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87TH CONGRESS 1
1st Session /
f EXECUTIVE
\REPORT No. 1
SENATE
ORGANIZATION FOR ECONOMIC
COOPERATION AND DEVELOPMENT
REPORT
OF THE
COMMITTEE ON FOREIGN RELATIONS
UNITED STATES SENATE
ON
EXECUTIVE E, 87TH CONGRESS, 1ST SESSION
• i•
MARCH 8, 1961.—Ordered to be printed
U.S. GOVERNMENT PRINTING OFFICE
67119
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WASHINGTON : 1961
COMMITTEE ON FOREIGN RELATIONS
J. W. FULBRIQHT, Arkansas, Chairman
JOHN SPARKMAN, Alabama
ALEXANDER WILEY, Wisconsin
HUBERT H. HUMPHREY, Minnesota
BOURKE B. HICKENLOOPER, Iowa
MIKE MANSFIELD, Montana
GEORGE D. AIKEN, Vermont
WAYNE MORSE, Oregon
HOMER E. CAPEHART, Indiana
RUSSELL B. LONG, Louisiana
FRANK CARLSON, Kansas
ALBERT GORE, Tennessee
JOHN J. WILLIAMS, Delaware
FRANK J. LAUSCHE, Ohio
FRANK CHURCH, Idaho
STUART SYMINGTON, Missouri
THOMAS J. DODD, Connecticut
CARL MAECY, Chief of Staff
DAEHELL ST. CLAIEE, Clerk
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CONTENTS
Purpose and background of the convention
Substance of the convention
Development Assistance Committee
Trade provisions
Other provisions
Protocols
Committee action
OECD and GATT
Functions of DAC
Relationship to NATO
Legal interpretation
Other questions
Further committee action
Conclusion
Appendix 1. Memorandum of understanding
Appendix 2. Official assistance to the less-developed countries by OECD
countries and Japan
Appendix 3:
Table A. Importance of OECD countries as a market for lessdeveloped countries
Table B. Proportion of export earnings of selected less-developed
countries derived from principal primary products, 1959
Appendix 4. Letter from the Legal Adviser, Department of State, dated
February 27, 1961, and enclosed memorandum
Appendix 5. Opinion of the Legal Adviser, Department of State, dated
March 6, 1961, and attached memorandum
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87TH CONGRESS
1st Session
)
\
ORGANIZATION
SENATE
j EXECUTIVE REPT.
1
No. 1
FOR ECONOMIC COOPERATION
DEVELOPMENT
AND
MARCH 8, 1961.—Ordered to be printed
Mr. FULBRIGHT, from the Committee on Foreign Relations, submitted
the following
REPORT
[To accompany Ex. E, 87th Cong., 1st sess.J
The Committee on Foreign Relations, having had under consideration the Convention on the Organization for Economic Cooperation and Development, together with two protocols relating thereto,
signed at Paris on December 14, 1960 (Ex. E, 87th Cong., 1st sess.),
reports the convention and protocols to the Senate and recommends
that the Senate give its advice and consent to ratification.
PURPOSE AND BACKGROUND OP THE CONVENTION
Since the end of World War II, vast changes have swiftly transformed relations between the non-Communist industrial nations, as
well as relations between these powers and the less developed but
politically awakened areas of the world. The Organization for
Economic Cooperation and Development (OECD) reflects these
changes, and has been designed to cope with those that can determine
economic stability and growth.
Structurally, the OECD consists of the 18 European members that
comprised the OEEC (Organization for European Economic Cooperation), plus the United States and Canada. The OEEC was
established in 1948 to help Europe recover from the war. It recommended allocations of Marshall Plan aid to member countries, established the European Payments Union and liberalized intra-European
trade. The OECD amounts to a recognition that the objective
of the predecessor organization has been attained, and has given way
to another and equally urgent set of problems that can be adequately
dealt with only by a remodeled organization, in which the United
States and Canada are participants.
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2 ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
The OECD has two broad purposes. One is to promote economic
stability and the orderly growth of the economies of member countries.
The other is to devise more effective methods of assisting the less
developed countries, and for arranging to distribute the aid burden
more equitably. Thus, on the one hand, the OECD reflects the growing interdependence of the economies of its member countries. And,
on the other, it acknowledges the urgent need to narrow the gap between the rich and the poor countries, yet in a form that will not tax
the economic vitality of any,one of its members.
The OECD concept—the need for such an institution—has been
widely discussed here and abroad in recent years. In the fall of 1959,
behind an American initiative, these discussions assumed an official
character. Next, in December 1959, the heads of Government of the
United States, France, Germany, and the United Kingdom, meeting
in Paris, publicly recommended an intensive study of methods of
promoting consultations on major economic problems. This was
followed by a ministerial meeting of January 14, 1960, in which representatives of the 18 OEEC countries and the United States and Canada
adopted a resolution 'establishing a group of 4 experts to determine
means by which the 20 nations could improve their cooperation on
economic problems and development assistance.
On April 7, 1960, the Group of-Four published its report, which
proposed that the OEEC be reconstituted as the OECD. On May
25, senior officials of the 20 nations presented their governments' views
on the Group of Four report and established a Working Party to draw
up a draft convention remodeling the OEEC and to begin reviewing
the OEEC acts.
On July 23, a Ministerial Conference reviewed the status of the
project and established a Preparatory Committee to complete the
transformation of the OEEC into the OECD. The Committee's
report was adopted at the Paris Ministerial Meeting of December 13,
1960, and the convention with related protocols was signed the next
day by the representatives of the 20 governments.
•
SUBSTANCE OF THE CONVENTION
The OECD Convention consists of 21 articles and 2 related protocols. The aims of the organization, as well as the methods and
provisions for achieving these aims, are set forth in articles 1—6.
A comparison of these six articles with the OEEC Convention reveals
the following: The objectives of the OECD are broader than those of
the OEEC. But the obligations are fewer and considerably less
demanding. The OECD Charter provides for consultation and
voluntary cooperation. The OEEC embodied rules and obligations
to which each of itJs members was bound. Although preoccupied at
the start with the distribution of Marshall Plan funds, the OEEC
became generally concerned with intra-European trade and payments problems. For example, the OEEC countries developed a
code of liberalization, which removed quantitative restrictions on
member imports within a system of reciprocal commitments. As a
concession to the United States, the OEEC's Code of Trade Liberalization has been discarded in its entirety. For some members,
this was a major—and painful—concession.
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Many of OEEC's other codes and obligations have also been
allowed to lapse. None of those that will be carried over will apply
to the United States. However, the United States has agreed to
certain recommendations of the OEEC. The terms of these recommendations do not obligate the United States, or other members, to
courses of action. Appendix No. 1 to this report is a memorandum
of understanding which formally commits the 18 OEEC members to
vote in the OECD Council for adoption of those OEEC acts that
have been recommended by the Preparatory Committee. However,
the United States and Canada are not similarly bound. Under paragraph 2 of this memorandum, the United States and Canada shall be
released from the commitment to vote in the OECD Council for
adoption of any acts in this category if appropriate notification is
given no later than 10 days after the deposit of either country's instrument of ratification. The act then becomes applicable to all the other
members, but not to an abstainee.
The OECD's basic purposes—to promote orderly economic growth
within its 20 member community, and to assist more effectively the
less developed countries—is embodied in article 1. Under article 2,
the members agree to pursue these aims by promoting the development and most efficient use of their economic, scientific, and technological resources.
They also agree, under article 2 (c), to—
pursue policies designed to achieve economic growth and internal and external
.stability and to avoid developments which might endanger their economies or
those of other countries.
This language clearly reflects the rapid and sweeping postwar changes
that have inspired the creation of the OECD. It acknowledges the
growing and relentless interdependence of the economies of the
member countries. These economies have together become an
elaborate skein, the threads of which are the payments balances and
economic policies of the member countries (and others, like Japan).
The process of reaction and adjustment between them is a constant
rhythm. Ideally, this process should also provide equilibrium, just
as the free gold standard was once supposed to provide automatic
equilibrium. Unfortunately, the tangled skein of international
economics lacks the element that would assure stability, or automatic
equilibrium. The OECD, through its Economic Policy Committee,
will provide advice and recommendations designed to protect each
member from economic disequilibrium.
