receives nothing in return? We speak of mutual aid in which mutuality is conspicuously absent. And we get the fantastic idea we are responsible for the well-being of a great part of the world.

We in the United States have been and want to continue being a generous people. But, if we want to so continue, we had better stop, look, and listen to make very sure that our intended good acts are not having exactly the opposite result to that intended.

Surely it needs no argument to prove that the many practices recognized and provided for in the Habana Charter are the important fetters that prevent sufficient production and exchange of goods among other countries. Socialistic governments, state trading, controlled economies, manipulated currencies, etc.— these are the conditions that are holding them down. We did not make them. nor can we change them. We can offer our advice and our help, but only they can make the changes, and for that the first requirement is the will to do it. This is why it is so deadly important that our vast effort to help through ERP should not in fact perpetuate the very conditions which we are convinced are the main cause of their difficulties.

So also it is said that the heart of the charter is the provisions for removing trade restrictions. The United States has been removing its restrictionswhether too little or too much is beside the point here. What is directly to the point is that we are doing this to persuade or even to bribe other countries to do what they ought to do in their own self-interest. And, while we tell them that restrictions are bad, on the other hand we provide in the charter for their continuance and even extension.

Nor should we overlook the fact that much of the lack of balance in trade is due not to United States failure to import the goods of other countries but more importantly to the fact that they do not produce for themselves or porcure from their neighbors many of the things which previously they obtained in that way. Just so long as the United States will supply the goods and the money with which to pay for them, many of the former channels of trade will remain closed.

Obviously, the longer this continues, the greater the balance-of-payment difficulties become. The abnormal excess of exports from the United States serves to perpetuate the difficulty.

Taken together, it is a grave question whether ERP and the Habana Charter do not constitute a merry-go-round on which the ride is becoming increasingly burdensome for the United States taxpayer without much real hope of ultimate

success.

H. Quotas-Exceptions for economic development

The report (pp. 48 to 50, inclusive) does not bring out some pertinent facts. First, the undeveloped countries had an education at Habana in the many devices used by other countries in their progress from undeveloped to developed status. They also listened with interest and at considerable length to the defense of the system of preferences. By now it is largely forgotten that a prime objective of the charter was the elimination of these. They were not eliminated. Why then be surprised when the undeveloped countries demanded the right to use the same device? And how could the United States consistently oppose preferences after surrendering on its original demand that they be eliminated from present practice?

A second fact not mentioned is, nevertheless, enlightening. When the nations who had taken part in the earlier negotiations at Geneva realized that the lessdeveloped nations would win their point and for reasons of economic development would be the beneficiaries of the obligations of articles 10 and 11 and would be permitted to establish new preferential agreements, a demand was made that reconstruction like economic development, should provide similar eligibility. That is why the chapter heading is now "Economic development and reconstruction" and appropriate additions are made throughout the text. I. Provisions on international investment

If, as the report states (pp. 53 to 55, inclusive), the United States Government viewed employment and economic development as specifically within the jurisdiction of governments rather than as matters susceptible of direct international treatment, it is too bad that position was not adhered to. It is difficult to understand the further statement that the United States delegation stood alone in contending for this view. It must have made its stand somewhere else, for it did not do so at Habana.

The statement does illustrate an important point, however, in that wherever and whenever the United States does stand alone on a principle it can and probably will be ridden over roughshod. It has one vote, and on many principles which we in the United States hold vital most other nations do not share our view. The report alludes to the difficulties encountered by the United States and a few others in leading the way to a sound and practical formula for international investments. This is peculiar, in view of the fact that it was the Australian delegation and not that of the United States that wrote the investment provisions in article 12.

And the solution is not a sound one for the investing country. The country receiving the investment has an affirmation in article 12 1 (c) (iii) of the right to prescribe and give effect on just terms to requirements as to ownership of existing and future investments. This covers expropriation or nationalization. There is now no provision for prompt and adequate payment. There is now no definition of "just terms" and, while the wording of Geneva calling for payment in local currency has also been dropped, the delegates who were vocal on the subject, notably Australia, affirmed and reaffirmed that payment in local currency was all that anyone should expect.

