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landing them in quantities at 10 to 15 percent less than we could make them.
Imports of woolen textiles jumped from 4,400,000 yards to 12,000,000 yards in 1939 and bankruptcy and disintegration in our textile industry developed to such an extent that there was only barely enough machinery remaining in operation here at the outbreak of the war in operating condition to clothe our Army. We were driven just as tight as we could go, and then we could not at the beginning quite keep up to the Army and Navy needs. Had the same tendencies continued, the same tendencies of disintegration, and had Pearl Harbor come in 1945 instead of 1941, our Army would have gone without enough blankets and enough clothes to cover itself and keep itself
That is what is happening to world industry. I heard someone yesterday take a crack at the woolen industry, and I think it has been quite a target. You know the woolen industry seems to have a higher tariff than other industries, and it looks as if it is way up on stilts. But the woolen industry does not have so much higher tariff when you stop to think that the labor content of a woolen piece of goods is very, very high. The labor content of steel rails is not so high, but a piece of cloth is practically all labor. You have the wool on the sheep's back, and from there on you have the sheep herder, you have the scourer, you have the top maker, you have the yarn maker, you have the cloth maker, and there is very, very high content of labor in a piece of cloth. If our labor is double or triple what it is, you have naturally got to give what looks like a high tariff. But there should not be an analysis of the virtue of any tariff, not by the figures on a piece of paper, but whether or not that industry has got full, free, and fair competition within our own borders. If it is not controlled by monopoly right within our own borders, prices have got to be fair, and in this industry of ours, by golly, we have surely got full, free, and fair competition. Sometimes we think it is too full
and too free. That is all right. It keeps us on our toes to compete, provided that we do not have to compete with nations that pay their girls 5 cents an hour, and that is what I am appealing to you gentlemen for. If you can save us from that, from this unfair outside competition, if we can reciprocate with anybody that use their people fairly, all right.
Whether peace brings another devastating slump or active economic advance will be determined by the decision that we make now. To that end wise trade policies are essential.
We have within our own borders a market for over 90 percent of our products. Our purpose should be to promote a like percentage of home markets for other regions. Let them build up their balanced economy and be 90 percent self-sustaining. You might say that that is going to hurt us. O. K., it is going to help us, and it is going to make a sounder world.
It is a notable fact that the nearer the approach to self-sufficiency, the greater the tendency of that region or federation toward peace. Russia's many states, like our 48 States, come nearer to being a natural self-sustaining regional area, and that has proved to be her salvation in this war.
A balanced economy with home production and home markets tends to make a nation peaceful, contented, and nonaggressive toward others, but powerful in defense. An unbalanced economy and excessive reaching for foreign markets has been a fertile cause for wars throughout history. Decisions, it seems to me, should not be made in secret on matters affecting the livelihood of so many people and should not be left in the hands of any one man or commission or bureau, but should be a matter for the elected representatives of the people to pass upon, and I know they say, "Oh, yes; that goes back to the old logrolling and brings out a lot of evils.". It probably does, but I wonder if those evils are as vicious as the evils of clamping down a lower tariff and ciestroying the protection of an industry, and that industry does not learn of it, by golly, until it hears of it through London. Should it be done in secrecy from ourselves, our own citizens, and should we learn it from abroad? Logrolling, the man in the South says—“Well, now, you fellows down east vote for my bill and I will vote for yours, and that is the vicious, the so-called vicious system of logrolling. But is that not reciprocity? And what helps the South helps the East, and what helps the East helps the West. "What helps any section helps the whole country.
I think logrolling is sometimes the finest kind of reciprocity. I should like to suggest an amendment to the effect that no increase or decrease of more than 25 percent-not 50 percent, certainly not 75 percent—but 25 percent from the basic tariff law shall be made without the consent of the Senate. If they want a little trading basis for 25 percent, if the psychological idea of renewing these reciprocity treaties is good-I think it is good, I think we would be criticized all over the world if we did not make some gesture toward a renewal-but let us keep down the amount that the State Department, which is not in close touch with our business economy, our domestic business economy, let us keep down the amount by which they can trade.
The President should also seek in addition to the advice of the Tariff Commission the advice of the Department of State, of Agriculture and Commerce, and of the Senate. This is with the thought of eliminating the shock of so drastic a cut in tariffs as the present 50 percent. Any approach to lower tariffs should be as was our approach to Philippine independence, gradually over a period of years of adjustment.
