Reciprocal Trade Agreements
"STABLE PEACE AND ECONOMIC WARFARE WILL NOT MIX"
By CORDELL HULL, Secretary of State
Statement made to House Ways and Means Committee, Washington, D. C., April 12, 1943
Vital Speeches of the Day, Vol. IX, pp. 433-435.
THIS is the third occasion on which the Congress undertakes a periodic review of the operation of a great national policy, which has been carried forward for the past nine years by cooperative action of the legislative and executive branches of the government. In a profound sense, the present is the most momentous of these occasions.
At the time when the policy was inaugurated in 1934, our country and all countries were suffering from the disastrous consequences of excessive restrictions and obstructions to trade, commerce and credit. The resulting intensive and destructive economic warfare caused a far-reaching disruption of world trade and was in large measure responsible for the collapse of domestic economies, including ours. Vigorous and determined action was needed to reverse the fatal trend toward ever-mounting obstructions. That action was undertaken through the adoption of the reciprocal trade agreements policy.
It was clear to us that satisfactory economic recovery was impossible without a restoration and expansion of healthy foreign trade. It was clear that our foreign trade and international trade as a whole could be restored and could expand only through a reduction, here and abroad, of unreasonable and excessive trade barriers. It was equally clear that the most advantageous method of accomplishing this was to negotiate with other countries mutually beneficial trade agreements, based upon a reciprocal reduction of trade barriers.
Essential Element of Peace
It was also clear from the beginning that a revival of world trade was an essential element in the maintenance of world peace. By this I do not mean, of course, that flourishing international commerce is of itself a guarantee of peaceful international relations. But I do mean that without prosperous trade among nations any foundations for enduring peace becomes precarious and is ultimately destroyed.
The reason for this is not far to seek. The political and social instability caused by economic distress is a fertile breeding ground of agitators and dictators, ready to plunge the peoples over whom they seize control into adventure and war. Economic warfare, which destroys trade and thus] works havoc on production, employment, prices, values, and standards of life within nations, is always a powerful factor of rivalry, dissension, and strife between nations.
All these explosive elements were present in the international situation at the time when we embarked on the trade agreements program. Through the trade program, our country made a determined effort to provide leadership in international cooperation and to point the way forward in the economic field. We attained a measure of success in spite of the colossal difficulties that stood in the way.
Unfortunately, the momentum of deterioration in other fields of international relations was already so great, that even the progress that was being made toward placing international economic relations on a sound basis was finally engulfed in the overwhelming catastrophe of a new world war.
It is well for us to bear in mind these facts and considerations as we begin this periodic review of our trade agreements policy. In them lies lessons for the future. To ignore them can only lead to recurrent and widespread disasters.
Agreements Twice Renewed
The trade agreements program was enacted nine years ago in exactly the form in which it has been twice renewed for three-year periods, and is now before the Congress for renewal for another period of three years.
The original purpose of the Act of 1934, as stated in its first section, was to expand foreign markets for the products of the United States, and so to create added employment and added income in this country. This was to be done by a process of negotiation and agreements, by which this country would obtain reductions in foreign restrictions against American products by granting similar reductions in American restrictions against foreign products. The concessions were to be adjusted "in accordance with the characteristics and needs of various branches of American production." The act looked forward to increased trade in both directions, to the benefit of employment, income and living standards both in this country and abroad.
By the Act of 1934 the President was authorized by the Congress to enter into trade agreements with other countries and, through the proclaiming of such agreements, to grant to foreign countries reductions in our tariff rates in exchange for benefits extended to our trade by the other countries.
It was specifically provided that no duty could be reduced by more than 50 per cent, that no article could be transferred between the dutiable and the free lists; that, while the proclaimed duties would be applicable to imports from all countries, their application could be suspended in the case of countries which discriminate against American goods.
It was likewise specifically provided that no agreement could be concluded for more than three years.
Each agreement would thereafter be subject to terminationupon not more than six months' notice. Provision was made for full collaboration of the Tariff Commission and the Departments of Commerce, Agriculture and State in the carrying out of the program. Finally, it was provided that reasonable public notice should be given of intention to negotiate an agreement and full opportunity be afforded for the presentation of views by any interested person.
