CONSULTATION UNDER ARTICLE XII:4(b) WITH GERMANY. Draft Basic Document prepared by the Secretariat I. SYSTEM AND METHODS OF THE RESTRICTIONS

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1 RESTRICTED 9 April 1957 CONSULTATION UNDER ARTICLE XII:4(b) WITH GERMANY Draft Basic Document prepared by the Secretariat I. SYSTEM AND METHODS OF THE RESTRICTIONS (a) Legal Basis of the Restrictions The statutory basis for the general regu? ations in force in the Federal Republic is Law No. 53 of the British and United States Military Governments concerning Foreign Exchange Control and Control of the Exchange of Goods and the similar Ordinance No. 235 of the French High Commissioner. These laws provide that all transactions between residents and non-residents are subject to control and all imports therefore require licences. In recent years several general import licences have been issued, and as a result individual licences are only required for a limited number of imports. (b) Administrative Basis of the Restrictions Circular Orders on Foreign Trade No. 51/54 of 29 June and No. 52/54- of 1 July 1954 formed the administrative basis of the restrictions, until they were superseded by Circular Order No. 61/56 of 24 August 1956 (Bundesanzeiger of 12 September 1956) in which the provision of those Orders were codified. Import possibilities are opened by Circular Orders on Foreign Trade, or by decisions of an Import Committee 1 which are published in the Federal Gazette (Bundesanzeiger) in the form of announcements. Import possibilities may also be opened - particularly for imports not exceeding DM in value - on the basis of a request made to the competent Federal Agency. 1 The Import Committee comprises representatives of the Federal Ministry of economics, the Federal Ministry of Food,.Agriculture and Forestry, nd the B:nk' doutochor Lander. Other Fodorrl Ministries may bo invited tc sond ropros.-nt- tivos to the discussions of the Commitfiee. Spec/33/57 English only.

2 Page J;..-l.-.".': :..._ ' 'Controls ever imports are maintained by the Federal Office for Industry and Trade (Bundesamt fur gewerbliche Wirtschaft) in the case of industrial commodities, and by the Foreign Trade Office for Food and Agricultural Products (imssenhandelstelle fur Erzeugnisse der Srnahrung und..landwirtschaft ) in the case of such products. (c) Methods used in restricting Imports Imports are admitted under two types of procedures: the ''declaration procedure" on the basis of a general import licence and the "individual licence procedure". Under the declaration procedure the importer must submit an import declaration to the Land Contrai Bank concerned within fourteen days following the conclusion of an import contract or in any case before the import is effected or payment is settled. Otherwise no control is exercised over such import transactions; however, ex post examination is carried out by the Land Central Banks or by the Federal authorities. This declaration requirement is maintained for statistical purposes and as e means of assuring-, that import transactions are carried out in conformity with existing regulations. This procedure applies to imports which are specified in free lists and to imports which are temporarily liberalized through notices which are published from time to time in the Federal Gazette in the form of ''publications concerning tenders" (Offene Ausschreibungen) The individual licence procedure applied to imports not within the purview of general import licences, i.e. to all transactions which are not covered by a free list or a "publication concerning tenders". Individual licences are granted by the Land Ministries of Economics. The licences are in principle valid for six months but a shorter time limit may be set for the conclusion of an- import contract. i.e. notices to importers inviting them to import specified commodities under the declaration procedure.

3 Page 3 Individual licences are issued (a) in accordance with import quotas established unilaterally, (b) to implement licensing commitments undertaken in bilateral agreements, cr (c) on a case by case basis without predetermined maximum limits (open licensing). The allocation of licences among importers may be on a first come first served basis, or account may be taken cf the conditions of price, delivery, quality etc., or of the total value of applications in relation to the import quota cet. At the time of importation the actual value cf the commodities may not exceed the value specified in the licence by more than 5 per cent. Articles of the book trade, products of the graphical industry and micro films up to a value of DM 200 per consignment are admitted free of licence. Certain imports are prohibited or restricted on the basis cf sanitary or veterinary regulations for the protection of crops, vegetables and animals. (d) Categories of Goods affected (Information to be included aftor discussion) (e) Proportion of Imports covered by each ilethod used Towards the end of 1956 the proportion of imports covered by the declaration procedure amounted to 79 per cent of total imports of The percentage of imports under the individual licence procedure was 21.0, cf which state trading and private trade accounted for 13.1 and 7.9 per cent respectively. (Further information, along the lines of the following table, to be included if available after discussion) Breakdown of Imports according to Import Regime ± Declaration Procedure 79 Private Trade State Trading 1 (if any) Individual Licence Procedure ; 21 Private Trade 7.9 State Tradingl 13.1 Imports effected by state monopolies or under the Market Regulation Laws.

