same tariff. Countries maintaining import or export monopolies were required to negotiate with other member countries upon request, as for the mutual reduction or binding of tariff rates, and either to undertake commitments with respect to tariff rates (or markups over cost plus a normal profit) or make other agreements which would achieve the same result. There was a general provision against discrimination, and a requirement that state trading enterprises make their purchases or sales solely on the basis of commercial considerations.10

When the ITO charter sought to make the QR escape clauses available to statetrading countries, the result was less satisfactory, because the QR rules_themselves were so much vaguer than the tariff rules, as they are today in GATT. Parallel treatment required that a state-trading country in a position to justify QR's on balance-of-payments grounds be free to restrict state monopoly imports to the same extent that it might have restricted private imports."

The existing GATT borrowed some, but by no means all, of the ITO provisions. Thus, the GÅTT now omits any provision requiring the negotiation of tariff margins on state-traded products, although it permits the inclusion of such negotiated margins in the GATT tariff schedules. 12 The new revision of GATT goes a little further by recognizing that state trading enterprises may "be operated so as to create serious obstacles to trade," and concluding that negotiations "to limit or reduce such obstacles are of importance to the expansion of international trade." 13 The theoretical test of the protective effects of a state trading enterprise worked out in the ITO charter, the provision requiring enough imports to meet the full domestic demand at a given price, has been lost in both versions of GATT. The references in the ITO charter to negotiations affecting the operations of an export monopoly have also been lost completely in GATT, except insofar as the very general exhortatory language applies to export monopolies as well as import monopolies. Both texts of GATT make the same provision on QR's as does the charter.14

However, the new text of GATT introduces a wholly new set of requirements which may prove to be of considerable practical significance. An economist's ideal definition is extremely hard to apply in commercial diplomacy when, as a practical matter, state trading enterprises are secretive about their purchases sales, and prices, and their privilege to maintain confidential information is recognized. State enterprises trading in basic commodities, particularly, contend quite plausible that their trading position would be seriously impaired if they operated in the full glare of publicity. The Communist countries have, in practice, been thoroughly secretive about most of their economic operations, domestic as well as international. In the absence of trade information, another country feeling itself to be injured would have no way of making out its case until long after the damage is done. With private enterprise, statistics are more readily available because the multiplicity of units makes it easy to publish figures without revealing the business secrets of particular companies.

The new provisions of GATT require that countries operating state trading enterprises notify the OTC of the products so handled. On the request of another country substantially interested, the country would be required to inform the OTC of the import markup or of the price charged. The Organization itself could request any other information about the operations of a state trading enterprise which appeared to be relevant to the obligations under the agreement. There is still a saving clause for "confidnetial information," but in the context of other provisions requiring information 15 this clause could probably not be invoked as a blanket excuse for revealing nothing. To the extent that these new information provisions prove effective in practice, the new text might well achieve a substantial foward step in working out practical standards of good international commercial practice in competition between state and private enterprise.

IX. SUBSIDIZATION

The subsidization of exported commodities has, in a general way, been considered an "unfair trade practice.' But the trade effects of subsidization have varied so sharply, and the internal pressures for subsidization have often been so insistent (witness our farm programs) that there has been considerable diversity in the treatment of subsidies in the postwar trade agreements.

10 ITO Charter arts. 29-31; see Wilcox, op. cit. supra note 3, at 94-102.

11 ITO Charter art. 20, par. 4.

12 GATT art. II, par. 4.

13 Rev. GATT art. XVII, par. 3.

14 GATT art. XI, par. 3; Rev. GATT annex H, notes and arts. XI-XIV; ITO Charter art. 20, par. 4. 14 Rev. GATT art. XVII, par. 4.

The problem presents itself in three ways. (1) When subsidized goods seek to enter a country which produces that commodity, the situation is simply one of self defense. The country whose producers are threatened can readily take protective measures, and typically does, with no need to enlist help. (2) When subsidized goods seek to enter a country which does not produce the commodity, the importing country ordinarily rejoices in the bargain its consumers are getting, and has no incentive to interfere. (3) When one country subsidizes exports into nonproducing countries, its competitors can do little by way of self-help. Matching the subsidy is expensive, and may only tempt further competing subsidies. It is in this area that the principal efforts have been made to reach some international agreement to limit subsidization.

