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

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improved. It was clear that the growth of all
sorts of new devices to restrict and channel trade
would continue unabated if each country tried to
solve its economic problems at the expense of
others. Only by joint effort by many countries,
could we hope to alter the trend toward diminish-
ing trade and bilateralism.

The United States is the leading exponent of



' Made before the House Committee on Foreign Affairs
on Apr. 19, 1950, and released to the press on the same date.



free enterprise and free competition. The United
States is a leading advocate of the advantages of
multilateral trade. The United States believes
in the cooperative approach to the settlement of
international problems.

ITO as a Test of Leadership

It is not enough to believe and to advocate.
American leadership in world affairs has always
depended on our willingness to translate belief
into action, to practice what we preach. In a
real and practical way, American action with re-
spect to the International Trade Organization is a
test of our leadership. It is a demonstration not
only to ourselves but to all other free peoples that
we really believe in free enterprise, competition,
and multilateral trade. Such a practical demon-
stration is sorely needed at this time when free-
dom is hanging in the balance in many parts of
the world and millions of people are looking in
our direction for assurance that we really mean
what we say.

We have learned the bitter lesson that freedom
is often a fragile thing — that it maj' wither, espe-
cially when its roots are shallow, under the stress
of privation and economic crisis. It is where the
people of a free nation can see the prospect of
achieving a fuller and more satisfying material
existence that the institutions of freedom are most
likely to be secure and the advocates of peace are
most likely to hold firmly tlie reins of government.

The European nations have made great strides
toward restoration of their production and eco-
nomic health by their own efforts and with our
help through the European Recovery Program.
They need to do much more.

In the Point 4 Program, we hope to help in the
long process of building production and bringing
about laigher standards of living in underde-
veloped areas.

But increase in production is not enough.
Countries must be able to exchange the goods they
produce for the goods of others which the}- need.



May 1, 1950



689



In other words, production and trade are two
sides of the same coin, both necessary to its value.

If the European countries are to retain the
ground they have gained and stand on their own
feet, they must be able to trade as freely as possi-
ble with each other, with us, and with the rest
of the world.

If the underdeveloped countries are to grow in
economic strength, they must have the greatest
possible access to the supplies and markets of the
rest of the world.

If the United States is to remain strong and
prosperous and secure, it needs a healthy and ex-
panding export and import trade.

If the channels of world trade are not cleared,
the economic recovery and the economic develop-
ment of other countries will be impeded : our own
goods will not be able to find markets abroad ; we
will be hindered in our efforts to get many of the
things we need or want from abroad; and eco-
nomic frictions between nations will be generated
as they vie with each other in the manipulation
of restrictions on each other's trade.

Purpose of the Charter

What is the purpose of this charter ? What does
it do?

The purpose of the charter is to help expand
international trade and, thus, to contribute to
higher standardis of living, to greater production
and wider distribution and consumption of goods
and services, and to economic and political stabil-
ity throughout the world.

It does three things. It establishes a code of
principles to guide action in a variety of inter-
national economic relations. It creates a mecha-
nism, the International Trade Organization,
within the United Nations family, to serve as a
forum for the international consideration and so-
lution of trade policy problems. It obligates its
members to consult about their international trade
policies before they act.

I do not propose to describe the charter in de-
tail. This will be done by witnesses who follow
me. But I would like to outline its main features.

Main Features

The core of the charter is the chapter on Com-
mercial Policy (chapter IV). That chapter con-
tains the underlying principles of the document.
The other chapters, for the most part, complement
or qualify those central principles. These prin-
ciples are :

First, the familiar principle of most-favored-
nation treatment; that is, that no country should
give special favors to the trade of another country
but should treat all alike (article 16). This prin-
ciple has been an integral part of our commercial
policy for over a quarter of a century.

Second, the principle that countries should be

690



prepared to negotiate with each other for the selec-
tive reduction of tariffs and for the elimination
of tariff preferences (article 17). This prin-
ciple is already embodied, so far as the United
States is concerned, in the Reciprocal Trade
Agreements Act.

Third, the principle that any barriers to trade
or limitations on imports should be openly concen-
trated at the customs frontier. This means that
after imported goods cross the frontier, they
should receive the same treatment as domestic
goods and that tariff concessions should not be
nullified by internal taxes or regulations which
discriminate against imported goods (article 18).

Fourth, the principle that the "invisible tariff"
of conf usintf and complicated customs regulations,
often more Durdensome to trade than actual tariff
rates, should be lowered by simplification (sec-
tion E) .

Fifth, the principle that quotas should not be
used for protective purposes but should be limited
to use in certain specified situations and that their
use must be subject to international control and
scrutiny (article 20).

These principles, if accepted and put into opera-
tion, will gi-eatly improve the opportunities of
businessmen and producers of the various coun-
tries to sell their goods to each other on a com-
petitive basis.

