SPEECH BY MR. ANDRE PHILIP, MEMBER OF THE FRENCH. ECONOMIC COUNCIL AT THE PLENARY MEETING OF THE CONTRACTING PARTIES HELD ON TUESDAY, 29 OCTOBER 1957

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1 Information Service Press Release GATT/357 European Office of the United Nations 30 October 1957 Geneva SPEECH BY MR. ANDRE PHILIP, MEMBER OF THE FRENCH. ECONOMIC COUNCIL AT THE PLENARY MEETING OF THE CONTRACTING PARTIES HELD ON TUESDAY, 29 OCTOBER 1957 I am particularly nappy to take part in the discussion which has just been initiated in the Contracting Parties. This discussion is important for a number of reasons. It is a rare occurrence in an international organization to find such a large number of ministerial representatives meeting together to express with authority the views of their country. This meeting takes place on the eve of a very important date: the tenth birthday of an organization whioh, in spite of the greatest difficulties and with administrative services which are very limited, has succeeded in the last few years in rendering most valuable services to the general cause of international trade and to the practical interests of all the countries which are meeting here today. Lastly, this meeting is important because it gives us the opportunity to present the Treaty establishing the European Economic Community. I think that we are all in agreement that this Treaty is a document of the highest importance which is evidence of a decisive transformation that is taking place in the economic and political relations not only between the Six countries of Western Europe but also between the Six and certain non-european nations who are awakening to a new life. May I first say a few words about the fortunes and misfortunes of our international organization during the last ten years. This organization was established in order to ensure the expansion of international trade and progressively to reduce tariffs as well as quantitative restrictions which are an obstacle to free trade among nations. During the first few years GATT achieved important successes; the Geneva, Annecy and Torquay conferences made a great contribution to a substantial reduction of customs barriers. Thus it was possible to establish conditions which, through a better understanding of the individual problems which each country has to face, favoured a continuing and considerable expansion of world trade which this year will exceed the #200,000 million mark. Nevertheless, GATT has come up against certain limitations. A number of countries have found it difficult to increase the degree of trade liberalization because of balance-of-payments difficulties. Other countries have found it difficult to pursue their economic development because of fluctuations in the prices of raw materials and foodstuffs and because of the low level of assistance which they could obtain from more advanced countries, in the form of investments. In the last few years, some people have had the feeling that there had been a slowing down in the activity of the organization. The fact that its status has remained provisional for too long a time is perhaps one reason for this.

2 Page 2 It is, I believe, because of these limitations and of the lack of a proper legal basis that regional action can profitably supplement the results achieved by the GATT at world level. Even at the time of the Havana Conference, we were already aware that world-wide attion and regional action, far from being opposed, were in fact complementary and, that depending on prevailing circumstances, stress should preferably be placed on one or the other. That is the reason why even then the French delegation was giving thought to European integration, and although at that time it was not yet known exactly what form a regional organization might take, the drafters of GATT drew up the Article which has now become Article XXIV. From the outset, the objective of this Article was therefore to promote what is happening now. i.e. the stimulation of production and trade within a regional framework determined by the elimination of trade barriers, the widening of outlets, the specialization of enterprises and the harmonization of the various methods of production while taking fully into account the legitimate trade interests of third countries. Since then there have been contacts and negotiations between the Six European countries. Serious difficulties have arisen, of course, but events have increasingly shown the need for Europe to unite both economically and politically. The negotiations which were initiated in Messina and which led to the establishment of the Treaty of Rome were undertaken by six countries which are also contracting parties to GATT and are determined to abide by the spirit of GATT, These countries can say in all sincerity that during all their negotiations they always had in mind the provisions of the General Agreement; when discussing proposals, this frequently led them to make substantial alterations in those proposals in order to abide by the GATT rules and to take into aocount the legitimate interests of the other contracting parties as a whole. It might also be added that the Treaty is open to all other European countries. I should like to recall with satisfaction that our British friends took the initiative of the negotiations which are currently being conducted in the QEEC, the aim of which is to supplement the European Economic Community by a free trade area which, it is intended, should be as extensive as possible. I said a little while ago that Article XXIV had been drawn up with a view to making such regional structures possible. I therefore believe that there is no need now to re-open a general discussion on the merits and demerits of such a formula since we already had such a discussion in Havana and we solved the problem by drafting Article XXIV. The Treaty of Rome is itself a combination of two possibilities envisaged by this Article: on the one hand the customs union, on the other the free trade area, while at the same time going far beyond either of them. MCRE

