394.31/12–1751: Telegram

The Secretary of State to the Embassy in Belgium


899. Embtel 832, Dec 17. Fol comments your numbered paras:

1. Explanation discrepancy is in Note to table page 28 Tariff Comm rpt referring to “errors” prelim official statistics e.g. Census Bureau figures. Tariff Comm investigated carefully and was reliably informed imports shown as from Neth actually from Belg so adjustments made accordingly. Census Bureau figures are prelim and Bureau is verifying this point. Final figures will undoubtedly result in reduction discrepancy in figures imports from Belg. Every effort being made secure figures accurately reflecting situation though from US point of view, given fact concession extended all sources supply at time study made, problem arises from increase total vol imports, not source.

2. For info Emb Dept fully aware unfortunate aspects case and suggests Emb assure Belgs connection with hat body case has not escaped our attn. Might call attn to fact that relation vol total imports to total domestic production all grades is not significant index in judging serious injury but relation imports which are chiefly low-grade fur to domestic production similar grades. On this basis increase of up to 20 percent in recent years is important and, in judgment Tariff Comm has resulted serious injury. Emb shld indicate proposed tariff increase applies to low-grade furs and not to all grades.

3. FYI there are two disputed interpretations term “unforeseen developments” in Art XIX GATT. Under one interpretation, for a country operating on basis it will make no concession resulting serious injury, any such injury resulting from reduction constitutes “unforeseen development”. US adheres this interpretation, pointing to fact that admin has committed itself to Cong and others not make any concession resulting serious injury. Tariff Comm pamphlet on criteria for application escape clause affirms this interpretation.

Under second interpretation mere reduction duty in itself cannot be considered “unforeseen development” even if it shld subsequently result serious injury. Only developments which negotiators might not reasonably have foreseen at time of negots can be taken into account as constituting an “unforeseen development”.

Under our interpretation “unforeseen developments” which shld be formally maintained as US position there is thus no difficulty considering [Page 1555] circumstances in this case as falling within concept “unforeseen developments”. Emb might point out informally that even if one shld operate under second interpretation, fol cld be pointed to as unforeseen developments:

Increased habit of going without hats, which is emphasized on page 18 of Tariff Comm report, as principal cause of decreased consumption. In this connection see acceptance by working party in hat body case of style change as factor in unforeseen developments in para 11 of their report.
Drastic decrease in cost rabbit skins used as raw material due to decreased use for rabbitskin garments discussed page 25 Tariff Comm report. For most hatters’ fur cost of raw material represents considerable proportion of total cost fur. Therefore the drastic changes in raw material costs taken in conjunction fact these costs relatively same for domestic and imported fur substantially reduced the incidence of protection afforded by the ad valorem duty to domestic processing industry. This cld be assumed to have resulted in increased imports as well as to have increased need for protection US producers.

4. Emb will note page 10 Tariff Comm report that Comm specifically commits itself to constant review case and recommendation action in light any change in conditions. For info Emb Dept considered suggestion definite time limit on modification concession but rejected suggestion for two reasons (1) impossible say for what period danger of injury to domestic industry may continue, and (2) fixing definite time period wld tend to freeze suspension concession for that entire period and thus increase difficulty in obtaining review and reinstatement concession before end period shld circumstances permit. Dept will consider announcement of action emphasizing fact that withdrawal is in effect “temp” and hopes assurance Cassiers desires is contained last para “Recommendations” of Tariff Comm.

5. No statistics monthly domestic production available but Tariff Comm investigators were assured in Oct domestic production still at standstill or limited to small production for inventory. Sales remain insignificant.