560.AL/2–2748: Telegram
The Ambassador in Cuba (Norweb) to the Secretary of State
priority
niact
249. For Clayton from Wilcox. Will have complete agreement on all outstanding issues within next 3 or 4 days. On basis present understandings final act will be signed by some fifty countries excepting Swiss, probably Argentina, possibly one or two other Latins. UK now making desperate last minute attempt to extract additional concessions or prevent successful conclusion of negotiations. Comments on points raised London’s 726 February 25 follow:
I. Specific Points
(a) Non-discrimination.
London’s 2(a), 3(2) and 4(a).
Draft Article 23 on non-discrimination which has been agreed unanimously in working party and has now been formally circulated here for action by sub-committee was negotiated by Clayton with British and French February 18 and 19. Subsequently considerable number of drafting changes were agreed upon principally to provide clarifications requested by British delegation. London’s statement that main difficulty involves 15 February 1948 basis for transitional discrimination is incomprehensible here. London evidently seriously misconstrues text. Present text permits British for transition period all of discrimination permissible under London draft Charter, plus all of discrimination permissible under Geneva draft Charter, plus any additional discriminations existing on 15 February 1948, plus adaptations thereof. This has been made entirely clear in draft worked out with full collaboration and approval by British delegation. Having reached complete agreement on article with all Europeans and Commonwealths and with no dissent from any other delegation which has seen text, it is inconceivable that we should ask fifty countries assembled here to await a new bilateral negotiation between US and UK on Section 9. For ten weeks here we stood firmly for Geneva [Page 876] draft against combined attacks by many Europeans including British. Finally we brought forward new draft on basis of which Clayton quickly negotiated agreement with British, Europeans, and Commonwealths. Could not undo this solution now without returning conference to impasse in which it languished for months.
(b) Protective quantitative restrictions for developmental purposes.
London’s 2 (b), 3 (1), and 4 (b).
Cripps’ objection here is to compromise drafted by delegates of US, UK, France, Austria cleared with all countries of Commonwealth and Western Europe, negotiated by Clayton with Latin Americans, and accepted by all other undeveloped countries. Is true that draft is inconsistent in principle with Washington proposals. But not inconsistent with compromise Charter texts adopted in London and Geneva with active participation and agreement UK delegates.
Statements that present draft involves “substantial breach” or “serious loophole”; that it “releases all of the less well developed countries from provisions of Charter”; that it enables them to impose restrictions unilaterally without receiving advance approval; that it gives ITO no subsequent control, are all untrue.
Fact is all products covered by trade agreements remain under tight control. Provisions in question, therefore, relate only to minor part of trade not covered in agreements. Here prior approval required in all cases. But given automatically in two limited cases: (1) Industries first established during war, and (2) industries whose markets have been taken away by new or increased restrictions imposed abroad. But even here ITO can fix any time limit it chooses on use of QR and any renewal must be sought under tighter provisions satisfying numerous and difficult criteria.
Present draft of Article 13 is the one crucial compromise which will enable us to obtain almost complete agreement between developed and undeveloped countries here. This may be reason Cripps has singled it out for attack. Draft is acceptable to all other industrial countries.
(c) New preferences.
London’s 2(c), 3(1), and 4(c).
Present draft of Article 15 is inconsistent with original Washington proposals. So were earlier drafts of same article which UK delegates accepted in London and Geneva. Present text drafted in full collaboration with UK delegate is designed to secure adherence of Arab states and Central American Republics whose trade, among themselves, has no great economic significance; is accepted for this purpose by all other industrial countries.
Statements that criteria are “loose”; that release is purely “automatic”; that arrangements are not subject to “close control”, are all [Page 877] untrue. Opinion here is that present draft is much tighter than London–Geneva drafts since we would certainly have been defeated on requirement in brackets for two-thirds vote.
Under draft, ITO must judge whether arrangement “necessary” to establish “sound and adequate” markets for new industries for each participant in new preferential arrangement. Can order applicants to negotiate with any member who would be injured by arrangement. Holds participants to MFN rates bound in trade agreements unless released by other parties to agreements. Binds preferential margin. Forbids departure from details of proposed arrangement.
