Sparking crucial queries

The Torquay Round ended in 1951 with outcomes that were unsatisfactory in terms of tariff cuts. Moreover, the two main players, the USA and the UK, refused to accept the other party’s views. The USA felt that it had given away too much, while the UK felt that the US should have done more, by way of unilateral tariff concessions. Moreover, the UK refused to do away with tariff preferences to the Commonwealth countries. It was only five years later that the GATT members met again in 1956 in Geneva.

The Geneva Round 1956

Before the Geneva round of 1956 (the round began in late 1955 and was concluded in May, 1956), the Marshall Plan for the reconstruction of Europe, which was financed by the USA, had ended. With the help of the USA, the Organisation for European Economic Cooperation was set up in 1948. And a European “coal and steel community” or ECSC among European nations (Benelux, West Germany, France and Italy were the six members) was formed in 1951, which would pool resources in these sectors. The US supported this on geo-strategic grounds even though it could block free trade. The US essentially wanted a strong ally in Western Europe in the cold war with the Soviet Bloc. The strongest opposition to the ECSC came from Czechoslovakia, which stated that it was a barrier to trade and violated the MFN clause of GATT. It also alleged that since coal and steel were important for the war economy, it was also against peace.

In this backdrop, the fourth round of GATT was being held in Geneva in 1956. Wyndham White, the then Executive Secretary of GATT stated in a speech in Geneva that the European Trading Bloc would have to abide by the GATT obligations of Most Favoured Nation (MFN) as well as the rules governing the formation of customs unions.

Twenty-Six countries participated in this round and exchanged Tariff Concessions worth USD 2.5 billion. Another notable event was the accession of Japan to the GATT in 1955.

As in other earlier Rounds, the US was the dominant player and made the maximum requests. A look at some of the request and offers makes for interesting reading:

* The request list of the USA to India ran into four pages and included all kinds of items ranging from tobacco to typewriters to electric transformers. India’s request to the USA was only one page and included many cotton items and textiles;

* Interestingly, the European Coal and Steel Community (ECSC) also participated in the request-offer process and made extensive requests to the USA;

* The USA and the UK continued their dominance of the Round with the bilateral request-offer list running into 81 pages. The USA requested tariff concessions in a variety of food items, wooden items, welding machinery and office machinery. The UK, on the other hand, requested for concessions on electric machinery, fresh fruits and vegetables, bitters etc. The UK also provided two lists consisting of items on which the US duty was more than 50 per cent (List I) and less than 50 per cent (List II);

* The newest member, Japan, also made offers to only two countries — the USA and Sweden — in a range of products such as fruits to automobile parts.

The Geneva Round of 1956 was less noteworthy in terms of the tariff concessions exchanged, but was important in the questions it raised. The two important questions it raised were: a) the conformity of the proposed European Common Area to the letter and spirit of GATT and b) how to better integrate less developed and developing countries into the world trading system so that they could benefit from free trade. The first question was that of creating a European Common Market among the six countries which formed the ECSC in 1951. Ultimately, the Treaty of Rome was signed by the six European nations, which created the European Economic Community. The US again supported this on the same grounds on which it supported the ECSC. However, Eric Wyndham White, the Executive Secretary of GATT, thought that it would conflict with the basic tenets of GATT, namely MFN and National Treatment. However, he also realised that there was little that GATT could do, and that the six nations would later apply for a waiver under GATT. As it turned out, this is exactly what happened. Moreover, the European nations offered lower tariffs to each other and floated a Common Agricultural Policy (CAP), both of which were discriminatory and had a distorting effect on world trade.

The second question of integrating less developed and developing countries into world trade led to the formation of an expert group. This group submitted a report titled Trends in International Trade in October 1958. The report, which later came to be known as the Haberler Report, focused on three issues: the trade and payments problems faced by less developed countries, particularly in their interaction with industrialised countries, the need for stability of world market in primary products, which were the main exports of less developed countries, and the harmful effects of policy of agricultural protectionism followed by industrialised countries. Some of the recommendations made were: provisions of funds for maintaining buffer stocks in less developed countries, moderation of agricultural protectionism by the rich countries and avoiding trade diverting measures such as those of the European Economic Community.

Conclusion

The Geneva Round of 1955-56 came after a long hiatus of more than five years amid a disillusion with GATT. This round was marked by the exchange of some tariff concessions, but became better known for the questions it raised. These were dealt with after the Round ended. The two main questions were: how to deal with special arrangements such as the European Economic Community, which violated the fundamental tenets of GATT, namely non-discrimination and MFN, and how to address the concerns of less developed countries. As we know, the Treaty of Rome, which created the European Economic Community, was signed among six European nations in 1958. This treaty was criticised by a number of countries in the GATT meetings that followed. However, the USA supported the Treaty. The stage was set for the next Round called the ‘Dillon Round’ in 1960.

The writer is Additional Chief Secretary, Department of Mass Education Extension and Library Services and Department of Cooperation, Government of West Bengal.