OAS

27 March 1951 

GENERAL AGREEMENT ON TARIFFS AND TRADE

Report on the Withdrawal
by the United States of a Tariff Concession
under Article XIX
of the General Agreement on Tariffs and Trade


October, 1951

THE CONTRACTING PARTIES
TO THE
GENERAL AGREEMENT ON TARIFFS AND TRADE
GENEVA, NOVEMBER 1951

PREFACE

In October 1950, just before the CONTRACTING PARTIES1 to the General Agreement on Tariffs and Trade gathered at Torquay for their Fifth Session, the Government of the United States announced its decision to withdraw one of the tariff concessions which had been negotiated at Geneva in 1947 and which had been in force since the United States became a contracting party to the General Agreement in January 1948. An investigation by the United States Tariff Commission had found that certain articles falling under a tariff item, on which the rates of duty had been reduced and bound against increase -namely hats, caps, bonnets and hoods for women's wear of a certain description and within a certain price range - were being imported in increased quantities and under such conditions as to cause serious injury to domestic industry. The Commission had reached the conclusion that the withdrawal of the tariff concession, so that the Government would be free to raise the protective duties, was necessary to prevent continuance of the injury. Accordingly the United States Government had decided to take action under the "escape clause" contained in Article XIX of the Agreement and to withdraw the concession in question with effect from December 1, 1950.

As required by Article XIX, the United States Government entered into consultations with the contracting party with which the concession had been initially negotiated and with several other contracting parties which had a substantial interest as exporters of the products concerned. Agreement was reached with each of these governments except with the Government of Czechoslovakia. On November 7, while the CONTRACTING PARTIES were in session, the Czechoslovak Delegation lodged a protest against the action of the United States, on the ground that certain conditions of Article XIX had not been fulfilled. The Czechoslovak Delegation proposed that the CONTRACTING PARTIES should place on record that the unilateral action of the United States was not in accordance with the provisions of Article XIX and should recommend that the United States Government revoke its intention in view of the serious consequences which this might have on the future of the Agreement.

The complaint of Czechoslovakia was discussed by the CONTRACTING PARTIES and was referred to a specially appointed working party for detailed study. The working party completed its deliberations and presented a report in March 1951 which embodied the findings of the members other than the two parties to the dispute. These members had come to the conclusion that there was no conclusive evidence that the action taken by the United States Government under Article XIX constituted a breach of its obligations under the General Agreement. They pointed out, however, that in their opinion action under Article XIX is essentially of an emergency character and a government taking such action should keep the position under review and be prepared to reconsider the matter as soon as the action was no longer necessary to prevent or remedy serious injury. When the report was adopted by the CONTRACTING PARTIES in October 1951 the United States representative announced that the President had requested the Tariff Commission to examine carefully the course of developments in order to report to him any changes which might make it possible partially or completely to restore the concession without the danger of renewed injury.

Geneva, November 10, 1951.

    E. WYNDHAM WHITE,

    Executive Secretary,
    Interim Commission for the
    International Trade Organization.


REPORT ON THE WITHDRAWAL BY THE UNITED STATES OF A
TARIFF CONCESSION UNDER ARTICLE XIX OF THE
GENERAL AGREEMENT ON TARIFFS AND TRADE

27 March 1951 - CP/106

I. INTRODUCTION

1.According to its terms of reference, the Working Party examined "the contention of the Czechoslovak Delegation that, in withdrawing item 1526 (a) from Part I of Schedule XX, the United States has failed to fulfil the requirements of Article XIX". The Working Party had at its disposal the following documents:

    (a)a communication from the Acting Chairman of the United States Delegation dated October 19, 1950 (see Appendix A);

    (b)a memorandum of the Czechoslovak Delegation dated November 7, 1950 (see Appendix B);

    (c)the record of the discussion in the plenary meetings of the CONTRACTING PARTIES;

    (d)Women's Fur Felt Hats and Hat Bodies, a report of the United States Tariff Commission dated September 1950;

    (e)a statement by the Czechoslovak representative; and

    (f)additional data submitted at the request of the Working Party.

2.The United States representative also circulated to the other members of the Working Party a report prepared by the United States Tariff Commission on the "Procedure and Criteria with respect to the Administration of the 'Escape Clause'". The Working Party took note of this document only insofar as it indicated the methods followed by the Tariff Commission in their investigation, and did not consider it to be part of its task to comment on the views expressed therein which have a bearing on the interpretation of Article XIX.

