Foreign Relations of the United States, 1955–1957, Foreign Economic Policy; Foreign Information Program, Volume IX

17. Minutes of a Meeting, Washington, January 6, 1955, 3:10–4:55 p.m.²

Washington , January 6, 1955, 3:10–4:55 p.m.

U.S. PARTICIPANTS

• John Foster Dulles, Secretary of State
• George M. Humphrey, Secretary of Treasury
• True D. Morse, Under Secretary of Agriculture
• Gabriel Hauge, Economic Assistant to the President
• Clarence Randall, Special Consultant to the President on Foreign Economic Policy
• R. Douglas Stuart, Ambassador to Canada
• Samuel C. Waugh, Assistant Secretary of State for Economic Affairs
• Livingston T. Merchant, Assistant Secretary of State for European Affairs

CANADIAN PARTICIPANTS

• C.D. Howe, Minister of Trade and Commerce
• Walter Harris, Minister of Finance
• L.B. Pearson, Secretary of State for External Affairs
• A.D.P. Heeney, Canadian Ambassador
• D.V. LePan, Minister-Counsellor, Canadian Embassy

1. Secretary Dulles opened the meeting at 3:10 p.m. by welcoming the Canadians and inviting them to explain the problems they wished to discuss. Mr. Pearson answered. He stated that their principal concern was the imposition by the U.S. of restrictions on agricultural imports under Section 22 of the Agricultural Adjustment Act³ and the U.S. request at Geneva for an “open-ended” waiver⁴ for this legislation under the GATT.⁵ He noted that Canadian public opinion was restive over the operation of the GATT since there was a growing feeling in Canada that while trade concessions made by Canada have been maintained intact, the concessions made by the U.S. are “becoming increasingly flexible”. He added that the Canadian Government is being subjected to increasing pressures for higher protection, and the waiver requested by the U.S. at the present Geneva negotiations⁶ is making these pressures even more powerful. It is economically difficult and politically impossible for Canada to agree to the waiver. It would be a public avowal by the Canadian Government, in effect, of agreeing with actions taken or to be taken by the U.S. in restricting imports of agricultural commodities crucially important to Canada and covered in the trade agreements between the two countries.

Mr. Pearson emphasized that Canada has great trust in U.S. intentions in these matters and in the past the two countries have always been able to work out ad hoc solutions as problems arose; however, a general waiver, if sought and obtained by the U.S. over Canada’s protest, would have the following unfortunate consequences:

(a) The creation of a serious disturbance in U.S.-Canadian economic and trading relations;

(b) The 2/3 majority required to obtain this waiver at Geneva would cause general economic disturbances and concessions would have to be made by the U.S. in return for a waiver. This would incite other countries to seek waivers which would cause economic and political embarrassment for Canada. Canada would be caught in the middle between pressures from the U.S. and probable pressures for various types of waivers from other countries if the U.S. waiver were obtained;

(c) A chain reaction of trade restrictions might be set up and the benefits which the U.S. would obtain under its waiver would be more than offset by increased trade obstructions generally;

(d) GATT would be undermined and its value to Canada and other countries would be lessened;

(e) The integrity of the GATT would be threatened if a major country [the U.S.]⁷ used the waiver procedure to gain exemption from obligations relating to a major segment of its trade; and

(f) This would impair Canada’s ability to negotiate with Japan because of the linkage of such negotiations with the waiver sought by the U.S.

2. Mr. Howe stated that the past ad hoc procedure under Section 22 and the GATT had met the U.S. problem without hurting the Canadian economy too much and it would be preferable that this procedure could be continued. He stated that Canada would support the U.S. on such a basis. He emphasized, however, that a general waiver probably would cause the imposition of tariffs and other obstructions by many countries to protect their agriculture and the chances of getting these additional restrictions lifted would be very slender. Other countries would, for financial reasons, prefer to resort to such restrictions rather than continue to give subsidies to the domestic agriculture. The United States request for a waiver would give them a good excuse to follow that course.

Howe said that there was a sentiment for withdrawal from the GATT rather than going along with the general waiver, since many groups in Canada felt that it would be preferable to trade with the United States on a bilateral basis as in the past.

Howe suggested that the U.S. look at GATT Article XI which he read to the meeting. He put principal emphasis on paragraph 2(c)(i) and (ii) which read as follows:

“(c) Import restrictions on any agricultural or fisheries product, imported in any form, necessary to the enforcement of governmental measures which operate:

(i) to restrict the quantities of the like domestic product permitted to be marketed or produced, or, if there is no substantial domestic production of the like product, of a domestic product for which the imported product can be directly substituted; or

(ii) to remove a temporary surplus of the like domestic product, or, if there is no substantial domestic production of the like product, of a domestic product for which the imported product can be directly substituted, by making the surplus available to certain groups of domestic consumers free of charge or at prices below the current market level;”

3. Mr. Harris noted that the many representations and deputations he receives as Finance Minister state that Canada has lived up to its GATT obligations but that the U.S., which is Canada’s chief customer does not. A public avowal by the Canadian Government that it approves the general waiver under Section 22 sought by the United States would have most unfortunate effects in Canada. He said that there is already a strong and growing feeling in Canada as to whether Canada should continue to participate in the GATT. He emphasized that he must deal with this matter in the budget speech before Parliament.

4. Secretary Dulles replied that the U.S. realizes this is a serious matter and welcomes the Canadians’ coming to Washington to discuss it as friends.

