TRADE AND EMPLOYMENT CONFERENCE PROGRESS REPORT

IV. GENERAL STATEMENT ON CHARTER

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(b) Australian Interests and Policy
The existence of some international body to determine the lines on
which international trade shall be conducted seems to offer
considerable advantages to Australia. Such a body would almost
inevitably increase the influence of small and middle-sized
countries, giving them a voice in decisions and enabling them to
play an important part in affairs from which they would otherwise
tend to be excluded. Without it, important decisions would be made
by the giants in concert or small countries would be grouped
around and dominated by them. The embryonic I.T.O. Charter bears
far more imprint of Australian ideas than other instruments of
economic policy which also affect the whole world, like the U.S.-
U.K. Loan Agreement.

From the economic stand-point Australia is highly dependent on
international trade. Only through this medium can many of our
industries be kept working and the living standards of our people
maintained. Order rather than cut-throat chaos suits our purposes
and our resources. Our interests lie especially along the lines of
flexible multi-lateral trade. Our old markets are located mainly
in United Kingdom and Europe, the relative world economic
importance of which are declining. The population of Western
Europe will begin to decline sharply within a few years and this
will limit its need for our foodstuffs. Our main avenues of
development, particularly for the export of manufactured goods,
point in new directions. Even in regard to foodstuffs the fiscal
policies of the United States are likely to prevent their becoming
a very large net importer of foodstuffs within a relatively short
time. It would be foolish to allow old habits of thought to hide
all signposts to the future. in such a changing world it is
important for us to be able to meet our future customers regularly
round the conference table to discuss our reciprocal needs and
wishes.

We have a particularly strong interest in the maintenance of a
high and stable demand for our export products. The employment
provisions of the Charter, though necessarily somewhat nebulous,
are an important psychological factor as well as an 'escape'
clause. They underline the source of demand for exports and
emphasise the bad neighbourliness of allowing preventable
unemployment. The 'commodity' provisions of the Charter should
also assist in removing some of the instability from which we have
suffered in the past.

One of the main planks of Australian policy is industrialisation
and full development of our resources. The original I.T.O.

proposals might have resulted in certain aspects of this policy
being called into question but the Charter as it is now emerging
stresses the importance of such policies in ultimately furthering
world prosperity, subject of course, to reasonable safeguards.

Considerable publicity has been given to the question of imperial
preference. From Australia's point of view this is probably much
more significant psychologically than materially, especially when
considered over the whole range of the Australian economy rather
than from the standpoint of a particular industry. Preference is
not to be abolished, however, but only reduced in respect of
particular items as an offset to concessions granted by other
countries. Apart from negotiated reductions the Charter permits
its preservation intact.

Imperial preference is nevertheless to be frozen by the Charter
against future extension, and the Charter will prevent preferences
remaining after the conclusion of the present tariff negotiations
from being increased. At first sight this may appear a concession
by British countries. Actually the opposite is nearer the truth.

The status quo is to be preserved for us and no other member
countries may initiate preference systems between themselves,
except under the close supervision of the Organisation. As several
South American and Middle Eastern countries have been considering
such moves the Charter provisions are in essence a gain for us-a
fact which they have not been slow to point out.

Another important interest of Australia is that of being able to
protect her economy as far as possible against the impact of
adverse world conditions when international measures fail, without
incurring odium elsewhere or provoking retaliation. This is
provided for by the Charter. The I.T.O. itself would moreover
provide for a forum for expressing our views and explaining our
position in such circumstances.

Membership of the I.T.O. would inevitably entail giving up our
freedom of action in many directions until the Organisation had
been consulted. In return other countries would have to do the
same in matters affecting us. The whole process is essentially one
of give and take in the evolution of some kind of order in
international trading relationships. A number of parties in
Australia could be adversely affected, though not, it is safe to
say, seriously in the case of any important established industry.

Considerable criticism can be expected, however, and eventual
decision as to membership can only be made by weighing up the pros
and cons. For better or worse I.T.0. is likely to be the only
attempt to establish an international body in the trade sphere in
this generation. If it is set up Australian interests will be
markedly influenced whether we go in or stay out.

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V. COURSE OF TRADE NEGOTIATIONS

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(c) Concessions Offered to Other Countries
The value of Australia's import trade from the 15 other countries
represented at the current negotiations in Geneva is equivalent to
87% of the total imports in 1938/39. No direct tariff negotiations
will be undertaken with Canada and New Zealand, whose trade with
Australia represented approximately 10% of total imports.

The requests for tariff concessions made by the remaining
countries represented on the Preparatory Committee cover the whole
range of the Customs Tariff. It has been necessary, therefore, to
examine the probable effects on Australian industries of any
reductions in existing tariff levels, and also the effects which
any narrowing of preference margins now enjoyed by Empire
countries may have in diverting trade from those countries to
other sources of supply.

In meeting requests from other countries, it has been the aim of
the Cabinet Sub-Committee to reduce extreme levels of duties,
rather than to make big reductions in individual items. The
reductions tentatively authorised will safeguard consumer
interests and at the same time will secure reductions of duties
against our exports.

The aim has been to offer reductions of duties in the most-
favoured-nation column of the tariff to rates of from 40-45% ad
valorem, with a top limit, unless in exceptional circumstances, of
50%. It is believed that the reduction of very high rates, which
for the most part have remained unused, will help to direct
Australian industry into economic channels.