3 Page 3 1. The Treaty provides inter alia for the establishment of a customs union which fully accords with the provisions of the General Agreement, since it provides that within a maximum period of fifteen years customs duties shall be completely eliminated between the Six countries and a common tariff shall be established, the average incidence of which shall not be higher than the average incidence of the individual tariffs previously existing in the Community countries. It is true that certain features of the Common Tariff are still Unknown since they are to be the subject of negotiations between the Member States; such negotiations must, however, be completed within a period of four years. The resulting common tariff will, of course, be submitted to the Contracting Parties vàio can then ascertain that it is in conformity with the requirements of Article XXIV. A number of comments have been made during the present Session on the speoial provisions of the Treaty relating to agriculture. It is obvious that agricultural matters constitute a delicate problem for all countries. The very conditions of agricultural production as well as its social implications require the State to give particular attention to this sector, and also require a minimum degree of market organization. This sort of organization is the more inevitable in a European Community since the opening up of new outlets will make it necessary to abandon or contract certain branches of production and to expand others. If GATT decides to undertake a general study of the problem of agriculture, the Member States of the Community will co-operate fully in seeking solutions, on oondition that such solutions are valid for all the contracting parties. As the representative of the Federal Republic of Germany pointed out,' however, the European Economic Community is much more than a customs union» There were very good reasons why one spoke first of a Common Market and finally the title of "European Community" was chosen e In addition to establishing a customs union, the Treaty of Rome contains detailed rules regarding the movement of persons and capital, transport, a social policy which includes provisions for the establishment of a European Social Fund, and» a policy for the co-ordination of certain investments through the European Investment Bank. The truth of the matter is that the Six have gone far beyond the trade and tariff field in which GATT is competent. They have taken an irrevocable decision to unite, and their various economies will have to adapt themselves to that decision. They have jointly decided to establish institutions to guide them towards a common destiny. 2, The Customs Union is indissolubly linked to the free trade area which associates them with certain overseas territories within a single community. ^ Whatever the legal bonds - and those are evolving very fast - which still link them to the countries with, which until now they have had no special ties, the overseas countries are now politically coming of age. But for a long time yet to come they will still need a practical demonstration of economic

4 Page 4 solidarity before they can achieve their own equilibrium which they consider adequate. This free trade area which unites them to the Six European countries has been established with the primary objective of assisting them without in any way prejudicing their political development. The free trade area. presents two complementary aspects. If we consider imports of European commodities into these territories we see that their trade will not be entirely free within the.area,, In fact;, these countries are authorized to maintain import duties as a transitional measure in order to protect their infant industries*, Thus., under the Treaty of Rome the overseas countries and territories enjoy the rights available to other countries under Article XVIII of GATT, However.- the Rome Treaty does not, as a result» deviate from the requirements of Article XXIV to the effect that a free trade area shall cover substantially all the trade concerned, At the present time the products on which such duties might eventually be levied only represent 3 per cent of the trade affected by the Treaty t The volume of this trade may increase in the future; but since the trade of the area as a whole will certainly increase at lsast as rapidly, it is very likely that vre shall never find ourselves in a position in which the notion of "substantially" in the sense of Article XXIV would cease to apply Of course, in the unlikely event that such a situation should arise, the problem of the area would have to be reviewed by the Contracting Parties. This is the only point in the Treaty on which coiments might have been made to us«3. However this may be, trade will net be entirely tree as far as imports into the overseas territories are concerned* With regard to exports from these territories to the Community countries, on the other hand, the requirements of Article XXIV are fully met, considering that upon the expiry of the transitional period; products originating in the overseas territories will enter the Community countries free of customs duties» I must admit that I was quite surprised to hear the statements made by some of our colleagues during these meetings, since it seemed that the Havana discussions to which the drafting of the rules which we now find in Article XXIV gave rise, were being reopened - whether by Sir David Eccles, the Australian representative or the representative of Ghana. They find fault with the free trade area precisely because it is a free trade area, that is to say because it provides for duty free admission for products originating in the overseas territories, while varying tariff rates would apply to imports from third countries into the constituent territories., We are, of course, ready to take part in the study of all real problems which may be presented and to reply to any questions that may. be asked as well as to take into consideration the computations involved. I must point out, however, that in general the arguments raised have not said to us: your Treaty is not in conformity with the free trade area provisions, but rather that a free trade area is in itself a bad thing, It is not the Treaty which is criticized, therefore, it is Article XXIV of GATT itself.

