The Twelfth Session of the Contracting Parties to the General Agreement on Tariffs and Trade begins in Geneva, Switzerland, on October 17th. This will be one of the regular sessions which take place annually to administer the Agreement, to consider complaints and to seek solutions to particular points of difficulty.

In conjunction with the Session there will be a meeting of trade ministers in Geneva during the week commencing October 29. This meeting should serve to strengthen adherence to the multilateral GATT arrangements at a time when a number of important initiatives are being taken in the international economic field, and would also emphasize the importance attached to the work of this session. In addition it would enable the member countries to deal more effectively with some of the major issues and to provide an opportunity for a general exchange of views among the Ministers responsible for foreign trade. A number of countries, including the United States and the United Kingdom, have already indicated the intention of their Governments to send a Ministerial representative to such a meeting.

It is recommended that a Canadian delegation should attend this Session to participate in the discussion of agenda items and to represent Canadian interests. It is further recommended that a Canadian Minister should attend the meeting of Trade Ministers. In view of the fact that Canada will be initiating new measures of agricultural protection which may not be fully compatible with the GATT arrangements, it will be necessary for the Canadian delegation to ensure that in its participation the way is left open for whatever action it may be considered necessary for Canada to take.

The following paragraphs deal with the more important items on the agenda of particular interest to Canada, and matters which may come up for discussion during the Session. In such discussions it should be kept in mind that Canada may wish, in the future, to obtain broad waivers from its GATT obligations, and, accordingly, it would be inappropriate for the Canadian delegation to press for commitments and assurances from other countries which could be embarrassing for Canada in the light of these circumstances.

1. Article XXVIII Negotiations and Rebinding of Schedules
   
   The tariff schedules appended to the General Agreement on Tariffs and Trade one for each Contracting Party consist of a list of all the tariff concessions made in the course of GATT tariff negotiations. It has been the practice to bind these tariff concessions against increase for firm periods, generally three years. The present bound period expires at the end of this calendar year. In the course of meetings commencing October 1st in Geneva, Contracting Parties will have an opportunity to renegotiate particular items. On completion of these renegotiations, it is expected that Contracting Parties will wish to rebind their tariff schedules for a further three year period.
   
   A number of Contracting Parties, including Canada, have indicated their intention to renegotiate certain items in their respective tariff schedules. A few of the new renegotiations notified by other countries affect Canadian exports and are of interest. In addition, to the extent that other countries might withdraw concessions as a consequence of Canada's renegotiations, Canadian export interests are involved. Under the renegotiation procedures a country wishing to increase bound rates of duty may do so, but is expected to offer compensation in the form of tariff concessions on other tariff items. If appropriate compensation is not made, other countries are free to withdraw from that country equivalent tariff concessions. The question of what constitutes adequate compensation is a matter for negotiation with the countries affected. To avoid the possibility of these negotiations leading to an unravelling of the many interrelated tariff agreements it is important for countries to maintain in these negotiations the balance of concessions already achieved.
   
   In order to obtain the freedom to implement Tariff Board recommendations contained in recent Tariff Board reports Canada will be required to engage in extensive renegotiations. There are also two particular tariff items which have not been referred to the Tariff Board, but which it appears advisable to modify at this time.
   
   The Canadian items to be renegotiated this fall consist of the following groups:
   
   

   1. Basic Iron and Steel products See Annex A

   2. Pipes and Tubes of Iron or Steel See Annex B

   3. Zinc and Manufactures of Zinc

   4. Fresh Fruits and Vegetables

   5. Two items which do not arise from references to the Tariff Board.

   In the Tariff Board reports on iron and steel and pipes and tubes, there are both tariff decreases and tariff increases recommended it is anticipated that this will also be the case in respect to zinc and manufactures of zinc. The Tariff Board report on this enquiry should be available shortly.
   
   It is hoped that in these three groups tariff increases will be offset by tariff decreases and that no substantial condensation in the form of other tariff reductions will be required to secure acceptance of the proposed tariff changes. However, there are a few countries who are suppliers of particular items on which tariff increases are proposed and since it may not be possible to find adequate compensation in these cases, the possibility of withdrawals of concessions to Canada by such countries cannot be dismissed.
   
   In respect to group (4), fresh fruits and vegetables, there is little prospect that the Tariff Board recommendations will make up a balanced package in terms of tariff reductions to offset tariff increases. It is to be anticipated, therefore, that unless compensation can be found which appears unlikely that equivalent tariff concessions would be withdrawn from Canada by the United States. The only country affected by prospective changes in the tariff on fresh fruits and vegetables is the United States.
   
   With respect to the fifth category, these two items are electrical instruments and prune nectar. These items were negotiated only last year and have given rise to unexpected objections. They are of relatively minor importance. Consequently, it is not expected that it will prove difficult to find adequate compensation in other Canadian tariff items without raising difficulties for Canadian producers.
   
   Two other groups of possible tariff changes, rubber footwear and textiles, should also be noted.
   
