International Trade Files, Lot 57D284, Box 165, Folder “Balance of Payments”

The Chairman of the United States Delegation to the Fifth Session of the Contracting Parties to GATT (Brown) to the Acting Director of the Office of International Trade Policy (Leddy)

personal and confidential

Dear John: The status of the Fifth Session, taking the Agenda, GATT/CP.5/1/Rev. 4 of November 10, which I hope you have by now, is approximately as follows.

[Here follows discussion of certain agenda items.]

We got to the meat of our consultations with the United Kingdom yesterday. I opened the discussion by making the enclosed statement.1 It was greeted with very appreciative remarks by the United Kingdom delegate and by very friendly comments from the Australian and New Zealand delegates in the corridors. The New Zealander said that he felt that it was a perfectly proper comment and they had no criticism of it whatever.

We were supported by the Cubans and the Canadians, but nobody else around the table said anything. Almost the whole of the rest of the day was taken up, as much of the previous day’s discussion was, by an unseemly wrangle about whether or not the Fund was justified in presenting the conclusions which it did. The British have pressed this point ad nauseam and are very angry about it.

[Page 771]

Everyone was agreed on the following points: that the Fund should not just give us a mass of undigested statistics; that this was a full and frank discussion in which everybody was to get his ideas off his chest; and that the form in which any government or institution expressed its views was for it to decide. I said that by entering into the GATT we all had accepted the principle established in Article XI that quantitative restrictions were not an accepted method of trade control. I pointed out that certain specified trade exceptions are provided in the GATT, e.g. short supply, which were not under consideration in this Working Party, but that what we were dealing with was import restrictions imposed not on any trade basis but on the basis of overriding financial necessity for which provision was made in Article XII. These restrictions which were the subject of discussion in the Working Party were only acceptable under GATT to the extent that they can be justified by financial necessity. The judgment on that point seemed to me to be clearly a financial judgment, entirely within the province of the Fund. I then pointed out that the first five sections of the Fund report on the United Kingdom dealt entirely with balance-of-payments and reserve problems, and that even the United Kingdom delegate took no exception to what was stated therein. At the end, the Fund stated its view that the present level of reserves and the current rate of gold and dollar earnings “make feasible” a progressive relaxation of restrictions. It seemed to me that this was essentially a financial judgment and a perfectly proper one for the Fund to make, even on the most narrow interpretation of its responsibilities under the GATT. I also pointed out that trade and balance of payments are inextricably interrelated.

[Here follows a brief account of procedural points affecting the Article XII consultations and discussion of other agenda items.]

Sincerely yours,

Winthrop G. Brown
  1. Supra.