Foreign Commercial Policy
ALIEN PROPERTY RIGHTS
By EUGENE P. THOMAS, President, National Foreign Trade Council
Delivered Before the Thirty-First Annual Meeting of the Chamber of Commerce of the United States, New York City, April 27, 1943
Vital Speeches of the Day, Vol. IX, pp. 584-587.
WITH ultimate victory for Allied arms no longer in doubt, the foreign commercial policy of the United States no longer is conditioned by what the Axis Powers may have accomplished in the setting up of new economic systems in the countries now occupied by them. The terms of unconditional surrender imply the scrapping of all forms of economic warfare by the enemy.
The approach to long-term domestic reconstruction should go hand in hand with the planning of measures for global economic reconstruction. Our immediate experiences with regard to reconstruction may be said to center in our relations with Latin America. There we have established a laboratory for the testing of plans for rendering aid to the economies of countries capable of planning supplementary measures. This planning for mutual aid may be of value in approaching the problems in the wider field of world reconstruction.
There is no intention, either on our part or on the part of the other Americas, of establishing a regional economic area. While much has been accomplished to make the other Americas more capable in the future of resisting adverse trade pressure and economic penetration, our closer Hemispheric relations create a bulwark of interdependence which, if the need should arise, would safeguard effectively the commercial interests of our sister republics.
The division of the world into regional continental economic groups would be provocative of misunderstandings and unfriendly relations and a constant threat to world peace. Balances of power, whether economic or political, must give way to the overruling concept of international cooperation. The only effective balance of power is that which is lodged in an international authority representing all the nations willing to cooperate.
The impact of the war has not been without compensating benefits to the 21 nations. The countries favored by priority types of strategic materials—Mexico, Chile, Peru and Brazil—are profiting by rising prices and are rapidly accumulating American dollars. Accessibility of these materials to our manufacturers after the war will be of great advantage when the transition horn wartime to peacetime production must be speeded to meet the renewed demands for goods in our own and other countries. Greater industrialization, and the supply of strategic materials to the United States, are enabling our Southern neighbors to increase their reserves of buying power.
To meet this backlog of pressing requirements everywhere, our expanded productive capacity in all industries and our surplus of shipping will be needed to play the greatest role in our history in the task of world reconstruction. Inevitably, this will entail radical readjustments in our imports from, and exports to, former normal sources of supply.
At the Rio conference, in 1942, the full cooperation of these Republics was pledged to the United States, in the supply of strategic materials. We in turn are pledged to assist them in the period of post-war reconstruction.
While our wartime relations with the other Americas give promise of increased trade with us, we do not look for any undue part of Latin America's normal trade with Europe being diverted to the United States after the war. The prosperity that comes from trade lies in the Open Door to all markets, on terms of equality. It is apparent, however, that Latin American countries will be less dependent than in the past on their trade relations with European countries. Transportation by air and sea, and improvements in production, should greatly increase our imports from them, not only of tropical and perishable foodstuffs, but of a vast variety of minerals. No factitious means, however, can be found for basing this trade on the belief that the American Hemisphere can become self-sufficient.
Unless the Allies adopt cooperative measures, there is the possibility of having to deal with continental blocs and government monopolies. Consolidation of Pan American commercial interests, therefore, is a condition indispensable to effective bargaining power in the future. An economic advisory body should be set up in the program of reconstruction to make recommendations regarding economic measures of any country prejudicial to the economic welfare of other countries. This should not imply the surrender of the sovereign rights of cooperating nations.
While it is true that trade between highly industrialized nations is always more highly developed than that between primary producing and industrial nations, it is also significant that trade differences between highly industrialized countries are more prone to affect the trade of all nations. As the authors of the Atlantic Charter and of the Mutual Aid Agreement, and as the leading trading nations of the world, it is of vital concern that Britain and the United States shall continue to travel the same road of commerce and finance internationally, until the agreements already reached in principle are translated into pacts which will weld the United Nations into a composite whole behind measures designed to establish a system of international commerce, free of entangling barriers, prohibitive and discriminatory tariffs, strangling quotas and exchange disequilibrium.
Millions of young ambassadors of good will, to all but our enemies, will return from the front with a new vision arising from their conquests in strange lands; a vision of new worlds to conquer—in expanded trade, finance and investments; in the new shipping lanes of the seven seas; in the uncharted stratosphere. I remember, a few years after the last war, meeting in Europe a young man who, after release from our army in France, had become a leading businessman, in one of the Balkan States, in mining, utilities and finance. Many of our boys will seize such opportunities to become important figures in the fields abroad, or return home imbued with the ambition to aid in preventing future wars by active participation in American planning and legislation for the reconstruction era.
