Mr. BROWN. There are some cases where there is a requirement of a two-thirds vote. The normal procedure would be majority vote. There is no requirement for a unanimous vote. Mr. FULTON. This is up just for acceptance or rejection. This bill cannot be amended in any major respect and have the charter go through? Mr. THORP. That is right. The problem is a problem of joining or not joining. I should point out that the charter itself has processes of amendment, so that it is possible over time to make changes in the charter, but the immediate problem is a problem of joining or not joining, of having this organization get off the drawing boards and become an actual, live organization. Chairman KEE. We will stand adjourned until tomorrow morning at 10 o'clock. I hope you will all be able to be present on time. (Whereupon, at 12: 20 p. m., the committee adjourned to reconvene at 10 a. m., Thursday, April 20, 1950.) 65515-50 MEMBERSHIP AND PARTICIPATION BY THE UNITED STATES IN THE INTERNATIONAL TRADE ORGANIZATION THURSDAY, APRIL 20, 1950 HOUSE OF REPRESENTATIVES, Washington, D. C. The committee met, pursuant to adjournment, at 10: 15 a. m. in the the Foreign Affairs Committee room, United States Capital, Hon. John Kee (chairman) presiding. Chairman KEE. The commmittee will come to order. This morning we are continuing the hearing on House Joint Resolution 236, a joint resolution providing for the membership and participation of the United States in the International Trade Organization and authorizing an appropriation therefor. We have with us again Mr. Thorp of the State Department who will continue his testimony. STATEMENT OF WILLARD THORP, ASSISTANT SECRETARY OF STATE-Resumed Mr. THORP. Mr. Chairman at the hearing yesterday, I discussed certain aspects of the ITO charter. You may recall that we talked particularly about the commercial-policy provisions in the charter, the notion of general acceptance of unconditional most-favored-nation treatment, the notion of willingness to negotiate for the reduction of tariffs. In that connection I pointed out the freedom which was left for the way in which the negotiation should be undertaken and the standards which any one country might apply. The policy with respect to doing away with internal regulations and laws discriminating against imported goods, the policy with respect to simplification and streamlining of customs procedures, and the policy with respect to the abolition of the quota approach as a way of limiting foreign trade. Then we also discussed the chapter in the charter which relates to special commodity problems and the possibility of commodity agreements, the problem of State trading, and the problem of the proposed machinery and the policies for dealing with international cartels. There are at least two other elements in the charter which I think I should call to the committee's attention. One is that the charter includes certain provisions with respect to international investment. It is important here to realize that there never before has been any international statement by governments with respect to investment policy. This committee has already given a good deal of thought to that problem from the point of view of American policy in connec tion with the Point IV program and I know that this committee endorsed the inclusion in the Point IV legislation of statements of our policy with respect to international investment. However, it also is clear that other countries have different policies and our great problem has been one of working out with other countries bases upon which foreign capital and particularly private foreign capital, might flow. I think it is fair to say that because the charter provisions represent an international document in which a great many countries participated in the drafting, that there is a gap between the provisions in the charter and the provisions which we would like to see in the understandings between countries with respect to the flow of capital. It is important to realize that this is a gap and not a contradiction and that actually the agreements which are recognized in the ITO charter represent a major step forward in the direction in which our American policy would like to see steps taken. In the charter there is in the first place a general recognition of the importance of investment and the proper treatment of international investment as distinct from the policies that have existed in some countries of an extreme nationalist type. There are certain general policy statements which relate to investment both from the point of view of the country receiving the investment and the country which is making the investment. From our point of view these statements give us the opportunity to appeal to the ITO whenever countries interfere with the investment process on bases which are defined in the charter as unjust or unreasonable interferences. These are not spelled out too exactly and I think this represents a starting point toward developing an improved statement over time through practice. But it does represent a recognition that investors have certain rights with respect to the way they are treated. It is also very important, we believe, that the charter recognizes the fact that multilateral understandings with respect to investment may not meet all the problems that arise and therefore it sets out an encouragement to governments to enter into bilateral agreements and negotiate commercial treaties. This is not again a commitment that countries will actually enter into agreement, there is no way in which that can be done, but it does put an obligation on countries to be willing to enter into the process of negotiating commercial treaties for amplifying and extending the provisions with respect to rights and responsibilities which may apply to foreign investment. I would like to be a little bit more specific on this matter because I think it is one in which there has been some degree of misunderstanding and if I may just summarize briefly the situation in the charter: Article 11 obligates members not to take unreasonable or unjustifiable action injurious to the rights of members in the capital or enterprise they have supplied. Article 12 obligates members to give reasonable opportunities for investments acceptable to them and adequate security for existing and future investments. Article 12 also obligates members to negotiate on request for commercial treaties. It recognizes that members have the right-and after all this is merely a statement of fact-they now have the right to determine what investments they will allow and to set up the terms with respect to ownership of existing and future investments. However, it requires that these terms be just and reasonable. It therefore permits a discussion of this in the forum of the ITO, and even a reference of definition, if that is desirable, by any of the members, to the International Court of Justice. By and large on this section I would say that it represents a major advance, as far as American policy is concerned, in the field of understanding that with respect to investment, we would proceed—and we think this should help us to proceed-in getting commercial treaties of the type that we have discussed already with this committee and which are declared to be the policy of this Government in the Point IV legislation. There is another chapter in the charter which has caused a good deal of discussion and where I think there also is misunderstanding. This is a chapter with respect to policy relative to full employment. It is very clear that trade among countries is related to prosperity in these countries. Those of you who followed the record last year know that in the recession which took place in the United States in the early months of last year, there was a much greater curtailment in foreign trade than there was a curtailment in our own domestic trade. This was in part due to the character of the recession, which was centered around a reduction in inventories. Therefore suppliers, particularly of raw materials and semimanufactured products, were particularly affected. It is clear on the historical record that our great swings in foreign trade are closely related to swings in business activity and employment. This was a matter of concern to a number of the countries who were present in the negotiations of the charter. Many of them proposed that the countries should undertake obligations with respect to maintaining employment which we from the United States felt was quite impractical for us to accept. This problem was finally resolved by writing into the charter the same commitment as was already established in American policy in the Employment Act of 1946. The charter does not create any additional commitments but it does recognize the intention of the member governments to maintain employment as it is described and defined in the Employment Act of 1946. We have stated this intent on the part of the United States in the United Nations Charter wherein, in articles 55 and 56 there is a pledge with respect to the maintenance of employment. The charter does not in any way define the measures which individual member countries may take with respect to the effort to stabilize their economies. It represents rather a statement of intent and a recognition of the problem on the part of the various countries. As I said before that is something which we have already recognized in this Government both in direct legislation on the subject and in connection with the United Nations Charter. Mr. Chairman, I think that concludes the discussion of the principles involved in the charter. We can, of course, as the committee may wish at some later time, develop any one of these or all of them for that matter in more detail. There are some other characteristics of the charter which it is exceedingly important to keep in mind. |