NAC files, lot 60 D 137, “Documents”

Position Paper Prepared in the National Advisory Council on International Monetary and Financial Problems 1

for nac use only
Document No. 1657

U.S. Position for OEEC Ministerial Meeting on Problems of Convertibility

1. U.S. recognizes the importance of OEEC as an effective forum for coordinating work on international trade and payments of European member countries and their internal economic policies, particularly during the impending transition to currency convertibility and liberalization of imports on a global basis. It appreciates the desirability of preserving and strengthening the real gains which trade liberalization has brought for the OEEC countries and attaches importance in this connection to the willingness which this homogeneous group of countries have previously demonstrated in this forum to abide by quite rigid trade rules and to submit internal policies to continuous and intensive multilateral review.

2. Closer liaison should be maintained with the IMF and GATT, including greater participation as appropriate of IMF and GATT representatives in the work of the OEEC in the trade and payments field. Approaches to the IMF for drawings or stand-by arrangements should be made by member countries and not by OEEC as such.

3. The OEEC should undertake a firm commitment to establish global trade liberalization programs for member countries to be approved at its next Ministerial Meeting this coming fall. These programs should involve (a) immediate steps for moving ahead toward full intra-European and dollar liberalization as rapidly as balance of payments positions permit and (b) provisions for the control of deliberalization if subsequent developments require.

[Page 367]

These programs should not be spelled out in detail in this meeting. However, the OEEC rules should provide, subject to appropriate escape clauses, a general policy of non-discrimination as between currency areas in new measures of liberalization or deliberalization following a general move toward convertibility. The OEEC rules should also seek progressive elimination of existing discrimination by increasing liberalization toward the dollar area without impairment of existing intra-European liberalization. These rules could well call for the elimination of discrimination by convertible countries within a reasonable period of time, and in the case of the inconvertible countries, could involve a reduction in trade barriers and a reduction in discrimination looking toward the introduction of full convertibility as rapidly as feasible. In formulating and operating the escape clauses referred to above, full consideration would be given to the effect of the new rules on the balance of payments of OEEC countries, on progress toward higher levels of trade and on the integration of Europe.

The program should be harmonized with existing member commitments to the GATT, should not prejudice GATT discussions re organization and trade rules and should be reexamined automatically in the light of new agreements as they are reached in the GATT. The programs should not preclude the stronger countries from moving more rapidly toward liberalization and non-discrimination nor should they prejudice arrangements which may be made in connection with drawings and stand-by arrangements from the IMF.

4. A European Fund should be set up under OEEC auspices through the use of the convertible capital assets of the EPU remaining at the time of liquidation in order to facilitate adequate temporary financing for liberalization programs of member countries. The U.S. would welcome contributions by the stronger European countries of additional financial and credit facilities on a multilateral basis to assist the weaker countries to maintain liberalized trading arrangements.

5. The work of the IMF and GATT and that of the OEEC in this field will necessarily be closely coordinated. This must be accomplished primarily through effective coordination of the positions taken in each forum by the individual countries concerned, nearly all of whom do participate in all three organizations. In this field the U.S. will, of course, continue to associate itself closely with the OEEC, as it has in the past, and to provide full support and cooperation on problems of common interest. The U.S. preliminary inclination, as expressed in instructions for the Alternates Meeting, was not to favor additional international organizations but rather improve working arrangements and coordination among international [Page 368] organizations now dealing with these relations. Coordination might be further facilitated by improving and strengthening the administrative machinery of the GATT, and improvement of the procedure for consultation between the IMF and GATT. (Additional statement illustrating improved procedures in preparation.)

6. The suggestion that additional provisions be made for the treatment of countries in extreme creditor positions is one of great concern to the U.S. We believe that this topic is adequately covered by existing provisions in the Articles of Agreement of the International Monetary Fund.

7. While the OEEC should not undertake to sponsor tariff negotiations, the OEEC may appropriately discuss tariff problems incidental to other OEEC activities, and we welcome such tariff reductions by individual countries as may result from such discussions. The function of sponsoring tariff negotiations should be left to the GATT. In any case the U.S. would not wish to see any departure from the global or most-favored-nation principle with respect to tariffs by introducing a preferential system which does not now exist.

8. Furthermore, the U.S. believes that most determined efforts should be made by the OEEC to avoid bilateral arrangements either within the OEEC or with non-member countries. It is believed that bilateralism constitutes a most serious threat of breaking down progress which has been made in a freer system of trade and payments both globally and within the OEEC area.

9. The special problems of continued implementation of the Code by countries unable to return immediately to convertibility will need further examination by the OEEC: but it should be pointed out that steady and persistent debtor positions will need to be dealt with through proper policies in debtor countries (including exchange rate adjustment).

[Appendix 2]


Procedures for Improving Co-Ordination Between the GATT and the Fund

The GATT Contracting Parties would establish in Washington a permanent Standing Committee, the functions of which would be both to conduct consultations under the GATT and to be available on a continuous basis for consultation on matters of common interest to the GATT and Fund. This Committee would be composed in [Page 369] the same way that working parties are now normally established by the GATT. It would consist of the principal trading countries in the GATT, which would have permanent membership, and of other countries which would have temporary membership on a rotating basis. Any Contracting Party not represented on the Committee at the time a particular case arose in which it was directly interested, would be permitted to sit on the Committee in an observer’s status for that case. In order to service the Committee with necessary trade information, the Committee would have a staff established in Washington, this staff constituting a branch office of the GATT Secretariat.
The Standing Committee in Washington might be authorized by the GATT Contracting Parties to act on their behalf, subject to appeal by any country in disagreement to whatever superior body is provided for by the renegotiated agreement.
There would be established a Joint Staff Committee drawn from the regular international staffs of the GATT and the IMF, the branch office of the GATT Secretariat in Washington providing the GATT staff for this purpose. The function of this Committee would be to prepare coordinated reports for the IMF Managing Board and the GATT Standing Committee on problems of restrictions. The reports would be prepared at the initiative of either the IMF Board or the GATT Standing Committee. While not every case would need to be the subject of a report by the Joint Staff Committee, the usual procedure would be for this Committee to prepare a report prior to consideration by the IMF Board and by the GATT Standing Committee.
The IMF Board and the GATT Standing Committee, as appropriate under the Fund and GATT Agreements, would act promptly upon cases covered in the Joint Staff Committee reports. In the consideration of all such cases, representatives of the GATT would sit with the IMF Board, and the IMF would be represented at meetings of the Standing Committee.
  1. Transmitted to the members of the NAC under cover of a memorandum by the NAC Staff Committee, dated July 9, 1954, not printed.
  2. Appendix 1, concerning the establishment of a European Fund, is not printed.