and they are subject to reduction in the future in accordance with the selective bargaining procedures of article 17.

2. ARTICLE 17. REDUCTION OF TARIFFS AND ELIMINATION OF PREFERENCES

In article 17, members undertake to enter into and carry out negotiations with each other directed to the substantial reduction of tariffs and the elimination of preferences. The procedures contemplated are similar to those under the Trade Agreements Act which has been in force in the United States since 1934. Tariff cuts are not made by reducing all existing rates by some uniform percentage. Instead, a country bargains individually with other countries, one at a time, concerning tariff reductions on those articles of which each country is the chief or an important supplier of the other and which each elects to put up for bargaining. In effect, countries agree to "swap" tariff concessions on a "product-by-product" basis.

This procedure was actually carried out on a large scale at Geneva in 1947 when the United States negotiated tariff reductions with 22 other countries, and many of these countries likewise negotiated with each other. The resulting tariff rates were then incorporated into one inclusive document known as the "General Agreement on Tariffs and Trade" 1

At this point, article 17 ties in closely with article 16 which obliges each member to extend to all other members its lowest tariff rates including all tariff concessions negotiated in trade agreements. The members who participated in the Geneva negotiations must extend to other countries joining Iro the same reduced tariff rates on every product included in the General Agreement. However article 17 requires that if these other countries are to continue to be entitled to receive "bargain" rates, they must also, within two years, negotiate tariff reductions with countries now parties to the General Agreement. 3. ARTICLE 20. GENERAL ELIMINATION OF QUANTITATIVE RESTRICTIONS (Quotas)

This article concerns quantitative restrictions, trade barriers that consist of governmental regulations specifying the amounts of any product that can enter or leave the country during a certain period of time. Article 20 lays down the general rule that members shall not use quantitative restrictions to regulate the import or export of any product, save under exceptional circumstances.

The chief exception to the rule against export restrictions in this article relates to the case of a critical shortage of foodstuffs or other essential products. The chief exception to the rule against import restrictions in the article relates to agricultural products, where the

1 Department of State publication 3107. Commercial Policy Series 111.

domestic supply is also subject to governmental restrictions. When used in conjunction with such domestic programs, however, quantitative restrictions on imports cannot be used as a protective device to increase the share of domestic producers in their national market.

II. SUPPORTING ARTICLES

The basic rules of the Charter with regard to equal treatment, the reduction of tariffs, and the elimination of quantitative restrictions are directly involved in some 50 related articles. Approximately half of these articles may be regarded as supporting or extending the basic provisions, while the remainder may be considered as qualifying them. 1. PROVISIONS RELATED TO ARTICLE 16

(a) Moving Pictures

Under article 19, movie films, a large U.S. export item, are guaranteed fair treatment in the theaters of each member country as against the competing film exports of other members. A member is allowed to reserve a portion of the total screen time in its theaters for films of domestic origin but must allow competition as between producers in other member countries for the remainder of the business. Moreover the proportion of time thus reserved is subject to reduction or elimination in accordance with the bargaining procedures of article 17.

(b) Non-discriminatory Administration of Quantitative Restrictions Article 22, as indicated by its title, likewise deals with the same general subject as does article 16. Under certain circumstances, a member may be permitted to use quantitative restrictions. However this article insures that such restrictions as are permitted will be applied equitably to give fair treatment to exporters situated in all other member countries. It prescribes a general rule to this effect and sets forth a number of requirements to give the rule precision and enable it to be enforced.

(c) State Trading Enterprises

In

Articles 29 and 30 concern the behavior of stat trading enterprises (i.e. those operated or controlled by governments) in world markets. These articles, also, are related to article 16 as indicated by the expression "Non-discriminatory Treatment" in their title. article 16, it will be recalled members are pledged not to discriminate against the trade of other members in customs matters. This pledge could be completely nullified, however, by the actions of state enterprises. They could be directed to discriminate against the commerce

of other members in their sales and purchases abroad if it were not for the provisions of article 29 which expressly prohibits such conduct. This article prescribes, moreover, that the buying and selling activities of state enterprises must conform to the same commercial considerations as govern the operations of private firms and must afford potential buyers and sellers abroad a reasonable opportunity to compete for the business of such enterprises.

2. PROVISIONS RELATED TO ARTICLE 17

(a) Internal Taxation and Regulations

Tariff reductions, as provided for in article 17, could be entirely nullified if a member were free to impose special regulations or taxes on trade in foreign products after they have entered its territory. The purpose of article 18 is to guarantee that this will not occur, and, accordingly, its provisions are basic in the structure of the Charter. Whereas article 16 prescribes most-favored-nation treatment, this article requires that when imported goods have duly passed into domestic trade, they can be subject only to the same taxes, laws, and regulations as apply to similar domestic goods. This principle of "national treatment" is expressed in the following words: "The products of any Member country imported into any other Member country shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations, and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use."

