GATT and the Goods Council
GATT 1947 and the grueling task of signing
The negotiations of the General Agreement on Tariffs and Trade (GATT) were formally concluded on 30 October 1947. Considered the largest trade negotiation of its time, the GATT was concluded in little over six months thanks to a series of innovative approaches, bold decisions, and a colossal effort by those involved. This short story describes some of the political and practical issues that had to be tackled by negotiators.
This short story is based on research undertaken by Roy Santana, WTO Counsellor. It is not an official WTO publication. It subsequently became part of a paper: Roy Santana, "70th anniversary of the GATT: Stalin, the Marshall Plan, and the provisional application of the GATT 1947", Journal of Trade Law and Development, Volume 9, pp. 1-20.
The negotiations of the General Agreement on Tariffs and Trade (GATT) were formally concluded on 30 October 1947. To mark the occasion, UN press release No. 469 proudly announced that:
"there is no parallel to this achievement in any previous trade negotiations, all of which have been on a more limited scale. The completion of such a large number of simultaneous negotiations of such broad scope in a little over six months is in itself a remarkable feat. Since April 1947, when negotiations were opened, nearly 1,000 scheduled meetings between the representatives of the countries concerned have taken place in Geneva. In addition, there were continuous discussions of a less formal character between the delegations concerned. … During the time when both tariff negotiations and Charter discussions were proceeding, the delegations and their staff numbered approximately 760 persons."
While the bitter differences on how to handle tariff preferences were still being addressed by Will Clayton, the lead US negotiator, and Sir Richard Stafford Cripps, the lead UK negotiator, and before the breakthrough of the "Brown-Helmore proposals", GATT negotiators had to face a number of legal and practical issues in order to conclude the agreement. Negotiations were particularly challenging because they took place at the same time that countries were engaged in a larger negotiation, which sought the establishment of the International Trade Organization (ITO). At the time, the "Preparatory Committee of the United Nations Conference on Trade and Employment" (Prepcom) was drafting the "Havana Charter for an International Trade Organization" (ITO Charter, also referred to as the Havana Charter). In other words, the ITO Charter and the GATT were closely intertwined but separate negotiating processes.
How did trade diplomats manage to efficiently conclude such a large negotiation in such a short period of time? What were the key stumbling blocks and how did they overcome them?
Reestablishing the World's financial order, promoting economic reconstruction, and encouraging open markets became a priority after World War II. One of the recommendations of the Bretton Woods Conference, which had been held from 1-22 July 1944, was the establishment of an International Trade Organization (ITO) which, together with the "International Monetary Fund" and the "International Bank for Reconstruction and Development" would become the pillars of the new international economic order. In 1946, the United States and the United Kingdom invited a large number of countries for a Conference that would take place in London on the Expansion of World Trade and Employment. Part of the Conference would be based on proposals which had been developed by the technical staff of the US government in 1945, which included the establishment of an International Trade Organization (ITO).
Fearing that a considerable amount of time would be required to complete the ITO negotiations and, most importantly, to implement the results of the tariff negotiations as quickly as possible, the US proposed in November 1946 to launch, in addition, the negotiation of a "Multilateral Trade Agreement Embodying Tariff Concessions". These negotiations would take place amongst the principal trading nations, which would enter into "reciprocal and mutually advantageous negotiations directed to the substantial reduction of tariffs and the elimination of preferences". In November 1946, the US idea was adopted with some modifications through a resolution, calling for multilateral negotiations to begin on 8 April 1947. During a broadcast of 21 August 1946, Mr. J.J. Dedman, Minister of Reconstruction of Australia, explained:
"The [ITO] Charter cannot stand by itself. The Charter and the proposed multilateral trade agreement are integral parts of the general plan to expand trade. The success or failure of the whole plan now depends on a similar degree of understanding being reached in the trade negotiations." (see quote here)
As a result of the London meeting, delegations agreed on a large number of principles, rules of engagement and procedures for these negotiations, which included a multistage plan that could be summarized as follows:
1. A subgroup of countries representing the main trading nations would begin meeting on 8 April 1947 to hold reciprocal and mutually advantageous negotiations that would, in general, proceed based on the "principal supplier rule". The overall result should fit into the framework of the ITO and be reflected into a schedule of concessions for each participating country. The best treatment offered to any party in those negotiations would be extended to all the other parties through "tariff schedules". If tariff negotiations progressed successfully and schedules could be agreed upon, participants would then incorporate them into a "General Agreement on Tariffs and Trade".
