Foreign Relations of the United States, 1955–1957, Foreign Aid and Economic Defense Policy, Volume X

196. Memorandum From the Assistant Secretary of State for Economic Affairs (Waugh) to the Under Secretary of State (Hoover)¹

Washington, January 27, 1955.

SUBJECT

• Curtailment of Oil Imports

The policy expressed in paragraph 4 in the Cabinet paper,² dealing with curtailment of oil imports, raises serious problems under the trade agreements—the GATT and the Venezuelan Trade Agreement.³ These agreements prohibit the institution or maintenance of quotas or other measures by any participating country which make effective prohibitions or restrictions on imports. Two possible let-outs from this commitment are the “escape” clause and the “security” exception clause in the two agreements. So far as the “escape” clause is concerned, it is not believed—and the sub-Cabinet Committee does not find—that imports are causing or threatening to cause serious injury to domestic producers. So far as the “security” exception is concerned, it would be difficult to make out a convincing case on this basis; in addition, since the “security” exception runs to everything in the trade agreements, our action on this basis under existing circumstances would pave the way for unraveling of all the commitments on the same basis by other countries whenever they felt they had the color of a case, a tendency which so far has not been pronounced.

The announcement by the Government of a policy of restriction would undoubtedly be taken by our trading partners to be the institution or maintenance of a restriction in violation of our commitment. We could try to make a public case based on either of the above-mentioned let-outs. Whether we succeeded or not, and it is doubtful that we would, the affected countries would be privileged to withdraw compensatory concessions made to us, or in the case of Venezuela, would have the right to terminate the agreement as well. Under these circumstances, it would be far better, at the time of announcing a policy, to state that appropriate consultations with the affected countries with whom we have trade agreements will be held. These consultations might lead to agreements on our part to compensatory withdrawals of concessions by them. We might be able to avoid, if such an announcement were made in the Committee’s recommendations, a disagreeable public exhibition of charges and defense. A sentence at the end of paragraph 4, along the following lines, is therefore recommended:

“The Committee recommends that appropriate consultations be held with affected countries with whom the United States has trade agreements.”⁴

1. Source: Department of State, Central Files, 411.006/1–2755. Official Use Only. Drafted by Metzger and concurred in by Potter and Nichols.
2. Reference is to the Report, supra.
3. Reference is to the Supplementary Trade Agreement signed at Caracas on August 28, 1952, and entered into force on October 11, 1952. For text, see 3 UST (pt. 3) 4195.
4. This sentence was not added to the report.