4 Page 4 (t) Treatment of Imports from different Countries or Currency Areas For the administration of the controls destincticns are drawn between the QEEC area, the ncn-oeec countries clearing through EPU or the non-participating countries (NPC area)- 1 -, the dollar area^ and the rest of the xrorld. A liberalization list is in force for each of the three first areas. Imports from OEEC countries are liberalized to a greater extent then imports from any other area, AS from 30 November 1956, imports from this group of countries have be_n liberalized to the extent of 92.5 per cent cf private imports in Seme products which have been freed when imported from CEi,C countries are still subject to restriction when originating in the NPC area. Since March 1954 imports from this group have been liberalized to the extent of 97.9 per cent cf private imports of Tighter controls are still maintained over certain imports from the dollar area, but since the beginning cf 1956 large global quotas valid for the- dcllor area have regularly been established for commodities net yet liberalized. Such liberal licensing amounts to de facto liberalization for certain products which the German authorities envisage freeing at a later stage and for which the reactions of importers are thus tested in advance. Calculated on the basis of trade on private account \tfith the United States and Canada in 1953, 92.9 per cent of imports from the dollar area have been fre:3d from restrictions and exempted from licensing requirement. For these contracting parties to GATT which are included in the "rest of the world area"3 a special free list has been established which is almost equal in scope to the N?C free list. Imports from the Australia, Burma, Cambodia, Ceylon, India, Indonesia, Iraq, Jordan, Laos, Libya, New Zealand, Pakistan, Federation of Rhodesia and Nyasaland, Sudan, Unicn of South Africa, Viet Nam. Bolivia, Canada, Chile(?), Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, SI Salvador, Guatemala, Haiti, Honduras, Liberia, Mexico, "Nicaragua, Panama, Peru, Philippines, United States cf America and United States dependencies, Venezuela. Brazil, Finland, Japan and Uruguay. benefit from this free list. Czechoslovakia, however, does not

5 Page 5 four countries in this category are liberalized to the extent of 96.3 per cent of private imports in Imports from the ether countries classified in the "rest cf the wrrld area 1 ' are admitted under the declaration procedure in accordance with 'publications concerning tenders" or agcinst individual licences issued within the purview of. import announcement by the Import Committee. For Spain, however, a separate free list is in force. Trade agreements are in force with all OEEC countries. The bilateral quotas established in these agreements represent r negligible part of the trade with these partnsr countries. Agreements exist with two countries cf the dollar area (Cub" and Peru), with several countries cf the MPC area and with some tan ether countries which generally rely on bilateral arrangements in the conduct cf their foreign trode. (g) The Use of State Trading or Governmental uonopoly in Imports and the restrictive operation of Such Regimes The right to import matches and spirits (with the exception of rum, «ask, cognac and liqueurs) is reserved for governmental monopolies. Import of various aroducts in the food -and agricultural sectors such as grains, grain fodder, sugar, butter, lard, margarine, manufactured edible fats, cattle and meat are subjected to state control on the basis of "Market Regulation Laws". Imports of these products are carried out by the Import and Stockpiling Agencies en the basis of licensing commitments undertaken in bilateral trade agreements. The proportion of imports of commodities coming under the iicrket Regulation Laws in relation to total imports in 1955 was 9 per cent, (h) Measures taken in the preceding Years to relax Restrictions Chronologically the -orincipal ch?nges since 1 January 1954 are as follows : 17 February 1954 A dollar free list ccme intv force covering some 1,800 of the 6,000 items in the commodity classification for foreign trade statistics. The freed products were mainly rrw materials and basic products. Imports from the dollar countries were theroby liberalized to the extent of 51.9 per cant of private imports from the United States and Canada in 1953.

6 Page 6 30 June 1954 The OELC free list was expanded by the addition cf several products, raising the liberalization tc 91.3 per cent of private imports from these countries in November 1954 Some 1,800 statistical items were added tc the dollar free list, raising the liberalization percentage to The newly freed commodities were meinly semi-finished and finished products. A few items in the first dollar free list, including ethylene-glycol, refrigerators, second-hand cotton textile machinery, and reaction engines, were withdrawn. 28 May 1955 A further addition was made to the list of products freed from quantitative restriction when imported from the dollar ^rea; the new list contained some 600 statistical items including mainly agricultural products and certain bo sic industrial products. The liberalization rose from per cent tc 68.1 per cent. 1 January 1956 The CEEC free list was slightly enlarged, raising the liberalization tc 91.5 per cent on the 1949 basis. 19 June 1956 The free list for imports from the dollar area was extended to cover about 600 more statistical items; the percentage cf liberalization of dollar imports was thereby raised tc Among the newly added products were certain be sic products such as coal, lubricating oils, refined copper, and a number cf semi-finished and manufactured products. 21 June 1956 Imports from Brazil, Finland, Japan and Uruguay were liberalized to the extent of 96.3 per cent of private imports in 1953.

