An analysis of the foreign economic policy of the United States in its relation to the International Trade Organization: An inquiry into the likelihood of American adherence

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AN ANALYSIS OP THE FOREIGN ECONOMIC POLICY OP THE UNITED STATES IN ITS RELATION TO THE INTERNATIONAL TRADE ORGANIZATION *«- ■£*

•JJ*

AN INQUIRY INTO THE LIKELIHOOD OP AMERICAN ADHERENCE

A T h e sis P re se n te d to th e F a c u lt y o f th e D ep artm en t o f I n te r n a tio n a l R e la tio n s The U n i v e r s i t y o f S o u t h e r n C a l i f o r n i a

In P a r t i a l F u l f i l l m e n t o f t h e R e q u ire m e n ts f o r t h e D egree M a ste r o f A r ts

by V ic to r A . F ah re June 1950

UMI Number: EP59891

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Dissertation PVMshing

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iVa This thesis, w ri tt en by

V i c t o r A . Pabr© under the-guidance of h%M.... F acu lty C o m m it te e , and a p p r o v e d by a ll its members, has been pr esented to and ac ce pt e d by the Co unc il on G rad ua te S t u d y and Res ea rch in pa r ti al fu lfill­ ment of the requirements f o r the degree of

M a ste r o f A r ts

..........................

Faculty Committee

K^nmrman

TABLE OP CONTENTS CHAPTER I. II.

PAGE INTRODH CT I O N .......................................................................... THE TARIFF PROBLEM IN RECENT AMERICAN H IS T O R Y ..............................

12

W ils o n - G o r m a n A c t o f 18 9 4 •

........................

T he D i n g l e y A c t o f 1 8 9 ? ..............................

III.

.

15 16

P a y n e - A l d r i c h A c t o f 1 909 « • • • • • •

17

U n d e rw o o d A c t o f 1 9 1 3 ..........................................

18

T a r i f f C o m m is s io n A c t o f 1 9 1 6 ........................

19

F o rd n e y -M c C u m b e r A c t o f 1922

21

H a w le y - S m o o t A c t o f 1 9 3 0

23

. . . . . . .

RECIPROCAL TRADE AGREEMENT ACT OF 1 9 3 4 .

.

25

..............................

26

....................................

29

..........................................

32

B ack ground o f th e A c t S a lie n t fe a tu re s E scape c la u s e s An e v a l u a t i o n IV .

1

.........................

36

THE HISTORY AND FOUNDATIONS OF ITO . . . . E c o n o m ic d e b a c l e

o f th e t h i r t i e s

44

. . .

45

E c o n o m ic d i s o r d e r o f p o s t - W o r l d War I I

. . .

.

T he A m e r i c a n p r o p o s a l s

• • • • • • • •

The G e n e r a l A g r e e m e n t o n T a r i f f s T rade

54 55

and

.............................................................

58

T he H a v a n a C h a r t e r .............................................

60

ii CHAPTER V.

PAGE OBSTACLES TO AGREEMENT.................................... * .

.

64

c o n f l i c t s ..............................................................

66

P o s t - w a r e c o n o m ic a n d p o l i t i c a l

B r i t i s h r e c o n s t r u c t i o n p ro b lem s

.

.

.

.

68

.....................

71

D e s i r e f o r t a r i f f p r o t e c t i o n by u n d e v e lo p e d n a tio n s

.

P ear o f U. S . d e p re ss io n V I.

V II.

.

.

. . . . . . .

ATTEMPTS AT REGULATION TRADE BARRIERS .

.

.

.

.

.

76 .

81

Im po rt d u t i e s

.

♦

82

Im p o rt q u o ta s

• • • • • • • • • • . • •

86

......................

Exchange c o n tr o l s

• • • • • • • • • • •

92

In v isib le

. . • • • • • • • • •

96

ta riffs

LOOPHOLES IN CHARTER.....................................................

103

E x c e p tio n s to q u a n t i t a t i v e re s tric tio n

c la u se

• • • • • • • • •

P ro te c tio n o f In fa n t in d u s trie s

V III.

. . . .

Ill

S t a t e - t r a d i n g m o n o p o lie s

. • • • • • .

115

In te rn a tio n a l c a rte ls

...............................

120

................................................

125

CONCLUSIONS

BIBLIOGRAPHY

104

.

.

.

* .

. .

• •

..........................................................................

132

CHAPTER I INTRODUCTION A t t h e e n d o f W o rld War I , h e r s e l f in p o s i t io n

to p la y th e le a d in g p a r t in th e e ra o f

g l o b a l r e c o n s t r u c t i o n t h a t was t o c r e d ito r n a tio n

fa ile d

p o sitio n *

fo llo w .

in th e m id s t o f a h e a v ily

I t was u n f o r t u n a t e , tim e ,

th e U n ite d S t a t e s fo u n d

th e n ,

to g ra s p th e

S h e h a d becom e a in d e b te d w o rld .

t h a t A m e ric a, a t su c h an a u s p ic io u s sig n ific a n c e

o f h e r n e w ly -a c q u ire d

T r a d i n g b e c a m e i n c r e a s i n g l y m o re d i f f i c u l t a s t h e

U n ite d S t a te s

c o n s tr u c te d h ig h e r and h ig h e r b a r r i e r s

to th e

f l o w o f i n t e r n a t i o n a l c o m m e rc e . In g e n e r a l , ills

r e s te d sq u a re ly

open h e r p o r t s

to

re h a b ilita tio n

o f t h e w o r l d ’ s e c o n o m ic

in A m e ric a ’s l a p .

Had s h e c h o s e t o

th e e x p o rta b le goods o f h e r d e b to r s , th e r e

w o u ld h a v e b e e n a g r a d u a l l e s s e n i n g o f t h e a d v e r s e e c o n o m ic p r e s s u r e b e a r i n g down o n a l l o t h e r c o u n t r i e s . c a p a c itie s

th r o u g h o u t th e w o rld t h e n ,

P ro d u c tiv e

w o u ld h a v e f o u n d a n

e x p a n d in g m a rk e t th r o u g h th e m e c h an ics o f i n t e r n a t i o n a l t r a d e . I t w o u ld b e u n f a i r t o d i f f i c u l t y ears

c o n c lu d e , how ever,

t h a t th e

t h a t f o l l o w e d W o rld War I w e re s o l e l y t h e

r e s u l t o f t h e e c o n o m ic p o l i c i e s a d o p t e d b y t h e U n i t e d S t a t e s . Many E u r o p e a n c o u n t r i e s ,

i n a d d i t i o n t o r e t a l i a t o r y m oves

tak e n a g a i n s t th e U n ite d S t a t e s , b a rrie rs

e s ta b lis h e d h ig h e r t a r i f f

a g a i n s t e a c h o t h e r i n a n e f f o r t t o d i s c o u r a g e im ­

p o rts and to

en co u rag e e x p o r ts .

s p r e a d o f e c o n o m ic n a t i o n a l i s m

By a d d i n g t o t h i s

th e r a p id

t h a t d e v e l o p e d am ong t h e

2 e c o n o m ic n a t i o n a l i s m sta te s

t h a t d e v e l o p e d among t h e n e w l y - c r e a t e d

o f E u ro p e , one m ig h t r e a d i l y

id e n tify th e u n d e rly in g

f o rc e s t h a t le d to a d im in u tio n o f i n t e r n a t i o n a l tr a d e b ro u g h t w ith i t w o rld -w id e d e p re s s io n and f i n a l l y

w h ich

W o rld

War I I . The a f t e r m a t h o f t h e s e c o n d w o r l d w a r f o u n d t h e U n ite d S ta te s a g a in a s th e

c o u n try m ost e a g e r ly s o u g h t a f t e r

f o r f i n a n c i a l a id and l e a d e r s h ip . fo rtifie d S ta te s

w ith th e le s s o n s

T h is tim e , h o w e v e r, w e l l-

l e a r n e d from th e p a s t , t h e U n ite d

g o v e r n m e n t q u i c k l y p r o p o s e d , among o t h e r t h i n g s ,

th e

e sta b lis h m e n t o f an i n te r n a tio n a l tra d e o rg a n iz a tio n as a c e n t r a l a g en cy c lo th e d w ith a u t h o r i t y t o g u id e an in f lu e n c e th e tr a d i n g n a tio n s o f th e w o rld . T he e n s u i n g C h a r t e r f o r a n I n t e r n a t i o n a l T r a d e O r g a n i ­ z a tio n

(IT O ) was d ra w n u p by r e p r e s e n t a t i v e s

o f 54 c o u n t r i e s

d u r i n g t h e f o u r - m o n t h U n i t e d n a t i o n s C o n f e r e n c e on T r a d e a n d E m p lo y m e n t a t H a v a n a , C u b a , i n t h e w i n t e r o f 1 9 4 7 - 4 8 . 1 T h i s c o n f e r e n c e c l i m a x e d o v e r tw o y e a r s o f i n t e n s i v e n a tio n a l n e g o tia tio n s, p re p a rin g

in te r­

by t h e m a jo r t r a d i n g c o u n t r i e s ,

in

th e C h a r te r .

The ITO C h a r t e r d o e s tw o t h i n g s . code o f p r i n c i p le s and r u l e s

I t e sta b lis h e s a

o f f a i r d e a lin g t h a t c o u n trie s v o l

1 O f t h e 54 c o u n t r i e s r e p r e s e n t e d a t H a v a n a , o n l y t w o , to d a te , have r a t i f i e d th e C h a r te r , v i z . , A u s t r a l i a and L ib e r ia .

3 u n t a r i l y a g re e to fo llo w in t h e i r o th e r.

It

c o n d u c t o f tr a d e w ith e a c h

c re a te s an o rg a n iz a tio n ,

m en ts t h a t a c c e p t t h e C h a r t e r , p r in c ip le s and r u le s

t o h e l p th e m c a r r y o u t t h e s e

in a c tu a l p r a c t ic e .

o f th e C h a rte r is t h a t c o u n trie s , upon d e f i n i t e

com posed o f a l l g o v e rn ­

T he b a s i c p r i n c i p l e

by a g r e e in g in advance

p r o c e d u r e s , c a n w o rk t o g e t h e r t o s o l v e t h e i r

common p r o b l e m s s o a s t o e x p a n d w o r l d t r a d e

and h a s t e n w o rld

reco v ery . The C h a r t e r i s a m ean s o f r e g u l a t i n g e c o n o m ic w a r ­ fare.

I t was b o r n o f p r e - w a r e x p e r i e n c e , w hen t h e many

c o u n t r i e s o f t h e w o r l d , w i t h d i f f e r e n t e c o n o m ic s t r u c t u r e s , p ro b le m s a n d o b j e c t i v e s ,

each a tte m p te d to

p ro b lem s r e g a r d l e s s o f t h e e f f e c t o f eco n o m y o f t h e o t h e r s *

its

so lv e

its

own

a c tio n upon th e

The r e s u l t was e c o n o m i c w a r f a r e t h a t

sh ru n k i n te r n a tio n a l tra d e

in th e

th irtie s ,

th a t c re a te d

e c o n o m ic d i s t r e s s a n d u n e m p l o y m e n t i n m any c o u n t r i e s , a n d c o n trib u te d le d ,

to th e s t e a d i l y m o u n tin g p o l i t i c a l t e n s i o n s t h a t

fin a lly ,

t o W o rld ?sfar I I .

The ITO C h a r t e r a l s o

i s an o u tw a rd e x p r e s s io n and

c o n t i n u a t i o n o f A m e ric an f o r e i g n

c o m m erc ial p o l ic y a s i t h a s

e v o l v e d u n d e r t h e wNew D e a l ” A d m i n i s t r a t i o n o f t h e l a t e P re s id e n t R o o se v e lt.

I n a s t a t e m e n t i s s u e d by M r. W i l l o u g h b y ,

th e c lo s e a s s o c i a tio n o f th e o b je c tiv e s w ith th e p r i n c i p l e s

o f t h e H avana C h a r te r

w h ich h a v e g u i d e d r e c e n t U n i t e d S t a t e s

4 f o r e i g n e c o n o m ic p o l i c y

is b ro u g h t in to

c le a r fo cu s.

He

sa id : The o b j e c t i v e s o f t h e ITO C h a r t e r e p i t o m i z e s t h e b a s i c p r i n c i p l e s w h ic h h a v e u n d e r l a i n a s e r i e s o f t r e a t i e s , a g re e m e n ts , and o t h e r i n t e r n a t i o n a l i n s t r u ­ m e n t s t o w h i c h t h e U n i t e d S t a t e s h a s b eco m e a p a r t y s i n c e t h e o u t b r e a k o f W o rld War I I . T hese p r i n c i p l e s may b e f o u n d i n t h e A t l a n t i c C h a r t e r o f 1 9 4 1 ; i n t h e l e n d - l e a s e a g re e m e n ts ; in th e a r t i c l e s o f ag reem en t o f t h e I n t e r n a t i o n a l M o n e tary Fund an d t h e I n t e r ­ n a t i o n a l B ank f o r R e c o n s t r u c t i o n a n d D e v e l o p m e n t i n 1944; in t h e A n g lo -A m e ric a n f i n a n c i a l a g re e m e n t o f 1 9 4 8 ; a n d i n v a r i o u s o t h e r i n t e r n a t i o n a l d o c u m e n ts . . . . They a r e i n c o r p o r a t e d in o t h e r c o m m e rc ia l t r e a t i e s a lr e a d y in e f f e c t . . . . A ll o f th e se d o c u m e n ts s p e l l o u t i n c l e a r a n d u n m i s t a k a b l e t e r m s t h e d e s i r e o f t h e U n i t e d S t a t e s t o make i n t e r n a ­ t i o n a l t r a d e a s u n ham pered and n o n d i s c r i m i n a t o r y a s p o s s ib le .s W hat t h e p r o p o s e d ITO m ea n s i n t e r m s o f b e n e f i t s

to

be d e r i v e d t h e r e f r o m by th e U n i t e d S t a t e s a n d t h e r e s t o f t h e w o r l d was b r o u g h t o u t i n c l e a r l y - e x p r e s s e d t e r m s by S e c re ta ry A cheson.

In a r e c e n t a d d r e s s i n w h ic h h e c a l l e d

f o r s u p p o r t o f th e H avana C h a r t e r , h e s t a t e d : T he C h a r t e r o f t h e I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n i s t h u s t h e b e g i n n i n g o f law in t h e r e a l m o f w o rld com m erce a n d t h e v e h i c l e f o r t h e g r o w t h o f a s p i r i t o f m u tu a lity and in te rd e p e n d e n c e in tr a d e r e l a t i o n s . I know o f no o t h e r r o a d t o t h e d e v e l o p m e n t o f t h e k in d o f w o rld t r a d i n g s y s te m in w h ic h t h e w o r l d fs p r o d u c t i v e e n e r g i e s can be tr a n s f o r m e d i n t o t h e h ig h e s t le v e ls o f m a te ria l w e ll-b e in g .

^W o o d b u ry W i l l o u g h b y , 11C o m m e r c i a l F o r e i g n P o l i c y o f th e U n ite d S t a t e s . ” U n ite d S t a t e s D ep artm en t o f S t a t e , B u l l e t i n (S e p t 12, 1948, Ho. 4 8 0 ), p . 3 2 5 . M r. W i l l o u g h b y T s C h i e f , D i v i s i o n o f C o m m e r c ia l P o l i c y , O f f i c e o f I n t e r ­ n a t i o n a l T rad e P o l i c y , D e p artm en t o f S t a t e .

