In submitting its third annual report under the dependent overseas territories waiver at the 12th Session of the Contracting Parties, the United Kingdom stated that it had taken no action under the terms of the waiver since submitting its second report at the 11th Session.

United States restrictions on imports of agricultural products (third annual report) (arts. II and XI)

Article XI of the General Agreement prohibits a contracting party from imposing nontariff restrictions on its imports from other contracting parties. Article II prohibits imposition of an import fee in excess of the rate of duty set forth in the appropriate schedule of concessions. These articles have been particularly significant to the United States, since it maintains governmental programs with respect to several agricultural products and, in order to carry out these programs, has on several occasions found it necessary to restrict imports of such products. Use by the United States of the agricultural exception has been of considerable concern to those countries that export agricultural products thereto and that have granted the United States tariff concessions in return for concessions that the United States has granted them on agricultural products.

United States programs for agricultural products have had various objectives. Some of them have been designed to control production; some, to assist in the orderly marketing of agricultural commodities for domestic consumption and for export; some, to provide for the disposal of surplus commodities; and some, to establish quality and grading standards. The principal objective of such programs, however, has been to stabilize prices at levels that would provide a fair return to producers, consistent with the interests of consumers.

To the extent that these programs have had the effect of maintaining domestic price levels for agricultural products above the duty-paid, laiddown prices of comparable imports, they have tended to stimulate a greater quantity of imports than would have prevailed had there been no domestic programs. Such artificially stimulated imports tend to increase the cost of relevant programs and to interfere with the realization of their objectives. To provide for contingencies of this kind, section 22 of the United States Agricultural Adjustment Act, as amended, authorizes the President to restrict the importation of commodities by imposing either fees or quotas (within specified limits) if such importation tends to render ineffective or materially interfere with the agricultural commodity programs of the United States Department of Agriculture. Section 22, as amended by the Trade Agreements Extension Act of 1951, specifically provides that no trade agreement or other international agreement heretofore or hereafter entered into by the United States shall be applied in a manner inconsistent with the requirements of section 22.

To resolve the differences between its domestic legislation and the provisions of the General Agreement, the United States-at the Ninth Session of the Contracting Parties in 1954-55-requested a waiver of its commitments under articles II and XI of the General Agreement, insofar as such commitments might be regarded as inconsistent with action it is required to take under section 22.30 Besides establishing certain rules of procedure and certain conditions as to consultation, the waiver, which the Contracting Parties granted to the United States at the Ninth Session, requires it to report annually on its actions under the waiver.

At the 12th Session of the Contracting Parties, held during October and November 1957, the United States submitted its third annual report under the waiver. The report, which covered the period between the 11th and 12th Sessions, presented an explanation of United States action with respect to each of the commodities that were under restrictive import controls during that time. The report noted that during the period reported, import controls under section 22 were in effect for only 6 of the 9 groups of products originally covered by the waiver, the same number of groups as in the preceding year. Within the dairy-products group, however, two modifications had been made to prevent imports of new types of commodities with high butterfat content from rendering ineffective the milk and butterfat program. These modifications were the placing of butter substitutes, including butter oil, within the dairyproducts quotas; and the placing of an embargo on imports of articles containing 45 percent or more of butterfat.

The report also described the positive steps that the United States had taken toward reducing surpluses of certain agricultural commodities. These actions included decreases in price-support levels; reduction, by means of mandatory controls and by the soil-bank program, of the acreage to be planted; and administration of programs to expand domestic and foreign consumption. After preparation of the third annual report, but before the opening of the 12th Session, the United States. notified the Contracting Parties that it had imposed an import quota on tung oil.

After discussing the United States report, the Contracting Parties referred it to the working party on agricultural waivers for further examination. The Contracting Parties subsequently adopted the report of the working party and approved its recommendation that the Netherlands be permitted to continue to limit to 60,000 metric tons its imports. of wheat flour from the United States during 1958.31

Between the 12th Session and June 30, 1958, the United States notified the Contracting Parties that it had removed its quota on imports of harsh

30 See Operation of the Trade Agreements Program (8th report), pp. 43-47.

1 See the discussion in this chapter on the Netherlands complaint with respect to United States restrictions on imports of dairy products.

or rough cotton having a staple length of less than three-fourths of 1 inch and had placed imports of tung nuts (on the basis of their oil content) under the existing quota for imports of tung oil.

Releases From Obligations Considered at the 12th Session Article XVIII of the General Agreement permits contracting parties to employ nontariff protective measures for purposes of economic development or reconstruction, provided the proposed measures meet the criteria established for them under the agreement.32 The article specifies, among other things, that the measures must be nondiscriminatory and must (1) be intended to promote an industry that processes an indigenous primary commodity, external sales of which have been reduced by increased foreign production, or (2) be necessary to develop resources that would otherwise be wasted and that, if conserved, would in the long run be beneficial to the applicant country. The measures must not be more restrictive than other practicable measures that would be permitted under the General Agreement. Permission to apply such measures may involve a release from a negotiated commitment, a release from other obligations under the General Agreement, or both. A contracting party that desires to take action under article XVIII is required to notify the Contracting Parties of its proposed action, so that other contracting parties may indicate whether their interests would be adversely affected by such action. Approval of the proposed measure by the Contracting Parties is mandatory if the measure meets the standards outlined above. During the first 10 years of the operation of the General Agreement— from 1947 to 1957-releases from obligations under the provisions of article XVIII for purposes of economic development have been granted on one or more occasions to each of four contracting parties-Ceylon, Cuba, Haiti, and India.

