A. GENERAL COMMENTS AND REPRESENTATION

1. The Fifteenth Session of the Contracting Parties to the General Agreement on Tariffs and Trade will open on October 26th in Tokyo and will last four weeks. It will be one of the regular Sessions of the Contracting Parties to administer the Agreement and seek solutions to general and particular trade problems. Another task of the Contracting Parties at this Session will be to review the progress made in the implementation of the programme for expansion of trade launched by the Contracting Parties following the Ministerial meeting held last October.

2. In conjunction with this Session, a meeting of Trade Ministers is to be held October 27th to 29th. A number of countries will have a Ministerial Representative. The United States will be represented by Mr. Douglas Dillon, the Under Secretary of State, a position which is regarded as Ministerial level in their system. Cabinet has decided that Canada will be represented by the Hon. Leon Balcer, Solicitor General of Canada. Because of the proximity of elections, it is understood that the United Kingdom will not be represented by a Minister.

3. It is recommended: That a Canadian Delegation should attend the regular Session; that Mr. J.H. Warren, Assistant Deputy Minister, Department of Trade and Commerce, should be Chairman of the Canadian Delegation; that Mr. S.S. Reisman, Director, International Economic Relations, Department of Finance, should be Alternate Chairman; that Mr. L.D. Wilgress should be a Special Adviser and that the following officials should also be included in the Delegation: C.A. Annis, Department of Finance, O.G. Stoner, Department of External Affairs; A.E. Richards, Department of Agriculture; V.L. Chapin and W. Lavoie, Department of Trade and Commerce; L.C. Howey, Department of National Revenue. Also included in the Delega-tion will be a member from the Canadian Permanent Mission in Geneva and one from the Canadian Embassy in Tokyo, who will act as Secretary to the Delegation. Other officers of the Embassy will be included in the Delegation, as required. In addition to serving on the Delegation, officers of the Departments of Trade and Commerce, National Revenue and Finance will be expected to take advantage of being in Japan to deal with a number of matters connected with the activities of their respective departments.

B. MINISTERIAL MEETING

4. The Ministerial meeting will give Ministers an opportunity for a general exchange of views on current trends and problems in international trade and trade relations, including the forth-coming general round of tariff negotiations. Particular attention will be given to the question of discriminatory import restrictions still maintained by various GATT countries; to problems in agricultural trade and the implications of regional trade arrangements. In addition, Ministers statements will deal with certain of the main agenda items.

C. AGENDA: QUESTIONS OF PARTICULAR INTEREST TO CANADA

(a) Quota Restrictions and Discrimination

5. It is almost a year since the introduction of external convertibility by the major trading currencies. There has since been substantial improvement in the financial position of most GATT members, particularly the United Kingdom and other European countries, and it is important that these new circumstances should be recognized in the trade field through the speedy elimination of discrimination and the further relaxation of non-discriminatory restrictions, in accordance with improvements in balance of payments positions. Progress has been made in this direction but a good deal remains to be done. The United States Government have initiated a major drive against trade discrimination and quota restrictions. High-level representations have been made by the United States in all important European capitals and London and Tokyo, urging these countries to end dollar discrimination. We are informed that the United States delegation at the Tokyo Session will follow up these representations vigorously. Moreover, prior to the 15th Session, the International Monetary Fund is expected to reach an important general decision that balance of payments justification of discrimination has disappeared.

6. It is recommended that the Canadian Delegation join with like-minded countries to press strongly for the speedy elimination of discrimination and the further reduction of quantitative restrictions generally, in accordance with the international obligations of the GATT and IMF. Many of the issues being considered at the GATT Session, such as the question of German import restrictions, the balance of payments consultations, trade in agricultural products and the implementation of the Rome Treaty, involve the question of discrimination. In all these deliberations the Delegation should oppose discrimination, particularly, of course, against Canadian goods.

7. Consultations are to be held in Tokyo on the restrictions still being maintained for balance of payments reasons by Norway, Sweden, Australia, the Federation of Rhodesia and Nyasaland, Malaya and Japan. Canadian representatives should participate actively in these consultations, should press for substantial and rapid progress in the removal of quantitative restrictions and the elimination of discrimination against Canadian goods.

