Political and Economic Solidarity of the Americas


By LAURENCE DUGGAN, Adviser on Political Relations, Department of State

Delivered at a luncheon of the Foreign Policy Association, New York City, November 2, 1940

Vital Speeches of the Day, Vol VII, pp. 124-128

A DECADE ago, if you had been told that within a few years the 21 independent republics of this hemisphere would have agreed that a threat to the peace, security, or territorial integrity of any one of them was a threat to all and that to repel this threat they would cooperate together, you would probably have branded this person as a confused and impractical visionary or an irresponsible scaremonger—a visionary, because the history of intervention on the part of the United States and the territorial conflicts between pairs of countries had made impossible agreement on any platform of hemisphere solidarity; a scaremonger, because the skies were clear of trouble, although from time to time a cloud, perhaps no bigger than a man's hand, appeared on the horizon.

Daring the kaleidoscopic developments of the last few months, did you ever stop a moment to consider what the predicament of the United States would be if, instead of friendship with our southern neighbors, we had their suspicion or hostility.

Only a few days ago, the Secretary of State in a public address said that only once before in our national existence has as grave a danger from without threatened the Nation. This danger would be more acute by many-fold if our relations with the other American countries were as deplorable today as they were 10 years ago. Happily they are on a more friendly basis than at any time since the days when Henry Clay was making eloquent speeches in the House of Representatives pleading for the recognition of the independence of the republics which, after heroic efforts reminiscent of our own Revolution, had thrown off Spanish control.

It is not pertinent to the subject of this meeting to discuss how hemisphere solidarity came to pass. It was the result of the far-sightedness and patient efforts of many people in each one of the 21 countries. But, before entering upon a discussion of what it is and how it operates, it might be in order to point out that this solidarity could be lost overnight, if the United States were to revert to the policy of the "big stick," "dollar diplomacy," and intervention; in other words, if we again undertook to dictate to the other American countries how they should run their own affairs. This would mean the end of the good-neighbor policy because that policy is based upon the recognition that each of the 21 countries is an equal partner entitled to full respect in the American community of nations. To fortify their determination in this regard, the 21 countries have engaged never to intervene directly or indirectly in the internal or external affairs of any of the other countries. This country has scrupulously respected this commitment in small as well as large ways. It has modified prior existing treaties in order to bring them into conformity. It has hewed to the nonintervention line in all of its actions. I make particular mention of this because intervention and hemisphere solidarity are incompatible. If the people of this country prize the friendship of the other American peoples, then their Government must base its relations on recognition of the equality and inviolability of the sovereignity of each of the 21 republics.

Let us consider first the political aspects of hemisphere solidarity. For machinery, there exists the consultative procedure developed at the successive Buenos Aires and Lima conferences. The American republics have undertaken to consult with one another whenever the peace or security of the Americas is threatened either from within or without.

At Lima it was agreed that a "threat" to the peace included threats of all kinds, not those merely of a military character; that consultations might be initiated by any country; and that the consultations were to be attended by foreign ministers or their representatives.

This machinery has been thought by some inadequate and cumbersome. They have urged a more precise definition of the conditions under which meetings should be called, of the procedure of the meetings, and of the commitments to be entered into under this or that contingency. They have urged an international covenant, spelled out to the last detail. It is perhaps sufficient to observe that the practicability and efficiency of the present arrangement have already been proved. Two meetings of foreign ministers have been held. The first was convened at Panama within three weeks after the outbreak of the war in Europe. The second was held at Habana within a short time after the rapid developments in Europe held forth the possibility of a transfer in sovereignty or control of certain European possessions in this hemisphere. Both of these meetings achieved the purposes for which they were called. In the face of emergency conditions, the 21 countries met, worked, and agreed upon several decisions and procedures of the first importance. This demonstrates that the consultative machinery corresponds to necessities and realities. It has worked, and worked well, although it doubtlessly will be improved upon bit by bit as experience points to the desirability of changes.

At both the Panama and the Habana meetings, it was the unanimous determination of all the countries to prevent, by any overseas power, interference in their own affairs or any attempt to dominate by force, by economic duress, or by any other means any portion of the New World.

Two manifestations of this determination might be mentioned.

It is well known that certain non-American powers have been endeavoring openly and covertly to subvert the internal institutions of the countries of this hemisphere. Through deceit, fraud, and guile, through threats and intimidation, they have relentlessly tried to upset existing political and social institutions in order to replace them with new ones under their own domination.

