, Habana, Cuba, the Contracting Parties concluded a Special Protocol which modified Article XIV of the General Agreement (see footnote 5, p. 652) and added an Annex J to the original Agreement, with an “Interpretative Note” on Article XIV (62 Stat. (pt. 2) 2000 or TIAS No. 1764).