It is true that there is a provision that members may later make specific agreements covering investments in which, if they desire, the terms may be more favorable. Obviously, no charter is necessary to give them that opportunity. On page 55 the report refers to enforcement procedure which makes it possible for any member to invoke a definite enforcement procedure against any 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, upon request of another member, bilateral or multilateral treaties providing security and opportunities for international investment. This attempts to read into article 12 something that is not there, as will be seen by reading it carefully.

The procedure described is that occurring in articles 93 to 96, inclusive, which would not apply because of the specific retention of rights in article 12 by the countries receiving the investments. If these countries retain the right to be the sole judge of certain matters, as they do in article 12, they could hardly be accused of a breach of obligation which would bring the matter under articles 93 to 96, inclusive.

J. An opportunity for American leadership

There was an unparalled opportunity at Habana. Except for the address by Dr. Wilcox already quoted in the report, ther was no consistent effort to lead and mostly no effort at all. In contrast, there was a constant expounding of ideas and doctrines to which the United States people are opposed. Most of the nations attending the Habana conference thus received a thorough indoctrination in statism but heard little or nothing about the workings and the successes under the opposite concept of freedom.

The report proposes that the charter be judged as to whether it is (a) an instrument for establishing private enterprise in the world, (b) an instrument for avoiding economic warfare and preserving private enterprise in countries desiring it. Later the report says "the crux is not how this charter compares with the perfect formula but how it compares with the situation that will obtain if the charter does not go into effect."

Boh of these are false alternatives. They serve to obscure the crucial question as to whether we in the United States are best served with or without this particular charter and whether or not we can through this charter exert the kind of leadship in ideals that have in the United States proved to be good.

Of course, we no not expect to force the establishment of private enterprise anywhere if the people do not want it. We can and should, however, expound its workings and its virtues so that people could make their own comparison and choice. If we truly believe we have a light, we should not hide it. And that is not compulsion on anyone; it is true leadership.

The second alternative offered by the report is equally false. No one expects the charter to be perfect. But to ask how it compares with what will obtain if we do not have it implies that without the charter conditions will be chaotic. And one of the great objections to the charter is that it condones and preserves the conditions that account for the chaos of today. It is even worse than that, as is clearly indicated in a report of a committee of the American Bar Association, which reads; “* the document is so deficient in precision and clarity in many of its substantive stipulations as to suggest that in these respects, at least, no reliable agreement was reached. The inevitable result of obscurity and

vagueness is uncertainty in interpretation and application, and ultimately dispute and disagreement."

The report reaches a conclusion favorable to adoption of the charter. Immediately, however, it suggests that it is susceptible of improvement by amendment. That points up the fact that ITO under the charter may through amendment modify benefits or obligations as they were originally defined in the charter, without the concurrence or even over the specific objection of one or more nations most affected. That gets us into the field of international legislation without the consent of Congress, a question discussed editorially in the August issue of American Bar Association Journal. And as to "improvements," it is not realistic to assume anything on this score. Commenting on this point, the recent report by a committee of the American Bar Association, already referred to, reads: "Thus it is merely realistic to assume that, in issues reflecting divergence of interests between 'creditor' and 'debtor' nations, we would stand alone. and that in issues reflecting controversies between mature and 'underdeveloped,' or 'war damaged' and intact economies, we would have only minority support, in either the Conference or the executive board. As significant divisions along these lines developed both at Geneva and at Habana, their recurrence is fairly likely."

And again:

"Notwithstanding the extensive powers of special dispensation, the procedure for amendment of the charter seems to involve additional hazards to the attainment of its prime objectives. Article 100, paragraph 1, provides for the adoption by a two-thirds vote of any amendment which does not alter the obligations of members.'

"Paragraph 4 stipulates that the determination of whether an amendment does alter members' obligations is the prerogative of the Conference, likewise by a two-thirds vote.

"But if an amendment is determined to 'alter' obligations, it may still be made effective by the same two-thirds vote, after that fraction of the members have accepted. Moreover, if the Conference decides that the amendment is of such a nature as to make such action appropriate. nonassenting members may be 'suspended' from the Organization. A special provision respecting amendments to chapter VIII (organization) is to the effect that nonassenting members may withdraw from the Organization. (Annex N.)

