THE GENERAL AGREEMENT ON TARIFPS AND TRADE

(GATT)

WHAT GATT IS AND WHAT GATT HAS DCNE

TEN SHORT POINTS «BOUT GATT

Origin and Background

The Structure of the Agreement

Economic Development

The Removal of Quantitative Res t r ic t ions on Imports

The Reduction of Tariffs

The Assured l i f e of the Tariff Concessions

Settlement of Complaints

Regional Arrangements

Trade in Primary Commodities

Disposal of Agricul tural Surpluses

The Seduction of Administrative Barr iers to Trade

Accession to the Agreement

Trends in In te rna t iona l Trade: Panel of Experts appointed

Information Office, GATT Sec re t a r i a t , Pa la is des Nations, 7th Edition Geneva, Switzerland. Apri l 1958

MGT/W58

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TI-J) OJtaRAL AGEukMiKT ON T AIUffFS AMD TRADiS

T£N ShQRT POINTS ABOUT GATT

1, The e s s e n t i a l element of the GATT story i s tha t since World War Two, fo*

the f i r s t time in h i s to ry , countries have co-operated in lowering trade

ba r r i e r s between themselves and in accepting a code of p rac t i ca l ru les for

f a i r t rading in in te rna t iona l commerce. This co-operation has been on a

world-wide, not a regional b a s i s .

2 . The GATT i s an in te rna t iona l trade agreement whose objectives are:

(a) to help ra i se standards of l i v ing ;

(b) to achieve f u l l employment; >

(c) to develop the world's resources;

(d) to expand production and exchange of goods;

(e) to promote economic development.

3 , Through belonging to the GATT the thir ty-seven member countries are

pledged to work towards the above common objec t ives . The member countries

include a l l the world's leading trading na t ions . Together they account for

80 per cent of world t rade. Thus the GATT code of ru les applies to four-

f i f ths of world t rade .

4 . In order to achieve the above object ives the member countries of, GATT

have bent the i r ef for ts towarcs reducing exis t ing ba r r i e r s to t rade . In

pa r t i cu l a r they have attacked t a r i f f b a r r i e r s . As a r e su l t of four t a r i f f

bargaining conferences which have been held between 1947 and 1956 customs

duties on tens of thousands of products, traded across the f r o n t i e r s , have

been reduced. I t i s estimated tha t t a r i f f s have been reduced under GATT

on products accounting for approximately half of world t r ade . When customs

duties are reduced more goods can be exchanged, pr ices can be lowered and

there may be more choice of goods for the buyer. GATT member countries

have also "frozen" customs duties over a wide area of trade so as to prevent

them being increased suddenly; th i s has given the business world encourage­

ment for expanding trade and developing markets.

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5. Working with the In te rna t iona l Monetary Fund the GATT has helped break

down the network of governmental r e s t r i c t i o n s and prohib i t ions , which s t i f l e

the na tu ra l flow of imports and expor ts . Under GATT rules countries t h a t

have no foreign exchange shortages or ofher legi t imate j u s t i f i c a t i o n s must

get r id of t h e i r r e s t r i c t i o n s on imports,. In pa r t i cu la r GATT has helped

to break down r e s t r i c t i o n s on trade that discriminate against a pa r t i cu la r

country or group of countr ies .

6. GATT i s contributing towards the development of the economies of the

less developed countries by offering them specia l trade r u l e s . These'

countries can encourage t he i r new indus t r ies by temporarily r e s t r i c t i n g

imports in ways which would not normally be permitted under GATT r u l e s .

7 . GATT provides for each member country to give the other members f a i r

and equal treatment in trade and not to discriminate against any of them.

This provision removes one of the major sources of discord among na t ions .

8 . The GATT countr ies , when they meet, provide a forum where governments

can discuss the i r trade problems and submit complaints a r i s ing from alleged

breaches of the GATT ru l e s . The GATT rules provide a code of f a i r prac t ices

i n in te rna t iona l t r ade . • I f a member country infr inges the code the party

claiming in jury can ask for a hearing and the other GATT countries w i l l

examine the complaint in a round-table hearing and recommend a so lu t ion .

This i s a new development in in te rna t iona l trade re la t ions and i n the ten

years of GATT1s experience many complaints have been s e t t l ed in th is way

which in e a r l i e r days would have ended in more r e s t r i c t i o n s on trade or

other forms of economic warfare.

9 . GATT has helped t raders by reducing the "paper ba r r i e r s " to t r ade .

Rules have been drawn up to cut down, the unnecessary f i l l i n g of forms and

other tiresome and expensive customs formal i t ies which some governments

i n s i s t on when ^oods are exported or imported. A Convention sponsored by

GATT has made i t simpler for merchants to send samples from one country to

another. Up to the end of 1957 t h i r t y countries had accepted the Samples

Convention.

