sympathy for the types of thinking the United States has, it could be expanded. Mr. ZABLOCKI. That is only possible by negotiation with various countries. By having certain set rules. Mr. BRISTOL. Yes. Mr. ZABLOCKI. You were critical of some of the rules of the ITO. Mr. BRISTOL. Yes. Mr. ZABLOCKI. Do you think there are any better set of rules that could be had to motivate such negotiations than those that are in the charter? Mr. BRISTOL. Yes, the solution is by the bilateral treaty-amplifying the present type of friendship, commerce, and economic development treaty, not the barter type common in Europe-with those countries sympathetic and in tune with us, hoping to increase the number of those who are similarly minded or tend to become similarly minded, and by that process expand a circle that we are increasingly going to do business with. Mr. ZABLOCKI. But you have to have a group of rules to go by. Mr. ZABLOCKI. I understand that earlier a similar question was propounded by one of my colleagues. In an unpartisan spirit I would like to join Congressman Fulton in requesting that you supply the committee a substitute for the ITO Charter that we could study and follow. Mr. BRISTOL. They have taken 3 years at it, haven't they? Mr. ZABLOCKI. You have been studying it right along, have you not? Mr. BRISTOL. We have been following it, studying it, yes, indeed we have. Mr. ZABLOCKI. You have been finding errors and criticizing. Undoubtedly you realize that we invite and desire constructive criticism, replacements, and amendments. That is how our Government operates. Mr. BRISTOL. I can agree with you at the outset that this is not a partisanship matter. The interests of the country as a whole are concerned. We are all involved in that. Mr. ZABLOCKI. Specifically, on page 7 you say: We may as well recognize the fact that the Havana Charter is not amendable in practice, at least not in the direction in which we would wish to see it amended. If you come in with your set of rules, what provisions would you make in your rules for an amendment, as an example? We would welcome it. Mr. BRISTOL. I do not suggest rules and amendments. We should make our start by individual bilateral agreements with countries sympathetic to us, plus possibly a discussion forum. You see, I think the only thing we want to fear basically is the negotiation with countries whose standards or principles differ from ours, where we are not in a sense talking the same economic language or the same philosophy of approach. I am speaking frankly in favor of private development and there are countries where governments obviously have a different philosophy. Mr. ZABLOCKI. Your statement now merely points up the problem, does it not? Mr. BRISTOL. I think so. Mr. CARNAHAN (presiding). Your time has expired. We will come back to you. Mr. Fulton Mr. FULTON. May I join with Mr. Zablocki to ask the National Association of Manufacturers to come up with a document which it believes under the United Nations we should enter, dealing with international trade and commercial policy. I was checking originally on your statement when you were giving it, especially when you had said: Now the intricacy of the charter is not accidental and cannot be ascribed to the subject matter of that document. There is no reason why an international agreement setting out the "laws of the game" for international trade could not be both brief and simple and intelligible even to the lay reader. I want to say to the witness and the National Association of Manufacturers, by that statement officially made, you now have yourself a challenger. I personally as a Republican challenge you to come up with such a document that can be agreed upon by nations. The next point is this: You said you had no particular objection, or that you would like an organization which might be under the United Nations and preferably under the Economic and Social Council of the United Nations. Mr. BRISTOL. Yes. I would have no objection if a discussion forum is deemed desirable. Mr. FULTON. If that is the case, I can readily remove that objection to the ITO Charter from the minds of you and your organization. As to the ITO there was first a statement made before the Economic and Social Council of the United Nations. It was then by the authority of the Economic and Social Council that there was set up a committee to prepare for an agendum for an international conference, right under the Economic and Social Council. As you know, the preparatory group met at London and then they met at Geneva in 1947 and then they went on to the conference at Habana in 1948. Now if that is the case there are several drafts of the charter. There is the London draft, the Geneva draft, and the Habana draft. From what you said in your statement it appeared to me that the charter started out fairly well and then became involved in complications and got intricate. Mr. BRISTOL. Yes. Mr. FULTON. Which one of the three drafts of the charter do you like best? Mr. BRISTOL. May I ask the permission of the chairman to refer that question to the only man whom I know, certainly the only one I know here in the room, who is qualified to answer that, because he was present at those meetings? Mr. FULTON. I am inclined to accept that as a reference and would ask your consultant to turn that in for the record in behalf of the National Association of Manufacturers. (The information requested is as follows:) In the course of the drafting of the charter, the National Association of Manufacturers advanced criticism and constructive suggestions on three different occasions, in comments on the original proposals and on the London and Geneva drafts. On each