(b) State Trading Enterprises

In article 31, state trading enterprises again figure, this time in relation to protective tariffs. The governments of some countries have decreed by law that all foreign trade in certain products, such as tobacco or some essential foodstuff, is to be conducted only by a designated company, usually a government-owned enterprise. Such monopoly enterprises can buy on the world market any required imports, resell them on the domestic market at a higher price, and thereby afford protection to domestic producers of the product. The effect is the same as that of a tariff duty. Article 31, therefore, subjects such protective margins established through state monopolies to the same bargaining rules as apply to tariffs under article 17. Article 31 also covers other aspects of the operations of state monopolies, including export monopolies, to insure that they are not conducted in a manner that would disrupt world commerce.

3. PROVISIONS RELATED TO ARTICLE 20

(a) Mixing Requirements

Article 18 (paragraph 5) forbids the adoption in the future of internal quantitative regulations commonly known as "mixing regu

lations". These are requirements imposed by governments that a certain percentage of a domestic product must be used in conjunction with an imported product (e.g., domestic alcohol with imported gasoline). Existing requirements of this kind, which are comparatively rare at the present time, are specifically exempted from this prohibition. However it is provided that they shall be subject to negotiations for their reduction in the same manner as tariffs under article 17.

4. PROVISIONS RELATED TO ALL THREE KEY ARTICLES

Consideration may next be given to some twenty articles which relate to the entire group of "key" provisions and whose purpose is likewise to avoid discriminatory treatment and to remove or reduce trade barriers. In addition, they are intended to prevent many governmental actions that might counteract or nullify the beneficial effects of the "key" provisions. These related articles are found in three major groups which may be conveniently studied as follows: articles 33 to 39 (section E of chapter IV); articles 46 to 54 (chapter V); and articles 25 to 28 (section C of chapter IV).

(a) "Invisible Tariffs"

Section E of chapter IV, "General Commercial Provisions,' governs the detailed regulations that countries apply to the handling of foreign trade shipments. These requirements, commonly known as "invisible tariffs", are detailed and complex; moreover, they are quite different in various countries both as to substance and administration. They constitute the "red tape" which traders frequently regard as more burdensome to their operations than many tariffs. The object of articles 33 to 39, which cannot here be reviewed individually, is to simplify these requirements and, where possible, make them uniform in all member countries; to reduce the costs of handling shipments; to ensure the just and impartial administration of all regulations; and otherwise to make it as convenient as possible for traders to move their goods in world commerce. These provisions thus mark an important advance in a field where previous attempts have been unsatisfactory.

(b) Restrictive Business Practices

Chapter V, "Restrictive Business Practices", concerns a subject commonly known as "international cartels". It would be largely futile to remove the discriminations and reduce or eliminate the trade barriers imposed on a product by governments if business enterprises were free under the Charter to create them. Indeed, if this were the case, governments might deliberately guide enterprises, private as well as public, to pursue policies or enter into agreements precisely contrary in effect to the rules laid down in articles 16, 17, and 20.

Moreover these rules presuppose that effective competition will prevail in world markets so that the flow of trade will respond to market forces, thus avoiding its regimentation under government-togovernment deals. Chapter V accordingly requires members to prevent public or private commercial enterprises from engaging in restrictive or discriminatory business practices which limit trade or production and interfere with the objectives of the Charter. The provisions of chapter V establish the detailed obligations of members, create certain rights of complaint against particular cases of restrictive practices, and empower Iro to make decisions and recommendations in respect of such complaints.

(c) Subsidies and Counter Measures

Section C of chapter IV deals with export subsidies and with domestic subsidies. A domestic subsidy consists of special payments by a government to producers of a product to stimulate its output. Unlike an export subsidy, such a domestic payment does not result in a difference between the selling price of the product on the home market and on the export market, in case a portion is sold abroad. Accordingly, members are not prohibited from granting a domestic subsidy but are obliged under article 25 to consult with other members or the organization upon request, with a view to agreeing upon limitations of the subsidy if this is necessary to avoid serious prejudice to the trade of others.

Export subsidies consist of special payments or bonuses by a government on the export of a product enabling it to be sold in foreign markets at a lower price than it is sold at home, thus capturing markets which could not be obtained under ordinary competitive conditions. Moreover the subsidy payments may be so administered as to discriminate between different foreign markets. Competing producers in other countries usually consider this form of subsidy to be particularly destructive and, in retaliation, other governments frequently resort to higher tariffs, quantitative restrictions, or other trade barriers. Thus, export subsidies tend to defeat the objectives of articles 16, 17, and 20. Accordingly, section C of chapter IV limits the use of this device. Export subsidies are prohibited (article 26) except in the case of a primary commodity (article 27). Even when permitted, the subsidy must not result in the acquisition of more than a fair share of the world market by the member in question (article 28). In cases of conflict with other members interested in the same primary commodity, the Iro will determine, in accordance with certain rules, what constitutes a fair share of the market. Finally, other members are permitted under article 34 to impose countervailing duties on imports of products which are subject to export subsidies or domestic subsidies by another member.