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coming back to my original question to you when we opened the discussion in that paragraph, what limitations, if any, are there as to the kind of measures which may be pursued.

Mr. TERRILL. Senator, is this in article 43 ?
The CHAIRMAN. Article 43, paragraph 1.

Mr. TERRILL. I am afraid, Senator, that I do not get the thought that you have in mind.

The CHAIRMAN. I want to make it very clear to you. Members may cooperate with each other in certain prescribed types of measures for the purpose of making something more effective. Now, they may cooperate in prohibitive practices, in preventive practices, or in other measures. I am trying to find out, may they, for example, engage in trade boycotts.

Mr. TERRILL. It is the “other measures” that you have in mind, Senator?

The CHAIRMAN. The measures of trade boycott might be prohibitory, they might be preventive or come under the category of “other measures.” I am trying to find out whether it includes other collective discriminatory practices.

Mr. TERRILL. Yes, I understand, sir.

The CHAIRMAN. In addition to the special things which I mentioned, what are the limits, or what are the lack of limits under that paragraph?

Mr. TERRILL. Thank you, sir.

(The State Department subsequently submitted the following memorandum :)

Question: What is the general purpose and effect of article 43? What is the limit of the remedies which members may impose under the article; can they harass United States business operating subsidiaries within their borders?

Article 43 provides :

"1. Members may, by mutual accord, cooperate with each other in prohibitive, preventative, or other measures for the purpose of making more effective any remedial order issued by a duly authorized agency of any Member in furtherance of the objectives of this chapter.

"2. Members participating in such cooperative actions shall notify the Organizations."

This provision affirms the right of any Member to cooperate with other Members in a manner which they are free to pursue today. It removes any ambiguity which the remainder of the chapter might otherwise have created regarding the freedom of Members in this respect. To have prohibited Members from engaging in cooperative undertakings with others or to have curtailed their rights in this respect might well be considered an unwarranted and unnecessary arrogation of power by the Organization.

Where a restrictive arrangement is complex and far flung, and requires remedial measures in a number of different countries, the procedures indicated by articles 43 will tend to bring about less diverse and better integrated remedies in the different countries. It will be noted that article 42 obliges each member to “determine action in accordance with its system of law and economic organization *". Since each Member must devise remedies consistent with its administrative and judicial procedures, there is no assurance that a remedy in the United States which is embodied in a court decree, for example, will parallel precisely a remedy devised by a European country. Thus, consultation between Members with respect to such remedial measures may be helpful in bringing about more effective world-wide solutions to major restrictive arrangements.

The question has been raised whether article 43, on ratification by Congress, may not clothe the Attorney General or the United States courts with the power to enforce the decrees of, say, a Canadian court. In our view, article 43 does not enhance the powers of the United States courts or the Attorney General. The article is not self-executing; it is couched in permissive language and is not

sufficiently express in character to constitute enabling legislation of the kind necessary to increase such powers.

Moreover, the nature of the action which can be imposed by Members under the article is limited under the Charter, and "remedies” which might be unfair to United States interests are, for practical purposes, barred by these other provisions. For example, in article 42, each Member undertakes to "determine. action in accordance with its system of law and economic organization". Members may do whatever their own laws empower them to do, consistent with the objective of eliminating the restrictive business practice involved, provided such remedies are not inconsistent with other articles of the Charter. Moreover, national remedies cannot be in violation of other international obligations of a Member, such as its treaties of commerce and friendship with other nations; and bilateral treaties of the United States with many other countries limit the freedom of these countries to impose arbitrary and discriminatory measures upon United States nationals and their property. This fact would in effect eliminate boycotts, special taxes, or other discriminatory or harassing "remedies". It should also be noted that article 12, paragraph 2, of the Charter specifies that the Members “* shall in general take no unreasonable action injurious to the interest of such other Members, business entities or persons." Moreover, under this paragraph each Member affirms that it

shall carry out all relevant internationad obligations to which it may be subject or may undertake pursuant to subparagraph (c) of article 61

As a result, it would appear that there is no danger of unfair "remedies" being used against United States interests under these articles.

The CHAIRMAN. Article 45 [reading]:

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EXCEPTIONS TO THE PROVISIONS OF THIS CHAPTER

1. The obligations in this.Chapter shall not apply to

(a) intergovernmental commodity arrangements meeting the requirements of Chapter VII;

(b) the international arrangements excepted in Article 59. What are those in 59? Mr. TERRILL. There is a fairly extensive list, sir.

