I think, Senator Hawkes, that even if you cannot take any definite or positive action in some of these matters, this organization can inform the world about them, and I think there is a great deal of benefit in that. Senator HAWKES. You still think there is a great deal of force in moral suasion? Mr. CLAYTON. I do. The CHAIRMAN. Am I correct, Mr. Secretary, that private cartels are banished or discouraged under the scheme and that the scheme does provide for intergovernmental cartels? Mr. CLAYTON. Perhaps you would call it a cartel. It does provide, and I will come to it, what we call the intercommodity arrangements having to do with primary commodities. The CHAIRMAN. As far as there is anything beneficent in the cartels, you are adopting it into an intergovernmental arrangement. Mr. CLAYTON. Governmental only and not private. Senator HAWKES. May I interrupt right there and ask you what hope you have for the cartel in the hands of government and the politicians as compared to the cartel in the hands of a private group? Mr. CLAYTON. There are other differences here, Senator Hawkes, besides the difference between a private cartel and a governmental one. The intergovernmental commodity arrangements have only to do with primary commodities, things like cotton and wheat and sugar and coffee and things of that character. They do not have to do with chemicals and steel and things of that kind which ordinarily lend themselves to cartel arrangements. These intergovernmental commodity arrangements are to protect the primary producers of commodities. There is a very great difference in the character of the two things besides the difference that one is private and the other is governmental. Chapter VII deals with intergovernmental commodity arrangements. The subject of commodity agreements is one on which there have been wide differences of view and much controversy. The provisions in the draft charter take a middle-of-the-road course on this subject. These provisions recognize that in some circumstances commodity arrangements may be necessary. In the case of certain primary products, chronic conditions of oversupply may result in serious and long-protracted difficulties for large numbers of producers. To the extent that distress conditions of this kind affect a substantial part of the producers of the country, the market of that country for the products of other countries is reduced. Despite the fact that commodity arrangements result in a more or less rigid control of trade and an undesirable degree of regimentation of both production and trade, there may be circumstances in which commodity arrangements become virtually indispensable. In such circumstances the draft charter would permit the negotiation of such arrangements in accordance with the procedural requirements and principles which the charter lays down. On the other hand, the procedures and principles outlined in this chapter are designed to confine the negotiations of such agreements to those cases in which the need for them is clearly established. Let me say that these intergovernmental commodity agreements are recognized only in cases of burdensome surpluses, and in the making of the agreement consuming countries must have equitable repre sentation and must take part in the formulation of policies respecting exports and imports and prices and that sort of thing. In other words, in your formulation of intergovernmental commodity agreements under this ITO, it will have to be done both by the consuming and producing countries. Senator LUCAS. Is my assumption correct on that, that the commodity arrangements which you are talking about which you have described here are somewhat in the nature of a cartel solely designed to protect the producers of some given commodity while, on the other hand, the cartel as I have understood it was one that was designed to really deny the consumers what they were entitled to? Mr. CLAYTON. I think you put your finger on it. Ordinarily, the cartels that we know about have arrangements regarding prices and markets between a handful of great corporations producing not primary commodities. Tin, for example, has always been a subject for cartels. The tin cartel involved may be three countries, three or four countries, and a dozen producers perhaps. There may have been more than that, but relatively few. Senator LUCAS. They held it within their own hands to the detriment of the public in general and with the primary thought of profit? Mr. CLAYTON. Right. These intergovernmental commodity arrangements are contemplated to protect millions, literally millions, of producers. In the United States we have 8,000,000 farm families. We have 2,000,000 farm families producing cotton. And first of all it would be entered into by governments, not by individuals for private profit. It would be entered into by governments and for the protection of primary producers, of millions and millions of people. Senator LUCAS. I hope they are not designated as cartels. Mr. CLAYTON. I beg your pardon? Senator LUCAS. I hope they are not designated as cartels. Senator GEORGE. They are not cartels. Our coffee problem, we are still sticking to the machinery that we had during the war because there may come a time when we may be confronted by an overproduction of coffee in the coffee-producing countries to the detriment of the people in this country who process and sell it and use it. Mr. CLAYTON. Senator George, you have mentioned an intergovernmental commodity agreement that I believe was the first of its kind that was ever