If the Trade Agreements Act were to expire, no more negotiations could be undertaken, but past agreements would survive until denounced. If the GATT were to be denounced, the American tariff would immediately rise, on the average, by 40 per cent. And if the pre-GATT and nonGATT agreements were also abandoned, the tariff would be doubled, returning to the rates of Hawley-Smoot. This is how we stand today. Where do we go from here? Our national interest requires not merely prevention of tariff increases but further reductions in barriers to trade. Our exports have outrun our imports since the war at an annual rate of 5 billion dollars, half of this consisting of military items and half of civilian goods. We have financed this surplus by extending foreign aid. Our action was desirable in the emergency. But it cannot be continued as a permanent policy. Such a course would not be fair to the American taxpayer. It would not be acceptable to other nations. It would not afford a sound basis for friendly international relationships. If we are not to keep on lending and giving, our alternatives are two: we can permit our exports to fall back to the level of our imports; we can maintain our exports by allowing our customers to pay for them in goods and services. Either course will necessitate adjustments. Larger imports will compel some of our sheltered industries to adapt themselves to competition, accepting smaller profits, cutting their costs, or even reducing the scale of their activities. But smaller exports would condemn to idleness the more efficient capital and labor that now produce vast quantities of goods each year for sale abroad. The first of these developments would be difficult; the second would be more so.
Removal of barriers to imports is needed for prosperity; it is even more important to national security. High duties and "Buy American" requirements increase the costs of materials needed in production for defense. They speed up exhaustion of scarce domestic supplies. They discourage production abroad to meet our needs. Our policies on aid and trade, moreover, appear to be designed to drive a wedge between ourselves and our allies. We object when Denmark delivers a tanker to Russia, but we exclude Danish cheese from the United States. We do not wish Japan to sell in China, but we move to raise a tariff when she tries to sell tuna fish to us. So Moscow shrewdly holds out the hope of markets behind the Iron Curtain, and Stalin confidently predicts the wreck of Free World unity upon the rock of trade. And he may well be right. If we close our doors to our friends, we shall drive them into the arms of our enemies. It follows that tariffs should be cut, but how? A mere renewal of the Trade Agreements Act will not suffice. The law has been enfeebled by amendments; it is no longer an effective instrument. Renewal would preserve a symbol; it would not permit the action that the times require. Determination of duties, however, should not be returned to Congress. For action there would be delayed and the law that finally emerged rather than bringing tariffs down would doubtless put them up. A new approach— and a bold one—is required.
Instead of being isolated and exposed to attack, trade policy should be handled in the context of foreign economic policy as a whole. Proposals with respect to currencies, investments, aid, and trade should be presented as related parts of a common program, considered in the same hearings, covered in the same debates, enacted at the same time, included in the same appropriation, and administered by the same agency. Thus handled, trade policy would gain in clarity of purpose and would take on borrowed strength.
The rationale of the policy should be that of increasing imports, not exports. Its stated objectives should be to preserve prosperity by preventing the loss of long-established export markets, to cut the budget and the burden of taxes by reducing the need for foreign aid, and to safeguard the nation's security by facilitating the procurement of strategic materials and by promoting the strength and the solidarity of the Free World. The approach should be that of "Trade, not Aid." In this context, barriers to commerce should be attacked, promptly and simultaneously, along a number of different lines. First of all, the disclaimer of the GATT should be repealed and funds appropriated to support its secretariat. Either this, or the rates of duty embodied in the trade agreements should be enacted into law, replacing those of the HawleySmoot tariff, now more than twenty years out of date. Some such action is needed to guard against the disaster of sudden and substantial increases in tariff rates. Second, nontariff obstructions to trade should be removed. The customs simplification bill, embodying provisions negotiated at Geneva and Havana, generally approved by American business and pending in Congress since 1949, should finally be passed. The Buy American Act, a relic of the Great Depression, should be repealed. The tying provisions should be removed from the laws that authorize loans and grants; recipients of dollars should be allowed to spend them where they will; funds supplied for foreign aid should not be diverted to domestic industries. Logically, also, subsidies should be withdrawn from American shipping and some method other than parity price supports adopted for aiding agriculture, so that export subsidies and import quotas would no longer be required. But these two measures do not fall within the bounds of political possibility. The other proposals, however, are both desirable and feasible.
Nor should action stop here. Exorbitant duties should be cut immediately by establishing a ceiling on protection at, say, 50 per cent ad valorem and reducing all higher rates to this amount. Provision should also be made for future cuts. This should be done in three ways. First, a steady approach toward freedom of trade should be assured by adopting a formula under which duties would be reduced, for example, by 10 per cent at the end of each year for the next ten years. This would proclaim to the world the future direction of American policy. And it would enable domestic industry gradually to adapt itself to the change. Second, the President should be empowered to issue orders, upon recommendation by the competent military authorities, suspending or removing all barriers to the importation of materials found to be essential to the defense of the United States. Domestic industries producing for military use if unable to meet foreign competition should be subsidized. And finally, the principle of delegating to an executive agency the power to negotiate trade agreements with other nations should be preserved. But this authority should not be limited in duration. And negotiators should not be forbidden, as is now the case, to transfer items from the dutiable list to the free list or to cut existing duties by more than half. Completed agreements, however, should be submitted to Congress, to be accepted or rejected in their entirety, taking effect unless defeated by a majority vote in both houses within sixty days. The periodic struggle over renewal of the power to negotiate would thus be avoided, the negotiators given greater latitude, and the constitutional authority of Congress maintained.