The Invisible Tariff - International Economic Relations

Tariff Bargaining, an Administrative

Job The 21 trade agreements already concluded represent a decided reversal of the upward trend of American protectionism. For the first time since 1913, American tariff duties have been actually reduced. It is significant that Congress did not itself undertake to cut the high rates it had set up in the Hawley-Smoot Act; instead, it turned the job over to the executive branch of the federal government. From the point of view of good government, the results have been revolutionary. For the first time in over a century, lobbying, log-rolling and other obnoxious accompaniments of tariff revision have been relegated far to the background. The expert administrators who have the negotiations in charge are sufficiently insulated from contact with pressure groups to be able to consider primarily the public interest. Special interests are not neglected, but are placed in their properly subordinate position.

From the point of view of our foreign trade, the results are promising but not revolutionary. After five years of tariff bargaining, dutiable corn-. modities still constitute only 40 percent of our total imports; our trade balance still continues active; our farmers still complain of unsaleable export surpluses. But upon examination, it appears that most of these conditions result from causes such as political instability abroad which cannot be immediately affected by changes in the American tariff. In the long run, they probably will be affected, but there is always the danger that Congress will not give Mr. Hull's program a long run. Protected interests, both agricultural and industrial, are bringing increasing pressure on congessmen to repeal the Act or to destroy its force by amendment. They oppose the program because it has done too much, or because it may do too much; export associations, on the other hand, are dissatisfied because it has done too little. The policy of bargaining and conciliation, they claim, is inadequate to meet the menace of totalitarian trade policies. They demand that stronger medicine—barter deals, clearing agreements, exchange control and the like—be administered to countries discriminating against American trade.

Quantitative Restrictions on Imports

So far, the United States has rather successfully avoided the extreme measures of administrative protectionism which now characterize the tariff policies of other great trading nations. We do not practice exchange control, nor have we entered into clearing or payments agreements. But

we should beware of a Pharisaical attitude, for our skirts are not entirely clear. For example, notwithstanding our denunciations of quantitative restrictions on trade, we already have our quotas. Most of those introduced thus far have been set at such a generous maximum as not actually to restrict imports. But the quotas on sugar do not fall into this harmless category. The restrictions on imports of Cuban and Philippine sugar are real restrictions: they have succeeded in accomplishing the standard results of quantitative restrictions, i.e., they have not only raised domestic sugar prices, but also have insulated our prices from the fluctuations of world market prices. Moreover, under the powers granted the Secretary of Agriculture in the Soil Conservation Act, there is wide opportunity for the imposition of new quotas, not only on farm products, but on industrial goods as well. We have probably not seen the end of this system.

Thus far, quotas on imports of manufactured goods have been authorized in only a few cases. What could not be accomplished by legislation, certain industrial interests have accomplished extra-legally. The recent agreement between the Cotton Textile Institute and an association of Japanese exporters, whereby the latter have limited their sales of piece goods in the American market for two years to 100,000,000 yards annually, is usually called a voluntary quota. One may perhaps be permitted to question the use of the adjective. If the Japanese exporters had not sensed in the background the threat of a legal quota or, perhaps, the application of American valuation, they probably would not have agreed to the restriction.

Control of Domestic Business Brings Control of Imports

The steady extension of government regulation of domestic business . . . is generally recognized as a leading characteristic of our economic history in the past half-century. It is not so generally recognized that each new extension of the police powers of state and national governments over domestic production and trade has been accompanied by corresponding administrative controls over imports. Pure food and drug legislation, the control of trade in alcoholic liquors and in narcotics, are all illustrations of measures aimed primarily at the protection of American consumers of domestic products. But such protection, obviously, cannot be effective if the new American standards and regulations are not applied to imports.