Foreign Relations of the United States, 1946, General; the United Nations, Volume I

560.AL/8–446^89a

The Ambassador in the United Kingdom (Harriman) to the Secretary of State

confidential
No. 1632

London, September 4, 1946.

Sir: I have the honor to refer to the Department’s telegram No. 5848, August 6,⁹⁰ instructing Mr. Hawkins and Mr. Peterson to visit Praha, Oslo, Brussels, The Hague and Paris to conduct discussions with Government officials regarding the United States proposals and Draft Charter for an International Trade Organization.

The discussions took place in Praha August 12–13, in Oslo August 15–19, in Brussels August 21–22 (where Mr. Robert Terrell of the Department joined the party), in The Hague August 23–24, and in Paris August 26–28. In passing through Copenhagen occasion was taken to call on the Danish Foreign Minister and his principal assistant to bring them up to date in developments relating to ITO.

The principal points of value of the trip may be summarized as follows:

(a) It brought to light several points in the United States Draft Charter regarding which there was common misunderstanding and criticism.

(b) As a result the Department, guided also by the results of conversations with non-European nuclear countries, will be to a certain extent briefed regarding attitudes likely to arise in the Preparatory Meeting in October, which thus permits a prior consideration of the position which the Department will take at the Preparatory Meeting.

(c) It served to emphasize to European nuclear countries the importance which the United States attaches to the proposed International Trade Organization, and the sincerity of the American intention to modify our own trade restrictions as well as to effect the renewal [removal?] or reduction of trade restrictions in other countries.

(d) It should speed up the study work of European nuclear countries, add importance to the status of their committees appointed to recommend a governmental position regarding the International Trade Organization, and should hasten both the preparation of request lists and the formulation of new post-war tariffs.

(e) It should bring about a greater appreciation of the importance of the relationships and conflicts between temporary trade arrangements of European nuclear countries and the long-term arrangements proposed for ITO.

(f) It should assist in clarifying the relationship of the Preparatory Meeting, the Negotiating Meeting, and the World Trade Conference, and indicate the type of personnel required from nuclear countries at the first two meetings.

(g) Finally, the trip provided additional personal knowledge of the views of individual government officials who are to participate in the Preparatory Meeting.

Outline of Report.

In order to provide maximum usefulness to the Division of International Trade Policy and the country committees concerned with ITO, this report will be divided into three main segments:

(a) Main conclusions of the London conferees regarding the outlook of the five countries toward the ITO.

(b) A chronological summary of the persons seen in the five countries and general indications given by them of the position of each country relative to the ITO.

(c) A serial review of the United States Draft Charter with comments on individual paragraphs reflecting the attitude of governmental officials in the five countries.

Main Conclusions

1. The five countries visited exhibited a sincere and wholehearted interest in the International Trade Organization, and the code of conduct for international trade appears to be considered by all five countries as an alternative greatly to be preferred to the nationalistic trade practices prevalent in the inter-war years. The United States proposals are in every case regarded as being in consonance with the basic economic interests of the countries visited.

The ultimate position which Czechoslovakia will take is more doubtful than that of the other four countries because of its political relationship with the U.S.S.R. and the disruption of its industrial structure because of enemy occupation and the resultant nationalization program. Czechoslovakia, geographically and politically, is on the fence between eastward and westward orientation in the economic and political spheres and has not yet made the basic decision between east or west. For that reason its position regarding the International Trade Organization is likely for a time to be equivocal.

A somewhat similar but less fundamental doubt must also be expressed for France because of conflicting political elements in the country, and the wartime dislocation in French industries which raises doubts as to what position France will be able to hold in a competitive post-war world and as to what position it should take regarding proposals envisaging greater competition in international trade. If the U.S.S.R. should not participate in ITO a conflict might easily arise between the political and economic interests of France which would be difficult to resolve.

As for the Netherlands, support for the kind of Trade Organization and commitments proposed by the United States seems likely to be qualified in a number of important respects because of Dutch concern for the welfare of the Dutch East Indies and Dutch political interests in that area.

The support for our ITO proposals by Norway and Belgium seems likely to be unqualified in every important respect.

