110 Coombs to Chifley

Letter [GENEVA], 9 June 1947

I returned to Geneva on 28th May and was able immediately to participate in the discussions on Chapter 4 of the Charter. During the previous week there had been a preliminary discussion of Chapter 3 and the various amendments submitted by Delegations had been referred to a Sub-Committee of which Australia is a Member.

We have cabled to Australia details of some of the amendments to the draft Charter, and as we shall be keeping you informed of the discussions in this way, I shall not repeat those comments. There are, however, some general observations which will be of interest.

Tariff Negotiations:

We have now commenced tariff negotiations with all the principal foreign countries in whose markets we are interested and also with South Africa and India. We are exploring the possibility of mutually advantageous negotiations with Chile and Lebanon-Syria, and examining the requests which we might make upon the various Colonies.

We have not so far progressed very much beyond the exchange of lists of first offers, and we are now preparing reports which will be cabled to you upon the relationship between the requests and offers exchanged.

United Kingdom Negotiations:

At a meeting with other British Commonwealth countries, it was agreed that the negotiations between Australia and the United Kingdom should formally be scheduled through the Secretariat and, as soon as our own requests on the United Kingdom are complete, we shall arrange for this and for the circulation to other countries of our requests upon each other. Canada does not at present intend to schedule at Geneva their negotiations with the United Kingdom.

There has been some criticism in the Tariff Steering Committee by the representatives of the Netherlands of the absence of negotiations between members of the British Commonwealth group, and this has been answered on the grounds that the absence of negotiations indicates a satisfaction with existing tariff duties.

The listing of negotiations between United Kingdom and Australia will be of some assistance in meeting this criticism.

U.S.A. Negotiations:

The Leader of the United States Delegation is due to return to Geneva about June 13th. We have not had any further discussions, of course, with the U.S.A. negotiating team, but I did make clear to the Acting Leader of the Delegation the views of the Government, and this was reported fully in my cable, ITO.102.

There is accumulating evidence that the whole of the tariff negotiations is being affected by our reaction and that of South Africa to the inadequate offer by the U.S.A. on wool duties. The point has come up, for example, because of our explanation to the representatives of the French Delegation that the absence of an offer on items in which they are interested is due to the fact that the principal supplier is U.S.A. and that, in present circumstances, we are unable to offer them a concession on the existing duty.

There has been some suggestion that in the event of their making an offer on wool duties, the U.S.A. will make a concerted attack upon the offers already made in respect of margins of preference.

They do not consider that any substantial concessions have yet been offered in these margins and you will already have our cables setting out the text of letters exchanged between the Leaders of the U.K. and U.S.A. Delegations-ITO. 84 and cable of 2[5]th May.

There has not been any discussion in the Committees of the progress of the tariff negotiations and the only reports have been those formally made by the Tariff Negotiation Working Party listing the numbers undertaken. In the course of remarks made in the Committees which were discussing Articles 14, 15 and 24, it was apparent that some countries, in particular, France, Benelux and Cuba, were considerably dissatisfied with the extent of the offers already made. France and Benelux were specially concerned in respect of existing preferential margins. We are examining this in detail with a view to deciding whether U.K. is unduly 'holding back' in her concurrence in the reductions in margins.

Employment:

A number of amendments to Chapter 3 of the draft Charter was submitted and these were referred to a Sub-Committee of which we were a Member. Some modifications have been made by the Drafting Committee whose report will be considered later by Commission A.

Full details of these amendments were cabled in my ITO.114.

From our point of view, the most substantial change is in Article 6 [1] relating to the obligations towards other Members of countries with a favourable balance of payments. in order to meet the political difficulties of U.S.A. we agreed to a formal wording which avoids a direct statement of causal connection between favourable and unfavourable balances, but does not affect the responsibility which we desired to include in the Article for countries, having a persistently favourable balance of payments, to take action to correct the situation. The agreed text represents a compromise between U.S.A. and Australian drafts.

A substantial modification was proposed by France to Article 7 [2] to make clearer the rights of Members to take action in the event of others failing to maintain effective demand and employment. It was subsequently agreed that Article 35 may be the more appropriate place for this provision. [3] Article 35 will not be discussed for some days and we have proposed amendments to that Article which make clear the right of a country to seek relief from the obligations under Chapter V of the Charter in the event of a failure by another Member to observe its obligations under Chapter 3. [4] The U.K. is proposing to incorporate part 2 of Article 35 in Article 86 [5], but, in either Article, the substance of our amendments can be incorporated. The U.S.

Delegation has agreed that this provision should be written in terms that leave no doubt that it includes the cases referred to in the report of the London Conference.

Industrial Development:

The U.S.A. submitted a proposal to include in the Chapter relating to industrial development sections setting out the responsibilities of countries receiving investment towards private investors other than their own nationals. We have cabled the text of this amendment to you and we consider that there is every possibility of its being defeated by the opposition of Czechoslovakia, India and other countries. There is, however, the possibility that some compromise may be sought and a wording has been suggested which would leave Members a free choice whether to abide by a set of clauses relating to the right of private investors or otherwise, to contract out of the obligations. We shall cable further about this shortly.

There have also been substantial amendments put forward to the terms of Article 13, which would give to the Members wishing to develop their economies the initiative to take protective measures subject to the right of complaint by other Members to the Organisation and subsequent review of their action. These amendments have been referred to a Sub-Committee of which we are a Member and we are, at present, examining the possibilities of a United Kingdom proposal to transfer the provisions of Article 13 to each of the Articles incorporating an obligation from which a release would be sought on the grounds of economic development.