Relatively few reductions have been made in specific rate duties,
as their incidence has become less severe as a result of the big
rise in world price levels.

As a general rule, rates of duty on United Kingdom goods have been
reduced by 5% ad valorem, except where special considerations
indicated the need for retention of existing rates. It is
considered that, after taking into account the development in
Australian industry over the war period, the slight reductions in
the British preferential rates should be generally beneficial.

Australian costs to-day compare very favourably with costs in
other countries and, while this position continues, the reductions
authorised will make little if any difference. The removal of
excessive duties will, however, tend to direct productive effort
into those lines which can be produced in Australia without
imposing extravagant costs upon consumers.

The tariff offers that have been tentatively authorised by Cabinet
Sub-Committee are being provisionally negotiated only when
reciprocal reductions on the duties operating against Australian
exports can be secured. Care has been taken not to offer the
binding of low rates of duty where it seems likely that industrial
expansion will take place in Australia during the next few years.

In many cases, the requests made on Australia have been directed
towards securing the elimination or reduction of the tariff margin
of preference which operates in favour of the United Kingdom,
Canada and New Zealand, as the result of trade agreements between
Australia and those countries. In every instance where an offer is
being made which has the effect of narrowing the agreed margin of
preference, the concurrence of the British country affected has
first been obtained.

Although at this date the tariff negotiations have not yet reached
their final stages, most of the items under request by other
countries have been dealt with in the various sets of negotiations
which have taken place. In terms of tariff items and sub-items
under consideration in these negotiations, the results may be
summarised as follows:-

Reductions in ad valorem rates
Offers of reductions ranging from 5% ad valorem 20% ad valorem
have been made on 71 items under the British Preferential Tariff
and on 132 items under the M.F.N. Tariff. Of these 58 and 91
respectively were under 10% ad valorem. In addition, offers of
reductions between 20% and 25% ad valorem have been made on 3
items under the M.F.N. Tariff.

These offers would have the effect of reducing the margin of
preference on 94 items.

Reductions in specific rates
Small reductions for the most part, ranging in a few cases up to
one-half the existing rates, have been made on 32B.P.T. items and
80 M.F.N. items. Offers of more than one half the existing rates
have been made under both the B.P. Tariff and the M.F.N. Tariff on
3 items.

Binding of existing rates has been offered on 118 items.

Retention of existing rates, but avoidance of binding
A response under this heading has been made on 64 items.

Primage duties
With one exception, all offers affecting customs duties have been
accompanied by an offer to eliminate any primage duties associated
with the items.

No offer
On 288 items the Delegation has advised the representatives of the
countries making requests that Australia could make no offer of
tariff concessions. In some cases the requesting country was not a
principal or important supplier of the goods under request, and
the items have been reserved for subsequent negotiations. In other
instances, reductions or bindings of existing rates would possibly
have exposed Australian industries to competition which they are
not able to meet.

Note
Offers in respect of 309 items have not yet been made by the
Delegation. These items relate mainly to requests made by the
United Kingdom. Reductions in the rates of duty on a number of the
items have been authorised by Cabinet Sub-Committee.

Possible losses of Empire Preference
The provisions of the proposed I.T.O. Charter would operate to
prevent the granting of new preferences or the increasing of
existing ones. Meanwhile, in the tariff negotiations now
proceeding in Geneva, requests are being made by foreign countries
for the reduction or elimination of Imperial Preference on some
items of export interest to Australia. In a few instances we, on
our part, have sought a reduction or the elimination of the
British Preference in respect of some items in Empire countries
where we do not enjoy the preference (e.g. on steel in South
Africa).

In so far as possible losses of preference may provide any cause
for concern to Australia the U.S.A. requests for the elimination
or reduction of certain preferences at present enjoyed by
Australia in the U.K., Canadian and New Zealand markets are of
most importance. In this connection dried fruits and canned fruits
are the principal Australian products which may be affected. Our
preferences on important items such as meat, butter and sugar will
not be under fire in the Geneva negotiations.

The first offers to the U.S. by the United Kingdom, Canada and New
Zealand have been moderate and involve in fact less reductions in
our preferential margins than had been anticipated here.

However the U.S. reactions to these first offers are not yet
known.

With the exception of the items mentioned above, requests by other
countries, including U.S.A. which may affect the preferential
position of Australia in Empire markets are not of sufficient
importance to provide any cause for concern.

Any reductions in the preferential margins which Australia at
present enjoys in these markets will be provisionally agreed to
for the purposes of the present negotiations only if appropriate
benefits to Australia are offering to at least offset them.

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VII. SUMMARY

The foregoing report covers the major issues involved. The I.T.O.

Charter which emerges from Geneva will be tentative only and
subject to change by the World Conference which meets in Havana on
November 21st. In the meantime it will be open for consideration.

No decision to accept or reject it will be required till some time
next year. The more immediate question is the General Agreement on
Tariffs and Trade which will contain the schedule of tariff
concessions. It is hoped that sufficient information will be
available to submit the matter to the next meeting of Cabinet for
decision as to what course of action should be taken. [1]

J.B. CHIFLEY
Prime Minister
Chairman of Cabinet
Sub-Committee