The Secretary of the Treasury, Mr. Dillon, in testifying before the
Committee on Foreign Relations, illustrated the need for the OECD
mechanism with this reference to the U.S. balance of payments
difficulties of 1960.
During the first half of 1960 our balance of payments deficit on an annual
basis was $2.9 billion—down markedly from the level of $3.8 billion in 1959.
Last spring our Federal Reserve discount rate was at 4 percent, the German
Bundesbank rate was 4 percent, and the Bank of England rate was 5 percent.
In other words, all those rates were close together. Then, as business began to
slow in the Unitedl States, our Federal Reserve began to ease credit and reduced
its rate first to 3 /2 percent, and later to 3 percent. Meanwhile the German
Bundesbank, with its eye on the domestic boom in Germany, and with the
objective of controlling inflation at home, increased its discount rate to 5 percent
in June. The Bank of England promptly followed suit and upped its rate to 6
percent.
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ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
These actions brought about a sharp imbalance in short-term interest rates.
The results were bad for all concerned. A flood of short-term funds left New York
seeking the higher return in Frankfurt and London. This sharply increased our
balance-of-payments deficit from an annual rate of $2.9 billion in the first 6
months to a rate of $4.7 billion in the second 6 months. This sudden and sharp
increase shook confidence in the dollar and the result was a substantial increase
in the outflow of gold. This, in turn, brought on the speculative outbreak in the
private gold market in London last October when for a day or two gold sold at
$40 an ounce.
Meanwhile the large inflow of American funds frustrated the efforts of the
German authorities to tighten up on investment in Germany. When this became
clear, the German and British authorities both cut back their discount rates, the
flow of short-term capital slowed and confidence was gradually restored.
The lesson to be learned by all this is that in these days of convertible currencies
there must be close cooperation and coordination between our financial and monetary authorities and those of the major industrialized countries of Western Europe.
This is now recognized on all sides. The OECD is the forum in which this coordination can be worked out and through which we can avoid similar episodes in
the future. As such, it is a vitally important element in our drive to right our
payments deficit without infringing on the actions that must be taken to reinvigorate our economy here at home.
Development Assistance Committee.—Under article 2(e), the OECD
members have agreed to meet their development assistance responsibilities by providing capital and technical assistance to the less
developed countries, as well as helping them to secure and expand
export markets. The OECD instrument for this activity will be its
Development Assistance Committee, successor to the Development
Assistance Group, which operated throughout 1960 on an interim
basis. Appendix No. 2 to this report is a breakdown of official assistance provided by the OECD members and Japan to less developed
countries. It should be noted that the French figures include assistance to Algeria, which in the past has been regarded by French governments as part of Metropolitan France.
The Development Assistance Committee (DAC) initially will consist of nine OECD members—Belgium, Canada, France, Germany,
Italy, the Netherlands, Portugal, the United Kingdom, and the United
States—and also Japan. The DAC will not of itself be an operating,
or "burden sharing," agency. Instead it will review aid programs,
recommend levels and kinds of aid, as well as more efficient and
equitable aid programming. It will be a clearinghouse for information
concerning the needs of the less developed areas and a forum in which
the capacities of the major industrialized nations of the West, along
with Japan, can be measured against these needs. The DAC will
thus enable nations which are meeting their responsibilities in this
area to encourage laggard nations to assume their share of the burden.
Trade provisions.—Artides l(c) and 2(d) provide that the OECD
members will "pursue their efforts" to expand world trade "on a
multilateral, non-discriminatory basis in accordance with international obligations"; also to try to "reduce or abolish obstacles to the
exchange of goods and services * * *." The OECD's concern will be
the broad outlines of trade policy, not tariff negotiations, or trade
rules. These matters are the concern of the GATT (General Agreement on Tariffs and Trade) of which all OECD members, excepting
Iceland, are contracting parties. Congress has never approved the
GATT, and approval of the OECD will not constitute approval of the
GATT. Articles l(c) and 2(d) do not obligate members to take any
actions which they otherwise would not take. These articles do mean
that the OECD, as an extension of its function of providing economic
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ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
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stability, will become a consultative forum in which members can deal
with general trade problems of concern to some or all of them.
As an example, Western Europe has divided into two trade blocs.
Leaving aside the unproductive competition inherent in such a division, other problems appear. On January 1, 1961, the Common
Market "Six" scaled down its internal tariffs on industrial items and
some agricultural goods. The effect of these first adjustments has
created some discrimination against imports from countries outside
the "Six." Obviously, the United States and others must encourage
the "Six" and the "Seven" (European Free Trade Association) countries to adjust their general trade policies in a way that will avoid further discrimination against those who are members of neither bloc.
The OECD will be a forum for such discussions, as well as for the
larger question of ending the trade division in Europe in a manner
that will protect every country's interests. The problem affects the
rich and poor alike.
In Africa, those countries which formerly were French colonies
have the privilege of association with the "Six." This means that
they can—and do—sell their goods in a preferred market. It also
means that neighboring African States—-Nigeria, for example, which
in 1959 sold 35 percent of its exports to the "Six"—must compete
for this market against a rising tariff wall. Appendix No. 3 to this
report contains two tables, (a) and (6), which show respectively the
importance of OECD countries as a market for the less developed
countries; and the proportion of export earnings of selected less developed countries derived from their primary products.
In article 2(d), one of the two trade provisions, the members also
.agree to try to "maintain and extend the liberalisation of capital movements." At present, only Belgium-Luxembourg, Canada, the United
States, and Germany, among the members, permit the unrestricted
flow of capital from their countries. This is another example of a
problem that can be discussed within the broad, multilateral framework of the OECD.
Other provisions.—In article 3 the members agree (a) to "keep each
other informed"; (b) to "consult together on a continuing basis"; and
(c) to "co-operate closely and where appropriate take co-ordinated
action."
The language "where appropriate" makes article 3(c) permissive
rather than mandatory. Furthermore, article 6(3) provides that—
Xo decision shall be binding on any Member until it has complied with the
requirements of its own constitutional procedures. The other Members may
agree that such a decision shall apply provisionally to them.
Articles 7-14 are concerned with organization and procedural
matters. Subsidiary bodies, such as the Economic Policy Committee
and the DAC, would be established under the authority of article 9.
Article 15 concerns the status of OEEC acts that might be carried
over. It provides that "* * * decisions, recommendations and resolutions of the Organization for European Economic Cooperation shall
require approval of the Council to be effective after the coming into
force of this Convention." Under article 6, each member shall have
one vote on the Council, and "decisions shall be taken and recommendations shall be made by mutual agreement of all the Members."
Article 17 allows any member to terminate membership in the
convention by giving 12 months' notice of that intention to the
depositary government.
•
Ex. Kept. 1, 87-1
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ORGANIZATION" FOR ECONOMIC COOPERATION AND DEVELOPMENT
Articles 18-21 cover the location of the OECD Headquarters
(Paris); budgetary procedure; and notification responsibilities of the
depositary government.
Protocols.—There are two supplementary protocols to the convention. The first gives the members of the European Economic Community the option of acting individually within the OECD, or jointly
through one of their commissions, such as the High Authority of the
Coal and Steel Community, or the European Atomic Energy Community. The second protocol covers the privileges, exemptions, and
immunities of OECD officials and representatives.
COMMITTEE ACTION
The convention, with related protocols, was transmitted to the
Senate by President Eisenhower on January 17, 1961. On February
14 and 15, the Committee on Foreign Relations examined the convention in public session. Witnesses from the executive branch,
representing President Kennedy, were heard on February 14. They
were the Secretary of the Treasury and the Under Secretary of State
for Economic Affairs. On February 15, the committee heard testimony
from all other persons who had asked to appear.
The Chairman, Mr. Fulbrighfc, asked whether article 6 (1) endowed
the individual members with a veto power over the decisions and
recommendations of the OECD Council. Under • Secretary Ball,
answering in the affirmative, said:
A nation which opposes a particular proposal has the option either of voting
against it, in which case the proposal is killed, or of abstaining, in which case
the proposal does not apply to that country.
