99 Coombs to Clayton

Letter GENEVA, 3 May 1947

SECRET

I refer to my letter of 26th April, 1947, and to the discussion which I and two of my colleagues had with you in relation to the United States' response to our request on wool.

During that discussion, you suggested to us that the offer of binding has a value because it will prevent possible increases in duties either in the immediate or more distant future. We do not regard the binding of the present duty of 34 cents as a concession for which any payment should be made by negotiating countries. The binding of a duty can have value only if such binding represents a real sacrifice by the binding country. Any proposal to raise the existing duties would, in our opinion, be inconsistent at least with the spirit of Article VII of the Mutual Aid Agreement [1] between our Governments and with the understandings on which the Charter discussions and the present negotiations were entered into. Furthermore, it would appear to us to be inconsistent with the statements of policy made from time to time by the United States' Government and its delegation at the Preparatory Committee.

It is true that the draft Charter would permit members to impose new duties on unbound items, but we have assumed that this freedom would be used for purposes broadly in accordance with the spirit of the Charter. The wool duty is already high. At normal pre-war values it was as high as 150% ad valorem on certain lines and averaged as much as 100%. Even at present abnormally high values, it is of the order of 60%. Secondly, wool is a raw material entering into the costs of many industries and, therefore, singularly inappropriate for protection by customs duty. Every other significant market in the world admits wool free of duty.

Thirdly, U.S. wool production cannot be regarded as a young industry in which temporary protection and experience in production are likely to lead to efficiency. Indeed, the indications are all to the contrary.

These considerations, we believe, establish a prima facie case that wool duties should be reduced quite apart from the bargaining element in the present negotiations. It is, therefore, inconceivable to us that value should be attached to the binding of the present duties.

I wish to refer also to the memorandum entitled, 'The Wool Situation in the U.S.', handed to us by your negotiating team. It is, as you know, the belief of the Australian Delegation that negotiations for the reduction of trade barriers should take into account sympathetically the purposes which the barriers are designed to achieve, and the problem which it is hoped they will solve. We have, therefore, for a long time given some thought to the problems which the United States Government faces in relation to its domestic wool industry. I attach a note in which we set out our views on the issues raised in your memo. I believe that those views show that our attitude is not based solely upon our own economic and commercial interests, but makes generous allowance for the real problems of the U.S. Government in relation to the wool industry. You will see that in our note we come to the following main conclusions:-

(a) The undertakings of the U.S. Government in Article VII of the Mutual Aid, the understandings on which this series of negotiations have been arranged and the statements made by the United States Government and its representatives here imply a willingness to reduce duties-a willingness which should apply with especial force to a duty as high, and as widespread in its effects as that on wool, (b) The United States argument that a reduction is unnecessary because of the present high demand for wool and the low domestic production, is based on short-term considerations and is unacceptable, (c) Contrary to the United States' view, a reduction in duties by leading to lower prices will expand United States' consumption and also enable Australia effectively to counter the competition of substitutes, (d) The increase in the burden of the price support programme on the United States Treasury represents no increase in the real burden of this programme on the community, but merely alters its distribution and subjects it to more frequent scrutiny, (e) The proposal for the reduction in the duties on wool put forward by the Australian Delegation taken in conjunction with our attitude on the United States domestic wool assistance programme, and the willingness of our Government to discuss with the United States the establishment of an International Wool Agreement, demonstrates a sympathetic consideration of the real difficulties facing the United States Government in relation to this industry and represents a constructive proposal consistent with the welfare of the United States domestic wool industry and in the interests of the United States consuming public.

Finally, I must repeat that it is the considered opinion of the Delegation that our request on wool is fundamental to a trade agreement between the United States of America and Australia. It is because of this that we are taking the subject out of the normal negotiating procedure and communicating with you in this way.

1 The agreement was made in 1942. Under Article VII signatories agreed to co-operate in action for the expansion of world trade, in particular by the elimination of discrimination and the reduction of tariffs and other barriers.

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