Foreign Economic Policy


By HON. LEO T. CROWLEY, Foreign Economic Administrator

Delivered at meeting held under the auspices of the Commerce and Industry Association of New York, January 17, 1944

Vital Speeches of the Day, Vol. X, pp. 282-285.

I AM happy to have the opportunity of making my first public statement of policy as Foreign Economic Administrator before this gathering. Any of you who have been through corporate reorganizations and any of you who hold offices or directorships on several corporations will appreciate what I mean when I say that it has been no easy task to make out of the many agencies that were placed under my charge a unified, smoothly working organization, designed and equipped to handle the foreign economic operations of our government.

You all, in one way or another, have had cause to know that there is a war going on. It has hit you personally, it has hit your families, it has hit your businesses.

You know that the Government has been active for many months on the civilian front, as well as in a military way, to work towards the winning of this war for democracy. The process of trial and error worked here as always.

But there has evolved finally a plan for economic prosecution of this war, for aid to liberated countries, and for restoration of this country's trade in the post-war era that to me represents both an achievement and a responsibility.

To recapitulate: In July 1943 I was asked to serve as Director of the newly established Office of Economic Warfare. This Office was merged on September 25, 1943 with Lend-Lease Administration, Office of Foreign Relief and Rehabilitation Operations, the Office of Foreign Economic Coordination, and the foreign import and export functions of several Government corporations.

The problems involved in organization of Foreign Economic Administration—human, economic, diplomatic, political, business, and financial—have been extremely complex. We have not hurried with these tasks, because we have felt all along that the end-product—victory—is what counted. We have made use of established procedures and of experienced personnel, wherever possible, for that reason. We have gone about the job of merging already established agencies steadily, but gradually, in order not to interrupt programs that already had been set up to get goods where they were needed on time.

I am glad to tell you that the problems of organization and of consolidation are pretty well behind us. For all practical purposes the merger has been completed. I am even more happy to be able to say that, since the reorganization of foreign economic functions of the Government was announced, the two-way movement of strategic materials, of foodstuffs, of other commodities, and of the finished materials of war has gone on not only as scheduled but at an accelerated pace.

Because of the very real interest of all of you in trade, both domestic and international, I am sure that you would like to know something of the way I think and the way I operate in my relatively new job. Let's talk of it in terms of the agency and its policies, rather than in terms of the man.

The Foreign Economic Administration is an independent agency. In its operations, however, it works very closely with the State Department both in Washington and abroad. The President and the Department of State are, under the Constitution, responsible for the initiation and the formulation of our foreign policy. FEA operations are carried out under the terms of United States foreign policy as defined by these authorities.

The agency's job, as it is defined in executive orders and as I view it, is to get done as quickly as possible its share of winning the war. I read into my orders no excuse for unnecessary encroachment upon the fields of private export and import trade.

I In time of war, dislocations and governmental controls are as inevitable for our business and industrial systems as they are for individuals. The people of the United Stateshave accepted gallantly the sacrifices they have been called upon to make. Without major exception, they realize that the force of the nation depends upon the loyalty and the unity and the vision of its individual citizens. They have given, and unstintingly.

Since the beginning of the war some businesses in the domestic field have had practically to go out of existence because they could not get materials in short supply or because needed manpower was not available. I know that some of you in the export and import fields—particularly those of you whose business was concerned primarily with the countries now under Axis domination or the enemy countries themselves—have been hard hit by the war. But I hope that you realize that many of the sacrifices and difficulties not only have been occasioned by the war, but are necessary if we are to win it.

Total war makes necessary the imposition of many regulations and controls over business, trade, finance, and industry. The rate at which we have armed ourselves and contributed to the arming of our allies without depriving our people of necessities or even of many luxuries indicates that these regulations and controls did not materially interfere with the business of production or logistics. In fact it aided them.

As circumstances have permitted, the restraints upon business and industry have been relaxed. This is a trend that will continue as the war progresses.

All of our thinking today must be based upon our major objectives: 1. To win the war in the quickest and most effective way with the least cost in lives and suffering; 2. To work out a solid foundation for lasting peace; and 3. To provide full production and full employment in the peace to come for our own people and to join with like-minded peoples everywhere in building a sound economic foundation for a peaceful and prosperous world.

In so far as it is consistent with these objectives Foreign Economic Administration will do everything it can to stimulate and make full use of private trade with other nations of the world.

A free flow of commerce between the several States of this country is one of the cornerstones upon which our national existence and well-being have rested. A free flow of commerce among all nations is precisely as essential to the security and prosperity of the world.

In line with these beliefs, we at Foreign Economic Administration are working constantly to implement the transition back to full-scale private trade.

We are now involved in plans to assist foreign government purchasing missions to deal directly with private exporters whenever this becomes possible in the case of particular commodities or particular areas.

In the case of our private exports to the other American republics, the Foreign Economic Administration regards the decentralization plan as an emergency war measure which already has been modified to some extent and which will be further modified as conditions permit.

