tracting Parties extended the waiver until December 31, 1958. The reports that these two countries submitted at the 11th Session, which were similar to those they submitted at the 10th Session, indicated that Libya will require assistance for some time in solving its trade problems. Luxembourg's quantitative restrictions on imports (first annual report) (art. XI)

On May 17, 1955, Luxembourg requested the Contracting Parties to waive its obligations under article XI of the General Agreement (requiring the general elimination of quantitative restrictions on imports) to permit it to maintain certain restrictions on imports of agricultural products. Luxembourg's economic structure, the request pointed out, is based essentially on the steel industry and agriculture. Agriculture is, therefore, a vital branch of the national economy and is indispensable to its structural and political balance. However, because of excessive fragmentation of agricultural holdings, unfavorable productive conditions, and a very narrow market, Luxembourg's agriculture is in a precarious position, and can be maintained in a satisfactory position only with the support of the state. For more than a century this precarious position has made it necessary to protect agriculture, the request stated, and Luxembourg is not now able to relinquish such protection. Consequently, Luxembourg desired permission to maintain quantitative restrictions on imports of certain agricultural products, of which Belgium and the Netherlands are the principal suppliers.

Luxembourg's request for a waiver was considered by an intersessional working party. At the meeting of this group, the representative of Luxembourg made it clear that his country's need for agricultural protection was structural in nature, and could not be regarded as transitional or temporary. Consequently, he pointed out, Luxembourg had requested the waiver pursuant to article XXV, rather than under the hard-core decision of March 5, 1955. The representative also explained the relationship between Belgium's request for a waiver and the request that Luxembourg had submitted. Restrictions that were specified in the requests of both countries, he noted, would be maintained by Luxembourg after they had been eliminated by Belgium. Restrictions that were specified only in the Belgian list would control importation into the whole territory of the Belgo-Luxembourg Economic Union, but when they were eliminated by Belgium no restrictions would remain on imports into Luxembourg. In administering restrictions appearing only on its list, Luxembourg would not discriminate between sources of supply; restrictions specified in the Luxembourg list would be applied to Belgian goods as well as to those of other countries.

Because the arrangements for protecting Luxembourg's agriculture were so closely related to those requested by Belgium (which applied to the entire Belgo-Luxembourg Economic Union) the working party recom

mended that the Contracting Parties consider Luxembourg's request at the 10th Session, together with the Belgian request. At their 10th Session, the Contracting Parties granted Luxembourg a waiver permitting it to continue its existing restrictions, with the understanding that Luxembourg would actively pursue the harmonizing of its agricultural policy with the policies of Belgium and the Netherlands, would adopt all measures necessary to make its agriculture more competitive, and would, so far as practicable, relax restrictions then in force. The waiver has no time limit.

In its first annual report to the Contracting Parties at the 11th Session, Luxembourg reported that its agricultural position had not changed substantially. Studies of a practical nature on methods of improving the country's agriculture were being made, but by the 11th Session they had not resulted in any solutions. It is expected that, because of the actions Belgium and the Netherlands will have to take in harmonizing their agricultural policies, Luxembourg also will have to make major policy decisions concerning this problem, probably before the 12th Session. As there were no specific requests that the Contracting Parties review Luxembourg's report at a plenary session, they did not do so.

Nicaragua-El Salvador free-trade area (fifth annual report) (arts. I and XIII) At their Sixth Session in 1951, the Contracting Parties approved a waiver relating to the Nicaragua-El Salvador free-trade area. The waiver freed Nicaragua from its most-favored-nation obligations respecting the 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 annual report to the Contracting Parties at their 11th Session,22 Nicaragua noted that—as in previous years-Nicaragua and El Salvador were satisfied with the results of the free-trade treaty. The report stated that during 1955 Nicaraguan treaty imports accounted for 80 percent of total imports from El Salvador. The value of Nicaraguan treaty imports had declined from 1.3 million dollars in 1954 to $960,000 in 1955. Nicaraguan treaty exports were valued at $740,000 in 1955, compared with 1.8 million dollars in 1954. The total nontreaty goods imported by Nicaragua from El Salvador, as a percentage of total imports from that country, increased from 15 percent in 1954 to 19 percent in 1955. As in previous years, however, such imports appeared to be mainly products from third countries transshipped through El Salvador.

22 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),

Waiver of certain United Kingdom obligations with respect to products entered free of duty from Commonwealth countries (third annual report) (art. I)

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 had subsequently been removed or modified in a manner consistent with the agreement. In requesting an amendment to the waiver, the United Kingdom stated—as it had in requesting 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 use the waiver to divert trade to the Commonwealth.23

In submitting its third annual report under the margin-of-preference waiver at the 11th Session, the United Kingdom noted that it had invoked the waiver during 1956 with respect to the most-favored-nation rates of duty on fruit stocks of malling varieties, Kentia palm, bananas, and lime oil. The duties on fruit stocks and Kentia palm, however, had not been altered by the end of the session. With respect to bananas and lime oil, the United Kingdom during 1956 had also invoked its waiver for assistance to its dependent overseas territories. According to the United Kingdom, it had notified the interested contracting parties and they had not objected to the increased duties.