2. In all five countries there seems to be general agreement regarding the elimination of quantitative restrictions for protective purposes. This is in sharp contrast from the position adopted in the inter-war years and most encouraging to the hope for a basis for tariff action that would have meaning.

3. The main objections from the five countries to the United States Draft Charter arise from their concern over a possible inadequacy of provisions relating to the transitional period. Their objections are not as yet very specific but it is to be expected that their concern over problems facing them will cause them to examine very critically any provisions which in any way limit their freedom of action for as long a period as there is any chance of these problems still existing.

4. Objections were expressed by several of the five countries to provisions in the Draft Charter regarding cartels and inter-governmental commodity arrangements. These objections in large degree arise from an ideological bias in favor of cartels and commodity agreements. This gives rise to a reaction against the anti-cartel and commodity agreements bias which seems implicit in the text of Chapters V and VI. In particular they object to the presumption that the specified practices of cartels are bad and are inclined to feel that the burden of proof should be on the organizations to prove them so. Regarding commodity agreements they feel that the machinery is so cumbersome as to prevent or delay unduly the taking of needed action.

5. A general question was raised in several of the countries regarding the relationship of shipping problems to the proposed International Trade Organization.

6. A feeling was evident in several countries that regional tariff groups should not be prohibited within the ITO membership if the objectives of the regional group were truly toward freedom in international trade and provided the agreements were actually and effectively open to other ITO members. It was argued that certain members of ITO with common economic problems might be able to reduce trade barriers among themselves to a greater degree than would be possible among all members of ITO; that under these conditions if a regional group gave special mutual concessions such arrangements should not be prohibited provided the offer was effectively open to all members of ITO.

7. Questions frequently arose, without taking the form of concrete suggestions, regarding the coordination of the work of Economic and Social Council, ITO, and other agencies, particularly the Food and Agricultural Organization.

8. In several of the five nuclear governments there was some fear of trade recession in the United States which raised the question whether the United States Draft Charter made adequate provision whereby a country might insulate itself from business recessions in other countries.

[Here follows balance of the report.⁹¹]

Respectfully yours,

For the Ambassador:

Harry C. Hawkins
Minister-Counselor for Economic Affairs

1. Presumably the date enclosure number should be 9–446; it is however filed as indicated here.
90. Not printed.

91. Additionally officers from the Department proceeded from Washington at varying intervals to Ottawa, Havana, Rio de Janeiro, Santiago, Wellington, Canberra, Pretoria, New Delhi, and Nanking, for similar consultations, during the period from mid-August to early October; and further discussions were held with the French at London on September 14 and at Washington on September 24 and October 1 (documentation found in 560.AL/file).

    On October 7 the Department in its weekly “Current Economic Developments” described the foreign reactions to this Government’s trade program in general fashion as follows:

    “Since the issuance of our Proposals and draft Charter, Department officers have discussed in detail the points contained therein with officials in the other countries of the Preparatory Committee group and have found that while there is considerable unanimity on some aspects of our program, the US delegation faces a difficult task of persuasion on others. Canada perhaps comes the closest to supporting our program as a whole. UK officials gave their approval to the Proposals before they were issued, and have criticized the draft Charter only where it differs substantially from the Proposals.

    A definitely different opinion is to be found in the less-developed countries (Australia, New Zealand, India, China, Cuba, Brazil, and Chile) with regard to the reduction of trade barriers. These countries, deeply concerned with the problem of industrialization and full employment, want to use restrictive measures to protect their infant industries. In general, they remain unimpressed with our contention that subsidies offer the least objectionable method for this purpose. They point out that, while tariffs and subsidies both amount to charges on their economies, the very real difficulties in raising the revenue to pay subsidies make the latter impractical for them. The Cubans are reluctant to give up their preferential position in the US market, as are the New Zealanders in the UK. The British, however, are willing to negotiate on preferences if convinced of the sincerity of the US intention to lower substantially our tariff wall, as a defense against which the Empire preferential system was developed.

    A major point of difficulty will be faced in connection with our cartel provisions. The Dutch, the Czechs and the Belgians are not willing to concede that all cartels are bad. They would be willing to have the Charter state that certain practices may have undesirable effects, but they object to having the burden of proof put on those engaging in cartel arrangements, as our draft Charter now provides.”