   The recent report of the Tariff Board on rubber footwear did not make any recommendations. A subsequent reference to Tariff Board has requested recommendations and it is expected that these will be forthcoming from the Board before the end of this year. The tariff items concerned are bound in Canada's GATT schedule and it may be necessary to include these in the forthcoming renegotiations. Should this be the case, a subsequent recommendation will be made to Cabinet after the Board submits its report.
   
   A more complex set of problems is raised by textiles. The textile tariff items were referred to the Tariff Board on September 24. It is most unlikely that a report will be received in time for the renegotiations which are taking place this fall. Accordingly, consideration will have to be given to the questions of how and when to deal with renegotiations of bound textile items which may result from the Tariff Board's recommendations. This will be the subject of a separate memorandum to Cabinet at a later date.
   
   Rebinding of Tariff Schedules
   
   One of the major benefits which Contracting Parties derive from the GATT is the considerable measure of tariff stability due to the fact that tariff schedules are bound against increase for firm periods of time. There are advance indications that Canada's major trading partners will be prepared to rebind their tariff concessions to Canada. In order to preserve these benefits, it will be necessary for Canada also to rebind its tariff schedules. The schedules to be rebound will, of course, include the results of the renegotiations. It should be emphasized that the rebinding of schedules for a firm period does not preclude renegotiation of particular items within the period. There are established procedures whereby, in special circumstances, this may be done.
   
   It is recommended that Canada agree to the rebinding of the Canadian tariff schedules to GATT for a period of three years from January 1st, 1958, subject to the satisfactory completion of these renegotiations and subject to any subsequent Cabinet decisions relating to rubber footwear and textiles. Depending on how the Government should decide to deal with the rubber footwear and textile items, it may become necessary to seek some modification in the terms and procedures for rebinding the schedules.
2. Canadian Agricultural Restrictions
   
   Import controls are now being applied by Canada on butter, cheddar cheese, turkeys and fowl and skim milk. In addition, further measures of agricultural protection are being considered by Canada, which may entail additional Canadian restrictions. The present restrictions are inconsistent with some of Canada's obligations under GATT and it may become necessary, in due course, for Canada to seek a waiver from these obligations, both with respect to these restrictions and with respect to whatever additional restrictive measures may be taken in the future.
   
   The GATT makes provision for a country to be granted a waiver in exceptional circumstances from an obligation it has entered into under the Agreement. The granting of such a waiver requires the approval of a two-thirds majority. A number of waivers have been granted, subject to terms and conditions, to meet particular difficulties of certain member countries. The obtaining of a waiver upsets the balance of rights and obligations under the GATT, and exposes the country concerned to retaliatory action by other countries whose interests may be adversely affected.
   
   While Canada's restrictions have not yet been formally questioned in GATT, they are a matter of concern to some other countries and it may well be that the compatibility of these restrictions with GATT will be questioned during the Session. It is proposed that the Canadian delegation in conversations with other delegations, or, if necessary, in a formal statement outline Canada's position along the following lines:
   
   

   1. An explanation of the special nature of the difficulties which have arisen with respect to the products now under import control.

   2. An indication that the Canadian Government recognizes that some of these restrictions raise problems in relation to the GATT.

   3. An assurance that the matter is being given careful attention by the Government with a view to determining what appropriate steps should be taken, having in mind the interests of other Contracting Parties and Canada's obligations and responsibilities in the GATT.
      
      

   A short note on the United States Agricultural Waiver is attached. (Appendix C)
3. European Common Market Treaty
   
   The Contracting Parties will be examining the Common Market Treaty in order to determine whether this Treaty is consistent with the policies and principles envisaged under GATT. Ratification of this Treaty by the six European countries concerned has almost been completed and the Treaty is expected to go into effect next year.
   
   The aim of the Treaty is the economic integration of its signatories. Canada has already indicated its sympathetic attitude to these objectives. However, a number of important features of the Common Market Treaty would appear to raise serious problems from the point of view of Canadian trade interests and from the point of view of multilateral trade generally. These relate to the following points, which have already been the subject of formal representations to the Six:
   
   

   1. With respect to the common tariff to be developed around the Customs Union, the Treaty lays down a framework which will facilitate unjustifiably high levels of protection on a wide range of products of interest to Canada such as base metals, aluminum, chemicals, synthetic rubber, pulp and paper and fish.

   2. With respect to import restrictions, the Treaty establishes a basis for policies which could well reinforce existing discriminatory restrictions for an indefinite time and lead to the development of common measures of restrictions against outside countries contrary to Canadian interests.

   3. The agricultural provisions of the Treaty (which cover both agriculture and fisheries products), envisage a protected and regulated system for agriculture involving high tariffs, guaranteed prices, preferential long-term marketing agreements and the use of quantitative restrictions against outside countries. These agricultural provisions are likely to lead to the stimulation of high-cost production in Europe and could affect Canadian exports of wheat and barley and other agricultural products which make up about 50 per cent of our present trade with these countries.

