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]