II. THE REQUIREMENTS OF ARTICLE XIX

3.In attempting to appraise whether the requirements of Article XIX had been fulfilled the Working Party examined separately each of the conditions which qualify the exercise of the right to suspend an obligation or to withdraw or modify a concession under that Article.

4.Three sets of conditions have to be fulfilled:

    (a)There should be an abnormal development in the imports of the product in question in the sense that:

      (i)the product in question must be imported in increased quantities;

      (ii)the increased imports must be the result of unforeseen developments and of the effect of the tariff concession; and

      (iii)the imports must enter in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers of like or directly competitive products.

    (b)The suspension of an obligation or the withdrawal or modification of a concession must be limited to the extent and the time necessary to prevent or remedy the injury caused or threatened.

    (c)The contracting party taking action under Article XIX must give notice in writing to the CONTRACTING PARTIES before taking action. It must also give an opportunity to contracting parties substantially interested and to the CONTRACTING PARTIES to consult with it. As a rule consultation should take place before the action is taken, but in critical circumstances consultation may take place immediately after the measure is taken provisionally.

III. EXISTENCE OF THE CONDITIONS REQUIRED

FOR ACTION UNDER ARTICLE XIX

5.For the purposes of this section the Working Party based itself mainly on the figures and other factual data contained in the Tariff Commission report; the Czechoslovak representative stated that he did not dispute the accuracy of these data, but that he could not agree with the conclusions which the United States authorities drew from them.

6.Increase in imports. The Working Party noted that, according to the available data, the volume of imports of women's fur felt hats and hat bodies into the United States increased substantially in 1948, 1949 and the first six months of 1950 as compared with 1946 and 1947; as from 1949 the imports also exceeded those of 1937. The relevant figures are reproduced below:

(quantity in dozens)

1937 1939 1946 1947 1948 1949 1950
(Jan.-June)
52,493 6,372 36,910 15,984 44,646 120,511 61,8272

The increase is even more apparent if the comparison is limited to the value-brackets affected by the withdrawal.

1946 1947 1948 1949 1950
(Jan.-June)
14,140 8,251 36,045 106,426 53,0972

7.Existence of unforeseen developments: relation of these and of the tariff concession to imports. The concession granted at Geneva was substantial. Taking a simple average for the four value-brackets from $9 to $24 per dozen the duties as from January 1, 1948, were 32.3 per cent less than the rates of the 1930 Tariff Act 3.

8.The United States representative stated that about the time the duties were reduced there was a style change greatly favouring hats with nap or pile finishes, a development which was not and could not have been foreseen at the time the concession was granted. As a result of that style change hat bodies with special finishes were imported in increased quantities and represented more than 95 per cent of the imports of women's fur felt hats and hat bodies in 1949 and in the first six months of 1950. The increased popularity of special finishes, which, as compared with the plain felt hats require much larger amounts of hand labour, which is more expensive in the United States than in the exporting countries, created a special problem for the United States producers who were not in a position to adapt themselves to the change in demand in view of a severe competition from imports. He stated that the United States negotiators at Geneva, while realizing the shifting fashions in the hat trade and expecting some increase in imports, had not been aware of the extent that this particular change in taste had then reached in Europe and had not foreseen the degree of the future shift to special finishes or the effect which it, together with the concession, would have on imports. He considered this statement was sufficient to show unforeseen developments.

9.The Czechoslovak representative stated that the term "unforeseen development" should be interpreted to mean developments occurring after the negotiation of the relevant tariff concession which it would not be reasonable to expect that the negotiators of the country making the concession could and should have foreseen at the time when the concession was negotiated. The other members of the Working Party (other than the United States representative) agreed with this view.

