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In the same document we have also expressed our approval of a “permanent system of general security." To establish world order there are three basic requirements that must be met, an expansion of world trade, collective security, and a means of arbitrating disputes so that injustices and inequities may be settled without resorting to war. It is in relaionship to these general principles that the Trade Agreemehts Act must be evaluated for the future.
THE EXPANSION OF WORLD TRADE
Natural resources in a dynamic industrial world civilization are constantly changing as new inventions occur; old resources are rendered obsolete and new ones created. At the same time the need for a larger variety of resources in industry makes access to them essential for all nations wishing to advance the level of living of their people. Because many of these essential resources are extremely localized no possible system of equal access can be devised by changing national boundaries or by migration. Population is not closely related to resources existing within national boundaries and there are and always will be "have" and "have not" nations and areas. When we contrast this Nation with any other (except possibly Russia) we have a small percentage of the world's population and a large percentage of the world's resources. Equality of access to natural resources, therefore, can only be given meaning in terms of an expanding world trade and elimination of barriers.
One of the major fears of agricultural groups in this country is that in this elimination of trade barriers the United States will be subject to floods of farm products from Latin America and Canada. However, as was pointed out in part II, where tariffs have been lowered on competing products, our market has been protected by quotas and seasonal limitations. In general we might say that in our hemisphere agreements, present policies have been realistically based upon a recognition of the dependence of Latin America upon European markets and the necessity of expanding world trade. Secretary Hull has insisted on including the unconditional moșt-favored-nation clause in all but one of the reciprocal trade agreements and Vice President Wallace has repeatedly emphasized the necessity of solving our economic problems on a world basis. This is good as far as it goes, but we must recognize that we must go much further if the needs of consumers in Europe and producers in this hemisphere are to be met. The major source of economic friction within the hemisphere lies in the competitive nature of nontropical agricultural products. This friction can best be removed by an expansion in the shipment of these products to Europe. To what extent this can occur will largely depend upon the degree to which European agriculture can be rationalized and adapted to a higher level of diet and to the extent that urban purchasing power can be maintained or increased. Our action must, therefore, be directed to supporting those policies which will increase purchasing power in Europe and assist in rationalizing agricultural production. These two policies must go hand in hand because the agricultural problem in Europe cannot be solved without an expansion of employment opportunities in industry. Capital loans for reconstruction from an international bank may play an important part in rebuilding European production and maintaining our own output of capital goods and domestic purchasing power.
No movement to expand world trade as outlined above can hope to be successful in solving our agricultural problems unless we also develop an effective system of collective security. Trade means interdependence and interdependence means insecurity unless it is offset with guaranties that will effectively outlaw aggression. At the same time trade so binds nations together that they are drawn to accept their responsibilities of maintaining peace in the world at large. Collective security without an expansion of world trade would tend to stabilize inequalities and privilege so that pressures would develop which might destroy the possibility of maintaining world peace because all nations needing access to raw materials might be forced to combine against the system of control.
THE ARBITRATION OF DISPUTES
After this war it is impossible to conceive of an ideal "just" peace that will solve all conflicts and problems. The dynamic nature of an industrial civilization excludes any stable series of economic relationships over time. Collective
security means protecting the status quo from change by violence. There must, therefore, be established alternative methods of moving to greater justice and equality. This may be through arbitration and a world court that will interpret agreements and develop a body of international law. In the case of a nation that feels its present position is unjust there must further be developed a system of modifying present agreements and laws. This is the essence of democratic justice which is not an ideal but simply a process by which we adjust to changing concepts of justice as held by the people and necessitated by dynamic changes. Blueprints range all the way from Federal Union to a series of commissions handling special problems-a reorganized League of Nations without the unanimity clause and with collective sanctions and power over economic affairs holds an intermediate position between the two extremes. It seems highly probable that a United Nations Council will establish both collective security and postwar economic adjustments. Out of this informal cooperation will develop the more formal and permanent organization.