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10. GATT i s a logica l development of

sphere through the United Nations and

i s the only instrument which provides

applicable on a world-wide b a s i s .

the post-war planning in the economic

the Specialized Agencies. Today GATT

a se t of rules for in t e rna t iona l t rade ,

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WHAT GATT IS AND WHAT GATT FIAS DONS

Origin and background

In the n i n e t e e n - t h i r t i e s , when the world was suffering from an intense

economic depression, many governments attempted to she l t e r behind various

kinds of protect ive trade b a r r i e r s : high t a r i f f pro tec t ion , quota r e s t r i c t i ons

on imports and exports , exchange controls , and so on0 I t became evident

during the Second World War tha t these r e s t r i c t i o n s might become permanently

fastened upon the world unless a resolute attempt was made to re -es tab l i sh

as soon as possible the pre-depression pat tern of mul t i l a t e ra l trading

between na t ions . The General Agreement on Tariffs and Trade i s today the

major r e su l t of the ef for ts which were made in th i s d i rec t ion .

The s t a r t i ng point of the s tory i s in the Atlant ic Charter and i n the

Lend-Lease Agreements in which the wartime a l l i e s bound themselves to seek

together a world trading system based on non-discrimination and aimed a t

higher standards of l iving to be achieved through f a i r , fu^l and free exchange

of goods and serv ices . In pursui t of th i s aim, long before the end of the

war the United S ta tes , the United Kingdom and other important trading

countries among the United Nations discussed the establishment of i n t e r ­

nat ional organizations to tackle the post-war problems of currenc/ , inves t ­

ment and t rade, The In terna t ional Monetary Fund and the In te rna t iona l Bank

for Reconstruction and Development were es tabl ished at Bretton Woods

Conference before the end of the war, But for various reasons, including

i t s wide range and i t s complexity, the Charter for the In ternat ional Trade

Organization (ITO), which was intended to be the th i rd tigency to operate in a

spucializ'-jc'. f i e ld of economic a f f a i r s , was .:ov. completed u n t i l March 194C

While the Charte1" for the ITO was being worked out, the governments that

formed the Preparatory Committee (appointed by the Eccxiomic and Social Council

of the United Nations to draft the Charter) agreed to sponsor negotiat ions

aimed a t lowering customs t a r i f f s and reducing other trade r e s t r i c t i o n s among

themselves, without waiting for the In terna t ional Trade Organization i t s e l f

to come into being.

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This was encouraging evidence of the seriousness of purpose of the

countries engaged in drafting the ITO Charter and a constructive step towards

carrying out one of i t s main purposes. Thus the f i r s t t a r i f f negotiat ions

were held at Geneva in 1947, side by side with the labours of the Committee

which was preparing the ITO Charter . The t a r i f f concessions resu l t ing from

these negotiat ions w -̂ro embodied in the Mul t i l a te ra l trade agreement which

i s cal led the General Agreement on Tariffs and Trade, or GATT, I t was

signed on 30 October 1947 a t Geneva and came in to force on 1 January 1943.

Original ly the GATT was accepted by twenty-three countr ies . At the end of

1957 there were thir ty-seven contracting p a r t i e s .

I t soon became evident tha t no acceptances of the Charter for the ITO - '

the Havana Charter - could be expected u n t i l the posi t ion of the United

Sta tes towards the establishment of the ITO was made c lear . With the

indicat ion in December 1950 tha t the Charter would not be submitted again to

the United Sta tes Congress, the attempt to es tab l i sh the In te rna t iona l Trade

Organization was abandoned.

The GATT was intended as a stop-gap arrangement, pending the entry in to

force of the Havana Charter and the creation of the In te rna t iona l Trade

Organization. But, as events have worked out , GATT has stood alone during

ten years as the only accepted interna/clonal instrument which lays down rules

of conduct for trade on a world-wide b a s i s , and which has been accepted by a

high proportion of the leading trading na t ions .

Between November 1954 and March 1955 the Contracting Par t i es undertook

a very thorough examination of the General Agreement in the l i g h t pf seven

years ' experience. They reaffirmed i t s bas ic objectives and obligations

and they reshaped some of i t s provisions to meet future needs. A subs tan t ia l

par t of these revis ions became effect ive in 1957. At the same time the

Contracting Par t i es drew up an agreement which - when i t has been accepted by

countries with a high proportion of world trade - w i l l e s t ab l i sh a permanent

organization to administer the GATT, thus taking the place of the present

arrangements. The new agency wi l l be known as the Organization for Trade

Cooperation (OTC).

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Today, the GATT i s administered by a small group of experts under an

Executive Secretary, k r . ^ r i c fayndham White. This s e c r e t a r i a t was or iginal ly

es tabl ished in 194-6', a f te r the Havana Conference, to prepare for the I n t e r ­

nat ional Trade Organization, but for a number of years i t has been wholly-

engaged on work for the Contracting Par t i es to the General Agreement.