The chairman, in referring to Secretary Dillon's comment on the
relationship between discount rates and capital outflows, asked
whether the OECD's authority would "affect the power of the Federal
Reserve Board to alter our discount rates." Secretary Dillon said no.
Senator Morse carried the question a step further and asked whether
the jurisdiction of the Federal Reserve Board might be enlarged by
the creation of the OECD. Secretary Dillon replied:
* * * this convention, will not in any way, shape or form enlarge the authorities of the Executive or of the Federal Reserve or any other organization in the
U.S. Government to take actions which are not already provided for * * * under
act of Congress.
OECD and GATT.—Senator Sparkman asked whether this organization would, or could, perform any of the functions that had been
contemplated for the ITO (International Trade Organization), or
whether the OECD bears any relationship to the GATT.
Secretary Dillon said that there is no connection whatsoever.
He added that during the OECD discussions some of the countries
objected to the elimination of the code of trade liberalization, because
they felt they drew a measure of protection from these trade rules.
However, the American position was accepted at the July OECD
ministerial meeting. It was stated then by Secretary Dillon as follows:
* * * In the [U.S.] Constitution it is * * * specified that foreign trade is
within the competence of the Congress of the United States and not within the
competence of the Executive. All the actions which the Executive takes in this
field and has taken over the past years in the form of trade agreements and so
forth have been taken on this specific authority which has been voted by the
Congress of the United States through the original Trade Agreements Act and
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ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
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its various extensions, the last of which occurred in 1958. It is impossible for
the United States to agree to anything which would infringe this competence
of the Congress.
One thing to which this happens to apply is the question of detailed and fixed
procedures and rules which have to be approved by the Congress as part of our
joining, working with, any new organization. We have suggested three times
in the last 10 years to our Congress, once under the Democratic administration,
and twice under the administration of President Eisenhower, that rules and procedures which had been worked out by experts, and which would help the
functioning of the GATT, be specifically approved by the Congress. Three times
the Congress has refused to do that, allowing us to continue to operate within
the framework of the GATT, but saying that as a Congress they would not
approve any specific rules which might have the effect of binding or making it
more difficult for them to operate with freedom in the field of trade in the future.
It is very clear that this same consideration applies to this Convention. Any
attempt to tie in rules of trade, rules of procedure that are fixed and definite,
would not be acceptable to our Congress and that is the reason why the United
States Representatives have continually objected to such rules and regulations.
It is not a question of substance, the substance of whether we wish to talk
about things or do not wish to, but it is a very important question of procedure
and the prerogative of our Congress, which we are bound to uphold. It would
be no use for us to reach an agreement around this table that we know would
not be acceptable to our Congress, and would be doing a disservice to all of us
sitting here. That is why I have dwelt on this problem.
Senator Aiken also sought a more precise understanding of the
intent of articles l(c) and 2(d), the trade provisions. And the
following exchange occurred between him and Secretaries Dillon
and Ball:
Senator AIKEN. * * *.
The Senator from Alabama asked what the relationship of OECD would be to
GATT, and you said there would be no relationship whatsoever.
But reading this pledge to pursue efforts to reduce or abolish obstacles to the
exchange of goods and services and current payments, makes one wonder whether
OECD intends to operate parallel to GATT. What is the purpose there?
Secretary DILLON. Well, in the field of capital flow and money, the GATT
does not operate, and in that field I think that OECD would operate.
We have always had a completely free regime for the flow of our capital and
investments overseas; since the war, certainly, and probably for quite some time
before that, the European countries have not.
Now that their currencies are becoming convertible, it is in our interest to
press for a greater freedom of these capital flows so that European funds will
come to the United States for investment with greater ease than is presently
the case. This would be a forum through which this objective would be sought,
and that is what I think is referred to here when they talk about current payments
and liberalization of capital movements.
Senator AIKEN. But GATT and OECD would perform parallel functions as
they .relate to removal of trade barriers.
Secretary DILLON. Well, that is the specific policy of the GATT, and in OECD
it is not its specific policy.
However, the countries agree that they will pursue their efforts individually,
that is, to reduce and abolish obstacles.
Now, by obstacles to the exchange of goods, we do not mean tariffs.
What is really meant there are discriminatory provisions such as the chairman
was talking about, which we have a few of in the agricultural field, and of which
the European countries have many more.
This is a pledge to work toward reducing or abolishing these, but how quickly
results will be achieved I do not know, and certainly this organization is not the
primary forum in which this will be discussed.
Mr. BALL. Senator, I might add that this organization will not be an organization that makes trade rules or that enforces trade rules or that modifies existing
trade rules.
There is a very clear distinction between what is contemplated here and the
operations of the GATT in Geneva.
Senator AIKEN. It would simply make findings and, on the basis of those findings, make recommendations to its members or just release its findings?
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Mr. BALL. The major interest of the United States in this, as Secretary Dillon
has said, is in relation to the resolution of the existing problems between the Six
and Seven. Our concern there is to see that in the consideration of this problem
the interests of the United States are represented.
The chairman pursued this matter further and raised with the two
executive branch witnesses some comments of the opposition to the
OECD:
The CHAIRMAN. * * *.
Since I asked you my question about the opposition, I have sent for, and have
received, this statement which is apparently the principal statement of the
opposition to this treaty. I think it would be well for the record if you would
comment on it.
First the ITO and OTC [Organization for Trade Cooperation] are described
and how they were defeated by the Congress. Then the statement says "They
both also sought to use the sanctity of an international agreement as a means of
making permanently supreme the economic outlook of people then in the executive branch of the Government and especially in the State Department."
Do you think this is a true characterization of this agreement?
Secretary DILLON. Not at all, Mr. Chairman.
The other two agreements did provide a mechanism for establishing trade
rules and, as such, they would have much more explicitly recognized the GATT.
The executive branch, at that time, felt that this was advisable because it was
thought that the GATT was a useful instrument to prevent discrimination.
But the OECD has nothing whatsoever to do with trade rules at all. We have
made that very clear. We would be glad to repeat it again. It does not reflect
the philosophy of any particular group.
It is a broad, bipartisan measure that is in the national interest, and it simply
recognizes the new facts of this era of convertibility, that we have to have a
forum for the interchange of economic information, and where we can develop
closer coordination and exchange views on methods and means by which each
of our countries is successful in pursuing the objectives, its own objectives, of
greater economic growth.
The CHAIRMAN. The statement says:
"While Congress has the constitutional authority and responsibility to regulate
our foreign commerce, it could no longer do so without encountering and, perhaps
running afoul, of provisions of the international agreement."
Do you think that is true?
Secretary DILLON. Xo, sir.
The CHAIRMAN. It says:
"Ratification of the agreement would, therefore, transfer some of the most
meaningful aspects of the enumerated congressional powers into the hands of
the Executive without bothering about a constitutional amendment. Surrender
by Congress in this matter would mean breaking faith with the electorate and,
in fact, betrayal of its trust."
Would you think it is a true statement?
Secretary DILLON. It would not transfer one single thing from the Congress to
the Executive.
The CHAIRMAN. It states:
"How would this come about? It would come about through an authorization
of membership in an international organization having aims which could not be
carried out without entrenching upon the functions of Congress."
Mr. BALL. As has been pointed out repeatedly here, Mr. Chairman, the decisions
of this organization can only be carried out through the constitutional processes
of the United States. It does not add, it does not detract one bit from the powers
of Congress. It does not expand the powers of the Executive.
Secretary DILLON. That was the very reason that that language was specifically
written into the charter in subparagraph 3 of article 6, so that there could be no
misunderstanding on this subject. We were afraid that otherwise some people
would misinterpret this thing. But with that language in there there can be no
misunderstanding.
The CHAIRMAN. So it is very clear that any specific agreement must return to
the Congress and follow the usual procedure. None is authorized in advance by
this agreement?
Secretary DILLON. That is correct.
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Senator Sparkman suggested that a memorandum outlining the
history of the GATT "from the standpoint of its consideration by
Congress/' along with some background on its activities, would be
helpful to the committee. The Legislative Reference Service of the
Library of Congress was asked to prepare such a memorandum. It
appears on page 102 of the printed hearings.
