Foreign Relations of the United States, 1950, National Security Affairs; Foreign Economic Policy, Volume I

394.31/10–1950

Memorandum of Conversations, by the Chief of the Monetary Affairs Staff (McDiarmid)

confidential

[Washington,] October 19, 1950.

Participants:	Mr. Frank Southard, U.S. Executive Director, IMF1
	Mr.Leddy—ITP
	Mr. McDiarmid—NM

Mr. Southard called me this morning for the purpose of reviewing the progress of the Fund ITO–GATT Committee which is preparing reports on the import restrictions of the sterling area countries for the Fifth Session of the GATT. He indicated in general terms the recommendations being considered on the various countries which appear to conform to the NAC action. The Fund would suggest some relaxation for all the sterling area countries except India and Pakistan, but in the case of Chile the Fund would indicate that it had been keeping the Chilean restrictions under review and does not consider that further relaxation would be appropriate at this time. I had previously suggested an action along this line in the case of Chile after clearing with ARA. The main point which Mr. Southard wanted to raise was the Department’s attitude towards the position which all the sterling area countries are taking in the Fund, namely, that, while the need for the maintenance of the present level of discrimination may be an appropriate subject to discuss, it is not the subject now before the Fund or the Contracting Parties. That subject is, in the British view, whether or not the action pursuant to the London Agreement of July 1949 was justified in view of the then existing situation. In previous discussions with Mr. Southard on this subject I had furnished him with the record of the Geneva meeting of the Contracting Parties which called for a consultation on the “recent changes in the import programs” of the sterling area countries and indicated that the British had agreed to “discuss fully all relevant questions” connected with the recent changes in their import programs. I had also indicated that in my view the consultations contemplated under Article XII 4 (b) of the GATT were not intended to be restricted to questions of “justification” for acts previously taken but should also include questions relating to the modification of programs in effect at the time of such consultations. Before expressing these views, I had discussed the matter with Mr. Levy-Hawes (BNA)² and with Mr. Weiss (CP),³ who had indicated agreement with this opinion.

Following my conversation with Mr. Southard I discussed the matter with Mr. Leddy,⁴ and we agreed that the consultations contemplated in the GATT should be of the comprehensive character indicated above and that the record of the Geneva meetings lends support to this view. Mr. Leddy also pointed out that it might be undesirable to accept the British position in view of the precedent for future GATT consultations. I then called Mr. Southard and transmitted to him the substance of these views. He said that he would proceed along the lines of the NAC action, anticipating that the U.S. Delegation to the Fifth Session would follow the same line at Torquay.

1. Mr. Southard was also Special Assistant to the Secretary of the Treasury.
2. Maurice Levy-Hawes of the Office of British Commonwealth and Northern European Affairs.
3. Leonard Weiss, Assistant Chief of the Commercial Policy Staff.
4. John M. Leddy, Deputy Director of the Office of International Trade Policy.