Analysis of the General Agreement on Tariffs and Trade
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1 University of Montana ScholarWorks at University of Montana Theses, Dissertations, Professional Papers Graduate School 1954 Analysis of the General Agreement on Tariffs and Trade Harry LeRoy Kirkham The University of Montana Follow this and additional works at: Recommended Citation Kirkham, Harry LeRoy, "Analysis of the General Agreement on Tariffs and Trade" (1954). Theses, Dissertations, Professional Papers. Paper This Thesis is brought to you for free and open access by the Graduate School at ScholarWorks at University of Montana. It has been accepted for inclusion in Theses, Dissertations, Professional Papers by an authorized administrator of ScholarWorks at University of Montana. For more information, please contact
2 AM ANALYSIS OF THE GENERAL AGREEI/iSNT ON TA R IFFS AND TRADE by HARRY L. KIRKHAM Presented in p a r t i a l fu lfillm e n t of th e requirem ents f o r th e degree of Aîaster o f A rts MONTANA STATE UNIVERSITY 1954 Approved by* Chairman rd b f E # m in er$ ean raaua School Date
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4 TABI OF COUTEIvT3 C h a p te r Page I. THE STATUS OF WORLD TRADE ( ) E f f o r t s to R e c o n stru c t World Trade between Ô... 1 The League o f N ations c la u se aimed a t p r o t e c t i o n i s t te n d e n c ie s in w orld t r a d e... 1 C onferences betw een 1920 and 1929 f o r stu d y o f w orld economic problem s... 2 F a ilu r e o f th e e f f o r t s d ir e c te d tow ard e s ta b l i s h i n g g r e a t e r economic i n t e r dependence among n a tio n s P lan s developed d u rin g World Uar I I f o r w orld m u l t i l a t e r a l tr a d e... 8 The A tla n tic C h a rte r and Lend-Lease... S J o i n t s ta te m e n t on com m ercial p o lic y is s u e d by th e U nited S ta te s and th e U nited Kingdom... 9 F i r s t m eeting o f Economic and S o c ia l C ouncil o f th e U nited N atio n s p ro p o ses i n t e r n a t i o n a l C onference on Trade and Employment C o n s titu tio n o f th e P re p a ra to ry Committee The work of th e P re p a ra to ry Committee * 10 A doption o f a r e s o lu t io n p e r ta in in g to m u l t i l a t e r a l t a r i f f n e g o tia tio n s.. 11 Second S e s s io n o f th e P re p a ra to ry Comm itte e in A p ril, 1947* a t which the o r g a n iz a tio n o f th e G eneral Agreement - i i -
5 C h a p te r on T a r i f f s and T rade was a c t u a l l y n e g o t i a t e d I I. PROCEDURES AND POLICIES DESIGNED TO FACILITATE WORLD TRADE G eneral g o a ls of th e G eneral Agreement on T a r i f f s and T r a d e G eneral p ro v is io n s T a r i f f C on cessio n s. 1? Trade p re f e r e n c e p ro v is io n s E x cep tio n to th e r u l e o f most fa v o re d n a tio n tr e a tm e n t M argins o f p re f e r e n c e a s fix e d under GATT The t a r i f f sc h ed u les a s p a r t o f GATT N a tio n a l tre a tm e n t of im ported p ro d u c ts.. 22 V a lu a tio n o f p ro d u c ts f o r custom s p u rp o se s E lim in a tio n of q u a n t it a t i v e r e s t r i c t i o n s. 24 E x cep tio n s to th e g e n e ra l p r o h ib itio n s a g a in s t q u o t a s B alance o f paym ents problem s and q u a n tit a t i v e r e s t r i c t i o n s Rule f o r a p p l i c a t i o n o f b a la n c e o f payment r e s t r i c t i o n s F i l i n g o f co m p lain ts co n c ern in g u se o f b a lan ce o f paym ent r e s t r i c t i o n s P ro ced u re f o r c o u n tr ie s f in d in g th e i n s t i t u t i o n o f b a la n c e of paym ents n e c e s s a r y D is c rim in a to ry use o f q u a n t i t a t i v e r e s t r i c t i o n s ? - i i i -
6 C h a p te r Page S afeg u ard s a g a in s t d is c r im in a tio n... 2Û R ules g o v ern in g exchange r e s t r i c t i o n s E x c e p tio n s to n o n d is c rim in a to ry tr a d e m easures R e s t r i c t i o n s p e r ta in in g to economic developm ents T rade c o n tr o l m easures and n a tio n a l s e c u r i t y N u l l i f i c a t i o n, im pairm ent and w ith d raw al p ro c e d u re s Customs t e r r i t o r i e s P e rio d ic m eetin g s o f GATT A cceptance and ad h eren ce t o GATT W ith h o ld in g and w ith d raw in g c o n c e ssio n s.. 40 M o d ific a tio n o f c o n c e ssio n s Amendment o f GATT W ithdraw al p ro ced u re A ccession to GATT I I I. AH APPRAISAL OF THE GENERAL AGREEmNT ON TARIFFS AND TRADE Im pact o f GATT on t a r i f f s New p la n f o r 30 p e r cen t r e d u c tio n o f t a r i f f s Summary o f GATT* s h a n d lin g of t a r i f f p r o b l e m s N o n - t a r if f tr a d e b a r r i e r s under GATT Q u a n tita tiv e r e s t r i c t i o n s Problem s s u b je c te d t o c o n s u lta t iv e p ro c e d u re i v -
7 C h a p te r Page E f f o r t s to d e a l w ith a d m in is tr a tiv e problem s o f tr a d e The d e s i r e f o r f r e e r t r a d e The n e c e s s ity f o r c o o p e ra tio n betw een th e U nited S ta t e s and th e B r i t i s h C o m m o n v /e a lth The a t t i t u d e of th e U nited S ta te s and i t s in f lu e n c e on w orld t r a d e.. 72 Summary o f accom plishm ents u n d er GATT. 78 BIBLIOGRAPHY... 65
8 CHAPTER I THE STATUS OF WORLD TRADE E f f o r t s to R e c o n s tru c t World Trade Between Ô# K ith th e end o f World War I one o f th e many sought a f t e r o b j e c t i v e s was th e rem oval o f b a r r i e r s to w orld t r a d e. One o f th e f i r s t ev id e n c e s of an a tte m p t to guard a g a in s t th e use o f p r o t e c t i o n i s t d e v ic e s was ex p ressed by P re s id e n t W ilson i n th e t h i r d o f h i s f o u rte e n p o in ts* In t h i s p o in t he c a lle d f o r " th e rem o v al, a s f a r a s p o s s i b le, o f a l l econo*t<ic b a r r i e r s and th e e s ta b lis h m e n t o f an e q u a l it y o f tr a d e c o n d itio n s among a l l th e n a tio n s c o n s e n tin g to th e peace and a s s o c i a t i n g th e m se lv e s f o r i t s m a in te n a n c e."^ A nother e a r l y a tte m p t a t e lim in a tio n o f p ro s p e c tiv e p r o t e c t i o n i s t te n d e n c ie s was an e f f o r t to p la c e in th e Coven a n t o f th e League o f N atio n s a c la u se g u a ra n te e in g " e q u a l i t y o f t r a d e c o n d itio n s." As f i n a l l y p la c ed i n th e Covenant t h i s c la u s e was to n e d down t o a p le d g e of " e q u ita b le t r e a t m ent" o f commerce o f o th e r members o f th e League, to be ac co rd e d " s u b je c t to and in ac co rd an ce w ith th e p ro v is io n s o f i n t e r n a t i o n a l c o n v e n tio n s e x i s t i n g o r t h e r e a f t e r ag reed upon by members o f th e L eague."* Iw. A. Brown, J r., The U n ited S ta t e s and th e R e s to ra t i o n o f World T ra d e. p. 29* 2l b i d.. p. 29. * 1
