394.31/11–2354: Telegram

The United States Delegation to the Ninth Session of the Contracting Parties to the General Agreement on Tariffs and Trade to the Department of State

official use only

Tagg 100. Pass White House for Randall and Hauge. It is becoming increasingly apparent that one of the main factors bearing upon the success or failure of this conference from the US point of view is the extent to which we can agree to consultation with respect to subsidies, section 22 and disposal of non-commercial stocks.

We are seeking (a) rules which will not unduly limit our use of subsidies, (b) to preserve our right to use section 22 under as open-ended a waiver as possible, and (c) to prevent the new agreement from dealing with commodity policy.

Some countries want to prohibit subsidies; most want to see them strictly limited, but want a tighter rule than the necessarily vague concept of equitable share. They can probably be persuaded to accept this concept if assured of a right to consultation. Delegation would argue that adequate opportunity for discussion is assured by present article XVI amended to require prompt consultation on request country claiming adverse effect. Delegation requests authority agree such amendment.

Most countries realize that we must have a waiver for section 22. The question will be upon what terms. The terms can be made far more liberal and open-ended if countries affected have the assurance that they will be consulted as Canada has been consulted. [Page 215]Canada will testify to the generally satisfactory results of such consultation for them.

Large majority of countries want GATT to deal with commodity policy as way of minimizing fluctuation in commodity prices. One important unsettling factor which concerns them is possibility sudden large liquidation US strategic stocks. Will greatly help defeating inclusion commodity policy provisions if their advocates can point to legal commitment for prior notice and consultation on liquidation of such stocks. Requirement such consultation would be wholly consistent with conclusions Randall Commission page 36 its report which will undoubtedly be quoted by other countries this connection.

Underlying thinking of all agricultural producing GATT countries is fear possible adverse impact their trade our PL 4801 and 6652 programs which to some extent fall outside present provisions GATT and invoke such unusual factors affecting normal competition as sales for local currency, return of proceeds to recipient country, etc.

Worry about these programs is one of their greatest concerns and degree reassurance this point they can take home will bear heavily on extent they can agree other provisions we want. Delegation believes this need could be met and undue tying of US hands could be avoided if Delegation were authorized to make formal statement that it would be US policy in administering PL 480 and 665 to consult with countries whose interests might be adversely affected with view minimizing or avoiding such effects.

Foregoing well illustrated by case of Australia, which is one of most troublesome situations in conference.

Australia appears to be genuinely considering whether it will remain in or leave GATT with slight preference for remaining if possible. This important because of Australia’s key position as industrialized country in Southeast Asia and member of British Commonwealth with contractual obligations to other Commonwealth countries under Ottawa Agreements. Australian Delegation is making difficulties on whole series of points, e.g., CP approval of balance of past payments QR, role of IMF, inclusion of commodity provisions, change in no new preference rule, freedom to change bound tariff rates, subsidies and section 22.

Delegation has reviewed entire field exhaustively with Australians. Conclusion is that their major difficulties could be met if US could give assurances on consultation suggested above. By consultation [Page 216]we do not mean agreement, but simply sufficient opportunity to make their views known and suggest result that would avoid undue damage their interests. Hard bargaining will be necessary with Australia on many points they have raised, but convinced agreement can be reached if this central point of consultation established. Australians advise they prepared station and maintain man permanently in Washington fully qualified conduct consultations their behalf.

Randall Commission report page 32 advocates “continue policy and extend practice of consulting” on export subsidies and import quotas.

Refusal US accept principle consultation implies insincerity in professions we do not intend injure trade of others and puts US in position of reserving right to use vast financial resources to possible serious detriment of others without giving them chance to be heard.

Such refusal would be doubly harmful our negotiating position and general standing conference in view fact that US has in fact consulted with Canada on section 22 quotas with generally satisfactory results, has already accepted obligation of prior consultation under article XX, part II, (c) with respect to liquidation of temporary surpluses of stocks owned by government, has general obligation to consult under article XXII, accepted resolution on consultation with respect to liquidation of stockpiles at last Latin American Ministers conference, states in September 9 policy statement that it does not desire injure other friendly countries in its disposal operations, and that Randall Commission advocated consultation.

Delegation fully appreciates that consultation will involve many practical difficulties and that some countries may endeavor abuse this right. But convinced these will be minority and that beneficial results will far outweigh disadvantages not only with respect success this conference, but with respect general long-run interests US and actual effectiveness our disposal programs.

Delegation therefore requests authorization (a) agree in principle commitment consult on liquidation of strategic stocks, specific proposals to be submitted to Washington for approval, (b) consider if necessary consultation provision in connection with section 22 waiver, and (c) to make statement that consultation in connection with administration, PL’s 480 and 665 will be US policy.

Reply soonest.3

[Page 217]

Parker and Fleming concur.4

  1. Agricultural Trade Development and Assistance Act of 1954, enacted July 10, 1954; for text, see 68 Stat. 454.
  2. Mutual Security Act of 1954, enacted on Aug. 26, 1954; for text, see 68 Stat. 832.
  3. In telegram Gatt 107, dated Dec. 2, 1954, the Department confirmed the principle of consultation with interested nations particularly with regard to U.S. transactions under Title I of P.L. 480. The Department defined “consultation” in terms of “discussion” and “explanation”, and requested the U.S. Delegation to insure that other Contracting Parties understood the term to mean the same thing. (394.31/11–2354)
  4. Lamar Fleming, Jr. of Anderson, Clayton and Co., Houston Texas; and Cola G. Parker of Kimberly-Clark Corp., Neenah, Wisconsin, were both public members of the U.S. GATT Delegation.