Current Economic Developments, lot 70 D 467

Current Economic Developments 1

Issue No. 382

GATT Contracting Parties Conclude Seventh Session 2

The Seventh Session of the Contracting Parties to the General Agreement on Tariffs and Trade which concluded in Geneva on November 10 was marked by the successful handling of a number of complaints of violation of the agreement or impairment of rights under the agreement. (See page 1, September 29, 1952 issue.) Of particular interest to the US in this area were the provisional settlement of the US complaint against restrictions imposed by Belgium on dollar imports and the authorization to the Netherlands to reduce its imports of wheat flour from the US in retaliation for restrictions on imports of Dutch dairy products imposed by the US under Section 104 of the Defense Production Act.3 Two other complaints entered against the US by Greece and Turkey were partially solved or deferred.

Among other significant actions taken during this session were: 1) the granting of a waiver of certain obligations in the General Agreement, particularly most-favored-nation provisions, to permit the six countries participating in the European Coal-Steel Community4 to fulfill their responsibilities under the CSC treaty without [Page 121] violating the GATT; 2) consultations with a number of countries on import restrictions imposed for balance-of-payments reasons; 3) action on the Japanese application for accession to the agreement; and 4) approval of the text of an international convention to facilitate the importation of commercial samples and advertising matter and of a code of standards to reduce documentary requirements for the importation of goods. The intersessional machinery which was established on a provisional basis at the sixth session was extended and strengthened for the period between this session and the next, which is scheduled to be held the middle of September 1953. During discussion of the functions of the intersessional committee, the question of re-examination of the General Agreement was raised. The chairman pointed out that if such a study is needed, the Contracting Parties themselves would have to initiate it, possibly through a special session.

Belgian Import Restrictions. During the last meeting of the Contracting Parties, the US and Canada expressed concern over action taken by the Belgo-Luxembourg Economic Union5 to restrict importation of goods from the dollar area, as one of the measures it had adopted to reduce its extension of credits to the countries in the European Payments Union.6 Early in 1952, the US filed a formal complaint that these restrictions were damaging US trade and constituted a departure from GATT obligations. At the seventh session, Belgium announced its intention to return to a regime free of quantitative restrictions and within the next two or three months, as the first step, would liberalize significantly its dollar import restrictions. The US and Canadian delegations expressed their satisfaction with the Belgian proposal and agreed there was no need for further consideration pending announcement of details of the Belgian proposals. The discussion of this problem spread to the broader problem of the conflict between EPU and GATT objectives, with the French stating that the solution proposed by Belgium might have repercussions on other countries having dollar problems and on the efficient operation of the EPU. Our representative explained the US position on EPU. He stressed the present importance of EPU, and the contribution it could make to [Page 122] ultimate convertibility, but pointed out that it is regarded in its present form as a transitional arrangement. He also pointed out that the US recognized the risk that, unless carefully managed, such an organization might lead to new preferential arrangements. In summarizing the situation, the chairman stated that the problem of reconciling the objectives of GATT and another organization such as the EPU was difficult and suggested that the eventual solution might be a GATT waiver.

US Dairy Products Restrictions. At this session, a number of countries exporting dairy products again claimed to be adversely affected by restrictions on imports of dairy products applied by the US under Section 104 of the Defense Production Act and asked that the Contracting Parties recognize their right to take compensatory action. It was the consensus that the US was still infringing the General Agreement and that although the exporting countries could rightfully claim impairment, it would be preferable for the US to lift the restrictions and thus avoid compensatory measures. A resolution was adopted urging the US to continue efforts to repeal Section 104. Of the countries claiming injury, only the Netherlands was prepared at this session to specify items it might wish to withdraw as compensation for its reduced exports of dairy products to the US. The Contracting Parties authorized the Netherlands to reduce its imports of wheat flour from the US by 12,000 tons in 1953 as compensation. In case other countries feel it is necessary to take compensatory action it might be necessary to convene a special session to deal with the specific proposals. At the last moment the New Zealand delegate received authorization to request approval of the withdrawal of certain specific items. It notified its government that the instructions had arrived too late for implementation at the regular session.

