405 Coombs to Dedman

Brief, [CANBERRA], 29 April 1948

The papers which are being submitted for consideration at the Cabinet Meeting on Tuesday May 4th and which relate to the Charter for an International Trade Organisation consist of - 1. Cabinet Agendum - which was approved at the meeting of the Cabinet Sub-Committee held on April 27th.

2. A statement attached to the Agendum showing the relationship between the Charter and the Geneva Agreement and a summary and copy of the amendments to the Agreement which were made in Havana.

3. A summary report of the Delegation to the Havana Conference.

4. A preliminary summary of the Charter compiled from statements prepared by Members of the Delegation.

INSTRUCTIONS The report by the Delegation surveys the instructions given by the Cabinet Sub-Committee and the success which the Delegation had in these matters. There were two principal items on which satisfaction was not obtained:-

(a) Customs Union. The first concerned the draft of Article 44 relating to Customs Unions. However, after the Conference had terminated, the U.K. Government sent an undertaking to the Commonwealth Government[1] which should remove any doubts about the effect of the European Customs Union on preferences. This problem is summarised in Attachment No. 1 to the Delegation report. A separate statement has also been prepared setting out the relation between the European Customs Union and the Charter and a copy of this statement is attached to this minute. It is to be noted that the Charter does not remove any rights which Australia has in relation to existing preferences and that her bargaining position in relation to the European Customs Union may even be strengthened by membership in the Organisation.

There was a brief discussion of this at the meeting of Cabinet Sub-Committee and Ministers accepted the explanations given.

(b) Employment Policy. One of the principal features of Australian policy at the Conferences has been to ensure the undertaking by countries of obligations to maintain high levels of employment. In order to make this obligation more effective we have also striven, successfully, for provisions in the Charter that enable the Organisation to review obligations in relation to commercial policy upon request by a country affected by the failure of another to maintain employment. Some doubts were expressed as to the adequacy of the wording in the Charter but Cabinet Sub-Committee has now accepted the view of the Delegation that it is satisfactorily expressed. This subject is discussed in Attachment No. 2 to the Delegation report.

The link in the Charter is of special importance to Australia in that it gives reality to the obligation for the U.S.A. to maintain employment at high levels and thus to provide an increasing market for imports of Australian goods.

CONSIDERATIONS AFFECTING AUSTRALIAN MEMBERSHIP The Cabinet Minute surveys at length considerations that would affect a decision whether or not Australia should join the Organisation and ratify the General Agreement.

Apart from these considerations there are some sections of the Charter to which special reference may be made - (1) Protection to Australian Industries.It has been the policy of the Australian Government to give protection to Australian industries by tariffs and, in isolated instances, by subsidies. Both of these methods of protection remain available. Other forms of protection may be used under the supervision of the Organisation but it is unlikely that Australia would wish to take advantage of these. On the other hand, Australia stands to gain considerably from the restriction placed on the use, by others, of such measures as quantitative restrictions on imports of Australian agricultural products.

(2) Investment. The objective of the U.S.A. Delegation was to include provisions relating to the encouragement of private international investment and the safeguarding of the interests in these investments. Australia successfully proposed an amendment and secured a more innocuous version which protects entirely the rights of Australia, as a capital importing country, to make conditions in respect of capital received.

(3) Preferences. A considerable advantage from the Charter is the restriction placed upon the creation of new preferences by many countries which would tend towards that method for development. However, despite strong opposition, the Charter recognises the existing preferences between members of the British Commonwealth and preserves them at their present level for future tariff negotiations. Although new preferences cannot be exchanged within the British Commonwealth - except under the provisions of Article 15 which relates to industrial development - the value of existing preferences is raised considerably by the prohibition of the creation of new preferences by others.

The Charter also provides that if, as a result of the reduction or elimination of a preference, there is an increase of imports which threatens serious damage to domestic producers the preference may be restored. This is similar to the procedure for emergency action in relation to tariffs.

TARIFFS Members of the Organisation undertake that they will enter into future tariff negotiations for the reduction of these barriers of trade. This will enable further tariff reductions in the U.S.A. to be sought by Australia and we shall also benefit from the tariff reductions in that country obtained by other Members of the Organisation in the course of their negotiations with U.S.A.

EXECUTIVE BOARD The Organisation will effectively be controlled by an Executive Board of 18 Member countries and a Director-General and his staff. As a result of active participation by Australia in the work of the Preparatory Committee and at the World Conference it seems likely that we shall obtain membership in the first Executive Board and thus be in a position to influence considerably the early policies of the Organisation.

STUD SHEEP There have been numerous discussion in the Cabinet Sub-Committee concerning the right to impose an embargo on the export of stud sheep. Article 20(2)(a) excludes from the Charter restrictions on exports which are necessary to prevent or relieve critical shortages. This will include the stud sheep embargo and is referred to at greater length in the report of the Delegation.

IRON ORE EMBARGO There have also been discussions in the Cabinet Sub-Committee concerning the prohibition on the export of iron ore. Article 99(1)(b)(II) excludes from the Charter measures taken in relation to the traffic in materials carried on for supplying a military establishment. This, also, is reviewed in the report of the Delegation and the provision would enable the imposition in the future of a similar embargo to that imposed on the export of iron ore.

[1] See Document 411 and note 2 thereto.

[AA : A9790, 415, VIII]