Unfortunately, having hundreds of pages of tariff schedules would not be enough: in the absence of other rules, they could be easily nullified or impaired through non-tariff measures. A basic framework of rules was definitively needed, but where could they come from?
2. Even in this early stage, negotiators were aware that having hundreds of pages of tariff schedules would not be enough. In the absence of additional rules, tariff concessions could be easily nullified or impaired through non-tariff measures A basic framework was needed, but they did not have the time to develop it. Since most of the work for the establishment of an ITO had focused, precisely, on developing trade rules that sought to regulate a number of non-tariff measures, GATT negotiators decided to copy and adjust those draft provisions. Paragraph 2 of Annex 2 of the "Resolution Regarding the Negotiation of a Multilateral Trade Agreement Embodying Tariff Concessions" provided that the GATT should include "either by reference or by reproduction, those general provisions of Chapter V of the Charter considered essential to safeguard the value of the tariff concessions." This approach had the dual benefit of avoiding duplication and lengthy discussions, as well as allowing negotiators to focus on what really mattered: the tariff negotiations. While a big part of the text could be borrowed from the ITO Charter, it would still be necessary to draft additional provisions to conclude a self-contained General Agreement. . For this reason the Resolution provided for the inclusion of "such other provisions as may be appropriate".
3. The GATT would be "legally independent" from the ITO and "be brought into force as soon as possible after its signature and publication". The idea was for the GATT to serve as a temporary vehicle that would quickly obtain results and achieve the provisional application of the tariff negotiations. The larger rule-making and institutional discussions of the ITO Charter would continue and these were clearly meant to prevail over the GATT. To this end, once the ITO Charter negotiations had been concluded in 1948, and its provisions had entered into force, that important "T" in the GATT (i.e. the tariff concessions) would then be transferred and absorbed by the institutional framework of the ITO.
The men for the job
Now, how best to wrap these ideas to hold those tariff negotiations and develop a General Agreement on Tariffs and Trade? Eric Wyndham White, Director of the Division on International Trade and Balance of Payments of the United Nations, was in charge of overseeing the larger work of the Prepcom, as well as the more limited GATT negotiations. However, given his multiple responsibilities, the task fell on the shoulders of his 29-year-old deputy, Julio Lacarte Muró, who would be assisted by Alan Renouf, legal counsel at the UN Secretariat.
A legal conundrum
In May 1947, negotiators were concerned by the considerable delays that could arise from the domestic legal procedures necessary to ratify an international agreement, and were eager to find ways to expedite the implementation of the tariff concessions. Negotiators were of the view that "it would not be practicable unduly to defer application of the tariff concessions. In addition, it is desirable that early proof should be given to the world of the benefits accruing from the present negotiations." (see p. 8 of E/PC/T/135) With this goal in mind, diplomats began exploring "the possibility of arranging for the Agreement to be applied provisionally, in anticipation of its definitive entry into force". To this end,they decided to survey whether there was a way of provisionally applying the tariff concessions without having to obtain parliamentary approval and having to deposit an instrument of acceptance.
With a view to studying this question, Lacarte and Renouf circulated a questionnaire on 18 June 1947 (E/PC/T/100) asking participants what internal procedures would be required to bring the GATT into force and, in particular, to implement the tariff concessions at the national level. Most countries replied that both elements would require ratification by the national parliament and preparation of an instrument of acceptance, which meant that the procedures could take several months after concluding the deal (see E/PC/T/135, p. 8).
Only a handful of countries, including Chile and the Customs Union of Syria and Lebanon, were in a position to apply the tariff concessions without parliamentary approval. Internal records suggest that the Netherlands questioned the overall approach, as they were dubious about submitting the GATT for approval to parliament while, at the same time, the Prepcom kept discussing very similar provisions for the Havana Charter. Why would the same or similar provisions have to be submitted twice to parliament as separate agreements? However, the Dutch changed their mind and did not block the approach.
The practical challenges
While the official records reflect the hard legal questions and choices that had to be made, the internal records provide a unique window into the practical challenges faced by Lacarte and Renouf. These included "teleprinter messages" exchanged between the UN offices at Geneva and Lake Success, NY, as well as writing internal memoranda and other informal records. For example, One practical consideration was whether the "U.N. seal" could be used for the signature of the General Agreement, which ended up being considered inappropriate as "the UN as an organization is not a party to it" (teleprinter message No. 27 of 17 September 1947). Another teleprinter message from the same date warned that the Spanish translation of the draft Havana Charter would take at least 10 more weeks if given priority, which meant that only the English and French versions could be copied. As a result, Spanish would need to be dropped for the GATT to conclude on time.
