138 Coombs to Dedman

Letter (extracts) GENEVA, 18 September 1947

Since your departure for Australia [1] we have concluded the discussions on the draft Charter and we have also made some progress in the tariff negotiations. As a supplement to the cables which we have been sending, I thought that you might find the following comments of assistance to you.

[matter omitted]

General Agreement Discussions in Committee are still continuing on the form and content of the General Agreement on Tariffs and Trade. Although a number of drafting changes is being made, it is not proposed substantially to alter the content of the Agreement.

We have persisted with our argument that Article 1-the most- favoured-nation Article, should be limited in its application. We proposed a formal amendment which would not involve a binding of margins of preference on products that are not being negotiated here in Geneva. We have received Cabinet's instructions on this point and arc maintaining this amendment in order to ensure that we obtain the maximum compensation in the form of tariff concessions for our agreement to this commitment. By raising strong opposition from the United States delegation we have succeeded in 'spotlighting' in the Committee the very great value which the United States delegation puts upon the adoption of this commitment and have emphasised this point in our discussions of the Preference issue with United States. One of the problems that has been causing us most concern was the relation between the Agreement and the Charter. After very long deliberations with other delegations we finally drafted an amendment which provides for a close link between the Agreement and the Charter. There will be a supersession of the obligations of Part II of the Agreement by the corresponding provisions of the Charter [2] when that emerges from the World Conference, unless there are objections to this course. If objections are raised the contracting parties must meet and agree upon a variation to the Agreement. If the Charter does not enter into force or if one of the parties to the Agreement fails to accept the Charter, provision is made for further meetings to consider the Agreement. We have cabled this text to Australia.

Unfortunately through the misreading of a word in our cable the nature of the Final Act that was drafted here was completely altered. [3] We have cabled pointing out that the world 'framing' and not the word 'affirming' was used in the text. The whole proposal for a Final Act solely for the purpose of authenticating the text has now been enthusiastically accepted by the Committee.

It is hoped that the discussions on the form of the Agreement will be terminated during this week and that it will be possible to finalise the form in which the Tariff Schedules will be prepared for incorporation in the Agreement.

Tariff Negotiations

[matter omitted]

As you will see from I.T.O. 330 and 331, our negotiations with U.S.A. are linked with the difficult position that has been reached between U.S.A. and U.K. We shall arrange, at an early date, to continue our own discussions with the U.S.A. delegation and to ascertain on what basis it will be possible to obtain further concessions on beef and butter. Even when we do reach a more settled form of negotiation and agreement, the outcome must still rest upon the decision which United Kingdom makes because the form of our agreement could be seriously affected by any adverse decision which the United Kingdom may make about margins of preference which she has tentatively agreed to give up in our market.

United Kingdom - United States There is very little that can be added to the two cables which we have already sent on this subject. The United Kingdom is preparing a statement which they hope will effectively counter the suggestion that the U.S.A. offers considerably outweigh the benefits which the United Kingdom is already prepared to concede.

It is hoped that by presenting this to Clayton it will be possible to convince him that his own advisers have drawn up a biased analysis and that there is, with perhaps some further but restricted concessions, a satisfactory basis for an agreement between U.S.A. and U.K. Until such time, however, as a decision is made by the United Kingdom Government and by the United States' Administration as to the outcome of these negotiations, it will not be possible for those countries to proceed effectively with further detailed negotiations, and this in turn affects our own position with U.S.A., and, as I have said, with Continental countries.

Our own discussions with the United Kingdom are continuing, but have also been affected by the preference issue. At the moment the United Kingdom is preparing some statements in relation to our requests, but we can hope for little from them. That is why we have continued to emphasise that they must enable us to conclude agreements with other countries by making concessions on preferences.

[matter omitted]

1 About 20 August.

2 Twenty-one articles from the Charter, dealing with controls on trade, were embodied in Part II of the Agreement (Articles 3 to 23) in order to protect the value of the concessions contained in Part I from impairment by the introduction of, or variation to, other controls on trade.

3 Cablegram IT0312, dispatched 8 September, conveyed a draft prepared by the Delegation for the Committee's consideration. It read in part: 'These negotiations ... have resulted in the firming of a general agreement ...'A handwritten note to the file copy amends 'firming' to 'affirming'. The word intended by the Delegation was 'framing'.

[AA : M448/1, 14]