Article

The International Trade Organization and the Monetary Fund

Author(s):
International Monetary Fund. Research Dept.
Published Date:
January 1950
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THE FINAL ACT of the United Nations Conference on Trade and Employment containing the Charter of the International Trade Organization (ITO Charter, or Havana Charter) was signed at Havana on March 24, 1948. The signing of the Final Act, however, does not imply an obligation to accept the Charter. Many nations are now considering its adoption, but most of them will not take formal action before knowing the final attitude of the United States.

Like the Fund, the ITO aims at achieving nondiscriminatory economic intercourse among nations, limited as little as practicable by exchange or trade restrictions. Both institutions are based on the axiom that only nations whose external financial positions are sound will be reliable partners in nondiscriminatory competitive trading. The drafters of the constitutions of both the Fund and the ITO took it for granted that the social task which the economic process is expected to perform will best be served by institutional arrangements that ensure that private businessmen engaging in foreign trade will not be limited in their transactions by either private monopolistic practices or government restrictions.

The purpose of the present study is to outline the fields and methods of contemplated cooperation between the Fund and ITO. It has not been thought necessary to avoid repetitions where certain items need to be presented in more than one context.

Cooperation outlined in Fund Agreement and ITO Charter

The Fund, according to its Articles of Agreement, “shall cooperate … with public international organizations having specialized responsibilities in related fields.”1 The responsibilities of the ITO are very closely related to those of the Fund.

The Fund Agreement itself contains very few references to commercial policy in the narrower sense.2 The participants in the Bretton Woods Conference attempted to limit the Fund’s scope to monetary affairs as far as such limitation seemed practicable, and within that framework to restrictions on payments and transfers in contrast to quantitative restrictions.3 The Governments taking part in the Bretton Woods Conference emphasized in a separate Resolution on International Economic Problems (No. VII) that, since the objectives set forth in the Fund Agreement cannot be achieved through the instrumentality of the Fund alone, it is necessary to make separate arrangements to facilitate international commerce.4

The ITO Charter also provides for effective cooperation with other intergovernmental organizations with related responsibilities (Art. 87). There is no doubt that the Fund is such an organization. A separate article of the ITO Charter is, moreover, devoted to regulating cooperation between the Fund and the ITO, especially as far as the external financial relations of members are concerned (Art. 24). In the extended meetings in London, Lake Success, Geneva, and Havana (dealing with the drafting of the Charter), discussions on balance of payments problems and on Fund relations played a prominent part. Many points were controversial, but the thesis that there should be the closest relation between the ITO and the Fund was never challenged.

Any consideration of the scope of cooperation between the Fund and the ITO must take into account that the objectives of the two organizations are overlapping and complementary, and that the membership of the ITO will broadly correspond to that of the Fund. Cooperation covers, of course, exchange of information, mutual participation in certain meetings, and all the other activities traditionally covered by the word “liaison.” It implies that each agency will formulate its policy as far as possible in the light of the policy of the other.

The numerous common objectives and interests of the ITO and the Fund have made many people wonder whether two separate bodies are needed to administer the field of international economic intercourse, or whether one combined institution embracing both the ITO and the Fund would not be a better solution. Experience of a decade or two will be needed to answer this question. Effective cooperation between the agencies of each Government which represent that Government in the ITO and the Fund is in any event a prerequisite to harmonious collaboration between the two organizations.

General notes on ITO-Fund relations

A few introductory remarks may assist in understanding the some-what involved network of ITO-Fund relations.

(a) The ITO deals primarily with the international exchange of goods. Only a few provisions of the Charter apply to other trans-actions (e.g., insurance, banking, transport, communication). The Fund’s scope covers all international payments and is not restricted to payments resulting from merchandise transactions.

(b) Membership of the Fund consists exclusively of countries which assume formal responsibility for the conduct of their diplomatic relations. The membership of a metropolitan territory in the Fund covers also all nonmetropolitan territories including those that are autonomous in the conduct of their external commercial relations (e.g., Southern Rhodesia). These territories may, however, be members of the ITO in their own right.

(c) The Fund Agreement permits only very few deviations from its fundamental principles by the unilateral action of members (escape clauses). The ITO Charter, on the other hand, permits a considerable number of exceptions allowing to members unilateral action to deal with emergency situations. Withdrawal from the Fund is simple and possible at any time. Withdrawal from the ITO is somewhat more complex.

(d) The Fund has full discretion in approving (or refusing to approve) restrictions on payments for current transactions, including their discriminatory application. The ITO Charter specifies the exact conditions under which the ITO may authorize quantitative restrictions and deviations from the rule of nondiscrimination.

(e) The Fund Agreement provides for “transitional arrangements” in the postwar period. No such general arrangement is contained in the ITO Charter. “Transitional arrangements” in Fund terminology covers restrictions on payments (including multiple currency practices and discriminatory arrangements) maintained (and adapted to changing circumstances) by a Fund member for balance of payments reasons in the postwar period. Only members whose territories were occupied by the enemy are permitted to introduce exchange restrictions under this provision. In ITO terminology the expression “Exceptional Transitional Period Arrangements” covers the discriminatory application of specified import restrictions authorized for balance of payments reasons. The discriminatory application of those import measures can be maintained and adapted only if the member is authorized under the Fund Agreement (or under a special exchange agreement)5 to use transitional exchange arrangements at the same time.

(f) The ITO Charter strictly distinguishes between quantitative restrictions authorized to safeguard a member’s external financial position and those authorized for other purposes (e.g., shortages, emergencies, economic development). The Fund Agreement makes no similar distinction with reference to exchange restrictions. However, it seems to be generally recognized that under the Fund Agreement restrictions on current payments (except those to save scarce currencies and on transactions with nonmembers) should serve principally to safeguard the external financial position of a country.

(g) Except for transitional arrangements, restrictions on payments on current transactions with other members are subject to prior approval (or prior consultation) under the Fund Agreement (after March 1, 1952, even transitional arrangements are subject to consultation). The ITO Charter permits much wider possibilities for imposing and maintaining quantitative restrictions without prior consultation with the ITO.

(h) The Fund when applying or enforcing the terms of its Agreement acts ex officio (i.e., its action is not conditional upon the institution of a complaint by another member). The ITO usually takes action to enforce compliance with the terms of the Charter only upon receipt of a complaint and when it appears that the interests of the complainant are adversely affected. The sanctions imposed under ITO are intended to compensate the complaining member for disadvantages suffered.

(i) The Fund’s members have weighted votes in the administration of the Fund. In all organs of the ITO, the “one country, one vote” system prevails.

Commitments of ITO members

Under the ITO Charter, Fund members joining the ITO assume vis-à-vis each other obligations in respect to their commercial policies. Since these obligations are important also from the standpoint of the effective pursuit of the Fund’s purposes, a few significant commitments are listed here.6

(a) Members shall maintain full and productive domestic employment. The application of measures for this purpose must not, how-ever, involve the creation of balance of payments difficulties for other countries. (Art. 3)

(b) When carrying out (without resort to trade restrictions) the provision of the Charter on Maintenance of Domestic Employment, an ITO member may be handicapped by difficulties in maintaining its external financial position. One major factor causing these difficulties may be a persistent export surplus in the balance of payments of another member. At the same time that the handicapped member takes appropriate action to correct its difficulties, the country with the strong export balance must make its full contribution to assist in the attainment of this objective. (Art. 4)

(c) A member shall not take unreasonable or unjustifiable action in respect to the rights or interests of nationals of other members that are supplying it with capital, technological skill, etc. (Art. 11)

(d) A member shall upon request of any other member participate in negotiations concerning opportunities and security for foreign investment in its country. It shall provide adequate security for existing and future investments by other members. Terms in respect of ownership of existing and future investments shall be just and reasonable. (Art. 12)

(e) Members imposing charges for the transfer of payments for imports or exports shall not treat one member less favorably than another. (Art. 16)

(f) Members shall not apply vis-à-vis other members quantitative restrictions on exports and imports (whether made effective through state trading operations or otherwise) unless so authorized by the Charter. (Art. 20)

(g) Members instituting import restrictions to safeguard their external financial positions shall consult with the ITO on the problems attendant upon the imposition and maintenance of such measures. They shall remove or modify the restrictions as their external financial positions improve. (Art. 21)

(h) Members authorized to apply quantitative restrictions shall apply them in a nondiscriminatory manner unless deviation from the rule of nondiscrimination is expressly authorized. (Art. 22 and 23)

(i) Members shall not frustrate by trade action the intent of the provisions of the Fund Agreement.7 (Art. 24)

(j) Members shall not grant export subsidies for other than primary commodities. Even the export of primary commodities shall not be subsidized in a manner which may deprive other members of an “equitable” share in world markets. (Art. 26 and 28)

(k) As far as state trading operations influence the international transactions of a member, such influence shall be exercised solely on the basis of commercial considerations. (Art. 29 and 31)

(l) Members may apply antidumping and countervailing duties only to counteract actual injury. (Art. 34)

(m) When a member needs to convert the currency of another country into its own currency for customs valuation purposes, it shall base the conversion rate on “par value” relations unless the Charter provides otherwise. (Art. 35)

(n) Members imposing fees or charges in connection with the administration of quantitative restrictions, licensing operations, or exchange controls, shall limit their amount to the approximate cost of services rendered. The imposition of these fees and charges should not result in indirect protection or revenue. (Art. 36)8

(o) Members shall promptly publish regulations relating to the transfer of payments for imports or exports. Such measures shall not be put into effect before they have been officially published. They shall be administered in a uniform, impartial, and reasonable manner. (Art. 38)

(p) Members shall not conclude intergovernmental commodity agreements except under conditions determined in the Charter. (Chapter VI)

The preceding explanatory remarks have attempted to throw light on Fund-ITO relations in a highly condensed form. In the following sections the analysis and synthesis of these relations will be elaborated.