The rules devised to deal with competitive subsidization have distinguished primary commodities from manufactured goods, and subsidization of exports alone from general subsidization applicable to goods sold at home as well as abroad. These distinctions have had as much political motivation as economic. The existing GATT in effect abandons the effort to formulate a rule on competitive subsidization. It simply requires that countries maintaining subsidies notify the contracting parties thereof, and undertake, upon request, to discuss with other countries "the possibility of limiting the subsidization." 16

The ITO charter contained the same provision with respect to general subsidies. but went a good deal further in dealing with export subsidies. It would have outlawed export subsidies on manufactured products after a two-year period of grace, while permitting them on primary products (agricultural, forest, fishery, and mineral products in a relatively unprocessed state), provided that such subsidies were not used to secure more than a fair share, defined primarily in historical terms, of world trade. There were various provisions requiring, in the case or primary commodities, that the country first seek an international commodity agreement before resorting to subsidization."7

The new provisions of GATT adopt some of the ideas of the abortive ITO, but do not go as far. Export subsidies on manufactured products would be prohibited after January 1, 1958, or at "the earliest practicable date thereafter." Until January 1, 1958, there would be a standstill, forbidding the introduction of new or the increase of existing subsidies. 18 However, if agreement is not reached by January 1, 1958, on a definite rule against export subsidies on manufactured products, there would remain only a pious expression of intention "to reach agreement to extend the application of the standstill until the earilest date thereafter by which they can expect to reach such agreement." 19 This provision is considerably weaker than the ITO provision, but it goes further than the present GATT, with its mere obligation to consult.

The new GATT provisions permit export subsidies on primary products, but subject these subsidies to the fair-share-of-world-export-trade rule.20 This is the compromise the United States delegates made with the other leading agricultural exporting countries.21 We agreed that we would not carry subsidization to the point of grabbing a bigger share of the world market than our traditional or "fair” share.22 In the other hand, we would remain free to cut our artificially supported domestic prices in order to hold our "normal" position in export markets. This rule on primary products is, in essence, similar to that written into the ITO. It does place a tangible limitation on competitive subsidization, in place of the present GATT obligation merely to consult.

In the self-defense situation, both the old and the new texts of GATT permit countries to levy countervailing duties. Such a duty may only be levied when the subsidization "is such as to cause or threaten material injury to an established domestic industry, or is such as to retard materially the establishment of a domestic industry," and may not overcompensate for the subsidy.23 The ITO charter contained the same provision.24

16 GATT art. XVI.

17 ITO Charter arts. 25-28.

18 Rev. GATT art. XVI, par. 4.

19 Id. annex H, note ad art. XVI, par. 4.

20 Id. art. XVI, par. 3.

21 The intense domestic pressure in the United States to move our surplus farm stocks abroad is evidenced by the Agricultural Trade Development and Assistance Act of 1954, 68 Stat. 454, 7 U. S. C. §§ 1691-724 (Supp. II, 1955), and the recent amendment requiring an expansion of the program, Pub. L. No. 387, 84th Cong., 1st sess. (Aug. 12, 1955). A recent GATT publication treats this program under the name "bilateral agreements." GATT, International Trade 1954, at 121-22 (1955).

22 The "fair share" is left to negotiation or OTC determination, as in analogous provisions on equitable quotas when QR's are applied under the rule of non-discrimination. Rev. GATT art. XIII, par. 2 (d). 23 GATT art. VI, pars. 6, 3; Rev. GATT art. VI, pars. 6 (a), 3.

