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INTERNATIONAL TRADE ORGANIZATIONS

TUESDAY, MARCH 25, 1947

UNITED STATES SENATE,
COMMITTEE ON FINANCE,

Washington, D.O. The committee met at 10:30 a. m., pursuant to adjournment in the Foreign Relations Committee room, the Capitol, Hon. Eugene D. Millikin (chairman) presiding.

Present: Senators Millikin (chairman), Martin, and Johnson of Colorado. Present also: Representative Gearhart. The CHAIRMAN. The meeting will come to order. Is Mr. Fahy here?

STATEMENT OF CHARLES FAHY, LEGAL ADVISER,

DEPARTMENT OF STATE, WASHINGTON, D. C. The CHAIRMAN. State your full name and position with the Government.

Mr. Fahy. Charles Fahy, legal adviser, State Department. The CHAIMAN. Go ahead, sir. Mr. Fahy. Senator, I have been advised that one of the problems which has concerned the committee is whether or not the proposed International Trade Organization, the charter, went beyond the powers of the Economic and Social Council under the United Nations Charter, and if so, whether that brought into question the legality of the proposed ITO charter.

I would like to state the legal position there as I am convinced that it is. First

, referring to the provisions of the United Nations Charter regarding the Economic and Social Council, so far as here relevant, contained in chapters IX and X. - Article 56 provides (reading] :

All Members that is, the nations who constitute the United Nations pledge themselves to take joint and separate action in cooperation with the Organization for the achievement of the purposes set forth in Article 55.

Now, article 55 states the purposes to be as follows [reading] : The United Nations shall promote higher standards of living, full employment, and conditions of economic and social progress and development.

Also, it shall promote solutions of international economic, social, health, and related problems; and international cultural and educational cooperation.

Article 57 of the Charter is quite important on the present question. It refers to the various specialized agencies, and I emphasize the following because it is important, and reads:

The various specialized agencies, established by intergovernmental agreement and having wide international responsibilities, as defined in their basic instruments, in economic, social, cultural, educational, health, and related fields, shall be brought into relationship with the United Nations in accordance with the provisions of Article 63.

Then comes a divisions as follows [reading]: The Organizationthat is, the United Nationsshall make recommendations for the coordination of the policies and activities of the specialized agencies.

The Organization shall, where appropriate, initiate negotiations among the states concerned for the creation of any new specialized agencies 'required for the accomplishment of the purposes set forth in Article 55.

The Economic and Social Council may enter into agreements with any of the agencies referred to in article 57, defining the terms on which the agency concerned shall be brought into relationship with the United Nations. The agreements are subject to approval by the Assembly.

Finally, we have article 63 which reads as follows:

It may coordinate the activities of the specialized agencies through consultation with and recommendations to such agencies and through recommendations to the General Assembly and to the Members of the United Nations.

Now, the scheme there contemplated left it free for the sovereign members of the United Nations to establish agencies as the Charter says, by intergovernmental agreement. The individual members of the United Nations, unless in some respect inconsistent with obligations assumed by acceptance of the Charter, are as free as they ever were to enter into treaties with other nations.

The proposed charter of the International Trade Organization would be an international compact or treaty standing for its validity on the power of the respective governments who enter into it, exercising their authority as governments. It cannot be thought that the Government of the United States was restricted by the charter from entering into trade agreements with other nations if authorized under the Constitution and statutes to do so. The relevant provisions of the United Nations Charter do impose upon the United Nations, as an organization, through the Economic and Social Council and through the member governments, the obligation, to further the ends of economic and social progress and to improve conditions; that is the sole participation here of the United Nations.

Through the provisions of the Charter, it is placing its encouragement and using its medium for the promotion of the objectives stated in chapter X of the United Nations Charter, but the International Trade Organization Charter is being worked out in its terms by the independent action of the sovereign nations concerned in the negotiations.

I might illustrate the relationship, for example, of the United Nations to conventions entered into by the members of the United Nations. For example, in the field of atomic energy, in connection with the purposes of the Charter relating to disarmament, one of the pur

poses as to which the charter states the General Assembly shall go into the principles regarding that matter, there are, as is well known, negotiations, discussions, proposals, with respect to international control, but the scheme contemplates from the beginning that what is agreed to depends upon an international agreement by the member governments within the framework of their own constitutional processes.

The United Nations is encouraging and giving impetus to progress in that direction through its own organization, in that case through both the General Assembly and the Security Council. It is not itself, unless granted that power by separate international agreement, the operating agency.

There are other illustrations that may be given. For example, the proposal now pending before the Senate for adherence by the United States to the International Refugee Organization. This is in the form of a convention or international agreement worked out with the assistance and through the medium afforded by the United Nations Organization, but depending for its operating responsibilities upon the provisions of the international agreement itself assented to by each of the members who do adhere to it under their own sovereign powers and constitutional processes.

Unless there are some questions about that, Mr. Chairman, I think I will rest on that statement of my conception of it.

The CHAIRMAN. Mr. Fahy, do you regard the organization as a sort of autonomous government within itself?

Mr. Fahy. No, sir; I would not go that far.

The CHAIRMAN. You say that it is a subordinate agency to the United Nations Organization?

Mr. Fahy. No, sir; I would not. I would say it is a specialized agency.

The CHAIRMAN. That is the intention, to make it a specialized agency?

Mr. Fahy. I suppose that it is. It will be brought into relationship with the United Nations as a specialized agency.

The CHAIRMAN. Mr. Hawkins, is there any question about bringing this organization under the United Nations as a specialized agency?

