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

24. Draft Report by the Acting Chairman of the Delegation to the Ninth Session of the General Agreement on Tariffs and Trade (Brown)¹

Washington, March 9, 1955.

The regular report of the Delegation² has described the main issues dealt with in the Review Session³ and the outcome from the point of view of achievement of the US objectives, as well as an appraisal of the results from the point of view of the General Agreement as a whole. This report deals with some of the underlying attitudes and problems which were revealed in the course of the session, and attempts an appraisal of some of the intangibles involved. It also describes some of the more important negotiating problems which may come up to give trouble in future sessions. It also includes the customary comments on some of the more important individuals in the Session.

General Impressions

The consensus of opinion of delegates who have participated in previous sessions of the GATT and in its negotiation in 1947 was that this session involved a far more difficult negotiation than any previous session. The reason for this is apparent, namely, that the delegates at this review session were dealing far more with actual realities than they were in 1947. At that time most of the commitments taken by the non-dollar countries were blurred by the ever-present opportunity for recourse to quotas for balance-of-payments reasons. Under the comfortable shelter of this admittedly essential protection, many provisions of the GATT and many commitments involved in it seemed less real than they do today. Thus most countries were reluctant to take on new obligations because they realized that their acceptance of those obligations involved them in more definite and real commitments than had been the case before. Many even wished to re-examine existing commitments, which, because of the improvement in the general world situation, were beginning to take force and bite where they had not had practical effect before.

Moreover, when the General Agreement was first negotiated it was done in the anticipation that the Havana Charter⁴ would come into effect. In the case of a good number of countries, particularly the underdeveloped countries, the Charter would have given certain escapes which are not present in the General Agreement and which during the present Review Session failed of inclusion in the General Agreement.

It is not surprising, therefore, that this Session did not result in any very great changes in the General Agreement. This is the more understandable because the Review of the Agreement revealed that in fact it was a far tighter and better Agreement than had perhaps been realized before. The rules against use of quotas for protective reasons, the obligation to maintain tariffs at the rates bound in the schedules, the obligation not to discriminate or obstruct imports through non-tariff and non-quota measures, have been in the GATT since the beginning. But their significance has been to a large extent submerged because of the extent of balance-of-payments restrictions. With the improvement referred to above in the world situation, these obligations stood out in the minds of the delegates as real commitments. True, they had not been applied in the past. But they were there as legal obligations. Actually, the rules against the use of quotas and the rules against discrimination needed little strengthening. What they needed was better enforcement. In this respect the Agreement was improved.

Another factor which stood out clearly was the inherent limitation on the capacity to effect major changes in countries’ internal policies by international agreement. In case after case where a really important national interest was involved the country concerned simply refused to take a commitment to change its national policy. Countries were willing to accept limitations on their freedom to act in many ways. They were willing to accept commitments to maintain the status quo. But on big issues they were not yet ready to bind themselves to make major changes in national policy, even to get others to accept the same obligations.

This was particularly clear in the case of United States with respect to Section 22, American selling price, etc., France in connection with export subsidies, Germany with respect to the need to protect the hardcore of its agricultural production, the underdeveloped countries with respect to their programs of economic development, and so forth.

The problem, therefore, was how to work out rules which met the majority of the cases on a sound basis and provided leeway where they ran into some really immovable national interest. This is the reason for the waivers granted at the Session.

It was felt that it was healthier not to change basic rules which were considered to be right simply to meet a few major individual difficulties. It was rather thought preferable to deal with these by specific dispensations, tailored so far as possible to meet the particular case, and carrying as strict conditions as the country involved was able to accept.

The approach of delegates to the Review revealed two basic schools of thought. The first was that of the large majority which believed that the Contracting Parties should be expanded into a very broadly-based permanent trade organization comparable to the proposed ITO. The other, in which the United States was the leader, and which was very much smaller, believed that the new organization should be primarily confined to administration of the General Agreement and closely related matters. A large part of the time of the Conference was taken up in discussing and defeating efforts to expand the scope of the new Organization into the fields of commodities, cartels, investment, full employment, etc.

In this and other senses a great deal of the achievement of this Conference lay in what was not done.

US Negotiating Position

The US negotiating position in the meeting was handicapped and the US influence considerably diminished, by three main facts. The first was the necessity to ask for a blanket waiver to cover all actions that the United States might in the future wish to take under Section 22 of the Agricultural Adjustment Act.

The second was the fact that we had to oppose so many substantive things desired by other countries, and that in that opposition there was practically no flexibility in our position. We were, for example, unable to accept any commitment with respect to consultation on disposal of surpluses or liquidation of strategic stocks. We were the only country that was unwilling to do anything in the field of commodity agreements. What we were able to accept with respect to subsidies was limited as compared to what others felt was reasonable. We had to insist on retaining the right to subsidize even when no domestic price support arrangements were involved and no arbitrary restrictions were being imposed against us; in other words, when all that was involved was free competition. We were unable even to take a commitment to give notice to countries that were interested in our liquidation of surplus stocks through diplomatic channels when we had given formal public notice.

