Cablegram ITO9 LONDON, 22 March 1947, 5.25 p.m.
MOST IMMEDIATE SECRET
We are invited by United Nations Secretariat in accordance with Memo on procedure to select a base date. Explanation of reasons for a base date is given in paragraph 2 of Section E of Memo on procedure. [1] Briefly I understand this to mean that since it is provided that preferences not reduced or eliminated in these negotiations as well as those altered by negotiations will be protected from most-favoured-nation rule [2] and bound against increase it is necessary to define precisely which preferences not so reduced are legitimately preserved and bound. Furthermore some point of comparison with new rates agreed upon helps in assessment of concessions granted and obtained.
It has not in the past been necessary to select a base date before entering into tariff negotiations. Such negotiations have been directed towards reaching agreement as to rates of duty that shall apply as from date of entry into force of agreement and have related to changes to be effected in tariffs as they existed at the time of negotiations. Briefly history of base date proposal is as follows- (A) United States Draft Charter provided that preference margins remaining after negotiations should be protected from elimination by most-favoured-nation rule provided they did not exceed those existing on either June 1939 or June 1946 at whichever date margin of preference was lower. Argument offered by United States was that this would prevent any increase in margins prior to negotiation for purely bargaining purposes.
(B) This proposal insofar as it related to alternative dates was rejected at the First Session as an attempt by United States to obtain benefit of reductions without compensating advantage.
Committee also dismissed possibility of bargaining increases as unrealistic.
(C) However, Canada pointed out that in emergency circumstances of war Canada had temporarily suspended all duties ordinarily payable on many commodities and that consequently they had temporarily suspended and eliminated margin of preference ordinarily operating on those items. Canada was not disposed to agree to a rule effect of which was automatically to eliminate suspended preferences.
(D) At first Session of Preparatory Committee it was agreed that establishment of a common date may be neither practicable nor satisfactory for all countries granting preferences. Committee therefore suggested that each member concerned should inform United Nations Secretariat as to date which it proposes to use for negotiations with respect to preferences. (See paragraphs) of Section B of Memo on procedures.) If it is agreed that Australia should select a base date selection of most appropriate date for Australia presents no difficulty as no substantial tariff changes have been made in recent years. Some alterations in primage duties involving elimination of certain preferential primage rates were introduced in November 1946. All agree that it would be desirable to select a date prior to their introduction because selection of such a date may enable these reductions to be counted as part of concessions granted in forthcoming negotiations. For this purpose opening date of first session namely 15/10/46 would appear to be suitable date. All Members of Delegation are agreed that if a base date to be selected that date would be most appropriate.
Fletcher’, however, has questioned the wisdom of selection base date at all. He argues that naming of base date is ‘commencement of a broader commitment’ purpose of which is to secure agreement to ultimate abolition of British preferential system and borders on an additional prior commitment.
He holds that for these reasons we should refrain from acting on suggestion that each member inform United Nations Secretariat as to date it proposes use as base date for negotiations with respect to preferences. However, as I cannot understand basis of Fletcher’s fears I have asked him to set his argument out fully and it follows in succeeding telegram.
As I understand it Australia committed only to enter negotiations in relation to tariffs and preferences and I agree that any further commitments should be avoided. I cannot see that nomination of a date extends that commitment in any way.
Furthermore a refusal to nominate date would mean presumably that negotiations would be conducted on basis of tariff as it now exists which may be slightly less satisfactory from point of view of those enjoying preferences in Australia than date proposed above. Assessment of concessions involved in agreement as to future rates must inevitably be based upon comparison between those rates and those operating either at commencement of negotiations or at some other date agreed upon as margin appropriate for indicating real sacrifice involved in concession.
Furthermore preferences not reduced in negotiations which are to be protected against most-favoured-nation rule must be preferences at time of negotiation or at some other date agreed upon as more appropriate.
This matter was discussed in British Commonwealth Meeting where I asked Fletcher to explain his fears to other Delegates. McKinnon of Canadian Delegation and Helmore of United Kingdom Delegation stated they did not see any commitment or embarrassment in naming a base date. No other Delegates spoke on the subject.
I recommend therefore that United Nations Secretariat be advised that Australia selects 15/10/46 as base date for the purpose of forthcoming negotiations. McCarthy, Morris [4], Morton, Marcusson [5], Phillips and Bury support this recommendation. I have read Fletcher’s telegram.
_1 Paragraph 2 read: ‘In order to determine what residual preferences shall be bound against increase under Article 14, and in order to determine what preferences shall be reduced or eliminated automatically under Article 24, it is necessary to establish a date which will fix the height of the preferences in effect prior to the negotiations.’ 2 Article 14(1) of the draft charter, on most-favoured-nation treatment, required that any privilege granted by a member to another country in respect of any product should be extended to all other members on the like product.
3 J. Fletcher, Chief, Trade Relations and Trade Treaties Branch, Department of Trade and Customs.
4 H.F. Morris, Chairman of the Tariff Board.
5 F.J. Marcusson, Assistant Chief, Industries and Tariff Revision Branch, Department of Trade and Customs.
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[AA : A1068, ER47/1/12]