24 ITO Charter art. 34, pars. 3, 6.

A surprising development in the new GATT text is an expansion of the privilege of a nonproducing country (which would seem to stand only to gain from subsidization of the goods it buys) to interpose countervailing duties to match any bounties. The existing provisions of GATT permit countervailing duties in this situation, but only by explicit permission of the Contracting Parties.25 The new text requires that this permission be given on a finding that injury to a competing exporting country is being caused or threatened, and permits such action pending OTC consideration in emergencies.26 What this expansion of the privilege of self-denial suggests is an avenue of protection for an exporting country against subsidization by a competitor, when the cooperation of the importing country can be secured. The obvious danger is that an exporting country, hurt by a competitor, will offer some trade advantage in self-sacrificing cooperation by the importing country. An essentially bilateral solution to this competitive problem is out of place in GATT, and underlines the inadequacy of even the new text as a multilateral solution to the probelm of competitive subsidization. This represents a backward step in the subsidization provisions, which otherwise are significantly tighter than in the existing text.

The present GATT text explicitly recognizes, as does the ITO charter, that "multiple currency practices can in certain circumstances constitute a sibsidy to exports which may be met by countervailing duties ***" This provision is retained in the new text of GATT.27 But none of the three texts contains any comparable labguage in the provisions dealing with competitive subsidization. The revised GATT text accentuates this schizophrenic treatment of the problem by explicitly permitting the use of multiple exchange rates when it can be done consistently with the Fund articles.28 In effect, competing exporters are denied the right to invoke GATT's provisions when the subsidization is carried out through the multiple-rate device (if sanctioned by the Fund), but clear authorization is given to protect domestic producers in exactly the same situation. This change in the new GATT text must be regarded as another unfortunate example of retrogression.

X. THE ORGANIZATION FOR TRADE COOPERATION

The new "Agreement on the Organization for Trade Cooperation," drafted at the 1954-55 session to provide an administrative machinery for GATT, is generally similar to the analogous texts provided for administering other postwar international agreements, but certain unusual features were designed with an eye to the political hurdles which it faces.

The need for a larger and better organized permanent administrative organization for GATT has been apparent from the beginning. Little can now be accomplished between meetings, which have been held about once a year and have usually lasted about 6 weeks. In recent years, there have been 1 or 2 brief meetings of an intersessional committee, mainly for the formulation of the agenda for the ensuing regular sessions, but the participating countries have been reluctant to delegate wide powers to a smaller group.29 Eric Wyndham-White, an English lawyer turned diplomat, has served as Executive Secretary of GATT from the earliest Preparatory Commission days, patiently holding together the nucleus of a staff against the day when political barometers in important capitals would move to a point more favorable for the establishment of a full-scale international organization in the trade field. A dozen professionals, with a few clerical and staff assistants, have somehow managed to service the GATT sessions, issue documentation, publish annual reviews and periodic bulletins on developments in international trade, and provide a measure of leadership at times when initiative was lacking among the governmental delegates. The International Monetary Fund, the organization most nearly comparable, had as last reported a staff of 428 persons, a large percentage of whom are professionals and many of international standing in the financial field.

25 GATT art. VI, par. 6.

26 Rev. GATT art. CI, pars. 6 (b), (c).

GATT annex I, note ad art. VI, pars. 2 and 3, n. 2; Rev. GATT annex H, note ad art. VI, pars. 2 and 3 n. 2; ITO Charter annex P, note ad art. 34, pars. 2 and 3, n. 2.

28 Rev. GATT annex H, note ad art. XVI, § B, n. 1. The Fund Articles of Agreement forbid the introduction of multiple currency practices except with permission, and require their progressive removal. Fund art. VIII, § 3. However, multiple currency practices may be maintained on a "grandfather clause" basis by those countries still in the postwar transitional period (now 45 of the 56 Fund members). Fund art. XIV, 2. The Fund has rules that changes in multiple currency arrangements require advance approval, despite article XIV, because they affect exchange stability. See Fund art. IV, § 4 (a). See International Monetary Fund Ann. Rep. 27-29, 65-72 (1948). But in practice, the Fund has been quite tolerant, and multiple rate practices remain quite prevalent, particularly in Latin America. International Monetary Fund Sixth Ann. Rep. on Exchange Restrictions (1955).

Intersessional Procedures (1955), GATT: Basic Instruments 9-15 (3d Supp. 1955).

