MEMBERSHIP AND PARTICIPATION BY THE UNITED STATES IN THE INTERNATIONAL TRADE ORGANIZATION THURSDAY, APRIL 27, 1950 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met, pursuant to adjournment, at 10:15 a. m., in the Foreign Affairs Committee room, United States Capitol, Hon. A. S. J. Carnahan presiding. Mr. CARANAHAN (presiding). The committee will come to order and we will proceed with further hearings in connection with the charter for an International Trade Organization. Our first witness this morning is Mr. R. F. Loree. STATEMENT OF R. F. LOREE, CHAIRMAN, NATIONAL FOREIGN Mr. LOREE. I am appearing on behalf of the National Foreign Trade Council, Inc., of which I am chairman. The council comprises in its membership manufacturers, merchants, exporters and importers, rail, sea, and air transportation interests, bankers, insurance underwriters and others engaged in foreign trade and investment. The views of the council regarding the Habana charter have been set forth in a detailed and critical analysis of that document, entitled "Position of the National Foreign Trade Council with Respect to the Habana Charter for an International Trade Organization." A copy of this analysis is now offered to the committee, with the request that it be made a part of the official record of the hearings of the committee on the Habana charter. Mr. CARNAHAN (presiding). Without objection, the document referred to will be included in the record at this point. (The document referred to is as follows:) POSITION OF THE NATIONAL FOREIGN TRADE COUNCIL WITH RESPECT TO THE HABANA CHARTER FOR AN INTERNATIONAL TRADE ORGANIZATION ANALYSIS OF PROVISIONS OF THE HABANA CHARTER TOGETHER WITH ANALYSIS OF PROPOSALS FOR THEIR IMPLEMENTATION PUT FORTH BY UNITED NATIONS AGENCIES AND OFFICIALS CHAPTER I. PURPOSE AND OBJECTIVES OF THE CHARTER Article 1 defines the purpose and objectives of the charter. As to the purpose of the charter, article 1, states: "Recognizing the determination of the United Nations to create conditions of stability and well-being which are necessary for peaceful and friendly relations among nations, the parties to this charter undertake in the fields of trade and employment to cooperate with one another and with the United Nations for the purpose of realizing the aims set forth in the Charter of the United Nations, particularly the attainment of the higher standards of living, full employment and conditions of economic and social progress and development, envisaged in article 55 of that Charter." Article 1 then states that, "to this end"-that is, to the end of realizing the aims of the United Nations Charter, particularly those set forth in article 55 of that document-the parties to the ITO charter "pledge themselves, individually and collectively, to promote national and international action designed to attain" six stated objectives. Since these stated ITO objectives purport to be in implementation of the aims of the United Nations Charter, and especially of those embraced in article 55 thereof, it will be desirable, before considering the stated objectives of the ITO, to determine just what are the above-mentioned United Nations Charter aims to which members of the United Nations are committed. The aims of the United Nations, in the fields with which the ITO Charter deals, are set forth in the preamble, in article 1 and, as above indicated, in article 55 of the United Nations Charter. The preamble to the United Nations Charter states that the peoples of the United Nations are determined "to employ international machinery for the promotion of the economic and social advancement of all peoples." Article 1 of the United Nations Charter further lists, as among the purposes of the United Nations, "to achieve international cooperation in solving international problems of an economic, social, cultural, or humanitarian character Article 55 of the United Nations Charter states: * "With a view to the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, the United Nations shall promote "(a) higher standards of living, full employment, and conditions of economic and social progress and development; "(b) solutions of international economic, social, health, and related problems; and international cultural and educational cooperation; and “(c) universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion." The responsibilities of members of the United Nations with respect to the above-quoted and other purposes of the United Nations are set forth in article 2 of the United Nations Charter, which states that "all members, in order to ensure to all of them the rights and benefits resulting from membership, shall fulfill in good faith the obligations assumed by them in accordance with the present Charter." With specific reference to the obligations of members respecting the aims set forth in article 55 of the United Nations Charter, article 56 of that document states that "all members pledge themselves to take joint and separate action in cooperation with the [United Nations] Organization for the achievement of the purposes set forth in article 55." As will be noted, under the above-quoted provisions of the United Nations Charter members of the United Nations have united in an expressed determination to "employ international machinery for the promotion of the economic and social advancement of all peoples" and have formally committed themselves to "take joint and separate action in cooperation with the United Nations" for the "creation of conditions of stability and well-being" and for the promotion of "higher standards of living, full employment, and conditions of economic and social progress and development; solutions of international economic, social, health, and related problems; and international cultural and educational cooperation." These are broad commitments. But they are stated in rather general terms and leave member nations a large measure of latitude in determining the extent of action which they shall take in implementing these commitments. The stated objectives of the Habana Charter, on the other hand, are definite and specific and would impose on ITO members obligations for the economic and social advancement of member countries which are much more far reaching and onerous than members of the United Nations are required to assume under the United Nations Charter. Under article 1 of the Habana Charter members of the International Trade Organization "pledge themselves, individually and collectively, to promote national and international action designed to attain the following objectives: "1. To assure a large and steadily growing volume of real income and effective demand, to increase the production, consumption, and exchange of goods, and thus to contribute to a balanced and expanding world economy. "2. To foster and assist industrial and general economic development, particularly of those countries which are still in the early stages of industrial development, and to encourage the international flow of capital for productive investment. "3. To further the enjoyment by all countries, on equal terms, of access to the markets, products, and productive facilities which are needed for their economic prosperity and development. "4. To promote on a reciprocal and mutually advantageous basis the reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international commerce. "5. To enable countries, by increasing the opportunities for their trade and economic development, to abstain from measures which would disrupt world commerce, reduce productive employment or retard economic progress. "6. To facilitate through the promotion of mutual understanding, consultation, and cooperation the solution of problems relating to international trade in the fields of employment, economic development, commercial policy, business practices, and commodity policy." The objectives which the United States, if it becomes a party to the Habana charter, pledges itself individually to "assure," "foster and assist," "further," and "promote" would impose enormous responsibilities on this country. Such a pledge on our part would amount to signing a blank check in favor of other parties to the charter, particularly those countries which are still in the early stages of industrial development. Having thus pledged itself individually, the United States as a party to the charter would help to establish the International Trade Organization through which, as a member, it would cooperate to achieve the purpose and objectives set forth in article 1. It is clear that the other parties to the charter would expect that in this cooperation the United States would, to the extent of its ability, individually assure, foster and assist, further, and promote those measures which the Organization fosters and promotes. Acceptance by the United States of the above-stated charter objectives might thus impose obligations on this country which were clearly beyond its financial and economic capacity to discharge. Under the proposed charter it would be the United States which would have to bear the major part of the burden of providing the "facilities" including funds, industrial techniques, and materials required by economically backward countries in furthering their industrial and general economic development. This country would also have to supply the bulk of foreign financial assistance needed by other member countries for the purpose of achieving other objectives of the charter as stated above. Some of the stated objectives of the charter obviously are impossible of realization in any foreseeable future. For example, it would be clearly beyond the competence of the proposed ITO to assure, in respect of many of the nations of the world, "a large and steadily growing volume of real income and effective demand." For many nations the objective of a large and steadily growing volume of real income is an aim that cannot possibly be realized for many years to come. The United States should not pledge itself collectively, and certainly not individually, to assure any such result for countries generally or for any single country. Nor should the United States accept any commitments which might lead other members of the projected ITO to expect that this country, either alone or in conjunction with other member nations, is going to assure them an increase in production, consumption, and exchange of goods, or that the United States will assure an inflow into underdeveloped countries of capital for productive investment or the provision of them of products and productive facilities which are needed for their economic development. Furthermore, the United States should not accept commitments which may encourage other countries to believe that this country will, by increasing imports from and making investments in other countries, relieve them from the necessity of adopting sound financial or other measures which will permit them to overcome, or prevent the development