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

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Connully's plan to set up eight subcommittees of
the Foreifrn delations Committee, which subcom-
mittee groups will correspond with the organiza-
tional structure of the State Department. This
new procedure is a decided step forward in the
matter of keeping the Committee, and, through
the Committee, the Senate, currently informed of
State Department attitudes toward pending for-
eign policy issues.

This new approach will serve not only to pro-
vide mechanics for free interchange of informa-
tion between State Dejiartnieiit representatives
and tlie Senate Foreign Kelations Committee, but
it will have the added advantage of quickening an
interest on the pai-t of the various consultative sub-
committees in the particular areas of the world or
the State Department functions for which they are
given specific responsibility in this new committee
organizational arrangement.

I hope that tlie Foreign Affairs Committee of
the House of Representatives will see fit to adopt
a somewhat similar pattern, in order that we may
bring about greater understanding and confidence
between State Department representatives and the
Members of the Congress who represent the House
and the Senate in the various fields of State De-
partment operations.

Developing Bipartisan Foreign Policy

Statement by John Foster Dulles
[Released to the press April 2^]

From now on, I expect to give most of my time
to ni}- new duties as consultant to the Secretary of
State. It is too early to know exactly what I shall
be doing or on what matters the Secretary may
particularly want my advice. As was said in the
State Department's release of April 6, 1950,^ the
President and the Secretary of State asked me
to be available to advise the Secretary of State "on
broad problems in the field of foreign affairs and
on specific lines of action which this Government
should follow."

I shall contribute as best I can to the common
goal of foreign policies which, so far as lies with-
in our power, will both preserve peace and also
provide a world in which free institutions can have
a vigorous growth. If the United States has such

' Bulletin, Apr. 24, l&oO, p. 662.

foreign policies, then I know that they will com-
manil the confidence and supi)ort of the over-
whelming majority of the American people and
of their representatives in Congress. If United
States foreign i)olicies do not measure up to that
standard, then they do not deserve that support.

I do not, for a moment, consider that my pres-
ence in the State Department as Adviser to the
Secretary of State automatically assures policies
that will deserve Republican support. I do think
that former Senator Cooper and myself, who have
served as Republicans in Congress, will find ways
to bring to Republicans, in and out of Congress, a
better understanding of our foreign policies, so
that they can better judge the adequacy of those
policies. I feel confident that our efforts, in this
respect, will be sympathetically welcomed by Re-
publicans who have, in the past, given ample proof
that they are not allergic to bipartisanship in for-
eign policy.

While, as I say, the presence of Senator Cooper
and myself in the State Department should not
stifle independent scrutiny and constructive com-
ment by Republicans, I do believe that Republi-
cans will be responsive, as the Democratic admin-
istration has been responsive, to the critical need
of developing foreign policies which will be in-
cisive and adequate and which will command
united support.

The free world cannot survive unless it can
present a united front to the aggressive and ex-
panding challenge of the Communist world. I
realize that there is no strength in unity that is
artificial. Unity is achieved only by policies and
efforts that, in fact, bind people together. If we
have war, no one doubts that we would have unity
both at home and with our allies. I am confident
that if we can achieve that unity now, we will not
have war. As I said in my book War or Peace,
"while we are yet at peace, let us mobilize the po-
tentialities which we usually reserve for war.

I am here in Washington because the President
and Secretary of State have offered me what seems
to be an opportunity to practice what I preached.
That, I know, is the spirit also of Senator Cooper.
It is a spirit which needs to pervade this nation
fi-om top to bottom if peace and fundamental hu-
man freedoms are to survive.

In the past, the American people have always
developed a unity of purpose which has enabled
them to repel successfully the successive challenges
which come inevitably to every nation. I am
confident that we are again developing the spirit
which will enable us, in fellowship with other free
peoples, to meet the challenge of our time.

