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: We have completed the consultations with the United Kingdom, Southern Rhodesia and Australia. I enclose copies of my statement about Australia.1 Could you see that a copy gets to the Treasury?

[Page 772]

The British and the Australians have been doing a good deal of needling of us on the question of the sterling area. For example, yesterday they said that if they had made clear to the Working Party the supreme importance of the sterling area, they would be content, and the Australian said he was glad to note that we said we recognized the existence of the sterling area. The impression, however, of their continued needling on this point is, in the minds of observers and other members of the Working Party, probably that we either agree or do not care very much about fighting the battle about the sterling area.

So, this morning I went over to see Stephen Holmes2 and told him we were getting fed up with this needling, that, consciously or unconsciously, the impression was being given by our refusal to be drawn into battle that we were tacitly accepting their point of view, and that if this went on very much longer I would have to make a very strong statement. In any event, I was going to make our views quite clear in connection with the report. I asked him to pass this on to the New Zealanders and to the others in his group. He said he would do so and that he did not think there would be any more said on that point by his group.

We are going to have difficulty, of course, when we come to the report, and I think we will have to say definitely that while we recognize the existence of the sterling area, we do not give it anywhere near the same weight in coming to our conclusions that the British and the Commonwealth do.

We are going to have some difficulty in the Delegation as to whether we press for a vote of the Working Party. Our instructions leave it to the discretion of the Delegation. George Bronz is inclined to feel that we should press for a vote. We will not get support even from the Canadians on this, but we will get support from them on having the countries identified in the views they express.

My own feeling at this stage is that if we press for a vote now we will gain very little and we will have put a very severe strain on the GATT without being in a very strong position to do so. It is certainly clear that a consultation under 4(b) does not require a vote, although we have made it clear that 4(b) does not prevent a vote. However, I think a good argument can be made, and one that would appeal to the Contracting Parties, that the purpose of 4(b), consistent with the general pattern of the GATT, is to afford an opportunity for preliminary consultation at which views can be expressed and the Contracting Party to whom admonitions are directed can have a chance to [Page 773] take note of them and mend his ways before being subjected to challenge under 4 (d).

It seems to me that the central thing that we are trying to get here is to record that the Governments of Canada, the United States and Cuba, and as many others as we can persuade to join us, have felt sufficiently strongly that the time has come for the British to start relaxing their restrictions [or?] to raise the issue formally in an international forum. We do not propose to go so far as to ask for sanctions under the agreement, and if we press for a vote there will be bitter opposition and much animosity introduced into an atmosphere which so far has been reasonably cordial and in which we have made a very good impression on the Contracting Parties by the moderation of our attitude.

If we press for a vote in the Working Party, we will probably have to press for a vote in the Contracting Parties and might squeak through with a bare majority, but there would inevitably be a large number of abstentions. I should think this would be a much weaker position for us than to have our views recorded with all proper firmness and then let that fact have its effect.

Len3 and Sol4 agree with me on this point. So does John Deutsch,5 and Saad told me the other evening he does not think any vote desirable.

I hope you will think about this and see if Leroy6 agrees. You may start getting pressures from Treasury to insist on a vote.

On the whole, things have gone well so far. We have won our objective of a consultation as of the current situation. We have won our objective of separate, individual country consultation. We have won our objective of the Fund report with its conclusions being incorporated in full in the records of the Working Party. We have formally stated our opinion that relaxation should begin, and have the warm support of Cuba and Canada on this point. And we have kept a friendly atmosphere in which it has been the British who have raised all the technical points and we who have kept the emphasis on the substance.

So, let’s not spoil it by pressing for a vote.

One point that George Bronz makes, which should be borne in mind, is that he feels the British press will report the result as, “GATT fails [Page 774] to sustain Fund”, and we will suffer a public relations setback.7 I would agree that some of the British press will certainly do this, but I think that there will be considerable segments of the press that will headline the fact that the United States and Canada have taken the position that they did. We know already, for example, that the Times and the Economist, commenting on the Fund report, have expressed the opinion that the time has come for the beginning of relaxation. So I am not too worried about this point.

[Here follows further and brief comment.]

Winthrop G. Brown
  1. Not printed.
  2. Sir Stephen Lewis Holmes, Second Secretary, British Board of Trade.
  3. Leonard Weiss, Assistant Chief, Commercial Policy Staff.
  4. Probably Saul R. Srole, Acting Assistant Chief, Monetary Affairs Staff, Department of State, and Adviser, United States Delegation to the Fifth Session of the Contracting Parties.
  5. Canadian chairman of Working Party “K,” Fifth Session of the Contracting Parties.
  6. Leroy D. Stinebower, Special Assistant to the Assistant Secretary of State for Economic Affairs.
  7. There had been considerable press attention about the Article XII consultations both in the United States and in the United Kingdom, occasioned to a degree by the fact that reports of the International Monetary Fund to the Contracting Parties had been the subject of unauthorized leaks to the press.