Dealing With Monopoly and Cartel

It was apparent, however, that the commercial
policy princijiles and commitments of the charter
could not do the job alone. In certain cases, ex-
perience has shown that monopoly and cartel
agreements between private business groups have
prevented competition in international trade as
effectively as barriers imposed by governments.
In the United States we deal with these practices
under the antitrust laws. But until the Habana
conference, there has never been any effort to
establish machinery for dealing with this problem
internationally.

The chapter on restrictive business practices
(chapter V) defines certain practices likely to be
harmful and contains commitments by the mem-
ber nations to take necessary action under their
own laws to eliminate practices found to be in-
jurious. I think you have already received a letter
from the Attorney General expressing his satis-
faction with these provisions.

The provisions of the charter on commercial
policy and cartels are designed to deal with situa-
tions in which the normal competitive forces of
the market place, if allowed to operate without
restrictions, will usually deal satisfactorily with
the problem.

Special Measures in the Charter

In one important area of international trade,
however, special measures may be required. This

Department of State Bulletin



is the urea of primary commodities whore burden-
some surpluses may develop wliic-h would create
widespread hardship in the absence of some action
by governments and where the normal forces of
the market place do not operate effectively to give
relief. In our domestic legislation, for example
our farm program, we have recognized the special
problems which often confront our producers of
primary protlucts. The charter similarly recog-
nizes that special measures may be required for
these pi-oilucts in international trade. It, there-
fore, defines circumstances under which commod-
ity agreements, like the wheat agreement for ex-
ample, may be entered into between governments
and sets up standards for such agreements, de-
signed to guard against some undesirable features
■which have characterized such agreements in the
past. For example, in the past such agreements
usually were between producers only. Under the
charter, consuming countries would have to have
equal representation (chapter VI ) .

Moreover, the charter recognizes that action to
remove barriers to the movement of goods will be
futile unless there are goods to move and purchas-
ing power with which to buy them. People who
are unemployed do not buy the products of their
own or other countries. Countries in a primitive
state of development do not provide substantial
markets for the goods of other countries. Nor do
they produce enough products for their own citi-
zens and those of other countries to buy. There-
fore, the charter deals with certain aspects of
employment and economic development (chap-
ters it and III).

In the field of employment, chapter II commits
the member countries to use their best efforts ac-
cording to tlieir own constitutional procedures
to achieve and maintain full and productive em-
ployment within their borders. An example of
the kind of action which might be taken is our
own Employment Act of 19-1:6.

Chapter III of the charter gives the organiza-
tion certain functions in the field of economic de-
velopment and contains provisions to help the flow
of technological information and skills and pri-
vate capital into areas which need and can use
them. It provides for the making of studies, the
furnishing of information, the encouragement of
commercial treaties. It also provides safeguards
against certain abuses of foreign investment which
have unhappily taken place in the past.

These are the principal substantive provisions
of the charter. Some changes in domestic laws
will be required for full compliance with it.
These changes, however, for the United States,
are relatively few in number.

The Character of the Charter

In working out the charter, a fundamental
choice had to be made at the outset as to the
character of the document. Was it to embody a
set of principles which the member countries would



like to see adopted as a long-term objective, even
though not all of them could be fully applied under
present conditions^ Or was it to be confined to
rules that all members could apply fully right
away? To put it another way, was the charter
designed to provide objectives, to set a direction
for the future, to ])rovide something to work
toward, or was it to accept the pteiiiise that the
present chaotic conditions of worUl trade were
here to stay and just try to make the best of it'^

To state the alternatives gives the answer as
to which should be chosen. We took the first, of
course, and set out to draft a charter which would
establish the rules as we would like to see them and
would make allowance for the cases in which
everyone agreed that the rules could not be applied
without qualification. Those allowances, which
are necessary for us as well as for other countries,
are the "exceptions" about which there has been
considerable public discussion.

Many of the commitments of the charter, even
under today's economic conditions, can be im-
mediately put into full effect. These commit-
ments include those dealing with negotiations for
the reduction of tariffs and elimination of pref-
erences, the abolition of discriminatory internal
taxes and regulations, the simplification and pub-
lication of customs regulations, the negotiation
and operation of commodity agi-eements, the limi-
tations on cartel activties and others.



Certain Qualifications

Other commitments contain qualifications,
because their immediate unconditional application
would not be possible at this time.



USE OF QUOTAS

For example, the members of the Ito will agree
as a general principle, to abandon the use of quotas.
But. at the pi'esent time, it is inescapably necessary
for many, if not most, countries to budget their
foreign purchases. Therefore, the charter pro-
vides that when countries are in real balance-of-
payments difficulties, i.e., short of dollai-s or other
foreign currencies, they may use quotas to limit
their expenditures of foreign exchange. When
the circumstances which the charter recognizes
as justifying the use of such restrictions have been
corrected, members must abandon them.

Other commitments may require special treat-
ment under particular circumstances.

