mand, but it was agreed that they could and should undertake to "take action designed to achieve and maintain" these conditions within their respective jurisdictions. Each country would, of course, be expected to use measures "appropriate to their political and economic institutions". To this was added the proviso that the measures adopted should be "compatible with the other purposes of the Organization"; i. e., in promoting employment, Members should not use methods that would be in violation of their commitments looking to the reduction of trade barriers and to the elimination of trade discriminations.

Particular attention was directed to the fact that a country might be maintaining employment, by measures in harmony with accepted principles of trade, and might nevertheless unwittingly contribute to or be the agent of balance-of-payments difficulties and consequent deflationary pressure experienced by other countries. This situation could occur if it were to sell considerably more than it bought and invested abroad, making up the balance by accumulating monetary reserves. Conversely, it was recognized that responsibility for the maladjustment might also rest with the countries experiencing the balance-of-payments difficulties; such difficulties might, for example, be caused by a flight of capital from the currencies of those countries. In the light of these various considerations, it was the Committee's belief that each country should agree "that in case of a fundamental disequilibrium in their balance of payments [terminology borrowed from the Articles of Agreement of the International Monetary Fund] involving other countries in persistent balance of payments difficulties which handicap them in maintaining employment, they will make their full contribution to action designed to correct the maladjustment".

Discussion turned next to the recourse that Members might have if economic difficulties should be created for them as a result of inability on the part of other Members to maintain high and stable levels of employment and high levels of effective demand as intended. One view was that the chapter dealing with employment should grant any Member so affected a broad release from other obligations under the charter. It was noted, however, that other parts of the charter already carried provisions designed to meet such contingencies. For example, a Member experiencing bal

ance-of-payments difficulties-the form in which deflationary pressure originating abroad would ordinarily become apparent could protect itself by imposing restrictions, in accordance with rules and procedures set forth in the chapter on commercial policy, on the quantity of goods imported. It was therefore concluded that the problem was one of assuring that the relevant exceptions or releases from obligations provided elsewhere in the charter and the machinery established to bring those provisions into effect should be adequate to cover deflationary situations created by a failure of another Member to maintain its employment and its effective demand. This problem was regarded as the responsibility of other committees. Committee I, however, expressly stipulated that the Organization "shall have regard, in the exercise of its functions as defined in the other Articles of this Charter, to the need of Members to take action within the provisions of the Charter to safeguard their economies" in such situations.

Other Issues and Undertakings

5

Committee I dealt with five other significant issues and it reached conclusions on: (1) development of resources and productivity; (2) labor standards; (3) consultation and information; (4) international (as contrasted with Member government) action relating to employment; and (5) the form that the employment provisions should take-i.e., their precise relation to the charter of the International Trade Organization.

Without questioning the importance of maintaining high and stable levels of employment in the major industrial and trading countries, spokesmen for a number of relatively underdeveloped countries pointed out that the prosperity of their economies would depend less on their ability to keep everyone at work than on their ability to improve the quality and productiveness of the work done. The acquisition of a modern technology was thus regarded as their greatest need. The Committee recognized the validity of this point in two ways: by making clear throughout its report and recommendations that the objective is "productive" as well as quantitatively high-level em

• With reservations entered in the case of labor standards, as noted below.

* This subject was later discussed at length by the Joint Committee on Industrial Development, which drafted a new chapter for the charter. Cf. footnote 2 above.

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ployment, or, in other words, that "under-employment" should be avoided as well as "unemployment"; and by adding a new draft article in which, "recognizing that all countries have a common interest in the productive use of the world's resources", each Member would "agree to take action designed progressively to develop economic resources and to raise standards of productivity within their jurisdiction"-this action, again, to take the form of "measures compatible with the other purposes of the Organization".

