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]