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

26. Minutes of a Meeting, Washington, March 15, 1955¹

Washington , March 15, 1955

PARTICIPANTS

• Mr. Randall, White House, Presiding
• Dr. Hauge, White House
• Mr. Butz, Agriculture
• Mr. Overby, Treasury
• Mr. Rose, Treasury
• Mr. Morton, State
• Mr. Waugh, State
• Mr. Wormser, Interior²
• Mr. Smith, Commerce³
• Mr. Kalijarvi, State
• Mr. Marget, Federal Reserve Board⁴
• Mr. Hutchinson, Budget ⁵
• Mr. Schneider, Justice
• Mr. Hall, FOA ⁶
• Captain Thorp, Defense⁷
• Mr. Arnow, Labor⁸
• Mr. DeFelice, Agriculture⁹
• Mr. Fields, Treasury¹⁰
• Mr. Frank, State
• Dr. Galbreath, White House
• Miss Kirlin, State
• Mr. Leddy, State
• Mr. Metzger, State
• Mr. Schaffner, Treasury
• Mr. Schalet, Treasury
• Mr. Thibodeaux, State
• Mr. Weiss, State
• Mr. Blake, State, Secretary

After some opening remarks regarding the status of H.R. 1 in the Senate Mr. Randall stated that the purpose of the meeting was to examine the various documents resulting from the GATT Session with a view to having Mr. Waugh sign them on behalf of the United States. Mr. Randall then asked for Mr. Brown’s comments on the GATT Review.

Mr. Brown stated that the Delegation was of the opinion that the United States had secured substantially all that it had been instructed to obtain during the review of the Agreement. The Delegation had been successful in keeping out of the Organization Agreement provisions dealing with restrictive business practices, international investment, and many other fields of international trade policy not related to tariffs. The proposals of other countries for the inclusion of certain chapters of the ITO Charter had been decisively rejected. The organizational provisions of the present General Agreement had been extracted from it and incorporated into a new Organization Agreement. The stability of the tariff concessions had been assured by their extension to the end of 1957 with a provision for their automatic extension for another three years after that time. In connection with this last point it had been necessary, however, to agree to a rather complicated renegotiation procedure to apply during the period of the firm life of the concessions.

Mr. Brown went on to note that the fair share concept relative to the export of agricultural subsidies had been written into the new Article XVI.¹¹ Moreover, the United States had secured a waiver in connection with restrictions required under Section 22 of the Agricultural Adjustment Act, as amended. This waiver would leave the United States complete freedom of action with regard to the imposition of such restrictions and has no stipulation as to time. Its provisions for notices to countries affected by a proposed restriction and for consultations with them are consistent with United States practice. Mr. Brown expressed the view that the United States obtained the waiver because other Delegations were convinced that it was necessary to secure Congressional approval of United States participation in the proposed Organization for Trade Cooperation. The fact that the United States had employed Section 22 restrictions sparingly, with the possible exception of those imposed on dairy products, had also influenced the negotiations.

Mr. Brown stated that the balance-of-payments provisions of the renegotiated GATT were substantially the same as the present provisions. However, there had been some simplification of them, and there was provision for their more effective enforcement. A change in their emphasis in the direction of the United States point of view had also been effected. A new feature of them provided for regular consultations by all countries imposing quantitative restrictions for balance-of-payments reasons. These consultations would be on an annual basis for the developed countries, and on a biennial basis for the underdeveloped countries. Under the present arrangements, all countries are not required to consult at the GATT sessions.

Related to the balance-of-payments provisions was the “hard core” problem, i.e. the desire of certain countries to continue to restrict imports after the balance-of-payments justification for such restrictions had come to an end. This problem was handled by a waiver arrangement which was considerably more strict than that covering the Section 22 waiver of the United States. Countries desiring to impose “hard core” restrictions would have to secure specific approval of the Contracting Parties, would have to show that the product in question had received incidental protection during the period when balance-of-payments restrictions were being imposed, that the removal of the restrictions on imports of the products concerned would work severe social and economic hardship on the applicant country, and that no other means was available for handling the problem under the Agreement except through the imposition of temporary restrictions on imports. The country satisfying the Contracting Parties on these points would still be required to furnish annual reports on the measures taken in connection with the waiver, the policy it was following in order to eliminate the causes of the problem, and, in addition, would have to guarantee to other countries that the volume of imports from them would be no less than that which had been permitted during the period when the general restrictions imposed for balance-of-payments reasons had been in effect.

Mr. Brown referred to the problem of the underdeveloped countries at the GATT Session. He stated that it had been generally agreed that some relaxation of the GATT rules would be necessary in order to encourage the underdeveloped countries to continue to adhere to the General Agreement. To meet this problem Article XVIII of the renegotiated GATT was made more flexible than the existing Article. The underdeveloped countries would have slightly more freedom than they now have to withdraw or modify tariff concessions, and to impose quantitative restrictions for the protection of infant industries. Moreover, they would only be required to consult every other year in connection with restrictions imposed for balance-of-payments reasons.

