repercussions. Moreover, I do not see how we can avoid becoming the subject of official discussion in international forums in the event that we do begin to have serious unemployment. Nor do I see how we can avoid participation in cooperative endeavors to solve serious world-wide problems. What specific results this consultation will lead to cannot be foreseen, as we cannot foresee the precise kinds of economic problems with which we shall be dealing. All that we can provide for at this time is a mechanism and certain essentially procedural rules concerning consultation. We cannot agree, and I do not believe that we would be agreeing in the charter, to go beyond the stage of consultation and of cooperation on a basis to which we agree, in dealing with the most difficult problems of serious economic maladjustment. The undertaking to maintain full and productive employment is supplemented in the employment chapter by a separate undertaking to maintain fair labor standards, particularly in production for export. Since the problem of competition from countries with lower labor standards than our own has been a perennial problem in our tariff history, that is a provision we should welcome. Its effectiveness will be realized at an extremely slow rate, of course, because of the tremendous difficulties involved in raising labor standards in countries with very low productivity. The method of implementing the fair labor standards obligation will remain a domestic matter. Close relationship will obviously have to be maintained with the International Labor Organization, which has primary responsibility among the specialized agencies in the labor field. The charter provides an avenue of appeal to the ITO itself if it can be shown that a country's failure to maintain fair labor standards has the effect of nullifying or impairing another member's benefits under the charter. The chapter on employment and economic activity emphasizes chiefly the attainment and maintenance of employment. The chapter on economic development looks to another major source of the future expansion of world trade, through the raising of productivity levels and realizing the potential capacity of relatively undeveloped areas. The contribution to be made to world trade and living standards here is the kind which is envisaged in the principles of Point 4 of President Truman's inaugural message. The economic development chapter envisages no intervention in the development plans of any member nation. The responsibility for development is a domestic one in each country, and development will necessarily take different forms in each. Development in some countries may concentrate on industrialization, in others on exploitation of mineral resources or the development of sizable projects in the field of transport or power, and in others on the achievement of higher development will necessarily require assistance from the capital, technical, and industrial resources of the capital-exporting countries. Their cooperation on a voluntary basis is important, and offers advantages to them as well as to the developing countries. The role of the ITO under the charter is essentially a coordinating role. Members in need of technical advice or financial assistance may come to the Organization for aid. The Organization will help them find such assistance, which may take the form of private technical service from other nations, paid for by the developing countries, or reference to the collaborative aid of another specialized intergovernmental organization, such as the International Bank for Reconstruction and Development. It is entirely likely that the actual role of the International Trade Organization in the field of positive economic development will be limited. The primary sources for developmental aid will continue to be private investment and governmental aid. Among the intergovernmental agencies, the role of the World Bank, the technical aid supplied by such specialized agencies as the International Labor Organization, and work done under the auspices of the Economic and Social Council should prove to be of equal or greater importance. The ITO has a necessary role in the development field because of its special role in cases where trade barriers are used to protect development. In this connection the ITO provides a mechanism through which restrictions on trade during the developmental process, especially when exercised through quantitative restrictions rather than tariff rates, can be held to a reasonable and supervised miniThis necessary concern of ITO members with problems of development may require attention to various phases of the problem of development, including helping the nation involved to find technical assistance or means to development other than trade restrictions. mum. One of the most difficult problems faced in drafting the charter was the question of the use of restrictions otherwise prohibited by the charter for purposes of economic development. At times during the negotiations, the provisions relating to the use of trade restrictions for "developmental" purposes threatened to offer the widest loopholes for escape from basic commercial policy rules. The deliberations were characterized by disputes between the industrialized countries and the relatively undeveloped nations, with the latter contending that limitations on their right to use restrictive trade practices were designed to keep them from industrializing. This misconception was corrected only by agreement of the larger industrial nations to an express endorsement of the idea of development and by a commitment on their part to cooperate in such