Foreign Relations of the United States, 1958–1960, Eastern Europe; Finland; Greece; Turkey, Volume X, Part 2

57. Memorandum of Conversation⁰

Washington, November 6, 1958.

SUBJECT

• Discussion of Economic Subjects

PARTICIPANTS

• Mr. Boleslaw Jaszczuk, Vice Chairman of the Planning Commission of the Council of Ministers
• Mr. Franciszek Modrzewski, Vice Minister of Foreign Trade
• Dr. Tadeusz Lychowski, Economic Minister, Polish Embassy
• E—Mr. Beale
• OT—Mr. Frank
• EE—Mr. Colbert
• TA—Mrs. Kallis
• LS—Mr. Muromcev

Mr. Beale expressed his great pleasure at the opportunity to meet Mr. Jaszczuk and Mr. Modrzewski. Following an exchange of pleasantries, Mr. Modrzewski asked what arrangements might be contemplated for beginning the next economic negotiations. Reference was made to the previous discussion of this matter between Mr. Beale and Dr. Lychowski,¹ and Mr. Modrzewski suggested that the next appropriate step might be for Dr. Lychowski to meet with Mr. Beale for the purpose of initiating discussions. Mr. Beale expressed his willingness to meet with Dr. Lychowski whenever the latter was ready to begin economic talks.² Mr. Beale added that he could not guess when we would be able to begin to discuss American property claims against Poland, but he was of the opinion that we would be ready soon and that these discussions could be undertaken during the course of the economic negotiations.

Mr. Modrzewski then turned to the question of Poland’s interest in GATT and said that he wished to ask Mr. Beale’s advice as to what it should do next in this regard. Mr. Beale said that he could best give advice against the background of the situation at the current GATT session at Geneva. He said the Yugoslav observer had made a statement in which he explained that Yugoslavia could not make the full commitments required of Contracting Parties to the GATT and that Yugoslavia did not wish to undertake commitments which it could not meet.³ He suggested that there might be some kind of associate participation, the exact form to be decided by the Contracting Parties. Mr. Beale said that there was no formal discussion of the Yugoslav statement, but rather informal discussion between delegations. Mr. Beale ventured a guess that a working party would be set up before the end of the present Session to consider whether some new type of relationship would be a good idea and, if so, what form it should take. Such a working party could be expected to report at the next plenary session in the spring of 1959 rather than in the autumn. While the task of the working group would be to consider the problem of associate participation in principle it would also have in mind the Yugoslav proposal, as well as the Polish interest in the GATT. As to advice, Mr. Beale suggested that the Poles think over a possible GATT relationship in terms of associate participation, and that they wait for an indication of the results on Yugoslavia. It would be advisable, Mr. Beale added, for the Poles to talk to the Executive Secretary of the GATT about putting the Polish question on the agenda for the next GATT Session. The question of associate participation is not an easy one for the Contracting Parties, he said. They are proud of the kind and tone of relationship that has been built up in the GATT and are anxious to maintain it.

Mr. Modrzewski replied that Poland wants to receive and also undertake privileges and responsibilities in the GATT. With respect to the U.S., he asked whether the Poles could expect to receive MFN treatment before the GATT issue is decided. Mr. Beale replied that it might be possible for the U.S. to extend MFN to Poland on a unilateral basis before the question is resolved. Mr. Modrzewski asked why the Polish question had to wait upon the Yugoslav application when Poland had started much earlier. Mr. Beale replied that the Yugoslav matter is more advanced, and is on the agenda, whereas the Polish question is not. Mr. Modrzewski appeared to accept the fact that the Contracting Parties have to examine associate participation in principle, and agreed with Mr. Modrzewski that the solution for Yugoslavia and Poland need not necessarily be the same.

In reply to Mr. Modrzewski’s query to Mr. Beale as to whether he thought that a GATT Working Party would arrive at the conclusion that associate membership was desirable, Mr. Beale said it was his personal opinion that while some of the members might not necessarily find the argument for associate membership persuasive, he thought there was a good chance that an exceptional procedure of this type might be contrived and not be inconsistent with the general course of GATTs evolution.