Recognizing that this was a danger to all countries equally, the American countries agreed at Habana that they would fully cooperate with one another within the limits of their respective capacities and always with complete respect for their individual liberty of decision. They have undertaken the fullest exchange of information with regard to such activities, so that the pattern uncovered in one country becomes known to all the others to aid them in unmasking and combating these alien efforts.

Of equal importance to the future security of the New World was the action taken with respect to the possessions in this hemisphere of non-American powers. With the occupation of the Netherlands and France, the possibility that the possessions of these countries in the Americas might be used as bases for activities of all kinds against this hemisphere had to be considered. Transfer of sovereignty would not necessarily have been involved. Control might have passed into other hands even though nominal sovereignty rested with the original owners. To prevent these possessions' Serving as a focus for the extension of totalitarian ideas and activities, the American countries in the incredibly short space of 10 days agreed upon a detailed arrangement for the temporary occupation and administration of the possessions in question. This knotty problem presented a real test of hemisphere solidarity. The Americas rose to the occasion in unanimous agreement on a very practical and workable arrangement under which action by them at a moment's notice is possible. No more stirring or convincing example of collaboration for the mutual benefit of all could possibly have been given than the agreement at Habana on this question.

Let us now turn to the economic aspects of hemisphere defense and solidarity. At every one of the inter-American meetings beginning with Montevideo in 1933, the American republics have stated their objectives to be the improvement of their standard of life through the expansion of international commerce, and through the development of their internal resources.

This objective may be discussed under two headings, from the long-range point of view and from the standpoint of the problems arising out of the dislocation of international trade on account of the war.

Let us take up the long-range aspect of this question first. As a very important step toward the restoration and expansion of international commerce, the Executive was given authority by the Congress to enter into reciprocal trade agreements. The purpose here was the revival of international trade, which had been drastically curtailed as a result of the world-wide depression. The method was the reduction of unreasonable trade barriers and the general reestablishment of the rule of equality of commercial treatment. In the six years since this program was initiated, 11 agreements have been entered into with the other American republics. That these agreements have contributed to the expansion of our foreign commerce is evidenced by the fact that our trade has increased with the countries with which we had agreements more than with those with which, for one reason or another, it has not yet been possible to conclude agreements. The authority to conclude trade agreements was extended at this session of Congress for another three years. Although the disturbed world conditions introduce new complications, nevertheless it is hoped that during the coming years it will be possible to negotiate further agreements with the other American countries and perhaps to revise and extend some of those already concluded.

Equally important to the expansion of international trade between the Americas is the diversification of exports so that the economy of many, if not most, of the American republics will no longer have to rely upon a small number of exports highly sensitive to world developments. The experience of the world depression has demonstrated that no country is truly independent when its economic life is almost exclusively dependent upon events or decisions which take place in other continents many thousands of miles away and in the determination of which it has no voice. An export economy, particularly when it is confined to one or two products, is extremely perilous for the producing countries, as they are

never able to count upon a continuous and steady consumption of their production.

The soil and climate and other natural conditions are excellent for the production in the other American republics of raw materials which we have heretofore been purchasing almost exclusively from other more distant parts of the world. Rubber is an outstanding example of this type of commodity. Forty years ago practically the entire world's supply came from the Amazon Basin. Rubber seedlings were smuggled out of Brazil to the Far East, and plantation rubber soon replaced the wild rubber of Brazil. Just as the original habitat of rubber was the Amazon Basin, so there is no reason why that area again should not become a great source of rubber. It has been objected that rubber in this hemisphere can not be produced as cheaply as in the Far East on account of the very low cost of labor in the Netherlands East Indies and Malaysia. Certainly our inter-American objective of an increase in the standard of living would not be attained by payment of wages comparable with those paid in the Far East. Living standards, already too low in some localities, would be lowered still further. The solution to this problem may rest in the development of new high-yielding strains of rubber. The experiments which have been carried on for many years, not on one acre, but on thousands of acres of trees in Brazil, in Panama, and in Costa Rica, show that new strains have been perfected in this hemisphere, which on the average yield more than three times as much as the trees in the Far East.

