and New Zealand reported that since the 11th Session there had been no changes in their foreign-exchange activities that were pertinent to their waivers. After considering these reports, the working party on balanceof-payments problems recommended that the Contracting Parties dispense with the requirement for annual consultations with, and reports by, Czechoslovakia and New Zealand. They recommended instead that the two countries be required to consult with the Contracting Parties and submit reports to them promptly after taking any action that has a significant effect on the application of the provisions of the General Agreement, or that is inconsistent with the principles of the International Monetary Fund. The Contracting Parties approved the recommendation of the working party.

European Coal and Steel Community (fifth and sixth annual reports) (arts. I and XIII)

On April 18, 1951, six contracting parties to the General AgreementBelgium, France, the Federal Republic of Germany, Italy, Luxembourg, and the Netherlands-concluded a treaty constituting the European Coal and Steel Community (ECSC), as well as a convention providing for certain transitional arrangements connected with its establishment.22 The six participating countries then requested the Contracting Parties to waive their most-favored-nation commitments under article I of the General Agreement and their commitments regarding the nondiscriminatory application of quantitative import restrictions under article XIII. At their Seventh Session in 1952 the Contracting Parties granted such a waiver.23 In effect, the waiver permitted the member countries to form a limited customs union for the purpose of establishing a common market within the Community for coal, iron ore, scrap iron, and steel products. The waiver also required the Community to make an annual report to the Contracting Parties on its progress in implementing the treaty.

At the 12th Session, the European Coal and Steel Community submitted its fifth annual report to the Contracting Parties on the measures taken by the members of the Community toward the full implementation of the treaty establishing the Community. The report, which covered the period September 1, 1956-September 1, 1957, stated that the Community would have harmonized the customs duties of its members for coal and steel products, as applied to third countries, at the end of its transitional period on February 10, 1958. As in previous years, the Com

"For text of the treaty and the convention, see European Coal and Steel Community, Treaty Constituting the European Coal and Steel Community and Convention Containing the Transitional Provisions, 1951.

23 For text of the waiver and of the report of the working party that considered the problem, see Contracting Parties to GATT, Basic Instruments . 1st supp., Sales No.: GATT/1953-1, Geneva, 1953, pp. 17-22 and 85–93.

munity also provided the Contracting Parties with supplemental information on its production and trade and on prices of coal and steel. As a result of comments and questions by contracting parties, the Contracting Parties referred the report to a working party for further examination. The majority of the working party concluded that the member states and the High Authority of ECSC had taken the necessary steps to complete the establishment of the Community on February 10, 1958, as contemplated by the Contracting Parties when they granted the waiver. However, some of the members of the working party stated that the harmonization of the customs tariffs of the countries comprising the Community did not conform to their understanding of "harmonization" at the time the waiver was granted. The working party therefore suggested that this problem be discussed in the Community's sixth and last report under the waiver, which would cover the period from September 1, 1957, to February 10, 1958. The working party recommended to the Contracting Parties that, because of the importance to certain third countries of the harmonization of the tariffs of the member states, this report be submitted to the Intersessional Committee before the end of March 1958. The working party also recommended that the Secretariat of the Contracting Parties (1) compare the rates of duty on coal and steel applicable in 1952 with those that are to apply after harmonization, and (2) confirm whether the increase in the level of bound duties was authorized under the treaty only for the purpose of permitting members of the Community to harmonize their duties. The Contracting Parties adopted the fifth report and the recommendations of the working party at their 12th Session.

24

The European Coal and Steel Community submitted the sixth and final report on its waiver to the Intersessional Committee at its April 1958 meeting. The Committee discussed the comments on the harmonization of the Community's external tariffs in the report, and the supplemental data on the Community's production, trade, and prices. At the conclusion of the discussion the Contracting Parties congratulated the six member countries on their attainment of a common market in coal and steel.

Italy's preferential customs treatment of Libyan products

(fifth annual report) (art. I)

At their Sixth Session in 1951 the Contracting Parties granted Italy a waiver of its most-favored-nation obligations under article I of the General Agreement. The waiver, which permitted Italy to accord dutyfree entry to a specified list of products of which Libya is Italy's principal foreign supplier, was intended to facilitate the development of Libya's 24 This comparison that the Secretariat was asked to prepare had not been submitted to the Contracting Parties by June 30, 1958.

economy during that country's transition to an independent status. At their Seventh Session in 1952 the Contracting Parties requested Italy to submit an annual report on the development of Italian-Libyan trade, and requested Libya to submit an annual report on Libyan economic development.25 Also, the waiver, originally granted for a period of 1 year, was extended at that session; at the 10th Session in 1955 it was further extended to December 31, 1958.

The reports of Italy and Libya, submitted to the Contracting Parties at their 12th Session, indicated increased Italian imports of Libyan products since 1954, and a substantial development of the Libyan economy. However, the reports noted a decline in Libya's total exports during 1956 resulting from the effect of adverse climatic conditions on Libyan agriculture, especially on the olive crop. The Libyan representative stated that the outlook for 1957-58 was better, particularly because of the expected large surplus of olive oil that probably would be available for export. The Contracting Parties noted the reports and agreed to review the situation again at their 13th Session.