The issue of labor standards was raised by a Member who pointed out that wage rates and other labor conditions not only affect the quality or suitability of employment and have an important bearing by way of the distribution of purchasing power upon the ability to maintain employment but also must be taken into account take in connection with trade because of the possibility Safe of unfair competition in export markets based on exploitation of labor. In the discussion of this question, full recognition was given to the general jurisdiction of the International Labor Organization in the labor-standards field. At the same time, a large majority favored adding to the employment provisions in the charter of the International Trade Organization an article in which, "recognizing that all countries have a common interest in the maintenance of fair labor standards" these standards being of necessity "related to national productivity"-each Member "agrees to take whatever action may be appropriate and feasible to eliminate substandard conditions of labor in production for export and generally throughout their jurisdiction". Two delegations reserved their votes when Committee I adopted this article.

With respect to the functions relating to employment to be performed by international bodies, provision was made for agreement by Members to participate in arrangements undertaken or sponsored by the Economic and Social Council, with mention also of cooperation on the part of the appropriate intergovernmental specialized agencies. It was decided that the information exchanged on domestic employment problems, trends, and policies should at least include "as far as possible information relating to national income, demand, and the balance of payments". Arrangements should furthermore be made to consult "with a view to concerted action on the part of

governments and inter-governmental organizations in the field of employment policies".

It was agreed that the maintenance of effective demand and employment must depend primarily on measures that, although they may involve cooperation or parallel action on the part of various countries, are nevertheless of a domestic rather than an international character. The Committee felt, however, that the possibilities of international action in support of the same objectives should not be overlooked. A separate Draft Resolution on International Action Relating to Employment was therefore prepared, requesting the Economic and Social Council "to undertake at an early date, in consultation with the appropriate inter-governmental specialized agencies, special studies of the form which such international action might take". It was suggested that the Council, in addition to investigating the effects on employment and production of an expansion of trade through a lowering of trade barriers and progressive elimination of discrimination, should include in its consideration measures relating to timing of capital expenditures and credit conditions, to stabilization of the incomes of primary producers, and to the support in periods of world deflationary pressure of the balance-of-payments position of countries pursuing domestic policies for full employment.

The final issue dealt with by Committee I concerned the form in which the agreement on employment should ultimately appear. The fact that employment functions were to be centered in the Economic and Social Council, and that consequently no separate commission to handle such functions was contemplated for the International Trade Organization, raised a question of whether the employment provisions should not be embodied in some instrument partly or wholly separate from the Organization's charter. On the other hand, the important connections between employment and trade, and particularly the difficulty that countries might have in assuming international commitments in the one field unless such commitments were associated with obligations binding all signatories in the other field as well, made it appear desirable to link these agreements together as closely as possible. It was therefore decided that it would be most appropriate to include the employment undertakings as a chapter in the charter of the International Trade Organization.

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Government Measures To Assist Development Another issue of major importance had to do with "legitimate protection", or the manner in which the objective of providing a maximum of encouragement for industrial and general economic development could be carried out along with the program for expanding trade through reduction of trade barriers. Various approaches to this problem were expressed, representing a wide diversity of views.

In the process of accommodating these differing views, it was decided that allowance for exceptional treatment for new or reconstructed industries should be made within the chapter on economic development in preference to having a series of special exceptions written into the various sections of the chapter on commercial policy. An article was accordingly drafted providing for (1) the recognition that special governmental assistance, which may take the form of protective meas

'A message was, however, sent to Committee II requesting it to make the following provisions: (1) in art. 18, "so that the Organization and other Members should, when considering the contribution which a Member can make to a reduction in tariffs, take into account the height of the tariff of that Member, and the need, if any, of that Member to use protective measures in order to promote industrial and general economic development"; (2) in art. 20, "to cover the position of a Member who, as a result of its plans for industrial development or reconstruction, anticipates that its accruing international monetary resources will be inadequate to finance the needed imports of goods, for example, capital goods, for the carrying out of such plans unless it imposes regulations restricting the import of certain classes of goods, for example, consumer goods".