Functions of DAC.—Senator Sparkman was interested in whether
the DAC would be an operating agency, and, if so, would there be
any overlapping of its functions with those of other multilateral organizations, such as the International Bank for Reconstruction and
Development (IBRD).
His question produced the following exchange:
Mr. BALL. I would like to point out a distinction here which, I think, could
be the subject of some confusion. This is not going to be an operating agency
in the area of foreign assistance. The OECD will provide a forum in which the
problem of foreign assistance can be freely discussed among the nations which
have the resources to contribute to that effort.
Senator SPARKMAN. Is that true of the OECD and the DAC, both?
Mr. BALL. Yes. The DAC is simply a committee established under the
OECD in which the problems of assistance are going to be discussed, and in
which the effort will be made to mobilize the greatest amount of effort and resources for the purpose. But it is not contemplated that this will be an agency
which administers aid.
Secretary DILLON. Senator, I might say that in the meetings that we had last
year of this Development Assistance Group, which is the predecessor organization, the World Bank and some of the U.N. agencies participated as observers,
and they worked very closely with this group.
This group might lead to closer coordination of national efforts, but, as Secretary
Ball says, it has nothing to do with operations and therefore would not interfere
with these other agencies at all.
Secretary Dillon added to the committee's understanding of the
purpose and function of the DAC with this observation:
We found when we started to discuss this last year in the earlier meetings of
the Development Assistance Group, which will be the predecessor of this committee, that there was not even agreement on the definition of what was foreign
aid. Some countries were calling foreign aid ordinan^ exports, which they financed
on a 2- or 3-year basis, and so there was a good deal of discussion on that. We
are now discussing what is aid and what is simply ordinary exports that one is
financing. Statistics are being gathered, and it will become clear whether one
or more of the big industrialized countries is not doing what it is obviously
supposed to be doing. For any country riot carrying a fair share of the burden,
there will be moral pressure on that country to do better.
Now, certainly no one could expect the United States to do any more since we
have been carrying the bulk of the load from the beginning with help from particularly the French and the British.
So, therefore, the effect of this committee will be, from our point of view, since
we are already doing what we should, to throw the spotlight on those who have
not yet met their full responsibilities. In that way it is a very important financial
tool and very helpful to the United States in seeing that the program is better
shared.
Relationship to NATO.—The chairman asked whether the OECD
might have the effect of downgrading the importance of NATO.
The opinion of the executive branch witnesses is that the two organizations will perform complementary functions. Senator Morse
pursued the matter further, and drew this comment from Secretary
Dillon:
I would like to say one thing about this. One field in which the OECD will
be active, which is the responsibility of the Development Assistance Committee,
is the coordination and discussion of policy for development assistance to underdeveloped countries throughout the world, many of which are neutral countries.
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10 ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
This is a function which simply could not be carried out successfully by NATO,
because NATO is looked upon as a military alliance, and a strong partisan of
one side—our side—in the cold war.
So these neutral countries of Asia and Africa would not feel comfortable if
their aid was being coordinated by that sort of an organization. They have
made that very clear. So that is the great advantage of having the OECD,
which does not have that connotation and which does have all the neutral
countries of Europe as members.
Senator MORSE. Mr. Secretary, I could not agree with you more. That is
why I pursue this matter a moment longer. Secretary Ball pointed out that
Sweden and Switzerland will be members of OECD. They are not members of
NATO.
Legal interpretation.—Several committee members were especially
interested in having a precise understanding of articles 5 and 6.
Specifically, they were concerned with what, if anything, distinguishes
the "decisions" of 5(a) from the "recommendations" of 5(b); also
whether article 6(3) clearly and adequately protects the balance
between the legislative and executive branches of the Government.
In response to a committee request, the Legal Adviser to the Department of State prepared a memorandum addressed to these specific
questions. It appears as Appendix 4 to this report. Under article
5(a), the Organization may "take decisions which, except as otherwise
provided, shall be binding on all the Members." The Legal Adviser
says: "Thus, by the very terms of a decision, it may be restricted in
its obligator}^ application to only certain of the members of the
Organization."
Under 5(b), the Organization may "make recommendations to
Members * * *". The Legal Adviser says:
* * * Recommendations may recommend a course of action by members, or
study of a matter, or adherence to an international agreement drafted in an OECD
committee, etc. For example, the OECD will normally deal with substantive
problems such as economic policy and assistance to the less-developed countries
by exchanging information and by informal discussions. To the extent that
additional action were necessary, this would normally be taken by the OECD
Council in the form of a recommendation to member governments. Thus, the
OECD Council might follow a discussion of assistance to the less-developed
countries by a recommendation to member governments that they increase the
length of the credits extended to the less-developed countries. In such cases, the
member governments would not be legally bound by the recommendations, but
they would endeavor to carry out the recommendations.
The Legal Adviser says that articles 1 and 2 are—
void of any grant of power to the Executive, and the power, in any particular
case, of the U.S. Executive to bind the United States must be sought and found
in an independent source outside the [OECD] Convention.
His conclusion is that—
paragraph 3 of article 6 allows for full compliance with U.S. constitutional procedure and the division of functions between the Executive and the Congress.
Other questions.—Senator Aiken asked about the anticipated size
of the OECD staff and the cost of maintaining the Organization.
The following exchange occurred between him and Secretary Dillon,:
Senator AIKEN. Mr. Secretary, how large an organization do you expect this
to be in terms of personnel?
Secretary DILLON. We have a feeling that this will be smaller than the present
OEEC organization because this organization had a very considerable number
of personnel engaged in certain functions which would probably not be continued.
I think that the total effort in Paris will be several hundred.
The figures, I think, on the OEEC now are somewhere under 1,000 people
working in that organization.
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ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT 11
Senator AIKEN. It may be 1,000. What was the estimated cost of maintaining
the organizaton a year?
Secretary DILLOX. Well, the OEEC's costs were approximately $4 million, so
we thought that our share would be about $1 million, if we had the same assessment
as our assessment in NATO, which is roughly 25 percent.
Senator AIKEN. 25 percent.
Secretary DILLON. We might have a smaller assessment here because this is
a larger organization somewhat. In NATO our assessment is 24.2 percent.
Here there are the few extra smaller countries, so it might be possible that we
could negotiate something between 20 and 25 percent, which, I think, would be
fair.
Senator Morse asked whether consideration was given to inviting
Japan to be a full-fledged member of the OECD. Secretary Dillon
replied that the United States "would like to see that happen."
However, the European countries, while agreeing to Japanese participation in the DAC, opposed a general membership for Japan. Secretary Dillon observed that this feeling might change and at some
later date Japan could be invited into full OECD membership.
The chairman and Senator Morse indicated that their further
questions would be submitted in written form. The contents of
their correspondence can be found in the appendix to the record of
the OECD hearings. Among other things, their questions dealt with
the balance of payments problem; discriminations against U.S.
products; restrictions against capital movements in and out of the
OECD countries; the U.S. tariff position and the benefit to the
United States of GATT participation; examples of decisions that
might be made by the OECD Council in regard to the aims set forth
in article 1.
Among those who asked to bring their views on the OECD before
the committee were three Members of Congress, Senator Jacob K.
Javits of New York; Representative W. J. Bryan Dorn of South
Carolina; and Representative James C. Davis of Georgia. Senator
Javits supports the convention. Congressmen Dorn and Davis oppose
it on the grounds that it could, in their view, expand the authority of
the executive branch to regulate foreign commerce. They were followed by seven public witnesses, six of whom oppose the convention
for reasons similar to those expressed by Congressmen Dorn and
Davis. The committee received over 600 communications concerning
the OECD. There was an approximately even division between those
who were for, and those who were against the convention.
Further committee action.—-On March 1, the committee met in
executive session to hear further testimony from Secretaries Dillon
and Bail. Senator Long questioned the language of article 2(d), and
the following explanation was offered by Secretary Dillon:
What this means—the English text was construed by the people wTho drafted
the language, and by those who signed it, to mean that they would pursue their
efforts to reduce or abolish obstacles and to maintain and extend the liberalization
of capital movements.
