127 Australian Delegation, Geneva, to Cabinet Sub-Committee on Trade and Employment Conference

Cablegram IT0254 GENEVA, 3 August 1947, 11.20 a.m.

SECRET

GENERAL AGREEMENT ON TARIFFS AND TRADE [1]

A. THE PROBLEM Early enquiries by the Tariff Steering Committee revealed that majority of countries negotiating agreements at Geneva would be unable to give definitive approval to a general agreement embodying tariff reductions before 1948. Many countries anticipated May and June as earliest they could manage. Some were quite indefinite.

At the same time there was widespread feeling that it would be undesirable and perhaps impossible to delay announcement of negotiated tariff announcement and operation of negotiated tariff reductions too long after completion of negotiations. Furthermore the United States are anxious to introduce reductions of United States tariff by Presidential proclamation under Reciprocal Trade Agreements Act as early as possible in order that action should not be too close to expiry date of Act [2] and so that tariff reductions will be in force and out of way before charter comes up for discussion by Congress.

If any country is to operate tariff reductions it [w]as agreed that it will be necessary, in justifying these reductions to its Legislature and public or in conforming to requirements of the authority by which it can make the reductions by Executive action (e.g. the United States Trade Agreements Act), to reveal reductions in other countries' tariffs or preferences which it has secured in exchange. There must therefore be approximate simultaneity in announcements of results of negotiations for various countries, and Governments concerned (not necessarily their Legislatures) must by that time have indicated their willingness to accept the agreements. They fear that if trade agreements were announced at the same time as charter was being considered opposition to tariff reductions would show itself in hostility to charter.

If a country introduces tariff reductions justified by concessions negotiated with another country and latter country fails to implement concessions offered, balance of a multilateral agreement may be destroyed and indeed agreement might break down. A multilateral agreement implies certainty that all negotiating countries will give effect to the reductions to which they have committed themselves.

An additional factor is that some countries particularly United States, United Kingdom and Canada desire that general agreement embodying the tariff reductions should be capable to continued operation [if] there is no agreement on a charter or if a sufficient number of countries should fail ratify charter.

Although we are not members of the Tariff Steering Committee we have attended number of its meetings and have emphasised following points:-

(a) It would suit us best to deal with tariff agreements and charter simultaneously.

(b) It is essential that there should be ample time between conclusion of tariff negotiations here and acceptance by Government of any commitment to present Tariff Agreement to Parliament with its support (i.e. signature of agreement) to allow complete review of results of negotiations by Cabinet, consultation with Caucus, and if considered necessary discussion in Parliament.

(c) We would be unwilling accept an agreement embodying tariff reductions and commercial policy provisions unless major countries simultaneously were accepting commitments relating to employment industrial development and commodity policy.

(d) A series of bilateral agreements would appear to offer better prospect of being able to relate reductions offered to those received and to protect against effects of failure by one or more countries to implement reductions negotiated.

[B.] STEERING COMMITTEE PLAN Tariff Steering Committee has put forward a draft general agreement based upon following plan which is intended to deal with these aspects of problem- 1. The Form of the Agreement. The agreement should be such as to permit Governments to accept it provisionally and to operate the tariff reductions provisionally pending outcome of World Conference and opportunity for full Parliamentary consideration or to accept and operate it definitively if they are able and wish to do so (e.g. United States).

2. Provisional Entry into Force. Agreement would not come definitively into force until sufficient countries had definitively accepted it with full Legislative authority i.e.

until at earliest the middle of next year.

Agreement would come provisionally into force when it had been accepted provisionally or definitively by eight key countries i.e.

United States, Cuba, United Kingdom, Canada, Australia, Belgium, Holland and France. These are key members of the two main preference systems and the main European trading countries. That while the agreement is in force provisionally- (i) The tariff reductions negotiated would operate.

(ii) The Governments would undertake to implement the other provisions of the agreement provisionally and within the limits of their existing Legislative Authority (no Government would need to introduce new or amending legislation).

(iii)Governments could withdraw on giving 60 days notice.

