Third Session

CP.3/SR22 - II/28

Held at Hotel Verdun, Annecy
on Wednesday, 8 June 1949, at 3.15 p.m.

    CHAIRMAN: Hon. L.D. WILGRESS (Canada)
Subjects discussed:

    l.Report on the negotiations affecting Schedule III between Brazil and United Kingdom and United States of America. [NOT REPRODUCED BELOW]

    2.Report of Working Party 2 on date of decision on proposal of the Government of Ceylon. [NOT REPRODUCED BELOW]

    3.Request of the Government of Czechoslovakia for a decision under Article XXIII.

Request of the Government of Czechoslovakia for a decision under Article XXIII as to whether or not the Government of the UnitedStates of America has failed to carry out its obligations under the Agreement through its administration of the issue of export licences. (cf. GATT/CP.3/23 and GATT/CP.3/38 and GATT/CP.3/39)

Mr. AUGENTHALER (Czechoslovakia) read a reply (GATT/CP.3/39) to the speech by the representative of the United States (GATT/CP.3/38), and in addition called attention to the possible effects on international trade if an unfavourable decision were given to the Czechoslovakian application. He said it was not only exports that might be unduly controlled on the pretext of national security; on the ground that security could be undermined by dependence on foreign supplies, a country might similarly restrict its imports, either discriminatorily or otherwise, by invoking the security clause of the Agreement. This would encourage the tendency towards autarky which the Agreement professed to eliminate.

Mr. EVANS (United States of America), referring to the last section of the 4th paragraph of Mr.Augenthaler's reply, said that if at any time it were thought that a decision had been based on false premises, the interested party could have recourse to the appeal board which was instituted for that purpose. In reply to the question asked by Mr. Augenthaler as to whether the regulations requiring export licences for the export of goods to certain countries but not to others, did not contravene the provisions of Article I, Mr. Evans remarked that the provisions of Article I would not require uniformity of formalities, as applied to different countries, in respect of restrictions imposed for security reasons. In conclusion he said that since no new facts had been presented by the Czechoslovakian representative beyond what had already been given in the original statement, he would repeat his proposal that the CONTRACTING PARTIES dismiss the request on the ground that the charge was not supported by facts.

Mr.HERRERA-ARANGO (Cuba) supported the United States proposal. He said that his personal experience in dealing with the United States Government had convinced him that the difficulties referred to by the Czechoslovakian representative were due to the rigour of the officials and their stringent way of administrating the issue of licences. The officials might be tenacious in their quests for information and were often hard to convince, but this provided no ground for the accusation put forward by the Czechoslovakian representative. On the basis of his experience, it seemed that the appeal board would be an effective means of redressing any erroneous decisions. The question asked by the Czechoslovakian representative in relation to the provisions of Article I did not require an answer since the United States representative had justified his case under Article XXI whose provisions overrode those of Article I. His delegation therefore thought that the question should be decided at the present meeting and the request by the Czechoslovakian delegation should be dismissed because of the lack of factual basis for the charge.

Mr. AUGENTHALER (Czechoslovakia) replied that the appeal procedure referred to by the United States representative was available only to exporters of the United States, and it was often inoperative because in the event of a refusal of an export licence, an exporter, in order to avoid displeasure was likely to choose not to resort to that procedure. Article I stated clearly that the provisions of non-discrimination were to be observed with respect to all rules and formalities in connection with importation and exportation. If exports were to be controlled, the same formalities must be applied to all countries wishing to purchase from the country concerned. Article XXI referred to the traffic in arms, ammunition and implements of war and other goods and materials for the purpose of supplying a military establishment, but the United States Government had used and interpreted the expression "war material" so extensively that no one knew what it really covered. The filing of an application for an export licence was therefore no mere formality. As regards the Cuban proposal, Mr. Augenthaler maintained that abundant facts had been supplied to the CONTRACTING PARTIES in the successive documents submitted by the Czechoslovakian delegation and the request could not be refused on the ground of insufficient information.

Mr. HASNIE (Pakistan) said he was glad that the question had been narrowed down to the provisions of two Articles. As regards Article I, it was the opinion of his delegation that the United States Government, as a pioneer of the General Agreement, would not have seen fit to violate the provisions of such a fundamental Article and thus deliberately destroy the structure of the Agreement. ArticleXXI, embodying exceptions to all other provisions of the Agreement, should stand by itself notwithstanding the provisions of other Articles including Article I, and therefore the case called for examination only under the provisions of that Article. While admitting that the Czechoslovakian case deserved careful and sympathetic consideration, Mr. Hasnie was convinced that the action taken by the United States Government was in the interest of security and peace. He thought the matter should not be delegated to a Working Party because he did not believe that tangible results could be produced by deliberations in a sub-group and that no economy of time would be justified in dealing with a matter of such great importance. He suggested that the information supplied was contradictory and too scanty to justify a sweeping decision by the CONTRACTING PARTIES. Since the United States had affirmed that its intention was merely to prevent the disruption of peace and order and had assured that it had no desire to interfere with ordinary trade, and since the Czechoslovakian Government had complained about restrictions being placed on goods which were not imported for war purposes, it appeared that the dispute had arisen from a misunderstanding of facts by one party or the other and should be resolved by detailed consultation between them. In his opinion, the CONTRACTING PARTIES should suggest that the two governments approach each other through diplomatic channels and seek a solution. Commenting on the complaint that the United States appeal procedure was only available to its exporters, he thought this was in accord with the general practice in jurisprudence and there would seem to be no way of providing complaint facilities for people other than residents of the country. If an exporter refused an order by an importer, it would seem to be the end of the matter except for negotiations to be carried out by the governments. In view of the importance of the question, the CONTRACTING PARTIES should not decide upon the request, but should try to bring about an understanding between the two parties which was not an objective achievable by deliberations in sub-committees.