10.On the basis of the interpretation accepted by the majority, the Czechoslovak representative maintained that:

    (a)it is universally known that fashions are subject to constant changes - "change is the law of fashion";

    (b)even the particular change of fashion which took place, viz. the change in favour of velours, could and should have been foreseen. This change was not due simply to a change in the taste of American women; it resulted mainly from the enterprise of the exporters (with their selling organization in the United States) and of the American milliners, who deliberately produced the new designs and created the demand for them by advertisement and good salesmanship. This change in fashion was thus not only foreseen but deliberately planned in advance;

    (c)the United States negotiators in Geneva in 1947 should have known that velours would become fashionable in the United States of America, since at that time it was well-known, and was commented upon in the trade journals, that velours had already become fashionable in Paris, and it could be expected that the Paris fashion would spread to other countries;

    (d)it was known to the United States negotiators in Geneva in 1947 that Czechoslovakia had for long had an important and special interest in the export of hat bodies with velours and other special finishes, had obtained a concession for this type of hat body in a pre-war trade agreement with the United States of America, and was desirous of obtaining once more a tariff concession on this particular type of hat body. The United States representative agreed that this is the case;

    (e)the United States negotiators in 1947 should accordingly have foreseen that Czechoslovakia's exports of hat bodies to the United States of America would consist primarily of velours and would increase as a result of the tariff concession, and that the Czechoslovak exporters and their selling organization in the United States of America would do their utmost to create a fashion in velours which would enable them to increase their sales as much as possible. In fact, the Czechoslovak exporters, together with the Italian exporters, created by their selling campaign a new market and new selling opportunities in the United States;

    (f)the causes which produced the change in fashion and the increased demand for velours in the United States of America were thus not unforeseen, but could and should have been foreseen by the United States negotiators in 1947; and

    (g)the other factors in the situation, viz. the level of productivity of the United States industry in hat bodies with special finishes and the high proportion of wage costs in the total cost of production of these hat bodies, have always existed and were known to the United States negotiators. There is no evidence whatsoever that the change in fashion, or this change combined with these other factors, constituted an unforeseen development.

11.The other members of the Working Party, except the representative of the United States, agreed with the Czechoslovak representative that the fact that hat styles had changed did not constitute an "unforeseen development" within the meaning of Article XIX. These members and the representative of the United States considered, however, that the United States negotiators in 1947 could not reasonably be expected to foresee that this style change in favour of velours would in fact subsequently take place, and would do so on as large a scale and last for as long a period as it in fact did. Moreover, the evidence before the Working Party appeared to indicate that the increase in United States imports of women's fur felt hat bodies in and after 1948 was due primarily to the following causes:

    (i)The change in demand which took place took the form of increased demand for particular types of hat body, the production of which requires much more labour than does the production of plain-finished hat bodies.

    (ii)As a result primarily of this higher labour content and of the high level of wages in the United States hat body industry, which is not matched by correspondingly high output, the generality of United States manufacturers were unable to produce special finishes which could compete in price or quality with similar imported hat bodies on which import duty was charged at the substantially reduced rates (averaging 47 per cent ad valorem) applicable as a result of the 1947 tariff negotiations.

    (iii)In consequence, imported supplies of special finishes were more attractive in price and quality in comparison to the generality of domestically produced special finishes to such an extent that overseas suppliers were able to secure by far the greater part of the increasing United States market for special finishes; and the volume of imports increased accordingly. Furthermore, the concession had the effect of reducing the price differential between imported special finishes and the better quality of plain felt hat bodies produced in the United States and of encouraging milliners and consumers to give their preference to imported velours and other special finishes.

12.The members of the Working Party, with the exception of the Czechoslovak representative, accordingly considered that the effects of the circumstances indicated above, and particularly the degree to which the change in fashion affected the competitive situation, could not reasonably be expected to have been foreseen by the United States authorities in 1947, and that the condition of Article XIX that the increase in imports must be due to unforeseen developments and to the effect of the tariff concession can therefore be considered to have been fulfilled.

13.Existence or threat of a serious injury. The United States representative produced the following facts. The apparent consumption of women's fur felt hat bodies was lower after the war than before, ranging from 500 to 700 thousand dozen, as compared with 900 to 1,100 thousand dozen in the years 1935-1939, but a larger percentage of that reduced demand has been met by imported supplies; the ratio of imports to consumption, which averaged 4.5 per cent before the war and was as low as 3.2 per cent in 1947, increased to more than 17 per cent in 1949 and more than 23 per cent in the first half of 1950. Domestic production in the United States remained at a lower level after the war than was the case before the war. Post-war figures were of the magnitude of 5-600,000 dozen as compared with 900,000 to 1,000,000 dozen before the war.

