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1st Session


1 No. 61




APKIL 28 (legislative day, APRIL 11), 1949.—Read; referred to the Committee on
Foreign Relations and ordered to be printed

To the Congress of the United States:
I submit herewith, for the consideration of the Congress, the
Charter for an International Trade Organization, prepared by a
conference of the United Nations which met in Habana in 1948,
together with a memorandum from the Secretary of State.
The Charter is designed to do two things: to establish a code ol
international conduct to guide nations hi dealing with the fundamental
problems of world trade, and to create an agency, within the framework of the United Nations, to help implement this code.
We have learned through bitter experience how necessary it is for
nations to approach jointly the task of improving the conditions of
world trade.
During the 1930's many nations acted independently, each attempting to gain advantage at the expense of others. The result was
a vicious circle—with restrictions by one nation provoking more
serious restrictions by other nations in retaliation. The end result
was a tremendous drop in the volume of international trade which
made the general depression worse and injured all countries.
Since the recent war, though some nations have again acted unilaterally, there has been a general resolve to prevent the vicious circle
of restrictions and to achieve progressively freer trade. To gain this
objective, action by many nations is necessary. No one nation alone,
and no small group of nations, can have enough impact on the network
of obstructions that has been built up.
Federal Reserve Bank of St. Louis



The United States program of reciprocal trade agreements has been
a shining beacon of cooperative action to reduce tariff barriers, and it
is vitally necessary that the Reciprocal Trade Agreements Act be
extended in full force.
But it is clear that trade agreements alone are not enough. These
agreements do not touch certain important obstacles to the expansion
of world trade. Subsidies, cartels, and many other devices have
important effects in limiting trade or creating disadvantages for one
country as compared with another. What is needed is cooperative
action to attack the whole range of obstacles that stand in the way of
broadening international trade.
The Habana Charter is a major step toward achieving that objective. It was agreed upon by the representatives of 54 nations
after more than 2 years of preparatory study and negotiation.
The Charter establishes an international organization, which is
essential to continuous and effective international cooperation in the
field of trade. The nations accepting membership in the International
Trade Organization commit themselves to abide by fair and liberal
principles of trade. They agree to take no action which may injure
another nation without first making a genuine effort to reach a constructive solution through consultation either directly between themselves or through the Organization. They agree to work together
continuously to achieve progressively greater trade and to settle
differences with respect to national policies that affect the flow of
international commerce.
The Charter is the most comprehensive international economic
agreement in history. It goes beyond vague generalities and deals
with the real nature of the problems confronting us in the present
world situation. While it does not include every detail desired by
this Nation's representatives, it does provide a practical, realistic
method for progressive action toward the goal of expanding world
The United States can be proud of its leadership in this constructive
action to help the nations of the world work their way out of the
morass of restriction and discrimination that has gripped international
trade ever since the First World War. The alternative to the Charter
is economic conflict and shrinking international trade.
This Charter is an integral part of the larger program of international economic reconstruction and development. The great objectives of the European recovery program will be only partially
realized unless we achieve a vigorous world trading system. The
economic advancement of underdeveloped areas likewise depends
very largely upon increasing the international exchange of goods and
services. Thus the Charter is an effective step toward improved
standards of living throughout the world, toward the growth of
production, and toward the maintenance of employment and economic
stability. It is fundamental to the progressive, expanding world
economy so vital to the increasing welfare and prosperity of the
people of the United States.
The great structure of international cooperation that is being
erected through the United Nations must rest upon a solid foundation
of continuous cooperation in economic affairs. The Charter for an
International Trade Organization is a necessary part of that founda8. Doc. No. 61
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tion, along with the special arrangements that have been made in the
fields of money and credit, transportation and communications, food
and agriculture, labor and health.
As an essential forward step in our foreign policy, I recommend that
the Congress authorize the United States to accept membership in
the International Trade Organization.
THE WHITE HOUSE, April 28, 1949.
Washington, April 27, 1949.

Memorandum for the President.
Subject: The Charter for an International Trade Organization.
On March 24, 1948, after more than 2 years of public discussion
and international negotiation, the representatives of 54 nations,
assembled at Habana, completed a Charter for an International
Trade Organization for submission to their respective governments.
This Charter establishes a code of principles to be accepted in the
conduct of international trade and an organization to help make them
work. The Organization would take its place with the International
Bank and the International Monetary Fund and the Food and Agriculture Organization as a specialized agency of the United Nations.