This high yield should more than offset the low cost of plantation labor in the Far East and make possible economic rubber production in the Americas. In fact we may anticipate a considerable reduction in the cost of rubber to the United States consumers as this development proceeds. The price of rubber, largely because of the controls exercised by the rubber cartel, has tended to be maintained at the level of about 20 cents a pound. Experts of the Department of Agriculture feel that it is quite practicable to grow rubber in the American republics, using the new high-yielding strains and with modern production techniques, at a cost of less than 10 cents per pound. At a price of 10 cents per pound, 130 million dollars would have been saved the American importers of rubber during the past year. It is clear, therefore, that there exist great possibilities for a great development of rubber production in this hemisphere of benefit both to producers in the other American republics and to consumers in the United States. Important areas of Central America, Panama, and Colombia have been found to be well suited to rubber production. Furthermore, the Amazon Basin might again become a great rubber-producing area. Thousands now making a scant living could be given steady employment at decent wages. The President of Brazil, with this among other possibilities in mind, has recently suggested a conference of all the Amazon countries to consider the utilization and development of the resources in that vast area.

Another strategically important product which can be grown in this hemisphere and thus supplant a supply which today comes mainly from the Far East is abaca, or manila hemp. The United States Navy uses the production from about 75,000 acres annually. Abaca is unusually valuable because the fiber is more resistant to salt water than any other in common usage. There are a great many abandoned banana areas which could be utilized for its production, and 2,000 acres of abaca are already under cultivation in Central America.

Another important product for which there is a ready market in the United States and other nations is quinine,

which, although originally produced mainly in the Andean region, is now supplied almost entirely from the Orient, under the control of a monopoly which sells it at a price far above what millions of persons can afford in malarial areas of the tropics of this hemisphere. The Department of Agriculture in its experiment station in Mayaguez, Puerto Rico, has carried out considerable research on quinine production during the last six years and has developed improved methods of producing high yields, not only of the cinchona bark, but of high percentages of the alkaloid.

Common to the tropics are many types of the so-called "fish-poison" or rotenone-bearing plants, which are extremely valuable for insecticidal purposes. Entomologists are keenly interested in these plants because they offer a possible solution to the spray residue problem presented by lead arsenate, particularly in the spraying of vegetables. Importations of these products have increased from two million pounds in 1936 to an estimated seven million pounds valued at about one million dollars for this year—1940. Since farmers and horticulturists each year use in excess of 100 million dollars' worth of insecticides, there is an important future market for rotenone-bearing plants.

It has become clear, despite the market for these products, that it will be necessary first to gather together the scientific information as a preliminary to the development of these natural resources. Today, thanks to an appropriation by our Congress, the Department of Agriculture, in collaboration with similar departments in several countries, has four field parties in the other American republics studying the conditions and places where rubber may best be grown. Already preliminary surveys have been completed or are now under way covering 10 of the other republics of this hemisphere, and additional surveys of rubber possibilities are contemplated in five of the remaining countries. In addition, the Department of Agriculture proposes to carry out investigations and geological studies in soils, climatic factors, disease conditions, et cetera, in areas where many other tropical products flourish. Soon there will exist the scientific information for use by those who are interested in the development of these complementary, non-competitive agricultural products which are so vitally important to the United States.

There is likewise a demand in this country for a number of mineral products which either are not produced at all in this country or in insufficient quantities and which are present in large deposits in the other American countries. Mention might be made of manganese, tin, tungsten, and chromium. For instance, with the exception of a few small domestic deposits of tin, this country is entirely dependent upon imports of this vital product. Although the ore equivalent to approximately one third of our total consumption of fine tin is produced every year in Bolivia, heretofore Bolivian tin ore has gone to England for smelting and thence has been reexported to the United States. Bolivian tin has crossed the Atlantic twice en route to the United States.

For years the Bolivian Government has not been satisfied with this arrangement. It has wished to diversify not so much its production as its market outlets. An agreement has now been reached in principle between the Metals Reserve Co., a subsidiary of the Reconstruction Finance Corporation, and Bolivian producers, under guaranty of the Bolivian Government, by which this country will purchase Bolivian tin ore under contract for a period of five years for smelting in the United States.

This type of operation, whether in the field of non-competitive agriculture or non-competitive mining, means an improvement in the standard of living in the other Amer-

ican republics as a result of new jobs and better wages. It also means additional security for the United States through the obtaining of important raw materials vital to our industry from friends who will always assure us a continuous supply.

Another way of bringing about an improvement in the economy of the other American countries is by the production of articles for internal consumption. The economy of the future, if that economy is to be the reflection of the progress of which the New World is theoretically capable, will represent in every quarter of this continent a high degree of diversified local production of manufactured articles. Scientific developments and technological advantages today make it possible for every country to produce to the greater or lesser extent consumers' goods. It has been argued in certain quarters that this may result in a diminution of the volume of our export trade. It is perhaps sufficient to state that the largest export trade of the United States has been with the countries most advanced industrially. Industrialization, carrying with it an increase in living standards, creates new wants and desires.