UK is not really objecting to above provisions. But is complaining that definition drawn to meet cases of Arabs and Central Americans will not let UK set up new preferences with colonies by majority vote in ITO, but would require two-thirds vote. Holmes presented this case yesterday at meeting US delegation office with all Commonwealth and Europe. Australia and New Zealand flatly rejected UK position. Canada and South Africa remained silent. Europeans just smiled.
Argument that article would be unjust to UK completely untenable. Charter permits British Commonwealth to retain preferential system vitally affecting major part of world trade without prior ITO approval. Forbids Arabs and Central Americans to establish preferences with insignificant effects on world trade without prior ITO approval.
In connection with (b) and (c) above, it should be noted that all Latin Americans and other undeveloped countries complain that Charter has been heavily slanted towards interests of UK, against interests of undeveloped areas, since it leaves former free to use QR and preferences and requires latter to get ITO permission to use them. In connection with (a) above, it should be noted also that Western Europeans, particularly Belgians and Dutch, complain that U.S. invariably sacrifices their interests whenever UK insists. In going along with UK on discrimination issue, we nearly lost Belgian and Dutch support for whole Charter. We could not now yield to British pressure without alienating most countries in world.
II. General Comments
Cripps suggests adjournment Habana Conference for 2 or 3 months either to enable London to inform itself on developments fully known to UK delegation here or to enable London to attempt to extract from Washington some concessions beyond those sought by UK delegation here.…
When I suggested adjournment as one possible course of action 2 months ago, Washington instructed me to press negotiations until satisfactory Charter approved by majority of countries here. Adjournment [Page 878] might have been possible then. It is impossible now. Fifty countries are ready to sign the final act of this conference within the next few days.
If conference is not adjourned, Cripps threatens UK will not “sign the Charter”. Of course nobody will “sign the Charter” at Habana. Delegates will merely sign final act of conference authenticating text. Governments will not be bound until parliaments ratify. Cripps probably means UK would not sign final act. Cannot believe he would … carry out this threat.
UK Government has been publicly committed as full partner of US in this project from Atlantic Charter in 1941 and Lend-Lease Article VII in 1942, through A–A loan agreement and jointly sponsored proposals in 1945, London Conference 1946, Geneva Conference 1947, and in 16-Nation report on ERP last fall. Agreement now within reach here essential to support Bretton Woods agreements and widely heralded as necessary aftermath of ERP. In scope, variety, detail, importance, will surpass anything in previous history of international economic relations. Conference will be universally acclaimed as first important one to be brought to highly successful conclusion since San Francisco and Bretton Woods. It is incredible that UK, with no support from anyone, would assume the responsibility of attempting to scuttle it at the eleventh hour.
In my judgment, the present Government of the UK, while giving lip service to the principles of multilateral trade, really believes that Britain can never face free competition and must seek sheltered markets through preferential arrangements, discriminatory bilateral contracts, and barter deals. For that reason, it has never wanted the Charter to be adopted or the ITO to be set up. The UK delegates have not given the US delegation whole-hearted or effective support at London, Geneva, or Havana. The UK has apparently assumed that agreement, among so many countries, on so many vital issues, could not be obtained. Now that it is in hand they are seeking to destroy it. Fortunately they are too late.
You will recall that Cripps threatened to walk out on the Geneva negotiations last summer unless we would give British complete freedom to discriminate for a year. We capitulated. Subsequently he refused flatly to carry out the commitment of his government to negotiate in good faith for the elimination of preferences. We capitulated again. Now he is employing the same tactics. But the situation is radically different. Everything is out in the open. He cannot get his way in secret. He is completely isolated—from the rest of the Commonwealth, from the countries of Europe, from all the undeveloped countries of the world. We do not have to give him anything. The UK will not move to adjourn the conference. It will sign the final act.
[Page 879]At this late hour it is undesirable and indeed impossible to transfer these negotiations to London or Washington. It must be remembered that this conference has been going on for more than three months and 56 other delegations are involved. If Cripps or Harold Wilson would fly to Havana, Clayton might meet him here. But he could scarcely get here in time to influence the final agreement in any way.
It would appear that only thing we can do under circumstances is explicitly to refute each of the British arguments under paragraph (a) above, flatly to reject the proposal that conference be adjourned, and emphatically to demonstrate it is impossible for Cripps to carry out his threat not to sign final act. This should be done soonest. The Havana streamroller cannot be stopped.
Repeated London for Douglas; sent Department 249. [Wilcox.]