The CHAIRMAN. That has to do with intergovernmental commodity arrangements.

Mr. TERRILL. Yes. The article begins with the distribution of commodities in short supply, then it goes on to conservation, and, third, it takes up military matters, fissionable materials and the like.

The CHAIRMAN. Continuing [reading]: 2. Notwithstanding the foregoing paragraph, the Organization may make recommendations to Members and to appropriate intergovernmental organizations concerning any features of the arrangements referred to in paragraph 1 (b) of this Article

Those are international arrangements excepted in article 594 which may have the effect described in Article 1 of Article 39.

I doubt if that article requires any particular comment. Do you wish to offer any further comments, Mr. Terrill?

Mr. TERRILL. No, sir. I have not any. What I have to say on patent matters can best, I think, be said in writing, rather than orally.

The CHAIRMAN. I have a paper entitled “Export Groups of the United Kingdom from the Board of Trade Journal dated April 20, 1946.” It purports to be a list of export groups recognized by the Board of Trade.

I believe that the list will show perhaps as many as 200 of such groups, and it will serve as a complementary list to the list of such groups put into the record earlier representing organizations of the United States interested in export trade.

It will be put in the record at this point. (The list appears as exhibit XII B.)

The CHAIRMAN. Will you state your full name, please, your resi. dence, your occupation, and tell us something of your background?

STATEMENT OF WILLIAM TAYLOR PHILLIPS, ACTING CHIEF,

INTERNATIONAL RESOURCES DIVISION, DEPARTMENT OF STATE,
WASHINGTON, D. C.
Mr. PHILLIPS. Yes, sir.

I am William Taylor Phillips, 1018 Valley Drive, Alexandria, Va. I am at present Acting Chief of the International Resources Division, in the Department of State.

My background is in the general field of economies. I taught economics 2 years at Cornell University and 2 years at the University of New Hampshire, after having received a PhD in economics from Cornell University.

I worked in the Bureau of Labor Statistics, and in the Office of Price Administration during 1942 and part of 1943; from there I went to the State Department, originally in the Division of Economic Studies, then in the Commodities Division, which was a newly constituted division during the war, and which, in turn, became the International Resources Division.

The CHAIRMAN. Going now to chapter VII [reading):

INTERGOVERNMENTAL COMMODITY ARRANGEMENTS

SECTION A. INTERGOVERNMENTAL (OMMODITY ARRANGEMENTS IN GENERAL

ARTICLE 46. DIFFICULTIES RELATING TO PRIMARY COMMODITIES The Members recognize that the relationship between production and consumption of some primary commodities may present special difficulties. These special difficulties are different in character from those which manufactured goods present generally. They arise out of such conditions as the disequilibrium between production and consumption, the accumulation of burdensome stocks and pronounced tiuctuations in prices. They may have serious adverse effects on the interests of producers and consumers, as well as widespread repercussions' jeopardizing general policies of economic expansion.

At this point, Mr. Phillips, let me ask you, is the chapter limited to primary commodities, or does it, for example, expand later on into industrial commodities.

Mr. PHILLIPS. It is limited, sir, to primary commodities, except that nonprimary products may, in special instances, be brought under the chapter. We had in mind two particular types of cases: First, a group of primary products, such as fats and oils, which might encompass one or more fabricated products, and second, a commodity such as rubber, where you might have a general world surplus, and you probably would have to take into account synthetic production in the United States and Canada, and the U.S. S. R.

However, the chapter is primarily directed at primary commodities. The CHAIRMAN. Article 47 [reading]:

OBJECTIVES OF INTERGOVERNMENTAL COMMODITY ARRANGEMENTS Intergovernmental commodity arrangements may be employed to enable countries to overcome the special difficulties referred to in Article 46 without resorting to action inconsistent with the purposes of this Charter, by achieving the following objectives:

(a) to prevent or alleviate the serious economic problems which may arise when production adjustments cannot be effected by the free play of market forces as rapidly as the circumstances require;

(b) to provide, during the period which may be necessary, a framework for the consideration and development of measures which will have as their purpose economic adjustments designed to promote the expansion of consumption or a shift of resources and manpower out of over-expanded industries into new and productive occupations ;

(c) to moderate pronounced fluctuations in the price of a primary commodity above and below the level which expresses the long term equilibrium between the forces of supply and demand (in order to achieve a reasonable degree of stability on the basis of remunerative prices to efficient producers without unfairness to consumers);

(d) to maintain and develop the natural resources of the world and protect them from unnecessary exhaustion; and

(e) to provide for expansion in the production of a primary commodity which is in such short supply as seriously to prejudice the interests of consumers. Dr. Phillips, is there not a fundamental inconsistency between the objectives of Article 47 and the other objectives of the Charter?

