TRADE POLICY FOR THE FIFTIES - OUR RECIPROCAL TRADE POLICY By Clair Wilcox The United States has striven, ever since the war, to restore the health of the world's economy. It has contributed to economic reconstruction, over the past seven years, more than 35 billion dollars in loans and grants. It has sought to stimulate the flow of goods and services. Given pronounced imbalance of trade, it has accepted restrictionism and discrimination, when practiced by others, as necessary evils. But it has assumed that a period of transition was shortly to be followed by the re-establishment of normal market relationships. In the meantime, it has worked for convertibility of currencies, for resumption of international investment, and for greater freedom of international trade. In part it has succeeded; in part it has failed. Recovery has been realized but trade has not been freed. Currencies are still inconvertible, investment sluggish, and commerce subjected to restrictive and discriminatory controls. Our aid has eased the world's pains. It has not removed the causes of its malady. More drastic remedies would seem to be required. There is thus need for re-examination of every aspect of our foreign policy: of monetary policy, investment policy, aid policy, and trade policy. Such re-examination is not only desirable; it is inescapable.
There will be pressure for action at home; there will also be pressure from abroad. The countries of the British Commonwealth and those of Western Europe are almost certain to advance proposals involving substantial changes in the arrangements that now govern trade and payments. And the principal recipients of our loans and grants are likely to be as reluctant to keep on taking as we are to keep on giving. The purpose of our friends abroad is expressed in a telling slogan, adopted first by them: "Trade, not Aid." And this slogan centers the attention of the world, quite rightly, on the tariff policy of the United States.
It is the purpose of this paper (1) to show just where that policy stands today, (2) to point out the direction that it should take in the future, and (3) to ask whether it is likely to go that way. If the discussion is dogmatic and emphatic, this fault may be attributed, in part, at least, to the demand for brevity.
The United States has trade agreements with forty-four other countries, thirty-three of them signatories to the General Agreement on Tariffs and Trade—negotiated at Geneva, Annecy, and Torquay from 1947 to 1951—and eleven of them parties to bilateral agreements that are independent of the GATT. Since 1934, these agreements have reduced the average level of duties on dutiable imports into the United States (measured in weighted average ad valorem equivalents, with specific duties converted to ad valorem figures at 1951 prices, and with all duties weighted by the volume of imports in 1949) from 25.8 per cent to 13.3 per cent. In short, they have cut the rates of the Hawley-Smoot tariff in half. American imports, which dropped from 4.4 billion dollars in 1929 to 1.3 billion in 1932, have run close to 11 billions in 1951 and 1952.
These figures, however, must be qualified. Since high duties cut imports more than low duties, the former are given a lighter and the latter a heavier weight in computing averages. Our tariff is therefore more restrictive than the weighted average ad valorem equivalent reveals. It still contains many rates that are virtually prohibitive, those on coal tar dyes, for instance, running as high as 200 per cent and 300 per cent of the foreign price. These duties are accompanied, moreover, by other measures that hamper and distort the flow of trade: by obstructive methods of customs administration, by the Buy American Act compelling procurement officers to purchase domestic goods unless their prices exceed those charged abroad by more than 25 per cent, by tying provisions in foreign aid laws requiring that goods financed by loans and grants be bought in the United States and transported in American ships, by heavy subsidization of the merchant marine, and by the maintenance in agriculture of a two-price system whose successful operation necessitates the subsidization of exports and the imposition of quotas on imports. In absolute figures, our imports have risen; relatively, they have declined. In 1929, they were 5 per cent of national income; today, they are only 3 per cent.