The world economy is still seriously out of joint. The aftermath
of 6 years of struggle, with its depletion of financial and material
resources and its distortion of the apparatus for the production and
distribution of goods, is still with us. There are pronounced imbalances of trade not only between the United States and most of the
rest of the world but between other countries.
Despite constructive efforts to cope with these problems, there is
still a widespread feeling in the world of economic and political insecurity. Nations face the problems of increasing production and
distribution of goods, of finding ways and means to bring the industrialized nations of the world back into full productivity and stability,
and of developing and bringing into the area of productive trade the
underdeveloped nations of the wTorld.
In such a situation there is a clear need for a body in which policies
in the field of trade can be continually discussed, questioned, explained, adjusted, and harmonious agreement reached. The ITO
Charter provides such a body.

Even while hostilities were still going on, many persons in Hie
United States began to think of how we could reach international
agreement after the war which would avoid the mistakes and economic
conflict of the interwar period and set the course of international trade
along expanding and liberal lines. The Atlantic Charter enunciated
the principle of equal access for all to the markets and the raw materials of the world. Article VII of the Mutual Aid Agreements laid
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down the principle of negotiation for the reduction of tariffs, for the
elimination of preferences, and for the removal of discriminatory
practices in international trade. As early as 1943, consultation began
with representatives of the British and Canadian Governments to
develop agreement on principles which ultimately emerged refined
and sharpened in the ITO Charter.
When the Bretton Woods Conference completed its labors in
establishing the Charters of the International Bank and the International Monetary Fund, the delegates recognized that their work
was not complete. They realized that action by nations in the field
of the international exchanges and in the field of international investment required complementary action in the field of trade. In the
final act of that Conference, therefore, they called upon the member
nations to continue to work to—
(1) reduce obstacles to international trade and in other ways promote
mutually advantageous international commercial relations;
(2) bring about the orderly marketing of staple commodities at prices
fair to the producer and consumer alike;
(3) deal with the special problems of international .concern which will
arise from the cessation of production for war purposa?: and
(4) facilitate by cooperative effort the harmonization of national policies
of Member States designed to promote and maintain high levels of employment and progressively rising standards of living.

When the Congress accepted membership for the United States in
the Bretton Woods organizations, it said:
In the realization that additional measures of international economic cooperation are necessary to facilitate the expansion and balanced growth of international
trade and render most effective the operations of the fund and the bank, it is
hereby declared to be the policy of the United States to seek to bring about
further agreement and cooperation among nations and international bodies, as
soon as possible, on ways and means which will best reduce obstacles to and
restrictions upon international trade, eliminate unfair trade practices, promote
mutually advantageous commercial relations, and otherwise facilitate the expansion and balanced growth of international trade and promote the stability of
international economic relations.

Further agreement has now been reached in the ITO Charter.
The basic ideas of the Charter were set forth in the United States
Proposals for the Expansion of World Trade and Employment,
placed before the peoples of the world for their consideration in
December 1945. It was at the suggestion of the United States that
the Economic and Social Council of the United Nations at its first
meeting in February 1946 appointed a committee to prepare the
agenda for an international conference on trade and employment,
the Conference which took place at Habana in 1948 and produced
the ITO Charter. \Vhen that Preparatory Committee met for the
first time in London in October 1946 it had before it and adopted as
its basic working document a suggested Charter for an International
Trade Organization proposed and prepared by the United States.
A second meeting of the Committee was held in Geneva in 1947.
After the London meeting, the resulting draft Charter was published. Public hearings were held upon it in seven cities in the
United States. Extensive hearings were also conducted by the
Finance Committee of the United States Senate. Most of the suggestions which were developed at those hearings ultimately found
their way into the Charter.
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The Charter is comprehensive and detailed. It is a code of principles
designed to guide action. It contains commitments covering a wide
range of trade relations. It stands in contrast to the resolutions and
recommendations of international economic conferences between the
two World Wars, which were uniformly in such general terms and so
lacking in substantive content as to have little or no practical effect
upon the activities of nations. The Charter leaves the world of pious
generalities and addresses itself to the more thorny task of providing
a guide for action in dealing with specific problems in international
Equally important, the Charter provides a mechanism for continuous consultation between nations on policies affecting world
trade. It establishes the obligation and the mechanism of consultation and adjustment before action, rather than retaliation after it.
We are pledged to unfaltering support of the United Nations
hi the conviction that international differences of opinion can best be
composed around the conference table. The International Trade
Organization will provide the conference room for discussion of problems of international trade. Its rules for action, its means for consultation, will together provide a method of meeting world trade problems
as they arise and of helping to maintain economic peace.