Who can sign?
A more complicated issue had to do with the "credentials" of those who would be signing the General Agreement, which involved the question of whether the representatives in Geneva had to demonstrate that they had sufficient authority to sign on behalf of their countries. After initial discussions that began in June 1947, and based on the work by Lacarte and Renouf, instructions concerning credentials were circulated on 9 October 2017 (E/PC/T/237) and a subcommittee on credentials created a few days later (E/PC/T/257). This committee would ascertain whether credentials were in the proper form on a case by case basis.
Lacarte and Renouf spent a considerable amount of time chasing delegations and gathering information. At one point, a troubled Renouf questioned the approach as he considered that many of the delegates had insufficient credentials to sign a General Agreement. However, one of the teleprinter messages clarified that this initial concern could be overcome if, instead, they signed a "final act", which is a formal summary of the proceedings of a diplomatic conference. (For an explanation, see here). In that scenario, the representatives would have sufficient credentials, as the assumption would be that the authority to sign derived from the general authority that had been given to delegations when they had been accredited to the Prepcom. On that basis, it appeared reasonable "that heads of delegations could delegate responsibility to members of his delegation in course of ordinary committee business without securing specific authorization from home" (teleprinter message of 18 September 1947).
The discussion on credentials also led to a peculiar problem arising from important geopolitical changes that were taking place in parallel: the partition of British India. The Dominion of India had thus far been represented by a single delegation, but there were plans to adopt an "Indian Independence Bill" on 15 August 1947, which would result in the succession of that government by the governments of the Dominion of India and the Dominion of Pakistan.
Ironically, Sir Stafford Cripps, the lead UK negotiator who at the time kept clashing with Will Clayton, had in 1946 been a major player of this political event through his participation in the "Cabinet Mission Plan" that eventually led to India's partition. By July 1947, Lacarte and Renouf were asked to clarify whether a representative of Pakistan would also need to sign the Final Act. In a letter dated 28 July 1947, Lacarte informed Mr Banerji from the Indian delegation that, in Renouf's opinion, it was possible for Pakistan to sign. However, Renouf felt that "it would be preferable, although not absolutely essential, that the Agreement be signed on behalf of India and Pakistan by different individuals each possessing and producing the necessary credentials from the two governments concerned."
By August 1947, trade diplomats adopted key decisions for the future of the General Agreement. Firstly, they agreed that it would not be necessary to submit the GATT for approval to the larger Economic and Social Council, effectively decoupling it from the Havana Charter negotiations. Secondly, rather than signing the General Agreement itself, a "final act" would record in brief terms what had taken place, and would attach the text of the GATT and the tariff schedules. This would effectively prevent further changes to the texts and the tariff concessions that had been exchanged.
Thirdly, the elements concerning the provisional application would be removed from the GATT itself and moved into a specially designed Protocol of Signature (see E/PC/T/135, p. 9). Unfortunately, there were also problems on that front. Following a series of discussions, it became apparent that only eight "key" countries would be in a position to sign the Protocol while six other countries would only be able to do it later on (Brazil, Cuba, New Zealand, Norway, South Africa, and Southern Rhodesia).
A provisional happy ending for the GATT
The efforts by Lacarte and Renouf finally paid off on 30 October 1947, when the Final Act of the General Agreement on Tariffs and Trade was signed by its 23 contracting parties, with English and French as the only authentic languages. On the same day, eight of those 23 countries were meant to sign the so-called "Protocol of Provisional Application" (PPA), thereby committing to provisionally apply the GATT and its tariff concessions: Australia, Belgium, Canada, France, Luxembourg, the Netherlands, the United Kingdom and the United States.
Through the PPA, these countries would undertake "to apply provisionally on and after 1 January 1948: (a) Parts I and III of the General Agreement on Tariffs and Trade, and (b) Part II of that Agreement to the fullest extent not inconsistent with existing legislation." Paragraphs 3 and 4 of the PPA allowed the remaining Contracting Parties to also provisionally apply the GATT at a later date.It is worth highlighting that the PPA is also a good reflection of the overall plan that was explained above. Part I of the GATT encompassed Article I (MFN) and Article II (Schedules of concessions) and, most importantly, the Schedules of concessions for each Contracting Party. Part II of the GATT reflected the draft provisions that had been copied from the ITO Charter, i.e. Articles III to XXIII. Finally, Part III of the GATT, comprised of Articles XXIV to XXXIV, dealt with the "treaty" aspects of the GATT.