After the war, many opportunities will exist for the investment of private capital, particularly in Latin America, but unless guarantees are forthcoming for the protection of investments against confiscatory and nationalistic laws there is little likelihood of the private investor being attracted to long-term opportunities. This conflict between municipal and international law, affecting alien property rights in a foreign country, has shaken the confidence of United States investors in the safety of their investments in countries where laws confiscatory, retroactive, or currently repressive in their character, tend to destroy not only the property rights of the investor, but that good faith in the discharge of obligations which lies at the root of all sound international relations.
More insidious and no less harmful to the good relations between nations is the tendency of these nationalistic laws to dispute the right of the direct investor to the control and management of his property, legally acquired under previous legislation.
The decline in the investment of private capital in Latin America, and the necessity of closer political and economic relations, have launched an entirely new development in our economic relations with our neighboring republics. These investments of our public funds will affect importantly our future relations with those countries. Financial arrangements between governments are always a source of potential danger to peaceful political relations, as neither government can give way readily in the event of dispute.
Without subscribing to any doctrine of governmental control, as distinguished from that of private enterprise, a solution may be found in the employment of private capital and management under agreements between our Government and the foreign governments. Funds loaned by the United States Government, if not eventually repayable on account of employment in long-term industrial ventures, may provide opportunities for the assumption by private capital, alien and national, of such obligations, under adequate Government guarantees.
We enter upon the most important task that has ever fallen to our statesmen and economic experts—the construction of a new world economic order. At every step, if we are to succeed in this task, we must have international accord. International stabilization-of currencies is important to the liberalization of world trade, under reciprocal trade agreements. Avoidance of unilateral trends in our own reconstruction policies will impress upon the entire world the sincerity of our profession of equality of treatment.
The post-war development of American industry, restored completely to private control and individual enterprise, is capable of evolving a sound international reconstruction policy for the purpose not only of rehabilitating the domestic economy, but of providing the needs of countries requiring relief and capital goods, and plans for the reopening of the normal channels of international trade.
The National Foreign Trade Council through its Foreign Trade Reconstruction Committee is cooperating in the study of these problems with the Foreign Commerce Department of this Chamber—both Committees being under the chairmanship of Mr. Clark H. Minor—and with the Committee on Economic Development, of which Mr. Paul Hoffman is chairman.
Such contributions to the building of a better world economic order, may be judged by what American industry is accomplishing toward the war effort.
The British press has commented on the possibility of divided counsels amongst the Allies in respect to post-war policy, unless agreements are definitely reached before the war ends. History warns against hopes based on wartime alliances. The experience of the last post-war period is too fresh in the public memory to ignore the warnings of the past. Present conversations between the Allied Governments relating to reconstruction policies should aim at the completion of agreements before the war ends and while yet the Allied Governments are bound together as comrades in arms.
The Allies will be required to police the world in military, political and economic affairs. Private industry will willingly accept a transitory period of intergovernment controls, while the world shakes off its military shackles and plans are made effective for international accord.
Except as temporarily necessitated by the exigencies of war and post-war conditions, businessmen, naturally, are apprehensive of any unnecessary intervention of government in the functions of private enterprise in foreign trade, as undermining the democratic concept of individual liberty. We will have fought in vain were governmental control to prolong inordinately the subordination of individual enterprise in the new era by the imposition of unnecessary and harmful limitations. The function of governmental agencies in normal times is mat of assisting private enterprise by the removal of barriers to its legitimate undertakings.
The continuance of the free enterprise system in the area of world trading will ensure that flexibility of method so essential to the commercial, financial and shipping needs of a reorganized world. Some Governments will continue to control the buying and selling by their nationals in overseas commerce, and our Government, in cooperation with business, must continue to deal with other governmental authorities until private enterprise again is free to take over its legitimate functions.
Failing international accord in respect to the implementation of the agreement of February 23, 1942, our Government, perforce, may have to resort to exceptional measures for the protection of American industries and their overseas trade, should other nations continue to employ discrimination on a barter or bilateral basis of trade.
Recognizing our responsibility to our Allies, we must employ our vast resources in aid of the economic resuscitation of countries which accede to measures promulgated by the Allies for the return of the world to orthodox principles of international trade, and the abandonment of future aggression.
The chief asset, in overseas competition, of these debtor nations, will be the reemployment of the millions of demobilized men. Their employment at living wages, will stimulate the production of goods for export at prices with which only American industrial ingenuity and the mass production system can enable us to compete. Therein lies one of our future difficulties. Indiscriminate dumping of such exports on the "world's markets must be controlled by agreed action of the United Nations. At the same time our more liberal treatment of needed imports can provide these debtor countries with the means of payment for our exports and for the remissions on account of the assistance we will render in goods and cash.