9 In a d d i tio n to th o s e e a r l y a tte m p ts to c r e a t e a d e s i r a b l e atm osphere f o r w orld tr a d e t h e r e fo llo w ed betw een 1920 and 1929 a s e r i e s o f f o u r m ajor c o n fe re n c e s devoted t o a stu d y o f i n t e r n a t i o n a l economic pro b lem s. Through th e s e c o n fe re n c e s i t was hoped th e r e would be p ro g re s s a lo n g th e fo llo w in g g e n e ra l l i n e s : (1) improvement o f th e l e g a l and a d m in is t r a tiv e b a s is o f i n t e r n a t i o n a l com m ercial r e l a t i o n s ; (2) r e d u c tio n o r e lim in a tio n of p r o h ib iti o n s and q u a n t i t a t i v e r e s t r i c t i o n s on im p o rts and e x p o rts ; (3) r e h a b i l i t a t i o n and g e n e r a l i z a t i o n of th e p r i n c i p l e o f u n c o n d itio n a l m o st-fav o red - n a t io n tr e a tm e n t; and (4) r e d a c tio n of th e g e n e ra l le v e l o f t a r i f f s. ^ The f o u r m ajor c o n fe re n c e s m entioned were th e B ru s s e ls F in a n c ia l C onference o f 1920, th e Genoa C onference o f 1922, th e Geneva World Economic C onference o f May 1927, and th e Geneva C onference o f O ctober A lthough th e s e c o n fe r en c es w ere devoted to a tte m p tin g to so lv e economic problem s o f th e tim e s th e y have been c h a r a c te r iz e d a s p ro d u cin g a backward lo o k in g a t t i t u d e T h a t th e e f f o r t s to r e s t o r e, r e c o n s t r u c t and r e b u ild upon th e o ld p la n o f i n t e r n a t i o n a l c o o p e ra tio n m ight n o t be com patible w ith e x i s tin g c o n d itio n s d id n o t seem t o be ta k e n i n t o c o n s id e r a tio n to th e d eg ree t h a t m ight have been ex p e c te d. What a c t u a l l y was ach iev ed 3l b l d.. p j, B. C o n d liffe, The Commerce of N a tio n s, pp. 439-
10 - 3 - i n th e 1920*s was th e r e s t o r a t i o n of p r iv a te e n t e r p r i s e w ith in th e n a t io n a l b o u n d a rie s o f th o s e c o u n tr ie s t h a t had escap ed th e w o rst ra v a g e s o f w ar, n o t th e r e s t o r a t i o n o f th e I n t e r n a t i o n a l m a rk e tin g p ro cess* ^ At l e a s t one reaso n f o r th e f a i l u r e o f n a tio n s to a d o p t p o l i c i e s t h a t would have le d to g r e a t e r economic i n t e r dependence was th e f a c t t h a t th e r e w ere w arning v o ic e s in ev e ry n a tio n which w ere d ir e c te d a g a in s t th e s t r a t e g i c d a n g e rs o f such in te rd e p en d e n ce* ^ A nother a n a ly s is o f th e r o o t c a u s e s o f th e f a i l u r e o f i n t e r n a t i o n a l tr a d e n e g o tia t i o n s i s p re s e n te d by S i r A rthur S a lte r* T h is a n a ly s is co v e rs th e p e rio d o f th e 1920*s and c o n t r a s t s m arkedly w ith th e view s of th o s e >dio a t t r i b u t e d th e p e r s is te n c e o f p ro te c ti o n is m p r im a r ily t o n a t io n a l r i v a l r i e s and h a tr e d s. S i r A rth u r h a s t h i s to s a y : 7 Each o f f i c i a l was th e p r is o n e r o f h i s own n a t i o n a l sy stem, each item o f w hich r e p re s e n te d a p r o te c t i o n t o some home in d u s try w hich was su p p o rted by th o se who had secu red i t s adoption* He was re s p o n s ib le to m in is te r s who w ere th e p r is o n e r s o f th e groups o f o rg a n iz e d i n t e r e s t s in t h e i r r e s p e c tiv e p a rlia m e n ts. Each n a tio n a l r e p r e s e n t a t i v e t h e r e f o r e, w hile u rg in g t h a t o t h e r s should change t h e i r p o l i c i e s, f e l t bound to d efen d h i s own and had no a u t h o r it y to ag ree to change i t. The g r e a t e s t o f a l l th e d i f f i c u l t i e s i n th e s e n e g o t ia tio n s was n o t t h a t o f a r e a l c o n f l i c t betw een d iv e rg e n t n a t io n a l i n t e r e s t s and n a t i o n a l p o l i c i e s, but t h a t th e r e was 5l b i d *. p l b l d.. p. 4Ô3* 7 S ir A rth u r S a l t e r, World Trade and I t s F u tu r e, p. 39.
11 - i f - * no genuine n a t i o n a l p o l i c i e s co n ceiv ed a s a whole b u t o n ly a s e r i e s o f n a t i o n a l system s d e v ise d u n d er p r e s s u r e. And n e i t h e r m in i s te r s n o r o f f i c i a l s w ere e f f e c t i v e l y m a s te rs o f th e n a tio n a l system so c o n s tru c te d. Always, a s th e n e g o tia t i o n s p ro cee d ed, one f e l t t h a t th e dom inant c o n s id e r a tio n In th e mind o f each n a t i o n a l r e p r e s e n t a t i v e was n o t a c o n c e p tio n o f h i s n a t i o n s i n t e r e s t s a s a whole m is ta k e n o r n o t, b u t a c a l c u l a t i o n o f th e p r e s s u r e s to w hich th e n a tio n a l governm ent would be s u b je c te d by o rg a n iz e d i n t e r e s t s in th e r e s p e c tiv e p a r lia m e n ts. Thus th e f i r s t wave o f p r o te c tio n is m d u rin g th e i n t e r war y e a rs was caused by th e p r e s s u r e upon n a t io n a l p a r l i a m ents o f th o s e l o c a l i n t e r e s t s w hich had been s h e lte r e d by war tim e c o n d itio n s and were th re a te n e d by im port c o m p e titio n a s soon a s w orld t r a d e began to r e v iv e. In f a c t J. B. Condl i f f e a s s e r t s t h a t th e p r e s s u r e o f th e l o c a l i n t e r e s t s was th e m ajor cau se o f t h i s f i r s t p r o t e c t i o n i s t te n d e n c y.^ However, in s p i t e o f th e s e te n d e n c ie s, th e r e was a p e rio d o f n e a r ly two y e a rs a f t e r th e Geneva C onference o f 1927 in w hich th e g e n e ra l r i s e i n t a r i f f s was s u b s t a n t i a l l y ch ecked, b u t w ith no im p o rta n t r e d u c tio n s b e in g a c h ie v e d. tjork was begun by th e League o f N ations on a sta n d a rd c l a s s i f i c a t i o n o f t a r i f f n o m en clatu re which was l a t e r ad o p ted by a number o f c o u n t r i e s, and u n s u c c e s s fu l a tte m p ts w ere made to re a c h a c l e a r i n t e r p r e t a t i o n o f th e m o s t-fa v o re d -n a tio n c la u s e. But a l l th e s e e f f o r t s w ere overshadow ed by d is c u s s io n s i n th e U n ited S t a t e s f o r a r a d i c a l upward r e v is i o n o f th e A m erican t a r i f f.9 i n a d d i t i o n t o th e s e d is c u s s io n s ^The Commerce o f N a tio n s, p. 4^4 ^arow n, o ^. c i t., p. 37-