May a, 1950

884582— Sa


The Habana Charter for an International Trade Organization


Chapter IV

Section A. Tariffs, Preferences,
and Internal Taxation and Regulation

This section (arts. 16-19) is one of the most im-
portant parts of the charter. It lays down basic
rules of (a) nondiscrimination (i.e. most-favored-
nation treatment) with regard to tariffs and cus-
toms matters generally, (b) negotiations by the
members directed to the substantial reduction of
tariffs and the elimination of preferences, and (c)
banning the use of internal taxes and regulations
as a substitute for tai'iff protection.

Most-Favored-Nation Treatment

One of the key principles on which the charter
is founded is tliat nations shall conduct their com-
mercial relations with each other on the general
basis of nondiscrimination. Accordingly, article
16 requires tliat each member of the Ito shall give
equal treatment to all other members with respect
to customs duties and charges, rules and for-
malities in connection with importation and ex-
portation, and internal taxes and other internal
regulations. The article thus incorporates
the unconditional most-favored-nation principle
(MFN) which since 1923 has been the general
policy of the United States in its commercial
treaties and agi-eements. Although certain long-
standing and deeply rooted preferential systems
are excepted from the general rule of nondiscrimi-
nation pending their elimination by negotiation as
required under article 17, the article provides that
these existing preferences may not be deepened
and no new preferences may be created.

Reduction of Tariffs

and Elimination of Preferences

Article 17 sets forth a second rule of basic im-
portance, namely, that members of the Ito must
enter into and carry out negotiations directed to
the substantial reduction of the general level of

Editor's Note : This summary is the second in a series.


tariffs and the elimination of existing preferences.
These negotiations are to be carried out on a selec-
tive, product-by-product basis and conducted in
such a way that reductions in nonpref erential rates
of duty will limit, reduce, or eliminate the dis-
criminations in favor of the countries entitled to
preferential rates. The provisions of this article
were followed in the negotiations of the General
Agreement on Tariffs and Trade concluded at
Geneva in October 191:7 and under which 23 coun-
tries have already made great progress in carrying
out the aims of this article.

National Treatment on Internal Taxation

Article 18 lays down a third fundamental rule,
namely that members of the Ito must not resort to
internal measures which would nullify tariff con-
cessions — in other words, internal taxes and other
internal regulations should not be used as a sub-
stitute for tariff protection. The article provides
generally that internal taxes and other internal
regulations applicable to imported products must
not be more burdensome than those applicable to
directly competitive domestic products. An im-
portant provision in the article will prevent mem-
bers from adopting in the future internal quanti-
tative or "mixing" regulations which require the
use or consumption of a specified minimum of
domestic products. This device, while employed
onlj' to a limited extent at present, is an extremely
effective method of restricting trade and threatens
to become widespread unless countries agree to
refrain from adopting further measures of this
kind in the future. Although the article permits
the continuance of existing ''mixing" regulations,
it prevents them from being made more restrictive
against imports and subjects them to negotiation
for their relaxation as in the case of tariffs under
article 17.

Special Provisions

Special provisions have been included in the
charter to deal with internal regulations affecting
motion picture films. Article 19 which covers
this subject was worked out on the assumption that

Department of State Bulletin

the economic peculiarities of the fihn trade make
import duties geiu-niliy an unsuitable or inade-
quate device for atl'ording lejritimate protection
to a domestic film industry. As a counterpart of
imjwrt duties, therefore, this article establishes for
the film trade alone an approved protective device
in the form of screen quotas which reserve a por-
tion of screen time for domestic films; such screen
quotas are subject to nej^otiation in the same man-
ner as tariffs. An important feature of article 19
is the provision (hat screen time not reserved for
domestic films may not be allocated among foreign
sources of supply (with a minor exception in case
of an allocation to a foreign source in effect on
April 10, 1947). In a word, this article means
that a member may adopt screen quotas but no
other type of internal quantitative regulation or
discriminatory internal tax in order to protect
its domestic motion picture industry.