The C h a r t e r o f t h e I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n i s w o r t h y o f t h e s u p p o r t o f a l l t h o s e who b e l i e v e t h a t p e a c e a n d p r o g r e s s may b e p u r s u e d b y e n a b l i n g t h e p e o p l e o f t h e w o r l d t o s e c u r e t h e m ean s t o a b e t t e r l i f e .3 It

i s e v id e n t fro m th e f o r e g o in g s ta te m e n ts

t h a t th e

p r o p o s e d ITO i s v i e w e d b y t h e m a k e r s o f o u r f o r e i g n e c o n o m ic p o lic y

w ith g r e a t f a v o r - a s an o r g a n i z a t i o n t h a t can s u c ­

c e ss fu lly

f o s t e r and m a in ta in a sy s te m o f c o n d u c tin g sa n e

in te rn a tio n a l a c tiv itie s

b e n e fic ia l,

co n cern ed .

o p p o n e n ts a r e n o t few i n num b er.

H ow ever,

Many c r i t i c s

a r e h e a r d who a r e a n x i o u s t o

sh o rtc o m in g s,

to a l l

p o in t o u t i t s

^ h e y w a rn u s a g a i n s t b e c o m in g t o o o p t i m i s t i c

or e n th u s ia stic o n ly f i l l u s

its

in th e lo n g r u n ,

in o u r a p p r a i s a l o f th e

w ith f a l s e ho p es a s

a s p r o p o n e n t s w o u ld l i k e n e c t i o n , M r. K i l l h e f e r ,

to

its

ITO , f o r i t

w ill

c a p a c ity to

p erfo rm

to have u s b e li e v e .

In t h i s

con­

who i n c i d e n t a l l y was a m em ber o f t h e

A m e ric an d e l e g a t i o n a t H a v an a , h a d t h i s

to

say c o n c e rn in g

t h e p r o p o s e d ITO: P ro p o n e n ts o f th e H avana C h a r te r a r e s t i l l t a l k i n g in th e a t t r a c t i v e g e n e r a l i t i e s o f th e p r o s p e c t u s . B ut t h e C h a r t e r i s t h e c o n t r a c t w h ic h e i t h e r d o es o r d o e s n o t i m p l i m e n t t h o s e h i g h h o p e s . And I s a y t h a t a c a r e f u l s t u d y o f t h e d o c u m e n t show s t h a t i t d o e s n o t do s o .

^D ean G. A c h e s o n , " E c o n o m ic P o l i c y a n d t h e ITO C h a r t e r . ” U n ite d S t a t e s D e p artm en t o f S t a t e , B u l l e t i n (May 1 5 , 1 9 4 9 ) , p . 6 2 7 .

C e r t a i n l y I am n o t a l o n e i n my a p p r a i s a l o f t h e C h a rte r. I t h a s h e e n s t u d i e d b y m any o f t h e p r i n ­ c i p a l o r g a n iz a tio n s o f b u s in e s s and in d u s tr y in th e U n ite d S t a t e s . They a r e in s u b s t a n t i a l a g re e m e n t in t h e i r c a l l f o r i t s r e j e c t i o n . . • • s e v e r a l o f th e l a r g e s t a n d m o s t i m p o r t a n t o f t h e m w a n t e d v e r y much t o go a l o n g , b u t f o u n d i t i m p o s s i b l e t o do so a f t e r lo n g and c a r e f u l s t u d y .4 The p r o b l e m t o w h i c h t h i s r e s e a r c h p rim a rily

is

th a t o f a s c e r ta in in g th e p o s itio n

d ire c te d

lik e ly

is

to be

t a k e n by t h e C o n g r e s s o f t h e U n i t e d S t a t e s and t h e A m e rican t r a d i n g c o m m u n ity r e l a t i v e a s a m em ber o f t h e th e a t t i t u d e

to t h i s

p r o p o s e d IT O .

c o u n try * s p a r t i c i p a t i o n For i t

is,

assum ed by th e U n ite d S t a t e s

u p o n Tnfoich t h e s u c c e s s o f t h i s R a tific a tio n

i n t h e m a in ,

in t h i s m a tte r

o rg a n iz a tio n r e s t s .

o f t h e H avana C h a r t e r by th e U n ite d

S t a t e s w i l l go a l o n g way t o w a r d s b r i n g i n g t h e o p e ra tio n .

ITO i n t o

But su ch a s t e p c a n n o t be ta k e n u n l e s s

ic a n C o n g ress

is

w illin g to

tu rn

its

back to

t h e A m er­

th e fo re ig n

e c o n o m ic p o l i c y o f p r o t e c t i o n i s m e s p o u s e d b y p a s t a d m i n i s ­ tra tio n s .

F u rth e rm o re ,

i t m u st,

in th e l i g h t o f p o s s ib le

a d v e r s e e c o n o m ic c o n d i t i o n s o f t h e f u t u r e , s u p p o rt w ith u n w a iv e rin g e n th u s ia s m th e H avana C h a r t e r s t a n d s .

For i t

c o n tin u e to

id e a ls

f o r # iic h th e

th e U n ite d S t a t e s ,

o v er-ex p an d ed p ro d u c tio n f a c i l i t i e s ,

a g a in f a l l s

w ith h e r p rey to

th e

^ E l v i n H . K i l l h e f e r , "ITO - I l l u s i o n o r R e a l i t y ? " The A n n a l s o f t h e A m e r i c a n Academ y o f P o l i t i c a l a n d S o c i a l S c i e n c e . VoTT 2&4 ( J u l y 1 9 4 $ ) , p . 8 3 7

7 s h i b b o l e t h o f p r o t e c t i o n i s m , s h e w i l l m o re t h a n l i k e l y r e l i n q u i s h h e r m em b e rsh ip i n t h e u n d o u b te d ly p r e c i p i t a t e m em b ers,

ITO*

S u c h a s t e p w o u ld

a s i m i l a r m o v em en t am ong o t h e r

i n t h e i r q u e s t f o r e c o n o m ic s e l f - p r o t e c t i o n ,

w o u ld o b v i o u s l y d e s t r o y

th e

ITO a s a n e f f e c t i v e

and

fu n c tio n in g

body* C h a p t e r Two p r e s e n t s a c h r o n o l o g y o f m a j o r A m e r i c a n ta riff

le g isla tio n

f o r th e e x p re ss e d i n t e n t o f e x p o sin g th e

c y c l ic a l n a tu re o f o u r p re v io u s t a r i f f siste n c y

in t h i s m a tte r

v ie w p o in ts to th e

is

le v e ls .

Lack o f con-

th e d i r e c t r e s u l t o f o p p o s ite

p ro b lem o f i n t e r n a t i o n a l t r a d e and i n t e r n a l

p r o s p e r i t y t a k e n b y t h e tw o m a j o r p o l i t i c a l p a r t i e s U n ite d S ta te s *

s.

The R e p u b lic a n P a r t y

ttp r o t e c t i o n i s t ” p a r t y ,

i.e * ,

is

in th e

tra d itio n a lly a

i t a d h e re s to th e p r i n c i p le

of

h i g h p r o t e c t i v e t a r i f f d u t i e s a s a m eans f o r a c h i e v i n g d o m e stic p r o s p e r i t y .

The D e m o c r a t i c P a r t y ,

h a n d , h a s been d e d ic a te d

on t h e o t h e r

in th e p a s t to th e p r i n c i p l e o f

f r e e r t r a d e o r lo w e r t a r i f f d u t i e s , a lth o u g h t h e r e in g e v id e n c e t h a t , ranks a I s o . 5

to d a y ,

i s grow ­

p ro te c tio n ism h as p ie rc e d i t s

Th0 r e s u l t h a s b e e n t h a t t h r o u g h o u t t h e y e a r s ,

5 In a c t u a l p r a c t i c e , t h e p la n k s in t h e p l a t f o r m s o f t h e tw o p o l i t i c a l p a r t i e s h a v e come t o t h e sa m e t h i n g . S in c e 1900, th e R e p u b lic a n P a r ty h a s a d v o c a te d t a r i f f s t h a t " e q u a l iz e c o s t s ” , w h ereas th e D e m o c ra tic P a r t y h a s f a v o r e d t a r i f f s t h a t " e q u a liz e c o m p e ti t io n " . A lth o u g h th e s e f o r ­ m u la s a d d u p t o t h e sam e t h i n g # R e p u b l i c a n m em b ers o f C on ­ g re s s have u s u a lly u rg ed th e h ig h e r t a r i f f .

8 A m erican t a r i f f

l e g i s l a t i o n h a s n o t b een an e x p r e s s io n o f a

b i - p a r t i s a n a p p ro a c h in th e f i e l d p o lic y .

T a r i f f l e v e l s h a v e r i s e n u n d e r th e a e g i s o f a

R e p u b lic a n A d m in is tr a tio n , to

o f o u r f o r e i g n e c o n o m ic

and c o n v e r s e ly ,

th ey h av e te n d e d

f a l l d u r in g a D e m o c ra tic A d m i n i s t r a t i o n .

T hus,

to d ay ,

i t may b e s a i d t h a t e f f o r t s u n d e r t a k e n b y t h e E x e c u t i v e D e p a rtm e n t o f t h e U n i t e d S t a t e s G o vernm ent to w a rd t h e fo r m a ­ t i o n o f a n ITO, u n d e r w h i c h c o n t i n u e d r e d u c t i o n o f t a r i f f b a rrie rs

are a n tic ip a te d ,

i s an e x p re s s io n o f th e s e n tim e n ts

o f t h e D e m o c r a t i c P a r t y now i n p o w e r . sa id th a t th e fu tu re

I t may f u r t h e r be

o f t h e p r o p o s e d ITO r e s t s ,

th e re fo re ,

upon w h e th e r o r n o t a change in th e a d m i n i s t r a t i o n o c c u rs in th e th a t,

im m e d ia te f u t u r e ; in th e

fo r

it

is re a so n a b le

lig h t o f p a s t e x p e rie n c e s,

to suppose

a R e p u b lic a n v i c t o r y

g a in e d in t h e n e x t e l e c t i o n , m ig h t v e r y l i k e l y p ron o u n ced d e c l in e

in o u r e f f o r t s

le a d to a

to w a rd th e fo r m a tio n o f

a n IT O . In G h a p te r T h r e e , a s tu d y o f th e R e c i p r o c a l T ra d e A g r e e m e n t s A c t o f 1 9 3 4 was u n d e r t a k e n p r i m a r i l y

to b rin g to

l i g h t a r e v e r s a l I n o u r f o r e i g n e c o n o m ic p o l i c y

brought

a b o u t by th e D e m o c ra tic v i c t o r y

in 1 932 .

U nder s u c c e s s iv e

p o s t - W o r l d War I R e p u b l i c a n A d m i n i s t r a t i o n s , began an u n p a r a l l e l e d r i s e

im p o rt d u t i e s

t h a t c u lm in a te d f i n a l l y

p a s s a g e o f th e H aw ley -S m o o t A c t o f 1 9 3 0 .

in th e

Thus th e H u l l

9 P ro g ram , as i t tre n d and to re d u c tio n

cam© t o b e k n o w n , u n d e r t o o k t o

rev erse th is

la u n c h a new p ro g ra m d e s i g n e d t o e f f e c t a

o f t r a d e b a r r i e r s on a w o rld -w id e s c a l e .

c o n n e c tio n ,

In t h i s

t h e p r o p o s e d ITO i s a n e x t e n t i o n o f A m e r i c a n

f o r e i g n e c o n o m ic p o l i c y a s

i t h a s d e v e lo p e d in r e c e n t y e a r s ,

in t h a t th e y b o th s t r i v e t o

e ff e c t a re tu rn to m u ltila te r a l

tra d e ,

th e e li m in a ti o n o f d i s c r im i n a t o r y tr e a tm e n t, and th e

lo w e r in g o r re m o v a l o f m a jo r im p e d im e n ts t o

th e flo w o f

i n t e r n a t i o n a l com m erce. In s u b s e q u e n t c h a p t e r s , C h a rte r p e r se i s u n d e rta k e n ic a n p a r t i c i p a t i o n , p o lic y .

a d i s c u s s i o n o f th e H avana

i n a n e f f o r t t o d i s c l o s e A m er­

b a s e d on i t s

p r e s e n t f o r e i g n e c o n o m ic

C h a p te r P o u r b e g in s w ith a c o n s i d e r a ti o n o f th e

b ackground t h a t

l e d t o t h e f o r m a t i o n o f t h e p r o p o s e d IT O .

H e r e , t h e a d v e r s e e c o n o m ic c o n d i t i o n s th e

in te r-w a r p e rio d

is h i g h li g h t e d f o r th e e x p re ss p u rp o se

o f p l a c in g t h e H avana C h a r te r in P ro m t h i s v a rio u s

p o in t,

ste p s

th e

t h a t p re v a ile d d u rin g

its

proper p e rs p e c tiv e .

c h a p te r p ro c e e d s w ith a re v ie w o f th e

t a k e n by t h e U n i t e d S t a t e s G o v e r n m e n t i n

its

e f f o r t t o p ro m o te t h e f o r m a t io n o f a n i n t e r n a t i o n a l t r a d e o rg a n iz a tio n and i t

c o n c lu d e s w ith a d e s c r i p t io n o f th e

o r g a n iz a tio n and f u n c tio n o f th e In C h a p te r F i v e ,

IT O .

t h e o b s t a c l e s t h a t w ere e n c o u n t e r e d

a t th e H avana C o n fe re n c e a r e p r e s e n t e d so a s to d i s c l o s e

th e

a r e a s o f d i s a g r e e m e n t am ong t h e d e l e g a t e s a n d t o e v i n c e t h e

10 s t a n d t a k e n by t h e A m e ric an d e l e g a t i o n . p re -o c c u p ie d w ith th e H e rc u le a n

G r e a t B r i t a i n w as

t a s k o f d o m e s tic r e c o n s t r u c ­

t i o n ; m any u n d e r d e v e l o p e d c o u n t r i e s w e r e p l a n n i n g t o p ro g ram s f0 3 r i n d u s t r i a l i z a t i o n . fears

o f th e consequences to

r e s u l t o f a d e p re ssio n

in

m a jo rity o f th e d e le g a te s come m em bers o f t h e

la u n c h

N ot a f e w h a d e x a g g e r a t e d

th e ir

i n t e r n a l e co n o m y a s a

th e U n ite d S t a t e s .

T hus, a g r e a t

a t H avana, th o u g h w i l l i n g to

IT O , w e r e s t r i v i n g

be­

to e x ac t s p e c ia l

p r i v i l e g e s a n d e x c e p t i o n s w h i c h t h e y b e l i e v e d w o u ld s e r v e th e ir

in d iv id u a l i n te r e s ts .

th e U n ite d S ta te s

In t h e l i g h t o f t h e s e o b s t a c l e s ,

was f o r c e d

not u n t i l a f te r a stru g g le

t o c o m p r o m is e h e r p o s i t i o n ,

t h a t was c a l c u l a t e d t o

but

fo re s ta ll

t h e c o n s t r u c t i o n o f a c h a r t e r t h a t s a n c t i o n e d t o o many r e ­ stric tiv e

tra d e p r a c tic e s .

I n t h e f i n a l tw o c h a p t e r s , C h a rte r a re d is c u s s e d

t h e r u l e s em b o d ied in t h e

in an a tte m p t to r e v e a l t h e i r e f f e c ­

t i v e n e s s a s m eans o f r e g u l a t i n g t h e c o n d u c t o f w o rld t r a d e . A lth o u g h th e a r e a siv e ,

s t i l l th e

i n w h i c h a g r e e m e n t w as r e a c h e d i s

in je c tio n

o f escape c la u se s or

im p re s­

lo o p h o le s

a p p e a r , t o n e g a t e t h e e f f o r t t o m ake o f t h e C h a r t e r a f i r m and p r e c i s e d o c u m e n t.

