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

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in the past 2 years, the hardest part of the job
is ahead. It is a job of changing work habits,
cutting costs, making their money interchange-
able so that they can trade more among themselves,
and making a concerted drive to sell more of their
goods and services in dollar markets.

No American can fully appreciate the diificul-
ties of this job. Unless you have had the experi-
ence of trying to buy and sell goods across the
national boundaries of Europe, you cannot have
the faintest conception of the kind of economic
strait jacket in which each nation goes about the
business of earning its living. It is a strait jacket
not only of quotas and currency restrictions but of
habit and prejudice.

Our part of the job is, fii-st, to help convince
Europeans that they can, little by little, free them-
selves from their national strait jackets, and, sec-
ond, it is to furnish some of the incentives that
will encourage them to try.

To suggest that we might walk out on Europe
in this hard and critical period is to suggest that
we would scrap the whole design of a productive
and thriving world economy. For a healthy and
self-supporting Europe is the basis of that design.

These 270 million Western Europeans repre-
sent the largest concentration of human skill and
creative genius in the world. They carry on more
than a third of the world's trade; they own more
than half the world's shipping tonnage.

On the basis of hard economic facts — and there
are many other relevant facts — the creation of a
modern Europe is essential to our three-part de-
sign for a free and expanding world economy.

AIDING UNDERDEVELOPED AREAS

A second major part of that design is to pursue
a line of action that will "make things happen"
in places where they have never happened ; to help
produce and grow things where there has been
little or no production; to create wealth where
there is poverty. In short, to lend our skills and
our productive capital in the underdeveloped
parts of Latin America, Africa, the Near East,
and the Far East.



Obviously, this second major effort is on a dif-
ferent level and demands a very different kind
of approach from the European enterprise. The
Euro])eans are not only higlily skilled in the pro-
ductive arts but they are also highly experienced
in the art of .self-government. Individually, they
are self-conscious and self-disciplined members
of an intricate and long-established social system.

The people of the underdeveloped areas have
skills and traditions of their own. But they are
the kinds of skills and traditions that were useful
in a bygone age. They are not adequate to pro-
vide the decencies of life that are now within
the reach of all people. They do not even provide
the foundations on which a decent life can be
built.

In Europe, you had all the foundations. You
had them in the physical form of stone and con-
crete, underneath the ruins and the rubble. More
important, you had them in the form of human
knowledge and experience. You had people who
knew how to run elections and collect taxes, keep
vital statistics, as well as to organize workshops.
But there are parts of Asia and Africa and Latin
America where the foundations do not exist;
where people have had little or no experience with
the simplest practices of public administration
on which modern society is based.

There are good humanitarian reasons for help-
ing the people of these areas to improve their
standards of life. There are good political rea-
sons since these very areas are the ideal breeding
ground for Communist agitation. But the over-
riding and compelling reason for drawing these
nonproducing areas and people into our design
is that we cannot create a thriving and expanding
world economy without them.

Now, you will notice that I spoke of helping
these people to raise their standards of life. Short
of tyranny and domination, for which we have
no stomach, there is nothing in human experience
to suggest that you can change a traditional way
of life unless the people themselves are determined
to change it. The best you can do is to try to
provide the kinds of help that people themselves
are looking for. The important thing is to begin
where these people are, to put within their reach
the ideas and implements they can use.

There are good reasons why we should offer
such help in a planned and purposeful manner.
We ourselves will look more and more to the
people of the underdeveloped areas to produce
the materials we need and to buy the goods we
make.

With all our wealth of natural resources, we
are still far from a self-sufficient nation. AVe are
more dependent than we u.sed to be on oil from
the Middle East and from Venezuela. We have
long depended on rubber from Malaya and tin
from the Indies. And we have recently had spec-
tacular evidence of our need for another com-



May 22, 1950



807



modity from an area that never seemed important
to lis — namely, uranium from the Belgian Congo.