Scope of Cooperation between ITO and Fund

Survey of fields of collaboration

Numerous provisions of the Charter suggest or require ITO collaboration with the Fund both on broad policies and on specific actions.9 The specific actions cover, generally speaking, the following: the safeguarding of the external financial position of ITO members, including the protection of monetary reserves by quantitative restrictions; exchange policies of ITO members which are not members of the Fund; trade measures other than quantitative restrictions involving monetary problems; customs valuation; and exchange of information.

Article 87 of the Charter, requiring effective cooperation with other intergovernmental organizations and the avoidance of duplication in the activities of these agencies, applies, of course, to ITO-Fund relations. Cooperation or joint action with “other governmental organizations” on specific matters is suggested in numerous provisions of the Charter, many of them applicable to Fund-ITO relations.

The article, however, which specifies the fields of collaboration peculiar to the Fund and the ITO is Article 24. This Article requires that the ITO seek collaboration with the Fund so that the two organizations will pursue a coordinated policy in respect to exchange and trade matters. Furthermore, the Charter requires the ITO (as discussed below in more detail) to consult with the Fund fully whenever it is called upon to deal generally or specifically with matters pertaining to the external financial position of its members.

The subsequent part of this study will deal principally with those provisions of the Charter which require the ITO to consult fully with the Fund when it “is called upon to consider or deal with problems concerning monetary reserves, balance of payments, or foreign exchange arrangements” (Art. 24). The raison d’etre of these provisions is that the Fund is the agency whose primary concern is the substance of balances of payments. The Fund is concerned with the substance not only from the long range point of view but also from the point of view of its day to day actions concerning exchange rate problems, gold policies, restrictions on payments, and the administration of the Fund’s resources.

The range of collaboration between the ITO and the Fund on monetary matters is outlined below in the following sequence: (a) matters pertaining to the exchange policies of ITO members, (b) monetary problems of a general nature dealt with in the Charter, and (c) monetary problems within the sphere of commercial, employment, and development policies. The monetary problems pertaining to quantitative restrictions (discriminatory and nondiscriminatory) and other matters requiring detailed discussion will be examined later in the section on Special Problems of Cooperation.

Matters pertaining to exchange policies

Why does the ITO deal with exchange problems? Because certain matters in the realm of foreign exchange which are not expressly covered by the Fund Agreement were considered by the drafters of the Havana Charter to fall within the framework of “commercial policy”; and, in addition, because the exchange relations of those ITO members which do not join the Fund need to be regulated, since undisciplined exchange action by non-Fund members may jeopardize ITO activities.

The Charter mandatorily requires the ITO to consult with the Fund when dealing with exchange problems. The great variety of subjects in the exchange field covered by the Charter is indicated by the following enumeration. Several of these items will be discussed later in more detail.

(a) Measures to sustain employment which are taken by one country and which create balance of payment difficulties for other countries. (Art. 3)

(b) Balance of payment difficulties of members that handicap them in carrying out their obligations, under the Charter, to maintain domestic employment. One factor causing such difficulties may be a maladjustment in the balance of payments of another member, appearing in the form of an export surplus. (Art. 4)

(c) General most-favored-nation treatment to be accorded to members in respect to charges on the transfer of payments in connection with exports and imports. (Art. 16)

(d) Exchange actions of members which frustrate the intent of Charter provisions contained in the Chapter on Quantitative Restrictions (except when exchange measures are used consistently with the Fund Agreement or with a special exchange agreement), or trade action of members which frustrates the intent of the provisions of the Fund Agreement. (Art. 24)

(e) Exchange actions of nonmembers of the Fund which are to be regulated by special exchange agreements. (Art. 24)

(f) Information on exchange matters required from ITO members which are not members of the Fund. (Art. 24)

(g) The conversion rate used in customs valuation. (Art. 35)

(h) The limitation, to the cost of services rendered, of fees and charges imposed in connection with imports and exports on exchange control. (Art. 36)

(i) The publication of regulations concerning the transfer of payments for imports and exports and impartial and reasonable administration of these regulations. (Art. 38)

(j) The obligation of one member to offer another an opportunity for consultation on its exchange regulations and related practices. (Art. 41)

(k) Measures relating to the import and export of gold which discriminate among member countries or which represent a disguised restriction on international trade. (Art. 45)

(l) Restrictive business practices of commercial banks in international trade. (Art. 53)

Monetary problems of a general nature

The Charter requires that the ITO deal with certain general economic problems which have monetary implications.

If the existence of “general disequilibrium” in international trade is indicated by the persistent and widespread application of import restrictions (imposed to safeguard the external financial position of members), the ITO is required to initiate discussions among its members to consider the measures that ought to be taken to remove the underlying causes of the disequilibrium. Such measures should be taken both by those members whose balances of payments are under pressure and those whose balances of payments tend to be exceptionally favorable. Furthermore, in such general consultation, the members may consider measures which could be taken by appropriate intergovernmental organizations to remove the underlying causes of the disequilibrium (Art. 21). Although no indication is contained in the text, the report of the London discussions of the Preparatory Committee seems to indicate that the provision of Article 21, par. 6 of the Charter was intended to apply to disequilibria occurring in the more distant future and not to the present situation which is generally ascribed to maladjustments resulting from the Second World War.10

A general review by the ITO of all import restrictions applied by its members in order to safeguard their external financial situation is provided for within a period of two years after the Charter takes effect (Art. 21, par. 5(b)). In addition, a review of certain import restrictions which are applied in a discriminatory way is envisaged by Article 23, par. 1 (g) of the Charter which provides that a Report be prepared by the ITO on or before March 1, 1950, and subsequently each year.11 No doubt ITO members must cooperate in such a review by ITO organs and have the moral obligation to give sympathetic consideration to any action suggested to them by the ITO. Any such review will deal with the nature of the financial situation which requires the maintenance of import limitations and with other connected topics.

Monetary problems in the sphere of commercial, employment, and development policies

The following list of subjects which may cover monetary problems but do not belong to the category of quantitative restrictions and ex-change measures is needed to complete the survey of topics on which ITO-Fund collaboration is envisaged. These subjects relate to employment, economic development, and commercial policies which may involve monetary reserves, balances of payments, and foreign exchange arrangements.

(a) Arrangements sponsored by the Economic and Social Council (including those initiated by the ITO) for the systematic collection, analysis, and exchange of information on balances of payments.12 (Art. 5)

(b) Measures to promote economic development and reconstruction. Prevention of the application by members of “unreasonable or unjustifiable impediments” that limit other members in obtaining facilities necessary for their development and reconstruction. Prevention of “unreasonable or unjustifiable action” against foreign capital and technological services of foreign origin. Promotion of bilateral and multilateral agreements on security of foreign investment. (Art. 8-12)

(c) Protective measures to establish and maintain infant industries (including nondiscriminatory quantitative restrictions and preferential arrangements).13 (Art. 13-15)

(d) Export subsidies, especially currency practices resulting in the subsidizing of exports. (Art. 25 and 26)

(e) Antidumping and countervailing duties applied to offset competitive advantages attained through exchange measures. (Art. 34)

(f) Agreements leading to customs unions and free trade areas. The Charter (Art. 44) recognizes the desirability of integrating the economies of ITO members in customs unions and free trade areas.14 Such integration may be accomplished by one comprehensive reform or gradually through an interim agreement (which is by its very nature discriminatory). Quantitative restrictions, for balance of payments purposes, may be maintained (or imposed) between the integrated areas. The Havana Charter gives the ITO considerable influence over the “plan and schedule” under which a customs union or free trade area shall be gradually established. The conclusion of such arrangements may have important monetary implications.

(g) Commercial policy obligations in connection with the, conclusion of Intergovernmental Commodity Agreements and Intergovernmental Control Agreements (Article 45 and Chapter VI). The Charter envisages the conclusion of intergovernmental agreements to stabilize or expand in a balanced manner production and trade in primary commodities and in those goods whose production or utilization conditions are so close to primary commodities that they must be included with them in a common agreement. Intergovernmental commodity agreements may also be made to organize the equitable distribution of goods which are in short supply on world markets, to conserve natural resources, or to shift “resources and manpower out of over-expanded industries into new and productive occupations.” The ITO also envisages, under certain conditions, the conclusion of so-called “commodity control agreements” by which members agree to restrict production, exports, and imports, and to regulate prices and other marketing conditions. The conclusion of these agreements may influence considerably the balance of payments of producer and consumer countries. When studying and negotiating the conclusion and administration of these agreements, the ITO may wish to consider their monetary aspects in consultation with the Fund.

(h) Economic measures imposed in the interest of international security at the request of the Security Council. (Art. 72)

(i) Waiving of obligations which involve exchange matters. (Art. 77)

(j) Exchange aspects of frontier traffic measures. (Art. 43)

(k) Customs valuation. As a general rule, when conversion is needed for customs valuation purposes, ITO members are required to convert foreign currency into their own currency on the basis of par value rates. If no par value is established for either or both of the respective currencies, the conversion rate shall reflect the current values in commercial transactions of the currencies involved. Where both countries have agreed par values and the exporting country employs multiple currency practices consistent with the Fund Agreement, the importing country shall convert the exporting country’s currency either according to rules to be formulated by the ITO in agreement with the Fund or according to par value rates (Art. 35). In this case, the consultative procedure with the Fund takes its strongest form, since action by the ITO is conditional upon consent of the Fund. Collaboration between the ITO and the Fund will, however, be most significant in relation to problems related to international payments in general, and to the balance of payments of members in particular.