Dr. Lychowski referred to the exchange of questions and answers between the GATT Secretariat and the Polish Government on the technical aspects of Poland’s possible accession. He said he had been informed by Poland’s Geneva representative last month that all technical questions relating to Poland’s membership in GATT had now been resolved. Mr. Beale and Mr. Modrzewski both told Dr. Lychowski that this did not agree with what they had been told at Geneva. Mr. Frank added that examination of the Polish answers in the light of Poland’s possible accession as a full Contracting Party would be a long and possibly fruitless exercise. It was on this account that associate participation was being suggested as a possible solution of the Polish problem. Dr. Lychowski then observed that apparently the advice he had received from the Polish representative in Geneva had been incorrect. Mr. Modrzewski said that Mr. Wyndham White had given him the same advice as Mr. Beale had just expressed, namely to wait for further developments especially with regard to the positions of the U.S. and UK Governments. Mr. Modrzewski said that he had had a discussion in Geneva with the chief British representative, Sir David Eccles, who, he said, had been favorable toward associate participation for Poland and who had also given him the same advice. Dr. Lychowski commented that discussion in the GATT has shown that, apart from the technical problems involved with respect to Poland, a request for membership of a special kind is advisable. Mr. Beale replied that this seemed to be the case and it was clear that people had not made up their minds. If a decision were forced, the outcome might be bad. Mr. Frank commented that full accession in the GATT is understood, but that associate participation is new and there must be consideration of what should be included. In reply to Mr. Modrzewski’s reference to the formula suggested by the Executive Secretary,⁴ Mr. Frank said that this was proposed only as a basis for discussion and was a very tentative draft. Mr. Colbert asked whether, in Mr. Modrzewski’s opinion, Poland might be able to accept associate participation in GATT along the general lines of the Executive Secretary’s statement. Mr. Modrzewski replied that the draft might be an acceptable basis and Dr. Lychowski added that such an arrangement could be basically acceptable if practical difficulties could be resolved, not through the GATT but bilaterally. He referred specifically to MFN treatment by the U.S. on a unilateral basis and indicated that there might be similar special problems with respect to other Contracting Parties. Mr. Modrzewski explained that 80% of the Contracting Parties already give MFN treatment to Poland. Germany does not and the only contractual arrangements between Poland and Germany have been on a short-term basis, two or three months. Only recently, he said, Poland had rejected a 50 million DM credit offered to Poland because, in the absence of contractual arrangements for the conduct of trade, there was no assurance that Poland could repay the debt. Mr. Modrzewski added that all of Poland’s present trading arrangements are on a bilateral basis and that Poland is interested in the GATT because it wants to move to a multilateral basis.

Dr. Lychowski raised a final point on the relationship between Poland’s interest in the IBRD and the IMF and the GATT. He referred to Mr. Dillon’s expression of opinion last spring that it would be more appropriate for Poland to make arrangements regarding GATT first, and then with the Bank and Fund.⁵ Dr. Lychowski wondered whether the delay now being encountered by Poland with regard to GATT, which was not Poland’s fault, would lead to a further delay regarding the Bank and the Fund. He also said that of course Poland saw no connection between membership in GATT and membership in the Bretton Woods organizations, but that they had accepted our advice as to the priorities. After some discussion of this matter, Mr. Beale said that the situation with respect to prospects of Bank and Fund membership was unclear, and that he did not want to speculate as to what the reactions would be by members of these two organizations in the event Poland received associate status in the GATT. Mr. Frank observed that associate membership for Poland should accelerate rather than delay consideration of Polish membership in the Bank and Fund.

0. Source: Department of State, Central Files, 848.00/11–658. Confidential. Drafted by Colbert and Selma G. Kallis and initialed by Kallis and Beale. W.T.M. Beale, Jr. was Deputy Assistant Secretary of State for Economic Affairs.
1. Reference presumably is to a conversation between Beale and Lychowski on September 17. A copy of the memorandum of that conversation, September 17, is Ibid., 748.5–MSP/9–1758.
2. Beale met with Lychowski on November 10, and they arranged that the first meeting would take place on November 17 and the second on November 21. (Memorandum of conversation, November 10; Ibid., 848.00/11–1058) The meetings in November were postponed and the U.S.-Polish economic assistance negotiations did not begin until March 4, 1959; see Document 67.
3. Yugoslavia formally applied for associate participation in GATT at the 13th Session which met in Geneva October 16–November 22. Yugoslavia was accepted by the GATT Secretariat as an associate member of GATT on November 18.
4. In a November 6 memorandum to Kohler, Colbert and Kallis reported that Wyndham White discussed this question with Modrzewski and told him that full accession by Poland to GATT was out of the question for the time being because most of the GATT Contracting Parties believed that GATT afforded no basis for a realistic exchange of obligations by GATT members with a state trading country. Wyndham White had advised the Poles not to press for full accession but to consider the possibility of a limited form of association in order to avoid the risk of a formal rejection if the matter were raised prematurely. (Department of State, EE Files: Lot 67 D 238, GATT July 1–Dec. 31, 1958)
5. Dillon’s remarks have not been further identified.