Many c o u n t r i e s ,

S ta te s,

in c lu s io n o f th e se c la u s e s p rim a rily

fo u g h t f o r th e

in c lu d in g th e U n ite d

t o p r o v i d e f o r a n e s c a p e m e c h a n is m t h r o u g h w h i c h m em ber n a t i o n s may r e j e c t c o n p u l s o r y a d h e r e n c e t o t h e C h a r t e r r u l e s .

11 I n many i n s t a n c e s , t h e e s c a p e

c la u se s

a r e o f A m e ric an

d e sig n , an e x te n s io n o f h e r p r a c tic e s u nder th e R e c ip ro c a l T rad e A g re em en ts A c t o f 1 9 3 4 .

In o t h e r s , t h e y r e p r e s e n t a

d e s i r e o n t h e p a r t o f many E u r o p e a n c o u n t r i e s

to

p rev en t th e

s t r e n g t h e n i n g o f t h e r e s t r i c t i o n s u p o n s t a t e - t r a d i n g m ono­ p o lie s,

and th e

net e ffe c t, C h a rte r to

fo rm a tio n o f i n t e r n a t i o n a l c a r t e l s .

n e v e rth e le ss,

The

i s t o w eaken c o n s i d e r a b l y th e

th e e x t e n t o f p ro m o tin g th e

b e l i e f t h a t th e n a tio n s

o f th e w o rld a r e n o t y e t p r e p a r e d u n q u a l i f i e d l y to a c c e p t an i n t e r n a t i o n a l o r g a n i z a t i o n s u c h a s t h e p r o p o s e d IT O .

CHAPTER I I THE TARIFF PROBLEM IN RECENT AMERICAN HISTORY T h ro u g h o u t th e y e a r s , t h e t a r i f f p o l ic y S t a t e s h a s a lw a y s b een a m a jo r p o l i t i c a l i s s u e # days o f our h i s t o r y , to r a i s e

revenue#

d e v e lo p m e n t to

ta riff

o f th e U n ite d I n t h e e a r l y ..

la w s w e r e e n a c t e d a s a m e a s u r e

H ow ever, a s o u r n a t i o n u n d e r w e n t i n d u s t r i a l

t h e p o i n t w here i t

f a c tu r e d goods, t a r i f f s

b e ca m e a p r o d u c e r o f m anu ­

f o r p r o te c tio n r a t h e r th a n f o r rev en u e

b e g a n t o a c q u i r e new s i g n i f i c a n c e a n d i m p o r t a n c e T h o u g h A m e r i c a n e c o n o m ic p o l i c y n e v e r e s p o u s e d t h e th e o ry o f fre e

tra d e

in i t s

f u l l e s t m e a n in g ,

h e ld t h a t a c o n s ta n t h ig h le v e l o f p r o te c tiv e

it

c a n be e q u a l l y

t a r i f f s has

n e v e r c o m p le te ly c a p tu re d th e f a v o r o f o u r s u c c e s s iv e m ak in g b o d ie s # th e r i s e

law ­

T a r i f f s h a v e been a n a t u r a l c o n c o m ita n t w ith

in U n ite d S t a t e s *

sh are o f in te r n a tio n a l tra d e ,

but

t h e i r v a ry in g p eaks o f s e v e r i t y o n ly h e l p to r e g i s t e r th e v a c c ila tin g a ttitu d e t h a t h a v e come i n t o

ta k e n by t h e v a r i o u s A d m i n is tr a t i o n s p o w e r#

P ro f e s s o r K ie k h o fe r e s t a b l i s h e s in th e h i s t o r y

th re e d i s t i n c t p e rio d s

o f th e U n ite d S t a t e s w h e re in t a r i f f

tio n flo u ris h e d .2

The f i r s t

le g isla ­

p e rio d w itn e sse d th e passag e o f

1 W i l l i a m H . K i e k h o f e r , E c o n o m ic P r i n c i p l e s , P r o b l e m s a n d P o l i c i e s (New Y o r k : D. A p p l e t o n - C e n t u r y C o m p an y , I n c . ,

TW 6TT p 7“3S7. 2 Ib id .,

P. 357.

13 ta riff

law s w h ic h w ere d e s i g n e d t o p r o d u c e r e v e n u e o n l y a n d

la s te d

from th e e s t a b l i s h m e n t o f o u r F e d e r a l g o v e rn m e n t in

1789 to t h e c l o s e second p e rio d

o f t h e N a p o l e o n i c W ars i n 18 15*

in o u r t a r i f f h i s t o r y

l a s t e d f r o m 1816 t o t h e

o u t b r e a k o f t h e War b e t w e e n t h e S t a t e s p e rio d o f p r o te c tio n , c o m p a ris o n w ith t h e sin c e

I8 6 0 ,

The

in 1861.

I t was a

b u t t h e s c a l e o f d u t i e s was lo w i n

le v e l o f d u tie s t h a t has

come t o p r e v a i l

B e g in n in g w ith th e o p e n in g o f t h i s

th e U n ite d S ta te s e n te r e d upon th e t h i r d

c o n flic t,

p e rio d .

T h is

in

t h e m a in h a s b e e n o n e o f h i g h p r o t e c t i o n w h i c h h a s l a s t e d u n t i l th e p re s e n t d a y . I t w i l l b e show n b e l o w how t a r i f f s b e tw e e n h i g h a n d lo w l e v e l s h ig h p r o te c tiv e

d u tie s.

a s one r e f l e c t s upon th e v a ile d d u rin g t h i s

d u rin g t h i s

F o r i t becom es

have f lu c tu a te d

s o - c a lle d p e rio d o f in c re a s in g ly a p p aren t

c h a n g in g a t t i t u d e s

th a t have p re ­

e r a t h a t th e p e o p le o f th e U n ite d S t a te s

have n e v e r been p re p a re d to a c c e p t one p h ilo s o p h y conduct o f t h e i r fo re ig n

in th e

tra d e .

I t can be c o n c lu d e d , t h e r e f o r e ,

th a t th e tra d e p o l i ­

c i e s f o l lo w e d by t h e U n i t e d S t a t e s G o vernm ent h a v e , p a st,

been c y c l ic a l r a th e r

th an c o n s ta n t in n a tu r e .

in th e T h is

le a d s to th e f u r t h e r c o n c lu s io n t h a t su ch p o l i c i e s p r e s e n tly in fo rce,

e s p e c i a l l y t h o s e w h ich h a v e b e e n c o m p a tib le w ith t h e

e s ta b lis h m e n t o f an I n t e r n a t i o n a l T rade O r g a n iz a tio n

(IT O ),

r e p r e s e n t a t e m p o r a r y v i c t o r y f o r t h e a d v o c a t e s o f a lo w

14 t a r i f f pro g ram .

S u sp ic io n

t h e p erm an en cy o f A m e r i c a ^

is a ro u se d a lm o st a t once as to c o n tin u e d s u p p o rt o f th e p ro ­

p o s e d ITO . T he o u t b r e a k o f t h e War b e t w e e n t h e S t a t e s d e m a n d e d l a r g e , new s o u r c e s o f r e v e n u e f o r t h e U n i t e d S t a t e s

T reasu ry .

T he n a t u r a l r e s u l t w as a s h a r p a d v a n c e i n t a r i f f d u t i e s . The M o r r i l l A c t ,

p a s s e d in 1 8 6 1 , an d am ended in 1862 a n d

1864, b ro u g h t th e h ig h e s t l e v e l o f d u tie s

sin c e

th e A ct o f

1 8 2 8 j y e t t h e p e a k o f t h e s e w a r t a r i f f l a w r a t e s w as n o t r e a c h e d u n t i l 1 8 6 8 , when t h e a v e r a g e r a t e s t o o d a t a lm o s t 49 p e r c e n t . & C o n t r a r y t o tio n s ,

on d u t i a b l e

im p o rts

g e n e ra l e x p e c ta ­

t h e c l o s e o f t h e War b r o u g h t no d o w n w ard r e v i s i o n o f

th e t a r i f f

c o m p a rab le to r a t e s

p r e v a i l i n g p r i o r t o t h e W ar.

I n s t e a d h i g h p r o t e c t i o n becam e t h e e s t a b l i s h e d p o l i c y o f th e

c o u n try . T a riff re v is io n s

c o n c e d in g so m e th in g t o

in

th e s e v e n tie s and e i g h t i e s ,

w h ile

t h e p o p u l a r dem an d f o r l o w e r r a t e s ,

d id n o t d is tu r b th e p r in c ip le

o f h ig h p r o t e c ti o n .

W h atev e r

r e d u c t i o n s w e r e m a d e , m o r e o v e r , w e r e m o re t h a n w i p e d o u t b y ' t h e M c K in le y A c t o f 1 8 9 0 , w h i c h e s t a b l i s h e d a v e r a g e r a t e s h ig h e r th a n any in o u r h i s t o r y u p to

3 I b id .. p . 359.

th a t tim e .

15 I.

WILSON-GORMAN ACT OP 1 8 9 4

The p e n d u lu m b e g a n t o s w i n g t h e o t h e r way w h e n , th e e le c tio n

in

o f 1892, th e D e m o c ra tic P a r ty o b ta in e d c o n t r o l

o f th e g o v e rn m e n t.

It

to o k a d v a n ta g e o f i t s

pow er t o

lo w e r

t h e t a r i f f b y p a s s i n g t h e W il s o n - G o r m a n A c t o f 1 8 9 4 w h i c h , th o u g h i t

c o u ld n o t be i d e n t i f i e d a s one t h a t in tr o d u c e d

sw e e p in g r e d u c t i o n s

in th e t a r i f f

le v e l,

pro du ced s u b s t a n t i a l

d r o p s in a d v a lo re m r a t e s on ite m s su c h as w o o l, s i l k , ir o n , and o th e r m in e r a l s .4

c o a l,

Mo o n e c a n d o u b t t h a t a s h i f t

in

th e r i g h t d i r e c t i o n h a d ta k e n p la c e u n d e r th e l e a d e r s h i p o f th e d e m o c ra tic m a jo r ity ,

b u t P r o f e s s o r T a u s s i g was a p p r e h e n ­

s iv e o f any a tte m p t to a t t a c h m a jo r s i g n i f ic a n c e

to

th e B ill

a s a n i n d i c a t i o n t h a t a n e r a o f f r e e r t r a d e was i m m i n e n t . He s a i d : I t i s c l e a r t h a t t h e new t a r i f f a c t m ade n o d e e p r e a c h in g change in th e c h a r a c t e r o f o u r t a r i f f l e g i s ­ la tio n . The o n e e x c e p t i o n was t h e r e m o v a l o f t h e d u t y on w o o l . . . . In n o t a few c a s e s , t h e d u t i e s , w h i l e l o w e r t h a n t h o s e e n a c t e d i n t h e M c K in le y A c t o f 1 8 9 0 , w e re s t i l l h i g h e r t h a n u n d e r t h e t a r i f f a c t . o f 1 8 8 3 . As f a r a s i t w e n t , i t b e g a n a p o l i c y o f lo w e r d u t i e s ; b u t m ost o f th e s t e p s in t h i s d i r e c t i o n w ere f e e b l e a n d f a l t e r i n g . 5

4 Ib id .. S ta te s

p . 359

® P r a n k W. T a u s s i g , The T a r i f f H i s t o r y O f T he U n i t e d (Mew Y o r k : G . P . P u t n a m 1s S o n s , 1 9 3 1 ) , p . S1V, 31& .

16 P r e s id e n t C le v e la n d s i g n i f i e d h i s v is io n s by p e r m ittin g It fin a lly

w ent i n t o

H ow ever,

it

d is c o n te n t w ith i t s

t o b eco m e l a w w i t h o u t h i s

s ig n a tu re .

e f f e c t o n A u g u s t 2 8 , 1894*

t h e A c t o f 1 8 9 4 was s h o r t - l i v e d .

p u b l i c a n s h a d m ade i t

a m a jo r is s u e

in

i a l c am p aig n o f 1 8 9 6 , a n d c o n s e q u e n t l y i n t e r p r e t e d a s a m a n d a te to r e v i s e II.

p ro ­

H ie R e ­

th e h e a te d p r e s id e n tt h e i r v i c t o r y was

th e t a r i f f .

THE DING-LEY ACT OP 1 8 9 7

A t th e tim e o f th e p a s s a g e o f th e t a r i f f a c t o f 1 8 9 4 , n o t h i n g s e e m e d m o re r e m o t e t h a n an e a r l y r e t u r n p o lic y o f h ig h p r o te c tio n . sta u n c h p r o t e c t i o n i s t s

But in th e y e a r s f o llo w in g 1893,

q u i c k l y m ade p o l i t i c a l c a p i t a l o f

th e g ro w in g p o p u la r b e l i e f t h a t a r e t u r n m eant a r e t u r n to

to th e

p ro sp e rity .

to h ig h p ro te c tio n

The D in g le y A c t o f 1 8 9 7 ,

w h ich a g a i n e s t a b l i s h e d a h i g h e r l e v e l o f p r o t e c t i o n i s t i c d u t i e s , was t h e r e s u l t . ® T h is a c t ,

w h ic h re m a in e d

i n f o r c e f o r 12 y e a r s

r e m a r k a b ly lo n g p e r i o d f o r a n A m e ric an t a r i f f re g is te re d p e o p le .

la w ),

(a

c le a rly

t h e c o n s t a n t l y c h a n g in g s e n t i m e n t s o f t h e A m e ric an

Its

s p e c i a l f e a t u r e was t h e r e - i m p o s i t i o n o f t h e

d u t y on w ool a l o n g w i t h a g e n e r a l r e s t o r a t i o n o f t h e t a r i f f le v e ls

t h a t w ere i n f o r c e p r i o r t o

6 Ib id .,

p.

3 21-323.

th e A ct o f 1894.

17 III.

PAYNE-ALDRICH ACT OF 1 9 0 9

D u rin g th e l a t t e r p a r t o f t h e D in g le y t a r i f f p e r i o d , h o w e v e r , t h e r e d e v e l o p e d l o u d dem ands f o r a d o w n w ard r e v i s i o n o f th e t a r i f f .

T he c o s t o f l i v i n g h a d r i s e n

o f a g rad u al r is e farm ers,

in th e g e n e r a l l e v e l o f p r i c e s .

b e n e fit.

g o o d s .7

ta riff

t h a t o f f e r e d th e m n o a p p a r e n t

O th e rs f e l t t h a t th e c h a r a c t e r o f th e c o u n tr y fs t r a d e was c h a n g i n g , a n d t h a t o u r h i g h t a r i f f s

w o rk in g to m a rk e ts

C onsum ers,

a n d e v e n c e r t a i n m a n u f a c t u r e r s cam e t o r e g a r d w i t h

su s p ic io n a p r o te c tiv e

fo re ig n

as a consequence

o u r d e tr i m e n t in w in n in g e a s y a c c e s s

i n w h ic h t o

to

w ere

fo re ig n

s e l l o u r g ro w in g s u r p l u s o f m a n u fa c tu re d

T h is c h a n g in g s e n tim e n t

in r e g a r d t o

h i g h p r o t e c t i o n a g a i n m ade t h e t a r i f f d e n t i a l cam p aig n o f 1 9 0 8 ,

an is s u e

th e

v a lu e o f

in th e p r e s i ­

in w h ic h b o t h D e m o c ra ts a n d Re­

p u b lic a n s p ro m ise d a t a r i f f r e v i s i o n . T he r e s u l t i n g r e v i s i o n o f t h e t a r i f f u n d e r t a k e n by t h e v i c t o r i o u s R e p u b l i c a n s w as t h e P a y n e - A l d r i c h A c t o f 1 9 0 9 . The p a r t y ,

in

its

p la tfo rm , had y ie ld e d to

p u b l i c o p i n i o n on t h i s

q u e stio n ,

s h o u ld be h ig h enough t o

th e p re s s u re o f

but In s is te d th a t p ro te c tio n

c o v e r t h e d i f f e r e n c e b e tw e e n c o s t

o f p r o d u c i n g a c o m m o d ity a t hom e a n d p r o d u c i n g i t

7 K iekhofer, o g . c i t . ,

p. 360.

ab ro ad .