5 Page 5 For the moment I will only mako a few remarks. The very fact of the; establishment of a "European Economic Community will lead to a spécialisât?,.on of production, an increase in productivity and a rise in standards of living which will in enj case result in turn in a considerable increase of the requirements of the Six for raw materials as well as an increase in consumption of foodstuffs from overseas I well understand the prooccupation of the Minister for Ghana with regard to. cocoa., In this connexion I should like to draw attention to the conclusions of tie study group on cocoa of the Committee on Commodity Problems of FA0 U This groupes report of 9 August 1957 states: "The change in customs duties is bound to have some immediate effects in stimulating imports from the associated overseas territories 0 Their share in the botal imports of the Common Market is likely to rise 3 However, since the objective of the Common Market is to raise economic standards, the total consumption of cocoa and chocolate products, which is relatively low in some of the countries, should increase and benefit also non-associated cocoa producing countries." What is true of cocoa could be repeated in respect of any other product. Some of the arguments which have been presented with regard to measures taken jointly in order to ensure maximum investment in the African territories, seem somewhat curious and perhaps out of date c If it is feared that to channel a maximum amount of investment towards the overseas territories might lead to a distortion of investment movements, we may ask ourselves whether this is really the time to abide by a conception which corresponds to an old wage theory by Eicardo and Lassalle; neither the investment fund nor the total amount of wages are fixedc They grow along with the revenue of countries likely to invest and, it must also be said, along with their readiness to make certain sacrifices in order to encourage the development of the under-developed countries» We naturally understand the claims and the fears of certain underdeveloped countries when we read the report on international trade as well as the remarkable statement by Sir Claude Corea, and we note that once again prices of certain raw materials have fallen this year and that the share of the non-industrialized countries in world trade has diminished. At each session of the GATT for several years past, the French, delegation has reaffirmed its conviction that we must pursue an international policy to stabilize prices of raw materials, and we were not totally inactive during the drafting at the Eleventh Session of the Resolution passed on this subject by the Contracting Parties., I should like to remind you o? paragraph 4 of this Resolution; I believe that we have raached a stage at which international joint action could usefully contribute to the solution of problems in the field of commodity

6 Page 6 trade and th8t to this end it would be advisable to make the necessary arrangements for an intergovernmental meeting on this subject. Similarly, I believe that international capital movement, which in the nineteenth century played such an important part in the expansion of the young countries, is today inadequate and frequently badly orientated, and we have given our support to the establishment of SUNFED. While, however, for reasons outside the desires of the Six it is not feasible for the time being to progress sufficiently in this matter at world level, the Six cannot accept a situation in which the inadequacy of international action could prevent them at regional level from making a real step forward and meeting the needs of the under-developed countries who are today by their own volition associated in the general endeavour of European integration. Once again I stress that there is no contradiction between the regional method and the universal method - they are complementary. The stability which the Six seek to give certain overseas countries and territories by offering them broad access to the European Community will only be effective if at the same time price stabilization measures are taken at international level. The logical and necessary consequence of the investment effort which the Six are to make is the organization on a universal scale of a steady flow of investment towards all the under-developed countries. Last but not least, it is apparent to us that the prosperity of each of the Six countries depends on the prosperity of the Community as a whole. Similarly, the prosperity of this Community will depend on that of all the other regions who will, no doubt, follow suit and it will also depend on the progress and general expansion of international trade. It has already been noted that following the establishment of Benelux the volume of trade between Member countries increased fourfold, while the trade with third countries doubled. Even if the partners of the Benelux countries had a smaller percentage of the trade of Benelux, they nevertheless gained to the extent that the volume of total trade increased in absolute figures,' The same will apply to the establishment of the European Economic Community, It is our hope that during this time GATT will be strengthened by the accession of as many countries as possible, that its action may be reinforced by the establishment of the Organization for Trade Cooperation and that wider agreements may be concluded which would go beyond the scope of tariffs and tackle the real problem, which is that of production and the equitable distribution of world resources. But it is because we wish to see a general increase in trade that, for our part, we are beginning by setting an example taking the necessary measures to this end. Finally, I should like to make myself perfectly clear. The Six consider that they are abiding by the spirit of the GATT. They consider that in a world where for some years past the efforts of GATT have been hampered by the obstacles which it has encountered, the action of the Six at regional level will help to free the situation and to stimulate further expansion of world trade.

7 Page 7 The Six are fully aware that all contracting parties may not entirely share their hopes for the future, but as far as the present is concerned the Six consider that they are fully in conformity with the requirements of Article XXIV. There can, therefore, be no question either of a readjustment of the Treaty or of any of its provisions, or of waivers or of subjecting the Six to special controls. On the other hand, the Six will co-operate fully and actively with the Contracting Parties in any action in order to deal with the same questions, and in particular questions concerning the under-developed countries, on a wider scale in order to arrive at recommendations or decisions which would apply to the great industrialized regions of the free world as a whole. The basic principle of GATT is the rejection of all discrimination. A new community is being born;, it is asserting itself on the same footing as other regional entities, and it is ready to undertake the same obligations but nothing more. END