Waiver with respect to special problems of dependent overseas territories of the United Kingdom (second annual report) (art. I)

During the Ninth Session in 1954-55, the United Kingdom submitted to the Contracting Parties a proposed amendment to the General Agreement that would broaden the scope of action by a contracting party in assisting 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 23 See Operation of the Trade Agreements Program: Seventh report, pp. 27-30; eighth report, pp. 30-32.

fulfilled under the provisions of the General Agreement. Because of its broad scope, however, and because its adoption would be tantamount to recognizing as permanent a problem they regarded as transitional, the Contracting Parties did not favor the proposed amendment. They decided, instead, to waive certain of the United Kingdom's obligations under the agreement, in order to permit the United Kingdom to accord its dependent territories treatment commensurate with its responsibilities as it recognized them.24

In its second annual report under its dependent overseas territories waiver, submitted to the Contracting Parties at their 11th Session, the United Kingdom noted that it had invoked the waiver for the first time. During 1956, to assist the trade in bananas from Jamaica, Nigeria, and certain other small colonies, and the trade in lime oil from Jamaica and Dominica, the United Kingdom had increased its most-favored-nation rates of duty on those products. Brazil, the only contracting party that had an interest in the United Kingdom's concessions on those products, did not object to the invocation of the waiver.

Waiver with respect to United States restrictions on imports of agricultural products (second annual report) (art. XI)

Article XI of the General Agreement prohibits a contracting party from imposing nontariff restrictions on its imports from other contracting parties. This article has been particularly significant to the United States, since the United States maintains governmental programs with respect to several agricultural products, and, on various occasions, has found it necessary to restrict imports of such products in order to carry out domestic programs for them. The United States use of the agricultural exception has been of considerable concern to those countries that export agricultural products to the United States and that have granted tariff concessions to the United States in return for concessions granted by the United States on agricultural products.

United States programs for agricultural products have taken various forms, including those designed to control production, to assist in the orderly marketing of agricultural commodities for domestic consumption and export, to provide for the disposal of surplus commodities, and to establish quality and grading standards. The principal objective of such programs has been to stabilize prices at levels that would provide a fair return to producers, consistent with the interests of consumers.

To the extent that these programs have had the effect of maintaining domestic price levels for agricultural products above the duty-paid, laid

24 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, Decisions, Resolutions, Reports, etc. of the Ninth Session, Sales No.: GATT/1955-2. Geneva, 1955, pp. 21-25.

down prices of comparable imports, they have tended to stimulate a greater quantity of imports than would have prevailed had there been no domestic program. Such artificially stimulated imports tend to increase the cost of relevant programs and to interfere with the realization of their objectives. To provide for such contingencies, section 22 of the United States Agricultural Adjustment Act, as amended, authorizes the President to restrict the importation of commodities by imposing either fees or quotas (within specified limits) if such importation tends to render inef fective or materially interfere with the agricultural commodity programs of the United States Department of Agriculture. Section 22, as amended by the Trade Agreements Extension Act of 1951, specifically provides that no trade agreement or other international agreement heretofore or hereafter entered into by the United States shall be applied in a manner inconsistent with the requirements of section 22.

To resolve the differences between its domestic legislation and the provisions of the General Agreement, the United States-at the Ninth Session of the Contracting Parties in 1954-55-requested a waiver of its commitments under the General Agreement, insofar as such commitments might be regarded as inconsistent with action it is required to take under section 22.25 Besides establishing certain rules of procedure and certain conditions as to consultation, the waiver that the Contracting Parties granted to the United States at the Ninth Session required the United States to report annually on its actions under the waiver.

At the 11th Session of the Contracting Parties, held during October and November 1956, the United States submitted its second annual report under the waiver. The report, which covered the period between the 10th and 11th Sessions, presented an explanation of United States action with respect to each of the commodities that were under control during the reporting period. Besides presenting, for each commodity, data on domestic production, consumption, purchases by the Commodity Credit Corporation, exports, and imports, the report described the quotas in effect and the steps that the United States had taken toward resolving the problem of commodity surpluses. The report noted that import controls were in effect on only 6 of the 9 groups of products originally covered by the waiver, the same number as in the previous year, except for two modifications-the increased coverage of the quota on long-staple cotton, and the temporary increase in the quota on peanuts.

The report also described the positive steps that the United States had taken toward reducing surpluses of certain agricultural commodities. These actions were intended to reduce existing crop surpluses, discourage the creation of future surpluses, and encourage consumption. Acreageallotment programs and marketing quotas had been instituted during previous years. Early in the fall of 1956 the United States soil-bank

25 See Operation of the Trade Agreements Program (eighth report), pp. 43–47.