In one direction only can he discerned any serious obstacles to international accord in the carrying out of the principles embodied in Article VII of the Mutual Aid Agreement of February 23, 1942—which has taken the place of the Atlantic Charter as the Master Agreement of the United Nations. We have not yet succeeded in bringing about 100 per cent accord between the United Nations on the great economic issues before them. There are differences to be composed, not only between the United States and Great Britain, and between them and other leading nations, but differences within the United States itself which continue to block the road to national unity with respect to our post-war foreign commercial policy.
There can be no reversion of our tariff policy of greater liberalization of world trade relations, without risk of serious impairment of our influence as a leader in the task of world economic reconstruction. We must not shake the confidence of other nations in our sincerity of purpose as a signatory of the Mutual Aid Agreement, by unwillingness to carry into the post-war era that broader outlook with respect to international trade which, as a leading creditor nation, led us to substitute the Reciprocal Trade Agreements Act, based on international cooperation, for the Hawley-Smoot Act with its unilateral and nationalistic attitude to the rest of the world.
What Mr. Sumner Welles defined as the acid test of American future intentions—the continuance of the Reciprocal Trade Agreements Act beyond its expiry date—remains in doubt, as sectional interests combine to prevent its re-enactment.
We would invite another depression like that of the 'thirties, were we to revert to the archaic tariff traditions of the Hawley-Smoot Act. By so doing we would shake the confidence of other nations in the permanence of our reciprocal concessionary policy, and the promise this has given of our abandonment of economic isolation for a more enlightened policy of international cooperation.
The great majority of American foreign traders, and those who favor foreign policy from the international rather than from the sectional "pressure group" standpoint, regard the reciprocal trade agreements method of tariff bargaining as peculiarly adaptable to post-war years of economic reconstruction, and as indispensable to continued unity amongst the United Nations. As a method of composing differences in commercial policy, the mechanism of the Hull program is the most effective yet devised.
It has been objected by opponents of the Act that increases in foreign trade attributed to it cannot be statistically supported. Trade statistics, however, since 1935, are remarkable for their uniformity in support of the claim that the rate of increase with agreement countries was considerably more rapid than in the case of our trade with non-agreement countries. Tested in the gravest depression that this country has ever experienced, the Hull trade policy has wen recognition by twenty-seven countries, including our leading markets, of its practical value in the expansion of trade opportunities, by the sweeping away of many restrictions and discriminations, and the freeing in greater degree of multilateral trade transactions.
The Reciprocal Trade Agreements Act reflects the spirit of our Good Neighbor policy which marked our departure, in 1934, from nineteenth century tariff walls of a debtor nation, re-established in the Hawley-Smoot Act. The consequences during the subsequent years of accumulating trade
barriers throughout the world pointed the way to the Hull policy to ensure to us a reasonable share of world markets, by expanded liberalization of tariffs. Belatedly conscious of our altered status as a creditor nation, we finally acknowledged the responsibility this imposed upon us of conceding to other nations what we ourselves claim—an open door to the markets of the world on terms of equality.
Freeing a substantial part of our commerce with twenty-seven countries from an accretion of excessive trade barriers, reciprocal benefits have been derived from the generalization of concessions, on the most-favored-nation basis, in our dealings with the bulk of the world's markets. We have substituted a policy of give-and-take for a unilateral tariff law of take-it-or-leave-it.
Opposition to the trade agreement policy as a basis for post-war planning, is a defeatist attitude that casts doubt upon the bargaining capacity of the United States, and offers no alternative acceptable plan for the promotion of world commerce and peace through international agreements. We are naturally skeptical of the plans of those partisans who formerly led the nation into the quagmire of unarmed neutrality and war unpreparedness, and the withdrawal of our shipping from European waters, as their contribution to national defense. The answer of our enemies to theseappeasement overtures was Pearl Harbor, and the subjugation of the Philippines, Singapore, and Dutch East Indies.
The United States, during this war, will attain a higher degree of self-sufficiency through the adaptation of synthetic production and the enormous accumulation of new equipment for manufactures. With peace, there undoubtedly will be an insistent demand to insure continued employment of surplus labor, and opposition to the abandonment of uneconomic enterprises. The expansion of foreign trade and conversion to domestic needs will no doubt provide for much of this equipment, now turning out eighty billion dollars annually of war requirements.
When we finally strike a ledger balance of material losses and gains in this war we will find, as in the previous war, but upon a scale immeasurably greater, that we have further familiarized the rest of the world with the scientific skill and efficiency of industrial America. Our "Jeeps" are a household word in every land and, along with our other Allies, we have carried into every war zone an exhibition of mechanical genius which cannot fail to prove of value to trade in the years to come. Above all we have laid the foundations of lasting friendships through our boys at the front, who have borne themselves with such magnificent courage and resource.