The Structure of ohe Agreement

As we have sa id , the t a r i f f concessions resu l t ing from the 1947 Geneva

negotiat ions were embodied in the GATT. But i t would be a mistake to think

of GATT only in terms of t a r i f f s . I t i s an agreement on t a r i f f s and t rade .

F i r s t of a l l there are the Art ic les dealing d i r ec t l y with t a r i f f s -

Ar t ic le I with the luost-Favoured-Nation obligat ion and Art ic le I I , the bas ic

t a r i f f Art ic le incorporating the schedules of t a r i f f concessions resul t ing

from the t a r i f f conferences. Art ic le I I I provides agreed ru les regarding

the appl icat ion of i n t e r n a l t axes , guaranteeing tha t foreign goods wi l l be

given equal treatment with domestic products . Ar t ic les IV to X - known as

the technical a r t i c l e s - are general ru les and pr inc ip les re la t ing to t r a n s i t

t r ade , to anti»dumping du t i e s , to customs valuat ion , customs formal i t i es , and

marks of o r i g i n . Ar t ic les XI to XV deal with quant i ta t ive r e s t r i c t i o n s on

imports and exports* .art icle XI formally outlaws quant i ta t ive r e s t r i c t i o n s ;

the remainder of these Ar t ic les are qua l i f ica t ions to th is general rule where

balance-of-payments d i f f i c u l t i e s make necessary such depar tures . There are

fur ther Ar t i c l e s dealing with s t a t e t rad ing , subsidies and economic develop­

ment (ee« beloif) end f i n a l l y , there are provisions for j o in t discussion and

sett lement of differences a r i s ing out of the applicat ion of the GATT.

Such i s the s t ructure of the GATT. In f a c t , a l l i t s provisions are

l inked t o and stem from the t a r i f f concessions, because these t a r i f f

concessions would be of doubtful value i f the par t i es to the Agreement were

to have t h e i r hands free in a l l other f ie lds of conmercial policy; for , given

such freedom. I t would be possible en t i r e ly to nu l l i fy the oenefits accruing

from concessions made in t a r i f f r a t t s . The r e s u l t has been to create a code

of commercial pol icy rules generally accepted and generally binding. I t i s

therefore not surpr is ing tha t the periodic sessions of the governments which

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are contracting pa r t i e s to the GATT have become a •"•alued piece of i n t e r ­

nat ional machinery for the discussion of commercial pol icy . In th i s

connexion the remarks of the Chairman of the eighth Session can be quoted:

"The GATT i s not a l i s t of r e s t r a i n t s and prohibi t ions re luc tan t ly accepted

by governments, but a se t of pr inc ip les and rules which a l l of us accept

because they are in the common long-run i n t e r e s t . "

economic Development

As s ta ted above., the pr incipal objectives of GATT include the ra i s ing

of standards of l i v ing , the ensuring of a large and s t ead i ly growing volume t

of r e a l income and effective demand, the development of the f u l l use of th©

resources of the world, and the promotion of progressive development of the

economics of i t s contracting part ies» These objectives are to be achieved

through arrangements directed to the subs tan t ia l reduction of t a r i f f s and

other ba r r i e r s to t raae and through the el imination of discriminatory t r e a t ­

ment in in te rna t iona l commerce, While seeking to reduce t a r i f f s and to

abolish quant i ta t ive import r e s t r i c t i o n s and s imilar ba r r i e r s to i n t e r ­

na t iona l t r ade , the Agreement recognises the exceptional conditions and

requirements of the underdeveloped countr ies ; there are specia l provision:; to meet the neods of such countries '.:iiov example, in order to provide suf f ic ien t f l e x i b i l i t y in the !>arifi s orr. coures of underdeveloped coon t i l e s .50 that~Aa vrLTl. ̂ protection can bo given for the establishment of pa r t i cu la r i ndus t r i e s , a speedier and less cumbersome procedure i s provided

i n A m i d e XVIII lo r the renegotiat ion of t a r i f f concessions granted under

the Agreement by underdeveloped countr ies . Under the revised provisions of

tha t Art icle underdeveloped countries have the r i g h t to apply quant i ta t ive

r e s t r i c t i o n s on t he i r imports, for balance-of-payments reasons on less

s t r ingent terms in a manner which takes f u l l account of the continued high

leve l of demands for imports l i ke ly to be generated by the i r programmes of

economic development,., Further, whenever a country finds t ha t governmental

assistance i s required to promote the establishment of a pa r t i cu l a r industry

with a view to r a i s ing the general standard of l iv ing of i t s people, i t w i l l ,

notwithstanding i t s general obligat ion to avoid the use of such r e s t r i c t i o n s ,

have the r igh t to resor t to such measures.. During recent years a number of

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countr ies , including Ceylon, Cuba and India , have taken advantage of these

specia l GAÏT provisions for the purpose of promoting the establishment or

development of i n d u s t r i e s .