The organizational provisions of the projected OTC are rather simple and, for the most part, in line with the arrangements which have become the common pattern in the international organizations created in the postwar period. The members of the Organization would be the governments adhering to GATT," each to be represented in an Assembly, which is to meet in regular annual sessions.31 The Assembly would elect an Executive Committee of 17 members periodically, with the injunction that it "shall include the 5 members of chief economic importance, in the determination of which particular regard shall be paid to their shares in international trade," and shall otherwise be representative geographically and in terms of the degrees of economic development, types of economies, and diversity of economic interests.32 If we assume that the decision on "chief economic importance" is made on a simple arithmetical computation of shares in world trade, the permanent members of the Executive Committee would be the United States, the United Kingdom, France, Canada, and Germany.3 The Excutive Committee would be required to act by a two-thirds vote.35 Provision is made for a secretariat,36 to be headed by a director-general, along the lines generally employed in analogous postwar international agreements. The rule of one vote per country would prevail in all bodies. The usual provisions are made for budget and contributions, for legal personality for the organization, for privileges and immunities to be accorded its officials and representatives, and for the establishment of cooperative arrangements with other intergovernmental organizations.38

34

The most significant feature of the new administrative scheme is the provision for an Executive Committee. If this Committee, in practice, sits in permanent session, as does the Board of Directors of the International Monetary Fund, it will be available for prompt action on questions such as the propriety of the introduction or intensification of QR's, questions which GATT is now most poorly equipped to handle.

The functions of the Organization are stated to be:

1. to administer GÄTT,

2. "to facilitate intergovernmental consultations on questions relating to international trade,"

3. "to sponsor international trade negotiations,"

4. "to study questions of international trade and commercial policy, and where appropriate, make recommendations thereon," and

5. "to collect, analyse and publish" international trade information and data.39

However, the agreement contains one provision which is specifically inhibitory on the powers of the Organization:

The Organization shall have no authority to amend the provisions of the General Agreement; no decision or other action of the Assembly or any subsidiary body of the Organization shall have the effect of imposing on a Member any new obligation which the Member has not specifically agreed to undertake.40

How the line is to be drawn between administering the agreement (which ineyitably involves interpreting its often very general language) and avoiding the imposition of obligations which the member has not specifically agreed to undertake is not at all apparent.

This quoted limitation on the OTC's powers and the fact that the agreement was prepared as a separate document from the substantive text, are the unusual festures of the OTC agreement which have a special political explanation. The political considerations in question are those which have developed in our Congress. They go back to the international agreements drafted in 1947.

30 OTC Agreement art. 2.

31 Id. arts. 5 (a), (d).

32 Id. art. 6 (a).

33 An annex to the OTC agreement lists the GATT countries, and assigns to each a figure representing its percentage share of the total external trade of all GATT countries. However, this listing is included for the purpose of article 17, which provides that the OTC agreement shall enter into force when countries account ing for 85 percent of GATT's external trade have accepted it. The same list is appended to the revised GATT, as annex G, where it serves a similar purpose.

34 Belgium, Luxemburg, and the Netherlands carried out their GATT tariff negotiations as a group, as the Benelux Customs Union. If the external trade of the three countries were added together, the group would take third place, and Germany would drop out of the top five. However, each of the three Benelli countries has adhered to GATT as a separate country and has normally participated separately, except fr tariff bargaining.