made, in that it did take into account producers as well as consumers. As you know, that arrangement was entered into by the United States and 14 coffee-producing countries in Central and South America. I think that is the only one of that kind that was ever made. That is the kind of agreement contemplated here, one that would be entered into by consumers as well as producers. Senator LUCAS. I can think of nothing that would be of more detriment to the program than to have it generally understood that these were cartel arrangements. Mr. CLAYTON. No, they are not. Senator LUCAS. I know they are not, but it was suggested that they were possible cartels. Mr. CLAYTON. We refer to them as intergovernmental commodity arrangements. The CHAIRMAN. I do not want to quarrel with the name you have on them, but what you propose does have something of a cartel about it. First, it goes to the control of production; secondly, it goes to some control of distribution; and, thirdly, it goes to control of price. So, you have the three basic principles of a cartel in what you call an intergovernmental commodity arrangement, and I am not quarreling about the term. Senator CONNALLY. Of course, Senator, we have good trusts and bad trusts. This is a good one, and a cartel is a bad one. Mr. CLAYTON. Of course, "cartel" generally carries a connotation of something evil. As a general thing, as he said, they are generally made by fellows who do not care about the consumer. Now, the consumer interests are taken into account in this thing and I think it takes away from it that evil connotation. With respect to the chapter on organization, the form of the organizational machinery established in the ITO is less important than the commitments member governments are willing to undertake on the substantive matters to which I have referred. These substantive undertakings are of more pressing urgency and significance. However, there is an interdependence between the substantive provisions of the charter and the organizational provisions. This fact warrants your examination of the provisions of the chapter on organization. I have attempted in this statement to mention only the more important provisions in the draft charter. Whatever the detailed provisions may be to which this and other governments give their ultimate approval, I am fully convinced of the indispensability of an organization functioning under articles of agreement along the lines of the present draft charter. Without this, none of the machinery for international economic cooperation can work effectively, if it will work at all. And I want to emphasize that if the machinery for economic cooperation does not work, the machinery for international cooperation in other fields will eventually and inevitably break down. Political questions arise between nations now and then; economic contacts and relationships are of hourly occurrence between most nations in the world. Most real differences between nations have their origin in economic causes. Seeds of future conflicts have often been planted in the failure to adjust such difference promptly and equitably. Moreover, there is a very close relationship between economic and political questions. This has recently been strikingly illustrated. The President in his recent address to the joint session of Congress on the Greek and Turkish situation, said that the seeds of totalitarian regimes are nurtured by misery and want; that they spread and grow in the evil soil of poverty and strife; and that they reach their full growth when the hope of people for a better life has died. The President said, therefore, that our help to the countries concerned should be primarily through economic and financial aid which is essential to economic stability and orderly political processes. For the time being, we must give direct financial help. But we should move as rapidly as possible in completing arrangements for international economic cooperation which will enable countries requiring assistance to get on their feet as quickly as possible. In this way we can, in time, accomplish our purposes not only without cost but with positive advantage to ourselves. This is so because the ex pansion of international trade through cooperation with other countries will greatly increase the prosperity of the United States. Thank you. The CHAIRMAN. Mr. Secretary, I am going to ask you a number of questions. If I ask you any which you would rather have referred to Dr. Wilcox, please let me know. Mr. CLAYTON. Yes, sir. The CHAIRMAN. First, I would like to expand on a point which Senator Connally raised a while ago. This organization will be under the United Nations Charter, will it not? Mr. CLAYTON. Yes, sir. The CHAIRMAN. It will be a specialized agency under the Economic and Social Council? Mr. CLAYTON. Yes, sir. The CHAIRMAN. It will have no powers that are not granted by the Charter of the United Nations, is that correct? Mr. CLAYTON. It will certainly have no powers that are not granted by its own charter, and I assume that they will all be consistent, certainly, with the powers granted by the United Nations Charter. The CHAIRMAN. Surely the subordinate agency cannot rise to higher Sources of power than the United Nations Organization itself? Mr. CLAYTON. It might be spelled out in a little more detail. The CHAIRMAN. But if spelled out in more detail, it would have to conform to the United Nations? Mr. CLAYTON. Yes, sir. The CHAIRMAN. Let me read from chapter IX of the Charter of the United Nations, article 55. [Reading:] With a view to the creation of conditions of stability and well-being which are necessary for peaceful and friendly relations among nations based upon respect for the principle of equal rights and self-determination of peoples, the United Nations shall promote. three listed purposes to which I am sure there is no sharp objection. [Reading:] ARTICLE 56. 