Trade Agreements in a New World
VOLUME 171
NUMBER 3
MARCH, 1943
86th YEAR OF CONTINUOUS PUBLICATION
by SUMNER WELLES
WHEN this war ends, Europe and much of Asia will be grim places to live in or to contemplate. Starvation, hatred, and disease — the terrible camp followers of war —will be more widespread than they have ever been before in modern times. The people who survive will face the job of making life tolerable again, or even possible.
The rest of the world — the United States, the other American republics, the British Dominions — will by comparison be very fortunate. Blood and treasure we shall have spent indeed, but we shall not, I feel sure, have seen our women and children slaughtered, our industries destroyed, our farms laid waste by hostile armies, our people starved, our brothers held as hostages. The plainest feelings of humanity will move us all to share our relative good fortune with those who stand in dire need of food, clothing, medicine, and shelter.
But relief of this sort cannot go on indefinitely. The peoples of the devastated countries will have to re-create their industries, bring their farms back into production, restore utilities and communications systems, and generally build up again the material foundations of civilized life. For the most part, they will have to do these things themselves. But the basis on which they are able to go forward, and therefore the character of the new world which may emerge, will depend to an important extent on the attitude and policy, especially the commercial policy, of other nations, and in particular of the United States.
If we and the other undevastated countries intend to move consistently in the direction of reducing barriers to trade, then the European countries and the great Chinese nation can move in that direction also and construct their new economies upon that basis. But if we do not have that intention, or if our intention is in doubt, they will have to plan and build for autarchy. It is therefore very important that the people of the United States determine and make clear in the near future their position and intentions in this matter.
The views of the present Administration have been clear since 1934. They are based on the conviction that American international commercial policy, like every other policy and act of the government of the United States, should seek to further, first and all the time, the genuine and long-time interests of the people of this country. Those overriding interests, in the field of foreign policy, are two: a secure and reliable peace, and a prosperous and fruitful world. The Good Neighbor policy; the gradual reduction ol trade barriers; the attempt to prevent the present war, and then to limit its scope, and finally to win it, are all based on these ultimate objectives.
Copyright 1943, by The Atlantic Monthly, Boston, Mass. All rights reserved.
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The first great purpose — secure peace — all Americans accept. The second is important because the first depends upon it, and because our own economic welfare is impossible without it. Naturally it is our own prosperity that interests us most, but modern history has made it clear that no producing and trading nation — not even the United States — can be prosperous in a starving world, any more than a great merchant can be prosperous when his customers and sources of supply are bankrupt.
Furthermore, the world will not be securely free from war until it is prosperous and fruitful. I should be the last to claim that economic causes are responsible, alone, for this or any other war. But surely it will not be doubted that what happened to the German people, and to German labor, and to the German middle class, between 1918 and 1933 had a great deal to do with the creation of the warped mentality that made it possible for a civilized people to accept a warmongering maniac for their leader.
It was therefore not only a humane sentiment, but the soundest considerations of national interest, that caused the President and the British Prime Minister to formulate, and the other United Nations to endorse, the great objectives of the Atlantic Charter: freedom from want and fear. Their common action recognizes that, until both of these freedoms exist throughout the world, neither will exist securely anywhere. It recognizes also that in these two fields the interests of all peoples are the same. We arc in the long run men together, and as men we all need food, shelter, freedom, security and peace. Together, if we are wise enough, we can have all of them; separated by hate and jealousy and war we can have none. The fate of humankind is, in the long run, one.
Once this is understood and acted on, the peoples of the world will have a chance by their own genius and labor to create for themselves and for their children a more fruitful and prosperous civilization than man has ever before known. For the thing that has happened in our time — and which is proved again by the miracle of American industrial production in this war — is that mankind now knows enough of the methods and techniques of production, of scientific agriculture, and of transport, to create from the world’s resources the material basis of a secure and decent life for all of the world’s people. It is because this is true — because of the advances of the last hundred years in all the sciences and techniques of production — that this century may indeed become the century of the welfare of the common man.
