The Secretary of State to the United States ( GATT ) Delegation 1
Gatt 88. 1. Re para 2, Repto 5093, rpted Geneva as Repto 83.2 We assume some type of exchange control by Belg in order to prevent concealed capital movements and trans-shipments is essential part of any complete solution. Whether or not control of Belg exports to EPU area is necessary depends on full consideration of alternatives but we see no possible need for export controls differentiated by products and by EPU-currency countries selected by Belg on basis of bilateral bargaining.
2. If Belg reserve position such that she could qualify for application import restrictions under GATT Art XII, Belg wld be entitled apply export controls under Art XIV–4. If her reserve position such, however, that Belg not entitled operate under Art XII, then export controls wld appear be violation GATT. Even though Belg might not meet tests Art XII, there might still be good reasons allow her apply [Page 1491]export controls, namely avoid what amounts extension forced credit by Belg as result Belg exports EPU countries, plus drain real resources and increased inflationary pressure Belg in such circumstances. If these reasons found sufficiently compelling, GATT CP’s cld grant Belg waiver under Art XXV.
3. In light foregoing, if export restrictions were determined to be necessary and Belg not entitled operate under Art XII, we are considering fol approach:
- Acting under Art XXV, CP’s wld
authorize Belg to impose export restrictions to extent nec meet
EPU problem under fol
- Authorization impose such restrictions shld be limited definite period of time, say for next three months during which EPU interim solution applies or until Seventh Session GATT;
- Such restrictions are not to be used for any of purposes enumerated in Working Party “D” Report QR’s Fourth GATT Session;3
- Such restrictions shld be applied on nondiscriminatory basis as among EPU-currency countries.
- In OEEC, condition use Belg export restrictions on prior clearance by OEEC trade committee.
4. We are also considering possibility that even if Belg can qualify for application export controls under Art XIV–4 so that no GATT waiver nec, might be desirable try through OEEC to condition Belg application such restrictions. For example, even if Belg cld justify under XIV–4 controls to direct exports of, say steel, to dol area to increase her convertible earnings, might be desirable to limit her freedom to do so in order avoid impairing defense effort OEEC countries. Hence, as part of interim solution EPU problem, Belg might be required obtain prior OEEC approval export restrictions even if there is no question right Belg apply such restrictions under GATT.
5. Provisos para 3(a) above believed important because of indications Belgs even now using export restrictions to enforce tie-in sales in bilateral agreements, linking soft-goods with hard goods. We intend propose this practice be examined in OEEC for bearing on size Belg EPU surplus.
6. Note we are not prepared authorize import restrictions by resort to Art XXV. Appreciate tactical risk in proposing use of Art for export restrictions while unwilling to permit resort to Art for import restrictions.
7. Request your comments and those OSR on foregoing, which represents our preliminary thinking on substantive issues involved.
8. ECA and Treas concur.