To give one example, in January 1952, the government of the United Kingdom was forecasting a balance of payments deficit for 1952 of about £500 million. The Chancellor of the Exchequer circulated a top secret Cabinet memo which declared: “The gold and dollar reserves continue to fall at an alarming rate... unless we tackle this situation... by the middle of the year we shall not be able to hold the pound at $2.80... Unless we stem this tide, it will swallow us up, and we shall reach a point at which we can no longer buy the basic food and raw materials on which this island depends...” (Butler, 1952). By early March, the UK suspended or restricted imports on an enormous variety of foodstuffs and manufactured goods - including cheese, cloth, dishwashing machines, roof tiles, metal buckets, fish hooks, and umbrellas - with the objective of reducing imports in 1952 by “about 10 per cent of the value of imports in the year 1951.” (UK, 1952) Figure 14 presents data on the number of import restrictions necessitated by BOP problems between 1950 and 1959.<sup>79</sup> While the absolute number may be small in any given year, the actions taken as a fraction of the total GATT membership at the time were sometimes substantial. For example, in 1952, _nearly half_ of the initial 23 GATT Contracting Parties - Australia, Brazil, Chile, Finland, France, New Zealand, Pakistan, Rhodesia, Sweden, South Africa and the UK - imposed import restrictions for balance of payments problems.

# **4.3.2 Japan’s GATT accession and the ‘temporary’ Article XXXV exception**

Two major economies were not included as part of the original 23 Contracting Parties that negotiated the launching of the GATT at the end of World War II - West Germany and Japan. Both were eventually allowed entry - West Germany acceded in 1951 and Japan acceded in 1955.<sup>80</sup> However, Japan’s accession to the GATT, and its re-industrialization and export-led growth strategy, led to a major period of adjustment for many other GATT members. Indeed, upon Japan’s GATT entry in 1955, more than 50 countries invoked the GATT’s Article XXXV exception which allowed them to refuse to apply the Agreement’s legal obligations to their trade with Japan. The implication was that most of the GATT membership set a higher tariff on imports from Japan, even after it joined the GATT, than the MFN tariff they applied to imports from all other members.<sup>81</sup> The length of this temporary non-application of the GATT varied substantially. Australia, Belgium, France, Netherlands, and the UK did not recognize Japan’s full membership into the GATT for nearly a decade (until 1963 or 1964). Others did not revoke their Article XXXV exception, and thus reduce their tariff on imports from Japan to MFN levels, until the 1970s or later.

> 79These data on the number of reports to the GATT of import restrictions necessitated by BOP problems are collected from the GATT Digital Archive.

> 80As we have already discussed, during the period in which West Germany was becoming a formal part of the GATT system, it was also involved in substantial efforts at Western European integration, including the ECSC in 1951 and the 1957 establishment of the European Economic Community and customs union. See again Section 2.3.

> 81On the other hand, Japan did not invoke the Article XXXV exception and thus granted MFN tariff treatment to all GATT members, including the ones that invoked Article XXXV.

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