occasion it met with the State Department and discussed in detail suggested revisions. It was not satisfied with any of the drafts. Of the three suggested drafts adopted by the Conferences held in London (with a drafting committee in New York), Geneva, and Habana, neither is acceptable as a document by which to set up a system of freer nondiscriminatory multilateral trade. In my opinion, the United States lost its effective leadership as far back as the London Conference. The philosophy of that Conference is expounded in a long introductory analysis published together with the London draft of the charter. These documents represent a basic departure from the principles which were underlying the original "proposals" published by the State Department in November 1945. From there on the charter deteriorated more and more in the successive drafts. The Habana charter is a far worse document from the point of view of the stated American objective with the possible exception of the investment provisions which while improved remain unsatisfactory-than was the London draft. But even the London draft was not an acceptable document. The Geneva draft occupies an intermediate position, in all fundamental respects equally objectionable as the other two. In the London ITO negotiations we got off to a wrong start and stayed on the wrong track until the end. Mr. FULTON. In addition, the question was asked, to show the extent of the witness' background or knowledge of the particular drafts of the charters and to see whether he had in his mind's eye constructive alternatives which he had approved and which he might feel were better. So that of all the alternatives already submitted, neither the witness nor the National Association of Manufacturers affirmatively at this point has made a choice. Now then, going a little further. You had stated to Mr. Zablocki, in answer to his questions, this: "I did not want to oversimplify the problem or its solution." Now may I compliment you for making that statement, because it is so directly contrary to what you had said on page 2, the next to the last paragraph. You said that the charter, because of its intricacy-and had inferred a planned intricacy-was something less than candid. That removes that particular inference from your statement, because in a way it did reflect on two of us sitting here at this table. We were delegates to the charter convention at Habana and we were certainly trying to do, regardless of politics or of partisanship, a job for the country, just as you are. That brings us up on a much different level in our discussion. Mr. BRISTOL. I am heartily sympathetic to what you are saying there, because it would be very unfortunate to leave the impression that we were trying to cast reflection on the sincerity with which this thing has been approached and especially upon the part of the United States delegation. Mr. FULTON. Thank you very much. Mr. CARNAHAN (presiding). Your 5 minutes have expired. Mr. Javits Mr. JAVITS. Mr. Bristol, first let me say that I am pleased to see you here with your experts to cast light on this critical subject and tell you that we would much rather have the National Association of Manufacturers in the water than on the bank looking in. Mr. BRISTOL. Or heckling. Mr. JAVITS. One thing interests me very much, you have rather sharply indicted the investment provision, article 12, which is contained at page 4 of your statement, and you say that it is prejudicial to the interests of foreign investors, and you add, so as to effectively discourage the revival of the international movement of private capital. Mr. Chairman, with your permission I would like to read into the record or insert in the record a news story from the NAM News, which I assume Mr. Bristol will identify as actually their publication. It is dated May 8, 1948. The representative of the NAM to the Habana Conference to which Mr. Fulton and I had the honor of being delegates, said this about this very investment provision. I quote the headnote. It says "Results at Habana seen forward step. Investors abroad will have better protection." Apparently the NAM was represented by H. W. Balgooyen, stated to be responsible for the article at that time and apparently the present NAM position differs. This article was written very much closer of course to the ITO Charter date than the present observations of the NAM, and so, Mr. Chairman, I would like to insert that in the record. The article is quite extensive and indicates outstanding support for this very investment provision now so sharply condemned. Mr. CARNAHAN (presiding). Without objection, the article will be inserted in the record. (The article referred to is as follows:) [From NAM News, May 8, 1948] RESULTS AT HABANA SEEN FORWARD STEP INVESTORS ABROAD WILL HAVE BETTER PROTECTION The most important gains made by the United States delegation at the Habana Trade Conference are considered by the delegation's business advisers to be the provisions revising the foreign investment sections of the proposed ITO Charter. Although the foreign-investment regulations of the Habana draft still fall short of what United States industry had hoped to obtain, nevertheless they do offer foreign investors greater protection than they have ever had previously against unjust, arbitrary acts by governments. Compared to the foreign investment sections in the Geneva preliminary draft, which were totally unsatisfactory to American business groups, the Habana provisions constitute a substantial improvement. That opinion is shared not only by the business advisers, but by the official United States delegation. NAM REPRESENTED An important role in drafting