411.006/8–2451

Memorandum by the Deputy Assistant Secretary of State for Economic Affairs (Linder) to the Secretary of State

Subject: Briefing Paper—Fats and Oils Restrictions1

Under the recently enacted Defense Production Act, the United States has imposed import restrictions on casein and cheese, and has embargoed butter, peanuts, flaxseed, dried skim milk, and rice. These restrictions on imports violate our trade agreement obligations and nullify or impair tariff concessions granted other countries.

Should this matter be raised, the Secretary should:

(1)
neither confirm nor deny charges that our action is inconsistent with our international obligations;*
(2)
express the willingness of this Government to give sympathetic consideration to any appropriate representations with a view to effecting a satisfactory adjustment of the matter in accordance with our obligations.

In extending the Defense Production Act, Congress added an amendment to the Act, in Section 104, providing that there shall be no imports of fats and oils (excluding petroleum and its products and coconuts and coconut products), peanuts, butter, cheese, other dairy products, and rice and rice products which the Secretary of Agriculture determines would (a) reduce domestic production below present levels or below higher production goals which may have been set or (b) interfere with orderly marketing or storing of the products or (c) cause any unnecessary burden or expenditure under any price-support program. Section 104 was adopted, over Administration opposition, under pressure from dairy and cottonseed crushing interests as a floor amendment to the bill.

Under the legislation the Secretary of Agriculture on August 9 embargoed imports of flaxseed, flaxseed screenings and linseed oil, peanuts, peanut oil, butter, butter oil and nonfat dried milk solids. He also placed imports of cheese and casein under quota, imports of cheese [Page 1437] being limited to the average amounts imported during the three-year period 1948–1950. The casein quota is based on imports in fiscal 1951. Licenses will be issued to importers of record in accordance with each applicant’s historical record of imports during the base period.

Flaxseed and linseed and rice and rice products had been under embargo as products in world short supply for some years, most recently under a different provision of the Defense Production Act, namely Section 101. Butter and peanuts and peanut oil had been under embargo for some years up to July 31, 1951 when these embargoes would have lapsed but for the enactment of this new legislation. Dried skim milk is under embargo for the first time, and we have likewise never before had quotas on imports of cheese and casein.

The Department has received vigorous protests from several governments concerning the imposition of these measures. In so far as the measures involve our international obligations, affected countries may charge that we have violated our commitment under Article XI of the General Agreement on Tariffs and Trade (GATT), which provides that quantitative restrictions shall not be imposed on imports except under specified conditions not present in this case, and that we have impaired or nullified tariff concessions granted to them on cheese and other products.

Of the contracting parties to the General Agreement which will probably be at San Francisco, those concerned with the restrictions would be France, Netherlands, the United Kingdom (primarily on behalf of the southern dominions) and New Zealand.

The case of the countries with which we have bilateral agreements is somewhat different. The bilaterals do not contain a general prohibition on quotas or even on embargoes but only prohibit quantitative restrictions on scheduled products (those on which tariff concessions have been granted). Moreover, several of the bilateral agreements contain an exception which permits quotas “in conjunction with governmental measures . . . operating to regulate or control the production, market supply or prices of like domestic articles . . .”

Action taken under one of the three criteria of Section 104, referred to above, and possibly under the other two also, would come within the broad exception of the bilateral trade agreements. That is, we do have programs to control the prices of the products covered, and in the agricultural import order it is not specified which criteria apply to which of the products covered. We might therefore argue with some of the countries with which we have bilateral trade agreements that our action is not inconsistent with our obligations.

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Nevertheless, for a variety of reasons it is believed that we should not press our claims. This Department opposed the amendment in Congress and is seeking its repeal.2 We have consistently opposed the use of quantitative restrictions by the United States except in conformity with the GATT. Instead, we should neither confirm nor deny charges.

Willingness to Consider Representations. Article XXIII of GATT provides that if any contracting party considers that any benefit accruing to it under the agreement is being nullified or impaired by the application by another contracting party of any measure, the latter shall give sympathetic consideration to representations or proposals by the former which may be presented with a view to the satisfactory adjustment of the matter. Accordingly, the United States should stand willing to give sympathetic consideration to representations by parties to GATT regarding this action.

In bilateral trade agreement, the United States made commitments similar to that in Article XXIII of the GATT. Our obligation to give sympathetic consideration to representations therefore applies to all of the countries with which we have either a bilateral or a multilateral agreement.

  1. Briefing paper prepared for the use of the Secretary of State at the San Francisco Conference. This conference for the signing of the Japanese Peace Treaty was to convene on September 4.
  2. There is a clear conflict between the application of the restrictions and Article XI of the General Agreement on Tariffs and Trade (GATT). Of the countries expected to be at San Francisco, the following are contracting parties to the GATT: Australia, Belgium, Brazil, Ceylon, Cuba, Czechoslovakia, Dominican Republic, France, Greece, Haiti, Liberia, Netherlands, New Zealand, Nicaragua, Pakistan, Peru, Turkey (the latter two are expected to accede to GATT soon), Union of South Africa, the United Kingdom and Uruguay (expected to accede to GATT soon). The Philippines are also expected to accede but the Agreement will not apply as between the United States and the Philippines. [Footnote in the source text.]
  3. Of the countries expected to attend the San Francisco conference, the United States has bilateral trade agreements with the following: Argentina, Ecuador, El Salvador, Guatemala, Honduras, Iran, Peru, Turkey, Uruguay, and Venezuela. [Footnote in the source text.]
  4. On August 23 President Truman in a message to the Congress recommended prompt repeal of Section 104.