7 Page 7 5 September 1956 A few more items including dried fruits and several types of nuts, certain fruit and fruit pulps were added tc the dollar free list raising the liberalization to 92.9 per cent. 30 November 1956 The OEiCC free list was expanded, the liberalization thereby raised to 92.5 per cent. II. EFFECTS ON TRADE (a) Protective effects of the Restrictions on domestic Production / In view of the continuously decreasing proportion of imports under quantitative restrictions, these restrictions now account only for minor protective effects. In the field of industrial production the restrictions have such protective effects only with regard to a few products originating in certain countries; these countries which, due to completely different conditions of competition, are able tc offer their products at terms to which the German industry concerned, cannot for the time being possibly adjust itself. The branches of industry concerned are mainly the textile çnd the ceramic industries, whose need for protection, however, extends only tc certain products. Despite this the importation of thsse commodities from the countries in question has always been admitted to a certain extent and has, in the course of time, been continuously expanded. In the field of agriculture, the restrictions have a somewhat larger protective effect. But here, too, the Federal Government has admitted to a considerable extent imports on the basis of quota arrangements with interested countries, as far as this could be harmonized with the legitimate interests of domestic agriculture. Moreover, the agricultural imports which are still subject to quotas are to a large extent treated

8 Page 8 so liberally by the application of amelioration clauses, open licensing and certain minimum price systems thrt in recent years a large part of the products still subject tc quotas has been imported aractically without quantitative restrictions. This applies, in particular, to imports of fruit and vegetables, live plants and cut flowers, partly also to imports of cattle, beef and lard. With regard tc basic foodstuffs which sr: the subject of the i'-arket Regulation Lews, import possibilities hava always been opened to the extent required tc wieot the domestic demand, account being taken of domestic production.7 (b) Difficulties or hardships that may be expected upon relaxation or elimination cf the restrictions (c) Steps taken to reduce incidental protective effects cf the restrictions (d) Steps taken tc minimize difficulties of transition to the stage where balance-of-payments restrictions may be eliminated (e) Steps taken to avoid unnecessary damage in accordance with Article XII:3(c)(iii) (Section II is tc be drawn up after the discussions in Bonn.) ANNEXES (Statistical tables and lists cf commodities, etc. to be added, including the following):

9 Page 9 BREAKDOWN OF IHFCRTS FROM THE UNITED STATES MP CANADA ACCORDING TC ÏÏE.-JIiINISTRaTIl/S RBOPg IN FORCE ON 1 OCTOBER 1956 ON THE BASIS OF ACTUAL IMPORTS IN 1953 (US $ millions find percentages of each sector.) Imports on private account Total imports Imports subject tc state trading Freed commodities Non-freed commodities I. Food and feeding stuffs 274.2(100*) 197.6(72.1.;) 61.8(22.5*) 14.8(5.4*) II. Raw materials 192.2(100%) 4.5(2.3/o) 179.0(93.1,o) 8.7(4.6%) III. iîanufactured 39.1(100%) (82.8>) 6.7(17.2%) TOTAL 505.5(10C>) 202.1(40.0%) 273.2(54.0%) 30.2(6.0%)

10 ç.^sée/33/57.'.. Page 10. LIST OF COMMODITIES STILL SUBJECT TO QUANTITATIVE RESTRICTION JBEN - IMPORTED FROM OEEC AREA Hcrses, commercial cattle and animals, trcut, carp, full cream milk, powdered skimmed milk, cut flowers and live plants, cabbage, onions, tomatoes, pulses as well as preparations thereof, seeds (vegetable and oil-seeds) as well as individual seeds, grapes for wine making, fruit and some edible fruit as well as preparations thereof and fruit juices, wine, must and some alcoholic beverages, salt, LIST OF COMMODITIES STILL SUBJECT TC QUANTITATIVE RESTRICTION WHEN IMPORTED FROM NPC AREA Horses, commercial cattle and animals, trout, carp, full cream milk, powdered skimmed milk, cut flowers and live plants, cabbage, onions, tomatoes, pulses as well as preparations thereof, seeds (vegetable and oil-seeds) as well as individual se.ds, grapes for wine making, fruit and some edible fruit as well as preparations thereof and fruit juices, wine, must and some alcoholic beverages, salt, nitrogenous fertilizers; coal tar dyes, aniline; hard soaps and seme cosmetic products of lower quality grades; gunpowder and explosives; belt conveyers, tyres; calf leather, sole leather and lining leather; cigarette paper, wallpaper, paper sacks; linen and hemp yarns, yarns of wool, flax and tulle; paving stones; crockery of fayence and household appliances of glass; precious metals; zinc, raw, in plates cr sheets; arms and ammunition (only insofar as designed for war purposes); different articles of mother-of-pearl and bone; aeroplanes; powdered full cream milk, cheese and curd; grass and clover seeds; dressed leather of cattle, sheep, goats and reptiles; fabrics of silk, wool, rayon, staple fibre and synthetic fibre, cotton and jute, stockings and socks cf synthetic fibre; shoes with rubber components.