I just stumbled across an article by Kerry Chase of Tufts that describes what he calls the “mysterious origins” of GATT Article XXIV. It appeared in World Trade Review in March 2006. The abstract:
The GATT treaty’s loophole for free trade areas in Article XXIV has puzzled and deceived prominent scholars, who trace its postwar origins to US aspirations to promote European integration and efforts to persuade developing countries to endorse the Havana Charter. Drawing from archival records, this article shows that in fact US policymakers crafted the controversial provisions of Article XXIV to accommodate a trade treaty they had secretly reached with Canada. As a result, the free trade area exemption was embedded in the GATT-WTO regime, even though neither the Havana Charter nor the US-Canada free trade agreement was ever ratified.
Intriguing. Anyone familiar with this claim?
[The author’s book on the political economy of trading blocs also looks interesting.]
[Table 1 summarizes what Ben discussed here. The WTO has not adopted a single report on FTAs or CUs.]
Trade Diversion 
Hi,
On the existence of the secret FTA, here is what I say in my 1997 “Domino Theory” paper in World Economy:
” In March 1948, the two nations concluded a secret draft protocol eliminating most tariffs and quotas bilaterally, but this was ultimately rejected by the Canadians (Smith 1988, p.39; Wonnacott 1987 p.15). ”
The folklore is that it was Britain who insisted on it for the Commonwealth Preferences, but my guess is that — as usual — there was a myrid of interests and Art. 24 was the language that got the deal done. US was interested in European Economic Integration. Marshall Plan “was developed at a meeting of the participating European states in July 1947” and some form of FTA was clearly part of the plan, but mid-47 is a bit late for GATT, but maybe the July 47 meeting drew on early work done by US during the war. The Secret agreement also seems ex post facto, but again maybe it was anticipated; surely it was not struck overnight. Lots of strange things happened during the war; remmeber when Churchhill proposed a union of France and Britain as the Nazis were marching in?
References
Smith, M. (1988), ‘The free trade agreement in context: A Canadian perspective,’ in The Canada-United States free trade agreement: The global impact (Washington: Institute for International Economics).
Wonnacott, P. (1987), The United States and Canada: The quest for free trade, (Washington: Institute for International Economics).
Oh, by the way, I completely agree with Chase’s assertion that the US was not a paragon of multilateral virtue. In my 1997 article I argued that the US had always been interested in bilaterals — the only trouble was that the natural partners, Mexico and Canada, were afraid of free trade with their big neighbour.
Here is my potted history from the 1997 article (you can find it by googling: domino theory baldwin)
“The US and Canada have a long history of bilateral trade talks, with major deals struck, or almost struck in 1854, 1874, and 1911. Yet even since the GATT was signed, the US has almost continuously sought to liberalise bilateral trade. In March 1948, the two nations concluded a secret draft protocol eliminating most tariffs and quotas bilaterally, but this was ultimately rejected by the Canadians (Smith 1988, p.39; Wonnacott 1987 p.15). In 1958 US government procurement was preferentially liberalised in Canada’s favour by the Defense Production Sharing Agreement (this was linked to Canadian purchases of US arms). In 1965 the Canada-US Auto Pact was signed, granting duty-free treatment to a wide swath of bilateral commerce, namely trade in automobiles and parts.
After failure of the 1948 effort, US interest in an across-the-board free trade agreement with Canada only re emerged in 1974, when Section 612 of the Trade Act of 1974 authorised the US President to negotiate an FTA with Canada. Interestingly, this came soon after an ambitious agenda had been agreed for the Tokyo Round. Also just as the Tokyo Round was winding up, Congress further probed the possibility of a CUSFTA. The Trade Agreements Act of 1979, section 1104, required the President to study “the desirability of entering into trade agreements with countries in the northern portion of the western hemisphere” (Wonnacott 1987 p.19). The resulting report to Congress, USTR (1981), found that the Auto Pact had worked well and that “further opportunities to rationalise industries through freer trade should be explored.” According to Wonnacott, the governments agreed upon four sectors for negotiation, but talks never began. At about the same time, Ronald Reagan espoused North American free trade in his 1980 Presidential campaign.
This long-running US interest in regionalism was rejected by Canada until the mid-1980s (Whalley 1993 p.369; Schott 1987 p.16; Hufbauer, Schott and Clark 1994 p.98). An FTA had long been the bête noir of Canadian politics, pitting commerical export interests against Canadian fears of economic/cultural domination by its giant neighbour. Ottawa’s policy, in fact, systematically deterred US involvement in Canadian industry, natural resources and media. A major factor in Canada’s conversion to the FTA idea was the 1980s rise in US protectionism (Smith 1988 p.41; Wonnacott 1987 p.17; Schott 1988 p.29). Indeed, countervailing duties and other unfair trade remedies were a central Canadian concern in CUSFTA talks. The Canada-US FTA started formally in September 1985 with Prime Minister Mulroney’s proposal (President Reagan accepted in December 1985). Despite their economic and institutional similarity, the success of the 1965 Auto Pact, and the low initial level of US and Canadian tariffs, the talks proved difficult (Bello and Winham 1992). CUSFTA entered into force only in January 1989. ”