12 t h e r e fo llo w e d c lo s e upon th e c lo s e o f th e 1927 co n feren c e t h e e v e r s tr e n g th e n in g e f f e c t s o f th e w orld c r i s i s in a g r i c u l t u r e w hich s ig n a le d t h e c o lla p s e o f th e e f f o r t s to re c o n s t r u c t w o rld t r a d e on a m u l t i l a t e r a l b a s i s, l.lt h in two y e a rs th e f i n a n c i a l c r i s e s t h a t b ro u g h t on th e g r e a t d e p re s s io n p u t an end to a l l hop o f f r e e r tr a d e In s p i t e o f th e f a i l u r e t o s u c c e s s f u lly d evelop m u ltil a t e r a l com m ercial r e l a t i o n s in th e decade fo llo w in g World War I, th e b a s ic c o n c e p tio n o f such a tr a d i n g system was n o t c h a lle n g e d. However, th e fo u n d a tio n s o f m u l t i l a t e r a l nond is c rim in a to ry w o rld tr a d in g system w ere underm ined by th e e f f e c t s o f th e d e p re s s io n The second p o stw a r decade was u sh ered in by th e d e p re s s io n o f * D uring t h i s p e rio d governm ents fa s h io n e d tr a d e in to an in stru m e n t o f economic w a rfa re. Such d e v ic e s a s im port q u o ta s, exchange c o n t r o l, and b i l a t e r a l c l e a r in g a l l came in to use a lth o u g h a t th e tim e th e y w ere in te n d e d a s emergency d e v ic e s r a t h e r th a n a s a perm anent system. D uring th e p e rio d o f th e 1930 s th e r e dev elo p ed o u t o f w hat had been a tte m p ts a t i n t e r n a t i o n a l c o o p e ra tio n a h ig h ly s y s te m a tic econom ic n a tio n a lis m. At th e o u ts e t i t was n o t a d e l i b e r a t e c r e a tio n. In th e e a r l y s ta g e s o f th e lo C o n d liffe, c i t.. p. 4&2. llb row n, o, c i t., p c o n d llf f e, op. c i t.. p. 437.
13 d e p r e s s io n g r e a t e f f o r t s had been made to save a s much a s p o s s ib le from th e w reck o f c o o p e r a t i o n - - e f f o r t s which c u l m in a te d in c a l l i n g th e M onetary and Economic C onference a t London in th e summer o f A fte r th e breakdown of t h i s c o n fe re n c e m ost governm ents c o n c e n tra te d upon a tte m p ts to work o u t by n a t io n a l a c t i o n means to i n s u l a t e t h e i r p e o p le s from th e p a n ic w hich s t i l l e n g u lfe d i n t e r n a t i o n a l m arkets The b a s ic re a s o n f o r th e com plete f a i l u r e o f th e London C onference can be tr a c e d to th e f a c t t h a t th e re was no r e a d in e s s in any co u n try to ta k e t h e n e c e s s a ry s te p s to s t a b i l i s e c u r r e n c i e s, re d u c e t a r i f f s, and g e t r i d o f th e q u a n t i t a t i v e r e s t r i c t i o n s on w o rld tra d e # I t i s a ls o t r u e t h a t th e b a s ic is s u e s o f th e c o n fe re n c e were n ev e r v e ry c le a r# C urrency r a t h e r th a n t r a d e p o lic y occu p ied th e c e n te r o f d is c u s s io n # W hile th e o v e r t d isa g re e m e n ts a t th e c o n fe re n c e were l a r g e l y on m a tte rs o f m onetary th e o ry, th e r e a l d isa g re e m e n ts w ere a c t u a l l y ro o te d in th e do m estic p r e s s u r e s on th e g o v ern m en ts.^^ W ith f a i l u r e a d m itte d a t London in 1933, ev e ry n a tio n t r i e d t o sa fe g u a rd i t s own economic s t a b i l i t y and i t s own s t r a t e g i c s e c u r i t y. A fte r t h i s tim e th e g e n e ra l co u rse of e v e n ts in th e f i e l d o f com m ercial p o lic y co u ld be d e s c rib e d by th e f o u r w ords, re g io n a lis m, d is c r i m in a tio n, b i l a t e r a l i s m. ^^I b i d., p. 4 9 â. ^^ I b i d.. pp ,
14 7 and i n s t a b i l i t y. 15 in t h i s atm osphere o f th in k in g and a c t i v i t y th e r e dev elo p ed th e fo rm a tio n of tr a d in g b lo c s le d by th e g r e a t pow ers. These trading; b lo c s w ere p ro b ab ly th e m ost s i g n i f i c a n t economic developm ent o f th e y e a rs p re c e d in g th e second World W ar.^^ The t r a d e d r iv e s p u t on by th e t o t a l i t a r i a n s t a t e s o f J a p a n, Germany, and I t a l y were p ro b a b ly th e most a g g re s s iv e m a n ife s ta tio n s o f th e tr a d in g b lo c id e a. Though th e U n ited S ta t e s in Ju n e, 1934, p assed th e R e c ip ro c a l T rade Agreem ents Act d esig n ed to n e g o tia te re d u c t i o n s in t a r i f f b a r r i e r s, th e u se made o f t h i s Act was n o t an e f f e c t i v e c o u n te rp o is e to th e t o t a l i t a r i a n t r a d i n g d r iv e s. The g r e a t p o t e n t i a l i t i e s o f th e method o f b i l a t e r a l n e g o tia t i o n to a c h ie v e an ex p an sio n of m u l t i l a t e r a l tr a d e w ere d e m o n stra te d i n a s e r i e s of ag reem en ts w ith L a tin America and some o f th e s m a lle r w e s te rn European c o u n tr ie s. However, th e g r e a t p r o p o rtio n of w o rld t r a d e conducted by th e s t e r l i n g a r e a made i t n e c e s s a ry to re a c h agreem ent w ith B r i t a i n i f w o rld t r a d e was to be r e s t o r e d. No such agreem ent could be re ac h e d u n t i l 193^ and by t h i s tim e th e ap p ro ach o f V.orld War I I made i t to o l a t e, even i f th e agreem ent had been more f a r - r e a c h i n g th a n i t was.^*^ 15Brown, o. c i t.. p. 45. l^ C o n d lif f e, op. c i t.. p l b i d.. p. 503.
