in the fall of 1947 and completed its labors on March 24, 1948. The result of the se deliberations is the Havana Charter for an International Trade Organization. III THE RELATIONSHIP OF THE CHAPTERS OF THE CHARTER TO EACH OTHER Commercial Policy The Charter deals primarily with the international exchange of goods. Its central core is the Chapter on Commercial Policy, (Chapter IV, pp. 45 to 84). It is that Chapter which contains the underlying principles of the document, and its other sections for the most part complement or qualify those central principles. These principles can be simply stated. First, there is the familiar principle of most-favorednation treatment, that is, that no country should give special favors to the trade of another country, but should treat all alike. Second, there is the principle, already embodied so far as the United States is concerned, in the Reciprocal Trade Agreements Act, that countries should be prepared to negotiate with each other for the selective reduction of tariffs and for the elimination of preferences. Third, there is the principle that any barriers to trade or limitations on imports should be openly concentrated at the customs frontier, that after imported goods cross the frontier they should receive the same treatment as domestic goods, and that tariff concessions given or received should not be nullified by internal taxes or regulations which discriminate against imported goods. Fourth, there is the principle that the "invisible tariff" of customs regulations, often more burdensome to trade than actual tariff rates, should be lowered by simplification. Fifth, there is the principle that quotas on imports and exports should not be used for protective purposes. If the se principles are accepted and put into operation, the movement of goods in international trade would be greatly facilitated and the businessmen and producers of the various nations of the world would have the best opportunity to sell their goods on a competitive basis. Cartels It was apparent, however, that this Chapter on Commercial Policy could not do the job alone. In certain cases, experience has shown that restrictive agreements and practices of private business groups had prevented and diverted the competitive movement of goods in international trade as effectively as barriers imposed by governments. We have had experience with such restrictive practices in the United States and we have domestic laws and institutions, such as the anti-trust laws and the Federal Trade Commission to deal with them. But there is as yet no mechanism for dealing with such practices in international trade. A Chapter is therefore included in the Charter to deal with this problem. Commodity Agreements The Chapters on Commercial Policy and Restrictive Business Practices are designed to deal with situations in which the normal competitive forces of the market place, if allowed to operate will usually deal satisfactorily with the situation. In one important area of international trade, however, special governmental measures may be required. This is the area of primary commodities, where burdensome surpluses may develop which would create wide spread hardship in the absence of governmental action, and where the normal forces of the market place do not operate effectively to give relief We have recognized in our domestic farm legislation (e.g. price supports) the special problems which often confront our producers of primary products. The Charter similarly recognizes that special measures may be required from time to time to deal with the problems of such producers in international trade. Hence it includes a Chapter on Intergovernmental Commodity Agreements. Economic Development Moreover, the Charter recognizes that action to remove barriers to the movement of goods will be futile unless there are goods to move and purchasing power to buy them. Men who are unemployed do not buy the products of their own or other countries. Countries in a primitive state of development do not provide substantial markets for the goods of other countries, nor do they produce many things for their own citizens and those of other countries to buy. Therefore the Charter contains Chapters dealing with certain international aspects of employment and economic development. Organization -4 Organization Finally, the Charter establishes an international organization in which problems arising out of trade relationships can be discussed and solutions reached. The Organization, after discussion of a problem, can make recommendations for action by members. Members are free to decline to follow the recommendations of the Organization. If they do, however, the Organization can release other affected members from their obligations under the Charter to the member refusing to follow the recommendations. The Organization has no power to direct or require any member to take action. Thus it will be seen that the various Chapters of the Charter are closely interrelated. They seek to deal with various trade problems which, though they arise in widely different forms, require consistent treatment if the central objective of the Charter, namely "To assure a large and steadily growing volume is to be achieved. -5 tiated under it will be incorporated in the General Agreement on Tariffs and Trade concluded at Geneva on October 30, 1947 and expanded at Annecy in 1949. It further contemplates that if any Member fails within two years after becoming a Member to negotiate its way into the General Agreement on Tariffs and Trade, the other Members who are parties to that Agreement may be released from their obligations under Article 16 to give the non-negotiating Member the benefits of the concessions which they granted in the General Agreement on Tariffs and Trade. 3. National Treatment with Respect to Internal Taxes and Article 18 embodies a recognition by Members that internal taxes and regulations should not be used as protective measures, and that products of any member country imported into any other member country shall not be subject to internal taxes or charges in excess of those applied to like domestic products. It requires similarly that internal regulations must not be applied to imported products in a more burdensome manner than to domestic products. Regulations requiring the mixture of domestic products with imported products are forbidden for the future, though existing mixing requirements are permitted to continue. These may not be increased and are subject to negotiation for their liberalization. This exception will permit the continuance of the mixing regulations imposed by the United States with respect to synthetic rubber, which is the only regulation of this type used by the United States. 4. Provision with Respect to Motion Picture Films Motion picture films are different from ordinary imports in that their value is not in the film itself, but in its earning power. Hence, the tariff is not an adequate protective device for motion picture films. It was therefore agreed that protection for domestic motion picture industries could be given by a so-called screen quota, which reserves a certain proportion of the playing time in domestic theaters for films of domestic origin. The amount of time thus reserved is made subject to negotiation, as are tariff rates, and the balance of time not reserved cannot be allocated as between imports from different sources. B Section B - Quantitative Restrictions and the Section B deals with quantitative restrictions (such as quotas) and related exchange matters. The Section contains a general commitment not to use quantitative restrictions. This rule has certain exceptions, the most important of which are that agricultural or fisheries imports may be limited when the production or marketing of the like domestic product is limited, and that imports may be limited when a country is in balance-of-payments difficulties. The determination as to whether a country is or is not in balance-of-payments difficulties rests with the International Monetary Fund.# If a country is permitted to restrict imports by quotas, it is required to apply those restrictions in a nondiscriminatory manner, except, during the postwar transitional period contemplated by the Fund Agreement, when it may discriminate in the application of quotas permitted for balance-of-payments reasons. General Elimination of Quantitative Restrictions (Article 20). Article 20 contains a basic undertaking of Members not to use quotas to restrict imports or exports. This is one of the major commitments in the Charter, since quotas are potentially most obstructive of all barriers to trade. A tariff, even though high, may be surmounted if there is sufficient demand, but the quota imposes an absolute limitation upon the amount of products which may be admitted. There are, necessarily, important qualifications to the full application of this principle. Some of these are permanent, others temporary. The net effect of Section B, however, is a general ban on the quota as an instrument of protection, though it may, under certain circumstances, be used for specified other purposes. For The International Monetary Fund was established in 1945 as a means of promoting stability in the field of foreign exchange. Forty-eight nations are members. United States membership was authorized by the Congress. |