Dear Wynne [Plumptre]:

I duly received your despatch No. E.2285? of June 11th, with regard to the pro­posed meeting of Canadian and United States officials to discuss matters coming up at the Sixth Session of the Contracting Parties to GATT, which is opening in Geneva on September 17th.

The only one of the topics for discussion on which I think it would be useful for you to have my comments is that pertaining to the future of GATT. In this connec­tion I recently had occasion to set out my views in a personal and confidential letter to Mr. Eric Wyndham White, Executive Secretary, ICITO. I am therefore enclosing for your information copy of the personal and confidential letter which I received from Mr. Wyndham White, dated May 17th, and copy of my personal and confi­dential reply of May 24th. You will note that Mr. Wyndham White raised the ques­tions relating to the future of GATT, and that I replied giving him my views as to what I thought should be the position taken in the interests not of any one country but of GATT as a whole.

I would ask you to ignore the particular references to the conflicting ideologies prevailing in Europe and North America, since I know that your own predilections are distinctly in favour of the European school. What I want to do is to keep ideolo­gies out of GATT and to make it an increasingly useful international instrument. I am sure that you yourself will be the first to agree that in our approach to commer­cial policy questions, our general position should be closer to that of the United States than of any of the European countries. This I think is more important than the adherence to any particular theory concerning international trade.

I hope that this exchange of correspondence will be of some use to you. I have had to mark this letter "Personal and Confidential" on account of the nature of my exchange of views with Wyndham White, but I thought it desirable that you should know what has been passing through both our minds.

With kindest regards and best wishes.

Yours sincerely,
DANA [WILGRESS]

[PIÈCE JOINTE 1/ENCLOSURE 1]

Le secrétaire exécutif de la Commission intérimaire
pour l'Organisation internationale du commerce
au haut-commissaire au Royaume-Uni

Executive Secretary, Interim Commission
for the International Trade Organization,
to High Commissioner in United Kingdom

PERSONAL AND CONFIDENTIAL                   Geneva, May 17, 1951

Dear Dana [Wilgress],

Although it is clear that the present unsettled state of affairs makes it very difficult to envisage what changes there may be in the attitudes of governments between now and the Sixth Session towards the General Agreement, I have been giving some thought to what sort of proposals might form the basis of discussion at the Sixth Session on the future arrangements for the administration of the General Agreement.

These arrangements can, it seems to me, be considered apart from the question as to whether governments intend to proceed to put the Agreement into definitive application. Moreover, I think that arrangements can be worked out which would not drastically differ from the present setup but would provide a solid basis for the existing structure and a basis for further expansion later if that became desirable.

The first fruits of my consideration of the problem are contained in the attached paper. It seems to me that from a legal point of view it would be quite feasible to proceed by way of a simple decision of the Contracting Parties. This would have the advantage of not involving the drafting of a legal instrument which would be required to be ratified and the entry into force of which would also involve delay and possibly some legal complications. As regards the substance of the proposal, you will see that it does not entail any change in the attributions or procedures of the Contracting Parties except that I have inserted the proposal for the establish­ment of a Standing Committee. This particular, proposal could be omitted if the decision of the Contracting Parties were unfavourable to the establishment of such a Committee. The decision would only require minor amendment if this were the case. It follows from this approach that no amendment of the General Agreement would be necessary to give effect to the decision.

As regards other amendments to the Agreement, I should have thought that it would be desirable at this point to do as little as possible. However, it might be feasible to meet the point of view of those contracting parties who feel that the Agreement in its present form is somewhat unbalanced if some general language on the question of economic development and full employment is not inserted. What I have specifically in mind is the insertion in an appropriate place, perhaps as an addition to Article XXII, of provision for consultation between the Contracting Parties, upon the initiative of any one or more of them, with a view to appropriate measures being taken by contracting parties against the international spread of a decline in employment, production or demand. As regards economic development, there might be introduced into the Agreement a general provision on the lines of paragraph 1 of Article 10 of the Havana Charter.

I should be grateful to have your views on these various suggestions since it seems to me that it will be in the interests of all concerned if the discussions in September on these questions could be directed to specific and limited proposals rather than ranging over a broad and indefinite field.

Yours ever,

[PIÈCE JOINTE 2/ENCLOSURE 2]

Le haut-commissaire au Royaume-Uni
au secrétaire exécutif de la Commission interimaire
pour l'Organisatioa internationale du commerce

High Commissioner in United Kingdom
to Executive Secretary, Interim Commission
for the International Trade Organization

PERSONAL AND CONFIDENTIAL                                                                                          London, May 24, 1951

Dear Eric [Wyndham White]:

I have read over with interest your personal and confidential letter of 17th May, particularly the draft decision relating to the administration of the General Agreement which was enclosed with your letter.

You are very wise to be giving early attention to the sort of proposals which might form the basis of discussion at the Sixth Session in September on the future arrangements for the administration of the General Agreement. I think the experi­ence of the last session shows the need for careful preparation before each step is taken.

I have no comments on the draft decision which you enclosed. It seems to meet the requirements very well, and I like the idea of setting forth the international administration as a whole. This serves to place the proposed Standing Committee in proper perspective, and gives the desired standing to a Permanent Secretariat which is one of the chief objects we wish to achieve.

I am glad you have come to the conclusion that from a legal point of view it is possible to proceed by way of a simple decision of the Contracting Parties. This will save a lot of trouble, since anything requiring ratification or anything in the nature of an amendment to the Agreement would have unduly complicated the whole approach to what is after all really a consolidation of developments over the past few years.