The objective of the Charter can be simply stated. It is to contribute to higher standards of living, to greater production and wider
distribution and consumption of goods and services, and thus to
economic and political stability throughout the world. It seeks to
do this, first, by reducing public and private barriers which restrict
and divert trade; second, by establishing the objective of multilateralism and nondiscrimination in international trade and by providing means and fostering conditions under which this objective
can be achieved as rapidly as possible; third, by providing a means
for dealing with problems arising out of surpluses of primary commodities; fourth, by promoting the economic stability and the
maintenance of employment so essential to liberalization of trade
policy; and, fifth, by advancing the economic development of underdeveloped areas, which have so great a contribution to make to their
own welfare and that of the world.

Many of the substantive commitments of the Charter are based
on familiar principles of United States policy. Others are of a pioneering character.
In the first group are:
(a) The commitment that member nations will stand ready to
negotiate for the reduction of tariffs and the elimination of tariff
preferences. This is simply international acceptance of a policy long
followed by the United States under the Hull reciprocal trade agreements program. So far as the United States is concerned, this comS. Doc. No. 61
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mitment will be carried out under the authority and procedures
of the Reciprocal Trade Agreements Act.
(6) Commitments designed to limit the use of indirect forms
of protectionism, such as discriminatory internal taxes, mixing
regulations, and arbitrary and concealed barriers in the guise of
customs regulations. The principal effect of these commitments
will be to concentrate charges upon imports at the customs frontier, to
make it widely and definitely known exactly what those charges are,
to simplify as much as possible the binding red tape of customs
administration and to secure a wider degree of uniformity in such
administration. The provisions of the Charter dealing with this
subject represent the widest area of detailed agreement yet reached
internationally in this complicated and highly important field.
(c) A condemnation in principle of the use of quantitative restrictions, a limitation of their use in practice to specified situations in
which all nations are agreed that their use is permissible, and a
commit^gnt to keep their use subject to international scrutiny
and control.
(d) Acceptance of the basic principle of nondiscrimination and
equal opportunity in international trade; the principle of unconditional most-favored-nation treatment.
These principles are familiar in the United States. They have long
been incorporated in our trade agreements and commercial treaties.
In the Charter they are reaffirmed as objectives in all cases and as
rules of immediate and present behavior in cases where that is now
possible. Where deviation is required by the exigencies of particular
situations, the degree of deviation from the principle, and the conditions under which such deviation will be recognized as legitimate,
are specifically laid down.
Some changes in present United States law will be necessary for
full compliance with the Charter. These changes, however, are relatively few in number and scope. They will be pointed out in detail
to the Congress during the presentation of the Charter and necessary
legislation will be presented later.