Another important modification that should be made is that the hidden advantage gained by currency depreciation by any foreign nation shall not be allowed to exist.
And a nation that vields nothing should not be allowed to come in under the umbrella of a grant to a nation that reciprocates. This is insincere and dishonest. Correspondingly, we should grant increasing sufferance to any nation that undertakes to shorten the hours and raise the wages of its workers, gradually coming up to our level.
Broadly speaking, the greatest service we can render to any of our world neighbors is to encourage them to build up their own balanced domestic economy. In colonial times in America and even todav in some empires local industry has been discouraged or forbidden. This is not conducive to world peace or sound world economy. All the rubber in the world should not come from some tightly controlled cartel in the Indies: nor all the dvestuffs from some similar monopoly in Germany; nor all the woolens from Yorkshire; nor all the gadgets come from America. Such would be the result in today's world were all tariffs barriers removed, and worldwide free trade immediately launched. Certain groups or nations would surely monopolize production of certain items. World production would be concentrated in definite section or segments.
A segmented industrial or agricultural society on a world basis is unsound and uneconomic. This Reciprocity Act should be the instrument of breaking down segmented economy or monopolistic economy, whether on the part of regions or as a result of cartels. It should be made the instrument of promoting many small and independent farm and industrial enterprises in all nations; not a mammoth and monopolistic silk industry in Japan, and none elsewhere; 'or textiles in Britain, and none elsewhere; or optical goods under a joint cartel in Germany and America, and none elsewhere. We saw in Germany the destruction of small, independent business. We saw the destruction of democracy in Germany. They said: “Let's get one joint cartel,” under the leadership of Mr. Thyssen, and then the first thing we knew he had 300,000 workers and he thought he was doing a swell job, but the next thing we knew Mr. Thyssen's business was taken over by the Nazi state, that tremendous concentrated industry, was taken over bodily by the state. We don't want that here in America. We don't want it anywhere in the world. We want the promotion and the preservation of small, independent farmers, small, independent businesses, and we could use this Reciprocity Act to promote that principle, and against the concentration of industry, whether it is here or whether it is abroad. The corrective powers inherent in the act of increasing tariffs, should be used as well as the powers of decreasing tariffs. Under the joint cartel between Germany and America we were made to pay $25 for a pair of glasses that, it is reliably reported, can be made and marketed for about $7.50. While the corrective powers inherent in the act could be used to increase tariffs as well as to decrease tariffs, I don't recall that there has been a single instance of the tariff being increased.
Before this war we had a lot of unemployment here. Had we been a little more foresighted and built up our synthetic-rubber industry while our people were unemployed, we would have put people to work and we would have guarded against what has happened to us in this war. We could have done that under a properly constituted tariff act by putting some sort of tariff on rubber and promoting the building of the synthetic-rubber industry when we really needed a place to put our workers.
We see a right start being made in the promotion of a steel plant in Brazil and in the Argentine, and Australia building upon their textile industries. We should do everything we can to make these tendencies grow. Wise reciprocity will have to be supplemented by a wide lend-lease policy projected for post war rehabilitation. As we help our neighbors become more self-sustaining we make of them better customers. We will thrive and the world will prosper as their economy becomes better balanced.
One fallacy behind the present Reciprocity Act as it has been administered has been the reasoning of the tariff committee as I observed it at their hearings. They say, “All right, suppose we do sacrifice the textile or the pottery or other American industry by buying cheaper abroad, we turn around and sell them autos and gadgets. Let's allow each nation to build up that for which it is best
fitted and swap with each other.” That is the line of reasoning that they follow.
Upon such thinking it built the destruction of independent small business and the demise of small family farms, and the crucifixion of labor, because such a program when developed is the very seed and fruition of cartels and private and state monopolies and totalitarianism.
The colonial plans of the British Empire have been that Britain should make for the Empire the steel products, the textiles, and the manufactured articles. Cotton mills in India were frowned upon. Manufacturing elsewhere than in England was discouraged. I understand that back in the time of our own Revolution, one cause of the Revolution was that we could not even make horseshoes here. That was their policy at that time. Contrast this with the American policy of development of the Philippines and help to Cuba.