Any international organization aiming at establishing collective security, democratic justice, and freedom of access to markets and natural resources must attain these minimum economic requirements: 1. Control over international exchange rates of currencies and international
capital investments. 2. Control over international cartels and raw materials. 3. Elimination of mass unemployment, post-war inflation, and world depres
sion. 4. Techniques of reducing tariff and quota barriers to world trade that will
cushion shocks resulting from adjustments so that a political swing
back to economic nationalism is avoided. These are minimum requirements and, when we consider the necessity of prosecuting them at the same time and the fact that they are all interdependent, the difficulties we face become apparent. Add to these problems the integration of internal and foreign economic policy and the political and cultural conflicts that exist and the pessimist may well shrug his shoulders and say "what's the use." The fact that the alternative is a return to world anarchy and war leading to rule by an authoritarian power complex does not eliminate the problems. The problems will be solved and the question is whether we solve them now on a democratic basis or go through a new collapse and chaos to solve them later. We could have solved them after the last World War but we did not. Whether we will solve them (or establish effective means of progressively modifying them, which is, of course, all we can expect) after this war may well determine the course of history for the next century.
INTERNATIONAL EXCHANGE AND CAPITAL LOANS The stabilization of exchange rates and the development of means of adjustment over time will be one of the most urgent and pressing problems in the postwar world. Competitive devaluation of currencies in frantic efforts to increase exports and curta il imports inevitably leads to retaliation and chaotic conditions. An international commission of experts should be developing acceptable plans now in order to avoid the development of competing currency blocks. The almost complete disruption of normal world exchange and the development of war controls lays a foundation for a comprehensive plan which could be put into operation as more normal relationships become possible.
The development of capital loans for reconstruction and industrialization has already developed between the United States and the other American republics and the Inter-American Bank may well become a unit in a world organization. The necessity of devising means of allowing capital investments through national rather than private agencies is based upon the need to allow the recipients to retain the ownership of their resources. Investments by private corporations directed at the exploitation of natural resources does little to raise the level of living of the people when the ownership of these resources passes into the hands of foreign investors. This has been clearly revealed in the case of oil in Ecuador, Venezuela, Mexico, and other countries. A second important factor is that private capital is seldom interested in long-term investments abroad when the rate of return is low. A third factor is the political importance of such loans, which may bear no relationship to either risk or interest rates. The fact that these factors have been recognized in inter-American affairs is encouraging, and our experiences
in this hemisphere help to lay the foundations for intelligent participation in a world organization.
RAW MATERIALS CARTELS
International cartels have developed in many areas, and, in some cases, with active Government participation. The necessity for management in such products as rubber, tin, manganese, aluminum, sugar, coffee, wheat, nickel, etc., will exist after the war and purely producer interests must be replaced by a combination of producer and consumer interests working together under Government auspices. Many detailed plans have been suggested from international commodity commissions with rather complete control to mutual national agreements reached between nations as in the case of the recent wheat agreement. All partake of one basic characteristic in that they are under Government control and not in the hands of private corporations. In this field there will be determined attempts by private interests to restore their privileges after the war. Such attempts may best be avoided by making commodity marketing plans now that will bind participating nations to continual collective action in the future. The wheat agreement is a good example of this technique.
MAINTENANCE OF EMPLOYMENT
No post-war plans will have much chance of success if we are again plunged into a world depression. When this occurs, nations act to solve internal problems first and fail to realize that in many cases such actions are only palliatives. This is a logical result of a lack of understanding of the relationship of national to international welfare. On the national level we are now making plans for adjusting our war economy and to the extent we are successful the easier it will be to make adjustments on the international level. At the same time international actions which will expand world trade will be extremely important in making internal adjustments more rapid and permanent. Capital loans abroad for farm and other machinery will provide more employment in our capital-goods industries and for a period of 2 years we may need to retain some controls to prevent inflation and short-run scarcities. Here again internal and external policies must be harmonized.
One of the most difficult problems we face is the development of techniques that will permit further reductions in tariffs. Opposition to extension of the Reciprocal Trade Agreements Act is already developing in this country. We can be sure that interests representing sugar, beef, wool, manganese, synthetic rubber, and other protected commodities will again press for high tariffs regardless of the effect of such actions on international trade and world relations. Similarly members of the British Commonwealth of Nations will be loathe to leave a system of Empire preference until they are reasonably sure that we will pursue a liberal trade policy over time and' not suddenly revert back to economic nationalism. The logical solution is to develop further trade agreements now and to establish machinery which will make it possible for other powers to appeal against nationalistic actions damaging to world trade. The problem lies in determining how much international control is expedient with present and probable future public opinion. If we can learn anything from history it is that more can be achieved now than can be achieved 6 months or a year after the war is
THE TRADE AGREEMENTS ACT
Because of the vital part that freedom of access to markets and raw materials plays in the whole complex scheme of international cooperation, our refusal to renew the Trade Agreements Act would be a repudiation of our commitments to world order. This would not only be disastrous for the future but might endanger cooperation in the present. We must accept now the basic fact that tariffs are not solely a national affair because they may disrupt the economy of other nations. Not only should we renew the act but we should also remove those restrictions which prevent it from being of maximum use both during the war and in establishing a sound economic basis for world peace.