The third was the continued insistence of the United States on taking positions for presentational reasons at home which seemed unreasonable or unnecessary to other countries, while at the same time opposing the inclusion, or insisting on exclusion, of provisions in the Agreement which other countries felt were necessary for their own presentational reasons. It was true in this Conference, as has been in the case in others attended by the writer, that the United States, more than any other country, tends to insist on presentational points in matters of detail in a manner which creates great difficulties in negotiation. This is perhaps due in part to the compartmentalization of thinking in the United States Government, perhaps inherent in its size, but it is a handicap which could to a considerable extent be avoided, and which it would be very helpful to avoid, in future negotiations.

The fact that the United States asked for a waiver for Section 22 overshadowed the whole Conference on every major issue in which we attempted to seek strengthening of the rules or of their enforcement, or to ask other countries to accept obligations to give more access to our goods, or to lessen discrimination against them. We were met with the simple question, “You are not willing to accept any obligation with respect to imports of agricultural products which might perhaps someday come under one of your agricultural programs. Why should we?” Or put more simply, “You tell us that you have a real problem because of the existence of your agricultural programs and Section 22. We believe you and we will reluctantly accommodate you, but we have a problem too and we must expect you to accommodate us”. That the final result contains as satisfactory rules from the point of view of the United States as it does (for example, that the so-called hard-core waiver is as tight as it is),⁵ is a tribute to the importance that other countries attach to the presence of the United States in the GATT. But this position did not enhance our prestige in that Organization.

The net result of all of this was to create an impression that the United States was always insisting on having its own way. This strengthened the feeling of a large and important bloc of countries that the GATT is an unbalanced and inequitable agreement largely tailored to accommodate the needs of the US.

US insistence on retaining the right to subsidize, and particularly refusal to accept the equitable share test as applied to individual markets rather than world markets, gave rise to many caustic comments about the US as the great exponent of free competition being unwilling to accept the fact that a country might win a market by straight competition. Moreover, it was exceedingly difficult to preach the virtues of competition to the underdeveloped countries and argue against protection of manufactured goods and agriculture in Europe against the background of our double-barreled insistence on the right to use Section 22 to protect our agriculture and the right to continue the use of export subsidies for our agriculture even in cases where there was no price support and no artificial barriers against our exports.

Negotiating Positions on Various Issues

The annex to this report (to be supplied)⁶ gives a résumé of the important factors and attitudes involved in the negotiations on each of the major issues of the Conference.

One of the significant developments which could not be much publicized was the complaint made by the Danes against the export price activities of the Coal and Steel Community. In the course of the review of the Coal and Steel Community’s report, the Dane⁷ made it plain that he considered export prices of the Community members to be inequitable and that Denmark was having to pay much higher prices for steel from the Community than other recipients of the Community’s steel. The Community resisted the complaint, but finally, under pressure, provided the Danes with a great many facts and figures which it had theretofore consistently refused to give him. An examination of these facts and figures looked on their face as though the Dane had spoken too soon in making his claim. He, therefore, agreed to withdraw the complaint from the Ninth Session agenda but reserved his right to revert to it at a later session pending study of the figures and finding out whether the figures were complete and accurate. The Coal and Steel Community sent four representatives down to listen to this withdrawal, which took about 30 seconds, and also sent along a press officer who, according to reliable correspondents, tried to give the impression that the Dane had fully abandoned his complaint and that he had been proved to have been entirely wrong, an interpretation not supported even by the reading of the actual press announcement.

This development further reflects the inordinate sensitivity of the Community throughout all examination of its report to any kind of criticism, or in some cases even to questioning, particularly on anything having to do with the cartel issue. It also boomeranged on the Community because the Dane protested the Community’s revelation of action taken at private sessions of the Contracting Parties and their biased representations to the press. In this he was unanimously upheld by the CPs. A press denial was issued, and a formal protest sent by the Chairman of the CPs to the High Authority.

The granting of our waiver for Section 22,⁸ of course, left a bad taste in everyone’s mouth because of its extremely broad terms and the precedent which everyone feared it would establish. A great many of the delegates felt somewhat less badly about the matter, however, because they did expect the United States to continue to be moderate in the use of Section 22. Much of the harm done by this waiver can be avoided and its effectiveness as a precedent for others can be greatly diminished if we continue this policy of moderation. If in practice it turns out, as it has in so many cases in the past, that the use of the Section really is limited to cutting off excessive and abnormal imports and that what might reasonably be considered to be a fair and normal share of the trade continues to be allowed to enter, we will in the future be in the position to argue much more effectively against unreasonable requests by others. Our legal position may not be much better, but our moral and negotiating position will be infinitely better. Such behavior will also protect us against the possibility of the waiver being withdrawn.