If we relj- on foreign sources of supply, how
much more does Europe depend on them for the
essentials of life itself. In fact, Europe cannot
contemplate a prosperous future without con-
tinually expanding markets and new sources of
imports.

I have talked at some length about strategic ma-
terials from these areas. I3ut that is not our pri-
mary interest. We have more to gain from what
we put into these underdeveloped areas than from
what we get out of them.

There is no decent future for any of us in the
kind of world community we now have. There is
no peaceful future for a world community in
which a few people live in comparative wealth
while the vast majority live in extreme poverty.
No community is secure today iu which 90 per-
cent of the people live on the wrong side of the
railroad tracks.

Our desire to change this state of affairs may be
a sign of our social conscience. It is also eco-
nomic common sense.

I have been describing the two major lines of
action that contribute to each other and to our
three-part economic design. Both of these lines
of action are aimed primarily at getting produc-
tion going: in Europe, where you have a higlily
skilled and disciplined society and in other parts
of the world where human skills and natural re-
sources are still largely untapped. Each of these
two lines of action contributes to the other and
to us.

CREATING ECONOMIC ENVIRONMENT

But production is only one part — though a
large part — of the answer to the world's economic
problems. It can never be an end in itself or exist
by itself. You have got to have an environment
in which trade can flourish — in which wealth can
circulate and create the demand for more wealth.

And, so, our third line of action is aimed at
creating such an environment and completing o\ir
design of healthy and expanding econouiic life.

Now, what do we mean when we talk about
creating an economic environment? This is one
of those terms that economists use to intimidate
ordinary people. It is hard to get your teeth into
an economic environment. It is practically im-
possible to take one by the scruff of the neck —
though that would sfimetimes seem desirable.

However, if we examine this thing, we find that
one of the elements that is present in a good eco-
nomic environment is confidence. People pro-
duce things when they are confident that they can
sell them and sell things when they are confident
they will be paid.

People with money to s])are invest it when they
are confident of a reasonable dividend and when
they hav(> confidence that they can recover the
principle.



Confidence as a Purpose of Foreign Policy

Now, you might say that one of the main pur-
poses of our foreign policy is to create confidence
among nations and peoples, the kind of confi-
dence that stimulates international trade. One of
the reasons that we support the United Nations
vigorously is because we want it to demonstrate
that international disputes can be settled by peace-
ful means. That builds confidence.

One of our purposes in making a mutual de-
fense treaty with other nations of the North At-
lantic community was to create confidence. The
program of military assistance which is now get-
ting under way was clearly intended to do the
same thing.

There are now before Congress two pieces of
legislation that have as their specific purpose the
creation of a better climate for foreicn invest-
ment. One is the bill authorizing the President's
Point 4 Program for economic development — the
program I have just been talking about. The
other is a bill authorizing the Export-Import
Bank to sell two kinds of insurance to foi'eign
investors : insurance against expropriation of their
property and against inability to convert the for-
eign currencies they earn.

We are now in the process of negotiating a score
or more of new treaties by which we and other
governments agree to observe certain rules for
fair treatment of foreign investors. The Foreign
Relations Committee of the Senate is beginning
hearings on two such ti-eaties that have been nego-
tiated with Uruguay and with Ireland.

But we should not delude ourselves with the
idea that treaties and laws automatically create
confidence. Nor should we expect American pri-
vate capital to flow abroad quickly in great vol-
ume, desirable as that might be. Americans will
send their money overseas when they have confi-
dence — and that is something you cannot manu-
facture artificially.

Another element that is present in a good eco-
nomic environment is what inight be called the
spirit of give and take. We, perhaps as much as
any other nation, can help to inject more of that
element into the international scene.

It is the essential element in two decisions that
are now before us. One decision is whether we
shall join the International Trade Organization.
The Ito is intended, ])rinuiril3', to provide a place
where the spirit of give anil take can dominate
the trading relations between nations. The char-
ter of I'i'O was hammered out in that spirit.

