We are invited by United Nations Secretariat in accordance with
Memo on procedure to select a base date. Explanation of reasons
for a base date is given in paragraph 2 of Section E of Memo on
procedure. [1] Briefly I understand this to mean that since it is
provided that preferences not reduced or eliminated in these
negotiations as well as those altered by negotiations will be
protected from most-favoured-nation rule [2] and bound against
increase it is necessary to define precisely which preferences not
so reduced are legitimately preserved and bound. Furthermore some
point of comparison with new rates agreed upon helps in assessment
of concessions granted and obtained.

It has not in the past been necessary to select a base date before
entering into tariff negotiations. Such negotiations have been
directed towards reaching agreement as to rates of duty that shall
apply as from date of entry into force of agreement and have
related to changes to be effected in tariffs as they existed at
the time of negotiations. Briefly history of base date proposal is
as follows-
(A) United States Draft Charter provided that preference margins
remaining after negotiations should be protected from elimination
by most-favoured-nation rule provided they did not exceed those
existing on either June 1939 or June 1946 at whichever date margin
of preference was lower. Argument offered by United States was
that this would prevent any increase in margins prior to
negotiation for purely bargaining purposes.

(B) This proposal insofar as it related to alternative dates was
rejected at the First Session as an attempt by United States to
obtain benefit of reductions without compensating advantage.

Committee also dismissed possibility of bargaining increases as
unrealistic.

(C) However, Canada pointed out that in emergency circumstances of
war Canada had temporarily suspended all duties ordinarily payable
on many commodities and that consequently they had temporarily
suspended and eliminated margin of preference ordinarily operating
on those items. Canada was not disposed to agree to a rule effect
of which was automatically to eliminate suspended preferences.

(D) At first Session of Preparatory Committee it was agreed that
establishment of a common date may be neither practicable nor
satisfactory for all countries granting preferences. Committee
therefore suggested that each member concerned should inform
United Nations Secretariat as to date which it proposes to use for
negotiations with respect to preferences. (See paragraphs) of
Section B of Memo on procedures.)
If it is agreed that Australia should select a base date selection
of most appropriate date for Australia presents no difficulty as
no substantial tariff changes have been made in recent years. Some
alterations in primage duties involving elimination of certain
preferential primage rates were introduced in November 1946. All
agree that it would be desirable to select a date prior to their
introduction because selection of such a date may enable these
reductions to be counted as part of concessions granted in
forthcoming negotiations. For this purpose opening date of first
session namely 15/10/46 would appear to be suitable date. All
Members of Delegation are agreed that if a base date to be
selected that date would be most appropriate.

Fletcher', however, has questioned the wisdom of selection base
date at all. He argues that naming of base date is 'commencement
of a broader commitment' purpose of which is to secure agreement
to ultimate abolition of British preferential system and borders
on an additional prior commitment.

He holds that for these reasons we should refrain from acting on
suggestion that each member inform United Nations Secretariat as
to date it proposes use as base date for negotiations with respect
to preferences. However, as I cannot understand basis of
Fletcher's fears I have asked him to set his argument out fully
and it follows in succeeding telegram.

As I understand it Australia committed only to enter negotiations
in relation to tariffs and preferences and I agree that any
further commitments should be avoided. I cannot see that
nomination of a date extends that commitment in any way.

Furthermore a refusal to nominate date would mean presumably that
negotiations would be conducted on basis of tariff as it now
exists which may be slightly less satisfactory from point of view
of those enjoying preferences in Australia than date proposed
above. Assessment of concessions involved in agreement as to
future rates must inevitably be based upon comparison between
those rates and those operating either at commencement of
negotiations or at some other date agreed upon as margin
appropriate for indicating real sacrifice involved in concession.

Furthermore preferences not reduced in negotiations which are to
be protected against most-favoured-nation rule must be preferences
at time of negotiation or at some other date agreed upon as more
appropriate.

This matter was discussed in British Commonwealth Meeting where I
asked Fletcher to explain his fears to other Delegates. McKinnon
of Canadian Delegation and Helmore of United Kingdom Delegation
stated they did not see any commitment or embarrassment in naming
a base date. No other Delegates spoke on the subject.

I recommend therefore that United Nations Secretariat be advised
that Australia selects 15/10/46 as base date for the purpose of
forthcoming negotiations. McCarthy, Morris [4], Morton, Marcusson
[5], Phillips and Bury support this recommendation. I have read
Fletcher's telegram.