3. Signature and Date of Provisional Entry Into Force. Signature would amount to a promise to take what action was necessary to bring the agreement provisionally into force on date to be agreed and to recommend the agreement to the Legislature for definite approval if outcome of World Conference should be satisfactory. It is suggested that Governments should decide 'whether they were willing to sign' in time for signature to take place on 30th September. This, if all Governments of key countries signed, would permit them take approximate simultaneous action to bring the agreement provisionally into force by 1st November.

4. Right to Withdraw Concessions. If any Government failed to implement reductions negotiated the other parties would be free to withhold or withdraw concessions negotiated with it subject to giving other participating Governments interested in the concession an opportunity to negotiate for its continuance. For instance if we had negotiated a reduction in Australian duty on glassware with Czechoslovakia and the Czechs did not implement agreement we would be free withhold or withdraw this and all other concessions negotiated with Czechs but we should be expected to allow Belgium to negotiate with us for continuance of reduction in return for an acceptable concession by them, this procedure the Committee hopes would give the flexibility which we claimed for series of bilateral agreements while preserving advantage of multilateral agreement to which most other countries attach great weight i.e. that they obtain all concessions from other countries as a Contractual Right irrespective of whether they were negotiated directly with them or by virtue of M.F.N. treatment.

This they believe to be of great importance in demonstrating to Legislatures and public advantages of agreement. The unravelling of the implications of preference reductions when one of the negotiating parties withdraws is however a complication.

5. Content of the Agreement. In addition to the provisions required to give effect to above proposals and machinery provisions, agreement contains- (a) An undertaking to grant tariff reductions noted in the schedule and to apply M.F.N. treatment to other parties.

(b) Commercial policy provisions corresponding closely to chapter V of the charter.

Latter includes provisions which would form normal part of a trade agreement for the protection of the tariff bargains negotiated.

These are made more complex by multilateral character of agreement but almost certainly go beyond the minimum necessary for this purpose. They probably represent all the provisions of charter which United States would [be] constitutionally able to implement under Trade Agreements Act without further reference to Congress.

When charter finally is agreed upon its terms will replace general articles of the agreement provided that two-thirds of the contracting parties agree.

Those parts of charter not included (e.g. chapters III, IV and VII) are referred to in protocol to the agreement in which the Governments undertake pending entry into force of the charter to observe its principles to fullest extent of their authority and if the charter does not enter into force by December 1948 to meet to consider how general agreement should be supplemented. This is an attempt to meet our view that we should be unwilling to make tariff reductions and commercial policy provisions effective unless major countries were simultaneously accepting obligations relating to employment etc., but also relates to the possibility of no agreement being reached on the charter.

C. COURSES OF ACTION OPEN To AUSTRALIA.

To clarify the issues involved we have examined the three following alternatives- (1) To accept the Tariff Steering Committee's Plan.

(2) To seek a modification of the plan so that at Geneva there would only be initialling of the text for verification and the date for signature of Provisional Agreement deferred until November in order to permit full examination in Australia prior to decision.

(3) To postpone all action on Tariff Schedules and General Agreement until after World Conference.

Alternative (1) If the Tariff Steering Committee Plan were adopted following would appear to be necessary procedure and approximate time schedule- 15th August-Completion of tariff negotiation-Return of Delegation to Australia as early as possible to prepare for Cabinet examination of results. (It would be necessary for certain technical officers to remain to check schedules, texts etc.) 1st-29th September-Examination of proposals by Cabinet etc.

Cabinet-Tariff Schedules. It would be necessary for Cabinet to review the outcome of tariff negotiations as whole and assess the balance of benefits to Australia and decide whether it was prepared recommend the schedules as a whole to Parliament and whether it was prepared implement the schedules provisionally.

The Charter would have to be examined to decide whether Government was prepared participate in World Conference and what attitude it would take towards charter if it were discussed in the House.

The General Articles of the General Agreement. Cabinet would have to decide whether it was prepared accept provisionally the general articles within the limits of its existing Legislative authority.