of, balance-of-payments difficulties. The proper functioning of their economies and the ability of such countries to produce and export goods in sufficient amount to enable them to purchase abroad the products need for their economic development and for other purposes and, at the same time, to balance their international accounts, is primarily their own responsibility and not that of the United States. There is no objection to the United States accepting the charter commitment to promote national and international action to reduce tariffs and other barriers to trade and to eliminate discriminations in international commerce. This objec tive has been promoted by this country through successive bilateral agreements and through the general agreement on tariffs and trade, which has been in effect since January 1, 1948. As to our obligations under the Habana charter, some American proponents of the charter have tended to minimize the binding character of the commitments which acceptance of the charter would impose on the United States. It has been contended, for example, that the text of the charter does not actually commit the United States to take action to assure realization of the objectives of the charter set forth above. It has been asserted that the only obligation resting on this country is to "promote" action "designed" to attain the ends mentioned. There is little doubt, however, that other countries, especially those with the least developed economies, will interpret the above-quoted provisions as a commitment on the part of the United States and other members of the ITO to take action which will assure attainment of the above-mentioned ends. As a matter of fact, that is exactly the way in which these countries are now interpreting the above-mentioned provisions. In resolutions of the General Assembly and the Economic and Social Council of the United Nations relating to these subjects and in reports and recommendations concerning these subjects made by subsidiary agencies of the Economic and Social Council and by the United Nations officials responsible for the development and administration of policies in the field of employment and economic stability, the terms used leave no doubt that members of the ITO are expected, individually and collectively, to take action to assure realization of the above-stated objectives of the Charter.1 Such an obvious difference in interpretation is only an invitation to ultimate controversy. If these Charter provisions have the meaning attributed to them by United Nations agencies and officials, they would impose legal and moral obligations on the United States which it would be highly unwise and extremely dangerous for this country to assume. If, on the other hand, the provisions do not mean what other prospective members of the ITO think they mean, then the provisions hold out false hopes to these nations. The United States should not be party to any commitments which arouse hopes that are impossible of fulfillment; nor should it accept any commitments which it does not sincerely believe in and cannot carry out in good faith. CHAPTER II, EMPLOYMENT AND ECONOMIC ACTIVITY Chapter II of the Charter consists mainly of provisions relating to the achievement and maintenance of a high level of employment and economic activity in the various member countries of the proposed International Trade Organization. This chapter contains provisions based on principles which, in the opinion of the Council, are not only unsound and fraught with danger to the domestic economy but which, if projected into the international economic sphere, would operate to increase rather than reduce restrictions and discriminations in international trade and thus tend to defeat the primary purposes of the Charter. Articles 2, 3, and 4 constitute the most important part of this chapter. The following analysis, therefore, deals primarily with the provisions of these articles. Before proceeding to the analysis of these articles, however, brief comment should be made regarding the remaining articles (5 to 7). Article 5 provides for the collection, study, and analysis of information relating to domestic employment problems, national income, demand and balance of payments, and for consultation with a view to concerted action by member governments and intergovernmental organizations in promoting employment and economic activity. While the foregoing would seem appropriate functions for an International Trade Organization, it will be noted that the Economic and Social Council of the United Nations has primary responsibility under the UN Charter for matters in this field. There would, therefore, seem some question as to the propriety or desirability of including these provisions in the ITO Charter. In this connection, it is pertinent to point out that the resolution of the Economic and Social Council of February 18, 1946, which provided for the calling of an international conference on trade and employment and for the creation of a preparatory committee to elaborate a draft agenda and convention for considera 1 See, for example, General Assembly Resolution 308 (IV) on full employment, adopted November 25, 1949 (published in Official Records of the Fourth Session of the General Assembly Resolutions: September 20-December 10, 1949) and Resolution 221 (IX) E of the Economic and Social Council, dated August 11, 1949 (published in Economic and Social Council-Official Records: Fourth Year, Ninth Session, Supplement No. 1). |