   4. The Treaty provides for the association of the dependent overseas territories of the European countries, as well as of such countries as Morocco and Tunisia which have lately achieved independent status. Exports from these areas to the Common Market will receive preferential tariff treatment and will benefit from the protection of the agricultural arrangements. Some of these areas are, or might become, important producers of commodities which compete directly with Canadian exports such as wheat, iron ore and aluminum. The overseas territories features of the Common Market Treaty are of particular concern to underdeveloped countries.

   The GATT examination of the Common Market Treaty which is to be initiated at this Session will provide an opportunity for outside countries, such as Canada, to influence the nature and direction of Common Market arrangements. Since Canada herself may be in the position of seeking broad waivers for measures envisaged in the field of agriculture and may also be looking for increased flexibility in the field of tariff action, the Canadian delegation should, in the review of the Treaty, avoid prejudicing Canada's future position. It is recognized that this may mean that Canada will not be in a position to press for strict safeguards within the GATT framework, particularly with respect to the agricultural provisions of the Treaty. It should be left open to the delegation to develop whatever safeguards may be possible on agriculture, tariffs and quantitative restrictions, in the light of these circumstances.
   
   It is recommended that the Canadian delegation should be authorized at the GATT Session to make clear that, despite Canada's sympathetic attitude to the objectives of the Treaty (i) it is not authorized to acquiesce in those provisions of the Treaty which go beyond the essential principles of a customs union and unjustifiably impair Canadian trade interests, and (ii) Canada reserves its rights to take appropriate measures, if necessary, with a view to restoring the balance of advantage in the Trade Agreements between Canada and these countries.

4. Free Trade Area
   
   The Free Trade Area negotiations are still in a preliminary stage and the proposed Free Trade Area arrangements are therefore not yet being considered formally by the Contracting Parties to the GATT. However, it is expected that a progress report on these Free Trade Area negotiations will be given to the Contracting Parties at this Session. It is likely, therefore, that delegations will take this opportunity to make general statements about their governments' attitudes towards the Free Trade Area plans. The Canadian delegation should be authorized, if the occasion arises, to make such a statement. It is suggested that the Canadian statement should indicate a constructive and helpful attitude of acquiescence in the principle of the Free Trade Area proposals, and, at the same time, point out the vital importance of an outward-looking policy being followed by the European countries in the working out of arrangements which do not adversely affect the trading interests of third countries. It should be added, that Canadian approval of any Free Trade arrangement will be subject to careful examination of its terms and provisions.

5. Surplus Disposals
   
   The GATT Contracting Parties in a resolution dated March, 1955, urged that when arranging the disposal of surplus agricultural products in world trade countries should consult the principal suppliers of those products with a view to avoiding prejudice to the interests of other countries. At this Session there will be an opportunity to discuss the way in which this resolution is, in practice, being implemented. The Canadian delegation should take this opportunity to express Canada's serious concern about the effects of U.S. surplus disposal operations on Canadian interests and on world trade. The Canadian delegation should urge that the United States take more fully into account the interests of other countries in accordance with the terms of this resolution. In making any such statement the Canadian delegation should, of course, bear in mind the nature of the discussions that will have taken place on this subject at the meeting in Washington on October 7-8 of the United States-Canada Joint Committee on Trade and Economic Affairs.

It is recommended that the Hon. Gordon M.Churchill, Minister of Trade and Commerce, should represent Canada at the meeting of Trade Ministers; that Mr.L.D. Wilgress should be Chairman of the Canadian Delegation to this Session of the Contracting Parties to GATT; that the following officials should be included in the delegation, as required:

Mr. M.W. Sharp Department of Trade and Commerce

Mr. C.M. Isbister Department of Trade and Commerce

Mr. S.S. Reisman Department of Finance

Dr. C.F. Wilson Department of Trade and Commerce

Mr. L.R. Younger Department of National Revenue

Mr. M.Schwarzmann Department of Trade and Commerce

Mr. R.E. Latimer Department of Trade and Commerce

Mr. W. Lavoie Department of Trade and Commerce

Mr. J. Warren Department of External Affairs

Mr. W.F. Stone Department of External Affairs

Mr. L.C. Howey Department of National Revenue

Mr. G.J. Dobson Department of Agriculture

Mr. M.G. Clark Department of Finance;

and that an officer from the Department of External Affairs from one of the Canadian Missions in Europe should be included in the delegation, if required. It is recommended that Mr.G.H. Glass, Director, Tariffs Section, Department of Finance, should lead the negotiating team, insofar as the negotiation of the Canadian tariff items under Article XXVIII is concerned.¹¹²

DONALD FLEMING
Minister of finance
GORDON CHURCHILL
Minister of
trade and commerce

Concurred in:
SIDNET SMITH
Secretary of State for External Affairs

¹¹² Approuvé par le Cabinet le 11 octobre 1957./Approved by Cabinet on October 11, 1957.