The Charter, however, recognizes that governmental trade barriers and discriminations represent only part of the obstacles to increased trade in today's economic world. It therefore goes on to
attack problems not hitherto dealt with in broad-scale international
agrc 3naent.
The Charter contains the first set of international commitments
with respect to the restrictive practices of private and public international cartels. In many cases such practices can be as effective
and as harmful to the development of international trade as the more
familiar restrictions imposed by governments. The Charter defines
these harmful practices, and contains commitments by the member
nations to take necessary action according to their own constitutional
and legal systems to secure the abandonment of practices found to be
The Charter contains the first set of commitments by governments
to guide the operation of their state trading enterprises. The development of state trading has been a phenomenon of increasing importance
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in the field of international trade. The purpose of the Charter commitments is to subject the conduct of such enterprises, as much as possible,
to the same criteria as those which normally govern the operation of
private enterprises.
The Charter contains the first set of international rules with respect
to the formulation and operation of intergovernmental commodity
agreements. Many special problems arise in the field of primary
commodities. These are often produced by large numbers of small
producers, and surpluses cause widespread hardship. Price fluctuations can be and often are violent.
Intergovernmental action is frequently required to assist in dealing
with such problems. In the past such action has normally been by
agreement only of the producing countries. The Charter, among
other things, would require that in any such agreement consuming
countries will have an equal voice with producing countries, a new
requirement for commodity agreements. .
The Charter contains provisions for consultation between members
with respect to their use of subsidies, with a view to limitation of such
use when it proves to be harmful to other nations' interests.
The Charter recognizes the importance to international trade of a
high and stable level of demand in the member countries. The reduction of barriers to international trade will be of little avail if there
is no demand for the products of international trade. The full
realization of demand for the products of international trade cannot
be achieved if there are unnecessary barriers to the exchange of such
products. These are two sides of the same coin. In the Charter
member countries would commit themselves to use their best efforts
according to their own constitutional procedures, such as our Employment Act of 1946, to achieve and maintain within their borders
full and productive employment.
Finally, the Charter recognizes the fundamental importance of the
economic development of underdeveloped countries. Vast areas of
the world are in very early stages of economic and industrial development, resources are not fully utilized, poverty is widespread, starvation and disease are ever present. Such conditions provide no basis
for economic progress or political stability. They are fertile breeding
grounds for discontent and unrest.
It is to the common interest of all nations to see such areas brought
to a higher stage of economic development. This can be done by
the efforts of the people and governments of the areas themselves, by
the efforts of private industry, agriculture, and labor in other countries,
by the help of other governments, and by the help of international
agencies. Therefore, the Charter contains provisions designed to
facilitate the flow of technological information and private capital
into areas which need and can use them and, at the same time, to
safeguard those areas against abuses of foreign investment which
have unhappily taken place in the past.
These provisions of the Charter were of deep and primary concern
to a large number of the countries represented at Habana. They are
of concern to the United States also. For it is in this area that the
United States and other highly industrialized and developed countries
can make a great contribution to the sound development of other
nations and, at the same time, to our own prosperity.
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The Charter is designed as a set of principles to be observed in
action. It is not just a set of temporary rules to meet the present
abnormal and emergency economic situation. It is designed also for
the longer term. It will represent agreement as to future objectives
as well as to the rules for today's action.
Many of the commitments, such as those dealing with negotiations
for the reduction of tariffs and elimination of preferences, the abolition
of discriminatory internal taxes and regulations, the simplification
and publication of customs regulations, the negotiation and operation
of commodity agreements, the limitation of the restrictive practices
of cartels, and others, can be, and must be, immediately and fully
lived up to.
Other commitments cannot, in the postwar economic world, be
fully lived up to by all countries immediately.
For example, the members of the ITO will commit'themselves to
abandon the use of quantitative restrictions. But during the postwar
transition period it is inescapably necessary for many, if not most,
countries to budget their foreign purchases. Therefore, the Charter
provides that when countries are in real balance-of-payments difficulties they may use quantitative restrictions to limit their expenditures
of foreign exchange. When the circumstances which the Charter
recognizes as justifying the use of such restrictions have been corrected, members are committed to abandon them.
Under certain circumstances, countries in the process of economic
development may have legitimate need to use restrictive measures,
which would otherwise be prevented by the Charter, for the development of new industry. Hence, the Charter provides certain cases
in \vhich this may be done, provided the Organization is satisfied
that carefully specified conditions, agreed to by all the members, have
been met.
Under certain circumstances a tariff rate, negotiated under the
commitment of members to negotiate for the reduction of their tariffs,
may cause or threaten unexpected injury to a domestic industry.
The Charter provides that under such circumstances the country
granting that concession may withdraw or modify it to the extent
necessary to prevent such injury. This provision is patterned on the
escape clause which the United States includes in trade agreements
negotiated under the Reciprocal Trade Agreements Act.
Under certain circumstances it has been necessary for governments
to intervene to prevent the disastrous effects of surpluses of agricultural products by programs restricting domestic production or marketing. In such cases it would be unfair for imports to be exempt
from control and they could be limited.
Considerations of national security at times require measures which
would not conform to the general principles which would normally be
applied under the Charter. An exception is, therefore, provided to
permit action to be taken by member countries necessary for their
national security.
Without exceptions of this kind, members of the Organization,
ourselves included, could not accept the commitments of the Charter.
The exceptions are carefully defined and are agreed to by all. Their
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use is subject to scrutiny by the Organization.
to complaint by the members.