If we are to cooperate with other nations in a general downward revision of trade barriers our representatives should not be limited to a 50-percent reduction from the Smoot-Hawley rates. This is the greatest weakness of the present act. For those who fear that such powers, delegated to specialists, might result in serious harm to some group of producers in this country, there is the history of 9 years of experience. Those responsible for formulating agreements have never lost sight of the problems of domestic producers. Indeed, many economists feel that too much attention has been paid to producers and too liule paid to the consumer. We will be forced to make choices and we must choose on the basis of general welfare and world cooperation rather than take the risks involved in economic isolationism that merely benefits a few special groups of producers. As we appraise the effect of reductions in our tariffs on producers and consumers in this country we must also appraise the effect of lower tariffs in European countries on our own exports of industrial and agricultural products.
In addition to removing the limitation on revisions the act should permit the reciprocal reduction of tariffs in conjunction with any international economic commission of which we are a member. After the war tariffs will be reduced by one of two ways; by outright abolition and the establishment of a free trade world, or by collective agreement between nations. If the former occurs, we have no further use for the act. Although abolishing tariffs altogether would be simple and most effective, many countries might fear that it would lead to too rapid and drastic changes and prefer a more moderate approach. In this case our experience through past agreements has provided us with techniques and information that will be invaluable at a world conference table.
In conclusion, it should be pointed out that the change from a normal economy to one geared to war is one example of an amazingly rapid adjustment that has taken place. Our post-war adjustment back to a peacetime economy will involve just as drastic adjustments but no one goes around saying it cannot be done. It bas to be done and it will be done. Compared to that adjustment, the complete abolition of all tariffs would be but as a ripple to a ware. To agriculture the maintenance of full employment and industrial purchasing power is infinitely more important than the maintenance of tariffs.
Many of the problems that agriculture has attempted to solve in the past, through high tariffs and curtailed production, can better be solved through low tariffs and expanded production. In this case, however, there must be more than just tariff reductions. These must be associated with collective security and international law because economic cooperation creates interdependence. Also tariff reductions essentially only represent the negative side of international economic cooperation. Agriculture will gain much from the positive programs previously outlined. Agriculture might well support such positive economie programs as exchange stabilization, an international bank for capital loans, commodity marketing agreements, and measures to maintain employment during the adjustment period.
1. In an industrial civilization freedom of access to raw materials and markets is essential to maintain or raise the level of living of the people.
2. Access to raw materials and markets is, therefore, a basic requirement of world peace and we have given our approval to this concept in the Atlantic Charter.
3. Lower tariffs are essential to stimulate world trade which is the only way in which access to raw materials can be made a reality.
4. International trade means interdependence and world trade must therefore be associated with collective security and international law.
5. The refusal to renew the Trade Agreements Act would be a repudiation of our commitments to world cooperation.
6. The act should be amended to remove the 50-percent limit if it is to be valuable in developing post-war economic cooperation.
7. The act should also permit general tariff revisions in cooperation with any international economic commission of which we are a member.
8. The adjustments from a war to a peace economy will be infinitely greater than any which would result from abolishing all tariffs.
9. Agriculture should press for positive measures to restore world trade and maintain purchasing power; such measures might include currency stabilization, an international capital loan bank, marketing agreements, and measures to maintain full employment.
TABLE 1.-Principal concessions made on Argentine agricultural imports into the United States, effective Nov. 15, 1941
(Source: U. S. Department of Agriculture, Foreign Agriculture, vol. v, No. 11, pp. 452-455)
19 Casein or lactar- | 242 cents per 572 cents per 52 cents per 2% cents per
lorem plus im- lorem plus im-
20 percent ad va- 10 percent ad va-
lorem plus im. lorem plus im-
of 244 cents per
port excise tax cents import ex-
port excise tax cents import ex-
pound. 701 Oleo stearin 1 cent per pound.- 1 cent per pound.. | 1 cent plus import 42 cent plus 142
excise tax of cents import 3 cents
United States duty
of 3 cents per
pound. Footnotes at end of table.