Section B. Quantitative Restrictions and Related
Exchange Matters

Of the various obstacles to international trade,
quantitative restrictions, commonly referred to as
quotas or "QR's," are one of the most serious. A
quota limits the quantity of a commodity which
may be imported or exported, as the case may be,
to a specified amount ; the importation or expor-
tation of quantities in excess of that amount is
prohibited. Quotas thus kill competition and
prevent price and other market forces from exer-
cising an equilibrating effect, since no matter
what price changes may occur between, for ex-
ample, the imported and the domestic commodity,
the importation of quantities above the quota ceil-
ings is forbidden. Quotas, in addition, tend to
put the government into business witli the gov-
ernment rather than private business determining
the commodities and amounts which may be ex-
ported or imported. They generally involve
elaborate governmental intervention because they
usually require the allocation of quotas among
domestic exporters and importers. Furthermore,
the determination of the goods and quantities to
be permitted to flow in international trade tends
to become the subject of bargaining between gov-
ernments. In addition, quotas invite the attempt
by interested pressure groups to influence the de-
cision of governments as to the goods and quanti-
ties which shall be permitted to be imported or

For these reasons, section B seeks to limit the
use of quantitative restrictions. The charter
recognizes, however, that there are certain special
situations in which the use of quotas is both neces-
sary and justifiable, and section B thus attempts
to define and circumscribe some of the particular
circumstances in which resort to quotas is per-
missible. In this connection, note should be taken
of articles 13, 45, and 99 which also specify par-
ticular conditions under which quotas may be

General Elimination of "QR's"

Article 20 of the charter lays down the basic
rule regarding quotas, namely that tiiey are pro-
hibited. A number of specific exceptions to this
general rule are then prescribed. Of these ex-
cejitions, perhaps the most important is that
permitting the use of import quotas on agricul-
tural and fisheries products where they are neces-
sary to the enforcement of domestic marketing or
production restriction programs or for the re-
moval of temporary surpluses. Quantitative
restrictions on exports are also permitted in con-
nection with the prevention or relief of critical
shortages of foodstuffs and other essential items.
QR's on both exports and imports are permitted
in connection with the application of standards
or regulations for the classification, grading, or
marketing of commodities in international trade;
and in connection with the restriction of produc-
tion of animal products whose output is directly
dependent on imported products. In connection
with import restrictions on agricultural and fish-
eries products, the article provides a number of
rules designed to safeguard the interests of mem-
bers, including rules relating to the import of
items of which domestic supplies are available
only seasonally, requirements for advance notice
and opportunity for prior consultation regarding
such import restrictions, requirements for public
notice of the quantity or value permitted to be
imported, and provision for preventing use of
such quotas to decrease the share of imports in
the domestic market.

Safeguarding Balance of Payments

Article 21 permits a member to impose import
restrictions to safeguard its external financial
position and balance of payments, that is to fore-
stall the imminent threat of, or to stop, a serious
decline in its monetary reserves or, if the member
has very low reserves, to achieve a reasonable rate
of increase in its reserves. Restrictions ap-
plied for such purposes must be relaxed as the
extei-nal financial position of the country con-
cerned improves. Provision is made for the im-
portation in such circumstances of minimum
quantities and the avoidance of unnecessary dam-
age to the commercial or economic interests of
other members. Although the right of a member
to maintain its domestic policies (even if they are
responsible for the member's financial difficulties)
and to give priority to the importation of more
essential commodities is recognized, the obligation
of the member to pay due regard for the need of
restoring equilibrium in its balance of payments
and assuring an economic use of resources is also
specified. Consultation is provided for with re-
spect to the maintenance, intensification, or insti-
tution of import restrictions for balance-of-pay-
ments reasons. A procedure is established for
questioning and securing the removal of restric-

Ma/ 8, 1950


tions which may be applied inconsistently with the
relevant provisions of this and other articles.
Provision is also made for initiating discussions
to consider measures for the removal of the under-
lying causes of any general disequilibrium which
may be restricting international trade.