14.Imports and production, and therefore also apparent consumption, of women's fur felt hat bodies in 1947 were all exceptionally low, and all increased from 1947 to 1948. In 1949 and the first half of 1950, however, both imports and apparent consumption continued to increase, while production declined. The following table shows this decline:

Production of Women's Fur Felt Hat Bodies

1948 1949 1950
(Jan.-June)

Quantities in dozens

629,235 565,768 203,2354

Percentage of decrease as compared with 1948 figures

- 10% 18%5

Consequently, at the time of the investigation, when imports were increasing rapidly, as indicated above, there had been a substantial decrease in production.

15.A substantial percentage (estimated at over 20 per cent in 1949 and at over 30 per cent in the first six months of 1950) of the apparent demand for hat bodies shifted to special finishes. 80 per cent of imports in 1949 were of these special finishes. As the total consumption did not increase substantially it would appear likely that in 1949 and the first six months of 1950 the imported hat bodies with special finishes replaced to some extent plain felt hat bodies which would have normally been supplied by domestic producers.

16.No data were available to assess the financial losses which firms producing felt hat bodies may have suffered from the increase in imports. In the industry as a whole the production of women's hat bodies represents about 25-30 per cent of the total production of hat bodies and hats, and it has not been possible to separate the financial results of the production of women's hat bodies from that of men's hat bodies and hats.

17.Inquiries by the United States Tariff Commission, however, showed that ten out of fourteen manufacturers questioned by it stated that they could not make hat bodies in special finishes at prices competitive with imports.

18.As regards the effects of increased imports on employment, the figures show a decrease in the number of productive workers on felt hat bodies (men's and women's) during the period 1947 to 1949. This reduction was substantial between 1948 and 1949 as indicated below:

Productive Workers Engaged in Making Fur Felt Hat Bodies

1947 1948 1949

Average number of workers

4,383 4,349 3,717
Percentage decline as compared with 1947 figures - 1% 15%

19.It is not practicable to segregate employment in the production of women's hat bodies from that in the production of men's hat bodies and hats. Moreover it was difficult to estimate to what extent the reduction in employment is due to increased imports of women's hat bodies and to what extent due to other factors including those affecting the production of men's hats. According to the findings of the United States Tariff Commission a considerable part of this reduction was attributable to increased imports, and this would seem to be supported by the substantial decrease in production of women's hat bodies in 1949 and in the first half of 1950.

20.This evidence of decline in employment should be viewed in the light of the particular vulnerability of workers in this industry to small declines in production and employment. Over 80 per cent of the workers are either skilled or semi-skilled, and their age is in general high. Thus a large majority of those employed would appear to be skilled workers with families dependent upon them. The social difficulties of a decline in employment in the industry would be likely to be accentuated by its geographic concentration. For instance, it is estimated that 85 per cent of the factory wages in Danbury and 50 per cent in Norwalk are ordinarily paid by the fur felt hat industry. Thus the effects of a relatively small decline in production might be aggravated by the lack of other employment opportunities locally and by the indirect effect on most other business activities of these communities. Figures for employment in the fur felt hat industry (men's hats as well as men's and women's hat bodies) and of general unemployment in Danbury and Norwalk tend to support the view that imports have contributed to a decline in employment in the case of the manufacture of women's hat bodies.

21.The Czechoslovak representative maintained that neither the data submitted by the United States representative nor the actual developments in the United States hat industry during the decisive period 1947-1950 proved that there was any injury or threat of it to the workers, by far the largest group of producers:

    (a)The figures for changes in the average number of productive workers employed in the fur felt hat bodies industry were not conclusive. The comparison with the pre-war situation had to be discarded as the whole structure of the industry was admittedly on a different footing after the war. The United States figures for employment in different sections of the United States hat industry were based on estimates and did not show how the average was computed or whether seasonal workers were included.

    (b)The downward trend of employment which was slight in 1948 and more marked in 1949 was attributed by the United States authorities investigating the situation largely to factors other than the influence of increased imports. Nothing definite was adduced to support the view that the increased imports had some effect on employment. The report of the Tariff Commission admits that "the proportion attributable to that factor cannot be estimated with any degree of precision".