However, Press release No. 479 shows that only six key countries were able to sign that day, as Australia and France had to be given until 15 November to do it. The six key signatures were those of P. A. Forthomme (Belgium), L. D. Wilgress (Canada), the Grand-Duchy of Luxembourg (J. Storm), the Netherlands (A. B. Speekenbrink), the United Kingdom (T. M. Snow), and the United States (Winthrop. G. Brown).
A few months later, other countries signed the PPA including Brazil, Ceylon (Sri Lanka), Cuba, Czechoslovakia, India, Burma (Myanmar), New Zealand, Norway, Pakistan, South Africa and Southern Rhodesia (Zimbabwe). Although Lebanon and Syria also submitted an acceptance, they individually withdrew from the GATT at the beginning of the 1950s. Chile and Uruguay failed to submit an acceptance in 1948, but became contracting parties subsequently, through a "Protocol of the Accession of Signatories of the Final Act". Many other countries quickly joined the GATT ranks either through the acceptance of dedicated protocols or through the figure of succession. For a detailed description of these accessions, see "GATT: Status of Legal Instruments".
While describing the importance of signing the Final Act of the GATT, Mr. Max Suetens, a Belgian diplomat and Chairman of the Prepcom, recalled in a speech that:
"5. The work undertaken by our Committee, under the auspices of the United Nations cannot be considered on its own. It is integrated into a wider economic field which extends over many objectives. This line of approach began to be foreseen during the war. I need only cite the Atlantic Charter, which laid down the principles for the basis of this collaboration, the Hot Springs decisions, concerning food, the Bretton Woods decisions relating to exchange stability and aid in event of temporary disequilibrium in the balance of trade. It remained to create the basic foundation for collaboration in the field of employment and commerce. In this particular sphere no mere symbolical act, no mere expression of a desire, would be sufficient. It was necessary to achieve a really constructive framework which would allow for the revival of international trade.
8. It may not be generally realized that the General Agreement offers far wider benefits than a series of bilateral agreements; for under its terms, each negotiating country will be contractually entitled, in its own right and independently of the most favoured nation clause, to enjoy each of the concessions in the schedules of the other negotiating countries. The multilateral form of the tariff schedules is designed not only to assure broad action for the reduction of tariffs, but to give countries a right to particular tariff concessions which they might wish to obtain, but which under bilateral agreements they would find it difficult to obtain because they could not claim to be of the main suppliers of the product concerned."
As it is well known, things did not go as originally planned in 1947. Although the Final Act of the Havana Charter was successfully signed in March 1948, it was not ratified by the US Congress so the ITO never came into existence. What is perhaps less known is that the GATT, as an international treaty, never entered into force either. Unknown to the 23 delegations celebrating 70 years ago, it was the signature of the PPA by those six "key" countries, and not the 23 signatures of the "Final Act" of the GATT that ultimately provided the legal hook that saved the multilateral trading system. The PPA allowed for the provisional application of the GATT for almost 50 years, and was finally terminated on 1 January 1996, one year after the entry into force of the Marrakech Agreement Establishing the WTO (see para. 3 of GATT document L/7583).
The events that took place in 1947 and 1948 forged the professional careers of those involved in the negotiations. Alan Renouf eventually became the Secretary of the Department of Foreign Affairs of Australia, and the Australian ambassador to Washington. Eric Wyndham White and Julio Lacarte remained deeply involved in the early work of the GATT and eventually became legends of the multilateral trading system. And, thanks to the 10 week delay in the translation, it took decades for Spanish to become an official language in the GATT.
As we commemorate the 70th anniversary of the signature of the GATT, let us not forget the tough decisions that had to be taken at the highest level and, more importantly, how perceived losses can often be transformed into major victories.
* Roy Santana, is a Counsellor of the Market Access Division of the WTO. His opinions should not be attributed to the WTO.
Acknowledgements: The author would like to thank Dolores Halloran, János Volkai and Trineesh Biswas for their insightful comments and suggestions on an earlier draft. This short story was inspired on research by Prof. Thomas W. Zeiler (1997), "GATT Fifty Years Ago: U.S. Trade Policy and Imperial Tariff Preferences", Department of History, University of Colorado at Boulder. For more detailed information on the issue, see Douglas A. Irwin, Petros C. Mavroidis, Alan O. Sykes, "The Genesis of the GATT", Cambridge University Press, 29 May 2009.
The first part of this series can be found here.
The second part of this series can be found here.