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in the fall of 1947 and completed its labors on March 24, 1948. The result of the se deliberations is the Havana Charter for an International Trade Organization.



Commercial Policy

The Charter deals primarily with the international exchange of goods. Its central core is the Chapter on Commercial Policy, (Chapter IV, pp. 45 to 84). It is that Chapter which contains the underlying principles of the document, and its other sections for the most part complement or qualify tho se central principles. These principles can be simply stated.

First, there is the familiar principle of most-favorednation treatment, that is, that no country should give special favors to the trade of another country, but should treat all alike.

Second, there is the principle, already embodied so far as the United States is concerned, in the Reciprocal Trade Agreements Act, that countries should be prepared to negotiate with each other for the selective reduction of tariffs and for the elimination of preferences.

Third, there is the principle that any barriers to trade or limitations on imports should be openly concentrated at the customs frontier, that after imported goods cross the frontier they should receive the same treatment as domestic goods, and that tariff concessions given or received should not be nullified by internal taxes or regulations which discriminate against imported goods.

Fourth, there is the principle that the "invisible tariff" of customs regulations, often more burdensome to trade than actual tariff rates, should be lowered by simplification.

Fifth, there is the principle that quotas on imports and exports should not be used for protective purposes.

If the se principles are accepted and put into operation, the movement of goods in international trade would be greatly

and the businessmen and producers of the various nations of the world would have the best opportunity to sell their goods on a competitive basis.

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It was apparont, however, that this Chapter on Commercial Policy could not do the job alone. In certain ca808, experience has shown that restrictive agreements and practicos of private business groups had prevented and diverted the competitive movemont of goods in international trade as effoctively as barriers imposed by governments. We havo had experience with such restrictive practices in the United States and we have domestic laws and institutions, such as the anti-trust laws and the Federal Trade Commission to deal with them. But there is as yet no mechanism for dealing with such practices in international trade. A Chapter is therefore included in the Charter to deal with this problem.

Commodity Agreements

The Chapters on Commercial Policy and Restrictive Business Practices are designed to deal with situations in which the normal competitive forces of the market place, if allowed to operate, will usually deal satisfactorily with the situation. In one important area of international trade, however, special governmental measures may be required. This is the area of primary commodities, where burdensome surpluses may develop which would create widespread hardship in the absence of governmental action, and where the normal forces of the market place do not operate effectively to give relief

We have recognized in our domestic farm legislation (e.g. price supports) the special problems which often confront our producers of primary products. The Charter similarly recognizes that special measures may be required from time to time to deal with the problems of such producers in international trade, Hence it includes a Chapter on Intergovernmental Commodity Agreements.

Economic Development

Moreover, the Charter recognizes that action to remove barriers to the movement of goods will be futile unless there are goods to move and purchasing power to buy them. Men who are unemployed do not buy the products of their own or other countries. Countries in a primitive state of development do not provide substantial markets for the goods of other countries, nor do they produce many things for their own citizens and those of other countries to buy. Therefore the Charter contains Chapters dealing with certain international aspects of employment and economic development.



Finally, the Charter establishes an international organization in which problems arising out of trade relationships can be discussed and solutions reached.

The Organization, after discussion of a problem, can make recommendations for action by members. Members are free to decline to follow the recommendations of the Organization. If they do, however, the Organization can release other affected members from their obligations under the Charter to the member refusing to follow the recommendations.

The Organization has no power to direct or require any member to take action.

Thus it will be seen that the various Chapters of the Charter are closely interrelated. They seek to deal with various trade problems which, though they arise in widely different forms, require consistent treatment if the central objective of the Charter, namely

"To assure a large and steadily growing volume
of real income and effective demand, to increase
the production and exchange of goods, and thus to
contribute to a balanced and expanding world eco-
nomy" (Article 1 (1) )

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The Article contemplates that tariff concessions negotiatod under it will be incorporated in the Goneral Agroement on Tariffs and Trade conoluded at Geneva on October 30, 1947 and expanded at Annocy in 1949. It further contom plates that if any Member fails within two years after becoming a Member to negotiate its way into the General Agroement on Tariffs and Trade, the other Members who are parties to that Agreement may be released from their obligations under Article 16 to give the non-negotiating Member the benefits of the concessions which they granted in the Gonoral Agreemont on Tariffs and Trade.

3. National Treatment with Respect to Intornal Taxes and

Regulations (Article 18)

Article 18 embodios a rocognition by Members that intornal taxes and regulations should not be used as protective measures, and that products of a my member country importod into any other member country shall not be subject to internal taxes or charges in excess of those applied to like domo gtic products. It requires similarly that internal regulations must not be applied to imported products in a more burden some manner than to domestic products,

Regulations roquiring the mixture of domestio products with imported products are forbidden for the future, though od sting mixing re qe irements are permitted to continue, These may not be increased and aro subject to negotiation for their liberalization. This exception will permit the continuance of the mixing regulations imposed by the United States with respect to synthetic rubber, which is the only regulation of this type used by the United States.

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Provision with Respect to Motion Picture Films
(Article 19).

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Motion picture films are different from ordinary imports in that their valuo is not in the film itself, but in its earning power. Hence, the tariff is not an adequate protective device for motion picture films. It was therefore agreed that protection for dame stio motion picture industries could bo given by a so-called screen quota, which reserves a cortain proportion of the playing time in domostio theaters for films or domestio origin. The amount of time thus reserved is made subject to negotiation, as are tariff rates, and the balance of timo not reservod cannot be allocated as botween imports from difforent sourcos.


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Section B deals with quantitativo rostrictions (such as quo tas) and related exchange mattors. The Soction contains a genoral commitment not to use quantitativo restrictions. This rule has cortain excoptions, the most important of which are that agricultural or fisheries Imports may be limited when the produs tion or marketing of the like domestic product is limited, and that imports may be limited whon a country 18 in balance-of-payments difficulties. Tho dotermination as to whether a country is or 18 not in balance-of-payments difficulties rests with the International Monetary Fund. # If a country 18 permitted to restrict imports by quotas, it is required to apply those restrictions in a nondiscriminatory manner, excopt, during the postwar transitional period con templatod by tho Fund Agreemont, when it may discriminato in the application of quotas permitted for balanco-of-payments reasons. 1. General Elimination of quantitative Restrictions (Artiolo 20).

Article 20 contains a basic undertaking of Members not to use quotas to restrict imports or exports. This is one of the major commitments in the Charter, since quotas are potentially most obstructivo of all barriers to trade. A tariff, oven though high, may be surmounted if there is sufficient demand, but the quota imposes an absolute limitation upon the amount of products which may be admitted.

Thoro are, no Cossarily, important qualifications to the full application of this principle. Somo of those are permanent, others tomporary. Tho not effect of Section B, however, is a goneral ban on the di ota as an instrumont of protection, though it may, undor corta in circumstancos, bo used for specifiod other purposos.

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The International Monetary Fund was established in 1945 as a means of promoting stability in the field of foreign exchange. Forty-eight nations are members, United States membership was authorized by the Congre 88.

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