Reference: Your teletype EX-289 of the 22 of February.?

The wind seems to be blowing so strongly here against GATT at the present time that we still think it would be wise for the Canadian Government to make formal representations without delay, pointing out the importance we attach to the General Agreement.

2. We have had a further talk on this subject with Ray Vernon, Acting Director of the Office of Economic Defence and Trade Policy in the State Department, and are now in a position to provide a little more information about the way in which the State Department is reacting to the recommendation contained in the report of the Randall Commission. ⁸⁸ Shortly after the report was submitted to the President, a tactical decision was taken in the State Department not to challenge the recommendations made by the majority of the Commission, but instead to concentrate on pointing out ambiguities and inadequacies in the recommendations and on interpreting them in as liberal as possible a way. In keeping with this decision, the State Department have circulated to other agencies a memorandum examining the recommendation on GATT. ⁸⁹

3. They have argued that beneath the surface of the passage in the report on GATT lie two anxieties shared by congressional members of the Commission.

(a) The congressional members objected to United States participation in GATT under the present arrangements because of the lack of any clear delegation of power by Congress to the President which would authorize the Executive to carry out the obligations of a contracting party.

(b) Congressional members were also concerned over the possibility that the provisions of this international instrument might be altered to affect adversely the interests of the United States without the United States Government concurring in the alteration.

4. The State Department's memorandum points out that no recommendation was made by the Commission to meet the second difficulty and that the recommendation made with a view to removing the first objection is inadequate. Agreeing that the Executive should be explicitly authorized to carry out the responsibilities of a contracting party, the memorandum goes on to consider how far the powers vested in the President by the existing Trade Agreements Act constitute sufficient authorization. The conclusion is reached that, although the existing Act does grant to the Executive some of the authority it needs to participate fully in an effective international trade organization, other powers that would be necessary are not granted to it by the present Act. The memorandum then goes on to propose that, to fill this gap, the existing Trade Agreements Act should be substantially amended when it comes up for reconsideration by Congress this spring. We have not been able to learn what amendments are being proposed by the State Department to make the Trade Agreements Act serve as adequate authorization for United States participation in GATT.

5. From this you will see that State Department officials are struggling in the coils of an unwelcome and embarrassing recommendation. They, and others within the Administration who are convinced of the importance of GATT, will need all the help they can get if they are to prevent the recommendation in the Randall Commission's report from resulting in a presidential proposal to Congress which would seriously weaken the agreement. Vernon, therefore, very much hopes that you will see your way clear within the next few days to instruct us to deliver a note drawing attention to the uncertain meaning of the recommendation and expressing once again the interest of the Canadian Government in preserving the usefulness of the General Agreement. He particularly hopes that such a note might point out that nothing is said in the recommendation about the rules of commercial conduct that are incorporated in the agreement and might stress their value in the eyes of the Canadian Government. You will recall that this is the point on which we tried to focus attention, without much success, at the briefing which Randall gave on the 22 of January.

6. On the other hand, Vernon was somewhat apprehensive about relying on a discussion within the Joint Committee as a means of influencing opinion within the United States Administration on GATT. In the first place he thought there was still a possibility that the original timetable might be met and that the President's message to Congress on foreign economic policy might be completed by the 15 of March. Further, he said that the Secretary of Commerce was opposed to GATT and that the Secretary of the Treasury was skeptical about it, while the Secretary of State had shown very little interest. If this account of the attitude of United States Cabinet Ministers towards GATT is accurate, we are rather inclined to think that that might be a further reason for the Canadian side initiating a serious discussion of this issue when the Ministers meet. A statement, for example, by Mr. Howe of Canada's interest in GATT would certainly have some salutary effect.

7. Looking again at the problem in the light of the further information provided by Vernon, we are still disposed to stick to our original recommendation. We would revise it only to the extent of suggesting that it might be advisable to tone down a little the reference we proposed to the first meeting of the Joint Committee, since there seems to be more likelihood than we had thought when we despatched our telegram No. WA-277 of the 17 of February? that the President's message to Congress on foreign economic policy may have been completed before the Committee meets. We still think, though:

(a) that a note on GATT should be presented to the State Department within the next few days;

(b) that attention should be drawn to the obscurity of the recommendation in the report of the Randall Commission;

(c) that the importance attached by the Canadian Government to GATT should be reiterated;

(d) that the value of having an international code of commercial conduct should be emphasized;

(e) that questions should be asked about the views of the Administration on the future of GATT; and

(f) that it should be suggested that the meeting of officials in Ottawa on the 4 of March, and the meeting of Ministers in Washington on the 16 of March, would provide suitable opportunities for further discussion of this subject.