International Trade Organisation (ITO)

During 1943-44, UK and US had discussion to have a consensus on ‘expansion of world

trade and employment’. Based on the consensus reached between them, US government in
November 1945 issued a document aimed at ‘proposal for expansion of World trade and
employment’. The aim of the proposal was to get consideration by an International
Conference on Trade and Employment.

The proposal demanded for (a) a charter or code of conduct relating to governmental
restraints on international trade and (b) for creation of ‘international Trade Organisation.

The purpose of the code was to create and confirm

a. the principle of unconditional MFN treatment,
b. Prohibition of quantitative restriction1
c. Agree for the principles put forward with the limitation of subsidies and
d. Certain exception to the countries with the ‘balance of payment’ difficulties.

The proposal never mentioned the economic development. The proposed ITO was meant for
settlement of disputes and related function s; collection and dissemination of trade statistics
and preparation of guidelines for customs valuations.

Sooner, US has invited 15 countries to enter into negotiation to conclude a multilateral trade
agreement at the earliest. Among them, Except russia, all other 14 countries accepted the
invitation to negotiate on the proposal.

Eventually, due to the long term consequences, the initiative taken by the proposal was
failed.

US Placed a similar proposal and placed before the United Nations. This proposal for ‘an
international conference on Trade and Employment’ was taken by Economic and Social
Council (ECOSOC) at its first meeting.

ECOSOC council appointed a preparatory committee of 19 countries to draft the charter

document.
The committed met at London in October November 1946, working for suggested
charter proposed by US.
First draft in London 1946
Second draft in New York 1947 (January - February)
Third draft at Geneva2 1947 (April August)
This third draft was the basis for a plenary conference on Trade and Employment, convened
by the UN at Havana in November 1947.
The Havana conference had agenda which includes

1
Quantitative restriction is restriction place on import of any goods on the quantity that is
allowed to be imported.
2
This negotiation at Geneva was hijacked by US, to initiate the failed proposal put forward by
Them. They conducted an alternative parallel negotiation at Geneva for their proposal
previously given to 15 nations to negotiate, which resulted in GATT.
 a. Employment
b. Economic development
c. Restrictive business practices
d. Commodity agreement
e. Commercial policy and
f. Elaborate structure of ITO.

The Final Act of Havana Conference embodying ITO charter was signed on March 24, 1948
with 53 states. However ITO charter never entered into force because it was unable to
obtain the ratification required.

The ratification was failed because of

1. US withheld to ratify the charter and countries were waiting for US to sign the charter.
2. Some states believed that ITO charter was too favourable to state intervention in
economy.
Or too favourable to free trade
3. Some states believed that the purpose of obtaining a consensus is already met by
other international organisation established at the same period. (GATT).
4. US congress shown less interest in ITO. The congress believes that supporting to
Havana Charter might impair support of its higher priority issues of foreign affairs. In
December 1950 State Department of US stated that ITO Charter would not be re-
submitted before the Congress.

Thus ITO which never formally rejected, Slowly faded away.

GATT AND ITS EFFECT ON ITO

ITO failed to came into effect. In the mean time, US continued and concentrated on the
negotiation on the trade agreement.

US together with 14 states of the previous negotiation and further 8 invited subsequently
were engaged in tariff cutting negotiations. Each countries negotiated to each other in pairs.
A total of 123 negotiation took place in Geneva during April and October 19473.

After discussion, ‘general agreement’ was opened for signature on October 30, 1947 and
provisionally entered into force on January 1, 1948.

This Geneva negotiations of 1947 sta a precedent for subsequent 8 rounds of negotiations
until 1999, which played major role in development of International Trade Law. the
concessions agreed at the negotiations was generalised to all the participants. All the
concessions were recorded by on single document called GATT.

The GATT negotiations were done parallel to the ITO Charter negotiations. Both
negotiations were done at the same City (Geneva) identical in nature).

GATT negotiation continued while ITO charter failed to get the required ratification.

3
These negotiations were done parallel to the negotiations for the proposed ITO.
When WTO was formed, GATT was adopted to it and ITO totally lost its relevance.
GATT got the momentum with the support of US and G5 & G7 nations, whereas ITO
stagnated, freezed and totally lost its relevance.