national Monetary System. The members of the Committee are to be governors of the Fund, ministers, or others of comparable rank. The Committee is to advise and report to the Board with respect to the Board's functions in supervising the management and adaptation of the international monetary system, "including the continuing operation of the adjustment process, and in this connection [is to review] developments in global liquidity and the transfer of real resources to developing countries." The Committee is also to consider proposals by the Executive Directors to amend the Articles of Agreement, and is to advise and report on sudden disturbances that might threaten the international monetary system.

The Board also established a Joint Ministerial Committee of the Boards of Governors of the IBRD and the Fund on the Transfer of Real Resources to Developing Countries, such Committee to be known as the Development Committee. The Development Committee is to "maintain an overview of the development process and shall advise and report to the Boards of Governors of the Bank and the Fund on all aspects of the broad question of the transfer of real resources to developing countries, and shall make suggestions for consideration by those concerned regarding the implementation of its conclusions." The Development Committee is to give urgent attention to the problems of the least developed countries and those developing countries most seriously affected by balance of payments difficulties.

For the full texts of the four resolutions adopted by the Board of Governors, see the IMF Survey, Oct. 14, 1974. The fourth resolution includes sections on the adjustment process, exchange rates, controls, global liquidity, valuation of the special drawing right, the special interests of developing countries, general review of quotas, and amendments to the Articles of Agreement.

Exchange Rates

Secretary of the Treasury George P. Shultz, in a statement to the Joint Economic Committee of the Congress on February 8, 1974, said the following with respect to exchange rates:

*

I believe there is a general consensus that, for the time being, a general system of par values and fixed exchange rates would not be workable or desirable. While the sizable changes in exchange rates in the past year have posed some problems floating rates have probably worked better than any other system that could have been devised during the past year. We have seen trade and investment continue to prosper, and businessmen and bankers have been able to accommodate to the situation. At the same time, the new uncertainties created by the rise in oil prices emphasize again the need for exchange rate policies which are internationally responsible,

whether par values or floating rates are used, if the destructiveness of competitive devaluation is to be avoided.

A floating regime, like a par value system, requires agreed principles of good conduct if conflicts are to be avoided. We believe criteria relevant in a par value system are also relevant to floating. For instance, under either regime, the aim should be to avoid prolonged imbalances, and significant movements in reserves can help tell us when governments unduly resist market forces and suggest when policies need to be adapted. In either regime, we should not use widespread controls on trade or capital to maintain an undervalued exchange rate. . . .

Hearings, Joint Economic Committee, 93d Cong., 2d Sess., Feb. 8, 1974; also the Dept. of the Treasury News, Feb. 8, 1974, pp. 9-10.

Special Drawing Right

At its meeting at Rome January 17-18, 1974, the Committee of the Board of Governors of the IMF on Reform of the International Monetary System and Related Issues discussed the valuation and yield of the SDR (special drawing right). The communiqué issued at the conclusion of the January 18 meeting included a statement that the Committee

agreed that further attention should be given to the question of protecting the SDR's capital value against depreciation. In the present circumstances the Committee agreed that, for an interim period and without prejudice to the method of valuation to be adopted in the reformed system, it would be appropriate to base the valuation of the SDR on a "basket" of currencies. They invited the Executive Board to work urgently on the composition of a basket of currencies, the effective interest rate, and other outstanding questions, with a view to early adoption by the Fund of this method of valuation.

Dept. of State Bulletin, Vol. LXX, No. 1807, Feb. 11, 1974, p. 151.

Monetary Law and the Energy Situation

The Communiqué issued at the conclusion of the Washington Energy Conference of February 11-13, 1974 (see this Chapter, § 8, infra, pp. 558-560) includes a section dealing with monetary and economic aspects of the energy situation. Point 10 of the Communiqué reads as follows:

With respect to monetary and economic questions, they decided to intensify their cooperation and to give impetus to the work being undertaken in the IMF, the World Bank and the OECD on the economic and monetary consequences of the current energy situation, in particular to deal with balance of payments disequilibria. They agreed that:

-In dealing with the balance of payments impact of oil prices they stressed the importance of avoiding competitive depreciation and the escalation of restrictions on trade and payments or disruptive actions in external borrowing.*

-While financial cooperation can only partially alleviate the problems which have recently arisen for the international economic system, they will intensify work on short term financial measures and possible longer term mechanisms to reinforce existing official and market credit facilities.*

-They will pursue domestic economic policies which will reduce as much as possible the difficulties resulting from the current energy cost levels.*

-They will make strenuous efforts to maintain and enlarge the flow of development aid bilaterally and through multilateral institutions, on the basis of international solidarity embracing all countries with appropriate resources.

In point 10, France does not accept paragraphs cited with asterisks. Footnote in original.]

For the full text of the Communiqué, see the Dept. of State Bulletin, Vol. LXX, No. 1810, Mar. 4, 1974, pp. 220–222. An outline of a statement to the Conference by Secretary of the Treasury George P. Shultz is at Id., pp. 215–220.