We also are working on the problems involved in program licensing and bulk-buying. Our purpose is to make modifications in these programs that will assist private trade as rapidly as we can.

Government-to-government dealings, however, will probably continue to constitute the bulk of our trade for so long as the war lasts, in order most effectively to use our manpower, our productive capacity, our transportation facilities and our other resources.

Private trade, for example, could not fairly or practically be asked to supply munitions to our fighting allies. And, at you know, more than half of our lend-lease aid, by dollar value, is in the form of finished munitions. Private trade could not be asked to underwrite financially unprofitable preclusive buying of strategic and critical materials in neutral countries to prevent the Axis from getting them or to undertake the costly development work required to get needed supplies into production in marginal areas.

Neither could it be expected that American private trade of itself could so coordinate and arrange its activities as to conserve and to make the best use of materials in critically short supply.

These are some of the things that the agencies combined in Foreign Economic Administration have been helping to do. Only our Government is in a position strong enough to take these risks and to exercise the necessary controls.

There is, in the meantime, no cause for pessimism about the health of private trade in America. Although war is the historic enemy of commerce among men and among nations, the foreign traders, the exporters and the importers in the United States have been able, since Pearl Harbor, to move a tremendous volume of goods within commercial channels.

In 1942, for example, cash exports—exclusive of lend-lease exports—amounted to more than $3,000,000,000. In the ten years from 1930 through 1939 our cash exports averaged about $2,500,000,000 per year. During this time about 30 per cent of our private export trade was with Germany, Japan, France and other countries which in 1942 were either enemy or enemy-dominated. Any patient who is capable of such a performance is far from dead.

The volume of private export trade handled through commercial channels in 1943 is only slightly less impressive. The latest available figures, those for the first ten months of the year, show a total dollar volume of cash exports running at a rate of more than $2,500,000,000 for the year despite the increased demands for materials, shipping, and other resources required for the allied offensives of last year and this year.

This achievement in private trade has been made possible by huge increases in the volume of trade with both Canada and South America. American merchants have created and are continuing to create vast new markets for American goods.

The healthy condition of private trade today is evidenced also by statistics of imports into the United States through private commercial channels in 1942 and 1943. The current volume of imports exceeds that of any peacetime year between 1929 and 1940, even though many of our former sources of supply are in enemy hands. In 1942 total imports into the United States amounted to $2,750,000,000. Considerably more than $2,000,000,000 of this trade moved exclusively through private import channels. In 1943, based on the record for the first ten months, total imports will approach $3,500,000,000 in value, higher than in any year since 1929.

Despite the restraints and hardships of war, therefore, it seems apparent that a sound, solid core of private foreign trade is continuing and that the industry as a whole, is more than surviving.

This I am glad to see, for after this war there will be the need for a healthy trading industry just as there will be the opportunity for trade and industry to go on to new highs of production and of distribution of commodities and goods.

The huge volume of exports and imports achieved in 1943 is closely linked with the tremendous overall production which the United States accomplished last year. Our total national production of goods and services is now approaching a rate of $190,000,000,000 a year. In 1929, our total national production of goods and services was about $99,000,000,000.

The pessimists told us that the production which we have now actually achieved was impossible. True, it was achievedin time of war. But we have proved that it can be done. It can be approximated in time of peace, if we use the same vision, courage and unified drive which we have used for prosecuting the war. It can be done if private industry, commerce, trade and banking join with the workers, the farmers and the Government in a cooperative team to do it.

In order to maintain our full productive capacity, we must, in addition to other measures, maintain our exports and our imports at a rate far above our previous peacetime levels.

The future of foreign markets for private commercial traders will depend largely upon the skill and the foresight with which the transition is made from our wartime economy to that of peace. The Government has a large share of the responsibility for this transition in view of the necessary controls and inroads it has been required to install since the war began.

As I see it, the Government will have to formulate a sound and workable plan of contract termination, based upon the premise that funds must be available to war industries after the war to permit them to retool or to convert to the manufacture of the goods of peace. The situation will be complicated further by the stockpiles we have accumulated and by the surplus stocks we shall have of many consumer goods when the war finally ends.

Much of the future of private business and industry will depend on the thinking, preparation and vision with which you in commerce and industry face the problems before us and cooperate with the Government in solving them. Your help is needed and we want it. The Foreign Economic Administration is set up to, and wants to give you every assistance it can.

Tremendous opportunities abound in the post-war world. There is ahead of us the enormous task of construction and reconstruction abroad. The devastation which has been wrought in Europe, Asia, and other parts of the world is horrible. The goods and services that will be required to mend that devastation are almost beyond calculation. Will not the United States play a large role in supplying these goods and services? Will it not be predominantly the job of private enterprise in this country?

China, for example, has learned—as we all have bitterly learned—that when transportation routes are cut in time of war, a country must have its own industrial power to make guns and planes and bullets, if it is to win decisive victories over the enemy. Russia, too, knows—as does the rest of the world—that its long hard drives for industrialization in the 23 years before the Nazi attack was a decisive factor in this war. Without such industrialization, the Soviet people and armies could not have taken on the armed might of the Nazis and moved from the defensive to the most brilliant offensives in history.