Nazi Germany's master plan follows the imperialistic philosophy, with all Europe's chemical and technical and industrial life to be centered in Germany, and Russia and the rest of Europe to become peasants.
This is not the American way, or the way of social progress for humanity, or the way of world peace. We know from our own experience the evils of a one-crop farm program for any region, or a one-industry set-up for any city. Yet failure to educate and guide communities or nations to plan to avoid this tendency leads to distress on a local scale and wars on an international scale. Absence of properly designed protection or the immediate proclamation of unlimited world free trade would open the door to concentration of industry in low wage countries, and specialized agriculture in delimited areas—the Nazi-totalitarian-monopoly system. You would not have any textile industry left in this country. You might just as well face that situation. If this reciprocity continues as it is, our textiles will all have to move to England, or more likely to Japan. I may be wrong, but that is the way it looks to me.
Under no consideration should concessions be made on products made here or abroad controlled by monopoly whether state or private, domestic or foreign. This should be written into the law.
Under no consideration should protection be granted to any products unless within our borders there exists in the production and sale of these products full, free, and fair competition; and where such full, free, and fair competition does exist within our borders full protection should be maintained and provided to American standards and wage levels. This should be written into the law.
The kind of reciprocity that we don't want was illustrated last week in testimony before the House Appropriations Committee reVealing a cartel agreement between the British Imperial Chemical Co., and the American du Pont Co., whereby the two huge companies agree to divide the world markets, with du Pont holding exclusive rights in the U. S. A.
A pact that operates to flood our neighbor's market with the products of our monopolistic business in such a way as to ruin his small business is a disservice to him and to ourselves.
I maintain that the objectives of the Reciprocity Act should be more clearly stated and defined; that the limits should be circumscribed in some details and amplified in other respects; and that the ratification of any trade pacts should be in the hands of the elected representatives of the people.
Specifically the suggestions I should like to offer are:
1. The act, at present inoperative because of the war, should be allowed to expire, so that we may be free to meet conditions facing us at the war's end. That doesn't mean that we should not have any reciprocity. I believe we should, but I believe it should come at the end of the war, based on conditions as we find them then.
Or if it should be decided for any reason to continue the act, sentimentally or psychologically, on account of our relations with other people, in that case the decisions should not be made in secret, and should be ratified by elected representatives of the people.
No cut of more than 25 percent from basic rates should be made at least, without the approval of the Senate.
Hidden advantages gained by currency depreciation should not be allowed to persist.
No concessions should be granted or accepted that fail to provide adequate protection to American wage and hour levels, or that will bring distress to small, independent businesses or small farmers here or abroad.
The preamble is outdated, and I propose changing it so as to emphasize the purposes I have outlined.
Now, I will not bore you with reading the corrections. They are a matter of record in my brief, but I would like to read, if you please, the short paragraph which may be substituted for the preamble:
For the purpose of aiding post-war recovery and promoting the world-wide welfare of labor, homestead farmers, and small business, and checking the growth of monopolistic practices by regulating the admission of foreign goods into the United States, the President, whenever he finds as a fact that any existing duties or other import restrictions of the United States or any foreign country are unduly burdening and restricting the foreign trade of the United States and that the purpose above declared will be promoted by the means hereinafter specified, is authorized from time to time and so on.
The law as now enacted, with one or two slight exceptions.
Mr. REED. I want to congratulate you, Mr. Gaunt, upon the very fine statement you have made. Yesterday we had presented to us a paper by the Business Advisory Council for the Department of Commerce, and I had the names put in the record, because they are very outstanding industrialists of this country, and men quite largely engaged in the export business. I notice many of the names I think I could claim as personal friends.
I want to ask you if you are appearing here-apparently you are as representing or speaking as one of the small businessmen, so-called small businessmen of the country? Do you have a comparable organization to work with the Department of Commerce in any way? Do they have a business advisory council that speaks for them!
Mr. Gaunt. Unfortunately they do not, Mr. Reed, and the composition of the so-called Business Advisory Council, a lot of fine, splendid men, is predominantly big business. You may remember the 1938 conference of small businessmen here in Washington.
Mr. REED. I remember it very well.
Mr. Gaunt. And at that time, at the request of the President, as I understand it-certainly at the request of Secretary of Commerce