In other words, the "maintain and extend the liberalisation of capital movements" follows after "pursue their efforts to," and therefore the agreement is to
pursue efforts to maintain and extend the liberalization of capital movements.
No flat commitment is made to maintain and extend them; in the French text,
which is equally valid, that is made very clear, because the word "to" is in there
in the French text.
There is a word "to" before "maintain."
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12 ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
The question arose again when Senator Gore asked this question
of Secretary Ball and the Legal Adviser to the Department of State,
Mr. Chayes:
If by this treaty we specifically agree to maintain and extend the liberalization
of capital movements, would a statutory enactment contrary to such liberalization of capital movement be in conflict with the treaty?
Mr. Chayes responded and the following exchange ensued:
Mr. CHAYES. Well, Senator, your hypothetical case depends upon reading
article 2(d) as an absolute engagement to maintain and extend the liberalization
of capital movements.
I think the Secretary has already said that the article is to be construed as an
engagement merely to pursue efforts to maintain and extend the liberalization of
capital movement.
Senator GORE. May I ask a question right there? Suppose that instead of the
Secretary's interpretation, the Court should hold that, in fact, this is an agreement to maintain and extend the liberalization of capital movements; what would
then be the confrontation?
Mr. CHAYES. Well, with deference, Senator, I cannot conceive a court so
holding in view of the fact that the French and English text have equal status,
and any ambiguity that appears in the English text is fully clarified by the French
text.
Senator Gore was specifically concerned with the meaning of the
term "current payments" and the phrase 'liberalisation of capital
movements" as they appear in article 2(d). The Department of
the Treasury, in order to define these terms precisely, offered a
memorandum that appears in the appendix of the printed hearings.
Several members sought further assurance that none of the provisions of the convention could endow the President with authority
that he does not already have; these members also sought further
clarification of the constitutional guarantees contained in article 6(3).
The Legal Adviser, Mr. Chayes, responded with a memorandum dated
March 6, which appears in appendix 5 to this report.
The committee met again in executive session on March 6. Under
Secretary Ball and the Legal Adviser, Mr. Chayes, were present.
Some members were interested in U.S. policies regarding mostfavored-nation treatment. Upon request, the Department of State
submitted one memorandum explaining American policy on this
subject, and another which set forth provisions of the GATT that
.allow contracting parties to adopt discriminatory policies under
certain circumstances. These memorandums may be found on page
245 of the hearings.
Senator Williams observed that the President's authority under the
Trade Agreements Act is discretionary. He asked whether a decision by the OECD Council might compel the President to act within
the scope of his authority, thus depriving him of his option not to act.
This produced the following exchange between the Senator, Under
Secretary Ball, and Mr. Chayes:
Mr. BALL. No; he could not bind himself to do anything unless he has the
power to do. I do not quite understand how this could possibly occur—do
you, Mr. Chayes?
Mr. CHAYES. Well, I do not think he could even bind himself to waive his
discretion in the case of a subsequent escape clause proceeding since he does not
have, I do not think, constitutional power to waive that subsequent discretion.
Mr. BALL. You see, he has to make a finding.
Senator WILLIAMS. That is right.
Mr. BALL. We cannot waive his power to make the finding. He has to make
the finding to comply with the statute. Otherwise he has no power.
*
*
*
*
*
*
*
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ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
13
Mr. CHAYES. I do not know just what the terms of our arrangements in
GATT are. But it is perfectly clear that in the case of any agreement in GATT,
or any other agreement under the Trade Agreements Act—and notice when we
are talking about the hypothetical case of an agreement under this Convention, it
is only an agreement carried out within the terms of the authority delegated by
the Trade Agreements Act—no such agreement can be made until the President's
discretion has been exercised in accordance with all the terms and conditions of
the act.
Senator Hickenlooper asked whether any provision of the convention
could give the President tariff-making authority and prevent the
Congress from taking back that authority.
Under Secretary Ball and Mr. Chayes replied that this would not
be possible.
The committee feels that in giving its advice and consent the Senate
must emphasize, as an inherent part thereof, that it accepts and relies
upon the assurances of the executive branch of the Government that
nothing in the Convention enlarges, diminishes, or alters the powers
of the President or the Congress in respect to any substantive actions
taken or that may be taken by the Organization for Economic Cooperation and Development and that a clear expression of such interpretation and understanding should be incorporated as an integral
part of such advice and consent. The committee felt that the resolution of ratification should contain the relevant assurances that had
been offered by Secretary of State Herter, Secretary of the Treasury
Dillon, Under Secretary Ball, and the Legal Adviser of the Department
of State. Secretary Herter's statement appears in his letter of January 16 to President Eisenhower, which can be found on page 2 of
the message from the President transmitting the convention to the
Senate (Ex. E, 87th Cong., 1st Sess.). Statements of the other
deponents may be found in this report and appendixes thereto. The
full text of the resolution of ratification itself follows:
RESOLUTION OF RATIFICATION
Having regard to and in reliance on the statement in the letter of January 16,
1961, from Secretary of State Herter to President Eisenhower and transmitted
by him to the Senate on January 17, 1961, that "the U.S. representative will not
have any additional powers in substantive matters to bind the United States
after the convention enters into force than now exist in the Executive, but that
any act of the Organization outside the power of the Executive will require action
by Congress or the Senate, as the case may be, before the United States can be
bound," and having regard to and in reliance on the testimony of Secretary of the
Treasury Dillon and Under Secretary of State Ball in behalf of the administration,
and having regard to and in reliance on the Opinion of the Legal Adviser of the
Department of State dated March 6, 1961, and quoted in the committee report
on this convention:
Resolved (Two-thirds of the Senators present concurring therein), That the Senate
advise and consent to the ratification of the Convention on the Organization for
Economic Cooperation and Development, together with two protocols relating
thereto, signed at Paris on December 14, 1960, by representatives of the United
States of America, Canada, and the 18 member countries of the Organization for
European Economic Cooperation (Executive E, 87th Congress, 1st session),
with the interpretation and explanation of the intent of the Senate that nothing
in the convention, or the advice and consent of the Senate to the ratification
thereof, confers any power on the Executive to bind the United States in substantive matters beyond what the Executive now has, or to bind the United States
without compliance with applicable procedures imposed by domestic law, or
confers any power on the Congress to take action in fields previously beyond the
authority of Congress, or limits Congress in the exercise of any power it now has.
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14
ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
CONCLUSION
The Committee on Foreign Relations believes that the OECD
member countries are undergoing the gravest test of their collective
history. To prevail will depend, as much as anything else, on their
ability to promote stability and growth within their delicately balanced, interdependent economies. Yet even this will not be enough,
if the product of this growth is not in sufficient measure devoted to
programs that will encourage the development of less favored peoples
in a way that is consonant with their best purposes. If the energies
and resources of the aspirant and newly independent peoples were
turned to uncongenial purposes, the consequences for Western
civilization would ultimately be decisive.
This thesis is understood by the leaders of both the Soviet Union
and the United States, and apparently by a majority of the people
of the United States. It is also understood by some, but by no
means all, of the leaders of West Europe. Many of them do not yet
understand either the moral imperatives or the cold logic of foreign
assistance. And what is true of these leaders can be safely said to
apply, as well, to their constituents.
In that light, the OECD will be an educational forum. Terms
can be defined. Foreign aid itself is a term that badly needs definition. To some, exports financed with short term, high interest credits,
are foreign aid, and sums for this purpose are cited, not as investment,
but as evidence of p'ood faith. To others, funds invested in a colony
fall within the definition of foreign aid. The American experience
with foreign aid must be brought to bear upon the consciousness of
other capital exporting countries. Bilateral talks, even if conducted
at the White House level, are no substitute for the education that
can be spread throughout the OECD membership by joint exposure
to the same information, to the philosophy and the logic that have
motivated American foreign aid from the beginning.
If Europeans have not developed a keen appreciation for foreign
aid, it is also true that Americans have been laggard in acknowledging
the economic interdependence
of the Atlantic Basin countries. The
truth is that the WTest can no longer tolerate economic disequilibrium.