    (c)The conclusion as to whether there was any injury to the workers caused by the increased imports should necessarily take into account not only the decrease in average numbers employed but also the actual figures of unemployed hat workers. These figures were not available. The decrease in employment in the areas concerned was attributed largely to other factors than increased imports. The contention that there was a causal relationship between the increased imports in hat bodies with special finishes and the employment situation in the United States hat industry remained extremely doubtful.

    (d)The assumption of the United States representative that the decrease in employment probably affected the skilled and older workers was not substantiated by any evidence. On the contrary, it would be more reasonable to assume that the skilled workers were not affected at all since the domestic production of hat bodies with special finishes, requiring a larger number of skilled workers, admittedly increased. The statistics of employment showed an upward trend in employment during the first half of 1950. It was highly probable that this resulted from the increasing domestic production of hat bodies with special finishes.

    (e)All this, together with the fact that the wage rates of the workers in the United States industry for women's fur felt hat bodies were not affected, proved that the increased imports caused or threatened no injury to the workers.

22.The Czechoslovak representative maintained further that the increased imports of hat bodies with special finishes did not threaten the United States domestic production of those types. On the contrary, the change in fashion created by the foreign suppliers and their selling organization and the resulting increase in demand for those types created an opportunity for the domestic producers to start and expand rapidly a production of these types:

    (a)Admittedly there was no production of hat bodies with special finishes in the United States in 1947. The domestic producers started to produce them in 1948 under the influence of the expanding market. The increase in the United States domestic production of hat bodies with special finishes is quite clear from the following table based on the data supplied by the United States representative:

Production
(in thousand dozen)
Increase compared
with the previous year
Index in comparison
to 1948

1947

no production - -

1948

15 - 100

1949

25 66% 166

1950

1006 400%6 6666

    The comparison between the rate of increase in imports and the rate of increase in the domestic production of hat bodies with special finishes shows that domestic production had increased in higher proportion than imports.

Index of Imports Index of Domestic Production

1948

100 100

1949

269 166

1950

580 6666

    The actual position of the domestic production of hat bodies with special finishes was, according to the data furnished by the United States representative, as follows:

      15 manufacturers accounted for most of the total domestic production of women's fur felt hat bodies;

      14 of them had made velours or samples of velours in either 1949 or 1950;

      10 of these 14 stated that they could not make a competitive product and sell it at prices competitive with imported hat bodies. The prices quoted by these firms ranged from $25 to $28 per dozen. This statement was not examined;

      4 of the above 14 quoted their price as $18. Obviously these 4 were the only ones whose production was on anything like a satisfactory basis. It appears from the United States data that these four produced nearly the whole of the total production of 25,000 dozen in the first half of 1950 and that one of them was satisfied with the price of $18. It is obvious that the other ten were producing nothing but samples and that their production was in an experimental stage and that this was the real cause of their high cost of production and inability to compete.

    (b)The United States contention that the domestic production of plain felt hat bodies was "to some extent" affected by the increased imports of velours does not bear examination. It might have been expected that the domestic production of plain hat bodies would decrease because the producers switched over to the production of special finishes and therefore part of their productive capacity which previously was concentrated only on plain hat bodies would be absorbed by the production of velours. But in fact total domestic production of hat bodies in the United States did not decrease at all:

Domestic production
(in thousand dozens)
Increase as compared
with previous year
Index in comparison
with 1947

1947

487 - 100

1948

629 +29% 129

1949

566 -10% 116

1950

6507 +15% 133

    The domestic production of women's fur felt hat bodies was thus 33 per cent above the level of 1947 when the concession was granted.

    The actual development of the domestic United States production of women's fur felt hat bodies from 1947 to the end of 1950 was such that there was no serious injury caused to it by the increasing imports of velours. The Czechoslovak representative referred to a graph drawn by him from the United States data showing the actual development of the United States production. What in fact happened was that the change in fashion created a new market and the demand was such that in 1949 and in the first half of 1950 the exporters and also the domestic producers were unable to fulfil all the orders they received for the special finishes. The market for plain felt hat bodies remained stationary; the domestic production of these types was estimated in thousand dozens by the Czechoslovak representative at 487 in 1947, 614 in 1948, 541 in 1949 and 550 in 1950. The action taken by the United States Government operated not to protect the domestic industry from a threat of injury but to protect an attempt by the domestic producers to capture and monopolize the new market by killing the import trade and to accumulate profits which previously never came their way. The application of Article XIX in this respect was improper.