development by imposing no unreasonable barriers to the international movement of capital and skills for developmental purposes. The more difficult problems of the use of trade barriers and regional preferences for development purposes were worked out through a series of elaborate and technical articles, which will be best reviewed by the committee during the course of the expert testimony before it. The charter is the product of negotiations among many people from many nations, each bringing his own experience and the reflection of his own political, economic, and social institutions. This is an element of strength in the charter. The basic provisions of the employment chapter, for example, were embodied in the original United States proposals which led to the charter. Both the employment and the economic development provisions embody principles which are an accepted part of our own national and foreign economic policy. They embody the positive steps which we must consider seriously in our own self-interest and as part of our participation in world affairs. I respectfully urge that your committee recommend unqualified acceptance of the charter for an International Trade Organization. Hon. JOHN KEE, Chairman, Committee on Foreign Affairs, DEPARTMENT OF LABOR, House of Representatives, Washington 25, D. C. DEAR CONGRESSMAN KEE: On May 24, 1949, I submitted to your committee a statement of my views on the question of United States approval of the charter for an International Trade Organization. I would like to take this opportunity to supplement my earlier statement with respect to events which have occurred since the original statement was made. The problem of maintaining full employment was the subject of intensive discussion at the 1949 meetings of the International Labor Conference and the Economic and Social Council of the United Nations and at the current (1950) meetings of the Economic and Employment Commission of the Economic and Social Council. The intensity of this discussion was to some extent a reflection of events in the United States and of concern as to the course which these events would take. Despite the basic health of our economy, the prospects of its continued prosperity, and the clearly temporary character of the 1949 recession, fear was widely expressed that any drying up of American purchasing power would curtail foreign sales in our markets, with serious resulting effects upon the other economies involved. Under these circumstances the renewing of our pledge to maintain full employment at home, as set forth in the employment chapter of the ITO Charter, is clearly appropriate. The taking of other steps to expand world trade, on a multilateral basis, as envisaged in the charter, is also essential as an adjunct in the international field to the measures which we take at home to maintain full employment. Specifically, the employment chapter of the charter obligates the United States to take measures with a view to achieving and maintaining full employment through actions appropriate to our own political, economic, and social institutions. Such a commitment is fully in keeping with our own domestic policy of maintaining a high and productive level of employment as set forth in the Employment Act of 1946. The furtherance of this aim throughout the world should do much to aid in the expansion of world trade and the general raising of living standards. I want to repeat my earlier statement to the committee that the employment chapter of the charter preserves our right to seek full employment with the minimum of Government intervention that we ourselves determine to be wise. In other words, in accepting the charter we would not be agreeing to any planning or control that we ourselves do not find to be necessary. We would not be agreeing to give the other nations of the world any power to compel us to take steps that we ourselves are unwilling to take. We would remain free to devise our own policies and programs. The employment pledge is very specific on this point, stating that— "Each member shall take action designed to achieve and maintain full and productive employment and large and steadily growing demand within its own territory through measures appropriate to its political, economic, and social institutions." [Italics supplied.] Our freedom of domestic action can be well illustrated by reference to the specific proposals for maintaining full employment which have been referred to or discussed at international meetings during the last year. At none of the sessions was there any question that a country's choice of methods was its own, and that it would remain so should the charter for an International Trade Organization come into effect. There is now before the Employment Commission of the Economic and Social Council, for example, a report by a group of experts appointed by the Secretary General of the United Nations concerning further steps which the nations of the world might take to aid in the maintenance of full employment entitled "National and International Measures for Full Employment." This report deserves a great deal of study. Many of its details include things that we now do under the Employment Act of 1946; others would require further legislative action. It is unmistakably clear, however, that whatever our reaction to the report, we are not committed to it or any part of it until and unless we ourselves decide that it has merit. This is the case now; it would continue to be the case after the ITO charter comes into effect. The months since the submission of my earlier statement have also seen the development of the Point 4 program as one