18 The p r i n c i p l e u p o n w h i c h t h e e n s u i n g a c t was b a s e d was em­ p lo y e d how ever as

ju stific a tio n

f o r th e e n a c tm e n t o f a t a r i f f

law t h a t p r o v e d d i s a p p o i n t i n g b e c a u s e o f t h e s m a l l r e d u c t i o n s i t h a d p ro d u ced .

N e v e r t h e l e s s , a s P r o f e s s o r T a u s s ig v iew ed i t :

T h o u g h t h e a c t a s a *foole b r o u g h t n o c o n s i d e r a b l e d o w n w ard r e v i s i o n , i t was l e s s a g g r e s s i v e l y p r o ­ t e c t i o n i s t th a n th e p re v io u s R e p u b lic a n m e a s u re s . . . . T h e r e was u n m i s t a k a b l e e v i d e n c e i n C o n g r e s s a n d i n t h e c o m m u n ity o f o p p o s i t i o n t o a f u r t h e r u p w a r d m o v e m e n t. H i g h - w a t e r m a r k a p p a r e n t l y h a d b e e n r e a c h ­ e d , a n d t h e r e w as r e a s o n t o e x p e c t t h a t t h e t i d e , no l o n g e r m o v in g u p w a r d , m i g h t t h e r e a f t e r b e g i n t o r e c e d e .9 IV .

UNDERWOOD ACT OF 1 9 1 3

The d i s s a t i s f a c t i o n made t h e

w ith th e sc o p e o f t h e A c t o f 1909

t a r i f f a g a in a m a jo r is s u e

in

th e e l e c t i o n o f 1 912.

T h is tim e th e D e m o c ra tic P a r t y em erg ed v i c t o r i o u s and p ro m p t­ ly re v is e d th e o f 1913.

t a r i f f d o w n w ard b y p a s s i n g t h e U n d e rw o o d A c t

I t b rought th e f i r s t m a te r ia l re d u c tio n s s in c e

War b e t w e e n t h e S t a t e s . s u g a r, b o o ts,

Many g o o d s ,

th e

su c h a s raw w o o l, raw

a n d s h o e s w ere p u t on t h e f r e e

lis t.

R a te s

in

g e n e r a l o n d u t i a b l e g o o d s w e r e r e d u c e d , a n d a h a t t e m p t was m ade t o

l o w e r t h e d u t y o n ’N e c e s s i t i e s 11 a n d t o

h ig h e r d u tie s upon l u x u r i e s . U nderw ood A c t ,

1914-1921,

D u rin g th e o p e r a t io n o f t h e

i n w h ich t r a d e

8 T a u s s i g , o j) . c i t . .

im p o s e t h e

p. 408.

was g r e a t l y d i s t u r b e d

19 by t h e w a r, th e a v e r a g e r a t e

o f d u t y on d u t i a b l e g o o d s was

2 7 p e r c e n t , a n d on a l l g o o d s i m p o r t e d 9 p e r

c e n t

.9

T h e F i r s t W o rld War e f f e c t e d g r e a t c h a n g e d i n o u r fo re ig n tr a d e .

O ur n o rm a l s o u r c e s o f im p o r ts s h i f t e d ,

t h e i r v o lu m e i n c r e a s e d ;

and

and th e am ount a n d v a lu e o f o u r e x ­

p o r ts expanded to u n b e lie v a b le m a g n itu d e s . V.

TARIFF COMMISSION ACT OF 19 16

D u rin g t h e e a r l y y e a r s o f P r e s i d e n t W i l s o n ’s a d m in ­ istra tio n fo r th e

th e r e h ad d e v e lo p e d c o n s id e r a b le p u b lic a g i t a t i o n

c re a tio n o f a t a r i f f

c o m m issio n , an d t h i s

show ed no s i g n s o f a b a t i n g . ^ c le a r th a t

F u rth e rm o re , as

it

dem and becam e

t h e e c o n o m i c e f f e c t o f t h e w a r w h ic h b e g a n i n

1 9 1 4 w o u ld l e a v e

its

m ark on t h e

i n d u s t r i a l and co m m erc ial

w o rld , th e need o f in fo rm a tio n as a g u id e to

fu tu re p o lic ie s

o f t h e G o v e r n m e n t i n t a r i f f m a t t e r s b e ca m e a p p a r e n t . it

A lso ,

was g e n e r a l l y a g r e e d t h a t t h e e x i s t e n c e o f s u c h a com­

m is s i o n w ith pow ers e s s e n t i a l l y w o u ld t a k e

to

in v e s tig a te

and to a d v is e

th e fo rm u la tio n o f t a r i f f p o lic y o u t o f th e re a lm

9 K ie k h o fe r, o p . c i t . ,

p . 360.

1 0 Tvyo p a r t i s a n ( R e p u b l i c a n ) T a r i f f C o m m i s s i o n s h a d e x is te d p r io r to t h i s . The f i r s t o n e i n 1 8 8 2 i n P r e s i d e n t A r t h u r fs a d m i n i s t r a t i o n , and t h e se c o n d in 1909 d u r in g P r e s i d e n t T a f t ’s a d m i n i s t r a t i o n .

20 of p o litic s

and p la c e

i t o n a m o re ’’s c i e n t i f i c

C o n g ress resp o n d e d to fa c t-fin d in g

m e n e n t, b i - p a r t i s a n

1916•

th e U n ite d S ta te s

T he A c t p r o v i d e d f o r a p e r -

b e lo n g to

th e .s a m e p o l i t i c a l

L i k e t h e F e d e r a l T r a d e C o m m is s io n a n d t h e

Com merce C o m m i s s i o n ,

T a riff

b o a r d com posed o f s i x m em b ers, o f w h ic h

n o t m o re t h a n t h r e e w e r e t o p a rty .

th e re c o g n iz e d need o f su ch a

b o d y by e s t a b l i s h i n g

C o m m is s io n i n S e p t e m b e r ,

b a s i s ; 1’! !

it

is

In te rsta te

in te n d e d to be a p e rm a n e n t body

and i s n o t i d e n t i f i e d w ith any g o v e rn m e n ta l d e p a rtm e n t, fu n c tio n

is n o t to d e te rm in e t a r i f f

p o lic ie s,

a s s i m i l a t e and p re p a re in f o r m a tio n f o r C ongress

b u t r a t h e r to

th e a s s i s t a n c e o f

in th e d e v e lo p m e n t o f a body o f t r a d e

o th e r p o lic ie s as le g is la to r s

its

law s and su c h

sh o u ld d e c id e u p o n .

T he l a w

o f 1 9 1 6 s t i p u l a t e s , am ong o t h e r t h i n g s , t h a t i t s h a l l be t h e d u ty o f s a i d c o m m issio n t o i n v e s t i g a t e th e a d m i n i s t r a t i o n and f i s c a l and in d u s ­ t r i a l e f f e c t s o f t h e c u s t o m s l a w o f t h i s c o u n t r y now i n f o r c e o r w h i c h may b e h e r e a f t e r e n a c t e d . . . . T h a t th e c o m m issio n s h a l l h a v e pow er to i n v e s t i g a t e t h e t a r i f f r e l a t i o n s b e tw e e n t h e U n i t e d S t a t e s and f o r e i g n c o u n t r i e s . . . .a n d c o n d i t i o n s , c a u s e s , and e f f e c t s r e l a t i n g to c o m p e titio n o f f o r e ig n i n d u s tr ie s w i t h t h o s e o f t h e U n i t e d S t a t e s , i n c l u d i n g d u m p in g and c o s t o f p r o d u c tio n .! 2

! ! U n i t e d S t a t e s T a r i f f C o m m i s s i o n , The T a r i f f And Its H isto ry . M is c S e r i e s ( G o v e r n m e n t P r i n t i n g O f f i c e , W a s h i n g t o n D. C . , 1 9 5 4 ) , p . 9 9 . ! ^ G e o r g e M. F i s k a n d P a u l S . P i e r c e , I n t e r n a t i o n a l C o m m e r c i P o l i-------c i e s (New Y o r k ; The M a c m i l l a n C o m p an y, 1 9 2 3 ) , p p . -" 1 1 7 -1a1l 8 ”-----

21 In t h e

th ir ty - f o u r y ears

has fu n c tio n e d ,

its

t h a t t h e T a r i f f C o m m is s io n

a c c o m p lish m e n ts and th e u n t i r i n g a s s i s t ­

a n c e i t h a s g iv e n o u r la w -m a k e rs h a v e c o n t r i b u t e d a g r e a t d e a l to

th e re m a rk a b le r e p u t a ti o n and p r e s t ig e

it

p re se n tly

e n jo y s. V I. To r e t u r n

FORDNEY-McCUMBER ACT OF 1 9 2 2 to

th e stu d y o f o u r r e c e n t t a r i f f h i s t o r y ,

th e c lo s e o f th e w a r, and th e r e t u r n o f th e R e p u b lic a n s t o pow er in

1920, a g a in b ro u g h t th e

lig h t o f d isc u ssio n .

ta riff

issu e

I t was u n f o r t u n a t e t h a t

in to

th e lim e ­

th e y e a rs d u rin g

w h i c h t h e t a r i f f a c t o f 1 9 1 5 was i n f o r c e w e r e a s f a r f r o m n o rm al a s c o u ld be im a g in e d ; an d c o n s e q u e n tly , c o u ld h a r d l y h av e been p la c e d

i n a m o re u n f a v o r a b l e

To A m e r i c a n m a n u f a c t u r e r s , p ro te c tio n

th an any t a r i f f

" N o t o n l y was f o r e i g n p le te ly e lim in a te d ,

its

o p e ra tio n lig h t.

th e w ar s e rv e d a s b e t t e r

le g isla tio n

c o u ld p o s s ib ly b e .

i m p o r t a t i o n o f c o m p e t i n g p r o d u c t s com­

b u t A m e ric an g o o d s s u c h a s p r e v i o u s l y

h a d b e e n m ade a t hom e o n l y u n d e r t h e

s h e lte r o f h ig h d u tie s

w e r e e x p o r t e d t o n e u t r a l m a r k e t s . ” 3-3 I t was n a t u r a l ,

th e re fo re ,

t h a t th e p r o t e c ti o n i s t s

s h o u ld p r e d i c t t h e p a s s a g e o f d a r k c lo u d s o v e r A m e ric an p o s t ­ war p r o s p e r i t y .

F or th e y re a so n e d t h a t ,

13 T a u s s i g ,

op. c i t .,

p . 448.

s in c e th e a r t i f i c i a l

22 t r a d © b a r r i e r s o f w a r no l o n g e r e x i s t e d

to p ro te c t our in ­

d u s t r y a n d d o m e s t i c m a r k e t s , we w o u ld b e r u i n e d by t h e r e v i ­ ta liz e d

p ro d u c tiv e

fa c ilitie s

d u t i e s w ere r e s t o r e d .

o f E urope u n l e s s h ig h

F u rth e rm o re ,

im p o rt

th e y w arned t h a t th e

c o n tin u e d d e v e lo p m e n t o f o u r w a r-b o rn d y e s t u f f s and c h e m ic a l in d u strie s

w o u ld b e d a n g e r o u s l y

o f p ro te c tio n f a i l

to

im p e d e d s h o u l d som e m e a s u r e

be l e g i s l a t e d .

F u ll p u b lic su p p o rt,

h o w e v e r , was n o t o b t a i n e d by t h e p r o t a g o n i s t s o f a h i g h e r t a r i f f b a rrie r u n til

th e d e p re s s io n b e g in n in g in

o f 1920 h a d s t r u c k r e s u l t i n g u l t i m a t e l y o f fiv e

t h e summer

i n t h e u n em p lo y m en t

to s i x m i l l i o n p e o p le . T he c u m u l a t i v e e f f e c t o f a l l t h e s e

a n o th e r upw ard r e v i s i o n o f t h e t a r i f f . w ith a s o - c a l l e d

i n f l u e n c e s was

A fte r a b r i e f p e rio d

t!e m e r g e n c y t a r i f f , ” t h e Fordney-*M cCum ber

A c t o f 1 9 2 2 was p a s s e d . p r e v i o u s l y on t h e

free

Many i m p o r t a n t g o o d s , s u c h a s w o o l , lis t

p l a c e d on t h e d u t y l i s t . h i g h e s t on r e c o r d .

o f t h e U n d e r w o o d A c t , w e re a g a i n

Some o f t h e r a t e s

"D u rin g th e y e a r s o f i t s

im p o sed w ere t h e o p e ra tio n ,

1930, th e a v e ra g e ad v a lo re m r a t e s on d u t i a b l e t o 3 9 p e r c e n t , a n d on d u t i a b l e a n d f r e e 14 p e r c e n t . ” 1 4

14 K iekhofer, op. c i t . ,

p. 361.

1922-

g oods am o u n ted

im p o rts to g e th e r to

23 On© new f e a t u r e f i r s t McCumber A c t , a n d r e t a i n e d is

th e f l e x i b i l i t y

in c o r p o ra te d in th e F o rd n ey -

in s u b s e q u e n t t a r i f f

p rin c ip le .

le g isla tio n ,

H ie P r e s i d e n t o f t h e U n i t e d

S t a t e s was a u t h o r i z e d , a f t e r d u e i n v e s t i g a t i o n a n d re c o m m e n ­ d a t i o n b y th© T a r i f f C o m m i s s i o n ,

to

in c re a s e o r d e c re a s e th e

d u t i e s b y a maximum o f 5 0 p e r c e n t o f t h e p r e v a i l i n g d u t i e s in o r d e r to o f f s e t d i f f e r e n c e s

i n c o s t o f p r o d u c t i o n a t home

and a b ro a d . V II.

HAWLEY-SMOOT ACT OF 1 9 3 0

T he i n c o n s i s t e n c i e s

in A m e ric an t a r i f f

h o w e v e r , w e r e s o o n t o r e a c h n ew h e i g h t s . a g ric u ltu re

in

le g isla tio n ,

Some s e c t i o n s o f

th e U n ite d S ta te s h ad f a i l e d

to

sh are

u n u s u a l p r o s p e r it y t h a t fo llo w e d th e d e p re s s io n

of 1921.

T hese g ro u p s dem anded v a r i o u s k in d s o f a s s i s t a n c e la tiv e th is

a c tio n .

f a r m e r s by m eans o f a

l a r g e r s h a r e o f t h e home m a r k e t f o r o i l s p ro d u c ts , h id e s and s k in s ,

a g ric u ltu ra l p ric e s.

and f a t s ,

d a iry

an d num erous o t h e r a g r i c u l t u r a l

A g ric u ltu ra l le a d e rs a ls o

o f som e i n d u s t r i a l t a r i f f s

ie n c in g

by l e g i s ­

A c c o rd in g to th e s ta te m e n ts o f farm l e a d e r s ,

a s s i s t a n c e w as t o b e g i v e n t o

p ro d u c ts.

in th e

proposed th e re d u c tio n

to b e t t e r e q u a liz e

C e rta in

i n d u s t r i a l and

i n d u s t r i e s a l s o w ere e x p e r ­

in c r e a s e d c o m p e titio n fro m im p o rts o f f o r e i g n goods

a n d d e m a n d in g m o re p r o t e e t i o n . ^ 5

15 U n i t e d S t a t e s

T a r i f f C o m m issio n , o p . c i t . .

p . 8 2 -8 5 .

