2. In order that the negotiations may proceed in an orderly fashion, it is desirable that a Steering Committee be established as soon as the various delegations have assembled at the Second Session.

SECTION G. RESULT OF THE NEGOTIATIONS

If the tariff negotiations proceed successfully along the lines set forth above, there should emerge from the negotiations a tariff schedule for each member, each schedule containing concessions granted to all of the other members in their own right. These schedules might be identified as follows:

Names of Country 1

Australia.

Belgo-Luxembourg-Netherlands Customs Union, Belgian Congo

and Netherlands Overseas Territories_.

Brazil..

Canada_.

Chile..

China

Cuba

Czechoslovakia....

France and French Union__

India_

New Zealand.

Schedule Schedule I

Schedule II

Schedule III

Schedule IV

Schedule V

Schedule VI

Schedule VII

Schedule VIII

Schedule IX

Schedule X

United Kingdom and the overseas territories for which it has international responsibility.

United States____.

Schedule XI

Schedule XII

Schedule XIII

Schedule XIV

Schedule XV

Schedule XVI
Schedule XVII

1 Separate, or possibly sub-divided, schedules may be necessary in the case of certain countries in order to provide adequately for certain overseas territories.

If the principles indicated in Article 33 of the Charter should prove acceptable to the Soviet Union, this schedule would relate, not to tariff concessions, but to an undertaking to purchase annually products valued at not less than an aggregate amount to be agreed upon.

SECTION H. GENERAL AGREEMENT ON TARIFFS AND TRADE

1. Once agreed upon the tariff schedules resulting from the negotiations among the members of the Preparatory Committee cannot easily be held in abeyance pending action by the International Conference on Trade and Employment and the adoption of the Charter by national legislatures.

2. It is, therefore, proposed that the tariff schedules be incorporated in an agreement among the members of the Preparatory Committee which would also contain, either by reference or by reproduction, those general provisions of Chapter V of the Charter considered essential to safeguard the value of the tariff concessions and such other provisions as may be appropriated. The Agreement should contain a provision under which the signatory governments could make any adjustments in the Agreement which may be desirable or necessary in the light of the action taken by the International Conference on Trade and Employment on the Charter. A draft outline of a General Agreement on Tariffs and Trade appears in Section I. The Drafting Committee should consider this outline and prepare a more complete draft for the consideration of the Preparatory Committee at its Second Session.

3. The General Agreement on Tariffs and Trade should be signed and made public at the close of the tariff negotiations. The Agreement should be legally independent of the Charter and should be brought into force as soon as possible after its signature and publication. Countries should be free to withdraw from the agreement at the end of three years or thereafter on giving six months' prior notice. This will provide an opportunity for a review of the Agreement and any adjustment of the tariff schedules which may be considered desirable.

4. The Agreement should conform in every way to the principles laid down in the Charter and should not contain any provision which would prevent the operation of any provision of the Charter.

5. The tariff concessions granted under the Agreement should be provisionally generalized to the trade of other countries pending the consideration by the International Conference on Trade and Employment of the question whether benefits

granted under the Charter should be extended to countries which do not join the International Trade Organization and which, therefore, do not accept the obligations of Article 24.

SECTION 1. CREATION OF A PROVISIONAL AGENCY PENDING THE ESTABLISHMENT OF THE INTERNATIONAL TRADE ORGANIZATION

Certain of the provisions of the General Agreement on Tariffs and Trade, for example, those incorporating Article 34 of the Charter (Emergency Action on Imports of Particular Products) and Article 35 of the Charter (Nullification or Impairment), will require for their successful operation the existence of an international body. It is proposed, therefore, that the members of the Preparatory Committee, which make effective the General Agreement on Tariffs and Trade, should create a provisional international agency for this purpose. This provisional agency would go out of existence upon the establishment of the International Trade Organization.

SECTION J. RELATION OF THE GENERAL AGREEMENT ON TARIFFS AND TRADE TO THE INTERNATIONAL TRADE ORGANIZATION AFTER ITS ESTABLISHMENT

Interim Tariff Committee

1. The Charter as now formulated provides in Article 67 that the countries which make effective the General Agreement on Tariffs and Trade shall constitute the original members of the Interim Tariff Committee to be set up within the International Trade Organization after the International Conference on Trade and Employment has met and the Organization has been established.