Other Complaints Against US. Turkey and Greece indicated that they were seriously injured by “escape clause” action taken by the US last summer which resulted in an increase in the duty on dried figs above the levels incorporated in the US schedule in GATT. The US delegation continued consultations which had been begun in Washington with these countries. In the case of Turkey, agreement was reached on a series of provisional withdrawals permitting Turkey to increase duties on certain US products entering Turkey. The Greek delegation felt there was no advantage to be obtained in withdrawals it might make and asked the US to consider additional concessions to offset the loss of the dried fig concession. A study of trade between the two countries will be made before the next GATT session to see if it is possible to find additional items on which the US might grant concessions. Our delegation stated it was the intention of the US, as expressed by the President when he [Page 123] announced the fig duty increase,7 to re-examine the need for this increase before the next fig marketing season or sooner if circumstances justify.

Greece, supported by Turkey, also declared itself injured by the US export subsidy on raisins. The US delegation expressed willingness to consult but pointed out that the subsidy had been designed to maintain the traditional US export market for the product and had not increased US trade or expanded US production. Consultations were begun but, because of the limited data available and the complicated nature of the problem, it was not possible to conclude them.

Other Complaints. The Contracting Parties considered the UK complaint concerning the increase in tariff rates imposed by the Greek Government on a number of commodities through the upward revision of previously agreed upon factors used in calculating import duties. It was agreed this is a violation of the General Agreement and the Greeks undertook to eliminate the violation by July 1. Another complaint was made against the “contribution tax” imposed by Greece on imported goods. The Contracting Parties were unable to determine whether this levy should be considered an exchange measure, a customs duty, or an internal tax and decided to seek advice from the IMF on the exchange aspect of the problem before making a decision.

With respect to Norway’s complaint concerning the discriminatory treatment by Germany of Norwegian-type sardines, Germany was requested to consider ways of removing the inequality of treatment accorded this product, to consult with Norway and to report back at the eighth session. The Contracting Parties again considered Norwegian and Danish claims that they are being discriminated against by Belgium’s application of a tax on their products imported for use by the central, provincial or municipal governments. The tax is not applied to products of other Contracting Parties which have been determined to have a system of welfare taxes equivalent to the Belgian “allocation familiale”, a tax to provide allowances to workers families. The Contracting Parties urged the Belgian Government to remove the discrimination.

Another complaint which was disposed of at this meeting was the UK purchase tax, long objected to because of its discriminatory effect on certain imported goods as compared to domestic goods. [Page 124] The UK delegation announced that the discriminatory aspects of the tax had been eliminated. No progress was made in eliminating discrimination in certain Brazilian internal taxes, but the Brazilian delegate expressed the hope that the discrimination would be removed before the next GATT session. India’s complaint against Pakistan’s export tax on jute was discussed bilaterally.

Coal-Steel Community Waiver. The Contracting Parties agreed to waive provisions of the General Agreement to the extent necessary to permit France, Italy, the German Federal Republic, the Netherlands, Belgium and Luxembourg to fulfill their treaty obligations as members of the European Coal and Steel Community. In general, so far as coal and steel products are concerned, the GATT rights and obligations of the CSC governments, whether acting singly or as the community, are hereafter to be the same as though they were a single Contracting Party whose customs territory included European territories of the member states. Provisions were made for working relationships between the Contracting Parties and the High Authority of the community. Although the US had hoped that a so-called general waiver would be granted to the six countries, our delegation believes that the specific waivers that were agreed upon will have the same result.