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 55. ARTICLE 57. (1) The various specialized agencies, established by intergovernmental agreement and having wide international responsibilities, as defined in their basic instruments, in econome, social, cultural, educational, health, and related fields, shall be brought into relationship with the United Nations in accordance with the provisions of Article 63. (2) Such agencies thus brought into relationship with the United Nations are hereinafter referred to as specialized agencies. I assume this to be one of those specialized agencies. Mr. CLAYTON. Yes, sir. The CHAIRMAN. I continue reading: ARTICLE 58. The Organization shall make recommendation for the coordination of the policies and activities of the specialized agencies. ARTICLE 59. 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. ARTICLE 60. Responsibility for the discharge of the functions of the Organization set forth in this Chapter shall be vested in the General Assembly and, under the authority of the General Assembly, in the Economic and Social Council, which shall have for this purpose the powers set forth in Chapter X. This is a little tedious, but I think that I am developing a very important point which will help us all through the later discussion of this matter. CHAPTER X. THE ECONOMIC AND SOCIAL COUNCIL ARTICLE 61. (1) The Economic and Social Council shall consist of eighteen members of the United Nations elected by the General Assembly. (2) Subject to the provisions of paragraph (3), six members of the Economic and Social Council shall be elected each year for a term of three years, A retiring member shall be eligible for immediate reelection. (3) At the first election, eighteen members of the Economic and Social Council shall be chosen. The term of office of six members so chosen shall expire at the end of one year, and of six other members at the end of two years, in accordance with arrangements made by the General Assembly. (4) Each member of the Economic and Social Council shall have one representative. ARTICLE 62. (1) The Economic and Social Council may make or initiate studies and reports, with respect to international economic, social, cultural, educational, health, and related matters and may make recommendations with respect to any such matters to the General Assembly, to the Members of the United Nations, and to the specialized agencies concerned. (2) It may make recommendations for the purpose of promoting respect for, and observance of, human rights and fundamental freedoms for all. (3) It may prepare draft conventions for submission to the General Assembly, with respect to matters falling within its competence. (4) It may call, in accordance with the rules prescribed by the United Nations, international conferences on matters falling within its competence. ARTICLE 63. (1) The Economic and Social Council may enter into agreements with any of the agencies referred to in Article 57, defining the etrms on which the agency concerned shall be brought into relationship with the United Nations. Such agreements shall be subject to approval by the General Assembly. (2) It may coordinate the activities of the specialized agencies through consultation with and recommendation to such agencies and through recommendations to the General Assembly and to the Members of the United Nations. ARTICLE 64. (1) The Economic and Social Council may take appropriate steps to obtain regular reports from the specialized agencies. It may make arrangements with the Members of the United Nations and with the specialized agencies to obtain reports on the steps taken to give effect to its own recommendations and to recommendations on matters falling within its competence made by the General Assembly. (2) It may communicate its observations on these reports to the General Assembly. ARTICLE 65. The Economic and Social Council may furnish information to the Security Council and shall assist the Security Council upon its request. ARTICLE 66. (1) The Economic and Social Council shall perform such functions as fall within its competence in connection with the carrying out of the recommendations of the General Assembly. (2) It may, with the approval of the General Assembly, perform services at the request of Members of the United Nations and at the request of specialized agencies. (3) It shall perform such other functions as are specified elsewhere in the present Charter or as may be assigned to it by the General Assembly.. Article 67 has voting provisions. Article 68 has provisions dealing with the setting up of commissions in economic and social fields for the promotion of human rights. [Reading:] ARTICLE 69. The Economic and Social Council shall invite any Member of the United Nations to participate, without vote, in its deliberations on any matter of particular concern to that Member. At the time the United Nations Charter was before the Senate, we had an interpretation of those chapters both by the Secretary of State and in the hearings on the Charter. I should like to read you briefly from the interpretation of the Secretary of State. It was dated, as you recall, June 26, 1945, in the Secretary's report to the President on the |