91 Cabinet Sub-Committee on Trade and Employment Conference to Coombs

Cablegram T16 CANBERRA, 3 April 1947, 5.05 p.m.

Your I.T.O.9 and 12.

1. Following is our understanding of position- (a) The nomination of a base date for preferences arises solely from Article[s] 14 and 24 of the Draft Charter:-

(i) Article 14-a base date is necessary to define the level at which non-negotiated preference margins will be bound [1] if and when Article 14 comes into force either as part of the General Agreement on Tariffs and Trade or as part of the Charter.

(ii) Article 24-a base date is necessary to define the starting- point of automatic elimination of preference margins if the 'automatic rule' in any form operates during the Geneva negotiations. [2]

Apart from these draft Articles, the schedules emerging from the negotiations could themselves specify all operative rates and margins under the Agreement without the necessity for a base date definition.

(b) The issue discussed in I.T.O. 9 and 12 is whether the naming of a base date implies acceptance in some degree of Articles 14 and 24, or whether the nomination can be accepted safely as a purely procedural step. The justification for the latter contention rests on the assumption that a base date may facilitate technically the course of the negotiations and contribute to the experimental approach suggested in your I.T.O.13 and approved by the Cabinet Sub-Committee, by providing a common procedural term without prejudice to the substance of the negotiations.

2. We are not yet committed to Article[s]14 and 24, and, as you are aware, our policy is to avoid any such prior commitment. In view of the specific wording of paragraph 2, Section E of the Procedural Memorandum [3], the Sub-Committee feels that, to avoid any possible danger that an unqualified nomination of a base date might be interpreted as implying some commitment to those articles, any nomination of a base date should be qualified by an express statement that it implies no commitment to or agreement with the principles of Articles 14 and 24. Subject to this qualification the Cabinet Sub-Committee has approved the recommendation for the nomination of 15th October, 1946, as the base date.

3. Subject to your comments, it is proposed to send the following message to our United Nations Delegation at New York:-

'Further to our 70 of 7th February and subsequent messages concerning Annexure 10 [4] of Preparatory Committee Report.

With reference to Section E of that Annexure, please advise the United [Nations] Secretariat that, on the understanding that nomination of a base date is merely a procedural step which in no way implies commitment to or agreement with the principles of Articles 14 and 24 of the draft Charter, the Commonwealth Government has decided to nominate 15th October, 1946 as the base date for the tariff negotiations at Geneva. You should point out that this proviso is already implied in the reservations made in our previous communication to the United Nations on Annexure 10, in which, inter alia, we stated:-

(i) that we objected to the "automatic rule" of Article 24 (referred to in Section D);

(ii) that we reserved our attitude as to the form and content of the proposed General Agreement (Sections G, H, I, J and K).

You should also point out that the Report of the First Session of the Preparatory Committee in Chapter III, Section A(2) (C) (ii) stated that the members of the Committee "would not be called upon to subscribe to the most-favoured-nation ... provisions until selective tariff negotiations had been completed and vice versa".' 4. We shall await your comments before despatching the above message. [5]

5. Please see also immediately following telegram dealing generally with implications of Article 14.

1 Article 14(2) permitted, as an exception to most-favoured-nation treatment (see Document 87, note 2), the continuance, without increase, of such preferences as did not exceed those remaining after the negotiations.

2 The text of the automatic rule is quoted in Document 90, note 1.

3 For text see Document 87, note 1.

4 i.e. the Procedural Memorandum.

5 Coombs approved the message which was dispatched on 17 April.

[AA : A3196, 1947, 0.5371/79]