Foreign Relations of the United States, 1950, National Security Affairs; Foreign Economic Policy, Volume I

411.0031/11–2050

Memorandum by the Deputy Assistant Secretary of State for Economic Affairs (O’Gara) to the Secretary of State

secret

[Washington,] November 13, 1950.

Subject: Legislative Program for the Trade Agreements Act and the ITO

Problem

To determine the position of the Administration in the 82nd Congress on the Reciprocal Trade Agreements Act¹ and the ITO.²

Considerations

1. Unless renewed, the Trade Agreements Act will expire on June 30, 1951. The ITO has languished for two years before the Congress without effective action.³

2. An effective trade program must be kept going. There will be strong opposition to this and a real possibility of defeat.⁴ We cannot overcome this opposition and avoid defeat unless we make it clear that the trade program is an essential, indispensable part of our total foreign policy.

3. An effective trade program requires:

(a) Renewal of the Trade Agreements Act.

(b) Passage of the Customs Simplification Act⁵ (and certain minor legislation), in order to make the General Agreement on Tariffs and Trade fully effective.

(c) The establishment of an organization in the field of trade.

4. The ITO Charter would have provided the necessary trade organization. But the ITO is no longer a practical possibility. Moreover, some of its controversial provisions are no longer necessary because of actions we have taken in other ways (e.g. Point Four).⁶ Re-introduction of the ITO will engage us in fruitless argument and end in almost certain defeat or indefinite delay. Either result would be damaging to foreign policy.

5. The General Agreement—to which 33 countries are parties—contains the same basic trade rules as the ITO, but has no organization. Without an organization the Agreement will bog down and become unworkable. Congressional approval is required to establish an organization.

6. The choice, therefore, is between either:

(a) Seeking Congressional approval of both the ITO and renewal of the Trade Agreements Act; or

(b) Discarding the ITO and concentrating our legislative efforts on renewal of the Trade Agreements Act with authority to establish an organization under the General Agreement.

7. A decision is needed promptly. The parties to the General Agreement are now meeting in Torquay. If the General Agreement, rather than the ITO, is to become the organization in the trade field, the U.S. delegation at Torquay must be instructed so that the form of an organization can be worked out internationally now (without commitment) for Congressional consideration later.

Recommendations

1. That the ITO be discarded.

2. That, in seeking renewal of the Trade Agreements Act, the Administration press for authority to establish an organization under the General Agreement. (The form and extent of the authority which should be sought for the reduction of tariffs will be the subject of later recommendations.)

3. That the Administration also press for passage of the Customs Simplification Act, and certain minor legislation, in order to make the General Agreement fully effective.

4. That the Administration’s decision on the foregoing be kept strictly confidential pending discussion of the whole program with the appropriate Congressional leaders.

A draft memorandum to the President setting forth these recommendations and the reasons for them is attached. (Tab A)⁷

1. The authority under which the United States Executive entered into the General Agreement on Tariffs and Trade (GATT) (concluded at Geneva, October 30, 1947) and continued after 1947 to negotiate multilaterally within the GATT framework, was the Tariff Act of 1930 (46 Stat. 560), as amended by the Act of June 12, 1934, as amended (48 Stat. 943, 57 Stat. 125, 59 Stat. 410, 63 Stat. 697). The basic amendment was in the Act of 1934, known popularly as the Reciprocal Trade Agreements Act. In the 1934 act, inter alia, Congress delegated its authority to the President to negotiate trade agreements, and subsequent acts were substantially simply “extension acts,” in prolongation of the presidential authority. At this time, the Act of September 26, 1949 constituted the most recent trade agreements legislation; it provided for a two-year extension of presidential authority rather than the normal (except for the 1948 act) three-year extension (63 Stat. 697).
2. For documentation on the formulation of the Charter for the International Trade Organization (ITO) at the United Nations Conference on Trade and Employment which met at Habana, Cuba, November 17, 1947–March 24, 1948, see Foreign Relations, 1948, vol. i, Part 2, pp. 802 ff. For texts of the ITO Charter, see United Nations Doc. ICITO/1/4 (a document of the Interim Commission of the International Trade Organization set up by the Final Act of the Habana Conference) or Department of State Publication 3117 (Commercial Policy Series 113), Havana Charter for an International Trade Organization and Related Documents (Washington, Government Printing Office, 1948).
3. The Administration never submitted the Habana Charter to Congress in 1948 for a variety of reasons (including higher priority for other legislation such as the European Recovery Program). The Executive sent the ITO Charter to the Congress on April 28, 1949, together with a presidential message asking for approval in a joint resolution, and an explanatory memorandum from the Secretary of State (81st Congress, 1st Session, Senate Document No. 61).
4. There is scattered documentation in file series 394.31 and 394 ITO for earlier in the year 1950 indicating increasing Administration concern at growing opposition to the trade agreements program both in and out of Congress.
5. This was a Department of the Treasury-sponsored bill which was introduced into the House of Representatives on May 1, 1950, by Representative Robert L. Doughton, Chairman of the House Ways and Means Committee. The Department of State strongly supported the proposed legislation, for reasons of general policy stated in a letter of February 8, 1950 from the Secretary of State to the Director of the Bureau of the Budget (Pace):

   “… For many years a cardinal objective of the foreign economic policy of the United States has been the reduction of unnecessary trade barriers. One important aspect of this problem relates to the simplification of customs procedures. In a number of international conferences leading to the formulation of the Charter for an International Trade Organization and the General Agreement on Tariffs and Trade, representatives of this Government took the lead in preparing and supporting measures for the simplification of customs procedures.

   “All of the amendments to existing laws proposed by the customs bill are consistent with the ITO Charter and some of them would be required in order to carry out certain of our international obligations arising from membership in the ITO and in order to make fully effective certain provisions of the General Agreement on Tariffs and Trade which is now being applied on a provisional basis. Some of the proposed amendments are needed to enable the United States to comply with the provisions of Annex 9 of the Convention on International Civil Aviation.” (Lot 57D284, Box 161, Folder “Customs Procedures”)

   An annex was attached to this letter, in the form of a memorandum drafted in the Office of International Trade Policy on January 31, 1950, which described in some detail specific changes included in the proposed customs simplification act.

6. For documentation on the Point IV program, see pp. 846 ff.
7. Not attached, but see the Secretary of State’s memorandum to the President, November 20, infra.