2. The Interim Tariff Committee will have the function of determining whether (with respect to any negotiations subsequent to those culminating in the General Agreement on Tariffs and Trade) any member of the Organization has failed to live up to its obligation regarding tariff negotiations and, under paragraph (3) of Article 24 of the Charter, of authorizing complaining members to withhold tariff benefits from offending members. The following points should be noted with regard to this function:

(a) A member of the Organization may be admitted to membership in the Committee when the member has completed tariff negotiations "comparable in scope or effect" to the negotiations already completed by the original members of the Committee. Thus, what is achieved by way of tariff action in the General Agreement on Tariffs and Trade will become the standard to which members of the Organization will be expected to conform in order to obtain membership of the Interim Tariff Committee. In applying this standard the Committee should have regard to the provisions of the Charter as a whole.

(b) Since it is agreed that the original members of the Interim Tariff Committee will have taken adequate steps toward fulfillment of the tariff obligations of the Charter in respect of negotiations among themselves (see Article III of the draft General Agreement on Tariffs and Trade), the Committee may not authorize one original member of the Committee to withhold tariff concessions from another original member of the Committee. This would be without prejudice, of course, to any decisions reached, under the auspices of the Organization, regarding a second series of tariff negotiations among the members of the Committee.

(c) Members of the Interim Tariff Committee must, in negotiations with members of the Organization which are not members of the Committee, be prepared to consider concessions on products of interest to the latter which were not dealt with in the original negotiations. Refusal to negotiate on such products might warrant a legitimate complaint. Accordingly the Committee could in such cases authorize a member of the Organization, which is not a member of the Committee, to withhold tariff benefits from a member of the Committee. However, the extent to which a member of the Organization, which is not a member of the Committee, might withhold tariff benefits from a member of the Committee would be limited only to tariff concessions which the former had already made pursuant to Article 24 and general tariff penalties could not be applied.

* It should be noted that the Organization, as distinct from the Committee, could authorize an original member of the Committee to withhold benefits from another original member of the Committee under certain other provisions of the Charter,

(d) The authority of the Committee would in all cases be limited to granting permission to a member of the Organization to withhold tariff benefits from another member. In no event could the Committee compel a member to withhold benefits.

Procedure for Broadening Membership in the Interim Tariff Committee through Additional Tariff Negotiations

1. Procedures must be developed for assuring, by negotiation, action for the reduction of tariffs and the elimination of preferences by members of the Organization, which are not parties to the General Agreement on Tariffs and Trade and hence would not be original members of the Interim Tariff Committee. The following alternative procedures are suggested for consideration:

(a) The original members of the Interim Tariff Committee would negotiate separate bilateral agreements with members of the Organization, which are not members of the Committee, and the latter would negotiate such agreements between themselves. The Committee would judge as to when a particular country had completed enough such agreements to entitle it to membership in the Committee.

(b) A member of the Organization, which is not an original member of the Committee, might offer to negotiate with the Committee a multilateral schedule of concessions similar in scope and legal application to the schedules appended to the General Agreement on Tariffs and Trade concluded among the original members of the Interim Tariff Committee and the original members of the Committee would agree to amend the multilateral schedules appended to the General Agreement on Tariffs and Trade to the extent necessary to assure appropriate concessions on products of which the country, not a member of the Committee, was a principal supplier.

2. Whatever procedure is adopted, due weight should be given in the negotiating process to concessions already made as a result of prior negotiations.

SECTION K. TENTATIVE AND PARTIAL DRAFT OUTLINE OF GENERAL AGREEMENT ON TARIFFS AND TRADE

The governments in respect of which this Agreement is signed:

Having been named by the Economic and Social Council of the United Nations to prepare, for the consideration of the International Conference on Trade and Employment, a Charter for an International Trade Organization of the United Nations;

Having, as the Preparatory Committee for the Conference, recommended to the Conference the provisions of such a Charter, the text of which is set forth in the Report of the Preparatory Committee; and

Being desirous of furthering the objectives of the Conference by providing an example of concrete achievement capable of generalization to all countries on equitable terms;

Have, through their respective Plenipotentiaries, agreed as follows:

Article I

1. During the life of the Agreement each signatory government shall make effective in respect of each other signatory government the provisions described below of the Charter for an International Trade Organization of the United Nations recommended in the report of the Preparatory Committee.

