Foreign Relations of the United States, 1949, National Security Affairs, Foreign Economic Policy, Volume I

848A.5151/11–648

The Secretary of State to the South African Minister (Andrews)

The Secretary of State presents his compliments to the Honorable the Minister of the Union of South Africa and refers to the Legation’s note of November 6, 1948¹ in which it was stated that the Government of the Union of South Africa has found it necessary to impose restrictions on exchange for imports from non-sterling areas and to prohibit the importation, from all sources, of limited lists of non-essential goods.

It appears to the Government of the United States that the aforementioned restrictions and prohibitions are directly related to certain obligations of the Government of the Union of South Africa under the General Agreement on Tariffs and Trade² and under the Articles of Agreement of the International Monetary Fund.³

This Government has received a document from the Chairman of the Contracting Parties to the General Agreement on Tariffs and Trade transmitting a letter dated November 12, 1948⁴ from the Department of External Affairs, Union of South Africa, stating that the restrictions were imposed in accordance with the provisions of Articles XII(2) (a) (1) and XIV(1) (b) of the General Agreement.⁵ In this connection, reference is made to Article XII 4(a) of the General Agreement which requires that a contracting party instituting restrictions under this Article consult with the Contracting Parties as to the nature of its balance of payments difficulties, alternative corrective measures which may be available, and the possible result of such measures on the economies of the other contracting parties. It is required that, where practicable, such consultation take place prior to the imposition of the restrictions, otherwise immediately afterwards.

The Government of the United States considers the consultative obligations of the contracting parties under Article XII to be of paramount importance in connection with the taking of action under this Article. This Government, therefore, is communicating with the Chairman of the Contracting Parties, pointing out the requirement for consultation contained in Article XII, and suggesting that, in view of the present practical difficulties in holding the type of consultation envisaged in that article, the letter of November 12, 1948 from the Department of External Affairs, Union of South Africa, be considered, for the time being, an appropriate form of compliance with Article XII 4(a) on the understanding that if this Government or the governments of the other contracting parties have questions regarding the matter which have not been resolved when the Third Session of the Contracting Parties convenes in April 1949 they will be placed upon the agenda for that meeting. This Government will not regard this procedure as a precedent for future cases.⁶

Reference is made also to Article XII 3(c) (ii) which commits the contracting parties not to apply restrictions so as to prevent unreasonably the importation of any description of goods in minimum commercial quantities, the exclusion of which would impair regular channels of trade. It is suggested that, in conformity with the foregoing requirement, the Union Government might find it practicable to apply a “token import scheme” to the list of items the importation of which is prohibited from all countries.

With respect to the obligations of the Government of the Union of South Africa under the Articles of Agreement of the International Monetary Fund, the Government of the United States invites attention to Article VIII (Sections 2 and 3) of that Agreement which requires that no member shall impose restrictions on the making of payments and transfers for current international transactions, or engage in any discriminatory currency arrangements, without the approval of the Fund. It is understood by the Government of the United States that this matter is under consideration between the Union Government and the Fund.⁷

Washington, January 7, 1949.

1. Not printed.

2. For the text of the Protocol of Provisional Application of the General Agreement on Tariffs and Trade (familiarly known as GATT, and often cited as the General Agreement), concluded at Geneva, Switzerland on October 30, 1947, see Department of State Treaties and Other International Acts Series (TIAS) 1700 (two volumes) or 61 Stat. (pts. 5 and 6). The many agreements that modify, rectify, or provide for accession to the General Agreement are printed as appropriate in the TIAS series and in the United States Statutes at Large, and also in United States Treaties and Other International Agreements (UST). The United Nations Treaty Series includes both the basic agreement and subsequent protocols. A convenient reference source for this period is Basic Instruments and Selected Documents, Volume I, Text of Agreement and Other Instruments and Procedures (GATT Doc. 1952–1953 series, Geneva, 1952) and Basic Instruments and Selected Documents, Volume II, Decisions, Declarations, Resolutions, Rulings and Reports (GATT Doc. 1952–1953 series, Geneva, 1952).

