Foreign Relations of the United States, 1958–1960, Foreign Economic Policy, Volume IV

31. Memorandum From the Assistant Secretary of State for European Affairs (Kohler) to Secretary of State Herter⁰

December 7, 1960.

SUBJECT

• Circular 175: Convention on the Organization for Economic Cooperation and Development and Related Documents

In accordance with Circular 175, authority is requested for signing a Convention to establish the Organization for Economic Cooperation and Development (Tab B)¹ and Protocols (Tabs B–l, B–2, B–3), and a Memorandum of Understanding (Tab B–5) relating to the Convention. There is also attached a Memorandum for the President (Tab A) transmitting for his signature a full power authorizing signature of the agreements.

Authority is also requested for concurring in a Ministerial Resolution (Tab C–1) which would approve the recommendations of the Preparatory Committee.

Discussion

The four Heads of Government at the Western Summit Meeting in Paris December 21, 1959 discussed the changes which had occurred in the international economic situation and recommended that a meeting be held in Paris to discuss new cooperative endeavors in the economic field.

Accordingly, a Ministerial Meeting was held in Paris on January 14, 1960 where it was agreed that a group of four experts should be set up to study the feasibility of revitalizing and broadening the work of the OEEC through the establishment of a successor organization which the United States and Canada could join as full members. After lengthy consultation with representatives of the interested governments and international organizations, the Group of Four sent its report, “A Remodelled Economic Organization”, to the twenty governments in April for their consideration.

Thereafter, intergovernmental negotiations on the reconstitution of the OEEC as the OECD began in May and continued almost without break through July. On July 22 a Ministerial Meeting was convened in Paris to review the progress made in these negotiations. The Ministerial Meeting reached agreement on the basic nature of the OECD and on the general outline and most of the fundamental articles of the OECD Convention. It was also agreed to establish a Preparatory Committee which would complete the negotiations on the draft OECD Convention, define the structure of the OECD, and make recommendations concerning OEEC Acts and activities to be carried over into the OECD.

The Preparatory Committee constituted by the Ministerial Resolution of July 23, 1960 held sessions from September 14 to November 23 during which time the Committee completed its report (Tab C), the draft Convention (Tab B), Protocols and Memorandum of Understanding (Tabs B–1, B–2, B–3, B–4, and B–5), and determined which acts of the OEEC should be recommended to the Council of the OECD for approval (Tab C).

All of the documents prepared by the Preparatory Committee have been forwarded to the governments for review prior to the Ministerial Conference to be held on December 13–14 in Paris.

The main features of the OECD emerging from the negotiations and as evidenced in the attached documents for signature are as follows:

The aims of the OECD provided for in Article 1 of the Convention shall be to promote policies designed:

a) to achieve the highest sustainable economic growth and employment and a rising standard of living in Member countries, while maintaining financial stability and thus to contribute to the development of the world economy;

b) to contribute to sound economic expansion in Member as well as non-Member countries in the process of economic development; and

c) to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations.

As an elaboration of Article 1 of the Convention, it has been agreed that the main functions and basic structure of the OECD should be as follows:

a) the OECD should strengthen the OEEC practice of consultation on the economic situation and policies of Member countries;

b) the OECD should foster consultation and facilitate coordination among Member countries concerning methods for making national resources available for assisting less-developed countries. In this regard the Development Assistance Group, upon inception of the OECD, will be constituted as the Development Assistance Committee;

c) while it was agreed that the OECD should have as one of its aims the promotion of policies to contribute to the expansion of world trade on a multilateral, non-discriminatory basis, the trade activities of the OECD will be quite different from and more limited than those of the OEEC.

Agreement has been reached that the OEEC Code of Liberalization, under which the Europeans undertook to reduce quantitative restrictions on trade among themselves but which was not applicable to the trade of other countries, should be abolished—it being understood that the benefits of the Code should be extended to other countries as rapidly as possible. It has also been agreed to establish a Trade Committee (Tab B–3) within the OECD to carry out, in particular, the following functions:

a) confrontation on general trade policies and practices at regular intervals or whenever requested by a Member;

b) examination of specific trade problems primarily of interest to Members;

c) consideration of any unsettled problems between the six countries of the European Economic Community and the seven countries of the European Free Trade Association.

While modifying and broadening the outlook of the Organization, it was generally agreed that it would be wise to preserve many of the valuable traditions and procedures of the OEEC which had worked so well for more than a decade. As a consequence, agreement was reached on Article 5 of the Convention, which provides that, in order to achieve its aim, the Organization may:

a) take decisions which, except as otherwise provided, shall be binding on all the Members;

b) make recommendations to Members; and

c) enter into agreements with Members, non-Member states, and international organizations.