[There would follow a list of the articles to be included in the Agreement.] * 2. Functions entrusted to the proposed International Trade Organization under any of the provisions of the Charter incorporated in this Agreement by virtue of paragraph 1 of this Article shall, pending the establishment of the Organization, be carried out by a provisional international agency consisting of delegates appointed by the signatory governments.

Article II

With regard to Articles 24, 32 and 33 of the Charter, which relate to negotiations for

1. The reduction of tariffs and the elimination of tariff preferences, and 2. Parallel action by state-trading enterprises,

the signatory governments declare that they have, by virtue of Article III of this

Agreement, taken this step towards fulfilment of the obligations of these Articles
in respect of themselves and that they stand ready, in conformity with the spirit
of these Articles, to undertake similar negotiations with such other governments
as may desire to become members of the International Trade Organization.

Article III

Each signatory government shall accord to the commerce of the customs ter-
ritories of the other signatory governments the treatment provided for in the
appropriate Schedule annexed to this Agreement and made an integral part
thereof.

Article IV

(This Article would set forth the general exceptions provided for in Article
37 of the Charter.)

Article V

(This Article would reproduce the provisions of Article 38 of the Charter re-
lating to territorial application.)

Article VI

(This article would permit revision of the Agreement, by agreement among
the signatories, if necessary or desirable in order to take account of changes in
the Charter effected by the International Conference on Trade and Employment.)

Article VII

(This Article would provide for the entry into force of this Agreement, its
duration, and its termination. The Agreement would remain initially in force
for three years. If not terminated at the end of the three-year period (which
would require six months' prior notice), it would remain in force thereafter,
subject to termination on six months' notice.

There would be a number of purely technical and of purely legal provisions.)

EXHIBIT IV-D

OFFICIAL REPORT OF THE UNITED STATES DELEGATION TO THE
FIRST MEETING OF THE PREPARATORY COMMITTEE FOR THE IN-
TERNATIONAL CONFERENCE ON TRADE AND EMPLOYMENT, LONDON,
ENGLAND, OCTOBER 15, 1946

In December, 1945, the Government of the United States published and trans-
mitted to other governments for their consideration its Proposals for Expansion
of World Trade and Employment. These Proposals contain suggestions for rules
to govern trade barriers, restrictive business practices, intergovernmental com-
modity arrangements, the international aspects of domestic employment policies,
and outlined a suggested structure for an International Trade Organization of
the United Nations whose members would agree to conduct their commercial
relations in accordance with these rules. This publication coincided with the
conclusion of negotiations with the Government of the United Kingdom with
respect to the British loan. The Government of the United Kingdom at that
time stated that it was in full agreement on all important points with these
Proposals, and that it accepted them as a basis for international discussion.

Shortly thereafter, the United States Government issued invitations to the
Governments of Australia, Belgium, Brazil, Canada, China, Cuba, Czechoslovakia,
France, India, The Netherlands, New Zealand, South Africa, the U. S. S. R.,
and the United Kingdom envisaging the convening of an International Conference
on Trade and Employment for the purpose of establishing an International Trade
Organization of the United Nations which would carry the ideas of the Proposals
into effect. These fourteen governments were invited to join the United States in:
(a) a preparatory meeting to lay the groundwork for the International Conference
by preparing a draft Charter for the Organization; and (b) a meeting to negotiate
concrete arrangements for the relaxation of tariffs and trade barriers of all
kinds. With the exception of the U. S. S. R., all the fourteen governments
accepted the invitation of the United States Government from both points of view.
On March 5, 1946, the Economic and Social Council passed a resolution under
which the Council decided that it would itself sponsor the International Confer-
ence on Trade and Employment and under which it set up under its own auspices
a Preparatory Committee consisting of the fifteen governments above named, with
the addition of the Governments of Chile, Lebanon and Norway, to lay the ground-
work for the Conference by the elaboration of an annotated draft agenda, including
a draft Charter, for its consideration. Thus the Council took over from the United
States Government the initiative on the first matter ("a", above) covered in the
United States invitation.

At the same time, the Council suggested to the Preparatory Committee that
its agenda include the following topics:

"(a) International agreement relating to the achievement and main-
tenance of high and stable levels of employment and economic activity,
"(b) International agreement relating to regulations, restrictions and
discrimination affecting international trade,

"(c) International agreement relating to restrictive business practices,
"(d) International agreement relating to intergovernmental commodity
arrangements,

"(e) Establishment of an international trade organization, as a specialized
agency of the United Nations, having responsibilities in the fields of (b), (c)
and (d) above:"