in from four different countries but actually is blocked off by one means or another from three of the countries, so only from the fourth country can it get into the market. That fourth country might be the least economic source of production; the discrimination might well be a distortion of proper foreign trade. It might have developed for a variety of reasons, ranging all the way from political to economic. Discriminations are a disturbing factor and in a world in which all countries move ahead on trade matters independently of each other, they have come to be a matter of great importance.

Preferences appear particularly in tariff matters. You are all familiar with certain preferences which exist as far as the United

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States is concerned, preferences with respect to Cuba and the Philippines. Preferences such as these which have a substantial historical background are not required to be abandoned by the ITO charter. But preferences cannot be increased and over a time they should be reduced by negotiation just as some of the preferences arising out of the old Ottawa arrangements have been reduced substantially. No new preferences can be created without permission of the organization.

Mr. VORYS. Would those historical preferences apply also to the British Commonwealth and the Empire preference system?

Mr. THORP. Yes. However, on that the obligation to negotiate for their reduction would apply. Actually, in recent negotiations with members of the Commonwealth that system has been substantially reduced. However, again you have a problem. We have this kind of system with Cuba and the Philippines and we cannot ask for special favors with respect to our own historical preference set-ups without being willing to recognize that in other countries.

Mr. JUDD. Mr. Secretary, those are definitely exceptions to the principle of most-favored nation?

Mr. THORP. That is correct. They are firm, fixed, and defined and there can be no new ones under the general principle.

(The chart was referred to entitled "Cartels Squeeze Trade.") Mr. THORP. I have been talking about the barriers which come from Government action. But it is equally important to have in mind that barriers can come from what we familiarly know in the United States as combinations in restraint of trade. In the past a number of these practices which in the United States are regarded as being against our economic interests, have been carried out with respect to international trade, particularly in international cartels, and this Government has been endeavoring to prevent the reviving of international cartels in the postwar picture. The process of limiting competition in turn tends to limit the economic operation of world trade. And in thinking about the over-all problem one of the difficulties of leaving it in governmental bilateral hands is that it is difficult to deal with the cartel problem along those lines.

These barriers which exist have a peculiar tendency to extend themselves. Because whenever a country moves in and takes action as against the products of some other country, the natural reaction is one of retaliation. Therefore it is important in this whole picture to have in mind not only the fact that these barriers do exist, but to have in mind that there is almost an automatic tendency on the part of governments, when action is taken against their products in a foreign market, in turn to take action against the products of the originating country.

All this situation means that not only have there developed most complicated regulations, limitations and controls on trade, but that they are continuously in a state of flux. Each country which indulges in this sort of thing is changing its quotas and erecting or lowering barriers and the net result is that it is very difficult for anyone operating in the foreign-trade field to operate with any substantial assurance with respect to what policies are going to be.

Mrs. BOLTON. Would the ITO change that?

Mr. THORP. The ITO would help that in a great many respects, both in terms of limiting certain types of actions which countries can take, and also in requiring consultation, so that there is an opportunity to deal with the question without its just being done arbitrarily by an individual country.

Mrs. BOLTON. And that would include the Commonwealth.

Mr. THORP. Oh, yes, that would. That is, we would hope the Commonwealth would join.

Mr. THORP. In the original planning of the United Nations there were to be a series of specialized agencies, one of which was to concern itself with international trade problems. In a sense it is a rather strange fact that the United Nations structure at the present time has organizations dealing with foreign exchange and dealing with international loans, agriculture and health and so forth, but has no organization in the field of international trade.

(The chart was referred to entitled "ITO Will Fill a Major Gap in UN Structure.")

The setting up of an organization is one of the two things that is accomplished by the charter. The other is the setting up of a general set of principles, a code of principles, which will guide the various countries' conduct.

(The chart was referred to entitled "ITO Provides a Forum for World Trade Problems.")

Mr. THORP. As to the organization itself it is in large part a forum. It has a set of principles which relate to the way in which the various countries will behave, and a place at which there can be a review of any