Balance-of-Payments Consultations. The Contracting Parties conducted consultations with seven countries—Italy, the Netherlands, France, Pakistan, Australia, Ceylon and the UK—on import restrictions which they apply for the purpose of safeguarding their balance of payments and monetary reserves. They discussed in considerable detail the financial basis for and the method of administration of the consulting countries’ import restrictions. The discussions covered a variety of specific commodities which illustrated the problems facing countries imposing restrictions, as well as the difficulties created for exporting countries. As in the case of previous consultations, these were characterized by full and frank discussion and free exchange of opinions. There was also full consultation with representatives of the International Monetary Fund as provided for in the General Agreement. Representatives of all of the consulting governments indicated that the views expressed by the Contracting Parties in the consultations would be conveyed to their governments for consideration. Arrangements were made for the Contracting Parties to carry out similar consultations at a future convenient time with Brazil, Chile, Finland, New Zealand, Southern Rhodesia, Sweden and the Union of South Africa.

Japanese Accession. At this session, the Contracting Parties considered Japan’s application to negotiate for accession to GATT and approved a resolution recognizing that Japan should take its rightful place in the community of trading nations and to that end [Page 125] should be admitted to appropriate international arrangements. An intersessional committee is to consider the question of conditions and timing under which Japan’s application could be pursued. During the seventh session this committee held two meetings with the Japanese on their foreign trade, unfair trade practices legislation, patents and trade marks, exchange controls, commercial policy and wage and hour legislation. The committee will next meet on the Japanese application on February 2, 1953. Some contracting parties have indicated that they may enter into bilateral tariff negotiations with Japan immediately, with the intention of incorporating the results of such negotiations into later multilateral negotiations directed toward accession to the General Agreement. In view of the forthcoming renewal of the US Reciprocal Trade Agreements Act,8 it is unlikely that the US would consider participating in tariff negotiations earlier than in a year or 18 months.

Chamber of Commerce Resolutions. In June 1951 the International Chamber of Commerce passed a series of resolutions urging governments to enter into an agreement to reduce red tape in import and export formalities. GATT action on these resolutions was begun at the sixth session. Continuing their work at this session, the Contracting Parties have now approved the text of an international convention providing for duty-free entry of samples and of certain advertising matter. The convention will be opened for signature February 1, 1953 and will enter into force when 15 states have acceded. The Contracting Parties have also agreed to review steps taken by governments to give effect to principles of valuation contained in the General Agreement and to ascertain methods of determining the nationality of goods. A code of standards was adopted on documentary requirements for importation of goods, and abolition of consular invoices and consular visas by the end of 1956 was recommended. Pending such abolition, certain standard practices in this field have been recommended to governments.

Tariffs and Tariff Negotiations. Work was continued on the plan put forward at the sixth session by the French delegation for the lowering of tariffs by 30% on a world-wide basis in three yearly stages of 10%. The extent of progress by the working party at the seventh session indicates that a great deal of work remains to be done before a specific plan will be available for consideration by the Contracting Parties. Most countries were not prepared at this time to express a view on the principles of the proposal. Study of [Page 126] the problem will continue intersessionally with the possibility that several plans of varying degrees of flexibility may be developed for further consideration. The Council of Europe also submitted to the Contracting Parties a recommendation concerning the adoption of a common policy for lowering tariff barriers in Europe. This proposal was dealt with separately from the French plan and a group of experts’ report, which was not considered by the Contracting Parties, will be submitted to the Council of Europe.

Other Items. The Contracting Parties agreed to an extension of time, until the opening of the eighth session, for the US and Cuba to complete negotiations for the modification of certain duties. The Italian request to continue special customs treatment towards certain Libyan products was granted. Reports were heard on the operation of the Nicaragua-El Salvador free trade area and on the South Africa-Southern Rhodesia customs union. It was agreed that the date for signing the Torquay protocol9 should be extended to December 31, 1952 for Brazil and Nicaragua and to May 21, 1953 for Korea and the Philippines. Uruguay was given until April 30, 1953 to sign both the Annecy10 and Torquay protocols.

