141 Australian Delegation, Geneva, to Cabinet Sub-Committee on Trade and Employment Conference

Cablegram IT0389 GENEVA, 14 October 1947

SECRET

Free Entry for Commonwealth Goods into United Kingdom.

Mr. Helmore [1] referred to discussions at Spencer House and at Commonwealth Meeting held 8th July in Geneva (see T.N.(P)(B.C.)(G.S.C.)(47) 20th meeting paragraphs 13 and 14) and said that the United Kingdom were anxious before Commonwealth Delegations left Geneva to get a clear understanding as to position in regard to free entry for Commonwealth goods. Problem for United Kingdom as everyone was aware arose from fact that on one hand the United Kingdom would be prevented under terms of GATT from increasing any margins of preference, while on the other hand the United Kingdom was committed under Ottawa Agreement and subsequent Trade Agreements with Commonwealth countries exempt Commonwealth goods from duty (apart from revenue duties and a few exceptional protective duties). Combined effect of these obligations was that the United Kingdom could not increase present duties on foreign goods entering United Kingdom whether or not these duties were bound under GATT for any such increase would increase margin of preference unless the United Kingdom imposed simultaneously corresponding duty on like goods from Commonwealth countries and this could not be done without infringing rights of Commonwealth countries to duty-free entry. The Canadian Government had proposed to replace their Trade Agreement with the United Kingdom by exchange of notes which, amongst other things, would release the United Kingdom from any obligations to admit Canadian goods free of duty if they were goods of the kind not scheduled to the GATT. This would go a considerable way to solving problem for the United Kingdom as Canada was Commonwealth country most likely to be affected by any increase of unbound United Kingdom duties.

But Mr. Helmore went on to emphasise that a satisfactory solution of the problem must be found in relation to other Commonwealth countries, it would clearly be an untenable position politically for the United Kingdom that they unlike other countries should be precluded from imposing protective duties on unbound items in their tariff and it was a matter of immediate concern to the United Kingdom Government that they should be in a position to reassure Parliament and industry before there was any public discussion of the problem.

Mr. Helmore went on to explain that United Kingdom Ministers had considered the whole question very carefully. They were reluctant to suggest that the United Kingdom should take any initiative by way of amending Ottawa Agreements and they had accordingly approved proposal tentatively made at meeting on 8th July that Commonwealth countries concerned should conclude gentlemen's agreement to cover point. Ministers had contemplated also that complex obligations of GATT might easily lead to other Commonwealth Governments finding themselves embarrassed in one way or another by reason of strict application of Ottawa Agreements and they recognised that other Commonwealth Governments too might wish to have reciprocal cover of gentlemen's agreement. What Mr.

Helmore wished accordingly put to meeting was that Governments of the United Kingdom, Australia, South Africa, India, Pakistan and Southern RhodeSia2 should go on record as having discussed this question and reached agreement as follows-

'In any case where any Government of the British Commonwealth of Nations considers that owing to obligations assumed under General Agreement on Tariffs and Trade obligations assumed by it in relation to another Government or Governments within the British Commonwealth have become impossible of fulfillment without serious prejudice to its interests in relation to a particular product, that Government may raise with other Commonwealth Governments enjoying rights under terms of Ottawa Agreements in relation to product concerned question of modifying those rights to extent necessary to avoid adverse consequences referred to above. It is understood- (a) That in any such case Commonwealth Governments enjoying rights under Ottawa Agreements will give sympathetic consideration to any such representations, (b) That in any case where Government enjoying rights is not at material time substantially interested in the export of product concerned to the territory of the Government making these representations consent to the modification of the rights enjoyed under Ottawa Agreement shall in general be granted and (c) That in all other cases Governments concerned shall consult together with view to agreeing upon an equitable solution.'

1 At the 29th meeting of British Commonwalth Talks held on 10 October and attended by representatives of Australia, Canada, India, New Zealand, South Africa and the United Kingdom.

2 New Zealand, Canada and Newfoundland are included in the list contained in the minutes of the meeting.

[AA : A1068, ER47/l/28, iii]