Caucus. On assumption that Cabinet decision was favourable it would be desirable to obtain Caucus approval for provisional action being taken. It would probably not be possible to reveal to Caucus the details of tariff reductions negotiated but sufficient could perhaps be said in general terms to indicate the balance of advantages which it was believed they provided for Australia.

Parliament. On the basis that there would have to be debate in Parliament before signature following procedure might be followed- (a) The report of the Second Session including the draft charter could be presented to the House and debated on a motion that the report be printed.

(b) In moving the motion the Minister could inform the House in general terms of the outcome of negotiations and advise House that subject to its views it was the Government's intention to sign the General Agreement provisionally to introduce the tariff schedules and to apply the general articles of the agreement provisionally and within the limits of its existing Legislative authority (the text of the General Agreement could be presented to the House but it would probably be preferable to print this together with the tariff schedules).

30th September. Signature of the General Agreement in Geneva or New York by the most appropriate Australia[n] Diplomatic representative-High Commissioner to United Kingdom or Ambassador to Washington.

1st to 31st October.

1. Debate by Parliament on charter if this was not held during September.

2. Presentation to Parliament of a resolution provisionally reducing the tariff items agreed upon as from 1st November and presenting- (a) List of tariff concessions obtained directly and indirectly from other countries: including statements of preferences given up.

(b) The text of the General Agreement.

It is understood that our constitutional practice would permit these tariff reductions to operate without Parliamentary confirmation for a period of six months.

1st November.

1. Tariff reductions to become operative at least in key countries.

2. Government would apply provisions of General Agreement within existing Legislative authority (an examination of agreements suggests that this would involve no significant change in our existing Administrative practice).

21st November - December. World Conference.

January to April 1948. On the assumption that the outcome of the World Conference was satisfactory and Cabinet was prepared support proposals to Parliament it would be necessary for Parliament- (1) To confirm the provisional resolution giving effect to tariff reductions negotiated.

(2) To ratify General Agreement.

(3) To ratify the Charter (which would supersede existing articles in the General Agreement).

This schedule has been compiled on the assumption that tariff negotiations will be completed by 15th August the official target date. Present indications are this highly improbable and that they will almost certainly extend to 15th September. Unless whole schedule were shifted forward this would practically eliminate period which above schedule provides for examination of the proposal by Cabinet, Caucus and Parliament before a decision as to signature will be required. This proposal is clearly impossible for Australia. From this end major difficulties appear to arise from absence of a clear break at the end of the Geneva negotiations and shortness of period between then and the signature by which the Governments undertake apply the tariff reductions and the general articles provisionally to extent practicable under existing Legislation. This is the period in which intensive study by Cabinet and a heavy programme of educational work in the party, Parliament, and for the public would be necessary. Six weeks is far too short particularly as negotiations may not be up to schedule and senior officials should be in Australia to prepare material for Cabinet etc.

If Australia were not regarded as a key country problem would be less acute since then we should have longer to make up our minds although while United Kingdom and Canada remain key countries we would be obliged make decisions affecting preference enjoyed by Australia in these countries in order that they could adhere to the schedule. Furthermore private advice is that United States will insist that Australia should be regarded as a key country.

(See sub-paragraph (b)(i) under Alternative 3 below.)

Alternative (2) If it is agreed that it is impracticable keep negotiated tariff reductions in cold storage for 6 to 9 months and that at least provisional acceptance by all key Governments is necessary so that approximate simultaneous action can be taken to announce results of negotiations, the desirable course might be to seek adjustments in the procedure contemplated to make the programme an acceptable one to Australia and yet meet main objectives which the Steering Committee have in mind. Main adjustments required would be- (1) To abandon all idea of signature in Geneva beyond at most a verification of text.

(2) To set a date for signature by key countries far enough ahead to ensure ample time for consideration, consultation and general preparatory work in Australia. On assumption that negotiations are unlikely finish before middle September the 21st November [3] of the World Conference might be possible.

(3) Announcement and provisional adoption of schedules could follow quite quickly after this.