of the most significant parts of our foreign economic policy. This program is a voluntary program on the part of the United States which pursues further the same broad objectives as the Economic Development Chapter of the Charter. The role of the International Trade Organization in the field of economic development would buttress and facilitate the sound realization of the program which we are initiating. The ITO Charter as a whole would insure that the products of economic development have a maximum opportunity to move in the channel of world trade and to contribute to a general raising of world living standards. Yours very truly, MAURICE J. TOBIN, OFFICE OF THE ATTORNEY GENERAL, Hon. JOHN KEE, Chairman, Committee on Foreign Affairs, House of Representatives, Washington, D. C. MY DEAR MR. CONGRESSMAN: This is in response to your request for the views of the Department of Justice with respect to the approval of the Habana Charter for an International Trade Organization, commonly known as the ITO Charter. The Department of Justice is primarily interested in chapter V of the ITO Charter which would provide the first international machinery intended to cope with restrictive business practices. Since others will, or have, commented on other parts of the proposed charter which relate more directly to the work of their particular departments, I would like to direct my remarks to chapter V. As you are well aware, production and marketing of important raw materials and manufactured commodities in world trade are frequently controlled by cartels, combines, and other restrictive international business arrangements. In their desire to increase profits and avoid competition, these organizations engage in practices which reduce the volume of world trade and employment, such as division of fields of activity, division of markets, allocation of production or export quotas, restriction on new capacity, and fixing of prices and terms of sale. The policy of the United States to eliminate restrictive practices in the foreign trade of our country has long been established. In the successful negotiation of the ITO Charter, in general, chapter V in particular, 54 other nations important in international trade have now indicated a willingness to work together with the United States in extending the general policy of eliminaing restrictive practices in world trade. The success of our Government's negotiations in getting such an agreement among other delegations representing different national experiences and traditions is in itself an accomplishment, and a real step toward breaking down barriers to world trade. I should like to point out at the outset that the ITO Charter clearly preserves the strength of our competitive traditions and our antitrust laws and their administration. The ITO is not given the power to interfere with the domestic laws or procedures of the United States or any other nation. The Charter contains an express provision that "no act or omission to act on the part of the Organization shall preclude any member from enforcing any national statute or decree directed toward preventing monopoly or restraint of trade." This provision keeps inviolate our antitrust legislation. It says in effect that if the ITO does not find a violation of the Charter in a particular instance, but the United States nevertheless finds that its laws have been violated, the right of the United States to enforce its laws is not impaired. ITO decisions or recommendations-or lack of them-do not supersede, supplant or modify in any way our antitrust laws. The Charter should provide a useful instrument for extending the principles of our competitive system to other countries and thereby render the enforcement of the antitrust laws themselves increasingly effective. While the Charter does not write a Sherman Act for the world, it does set a pattern, clearly recognizable as American in origin, for curbing restrictive business practices, such as I have pointed out above, affecting international trade. The Organization would be empowered to receive complaints from member governments, initiate investigations, hold hearings, and make reports and recommendations for remedial measures, with final action resting in the individual governments. Subscribing nations, agreeing to this pattern, commit themselves to take such measures as will achieve the objectives of the Charter. The effect of this commitment is to raise the standards of other countries for curbing cartels and restrictive business practices toward our level-and not the reverse. In this respect, the Charter helps to extend the concepts of free enterprise upon which our own antitrust laws are based. The commitment of members to take full account of ITO recommendations for remedial action in specific instances, can be most useful in preventing cartels and conspiracies in restraint of international trade. Thus, the ITO provides machinery for effecting a substantial measure of international cooperation in avoiding restrictive business practices and bringing about an increasing acceptance of free-enterprise objectives. Frequently, in the course of investigating or prosecuting restraints upon our foreign commerce we find some of the guilty parties wholly outside the jurisdiction of our courts. This means that while we may cut off some parts of the offense, complete and adequate relief cannot always be achieved. The result in some cases may be to limit the effectiveness of the Justice Department and of our courts in eliminating violations of our antitrust laws. The Charter provides methods which are designed to overcome these jurisdictional limitations. One