A third international multilateral economic organization was deemed necessary for the regulation of trade, including areas such as tariff reduction, business cartels, commodity agreements, economic development and foreign direct investment. The idea of such an international trade organization was first mooted in the US Congress in 1916 by Representative Cordell Hull, later Roosevelt’s first Secretary of State in 1933.
In 1946, the US proposed to the United Nations Economic and Social Council (Ecosoc) to convene a conference to draft a charter for an ITO. The US State Department prepared a draft charter for the UN Conference on Trade and Employment. US officials then made significant concessions to accommodate ‘underdeveloped’ countries. Underdeveloped countries then were generally unwilling to guarantee the security of foreign investments, widely seen as a means for foreign exploitation.
The Havana Charter’s rule that the foreign investments could not be expropriated or nationalized except with “just”, “reasonable”, or “appropriate” conditions was seen by US business as weakening the protection that US investments previously enjoyed. US concessions on the use of quantitative restrictions for economic development were also seen as undermining free trade. Thus, the Havana Charter lost crucial support from US business.
However, by 1949, US political elites and corporations believed that American interests and investment interests were not well protected by the Havana Charter. What had begun as an American project was out of control. Thus, the Republican-dominated Congress opposed ratification. What seemed a certainty only months earlier, ended in failure by December 1950.
Thus, the ITO did not survive American trade politics despite initial US sponsorship and signing the Draft Charter in Havana. A coalition of protectionist and ‘perfectionist’ critics of the Charter convinced President Truman to withdraw the draft treaty from Congress, reneging on his administration’s undertaking to support the ITO.
Different Trade Order
Clearly, this strong commitment to achieving full employment was the glue for the post-war global consensus underlying the new post-colonial economic multilateralism. This global new deal became the basis for the post-war Keynesian Golden Age quarter century when inequality declined among nations as well as within many economies.
Negotiators at the Conference recognized the need for domestic and international measures, including international policy coordination, for “attainment of higher living standards, full employment and conditions of economic and social progress development”, as envisaged by Article 55 of the UN Charter. Security of employment would have become a critical international benchmark for international trade promotion. Thus, the ITO’s collapse represented a significant setback to prioritizing full employment, accelerating the transition to the imperial ‘free trade’ canon.
Richard Toye, a leading economic historian, has suggested a different order had the ITO survived: “The ITO might have been a more attractive organization for underdeveloped countries to join, which might, in turn, have promoted less autarchic/anarchic trade policies among them with additional growth benefits. This development might, in its turn, have given a further boost to the impressive post-Second World War growth in world trade … At the same time, the Havana charter’s exceptions to free-trade rules, especially those made in the interests of the economic development of poorer countries, might have helped to reduce global inequalities.” Thus, the ITO could have enabled a more inclusive, productive, orderly and just world economy.