Mr. HAWKINS. That is the intention, I think.

The CHAIRMAN. Now, in taking that position as a specialized agency under the Economic and Social Council, how can the subordinate agency have greater power than the main agency?

Mr. Fahy. But there, Senator, it is not a subordinate agency, it is a specialized agency within the meaning of the Charter, when it negotiates the agreement for its relationship with the United Nations, as an independent agency.

Now, the terms under which it is related to the United Nations depend upon the terms of the agreement worked out between the organization, the specialized agency, and the United Nations.

So, "subordinate is not quite the word.

The CHAIRMAN. But can the United Nations lift itself beyond its own powers by making an agreement with a specialized agency which operates as a satellite to the main organization?

Mr. Fahy. The United Nations cannot, by its own boot straps, lift itself beyond the terms of the Charter.

The CHAIRMAN. Yes, sir.

Mr. Fayy. A specialized agency is not limited by the terms of the charter. It may govern its relationships with the United Nations by the terms in an agreement with the United Nations.

Now, in making that agreement, the United Nations is bound by the Charter. The operation of the specialized agency is not limited to what the United Nations can do, it is determined by the agreement which the members of that specialized agency make among themselves as independent states.

The CHAIRMAN. It is your contention that from the time this Or. ganization becomes effective, so far as the joining by the signatory members is concerned, that it will have the powers set forth in the charter?

Mr. Fahy. In its own charter.

The CHAIRMAN. Whether or not those powers exceed those granted to the United Nations in the same subject matter?

Mr. Fahy. That is correct.
The CHAIRMAN. Review again, please, your theory for that.

Mr. Fahy. The power of the United Nations in this field is in those several articles which I read from the Charter of the United Nations, and it is to recommend, for the coordination of policies and activities of specialized agencies, it is to promote high standards of living conditions, of economic and social progress, and the solution of international economic, social, health, and related problems.

This particular International Trade Organization was originally initiated by the United Nations; let us assume that it was originally initiated by the United Nations, because the United Nations is in the picture with respect to the Trade Organization. The United Nations would have authority to ask, request, or recommend to any group

of nations which the United Nations thought played the dominant part in this field that they form an International Trade Organization.

Now, that would not be beyond the power of the United Nations to instigate or promote or encourage such an international compact leading to an International Trade Organization.

The compact between the nations resulting in the operating body is free then to have in its organization such terms for its own operations as the nations themselves, parties to it, are willing and agree upon. The CHAIRMAN. You contend that they could be inconsistent?

Mr. Fahy. No, sir; I would not say that, not that they could be inconsistent with the purposes of the United Nations Charter. In the operation they can be independent, except as the Organizations themselves, that is, the United Nations and the specialized agency, agree in the governing of their relationship between each other.

The CHAIRMAN. It was the intention that the Economic and Social Council should have no powers other than those that might be recommendatory?

Mr. Fahy. That is right.

The CHAIRMAN. Therefore, if this satellite organization, or this specialized organization, however you wish to characterize it, has greater than recommendatory power, is it consistent with the provisions of the Charter?

Mr. FAHY. Yes, Senator.
The CHAIRMAN. Explain that.

Mr. Fahy. As you state, the power of the Economic and Social Council is recommendatory, it has the power, therefore, to recommend the creation of such an organization, such a trade organization.

The CHAIRMAN. Are you saying now that it has a power to recommend an organization having greater powers than it has itself!

Mr. Fahy. Yes, sir; greater than recommendatory. The fact that the Economic and Social Council is limited to the power of recommendation does not limit the power of the Organization which it recommends should be created. The powers of the Organization created between the United States and other nations need not be limited to recommendatory power, although the Economic and Social Council power, speaking generally now, is itself limited to such matters as promotion of such organizations which are operating and not merely recommendatory.

The CHAIRMAN. Let us run through some of these articles of the Charter. I read article 55:

With a view to the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations based on respect for the principle of equal rights and self-determination of peoples, the United Nations shall promote:

(a) higher standards of living, full employment, and conditions of economic and social progress and development;

(b) solutions of international economic, social, health, and related problems; and international cultural and educational cooperation; and

(c) universal respect for, and observance of, human rights and fundamental freedoms for all without distinction as to race, sex, language, or religion,

Now, I assume that the purposes of the proposed Organization fit those purposes without any serious conflict?

Mr. Fahy. Fits certain of those economic clauses.

The CHAIRMAN. So this is the type of organization that is contemplated by the statement of these purposes?

Mr. Fahy. The Trade Organization includes some of these purposes but not all, I would not say.

The CHAIRMAN. Let us see whether they are not all in here.
Mr. Fahy. I was thinking of health, for example.

The CHAIRMAN. Well, I say this is a larger blanket. Under the blanket is completely covered the Organization that we are talking about.

Mr. Fahy. I am sorry; yes, The CHAIRMAN. Article 56 reads: All Members pledge themselves to take joint and separate action in cooperation with the Organization for the achievement of the purposes set forth in Article

sir.

55.

Now, is it not correct to say that the achievement of the purposes, those limitations which operate on the principal body, shall be principal limitations on the subordinate or satellite bodies?

Mr. FAHY. Yes.
May I interrupt you a moment, Senator?
The CHAIRMAN. Surely.

Mr. Fahy. The Congress of the United States, for example, passes a law authorizing the President to enter into trade agreements under certain standards. Now, the Senate or the Congress does not function with respect to the details.

The CHAIRMAN. That is right; it sets up the standards.

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