15 8 P la n a D eveloped P u rin» World War I I f o r F o s te r in g World M u l t i l a t é r a l T rade upon C e s s a tio n o f H o s t i l i t i e s. W ith th e ad v e n t o f th e second World War a l l e f f o r t s tow ard s e t t i n g up w orld tr a d e on a m u l t i l a t e r a l b a s is w ere fo rc e d in to th e background. Even th o u g h t h i s was so i t had become e v id e n t by th e tim e o f t h e w ar t h a t u n le s s th e w orld w ished to p erm an en tly a d o p t a l l th e many ty p e s o f t r a d e r e s t r i c t i o n s, a r e s o l u t e a tte m p t would have to be made to r e - e s t a b l i s h a p a t t e r n o f m u l t i l a t e r a l tr a d in g betw een n atio n s* The G eneral Agreement on T a r i f f s and Trade i s to d ay th e m ajor r e s u l t o f th e e f f o r t s made to t h a t end. 1 ft The s to ry s t a r t s i n th e A tla n tic C h a rte r and in th e L end-l ease Agreements whereby th e w artim e a l l i e s bound thems e lv e s to seek to g e th e r a w o rld tr a d in g system based on nond is c r im in a tio n and aim ed a t h ig h e r s ta n d a rd s o f l i v i n g a c h ie v e d th ro u g h f a i r, f u l l and f r e e exchange o f goods and s e rv ic e s * In p u r s u it o f t h i s aim, even b e fo re th e end o f th e w ar th e U nited S t a t e s and th e U nited Kingdom d is c u s s e d th e e s ta b lis h m e n t o f i n t e r n a t i o n a l o r g a n iz a tio n s to ta c k le th e p o stw a r problem s o f c u rre n c y, in v e stm e n t and t r a d e. The two c o u n tr ie s a l s o a g re e d to m u tu al a c ti o n d ir e c te d to th e ex p a n sio n o f p ro d u c tio n, employment and th e exchange and consum ption o f goods, to th e e l im in a tio n o f a l l form s o f l6 " F o r C o -o p e ra tio n i n World T r a d e, U n ited N ations B u l l e t i n * XVI No* 6 (March 15, ), p. 23Ô. 19 i b i d.* p. 23Ô.
16 - 9 - d is c r im in a to r y tre a tm e n t i n i n t e r n a t i o n a l commerce, and to th e r e d u c tio n o f tr a d e b a r r i e r s and t a r i f f s, T h i s program was n o t in te n d e d to be e x c lu s iv e a s o f betw een th e two c o u n tr ie s b u t was open to p a r t i c i p a t i o n o f a l l c o u n trie s t h a t a g re e d w ith th e id e a s e t f o r t h. A summary o f t h e developm ents d u rin g th e p e rio d o f th e second World War would have to in c lu d e an ag ree d b a s is f o r th e d is c u s s io n s which l a t e r to o k p la c e a t B re tto n Woods, s te p s ta k e n f o r th e e s ta b lis h m e n t o f th e Food and A g ric u l t u r a l O rg a n iz a tio n o f th e U n ited N a tio n s, and c o n s u lta tio n s i n th e f i e l d o f com m ercial p o lic y. With r e s p e c t to com m ercial p o lic y th e U nited S ta te s and th e U nited Kingdom conducted fo rm al n e g o t ia t io n s betw een Septem ber and December 1945 w hich produced a common program f o r a c t i o n. The agreem ent on com m ercial p o lic y took th e form o f a J o i n t S tate m en t i n which th e U n ited Kingdom Governm ent s t a t e d t h a t i t was i n f u l l acco rd w ith a l l th e im p o rta n t p o in ts in c lu d e d in a document made p u b lic a t th e c lo s e o f c o n v e rs a tio n s under th e t i t l e "P ro p o sa ls f o r Cons i d e r a t i o n by an I n t e r n a t i o n a l C onference on Trade and E m p l o y m e n t "21 The " P ro p o sa ls" d e a l t w ith such m a tte rs as u n c o n d itio n a l-m o s t-fa v o re d n a tio n tr e a tm e n t, r u l e s o f 20Brown, c i t.. p. 48 c i t i n g th e t e x t o f th e M utual Aid A greem ent, pp * 2^The f u l l t e x t o f t h i s document i s c o n ta in e d in D epartm ent o f S ta te p u b lic a t io n 2411» Commercial P o lic y S e r ie s 79 (November, 1945),
17 co n d u ct i n te c h n ic a l m a tte r s, p r o h i b i t i o n o f q u a n t i t a t i v e r e s t r i c t i o n s, s u b s i d ie s, s t a t e t r a d i n g, exchange, i n t e r n a t io n a l c o o p e ra tio n i n employment m a tte r s, and the c o n s t i t u t i o n o f a p ro p o sed I n t e r n a t i o n a l Trade O rg a n iz a tio n,^ ^ When S e c r e ta r y o f S ta te B yrnes made th e P ro p o sa ls" p u b lic he s ta t e d t h a t U nited S t a t e s r e p r e s e n t a t i v e s i n th e U n ite d N atio n s would urge t h a t an I n t e r n a t i o n a l C onference on T rade and Employment sh o u ld be sponsored by th e U nited N a tio n s, He a lso announced t h a t th e U nited S ta te s and th e U n ited Kingdom were com m itted a s betw een th e m selv e s to s t a r t n e g o t ia t io n s t o c a rr y o u t th e " P ro p o s a ls " in c lu d in g d e f i n i t i v e m easures f o r r e l a x a t i o n o f t r a d e b a r r i e r s of a l l k in d s. At th e f i r s t m eeting o f th e Economic and S o c ia l C o u n cil of th e U nited N a tio n s a r e s o l u t i o n was in tro d u c e d c a l l i n g f o r an I n t e r n a t i o n a l C onference on Trade and Employm ent, I t was d ec id ed to c a l l t h i s c o n feren c e in th e l a t t e r p a r t o f , At th e same tim e a P re p a ra to ry Committee was c o n s t i t u t e d to draw up an agenda f o r th e C onference, B efo re th e P re p a r a to r y Committee met th e U nited S t a t e s governm ent form ed i t s " P r o p o s a ls," a s n e g o tia te d w ith th e U n ited Kingdom, in to d e t a i l e d C h a rte r language in th e form o f a "S u g g ested C h a rte r" f o r an I n t e r n a t i o n a l Trade O rg a n iza - ^^Brown, 2 2» c i t., p. 5 6, 23i b l d,, p. 5 Ô,
18 t l o n o f th e U n ited N a tio n s.t h is "S uggested C h a rte r" was made th e b a s is f o r th e d is c u s s io n s o f th e P re p a ra to ry Comm itte e a t i t s f i r s t s e s s io n i n London which began O ctober 15 and ended on November 22, J u s t b e fo re th e end of th e s e s s io n on November 9, 1946, th e a c t i n g S e c re ta ry o f S ta te gave n o tic e o f an i n t e n t i o n to b e g in t a r i f f n e g o tia tio n s w ith th e e ig h te e n c o u n tr ie s i n a tte n d a n c e a t th e P re p a ra to ry Committee s e s s io n. At th e end o f th e London s e s s io n th e Committee ad o p ted a r e s o l u t i o n p e r t a i n i n g t o th e n e g o t ia tio n o f a m u l t i l a t e r a l tr a d e agreem ent embodying t a r i f f c o n c e s s io n s. The r e s o l u t i o n recommended t h a t th e members o f th e P re p a ra to ry Committee h o ld th e m eetin g u n d er th e sp o n so rsh ip o f th e Committee in c o n n e c tio n w ith, and a s p a r t o f th e second s e s s io n o f th e Com m ittee. The n e g o t ia t io n s w ere c a r r ie d o u t and embodied i n a document e n t i t l e d " F in a l Act Adopted a t th e C onclusion o f th e Second S e ssio n o f th e P re p a ra to ry Committee o f th e U n ite d N atio n s C onference on Trade and Em ploym ent," The w ording was chosen to i n d i c a t e t h a t th e t e x t c o n ta in e d in th e " F in a l A ct" was a c o m p le te ly in d ep en d en t recom m endation o f th e r e p r e s e n t a t i v e s o f governm ents t h a t happened to be p r e p a r in g a t th e same tim e an agenda f o r th e coming C o n ference on T rade and Employment. T h is d i s t i n c t i o n was p r a c t i c a l in th e sense t h a t i t 24% bld.. p l b l d.. p. 61.