35 OTC Agreement art. 6 (b).

36 Id. art. 7.

37 Id. art. 8.

38 Id. art. 9, 10, 11.

39 Id. arts. 3(a), (b).

40 Id. art. 3(d).

The ITO charter was prepared as a permanent world trade agreement. It was fully self-contained, substantively and administratively. GATT was merely to serve as a temporary device, made effective by executive action, to bring tariff reductions into force quickly, pending unhurried legislative consideration of the ITO plan. It was left as bare of administrative machinery as possible. From the viewpoint of congressional relations here, it was desirable that GATT look as much like the bilateral trade agreements which had been made under the Trade Agreements Act and as little like a permanent trade organization as possible. Every effort was made to avoid the charge that the ITO was a fait accompli in the guise of GATT. Even GATT was put into force only on a provisional basis."1 This effort to present GATT as only a broadened form of our traditional bilateral trade agreements was not entirely successful. The real stimulus for opposition to the ITO and GATT in the Congress has, of course, been old-fashioned protectionism, the belief in high United States tariffs. The legislators who opposed the ITO and have been sniping at GATT are those who have been against the Trade Agreements Act or who have supported stultifying amendments to it. But GATT provided a convenient talking point and a cloak of constitutionalism. This attack on GATT is the very one which the careful stripping-down of the agreement was designed to avoid. A showing that GATT was not simply a "foreign trade agreement," which was authorized by the Trade Agreements Act, but was a much broader international undertaking, was the thesis to be established. Senator Millikin undertook the task of serving as the exponent of this analysis. His method was detailed cross-examination of administration witnesses through a line-by-line reading of the text. The predominant theme through days and weeks of questioning on several occasions was that GATT was an international organization which might, by what was essentially legislative action, impose obligations on the United States, and thereby usurp the functions of the Congress. This argument was of very much the same school as that later advanced by proponents of the Bricker Amendment.44

This campaign did not succeed in ending United States participation in GATT; the Congress repeatedly reenacted the statutory authority for GATT. But it gave rise to the explicit disclaimers of approval or disapproval included in each extension of the Trade Agreements Act since 1951.45

When the new administration took office in 1953, it undertook a review of international trade policy through a Commission on Foreign Economic Policy (the "Randall Commission"). Senator Millikin was a member of the Commission. The report of the Commission was generally favorable to the liberal international trade policies of the preceding administrations, including the continuation of GATT. But it sought an avenue of reconciliation with Senator Millikin's theme. Its recommendation was:

The organizational provisions of the General Agreement on Tariffs and Trade should be renegotiated with a view to confining the functions of the contracting parties to sponsoring multilateral trade negotiations,

recom

41 While GATT from the beginning has made provisions for direct adherence thereto, GATT arts. XXVI XXXIII, no country has adhered by this procedure. Instead, a temporary procedure was devised, called the Protocol of Provisional Application, 1 GATT: Basic Instruments 77 (1952). Similar protocols were used when additional countries acceded. Id. at 79, 86. Two significant differences were achieved by this procedure. (1) A country can withdraw from its adherence to the protocol on sixty days' notice, id. at 78 (Original Protocol), 81 (Annecy Protocol), 91 (Torquay Protocol), while six months' notice is required by GATT itself, GATT art. XXXI. (2) While definitive acceptance of GATT involved a commitment to all of its terms, acceptance of the Protocol alone was subject to the exception that "Part II" need only be made effective to the extent consistent with legislation in effect on October 30, 1947. (In the case of countries acceding later, the governing date is the date of the protocol of accession.) Part II contains all of the substantive provisions except the tariff concessions and the provisions directly related thereto. By this qualification, GATT could be made generally effective without legislative action. The first customs simplification bill presented to Congress in 1951 was drafted to eliminate a number of minor inconsistencies between our statutes and GATT, but some of these provisions were eliminated before enactment of the bill in 1953. See note 43 supra. With a view to enlisting definitive adherence, GATT in 1955 accepted in advance, by unanimous agreement, reservations to the text incorporating the protocol qualifications as to "existing legislation." GATT: Basic Instruments 48 (3d Supp. 1955). Presumably a generally favorable reaction to the 1955 texts will be followed by definitive acceptance.

42 Throughout this period, Senator Millikin was the ranking Republican member of the Senate Committee on Finance, and, during periods when the Republicans organized the Senate, chairman of that committee.

See, e. g., Hearings Before the Senate Committee on Finance on the Trade Agreements System and Proposed International Trade Organization Charter, 80th Cong., 1st sess. (1947); Hearings Before the Senate Comnittee on Finance on H. R. 1211, 81st Cong., 1st sess. (1949).

44 The Bricker Amendment would have restricted the powers of the President in making treaties and executive agreements. See Hearings Before a Subcommittee of the Senate Committee on the Judiciary on S. J. Res. 1 and S. J. Res. 43, 83d Cong., 1st sess. (1953). A recent case which might have shed some light on the limits of the power to enter into foreign trade agreements was decided on factual grounds. United States v. Guy W. Capps, Inc., 348 U. S. 296 (1955).

45 See note 5 supra.