Mr. WILCOX. No.

The CHAIRMAN. Will you give us examples of deflationary pressures resulting from serious or abrupt decline in the effective demands of other countries?

Mr. WILCOX. Well, specifically, if there were a sudden and sharp depression, say, in the United States, it would result in a contraction of our orders for foreign goods, particularly foreign raw materials. The effect of that would be a decline in the volume of industrial activity in the country that otherwise would have sold those goods and that would have a deflationary effect.

The CHAIRMAN. And that country, in the manner provided in the charter would have the right to safeguard its economy from those effects?

Mr. WILCOX. In the manner provided in chapter V.

The CHAIRMAN. Give us a rough sketch by the way of anticipation of the manner in which the charter will provide for that.

Mr. WILCOX. Well, that country would be permitted, if there were an imminent threat to its monetary reserves which could be demonstrated as such to the satisfaction of the International Monetary Fund and International Trade Organization, it would be permitted to employ import quotas.

The CHAIRMAN. It would be permitted to raise tariffs?

Mr. WILCOX. No. It would be permitted to raise any tariffs that it had not bound in a trade agreement, yes.

The CHAIRMAN. There are some provisions in the charter which will even authorize breach of a trade agreement under special circumstances, are there not?

Mr. WILCOX. Well, in chapter IV, relating to economic development, yes, but I think otherwise the only resource would be giving notice and denouncing.

The CHAIRMAN. Now, Great Britain, as I recall it, has set a goal of export busines of 175 percent of their prewar goal and she is now reaching about 110 percent; as I recall it.

Does that situation have any repercussion as far as this particular clause is concerned

In other words, she is not importing into this country as much as she expected. She is not importing anywhere as much as she expected

to.

Mr. WILCOX. I do not see the relation of that situation to this article. The CHAIRMAN. Is that not deflationary?

Mr. WILCOX. You mean her failure to achieve as much as she had hoped to achieve in the way of an increase in exports?

The CHAIRMAN. That is right.

Mr. WILCOX. I do not believe that would be covered by this article. This is confined to a serious or abrupt decline in the effective demand of the country.

The case that you gave is the failure to increase as much as they hoped.

The CHAIRMAN. I think your point is well taken.

Am I roughly correct on my figures as to British expectations as to export trade and as to what she has actually achieved?

Mr. WILCOX. The original statement was that she would have to increase imports in money terms by 75 percent, but I believe the present goal runs about 40 or 45 percent.

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The CHAIRMAN. I think they are running substantially behind. Is this another one of those clauses where the members should think about something but do not necessarily have to do anything?

Mr. WILCOX. No; this is a clause in which the Organization thinks about it. This is a direction to the Organization.

The CHAIRMAN. Now, the organization thinks about it, and after thinking about it, what does it do about it?

Mr. WILCOX. The answer to that is in the fifth chapter.
The CHAIRMAN. In the fifth chapter?

Mr. WILCOX. That is, other countries, in our discussion of this charter, have made a great deal of the problem of employment. They have said that the United States is concerned primarily with restoring a freer trading system in the world, "That is all you are thinking about."

They say that is a negative approach to the problem. "What you need is a positive approach to the problem."

The positive approach to the problem is the approach to employment, but when you come right down to it, down to the issue of what they would do, they do not propose giving to any international organization any affirmative function for the provision of employment.

It comes down to the point that what they are really talking about is the question of whether they will or will not have freedom, or how much freedom they will have, to impose import quotas.

So that what appears here with reference to this subject in this chapter really refers back to the question of import quotas which I suggested the other day is the central problem in the charter.

The CHAIRMAN. Now, the British economists make it very clear that the fate of Great Britain, and I think of others, that the fate of the world is more or less dependent upon the maintenance of a prosperous economy in this country.

I am correct in that, am I not?

Mr. WILCOX. Yes, I should say so.

The CHAIRMAN. Now, let us assume that by design or just by undesigned depression in this country, our market for imports dried up.