He noted that by and large the U.S. has pursued, over the last few years, an enlightened economic and trade policy. He explained that this was not always very easy for the U.S. Government as the vast size and intricate nature of the U.S. and its economy make it difficult to persuade and educate the people generally as to what is in our enlightened interest. He noted that some legislators see the trade and tariff problem as it affects their local areas rather than the nation, and this affects their attitude on trade legislation. He added that the President is not discouraged by the past development of his foreign economic policy and that he hopes to obtain the enactment of legislation this year that will enable him to push ahead with the foreign economic program that he announced last year and which he will again outline to the Congress on January 10. He noted the introduction in Congress of HR-1, the Trade Agreements Extension Act of 1955.⁸

The Secretary said that our views, which he felt are also those of the Canadians, is that a free world united by strong and close trade ties is indispensable to the fullest economic strength and cohesion of the free countries.

Secretary Dulles noted that the practical occasion and need for the waiver we are requesting at Geneva will diminish as Secretary Benson’s programs for production adjustments and surplus disposals go forward. He mentioned specifically, for example, the beneficial use of surpluses in aid to Yugoslavia and Pakistan. He stated that the U.S. has to request a general waiver at Geneva because of the explicit provisions of Section 22, and at present there is no possibility of getting this law repealed. Now that the GATT is being revised, and since the GATT organization has to be approved by the Congress, the U.S. has no choice but to ask indulgence of our friends in this matter. The U.S. must have this waiver if it is to succeed in getting approval by the Congress of the GATT organization being negotiated at Geneva. The President has said that he would seek Congressional approval of this organization.

He said that he does not believe U.S. actions will “bust the GATT wide open” and lead to a trade restriction spiral. On the contrary, we wish to avoid this. The waiver we request would give us breathing time to correct our present agricultural surplus problem.

5. Mr. Randall referred to Mr. Howe’s suggestion for modifying GATT Article XI to cover the requirements of Section 22. He stated that the requirements of Section 22 are far broader than the exceptions allowed under Article XI. He emphasized that the U.S. Executive Branch is not a free agent in this matter because of existing law, and emphasized that the stakes in this issue are much larger as the purposes of the Trade Extension Act will fail if Congressional approval of GATT fails. If we lose the GATT, we lose the mechanism whereby we can engage in multilateral tariff negotiations. He stated that the main point in the U.S. Congress is that GATT will not pass if there is any suggestion that the Executive Branch is limiting or compromising domestic law; i.e., no executive power nor international agreement can contravene or override Section 22.

6. A rather lengthy discussion ensued as the possibility of modifying Article XI to embody Section 22. The general consensus was that a broadening of Article XI to cover Section 22 was no better than a waiver of the type being proposed by the U.S. and would create serious additional problems in itself. Mr. Randall, in answer to a question by Mr. Pearson, emphasized again that approval of the GATT by the Congress was necessary for an adequate effectuation of the Trade Extension Act. Mr. Randall explained that the issue of executive-legislative powers and the superiority of domestic law would be injected into the debate on the Trade Extension Act unless the U.S. obtained a waiver under GATT that made it crystal-clear that there would be no conflict between the two.

7. Mr. Howe suggested that one means of solving the problem would be to put off Congressional action on GATT until next year. Mr. Randall replied that this was impossible as the GATT and the Trade Extension Act were both necessary and were supplementary to each other. He stated that trading without GATT would be impracticable as this was the instrument of U.S. multilateral trading.

8. In reply to a question by Mr. Waugh, Mr. Howe said he had no proposal for a modified waiver, such as one including a time limitation.

9. Secretary Dulles closed for the U.S. by stating that the U.S. will continue to do in the future as it has done in the past in that it will take into consideration the interests and problems of its friends.

10. Mr. Pearson stated that Canada hopes to avoid, both in Parliament and at Geneva, the taking of a position in opposition to that of the U.S., but he did not state that would be possible.

11. Mr. Pearson handed to Secretary Dulles the attached memorandum⁹ at the close of the meeting.

12. The attached statement was handed to the press at the close of the meeting.¹⁰

13. The meeting adjourned at 4:55 p.m.

2. Source: Department of State, GATT Files: Lot 63 D 134, Section 22. Confidential.
3. See footnote 4, Document 10.
4. The waiver would release the United States from its obligations under Articles II and XI where these articles conflicted with Section 22. The text of the waiver which was ultimately granted to the United States on March 5, 1955, is printed in Contracting Parties to the General Agreement on Tariffs and Trade, Basic Instruments and Selected Documents, Third Supplement (Geneva, 1955), p. 32.
5. The General Agreement on Tariffs and Trade (GATT) was concluded by the United States and 22 other nations at Geneva, October 30, 1947, for the purpose of reducing trade barriers among participating countries.
6. Reference is to the Ninth Session of the Contracting Parties to the General Agreement on Tariffs and Trade, which convened at Geneva, Switzerland, on October 28, 1954. During this session the contracting parties conducted a full review of GATT provisions in the light of its 7 years in operation. For documentation on the negotiations in late 1954, see Foreign Relations, 1952–1954, vol. I, Part 1, pp. 208 ff.
7. Brackets in the source text.
8. Public Law 86, enacted June 21, 1955; for text, see 69 Stat. 162.
9. An undated memorandum formally presenting the Canadian position on the U.S. waiver request; not printed.
10. Reference is to Department of State press release 7, dated January 6, not printed.