Delegations and People

One of the difficulties faced by the delegates was the fact that this Conference was not strongly led. The British Delegation started out vigorously as the leader of the group wishing to strengthen the balance-of-payments provisions. For a variety of reasons it was not able to maintain real leadership throughout the Conference. Many of the proposals it made, for example, the two-year time limit for balance-of-payments restrictions, were unrealistic and obviously foredoomed to failure. They were also opposed by a large portion of the Commonwealth. The British Delegation was not of the high calibre of its delegation in 1947; the acting leader, Edgar Cohen, of the Board of Trade, being sporadically brilliant, but not a personality calculated to be effective in a prolonged negotiation with a wide variety of countries.

The British Delegation was particularly weak, for example, in contacts with Latin America. They made little apparent effort to cultivate the Latin Americans and to dissipate the deep suspicion with which the Latin American delegates as a group regard anything British. They frequently, for example, made the mistake of approaching Latin Americans through an Indian or a Pakistani. Nothing could have been better served to annoy the Latins, or to make them feel that their suspicions that Britain dominates the Commonwealth were correct.

The United States was not able to exercise the same leadership as it had in the past because its general prestige and moral standing in the meeting was so diminished by its request for the Section 22 waiver, the other factors described above and its unwillingness to accept any commitments with respect to inconsistent existing legislation.

The entire performance of the French Delegation was deplorable. Throughout the meeting they did their very best to disrupt and sabotage the efforts of those who wished to strengthen the GATT. They bid openly and in an almost humiliating manner for the support of the underdeveloped countries on anything that would weaken the provisions of the GATT. In so doing, according to one of their principal representatives, they were reflecting a philosophy of the French Government against any international commitments in the economic field. Thus anything that could make the GATT weaker was desirable from their point of view. They would not, however, for prestige reasons leave the GATT.

The Latin Americans were their usual difficult selves, Brazil being particularly irresponsible. The only time during which the Brazilian Delegation was in the least reasonable was during the brief period after Mr. Boucas⁹ came to Geneva as leader of the Delegation, and at the very end. Efforts by the United States Delegation to establish direct and friendly contacts with the Brazilian Delegation were not successful until Mr. Boucas arrived. After that much greater cordiality prevailed.

The Cuban Delegation was on the whole competent and friendly. The leader, Mr. Vargas-Gomez,¹⁰ is a sincere man who frequently gets fuzzy ideas in his mind and clings to them with the tenacity of a bulldog. Lack of clarity of thinking by the Cuban Delegation, an unwillingness to compromise on small points even when substantial concessions were made to the Cuban viewpoint, and obsession with particular problems (such as possible loss of advantage to the Dominican Republic in sugar), often made it most difficult to deal with the Cubans and at times seriously complicated and protracted the negotiations. There were, however, uniformly, cordial and friendly relations between the Cuban and US Delegations.

The Asian Delegations, with the exception of Ceylon and Indonesia, were on the whole extremely constructive and reasonable. Ceylon was somewhat difficult on commodity problems but otherwise cooperative.

The Turkish Delegation was uniformly friendly to the United States and helpful.

The chairman, Mr. Wilgress, presided with his usual skill. He is, however, getting on in years and was handicapped by the fact that he carries heavy responsibilities for Canada in NATO and was not able to give as much time to the meeting as on previous occasions.

Mitchell Sharp¹¹ of Canada and Paul Koht¹² of Norway were newcomers of very high calibre. Both are intelligent, clear in expression and capable of carrying responsibility in future sessions.

The two outstanding personalities in the meeting were Jha¹³ of India and Crawford¹⁴ of Australia. Jha was uniformly intelligent, instructive, cooperative and clear-thinking. He was wise in judgment, eloquent in debate, reasonable in approach and extremely well informed. More than any other Asian with whom the Delegation has had to deal, Jha thought like a Westerner. He also had the courage to take a Western position when he believed in it and support it with other underdeveloped countries who disagreed… .

Crawford of Australia was extremely cooperative and helpful. He also is highly intelligent, very clear-thinking, firm, humorous and well informed. He also has a great capacity for not wasting time and sticking to the point. The Delegation found him exceedingly satisfactory to deal with and it was possible at all times to be completely frank with him. On many occasions his subordinates tried to bargain too hard, but it was always possible by discussion with Crawford to come out with a reasonable and mutually satisfactory solution. He also would make a good chairman of the CPs.

