Italy's complaint with respect to France's special temporary compensation tax on imports, and concluded that the tax violated the provisions of the General Agreement. France accepted this conclusion and undertook to remove the special compensation tax as soon as possible. The Contracting Parties instructed the Intersessional Committee to follow closely the measures that France took toward this end, and requested that France report to the committee regarding the matter before the 10th Session convened.

At the 10th Session, the Intersessional Committee submitted its report to the Contracting Parties. The Committee reported that, since January 1955, France had eliminated the compensation tax on some items and had reduced it on others. It stated, however, that France had also extended the tax by applying it to most of the products from which quantitative restrictions had been removed in September 1955 under the liberalization program of the Organization for European Economic Cooperation (OEEC). The committee's report also noted that France had confirmed its intention to gradually remove the compensation tax.

Progress by France in eliminating the tax and reducing its discriminatory effects was slight during the interim between the 10th and 11th Sessions. The reductions that were made during this period were offset somewhat by France's imposition of the tax on the new items that it added to its OEEC liberalization list in January and April 1956. Because of its adverse balance-of-payments position during 1956, the effect of the severe winter of 1955-56 on French agricultural production, and extraordinarily large defense expenditures during 1956, France could not foresee further substantial progress in eliminating the tax or in reducing its discriminatory effects during 1957.

At their 11th Session, the Contracting Parties again expressed disappointment at the lack of progress by France, and called for the reduction or elimination of the tax and its discriminatory effects as promptly as possible. They particularly recommended that France reduce the rate of the tax on a number of articles on which the tax had remained constant for more than 12 months, since the volume of trade in those articles was relatively small. The Contracting Parties agreed to review the matter again at their 12th Session, and requested that France report to the Intersessional Committee by September 1, 1957, on further developments with respect to the tax.

French internal tax on automobiles (art. III)

On June 30, 1956, the French Parliament enacted legislation that established a national solidarity fund for old people. Revenue for the fund was to be obtained by levying a uniform tax on all passenger automobiles rated at more than 16 horsepower and registered after January 1,

* See Operation of the Trade Agreements Program (eighth report), pp. 34–36.

1950. By a decree of September 3, 1956, however, cars more than 6 years old were exempted from the tax; the rate on cars between 2 and 4 years old was reduced by 50 percent, and that on cars between 4 and 6 years old, by 75 percent. A new tax was levied on cars of 16 horsepower or less, but at a much lower rate than that on cars of more than 16 horsepower. In 1956 at the 11th Session of the Contracting Parties, the United States noted that French production of automobiles rated at more than 16 horsepower is negligible and that therefore the French tax applies almost exclusively to imported cars, particularly United States makes. The United States felt that for these reasons the tax was discriminatory and contrary to the provisions of article III of the General Agreement, which prohibits the use of internal taxes to protect domestic producers. Moreover, according to the United States, the effect of the tax was to nullify benefits to which the United States was entitled under existing French tariff concessions on automobiles. France contended that the United States complaint was technically improper, since it was made under the wrong article of the General Agreement, and that the tax had not been levied as a protective measure, but to provide revenue.

The United States indicated that it would continue to consult with France on the question of the automobile tax. The Contracting Parties requested that, if these consultations did not result in a satisfactory solution, the United States refer the matter to the Intersessional Committee for further examination.

French stamp tax on imports (art. II)

The French stamp tax on imports, which is levied in addition to the regular import duties, is designed to defray the costs of clearing imported commodities through the customs. The General Agreement authorizes such taxes by providing (art. II) that a contracting party shall not be prevented from imposing fees or other charges on imports commensurate with the cost of services it renders in connection therewith. At the Ninth Session of the Contracting Parties in 1954-55, the United States asserted that France had increased its stamp tax beyond the allowable limits. The matter was temporarily resolved, however, when the French representative noted that France had not increased the tax-and did not intend to increase it-beyond the point necessary to meet the cost of services rendered, as authorized by the General Agreement. In August 1955, however, France increased the tax from 2 percent to 3 percent, with the specific provision that the increase in the proceeds from it be applied to the budget for agricultural family allowances.

The United States immediately complained to the Contracting Parties that France's action was inconsistent with its obligations under the General Agreement. When the matter came before the Contracting

See Operation of the Trade Agreements Program (eighth report), pp. 34-36.

Parties at their 10th Session, the French representative agreed that the increase in the tax violated the agreement. But, he stated, France had decided on the increase in exceptional circumstances-when it had been necessary to finance his country's program of agricultural family allowances and when there seemed to be no possibility of financing such allowances by normal methods. Also, he noted, the increase in the level of protection involved was small and did not seem to be of such a nature as to seriously damage the interests of the contracting parties or to alter the channels of trade. He assured the Contracting Parties, however, that his Government would adjust the tax as soon as possible.

At the 11th Session, the French delegate informed the Contracting Parties that the draft of his country's Finance Act for 1957 provided for the reduction of the stamp tax from 3 to 2 percent. The Contracting Parties requested the French Government to inform them when the measure had been approved. As approved by the French National Assembly on December 29, 1956, however, the Finance Act continued the stamp tax at the rate of 3 percent. For this reason, the Contracting Parties placed the United States complaint on the agenda for their 12th Session.