This listing (admittedly tedious) of subjects on which more or less cooperation between the ITO and the Fund is required indicates the extent to which the interests of members in the two organizations are interwoven.

Special Problems of Cooperation

Import restrictions for balance of payments purposes

To safeguard the external financial position of a member, the Charter authorizes prohibitions and restrictions (through quotas, licensing, state trading operations, or other measures) on the importation of goods from other member countries. The use of quantitative restrictions to prevent an undesirable outflow of monetary reserves and to assist in the accumulation of adequate reserves is not confined to the “postwar transitional” period; a member may take advantage of these safeguards (which are set forth in Article 21) whenever it finds that conditions necessitate their application.

To be sure, the Charter authorizes import restrictions not only for balance of payments reasons but for various other purposes (e.g., economic development, intergovernmental commodity agreements, shortages in supply or distribution). There is nothing in the Charter to prevent a member from maintaining import restrictions on two or more grounds.15 It is a truism that import restrictions imposed for any purpose influence the balance of payments position of a member, and import restrictions instituted for balance of payments purposes and maintained for a period of some length will have a protective effect. To distinguish (on the basis of objective tests) between the various types of import restrictions may be somewhat difficult. A sharp distinction in respect to the grounds on which import restrictions are instituted may, however, be important since the conditions under which quantitative restrictions may be imposed vary, e.g., quantitative restrictions to make intergovernmental marketing schemes effective are subject to entirely different conditions from those which apply to import restrictions to protect monetary reserves.

The distinction between restrictions imposed on the transfer of payments (exchange restrictions) and restrictions imposed on the volume or value of imported goods (import restrictions) will almost always be important since this distinction will determine whether the Fund or the ITO has primary jurisdiction over the member’s restrictive action. Of course, a member may choose to apply quantitative or exchange restrictions according to its own convenience, provided the measures it chooses are consistent with its international obligations. Both quantitative and exchange restrictions, if instituted for balance of payments purposes, are expected to assist in the financial restoration of weak economies. Such restoration is considered necessary both for the balanced expansion of those economies and for the ultimate multilateralization of international trade in general.

Article 21 of the Charter dealing with nondiscriminatory balance of payments restrictions, and Article 23 dealing with exceptions from the rule of nondiscrimination, were the most contested provisions of the Charter when it was being drafted. Article 21 contains a number of commitments in connection with the imposition of import restrictions, culminating in the member’s undertaking to pay due regard, in its domestic and foreign trade policies, to the need for maintaining its balance of payments “on a sound and lasting basis, and to the desirability of assuring an economic employment of productive resources.” This Article authorizes a member to employ nondiscriminatory import restrictions in order to achieve a reasonable rate of in-crease in its monetary reserves, if the reserves are very low. Non-discriminatory import restrictions may also be instituted, maintained, or intensified by a member to stop a serious decline in its monetary reserves. Furthermore, as a preventive measure, such restrictions are authorized to forestall the imminent threat of a serious decline in a member’s monetary reserves. The extent of the import restrictions employed must be commensurate with the effect which they are intended to achieve. This extent has to be considered in the light of other corrective measures which have been taken (or are to be taken) by the member, especially restrictions on payments which are employed along with the import restrictions. Exchange and import restrictions may overlap, i.e., they may regulate the same types of transactions.

As the external financial position of the member improves (provided the improvement is likely to be sustained), the member must proportionately relax and ultimately remove the import restrictions. However, pressure on the member’s reserves may be a result of its domestic policies, especially in employment and economic development. If such domestic policies are consistent with the terms of the Charter, the member cannot be required to relax or remove the restrictions on the ground that their use might be unnecessary if different employment or development policies were adopted. Generally speaking the provisions of the Charter on import restrictions are not intended to give the ITO authority to interfere with the domestic policies of its members.16

To the use of import restrictions for balance of payments purposes is attached the obligation of the member to consult with the ITO as to the nature of its balance of payments difficulties, the available alternative corrective measures, and the possible effect of such measures (whether import measures or alternative measures) on the economies of other members.

Members which are not applying import restrictions to safeguard their external financial position but are considering doing so must initiate consultations with the ITO (a) if practicable before instituting import restrictions, or (b) otherwise, immediately after their institution.17 In addition, the ITO is authorized to institute consultation on import restrictions for balance of payments purposes at any time.18

One of the objectives of the consultation is to limit, in the interest of other countries, the possibility of an arbitrary and capricious employment of import restrictions. A further objective is to ensure a free exchange of opinions with the member on the domestic and external causes and possible consequences of its balance of payments difficulties (their “nature”), on the comparative advantages and disadvantages of the alternative measures available to correct (partly or wholly) the maladjustment, and on the possible effect of the import measures and suggested alternative measures on the economies of other members. The terms of the Charter do not prevent the ITO from indicating in the course of consultation that the contemplated import measures are insufficient to create the conditions in which measures can be fruitfully employed to correct the maladjustment in the member’s balance of payments, and that restrictions more radical than those envisaged (or imposed) by the member are necessary.

What are the consequences if a member institutes import restrictions without consultation although under the terms of the Charter it is obliged to initiate consultation, or if the member does not respond to the invitation to consult? Such import restrictions (however justifiable they may be in substance) must be considered as applied inconsistently with the terms of the Charter until consultation takes place. Although the Charter does not provide a direct enforcement mechanism compelling the member to consult, the fact remains that such non-consultation is a violation. The ITO can enforce consultation only if another member whose trade is adversely affected by the import restrictions complains (Art. 21, par. 5(d)).

The decisive factor determining whether a member shall be authorized to apply import restrictions to safeguard its external financial position is the condition of its monetary reserves (Art. 21, par. 3(a)). The criteria for testing whether the restrictions are consistent with the Charter are the inadequacy of the reserves, their serious decline, or an imminent threat of their serious decline. How are the member’s monetary reserves to be defined when these criteria are considered? Broadly speaking, liquid short-term net foreign assets (including gold) which are under the control of the monetary authorities of the member and which can be used for settling the international accounts of that member (taking into account committed and earmarked amounts) may be considered its monetary reserves for the purpose of Article 21, par. 3(a). If the monetary authorities control sufficient short-term liquid net assets to settle their net international obligations (taking into account possible fluctuations), and if these net assets are not declining and no imminent threat of a serious decline exists, the member’s reserves do not need protection through import restrictions. Whether monetary reserves are to be considered adequate depends, in the broadest sense, on the member’s balance of payments prospects.

The ITO will rely upon the Fund’s opinion as to which assets (taking into account earmarked amounts and short-term liabilities influencing the reserves) may be considered monetary reserves for the purpose of Article 21 of the ITO Charter. The ITO will also rely on the Fund’s judgment as to the significance of various factors affecting the reserves or the need for reserves.19 The term “monetary reserves” must be read in the context of Article 21, and interpreted from the point of view of the subject matter with regard to which the term is used. This subject matter is the necessity of import restrictions to safeguard a member’s external financial position.

The Preparatory Committee of the ITO, which prepared the various drafts of the Charter (London, Lake Success, Geneva), based its work at London on The Suggested Charter of an International Trade Organization of the United Nations, published in September 1946 by the U. S. Department of State. This document contained an article on “Restrictions to Restore Equilibrium in the Balance of Payments” (20) authorizing import restrictions to protect monetary reserves, which included the following provision:

“A Member’s monetary reserves shall be understood to mean its reserves as defined in Article XIX (e) of the Articles of Agreement of the International Monetary Fund.”

Article XIX(e) of the Fund Agreement reads:

A member’s monetary reserves shall be calculated by deducting from its central holdings the currency liabilities to the Treasuries, central banks, stabilization funds, or similar fiscal agencies of other members or non-members specified under (d) above, together with similar liabilities to other official institutions and other banks in the territories of members, or non-members specified under (d) above. To these net holdings shall be added the sums deemed to be official holdings of other official institutions and other banks under (c) above.

Though the Preparatory Committee at London accepted the fundamental idea of the American draft for authorizing quantitative restrictions to safeguard the balance of payments, it did not adopt the language of the draft which interpreted “monetary reserves” by referring to Article XIX(e) of the Fund Agreement.20 Neither later drafts nor the ITO Charter itself includes definitions of monetary reserves.21

The Charter expressly determines the three principal subject matters on which consultation is required in relation to import restrictions. They are (a) the nature of the member’s balance of payments difficulties, (b) available alternative corrective measures, and (c) the possible effects of import restrictions and of available alternative measures on the economies of other members.

Of course, within the framework of these main topics a number of other problems covered by the Charter may arise in the course of consultation upon the initiative of those who are participating in it. The consultation may be concluded by the ITO putting its views into either formal or informal opinions. It cannot be contended that the failure to express a formal opinion on certain aspects would make the consultation on the matters under review purposeless, since the exchange of views in itself may serve the purpose intended by the Charter. The ITO cannot, however, reasonably display an inconclusive attitude on such decisive points as the general status of reserves, or the necessity for imposing import restrictions.

The developments in the course of the consultative procedure between the ITO and its member (especially insofar as the ITO renders formal decisions) will decisively influence the corresponding consultative procedure between the ITO and the Fund. Some light may be thrown on Fund-ITO relations in this connection by listing the important types of formal decisions which the ITO may render.

