394.31/11–850: Telegram

The Secretary of State to the United States Delegation to the Fifth Session of the Contracting Parties to GATT, at Torquay 1


138. Following State–Treas views re import restrictions of sterling area countries for your guidance:

Del shld attempt ensure that majority CP’s give positive acceptance to conclusions Fund reports.
Despite circulation of Brit paper stressing common criterion for import policies of sterling area countries, Del shld if at all possible avoid sharpening issue with respect to validity of basic sterling area arrangements insofar as consistent with strong support of Fund views that start toward relaxation by net dollar earners is appropriate step at this time.
With this in mind Del shld take position in GATT that Fund report does not attempt to decide question of common criterion for trade policies of sterling area countries and that US, while not accepting this principle, is not raising that issue at this time. Del shld make clear that US will feel free to raise issue at later date if it so desires.
We plan to approach Brit in Washington along following lines. Del is authorized make similar approach privately if Del considers desirable. We will express regret that Brit tabled paper. Indicate US not attempting to force issue of sterling area solidarity at this time. Evidence of this is provided by US approach in IMF. US refrained from pressing finding which wld state that Ceylon was in violation of obligations under IMF and GATT by maintaining restrictions on dollar imports beyond the necessities of its own balance of payments while contributing to common reserve pool. Further evidence is fact that US recognized inconvertibility of sterling holdings of sterling area countries as some reason for maintaining restrictions. US is asking only for relatively mild statement of progress toward relaxation, clearly in accord with facts. Therefore, US thinks it unfortunate that Brit chose to sharpen issue by tabling paper. US still hopes issue can be avoided. However, Brit shld be informed that if they choose to force issue by attempting to include in GATT action language supporting principle of common criterion, US will offer strong resistance. Point shld be made that, in offering such resistance, Ceylon’s anomalous position in relation to GATT obligations might be pointed up to such degree as to lead other govts to take much stronger position on Ceylon than US has heretofore taken, thereby forcing US support position which it has heretofore avoided. For example, if motion were put that Ceylon has right under GATT to continue restrictions in order to build up central reserves rather than deal with its own B/P and reserve position, we wld have to vote no. This wld imply corresponding position in Fund. US basic position is that each country accepting membership in Fund and GATT accepts obligations and commitments to those institutions as separate member.
If necessity to take position in GATT mtg arises without opportunity for further consultation with Washington you are authorized take above line.

  1. Sent to London for information as telegram 2394.