(b) German Import Restrictions

8. At the last Session, Germany was granted a special dispensation from GATT obligations for the continued maintenance of certain import restrictions, mainly in the agricultural field. This waiver was granted for a period of three years and included an undertaking by Germany to make further progress in the relaxation of many of its restrictions and to consult with countries regarding their interests in the German market for the products affected. This Session will provide the first opportunity to scrutinize the measures taken by Germany under the terms of the waiver. The continued maintenance of these restrictions by Germany involves an important point of principle and could set the pattern for developments in other countries emerging from balance of payments difficulties. The German case may also constitute a dangerous precedent for the maintenance of restrictions by Common Market countries, particularly in the field of agriculture. Canada has a direct interest in a number of items affected, among which are wheat, canned fruits and vegetables, frozen and canned pork and fresh apples.

9. It is recommended that the Canadian Delegation, in concert with other Contracting Parties, should participate actively in the examination of German compliance with the terms and conditions of the waiver. In particular, the Delegation should review closely the progress made by Germany in implementing its undertaking to remove restrictions on a wide range of listed items and the measures taken by Germany to provide increased access to the German market on a non-discriminatory basis. The Canadian Delegation should be further authorized to enter into consultations with the German delegation with a view to obtaining improved access for Canadian goods affected. In these discussions and consultations, the Canadian Delegation should keep in mind the importance of safeguarding Canada's interest in the German market for wheat.

(c) Arrangements for Tariff Negotiations

10. At the last Session it was decided to hold another round of general tariff negotiations to commence September 1960. These negotiations will embrace the following:

(1) Negotiations for new concessions;

(2) Re-negotiations by countries who wish to modify existing concessions;

(3) Negotiations with members of the European Economic Community related to the esta-blishment of their common tariff;

(4) Negotiations with new members of the GATT (Israel).

The Canadian Government has recently announced that it will participate in this tariff conference.

11. At the forthcoming Session the Contracting Parties will consider rules for the conduct of the tariff negotiations. These rules deal with such matters as the objective, scope and methods for the negotiations and how the tariff conference is to be administered. The proposed rules are for the most part non-controversial and similar to those used in past negotiations, with certain additions to cover re-negotiations with the European Economic Community. These rules are satisfactory from the Canadian point of view and the Canadian Delegation should support them.

12. The Contracting Parties will also consider an Australian proposal that the negotiating rules be expanded to provide for the negotiation of tariff concessions against non-tariff barriers, i.e. subsidies, certain quotas and internal taxes. Australia believes that if trade measures of this kind were made negotiable, efficient agricultural producers could secure better access to markets of the industrial countries. While the Australian objectives are commendable, it is doubtful that the Australian proposal would contribute to their achievement, or be acceptable to the C.P.'s.

(i) Quotas:

The GATT allows import restrictions on farm products if they are necessary to enforce governmental measures which operate to restrict domestic production or to remove a temporary domestic surplus. The Australian proposal is that such quotas should be made negotiable. If such quotas became negotiable, it is feared that an incentive would be created to establish or maintain them for bargaining purposes. Accordingly, the Canadian Delegation should oppose this proposal.

(ii) Subsidies:

If a country wishes to negotiate the level of its subsidies there is nothing in the GATT to prevent this. However, there is at present no obligation to do so. The Australian proposal is that the rules should provide explicitly for negotiations respecting subsidies. Adoption of this proposal would mean that a country could make negotiations on subsidies a condition for concluding a tariff agreement. United States laws prevent it from negotiating subsidies. The United Kingdom is unlikely to support the proposal. The main European countries are also likely to oppose it. In these circumstances, it does not appear necessary for Canada to decide now its policy on the substance of this difficult issue. Canada could support the continuation of the present situation described above.