(a) An opinion to an individual member as to whether the contemplated import restrictions (or alternative measures) are consistent with the Charter; also, on the nature of the member’s balance of payments difficulties, on alternative corrective measures, and on the possible effect of such measures on the economies of other members. (Art. 21, par. 5(a))

(b) Prior approval insofar as the general extent, degree of intensity, and duration of import restrictions are concerned. (Art. 21, par. 5(c))

(c) An opinion as to whether quantitative restrictions that are maintained or intensified are consistent with the terms of the Charter. (Art. 21, par. 5(a) and (b))

(d) An expression of views concerning conditions for settlement of complaints raised against members maintaining restrictions; after determination that restrictions are maintained inconsistently with Articles 21, 22, and 23 of the Charter, recommendations for modification or withdrawal of restrictions; the release of members from specified obligations under the Charter vis-à-vis members applying quantitative restrictions in a manner which is inconsistent with the terms of the Charter. (Art. 21, par. 5(d))

(e) Recommendations or rulings in respect to complaints of a member that any benefit accruing to it under the Charter is being nullified or impaired or that the attainment of any objective of the Charter is being impeded by the action of another member; determination in the course of a “Nullification or Impairment” procedure that the circumstances of the case are serious enough to justify the release of a member from obligations or from the granting of concessions pursuant to the Charter as the ITO may determine. (Art. 94 and 95)

(f) The waiving of certain obligations connected with monetary reserves, balance of payments and foreign exchange arrangements, and the decision on separate voting requirements in such cases. (Art. 77)

The consultative procedure on import restrictions may merge in certain cases with consultation on exchange restrictions which are to be conducted by the ITO pursuant to a special exchange agreement. It may also merge with consultations concerning the discriminatory aspect of import measures. Technical details in respect to the procedure of consultation will be covered on the one hand by the general rules of procedure of the ITO, on the other hand by administrative arrangements between the ITO and the Fund.

Discriminatory practices

Numerous provisions of the ITO Charter restrict members in applying discriminatory trade practices by government action against each other. In accordance with the ideology underlying the Charter, the businessman should in principle negotiate and conclude business transactions in respect to imports and exports free from governmental regulations other than those requiring the payment of nondiscriminatory customs duties and similar charges. He should be able to act according to his profit interest. Article 22 of the Charter contains a general prohibition of discrimination in export and import transactions.22

No doubt the fundamental idea underlying the Fund Agreement, in respect to discrimination, is almost identical with that underlying the Charter. However, the Fund Agreement is much less articulate than the ITO Charter in condemning discriminatory practices and especially in specifying which practices should be avoided. The consultative functions of the Fund (including “findings” of facts and rendering “determinations”) extend also to discriminatory practices whenever the ITO is dealing with problems concerning monetary affairs.

It would be difficult to describe with any degree of exactness the discriminatory arrangements which will require collaboration with the Fund. The best approach to a generalized description may be a brief discussion of those Charter provisions which apply to discriminatory practices that have some bearing on balance of payments problems. To give a picture of the relevant Charter provisions, specified prohibitions of discriminatory measures as well as authorized discriminatory practices are discussed below.

Transitional discriminatory arrangements. In the transition period from the end of the Second World War to the time when the necessity for protecting foreign exchange reserves will be exceptional, the Charter permits certain deviations from the rule of nondiscrimination. These are called Exceptional Transitional Period Arrangements.

The provisions of Article 23 on Exceptional Transitional Period Arrangements authorize discriminatory deviations in the use of import restrictions for no other purpose than to safeguard a member’s external financial position. The member must at the same time be availing itself, in the exchange field, of “transitional arrangements” in accordance with Article XIV of the Fund Agreement (or in accordance with a special exchange agreement). ITO members which are not members of the Fund cannot take advantage of Exceptional Transitional Period Arrangements unless they have concluded special ex-change agreements authorizing transitional arrangements in the exchange field. The Charter requires that policies used in connection with any of the Exceptional Transitional Period Arrangements shall (a) promote maximum development of international trade and (b) expedite attainment of a balance of payments position which does not require resort to restrictive measures. The Charter permits the three following categories of Exceptional Transitional Period Arrangements.

  • (A) Discriminatory import restrictions having an effect equivalent to transitional exchange arrangements under Fund Agreement. (Article 23, par. 1 (b) of the Charter)

A member which applies import restrictions to safeguard its external financial position may, in the use of such restrictions, deviate from the rule of nondiscrimination in a manner which has an effect equivalent to those exchange restrictions which the member may at that time apply under Article XIV (Transitional Period) of the Fund Agreement (or under an analogous provision of a special exchange agreement). In other words, the discriminatory effect of the import measures must be equivalent to the discriminatory effect of transitional exchange arrangements which the member (in its capacity as Fund member or as a party to a special exchange agreement) is at the same time authorized to apply (regardless of whether or not it actually does apply them). The authorization in the Fund Agreement for a member to adapt transitional exchange arrangements to changing circumstances (and, in the case of members whose territories have been occupied by the enemy, to introduce new transitional exchange arrangements where necessary) automatically broadens the range of possibilities in regard to the discriminatory application of import measures. After March 1, 1952, the member may “retain” its deviations from the rule of nondiscrimination as far as they have an effect equivalent to the transitional exchange arrangements “retained” in accordance with Article XIV, Section 4, of the Fund Agreement. Since the retention of transitional exchange arrangements after March 1, 1952 is conditional on consultation with the Fund, the Fund will exercise indirect (but decisive) influence upon this category of discriminatory import restrictions.23

Furthermore, since the Fund may under exceptional conditions (Art. XIV, Sec. 4 of the Fund Agreement) require the abandonment of one particular restriction, or the general abandonment of exchange restrictions which are inconsistent with the purposes of the Fund, it follows that the Fund’s decision requiring the withdrawal of one (or all) exchange restrictions automatically changes the member’s authority to impose or maintain discriminatory import restrictions on the basis of Article 23, par. 1 (b) of the Charter.

  • (B) Discriminatory import restrictions which were applied on March 1,1948. (Article 23, par. 1 (c) of the Charter)

A member which was applying import restrictions to safeguard its external financial position on March 1, 1948, in a manner which deviated from the rules of nondiscrimination, may continue so to deviate, and may adapt such discriminatory deviations to changing circumstances. This authorization does not apply, however, to those discriminatory deviations which the member was authorized to apply on March 1, 1948 under the provision of Article 23, par. l(b) of the Charter, discussed above under (A). In March 1952, and each year thereafter, the member must consult with the ITO concerning its general policies in respect to the retention of discriminatory deviations considered here under (B).

The principal difference between discriminatory deviations as discussed here under (A) and (B) is that deviations considered under (A) are (indirectly) controlled by the Fund, whereas those discussed under (B) are controlled by the ITO (although in consultation with the Fund).

  • (C) Discriminatory import restrictions in order to obtain additional imports. (Annex K to Charter)24

A member applying import restrictions to safeguard its external financial position may relax such restrictions in a manner which de-parts from the rule of nondiscrimination to the extent necessary to obtain additional imports. Additional imports are considered to be those which exceed the maximum total of imports which would be obtainable if the import restrictions were applied in a nondiscriminatory manner.

The levels of prices of such additional imports should not be substantially higher than those for comparable goods available from other countries. The import transaction must not be part of an arrangement which would result in a reduction in the amount of gold and convertible currencies derived from exports to members not participating in such arrangement.25 If it is not practicable for a member to ascertain whether the complex conditions here described prevail in respect to each individual import transaction, the member is required at least to satisfy itself that these conditions are fulfilled “generally.”

The ITO may require a member to withdraw discriminatory deviations which are inconsistent with the provisions of Annex K. Also beginning March 1, 1952, the ITO may issue limitations of a general nature concerning the application of discriminatory deviations (and adaptations of discriminatory deviations to changing circumstances). In addition, a member is required to consult in March 1952 (and each year thereafter) with the ITO in respect to general policies relative to import discrimination if it wishes to continue to maintain discriminatory deviations based on Annex K of the Charter. A member may consult with the ITO with a view to obtaining its prior approval in respect to the general extent, intensity, and duration of deviations from the rule of nondiscrimination pursuant to Annex K. Members must keep the ITO informed on discriminatory actions under Annex K, and the ITO has special authority to require information on such actions.

Authorization for the discriminatory arrangements based on these provisions cannot be given under more than one of the three categories, (A), (B), and (C). That is to say, one particular discriminatory import measure cannot be based on A and B, or A and C, or B and C, or on A, B, and C.

Temporary discrimination in small part of trade. Members applying import restrictions to safeguard their external financial position (Art. 21) may, with the prior consent of the ITO, apply them in a discriminatory manner in respect of a small part of their external trade. The ITO may consent to such measures if the benefits (arising from the discriminatory deviation) to the member substantially outweigh any injury to the trade of other members. This measure is independent of whether or not the transitional exchange arrangements (in accordance with the Fund Agreement or a special exchange agreement) have been terminated.26

Direction of exports to earn convertible currencies. The provisions of the Charter on quantitative restrictions (Section IV-B)27 do not preclude a member that is applying balance of payments restrictions from requiring its residents to specify payments for their exports in order to increase the member’s acquisition of currencies which it can use without deviation from the rule on nondiscrimination. (Art. 23, par. 4)

Discrimination to assist economies disrupted by war. A member applying import restrictions to safeguard its external financial position under Article 21 is authorized until December 31, 1951 to discriminate in the application of those import restrictions, if the discrimination does not involve a substantial departure from the rule of nondiscrimination (Art. 22), and if as a result of the discrimination the member is placed in a position to assist another country whose economy has been disrupted by war. (Art. 23, par. 3 (b))

Discrimination within a political union. Import restrictions to safe-guard their external financial positions (Art. 21) may be applied in a discriminatory manner by a group of ITO members which have a “common” quota in the Fund against outsiders which are not covered by that “common” Fund quota. In this way, as far as the discriminatory import restrictions are concerned, a free trade area will exist among the members of a group of territories which are covered under one membership in the Fund.28

Discriminatory measures in connection with scarce currencies. A formal declaration of the Fund that a currency is scarce in the Fund operates as an authorization to members of the Fund to impose (after consultation with the Fund) temporary limitations on the freedom of exchange operations in the scarce currency. The Charter authorizes ITO members to apply discriminatory quantitative restrictions having effect equivalent to exchange restrictions applicable by Fund members under the title of scarce currencies. (Art. 23, par. 5(a))

Quantitative restrictions to make exchange measures effective. Article 24, par. 8(b) of the Charter authorizes the use of restrictions on imports and exports to “make effective” such (discriminatory and nondiscriminatory) exchange measures as are consistent with the Fund Agreement or with the terms of the respective special exchange agreement; there is a qualification, however, that these quantitative restrictions must not conflict with provisions of the Charter other than those included in the Section on Quantitative Restrictions. In other words, members legitimately applying exchange restrictions or exchange controls (whether on capital or on current transactions) may implement them through quantitative restrictions (e.g., an export licensing system for jewelry may be instituted to reinforce exchange restrictions established to prevent capital flight).29 However, the quantitative restrictions so instituted cannot conflict with other provisions of the Charter which are not included in the section on Quantitative Restrictions and Related Exchange Matters (e.g., those on Intergovernmental Commodity Agreements or Freedom of Transit).30

The Fund will have indirect control over these quantitative measures since the underlying exchange measures are under its authority.