"Thus, if we are inclined to optimism, and believe that a two-thirds majority can be voted in favor of improving the Habana Charter, it is probable that such affirmative amendments would operate to 'alter' the dissident members' obligations, leaving the obvious alternative of submitting to 'suspension,' an action whose legal significance is left obscure. On the other hand, taking a pessimistic view, amendments further diluting the basic principles of the charter, and particularizing exceptions, might more readily be considered not alterations, and thus become effective without further review."

The report reaches the final conclusion that there is naught to gain and much to lose in failing to accept the Habana Charter. But neither the specific content nor the obvious implications of the Habana Charter support that conclusion. If the United States accepts an admittedly bad charter, it will prejudice the possi bilities of improving it. If, on the other hand, the United States would return to the original concept of a consultative and advisory body, there could be considerable hope and expectation of eventually getting a much better charter and Organization. Continued consultation and discussion, ascertaining one point after another on which most nations can agree, is not only a sensible course, but that slower, more gradual process of evolution will lead to wider understanding and a far more enduring activity. A good starting point would be to put together all of the material of the present charter on which there is general agreement, without exceptions.

And unless the United States leads in such a constructive approach, there is little likelihood that any other nation will do so. Proof of that is before us in the charter itself, in which the other nations have succeeded in preserving the very practices the Organization was intended to cure.

COMMENTS ON MR. KILLHEFFER'S REJOINDER TO THE FULTON-JAVITS REPORT

This memorandum will concern itself primarily with the errors of fact in the rejoinder. 1. The charter is criticized because it is only an objective.

The proponents of the charter never claimed that it was more than an objective in many of its important provisions. But the statement and acceptance of the objectives is vital.

The rejoinder does not mention the fact that there are many provisions of the charter which must go fully into effect right away.

2. On page 2, the rejoinder points out that tariff reductions under today's circumstances are in many cases not important.

Agreed. Nevertheless, in the long term, the level of tariffs is important and will become increasingly so as production in the world increases.

3. On page 3, the rejoinder says that the United States agreed to limit the amount of general-purpose synthetic rubber consumed under its mixing regulations to 25 percent of total consumption.

This is not true. What we agreed was twofold:

(a) We are permitted, despite a general ban on such regulations, to maintain the mixing regulations in effect on April 10, 1947, or on the date the charter goes into effect (at our option). We agreed not to modify them to the detriment of imports. On April 10, 1947, our regulations required that about 45 percent of our total usage of rubber be synthetic. We can use any percentage we want in particular products.

(b) We agreed that the British would give us reductions in their colonial preferences but could take them back if in any year the production of synthetic rubber required by United States regulation was above the 25-percent limit. There was no agreement by the United States to abide by that 25-percent limit. We flatly refused to make any such agreement.

4. On page 4, the rejoinder states that the British reductions were to be inoperative "only in a year following a year in which the United States did not comply with the percentages established for rubber consumption. The British did not wait, they made them inoperative immediately and in the very year that they made them inoperative the United States did comply with the percentages above referred to. Actual instances of this kind are of considerable value in their illustration of intent."

These are not the facts. The agreement expressly provided that the British reduction did not have to become effective for a year in order to give them a chance to consult with their colonial governments and to make the necessary arrangements. This was necessary since about 30 or 40 different areas were involved. In other words, far from the British action being an illustration of bad faith, they showed good faith in telling us that they could not make the concession effective for many months and asking for agreement that they should have the necessary time to do so.

In any event, this colonial concession-25-percent arrangement-was subsequently suspended in its entirety.

5. On page 4, the rejoinder states that the Javits-Fulton report is incorrect in stating that any government may withdraw from GATT on 60 days' notice because such withdrawal is only possible after 1951.

The Javits-Fulton report is correct. The GATT is only in operation by virtue of the Protocol of Provisional Application, which contains the 60-day right of withdrawal at any time. Moreover, after 1951 the GATT itself requires 6 months' notice.

6. On page 5, the rejoinder says that GATT would not be wholly superseded by the charter if and when it comes into force and that great reliance has been placed on the continuance of GATT if the charter is not ratified. He says that is why it is frequently referred to as "little ITO."