The other decision we have to malce is whether
we shall become again a great importing as well
as a great exporting nation — in other words,
whether we shall pei-mit ourselves to be paid for
the goods we exi)ort. AVe shall shortly begin a
third round of general agreements to reduce
larilfs. at Torquay in England. A bill has been
sent to Congivss which would greatly simplify
our customs regulations and procedures.
(Continued on jxkjc S2])



808



Department of State Bulletin



The Habana Charter for an International Trade Organization



COMMODITY AGREEMENTS

Chapter VI

Chapter VI contains a code of rules for the
preparation, conclusion, and administration of
intergovernmental commodity agreements.

Tlie charter recognizes that special difficulties
of production adjustment and extreme fluctua-
tions in prices, wliicli would jeopardize the char-
ter objectives of economic expansion, have at times
characterized primary commodities produced and
marketed under certain economic circumstances.
These difficulties may, at times, be of a character
that requires intergovernmental arrangements
concerning the international trade in such com-
modities. The charter provides principles to
govern the objectives and operation of these
agreements generally; and establishes special con-
ditions for those agreements, known as "control"
agi-eements, which restrict production or trade or
regulate price.

Control agreements are justified only when
specific government action is needed to alleviate
hardship under conditions in which (a) small
producers account for a substantial part of the
supply, a burdensome surplus of the commodity
exists or is expected, and neither consumption nor
production respond readily to price change; or
(b) consumption does not respond readily to price
changes, important producing areas afford inade-
quate alternative employment opportunity for
displaced labor, and widespread unemployment
has developed or is expected. The charter re-
quires that importing and exporting countries
have equal votes on substantial matters in the con-
duct of control agreements. Control agreements
are limited to 5 years duration but may be renewed
if the difficulties still exist. "Other" agreements
are subject to less rigid rules, but, even in these
cases, the charter requires that there be adequate
participation by important importing as well as
exporting countries and that full publicity be
given. The Ixo may review the operation of com-
modity agreements to assure conformance with
the charter.

The core of the commodity agreements chapter

Editor's Note : This summary is the fourth in a series.
May 22, 1950



remains substantially as it was in the original
United States suggested draft charter of Sep-
tember 1946.



Commodity Agreements and the Charter Objectives

Under the charter, governments voluntarily
undertake to abide by a set of commodity agree-
ment rules designed to promote fair multilateral
procedures calculated to contribute to the long-run
expansion of trade. They further undertake to
use restrictive commodity agreements onlj' where
necessary to deal with special difficulties not sub-
ject to correction by normal market forces. Thus
the commodity agreements chapter contributes to
the over-all charter objective to expand world
production and trade.

The commodity agreements chapter does not
require a country to make or to participate in
commodity agi-eements. Under it, countries may
make certain kinds of commodity agreements if
they think this is the best way to deal with a
particular problem. Under our constitutional
procedure, the problem of giving effect to any
commodity agreement involving legislation must
be submitted to the United States Congress.

Principal Provisions of Chapter VI

This chapter defines the conditions under which
two types of commodity agreements may be made,
namely :

(a) Commodity control agreements which re-
strict the production or trade or regulate the price
of a primary commodity (i.e., raw material or
closely associated commodity as defined in art. 56) .
These may be made only (i) when there is, or is
expected, a burdensome surplus of the primary
commodity which causes hardship to producers,
among whom are many small producers — as is the
rule in the case of many agricultural products —
and which cannot be corrected by normal market
forces in time to prevent such hardship; or (ii)
when there is, or is expected, widespread unem-
ployment over an area arising from the condition
of the primary commodity which cannot be cor-
rected by normal market forces in time to prevent

809



serious hardship. The latter is a condition some-
times experienced in the case of mineral products,
(b) "Other" commodity agreements which are
nonrestrictive. These are subject to various pro-
visions of this chapter but not to the very rigid
conditions (arts. 62-66) prescribed for control
agreements. "Other" agreements may be made
for primary commodities — since "other" is not de-
fined in the charter, they are not specifically ex-
cluded for nonprimary commodities.