24 A s p e c i a l s e s s i o n was c a l l e d b y P r e s i d e n t H o o v e r f o r June,

1 9 2 9 , w h i c h was t o

situ a tio n .

d e a l p r im a r ily w ith th e a g r i c u l t u r a l

He s u g g e s t e d t h a t t a r i f f s

be r a i s e d on a g r i c u l ­

t u r a l p ro d u c ts and t h a t any m a n u fa c tu rin g i n d u s t r ie s

th a t

w e r e s e r i o u s l y h u r t s h o u l d b e a i d e d i n t h e sam e w a y . was t o b e l i m i t e d r e v i s i o n p r o g r a m came t o n o t h i n g g u id e t a r i f f in to

sp e c ific

i l l s . 16

in t h e C o m m itte e s t h a t

le g isla tio n .

th e r e g u la r s e s s io n

to cu re

is m r e a c h

its

T a u s s ig e m p h a siz e s as he p o in ts o u t,

and

The s p e c i a l s e s s i o n d r a g g e d o n i n D e c e m b e r , a n d t h e f i n a l l a w , known

fo r th is

h ig h tid e

But th e

in itia te

a s t h e H a w le y - S m o o t A c t was n o t e n a c t e d u n t i l J u n e , The r e a s o n s

T h ere

1930.

a c t w h ich saw A m e ric an p r o t e c t i o n ­

a re not easy to

fin d .

P ro fesso r

th e p e c u l i a r i t y o f t h e 1930 t a r i f f w h ic h , c a n n o t be e x p la in e d

by any o f th e c irc u m ­

s t a n c e s w h ic h a c c o u n te d f o r t h e a c t s t h a t h a d p r e c e d e d i t . He c o n c l u d e s

th a t:

” T he e x p l a n a t i o n o f t h e a c t o f 1 9 3 0 .

t u r n s o n some p e c u l i a r i t i e s

. . .

i n t h e e c o n o m ic c o n d i t i o n s o f t h e

d e c a d e 1 9 2 0 -3 0 , an d e s p e c i a l l y on t h o s e o f th e a g r i c u l t u r a l s i t u a t i o n . ” 1*7 by a g r i c u l t u r a l

T h i s a c t w as t o b e a l i m i t e d t a r i f f in te re s ts .

h o w e v e r, an d due t o groups

in C o n g ress

p ro m p te d

T he r e v i s i o n g o t o u t o f h a n d ,

th e m u tu a l s u p p o r t o f s p e c i a l i n t e r e s t (”lo g -ro llin g ” ) i t

b e ca m e a g e n e r a l u p ­

w ard r e v i s i o n .

Y ork:

M i c h a e l A . H e i l p e r i n , The T r a d e o f H a t i o n s A l f r e d A. K nopf, 1 9 4 7 ), p . 2 1 4 -2 1 7 .

I?

T a u ssig , o p . c i t . ,

p . 48 9 -4 9 1 .

(Hew

CHAPTER I I I THE RECIPROCAL TRADE AGREEMENTS ACT OF 1 9 5 4 In th e p r e c e d in g c h a p t e r , p re se n te d o f th e t a r i f f sin c e

1860.

in c re a se s

Its

a t h u m b - n a i l s k e t c h was

p o l i c y u n d e r t a k e n by t h e U n i t e d S t a t e s

d e v e lo p m e n t, c h a r a c t e r i z e d by th e p e r s i s t e n t

in th e p r e v a i l i n g

le v e l o f t a r i f f d u tie s , re s u lte d

m a in ly fro m t h e p r i n c i p l e s t o w h ic h t h e r e c u r r i n g v i c t o r i o u s R e p u b lic a n P a r ty a d h e r e d . th e D e m o c ra tic P a r t y th e p o lic y

O n ly a t

i n f r e q u e n t i n t e r v a l s when

c o n t r o l l e d t h e r e i g n s o f g o v e r n m e n t w as

of p ro te c tio n is m reb u k ed .

P o l i t i c a l f o r tu n e s tu r n e d , h ow ever, a s a r e s u l t o f th e p r e s id e n tia l e le c tio n

o f 19 32 i n w h i c h t h e D e m o c r a t i c

P a r t y em erged w i t h a d e c id e d m a j o r i t y . tio n ,

ta k in g a d v a n ta g e o f i t s

o v e r w h e l m i n g v i c t o r y , m oved

q u ic k ly , y e t w ith g r e a t c irc u m s p e c tio n , bonds o f w o rld t r a d e

w h ich i t

The new a d m i n i s t r a ­

to u n sh a c k le th e

b e l i e v e d w ere o c c a s i o n e d by t h e

p a s s a g e o f t h e H aw ley -S m o o t B i l l .

The r e s u l t i n g

le g isla tio n ,

p a s s e d a s a n a m e n d m e n t t o t h e A c t o f 1 9 3 0 , was t h e R e c i p r o c a l T ra d e A g re em en ts A c t o f 1934 r e p r e s e n t i n g a h i g h l y s i g n i f i c a n t d e p a rtu re

i n A m e ric an c o m m e rc ia l p o l i c y .

B efo re d e lv in g act

in to a th o ro u g h i n v e s t i g a t i o n o f th e

in o r d e r to r e f l e c t

s a r y t h a t som e a t t e n t i o n

i t s g e n e r a l c o m p o s itio n , be g iv e n to

its

it

is n eces­

e v o lu tio n a ry a s p e c ts .

F a ir e v a lu a tio n o f any p o lic y

is h a rd ly p o s s ib le w ith o u t an

a d e q u a te c o n s id e r a tio n o f i t s

o rig in s .

26 I.

BACKGROUND OP THE ACT

F o llo w in g th e u n p re c e d e n te d r i s e

in t a r i f f d u tie s

o c c a s i o n e d b y t h e p a s s a g e o f t h e H a w le y - S m o o t b i l l * tr a d e began a p r e c i p it o u s

and d r a s t i c

d e c lin e *

'’B e tw e e n 1 9 2 9

a n d 1 9 5 3 w o r l d t r a d e d r o p p e d 66 p e r c e n t i n v a l u e * th e f o r e ig n cen t in

• • • and

tr a d e o f th e U n ite d S ta te s had d e c lin e d 68 p e r

v a lu e .”1

T h is d e c l i n e

d o w n w ard r e v i s i o n te llin g

w o rld

in v a lu e n o t o n ly r e f l e c t e d a

o f t h e c o m m o d ity p r i c e s t r u c t u r e ,

im p o rta n c e ,

it

s i c a l v o lu m e o f t r a d e

re p re se n te d a f a llin g

b u t,

of

o f f o f th e phy­

e n te r in g th e c h a n n e ls o f

in te rn a tio n a l

com m erce. W ith o u t d o u b t,

t h e f o r e i g n e c o n o m ic p o l i c y u n d e r t a k e n

by t h e U n i t e d S t a t e s a f t e r t h e e n a c t m e n t o f t h e o f 1930 p la y e d

its

But t o

t h e H a w ley -S m o o t b i l l an d i n f e r

iso la te

th e s o le re a so n

ta riff

b ill

p a r t in r e d u c in g h e r s h a r e o f w o rld tr a d e *

fo r th e

c o n s titu te a c o n c lu sio n

sh rin k a g e

t h a t in

it

la y

i n w o r l d c o m m erc e w o u ld

t h a t w o u ld be h a r d t o

ju stify .

An

1 P a u l V. H o r n , I n t e r n a t i o n a l T r a d e P r i n c i p l e s a n d P r a c t i c e s (New Y o r k : P r e n tic e - H a ll, I n c ., 1 9 4 ?), p . 193T” A lso S e e : John P . Y oung, I n t e r n a t i o n a l T ra d e an d F in a n c e (New Y o r k : The R o n a l d P r e s s C o . , 1 9 3 8 ) , p . 3 . , f r o m w h i c h a re q u o te d th e fo llo w in g f i g u r e s : The f o r e i g n t r a d e o f t h e U n i t e d S t a t e s , e x p o r t s an d im p o r ts co m b in ed , d e c l i n e d from $ 1 0 ,2 5 0 ,0 0 0 ,0 0 0 in 1929 to o n ly $ 2 ,9 3 6 ,1 0 0 ,0 0 0 in 1 932, th e l o w e s t a m o u n t s i n c e 1 9 0 8 . A l a r g e p a r t o f t h i s d e c l i n e was in v a lu e r a t h e r th a n in v o lu m e . The v a l u e s d e c l i n e d by a b o u t o n e - t h i r d o v e r t h e p r e v i o u s y e a r , w h i l e t h e v o lu m e d e c l i n e d by o n l y a b o u t o n e - f i f t h f o r e x p o r t s a n d o n e - t e n t h f o r i m p o r t s .

27 o b j e c t i v e a p p r a i s a l w o u ld e v i d e n c e t h e f a c t t h a t A m e r i c a ^ e c o n o m ic p o l i c y

in

a lre a d y u n ste a d y cause

its

to ta l

1950 s e r v e d m e re ly t o a g g r a v a te t h e

tra d e s tru c tu re c o lla p s e .

o f t h e w o rld r a t h e r th a n

to

One a u t h o r s u c c i n c t l y o b s e r v e d

th a t; T rade r e s t r i c t i o n s a b ro a d h a d m u l t i p l i e d , i n t e r ­ n a t i o n a l in v e s tm e n ts h a d b ro k e n down, a n d d e f l a t i o n and d e p r e s s io n h a d f a s te n e d t h e i r g r i p upon th e w h o le w o r l d . N e v e r t h e l e s s , i t may b e f a i r l y s a i d t h a t o u r h i g h t a r i f f b a r r i e r s w e re i m p o r t a n t c o n ­ t r i b u t o r s t o th e d e b a c le , an d l a t e r a c t e d a s im p e d i­ m en ts t o w o rld t r a d e r e c o v e r y . Many o f t h e t r a d e r e s t r i c t i o n s o f f o r e i g n c o u n t r i e s w e r e im p o s e d i n d ir e c t r e ta lia tio n a g a in st our p ro h ib itiv e r a te s , w h ile th e s e v e r e and sudden r e s t r i c t i o n o f o u r m ark et c a u se d o t h e r c o u n tr ie s h a s t i l y to e r e c t b a r ­ r i e r s i n d e f e n s e o f t h e i r d o m e s t i c e c o n o m i e s .2 The i n c r e a s i n g s e v e r i t y o f t h e w o r l d d e p r e s s i o n to hav e

its

c e d e n te d

e f f e c t s upon th e U n ite d S t a t e s .

in th e h i s t o r y o f o u r f o r e i g n

in o u r e x p o r ts

tra d e

O b s ta c le s u n p re ­ c re a te d a d e c lin e

t h a t p la c e d u n b e a ra b le h a r d s h ip s upon th e

A m e ric an econom y, p a r t i c u l a r l y u p o n a g r i c u l t u r e . th e n a tu re

o f our e x p o rts

raw m a t e r i a l s

B efo re 1930,

c o n s is te d m a in ly o f s u r p lu s e s

of

a n d f o o d s t u f f s w h ic h w e re in s u c h g r e a t dem and

ab ro ad th a t a r e t a l i a t i o n little

began

to our p o lic y o f h ig h t a r i f f s

i f any e f f e c t upon o ur t r a d e .

f o l l o w i n g W o rld War I , c u lt u r a l p ro d u c tio n

H o w ev er,

had

in th e y e a r s

t h e r e d e v e lo p e d an i n c r e a s e

in a g r i ­

th ro u g h o u t th e w o rld , e s p e c i a l l y

in

^ L a w r e n c e W. T o w l e , I n t e r n a t i o n a l T r a d e a n d Commer­ c i a l P o l i c y (New Y o r k : H a r p e r a n d B r o s . , 1 9 4 7 } , p . 4 0 9 .

28 W estern E u ro p e ,

t h a t p la y e d havoc w ith o u r fa v o ra b le

in d i s p o s i n g o f o u r s u r p l u s f a r

p ro d u c ts.

w o rld m a r k e ts s t i f f e n e d m ak in g i t

C o m p e titio n f o r

i n c r e a s i n g l y m o re d i f f i c u l t

fo r

th e U n ite d S ta te s to ad o p t u n i l a t e r a l l y

iff

p o lic y she f e l t

to

p o s itio n

any s o r t o f t a r ­

be e x p e d i e n t w i t h o u t p r e v i o u s

in te r­

n a tio n a l c o n s u lta tio n and a g re e m e n t.3 T he n e e d f o r a r e s t a t e m e n t o f A m e r i c a * s f o r e i g n e c o ­ n o m ic p o l i c y b e ca m e u r g e n t ; a n d

in l i n e

w ith t h i s

d ire need,

t h e D e m o c r a tic P a r t y c o m m itte d i t s e l f t o a r e v i s i o n e x is tin g t a r i f f its

p la tfo rm

le g isla tio n

su ch a p le d g e

f o r t h e co m in g p r e s i d e n t i a l e l e c t i o n

I n a C a m p a ig n s p e e c h , sta te d

by i n c l u d i n g

its

o f th e

c a n d id a te , F ra n k lin

in

in

1932.

D. R o o s e v e l t

th a t; I h av e a d v o c a te d and c o n tin u e to a d v o c a te a t a r i f f p o l i c y b a se d in a l a r g e p a r t upon th e sim p le p r i n ­ c ip l e o f p r o f i t a b l e exchange a r r i v e d a t th ro u g h n e g o tia te d t a r i f f s w ith b e n e f it to each n a tio n . T h is p r i n c i p l e o f t a r i f f s b y n e g o t i a t i o n m eans to d e a l w ith e a c h c o u n try on th e b a s i s o f f a i r b a r t e r The d e c i s i v e

p o lls gave i t e c o n o m ic s t a t e

v ic to ry

o f th e D e m o c ra tic P a r ty a t th e

c o n t r o l o f t h e g o v e r n m e n t a t a t i m e when o u r of a ffa irs

. 4

w as m o v in g r a p i d l y

to w a rd t o t a l

3 A r t h u r D. G a y e r a n d C a r l T . S c h m i d t , A m e r i c a n E c o n o m ic F o r e i g n P o l i c y (New Y o r k ; A m e ric an C o o r d i n a t i n g C o m m i t te e F o r I n t e r n a t i o n a l S t u d i e s , 1 9 3 9 ) , p p . 7 4 - 7 5 . 4 Q u o t e d i n H e n r y J . T a s c a , The R e c i p r o c a l T r a d e P o lic y o f th e U n ite d S t a te s ( P h ila d e I p h ia T U n iv e r s ity o f P e n n sy lv a n ia P r e s s , 1 9 3 8 ), p p . 1 7 -1 8 .

29 c o lla p s e .