The Removal of Quantitative Rest r ic t ions on Imports

The general prohibi t ion on the use of quant i ta t ive r e s t r i c t i o n s on

imports together with the rule- of non-discrimination, i s one of the basic

pr inc ip les of the General Agreement» The main exception i s the use of

quant i ta t ive r e s t r i c t i o n s to safeguard the balance of payments and monetary

reserves and, in cer ta in circumstances, the use of such r e s t r i c t i o n s in a

discriminator]' ' way. Under the GATT, import r e s t r i c t i o n s applied for

balance-of-payments reasons are subject to review and consul ta t ions: in 1952,

following the entry in to force of the revised t ex t of the GATT, the Contract­

ing Par t i es are engaged in a general review of a l l such r e s t r i c t i o n s in force,,

hereaf ter the countries continuing to apply such r e s t r i c t i o n s are required to

consult with the Contracting Par t i es annually (or every two years i f they

belong to the "underdeveloped country" category)] countries introducing new

r e s t r i c t i o n s or subs tan t ia l ly intensifying exis t ing r e s t r i c t i o n s are required

to consultwith the Contracting Par t ie s ; and any country which considers tha t

another country i s applying r e s t r i c t i o n s incons is ten t ly with the provisions

of the Agreement and tha t i t s trade i s adversely affected i s permitted to

bring the matter up for discussion and to ask for redress» The subject

matter for consultations on balance -of -paj-ments r e s t r i c t i o n s are : the nature

of the balance-of-payments d i f f i c u l t i e s in question, a l t e rna t ive corrective

measures tha t may be available and the possible effects of the r e s t r i c t i o n s

on the economies of other countr ies . The general purpose of such consul­

ta t ions i s to afford an opportunity for the exchange of views on the problems

facing the countries resor t ing to r e s t r i c t i o n s as well as the d i f f i c u l t i e s

which are created for exporting countr ies . On any f inanc ia l questions

a r i s ing in any consultation of t h i s nature, the Contracting Par t ies consult

fu l ly with the In terna t ional Monetary Fund; which i s the competent i n t e r ­

nat ional organization in th i s f i e l d .

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Since 1949 a considerable number of consultations have been held. I t

i s safe to say tha t the various consultations of the type described above,

as wel l as cer ta in annual consultations held in connexion with the discr imi­

natory applicat ion of r e s t r i c t i o n s , have contributed to a be t t e r under­

standing by o f f i c i a l s of various countries of the impacts and ramifications

of import r e s t r i c t i o n s , and of the ways and means of reducing the need for

using them and of reducing the i r harmful e f fec t s . A general se r ies of

consultations held in 1957 const i tuted one of the most important a c t i v i t i e s

of the year and haie been considered to be of considerable significance both

for in te rna t iona l trade co-operation and for the future operation of the

Agreement, The consultations procedures of GATT must be pa r t l y responsible

for the fact t ha t r e s t r i c t i o n s introduced by governments to redress ser ious ,

balance-of-payments d i f f i c u l t i e s have invariably been relaxed, and discr imi­

nation reduced, whenever an improved s i tua t ion permitted.

In the review of the GATT in 1954-1955 the basic pr inc ip le tha t

quant i ta t ive r e s t r i c t i o n s must be eliminated as soon as they are no longer

j u s t i f i e d for balance-of-payments reasons was reaffirmed. I t was recog­

nized, however, tha t some countries may have d i f f i cu l ty in dismantling the

so-cal led ; lhard core" of these r e s t r i c t i o n s , and i t was agreed tha t subject

to the concurrence of the Contracting Pa r t i e s in each case, a country w i l l

be allowed to r e t a in for a l imited period r e s t r i c t i o n s o r ig ina l ly imposed

for balance-of-payments purposes but no longer j u s t i f i e d on tha t account.

(At the Tenth Session in 1955^ the f i r s t case of th is type was examined,

namely, Belgium's applicat ion for authorizat ion to maintain temporarily

import r e s t r i c t i o n s on some agr icu l tu ra l products» A formula was agreed

under which Belgium w i l l progressively reduce the r e s t r i c t i o n s and w i l l

eliminate a l l r e s t r i c t i o n s by the end of 1962).

The Reduction of Tariffs

The reduction of t a r i f f s i s l a i d down in the General Agreement as one

of the pr inc ipa l means of a t ta in ing i t s broad objectives» There have been

four main t a r i f f negotiat ing conferences? i n 1947 (Geneva), 1949 (Annecy,

France), 1951 (Torquay, England) and 1956 (Geneva). As a r e s u l t of these

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conferences the t a r i f f r a t e s for tens of thousands of items entering in to

world commerce have been reduced or bound against increase . The reduction

and binding of t a r i f f levels under the GAIT affects a high proportion of the

trade of the member governments and i n d i r e c t l y the trade of many other

countr ies . The GATT i s , in e f fec t , ùhe most comprehensive undertaking for

reducing and s t ab i l i z ing r a t e s of customs duties ever brought in to operation.