Too much depends ou the vigor of its interdependent economy,
greater by far than the sum of the individual parts.
More important than the collective GNP ($775.5 billion) of the
OECD members are the scientific and technical resources upon which
it is built. With the OECD, these resources can be mobilized and
directed toward productive purposes. For the first time, a group of
countries with common interests, beset by common problems, will be
free to discuss their goals and problems within an organization designed for precisely that purpose.
This is a time of sweeping political, social, and technological change.
History is being shaped within a swirl of events that often develop
with bewildering speed. The committee believes that the OECD will
enable its members to see these events in a broader and, hence, more
relevant perspective. It will enable them to look above the crises of
today to problems that lie ahead; to dispose of many problems in a
systematic, orderly fashion, thus avoiding the harsh urgency that so
often distorts bilateral efforts to solve problems that become critical
overnight. The committee, therefore (by a vote of 16 to 0), recommends that the Senate give its advice and consent to the ratification
of the pending treaty.
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APPENDIXES
APPENDIX 1
MEMORANDUM OF UNDERSTANDING ON THE APPLICATION OF
ARTICLE 15 OF THE CONVENTION ON THE ORGANISATION FOR
ECONOMIC CO-OPERATION AND DEVELOPMENT
Article 15 of the Convention on the Organisation for Economic Co-operation
and Development (hereinafter called the "Convention") provides that decisions,
recommendations and resolutions (hereinafter called "acts") of the Organisation
for European Economic Co-operation shall require approval of the Council of the
Organisation for Economic Co-operation and Development (hereinafter called the
"Council") to be effective after the coming into force of the Convention.
Pursuant to a Resolution adopted at the Ministerial Meeting of 22nd-23rd July,
1960, a Preparatory Committee has been established and instructed to carry
further the review of the acts of the Organisation for European Economic Cooperation, to determine which acts should be recommended to the Council for
approval, and to recommend, where necessary, the modifications required in order
to adjust these acts to the functions of the Organisation for Economic Co-operation
and Development.
At the said Ministerial Meeting it was agreed that there should be the maximum possible degree of certainty as regards approval by the Council of acts of
the Organisation for European Economic Co-operation in accordance with the
recommendations of the Preparatory Committee; it was also agreed that Canada
and the United States, not being Members of the Organisation for European
Economic Co-operation, should have a certain latitude with respect to the said
recommendations. '
Therefore the Signatories of the Convention have agreed as follows:
1. The representatives of the Signatories on the Council shall vote for approval
of acts of the Organisation for European Economic Co-operation in accordance
with the recommendations of the Preparatory Committee, except as otherwise
provided hereinafter.
2. Any Signatory which has not been a Member of the Organisation for
European Economic Co-operation shall be released from the commitment set
out in paragraph 1 with respect to any recommendation or part thereof of the
Preparatory Committee which it specifies in a notice to the Preparatory Committee no later than ten days after the deposit of its instrument of ratification
or acceptance of the Convention.
3. If any Signatory gives notice pursuant to paragraph 2, any other Signatory,
if in its view such notice changes the situation in regard to the recommendation
or part thereof in question in an important respect, shall have the right to request,
within fourteen days of such notice, that the Preparatory Committee reconsider
such recommendation or part thereof.
4. (a) If a Signatory gives notice pursuant to paragraph 2 and no request is
made pursuant to paragraph 3, or, if such a request having been made, the
reconsideration by the Preparatory Committee does not result in any modification of the recommendation or part thereof in question, the representative on the
Council of the Signatory which has given notice shall abstain from voting on the
act or part thereof to which the recommendation or part thereof in question
pertains.
(b) If the reconsideration by the Preparatory Committee provided for in
paragraph 3 results in a modified recommendation or part thereof, the representative on the Council of the Signatory which has given notice may abstain from
voting on the act or part thereof to which the modified recommendation or part
thereof pertains.
(c) Abstention by a Signatory pursuant to sub-paragraph (a) or (b) of this
paragraph with respect to any act or part thereof shall not invalidate the approval
of that act or part which shall be applicable to the other Signatories but not to
the abstaining Signatory.
5. The provisions of this Memorandum relating to actions to be taken before
the voting in the Council shall come into force upon its signature; the provisions
relating to the voting in the Council shall come into force for each Signatory upon
the coming into force of the Convention as regards that Signatory.
IN WITNESS WHEREOF, the undersigned have appended their signatures to this
Memorandum.
DONE in Paris, this fourteenth day of December, Nineteen Hundred and Sixty,
in the English and French languages, both texts being equally authentic, in a
single copy which shall be deposited with the Government of the French Republic,
by whom certified copies will be communicated to all the Signatories.
[Signatures omitted.]
15
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16 ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
APPENDIX 2
Official assistance to the less-developed countries by OECD countries and Japan
[Dollars in millions]
1956
Austria:
GNP ..
Aid
Aid as percent of GNP
Belgium-Luxembourg:
«NP
Aid. .
Aid as percent of GXP. . _ Denmark:
GXP
--.
Aid
Aid as pe'cent of GXP
France:
GNP
...
_ ...
Aid
Aid a« percent of GXP
Germany:
GNP
Aid
—
.-- .
Aid as percent of GNP
Ireland:
GNP
Aid
Aid as percent of GXP
Italy:
GXP
Aid
Aid as percent of GXP
Netherlands:
GXP
Aid
A.ld as percent of GXP
Norway:
GNP
Aid
4id as percent of GNP
Portugal:
GNP
Aid
Aid as percent of GNP
Sweden:
GNP
Aid
.
Aid as percent of GNP
Switzerland:
GNP
Aid
Aid as percent of GNP
United Kingdom:
GNP
Aid
Aid as percent of GNP
Total, above countries:
GNP
Aid ..
Aid as percent of GNP
United States:
GNP
Aid
Aid as percent of GNP.
Canada:
GNP
. .
Aid
Aid as percent of GXP
Japan:
GNP
Aid .
Aid as percent of GNP
-.-
-
.
1957
1958
1959
1956-59
$4, 238
$2
0.05
$4,665
$1
0.02
$4, 938
0.12
$5 264
$4
0 08
$19 105
$13
0 07
$10,860
$17
0. 16
$11,650
$24
0.21
$11,616
$23
0.20
$12 000
$52
0 43
$46 126
$116
0 25
$4, 461
$3
0.07
$4, 769
$1
0.02
$4, 918
$4
0.08
$5, 270
$5
0 09
$19 418
$13
0 07
$37,513
$487
1.30
$41, 867
$639
1.53
$47, 532
$787
1.66
$51 000
$954
1 87
$177 91°
%2 867
1 61
$46, 048
$21
0.05
$49, 905
$46
0.09
$52, 929
$78
0.15
$56 645
$107
0 19
$205 527
$253
0 12
$1, 510
$1, 588
$1
0.06
$1 710
$6 438
$1, 630
$1
0.06 .