G ro w in g s u r p l u s e s ,

ttr u n s !! on o u r b a n k s w e r e c l e a r

fa llin g

p ric e s,

in d ic a tio n s

t h a t co u rag eo u s

a c t i o n was d e m a n d e d o f t h e new a d m i n i s t r a t i o n to a v e r t th e

th e

th e d o m e stic i s s u e s

it

in te n d e d

p re s su re o f d e a lin g e f f e c tiv e ly

le ft

th e fo re ig n

h o w e v e r , o w in g t o

th e t i r e l e s s

C o r d e l l H u l l , an am endm ent t o

w ith

e c o n o m ic p o l i c y t o

a d o p te d by t h e P r e s i d e n t t o re m a in u n c e r t a i n .

A c t w h ic h ,

if

im p e n d in g c a t a s t r o p h e .

At f i r s t ,

w as p a s s e d .

and s e r io u s

e ffo rts

be

In June 1934,

o f S e c re ta ry

of S ta te ,

t h e H a w le y - S m o o t B i l l o f 1 9 3 0

I t was known a s t h e R e c i p r o c a l T r a d e A g r e e m e n t s f o r t h e l a s t 16 y e a r s , h a s r e m a i n e d a s t h e

co rn er­

s t o n e o f A m e ric an c o m m e rc ia l p o l i c y * ^ II.

SALIENT FEATURES

T he H u l l P r o g r a m a s a tta in m e n t o f th re e

it

b e ca m e k n o w n ,

in v o lv e d th e

g o a ls:

(1 ) t o s e c u r e re m o v a l o f r e s t r i c t i v e f o r e i g n b a r ­ r i e r s t o A m e r i c a n e x p o r t s * ( 2 ) t o s c a l e down e x ­ c e s s i v e A m e ric a n t a r i f f r a t e s ; (3) to c h e c k th e t r e n d to w a rd d i s c r i m i n a t o r y t r a d e p r a c t i c e s o f f o r e i g n c o u n t r i e s a n d t h e u n e c o n o m ic b i l a t e r a l i z a ­ t i o n o f t r a d e , an d to r e s t o r e to th e w o rld a c o m m e r c i a l s y s t e m b a s e d on e q u a l t r e a t m e n t

5 F r a n c i s B . S a y e r , The Way F o r e w a r d T h e M a c m i l l a n C om pany, 1 9 3 9 ) , p p . 5 4 - 5 9 . P o lic y

(New Y o r k :

® W i l l i a m D i e b o l d , J r . , New D i r e c t i o n s I n O u r T r a d e (New Y o r k ; C o u n c i l On F o r e i g n R e l a t i o n s , 1 9 4 1 ) , p . 6 .

30 T he A c t e m p o w e re d t h e ra te

a s m uch a s

50; p e r c e n t

a g re e m e n ts w ith f o r e i g n

P r e s id e n t to re d u c e any t a r i f f

in n e g o t i a t i n g r e c i p r o c a l t r a d e

c o u n trie s .

Such r e d u c tio n s

c o u ld be

m ade, h o w e v e r, o n l y a f t e r a p p r o p r i a t e p u b l i c h e a r i n g s w ere c o n d u c te d a t w h ic h i n t e r e s t e d p a r t i e s

c o u ld p r e s e n t t h e i r

a rg u m e n ts,

th e P r e s i d e n t fro m

p ro o r c o n .

tra n s fe rrin g a rtic le s o r v ic e v e rs a . d e p a rtu re

I t p ro h ib ite d

from th e d u t i a b l e

F u rth e rm o re ,

it

lis t

to

th e f r e e

p ro v id e d f o r a s i g n i f i c a n t

f r o m t h e c u s t o m a r y m a n n e r i n w h ic h o u r t a r i f f

l a t i o n h a s b e en m ade;

A l l new p a c t s w e r e t o b e

o f " a g r e e m e n t s 11, n o t t r e a t i e s

lis t

le g is­

in t h e fo rm

w h ic h p r e c l u d e d t h e n e c e s s i t y

f o r f i n a l S e n a t e a p p r o v a l . 1? T he c o n t i n u e d i n s e r t i o n fa v o re d -n a tio n

o f th e u n c o n d iti o n a l m o st-

c la u se ® in a l l s u b s e q u e n t t r e a t i e s

c o n c lu d e d

u n d e r a u t h o r i t y o f t h i s A c t was p r o v i d e d f o r b y s t i p u l a t i n g t h a t " th e

p ro c la im e d d u tie s

w ere t o a p p ly t o w o rds, ev er,

im p o rt r e s t r i c t i o n s *

th e p ro d u c ts o f a l l c o u n tr ie s ;

g e n e ra liz a tio n in a n t i c i p a t i n g

by fo re ig n

and o th e r

o r,

in o th e r

o f c o n c e s s i o n s w as p r e s c r i b e d . " ® th e p o s s ib l e m isu se o f t h i s

How­

p ro v isio n

c o u n t r i e s , t h e A c t e m p o w e re d t h e P r e s i d e n t t o

*? T o w l e , o p . c

i t pp.

41 1 -4 1 3 .

® P r i o r to 1 9 2 3 , t h e U n i t e d S t a t e s was a n a r d e n t s u p ­ p o r t e r o f th e c o n d i t i o n a l fo rm o f M o s t-F a v o re d -N a tio n t r e a t m e n t . Y ork;

® M a r g a r e t S . G o r d o n , B a r r i e r s To W o rld T r a d e T h e M a c m i l l a n C om pany, 1 $ 4 1 ) , p . “"3 9 $ .

(New

31 "suspend t h e i r

‘a p p l i c a t i o n t o a r t i c l e s

th e g ro w th ,

o r m a n u fa c tu re

o f any c o u n try b e c a u s e of i t s

p roduce,

d isc rim in a to ry

t r e a t m e n t o f A m e r i c a n c o m m erce o r b e c a u s e o f o t h e r a c t s o r p o l i c i e s w h ic h in h i s

o p in io n *

ten d e d

* to d e f e a t t h e p u r p o s e *

o f the a c t * "10 The U n i t e d S t a t e s

stre sse d

th e p r in c ip le

of re c ip ro ­

c i t y o f t r e a t m e n t by e x p r e s s i n g a w i l l i n g n e s s t o a g re e m e n ts w ith c o u n tr i e s t h a t p a r a b l e d o w n w a rd r e v i s i o n a p p lic a tio n

w e r e p r e p a r e d t o m ak e a com­

in t h e i r

ta riffs

o f th e m o st-fa v o re d -n a tio n

v i s i o n s w ere w r i t t e n

in to

th e

c o n c lu d e

and to

c la u se *

in c lu d e

th e

S p e c ia l p ro ­

law in o r d e r t o cope w ith

c o u n t r i e s w h ich p r a c t i c e d q u a n t i t a t i v e

tra d e r e s t r i c t i o n s ,

a n d no c o m m e rc ia l a g r e e m e n ts w ere t o be s i g n e d w ith c o u n t r i e s known t o b e d i s c r i m i n a t i n g a g a i n s t U n i t e d S t a t e s e x p o r t s . H T he T r a d e A g r e e m e n t s A c t w as t o r e m a i n th ree y ears sev eral

a fte r

t i m e s ,

its

in c e p tio n .

12 an. c i t . , 22 I b i d . .

N o r c a n we s a y t h a t t h e a b s e n c e

p . 394

p p . 3 9 4 -2 9 6 .

41 o f a tra d e

in c re a se

i n a n y p a r t i c u l a r ^com m odity c o v e r e d b y

an a g re e m e n t i n d i c a t e s t h e f u t i l i t y

o f th e c o n c e ssio n s

in v o lv e d * N e v e rth e le ss,

i t may b e p o s s i b l e

to

in d ic a te th e

g en eral e ffe c tiv e n e ss

o f o u r r e c i p r o c a l t r a d e p rogram by

n o tin g th e d if fe re n c e

i n t h e v o lu m e o f t r a d e b e t w e e n a g r e e ­

m en t c o u n t r i e s a n d t h o s e c o u n t r i e s w i t h w h ich a g r e e m e n ts have n o t been reach ed * c o u n trie s e x p o rts

In 1 9 3 6 , o u r e x p o r t s t o a g r e e m e n t

i n c r e a s e d by 1 4 .1 p e r c e n t o v e r 1935 w h ile o u r

to o th e r n a tio n s

i n c r e a s e d by o n l y 4 . 0 p e r c e n t*

D u rin g 1937, e x p o r ts to a g re e m e n t c o u n t r i e s p e r c e n t o v e r 1936 w h i l e o u r e x p o r t s t o by 3 3 .7 p e r c e n t .

ev er,

is

e x p o rts

a l l o th e rs

in c re a se d

In 1938, o u r t o t a l e x p o r t s , r e f l e c t i n g

th e g e n e ra l b u sin e ss re c e s s io n , c e n t b e lo w t h e

i n c r e a s e d by 4 0 .6

le v e l o f 1937.

th e f a c t t h a t

d e c lin e d by ab o u t e ig h t p er To b e e s p e c i a l l y n o t e d , h o w ­

i n t h e tw o y e a r s

1937 a n d 1 9 3 8 , o u r

to ag reem en t c o u n tr ie s a v e ra g e d s ix ty - o n e p e r c e n t

g r e a te r th a n our a v e ra g e e x p o rts

to

th e

sam e c o u n t r i e s

1934 an d 1935 w h e rea s o u r e x p o r t s to o t h e r c o u n t r i e s

in

in ­

c r e a s e d b y o n l y 3 7 . 9 p e r c e n t . 23 In a b r i e f b u t c o n c is e m anner, a te s

th e

P r o f e s s o r T o w le e v a l u ­

e f f e c t o f th e H u ll pro g ram upon i n t e r n a t i o n a l t r a d e

by s a y i n g t h a t :

2 3 Sayre, op. c i t . ,

pp. 182-183.

42 T h e r e c a n b e no d o u b t t h a t t h e R e c i p r o c a l T r a d e A g r e e ­ m en ts p ro g ra m o f t h e U n i t e d S t a t e s h a s on b a la n c e o p e ra te d to red u ce b a r r i e r s to tr a d e . D u tie s have b e e n r e d u c e d on t w o - t h i r d s o f t h e d u t i a b l e i m p o r t s o f t h e U n i t e d S t a t e s (1 9 5 9 f i g u r e s ) ; on 68 p e r c e n t (by v a l u e ) o f t h e ite m s e f f e c t e d , t h e r e d u c t i o n h a s a m o u n t e d t o t h e f u l l 50 p e r c e n t p e r m i t t e d b y t h e A c t. T h e s e d u t y r e d u c t i o n s by t h e U n i t e d S t a t e s h a v e b e e n p u r c h a s e d by f o r e i g n c o u n t r i e s w i t h d u t y r e d u c t i o n s o n t h e i r own i m p o r t s . The A m e r i c a n T r a d e A g reem en ts p ro g ram i s th e o n ly d e v ic e y e t t o a p p e a r t h a t h a s h a d any s i g n i f i c a n t s u c c e s s in lo o s e n in g t h e c o r d s o f b i l a t e r a l i s m , w h i c h w e re s l o w l y s t r a n ­ g l i n g i n t e r n a t i o n a l c o m m e rc e , a n d i n l i b e r a l i z i n g t r i a n g u l a r t r a d e . 24 Of s i g n i f i c a n t

im p o rtan c e

is

th e f a c t t h a t th e

c o m in g

o f w ar

in 1939 d id n o t b r i n g a b o u t t h e en d o f t r a d e n e g o t i a ­

tio n s *

Though th e u n i v e r s a l n a t u r e o f th e c o n f l i c t a c t e d a s

a n e c e s s a r y in cu m b ran c e,

i t d i d n o t im p e d e n e g o t i a t i o n s f o r

t h e r e n e w a l o f a g r e e m e n t s w i t h C uba a n d C a n a d a . of fa c t,

th e w ar y e a r s

(1939-1945)

c o n stitu te d

As a m a t t e r a p e rio d

v&Lich t h e n a m e s o f f i v e L a t i n - A m e r i c a n c o u n t r i e s , I c e l a n d * ^ w ere a d d e d to

th e g ro w in g l i s t

Iran ,

in and

o f n a tio n s w ith

w h ic h t h e U n i t e d S t a t e s h a s e s t a b l i s h e d n ew c o m m e r c i a l r e la t io n s. Many v o i c e s a r e h e a r d c r i t i c i z i n g t h e th a t has

p ro gram a s one

c o n tin u e d t o m a i n t a i n a m a rg in o f p r o t e c t i o n w h ich

i n m any i n s t a n c e s

24 25 E c o n o m ic s

i s m o re t h a n n e c e s s a r y .

T o w le, o p . c i t . ,

I n m any i n s t a n c e s

pp . 4 2 1 -4 2 2 .

S te p h e n Enke a n d V i r g i l S a l e r a , I n t e r n a t i o n a l (New Y o r k : P r e n t i e e - H a l l , I n c . , 1 9 4 7 ), p . 517

43 th is

is

s o , b u t an u n p r e ju d ic e d e v a l u a t i o n m ust l e a d t o

c o n c lu sio n th a t

i t h a s h ad a te n d e n c y to e a se th e

com m erce am ong n a t i o n s .

th e

bonds o f

I t r e m a in s a s t h e o n e p ro g ra m w h ic h

m akes a v a i l a b l e , on e q u a l t e r m s , t h e m a r k e ts a n d r e s o u r c e s o f th e w o rld to a l l n a t i o n s ,

la rg e o r sm a ll.

U n t i l su c h tim e a s t h e p r o p o s e d I n t e r n a t i o n a l T ra d e O r g a n iz a t i o n becom es o p e r a t i v e , re d u c in g b a r r ie r s

to

w o rld t r a d e

in w h ich c a s e t h e

ta sk o f

w i l l th e n b e u n d e r t a k e n by

an i n t e r n a t i o n a l b o d y , th e T ra d e A g re em en ts A c t,

w h ic h p r o ­

v id e s f o r a ty p e o f b i l a t e r a l ag reem en t b a se d upon th e un con ­ d i t i o n a l MFN c l a u s e , th e r e s t o r a t i o n

seem s to o f f e r

th e g r e a t e s t p ro m ise f o r

o f a m u l t i l a t e r a l w o rld t r a d i n g s y s te m , a

sy s te m o f t r a d e g r e a t l y t o

be d e s i r e d .

CHAPTER IV THE HISTORY AND FOUNDATIONS OF THE INTERNATIONAL TRADE ORGANIZATION The c r i e s

o f nb a c k t o n o r m a l c y 1* w h ic h w e r e h e a r d w i t h

s u c h r e s o u n d i n g v o lu m e a f t e r t h e c l o s e

o f W o rld War I w e r e

r e d u c e d t o m u rm u rs a s t h e m a g n i t u d e o f t h e Many c o u n t r i e s f o u n d i t d i f f i c u l t , to re c o v e r f i n a n c i a l l y c o n d itio n s

th a t

ta s k s t r u c k hom e.

i f n o t d o w n rig h t im p o s s ib le ,

w h ile s t r u g g l i n g w ith g e n e r a l b u s in e s s

in c lu d e d

in fla tio n

and d e f l a t i o n .

The g l o b a l t r e n d t o w a r d e c o n o m i c n a t i o n a l i s m b e g in n in g to have o u t th e w o rld . a lte re d .

its

p a tte rn s

d e p re ss io n

t a r i f f w a lls.

w ere b e i n g

fin a lly

in

in a

w h ic h s h o o k t h e w o rld i n t h e e a r l y t h i r t i e s .

U n ite d S ta te s w ith th e

A p re c ip ito u s d e c lin e

began t h a t r e s u l t e d

I t w as d u r i n g t h i s

d e p r e s s e d e c o n o m ic p e r i o d t h a t t h e

e n a c te d t h e R e c i p r o c a l T ra d e A g reem en ts A c t

p u r p o s e i n m in d t o c o r r e c t t h e a d v e r s e t r a d i n g c o n ­ t h a t had d e v e lo p e d s in c e

t h e e n d o f W o rld War I .

