FOREIGN ECONOMIC AND COMMERCIAL POLICY


reasons, maintaining them only to the extent that their reserve position
still justifies.
  Paragraph 9 of Article XV also bears on the problem. The para-
graph provides that nothing in the GATT shall preclude the use by a
contracting party of restrictions or controls on imports or exports,
where the sole effect of such trade restrictions is to make effective
exchange controls or restrictions which are in accordance with the
Articles of Agreement of the International Monetary Fund. The
relevant provision of the Fund is found in Article XIV, Section 2,
which provides in part:
  "In the post-war transitional period members may, notwithstanding
the provisions of any other articles of this Agreement, maintain and
adapt to changing circumstances . . . restrictions on payments and
transfers for current international transactions. Members shall, how-
ever, have continuous regard in their foreign exchange policies to the
purposes of the Fund; .... In particular, members shall withdraw
restrictions maintained or imposed under this Section as soon as they
are satisfied that they will be able, in the absence of such restrictions,
to settle their balance of payments in a manner which will not unduly
encumber their access to the resources of the Fund."
   Taken as a whole, the exceptions to Article XI, paragraph 1, do not
appear to offer any justification to member countries to impose import
restrictions for protectionist purposes. It would appear that when the
avowed purpose of a given restriction is to protect the domestic in-
dustry, rather than to safeguard a country's balance of payments, that
restriction is in violation of the GATT. 11 J]
   Proposed action. U.S. interest in this general problem derives from
three factors. First, the protectionist element of quantitative restric-
tions in intra-European trade is proving a major stumbling block to the
GEEC trade liberalization program. The U.S., therefore, may well be
justified in availing itself of all international obligations which might
be used as a means of eliminating that element from intra-European
quantitative restrictions. Second, the long-range self-interest of the
U.S. requires that the protectionist use of quantitative restrictions
should be resisted at every opportunity. Otherwise, the widespread use
of such quantitative restrictions against U.S. exports may well con-
tinue beyond the period when it is justified by dollar shortages. Finally,
the U.S., as a principal sponsoring party of the GATT, is interested in
enhancing the effectiveness and, hence, the prestige of the organiza-

   II1 Note should be taken, however, of the provisions of Article XVIII
of the
 GATT which permit quantitative restrictions on imports in connection with
the
 economic development of a member country, provided certain express criteria
are
 met. This provision has so far not been used broadly, partly because the
Contract-
 ing Parties have laid a heavy burden of proof upon a member country invoking
 the provision. [Footnote in the source text.]
      496-362--77-46


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