19 made i t p o s s ib le t o n e g o tia te th e G en eral Agreement on T a r i f f s and T rade i n c o n ju n c tio n w ith th e C h a rte r, f o r an I n t e r n a t i o n a l T rade O rg a n iz a tio n, a s p a r t o f a bro ad e f f o r t under U n ited N atio n s s p o n s o rs h ip to make p o s s i b le a more r a t i o n a l system o f w orld t r a d i n g r e l a t i o n s. At th e same tim e th e c h a r a c te r o f th e G en eral Agreement would be p re s e rv e d a s an in d ep en d en t in s tru m e n t. I f t h i s had n o t been th e case w ith r e s p e c t to th e G en eral Agreement on T a r i f f s and T rade, i t co u ld n o t have been n e g o tia te d and ad h ered t o by th e e x e c u tiv e bran ch o f th e U n ited S t a t e s governm ent and th e Trade Agreem ents Act o f At i t s second s e s s io n, in Geneva on A p ril 10, 1947, th e P re p a ra to ry Committee accom plished th e a c t u a l n e g o tia t i o n o f th e G eneral A g r e e m e n t. T w e n t y - t h r e e c o u n tr ie s were in v o lv e d in th e n e g o t ia t io n s t h a t c u lm in a ted in th e s ig n in g 27 o f th e G en eral Agreement by them on O cto b er 30, Of th e tw e n ty -th re e c o u n tr ie s A u s t r a l i a, Belgium, Canada, F ra n c e, Luxemburg, th e N e th e rla n d s, th e U nited Kingdom, and th e U n ite d S t a t e s gave p r o v is io n a l a p p l i c a t i o n to th e Agreement on J a n u a ry 1, 194^*^^ 2% b i d.. pp The tw e n ty -th r e e c o u n trie s w ere; A u s tr a li a, Belgium, B r a z i l, Burma, Canada, C eylon, C h ile, C hina, Cuba, C zech o slo - v a k ia, F ra n c e, I n d ia, Lebanon, Luxemburg, The N e th e rla n d s, New Z ea lan d, Norway, P a k is ta n, S outhern R h o d esia, S y r ia, S o u th A fr ic a, th e U n ited Kingdom and th e U n ited S t a t e s. 2 8 n p p o to co l o f P ro v is io n a l A p p lic a tio n o f th e G en eral Agreem ent on T a r i f f s and T r a d e, U n ited N a tio n s G eneral A greement on T a r i f f s and T ra d e. U n ited N ations Economic and S o c ia l C o u n c il P re p a ra to ry Committee o f th e I n t e r n a t i o n a l C onference T rade and Employment. V o l. ^ )»
20 1 3 The p a r t i c i p a t i n g c o u n t r ie s conducted 123 t a r i f f n e g o t i a t i o n s w hich w ere c o n s o lid a te d in to tw en ty sc h e d u le s o f c o n c e s s io n s in v o lv in g d u ty r e d u c tio n s o r b in d in g s on long l i s t s o f p ro d u c ts im p o rta n t in t h e i r tr a d e w ith each o th e r. The A greem ent, vdiich i s p r o v i s i o n a l ly in e f f e c t, r e p r e s e n ts th e m ost com prehensive u n d e rta k in g f o r re d u c in g tr a d e b a r r i e r s e v e r consummated. S ubsequent t a r i f f n e g o tia tio n s a t Annecy, F ran ce i n 1949 and a t T orquay, England in 1951 have f u r t h e r e n la rg e d th e G eneral Agreement so t h a t i t now h as t h i r t y - f o u r c o u n tr ie s w hich a r e c o n tr a c tin g p a r t i e s. These c o u n tr ie s account f o r some f o u r - f i f t h s o f th e w orld tr a d e and th e t a r i f f c o n c e ssio n s n e g o tia te d a p p ly to p ro d u c ts w hich ac co u n t f o r more th a n tw o - th ir d s o f th e im p o rt tr a d e o f t h i s group o f c o u n t r ie s and more th a n o n e - h a lf o f th e im port tr a d e o f th e w o rld. The p r e s e n t c o n t r a c tin g p a r t i e s to th e Agreement a re : A u s t r a l i a, A u s tr ia, helgiura, B r a z il, Burma, Canada, Ceylon, C h ile, Cuba, C z e c h o slo v ak ia, Denmark, Dominican R e p u b lic, F e d e ra l R ep u b lic o f Germany, F in la n d, F ra n c e, G reece, H a i t i, I n d ia, In d o n e s ia, I t a l y, Luxemburg, th e N e th e rla n d s, New Z ea lan d, N icarag u a, Norway, P a k is ta n, P eru, S outhern R h o d e sia, Sweden, T u rk e y, Union o f S outh A fr ic a, U n ited Kingdom, th e U nited S t a t e s and Uruguay. L ib e r ia w ithdrew, June 13, 1953; S y r ia, August 6, 29«I n te r n a ti o n a l T rade P o lic y I s s u e s, Chamber o f Commerce o f th e U n ited S t a t e s. W ashington, U.CT% (F e b ru a ry, 1953)-
21 ; Lebanon, F e b ru a ry 25* 1951; and th e R epublic o f China, May 5, 1950.^^ ^^*»The GATT and I t s O r i g i n, The C o n g ressio n a l D ig e s t. V o l. 3 3, No* 1 (Ja n u a ry ), p* 6.