Private Ownership of Gold

Public Law 93-373 (88 Stat. 445), approved August 14, 1974, inter alia repeals subsections 3(b) and (c) of P.L. 93-110 (87 Stat. 352), approved September 21, 1973, and substitutes in their place the following:

Sec. 2. Subsections 3 (b) and (c) of Public Law 93-110 (87 Stat. 352) are repealed and in lieu thereof add the following:

(b) No provision of any law in effect on the date of enactment of this Act, and no rule, regulation, or order in effect on the date subsections (a) and (b) become effective may be construed to prohibit any person from purchasing, holding, selling, or otherwise dealing with gold in the United States or abroad.

"(c) The provisions of subsections (a) and (b) of this section shall take effect either on December 31, 1974, or at any time prior to such date that the President finds and reports to Congress that international monetary reform shall have proceeded to the point where elimination of regulations on private ownership of gold will not adversely affect the United States' international monetary position.".

*

See also this Chapter, § 3, infra, p. 517, and Ch. 14, § 7, infra, p. 737. Subsections 3(a), (b) and (c) of P.L. 93-110 provide:

*

Sec. 3 (a) Sections 3 and 4 of the Gold Reserve Act of 1934 (31 U.S.C. 442 and 443) are repealed.

(b) No provision of any law in effect on the date of enactment of this Act, and no rule, regulation, or order under authority of any such law, may be construed to prohibit any person from purchasing, holding, selling, or otherwise dealing with gold.

(c) The provisions of this section, pertaining to gold, shall take effect when the President finds and reports to the Congress that international monetary reform shall have proceeded to the point where elimination of regulations on private ownership of gold will not adversely affect the United States' international monetary position.

Regional Cooperation

The Declaration of Tlatelolco, issued on February 24, 1974, after the Conference of Foreign Ministers of the United States, Latin America and the Caribbean region met in Mexico City from February 18-23, 1974, included provisions on international monetary affairs. The Foreign Ministers declared that:

They reaffirm the need of Latin American and Caribbean countries for an effective participation of their countries in an international monetary reform.

It was acknowledged that the net transfer of real resources is basic, and that ways to institutionalize transfers through adequate mechanisms should be considered.

It was reaffirmed that external financial cooperation should preferably be channeled through multilateral agencies and respect the priorities established for each country, without political ties or conditions.

Dept. of State Press Release, No. 67, Feb. 24, 1974, p. 6; Dept. of State Bulletin, Vol. LXX, No. 1812, Mar. 18, 1974, pp. 262–264. See also this Chapter, § 2, infra, pp. 482-483, and § 3, infra, pp. 518–519.

The Trade Act of 1974 (P.L. 93-618; 88 Stat. 1978) was approved by President Ford on January 3, 1975. The Act contains several basic features: authority to negotiate further reductions and elimination of trade barriers, and to work for reform of the General Agreement on Tariffs and Trade (GATT); major changes in measures for relief from injury caused by import competition and from unfair trade practices; authority to extend most-favored-nation trade concessions to countries whose products were not then receiving such treatment; and authority to extend generalized preference to beneficiary developing countries. The following is a summary of the Act, prepared by the staffs of the Senate Committee on Finance and the House Committee on Ways and Means.

TITLE I. NEGOTIATING AUTHORITY

General Authority. The Trade Act of 1974 authorizes the Executive for a period of five years to enter into trade agreements with other countries, for the purpose of harmonizing, reducing, or eliminating tariff and nontariff barriers to, and other distortions of, international trade, subject to certain limitations and conditions. The Act gives strong emphasis to the need for establishing fair and equitable conditions of trade, including reform of the General Agreement on Tariffs and Trade.

Tariff Authority (Title I, Ch. 1).-In order to promote the purposes of the Act, detailed in section 2 and in the negotiating objectives set forth in various sections of Title I, the President is authorized to proclaim, in accord with certain limits described below, modifications in rates of duties pursuant to trade agreements whenever he determines that existing duties or other import restrictions of a foreign country or of the United States are unduly burdening and restricting the foreign trade of the United States. The President is authorized to decrease duties below the rates in effect on January 1, 1975, within the following limitations:

If existing duties are:

5% ad valorem or less-no limitation;

Over 5% ad valorem-reductions may not exceed 60 percent of existing duties.

The Act establishes certain prenegotiation procedures, including public hearings and advice by the Tariff Commission (renamed the United States International Trade Commission), to assess the probable economic effect of such potential duty reductions on industries producing like or directly competitive articles and on consumers for the purpose of avoiding serious injury to the U.S. economy. In addition, private advisory groups are established to provide the negotiators with policy and technical advice prior to, and throughout, the negotiations.

Negotiated duty reductions which exceed ten percent of the prior rate would be staged over a period of time at an annual rate not exceeding the greater 3% ad valorem or one-tenth of the total reduction.

The President is authorized, as part of negotiated trade agreements, to increase (or impose) rates of duties not to exceed 50% above the column 2 rate existing on January 1, 1975, or 20% ad valorem above the rate existing on January 1, 1975, whichever is higher.

Nontariff Barriers (Title I, Ch. 1).-The President is authorized to enter into trade agreements to harmonize, reduce, or eliminate nontariff barriers and distortions, including subsidies, to international trade in goods and services which he determines are unduly burdening or restricting the foreign commerce of the United States, adversely affecting the U.S. economy, preventing fair and equitable access to supplies, and preventing the development of open and nondiscriminatory trade among nations.

At least 90 days before entering into such a trade agreement under section 102 of the Act, the President is required to notify the House 569-769-75- -30