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How shall we go about it? Clearly, in cooperation — the coöperation of free people everywhere to the agreed and common beneficial ends of peace, liberty, security, and plenty.
Peace, liberty, and security require political collaboration, through effective common institutions of police, of political adjustment, and of justice. This is not the place to try to draw the blueprints. Assuming they are drawn, and that they operate well enough to enable a major part of the world’s productive powers to be applied to the purposes of peace, what are the other requisites for the plenty which we seek?
Here some definite statements can be made. The world will have, to cat and wear, to live in and play with, only what the world produces. Efficient and continuous production of useful goods and services, wise use and development of resources, and effective distribution and exchange are the necessary bases of freedom from want anywhere.
Production must first of all be abundant. This means that people must be free to work at jobs for which their special skills suit them, according to processes which are themselves efficient, and with efficient tools. Much capital must be supplied, much knowledge spread, much training done, before this will be true.
Second, production, to be profitable and abundant, must be well situated. We shall not grow bananas well in the United States, nor cinchona, nor coffee; nor can steel be made too far from the natural deposits of coal and iron and limestone. The division of production in space, both within nations and between nations, is fundamental to the attainment of the standard of living of which the world is capable. We shall not attain freedom from want anywhere without it.
This seems to be a hard lesson for some Americans to learn. True, we have been more prosperous than many other countries; true, also, we have generally had a high tariff. But the people who connect the two as effect and cause forget the real causes of our comparative prosperity.
Those real causes are not far to seek. We have had first of all an industrious, intelligent, and ambitious people, enriched by all the strains and skills of the Old World, living and working under political institutions that encouraged free development, and with an enormously rich natural environment of continental scope. And we have had, within that great continental area, free trade between the states. The wisdom of the men who helped compose the early bitter trade disputes between the thirteen states by writing the Constitution of the United States and by fighting through the great political battles that led to its adoption, and the wisdom of the judges who used the commerce clause of that Constitution to strike down state-created barriers to trade, have given us the largest and richest free-trade area anywhere in the world, and have made largescale American industrial and agricultural development a possibility. That development is proof, not of the virtues of impediments to trade, but of the benefits of freedom.
Many men in the United States, and substantially all professional economists, have said this often. But internationally we have generally moved in the opposite direction. The total interests of all of our people — farmers, merchants, workmen, manufacturers, consumers— have been too often overlooked. We have built our walls too high, others have retaliated, and the result has been a lower living standard all around, even in our country, than it otherwise would have been.
The economic conduct of mankind is very puzzling. With one hand we expend enormous energies, intelligence, and capital improving transportation, to make it easy and inexpensive to move goods, and with the other we build tariff barriers to slow the movement. Why did we build the ships and dredge the harbors and lay out the railroads and the highways and the airports in the first place? If we really think it mutually beneficial for New York and California to exchange the products of their labor, why do we doubt it as to California and England?
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No responsible statesman has proposed complete free trade for the United States, either tomorrow or in the measurable future. What is proposed, and what a growing number of the United Nations have agreed to seek with us, is “agreed action . . . open to participation by all other countries of like mind, directed to the expansion, by appropriate international and domestic measures, of production, employment, and the exchange and consumption of goods, which are the material foundations of the liberty and welfare of all peoples; to the elimination of all forms of discriminatory treatment in international commerce, and to the reduction of tariffs and other trade barriers; and in general, to the attainment of all the economic objectives set forth in" the Atlantic Charter.
Many things are included in these objectives. The heart of them is increased trade. Production, employment, living standards, the stabilization of exchange, the development of resources, international investment, all depend in the long run on the facilities for moving goods. Unless we can make exchanges of goods freer, other economic measures will fall far short of their objectives.
How do we propose to move from hope to accomplishment? Clearly by a process of negotiation, either between two countries at a time, or many. Neither we nor they expect to act alone, nor could any of us do very much alone. We must first talk together, fix our path in detail, and then go forward according to our various constitutional arrangements to put our detailed agreements in effect.
