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Department of State bulletin (Volume v. 22, Apr- Jun 1950) online

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serious prejudice to the exports of a primary com-
modity on which the economy of another country
is highly dependent. The particular release
granted by Ito is not renewable at the end of the
initial period under this provision, i.e., it could
be renewed only under procedure (ii) below.
Also, the applicant member must apply these



measures "in such a way as to avoid unnecessary
damage to the commercial or economic interests
of any other member" ;

(ii) if the application does not fall in the
above category, the Ito must consult all "ma-
terially affected" members. If all "materially af-
fected" members agree, it must grant the release ;
or if any "materially affected" member objects, the
Ito must examine the proposed measure in the
light of its long-run effect on international trade
and on the standard of living of the applicant
member. The Ito may then release the member,
subject to such limitations as it may impose.

Transitional Measures (art. H). — Whereas
article 13 sets up procedures whereby a member
may seek Ito ajiproval for proposed new measures
for economic development and reconstruction
(which would otherwise be prohibited under the
charter), article 14 establishes a transitional pro-
cedure for seeking approval for existing meastires
for economic development and reconstruction
which members have in effect when they join the
Ito (and which would otherwise be prohibited un-
der the charter) . Generally speaking, such meas-
ures, as regard products vtpon which tariff conces-
sions have not been made under Gatt, may be con-
tinued in effect if they are nondiscriminatory and
if advance notice is given — but they are subject to
a kind of post-audit of Ito, i.e., they are subject to
i-eview and possible disapproval by Ito on the
same basis as though the request had been sub-
mitted as a new measure under article 13. The re-
view and decision by Ito must be given within 12
months after a member enters the Ito (except if
the permission had already been granted by the
Gatt contracting parties, the charter says that
the Ito may review the decision if it desires, but
it does not specify a time limit for the review).
If the Ito renders an adverse decision, the appli-
cant member is obligated to withdraw the pro-
tective measure ( allowance being made for a period
of time in which to make the modification or
withdrawal).

This special transitional procedure of article 14
may be used only for products upon wliich no
concession has been granted under Gatt. If a
member had granted a concession on the product
under Gatt, it wovild not be allowed under the
charter to retain, for purposes of economic de-
velopment, protective measures on that product
which are prohibited by the charter (such as im-
port quotas for development purposes). The
United States is not substantially affected by this
article, and we have not submitted to the Gatt
contracting parties any list of protective meas-
ures that, although in conflict with the charter,
we wish to retain for development purposes.

New Preferential Agreements
on' Individual Products

Members may make new preferential agree-
ments on individual products for purposes of eco-



638



Department of Stale Bulletin



What Will the ITO Cost?

Tlie cost of Ito will be small because the only
exiH'iise will be for administrative purposes. It is
neither provided nor intended that Ito shall have
funds for lending to Its members or for any other
similar purposes.

From the standpoint of dollars and cents, Ito will
yield returns niany times greater tliiin its cost to
the United States. The Iro will (a) benefit directly
those brandies of American agriculture and in-
dustry that must export, (b) benefit consumers and
consuming industries in this country that depend
upon foreign sources for their raw materials, and
(c) help other countries support themselves, thereby
reducing their need for American grants and loans.
The Ito thus offers a substantial bargain to the
American taxpayer.



nomic development, with the prior consent of the
Ito, normally by a two-thirds majority vote except
in certain cases where a simple majority vote is
sufficient.

The conditions under which the Ito may ap-
prove a new preferential agreement by simple
majority vote are as follows :

(1) First, six conditions must be met under
paragraph 4, as follows : The agreement must be
between neighboring countries, or countries in the
same economic region — the latter not being de-
pendent upon proximity but upon the economic
integration of the countries concerned. The pref-
ence must be necessary to insure a sound and ade-
quate market for the new product. If the party
to the agreement that receives a preference should
grant a preference to the other, as compensation,
these preferences are subject to the same rules as
all other preferences in the agreement. The agree-
ment must be open to other members which may
be able to qualify under the charter requirements.
It must be for a definite period not longer than
10 years, subject to renewal. The parties to the
agreement must establish as between themselves
either low duties or free entry for the product in
question.

(2) Second, assuming that the proposed agree-
ment meets the above conditions:

(a) if it is not likely to cause substantial in-
jury to the export trade of another member, the
Ito must permit the proposed agreement — pro-
vided, however, that it is "not likely to jeopardize
the economic position of a member in world
trade" ;

(b) but if it is likely to cause substantial
injury to the export trade of another member,
the Ito must permit the proposed agreement if
and when the applicant member and the injured
members reach an "agreement"; if they do not
reach an agreement within 2 months, the Ito may
authorize the proposed agreement and fix a "fair
compensation" for the injured member. The in-

hptW 24, 1950



jured member could resort to chapter VIII if not
satisfied with the "fair compensation";

(c) and, if the Ito finds that the proposed
agreement "is likely to jeopardize the economic
position of a member in world trade", it must not
permit the proposed agreement unless the parties
to the agreement have reached a "mutually satis-
factory understanding" with the injured member.

(3) AVhen the Ito apju-oves new preferential
agreements by simple majority vote, it may re-
quire as a condition of its approval a reduction
in the unbound MFN rate if any other affected
member considers the MFN rate excessive. (If
an applicant member seeks to establish the prefer-
ential margin by increasing a bound MFN rate, it
would have to resort to article 13 (3) which re-
quires either consent of all parties to the agreement
or consent of Ito after obtaining "substantial
agreement" from till "materially affected" parties
to the agreement.)