Mr. PHILLIPS. Yes, sir, there is, in this sense. The activities which might be included in an intergovernmental commodity arrangement, which would be under governmental auspices, might require, in fact very probably would require, the imposition of export quotas, perhaps a two price system-a domestic price and a world price—and other types of restrictions which the whole Charter attempts to do away with.

The reason that we feel it may be necessary to resort to these particular activities is that certain commodities are so vitally important to particular countries such as, for example, wool, meat, and dairy products from Australia or tin from Bolivia. In that sort of a situation it is felt that there will be commodity arrangements among producers, whether we like it or not, simply because those countries are either unable or unwilling to let the slow market readjustment take place. They feel that they must take some sort of action. That action very often results in such things as reserving the domestic market exclusively for domestic production, which might be accomplished through embargoes or quotas.

It might be done through an export subsidy whereby a country attempts to force its own production on the world markets. In that case, a subsidy race may ensue where the largest purse would determine which country actually got rid of its surplus.

So, we feel that intergovernmental action will be taken and that arrangements will be entered into; they have in the past, and we know that they will be in the future. What we are trying to do in this chapter is to lay down some rules of the road, so to speak, which will eliminate some of the worst characteristics of agreements as we have seen them in the past.

Previous agreements in many cases have involved producers only. The consumer has had nothing to say about the activities taken under the agreement. In many cases agreements have merely provided an

60316-47-pt. 1-31

umbrella for producers, whether efficient or inefficient. In most cases they have been conducted more or less behind a veil of secrecy.

The attempt here in this chapter is to admit that there probably will be agreements. We are not trying to encourage such arrangements nor to prohibit them, but we feel that whatever agreements are entered into should follow specific rules of the game, the most important of which is the requirement that consuming interests should have an equal voice in determinations with the producing interests. That, plus full publicity, we feel, will give a great measure of protection against possible abuses that have appeared in the past.

The CHAIRMAN. Is the net effect to exclude private arrangements ?

Mr. PHILLIPS. Yes. The fear is that if you take action such as that described in chapter VI to eliminate restrictive business practices, there might be a tendency for private interests, particularly in some of the smaller countries, to shift to an intergovernmental basis, and private producers might urge that their governments press for intergovernment arrangements on all kinds of fabricated products. We don't want that to occur. That is one of the major reasons for limiting this chapter almost exclusively to primary production. We do not want it to become an outlet for fabricated products which were subject to a cartel arrangement, under what might be governmental auspices.

The CHAIRMAN. Now, let us suppose that the United States entered into one of these intergovernmental commodity arrangements on, let us say, wheat.

What, exactly, would the United States have to do to bring its arrangement into consonance with the facts of wheat growing, wheat harvesting, wheat storage, wheat distribution, wheat pricing?

Mr. PHILLIPS. Senator, I believe the technique would be as follows:

The countries of the world, both producing and consuming, that are substantially interested in world wheat would get together and undertake negotiations among themselves for a wheat agreement. Precisely what form that agreement would take, it is impossible to say.

The CHAIRMAN. It would have some characteristics; would it not!

Mr. PHILLIPS. Yes, sir; it would have characteristics, and after negotiation, it would be referred to the Congress.

The CHAIRMAN. Now, what would be the normal characteristics of an agreement of that kind; let us say, as to a wheat agreement ?

Mr. PHILLIPS. Well, my guess would be that a wheat agreement would probably involve export quotas that the producing countries would guarantee to ship. It might well involve commitments on the part of the importing countries to import certain quotas. In addition, there might be a permitted price range.

The CHAIRMAN. There might be price ranges in there?

Mr. PHILLIPS. Within a price range, you presumably would have a commitment on the consumers to taxe X bushels of wheat at something within the price range.

The CHAIRMAN. Then, there would be delivery schedules and delivery points?

Mr. PHILLIPS. Yes. Well, there would be delivery points, certainly, but whether or not it would be necessary to schedule shipments under international auspices would be hard to say.

The CHAIRMAN. Well, somewhere in the arrangement, those things would naturally be taken care of; would they not?

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