In this connection one should also mention Westerman,¹⁵ who was in charge of the Australian Delegation for some time. He was most cooperative and competent. In fact, throughout the whole meeting, even despite initial very strong differences of opinion on balance-of-payments problems, subsidies, surplus disposal, scarce currency and the Section 22 waiver, it was always possible to work out a satisfactory agreement with the Australians. Moreover, Crawford was willing to take responsibility for a compromise, to put it forward himself and to defend it in Working Party and plenary. The best example of this was the help he gave in connection with our waiver and in connection with scarce currency.

One potentially very important development of the Conference was the failure of an effort to establish a real working relationship between the staff of the Fund¹⁶ and the GATT secretariat. While the writer would agree that certain members of the GATT secretariat had been rather irritating and that they did not start the discussions in a very intelligent or tactful manner, the final impression left with them and with members of the United Kingdom and other delegations is that the Fund staff simply did not want, or were unable to give, real cooperation. Rightly or wrongly, they gave the impression of being either unable or unwilling to discuss anything on an informal basis and to feel that every kind of discussion, even of small details, had to be done on a basis of the Executive Directors of the Fund speaking to the CPs as a whole. This result, of course, plays completely into the hands of delegations here which would like to see the influence of the Fund weakened in GATT matters. While the final report that came out is a generally satisfactory document, and looks all right on the surface, the writer believes that this problem is still basically unsolved.

No commentary on people would be complete without mentioning the Executive Secretary, Wyndham White. His ingenuity and skill in finding acceptable compromises and suggesting negotiating techniques was invaluable throughout the Conference. On many occasions (for example, scarce currency, full employment, Article XXVIII, reservation for existing legislation, organizational aspects), his suggestions to a large extent helped bail the United States out of difficult positions it was trying to hold. He, more than any other single person, was responsible for the fact that any agreement was reached on one of the most difficult problems before the Conference, Article XXVIII. He proved again to be one of the best friends the US has in the GATT and to be a key, if not the principal, figure making this enterprise work despite serious handicaps.

The office of the Executive Secretariat is also a very useful sounding board through which to sense the feelings of other delegations on important issues.

The Future

The writer believes that the General Agreement as it emerged from the review is a better agreement, and that the organization agreement is wholly satisfactory from the US point of view.

The GATT has become for many countries even more the symbol of our cooperation in the field of trade than the Trade Agreements Act. And it is the fact that the Organization for Trade Cooperation will never be born if the US does not join it. The writer doubts if the GATT could survive our rejection of the OTC, and the blow which our rejection would give to our political and economic relationships with other countries would be heavy indeed.

But assuming our participation, the establishment of the OTC would be only a first step. We will have to make it work. This means providing it with qualified people. We must have a really first-class representative on the Executive Committee and he must be adequately staffed and backstopped in Washington. Moreover, our greatest check on abuse of balance-of-payments restrictions by other countries to the detriment of our exports is through the consultations required by the new rules. These will be complicated and will require work and study, and qualified men to do that work for us. If we and others do not staff this enterprise properly it will fail.

1. Source: Department of State, GATT Files: Lot 66 D 209, GATT, Ninth Session Review. Secret. The report was circulated in this form as background material for the discussions of the Review Session scheduled for the week of March 13.
2. A copy of the Report to the Secretary of State by the Chairman of the U.S. Delegation to the Ninth Session of GATT is ibid., Report—U.S. Delegation.
3. The Ninth or “Review” Session formally ended March 7.
4. See footnote 6, Document 21.
5. The “hard core” waiver, approved March 5, allowed contracting parties a maximum 5-year period during which a quota could be maintained after the balance of payments difficulties which had originally justified it had passed. For text, see Basic Instruments and Selected Documents, Third Supplement, p. 38. See also Document 26.
6. Not found in Department of State files.
7. Reference is unclear.
8. The U.S. waiver was accepted by the necessary two-thirds majority on March 5 by a vote of 23–5 with 5 abstentions. Canada, Cuba, Denmark, the Netherlands, and New Zealand voted against the waiver; Brazil, Burma, Ceylon, Czechoslovakia, and South Africa abstained.
9. Valentim F. Boucas, head of the Consultative Council of the Brazilian Ministry of Finance, deputy leader of the Brazilian Delegation.
10. Andrés Vargas-Gómez, Minister Plenipotentiary, deputy leader of the Cuban Delegation.
11. Mitchell Sharp, member of the Canadian Delegation.
12. Paul Koht, Director of the Politico-Commercial Department of the Norwegian Ministry of Foreign Affairs, deputy leader of the Norwegian Delegation.
13. L.K. Jha, Joint Secretary of the Indian Ministry of Commerce and Industry, deputy leader of the Indian Delegation.
14. J.G. Crawford, Secretary of the Australian Department of Commerce and Agriculture, deputy leader of the Australian Delegation.
15. W.A. Westerman, Assistant Secretary of the Australian Department of Commerce and Agriculture.
16. International Monetary Fund.