Foreign Relations of the United States, 1951, National Security Affairs; Foreign Economic Policy, Volume I

International Trade Files, Lot 57 D 284, Box 134

Text of the Van Blankenstein Proposal, From the Files of the United States Delegation to the Torquay Conference

secret

Memorandum by the Delegations of the Benelux Countries¹ on European Tariff Negotiations²

1. On several occasions the Benelux countries have clearly stated that the inequality in European tariff rates forms a serious impediment to a further liberalization of trade and to an integration of European economies in particular. Experience at Geneva and Annecy has shown that the manner in which tariff negotiations are conducted has not led to a sufficient reduction of that inequality.

2. The unsatisfactory results of the attempts to arrive at a better equilibrium in levels of European tariffs are in part due to the following causes:

a) The rule that the binding against increase of low duties shall in principle be recognized as a concession equivalent in value to the substantial reduction of high duties has not been satisfactory in its application. In most cases where the rule was applied the higher rate was not brought down anywhere near the level of the lower rate.

b) The bilateral conduct of negotiations has hampered countries with relatively low tariffs in their attempts to obtain an overall reduction of the high levels in neighbouring countries. In this connection it should be made clear that Europe comprises in a relatively small space a number of customs territories among which exists an extensive trade in a wide range of goods, very often of the same or similar nature. Even if a low tariff country obtained the reduction of a high duty from one of its neighbours, in exchange for the binding of its low duty, it would still be left facing the high rates of its other neighbours. What is more, it would be the binding of its low rate have lost part of its limited bargaining power. In practice the problem is even further complicated by the refusal of any high tariff country to reduce its duties, unless it has a guarantee of a similar reduction by all its neighbours. This shows that the low tariff countries in Europe are greatly handicapped by the bilateral manner in which the negotiations take place.

3. It is clear that in the present circumstances the low tariff countries could only increase their limited bargaining power by drastic action. Not only could they decide—collectively or not—to abstain from concluding further tariff agreements with high tariff countries who are not willing to meet them on the road to better equilibrium, but they might also refuse to re-consolidate their existing schedules. This would increase their possibility to raise their tariffs. Moreover the resolution of the Council of O.E.E.C. of 27th October 1950 points in the direction of quantitative restrictions. It is however highly desirable that such drastic action should be avoided.

4. The answer to this problem appears to be multilateral negotiations between a group of O.E.E.C. members taking part in the Torquay conference, whose trade is interrelated. Such negotiations, although not in accordance with the established practice, would not be contrary to the spirit of G.A.T.T.

5. For this purpose—and without prejudice to any bi-lateral negotiations in course or scheduled—a meeting might be called of the delegations of the O.E.E.C. countries referred to in paragraph 4 and present at Torquay joined by the U.S.A. and Canada.

6. At that meeting a method should be worked out by which the duties of the countries concerned could as far as possible be reduced to the level of the lowest duties enforced in any of the participating countries. In exchange for such reductions the countries with low duties should bind those duties.

7. In no case should these negotiations lead to an increase of the existing rates. On the other hand any special situation particular to certain country should be taken into account when fixing the level of the duty applicable in that country.

8. It is probable that some countries who at present have a relatively high tariff might point to the fact that a considerable reduction of that tariff might affect their relations with non-European countries. They possibly will object that they would be prepared to reduce the level of their tariff as far as European imports concerned on condition that it would not diminish their bargaining power or the protection afforded them by their tariff in their relations to countries. This should not prevent an attempt to solve the problem of disequilibrium in European tariff rates.

9. A solution to the problem of bargaining power would more easily be found if the United States and Canada took an active part in these talks. As far as other non-European countries are concerned, there is no great risk in assuming that Europe’s trade with them is conducted in goods which are of minor importance with regard to inter-European trade. Consequently the bargaining power of the European countries in tariff-negotiations with those non-European countries would not be affected by the proposed multilateral negotiations.

10. As regards the question of protection, the U.S.A. and Canada appear to be Europe’s main competitors among the contracting parties. In this respect it might be useful to consider the fact that the European shortage of dollars may for some time to come necessitate the application of quantitative restrictions on imports from dollar sources.

Moreover it might be argued that some countries appear sufficiently protected by relatively low duties. It therefore seems hardly likely that other countries with a similar level of industrial development should require a very much higher rate of protection.

Torquay, January 1950.

1. The position of the Netherlands Government on the question of European tariff disparities was strongly supported by the other two members of the Benelux bloc, Belgium and Luxembourg. The Scandinavian countries also endorsed the Netherlands position, but did not engage directly in this démarche.

2. This Benelux memorandum was not an official document of the Torquay Conference, as the question of European tariff disparities was not on the agenda of the Conference. All discussion and action with regard to the Van Blankenstein proposal was. strictly speaking, outside the Conference.

   The United States Government had knowledge of the impending Benelux démarche from early December 1950, when Dr. van Blankenstein handed a draft of the proposal to Winthrop G. Brown, Chairman of the United States Delegation to the Fifth Session of the Contracting Parties to GATT, which met at Torquay November 2 to December 16, 1950.