Early in the 12th Session of the Contracting Parties, Ceylon requested that its applications for releases on 3 products of new industries, and the modification and extension of earlier releases on 3 other products, be considered by a panel instead of by a working party. The Chairman of the Contracting Parties pointed out that the panel method of handling the applications would be appropriate only if Ceylon had signed the Protocol Amending the Preamble and Parts II and III of the General Agreement, which contained the revised text of article XVIII. Ceylon signed the protocol on October 30, 1957, and its applications for releases were then referred to a panel. The 3 new products for which releases were sought were cotton textiles, crown corks, and bicycle tires and tubes.

32 See Contracting Parties to GATT, Basic Instruments vol. I, Text of the Agreement and Other Instruments and Procedures, Sales No. : GATT/1952-3, Geneva, 1952, pp. 41-46. 33 For a discussion of Ceylon's previous releases, see Operation of the Trade Agreements Program: 9th report, pp. 30-31; and 10th report, p. 34.

Ceylon's applications also requested an increase of the coverage of the previously granted release on sarongs and sarong cloth, and an extension of the time limit for the releases on plywood chests and shooks.

The panel reported to the Contracting Parties that Ceylon had entered into consultations with interested parties whose products would be affected by the proposed releases. By the time the panel had completed its deliberations on the applications it had not been informed of the outcome of these consultations. It therefore recommended that the Intersessional Committee be authorized to grant the releases when the consultations had been successfully completed." The Contracting Parties approved the recommendation.

The United States representative stated that his delegation could not accept the panel's recommendation on the duration of the releases, since the recommendation established no specific terminal dates to insure that the releases would be placed in effect within a reasonable time. The Chairman of the Contracting Parties proposed that the question be discussed more fully on another occasion.

Since Ceylon's applications for releases at the 12th Session were the first filed by any contracting party under the provisions of the revised article XVIII, the panel also made several other recommendations concerning the procedures to be followed under the revised article. The panel suggested that, since the revised article sets several fixed time limits for the procedures involved, future applicants for releases under article XVIII submit with their applications pertinent data that the Contracting Parties might need in considering the applications. The panel also recommended that the Contracting Parties confirm the Intersessional Committee's authority to act for them if, under the time limits prescribed in the revised article, a notification requires action when the Contracting Parties are not in session. The panel further recommended that for the annual review by the Contracting Parties of releases granted pursuant to the provisions of the revised article XVIII, the contracting parties concerned submit reports containing detailed information on the developments in the production, prices, and imports of the products involved. The Contracting Parties approved the panel's recommendations. Examination of Quantitative Import Restrictions Imposed for Balance-of-Payments Reasons (Arts. XI-XV)

Articles XI through XV of the General Agreement deal with the problem of the use of quantitative restrictions on imports in trade between contracting parties. Article XI prohibits a contracting party from imposing nontariff restrictions-such as import restrictions, quotas, licensing "The Contracting Parties were notified during the first half of 1958 by the consulting countries that the consultations had been concluded and that the releases had entered into

force.

systems, or other quantitative control measures-on its imports from other contracting parties. Article XII, however, permits certain exceptions to this general rule for those contracting parties that are faced with balance-of-payments difficulties. Article XIII sets forth the general rule that any quantitative restriction applied pursuant to the provisions of the agreement must be nondiscriminatory in nature, but article XIV permits certain exceptions to this rule for countries faced with balanceof-payments difficulties that are regarded as transitional in character. Article XV recognizes the interrelationship-in balance-of-payments problems of quantitative restrictions on imports that are within the jurisdiction of the Contracting Parties and of exchange problems that are within the jurisdiction of the International Monetary Fund. It does this by providing for consultation between the two organizations and by delineating the sphere of action of each in balance-of-payments problems. In essence, these five articles of the General Agreement impose on contracting parties an obligation to forego the use of quantitative restrictions on imports except in the most compelling circumstances. Although articles XII and XIV make it clear that balance-of-payments difficulties may justify resort to quantitative restrictions, those articles also provide that a contracting party that resorts to such restrictions must in certain instances consult with the Contracting Parties regarding the nature, extent, and justification of the restrictions. Furthermore, article XIV requires the Contracting Parties to prepare an annual report on the discriminatory application of the quantitative restrictions permitted by the provisions of that article.

Contracting parties that wish to apply discriminatory import restrictions may do so under the provisions of paragraph 1(b) of article XIV 35 of the General Agreement. Under the provisions of this paragraph, deviation from the provisions of article XIII is permitted to the same extent that it is permitted under article XIV of the Articles of Agreement of the International Monetary Fund or under paragraph 6 of article XV of the General Agreement, both of which provide for special exchange agreements. If, on March 1, 1948, for balance-of-payments reasons, a contracting party was, under the provisions of paragraph 1(b) of article XIV of the General Agreement, applying import restrictions that deviated from the rules of nondiscrimination set forth in article XIII, it could elect to continue to apply such restrictions under paragraph 1(c) of that article and could adapt such deviations to changing circumstances. If a contracting party did not wish to be bound by the provisions of paragraph 1(b) and 1(c) of article XIV of the General Agreement, and had signed the Protocol of Provisional Application before July 1, 1948, it could

35 These and other similar provisions were adopted by the Contracting Parties in recognition of the transitional exchange problems that various contracting parties faced after World War II.