SI
0 06
$9
0 03
$23. 414
$16
0.07
$25, 088
$16
0.06
$26. 638
$31
0.12
$27 970
$17
0 06
$103 110
$81
0 08
$8, 610
$33
0.33
$9, 315
$34
0.37
$9, 592
$41
0.43
$10 175
$43
0 42
$37 692
$151
0 40
$3, 725
$1
0.03
$3, 950
$2
0.05
$3, 894
$3
0.08
$4 100
$4
0 10
$15 669
$10
0 06
$1, 945
$7
0.36
$2, 015
$5
0.25
$2, 071
$4
0.19
$2 135
$21
0.98
$8 166
$38
0 47
$9, 470
$3
0.03
$10, 245
$12
0.12
$10, 623
$4
0.04
$10, 850
$10
0 09
$41 188
$29
0 07
$6, 846
$1
0.01
$7, 355
$1
0.01
$7, 593
$3
0.04
$8 000
$1
0 01
$29 794
$5
0 02
$57, 960
$208
0.36
$61,328
$243
0.40
$63, 484
$264
0.42
$65, 700
$356
0.54
$248, 472
$1 070
0 43
$216, 600
$799
0.37
$233, 740
$1,025
0.44
$247, 458
$1,247
0.50
$260. 819
$1,575
0.60
$958 617
$4,648
0 48
$419, 200
$2, 141
0.51
$442, 500
$2, 343
0.53
$441, 700
$2,415
0.55
$478, 000
$2, 438
0.51
$1,781,400
$9,340
0.52
$30, 182
$28
0.09
$31, 773
$46
0.14
$32, 509
$88
0.27
$34, 700
$57
0.16
$129.614
$219
0.17
$24, 650
$16
0.06
$28, 050
$15
0.05
$27, 750
$205
0. 74
$30, 000
$41
0.14
$110. 450
$277
0.25
NOTES
1. GNP figures are at current market prices. The figures for 1959 are estimated.
2. Both the GXP and aid figures have been converted to dollars at current exchange rates.
3. Aid figures are based primarily on actual expenditures. For all the countries they include: (a) net
official grants, (6) gross official bilateral loans of 5 years or over, (c) official contributions and subscriptions
to international organizations paid during the period (i.e., net I B R D subscriptions, IFO capital contributions, contributions to the EEC Development Fund, net contributions to United Nations technical
assistance and relief agencies). For the United States, the increase in U.S. holdings of local currencies
derived from Public Law 480, title I sales is included to reflect the transfer of resources. For Japan, the
yearly breakdown on gross official bilateral loans of 5 years or over is estimated. Reparations payments
have not been included.
4. This definition of assistance has not been accepted by the countries involved and has no international
standing.
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APPENDIX 3
TABLE A.—Importance of OECD countries as a market for less developed countries—Exports from less developed countries to OECD members
by principal commodities, total exports, and proportion taken by OECD countries, 1959
Rubber
Imports from LDC 's into—
Austria
Belgium/Luxembourg...
Canada
Denmark
France
Germany
Greece.
Iceland
Ireland
Italy..
Netherlands
Norway
Portugal
Spain
Sweden
..
Switzerland
Turkey
United Kingdom
United States
Total OECD imports from LDC's...
Total world imports from LDC 's
Cotton figures are for crop year 1958-59.
Negative.
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Cocoa
Coffee
Rice
Tobacco
Petroleum
Cotton '
Tin
Copper
Thousand,
Thousand Thousand
Thousand Thousand
Million
Thousand
Thousand
long tons Metric tons long tons metric tons metric tons metric tons metric tons
bales
Metric tons metric tons
11.3
534
10.0
9.8
1.6
1.9
0
48.6
0
2.6
14.3
60
10.0
54.8
22.5
11.2
6.7
269.5
2,001
180.3
45.3
16,739
12.5
56.8
8.2
.3
15.8
201.3
967
0
6.2
843
3.4
38.4
0
6.0
(*)
25.4
0
.5
120.4
1,496
55.3
197.0
82.4
12.2
28.8
686.2
339
53.8
143.9
6,965
102.3
136.7
45.4
18.3
16.5
889.9
50
219.3
1.9
109
2.4
7.2
1.3
0
1.3
1.1
88
.2
1.6
0
0
0
0
0
0
3.8
9,962
5.8
.4
0
.1
.9
13.9
0
0
56.1
1,315
26.2
83.6
.6
0
22.5
323.1
2,342
76.7
20.6
9,605
74.3
50.3
39.9
12.9
12.4
288.9
80
10.7
2.9
71
4.0
25.1
.5
.7
.1
12.0
0
0
4.8
167
1.0
10.5
.7
.8
1.2
222.4
0
2.8
21.4
57
21.4
.1
0
(>)
7.2
137.4
0
14.1
21.3
1,040
6.7
68.0
0
.6
2.4
31.5
0
30.7
6.4
(')
12.0
(»)
(8)
(3)
(3)
120.0
57
14.2
3. 8
5,912
.8
1.0
0
0
0
0
163
0
167.3
228,272
77.2
52.9
23.2
57.6
46.2
777.2
0
336.2
557.4
45,258
204.7
1,396.6
0
14. 5
58.7
136.3
24,162
206.4
1,209.0
328,402
630.0
2.240.9
22ti. 1
137.0
220.9
4,184.7
30,249
1,148.6
2,042.5
479,655
750.4
2.511.8
3,833.7
241.7
317.3
8,115.0
50,052
1.430.0
OECD imports as percentage of world
imports from LDC's
1
2
Tea
59
68
84
89
6
3
Not available.
57
70
52
60
80
All LDC
exports
Millions
$70
580
440
80
1,880
1,710
60
(2)
80
860
750
120
120
(3)
300
140
(")
3,920
6,040
17,150
26.210
65
18 ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT
TABLE B.—Proportion of export earnings of selected less developed countries derived from principal primary products, 1959
[Percentages]
Cocoa
Countries
Bolivia
._
Brazil
Chile .
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Haiti
Honduras
Mexico
Nicaragua
Panama
Paraguay
Peru
Venezuela
Egypt
Iraq
Sudan.
Syria
Ethiopia
Ghana
Burma
Cevlon
India ._
Indonesia -5-1
Malava
Pakistan
Thailand
Vietnam
-. J
;
5
5
17
13
3
Coffee Copper Cotton Petroleum Rice Rubber Tea Tin Tobacco
77
50
13
3
64
71
• 55
24
9
21
69
2
57
69
16
21
4
8
26
45
7
22
5
87
71
1
93
60
48
•67
8
61
2
71
12
34
32
APPENDIX 4
17
48
66
26
31
63
60
20
4
10
6
.
DEPARTMENT OF STATE,
February 27, 1961
Hon. J. W. FULBRIGHT,
Chairman, Committee on Foreign Relations,
U.S. Senate.
DEAR MR. CHAIRMAN: In the course of the hearings on the Convention on the Organization for Economic Cooperation and Development on Wednesday, February 15, 1961, before the Foreign Relations
Committee a request was made for a memorandum setting forth the
legal analysis of article 5 and article 6.
I attach such a memorandum and hope it will be helpful to your
committee in the consideration of the convention. I wish to point
out that the Department of Justice has been consulted in the preparation of this memorandum.
Sincerely yours,
ABRAM CHAYES, The Legal Adviser.
Enclosure: Memorandum.
MEMORANDUM
Article 5 of the Convention on the Organization of Economic Cooperation and
Development reads as follows:
"In order to achieve its aims, the Organization may:
"(a) take decisions which, except as otherwise provided, shall be binding
on all the Members;
"(b) make recommendations to Members; and
"(c) enter into agreements with Members, non-member States and international organizations.
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Article 6 reads as follows:
"1. Unless the Organization otherwise agrees unanimously for special cases,
decisions shall be taken and recommendations shall be made by mutual agreement of all the Members.
"2. Each Member shall have one vote. If a Member abstains from voting on
a decision or recommendation, such abstention shall not invalidate the decision
or recommendation, which shall be applicable to the other Members but not to
the abstaining Member.
"3. No decision shall be binding on any Member until it has complied with the
requirements of its own constitutional procedures. The other Members may
agree that such a decision shall apply provisionally to them."
It appears that the discussion in the committee which gave rise to the request
for the present memorandum concerned in the main article 5 and article 6, paragraph 3.
Under article 5 (a) the Organization may act by taking decisions. Such decisions are binding on all the members, except as otherwise provided. Thus, by
the rvery terms of a decision, it may be restricted in its obligatory application to
onh certain of the members of the Organization.
Under article 5(b) the Organization may act by making recommendations.
As the term signifies, these are not of an obligatory nature, but a member would
be expected to endeavor to carry out such a recommendation, unless the member
abstained from voting for it. Recommendations may recommend a course of
action by members, or study of a matter, or adherence to an international agreement drafted in an OECD committee, etc. For example, the OECD will normally
deal with substantive problems such as economic policy and assistance to the
less-developed countries by exchanging information and by informal discussions.
To the extent that additional action were necessary, this would normally be taken
by the OECD Council in the form of a recommendation to member governments.
Thus, the OECD Council might follow a discussion of assistance to the lessdeveloped countries by a recommendation to member governments that they
increase the length of the credits extended to the less-developed countries. In
such cases, the member governments would not be legally bound by the recommendations, but they would endeavor to carry out the recommendations.