Nondiscriminatory Administration
of "QR's" and Exceptions

Article 22 provides for the nondiscriminatory
administration of such quantitative restrictions as
are applied. It thus prohibits the application of
quantitative restrictions against one member un-
less the}' are similarly applied against all other
coimtries whether or not members. Rules are
specified with a view to assuring, in the event im-
port restrictions are applied, a distribution of
trade in the product concerned approaching as
closely as possible the shares which the members
would be likely to have in the absence of restric-
tions. These rules include provision for fixing
total quotas wherever practicable and giving notice
of their amounts and for allocating quotas among
supplying countries either by agreement or on the
basis of shares supplied in a previous representa-
tive period, due account being taken of any special
factors which may have affected or may be affecting
the trade in the product concerned. Provision is
also made for furnishing relevant information
concerning the administration of import restric-
tions involving the granting of import licenses,
giving public notice of the quantity or value which
may be imported during a specified period where
quotas are fixed, and promptly informing supply-
ing countries of the quotas which may have been
allocated to them. Special provision is made for
supplies en route at the time public notice of the
quota may have been given. The article recog-
nizes the right of a member initially to select the
representative period and appraise the special
factors involved in connection with the establish-
ment of import restrictions. At the same time,
however, the article specifies an obligation on such
a member to consult promptly, upon the request of
any other substantially interested member, regard-
ing these matters and other aspects relating to the
allocation and utilization of the quotas con-
cerned. Provision is made for the application of
the provisions of the article to tariff quotas and, of
the principles of the article in so far as applicable,
to export restrictions.

Article 23 defines a number of exceptions to the
general rule of nondiscrimination prescribed in
article 22 for the administration of such QR's as
are permitted. The article thus permits the appli-
cation of discriminatory import restrictions for
balance-of-payments reasons provided the rcstnc-
tions satisfy the criteria specified in the article.
The policies followed in applying such restrictions
must, in addition, be designed to promote the
maximum development of multilateral trade possi-
ble and to hasten the attainment of a financial

position which will not require such measures.
Furthermore, such discriminatory restrictions
may, with relatively minor exception, be applied
only during the postwar transition period of the
country aj^plying the restrictions. (The period
is fixed under the articles of agreement of the
International Monetary Fund.) Provision is also
made for review of the discriminations and con-
sultation with a view to limiting or terminating
them when they are no longer justifiable. In
addition to the restrictions referred to above, the
article also permits discriminatory restrictions in
the following cases : (a) where the restrictions are
applied to a small part of a member's foreign trade
and the benefits derived by the member or mem-
bers concerned substantially outweigh any injury
which other members may incur; (b) where the
restrictions are applied by countries having a com-
mon quota in the International Monetary Fund;
(c) where they are to assist another country whose
economy has been disrupted by war; (d) where
they are used by a country in balance-of-payments
difficulties to direct its exports so as to increase its
earnings of currencies which it can use without
discriminating; (e) where they are equivalent to
restrictions authorized under the "scarce cur-
rency" provisions of the Fund agreement ; and (f )
where they are applied under certain very limited
preferential arrangements existing in the United
Kingdom pending negotiations to eliminate them
or to replace them by tariff preferences.

Relation to Fund

Article 24 defines the relationship of the Ito
with the Fund to insure a coordinated policy be-
tween the two organizations in matters of mutual
interest. The article thus enjoins the Ito to co-
operate with the Fund in order to achieve a
coordinated policy with respect to exchange ques-
tions falling in the purview of the Fund and trade
questions falling within the jurisdiction of the Ito.
The Organization is required to consult with the
Fund in cases involving monetary reserves, bal-
ance of payments, or foreign exchange arrange-
ments. In such consultation, the Organization is
required to accept the findings and determinations
of the Fund with respect to the financial aspects
of tlie problems under consideration. Further-
more, members of the Ito are prohibited from
frustrating, by exchange action, the intent of the
provisions of this section of the charter dealing
with quantitative restrictions and related ex-
change matters; similarly, they are prohibited
from frustrating, by trade action, the intent of
the provisions of the Fund agreement. As an
additional measure for insuring coordinated
policy between the Ito and the Fund, those mem-
bers of the Ito whicli are not members of the Fund
must, with relatively minor exception, either be-
come Fund members or conclude a special ex-
change agreement which will provide that the
objectives of the charter will not be frustrated by


Departmsnt of State Bulletin

exchange action by the members concerned. The
article specifically recojinizes the ri

Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 22, Apr- Jun 1950) → online text (page 41 of 116)