22 CHAPTER I I PROCEDURES AND POLICIES DESIGNED TO FACILITATE WORLD TRADE I n e s t a b l i s h i n g th e o r g a n iz a tio n o f th e G eneral Agreement on T a r i f f s and T rade^ th e c o n tr a c tin g p a r t i e s v o ic e d c e r t a i n g e n e ra l aim s a s w e ll a s s p e c i f i c p ro ce d u res by w hich th e alma were to be r e a l iz e d. The g e n e ra l g o a ls a s s t a t e d w ere: C onducting r e l a t i o n s in th e f i e l d o f tr a d e and econom ic en d eavor w ith a view to r a i s i n g s ta n d a rd s o f l i v i n g, e n s u rin g f u l l employment and a la rg e and s t e a d i l y growing volume o f r e a l income and e f f e c t i v e demand, d e v e lo p in g th e f u l l use o f th e r e s o u r c e s o f th e w orld and expanding th e product i o n and exchange o f goods* I t was f e l t by th e s e c o n t r a c tin g p a r t i e s t h a t c o n tr ib u tio n s tow ard th e s e o b je c tiv e s co u ld be made by e n te r in g in to r e c i p r o c a l and m u tu a lly ad v antageous arran g em en ts d i r e c t e d to th e s u b s t a n t i a l re d u c tio n o f t a r i f f s and o th e r b a r r i e r s t o t r a d e and to th e e lim in a tio n o f d is c r im in a to r y tre a tm e n t in i n t e r n a t i o n a l com m erce.2 Under th e e x i s t i n g p r o v is io n a l a p p l ic a tio n o f th e g e n e ra l p r o v is io n s o f th e GATT, th e c o n tr a c tin g p a r t i e s a r e n o t r e q u ir e d t o amend e x i s t i n g dom estic l e g i s l a t i o n o r to draw up and e n a c t new l e g i s l a t i o n in o rd e r to ad h ere to th e 3-To be r e f e r r e d to in th e fo llo w in g p a s sa g e s a s GATT. 2The G en eral Agreement on T a r i f f s and T ra d e. D e p a rtment o f S ta te P u b lic a tio n 375, Com mercial P o lic y S e r ie s 124, r e le a s e d F e b ru a ry, 1950, p
23 Xô*" GATT. They a r e, how ever, r e q u ir e d to r e f r a i n from e n a c tin g new l e g i s l a t i o n in c o n s is t e n t w ith th e GATT.^ G en eral P ro v is io n s o f GATT. G eneral p ro v is io n s under GATT a r e d iv id e d in t o t h r e e p a r t s ; ^ P a r t I g iv e s l e g a l e f f e c t to th e t a r i f f c o n c e ssio n s s e t o u t i n th e S ch ed u les o f th e Agreement and, in a d d itio n, la y s down th e b a s ic r u l e o f n o n d is c rim in a tio n in t a r i f f and custom s m a tte rs g e n e r a lly. P a r t I I d e a ls w ith b a r r i e r s to tr a d e o th e r th a n t a r i f f s, such a s q u o ta s, p r o t e c t i v e e x c ise t a x e s, r e s t r i c t i v e custom s f o r m a l i t i e s and th e l i k e. The p ro v is io n s o f P a rt I I a r e in te n d e d to p re y e n t th e v alu e of t a r i f f c o n c e ssio n s from b e in g im p a ired by th e u se o f o th e r d e v ic e s. I t a lso i s i n ten d ed t o b rin g ab o u t th e g e n e ra l r e l a x a t i o n o f n o n - t a r i f f tr a d e b a r r i e r s, th u s a s s u r in g a f u r t h e r "quid pro quo" f o r th e a c t i o n ta k e n w ith r e s p e c t to t a r i f f s. P a r t I I I d e a ls w ith p ro c e d u ra l m a tte r s, and w ith o th e r q u e s tio n s r e le v a n t to th e Agreement a s a w hole. I n clu d ed i n P a r t I I I a r e : p r o v is io n s d e f in in g th e r e l a t i o n s h i p betw een th e Agreement and th e p ro p o sed C h a rte r f o r an I n t e r n a t i o n a l T rade O rg a n iz a tio n, p r o v is io n s e s ta b l i s h i n g ^he a d m in is t r a tio n o f th e Agreem ent; and p r o v is io n s f o r i t s e n tr y 3 «The GATT and I t s O rig in," The C o n g re ssio n al D ig e s t. XXXIII (J a n u a ry, ), p. 6. 4The D epartm ent o f S ta te B u l l e t i n. " A n a ly sis o f Gene r a l Agreement on T a r i f f s and T ra d e," XVII (November 30, ), P
24 1 7 - I n t o f o r c e, amendment and te r m in a tio n. T a r i f f C o n c e ss io n s. Under GATT, i n i t i a l n e g o tia tio n s f o r t a r i f f c o n c e s s io n s a re conducted b i l a t e r a l l y on a produ c t by p ro d u c t b a s is a t c o n fe re n c e s sp o n so red by th e cont r a c t i n g p a r t i e s. O r d i n a r ily, each p a r t i c i p a t i n g c o u n try n e g o t i a t e s on th e b a s i s o f th e p r i n c i p a l - s u p p l i e r r u l e, n e g o t ia t in g on any g iv en im port commodity w ith th e co u n try t h a t h a s b een, o r g iv e s prom ise o f becom ing, th e p r i n c i p a l s u p p l i e r o f t h a t commodity. The u n d e rs ta n d in g s reach ed in th e b i l a t e r a l n e g o t ia t io n s a r e th e n combined to form th e r e s p e c t i v e sc h e d u le s o f t a r i f f co n c e ssio n s t h a t a re s e t f o r th i n th e G en eral A greem ent.^ Any agreem ent re a c h e d in th e s e b i l a t e r a l n e g o tia tio n s betw een c o n t r a c tin g p a r t i e s to th e GATT must im m ediately and u n c o n d itio n a lly be extended t o a l l o th e r c o n tr a c tin g members, w here l i k e p ro d u c ts a re co n cern ed. T h is i s th e m o st-fa v o re d - n a t io n c la u s e and i t s p u rp o se i s to make c e r t a in t h a t th e t a r i f f s a p p lie d by each p a r ty t o GATT to p ro d u c ts im ported from th e o th e r p a r t i e s w i l l n o t be h ig h e r th a n th e t a r i f f s a p p lie d t o th e same p ro d u c ts when im ported from any o th e r c o u n try. T h is c la u s e i s a l s o to be a p p lie d w ith r e s p e c t to "custom s d u t i e s, c h a rg e s of any k in d im posed on o r in conn e c tio n w ith im p o rta tio n o r e x p o r ta tio n o r imposed on th e i n t e r n a t i o n a l t r a n s f e r o f paym ents f o r im p o rts o r e x p o r ts, 5The C o n g re ssio n a l D ig e s t, o p. c i t., p. 6.
25 xâ* to th e method o f b u y in g such d u t i e s and c h a rg e s, and w ith r e s p e c t t o a l l r u l e s and f o r m a l i t i e s I n c o n n e c tio n w ith im p o r ta tio n and e x p o r t a t i o n. *^ T rade P re fe re n c e P r o v is io n s. The GATT does n o t r e q u i r e t h e e lim in a tio n Im m ediately o f e s ta b li s h e d tr a d e p r e f e r e n c e s. Exam ples o f such p r e f e r e n c e s t h a t were allow ed to s ta n d a r e th e p r e f e r e n c e s in f o rc e e x c lu s iv e ly between t e r r i t o r i e s p a r t i c i p a t i n g in th e B r i t i s h Im p e ria l and C o lo n ia l P re fe re n c e System, th e t e r r i t o r i e s o f th e French U nion, th e U nited S ta te s and Cuba, and th o se between th e c o l o n i a l and m e tro p o lita n t e r r i t o r i e s o f th e B elgian-luxem - b o u rg -K e th e rla n d s Customs Union.^ F u rth e r h a n d lin g o f p r e f e r e n c e s by th e c o n tr a c tin g p a r t i e s r e s u l t e d in th e amendment o f th e Agreement to p ro v id e an e x c e p tio n to th e r u le o f m o s t-fa v o re d -n a tio n tre a tm e n t in f a v o r o f p r e f e r e n c e s betw een c o u n tr ie s fo rm e rly p a r t o f the Ottom an Empire and d e ta c h e d from I t on J u ly 24, The p r e f e r e n c e s in q u e s tio n h e r e, how ever, m ust be approved by th e c o n tr a c tin g p a r t i e s i n ac co rd a n c e w ith th e p ro ced u re s p ro v id e d f o r w aiv e r o f o b lig a tio n s in e x c e p tio n a l circum s ta n c e s. W ith r e s p e c t to e x c e p tio n a l c irc u m sta n c e, "The cont r a c t i n g p a r t i e s may w aive an o b l i g a t i o n imposed upon a ^D ept. S ta te P u b lic a tio n 37 5 ^, ojo. c i t.. p. 2. 7w. A. Brown, J r., The U n ited S ta te s and th e R e s to ra t i o n o f World T ra d e, p. 25Î-