Under article 5(c) the Organization may enter into agreements with members,
nonmembers, or international organizations. One such type of agreement is
referred to in Supplementary Protocol No. 2, namely, an agreement by the Organization with Canada or a nonmember government regarding the legal capacity
and privileges and immunities of the Organization on the territory of Canada or
such nonmember government. Also the Organization might enter into an agreement with another international organization, such as the International Monetary
Fund, for participation of representatives of the IMF as observers in certain
committees of the OECD.
The question was raised in the hearings before the committee whether the statement of the aims of the Organization in article 1 and the agreement in elaboration
of such aims in article 2 could be construed, assuming Senate ratification, to confer
power upon the executive branch of the United States Government acting through
its representative on the Council of the Organization, to bind the United States
by participating in a decision of the Organization within the fields described in
articles 1 and 2 which define the substantive scope of the Organization. As
stated in the letter of January 16, 1961 of the Secretary of State to the President,
which the President enclosed with his message to the Senate of January 17, 1961,
and as reiterated by Government spokesmen at the hearings, it is not considered
that by the convention the Executive will have any additional powers in substantive matters that now exist in the Executive. In short, articles 1 and 2 set
forth the general agreement between the member nations and limit the proper
scope of activities of the Organization; these articles are void of any grant of
power to the Executive, and the power, in any particular case, of the United
States Executive to bind the United States must be sought and found in an
independent source outside the convention.
With this as background, consideration may now be given to article 6, paragraph
3. This important paragraph states that no decision shall be binding on a member
until it has complied with the requirements of its own constitutional procedures.
Thus, if a decision were proposed to the Council for the establishment of a
committee of representatives of member governments to study the promotion of
tourism, the executive branch would consider it had power to agree to such a
decision. Similarly, if a decision were proposed to the Council for the establishment of a fund for the period of a year, contributed to by all members, to encourage
tourism in member countries, the United States Executive would consider it had
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20
power to agree to such a decision, if the United States Congress had authorized
and appropriated funds for the promotion of tourism to the United States. If
no such congressional authorization and appropriation existed, the executive
branch through its representative would either veto the decision, or abstain (thus
permitting the decision to become binding as to other member countries) or
approve, subject to compliance with United States constitutional procedures.
In this last event, appropriate United States congressional action would have to
be taken before the decision could be binding on the United States. Similarly,
a decision might be proposed to the Council involving an international agreement
of a type which would require Senate advice and consent under United States
treaty procedure. In this case, again, the United States representative could
veto, abstain, or approve subject to compliance with United States constitutional
procedures. In this last event, Senate advice and consent would need to be given
before the decision could be binding on the United States. In conclusion, it is
our view that paragraph 3 of article 6 allows for full compliance with United
States constitutional procedures and the division of functions between the Executive and the Congress.
It may be noted that it is expected that most of the decisions taken by the
OECD Council which will be binding on member governments will not pertain to
substantive matters but will pertain to administrative matters, such as the establishment of committees and working parties. For example, the OECD Council
will have to take decisions to establish the appropriate subsidiary bodies of the
OECD. Council decisions will also be taken concerning the terms of reference of
these committees. Later Council decisions will be taken covering the activities
of these committees.
APPENDIX 5
MARCH 6, 1961.
OPINION OF THE LEGAL ADVISER
The Legal Adviser of the State Department is of the opinion that nothing in
the Convention on the Organization for Economic Cooperation and Development
confers any power on the Executive to bind the United States in substantive
matters beyond what the Executive now has, or on the Congress to take action in
fields previously beyond the authority of Congress. Conversely, nothing in the
convention diminishes the power of the Executive or Congress in these respects.
The attached memorandum sets forth the reasoning underlying this opinion,
ABRAM CHAYES, The Legal Adviser.
MEMORANDUM
1. There is nothing in the convention which expands or enlarges the power
of the Executive in substantive matters.
Article 1 states the aims of the Organization and article 2 sets forth the general
agreement of the members in elaboration of these aims. Then article 5 states
that the Organization may take decisions and article 6 describes the process by
which these decisions be taken. This process provides two safeguards for the
United States. In the first place no decision may be imposed on it without its
consent. Secondly, that consent must be given in compliance with the requirements of U.S. constitutional procedures before the decision becomes binding
upon us.
The argument has been intimated that since the Organization under article 5
is authorized to take decisions and since the executive branch will be representing
the United States in the Organization, the convention will operate to give the
Executive power to agree on decisions in the substantive fields covered by articles
1 and 2. This argument is based on the erroneous assumption that the convention in any way concerns itself with the distribution of powers within the United
States or any other member state. Properly viewed, articles 1 and 2 merely
set forth a general agreement between the member nations on broad lines of
public policy and define the area of concern of the Organization. Under article 5
the Organization may take decisions, but the convention is silent as to the process
by which a member nation, within its own internal system, arrives'at the point,
where it may cast an effective vote in favor of a particular decision. Articles
1 and 2 are void of any grant of power to the Executive. Thus, the power of the
United States to cast a favorable vote and bind the United States in any particular
case must be sought in a source outside the convention.
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ORGANIZATION FOR ECONOMIC COOPERATION AND DEVELOPMENT 21
Paragraph 3 of article 6 was urged upon the other countries by the United
States. The United States in the negotiations emphasized that under our constitutional system certain matters were in the purview of Congress and that the
agreement of the United States to Council decisions on such matters even after
the ratification of the convention would remain subject to further action by the
Congress before being binding on the United States. Paragraph 3 of article 6
would have been unnecessary and meaningless if the mere ratification of the
convention served to clothe the Executive with powers to take action in the fields
covered by articles 1 and 2.
It may be pointed out that the view that the convention does not enlarge the
power of the Executive in substantive matters (1) was stated in the letter of
January 16, 1961, of Secretary of State Herter to President Eisenhower which
he enclosed with his message to the Senate of January 17, 1961, (2) was repeated
several times by Secretary Dillon and Under Secretary Ball at the hearingsbefore the Foreign Relations Committee, and (3) was developed in some detail
in a memorandum of the Legal Adviser of the State Department concurred in
by the Department of Justice and enclosed with a letter of February 27, 1961,
from the Legal Adviser to the chairman of the Foreign Relations Committee.
2. There is nothing in the convention which expands or enlarges the power of
the Congress to take action in fields previously beyond the authority of the
Congress.
The argument appears to have been made that the provisions of articles 1 and 2
may in some way serve as the source of authority for Congress to legislate in the
future in fields which are reserved to the States by the 10th Amendment. As was
stated at the hearings by Government spokesmen, articles 1 and 2 define the
broad aims and goals of the Organization. The language of article 2 is that of
agreeing to "promote," "pursue policies," "pursue * * * efforts" and "contribute * * * by appropriate means." The concrete steps by which the broad aims
and goals are to be effectuated remains in the complete discretion of each member
nation. We wish to emphasize the point made in Under Secretary Ball's letter to
the chairman of February 27, 1961, that such language in article 2 does not constitute a commitment to take any concrete action or refrain from any concrete
action. We are merely bound to consult and exchange views and information in
a regular and systematic manner on matters within the purview of the article.
In our view this language cannot serve as any authorization to Congress to take
any action it otherwise could not take.
In this connection it should also be pointed out that treaties, like laws, are
subordinate to the Constitution. They cannot violate the Constitution.
Finally, reference is again made to paragraph 3 of article 6. This paragraph,
on its face, defers to our constitutional system not only in its distribution of
powers between the Executive and the Congress, but also in its distribution of
powers between the Federal Government and the States.
3. Nothing in the convention diminishes the power of the Executive or
Congress.
In the course of the hearings the question was raised whether provisions of
article 2 might not override congressional actions or inhibit congressional actions
on particular subjects. As stated before, the terms used in article 2 do not constitute commitments to take any concrete action or refrain from any concrete
action. In this view, it is difficult to envisage any statute of Congress or any act
of the Executive that could be inconsistent with the terms of article 2. We therefore conclude that the terms of article 2 will not diminish the powers of Congress
or the Executive in the fields therein described.
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