T he e f f e c t i t h a s h a d i n r e v i v i n g w o r l d t r a d e e v a l u a t i o n o f t h e A c t w ere d i s c u s s e d I f th e A ct i s it

th ro u g h ­

A l l c o u n t r i e s o f th e w o rld beg an s e e k in g p r o t e c t i o n

c o m m e rc ia l a c t i v i t y

d itio n s

on c o m m e rc ia l r e l a t i o n s

L ong e s t a b l i s h e d t r a d e

b e h in d e v e r - r i s i n g a ll

e ffe c ts

was

In th e

to be c r i t i c i z e d a t a l l ,

and a g e n e r a l

p re v io u s

c h a p te r.

I t s h o u ld be b e c a u se

d i d n o t go f a r en o u g h in r e l e a s i n g t h e b o n d s o f i n t e r ­

n a tio n a l tra d e . o b sta c le s

H ow ever,

Its

success,

c o n s id e rin g th e

i t h a d t o o v e r c o m e , w as s u f f i c i e n t l y

c o n v in c in g to

45 prom pt th e U n ite d S t a t e s . i n t o

d r i v i n g f o r an i n t e r n a t i o n a l

t r a d e o r g a n i z a t i o n b a s e d s o m e w h a t on t h e p r i n c i p l e s R e c i p r o c a l T ra d e A c t* and i t

was r e a s o n a b l e

v io le n t d isru p tio n

o f th e

F o r war h a d a g a i n b ro k e n o u t in to p r e d i c t t h a t ,

1939,

as a co n seq u en ce, a

o f w o r ld t r a d e w o u ld e n su e *

T he p r o p o s e d

I n t e r n a t i o n a l T rade O rg a n iz a tio n

is

th e

p r o d u c t o f t h e p e c u l i a r e c o n o m ic c o n d i t i o n s t h a t d o m i n a t e d t h e w o rld s c e n e d u r in g th e

in te r-w a r y ears*

B efo re p ro c e e d ­

in g w ith an e x a m in a tio n o f th e v a r i o u s s t e p s c u lm in a te d

in th e a d o p tio n o f th e C h a r t e r ,

f o r c e s w h ic h p r e v a i l e d d u r in g t h e s e y e a r s be m ade.

F or such a re v ie w is

ta k e n t h a t

a stu d y o f th e (1 9 2 0 -1 9 3 9 ) w i l l

in d is p e n s ib le

in g iv in g th e

C h a r t e r p e r s p e c t i v e a n d i n a n t i c i p a t i n g t h o s e who m i g h t h o l d to

th e c la im

th a t I.

T he y e a r s

it

is

w ith o u t r a is o n d ^ t r e *

ECONOMIC DEBACLE OF THE THIRTIES t h a t f o l l o w e d t h e c l o s e o f W o rld War I

w e re m a rk e d b y an econom y so u n s t a b l e seem ed im m in en t a t e v e r y t u r n .

th a t t o t a l c o lla p s e

T he v i o l e n t n a t u r e o f t h e

c a t a s t r o p h e was s u c h a s t o o c c a s i o n a c o m p l e t e d i s r u p t i o n i n e v e r y p h a s e o f i n t e r n a t i o n a l e c o n o m ic l i f e . In s u c h a d i s t u r b e d p e r i o d th e c h an g e s n e c e s s a r y t o re v iv e

t h e p r e - w a r e c o n o m ic b a l a n c e b e tw e e n t h e n a t i o n s

p r o v e d s o o v e r v d i e l m i n g t h a t m any g o v e r n m e n t s l o o k e d f o r new p r o c e d u r e s by w h ic h b e n e f i t s

fro m i n t e r n a t i o n a l t r a d i n g

46 a c tiv itie s

c o u l d be a c h i e v e d . ^

e c o n o m ic a n d s o c i a l p o l i c i e s

In t h i s

of re s tric tio n

w e re p u t i n f o r c e b y t h e m any n a t i o n s th e

i n t e r n a t i o n a l t r a d i n g sy ste m to

re s tric tio n s

c o n n e c tio n ,

th e

th a t e v e n tu a lly

o f t h e w o rld c a u se d

c o lla p s e .

A lth o u g h su c h

w ere p r o d u c t s o f th e w ar a n d o f t h e r a b i d n a t i o n ­

a l i s m w h ic h I t

p ro v o k e d , th e y re m a in e d a s p i l l a r s

e co n o m ic p o l i c i e s

th ro u g h o u t th e

of n a tio n a l

in te r-w a r p e rio d .2

R easo n s f o r t h e g ro w in g d i s e q u i l i b r i u m m u s t, h o w e v er, be s o u g h t in th e u s e o f u n w ise n e g a t i v e a n d r e s t r i c t i v e g o v e rn m e n ta l p o l i c i e s .

The f a i l u r e

w h ich a ll o w e d f o r r e l a t i v e l y sta b ility

- c h a ra c te ristic

freer

to r e t u r n tra d e

o f th e y e a rs

to th e

sy ste m

and o f m o n e ta ry p r e c e d i n g 1914 - l i e s

p r i m a r i l y w i t h e c o n o m ic p o l i c y r a t h e r t h a n e c o n o m ic f a c t . E v e n w i t h i n t h e r e a l m o f e c o n o m ic d e v e l o p m e n t s , t h e is a p o l i t i c a l one. th e

p a st,

S u c h e c o n o m ic t e n d e n c i e s

w orked to w a r d a c e r t a i n

p ro b lem

th a t have,

in

d eg ree o f In te rd e p e n d e n c e

am ong t h e t r a d i n g n a t i o n s o f t h e w o r l d w e r e now g i v e n t o l e s s fre e d o m o f a c t i o n a s g o v e rn m e n ts p l a c e d h i g h e r b a r r i e r s t o t h e d e v e l o p m e n t o f a m o re n a t u r a l r e l a t i o n s h i p th em .

R e stric tio n s

m ig ra tio n .

Y o rk:

w ere i n t e n s i f i e d f i r s t

b e tw e e n

in th e f i e l d o f

T h i s was f o l l o w e d q u i c k l y b y m o re e f f e c t i v e

1 C h a r l e s A . H ic k m a n , W o rld E c o n o m ic P r o b l e m s P i t m a n P u b l i s h i n g C o r p o r a t i o n 7 1947) , p . 95.

(New

2 J . B . C o n d i i f f e , T h e R e c o n s t r u c t i o n O f W o rld T r a d e (New Y o r k ; W. W. N o r t o n & C om pany, 19 4 0 ), p . 6"§.

47 im p e d im e n ts t o

t h e m ovem ent o f c o m m o d itie s .

as a n a tu ra l consequence, m o re r e s t r i c t i o n

lim ita tio n

T here fo llo w e d ,

o f c a p i t a l m o v em en ts,

u p o n c o m m o d ity t r a d e ,

and f i n a l l y ,

c o m p le te

r e g u l a t i o n o f b o th d o m e s tic an d e x t e r n a l e c o n o m ic a c t i v i t i e s . At ev ery tu r n ,

such r e s t r i c t i o n s

e c o n o m ic i n t e r c o u r s e h e l p e d o n l y t o b e in g e x p e rie n c e d w ith in

a g g ra v a te th e d i f f i c u l t i e s

e v e r y n a t i o n a l c o m m u n ity .

d iffic u ltie s

n o t o n ly w ere u s e d a s

re s tric tio n ,

b u t a ls o to

fan th e

ju stific a tio n

sm o ld e rin g f i r e

to w a rd i n t e r n a t i o n a l c o o p e r a t i o n . p ro b le m o f r e p a r a t i o n s

p la c e d upon no rm al

T hese

fo r fu rth e r of h o s tility

In a d d i t i o n , t h e

d e lic a te

a n d w ar d e b t s p l a c e d a n o t h e r o b s t a c l e

i n t h e p a t h o f a w o r l d g r o p i n g f o r an i n t e r n a t i o n a l e c o n o m i c p a tte rn

t h a t c o u ld f u n c t i o n .

One a u t h o r , who f e l t

c l i n e d to w a rd to o s t i n g i n g a c r i t i c i s m p o lic y m akers,

le ss

in ­

o f t h e w o r l d ’ s e c o n o m ic

sa id :

I t m u st be rem em bered t h a t w ar i n e v i t a b l y l e a v e s in i t s w ake s t r o n g n a t i o n a l i s t e m o t i o n s a n d a t t i t u d e s o f re v e n g e , h a t e , f e a r , and i n s e c u r i t y . To e n d u r e th e to r tu o u s lo n g run p ro c e s s e s o f a d ju s tm e n t n e c ­ e s s a r y to a c h i e v e i n t e r n a t i o n a l e co n o m ic c o o p e r a t i o n i s in d e e d a suprem e t e s t . 3 It

is

in te re s tin g

a u t h o r who v i e w e d t h e

to n o te

th e rem ark s o f a n o th e r

c o m p le te c o l l a p s e o f

e co n o m ic c o o p e r a t i o n d u r i n g t h e

in te r-w a r p e rio d as a

p a rtic u la r

® Hickman, op, c i t . ,

in te rn a tio n a l

p. 96

48 ’a t t i t u d e o f m in d * w h i c h , b y p l a c i n g t h e i n t e r e s t o f p a r t i c u l a r g r o u p s b e f o r e t h a t o f t h e c o m m u n ity a s a w h o le , and in p a r t i c u l a r , s e e k in g t o p r e s e r v e and b u t tr e s s th e u n f e tte r e d s o v e re ig n ty o f th e N a tio n S t a t e , n o t o n l y b r o u g h t a b o u t t h e w a r w h i c h w as t h e o r i g i n a l c a u s e o f t h e b r e a k d o w n b u t h a s now l e d t o a g h a s tly r e p e t it i o n o f th e tra g e d y .4 It

is

w o rth n o t i n g , h o w e v er,

t h a t t h e e c o n o m ic a n d

f i n a n c i a l u p h e a v a l b r o u g h t o n b y t h e G r e a t War d i d s o u n d t h e o c c a sio n

f o r a s e r i e s o f m e e tin g s d e sig n e d to

c ris is .

In th e t w e n t i e s , a num ber o f i n t e r n a t i o n a l c o n f e r ­

e n c e s w ere h e l d ; d isa p p o in tin g ,

cope w ith th e

a n d , th o u g h in th e m a in , t h e r e s u l t s

s till

c o n sid e ra tio n

s h o u ld be g i v e n

w ere

to th e

a b n o rm a l p r e s s u r e o f t h e t im e s u n d e r w h ic h t h e d e l e g a t e s m e t . T he f i r s t

c o n fe re n c e s, h e ld

in B r u s s e ls

in 1920 an d i n Genoa

i n 1 9 2 2 , w e r e o v e r s h a d o w e d by m o n e t a r y a n d f i n a n c i a l p r e ­ o c c u p a tio n . in fla tio n s ;

N a t i o n a l e c o n o m ic s w ere r i p e

w ith s p e c t a c u l a r

i n t e r n a t i o n a l m o n e ta ry d i s t u r b a n c e s w ere p a r t i ­

c u l a r l y a n n o y in g .

It

a g r e e m e n ts on t a r i f f s

was f e l t ,

th e re fo re ,

t h a t no e f f e c t i v e

c o u ld be r e a c h e d w h ile s u c h w id e ­

s p re a d m o n e ta ry chaos p r e v a i l e d .

T h o u g h som e r e c o m m e n d a t i o n s

on c o m m e r c ia l p o l i c y w ere d r a f t e d a t G en o a, t h e y w ere g e n e r ­ a lly

reg ard ed ,

n e v e rth e le ss,

4 C o n d liffe , Y ork:

op,

a s w e a k .a n d to o

c it.,

lim ite d

in s c o p e .5

p . 71

5 M i c h a e l A . H e i l p e r i n , T he T r a d e O f N a t i o n s A l f r e d A* K n o p f , 1 9 4 7 ) , p . 1 4 F I

(New

49 The r e a l a t t e m p t t o d e a l w i t h t h e n a t i o n a l e c o n o m ic r e l a t i o n s

issu e s o f i n te r ­

cam e i n 1 9 2 7 a t a t i m e when t h e

c o n d i t i o n o f w o r l d e c o n o m y was b e c o m in g i n c r e a s i n g l y p r e c a r ­ io u s .

I t was a t G e n e v a t h a t t h e W o rld E c o n o m ic C o n f e r e n c e

m e t w h i c h Mp r o d u c e d t h e m o s t c o m p r e h e n s i v e r e p o r t o f i t s k i n d , a w e l l - r e a s o n e d d o c u m e n t, m in a tin g

i n a l a r g e n u m b e r o f r e c o m m e n d a t i o n s * l?6

ag reem en t re a c h e d d e a l t , in g i n t e r n a t i o n a l t r a d e r e v i v a l o f lo n g -te rm c la u se ,

c a r e f u l l y p re p a re d and c u l­ T he g e n e r a l

o f c o u r s e , w i t h t h e m eth o d s o f f r e e ­ by m eans o f t a r i f f r e d u c t i o n s , a

c o m m erc ial t r e a t i e s

e lim in a tio n o f e x p o rt s u b s id ie s ,

e m b o d y i n g t h e MFN an d th e p r a c t ic e

o f d u m p in g a n d d i s c r i m i n a t i n g * Much h a s b e e n w r i t t e n

in p r a is e o f t h i s

co n feren ce

a s one t h a t p ro d u c e d t h e b e s t re c o m m e n d a tio n s f o r d e a l i n g w ith th e sp ite

c ris is

of th is ,

d u rin g th e its

e ffo rts

e n tire

in te r-w a r p e rio d .

Y et in

cam e t o n a u g h t b e c a u s e , a s M r,

H e ilp e r in w ro te : I t is a m a tte r o f u tm o st r e g r e t t h a t th e C o n feren ce h a d no p o w e rs to d ra w u p a c o n v e n t io n w h ic h m ig h t i n v o l v e a c t u a l c o m m itm e n ts on t h e p a r t o f t h e v a r ­ io u s n a t i o n a l g o v e rn m e n ts. I t was n o t a ‘d i p l o m a t i c c o n f e r e n c e *. I t s re c o m m e n d a tio n s w ere r e a d and s t u d i e d by e x p e r t s (o n e h o p e s ) a n d p i g e o n h o l e d by c a b i n e t m e m b e rs a n d p a r l i a m e n t a r i a n s .7

6 Ib id .,

p . 151.

7 Ib id .,

p . 151.

50 Two a g r e e m e n t s r e l a t i n g hones,

to h id e s and s k in s and to

ste m m in g fro m t h e C o n f e r e n c e o f 1 9 2 7 , w ere r e a c h e d ,

ho w ev er,

a n d w ere s i g n e d by s i x t e e n

in te re s te d

c o u n trie s .

T he f i r s t a g r e e m e n t p r o v i d e d t h a t b e g i n n i n g w i t h O c t o b e r 1 , 1929,

"th e e x p o rta tio n

j e c t to any p r o h ib itio n d u ty o r c h a r g e . A g re e m e n t,

th e

.