There can be no doubt tha t t h i s widespread and unprecedented s t a b i l e i n

t a r i f f levels has bean an e s sen t i a l condition for the movement towards a

system of free mu l t i l a t e r a l t rading.

The Assured Life of the Tariff Concessions

The t a r i f f concessions contained in the or ig ina l schedules annexed to

the General Agreement entered in to force in 194Û with an assured l i f e of

three years , u n t i l the end of 1950. After that time a contracting party

could modify or withdraw any concession by negotiat ion and agreement with

the government with which i t had been negotiated. Governments involved

in such negotiat ions were to endeavour to maintain a l eve l of concessions

not l e s s favourable to trade than those o r ig ina l ly provided for in the

schedules. If no agreement could be reached on compensatory adjustments

on other products , the contracting party would, never theless , be free to

modify or withdraw the concession and, in tha t event, the other contracting

party could withdraw equivalent concessions.

Thus, there has always been the p o s s i b i l i t y tha t a f t e r the period of

binding, extensive renegotiat ion and possibly withdrawal of items might

ensue, with the danger of a gradual or even speedy unravelling of the ne t ­

work of concessions. To prevent t h i s eventual i ty the assured l i f e of the

schedules was extended for a second period of three years u n t i l the end of

1953. At the i r eighth Session the Contracting Par t i es agreed to a fur ther

extension u n t i l July 1955» and in the course of the review of the GATT, in

1955> i t was agreed t ha t the assured l i f e of the schedules should be fur ther

prolonged to 31 December 1957. In addi t ion, a new pr inciple was introduced

envisaging the automatic extension of the assured l i f e for successive

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periods of three years, with suitable opportunities for individual adjust­

ments of tariff rates. Thus a new period of three years during which

tariff concessions may not normally be withdrawn began on 1 January 1950.

Settlement of Complaints

Among the matters which are referred to the annual Sessions of the

Contracting Parties are the trade disputes which have been brought up under

the Article XXIII procedures, which enable complaints to be made that

benefits under the Agreement are being nullified or impaired. (A contract­

ing party which considers that a benefit which should accrue to it is being

nullified or impaired or that the attainment of any objective of the Agree­

ment is being impeded may seek consultations with the parties concerned.

If, after consultations, no satisfactory adjustment is reached a complaint

may be lodged and the Contracting Parties are then required to carry out

prompt investigations, to make recommendations or to give rulings.)

Great and small countries have been involved in these applications,

both as complainants and as defendants. For example, in 1950 a complaint

was made that the British system of Purchase Tax so operated as to discri­

minate in favour of domestic products and against similar imported goods.

The United Kingdom Government admitted that -the tax did have this discri­

minatory effect, though unintentionally. They agreed to amend the system

so as to eliminate the element of discrimination and thus bring the

operation of the tax into conformity with the obligations of the United

Kingdom under the Agreement. In 1952 this pledge was fulfilled.

The United States and Canada complained that Belgium was imposing

discriminatory import restrictions aimed againsç. imports requiring payment

in dollars, although Belgium was not in balance-of-payment difficulties.

Belgium undertook progressively to eliminate this discrimination and

reported in 1954 that all exchange restrictions on dollar imports had been

abolished. Complaints by Chile against Australia, by Norway against

Germany, by the United Kingdom and France against Greece have been success­

fully dealt with. In 1952 India brought before the Contracting Parties a

complaint against Pakistan about the levying of discriminatory taxes on

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exports of ju te to Ind ia . The Contracting Par t ies f e l t chat t h i s question

might be more ea s i l y resolved i f i t were considered together with other

t rading d i f f i cu l t i e s between the two Governments, including the conditions

under which coal was supplied by India to Pakistan. Therefore they invi ted

the two Governments to consult together with a view to finding a solution

along these l i n e s . These consultations were concluded successfully when

the two Governments signed a long-term trade pact and agreed to drop the

discriminator;.'' levies in question. A French tax on imports and exports ,

which was intended to provide a socia l assurance fund for agr icu l tu ra l

workers, was the subject of complaint as an infringement of the GATT. The

French Government undertook to remove the tax and th is was done a t the end

• of 1954.