It would be necessary of course for this programme to be examined in detail in Australia from Constitutional, Administrative and political points of view but would from this end appear to be practicable. It has following advantages- (a) Conclusion of important tariff agreements by demonstrating effectiveness of International co-operation will provide good publicity and hopeful atmosphere for World Conference.

(b) It meets the United States' need [4] tariff changes well in advance of Congress consideration of charter and before the Trade Agreements Act approaches its expiry date.

(c) It will enable provisional action to be taken in Australia on results of tariff agreements as a whole and before sectional interests have an opportunity concentrate attention on particular items. It seems important to us particularly if significant benefit is obtained on whole, that impetus given by such gains should be taken advantage of as promptly as possible.

On the other hand the plan suffers from following disadvantages- (a) Period may even be too short to carry out adequately the preparatory and educational work necessary.

(b) Fact that tariff schedules are operating only provisionally may expose them to attack between their introduction and confirmation after World Conference. This could be avoided if Government decided seek Parliamentary approval for definitive acceptance of agreement this year. If this were done and outcome of World Conference was unsatisfactory or other countries did not live up to their undertakings relevant act would have to be repealed subsequently. In substance, however, this does not appear to be very different from provisional adoption and would involve prolonged Parliamentary debate on schedules themselves before acceptance.

Alternative (3) It seems clear that there would be strong opposition from some countries to any proposal to defer action by all countries until after World Conference. This due partly to United States difficulties to which we have referred but also to desire by number of countries that tariff reductions should operate as early as possible after completion of negotiations. If this opposition proves effective we could obtain postponement for Australia only by either- (a) Asking that Australia should not be regarded as a 'key' country.

(b) Informing Conference that it was impossible for Australia take necessary action before next week. If other countries could not adjust their plans to that situation it would lead to a breakdown.

With regard to (a) it seems unlikely that we could obtain exclusion from the list of key countries- (i) The United States will insist on our inclusion as a condition of going on with programme. Their reason is that without ourselves and Canada they could not present the agreements as having brought about any significant modification of imperial preference. This is essential if reductions in their own tariff which they contemplate are to be acceptable.

(ii) Our absence would make it necessary for us to ask that concessions published by United States, Canada and United Kingdom should exclude modification in preferences we enjoy to which we had provisionally agreed and reductions in preferences in Australia enjoyed by United Kingdom and Canada which United States had obtained as part of the justification for their own reductions. All three would object to this as it would mean incomplete publication of their agreements.

(iii) There would be similar complications in regard to reductions in preferences granted by us in favour of foreign countries where the concession was at expense of United Kingdom and Canada.

With regard (b) same difficulties would arise. In addition we may not be able persuade United Kingdom and Canada not to publish reductions of preferences we enjoy in their tariff. in this case there would be a publication of these concessions in Australia made apparently with our approval without our being able publish at same time benefits which justify their having concurred in modification.

[D.] CONCLUSION There has been no discussion of report in full committee as yet but it is known that some countries share our difficulties. We understand, however, the other key countries agree that it is necessary proceed along the lines of the Committee's plan. It would appear difficult for them adjust their plans if Australia does not act concurrently with other key countries and if we insist a breakdown is probable. For these reasons we are inclined favour solution of what is undoubtedly a difficult problem along the lines of second alternative.

Foregoing gives little attention to actual contents of general articles of agreement. These are being further examined. We should, however, be glad of your early comment on foregoing, but will telegraph further as soon as committee discussion takes place. Re your T.162 we will cable recommendation for Cabinet meeting. [5]

1 The cited copy lacks several paragraphs near the beginning and end of the document. The missing portions have been inserted from an unnumbered correcting cablegram dispatched 8 August.

2 11 June 1948.

3 A sign here indicates words missing from text.

4 A sign here indicates 'mutilated'.

5 Cablegram T162, dispatched 8 July, notified Dedman that a meeting of Full Cabinet on 15 August would consider a Sub- Committee submission on legislation to implement the GATT.

[AA : A1068, ER47/1/28, ii]