    (c)The United States producers of hat bodies with special finishes were not at a serious competitive disadvantage with the foreign suppliers; the domestic production was sufficiently protected by the reduced tariff (40-55 per cent) plus other expenses of importation. The United States representative was not able to give any definite figure for the percentage of wage cost in the domestic product. The Czechoslovak representative provided the figures 37-45 per cent for this cost in the British production of velours. The proportion may be somewhat lower in the Czechoslovak production, which is not the result of cheaper labour in Czechoslovakia but of the higher productivity of the Czechoslovak industry. In any case it was doubtful whether the percentage of the wage-cost in the United States products could be higher than the percentage rates of duty fixed at Geneva. Even those United States producers whose prices for samples were obviously burdened by the cost of experimental production were able to sell at $25-$28. The bulk of the imported hat bodies sold in the

    United States market at prices ranging from $19 to $35 per dozen. The illusion of a competitive disadvantage is due to the fact that the selling prices of the domestic producers were compared with the lowest price of the imports ($19) and not with the range of prices. No data concerning the profits and dividends of the United States manufacturers of women's hat bodies were available and there was no evidence that those profits and dividends were unfavourably affected by the situation after the tariff concession had been granted.

23.Lastly, the Czechoslovak representative, without questioning the good faith of the United States Tariff Commission, maintained that it was misled when suggesting the withdrawal of the tariff concession and the United States authorities mistaken when resorting to this measure. On the basis of a graph showing the curves of the domestic production month by month in 1948, 1949 and 1950 and comparing this curve with the timetable of the stages of the American action, the Czechoslovak representative stated that:

    (a)the investigation started when the United States production was low, this being the normal situation in the beginning of the year;

    (b)the report to the President alleging serious injury was presented at a date when domestic production had already reached its usual seasonal peak. Statistics later available showed that in 1950 the seasonal peak was the highest since the war; and

    (c)the withdrawal was proclaimed at a time when domestic production was increasing considerably. The Czechoslovak representative maintained that the United States authorities could and should at that time have taken account of the latest trend in domestic production and have accordingly refrained from withdrawing the tariff concession. Resort to Article XIX was no longer necessary.

24.The views of the other members of the Working Party on the question of serious injury were as follows. Since the Working Party was required to consider whether the action taken by the United States in autumn 1950 fulfilled the requirements of Article XIX, the question here to be considered is whether serious injury or a threat thereof to the United States women's hat body industry could be considered to have existed at the time of the United States Tariff Commission investigation on which the United States action was based; data which have subsequently become available, e.g. on production and imports in the second half of 1950, are irrelevant to this question.

25.Two main types of data are available, viz. (a) data relating to the quantities of imports and of United States production, and (b) statistics of employment in the United States hat industry, and of unemployment in certain hat producing areas.

26.As regards the former, the statistics bearing on the relation between imports and domestic production up to mid-1950 show a large and rapidly increasing volume of imports, while at the same time domestic production decreased or remained stationary. On the whole, therefore, they constitute evidence of some weight in favour of the view that there was a threat of serious injury to the United States industry.

27.On the other hand it is noteworthy that the Tariff Commission report contains the following statement:

"Imports of hat bodies of these special finishes have to some extent affected domestic production of hat bodies of plain felt, particularly those in the higher-priced ranges. More especially, however these imports have severely limited the establishment and expansion of domestic production of these special finishes".

28.In this respect, it must be commented that any proposal to withdraw a tariff concession in order to promote the establishment or development of domestic production of a new or novel type of product in which overseas suppliers have opened up a new market is not permissible under Article XIX but should be dealt with under other provisions of the Agreement, such as Article XVIII. On the other hand, it may be permissible to have recourse to Article XIX if a new or novel type of imported product is replacing the customary domestic product to a degree which causes or threatens serious injury to domestic producers. The statement quoted in paragraph 27 would tend to weigh against the view that serious injury was caused or threatened to the domestic industry. Nevertheless, the statistics up to mid-1950 appear on the whole to indicate a material degree of displacement of domestically produced plain felt hat bodies by imported velours and other special finishes; since moreover the hat bodies with special finishes imported in the last three years have been sold at prices substantially lower than before in comparison with plain-finished bodies, thus bringing the former into the medium-priced range in which they were not previously available, it may well be that they would later, if the United States had not raised the rates of import duty, have displaced domestically produced plain-finished hats to a considerably greater degree.