TARIFF RATES

Under certain circumstances, for example, a
tariff rate, negotiated under the commitment of
members to negotiate for the reduction of their
tariffs, may cause or threaten unex])ecte(l injury
to a domestic industry. The charter provides
that under such circumstances the country grant-
ing that concession may withdraw or modify it



May I, 1950



691



to the extent necessary to prevent such injury.
This provision is patterned on the escape clause
which the United States inchides in trade agree-
ments negotiated under the Reciprocal Trade
Agreements Act.

National security at times requires measures
which would not conform to the general principles
which would normally be applied under the
charter. An exception is, therefore, provided to
peimit action by member countries necessary for
their national security.

Without exceptions of this kind, members of
the Organization, ourselves included, could not
accept the commitments of the charter. The ex-
ceptions are carefully defined and are agreed to
by all. Their use is subject to scrutiny by the
Organization. If abused, the members may
complain to the organization.



Proposed Structure

Finally the charter establishes an international
organization in which problems arising out of
trade relationships can be discussed and solutions
reached. It will be a specialized agency of the
United Nations. Its proposed structure is similar
to that of the other specialized agencies.

The Organization will be financed by contribu-
tions from the members. The scale of contribu-
tions will be determined by the Conference under
the principles applied by the United Nations.

The charter will come into effect when it is ac-
cepted by 20 governments. Only two have ratified
it to date. The others are all waiting to see what
the United States does. No such organization can
hope to function successfully without the full sup-
port of the United States if for no other reason
than that the United States alone accounts for
about 50 percent of the world's industrial pro-
ductive capacity, about 20 percent of its agricul-
tural capacity and about 20 percent of world trade.

Mr. Thorp will give you a more detailed descrip-
tion of the charter with some charts which I be-
lieve will be helpful. But before I close, there are
some points of general significance which I would
like to stress and to urge you to keep in mind
throughout your consideration of this document.

Points of General Significance

First of all, this charter represents agi-eement
of the representatives of 54 nations on a code of
principles to be applied in the conduct of their
international trade. These principles are not mere
generalities. They are sufficiently precise to be
guides for action. And they cover a very wide
range of trade relationships. To have reached
agreement on the articles dealing, for example,
with customs procedures alone, or those dealing
with restrictive business practices alone, would
have been a very considerable achievement. To

692



have reached agreement over so wide a range of
trade relationships is unprecedented. It required
over 2 years of international negotiation and study
and more years of prior preparation. Therefore,
the charter is a document developed with unusual
care and thoroughness.

Second, the charter represents acceptance by the
representatives of 54 nations of the principle of
consultation before action, where action affects
another's interest, rather than the principle of
unilateral action followed by retaliation. It pro-
vides for an organization to serve as a conference
room for discussion and solution of trade problems
and an impartial mediator and arbiter in trade
disputes.

I cannot stress too strongly the importance of
this combination of agreed principles and the ob-
ligation and mechanism of consultation. Each
nation can proceed more confidently in reduction
of its barriers to trade if it knows "that other na-
tions are committed to travel the same road, that
it will be consulted before action is taken which
may adversely affect its interests, and that it can
bring problems up for discussion and public scru-
tiny in an impartial forum.

The sanctions of this Organization are not the
sanctions of force, or of power to direct action by
member nations, or of the power to spend money,
for it will have no money to spend. Btit it has
sanctions. Its sanctions stem from the voluntary
agreement of its members to abide by certain
rules, and include the power to bring up for open
discussion and public scrutiny cases of failure to
abide by that agreement and the power to release
members from their obligations under the charter
to another member which is found by the Organ-
ization to have failed to abide by its agreement.

Third, the fact of agreement over so wide an
area of trade relationships is, as I have said, most
remarkable and most heartening. Equally heart-
ening and equally important is the fact that we
have this agreement now, while trade patterns and
policies are still in the making, and there is still a
choice as to the direction in which nations will
move. Action now is needed. We cannot afford
to wait in the vain hope that, at some future time,
economic conditions will be more favorable to
getting a better agreement.

By joining the Ito, member nations will accept
the principles of nondiscriminatory, competitive,
multilateral trade, governed primarily by the
forces of the market place. These are the prin-
ciples in which the United States believes and
which it has advocated. Only if these principles
are accepted and widely lived up to can the pri-
vate trader have a I'eal opportunity to conduct his
business on a fair, competitive basis. The fact of
commitment to these principles will influence
every decision of member nations in developing
their trade policies. In this way, the charter can
have a profound influence on the future course
and form of international trade.

Department of State Bulletin



Limitations of the Charter

It is important to recognize the liniitiitions of
the document a.s well as its advantages. Let nie
make it clear at once that the charter is not pre-
sented to you as a panacea or a cure-all or a final
solution to our trade problems. It does not im-
mediately or completely remove all rigid quota
controls on trade or all trade discriminations.
Obviously it cannot. It is designed to make a
beginning and to provide the means of further
progress in dealing with the disturbed and difti-
cult conditions which exist today and in bringing
about more normal conditions.

Moreover, since the charter represents the
agreement of representatives of 5-4 nations and is
designed as a means of helpin



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 22, Apr- Jun 1950) → online text (page 37 of 116)