An agreement which is not restrictive at the
time negotiated but which may become so in the
future (e.g. may provide for future minimum
prices) must conform to the conditions of articles
62-66 only at the time when the restrictive pro-
visions go into effect.

Chapter VI may apply only in part or not at all
to certain special intergovernmental commodity
arrangements listed in article 70 (such as purely
conservation agreements, sanitary agreements,
allocation agreements for products in short sup-
ply, intergovernmental purchase contracts) and
in article 99 (such as agreements concerning fis-
sionable materials, arms, ammunition or imple-
ments of war, or those for purely military
requirements).

Commodity Studies and Conferences

Certain procedures and conditions must be ob-
served in making both "control" and "other"
agreements. The normal procedure in making
new agreements is for the Ito to establish a study
group of countries interested in a particular com-
modity at the request of an interested member.
The study group investigates the commodity prob-
lem and reports its findings and recoimnendations
to its participating members and to the Ito.
Whether or not there has been a formal study
group, the Ito may proceed to convene a com-
modity conference of all interested Ito members
to decide whether a commodity agreement is desir-
able, and if so, to negotiate it. In case of unrea-
sonable delay, members interested in a particular
commodity may negotiate with each other directly,
without going through the procedure of a study
group and a commodity conference. Members,
however, agree tliat new agreements will follow
charter principles. Such agreements must be
open to all Ito members on nondiscriminatory
terms. Nou-Ito members may be invited to par-
ticipate in an agreement on equal terms with Ito
members. Importing countries must be given
equal voice with exporting countries in control
agreements and adequate participation in other
agreements. There must be full publicity of the



terms of the agreement. Any country that sub-
sidizes a primary commodity must stand ready to
cooperate in efforts to negotiate a commodity
agreement on that commodity (art. 27 (2)).
Members agree to submit existing agreements to
Ito review. The Ito, if it considers an existing
agreement inconsistent with the charter, will sub-
mit its findings to the members participating in
tlie agreement "in order to secure promptly the
adjustment of the agreement to bring it into con-
formity with the provisions of the Charter."

In addition, control agreements are subject to
special requirements. At the request of a mem-
ber, the Ito must decide whether a particular
agreement is a control agreement. Control
agi'eements may be made only after a finding that
a burdensome surplus or widespread unemploy-
ment in connection with a primary commodity
has developed or is expected to develop, which
cannot be corrected by normal market forces in
time to prevent serious hardship. This finding
must be made multilaterally either by the com-
modity conference of all members interested in
that commodity or by the interested members
through the Ito. The Ito is not required to re-
view the finding, but it may review the operation
of the agreement to ascertain whether the agi'ee-
ment is operating in accordance with the charter.
Members agree to carry out Ito recommendations
either by bringing the operation of control agi'ee-
ments into line with the charter or to terminate
them.

Control agi'eements must assure adequate sup-
plies at prices that give reasonable return to pro-
ducers but that are fair to consumers. They may
be made for periods not longer than 5 years, sub-
ject to 5-year renewal periods. Each country
agrees, when it concludes a control agreement, to
undertake such internal measures as it considers
practicable toward solution of the commodity
problem. Members participating in a commod-
ity agreement will try to settle differences of opin-
ion concerning the agreement among themselves.
If unsuccessful, they will refer the dispute to the
Ito which operates under the general procedure
for the settlement of disputes outlined in chapter
VIII. All commodity control agreements must
include provisions permitting a country to with-
draw from the agreement, but still remain within
Ito, if it desires.

Other intergovernmental organizations, such as
the Food and Agi'iculture Organization, which
are deemed by the Ito to be competent are entitled
to attend the study groups or conferences ; to rec-
ommend study or submit a relevant study of a pri-
mary commodity ; and to recommend that a con-
ference be called.