Pacts With 27 Countries
During the years that the Act of 1934 has been in force we have concluded agreements under it with twenty-seven countries. I shall not undertake to discuss the unquestionably impressive commercial results of these agreements carefully concluded under the safeguards prescribed by the Congress. These results attained under peace conditions were examined fully by your committee three years ago, and I assume will be examined again in these hearings. My associates will be glad to furnish you any data which you may desire to have for that purpose.
Important as was the trade agreements program in the past, important as it has been and will be from a broader point of view, it will be more significant than ever, from the viewpoint of our own material interest, when the present fighting stops. When that happens, almost every metal-making plant in the United States, and many other factories and mines and farms, will be faced with the termination of war orders and will be looking urgently for markets for their peacetime products. Foreign markets will be very important to us then and will continue to be essential as far as any one can see ahead. It will be well to have in being and in working order a tested and tried instrument for obtaining the reduction of foreign trade barriers and the elimination of discriminations against our products.
It will be well, too, to carry on the process of negotiated reduction of trade barriers wherever clearly feasible, even during the war years, as we have already found it possible to do in some instances with appropriate safeguards against unforeseeable contingencies. In this way, our producers will find it possible to develop their foreign business as smoothly and rapidly as possible when the war ends.
To negotiate effectively to either of these ends this country will need the kind of authority the Trade Agreements Act provides. The extension of that authority, and the intelligent and careful use of it are the best available insurance against new and old discriminations and restrictions on the foreign markets open to American enterprise and American products.
The trade agreements program is not only a thoroughly tested instrument, but also a flexible one. Plainly, after the war, all manner of conditions will need to be taken into account, arising out of new forms of trade, changed values of currency, and shifting currents of commerce. The flexibility of operation which the Trade Agreements Act makes possible will enable us to adjust our commercial policy to the actual conditions of our post-war economic situation in all its branches.
Countries Still in Accord
Of the twenty-seven countries with which we have concluded trade agreements, only tragic Finland is at war today with any of our allies, and even she is not at war with us. Of the others, sixteen are now by our side, at war with our enemies. They are Belgium, Brazil, Canada, Costa Rica, Cuba, Czechoslovakia, el Salvador, France, Great Britain, Guatemala, Haiti, Honduras, Luxembourg, Mexico, the Netherlands and Nicaragua. Six of the remaining ten have broken off relations with the Axis countries and are cooperating on our side in many ways. These six are Colombia, Ecuador, Iran, Peru, Uruguay and Venezuela.
The remaining four are neutral—Argentina, Sweden, Switzerland and Turkey—and one of these, Switzerland, has undertaken the heavy duty of representing American interests, including the interests of American prisoners of war, in the places which our enemies control.
The nations which entered into trade agreements did so because they were peace-loving nations, seeking peaceful relations in all respects, economic and political. It is no accident, therefore, that in the searching test to which individuals and nations are being subjected in this war those nations which have entered into a cooperative economic relationship with us through the conclusion of trade agreements are on the side of opposing rather than aiding the forces of aggression.
As we look into the future, it is this theme of international cooperation that should be uppermost in our minds, if we really want to make sure that another world conflict is not to be ahead of us after we win this war.
Choice of Courses to Follow
When the day of victory comes, we and other nations will have before us a choice of courses to follow. Basically, that choice will be, as it was in 1918, between, on the one hand, extreme nationalism, growing rivalries, jealousies and hatreds, with the ultimate certainty of another and even more devastating war; and, on the other hand, increased international cooperation in a wide variety of fields, and at least the hope of secure peace for our children.
No one can give a promise that secure peace will really prevail. It is much harder to make the peace secure than it is to wage successful war. Many wars have been fought and won, by many nations, but not yet has any nation made its peace secure and enduring. No one nation, no two nations can do this. For war is an international affair; in a world of many nations its prevention requires international collaboration.
In the new world of the airplane all nations are the near neighbors of all others. In such a world any one strong industrial country has power to plunge the world into war with devastating suddenness and violence. To keep the peace secure will require the resolute and continuous collaboration of all law-abiding nations. It is a hard way and a long way, but it is the only hopeful way there is to prevent war.