Other complaints successfully dea l t with have included the suppression

of a discriminatory tax levied on imports by the Belgian a u t h o r i t i e s , and

the lessening of r e s t r i c t i o n s on American coal imported into Germany. In

another type of case, Sweden undertook to remove the cause of a complaint

by I t a l y tha t Swedish anti-dumping dut ies on I t a l i a n nylon stockings were

being administered unfa i r ly . In another, following a complaint by Czecho­

slovakia, t rade between tha t country and Peru, which was previously stopped

by the Peruvian Government, was res to red . In 1957 Brazi l took steps to

s e t t l e a long-standing complaint regarding the discrimination in i n t e rna l

taxat ion between cer ta in domestic and foreign products.

Not a l l disputes have been resolved successfully through the GATT

machinery. Probably the most ser ious has been the complaint by a number

of countries against the United Sta tes import r e s t r i c t i o n s on dairy products.

At successive sessions the Contracting Par t ies s ta ted c lea r ly tha t these

were a v io la t ion of the Agreement. The United States Administration agreed

tha t t h i s was so, but t h e i r e f for t s to remove the r e s t r i c t i ons by l e g i s ­

l a t i ve means were unsuccessful. At successive Sessions the Contracting

Pa r t i e s have authorized one affected country, namely the Netherlands, to

l i m i t imports of United States f lour by way of compensation. The Contract»

ing Par t i es have always recognized, however, "that r e t a l i a t i o n i s no solution

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to a problem of th i s kind, and in the course of the review of the Agreement

in 1955» they granted a waiver to the United States recognizing the r i gh t

of the United States Administration to impose import r e s t r i c t i o n s where i t

has to do so under the terms of the Agricul tural Adjustment Act. At the

same time, the r igh ts of injured countries to have recourse to the GATT

complaints machiner"/ i s preserved and each year the Contracting Par t ies

review the act ion taken by the United Sta tes under th i s l e g i s l a t i o n .

Regional Arrangements

Although one of the objectives of the General Agreement i s "the

el imination of discriminatory treatment in i n t e rna t iona l coamerce", the '

Agreement i s designed not to prevent the formation of economic or customs

unions involving the removal of t a r i f f s and other trade ba r r i e r s between

par t i c ipa t ing countr ies . Therefore, i f a project for union, through

es tab l i sh ing an inter im pre fe ren t i a l regime, i s expected to lead to the

removal of a l l bax-riers between the par t i c ipa t ing countries - i . e . to a

customs union or f ree- t rade area - i t can be condoned and even encouraged.

While the Agreement provides for interim agreements leading to the

formation of customs unions and free- t rade a reas , no provision i s made for

the formation of unions l imited to sectors of trade such as the Coal and

S tee l Community in Uestern Europe. Therefore the plans of the Governments

of Belgium, Luxemburg, France, the Netherlands,- Germany and I t a l y to create

a common market throughout t he i r t e r r i t o r i e s for coal and s t e e l were sub­

mitted to the Contracting Par t i es who were requested to grant a waiver of

certain ob l iga t ions . At t he i r 1952 session the Contracting Par t i es

examined the Treaty const i tu t ing the European Coal and Steel Community and

found tha t the objectives of the Community were broadly consistent with

those of the General Agreement.

In November 1952, the Contracting Par t i e s granted the required waiver

authorizing the s ix governments to el iminate within the Community import

and export duties and quant i ta t ive r e s t r i c t i o n s on the products covered by

the Treaty. During the f ive years of the t r ans i t i ona l period provic^d in

the Convention, which ended in February 1958, the Contracting Par t i e s were

- 14 -

concerned to see first, that the single market was operating consistently

with the conditions laid down in the waiver and, secondly, that the tariffs

and restrictions imposed by the six governments on imports of coal and steel

frem other contracting parties were made no more restrictive than those in

force when the waiver was granted. From the Eighth to the Twelfth Sessions

the Contracting Partie* examined the reports from the six member countries

of the Community with great care, in view of the assurances of these

ccuntries that they wmld follow a liberal policy and take account of the

interests of third countries both as consumers and suppliers of coal and

steel products.

At the Eleventh Session, in 1956, the Contracting Parties took cognizance

, of certain schemes for the closer economic integration of Europe. The

representatives of the six countries which were drawing up a treaty to

establish a European Economic Community gave an assurance that these

countries intended to submit the treaty to the Contracting Parties after it

had been signed, but before ratification. (These six countries are those

which form the Coal and Steel Community - see above). The Treaty - known

as the Rome Treaty - was signed in March 1957 and entered into force on

1 January 1958.

The Rome Treaty provides for the creation, at the end of a transitional

period of twelve to fifteen years, of a single customs territory among the

six countries. This implies the elimination of customs duties between the

six Member States and the creation of a common customs tariff. The Treaty

provides for the elimination of quantitative restrictions on imports between

the Member States; there are also special provisions regarding trade in

agricultural products. Part of the Treaty deals with the association of

certain overseas countries and territories with the Community.

