International Trade Files, Lot 57D284, Box 111
Extract From Confidential Report by Mr. Henry F. Grady Chairman of the United States Delegation to the Fourth Session of the Contracting Parties to GATT, to the Secretary of State
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10. Intensification of Import Restrictions Under Article XII.
The position paper recommended that the Delegation should accept in principle that the general level of intensification of restrictions on dollar imports imposed by the sterling countries in July of 1949 was consistent with GATT obligations. The Delegation was to develop [Page 750] as much, factual information as possible concerning administration of the restrictions.
Prior to consideration of this item by the Contracting Parties, the Delegation was informed by representatives of the International Monetary Fund that it was prepared to enter into consultation only with respect to the United Kingdom, and that it had not been previously informed that such consultation would extend to other countries. Accordingly, the Delegation informed the Department that it intended to proceed with the UK consultation, deferring consultation with the other Commonwealth members and Chile. The Department subsequently approved this course of action in Tagg 64.1
When the item finally came up for discussion in the working party, the Representative of the IMF made the announcement previously communicated to the US Delegation, that he was prepared to enter into the consultations only with respect to the UK. Accordingly it was agreed to defer consultations until the next session and on the suggestion of New Zealand, that the sterling area countries should be considered together, it was decided that the UK consultation should also be deferred. No commitment was made by the US Delegation to consult with these countries on a group basis.
11. Report on Exceptions to the Rule of Non-Discrimination, Art. 14(1)(g).
The position paper stated that in accordance with an understanding with the British, the Delegation should avoid provoking the UK into making statements on basic policies governing the operation of its discriminatory trade controls. The Delegation was, however, to point out the necessity of restoring multilateral trade and full convertibility of currencies and that the solution should be found in increased exports to hard currency areas. The Delegation was also instructed to review the restrictions in the light of the standards of the Agreement and to request additional information on the restrictions if it was needed to judge their consistency with the Agreement.
Individual reports were examined in the working party on a country by country basis. The Delegation put questions to the various representatives designed to obtain supplementary information where the reports were considered to be inadequate. Telegrams from the Department (Tagg 46)1 suggesting additional questions assisted greatly in this process. A report was prepared and approved for [Page 751] publication which was satisfactory to US objectives and consistent with the instructions of the Delegation.2
One problem was raised during discussion in the working party and in plenary session that is likely to recur in later sessions. Several countries raised the question of the degree of consistency existing between the OEEC liberalization program and the GATT. The Ceylonese delegate stated that a full discussion will be demanded at the next session.
12. Arrangements for Regular reporting in Accordance with para. 2 of Annex J and for Reporting in Accordance with Article XVI.
The Delegation’s instructions with respect to reporting under the provisions of Annex J were contained in the Department’s telegram Tagg 753 and listed detailed points which should be included in any questionnaire prepared to implement the requirements of para. 2 of Annex J. The position paper with respect to Article XVI reporting stated that the Delegation should attempt to assure the submission of the reports called for, with as little appearance of initiative on the part of the United States as possible.
The Delegation’s instructions with respect to Article XVI reports were fully met when a resolution sponsored by the Canadian Delegate was approved. This resolution recommended that all contracting parties applying subsidies affected by the provisions of Article XVI should submit a report by August 1, 1950, and that any measures instituted after that date should be notified to the Contracting Parties as soon as possible.
[Page 752]In respect of reporting under Annex J, most delegations felt that in view of the fact that the Secretariat was being instructed to prepare a questionnaire for use in reporting under the provisions of Article XIV(1)(g), and Article XII which would include many questions applicable to Annex J countries, it was not necessary to make additional arrangements at this stage. The Secretariat was instructed however, in the final report, to bear in mind the requirements of Annex J and the discussions which had taken place in the working party. As reported in the telegram Gatt 114,4 this procedure had previously been agreed to by the Delegation in conversations with the Chairman of the working party (Deutsch of Canada) because it would give the United States more time to consider the substance of the Annex J Questionnaire and submit suggestions, if any, to the Secretariat at a later date. Questionnaires, covering all subjects are to be agreed on at the Fifth Session in time for submission to member governments by the end of the year.5
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The Working Party concerned incorporated into Doc. GATT/CP.4/37, 30 March 1950 (Lot 57D284, Box 111) an examination in depth of the question of the discriminatory application of import restrictions under the transitional period arrangements of Article XIV. Most of the 20 countries taking action under Articles XII and XIV belonged “to one or other of two groups which have cooperative arrangements either for the inter-convertibility of their currencies or in respect of payments for their mutual trade. … The first group is the sterling area and the second comprises the members of the Organization for European Economic Cooperation.” A very specific effect of import restrictions was described at the end of the analysis:
“… It is evident … from a review of the information supplied in response to the Secretariat’s enquiry that the action taken under the provisions of Article XIV and Annex J has had the effect, as far as trade among the contracting parties is concerned, that the twenty countries applying restrictions have encouraged the expansion of trade among themselves while reducing purchases in convertible currencies notably in United States dollars and Swiss francs and in other relatively ‘hard currencies’ such as Canadian dollars and Belgian francs, and avoiding unfavorable trade balances that would require settlement in these currencies or in gold.”
On April 1 the Contracting Parties incorporated the findings of this report into their First Report on the Discriminatory Application Of Import Restrictions. (Information GATT No. 22, April 1, 1950 (Geneva))
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- Regarding sessional documentation, see footnote 2 above.↩