Of the various necessary fields of international collaboration one of the most essential is the field of economic life. The goods and services by means of which men live must be abundant, and they must be well distributed. If the material basis of civilization fails, we must not anticipate that human beings will be civilized or peaceful. Solid and lasting friendships between large groups of people require mutual willingness to cooperate in the fundamental business of earning a living.
That is why it is so essential, in the words of the Atlantic Charter, "to bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards, economic advancement and social security."
Endorsed by United Nations
This objective, and the balance of the charter, have now been endorsed by all of the United Nations. That action was taken by the hard-headed and realistic men who guide these governments, not by reason of humane sentimentsalone, but because they recognize that the only way to attain these ends is through cooperative action.
Stable peace and economic warfare will not mix. We know that now from bitter experience. Just as we must work together to set up and operate the necessary machinery to maintain peace, we must work together to make the years of peace fruitful for ourselves and for others.
One of the most essential subjects of international cooperation in the years that lie ahead is this very one of trade and the various trade restrictions to which the act refers. What happens to international commerce has an intimate effect on many of the things that lie closest to the minds of the people of every country. The price of crops, the chance of paying off the mortgage, or of getting or holding a job, the supply and price of common articles on merchants' shelves; these are the things that foreign trade affects in every country. If both reason and experience teach anything, they teach the necessity for more trade between nations.
It has long since become axiomatic that international trade cannot be a one-way affair. The problems which it presents can, therefore, be dealt with wisely only by international cooperation of governments and of peoples.
Aim of Trade Program
Nations have various ways of managing the production and exchange of goods and services. In this country we prefer that our combined domestic and international economy rest primarily on a system of free enterprise. The trade agreements program is designed to promote this end.
International trade is regulated and is necessarily affected by the tariffs, regulations and economic institutions of the various countries. What the trade agreements program proposes is that this complex system of trade regulation, both our own and that of others, shall be administered and guided, as far as our influence extends, not in the direction of regimentation and scarcity, but in the direction of increased production, better distribution and more abundant consumption.
That is neither Republican nor Democratic doctrine. It is American doctrine, and the greater the extent to which we can get it accepted by other nations the better will be the prospect for our own future prosperity and peace.
I am confident that the more the subject is discussed the more clearly these facts will be seen by all of us, and the more nearly unanimous we shall be in our support not only of the measure now before us but of all measures that make possible, in our own hard-headed self-interest, fuller international cooperation against the common scourges of poverty, social and political instability and war, and for greater abundance, social and political stability and secure peace.
Bases of Cooperation
The foundations of international cooperation must be laid now, and they must be built out of mutual confidence, mutual respect and common interest. Today we are engaged in the greatest cooperative enterprise in history. In this struggle for human freedom thirty-one united nations, large and small, are banded together in a brotherhood of self-preservation, and twelve other nations are associated with them. While bending their utmost energy to the attainment of complete military victory and enduring the immense sacrifice which the war imposes upon them, these nations are meantime laying plans for the future.
All these hope-inspiring plans for international cooperation will come to nothing more than pious expressions unless there is confidence that the countries which participate in them are determined to have ready for immediate use, whenever needed, the necessary instruments of effective action.
So far as our nation is concerned, the continued existence of the trade agreements machinery is the most important of these instruments. It is the central and indispensable point in any feasible program of international cooperation. The only alternative is for nations to travel the same extremely narrow economic road that was traveled so disastrously during the years following the last war.
The many peoples who look toward this country with hope are watching our action on this act with profound interest. What we do about it will be looked upon as a signpost pointing to the path they can expect us to follow. Repudiation of the trade-agreements program, or the curtailment of it in scope or time by amendment, would be taken as a clear indication that this country which, in war, is bearing its full share of responsibility, will not do so in peace.
This might well weaken the ties which hold together the group of nations with which we are so vitally associated in the prosecution of the war. Extension of the program without change will mean not only that we understand the kind of commercial relationships which, from a purely business point of view, lead to our mutual well being, but that we recognize the deeper implications of our great strength and commensurate responsibility for good or ill in the world.
Strong non-partisan support of this non-partisan legislation would have a most heartening effect on people here and everywhere who look forward, with profound hope, to a world rich in economic and spiritual opportunities for all.