Following the signature of the Rome Treaty, it was submitted to the

Contracting Parties for consideration in accordance with the terms of GATT

Article XXTV, paragraph 7. At the Twelfth Session it was decided to create

a Committee to examine the relevant provisions of the Rome Treaty and of the

General Agreement on Tariffs and Trade and to consider the most effective

- 15 -

methods of implementating the i n t e r - r e l a t e d obligations which governments

have assumed in the two instruments„ This Committee - known as the Committee

on the Treaty of liome - created f c i r sub-groups to examine the arrangements

provided for in the RCC Treaty with respect -bo t a r i f f s , the use of quanti­

t a t ive r e s t r i c t i o n s for baiance~of-payments reasons, trade in agr icu l tu ra l

products and the associat ion of cer tain overseas countries and t e r r i t o r i e s

with the Community. The sub-groups held extensive discussions on each of

these matters during the Twelfth Session and progress was made in clarifying

the issues which might a r i se both during and af ter the t r a n s i t i o n a l period.

At the end of the Session the Committee on the Rome Treaty made a progress

import to the Contracting Pa r t i e s , who agreed t h a t t h i s preliminary bxaauna-'

t ion had been useful but recognized tha t a number of important questions

s t i l l remained to be solved.

Accordingly, the Contracting Par t i es decided tha t the In te rsess iona l

Committee should continue the work, Because of the importance of the i s sues ,

a l l contracting pa r t i e s w i l l be represented on the In te rsess iona l Committee

between the Twelfth and Thirteenth Sessions; normally t h i s Committee i s

composed of about half the Member countr ies . Arrangements were made for the

sub-group dealing with the association of the overseas t e r r i t o r i e s to meet i n

January - March 1956 and to report to the GATT In tersess iona l Committee in

April 1958.

Discussions also took place a t the Twelfth Session on the trade aspects

of the Treaty es tabl ishing the .European Atomic energy Community (..1JRAT0M).

ïhe EURATOM Treaty, drafted and signed in conjunction with the ^ C Treaty by

the same six na t ions , provides for accelerated establishment of a common

market with respect to materials and equipment for the production and use of

nuclear energy. Only the trade provisions were considered and i t was decided

tha t fur ther consideration could take place along with the provisions of the

E3C Treaty.

On another aspect of European economic in tegra t ion the Contracting

Par t i es a t the Twelfth Session agreed tha t the In te rsess iona l Committee

should follow developments with regard to the proposed European Free-Trade

- 16 -

Area which would associate the s ix EEC countries with the United Kingdom and

several other Western European countries which are members of the Organization

for European economic Cooperation.

Irade in Primary Commodities

For some years the Contracting Par t i e s have been considering proposals

for the adoption of a se t of ru les governing in te rna t iona l act ion to overcome

problems in the f i e l d of trade in primary commodities. At the Eleventh

Session, in 1956, thejr decided on a new approach to these problems and adopted

a Resolution, whereby they recognized t h a t , under "the terms of the relevant

provisions of the Agreement, the Contracting Par t i e s are competent to deal

with special d i f f i c u l t i e s a r i s ing in connexion with in te rna t iona l trade in

primary commodities. They decided to review a t every Session the trends

and developments in in te rna t iona l commodity trade and they decided tha t in

the course of consultations on import r e s t r i c t i o n s they would take account

of problems re l a t ing to in t e rna t iona l commodity trade affecting the balance-

of-payments pos i t ion of countr ies .

Disposal of Agricul tural Surpluses

During the Review of the Agreement, in 1955, the Contracting Par t i es

adopted a Resolution on the Disposai of Surpluses, in which they noted tha t

i t was the in ten t ion of individual contracting pa r t i e s to l iquidate a g r i ­

cu l tu ra l surpluses in such a way as to avoid unduly provoking disturbances on

the world market, and considered tha t any contracting par ty making arrange­

ments for disposal of surplus agr icu l tu ra l products should consult with the

pr inc ipa l suppl iers of these products so as to achieve an orderly l iqu ida t ion .

The discussionsat the Tenth, Eleventh and Twelfth Sessions showed tha t

there i s continuing concern regarding the existence of large surpluses and

the pol ic ies for t he i r disposal* I t was emphasized tha t the consultation

procedures could be more effective,, which would contribute to the more

orderly l iquidat ion of stocks* Expansion of consumption was shown to be a

desirable object ive , r a ther than r e s t r i c t i o n of production.