Discriminatory restrictions in the interest of national or international security. ITO members which are also members of the United Nations may be required by the Security Council, in the interest of maintaining security, to restrict all kinds of economic activity with another country (member or nonmember of ITO). The Security Council may require members to carry out such actions directly, or through such international organizations as the ITO or the Fund31 (Articles 39, 41, 42, 48, 103 of the UN Charter and Article 86 of the ITO Charter). Cooperation in economic sanctions against members and nonmembers may pose to the ITO and the Fund complex problems in the fields of law and economics, and the application of such sanctions will be as delicate as it is important.

The Charter’s provisions on General Exceptions (Article 99) authorize members to protect their essential national security interests, especially in periods of emergency in international relations. Such protective action will frequently take the form of discriminatory quantitative restrictions. Discriminatory measures to enforce the provisions of peace treaties and of other arrangements resulting from the Second World War are also authorized. (Art. 99)

Discrimination through state trading. As far as discriminatory quantitative restrictions are “made effective” through state trading operations, the provisions of the Charter covering quantitative restrictions apply (Art. 20, par. 4). If members use other state trading practices which have a restrictive effect (e.g., export or import monopoly), they must negotiate with other members to equalize the competitive advantages resulting from state trading. As far as practicable, members must act solely in accordance with “commercial” considerations (Articles 29 and 31). In considering the discriminatory trade and financial effects of state trading operations, the ITO and the Fund will enter an unexplored field.

Charges on exchange transactions. The Charter prohibits discrimination with respect to charges imposed on the transfer of payments for imports and exports (Art. 16). Even if such discriminatory charges are authorized under the Fund Agreement, they must not be applied (according to the terms of the ITO Charter) in a discriminatory manner.

Miscellaneous titles. Discrimination in trade which may require ITO action (and consultation with the Fund as far as monetary aspects are concerned) may occur in a number of other cases. A few examples are given here. International commodity and commodity control agreements, like preparatory measures for customs unions and free trade areas, will by their very nature involve discrimination (Art. 45(a)(ix)). Discriminatory restrictions are temporarily authorized to relieve critical shortages of essential goods (Art. 20, par. 2(a)), or in the postwar period to deal with such problems as the distribution of products in short supply, the control of prices, and the liquidation of war surpluses (Art. 45 (b)). Pakistan and India are authorized to apply to each other more favorable conditions in respect to quantitative restrictions (Annex M). Old and new preferential regimes may be authorized to use discriminatory quantitative measures (Art. 15, 16, par. 2, 23, par. 5(b)). Film quotas may be discriminatory (Art. 19(d)).

One of the most important problems in ITO-Fund collaboration will be the development of policies concerning the use of discriminatory measures. The principal purpose of such measures is to strengthen the economic position of members so as to enable them to participate in nondiscriminatory trade.

Findings and determinations of the Fund32

Consultation between the Fund and the ITO on subjects related to the three principal items in Article 24, par. 2—i.e., monetary reserves, balance of payments, and foreign exchange arrangements—will center on assembling information on facts and consideration of opinions on the problematical issues involved. The facts supplied by the Fund, and the opinions rendered by it, will carry more weight for ITO than is usual in consultations between intergovernmental organizations. Article 24, par. 2 of the Charter requires the ITO to “accept” certain findings and determinations of the Fund.33 The circumstances under which the Fund may designate certain facts, which it supplies, as “findings,” and certain opinions as “determinations,” which must be “accepted” by the ITO, will now be examined. When consulted the Fund may supply the ITO with (a) findings on statistical and other facts, (b) determinations as to whether exchange actions of ITO members are authorized, and (c) determinations concerning the monetary aspects of import restrictions. Even where the Fund is authorized to designate certain facts and opinions as “findings” and “determinations” it is not, however, obliged to do so. It may indicate that it prefers to have these communications regarded merely as informal advice.

Findings on statistical and other facts. When the Fund is consulted by the ITO on a problem concerning monetary reserves, balance of payments, or foreign exchange arrangements (regardless of whether the consultation concerns quantitative restrictions or other topics), the Fund may on its own initiative, or upon request of the ITO, present to the ITO findings of statistical facts, and other (than statistical) facts, relating to foreign exchange, monetary reserves, and balance of payments.34 These findings must be “accepted” by the ITO. The obligation to “accept” the findings of the Fund means that the ITO must, if it wishes to base its action involving monetary matters on “statistical and other facts,” not base its action on facts other than those supplied by the Fund. If the ITO wished to disregard the Fund’s “findings,” it could do so only by basing its action on facts other than those over which the Fund has the sole function to render “findings.”

The Fund will presumably base its findings on verifiable evidence. Facts concerning foreign exchange, balance of payments, and monetary reserves will often have to be deduced from other facts; inferential deduction on certain concepts (for example, on what composes foreign exchange) may frequently be necessary. Presumably, the Fund will inform the ITO (upon its request) what methods it used in ascertaining facts (including estimates) and on what evidence its findings have been based. When the Fund cannot divulge confidential evidentiary-facts, it will inform the ITO to that effect. Presumably the Fund and the ITO will take administrative measures to make it possible for non-members of the Fund to arrange for direct consultation with the Fund on facts which are of concern to these nonmembers.

Determination as to whether exchange actions of ITO members are authorized. The Fund (when consulted by the ITO on monetary problems) may upon its own initiative or upon request of the ITO render “determination” as to whether actions of ITO members “with respect to exchange matters” are “in accordance” with the Fund Agreement, as far as Fund members are concerned, or with a special exchange agreement, as far as nonmembers of the Fund are concerned. The expression “action with respect to exchange matters” covers a variety of situations. All actions of a member (except mere organizational measures) covered by the Fund Agreement or by a special exchange agreement will be considered as taken “with respect to exchange matters.”

The administration of a special exchange agreement35 will consist principally of judging whether an exchange action is “in accordance” with that agreement. This is the reason for the Fund’s extended functions in the application of those agreements.

Determinations concerning the monetary aspects of import restrictions. When a member imposes (or envisages) import restrictions to protect its reserves, or maintains or intensifies such restrictions, the ITO may be called upon to consider whether certain criteria have been observed which make the member’s action consistent with the Charter.36 These criteria are set forth in Article 21, par. 3 (a) of the Charter which reads:

No Member shall institute, maintain or intensify import restrictions under this Article except to the extent necessary

  • (i) to forestall the imminent threat of, or to stop, a serious decline in its monetary reserves, or

  • (ii) in the case of a Member with very low monetary reserves, to achieve a reasonable rate of increase in its reserves.

Due regard shall be paid in either case to any special factors which may be affecting the Member’s reserves or need for reserves, including, where special external credits or other resources are available to it, the need to provide for the appropriate use of such credits or resources.

The Charter requires the ITO to accept the “determination” of the Fund on the monetary aspects of the problems here involved. The last sentence of Article 24, par. 2, reads as follows:

When the Organization is examining a situation in the light of the relevant considerations under all the pertinent provisions of Article 21 for the purpose of reaching its final decision in cases37 involving the criteria set forth in paragraph 3(a) of that Article, it shall accept the determination of the Fund as to what constitutes a serious decline in the Member’s monetary reserves, a very low level of its monetary reserves or a reasonable rate of increase in its monetary reserves, and as to the financial aspects of other matters covered in consultation in such cases.

In other words, when consulted by the ITO on problems which concern monetary reserves, balance of payments, or foreign exchange arrangements, the Fund may render “determinations” (under conditions indicated below)

  • (a) from all relevant points of view, as far as the matter at issue is what constitutes

    • (1) a serious decline in a member’s monetary reserves,

    • (2) a Very low level of a member’s monetary reserves, or

    • (3) a reasonable rate of increase in a member’s monetary reserves, and

  • (b) from the financial point of view only, as far as other matters (i.e., other than a serious decline of reserves, a very low level of reserves, and a reasonable rate of increase in the reserves) are concerned, which matters are covered in consultations involving the criteria set forth in Article 21, par. 3(a).

Such determinations as those just outlined will be supplied by the Fund only when the ITO is considering cases involving the status of monetary reserves in order to reach a “final decision.”38 The ITO shall reach its decision in the light of all relevant provisions of Article 21, and not only on the basis of those on which the Fund is authorized to render determinations (e.g., it has to consider also employment problems). The over-all “final” decision as to the extent to which a member’s import restrictions are necessary, and the over-all considerations concerning the effect of such restrictions, are in the province of the ITO, although in reaching such “final decision” the determination of the Fund will be, no doubt, a very weighty element.