[Here follow unrelated articles on the United States-Korean Tungsten Agreement and the status of Soviet Lend-Lease negotiations.]

  1. Current Economic Developments was prepared as a classified twice-monthly publication by the Bureau of Economic Affairs (subsequently the Bureau of Economic and Business Affairs) of the Department of State for internal use as a background and policy guidance report for policy level officers of the United States Government serving at home and abroad. It was instituted in 1945 and terminated as a separate publication in October 1974.
  2. The texts of many of the GATT resolutions, declarations, decisions, and rulings mentioned in the following summary can be found in Basic Instruments and Selected Documents, First Supplement, issued by the Contracting Parties to the General Agreement on Tariffs and Trade, March 1953.
  3. Reference is to the Defense Production Act of 1950 (Public Law 774), first enacted Sept. 8, 1950, and amended July 31, 1951 (Public Law 96) and June 30, 1952 (Public Law 429); for texts, see 64 Stat. 798, 65 Stat. 132, and 66 Stat. 297. A brief discussion of Section 104 is included in the memorandum from Metzger to Tate, dated Feb. 25, 1953, p. 138.
  4. The European Coal and Steel Community was established by representatives of Germany, France, Italy, Holland, Belgium, and Luxembourg in April 1951, and became operative Aug. 10, 1952. Within the Community all trade barriers on coal and steel exports between the six countries were removed and their coal and steel industries placed under Supranational control. For documentation, see volume vi .
  5. The Belgium-Luxembourg Economic Union, first concluded in 1921 and dissolved in 1940, was reestablished in May 1945.
  6. The European Payments Union (EPU) was established July 1, 1950, as a vehicle for expanding intra-European trade on a nondiscriminatory basis. It included all Western European nations except Spain and provided a mechanism for achieving currency convertibility and for easing short-term balance-of-payments difficulties among its members. For documentation regarding U.S. policy toward the EPU, see Foreign Relations, 1950, vol. iii, pp. 611 ff.
  7. The text of President Truman’s proclamation on dried figs is printed in the Department of State Bulletin, Sept. 1, 1952, pp. 337–338.
  8. The Trade Agreements Extension Act of 1951 (Public Law 50), enacted June 16, 1951, authorized the President to enter into foreign trade agreements until June 12, 1953. It was superseded by the Trade Agreements Extension Act of 1953 (Public Law 215), enacted Aug. 7, 1953. For texts, see 65 Stat. 72 and 67 Stat. 472.
  9. The third round of GATT tariff negotiations (following previous sessions in Geneva in 1947, and Annecy in 1949) was held in Torquay, England, Sept. 28, 1950–Apr. 21, 1951. The Torquay Protocol to the General Agreement on Tariffs and Trade, which set forth the results of the negotiations and the terms on which new Contracting Parties could accede to the Agreement, was signed by the United States on Apr. 21 and left open for signature by other countries until Oct. 20, 1950. Since by that date only 29 of the 37 countries which had negotiated at Torquay had signed, extensions were granted to the other 8 nations. The extensions referred to in the text represent further extensions of roughly one year beyond the original ones. For the text of the protocol, see 3 UST 588. For documentation on the Torquay negotiations, see Foreign Relations, 1951, vol. i, pp. 1245 ff. For a brief summary of the conference, see Department of State Bulletin, May 21, 1951, pp. 816–817.
  10. The Annecy Protocol of Terms of Accession to the General Agreement on Tariffs and Trade was the result of tariff negotiations held in Annecy, France, Apr. 11–Aug. 27, 1949, between the Contracting Parties to the GATT; for text, see 64 Stat. B139 or 4 Bevans 859. For documentation on the negotiations, including a confidential report by U.S. Delegation chairman Woodbury Willoughby, see Foreign Relations, 1949, vol. i, pp. 651726. See also Willoughby’s article, “The Annecy Conference on Tariffs and Trade,” Department of State Bulletin, Nov. 21, 1949, pp. 774–778.