Your I.T.O.9 and 12.

1. Following is our understanding of position-
(a) The nomination of a base date for preferences arises solely
from Article[s] 14 and 24 of the Draft Charter:-

(i) Article 14-a base date is necessary to define the level at
which non-negotiated preference margins will be bound [1] if and
when Article 14 comes into force either as part of the General
Agreement on Tariffs and Trade or as part of the Charter.

(ii) Article 24-a base date is necessary to define the starting-
point of automatic elimination of preference margins if the
'automatic rule' in any form operates during the Geneva
negotiations. [2]

Apart from these draft Articles, the schedules emerging from the
negotiations could themselves specify all operative rates and
margins under the Agreement without the necessity for a base date
definition.

(b) The issue discussed in I.T.O. 9 and 12 is whether the naming
of a base date implies acceptance in some degree of Articles 14
and 24, or whether the nomination can be accepted safely as a
purely procedural step. The justification for the latter
contention rests on the assumption that a base date may facilitate
technically the course of the negotiations and contribute to the
experimental approach suggested in your I.T.O.13 and approved by
the Cabinet Sub-Committee, by providing a common procedural term
without prejudice to the substance of the negotiations.

2. We are not yet committed to Article[s]14 and 24, and, as you
are aware, our policy is to avoid any such prior commitment. In
view of the specific wording of paragraph 2, Section E of the
Procedural Memorandum [3], the Sub-Committee feels that, to avoid
any possible danger that an unqualified nomination of a base date
might be interpreted as implying some commitment to those
articles, any nomination of a base date should be qualified by an
express statement that it implies no commitment to or agreement
with the principles of Articles 14 and 24. Subject to this
qualification the Cabinet Sub-Committee has approved the
recommendation for the nomination of 15th October, 1946, as the
base date.

3. Subject to your comments, it is proposed to send the following
message to our United Nations Delegation at New York:-

'Further to our 70 of 7th February and subsequent messages
concerning Annexure 10 [4] of Preparatory Committee Report.

With reference to Section E of that Annexure, please advise the
United [Nations] Secretariat that, on the understanding that
nomination of a base date is merely a procedural step which in no
way implies commitment to or agreement with the principles of
Articles 14 and 24 of the draft Charter, the Commonwealth
Government has decided to nominate 15th October, 1946 as the base
date for the tariff negotiations at Geneva. You should point out
that this proviso is already implied in the reservations made in
our previous communication to the United Nations on Annexure 10,
in which, inter alia, we stated:-

(i) that we objected to the "automatic rule" of Article 24
(referred to in Section D);

(ii) that we reserved our attitude as to the form and content of
the proposed General Agreement (Sections G, H, I, J and K).

You should also point out that the Report of the First Session of
the Preparatory Committee in Chapter III, Section A(2) (C) (ii)
stated that the members of the Committee "would not be called upon
to subscribe to the most-favoured-nation ... provisions until
selective tariff negotiations had been completed and vice versa".'
4. We shall await your comments before despatching the above
message. [5]

5. Please see also immediately following telegram dealing
generally with implications of Article 14.