Three terms of the last sentence of Article 24, par. 2 are analyzed briefly here in order to make more explicit the circumstances under which the Fund is expected to make determinations on monetary issues: (a) Significance of the “criteria” set forth in Article 21, par. 3 (a); (b) What “cases” involve these criteria? (c) What are “other matters” on which the Fund renders determinations from the financial point of view?

Significance of “criteria.” Criteria are “set forth” in par. 3 (a) of Article 21 in order to enable the ITO and its members to test whether (and to what extent) import restrictions to safeguard the external financial position of a member are necessary. The “extent” of these import restrictions will probably be “measured” in terms of the value of merchandise which they will keep out of the country, or in terms of the value of foreign exchange which will be saved. The following are set forth in Article 21, par. 3 (a) of the Charter as criteria for testing the authorization to impose import restrictions:

(1) The fact that there exists an imminent threat of a serious decline in the monetary reserves of a country, which threat can be forestalled with the assistance of import restrictions;

(2) The fact of a serious decline in the monetary reserves of a country, which decline can be stopped with the assistance of the application of import restrictions;

(3) The fact that a country’s monetary reserves are very low (below the required level) and that with the assistance of import restrictions a reasonable rate of increase in these reserves can be achieved.

Each of these criteria represents a yardstick for testing whether (and to what extent)39 import restrictions are authorized under Article 21 of the Charter. When these criteria are appraised, coexistent (or expected) exchange restrictions affecting the reserve position of a country must be taken into consideration. Furthermore, a number of “special” factors which may positively or negatively affect the need for protection of the country’s reserves must also be taken into account. One such “special” factor is the need to provide for the appropriate use of special external credits or other resources where such credits or resources are available.

The criteria that have been discussed here are those “set forth” in Article 21, par. 3(a). In addition, the external financial position of a country can be tested by reference to a number of other criteria. The principal criterion implied (but not “set forth”) in Article 21, par. 3 (a) is the “desirable” status of monetary reserves which is to be considered in the light of a “desirable” setting of international economic intercourse.

Significance of “cases” involving monetary reserve criteria. Determinations will be rendered by the Fund when the ITO consults the Fund in “cases” involving criteria significant for the status of monetary reserves. Generally speaking, one or more of these criteria will be involved in all consultations on the institution, maintenance, intensification, relaxation, removal, or modification of import restrictions (whether or not these measures are applied in a discriminatory way). The Fund will render determinations only in “cases” which actually concern one or more individual members of the ITO. Abstract problems relating to monetary reserves (for example, whether there is widespread disequilibrium as mentioned in Article 21, par. 6) on which the Fund is consulted in the interest of the community of ITO members will not constitute a “case” from the point of view here discussed. A few examples of “cases” which may involve the criteria set forth in Article 21, par. 3 (a) are the following:

(1) Consultation of a member with ITO, before instituting import restrictions, as to the nature of its balance of payments difficulties, alternative corrective measures, and the possible effects of such measures on the economies of other members. (Art. 21, par. 5(a))

(2) Consultation upon invitation of ITO. (Art. 21, par. 5(b))

(3) Consultation with a view to prior approval of import restrictions, under specified future conditions as to their general extent, degree of intensity, and duration. (Art. 21, par. 5(c))

(4) Complaints of adversely affected ITO members against members maintaining import restrictions. (Art. 21, par. 5(d))

(5) Settlement of disputes involving monetary reserve problems in accordance with Articles 93, 94, 95, and 96 of the Charter, which deal with impairment and nullification.

(6) Application of waiver provisions, if the waiver concerns problems relating to monetary reserves, balances of payments or foreign exchange arrangements. (Art. 77, par. 3)

“Other” matters than the serious decline and very low level of re-serves and a reasonable rate of the increase of reserves. What are the “other” matters which may be covered in consultation? They are those matters on which the Fund can render determination only from “financial” aspects and not those on which the Fund may render de-terminations from any relevant aspect. Financial aspects include the domestic and external monetary, fiscal, credit, and investment position of the member. They also embrace inflationary and deflationary movements in connection with the import restrictions under consideration. A few examples covered by the term “other” matters are the existence of an imminent serious threat to monetary reserves, the domestic and external causes of the threat, the nature of the balance of payments difficulties requiring protective import measures, corrective measures alternative to import restrictions, and possible effects of import restrictions and of alternative measures on the economies of other members.

In conclusion, it may be said that the ITO will determine on its own responsibility whether the extent of import restrictions applied (or contemplated) by a member is justified in the light of the Charter. However, in making this decision the weightiest factors which the ITO will take into account will be the Fund’s determinations on certain monetary problems and the Fund’s findings on facts in the monetary field.

Special exchange agreements

With one insignificant exception40 the Charter requires that its members either join the Fund or enter into a special exchange agreement with the ITO.41 The most important provisions of the Charter could be made ineffective if nonmembers of the Fund were free to act in the field of exchange policies according to their discretion though bound by the provisions of the Charter in respect to trade policies. The special exchange agreement is intended to be a substitute for Fund regulation, subjecting nonmembers of the Fund to a reasonable discipline in respect to exchange stability and exchange restrictions.

There will be very close cooperation between the ITO and the Fund in respect to the preparation, conclusion, and administration of special exchange agreements. The Fund will determine, in the course of consultations, whether an ITO member’s action with respect to exchange matters is in accordance with the terms of a special exchange agreement (Art. 24).

The special exchange agreement will probably cover the following four groups of related obligations: (a) general collaboration on exchange stability with other ITO members, (b) establishment of a par value of the member’s currency governing official gold transactions and exchange rates, (c) par value changes to be made only after consultation with ITO (or its prior approval) and only to correct a fundamental disequilibrium, and (d) the subjecting of restrictions on international payments to prior approval of the ITO.

A model text for a special exchange agreement was adopted by the Contracting Parties to GATT at their Annecy session in June 1949. This document will serve as the basis for discussions with the ITO.

The position of ITO members which are not members of the Fund and which have not yet concluded a special exchange agreement may be briefly indicated: Such members may be required (a) to consult at any time with the ITO on any exchange problem (the ITO is there-fore authorized to require them not to make changes in their exchange system without prior consultation), (b) to supply the ITO with information on exchange matters within the general scope of Article VIII, Sec. 5 of the Fund Agreement, (c) not to frustrate, by exchange action, the intent of the provisions of that section of the Charter which deals with Quantitative Restrictions and Related Exchange Matters (Art. 20-24). Before concluding a special exchange agreement, nonmembers of the Fund cannot take advantage of those provisions of the Charter which restrict the use of certain exceptions to the rule of nondiscrimination to those members authorized to take advantage of the transitional period under the Fund Agreement or under a corresponding provision of a special exchange agreement (e.g., Art. 23, par. 1 and Art. 24, par. 8).

The frustration clause

The frustration clause included in Article 24, par. 4 of the Charter reads as follows:

Members shall not, by exchange action, frustrate the intent of the provisions of this Section, nor, by trade action, the intent of the provisions of the Articles of Agreement of the International Monetary Fund.

Thus, members of the ITO are under obligation not to “frustrate” by trade action the intent of the provisions of the Fund Agreement (Art. 24, par. 4). This provision applies to both members and non-members of the Fund. The “trade action” does not refer only to trade measures which are inconsistent with the provisions of the ITO Charter. It refers also to trade action which in the absence of the frustration clause would be consistent with the Charter. In order to comply with this provision, the “intent” of the provisions of the Fund Agreement must be knowable to ITO members.

ITO members must not frustrate the intent of the provisions included in Section IV-B of the Charter (Quantitative Restrictions and Related Exchange Matters) by exchange action which is inconsistent with the Fund Agreement or with the terms of a special exchange agreement. This clause is applicable without limitation to the exchange actions of ITO members which are not members of the Fund and have not yet concluded a special exchange agreement. However, members which are Fund members or which have concluded a special exchange agreement are not precluded by the frustration clause, or by other provisions of the Section on Quantitative Restrictions and Related Exchange Matters (Art. 20-24), from using exchange controls and exchange restrictions which are consistent with the Fund Agreement or with a special exchange agreement (Art. 24, par. 8). But they may be precluded from using such authorized exchange measures by Charter provisions other than those included in Section IV-B (e.g., on export subsidies or on most-favored-nations treatment).

Restrictions on purchase and sale of services

In order to safeguard its external financial position, a country may wish to prohibit or restrict transactions by its residents involving the purchase or sale of services abroad. These transactions may be controlled by licensing payments for the purchase of such services or by requiring residents to surrender the foreign exchange acquired by their sale.

However, restrictions on service transactions may be achieved also in a direct way. The purchase of services from abroad may be prohibited outright or restricted in respect to kind, quantity or sources. For example, the purchase of insurance from certain countries may be prohibited or restricted to certain types of insurance. Also, the sale of services abroad may be prohibited, restricted, or made subject to license. For example, the chartering of ships by foreign residents may be prohibited, or made subject to certain conditions or to licensing.

Restrictions on payments in connection with service transactions are undoubtedly subject to the provisions of the Articles of Agreement of the Fund in the same way as other restrictions on payments. However, if service transactions are restricted by quantitative limitations they are not subject to either the Fund or the ITO except insofar as they are incidental to merchandise transaction. The fact that the provisions of the ITO Charter do not cover quantitative restrictions on service transactions does not, however, imply that the Fund and the ITO, when considering the balance of payments position of the country, will disregard the repercussions of quantitative restrictions on services on the external financial position of the member.

