The Governments of the Economic Union of Belgium and Luxembourg recently announced that intensified restrictions would be applied against imports from dol­lar countries. The reason for these restrictions stems from the substantial trade sur­plus which Belgium has with other members of the E.P.U. Under present conditions, the surplus must be financed either by credits by Belgium or by gold payments by the debtor countries. It appears that Belgium is not prepared to extend further credit to the extent necessary to cover its present surplus and the debtor countries are not willing or able to finance it with gold. The O.E.E.C. and E.P.U. have suggested that Belgium should attempt to correct this situation by diverting certain of its imports from the dollar area to E.P.U. countries by means of discrimi­natory restrictions.

The Canadian Delegation, presently attending the Sixth Session of the Con­tracting Parties of the G.A.T.T., has been informed that the Belgian Delegation intends to raise this matter at the current session.⁷ How to present the case appears to be delaying this action because it is difficult to envisage how the new restrictions can be permitted within the provisions of the G.A.T.T. Articles XI and X11, which deal with import restrictions, do not make provision for a country to apply restric­tions in a discriminatory manner in order to help debtor countries, unless it is in balance of payments difficulties itself with the countries against which it is discriminating.

The Belgians do not appear to have decided under which articles of the G.A.T.T. they will raise the matter. According to a communication from the Canadian Dele­gation, the Belgians may try to claim that without such new restrictions their gold and hard currency reserves will be impaired. In this connection their reasoning appears to be that the other E.P.U. members, some of whom now pay for a substan­tial part of their purchases in Belgium with gold or dollars, will curtail their purchases in Belgium. Thus that country's gold and dollar reserve will be decreased. Unless Belgium's imports from the dollar area are likewise reduced, there will be a depletion of the country's reserves.

It is difficult to foresee how such a case could be justified. There has been no impairment of Belgium's reserves; to what extent, if any, there would be a decrease is a matter of conjecture. It would therefore be difficult to sanction a remedy for a problem that might not arise.

The Belgian restrictions will have a considerable influence on Canadian trade with that country. Some of the new restrictions became effective on September 10th and a number of Canadian exporters have already been told that in future no licenses will be issued for the importation of their products. These include cheddar cheese, nylon stockings, toys, washing machines and possibly whiskey.

Up to the present the Belgian authorities have issued a list of items that will not be subject to licensing. All other goods are to be subject to restriction. No regula­tions have yet been released respecting whether quotas will be established for these items or which ones will be prohibited. In the past it has often been the practice of the Belgian authorities not to make this information public, but to issue or deny licences on a basis known only to them.

In spite of the lack of definite information, it has been possible to make a pre­liminary appraisal of the damage that may result to Canadian exports. The follow­ing two tables'' show, first, the list of Canadian exports to Belgium in 1950 which were subject to licensing prior to the new restrictions and which will continue to be under licence. Licences were freely granted for most of these products prior to Sep­tember 10. The second list shows those exports in 1950 for which no licence was formerly required but which are now subject to restrictions.

These lists have been studied by the commodity specialists of this Department. They have indicated, for each item, whether in their opinion, similar goods in the same quantities can be obtained in Europe. The results are as follows:

(1950)

1. Total Canadian exports to Belgium-Luxembourg were roughly $66 million.

2. The exports of goods to be subject to licensing under the new regulations amount to $10.647 million.

3. In the opinions of the commodity officers Belgium will have to continue importing $3.8 million of the products placed under restriction. It might be possible to do without $6.8 million which could be bought in Europe.

4. It is in Canada's interests to attempt to keep the Belgian market for many of the items that could be procured in Europe. This market has been built up with considerable effort and for many lines is the only one in Europe which is open to Canadian exporters.

Conclusion

The Canadian Delegation to G.A.T.T. should take the position that these mea­sures cannot be justified under the provisions of the Agreement. The Delegation ask that the CONTRACTING PARTIES request Belgium to again consult with O.E.E.C. and E.P.U. with a view to finding an alternative and more constructive method of solving that country's balance of payments problems with other mem­bers of the E.P.U.⁸

⁷ Voir le document 343./See Document 343.

⁸Note marginale :/Marginal note:
[Frank] Hooton You will have seen from [the] circulating file the action taken as a result of discussion of this paper yesterday with Bull and Deutsch. A.F.W.P[lumptre] Oct. 3/51