In the United States, so far as the tariff is concerned, the machinery for negotiation and for action is already in existence. It consists of the Trade Agreements Act of 1934, renewed in 1937 and 1940, under which the President is authorized, by the procedure and within the limits stated in the Act, to enter into agreements about tariff rates, quotas, and the like with foreign governments, and to proclaim the changes in American rates necessary to carry out our part of the agreements. We have been operating under the Act and its renewals since 1934, have made thirty agreements under it, and have accumulated an important body of experience, both as to procedures and as to the tangible and intangible benefits of such a program.
Tariff making is of course within the control of Congress, under that body’s stated constitutional powers to tax and to regulate foreign commerce. But Congress cannot negotiate with foreign governments, and cannot therefore obtain reductions of their barriers by the process of negotiation and agreement. Nor can Congress, with its many other duties, engage in the continuous and detailed studies which are necessary to understand the actual operation of our complicated tariff structure and that of other countries. Accordingly, by the Act of 1934, Congress marries part of its tariff-making power to the President’s executive authority, and authorizes him, within the limits stated in the Act, to make agreements and to proclaim the rates resulting from them.
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The practical operation of the Trade Agreements program is well illustrated by the most recent major agreement made under the Act — the one with Mexico, signed December 23, 1942, and effective January 30, 1943. That agreement reduces, or binds at present levels, United States tariff rates on a number of important products supplied to us in quantity by Mexico, and reduces Mexican duties on many agricultural and manufactured products which we furnish to that country.
Each country grants the other unconditional most-favored-nation treatment, so that in the future we shall receive the benefit, at once, of any tariff reductions made by Mexico in agreements with other countries, and vice versa. The most-favored-nation principle is spelled out in detail in its application to quotas, to exchange control, to purchases by government monopolies, and to other forms of regulation affecting foreign commerce. The specific duty reductions agreed to will, under the Act, be generalized to like articles imported from third countries, in accordance wit h our long-standing most-favored-nation policy. We have, in short, agreed with Mexico to enable trade to move more freely, as natural economies call forth the movement, both between the two countries concerned and between them and other areas.
One great advantage of this sort of negotiation is that it can be conducted now, before the war is over. No one can tell in detail what the foreign trade of any country will be like after this war, but natural resources, climate, and many skills are permanent and condition the main patterns. Agreements based on them cannot therefore be far wrong; and if they err in detail they may be modified under the emergency clause, which is fully developed in the Mexican agreement, or by renewed negotiation.
That emergency clause, plus the general right of either country to terminate the contract at the end of the first three years or thereafter, affords adequate protection against unforeseen developments, and enables the main work to go ahead. It is important that it should go forward now, so that when the fighting stops, the recuperative forces of production and exchange may be able to operate as freely and as rapidly as possible. It is equally important that our intentions for the future should be settled and made clear, so that the rest of the world, and especially those countries which must re-create their business life from ruins, may know what they can count on.
The authority to enter into trade agreements under the 1934 Act is due to expire next June unless action is taken again by the Congress to extend it. The action of the Congress with regard to this matter will furnish a real test of our intentions toward the future. If Congress provides adequate trade-agreement authority, this country will be able to move in the right direction, in concert with other “countries of like mind,” reducing selectively and with regard to all the interests concerned, and by a well-organized and proved process of negotiation and agreement, the multitudinous restrictions that hamper our commerce with the world.
The renewed grant of such authority, by as large and as bipartisan a vote as possible, will settle the main question. It will demonstrate that the people of the United States approve and intend to have their government act in accordance with the promises and hopes expressed in their behalf in the Atlantic Charter, the Declaration by United Nations, and the LendLease Agreements. Once that has been made clear the rest of the world and the executive branch of the government of the United States will know where they stand and the general policy that they can count on. They and we can then go forward, with whatever speed and by whatever detailed methods other developments make possible, to carry out that policy.
The decision about the trade-agreements authority is not the only choice, or the most difficult, that the people of the United States will have to make about the foundations of the peace. But it is fundamental, and it happens to come first in time. Our action on it will be an acid test of our intentions.