of these methods consists of voluntary consultation among member nations. When a member nation considers that in any particular instance a business practice has or is likely to have a harmful effect, it may consult directly with other members concerned "with a view to reaching mutually satisfactory conclusions." Or, if members wish, they may request the ITO to facilitate such consultation. This contemplates a cooperative method by which members may agree among themselves as to the best means of dealing with mutual problems of international cartels or restrictive business practices. In carrying out corrective measures, each member is to act within its own jurisdiction in accordance with its own constitution and economic organization. In this way irritating jurisdictional obstacles may be avoided. Another method for avoiding jurisdictional barriers consists of cooperation among members "for the purpose of making more effective within their respective jurisdictions any remedial measures taken in furtherance of the objectives of this chapter and consistent with their obligations under other provisions of this Charter." By this procedure restrictive or monopolistic practices may be eliminated voluntarily and amicably. The possibilities of ITO success, so far as chapter V is concerned, seem good. I am sure that many other governments have had unhappy experiences with international cartels and would welcome a mechanism through which harmful practices of these enterprises might be curbed. It is heartening to note that Sweden, Norway, Canada, and more recently Great Britain, have passed statutes providing for continuing commissions to investigate restrictive business practices within their respective jurisdictions. These laws will help implement their obligations under the Charter. The significance of the new British law relative to the ITO Charter was indicated in the House of Lords during debate on the bill. In asking for a second reading on July 5, 1948, the First Lord of the Admiralty (Viscount Hall), stated: "The present bill was drafted at the same time as the Charter was being given its final shape at Habana. The two documents are entirely consistent; the procedure of the International Trade Organization will, like our own, be one of investigation into particular restrictive arrangements to try to establish what effects they have on international trade. If at a later date His Majesty's Government ratify the Charter, and are called upon to take any action under chapter V, this bill will provide us with adequate power to carry out our international obligations * * The bill is in line with developments in other countries. It has the support of all parties in its general purpose." * Furthermore, the Austrian Government has recently introduced antitrust legislation in its Parliament, a commission under the Minister of Commerce of Denmark is drafting antimonopoly legislation, and the French Government is also drafting an antitrust law. The significant progress that has been made in assisting the economic recovery of western Europe has made possible an increasing emphasis under the ERP for the creation of an integrated western European economy. The liberalization of trade and the creation of a wide western European market as measures to obtain increased productivity, lowered costs, a higher standard of living and the establishment of a viable European economy can be promoted by the ITO. Following the termination of the European recovery program the ITO may well become the most important single international instrument for the attainment of an expanding competitive international trade. Under chapter V machinery can be established to help prevent the regrowth of cartel arrangements which would nullify by private agreement these economic objectives. Promptness in getting the ITO under way will, I believe, help to facilitate world economic recovery and promote continued prosperity. The ITO represents the high-water mark in efforts to establish a cooperative intergovernmental organization equipped with the machinery and procedures necessary to solve common problems in the field of international business practices. If the ITO is competently and adequately staffed, and properly administered, it should in my opinion, prove most helpful in eliminating international restrictive cartel arrangements which have worked hardships on American and foreign economies alike. This, in turn, would also remove an important source of international ill will generated by restrictive cartel activities. Participation in the ITO could provide a valuable supplement to the unilateral action to which we have in the past been limited. I therefore believe we should support this Charter and should participate actively in the ITO. Sincerely, J. HOWARD MCGRATH, Attorney General. Chairman KEE. This morning we have Mr. Albert Barnes, of the American Bar Association, 25 Broadway, New York, N. Y. Mr. Barnes, are you present? STATEMENT OF ALBERT BARNES, REPRESENTING THE AMERICAN BAR ASSOCIATION, NEW YORK, N. Y. Chairman KEE. We are very glad to have you with us this morning, Mr. Barnes. You may proceed with your testimony in any manner that you wish. Mr. BARNES. On behalf of the American Bar Association, we thank the chairman and the members of the committee for permission to appear here. I can best take up the chain of discourse, as it were, by starting myself along the lines of this brief which has been filed. Three committees of the American Bar Association made separate and independent studies of this International Trade Organization Charter. Those studies were made at two or three different times and culmi |