29.Employment and unemployment statistics are inconclusive. Annual average figures of employment in the production of fur felt hat bodies show a decrease of about 15 per cent in the average number of workers so employed in 1949 as compared with 1947. These figures, however, relate to the production of bodies for men's and women's hats and it is not clear how far this reduction is due to decreased demand for domestically produced women's hat bodies and how far to other factors, especially since the greater part of the workers concerned are employed in producing men's hat bodies. Figures of total unemployment in Danbury and Norwalk, where hat-making is the predominant industry, show a relatively substantial increase in unemployment in 1949 as compared with 1947 and 1948; the movement in the figures of total unemployment in these towns, however, differs considerably from the movement in the figures of employment in hat-making therein, so that no great degree of significance can be attached to these statistics.

30.To sum up, the available data support the view that increased imports had caused or threatened some adverse effect to United States producers. Whether such a degree of adverse effect should be considered to amount to "serious injury" is another question, on which the data cannot be said to point convincingly in either direction, and any view on which is essentially a matter of economic and social judgment involving a considerable subjective element. In this connection it may be observed that the Working Party naturally could not have the facilities available to the United States authorities for examining interested parties and independent witnesses from the United States hat-making areas, and for forming judgments on the basis of such examination. Further, it is perhaps inevitable that governments should on occasion lend greater weight to the difficulties or fears of their domestic producers than would any international body, and that they may feel it necessary on social grounds, e.g. because of lack of alternative employment in the localities concerned, to afford a high degree of protection to individual industries which in terms of cost of production are not economic. Moreover, the United States is not called upon to prove conclusively that the degree of injury caused or threatened in this case must be regarded as serious; since the question under consideration is whether or not they are in breach of Article XIX, they are entitled to the benefit of any reasonable doubt. No facts have been advanced which provide any convincing evidence that it would be unreasonable to regard the adverse effects on the domestic industry concerned as a result of increased imports as amounting to serious injury or a threat thereof; and the facts as a whole certainly tend to show that some degree of adverse effect has been caused or threatened. It must be concluded, therefore, that the Czechoslovak Delegation has failed to establish that no serious injury has been sustained or threatened.

TO CONTINUE WITH GENERAL AGREEMENT ON TARIFFS AND TRADE


1The expression "CONTRACTING PARTIES" is written with capital letters to denote the contracting parties acting jointly.

This report was examined by the CONTRACTING PARTIES at their Sixth Session in September-October 1951. The Czechoslovak representative did not agree with the conclusions of the report. Except for this dissension the report was approved by the CONTRACTING PARTIES as embodying their collective view, and it was agreed that, because of its value in relation to the interpretation of Article XIX of the General Agreement, the text of the report should be published.

2Provisional figures for January to June 1950; these were the latest figures available to the Tariff Commission at the time of their enquiry. These figures for total imports show, as compared with the corresponding figures for the first six months of 1948 (7,825 dozen) and of 1949 (16,871 dozen) a very substantial increase in the rate of imports in 1950 as compared with 1949 and 1948. Statistics now available indicate that total imports in the period January-November 1950 were 259,032 dozen. (Source: Official Statistics of the United States Department of Commerce.)

3This figure is computed by comparing the ad valorem equivalent of the 1930 compound duties at the middle point of the several brackets with the straight ad valorem duties fixed in the Geneva agreement, disregarding the fact that on the value-bracket $18 to $24 the compound rate of the Act of 1930 had previously been reduced by the 1938 trade agreement with the United Kingdom, to an ad valorem rate of 50 per cent. The appended table on page 19 shows further details on this subject.

4These were the latest figures available at the time of the investigation. It has been subsequently determined that total production for January-November 1950 was 607,265 dozen.

5Based on production of 247,865 dozen for January to June 1948.

6Based on figures obtained by the Czechoslovak representative from his own source of information in the United States of America. The estimate arrived at by doubling the output in the first half of the year 1950 would be 50,000 dozen.

7Arrived at by adding an estimate of 43 for December to the United States figures of 607 for the first eleven months in 1950.