An outstanding example of the practical working out of this policy of diversification is the arrangement recently concluded by the Brazilian Government and the Export-Import Bank for the creation of a steel industry in Brazil. If this steel industry will mean cheaper steel in Brazil and will help to develop Brazilian industry, it will inevitably result in an improvement in living standards and an expanded market for American exports. This country is thus not only helping the people of Brazil by opening up new opportunities to them, but is helping itself in paving the way for an expanded volume of purchases by the 45 million Brazilians.

Although the Brazilian steel proposition is an outstanding example, many other possibilities in agriculture and industry await only imagination, the investment of capital, and hard work. In order to provide a mechanism, which could take the initiative in fostering enterprises of mixed United States and local ownership and management, to develop such possibilities, the Inter-American Financial and Economic Advisory Committee established last June the Inter-American Development Commission, which is now functioning under the chairmanship of Mr. Nelson A. Rockefeller and with private and public representation of the United States and the other American republics. The Development Commission has already arranged for a special commission of retail buyers who, headed by Mr. Oswald Knauth, will shortly leave for South America to investigate the possibilities of establishing there small industries to supply the type of retail merchandise formerly obtained in Central Europe. In addition, the Development Commission has actively been furthering the development of plants in Brazil to produce mandioca starch. The Development Commission has established subcommissions in Brazil, and several other countries to advise with it on the particular problems of the individual countries. Although the Development Commission has started in a rather modest way, it is rapidly expanding its activities and should be considered, I believe, a most important instrument of inter-American economic cooperation, both for the long-run developmental objectives and the immediate problems arising out of the war's dislocations.

In this regard it seems fundamental in any new development of the resources of the other American republics that the countries and peoples concerned participate to a greater extent in the future than they have in the past in the benefits resulting therefrom. The belief is too widespread and perhaps too true that exploitation of natural resources has meant only higher wages for a few, some increased taxes for the government, and the depletion of the resources at the

end of their development. Just as in the field of inter-American governmental cooperation there has been developed the feeling of partnership, so among businessmen a similar arrangement, in both logic and practice, should be developed. Local capital should not only be given every opportunity but should be encouraged to participate in new enterprises. Citizens of the country where the enterprises are located should be on the board of directors.

And may I say a word about the position of citizens of this country who participate in these new enterprises? These must not only be willing to share the opportunity for investment and the responsibilities of management and administration, but they must be ready to throw their lot in with the future destinies of the countries where their enterprises are located. Absenteeism will not work, and it will be necessary, if these enterprises are to have their maximum benefit, for the participating citizens of this country to plan to go to the other American countries with their families with the intent of staying there indefinitely. Only in this way will a real partnership effort be accomplished and practical demonstration given of the intention of our country to work for the benefit of ail.

We have now discussed briefly the long-range economic objectives of inter-American cooperation. Let us now turn to the immediate problems arising out of the dislocation of international trade on account of the war. Since Europe has in normal times provided a market for more than 50 per cent of the exports of the 20 other American republics, the progressive spread of warfare in Europe, with its accompanying blocking of markets, has had far-reaching repercussions on the exports, the exchange situation, and the internal economies of those nations. Some of these difficulties were anticipated at the outbreak of the war, and the First Meeting of Foreign Ministers at Panama shortly thereafter provided for the creation of an Inter-American Financial and Economic Advisory Committee to proceed immediately to consider possible methods of alleviating the situation. This Committee, which has met continuously at Washington since November 15, 1939, has undertaken a wide variety of studies and has recommended a number of important measures. In the rather short time that it has been in existence, it has come to be recognized as one of the most important intergovernmental advisory groups ever established. Recognizing this, and in view of the increasing gravity of the international economic situation, the Second Meeting of Foreign Ministers at Habana last July resolved to strengthen and expand the activities of the Committee in a broad program for the maintenance and improvement of the economic and social well-being of the peoples of the Western Hemisphere.

With respect to those commodities which are of primary importance to the maintenance of the economic life of the hemisphere, this program envisages measures for increasing their consumption and interchange among the American republics, facilities for the temporary handling and orderly marketing of such surpluses as are not immediately marketable because of the war's dislocations, and the development of appropriate commodity arrangements with a view to assuring equitable terms of trade for both producers and consumers of the individual commodities concerned.

Within this general framework numerous specific measures have been taken and institutions set up. After a very careful study and analysis over a period of six months by some of the outstanding financial experts of the Americas, the Inter-American Committee recommended the establishment by the 21 governments of an Inter-American Bank. Already nine of the republics, including the United States,

have indicated their intention to participate in such an institution by signing the appropriate convention, and it is my belief that many more, if not all, of the nations will do so during the next six months or a year.