Mr. SHACKLE (United Kingdom) thought that since the question clearly concerned Article XXI, the United States action would seem to be justified because every country must have the last resort on questions relating to its own security. On the other hand, the CONTRACTING PARTIES should be cautious not to take any step which might have the effect of undermining the General Agreement. The nature of the question seemed to suggest that it should be examined in detail by the two governments concerned, and that no purpose would be served by a general decision given by the CONTRACTING PARTIES. Therefore, so far as the CONTRACTING PARTIES were concerned, the request by the Czechoslovakian delegation for a decision should be dismissed.

Mr. HERRERA-ARANGO (Cuba) agreed with the representative of Pakistan that the importance of the case called for a full investigation, but he would not think that practical results could be produced.

Mr. AUGENTHALER (Czechoslovakia) reaffirmed that the provisions of Article XXI were misapplied because the narrow reference in the text to war materials had been construed by the United States Government to cover a wide range of goods which could never be so regarded.

Mr. EVANS (United States of America) replied that this was a distortion of facts; the United States Government had never denied export licences to Czechoslovakia on any item on the positive list. Out of 3,000 group items under the export classification, only 200 were affected by export control. Therefore there were no grounds for the accusation that the provisions of Article XXI were extended to cover everything; for the commodities thus controlled constituted an extremely small proportion of the exports of the country.

The CHAIRMAN, in summing up, concluded that if a decision must be made under paragraph2 of Article XXIII, it should be understood that the consultation referred to in paragraph 1 of the Article had already taken place. Under paragraph 2, the CONTRACTING PARTIES should promptly investigate, and should either make an appropriate recommendation to the contracting parties concerned or give a ruling on the matter as appropriate. The complaint made by Czechoslovakia was based on ArticlesI and XXI and the United States justified any discrimination which might have occurred on the basis of Articles XX and XXI and particularly on the ground of security covered by the latter. The proposal for a Working Party to be set up to examine the issue had not found support during the discussions, and the representatives of Cuba and Pakistan had spoken against this suggestion. The CONTRACTING PARTIES, therefore, should give a decision in accordance with paragraph 2 of Article XXIII at the present meeting. The Czechoslovakian representative had posed the question of whether or not such regulations conform to the provisions of Article I. The Chairman, however, was of the opinion that the question was not appropriately put because the United States Government had defended its actions under Articles XX and XXI which embodied exceptions to the general rule contained in Article I. The question should be put as expressed in the Agenda item, i.e. whether the Government of the United States had failed to carry out its obligations under the Agreement through its administration of the issue of export licences.

A vote was put by roll-call, as requested by the representative of Czechoslovakia, with the following results:

1 affirmative17 Negatives3 Abstentions2 Absent:
New Zealand
S. Rhodesia
South Africa
United Kingdom
United States

Mr. HASNIE (Pakistan) explained his vote by saving that it was necessary for him to vote against the charge because this was not proved by factual evidence, and according to the principles of common law innocence would have to be presumed unless it was proved otherwise.

Mr. AUGENTHALER (Czechoslovakia) stated on behalf of his Government that it could not consider that the CONTRACTING PARTIES had made a legally valid decision or correct interpretation of the General Agreement. In consequence, his Government would regard itself free to take any steps necessary to protect its national interests. He enquired whether the decision could not be communicated to all members of the Interim Commission for the International Trade Organization, so that they would be informed of the interpretation given by the CONTRACTING PARTIES of the provisions of the Havana Charter.

Mr. EVANS (United States of America) thanked the majority of the representatives on behalf of his delegation and expressed his understanding of the position of those representatives who abstained. He requested that the proceedings of this meeting be released to the press.

The CHAIRMAN said, in reply to the Czechoslovakian representative, that the summary record of this meeting would be sent, according to the usual practice, to all signatories of the Havana Final Act and to other members of the United Nations. The meeting agreed that a press release should be issued at the authorization of the Chairman.

The meeting rose at 6 p.m.


Decision of 8 June 1949

The CONTRACTING PARTIES decided to reject the contention of the Czechoslovak delegation that the Government of the United States had failed to carry out its obligations under the Agreement through its administration of the issue of export licences.

1A complaint was brought by the Czechoslovak Government under Articles I and XXI that export restrictions imposed by the United States did not conform to the provisions of Article I.