(4) If the Ito finds that parties to a prospective
preferential agreement have obtained the consent
to make such an agreement from countries that
supplied at least two-thirds of their imports be-
fore November 21, 1947, the Ito must authorize
the agreement, unless it finds that the exports of
a member that has not given its consent are
threatened with "substantial injury," in which case
the Ito may grant the consent only if the appli-
cant and the injured member reach an understand-
ing or, in the absence of an understanding, if the
Ito grants "fair compensation" to the injured
member.



U.N. Documents:

A Selected Bibliography^

Economic and Social Council

United Nations Appeal for Children. Report of the Sec-
retary-General. E/1589, January 17, 1950. 14 pp.
mimeo.

Proceeds of Sale of UNRRA Supplies. Report of the
Secretary-General. E/1590, January 17, 1950. 48 pp.
mimeo.

Trade Union Rights (Freedom of Association). Com-
munication from the Director General of the Interna-
tional Labour Office. E/1595, January 27, 1950.
6 pp. mimeo.

' Printed materials may be secured in the United States
from the International Documents Ser\'lce, Columbia Uni-
versity Press, 2960 Broadway, New Tork 27, N.Y. Other
materials (mimeographed or processed documents) may
be consulted at certain designated libraries in the United
States.

The United Nations Secretariat has established an Offi-
cial Records series for the General Assembly, the Security
Council, the Economic and Social Council, the Trusteeship
Council, and the Atomic Energy Commission ; which in-
cludes summaries of proceedings, resolutions, and reports
of the various commissions and committees. Publications
in the Official Records series will not be listed in this
department as heretofore, but information on securing
subscriptions to the .series may be obtained from the In-
ternational Documents Service.

639



Aspects off International Petroleum Policy'



Stated most generally, the Department of
State's interest in petrolemn derives from its re-
sponsibilities for the conduct of our foreign rela-
tions. Oil is essential to the economic well-being
of most countries. The value of oil moving in in-
ternational trade exceeds that of any other com-
modity. Oil enters into our foreign trade, both on
the import and export side. In an emergency, as-
suming no material change in domestic supply and
demand, we shall need large quantities of oil pro-
duced outside of the United States.

Oil production is of predominant significance to
certain countries and areas, notably Venezuela and
the Middle East. Its development and sale ac-
counted for 26 percent of the total direct United
States private foreign investment existing abroad
at the end of 1948 and for 75 to 80 percent of such
new investments made in the past 3 years. It is on
the operations and investments of oil companies
that the economic development of the oil-produc-
ing areas largely depends.

Even if there were no American company inter-
est in the large and important foreign oil indus-
try, petroleum would, nevertheless, affect foi'eign
relations and, therefore, be of interest to the De-
partment. It is even more the case because
American oil companies have such extensive and
widespread interests in all phases of the foreign
oil industry. The relations of American oil com-
panies in producing countries are usually with
governments, and their marketing operations are
extensively subject to decisions by foreign gov-
ernments affecting imports and sales.

In a very real sense, therefore, oil and the opera-
tions of oil companies affect foreign relations.
And in view of the complex and interrelated na-
ture of the international oil trade, any significant
action affecting the foreign or domestic activities
of the United States oil industry has extensive
economic repercussions upon our foreign economic
and political interests.

As this general statement is illustrated by my
later comments on specific points of your inquiry,

' Substance of a statement made liy Willard L. Thorp,
Assistant Secretary for Economic Affairs before the spe-
cial subcommittee on petroleum of the House Committee
on Interstate and Foreign Commerce on Apr. 5, 1050, ami
released to the pnjss on the same date.

640



I shall not discuss it further in my prepared state-
ment. An elaborate presentation of pertinent facts
has been set forth previously, particularly in the
publication "Oil Concessions m Foreign Coun-
tries," - in the hearings in June 1945 pursuant to
Senate Resolution 36 concerning "American Pe-
troleum Interests in Foreign Countries," and in
my later statement on February 5, 1948, before ,
the Petroleum Subcommittee of the House Com-
mittee on Armed Services.

I might say before leaving this point that the
Department's necessary interest in the foreign as-
pects of American oil operations, and in the effect
on our foreign relations of decisions regarding
petroleum, should not be interpreted, as it some-
times seems to be, as an indication of a lack of
interest in the domestic industry. That is not the
case. We believe, however, it is essential that our
position on oil questions, as on other questions, be
based on the total national interest which is fre-
quently a broader concept than the special interests
of particular segments of the United States econ-
omy. We also believe that American concerns op-
erating in foi'eign areas are no less American
because they operate abroad. Both as corpora-
tions and as employers of American citizens, their
example, their activities, and their contributions
to industrial development and economic well-being
abroad may be more influential in promoting a
democratic way of life and free enterprise than
any governmental actions. American business
interests abroad, of which the United States petro-
leum industry is the largest, deserve and should
receive the strong support of the Government.

It seems to me that I might speak briefly on
the extent, location, and importance of the foreign
oil interests of American nationals, on the closely
related import and sterling-dollar oil problems,
and finally on the proposal to establish a Petroleum
Policy Council.

Extent, Location, and Importance of American
Petroleum Interests in Foreign Countries

Outside of tiie United States and Russia, the
inijiortant oil producing areas are Venezuela, the
Middle East, and Indonesia. Mexico also produces

■ H. Doc. 07, GSth Cong., 1st soss.

Department of State Bulletin



a substantial amount of oil, and Canada is poten-
tially very promisin



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 22, Apr- Jun 1950) → online text (page 27 of 116)