- 17 -

The Réduction of Administrative Barr iers to Trade

The Contracting Pa r t i e s have been tackling customs formal i t ies and various

administrative ba r r i e r s to t r ade , stage by stage» In 1950 they drew up a

code of standard pract ices for the administrat ion, by governments, of import

and export r e s t r i c t i o n s and exchange cont ro ls . In 1952 they adopted a code

of standard prac t ices fo r documents which are required for importation and

they made several recommendations which envisage the elimination of consular

formal i t ies as soon as poss ib le . At 1h= Twelfth Session they again called for

the abol i t ion of consular formal i t ies and recommended the f a i r e s t possible

administration of such formal i t ies as remain in i o r c e . The Contracting ,

P a r t i e s also drew up and opened for signature ( in February 1953) the In t e r ­

na t iona l Convention to F a c i l i t a t e the Importation of Samples and Advertising

Mater ial the broad purpose of which i s to minimize -the costs and reduce the

formal i t ies and delays which t raders and merchants have to face i n sending

samples and adver t is ing mater ia l from one country to another. The Convention

entered in to force in November 1955. By the end of 1957 t h i r t y governments

had accepted t h i s Convention.

Accession to the Agreement

At the Twelfth Session two t e r r i t o r i e s which a t ta ined independence in

1957, namel]' Ghana and Malaya, became the t h i r t y - s i x t h and th i r ty-seventh

contracting pa r t i e s to the General Agreement.

At the Twelfth Session arrangements were made for Switzerland to conduct

t a r i f f negotiat ions with a view to becoming a contracting par ty . I t was

agreed t ha t the negotiat ions w i l l open a t Geneva in May 1958.

Japan has been a contracting party for over three years , but up to the

beginning of 1953, f i f teen contracting pa r t i e s invoked Art icle XXXV (with

respect to Japan) thereby refraining from undertaking GATT obligat ions

towards tha t country.

- Xu -

Trends in In terna t ional Trade: Panel of experts appointed

During the Minis te r ia l Meetings held during the Twelfth Session a number

of speakers drew a t tent ion to certain important trends in in te rna t iona l t r ade .

In p a r t i c u l a r , concern was expressed by some a t the fa i lu re of the export

trade of the l ess indus t r i a l i zed countries to maintain i t s r e l a t ive posi t ion

with t h a t of "the indus t r i a l i zed countr ies . Reference was also made to the

ef fec t of even small declines in the pr ices of primary products. Concern

was also expressed regarding the widespread resor t to ag r i cu l tu ra l protect ion.

I t was therefore agreed that there would be value in a thorough and objective

examination of the past and current in te rna t iona l t rade t rends , with specia l

reference to the factors to which a t t en t ion was drawn in the course of those

meetings.

The Contracting Par t i e s ins t ruc ted the executive Secretary to appoint a

Panel of non-governmental experts of in te rna t iona l repute to examine these

trencs and the i r implications and in pa r t i cu l a r to assess the medium term

prospects for in te rna t iona l t rade . The report of the expert group which

consis ts of four persons w i l l be considered by the Contracting Par t ies a t

the Thirteenth Session.

GATT Training Programme

uvery s ix months a group of government o f f i c i a l s , holding fellowships

granted by the United Nations Technical Assistance Administration, joins the

GATT s e c r e t a r i a t for a period of t ra in ing . up to January 1958 some twenty-

ei;_ht o f f i c ia l s from nineteen countries had so far undertaken th i s t ra ining

course, which comprises an intensive study of the General Agreement as well

as par t i c ipa t ion in the p rac t i ca l work of the GATT s e c r e t a r i a t ,

GATT Publications

GATT publicat ions are s e t out i n the Lis t of Official Material r e l a t ing

to the General Agreement on Tariffs and Trade, available free of charge from

the GATT sec re t a r i a t . This l i s t gives f u l l de ta i l s concerning the t ex t of

the General agreement, the uasic Ins t ru i s io'j . .:ia S^l^ctec Docum^ntj - u r i e s ,

Tariff Schedules, Reports on In ternat ional Trade, Trade In te l l igence Papers,

e t ce t e ra .

- 19 -

Thirty-seven Contracting Par t i es to the General Agreement

Austra l ia

Austria

Belgium

Brazi l

Burma

Canada

Ceylon

Chile

Cuba

Czechoslovakia

Denmark

Dominican Republic

Finland

France

German Federal Republic

Ghana

Greece

Haiti

India

Indonesia

Italy

Japan

Luxemburg

Malaya

Kingdom of the Netherlands

New Zealand

Nicaragua

Norway

Pakistan

Peru

Federation of Rhodesia and Hyasaland

Sweden

Turkey

Union of South Africa

United Kingdom

United States

Uruguay

Chairman of the Contracting Par t i es Shri L.K. Jha (India)

Vice-Chairmen Mr. Fernando Garcia-Oldini (Chile)

Dr. Heinz Standenat (Austria) (Alternate Î Dr. xJnmanuel Treu

(Austria))

Executive Secretary Mr. Sr ic Wyndham White (U.K. )

Deputy executive Secretary Mr. Jean Royer (France)

Requests for information should be addressed to the Information Officer, GATT s e c r e t a r i a t , Pala is des Nations, Geneva, Switzerland.