The bank is designed to promote the fuller exploitation of the natural resources of the Americas, to intensify economic and financial relations among the American republics, and to mobilize for the solution of economic problems the best thought and experience in the Americas. Specifically, it is believed that the bank's principal importance will lie in investigating and facilitating rather long-term development projects in the other American republics, and that a secondary activity of consequence will be the extension of shorter term facilities to the monetary authorities of this hemisphere to assist them in eliminating seasonal and temporary fluctuations in their exchanges. Its creation will fill a gap in that wide zone of economic and financial activity for which the existing machinery of inter-American cooperation has been inadequate. I should also like to point out that it is the clear intention of all concerned that the Inter-American Bank shall complement existing financial institutions rather than provide a substitute for them. The by-laws of the proposed institution clearly carry out this intention. The safeguarding of the interests of individual nations is inherent in the entire plan and appears throughout the drafting. No action may be taken by the bank which may affect any particular nation until after that nation has been given an opportunity to object to, or to give its consent, approval or guaranty to the operation.

The Inter-American Financial and Economic Advisory

Committee has also been active in the field of the problems of specific commodities. Following the conclusion of the Third Pan-American Coffee Conference in New York last summer, it established a special coffee subcommittee which last week completed the preparation of an Inter-American Coffee Marketing Agreement. The Inter-American Committee has referred this agreement to the 15 interested governments for their approval, and it is expected that their action will soon be taken. This coffee agreement represents the first broad attempt of the American nations producing and consuming an important product to get together to work out a marketing arrangement in the best interests of both the producers and consumers. It represents an undertaking to avoid ruinous competition between 14 producers of a single commodity for markets sharply restricted by the European situation. It represents an endeavor to obtain for the coffee producer a reasonable and equitable return, without prejudicing the interests of the consumer. It is an example of the type of cooperation on specific commodities which may be attained.

In all of these discussions and studies the United States has played an active role, contributing technical advice and factual back-ground information prepared by the various agencies of the Government. It has also utilized its existing agencies, including especially the Export-Import Bank on the financial side, to enter into mutually advantageous arrangements with a number of American republics in connection with the development of particular industries and by way of assistance to their central banks in monetary and foreign-exchange matters. The Congress has, moreover, recently expanded the operations of the Export-Import Bank, allocating an additional 500 million dollars "to assist in the development of the resources, the stabilizations of the economies, and the orderly marketing of the products of the countries of the Western Hemisphere." With this authority the United States is in a position to expand its cooperative efforts with other American nations in the fields of long-term development and of monetary and exchange matters, to participate in immediate joint action with such other nations to meet pressing trade situations, and to enter effectively into arrangements for the temporary handling of important commodities.

I am confident that you share my belief that the governments of the 21 American republics have done their share

to build firm foundations for the structure of inter-American unity and solidarity. But governments can do only so much. They alone cannot complete the structure.

The people of this country as a result of the rapid changes in European politics during the last six months have indicated their desire for a strengthening of our relations with our southern neighbors. They must not expect that their Government alone can do this job. If you, the people of the United States, set a high value on the friendship of the other American countries, you must do your share toward bringing this about. In as much as there are probably represented in this audience a very wide variety of professions and occupations, it would be fruitless to endeavor to explain what contribution each one could make. I would, however, like to be permitted two observations. In the first place, real statesmanship on the part of our business and financial interests can help to ameliorate the economic difficulties now besetting every country in the Americas. There is a belief in many quarters throughout the hemisphere that our export interests are taking advantage of the temporary absence of competitors from the market to charge whatever the market will bear in order to reap a rich harvest. It should be our policy to fill the import needs of the other American countries at as low a price as possible.

Again, there is a belief that our private financial institutions are failing to realize that moderate credit terms during these critical days will not only help the countries to which they are extended, but also, from the long-term point of view, the position of the banks which extend them. Wise policy would seem to indicate the desirability of our banking interests' making credit available on as reasonable terms as possible.

In the second place, it is as impossible to be friendly with a country that you do not know as with a person whom you do not know. If, therefore, you really believe in the solidarity of the Americas, you will undertake, if indeed you have not already done so, to learn the languages of the countries and to familiarize yourself with their historical heritage and their cultural achievements. When the people of this country know as much about the other countries of this hemisphere as they do of certain European countries, then we will have advanced a long way along the road toward real understanding, without which the structure of inter-American solidarity will never be complete.