Now, just exactly what would the Organization do about that, or what could it do about that so far as other member nations are concerned, and as far as we are concerned?

Mr. WILCOX. If the effect of that were to throw other nations into balance-of-payments difficulties at any time, as this is envisaged, they would then receive the right under the terms of the charter to protect their economies by imposing import quotas.

The CHAIRMAN. That would be a right granted by the Organization? Mr. WILCOX. Well, it goes a little beyond that. There are certain stipulations in that chapter under which they would have the right to do so without consulting the Organization initially and they might consult thereafter.

Of course, any nation then could say that they were doing this in violation of the provisions and then the question would come up as to whether retaliation were permitted.

The CHAIRMAN. Now, then, let's see if we cannot pump a little more specific meaning into that word “regard.”

Let us suppose that our import market dried up. It says the Organization shall have regard for the situation of members in that kind of contingency. What regard does it have for that? What is proposed! What is its function?

Mr. WILCOX. Well, a member that wants to impose quantitative restrictions for balance of payments reasons, can go to the organization and present its case, and if the Organization says, after consultation with the Fund if the Organization and the Fund agree that this country is in imminent danger of a loss of necessary monetary reserves, it can then say, "For this time and to this extent you may imposeimport quotas.'

If it does that, no member can complain that the country has violated its commitments under the charter.

Now I think that is the only decision in the making of which this: direction would have significance; that is, the Organization in making: that decision would have regard of the fact that a sudden and abrupt decline in foreign demand might necessitate the imposition of import quotas in a country.

I do not think that this particular article adds anything to what is in chapter V.

When you get into chapter V, you will want to examine that pretty carefully but it is really a cross-reference.

The CHAIRMAN. Taking the language strictly, is the member in that kind of a case limited exclusively to the action which the charter sets up for safeguarding a member under those circumstances?

Mr. WILCOX. Well, one possibility would be exchange action and it is limited as to exchange action if it is a member of the Fund under the terms of the Fund.

The second possibility is import quotas and the charter sets up provisions with respect to the use of import quotas.

The third possibility would be to raise a tariff.

Now, if it has not been covered in a trade agreement, it is perfectly free to put on a tariff, but if it has bound that tariff, it would not be free to do that. However, it could withdraw from the agreement according to its terms on due notice.

The CHAIRMAN. What I am getting at is, that prior to this last war, we saw the development of a number of new techniques, monetary control, and trade restrictions, and barter, and so forth.

Are the safeguarding measures limited to those which are prescribed in the charter, or if a member can think of a new way to safeguard itself, is it at liberty to do so even if that method is not prescribed in the charter?

In other words, are you trying to shut off the invention of new techniques for national safeguarding.

Mr. WILCOX. We may have caught that.

If, according to article 35 on nullification or impairment, if any member should consider that any other member has adopted a measure, whether or not it conflicts with the terms of this charter, or that any situation has arisen which has the effect of nullifying or impairing any object of this charter, the member concerned shall give sympathetic consideration to written representations, and so on.

Then, there is provision for the application of sanctions there.

So, I think an effort is made to catch evasions of the rules by the invention of new devices, but the principal devices that have been used in the past are covered in the text.

The CHAIRMAN. The article which we are discussing refers to legitimate safeguards, those which are provided in the charter.

Would it be possible to have a legitimate safeguard that is not provided in the charter?

The reason I raise the question is, as I said before, we had a lot of new inventions on so-called safeguarding procedure before this last war. Are we now in a position that we know all of them and can provide against all of them?

Mr. WILCOX. I do not think that point is caught in the draft, Senator. I thing the wording of the draft is directed at new devices and the section that I refer to is aimed to catch the use of any other device as an evasion but there is nothing in here that would provide a sanction for some new device to accomplish this purpose.

The CHAIRMAN. Now, the prelude to article 8 reads as follows:

The Members and the Organization shall participate in arrangements made or sponsored by the Economic and Social Council of the United Nations, including arrangements with appropriate inter-governmental organizations.