It was furthermore agreed (Article 6) that unless the Organization agrees unanimously for special cases, decision shall be taken and recommendations shall be made by mutual agreement of all Members. Each member has one vote. If a Member abstains from voting, a decision or recommendation shall only be applicable to the other members—not to the abstaining member. In any case no decision shall be binding on any Member until it has complied with its own constitutional procedures.

The provisions of Article 6 thus make clear that no action binding on the U.S. can be taken by the Organization without the concurrence of the United States. Further, it is considered after the Convention enters into force, that the United States representative will not have any additional powers than now exist in the Executive to bind the United States, but any act of the Organization outside the power of the Executive will require action by Congress or the Senate as the case may be before the United States is bound.

The United States considered it essential that there be no automatic carry-over of OEEC Acts into the OECD. Consequently, the U.S. urged the following provision which appears in Article 15 of the draft Convention: “... decisions, recommendations and resolutions of the Organization for European Economic Cooperation shall require approval of the Council [of the OECD]² to be effective after the coming into force of this Convention.” (Tab B–5). This means that no Act of the OEEC will be carried over into the OECD unless the Council of the OECD agrees unanimously. However, the European countries considered that this provision might unsettle many of the decisions heretofore made in the OEEC and it was accordingly agreed at the Ministers Meeting in June that an agreement would be entered into which would commit the Members to approve the Acts recommended for continuation by the Preparatory Committee but would allow the United States and Canada a certain latitude with respect to such Acts. This agreement is embodied in the Memorandum of Understanding on the Application of Article 15 of the Convention (Tab B–5). Under this Memorandum the United States and Canada may within ten days of their acceptance or ratification of the Convention specify any Act or part thereof which it is to be released from the commitment to approve. The Memorandum sets forth certain procedures which may be followed for revision of the Preparatory Committee recommendation as to the Act or part thereof. In any event, if the United States or Canada so wish they have the privilege not to be bound by any Act or part thereof on which they have notified, although such Act or part thereof may become binding on the other members of the OECD.

Article 14 of the Convention provides that after signature, the Convention shall be ratified or accepted by the Signatories in accordance with their respective constitutional requirements. The Convention enters into force when all signatory countries have accepted or ratified, or on or after September 30 if fifteen signatories have accepted or ratified. The Department contemplates submitting the Convention and related documents to the Senate for its advice and consent.

Article 17 provides that any party to the Convention can withdraw on twelve months’ notice.

Attached to the Convention are four Protocols: (1) Supplementary Protocol No. 1 (Tab B–1) which provides for the representation in the OECD of the European Economic Community, the European Coal and Steel Community, and Euratom; (2) Supplementary Protocol No. 2 (Tab B–2) which provides for the privileges, exemptions and immunities of the OECD, its officials and representatives to it; (3) Supplementary Protocol No. 3 (Tab B–3) which establishes a Trade Committee and outlines its functions (the status of this Protocol is still the subject of negotiation and the United States is attempting to have it eliminated and its contents embodied in the report of the Preparatory Committee); (4) Protocol on Revision of the Convention on European Economic Cooperation of 16th April 1948 (Tab B–4) which provides for the replacement of the OEEC Convention when the OECD Convention comes into force (this Protocol will be signed only by the members of the OEEC and not by the United States or Canada).

In addition to its recommendation on the Acts of the OEEC which should be continued, the Preparatory Committee has made recommendations as to structure, activities and principles to be followed by the OECD. In order to give some assurance that these latter recommendations will be given due weight, a Ministerial Resolution (Tab C–1) has been drafted which would “Approve the report of the Preparatory Committee and Accept the recommendations contained therein”. It is not considered that concurrence in this Resolution by the United States and other countries would create a legal obligation, but would merely “confirm the determination of Governments” to carry on the work in accordance with recommendations (Preparatory Committee Report, Tab C, p. 15).

[Here follow recommendations that the Secretary (1) authorize signature of the convention, protocols, and memorandum of understanding, (2) authorize approval of the draft resolution for the ministerial meeting, and (3) initial the memorandum for the President cited in the source note above. The memorandum bears a stamped indication that Herter approved recommendation 1 on December 7.]

0. Source: Department of State, Central Files, 374.800/12–760. Official Use Only. Filed as an attachment to a memorandum of the same date from Secretary Herter to the President which transmitted a document for his signature authorizing Dillon to sign the convention and protocols establishing the Organization for Economic Cooperation and Development.
1. None of the tabs is printed. For text of the convention signed at Paris on December 14, together with two protocols and a memorandum of understanding, see 12 UST 1728. The text of a communiqué issued at Paris by the ministerial meeting of OEEC members and associates on December 13 is printed in American Foreign Policy: Current Documents, 1960, pp. 333–335. Documentation concerning the meeting is in Department of State, Conference Files: Lot 64 D 559.
2. Ellipsis and brackets in the source text.