In conclusion, Mr. Brown stated that all the other GATT countries were looking anxiously to the United States to see what this country would do vis-à-vis the proposed Organization for Trade Cooperation. He pointed out that if the United States does not join the Organization then it will not come into existence. Other countries feel that United States willingness to participate in the OTC is more important than the passage of H.R. 1. This feeling is based not only on the importance of the United States in the world trade community, but also because the GATT after seven years, has much to commend it as an instrument of international trade policy. Mr. Brown concluded his remarks by paying warm tribute to the members of the United States Delegation and the excellent cooperation the Delegation had received from Washington.

Mr. Randall asked whether there were any comments the members of the group desired to make.

Mr. Marget stated that he was pleased that the United States had emerged so well from the Geneva negotiations. In his opinion, the Agreement was respectable, forward-looking and, in addition, it made sense.

Mr. Overby noted that Treasury had some problems in connection with the degree of latitude that was to be given to the underdeveloped countries and also with respect to the possibility that commodity arrangements might be associated with the proposed Organization. He asked whether it would be possible to state during the presentation of the Organization Agreement to the Congress that the Agreement was reasonably divorced from commodity arrangements.

Mr. Brown stated that when the United States Delegation went to Geneva it found a strong desire among the majority of the countries for the creation of a world trade organization that would deal with all aspects of international commerce. Several countries made a strong effort to include Chapter 6 of the Havana Charter in the renegotiated GATT. This effort was defeated. A Working Party had been created to develop a separate convention on international commodity policy. The United States did not participate in the Working Party but its influence was felt. If the work of this separate Working Party materialized, a separate international body with functions in the commodity field would be created. This body would be opened to all governments for membership, including countries not members of the OTC. He felt that it would be accurate to say that the commodity agreement drafted at the Ninth Session had been “split off” from the proposed OTC.

Mr. Randall expressed some concern over the fact that so many other governments were desirous of establishing agreements in the international commodity field. In his view such agreements were the complete opposite of everything which the United States represented.

Mr. Overby noted that a problem appeared to be developing in connection with a strong desire in the Congress to impose import restrictions on foreign oil. He asked what the situation would be under the renegotiated GATT if such restrictions were imposed.

Mr. Brown stated that import restrictions might be imposed as part of an escape clause action. He noted, however, that such restrictions would have to be non-discriminatory in character, and that if they were imposed for reasons of national security they would still have to be non-discriminatory. Dr. Hauge noted that a certain amount of automatic discrimination was involved in the selection of the base periods used in connection with the allocation of the import quotas.

Mr. Rose asked whether there would be any change in the escape clause provisions of the GATT. Mr. Brown replied in the negative, stating that a contracting party would still have the right to withdraw or modify concessions under Article XIX. Countries affected by such withdrawals or modifications would be free to withdraw such compensatory concessions as the Organization would not disapprove.

Dr. Hauge asked whether the removal of quantitative restrictions for balance-of-payments reasons might be accompanied by a rise in escape clause actions with respect to imports from the United States. Mr. Brown stated that such actions might increase but that they would not amount to more than two or three a year at the very most. He did not think that this figure would be significantly increased after convertibility.

Mr. Randall stated that the United States Delegation appeared to have fulfilled very well the objectives of the President’s message of March 30, 1954 on foreign economic policy in which he had indicated that the Administration would seek a review of the General Agreement on Tariffs and Trade.¹² There was every reason to believe that the renegotiated GATT, strengthened by a permanent Organization to administer its provisions, would significantly contribute to the development of outlets for American agriculture and industry through the progressive elimination of unjustified hinderances to international trade. He, therefore, suggested that the Executive Branch endorse the GATT as it had been renegotiated in Geneva and the Organization Agreement by authorizing Mr. Waugh to sign the appropriate documents in Geneva on behalf of the United States. There being no dissent, Mr. Waugh was so authorized.

1. Source: Department of State, GATT Files: Lot 59 D 563, Memos, 1955. Limited Official Use.
2. Felix E. Wormser, Assistant Secretary for Mineral Resources, Department of the Interior.
3. Marshall M. Smith, Deputy Assistant Secretary for International Affairs, Department of Commerce.
4. Arthur W. Marget, Director of the International Finance Division, Federal Reserve System.
5. Edmond C. Hutchinson, Staff Assistant to the Director, Bureau of the Budget.
6. Edward B. Hall, Director of the Office of Trade, Investment, and Monetary Affairs, Foreign Operations Administration.
7. Capt. Wakeman B. Thorp, USN, Office of International Security Affairs, Department of Defense.
8. Philip Arnow, Associate Director, Office of International Labor Affairs, Department of Labor.
9. A. Richard DeFelice, Director of the Trade Policy Division, Department of Agriculture.
10. Morris J. Fields, Office of International Finance, Treasury Department.
11. The amended article stated that an export subsidy which is authorized by the contracting parties should not result in the beneficiary country gaining more than “an equitable share” of the export market based on its previous exports of the subsidized product.
12. The President’s message to Congress is printed in Department of State Bulletin, April 19, 1954, p. 602.