Organizational Matters

Presumably the Fund will accept the functions which it is requested to perform pursuant to the terms of the ITO Charter. A draft agreement covering fundamentals has been prepared and will be submitted for formal approval to the first Conference of the ITO and the Board of Governors of the Fund. On the establishment of the ITO, a number of administrative understandings on a variety of matters will be concluded with the Fund. Liaison problems will be easily settled if the seat of the ITO is in or near Washington, D. C. More complicated liaison problems may arise if the ITO’s central office is located outside the North American continent. The Fund will certainly take advantage of the knowledge and experience of commercial policy relations which the ITO will acquire.

The General Agreement on Tariffs and Trade (GATT)

GATT is a multilateral trade agreement concluded among 23 nations42 representing more than 75 per cent of world trade. GATT consists of tariff provisions and related regulations on the one hand, and of provisions concerning general commercial policy on the other. It is organically and legally independent of the ITO; however, the two arrangements (GATT and ITO) are closely connected ideologically, and are expected to merge in respect to the application of general provisions on commercial policy. The tariff sections of GATT are expected to be administered by the executive organs of ITO. The substance of the provisions of the ITO Charter which are of greatest interest for the Fund, especially the balance of payments provisions, is also embodied in GATT. These provisions are adopted only “provisionally.” During such provisional application, a contracting party may give 60 days’ notice of withdrawal, and the provisions of these articles are to be applied to the fullest extent in a fashion not inconsistent with the existing domestic legislation of the individual contracting parties. In other words, a contracting party is not required to adjust its statutory law to GATT during the period of the “provisional application” of GATT, but the member is required not to adopt new statutory provisions which are inconsistent with the terms of GATT. The contracting parties are required to observe the general principles embodied in the ITO Charter43 to the fullest extent of their executive authority.

The Third Session of the Contracting Parties took place at Annecy between April and August 1949 when ten other countries44 expressed their wish to join the Contracting Parties.

An informal understanding exists between the Fund and the Contracting Parties concerning procedures of consultation.

The GATT is not a substitute for the ITO. However, it is for the time being the only comprehensive international mechanism dealing with general problems of commercial policy on the same basis as the ITO.

Interim Commission for the ITO

The Havana Conference established an Interim Commission to prepare various organizational matters of the future ITO and also to call the first Conference. In its only session on March 20, 1948 (in connection with the final session of the Havana Conference), the Interim Commission elected an Executive Committee consisting of 18 members to which it delegated all its powers and duties. The Executive Committee held two sessions and a few informal meetings at Annecy, in June 1949. A third session is expected to be called when the approximate date of the first Conference is known (pending, of course, a sufficient number of ratifications, especially those of the United States and the United Kingdom).

The Fund has discussed with the Executive Committee its contemplated agreement with the ITO and various other preparatory measures.

Agreement between the ITO and the Fund

Article 24 of the ITO Charter requires the ITO to seek (a) cooperation with the Fund to the end that the two organizations may pursue a coordinated policy in respect to problems of common interest and (b) an agreement with the Fund regarding procedures in consultation. In addition, Article 87 of the Charter requires the ITO to make arrangements with intergovernmental organizations having related responsibilities (e.g., the Fund) to provide for effective cooperation and for the avoidance of unnecessary duplication in the activities of the organizations. Regarding implementation of these provisions, the United Nations Conference on Trade and Employment, which adopted the ITO Charter at Havana in March 1948, passed a Resolution requesting the Interim Commission of the ITO to prepare documents and recommendations necessary for the cooperation of the ITO and other inter-governmental organizations. In pursuance of that Resolution, a draft was prepared and adopted by the Executive Committee of the Interim Commission at its Second Session in Geneva and by the Executive Board of the Fund. After consideration by the interested governments, the draft is to be submitted for final approval to the first Annual Conference of the ITO and to the Board of Governors of the Fund. The draft in substance and language is, as far as practicable, adjusted to the Fund-United Nations Agreement.

The following are the principal provisions of the draft:

  • (1) The Fund agrees to cooperate with the ITO in accordance with the terms of the Charter.

  • (2) The organizations will consult on matters specifically referred to in the Charter and on other matters agreed to be of mutual interest. Findings and determinations of the Fund shall be communicated in writing.

  • (3) The Fund will give technical assistance to the ITO in preparing its reports on discriminatory import restrictions.

  • (4) Reciprocal representation at meetings will be arranged. Close liaison will be maintained on the basis of separate understandings.

  • (5) Subject to necessary limitations to safeguard confidential in-formation, the two organizations will exchange information to the fullest practicable extent.45 Unnecessary duplication will be avoided.

Fund Action When Consulted by ITO on Problems Concerning Monetary Reserves, Balance of Payments or Foreign Exchange Arrangements(Art. 24, par. 2 of the Havana Charter)
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Findings on factsDeterminations whether exchange action authorizedDeterminations on monetary reservesAdvisory opinions
Fund renders findings of statistical and other facts relating to foreign exchange, monetary reserves, and balance of payments.Fund determines whether action by a member with respect to exchange matters is for Fund members in accordance with the Articles of Fund Agreement, or for non-Fund members in accordance with the terms of the respective special exchange agreement.Cases involving the criteria set forth in paragraph 3 (a) of Article 21 in which the ITO renders a final decision, and where in order to reach a final decision the ITO has to examine the situation in the light of all pertinent provisions of Article 21: Fund when consulted in such cases may render determinations as to what constitutes a serious decline in the member’s monetary reserves, a very low level of its monetary re-serves, or a reasonable rate of increase in its monetary reserves. Fund also renders determinations as to the financial aspects of other matters covered in consultation in cases involving the criteria set forth in paragraph 3(a) of Article 21.Fund renders advisory opinions which do not have the character of “findings” and “determinations.”

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Article X.

Article I, dealing with Purposes of the Fund, enumerates, of course, a number of objectives which are related to commercial policy. Article XIV, on the Transitional Period, suggests in Sec. 2 that members using transitional arrangements shall take all possible measures to develop such commercial arrangements as will facilitate exchange stability. Article XII, Sec. 8, which authorizes the Fund to communicate its views to members, covers also communications concerning their commercial policies. Furthermore, Article IX, dealing with Immunities and Privileges and with freedom of Fund assets from restrictions, refers to all kinds of restrictions, including quantitative restrictions.

The following passage from a Report of Ad Hoc Committee of Commission I, on Exchange Controls on Current Payments (July 12, 1949, CI/AH/RP3) is characteristic of the Bretton Woods atmosphere: “In particular, it was brought out in discussion that the proposed provisions do not contain any language which commits a member country to pursue any given commercial policy and is confined strictly to the question of exchange restrictions on transactions on current account and to discriminatory and multiple currency practices.” (Proceedings and Documents of the United Nations Monetary and Financial Conference. Vol. I, Washington, D. C., 1948, p. 545.)

Ibid., p. 941.

See below, pp. 167-68.

The principal difference between the commitments of ITO members which are members of the Fund and those which are not is that members of the Fund are under the authority of the Fund in respect to their exchange policies, whereas nonmembers of the Fund are subject to the authority of the ITO, as discussed below in detail.

The trade action here referred to seems to mean action which, in the absence of the frustration clause, would be consistent with the Charter.

Article 18 requires members not to apply “internal” taxes and charges to imported products in excess of those applied to like domestic products. When this provision on National Treatment on Internal Taxation (Article 18) was drafted, consideration was given to charges imposed on transactions in international trade in connection with multiple currency practices. The following note in the Report of the Subcommittee on Article 18 may explain the intention of the drafters:

39. The Sub-Committee considered that charges imposed in connection with the international transfer of payments for imports or exports, particularly the charges imposed by countries employing multiple currency practices, where such charges are imposed not inconsistently with the Articles of Agreement of the International Monetary Fund, would not be covered by Article 18. On the other hand, in the unlikely case of a multiple currency practice which takes the form of an internal tax or charge, such as an excise tax on an imported product not applied on the like domestic product, that practice would be precluded by Article 18. It may be pointed out that the possible existence of charges on the transfer of payments insofar as these are permitted by the International Monetary Fund is clearly recognized by Article 16.

See George Bronz, “The International Trade Organization Charter,” Harvard Law Review (Cambridge, Mass.), Vol. 62, No. 7, May 1949.

The relevant section of the London report (Report of the First Session of the Preparatory Committee of the UN Conference on Trade and Employment, p. 13, item m) reads: “The Preparatory Committee agreed that, if there were a persistent and widespread application of restrictions on these grounds [i.e., on balance of payments grounds], there should be a procedure whereby the Organization in consultation with the International Monetary Fund should initiate discussions with members to consider whether other measures might not be taken by the countries with favorable or unfavorable balances of payments or by the Economic and Social Council of the United Nations or any appropriate inter-governmental organization to remove the underlying disequilibrium.” (Italics supplied)

Since the ITO will not be in existence on March 1, 1950, no such report can be prepared. The Contracting Parties to the General Agreement on Tariffs and Trade, however, are preparing a report.

The draft agreement of the Fund with the ITO provides that there should be no duplication in the collection and analysis of information and statistics. The fact that in most consultations the Fund’s data on balances of payments will carry decisive weight will influence the administrative arrangements for collecting and analyzing balance of payments data.

For example, a member may intend to develop a particular industry for the processing of an indigenous primary commodity, since the external sales of such commodity have been reduced by new exchange or quantitative restrictions. In the interest of such development, the ITO may authorize nondiscriminatory measures affecting imports (Art. 13, par. 7(a)(ii)).