26 1.9" ' c o n t r a c tin g p a r t y by th e ag reem en t; p ro v id ed t h a t any such d e c is io n s h a l l be approved by a tw o - th ir d s m a jo rity o f th e v o te s c a s t and t h a t such m a jo r ity s h a l l com prise more th a n h a l f o f th e c o n tr a c tin g p a r t i e s. The c o n tr a c tin g p a r t i e s a l s o by su ch a v o te d e f in e c e r t a i n c a te g o r ie s o f e x c e p tio n a l c irc u m s ta n c e s to w hich o th e r v o tin g re q u ire m e n ts s h a l l ap p ly f o r th e w a iv e r o f o b l i g a t i o n s, I n a d d i t i o n to d e f in in g th e a re a o f p e rm itte d p r e f e r e n c e s, th e GATT f i x e s maximum m argins o f p re fe re n c e t h a t can be exceeded o n ly th ro u g h r e s o r t to th e escape 9 c la u s e o r th ro u g h a w aiv er o f o b lig a tio n s g ra n te d by th e c o n t r a c tin g p a r t i e s a c tin g j o i n t l y. T h is i s accom plished p a r t l y by s e t t i n g f o r t h t h i s maximum f o r c e r t a i n p ro d u cts in th e sc h e d u le s them selves# In a l l o th e r c a s e s i t i s fix e d by th e fo llo w in g g e n e ra l form ula: The m argin o f p r e f e r e n c e on any p ro d u ct in r e s p e c t o f which p r e f e r e n c e i s p e r m itte d., s h a l l n o t exceed: (a ) in r e s p e c t o f d u tie s o r ch a rg e s on any p ro d u c t d e s c rib e d in such sc h e d u le, th e d i f f e r en ce between th e m o s t-fa v o re d -n a tio n r a t e and ^D ept, S t a t e P u b lic a tio n 3758, o p, c i t.. pp, 57-58, ^The esca p e c la u s e p ro v id e s t h a t co n c essio n s may be w ithdraw n o r o b lig a tio n s suspended, i f i n view of u n fo rse e n d ev elo p m en ts, th e y r e s u l t in in c re a s e d im p o rts so s u b s t a n t i a l a s to c a u se o r t h r e a t e n s e r io u s in j u r y to home p ro d u c e rs. T here m u st, how ever, be c o n s u lta t io n w ith th e o th e r a f f e c te d c o u n tr ie s e i t h e r b e fo re o r inunediately a f t e r w ithdraw ing th e c o n c e s s io n w ith a view to re a c h in g agreem ent. I f agreem ent i s n o t re a c h e d, and th e a c tio n i s ta k e n, th e o th e r p a r t i e s a f f e c t e d by th e a c tio n can th e n w ithdraw e q u iv a le n t co n cess io n s, A r t i c l e XIX, Emergency A ctio n on Im p o rts of P a r t i c u l a r P ro d u c ts, The D ep t, o f S ta te B u l l e t i n. "A n a ly sis o f G en e ra l Agreement on T a r i f f s andl T ra d e, XVII (November 3 0, ly 4 7 ) f P«1050.
27 2 0 p r e f e r e n t i a l r a t e s p ro v id ed f o r th e r e i n ; i f no p r e f e r e n t i a l r a t e i s p ro v id e d f o r th e p r e f e r e n t i a l r a t e s h a l l.... be ta k e n t o be t h a t in f o r c e on A p ril 10, 1947, a n d, i f no m o st-fa v o re d - n a t io n r a t e i s p ro v id e d f o r, th e m argin s h a l l not exceed th e d if f e r e n c e between the m o st-fa v o re d - n a tio n and p r e f e r e n t i a l r a t e s e x i s t i n g on A p ril 1 0, (b) in r e s p e c t o f d u t i e s o r ch arg es on any p ro d u c t n o t d e s c r ib e d in th e a p p r o p r ia te sc h e d u le, th e d if f e r e n c e betw een th e m o s t-fa v o re d -n a tio n and p r e f e r e n t i a l r a t e s e x i s t i n g on A p ril 10, 1947.^^ E a r l i e r d a t e s, a g re e d upon d u rin g the t a r i f f n e g o tia t i o n s, r e p la c e A p ril 10, 1947 in th e case of A u s tr a lia, Canada, F ra n ce, S y ro -le b a n e s e Customs Union, South A fric a, and S o u th ern R h o d esia, S u b -p arag rap h (b) o f t h i s fo rm u la i s a fundam ental f e a t u r e o f th e Agreement, I t i s a custom s commitment o v er and above th o s e c o n ta in e d in th e s c h e d u le. I t b in d s a g a in s t in c r e a s e o f a l l p r e f e r e n c e s g ra n te d by any c o n tra c tin g p a r ty and th e r e f o r e In e f f e c t g r e a t l y expands th e scope o f th e s c h e d u le s so f a r a s p r e f e r e n c e s a r e concerned. The Schedule a s P a rt of th e A greem ent. The sch ed u les th e m se lv e s a re l i s t s o f t a r i f f and p re fe re n c e co n c e ssio n s w hich a r e in c o rp o r a te d i n th e Agreem ent, one f o r each s ig n a to r y. These s c h e d u le s do n o t show th e c o u n try w ith w hich any p a r t i c u l a r c o n c e ss io n was i n i t i a l l y n e g o tia te d. They r e p r e s e n t th e e n t i r e p re fe re n c e and t a r i f f n e g o tia tio n s i n t h e i r f i n a l outcome and l i s t th e sum t o t a l of th e ^^Dept* o f S ta te P u b lic a tio n 375^, o. c i t.. p. 3. lljbrown, o o. c i t.. p. 252,
28 21«* c o n c e s s io n s t h a t th e c o u n try t o which th e sch ed u le a p p lie d g ra n te d t o a l l th e o th e r s. W illiam A. Brown, J r., to whom r e f e r e n c e has p re v io u s ly been m ade, s t a t e s t h a t "th e most im p o rta n t and c e n t r a l p ro v i s i o n o f th e G en eral Agreeaient ( A r t i c l e I I, 1 ( a ) " i s in v o lv ed i n th e annexed l i s t o f s c h e d u le s. T his p ro v is io n re a d s as fo llo w s : "Each c o n t r a c tin g p a r ty s h a l l acco rd to th e comm erce o f th e o th e r c o n tr a c tin g p a r t i e s tre a tm e n t no l e s s f a v o ra b le th a n t h a t p ro v id e d f o r in th e a p p ro p ria te sch ed u le annexed t o t h i s Agreement.This h as th e e f f e c t o f p u tti n g th e sc h e d u le s in to f o r c e. Under t h i s p ro v is io n "each p a rty to th e Agreement i s c o n t r a c t u a l l y e n t i t l e d, in i t s own r i g h t, and In d e p e n d e n tly o f th e m o s t-fa v o re d -n a tio n c la u s e, to en jo y each o f th e c o n c e ssio n s i n th e sc h ed u le s o f th e o th e r n e g o t ia t in g c o u n t r ie s." ^ ^ A r t i c l e I I which in c o r p o r a te s, a s a l e g a l and i n t e g r a l p a r t o f th e A greem ent, th e t a r i f f c o n c e s s io n s s e t f o r t h in th e s c h e d u le s, a ls o makes c e r t a i n o th e r r a t h e r g e n e ra l p r o v i s io n s w hich s p e c if y t h a t p ro d u c ts l i s t e d in th e sc h e d u le s w i l l n o t be s u b je c t t o any o r d in a r y custom s d u tie s h ig h e r th a n th o s e s p e c if ie d in th e sc h e d u le s, and in a d d itio n w i l l n o t be s u b je c t to any su p p lem en tary ch arg e s on im p o rta tio n s i^b row n, 0. c i t., p D ep t, o f S ta te P u b lic a tio n 375^i o * G it* «P* 4. ^ 4 y n ite d S t a t e s D ept, o f S t a t e, " A n a ly sis o f G eneral A greem ent on T a r i f f s and T ra d e," P u b lic a tio n 29^3, Commercial P o lic y S e r ie s 109 (November 1947), p. 2.
