Office of the Historian

893.50 Recovery/6–2848: Telegram

The Secretary of State to the Ambassador in China (Stuart)

Washington, June 28, 1948—3 p.m.

933. As indicated Deptel 920, June 24, numbered para 3 re Art. II, interpretative minutes to agreements have recently been developed with ERP countries. They will be appended each European agreement as Annex and will have equal validity [with] agreement. They are important primarily from point of view other govts, although two or three points may be useful to US. Although Annex not vital to China agreement, would not Chigovt have justifiable complaint if not informed contents and given opportunity adopt similar Annex? Emb authorized use its discretion this matter in light time factor (instruction re this subject follows). Emb may have additional points of interpretation standard or unique China articles which it would be helpful include Annex.

If Annex is appended China agreement, Art. XII (Entry into Force, etc.) should have new para inserted after para 2 and final para 3 should be renumbered as 4. New para 3 should read “The Annex to this Agreement forms an integral part thereof”.

Following is text those portions Annex applicable China agreement. Note that Section 2 reproduces definition restrictive business practices contained in Art. 46 para 3 Havana ITO Charter.

Annex—Interpretative Notes

1.
It is understood that the requirements of para 1 (a) of Art. II, relating to the adoption of measures for the efficient use of resources, would include, with respect to commodities furnished under the Agreement, effective measures for safeguarding such commodities and for preventing their diversion to illegal or irregular markets or channels of trade.
2.
It is understood that the business practices and business arrangements referred to in para 3 of Art. II mean: [Page 585]
(a)
Fixing prices, terms or conditions to be observed in dealing with others in the purchase, sale or lease of any product;
(b)
excluding enterprises from, or allocating or dividing, any territorial market or field of business activity, or allocating customers, or fixing sales quotas or purchase quotas;
(c)
discriminating against particular enterprises;
(d)
limiting production or fixing production quotas;
(e)
preventing by agreement the development or application of technology or invention whether patented or unpatented;
(f)
extending the use of rights under patents, trade marks or copyrights granted by either country to matters which, according to its laws and regulations, are not within the scope of such grants, or to products or conditions of production, use or sale which are likewise not the subjects of such grants,; and
(g)
such other practices as the two Grovts may agree to include.
3.
It is understood that the Govt of China is obligated to take action in particular instances in accordance with para 3 of Article II only after appropriate investigation or examination.
4.
It is understood that the phrase in Article VI “after due regard for the reasonable requirements of China for domestic use” would include the maintenance of reasonable stocks of the materials concerned and that the phrase “commercial export” might include barter transactions. It is also understood that arrangements negotiated under Article VI might appropriately include provision for consultation, in accordance with the principles of Article 32 of the Havana Charter for an ITO, in the event that stockpiles are liquidated.
5.
It is understood that the Govt of China will not be requested, under para 2 (a) of Art. VIII, to furnish detailed information about minor projects or confidential commercial or technical information the disclosure of which would injure legitimate commercial interests.
6.
It is understood that the Govt of the USA in making the notifications referred to in para 2 of Art. X would bear in mind the desirability of restricting, so far as practicable, the number of officials for whom full diplomatic privileges would be requested. It is also understood that the detailed application of Art. X would, when necessary, be the subject of inter-governmental discussion.
7.
It is understood that any agreements which might be arrived at pursuant to para 2 of Art. XI would be subject to ratification by the Senate of the USA.
Marshall