810



Department of State Bulletin



Economic Treaties With Uruguay and Ireland



Statement hy WiUard L. Thorp
Assistant Secretary for Economic Affairs ^



Mr. Chairman : The treaties with Uruguay and
Ireland which are now before the Committee, al-
though differing somewhat in name, serve the
same basic purpose, which is to establish a com-
prehensive legal framework within which general
economic relations with each of those countries
may be conducted. These treaties set forth the
rights and privileges enjoyed by nationals and
enterprises of the one country who reside or do
business in the territories of the other and define
the conditions which govern trade, shipping, and
other activities. A treaty of this kind is, in effect,
a "bill of rights"' for the nationals of one country
in their dealings with the government, nationals,
and enterprises of the other country.

In their basic purpose and in most important
matters of substance, the treaties with Uruguay
and Ireland also resemble other treaties of friend-
ship, commerce, and navigation which have been
considered by the Committee and approved by the
Senate in recent years. However, there are cer-
tain points of difference in matters of substance
and of emphasis between the two treaties and also
between them and earlier commercial treaties
which I should like to mention at this time. It
may be helpful first to discuss the treaty with
Uruguay, comparing it in a general way with the
recent treaty with Italy, and then to consider the
treaty with Ireland in order to note the particulars
in which it diffei's from the treaty with Uruguay.



Treaty of Friendship, Commerce

and Economic Development With Uruguay

Tlie treaty of friendship, commerce, and eco-
nomic development with Uruguay which is now
before the Committee is the third comprehensive
treaty governing general economic relations which
has been concluded by the United States since the
war. Earlier treaties of friendship, commerce,

' Made before the Senate Foreign Relations Committee
on May 4, 1950, and released to the press on the same
date.



and navigation with China and Italy were con-
sidered by the Committee and approved by the
Senate in 1948. These treaties represent signifi-
cant progress in the Department's program for
expanding and modernizing this country's net-
work of conunercial treaties, pursuant to a long-
established policy of this country. These treaties
are expressed in terms of general principles rather
than of narrow technicalities and from the first
have been concerned with defining the rights en-
joyed by individuals and economic enterprises in
foreign countries and with fixing the general rules
which govern the exchange of goods and the treat-
ment of vessels. Like its forerunners, the treaty
with Uruguay is concerned principally with these
subjects.

COMPARISON WITH ITALIAN TREATY

It has been necessary, however, constantly to re-
shape these treaties to meet changing economic
conditions. As the Committee is aware, the recent
treaty with Italy applies the traditional frame of
the commercial treaty to such modern economic
problems as the increased use of the corporate
form of business enterprise, the growing state
ownership of economic enterprise, and the spread
of discriminatory trade and business practices.
The treaty with Uruguay represents a continua-
tion and improvement of this process of adap-
tation. It has the same general structure as the
treaty with Italy, but its provisions have been ex-
tensively restated and simplified, and certain of
them have been amplified in substance. Funda-
mentally, however, the two treaties cover the same
ground in much the same way. In this connection,
I should like to offer for the record a tabular
comparison of the provisions of the two treaties
which illustrates their basic similarity and the
limited differences between them.

Wliile the provisions of the treaty with
TTruguay are similar to those of the treaty with
Italy, it may be helpful to the Committee in its
consideration of the former to have a brief sum-



May 22, 7950



811



niary of its provisions. The Department has
recently prepared such a summary, and I should
like to offer it also for the record.

DIFFERENCES BETWEEN THE TREATIES

It may be fitting at this time, however, to refer
to certain of the differences between the two
treaties. The first concerns the title. The use of
the term "economic development" reflects current
interest in certain features which have long been
present in treaties of friendship, commerce, and
navigation but which have been given increased
importance by present economic conditions. I
refer, of course, to the promotion of a favorable
climate for private capital, technology, and enter-



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 22, Apr- Jun 1950) → online text (page 58 of 116)