   For a comprehensive analysis of the basic agreement of 1947, see Department of State Publication No. 2983, Analysis of the General Agreement on Tariffs and Trade (Washington, Government Printing Office, 1947). Briefly, the General Agreement on Tariffs and Trade consists of three basic types of provisions, namely (1) tariff concessions, which set a maximum limit to the height of enumerated rates (plus some limitations on margins of preferences), (2) general provisions, which are intended both to set certain rules of trade conduct and to safeguard the value of the tariff concessions, and (3) administrative provisions, such as the procedures for accession to the General Agreement, the territorial application of the Agreement, and the method of taking decisions. For the most part this and other chapters regarding the General Agreement that will appear in subsequent volumes of the Foreign Relations series will be concerned principally with matters relating to (2). For documentation on the Geneva negotiations leading to the conclusion of the General Agreement, see Foreign Relations, 1947, vol. i, pp. 909 ff.

   The authority under which the United States Executive entered into the General Agreement on Tariffs and Trade, and continued after 1947 to negotiate within its framework, was the Tariff Act of 1930 (46 Stat. 560), as amended by the Act of June 12, 1934, as amended (48 Stat. 943, 57 Stat. 125, 59 Stat 410, 19 U.S.C. (1940 edition), sec. 1351). The basic amendment was in the Act of 1934 (known popularly as the Reciprocal Trade Agreements Act), by way of adding a new Part III, entitled “Promotion of Foreign Trade”, at the end of Title III of the 1930 Act. Part III consisted of one section only, section 350, which “For the purpose of expanding foreign markets for the products of the United States.…” authorized the President “… from time to time—(1) To enter into foreign trade agreements with foreign governments or instrumentalities thereof; and (2) To proclaim such modifications of existing duties and other import restrictions … as are required or appropriate to carry out any foreign trade agreement that the President has entered into hereunder.…” (48 Stat. 943, 944). This authority was granted to the President for three years in section 2(c) of the 1934 Act (ibid., 944), and subsequent acts were simply trade agreement extension acts in prolongation of the President’s authority. The Act of 1948 unusually provided for an extension of this authority for only one year, and also restricted the President’s discretion by requiring him to consult closely with the U.S. Tariff Commission in the phase preceding actual diplomatic negotiations (62 Stat. 1053).

3. The Final Act of the Bretton Woods Conference of 1945 contained as Annex A and Annex B the texts of the Articles of Agreement of the International Monetary Fund and the Articles of Agreement of the International Bank for Reconstruction and Development; see Department of State Publication No. 2866: Proceedings and Documents of the United Nations Monetary and Financial Conference, Bretton Woods, New Hampshire, July 1–22, 1945 (Washington, Government Printing Office, 1948), 2 volumes (the texts of the Articles of Agreements are in volume i), or TIAS No. 1501 (the Fund agreement) and 1502 (the Bank agreement).
4. Neither printed. The Chairman of the Contracting Parties to the General Agreement on Tariffs and Trade, which held their first two sessions at Habana, Cuba (February 28–March 24, 1948) and Geneva, Switzerland (August 16–September 14, 1948), respectively, was L. Dana Wilgress of Canada.
5. The provisions of Article XIV had to do with exceptions to the general GATT rule of nondiscrimination, for balance of payments reasons, and were the object of particular concern for the Contracting Parties at their First Session held at Habana, Cuba in February–March 1948; see Foreign Relations, 1948, vol. i, Part 2, pp. 901–909.
6. These views were communicated to Mr. Wilgress in a letter in the name of the Secretary of State from the Chief of the Division of Commercial Policy (Willoughby), January 11, 1949, not printed.
7. In an instruction of January 13, 1949, not printed, the Secretary of State transmitted copies of this note and the letter to Mr. Wilgress to the Legation in South Africa (Pretoria).