German (Federal Republic) turnover tax on imports of printed matter (art. III)

In the latter part of 1954 the customs authorities of the Federal Republic of Germany began to calculate the country's 4-percent compensatory turnover tax on imported printed matter on its "wholesale" pricethat is, on the ultimate German retail price reduced by a fixed percentage. Formerly, the tax had been based on the invoice price, which is the contractual price paid by the publisher to the printer, and which is still used as the base for the tax on domestic printed matter. At the 11th Session the Netherlands complained that, under the new method of calculating the tax, the taxable value of imported printed matter includes copyright, royalty, and other cost elements, whereas the taxable value of domestic printed matter does not include them. Moreover, according to the Netherlands, the method of calculating the tax is not in accordance with the principles of article III of the General Agreement, which provides for "national" treatment of imported products for purposes of internal taxation. The difference in calculating the tax results in a higher tax on foreign printed matter than on such matter obtained from German printing establishments.

During the 11th Session the delegates of the Netherlands and the Federal Republic of Germany and the delegate from Austria-—which is also an interested party-expressed hope that the matter could be settled satisfactorily through consultations by the contracting parties concerned. Accordingly, the Contracting Parties took no action on the matter at that session.

Greek increase of bound duties (art. XIX)

On October 3, 1956, Greece increased the duties it had bound in the General Agreement on refrigerators and long-playing phonograph records. In its complaint concerning the increased duties at the 11th Session in 1956, the Federal Republic of Germany requested that the Contracting Parties examine only the increased duty on phonograph records. Inasmuch as Greece had increased the duty on refrigerators under what it believed to be the "critical circumstances" envisioned in paragraph 2 of article XIX of the General Agreement, Western Germany did not insist that its complaint on that item be discussed at the 11th Session. However, it reserved the right to bring the matter to the attention of the Contracting Parties later if consultations show that the prerequisite conditions for action by Greece under article XIX do not exist. Greece claimed that the possibility of injury to domestic producers of refrigerators arises, not because the domestic product cannot compete with the imported product, but because of heavy imports resulting from the ability of importers to sell imported refrigerators to domestic purchasers on the installment plan-which type of financing is made possible by foreign capital loaned for that purpose to the retailers of refrigerators in Greece.

At the time that Greece bound its duty on phonograph records at Annecy and Torquay, long-playing records (33% and 45 revolutions per minute) were a new development and were not imported by Greece. The Greek concession on phonograph records did not mention record speed. In the opinion of the German delegation to the 11th Session, as well as that of a group of experts that the Contracting Parties appointed during the session, the general practice in classifying new or modified products is to apply provisions of the tariff item that specify the products by name, or, if no such item exists, to assimilate the new products into existing classifications in accordance with the principles established by national tariff legislation. It was the opinion of the experts that longplaying records should have been included under the bound item, and that, if Greece had desired to modify its concession on phonograph records, it should have resorted to the procedures provided in articles XVIII, XIX, and XXVIII of the General Agreement.

After the discussion, the Contracting Parties decided to refer the matter to the Intersessional Committee, which in turn was to refer it to a working party. The Contracting Parties directed the working party to consider both the technical and the policy aspects of the problem. United Kingdom subsidization of exports of eggs, cattle, and potatoes (art. XVI)

At its meeting that began on April 24, 1957, the Intersessional Committee considered a complaint by Denmark that during the first few months of 1957 the United Kingdom had begun to export large quantities of eggs, cattle, and potatoes to Denmark's traditional European markets.

The Danish representative expressed the opinion that the exports in question were the result of production in excess of the United Kingdom's domestic requirements, and that such excess production resulted from the operation of the United Kingdom's guaranteed-price program for these products. According to the Danish representative, his country was willing to await future developments with respect to the United Kingdom's action to reduce its exports of cattle and potatoes. He felt, however, that the United Kingdom had failed to take sufficient action with respect to exports of eggs, and that he must ask the United Kingdom to discuss with Denmark the possibility of limiting the exportation of subsidized eggs in accordance with the provisions of article XVI of the General Agreement. The Danish complaint was supported by the Netherlands, Belgium, Germany, and Sweden.

After discussion, the Intersessional Committee recommended that the United Kingdom and Denmark continue the consultations that they had undertaken and that, in determining its future policy with respect to subsidies on the products in question, the United Kingdom consider the views expressed by the various contracting parties. The Committee also appointed a panel to examine the Danish complaint. The panel is to examine the complaint if the contracting parties concerned report to the Executive Secretary of the Contracting Parties that their consultations have not led to a satisfactory settlement of the problem.

United States subsidization of poultry exported to Germany (Federal Republic) (art. XVI)

On September 27, 1956, the United States Department of Agriculture announced that the United States was granting an export subsidy of 52 cents per pound on about 3 million pounds of whole frozen readyto-cook poultry intended for sale in the Federal Republic of Germany. Western Germany has been a traditional market for Danish poultry products, and Denmark had obtained tariff concessions from Western Germany, under a bilateral trade agreement in 1951, as a principal supplier of those products.

At the 11th Session of the Contracting Parties, Denmark asked the Contracting Parties to review the United States subsidy on poultry exported to Western Germany. According to Denmark, the United States subsidy was not compatible with the spirit of the present article XVI of the General Agreement, and was clearly inconsistent with the revised article XVI, which the United States already has accepted. The revised article states that contracting parties should avoid subsidies on the exportation of primary products, including agricultural products.

The Contracting Parties noted the Danish complaint and the fact that Denmark and the Netherlands (which also is an interested contracting party) proposed to consult with the United States on the matter under the provisions of article XVI.