What part will the United States, with its great productive capacity, be able to play in aiding China, for example, to develop its electrical power, its railroads, its factories, its mines and its other resources and facilities? What will the United States do in helping the Soviet people to rebuild the dams, the power plants, the factories and the other industries destroyed by the Nazis or by the Russians themselves in their scorched-earth policy? What will we do to help rebuild or construct new factories and plants for Czechoslovakia, Poland, France and die other Allies?

In thinking through the problems involved in the large task of foreign construction and reconstruction we should remember that the largest volume of export trade has always taken place between industrialized nations. The more a nation is industrialized, the greater is its demand for imports from other industrialized nations.

You may want to consider China as an illustrative case. China had a population of more than 450,000,000 people in the decade prior to the war. In that period, the United States exported, for example, no more than 1,500 private automobiles to China per year.

In facing these issues of construction and reconstruction, I would like to present to you some of the fundamental assumptions and questions which occur to me.

It has always been my view that Government should not do what private industry, commerce, trade or banking can do as well or better. In the development of the tremendous potential post-war need for construction, however, it will probably be necessary for Government to be of assistance to private industry and to private banking. The task is of such dimensions that it will require the joint efforts of business and of Government for its adequate fulfilment. We hope to see business ready to throw all its skill and its resources into the necessary tasks of reconstruction and into development of the potential opportunities for new construction in foreign fields. I feel certain that the efforts of business and of banking will receive all possible support and aid from the Government in this endeavor.

If we all will face and meet these problems of foreign construction and reconstruction adequately, I would venture to predict that we can, in the ten years after the war, easily double what our private foreign trade was before the war.

Not only can there be a large potential international demand for American goods and products after the war, as a result of our foreign reconstruction policies, but the large shipbuilding program which we have undertaken will mean that a strong American merchant marine can play a vital part in a growing international trade. Here, again, the Federal Government can do much to facilitate the acquisition by private parties of the merchant shipping constructed by the Government during the war.

I do not mean to imply that all the shipping which we have built should become part of the American merchant marine. In fairness and justice, we must recognize sacrifices already made by other countries. For example, before the war, Norway had a large merchant marine and a large fishing fleet. Her economy was based to a large extent on the services which her merchant marine fleet rendered to world trade. Without thought to the eventual cost to her own economy, Norway made available to the United Nations all her available ships at a time when they were sorely needed. A very large proportion of Norway's ships have been sunk while performing the vital service of keeping the allied supply lines functioning. Can we reasonably use in peacetime all the ships we have built for war purposes? Shouldn't the United States permit the Norwegians and our other allies to acquire some of the ships produced in our shipyards?

Our international trade cannot reach the highest possible volume if we think only in terms of exports. We all have learned that no nation can achieve the full advantages of international trade if it desires only to sell and refuses to buy.

In the relatively short time that our reciprocal tariff agreements were in effect before the war, we began to realize that the abolition of artificial trade barriers could accomplish much for our international trade. Our Lend-Lease operations, too, have been striking evidence of the effectiveness of hurdling such barriers and of the desirability of knocking them permanently down.

We must plan for an intelligent post-war American trade and tariff policy. We must also prepare for and encourage international understandings and agreements which will open

the markets of the world to all on a fair competitive basis, and which will give all nations fair and equitable access to the raw materials of the world.

I want to leave with you a caution against expecting too early or too complete a resumption of peacetime private trade. We cannot afford the luxury of our peacetime freedoms until American boys are no longer dying and suffering in bloody battles.

But I also want to leave with you my firm conviction about the great potential future of our private trade.

An expanding volume of world trade offers the greatest hope for a peaceful and prosperous world. One of the surest ways to achieve the full-scale employment here at home—something that we are all seeking—is to open up world markets. This does not mean the exploitation of one country by another. The most advanced countries economically are those that trade the most. The restoration of the economy of Europe, Asia and other parts of the world after the war will offer a tremendous challenge to American production and an expanding market for American products. Industrial development and construction and reconstruction in China, Russia and in other countries will open up vast new markets. Such construction and reconstruction will help to lay the sound economic foundations for a secure peace. It will also raise the standard of living abroad and enlarge the capacity of the peoples abroad to buy what we have to sell.

Government and business have done an extremely effective job of gearing this country up to war pitch and of implementing our will to win the guns and ships and planes. This joint effort will have to continue unabated until the enemy is utterly defeated.

It will continue, I am convinced. We shall fight on, side by side, until the victory is won. Then, after we have shared in writing the peace, we shall go on—Government and business—strong in our new-found unity, mutually benefited by our joint good job of war work, and convinced firmly of our interdependence, to take our rightful place in a world at peace. We pledge to build of these United States a nation eternally dedicated to national security and individual well-being; to take our place, with a full share of responsibility and of benefit, in a community of nations dedicated to international security and well-being; and to mold from the casting that pours from the furnace of war a future for American commerce, American industry, and the American people, that will be a future of peace and prosperity.