The only people who refer to the GATT as "little ITO" are the opponents of the ITO. The fact is that the GATT will be wholly superseded by the charter except for its schedules when the charter comes into force. And there also is considerable doubt as to whether the GATT would be continued in case the charter is not ratified. This doubt is based upon conversations with the other countries and upon the history of the negotiations leading to the conclusion of the GATT.

7. On page 6, the rejoinder states that there were a great many reservations to the charter which "while they were not attached to the charter neither were they disposed of."

This is simply incorrect in fact. There are no reservations to the charter and it will be presented as it stands. The entire charter which is to be considered by the United States Congress and by the legislatures of the other countries concerned is the document which was initialed and emerged from Habana. There are no secret protocols.

8. On page 7, the rejoinder mentions the GATT compliance with charter provisions regarding United States rubber policy.

As shown above the charter explicitly permits the continuation of United States rubber policy in the form in which it now exists.

9. The rejoinder also refers, as an objection to the charter, to the fact that we have an obligation to maintain full employment.

We have that obligation already in the Employment Act of 1946 adopted by the United States Congress.

10. The rejoinder objects to the fact that under the charter we will have to change the basis of our valuation for customs purposes.

The proponents of the charter consider that this would be an advantage from the point of view of the United States and from the point of view of international trade. Perhaps what troubles the author of the rejoinder is the fact that the change in customs valuations required by the charter would require a change from the use of American selling price as a basis for valuation. It would not require a change in the level of protection, as rates could be adjusted to reflect the change in basis of valuation.

The use of American selling price is particularly prevalent in the chemicals schedules of the United States tariff-a schedule in which the du Pont Co. in primarily interested. The effect of the use of American selling price is not necessarily to change the level of protection which the domestic industry enjoyswhat it does is to obscure the level of protection. For example, when you have a 10-percent duty based on American selling price it may well be a 40- or 50- or 60-percent duty based on the foreign value, which is the customary value used for custom valuations in other parts of the American tariff. Since there will not be rather to

be any change in the level of the tariff, the objection must be rather to the fact that the change would publicize and make clear the outrageous level of protection which certain industries now enjoy in many cases.

11. On page 8, the rejoinder says that there has been a wholly insufficient basis of agreement in the charter.

We would suggest that things objected to elsewhere in the rejoinder indicate that there has been a very precise measure of agreement. It is the fact that the charter recognizes many of the particular problems of different countries and deals with them in concrete terms which is what the rejoinder objects to. The precise measure of agreement rather than the lack of agreement is what causes the difficulty.

12. On page 9, the rejoinder says that the United Kingdom is not observing the requirements of article XIX with respect to motion-picture imports.

This is not true. Article XIX says that the importing countries are permitted to use screen quotas. The United Kingdom does this. Countries are also permitted to use tariffs. The United Kindom does this. The amount of the screen quota and the amount of the tariff are subject to negotiation. Internal quantitative restrictions other than screen quotas are prohibited because the nature of the motion-picture industry would make impairment of negotiated conces sions easy in the absence of such prohibition. There have been no intergovernmental negotiations as envisaged by article XVII between the United Kingdom and the United States Governments on screen quotas or tariffs. The United Kingdom Government has, however, discussed and entered into arrangements with the United States industry on these matters.

13. On page 9, the rejoinder objects to the fact that the United States and other member nations would take an obligation not to use export subsidies to acquire more than an equitable share of world trade of the commodity involved. Does the author advance the position that the United States should use the power of the subsidy to shut other producing nations of basic commodities out of the world market? Does the author object to the fact that other nations might have a voice in the decision as to what was or was not an equitable share of the world market? Does he advance the thesis that the party in interest should be the sole judge of what is right to serve his interests?

14. The rejoinder also objects to the sentence in the Javits-Fulton report that says the charter would restrict the operation of article XXXII of the Agriculture Adjustment Act because he says we have been assured that the charter would not interfere in domestic affairs.

Does the author object to the fact that the agency administering the Agriculture Adjustment Act would have to live up to and be guided by an international commitment accepted by the Congress of the United States? That is all that would be involved.