Their abuse is subject



The International Trade Organization would be a specialized agency
of the United Nations. As such, it would enter into relationship
with the Economic and Social Council of the United Nations and with
the other specialized agencies in order to insure coordinated action
and to avoid duplication of activities and functions.
The structure of the Organization itself is simple. It will have a
Conference composed of all the member nations which will be its
fundamental governing body. The Conference will meet periodically,
but at least once a year.
The executive functions of the Organization will be vested in an
Executive Board of 18 countries, of which 8 must be nations of chief
economic importance as determined by the Conference. This provision insures a permanent seat for the United States on the Executive Board. Other nations likely to have permanent seats under this
test will be the United Kingdom, France, the Benelux Customs Union,
and Canada.
Each member country will have one vote in the Conference and on
the Executive Board. Decisions of the Conference and of the Executive Board will, except in certain cases where a two-thirds vote is
required, be by majority vote.
The Organization will have a Director General, to be appointed by
the Conference on recommendation of the Executive Board, who will
be responsible for its day-to-day activities under the direction and
supervision of the Executive Board.
With one exception, relating to the discriminatory application of
restrictions for balance-of-payments reasons, the Organization wiU
have no power to require any member to take any specific action.
It will have the power to decide whether a member has lived up to
its commitments under the Charter. If it finds that the member has
not lived up to a given commitment, it may release other members
from certain of their Charter obligations to that member, which, if
not satisfied with this decision, may in most cases withdraw from the
Organization on 60 days' notice.
Decisions of the Conference of the Organization may be referred to
the International Court of Justice for legal opinion.
The Organization will provide a forum where problems may be
discussed and conflicting interests reconciled. It provides a means
of bringing to bear upon a given problem the force of international
public opinion. It provides a means of developing, on a case-by-case
basis, international precedents in the field of economic and commercial
The Organization will provide a means for the accumulation and
dissemination of trade statistics and information about trade practices
of government, e. g., customs regulations, etc., which can be of great
service to businessmen.
The Organization will be empowered to make studies in various
fields, for example, standardization, uniformity, and simplification of
customs regulations. It can be a means for the collection and
dissemination of technological information.
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The expenditures of the Organization are to be met by contributions
from the members. These contributions are to be apportioned among
the members in accordance with a scale fixed by the Conference following such principles as may be applied by the United Nations.
Should the United Nations place a maximum limit on the proportionate contribution to its budget by any one member, the same
limit is to be applied to contributions to the Organization.

It is apparent that the economic problems facing us today cannot
be solved by any one nation, or any few nations, but must be tackled
by many nations working together.
We are committed to unfaltering support of the United Nations.
We have participated in the building and establishment of the International Monetary Fund to deal with the problems of international
exchange. The purpose of the fund is to promote by international
action reasonable stability and convertibility of currencies. Clearly,
trade must be brought into balance if currencies are ever to be and
remain stable. Regulation of exchange controls is futile if nations
are free to use quantitative restrictions instead. To solve the problems of international trade, international cooperation with respect to
exchange controls and currency valuation must go hand in hand with
international cooperation with respect to other forms of trade barriers
and the expansion of demand in international trade.
We have participated in the building and operation of the International Bank for Reconstruction and Development. We are interested
in foreign private investment. Clearty, loans cannot be repaid or
earnings on investments received if international trade is not fostered
and freed. International cooperation in provision of capital must go
hand in hand with international cooperation in the development of
the kind of conditions in which capital can exercise its catalytic and
constructive influence.
We are playing a tremendous part in the great work of European
recovery. In the development of the European recovery program
there has been consistent recognition of the vital importance of increased trade. The participating countries have pledged themselves
to cooperate to reduce trade barriers and expand trade in accord with
the principles of the draft Charter for an International Trade Organization. Similar pledges are repeated in the convention for European
economic cooperation.
Section 115 (b) (3) of the Economic Cooperation Act requires the
inclusion in the bilateral aid agreements between each of the participating countries and the United States a general undertaking to
cooperate in facilitating and stimulating an increasing interchange of
goods and services and in reducing barriers to trade. In accord with
this congressional mandate a provision to this effect was included in
the bilateral aid agreements with the participating countries.
The European recovery program is designed to help put the European countries on their feet. The ITO Charter provides principles
and rules of trade which, if followed over the long term, will give them
the best chance of staying on their feet. The problem is one of
markets as much as it is one of production. Our investment in the
European recovery program can be fully realized only if the particis. Doe. No. 61
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pating countries are able and willing to adopt trade policies which
will foster multilateral, nondiscriminatory, and expanding international trade, rather than policies of bilateralism, discrimination,
limitation, and control. Wide acceptance of the Charter throughout
the world would mean that many other nations besides those in
western Europe would be marching in the same direction and with the
same purpose.
We are deeply interested in assisting in the development of underdeveloped areas of the world. We hope to see these areas develop
under political and economic institutions in which human dignity and
freedom can be preserved. In particular, we hope to increase the
international flow of technical knowledge. This is not something
which we can, or would wish, to do alone. Other nations have great
reservoirs of knowledge ana experience which they, too, can, ana will
be glaa to share. The International Trade Organization will be one
means whereby resources of knowledge may be pooled and directed
to the areas and projects where they can be most constructive.
Thus, the International Trade Organization, like the other specialized agencies of the United Nations, is part of a pattern—the pattern
of the great majority of a community-of nations cooperating together
in various fields of the community's life to provide the services which
the community needs.


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