I now come to the more important question of substantive amendments to the Agreement. In my view the whole future of the General Agreement depends upon the manner in which this difficult question is approached, and that is why I think the Sixth Session will be so important in the history of GATT.

I quite agree that the administrative arrangements can be considered apart from the question of whether governments intend to proceed to put the General Agreement into definitive application. On the other hand, the standing of the General Agreement and its future as a recognized international instrument depends, in my view, on keeping ever before governments the prospect that the Agreement will eventually be definitively applied. For this reason it is almost vital that the United States Government should continue to declare their intention of applying the Agreement definitively whenever it is possible to have Congress pass the Customs Simplification Bill and other consequential legislation.

We must learn from the mistakes of the past. It is quite clear that continued United States support for GATT will not be forthcoming if we incorporate into the General Agreement provisions of the Havana Charter which are repugnant to American opinion. Among such provisions I would cite the full employment provisions, paragraph 4(b) of Article 21 (the domestic policy provision), the more specific provisions relating to subsidies, and the chapter on commodity agreements.

These provisions have a particular appeal to the countries of Western Europe who have been most influenced by the ideas of the late Lord Keynes. What we have to realize is that these ideas have not secured anywhere near the same foothold on the North American continent, and in fact are anathema to the liberal school of thought often designated by the term "free enterprise". We hear a lot of talk about American free enterprise being opposed to European socialism, but the clash in reality is between economic liberalism and managed economies. What we have to do in GATT is to try to steer a middle course between the two and not become involved too much one way or the other.

The provisions I have cited as appealing particularly to the managed economy school of thought also appeal to the underdeveloped countries, whose pet provisions of the Havana Charter are those concerning economic development. It is easy to obtain a majority in support of the inclusion of many of the provisions dear to the managed economy school by throwing in also the economic development provisions. The result would be in the end a General Agreement as repugnant to the United States opinion as the Havana Charter. I would have no great objection to an addition to Article XXII of a provision for consultation in case of a decline in employment, production or demand, nor would I have any strong objection to the inclusion of such a general and rather meaningless provision as paragraph 1 of Article 10 of the Havana Charter. I fear, however, that if at an early stage of the Sixth Session there was a proposal to include such provisions, it would merely whet the appetite of many of the Contracting Parties for more, and the rot would set in with fatal results to the whole cause we have at heart. In my view, such proposals should only come at a stage somewhat similar to that which was represented by the Coordinating Committee at Havana, namely as a last attempt to reach a compromise.

The United States Delegation is going to have a difficult time to resist additions to the General Agreement. The only support they can rely on would be that of the Canadian Delegation. Since one cannot always be sure of the quality of the United States representation, it may be necessary for you at times to step out of your role as Executive Secretary and give the United States Delegation friendly advice as coming from one who has the interests of the General Agreement so much at heart.

I would think that the proper tactics to adopt are to take a firm stand against any additions to the General Agreement. It could be argued that we have got along very well with the Agreement as it now stands; that we have been successful because we have not been attempting to do as much as was envisaged for the ITO; that if we add on to our organization functions originally intended for an ambitious organiza­tion like the ITO, we may break the back of a small organization based on the administration of an instrument which is now only receiving provisional application.

From this one could go on to argue that there is no need to add the provisions of the General Agreement, because most of the other provisions of the Havana Charter are being administered by other international bodies. For instance, the Economic and Social Council has been giving active attention to full employment. Economic development is also being dealt with by the same body and by other organizations. An organization is in process of development in Washington for dealing with com­modities. It is true this organization is at present only concerned with raw materi­als, but it would be a simple matter to have it later on deal with basic foodstuffs. There only remains restrictive business practices, but this chapter of the Havana Charter was the special pet of North America and the North American delegations are willing to forego the addition of this chapter if other countries will forego the addition of provisions of the Havana Charter which are of special interest to them.

In my view, the General Agreement has succeeded because there is great need for a code of conduct regulating international trade. It is when we endeavour to go beyond the administration of that code of conduct to give effect to more positive provisions that we will land in trouble, simply because then we run up against the irreconcilable differences between opposing schools of economic thought.

Coombs argued very effectively at London, Geneva, and Havana, that the origi­nal United States proposals were too negative. They consisted merely of a series of "don'ts". He urged, therefore that we include some positive provisions so that the Havana Charter contained a series of "shalls". It is too much to expect the United States, representing as it does onehalf of the world's economy, to swallow this series of "shalls" as the price of having the other countries swallow the "don'ts".

We have achieved in GATT an instrument which I believe will in course of time be acceptable to American opinion. We must not jeopardize this chance by pursu­ing what experience has proved to be wrong. The chief fallacy of Coombs was that it is often difficult to combine positive with negative functions. No one would think of condemning the Criminal Code because it is entirely negative in character, nor would one think of fastening on to Courts of Justice responsible for administering the Criminal Code the additional burden of running institutions designed to remove the causes of crime. The latter more positive functions rightly belong to other bod­ies. Let us, therefore, leave to ECOSOC and other international organizations the positive functions Coombs had in mind, and keep alive what already has proved to be a code of conduct which the important trading nations of the world can accept. There would not be 38 Contracting Parties to the GATT if this was not the case.

I hope you will excuse this rather lengthy letter, but I did want to make clear to you how I feel about these important matters. A great deal will depend upon how you yourself approach these problems during the coming months.

With kindest regards and all good wishes,

Yours sincerely,
L.D. WILGRESS

P.S. It is important also to bear in mind that the United Kingdom are anxious to have the General Agreement thrown open for amendment so that they can attempt to have removed the ban on increases in preferences.