In a customs union, the members of the union apply substantially the same duties and regulations of commerce to the trade with countries not included in the union. In a free trade area, two or more customs territories are connected in a group in which the duties and other restrictive regulations of commerce are eliminated in respect to products originating in the constituent territories of the group. Vis-à-vis nonmembers of the group, each member of the group may apply a separate customs regime and separate restrictions.

An interpretative footnote to Annex K states explicitly that a member may justify discriminatory quantitative restrictions concurrently as balance of payments restrictions and as restrictions essential to the acquisition of products in short supply (Art. 45).

The ITO cannot “require” its members to change their domestic policies. This does not mean that in the process of consultation the ITO cannot and should not indicate the advantages and disadvantages of certain economic and social measures pertaining to the domestic economy of a member.

If the member represents that prior consultation was impracticable, the consultation may coyer consideration of circumstances which made the prior consultation impracticable.

The ITO is required by Article 21, par. 5(b) to invite members substantially intensifying their import restrictions to consult within thirty days. If, however, a member substantially intensifies its import restrictions while consultation is in progress on those restrictions which it has applied before intensification, the ITO will include (upon request of the member) in the consultation consideration of the newly imposed restrictions. If no request is made by the member, the ITO will issue an “invitation” to consult in respect to the intensification.

The need to provide for the appropriate use of such secondary reserves as credits and other financial resources may influence the necessity and extent of import restrictions in several ways. The appropriate use of credits and resources requires, on the one hand, that no undue pressure should be exerted upon a country to use its credits and resources inappropriately in order to avoid the maintenance, intensification, or imposition of import restrictions. On the other hand, if import restrictions can be avoided by an appropriate use of secondary reserves, such credits and other resources should be used to a reasonable extent.

The provision of Article XIX(e) needs to be read in conjunction with paragraphs (a), (b), (c), and (g) of that Article. As far as monetary reserves are concerned, Article XIX of the Fund Agreement was intended to give guidance in interpreting those provisions of the Fund Agreement in which that term occurs. On international reserves and on a working concept of surplus and deficit in the balance of payments, see International Monetary Fund, Balance of Payments Yearbook, 1938, 1946, 1947 (Washington 1949), pp. 4 ff.

Professor Clair Wilcox, who played a prominent part in the preparation and discussion of the ITO Charter, seems to interpret the term monetary reserves in the context of Article 21, as “holdings of gold and convertible currencies.” In his opinion, a member “may not impose quotas unless unrestricted imports would reduce its holdings of gold and convertible currencies to levels inconsistent with continued financial stability” (4 Charter for World Trade, New York, 1949, p. 86).

The Charter defines discriminatory quantitative restrictions as follows: Prohibitions and restrictions “applied by any member on the importation of any product of any other member country or on the exportation of any product destined for any other member country, unless the importation of the like product of all third countries or the exportation of the like product to all third countries is similarly prohibited or restricted.”

The respective part of Article XIV, Sec. 4 of the Fund Agreement reads “Five years after the date on which the Fund begins operations, and in each year thereafter, any member still retaining any restrictions inconsistent with Article VIII, Sections 2, 3, or 4, shall consult the Fund as to their further retention.”

Annex K applies to only the United Kingdom, Canada, Ceylon, Southern Rhodesia, Union of South Africa, Lebanon, and Syria, which exercised an option in favor of Annex K. The members here enumerated cannot apply discriminatory import restrictions on the bases discussed above under (A) and (B)

More precisely expressed, the import transaction must not be part of an arrangement with other members which would result in a situation in which the direct and indirect receipts in gold and convertible currencies from current exports to members not participating in the arrangement would be reduced below a hypothetical level. This hypothetical level is composed of export receipts in gold and convertible currencies which the member (applying the discriminatory import measures) could have reasonably expected to receive (in the absence of the arrangement here mentioned) from current exports to members not participating in the arrangement.

Article 23, par. 2 of the Charter authorizes the ITO to consent to certain discriminatory deviations of an individual member “whether or not its transitional period arrangements have terminated.” According to this text, only members which are availing themselves of transitional exchange arrangements under Article XIV of the Fund Agreement (or a corresponding provision of a special exchange agreement) and those which have terminated the application of such transitional exchange arrangements can be accorded such consent. Since there is no conceivable difference between the position of a member which has never applied transitional exchange arrangements and that of a member which has terminated such arrangements, it may be assumed that the former may also take advantage of this provision.

Under provisions of the Charter other than those contained in Section IV-B, however, the member may be precluded from directing its exports to earn convertible currencies. See also Article 24, par. 8 (b).

The Fund Agreement does not provide literally for “common” membership; Governments accept the Fund Agreement both on their own behalf and in respect of all territories in which they exercise authority.

Exchange restrictions authorized against nonmembers of the Fund by Article XI, Sec. 2 of the Fund Agreement cannot be made effective by quantitative restrictions if the “nonmembers of the Fund” are members of the ITO. This is not specified in the Charter, but it follows by implication from its provisions.

Quantitative restrictions instituted under this title and their discriminatory application are not subject to the consultation and complaint procedure pursuant to Article 21, par. 5, and to the frustration provision of Article 24, par. 4,

According to the Agreement of the UN with the Fund (Art. VI), the Fund takes note of the obligation of its members to cooperate in the maintenance of peace and security under Article 48, par. 2 of the UN Charter.

A tabular summary of Fund action to be taken when consulted by ITO on problems concerning monetary reserves, balance of payments or foreign exchange arrangements is given on page 173.

Article 24, par. 2, reads: “In all cases in which the Organization is called upon to consider or deal with problems concerning monetary reserves, balance of payments or foreign exchange arrangements, the Organization shall consult fully with the Fund. In such consultation, the Organization shall accept all findings of statistical and other facts presented by the Fund relating to foreign exchange, monetary reserves and balance of payments, and shall accept the determination of the Fund whether action by a Member with respect to exchange matters is in accordance with the Articles of Agreement of the International Monetary Fund, or with the terms of a special exchange agreement entered into between that Member and the Organization pursuant to paragraph 6 of this Article. When the Organization is examining a situation in the light of the relevant considerations under all the pertinent provisions of Article 21 for the purpose of reaching its final decision in cases involving the criteria set forth in paragraph 3 (a) of that Article, it shall accept the determination of the Fund as to what constitutes a serious decline in the Member’s monetary reserves, a very low level of its monetary reserves, or a reasonable rate of increase in its monetary reserves, and as to the financial aspects of other matters covered in consultation in such cases.”

No doubt, the Fund’s fact-finding function extends also to consultations in the course of application of the provisions of a special exchange agreement.

See below, pp. 167-68.

Questions involving these criteria may also arise in other “cases” than those involving import restrictions. However, such other “cases” will occur rather exceptionally.

The “cases” mentioned concern principally import restrictions. The sole authority over them rests with ITO.

In a consultation between ITO and a member, ITO itself will determine whether it wishes to consider its conclusions partly or fully as “final decisions” or merely as informal advice.

The consistency of the import restrictions with the Charter must be considered in the light of the provisions of Article 21, par. 3(b) which reads: “A Member applying restrictions under sub-paragraph (a) shall progressively relax and ultimately eliminate them, in accordance with the provisions of that sub-paragraph, as its external financial position improves. This provision shall not be interpreted to mean that a Member is required to relax or remove such restrictions if that relaxation or removal would thereupon produce conditions justifying the intensification or institution, respectively, of restrictions under sub-paragraph (a).”

A member is not required to conclude a special exchange agreement so long as it uses solely the currency of another member and so long as neither the member nor the country whose currency is being used maintains exchange restrictions, provided further that the ITO is not of the opinion that the absence of a special exchange agreement may result in frustrating any provision of the Charter (Art. 24, par. 6). There is little probability that this exceptional rule will be widely used.

ITO members which are autonomous in the conduct of their external commercial relations but do not maintain diplomatic relations on their own behalf will not be able to be covered by the Fund Agreement unless the metropolitan territory to which they belong joins the Fund. As mentioned elsewhere in this study, Fund membership is restricted to countries which are carrying on their foreign relations under their own responsibility. However, a nonmetropolitan territory may have the capacity to become a member of the ITO and consequently to conclude a special exchange agreement.

The 23 nations are Australia, Belgium, Brazil, Burma, Canada, Ceylon, Chile, China, Cuba, Czechoslovakia, France, India, Lebanon, Luxembourg, Netherlands, New Zealand, Norway, Pakistan, Southern Rhodesia, Syria, Union of South Africa, United Kingdom, United States.

More exactly, until all contracting parties adopt the amended version of Article XXIX of GATT, the contracting parties are to observe the general principles embodied in the Geneva version of the ITO draft charter. At the time of writing of this study, only Brazil and Chile have not yet accepted the amended version of Article XXIX of GATT.

Denmark, Finland, Italy, Greece, Sweden, Dominican Republic, Haiti, Liberia, Uruguay, Nicaragua.

Both the Fund and the ITO are designated in their respective constitutions as “centers of information” on certain, more or less circumscribed, subjects. The Fund is a center of information on monetary and financial problems (Art. VIII, Sec. 5(c) of the Fund Agreement). The ITO will serve as the center for information on external trade in goods, on government revenue from customs duties and other charges imposed in connection with imports and exports, and on subsidies affecting international trade. The statistical material issued by the ITO should be so arranged as to reveal the “operation of any restrictions on importation or exportation which are based on or regulated in any manner by quantity or value or amounts of exchange made available.” (Art. 39)

Article 24, par. 7 of the Charter provides that ITO members which are not members of the Fund shall supply the ITO with information along the same lines as are required by the Fund from its members in accordance with Article VIII, Sec. 5 of the Fund Agreement. The ITO-Fund Agreement contains a provision that this material will be made available to the Fund so that the Fund may be in a position to consult effectively on matters concerning nonmembers of the Fund.

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