29 h ig h e r th a n th o s e in f o r c e on O ctober 30, A r t ic le I I a ls o s a fe g u a rd s th e t a r i f f co n cessio n s a g a i n s t a d v e rs e changes i n method o f t a r i f f v a lu a tio n o r c u r re n c y c o n v e rs io n ; a g a in s t changes in t a r i f f c l a s s i f i c a t i o n s ; and a g a i n s t u n w arran ted in c r e a s e s i n r a t e s o f s p e c i f i c d u tie s i n th e ev e n t o f c u rre n c y d e p r e c ia tio n,^ ^ N a tio n a l T reatm en t o f Im ported P ro d u c ts. As a f u r t h e r means o f f o s t e r i n g th e developm ent o f i n t e r n a t i o n a l tr a d e th e c o n t r a c tin g p a r t i e s t o th e Agreement p ro v id ed i n A r t ic le I I I t h a t members a r e to a c c o rd n a tio n a l tr e a tm e n t, as w e ll a s m o s t-fa v o re d -n a tio n tr e a tm e n t, i n m a tte rs go v ern in g th e s a le o r d i s t r i b u t i o n o f im ported p r o d u c ts. That i s, th e y are u n d er o b l i g a t i o n n o t to impose i n t e r n a l ta x e s o r i n t e r n a l ch a rg e s o f any k in d on th e im p o rted p ro d u c ts o f any o th e r member i n ex c ess o f th o s e a p p lie d d i r e c t l y o r i n d i r e c t l y to th e l i k e p ro d u c ts of n a t i o n a l o r i g i n, Members to th e A greement a ls o m ust allo w im p o rted prckiucta to be s o ld, o ffe re d f o r s a l e, p ro duced, and tr a n s p o r te d u n d er laws and r e g u la t i o n s a s fa v o ra b le a s th o s e a p p ly in g t o l i k e dom estic p r o d u c ts. Two e x c e p tio n s to t h i s m l e a r e : (1) The A greement s t a t e s t h a t i t d oes not a p p ly to p ro d u c ts p u rch ased f o r governm ent use w hich a r e n o t f o r com m ercial r e s a le and (2) i t d o es n o t o p e ra te to p re v e n t th e paym ent of s u b s id ie s to ^^The D epartm ent o f S ta te B u l l e t i n, XVII, (November 3 0, ), p
30 16 d o m estic p ro d u c e rs. «*23" V a lu a tio n of P ro d u c ts f o r Customs P urposes. The GATT re c o g n iz e s t h a t d e f i n i t i o n s o f v alu e f o r custom s p u rp o ses sh o u ld be s ta n d a rd iz e d and t h a t i t i s d e s ir a b le to have u n i form p ro c e d u re s f o r custom s v a lu a tio n p u rp o se s. To ac h iev e u n ifo rm ity i n v a lu a tio n A r t i c l e V II s e t s f o r t h fo u r p r in c ip le s ; (1) The v a lu e f o r custom s p u rp o ses o f im ported p ro d u c ts should 17 be based on a c t u a l v a lu e, (2) The p r ic e to be c o n sid e re d f o r custom s p u rp o ses sh ould be r e l a t e d to com parable q u a n tit i e s w henever th e p r i c e o f m erchandise i s governed by th e q u a n t ity i n a p a r t i c u l a r t r a n s a c t i o n, (3J The b a s e s and m ethods f o r d e te rm in in g th e v alu e o f p ro d u c ts should be s ta b le and p u b lic ly known* (4) The r a t e s o f exchange used i n c o n n e c tio n w ith custom s v a lu a tio n sh o u ld a s a g e n e ra l r u l e be th o s e e s ta b li s h e d by th e I n t e r n a t i o n a l M onetary Fund. Where no p a r v alu e h a s been e s ta b lis h e d betw een c u rre n c ie s u n d e r th e A r t i c l e s of Agreement o f th e I n t e r n a t i o n a l M onetary Fund, th e c o n v e rsio n r a t e i s supposed to e f f e c t i v e l y r e f l e c t th e c u r r e n t v alu e o f such c u rre n c y in com m ercial t r a n s a c t i o n s.^ ^ ^^Brown, 0. c i t.. p » A ctu al v a lu e " i s d e fin e d a s " th e p r ic e a t w h ich, a t a tim e and p la c e d eterm in ed by t h e l e g i s l a t i o n o f th e co u n try o f im p o rta tio n and in th e o r d in a r y co u rse of t r a d e, such o r l i k e merci-iandis i s so ld o r o f f e r e d f o r s a le under f u l l y comp e t i t i v e c o n d itio n s. D ept, o f d t a t e P u b lic a tio n 3756, o o. c i t.. p Sl b i d., p. 17.
31 E lim in a tio n o f Q u a n tita tiv e R e s t r i c t i o n s. A nother m ajo r c o n s id e r a tio n o f th e c o n tr a c tin g p a r t i e s d e a l t w ith f a c i l i t a t i n g com m ercial t r a n s a c t i o n s th ro u g h th e e lim in a tio n o f q u a n t i t a t i v e r e s t r i c t i o n s. V ith t h i s end in view A r t ic le Ï I o f th e Agreement c o n ta in s th e g e n e ra l p r o h ib iti o n s a g a in s t q u o ta s and s e t s f o r t h c e r t a i n perm anent e x c e p tio n s. The most im p o rta n t o f th e s e e x c e p tio n s would p e rm it th e im p o s itio n of an im p o rt quota on a f o r e ig n a g r i c u l t u r a l p ro d u ct i f th e p ro d u c tio n o r consum ption o f th e li x e do m estic p ro d u c t is a l s o s u b je c t to r e s t r i c t i o n in eq u al d e g re e. The p u rp o se o f t h i s e x c e p tio n i s to ad.low th e e s ta b lis h m e n t o f c o n tin u a tio n o f go v ern m en tal c o n tr o ls o v er a g r i c u l t u r a l p ro d u c tio n which a r e n e c e s s a ry to p re v e n t heavy s u rp lu s e s o f farm p ro d u c ts and d r a s t i c p r ic e d e c lin e s. O th e r perm anent e x c e p tio n s p erm it q u a n t ita tiv e r e s t r i c t i o n s w hich a r e n e c e s s a ry to e n fo rc e s ta n d a rd s and g r a d e s, t o r e l i e v e c r i t i c a l s h o rta g e s o f f o o d s tu f f s, such a s a r e cau sed by fam in e s, and to a s s i s t in s u rp lu s d is p o s a l program s h a v in g a r e l i e f c h a r a c te r. In r e l a t i o n to t h i s p r o v is io n on th e g e n e ra l e lim in a t i o n o f q u a n t i t a t i v e r e s t r i c t i o n s th e Agreement ta k e s acco u n t o f th e s i t u a t i o n w hereby a c o u n try does n o t p o sse ss enough f o r e i g n exchange t o pay f o r a l l o f th e im ported goods t h a t i t s p o p u la tio n would n o rm ally p u rc h a se and consume. 19The D ep t, o f S ta te B u l l e t i n, XVII (November 30, 1947)» p p. c i t *, p
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