By what authority does this particular Organization bind the members to participate in arrangements made or sponsored by the Economic and Social Council?

Mr. WILCOX. Only by their agreement to this article.

The CHAIRMAN. And is that a blank check agreement?

Mr. WILCOX. Well, there is a colon there and the things in which they agree to participate are definitely specified; that is, statistical interchange.

The CHAIRMAN. I notice that paragraph (b) says:

For consultation with a view to concerted action on the part of government and inter-governmental organization in the field of employment policy.

Mr. WILCOX. That is right, for consultation.

The CHAIRMAN. I keep continuously curious as to the authority of this Organization in defining the relationship of its members to the Social and Economic Council.

I wonder if you are not presuming too much.

Mr. WILCOX. Of course the purpose here really is to indicate that this material in the main belongs outside of the jurisdiction of the Trade Organization.

It does say that the Trade Organization itself may participate in this statistical work.

The CHAIRMAN. Give us some examples of the concerted action that may be taken under the circumstances mentioned?

Mr. WILCOX. Well, the only commitment is to consultation. I do not know what would come out of the consultation.

The CHAIRMAN. Nothing more?

Mr. WILCOX. For consultation.

The CHAIRMAN. With a view to concerted action?

Now, would the consultation bind a program of concerted action? Mr. WILCOX. Obviously not.

The CHAIRMAN. So that you can say without equivocation that insofar as that subparagraph (b) is concerned, there is nothing binding except as to concerted action?

Mr. WILCOX. That is right.

The CHAIRMAN. There is no pledge there to agree to anything?
Mr. WILCOX. No.

The CHAIRMAN. Is there a pledge that a majority of the votes under any circumstances laid down under the charter would bind nonconsenting members to the agreement?

Mr. WILCOX. No.

The CHAIRMAN. Chapter IV, article 9, reads as follows:

The Members recognize that the industrial and general economic development of all countries and particularly those of which resources are as yet relatively undeveloped, will improve opportunities for employment, and enhance the productivity of labor, increase the demands for goods and services, contribute ultimately to economic stability, expand international trade, and raise levels of real income, thus strengthening the ties of international understanding and accord. How will those matters which are specified contribute ultimately to economic stability?

What I have in mind is that your greatest instability in this world is in highly industrialized countries.

Mr. WILCOX. I think you are quite right, sir.

The CHAIRMAN. What, then, do we do to take the bunk out of this statement?

Mr. WILCOX. I think it ought to be amended.

The CHAIRMAN. I am very very glad to have you say that.

For example, we have just finished disposing of two problems resulting from the industrialization of nations, to wit: Japan and Germany, and their industrialization in no way helped the peace of the earth. As Senator Johnson said this morning, I think that is one of those mouth-filling, and, in this case, deceptive phrases.

Will you run a foreward in your next conference on that?

Mr. WILCOX. As a matter of fact, Senator, this was a slip. I did get it out of the committee report, but I did not get it out of the text itself. The CHAIRMAN. Article 10 has a subhead: "Development of Domestic Resources and Productivity."

It reads as follows:

Recognizing that all countries have a common interest in the productive use of the world's human and material resources. Members shall take action designed progressively to develop industrial and other economic resources and to raise standards of productivity within their jurisdictions through measures compatible with the other provisions of this Charter.

Does the reference to a "common interest" mean a legal interest, or is it a sort of every-man-is-his-brother's-keeper interest?

What is the common interest that we have in humans all over the world and in material resources all over the world, and so forth? Mr. WILCOX I am not sure tha I get the point of the question of whether the question of interest is a legal interest.

I think the answer to that is "No."

The CHAIRMAN. Then what is the nature of that common interest so far as we can define it and make something out of it if we can, that is measureable?

Mr. WILCOX. Well, we have observed that our best markets have always been in countries that have achieved a considerable degree of industrialization; that standards of living are highest in countries. that are relatively more advanced economically; that when you have prosperous economies all over the world with trade among them,