extended the waiver until December 31, 1955, and requested annual

reports by Italy on the development of Italian-Libyan trade and by Libya on that country's economic progress.

1/

At the 10th Session, Italy and Libya presented their third annual reports on the operation of the waiver. Libya also requested that the special customs treatment sanctioned by the waiver be allowed to continue, since it would be some time before the competitive position of Libyan products could equal that of products of the more developed countries. In addition, it requested certain modifications in the list of products accorded preferential treatment. Italy concurred in Libya's requests.

After considering the Italian and Libyan reports and other supplemental information, a working party reported to the Contracting Parties that there had been a gratifying expansion of Libyan exports to Italy and to other countries, and that the members of the working party were agreeable to the request for extension of the waiver. The Contracting Parties accordingly extended the waiver until December 31, 1958, and approved the requested changes in the list of products accorded preferential treatment. Although the representative of Cuba did not vote against the extension of the waiver, he expressed his country's dissatisfaction with it, and with the growing use of waivers for such purposes.

1/ See Operation of the Trade Agreements Program (seventh report), pp. 31-32, and Operation of the Trede Agreements Program (eighth report), pp. 33-34.

Nicaragua-El Salvador free-trade area (fourth annual report)

(arts. I and XXIV)

At their Sixth Session in 1951, the Contracting Parties approved a waiver relating to the Nicaragua-El Salvador free-trade area. This waiver freed Nicaragua from its most-favored-nation obligations respecting products covered in its treaty with El Salvador, which became effective August 21, 1951. Under the terms of the treaty, each country agreed to accord reciprocal duty-free treatment to specified products originating in the other country. In its report to the Contracting Parties at the 10th Session, 1/ Nicaragua noted that--as in previous years--Nicaragua and El Salvador were satisfied with the development of trade under the free-trade treaty. The report stated that, in the period under review, Nicaraguan treaty imports from El Salvador accounted for 84.75 percent of total imports from that country, but only 2.27 percent of total imports by Nicaragua from all sources. Treaty exports in 1954 accounted for 2.9 percent of Nicaragua's total exports to all countries. The value of Nicaraguan treaty imports, the report noted, had increased from $390,000 in 1953 to 1.3 million dollars in 1954. Nicaraguen treaty exports were valued at 1.2 million dollars in 1953, compared with 1.8 million dollars in 1954. In accordance with a request by the Contracting Parties at their Ninth Session in 1954-55, the report also contained a statistical analysis of the trade between Nicaragua and El Salvador.

1/ Inasmuch as El Salvador is not a contracting party to the General Agreement, only Nicaragua is obliged to report to the Contracting Parties on developments under the waiver. For the origin of the waiver, see Operation of the Trade Agreements Program (sixth report), p. 50.

Certain United Kingdom obligations with respect to products entered free of duty from the Commonwealth (second annual report) (art. 1)

At their Eighth Session in 1953, the Contracting Parties granted the United Kingdom a waiver of its obligations under the provisions of article I of the General Agreement, which prohibit increases in margins of preference. The waiver permitted the United Kingdom to alter margins of preference accorded to Commonwealth countries by increasing rates of duty on imports of unbound items from non-Commonwealth countries without imposing comparable duties on those items when imported from

Commonwealth countries.

The waiver applied only to items on which

no concessions were in effect under the General Agreement at the time

it was granted.

At the Ninth Session of the Contracting Parties in 1954-55, the United Kingdom requested, and was granted, an amendment to the waiver permitting it to increase margins of preference on items on which concessions were in effect under the General Agreement at the time the waiver was approved, but from which the concessions had subsequently been removed or modified consistently with the agreement. In requesting an amendment to the waiver, the United Kingdom stated--as it had when it requested the original waiver--that it desired to accord itself greater protection only in a limited number of instances where the need for tariff protection had been demonstrated, and that it did not intend to 1/ use the waiver to divert trade to the Commonwealth.

1 See Operation of the Trade Agreements Program (seventh report), pp. 27-30, and Operation of the Trade Agreements Program (eighth report), pp. 30-32.

At the 10th Session, the United Kingdom submitted its second

annual report on the action it had taken under the margin-of-preference waiver. The report noted that, since the submission of its first

report in October 1954, the United Kingdom had invoked the waiver with respect to a change in the unbound rate of duty on certain flowers and plants in flower, and with respect to an increase in the unbound rate of duty on wood wool. Belgium, France, and the Netherlands had been notified of the United Kingdom's intention to invoke the waiver with respect to flowers and plants in flower, the report stated, but none of these countries had requested consultations with the United Kingdom. The report also noted that, with reference to wood wool, the United Kingdom had held discussions with the Netherlands, Norway, and Sweden, after which it was agreed that the waiver would apply. At the plenary discussion of the report, however, the Norwegian representative noted that although the United Kingdom's report was correct, he did not wish it understood from the reference to discussion and agreement that Norway was pleased with the increase in the rate of duty on wood wool. Special problems of dependent overseas territories of the United Kingdom (first annual report)

During the Ninth Session in 1954-55, the United Kingdom submitted to the Contracting Parties an amendment to the General Agreement that proposed to broaden the scope of action that a contracting party might take under the agreement in assisting in the economic development of its dependent territories. The United Kingdom desired such an amendment because it believed its social and political responsibilities to

dependent territories could not otherwise be fulfilled under the provisions of the General Agreement. The Contracting Parties did not favor the proposed amendment, however, because of its broad scope and because its adoption would be tantamount. to recognizing as permanent a problem they regarded as transitional. They decided, instead, to waive certain of the United Kingdom's obligations under the agreement, in order to permit the United Kingdom to accord to its dependent territories treatment 1/ commensurate with its responsibilities as it recognized them.

The United Kingdom's first anmal report, under the terms of

its dependent overseas territories waiver, was submitted to the Contracting Parties at their 10th Session. The report stated that, as of October 24, 1955, the United Kingdom had taken no action under the waiver. At the plenary discussion of the report the Brazilian representative stated that, with so many waivers, and annual reports thereunder, it was essential for their proper consideration that some commentary be provided to indicate the actual impact of the waivers on channels and terms of trade. He proposed, therefore, that all reports on waivers be accompanied by comments by the GATT Secretariat on the actual consequences of the actions taken, in the light of the objectives of the General Agreement. In response to the Brazilian delegate's proposal, the Chairman of the Contracting Parties requested countries that had

1 A more detailed discussion of the United Kingdom dependent overseas territories will be found in Operation of the Trade Agreements Program (eighth report), pp. 76-78. For the text of the waiver, see Contracting Parties to GATT, Basic Instruments . . .. Third Supplement, pp. 21-25.