America and the World Crisis
"SHALL THE HULL METHOD OF TARIFF MAKING BE ENDED?"
By DR. D. F. FLEMING, Teacher and Author
Broadcast over Station WSM, Nashville, Tenn., April 21, 1943
Vital Speeches of the Day, Vol. IX, pp. 511-512.
THIS may sound like a dull subject, but I believe I can convince you that it intimately affects our future peace and happiness.
Before June 12 the Congress must decide whether or not to continue the Hull method of making tariffs by negotiated agreements with other nations. This authority has been given to Mr. Hull three times since 1934 for a period of three years each time. In these nine years agreements have been negotiated with 27 nations, including one with Iran, or Persia, signed only on April 8. All of these agreements will expire soon, unless the authority behind them is renewed.
Failure to continue this friendly, give-and-take method of making tariffs would unquestionably be taken by the rest of the world as a sure sign that the United States is headed back into another period of isolationism and extreme nationalism. The notice would be so clear that no one could possibly misunderstand it. Failure to renew the trade agreements might not seem to us to be a declaration of war but it would be interpreted abroad as something close to that—economic war in the post-war period and a third world war at the end of that road.
The renewal of the trade agreements could nevertheless be defeated by a combination in Congress of local interests, each of which wanted high tariff protection for itself, regardless of the effect upon the nation as a whole, and upon other nations. In the past tariff laws have been made mainly by this method. The result was not always disastrous in a period when we were a debtor nation and when peace depended less on peaceful trade, but in the future we dare not leave out of account the effects of our tariffs upon the national welfare and upon the welfare of other nations.
The new method of tariff making enables the national interest to be considered. It works something like this after preliminary negotiation has established the possibility of an agreement with Iran, let us say, the government of Iran will send to this country a delegation of experts tonegotiate with our people. For this discussion Mr. Hull has committees already organized in the State Department, the Commerce Department, the Department of Agriculture and the Tariff Commission. These men know a great deal about trade conditions here and abroad. All of these committees are available to study the possibilities of expanding trade with Iran to our mutual advantage. But a special committee is likely to be constituted to bargain with the men from Iran. The Iranians will propose a list of things they would like to sell in this country more freely, and they will indicate some things they would be willing to import from the United States more liberally. We of course will give the Iranians two corresponding lists that we have made up. Then each side will study the effects of the imports into its country that have been proposed. On our side the effect of every proposed import will be studied and debated. Will it hurt our producers? If so, how much? Will the import benefit our consumers? How much? Will it be a good thing for the nation?
The process of bargaining may last for weeks or months, each side arguing its points in detail. The final result is, of course, a delicate balance of compromises. We have made concessions and so have they. It is a whole series of bargains, the net effect of which is to benefit both nations and to increase the trade between them. It is by no means a onesided arrangement—just a means of admitting foreign goods into this country. On the contrary, the agreements have increased our exports far more than our imports. Secretary of Commerce, Jesse Jones, testified on April 13 that during the period 1934 to 1939 our imports from trade agreement countries increased 22 per cent while our exports to the same countries increased 65 per cent, from the seller's point of view then, we gained notably.
There is no evidence either that any of our home producers were seriously hurt. In some cases their profits have been reduced, but Mr. Hull's organization has been very gentlewith all vested interests, well knowing that if they were seriously hurt the uproar in Congress would lead to the end of the trade agreements program. It is true that the tariff adjustments made under these treaties have all been downward. It has been a way of carefully and gradually reducing our high tariff rates.
But what about the beneficiaries of our high tariffs? Do they have a chance to protest? At one stage of the process they do. Public notice is given and they can appear before a committee and present their arguments, though their lobbyists cannot influence the trade-agreements committees as much as they could a committee of Congress.
How does this new method of tariff-making compare with the old method, whereby Congress tried in one big law to fix thousands of tariff rates at exactly the right points? The last congressional revision of the tariff took place in 1930. Hearings before the House Ways and Means Committee began January 7, 1929, and the crush of those desiring protection was so great that the hearings resembled a bargain counter. Schedules were made out covering weeks in advance, yet the schedule was always falling behind. Day after day the petitioners for protection filed by, exhorted constantly to be brief in presenting their demands. The pressure was so great that five minutes was an age to the committee. Minutes were doled out by the chairman. Some petitioners were lucky to get three minutes—two minutes. At one time a crisis arose because only 118 witnesses had been heard in four days, whereas 184 were scheduled to appear. The witnesses had to be driven through faster and faster. The bankruptcy of the proceedings was openly confessed by cutting off witnesses who had more to say and were struggling to say it.
Representatives of important industries had perforce to be given more time, but all were urged to leave the rates they wanted in writing, and finally the committee attemptedto digest the vast mass of written requests for higher tariffs presented to it. There was no attempt to check briefs, to require proof of the need for protection or to secure the evidence of persons able to verify disputed testimony.
The contrast is evident between that kind of procedure and the long, patient consideration given by the Hull committees to a small fraction of the total tariff structure. Actually it is impossible for the 531 laymen elected to our Congress to know where tariff duties ought to be fixed on many thousands of different articles. A very few members may by long and hard study make themselves able to pass intelligently on some tariff rates, as Cordell Hull did while in Congress, but very few can or will undergo the long labor required to master tariff problems.
Nor is it possible to give the laymen in Congress any tariff yardstick whereby they could legislate for the benefit of the nation. The formula most often proposed is "cost of production plus a reasonable profit," but consider where this leads. What is the cost of production of typewriters in this country? What is it abroad? How are we to find out? At one time we actually tried to get access to the records of foreign manufacturers. Many factors enter into cost of production and these factors often change rapidly, so that by the "cost of production" theory the tariff rate will be often obsolete by the time it is fixed. What also is a fair profit—for our producers, and for theirs? Obviously all congressmen can do in trying to answer all these questions for thousands of rates is, in general, to vote the rates up or down.
By comparison, the Hull method is deliberate, careful, and continuous. It enables men with great knowledge of trade conditions to weigh the evidence for each proposed change. It is slow, but it operates continuously, there is never a sudden upheaval which unsettles the whole business structure of the nation.
It seems obvious that the business of tariff making has become far too complicated for any parliament to handle, but one final and dangerous objection is made to the Hull method. It is said that the trade agreements are really treaties and that they should be approved by a two-thirds vote of the Senate. At first glance this is reasonable, but in practice it would certainly mean the death of the trade agreements program, for then the old practice of log-rolling would hit the trade agreements with redoubled force, especially since a third of the senators could defeat any trade agreement whereas a majority would be required to defeat a tariff law.
When the Congress made tariffs there was never much trouble in assembling a majority of the Senate, each senator getting his special tariff favors. The same custom would enable every economic interest in the country which thought it might be adversely affected by a trade agreement with Iran to enlist senators in opposition. Any requirement that the trade agreements be approved by two-thirds of the Senate would mean the end of the program.
With the world in chaos and likely to be for a long time, this is surely not the time to give notice to the world that we propose to revert to economic war—the precursor of shooting war. We are not required to play Santa Claus to the World, but we are compelled to live in it, to buy as well as sell, to trade with all the earth and to permit it to trade with us, to live and let live.
All of these axiomatic truths would be denied by a failure to continue the trade agreements program. To kill it now Would also give a death blow to all our hopes of organizing the United Nations into a shield and protection for our future against the colossal wastes and sufferings of global wars.