Luxembourg's quantitative restrictions on imports (second annual report) (art. XI)

On May 17, 1955, Luxembourg requested the Contracting Parties to grant it a waiver of its obligations under article XI of the General Agreement (requiring the general elimination of quantitative restrictions on imports) to permit it to maintain certain restrictions on imports of agricultural products. Luxembourg's economic structure, the request pointed out, is based primarily on the steel industry and agriculture, and agriculture is therefore a vital branch of the national economy. However, Luxembourg's agriculture is in a precarious position and can be maintained in a satisfactory position only with the support of the state. Consequently, Luxembourg desired permission to maintain quantitative restrictions on imports of certain agricultural products of which Belgium and the Netherlands are the principal suppliers. At a meeting of an intersessional working party, the representative of Luxembourg made it clear that his country's need for agricultural protection was structural in nature, and could not be regarded as transitional or temporary. For this reason Luxembourg requested the waiver pursuant to article XXV, rather than under the hard-core decision of March 5, 1955.26

At their 10th Session the Contracting Parties granted Luxembourg a waiver permitting it to continue its existing restrictions, with the understanding that Luxembourg would actively pursue the harmonizing of its

25 See Operation of the Trade Agreements Program: 7th report, pp. 31-32; 8th report, pp. 33-34.

26 For a discussion of the relationship between Luxembourg's request for a waiver and the trade restrictions of Belgium and the Benelux Union, see Operation of the Trade Agreements Program (10th report), pp. 28-29.

agricultural policy with the policies of Belgium and the Netherlands, would adopt all measures necessary to make its agriculture more competitive, and would, as far as practicable, relax restrictions then in force. The waiver has no time limit.

At the 12th Session Luxembourg reported, as it had in its first annual report at the 11th Session, that its agricultural position, and therefore its need for the waiver, had not changed substantially. However, Luxembourg pointed out that its commitment to progressively liberalize its trade in agricultural products is carefully defined in the treaty establishing the European Economic Community. According to Luxembourg, the obligations assumed by it in the treaty will require it to improve the competitive ability of its agriculture. The Contracting Parties did not review the report at a plenary session.

Nicaragua-El Salvador free-trade area (sixth annual report) (arts. I and XIII) At their Sixth Session in 1951 the Contracting Parties approved a waiver relating to the Nicaragua-El Salvador free-trade area. The waiver freed Nicaragua from its most-favored-nation obligations respecting the products covered in its treaty with El Salvador, which became effective August 21, 1951. Under the terms of the treaty, each country agreed to accord reciprocal duty-free treatment to specified products originating in the other country.

In its annual report to the Contracting Parties at their 12th Session," Nicaragua noted that—as in previous years-both Nicaragua and El Salvador were satisfied with the operation of the free-trade treaty. The report noted that trade between the two countries had been declining as a result of the controls Nicaragua had imposed on the exportation of grain during 1955 and the restriction El Salvador had imposed on imports of grain during 1956. The Chairman of the Contracting Parties commented that on the basis of the report Nicaragua and El Salvador appeared to have met the provisions of paragraph 8(b) of article XXIV of the General Agreement, since the restrictive regulations on trade between the two countries in products originating in their territories had been substantially eliminated. It therefore appeared that the free-trade area was being maintained successfully.

United Kingdom obligations with respect to products entered free of duty from Commonwealth countries (fourth annual report) (art. I)

At their Eighth Session in 1953 the Contracting Parties granted the United Kingdom a waiver of its obligations under the provisions of article I of the General Agreement, which prohibit increases in margins of 27 Inasmuch as El Salvador is not a contracting party to the General Agreement, only Nicaragua is obliged to report to the Contracting Parties on developments under the waiver. For the origin of the waiver, see Operation of the Trade Agreements Program (6th report), p. 50.

preference. The waiver permitted the United Kingdom to alter margins of preference accorded to Commonwealth countries by increasing rates of duty on imports of unbound items from non-Commonwealth countries without imposing comparable duties on those items when imported from Commonwealth countries. The waiver applied only to items on which no concessions were in effect under the General Agreement at the time it was granted.

At the Ninth Session of the Contracting Parties in 1954-55, the United Kingdom requested, and was granted, an amendment to the waiver permitting the United Kingdom to increase margins of preference on items on which concessions were in effect under the General Agreement at the time the waiver was approved, but which had subsequently been removed or modified in a manner consistent with the agreement. In requesting an amendment to the waiver, the United Kingdom stated—as it had in requesting the original waiver-that it desired to accord itself greater protection only in a limited number of instances where the need for tariff protection had been demonstrated, and that it did not intend to use the waiver to divert trade to the Commonwealth.28

In submitting its fourth annual report under the margin-of-preference waiver at the 12th Session of the Contracting Parties, the United Kingdom stated that it had not invoked the waiver since submitting its third report at the 11th Session.

Special problems of the dependent overseas territories of the United Kingdom (third annual report) (art. I)

During the Ninth Session in 1954–55, the United Kingdom submitted to the Contracting Parties a proposed amendment to the General Agreement that would broaden the scope of action by a contracting party in assisting the economic development of its dependent territories. The United Kingdom desired such an amendment because it believed its. social and political responsibilities to dependent territories could not otherwise be fulfilled under the provisions of the General Agreement. Because of the broad scope of the amendment, however, and because its adoption would be tantamount to recognizing as permanent a problem they regarded as transitional, the Contracting Parties did not favor the proposed amendment. They decided, instead, to waive certain of the United Kingdom's obligations under the agreement, in order to permit the United Kingdom to accord its dependent overseas territories treatment commensurate with its responsibilities as it recognized them.2o

28 See Operation of the Trade Agreements Program: 7th report, pp. 27-30; 8th report, pp. 30-32.

29 For a more detailed discussion of the United Kingdom's dependent overseas territories waiver, see Operation of the Trade Agreements Program (8th report), pp. 76-78. For text of the waiver, see Contracting Parties to GATT, Basic Instruments . 3d supp., Decisions, Resolutions, Reports, etc., of the Ninth Session, Sales No. : GATT/1955–2, Geneva, 1955. pp. 21-25.