731952-47

2

ures, may be required to promote the establishment or reconstruction of particular industries; (2) recognition "that an unwise use of such protection would impose undue burdens on their own economies and unwarranted restrictions on international trade, and might increase unnecessarily the difficulties of adjustment for the economies of other countries"; and (3) a procedure whereby a Member with a legitimate case for granting special protection to certain industries, in order to assist its economic development, may enlist the support of the International Trade Organization and avoid retaliatory action on the part of other Members.

This procedure was made to depend on the kind of obligation from which release may be sought. In all cases-if a Member proposes to employ any protective measures that would conflict with any of its obligations under or pursuant to the charter-it must first inform the Organization, which in turn shall promptly notify other Members substantially affected, give them an opportunity to present their views, and "then promptly examine the proposal in the light of the provisions of this chapter, the findings presented by the applicant Member, the views presented by Members substantially affected, and such criteria as to productivity and other factors as it may establish, taking into account the stage of economic development or reconstruction of the Member." The next step, however, assuming the Organization might concur in the proposal, would differ according to circumstances. Conceivably, permission might be sought to raise a tariff that had been bound as a result of tariff negotiations with other Members, or to impose some other form of protection that would impair the value to other Members of an agreement negotiated with respect to a tariff, or would otherwise not be permitted under agreements negotiated pursuant to chapter V. In such a case the Organization should, as a pre-condition for granting the release, "sponsor and assist in negotiations between the applicant Member and other Members substantially affected, with a view to obtaining substantial agreement". On the other hand, if the requested release is one that would not impair a negotiated tariff concession or other commitments negotiated pursuant to chapter V, the Organization, after taking the earlier steps, may give final approval at its own discretion. In either. type of case, a release when granted is "subject to such limitations as the Organization may impose."

Allocation of Functions

vide its personnel with continuous experience with the positive as well as the protective aspects of national development policies. On the other side it was pointed out that there were already several international agencies concerned with various aspects of industrial development, including the newly created Sub-Commission on Economic Development of the Economic and Social Council, the International Bank for Reconstruction and Development, the International Labor Organization, the Food and Agriculture Organization, and the United Nations Educational, Scientific and Cultural Organization. In view of this fact, some Members expressed the opinion that, in the interests of avoiding a duplication of functions, the broad language of the United States draft charter on this question should be retained, and a specific decision to undertake positive tasks postponed until experience should show that necessary func tions were not being performed either under the Council or by other specialized agencies.

The final item on the agenda of the Joint Committee concerned the part that the International Trade Organization itself should play in carrying out the various functions relating to development. It was recognized that requests for permission to impose special protective measures in the interests of development should be handled by the Organization's Commission on Commercial Policy, since such requests would involve obtaining release from commercial-policy obligations. It was also agreed that Members themselves should "undertake to promote the continuing industrial and general economic development of their respective countries and territories" and in that connection should "cooperate through the Economic and Social Council of the United Nations and the appropriate intergovernmental organizations". With these questions settled, however, an issue arose which the Committee was unable to resolve. This point involved deciding how far the International Trade Organization should go in assisting Members to obtain technical and other assistance in connection with their development programs.

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Rather than attempt to settle this issue, the Committee decided to request the opinion of the Economic and Social Council, and the draft clauseregarding the role of the Organization in promoting economic development was enclosed in parentheses to indicate its tentative character. A resolution was then drafted drawing the attention of the Economic and Social Council to the discussion of this question in the Committee's report and 1947 asking the Council to state, before the commencement of the Second Session of the Preparatory Committee, whether the clause provisionally in-minar cluded in the draft chapter "was in accordance with the Council's views on the appropriate alloca-cola tion of functions among the various specialized international agencies."

One view was that the Organization should itself undertake certain of the positive functions involved, particularly in helping Members to obtain technical aid in the formulation and execution of plans for development. In support of this position it was urged that the task was essentially administrative in character and hence appropriate to a specialized agency; that its performance by the International Trade Organization would provide a useful means of cooperation with Members; and that the best way to secure a balanced point of view within the Organization would be to pro

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