the new provisions was played at Habana by H. W. Balgooyen, secretary of American & Foreign Power Co., who was named by the NAM to serve as adviser to the United States delegation. Because of his practical experience in the foreign investment field, Mr. Balgooyen was asked to work with Seymour J. Rubin, of the State Department, both in preparing amendments to be offered by the United States and in studying and analyzing the various amendments submitted by other countries. The principal task of the United States delegation, as far as foreign investments were concerned, was to repair the damage that had been done at Geneva. The Geneva draft not only placed undue emphasis on the "sovereign right" of governments to seize foreign-owned properties under a variety of pretexts, but it specified that, in case of seizure, the foreign investor should be paid in local currency. This would have left the foreign investor even worse off than he has been during the last few years. Despite the sweeping trend toward nationalization abroad, many countries still respect their obligation to pay off in dollars when American-owned properties are seized. Messrs. Rubin and Balgooyen found it was not possible to get the 58 nations represented at Habana to agree to the kind of any investment code that would fully satisfy United States industry. India, Australia, and some of the other undeveloped nations stated bluntly that they do not want foreign private capital except under their own terms. FRANK EXPRESSIONS Moreover, many of the countries in which substantial volumes of foreign capital already are invested were equally frank in reserving their right to nationalize such investments, or to transfer them to their own nationals. Faced with this situation, the United States delegation decided to concentrate its efforts on provisions which would support a claim for redress to foreign investors whose properties might be seized, and maximum protection to investments that are not nationalized, and on providing a basis for the negotiation of bilateral treaties between the investing countries and those underdeveloped areas that desire private capital and still would provide full protection. The fight that resulted was one of the most prolonged and intensive of the entire conference. Only Canada, Switzerland, Holland, Sweden, Belgium, and at times Great Britain, actively supported the United States position. Arrayed in opposition were Australia, India, New Zealand, Ceylon, Burma, the Arab bloc, and the powerful Latin American bloc. The formal negotiations were handled chiefly by Mr. Rubin, the nongovernmental advisers, for the most part, not being permitted to participate in the official sessions. However, Mr. Balgooyen and the other business advisers played important parts in the informal discussions, where the decisions actually were reached and in the day-to-day planning of the United States delegation's strategy and tactics. PROVISIONS ACCEPTED Finally, after 3 months of continuous negotiations, the following provisions were accepted by the 58 nations: * 1. A commitment that "no member [nation] shall take unreasonable or unjustifiable action * injurious to the rights or interests of nationals of other members in the enterprise, skills, capital, arts, or technology which they have supplied." (Article 11.) 2. A provision that the ITO later will on the treatment of foreign investment. formulate a detailed general agreement (Article 11.) 3. Recognition of the importance of international private investment in promoting economic development, and of the fact that "the international flow of capital will be stimulated to the extent that members afford nationals of other countries opportunities for investment and security for existing and future investments. (Articles 11, 12.) 5. A definition of the "sovereign rights" of the countries in which foreign capital is located, to (a) Take appropriate safeguards against interference in its internal affairs by foreign investors. (b) Determine whether, and under what conditions, it will accept new foreign private investments. (c) Prescribe and give effect "on just terms" to ownership requirements of foreign investments (the nationalization provision). (d) Prescribe and give effect to other "reasonable" requirements. (Article 12.) 6. A definite enforcement procedure which can be invoked by the Organization or by any member, against a member who takes "unreasonable or unjustifiable action" against the rights or interests of foreign investors, seizes all or part of a foreign investment without providing "just terms," or fails to negotiate, at the request of another member of the Organization, bilateral or multilateral treaties to provide security and opportunities for international investment. Under the enforcement procedure, the offending member agrees to consult with the members making the complaints, and they may submit the dispute to arbitration. If consultation and arbitration fail, the matter can be referred to the ITO executive board, which can recommend remedial action. The board's decision can be appealed to the whole conference, and, finally, if a satisfactory decision still is not forthcoming, the matter can be referred to the International Court of Justice, whose decisions are binding on all ITO members. (Articles 11, 12, 92, 93, 94, 95, 96.) "SOVEREIGN RIGHTS" Apparently, the criticisms that have been voiced by some businessmen result from the paragraph affirming the "sovereign rights" of the nations wherein foreign capital is invested. In analyzing the foreign investment sections at a recent meeting of the advisory group to the NAM International Relations Committee, Mr. Balgooyen frankly |