We are maintaining the position that a Member wishing to seek relief from the obligations contained in the Charter or in a Trade Agreement should first approach the Organisation before taking action, and we are proposing measures to prevent delay in the consideration of such a Member's case.

Articles 14, 15 and 24:

Discussion is in progress in the Commission on Articles 14,15 and 24. [6] We have made it quite clear that our acceptance of Articles 14 and 15 is conditional upon the acceptance by other countries of the other obligations contained in the Charter upon our belief that these undertakings will be carried out, and upon the satisfactory outcome of the tariff negotiations.

I have cabled the statement which I made in introducing our amendment for the elimination and modification of the Automatic Rule [7] and there is an indication that the U.S.A. is prepared to consider an amendment along the lines of the one proposed by us.

It has been referred to a Sub-Committee of which we are a Member.

There has been a lengthy discussion concerning Article 15 [8] and strong objection was raised by the South African Delegation to the inclusion of 'transportation'. I suggested that generally the obligation was acceptable to us, provided that we were not faced with the administrative burden of seeking out and removing provisions that would be contrary to the Article. There was support for our suggestion that no future laws or regulations should be introduced contrary to the Article and that, on complaint by a Member, action would be taken in specific cases to remove any measure conflicting with the provision.

Non-Governmental Advisers:

We have continued to have regular discussions with the non- governmental advisers and we are now holding in addition, meetings with them to discuss the amendments to the Charter that have been submitted by other Delegations.

There was a request that the non-governmental advisers be admitted to the Charter discussions and, whilst I think that would have been useful to us in many ways, I think that it would have been undesirable to accept the principle in relation to representatives of non-governmental organisations which have been sent to the Conference as observers, and also to non-official advisers attached to other Delegations. The proposal was discussed at a meeting of the Heads of Delegations and there was unanimous opposition to the admittance of any non-governmental advisers to the Charter discussions. I have reported this fully in my cable ITO.105. I have now received your cable advising that no change in the procedure should be made.

Article 35:

The South African Delegation, for the purpose of securing a discussion on Article 35, moved an amendment to Article 12 for the elimination of the reference therein to Article 35. In the course of his statement, the Delegate for South Africa said that he considered that Article 35 should relate only to the specific contractual obligations or concessions undertaken in pursuance of the Charter and not to the other more general statements contained in other Articles. This exclusion would have applied to such Articles as the employment undertaking, but I gather that he was thinking particularly of the one relating to fair labour standards.

I spoke strongly upon the need to maintain Article 35 as it stood so that there could be an immediate review of obligations in the event of a failure of another country to maintain employment and effective demand. I said that unless there was some reasonable assurance that the undertakings that we might assume in Chapter 5 of the Charter would have to be implemented only in conditions in which there is reasonably full employment, in which the balance of payments of the major countries of the world are not seriously in disequilibrium, and in conditions in which the progressive development of the economic resources of the world can proceed, we would be unable to carry out those obligations. If there were to be again a widespread collapse of effective demand and of the prices of our primary products, we could not in such circumstances carry out undertakings that would in fact mean the intensification of the depression in our own country. For these reasons I stated that the commitments embodied in the other sections of the Charter are complementary to those contained in Chapter 5.

I said that for these reasons we would resist any proposal to alter the right of a country to seek a modification of the undertakings it has given if, by the action of others, conditions are created in which it can no longer carry out those undertakings.

In a subsequent private discussion with the Leader of the South African Delegation he assured me that he was equally concerned with the possible collapse of world demand and realised the need for a revision of other commercial undertakings in those circumstances. He was concerned, however, with the important issue of national sovereignty. At the meeting I pointed out that there was no interference with this right of national sovereignty and that, in fact, a country could release itself from its obligations by withdrawing from the Organisation. Article 35 of the Charter, however, represented a substantial benefit for a country which, in unfavourable circumstances, was given the opportunity to state its case to the international community and to have its obligations reviewed with full international approval instead of being forced to withdraw from the Organisation.

This matter will again be raised when we return to consideration of Article 35. [9]

1 Article 7 in the London draft.

2 Article 8 in the London draft.

3 Article 35 provided for consultation between members when a member was aggrieved by (1) any regulation imposed by another member which affected the operation of chapter V (on general commercial policy) or by (2) any measure which impaired or nullified the Charter itself. Where no agreement was reached the matter could be referred to the ITO for advice.

4 Chapter 3 required members to take action to achieve and maintain a high level of domestic employment and effective demand.

The Cabinet Sub-Committee strongly supported the amendment saying, in cablegram T95, dispatched 11 June to the Delegation, that it 'attaches the utmost importance to establishing the independence of the obligations contained in chapters III and V through the medium of Article 35(2) and desires the relationship to be made as specific as possible'.

5 Article 86 concerned the settlement of disputes.

6 For the Cabinet Sub-Committee's instructions to the delegation concerning these articles see Document 104.

7 The text of the amendment to Article 24(1)(b) is given in Document go. It was subsequently further amended by the delegation and approved by the Cabinet Sub-Committee. This draft became Article 17(1)(a) in the Geneva draft with minor textual changes.

8 For Article 15 see Document 104, note 1.

9 The Australian amendment to Article 35(2) was accepted with minor textual changes and transferred to chapter VIII (on the settlement of differences).

[SFU : EVATT COLLECTION, TRADE CONFERENCE GENEVA, 1947]