Cablegram TE6 LONDON, 4 October 1946, 5.34 p.m.
Please deliver this urgently.
Text of notes submitted by the United Kingdom on quantitative
restrictions follows. This is to be discussed by the British
Commonwealth Conference  next Tuesday afternoon. Please send
any comments you may have to reach us not later than Tuesday
Quantitative restrictions to safeguard the balance of payments.
Note by the United Kingdom Delegation.
1. We attach a text (Annex A) which we have prepared and which we
are considering putting for-ward at the Preparatory Committee
Meeting in place of the text in Articles 20 to 22 of the American
Draft Charter though this is without prejudice to our general view
that there should be no detailed discussion of texts at the
Preparatory Committee Meeting.
2. The main points in which our text differs from the American
(A) In paragraph 231 we allow for discrimination in the
transitional period, this has been dropped in the American Draft.
(B) Moreover, under our formula the transitional period itself is
elastic in that it will not be deemed to have ended until six
months after each particular member has accepted the obligation of
convertibility of its currency under Article VIII of the I.M.F.
Agreement. In this way allowance is made for the different
circumstances of different members. (C)We have made the test for
the imposition of new or intensification of existing restrictions
dependent upon the decline in a country's monetary reserves. The
Americans on the other hand make this dependent upon the deficit
in a country's balance of payments on current account. In our view
the draft on reserves is in principle the right criterion since
there are some movements of funds which do not figure in the
balance of payments on current account but which should
nevertheless be taken into consideration. It may well be that a
country might have no deficit on its current balance of payments
but at the same time a great draft upon its reserves might be in
progress for entirely legitimate reasons. Moreover, the balance of
payments on current account is a matter only determinable with
difficulty in any case and for the determination of which reliable
data will be lacking in many countries.
(D) We have allowed unconditionally for action which is necessary
to forestall movements in reserves whereas the Americans permit
anticipatory action only in the case of a Country whose monetary
reserves are already very low.
3. Paragraph 1 of the attached text has been drafted on the
assumption of common membership of the I.T.O. and I.M.F. The
situation may arise, however, that some Members of I.T.O. will not
be members of I.M.F. and this raises the question what exchange
control rules will have to be included in the Charter. With common
membership members of I.T.O. would of course automatically observe
the I.M.F. exchange control rules. As regards the transitional
period we suggest that for non members of the I.M.F. the deadline
fixed by the Americans in their draft charter (i.e. 31/12/1949)
should apply though provision should be made for appeal in special
circumstances for an extension of time. The text of paragraph 1 as
it now stands would apply to those who were members of both
4. It should be noted that members are not required either by our
text or indeed by the Americans to consult the I.T.O. before
imposing new or intensifying existing restrictions. Members are
only required to undertake to inform the I.T.O. and if required to
consult the I.T.O. Annex 'A' restrictions to safeguard the balance
Members are entitled impose or maintain restrictions on quantity
or value of merchandise permitted to be imported as an aid to
restoration or maintenance of equilibrium in their balance of
payments or to restoration of their reserves to a safe level. This
provision is subject following conditions and qualifications-
(1) During a transitional period a member may impose or maintain
restrictions which discriminate between currencies in which it
purchases imports. Member must withdraw these discriminatory
restrictions within six months after it has accepted obligations
in Article VIII of I.M.F. Agreement when transitional period for
that Member shall be deemed to have ended.
(2) After transitional period any import restrictions applied by a
member shall be nondiscriminatory except for-
(a) Restrictions imposed in conformity with Article VII of I.M.F.
Agreement relating to scarce currencies.
(b) Restrictions to assist by measures not involving a substantial
departure from general rule of non-discrimination a country whose
economy has been disrupted by war.
(c) Restrictions to enable members to use balances of
inconvertible currencies for buying imports. Arrangements which a
member may make for conduct of trade with countries having
inconvertible currencies shall be subject to discontinuance or
modification in event of the I.T.O. finding that they are contrary
to purposes of Organisation.
The provisions under (b) above will cease to operate at 31/12/49.
(3) After transitional period members may impose or maintain
nondiscriminatory import restrictions in so far as they are
necessary to safeguard their balance of payments and monetary
reserves but they undertake [to] observe following principles in
(a) To refrain from imposing new or intensifying existing
restrictions except to extent necessary (having due regard to any
special factors which may be affecting level of reserves) to
prevent or stop a serious decline in monetary reserves or to
prevent them from falling below level of safety or to avoid need
for drawing upon special credits to protect their reserves.
(b) To expand imports-if necessary reducing restrictions to point
of elimination-to extent necessary to correct a substantial or
persistent growth in monetary reserves except where such growth
needed to restore reserves to a safe level or where it is caused
by capital imports which are not likely to recur in future years.
(c) Any imposition of new import restrictions or intensification
of existing restrictions in pursuance of (a) shall not be carried
to point at which it involves complete exclusion of imports of any
class of goods.
(d) Members imposing new or intensifying existing restrictions
under (a) above undertake to inform the I.T.O. In addition all
members applying restrictions under this article undertake if
requested to consult the I.T.O.
(e) For purpose of this section a country's monetary reserves
shall be defined as in Article XIX of the I.M.F. Agreement.
(4) Quantitative import restrictions shall be deemed non-
(a) They are administered on a basis which does not discriminate
among member countries sources of supply of any imported product.
(b) They are applied in a manner otherwise consistent with (a) by
a group of territories which have a common quota in I.M.F. against
imports from other countries.
(5) In administering non-discriminatory import restrictions the
import control authorities of a member country shall subject to
tariffs or tariff preferences or other preferences which may be
maintained consistently with this Charter be influenced solely by
commercial considerations such as price quality and customary
sources of supply.
(6) Any Member-Country who considers that any other Member-Country
is applying import restrictions in a manner inconsistent with
provisions in paragraphs (1) to (5) above or in a manner which
unnecessarily damages its commercial interests may bring the
matter for discussion at the I.T.O. and the Member Country
imposing the restrictions undertakes to discuss the reasons for
its action. The I.T.O. may recommend that the restrictions are
being applied in a manner inconsistent with provisions of this
Article and in this case other Member Countries shall after a due
interval be released from such obligations incurred under this
Charter towards the country applying the restrictions as the
I.T.O. may specify.
(7) Member Countries agree that they will take part in any
discussions which the International Trade Organisation on
recommendation of Executive Board in consultation with other
International Organisations may initiate in order to consider
whether other measures might not be taken either by those
countries whose balances of payments are under pressure or by
those countries whose balances of payments are exceptionally
favourable or by any appropriate International institution or
institutions to remove the underlying cause of the disequilibrium
in the International balance of payments. The International Trade
Organisation shall initiate such discussions on request of any
three or more Member Countries.
(8) Throughout this section phrase 'quantitative import
restrictions' includes the restriction of imports by State Trading
Organisations to an extent greater than that which would be
permissible under Chapter III Section F of the 'Proposals'.