(iii) Internal Taxes:

The less developed countries are concerned over the very high internal taxes imposed by West European countries on primary tropical products such as coffee, cocoa and tea. Australia has proposed that the negotiating rules make such internal taxes negotiable. Canada does not impose internal taxes on coffee, tea or cocoa, so that this proposal would not appear to raise difficulties. The Canadian Delegation should support this proposal, provided it is clear that it would not involve Canada in negotiating concessions with respect to traditional revenue taxes on wines, spirits and tobacco.

13. A related Australian proposal is to introduce a new obligation requiring that a country wishing to apply any trade measure which impairs a tariff concession should first negotiate compensation under the existing GATT provisions relating to the withdrawal or modification of tariff concessions. This is a far-reaching proposal for the amendment of the Agreement, and will be opposed by many countries. Moreover, it is doubtful if it can be applied in practice. The Canadian Delegation should not support this proposal.

(d) The European Common Market

14. The issues raised by the establishment of the European Common Market continue to be subject to detailed appraisal and examination by the Contracting Parties in the light of the terms and objectives of the GATT. Important developments are expected to take place in the next few months. The Common Market countries have undertaken to announce most of the rates of duty proposed for their Common External Tariff by the end of the year. The countries concerned are currently working out the rates to be established on a number of items of major interest to Canada, such as aluminum, lumber, synthetic rubber, lead and zinc, pulp and salt cod. The Canadian Delegation will be pressing for the lowest Common Market tariff on these items. The Canadian Delegation will cooperate with other like-minded delegations to this end. With respect to the problems raised by the preferential arrangements in favour of the French and Belgian Overseas Territories with the European Common Market, joint consultations with the Six are now proceeding with a view to finding satisfactory solutions to these problems. Canada will be participating in the consultations on aluminum, lead and zinc which are due to take place in December.

15. The major area of uncertainty remains the Common Market agricultural arrangements. The countries of the Community are at present working out proposals for a common agricul-tural policy based on principles provided for in the Rome Treaty, and decisions and recommendations in this field may be made before the end of the year. It is expected that these proposals will include long-term marketing arrangements to govern the trade in wheat and other grains among the Six, and an extensive system of minimum prices for other products which could be seriously restrictive of trade. Canada has a great interest in European agricultural policy since more than 35 per cent of Canada's sales to the Six comprised farm products, including wheat, coarse grains, seeds, tobacco and vegetable oils.

16. It is recommended that the Canadian Delegation, in cooperation with other interested countries, should indicate Canadian sympathies with the political objectives of the Rome Treaty but should continue to press for safeguards and assurances concerning access to the Common Market for our exports. The Canadian Delegation should make clear Canada's interests in agricultural policies of the Six and should urge the Six to avoid policies which could adversely affect the trade of Canada and other outside countries. The Delegation should press for a general review of the proposed agricultural arrangement of the Common Market immediately that their plans have been worked out.

(e) European Free Trade Association

17. While this item is not on the Agenda, it will probably give rise to some discussion during the Tokyo meetings. In this event, the Canadian Delegation should be guided by the instruct-tions to the Canadian Delegation to the recent meeting of the Commonwealth Economic Consultative Committee, as appropriate to the GATT forum.

(f) Brazilian Market for Codfish

18. In the context of recent negotiations under GATT arrangements were made for the sale of Canadian codfish to Brazil. However, it was not possible to obtain a firm Brazilian undertaking to provide continuing access for this commodity. It is recommended, therefore, that the Canadian Delegation should explore with the Brazilian Delegation at this Session the question of further sales of Canadian codfish in the Brazilian market.

(g) Lead and Zinc

19. The United States continues to maintain restrictions against imports of lead and zinc. Last year Canada reserved its right under the GATT with respect to these commodities. It is recom-mended that these rights be further reserved at the 15th Session.

(h) Other Items

20. There are many other items on the Agenda not dealt with in these instructions. For these items, the Canadian Delegation should be guided by the instructions for recent GATT Sessions, and, more generally, should seek to safeguard and promote Canada's trade interests.

[GORDON CHURCHILL]
Minister of Trade and Commerce
[DONALD FLEMING]
Minister of Finance
[H.C. GREEN]
Secretary of State for External Affairs