.

o f h id e s and sk in s or re s tric tio n

w o u ld n o t b e s u b ­

a n d t h a t no e x p o r t

.w o u ld be l e v i e d on th e m . "8

sp e c ific a tio n s

In th e

B on es

" l i m i t e d th e am ount o f p e r ­

m i s s i b l e e x p o r t d u t i e s a n d p r o v i d e d t h a t no t a x n o t a p p l i c a b l e to

a ll

c o m m e rc ia l t r a n s a c t i o n s

c o u ld be m a i n t a i n e d ." ^

I t so o n becam e a p p a r e n t , ed and f a i l e d ,

t h a t th e

as o th e r c o n fe re n c e s fo llo w ­

c re s t o f in te rn a tio n a l endeavor th a t

p r e v a i l e d a t G eneva h a d b e e n r e a c h e d . fin a lly

e x p lo d e d in 1929,

So,

when t h e s i t u a t i o n

th e w o rld fo u n d i t s e l f

p r i v e d o f m a c h in e ry t h a t c o u ld d e a l e f f e c t i v e l y c o n c e rte d a c tio n .

T h is n a t u r a l l y

so re ly de­ w ith i t

by

p la c e d th e b urden o f s a l ­

v a t i o n s q u a r e l y u p o n n a t i o n a l m eans w h ic h s o o n d e v e lo p e d in to

a n " e v e r y man f o r h i m s e l f "

rig id

sta te

a ttitu d e .

p la n n in g u n d e rw e n t ren ew ed e m p h a sis,

p l e t e and d ra m a tic d i s i n t e g r a t i o n its

As a c o n s e q u e n c e ,

o f w o rld t r a d e

a n d a com­ en su ed w ith

c o n c o m ita n t t o t a l c o l l a p s e o f t h e w o r ld ’s m o n eta ry

s tru c tu re •

8 E t h e l B . D i e t r i c h , W o rld T r a d e H o l t a n d C o m p an y , 1 9 3 9 ) , p . 2 6 9 . 9 Loc. c i t .

(New Y o r k :

H enry

51 F o llo w in g c l o s e l y on th e h e e l s in A m e ric a a n d t h e

hank f a i l u r e

in A u s tr ia

d e p re ss io n o f th e e a r ly t h i r t i e s its

trad e

T he i m m e d i a t e r e a c t i o n

c o n tro ls

p r i m a r il y to p r o t e c t th e d o m e stic p r ic e p ric e

le v e ls

so rts

o f d e v i c e s w ere b r o u g h t t o

s ta b ility

was t h e e c o n o m i c

t h a t s t r u c k down w i t h a l l

fu ry th e n a tio n s o f th e w o rld .

to o k th e fo rm o f f o r e ig n

o f th e m ark et c r a s h

t h a t w ere d e s i g n e d l e v e l fro m w o rld

t h a t w ere u n d e rg o in g a s p i r a l i n g d e c l i n e .

b e ar to a c h ie v e i n te r n a l

w h i c h now h a d r e p l a c e d e x t e r n a l e q u i l i b r i u m a s

s in e qua non o f i n d i v i d u a l n a t i o n a l s e c u r i t y . i n g e n u i t y o f man was now t o h a v e h i s

b lo w s o f d e p r e s s i o n a n d r i g i d

tra d e

fa lte re d

c o n tro ls ,H

th r o u g h o u t th e w o rld b eg an e x p e r i e n c in g a d r a i n g o ld r e s e r v e s .

The c o u p de g r a c e , h o w e v e r,

to t h e m o n e ta ry s t r u c t u r e

T ru ly th e

f,d a y i n c o u r t ” . 10

As i n t e r n a l e c o n o m i c s t a b i l i t y

te re d

b e fo re th e n a tio n s on t h e i r

w asn*t a d m in is ­

o f a c o n s i d e r a b l e num ber o f

g o v e r n m e n t s u n t i l B r i t a i n a n n o u n c e d on S e p t e m b e r 2 0 , th a t

A ll

she had abandoned th e g o ld s t a n d a r d .

H er a c tio n

1931, in

t h i s m a t t e r was i m p o r t a n t n o t o n l y fro m t h e s t a n d p o i n t t h a t it

w o u ld n e c e s s i t a t e

s im ila r a c tio n

by n u m e r o u s o t h e r

10 F o r a n i n t e r e s t i n g d e s c r i p t i o n o f g o v e r n m e n t a l a c tio n to c o n tr o l f o r e ig n tr a d e d u rin g th e t h i r t i e s , S e e : H ic k m a n , o p . c i t . , p p . 1 0 1 - 1 0 2 . 11 T h e s e w e r e : Exchange c o n t r o l s , im p o rt q u o ta s , i n t e n s i f i e d C u s to m s r e g u l a t i o n s , c o m p l e x t a r i f f c l a s s i f i c a ­ t i o n s , e x p o r t s u b s i d i e s , g o v ern m en t im p o rt m o n o p o lie s , c l e a r ­ in g and c o m p e n sa tin g a g re e m e n ts , and b a r t e r a r r a n g e m e n ts .

52 c o u n trie s , o f g reat

but a lso

b ecau se she had beene n jo y in g

a p o sitio n

im p o rta n c e

as a tra d in g n a tio n . A la rg e

p art of

t h e w o rld * s t r a d e h a d b een f i n a n c e d th r o u g h London,

and th e

d e p r e c i a t e d v a l u e o f B r i t a i n * s n ew p o u n d g a v e h e r c o n s i d e r ­ a b le

a d v a n ta g e o v e r th o s e

to th e

g o ld s ta n d a r d a s

c o u n t r i e s who a t t e m p t e d t o h o l d on

lo n g a s p o s s i b l e . .

By t h e e n d o f 1 9 3 1 , t h e n a m e s o f n ew c o u n t r i e s s w e llin g th e d e p re c ia te

lis t

began

o f t h o s e who a l r e a d y h a d t a k e n a c t i o n

th e ir c u rre n c ie s.

W hen, i n A p r i l ,

1933,

to

th e

U n ite d S ta te s announced h e r su s p e n s io n o f th e g o ld s ta n d a rd , it

began t o

lo o k as

b e co m in g a t h i n g

i f p r e - d e p r e s s i o n p a r v a l u e s w ere s lo w ly

of

th e

p a s t . 12

M e n t i o n s h o u l d b e m ade a t t h i s

p o in t of th e

g r e a t e c o n o m ic c o n f e r e n c e t o m e e t b e f o r e t h e W o rld War I I .

I t w as a t L o n d o n ,

in

la s t

o u tb re a k o f

June 1 9 3 3 ,

th a t th e

M o n e t a r y a n d E c o n o m ic C o n f e r e n c e c o n v e n e d i n p l e n a r y s e s s i o n w h ic h ,

fro m a l l o u tw a rd a p p e a r a n c e s , was fo re d o o m e d t o

u re a t

th e o u t s e t .

Two p r e p a r a t o r y s e s s i o n s

h a d cau sed a c le a v a g e v h ic h a lo n e But t h e f a t e by th e r i s e

Y ork;

to

fa il­

a t G eneva a l r e a d y

d e v e l o p am ong t h e m a j o r p r o t a g o n i s t s

c o u ld h a v e r e n d e r e d t h e London m e e tin g i n o p e r a t i v e . o f t h e C o n f e r e n c e w as m ade e v e n m o re p r e c a r i o u s of H itle r

i n G e rm a n y a n d t h e

in a u g u ra tio n o f th e

12 M a r g a r e t S . G o r d o n , B a r r i e r s To W o r ld T r a d e The M a c m i l l a n C o m p an y , 1 9 4 1 , p p . 3 T - 3 9 .

(New

53 ”New D e a l ” i n A m e r i c a , is tic

th e l a t t e r

11i n s u l a t i o n ” i n t h e e a r l y

b e in g i n s p i r e d by n a t i o n a l ­

sta g e s o f i t s

o p e ra tio n .

In

g e n e r a l t h e n , a t th e tim e th e C o n fe re n c e m e t, th e p o l i t i c a l a t m o s p h e r e h a d b eco m e s o p o l l u t e d w i t h u n f a v o r a b l e d e v e l o p ­ m en ts t h a t an a tte m p t

to e c o n o m ic a lly d e m o b i l i z e ” th e

w o rld

w as b o u n d t o m e e t w i t h s t i f f r e s i s t a n c e • 1 $ A c c o rd in g to S e c r e ta r y H u l l ,

th e sud d en a d jo u rn m e n t

o f th e C o n feren ce w ith o u t h a v in g a c c o m p lish e d any o f th e w o rk i t h a d s e t o u t t o do r e s u l t e d p r i m a r i l y

f r o m t h e m any

f o r c e s t h a t w ere w o rk in g a t c r o s s - p u r p o s e s a t t h e t i m e . i s n o t d is p o s e d to

th e b e l i e f t h a t P r e s id e n t R o o s e v e lts

c e l e b r a te d m essage c o n s t i t u t e d u re

He

th e s o le re a s o n f o r th e f a i l ­

o f th e C o n fe re n ce . In an a d d r e s s b e f o r e th e d e l e g a t e s

a tte m p te d to

in w h ic h h e

f o r e s t a l l t h e g r o w i n g m o v e m e n t am ong t h e m e m b e rs

to s e iz e upon th e P r e s i d e n t s m essage a s an o p p o r tu n ity p la c e

its

f a i l u r e upon h i s

to

s h o u l d e r s , M r. H u l l s t a t e d :

T h u s f a r , we h a v e n o t s c r a t c h e d t h e s u r f a c e w i t h r e s p e c t t o t h e m any p r e s s i n g q u e s t i o n s we h a v e b e e n s e n t h e re to d e a l w ith . T he q u e s t i o n i s w h e t h e r we s h a l l n o w , a t t h i s e a r l y s t a g e o f t h e C o n f e r e n c e , c o n f e s s b e f o r e t h e w o r l d t h a t , a f t e r a l l , we a r e In c o m p e te n t to m eet o u r r e s p o n s i b i l i t i e s a s d e l e ­ g a te s. A r e we t o c o n f e s s t h a t we a r e t a k i n g a d v a n ta g e o f an i n c i d e n t l i m i t e d in i t s sc o p e

15 H e ilp e r in , op. c i t . ,

p. 152.

54 a n d p o s s i b l e e f f e c t s i n o r d e r t o b r e a k u p t h e Con­ ference? Are th e d e l e g a t e s th e n to s c a t t e r o f f in e v e r y d i r e c t i o n c a r r y i n g w ith them t h e p u e r i l e p l e a t h a t t h e y w e r e n o t c o m p e t e n t t o p r o c e e d f u r t h e r ? 14 W ith t h e f a i l u r e

o f t h e London C o n f e r e n c e ,

the sta g e

was s e t f o r a c o n d i t i o n o f g l o b a l f i n a n c i a l d i s o r d e r t h a t was t o

c o n t i n u e u n t i l t h e o u t b r e a k o f war t h a t

Septem ber,

1939.

II.

ECONOMIC DISORDER OP POST WORLD WAR I I

H i s t o r y h a s a way o f r e p e a t i n g stru c tio n

t h a t was a c c o m p l i s h e d a f t e r

itse lf.

y e a r i n w hich t h e f i g h t i n g situ atio n

ceased,

By 1 9 4 5 , t h e

t h e w o r ld econom ic and

was a g a i n c h o a t i c .

tu r e s u ffe re d w idespread d e v a s ta tio n ,

In d u s try and a g r i c u l ­ c ap ita l

w r e c k e d , and manpower g e n e r a l l y r e d u c e d . d encies

Yi/hat r e c o n ­

1 9 1 8 was q u i c k l y a n d

t h o r o u g h l y u n d o n e a s a r e s u l t o f W o r l d War I I .

trad in g

came i n

s t r u c t u r e s were

In flatio n ary ten ­

s p r e a d t h r o u g h o u t t h e w o rld a s p e n t - u p demands f o r

goods e x e r t e d u n b e a r a b le p r e s s u r e upon th e fa c ilitie s

lim ite d p ro duction

th a t escaped d e s tr u c tio n d u rin g th e w ar.

An a c u t e s h o r t a g e o f A m e r i c a n d o l l a r s

developed

th ro u g h o u t th e w orld t h a t p la y e d havoc w ith r e c o n s t r u c t i o n e ffo rts.

York:

Many c o u n t r i e s ,

l o o k i n g t o t h e U n i t e d S t a t e s whose

14 C o r d e ll H u ll, The Memoirs o f C o r d e ll H u ll (New The M acm illan Company, 1 ^ 4 8 ), W l , 1 , p . 265•

55 i n d u s t r i a l p l a n t e sc a p e d th e d e s t r u c t i o n o f war, selv es

f o u n d them ­

in c r e a s in g ly u n a b le to buy th e b a s ic needs such as

c o a l , m a c h in e ry , and s t e e l w ith w hich t o r e v i v e t h e i r n a l econom y.

Such e f f o r t s

as s a le

of fo reig n a sse ts

U n ite d S t a t e s and th e g r a n t i n g o f A m erican lo a n s c o u n tries

failed

cases,

in the

t o m any

to produce the d e s ir e d e f f e c t s in c e

w ere f o r c e d t o cope w ith A m erican p r i c e s

w hich,

in te r­

th ey

i n many

were s t e a d i l y r i s i n g . Under th e s e

co n d itio n s,

r e t a i n e d and i n t e n s i f i e d

rig id

w a rtim e c o n t r o l s were

by m ost n a t i o n s .

Many o f t h e m

re s o rte d to d iscrim in ato ry b i l a t e r a l d e a ls, t r a d i n g on a b a r t e r b a s i s . on f o r e i g n p u r c h a s e s ,

a n d some b e g a n

S tr ic t lim ita tio n s

were p l a c e d

and o n ly goods o f u r g e n t n e c e s s i t y

w e re i m p o r t e d by g o v e r n m e n t s f r a n t i c a l l y a t t e m p t i n g s e rv e what f o r e ig n exchange th ey d id p o s s e s s .

to con­

W ar-born

" in fa n t in d u s tr ie s ” e sta b lis h e d vested in te r e s ts

and as

u s u a l demanded p r o t e c t i o n a g a i n s t i m p o r t s , r e g a r d l e s s o f t h e i r own l e s s

e f f i c i e n c y and more c o s t l y p r o d u c t i o n . III.

THE'AMERICAN PROPOSALS

In l i n e w i t h i t s attem p ts

to

lo n g r u n c o m m e rc ia l p o l i c y w hich

provide th e b e s t p o s s ib le c o n d itio n s f o r a r e ­

v iv al of in te rn a tio n a l trad e , d e v e lo p in g a program t h a t

th e U n ite d S t a te s h a s been

stem s p r i m a r i l y fro m th e R e c i p r o c a l

56 T rade A greem ents A ct o f th e

i n t e r - w a r y e a r s . 15

c u r r e n t l y u n d e r way, c o n s i s t s

o f co n crete

The p r o g r a m ,

s te p s tow ard r e a l ­

i z i n g A m erican id e a s o f a w o rld -w id e sy s te m o f t r a d i n g b a se d upon an i n t e r n a t i o n a l

com m ercial r e l a t i o n s h i p f a v o r a b l e to

a ll. At t h e tim e A m erican d e l e g a t e s were p a r t i c i p a t i n g s e t t i n g up th e U n ite d N a tio n s

stru c tu re ,

drawn fr o m a l l

d e p a rtm e n ts and a g e n c ie s o f

the

th e U nited S ta te s

in te reste d

a group o f e x p e rts

G overnm ent w ere e n g a g e d on s p e c i f i c p l a n s

f o r m u l t i l a t e r a l e x p an sio n o f w orld t r a d e . tw o y e a r s o f w o r k , its

th is

F in a lly ,

g r o u p i s s u e d on December 6 ,

after 1945,

,fP r o p o s a l s F o r E x p a n s i o n o f W o r l d T r a d e a n d E m p l o y m e n t ” 15

I t was i n t h e s e ward t o

^ P r o p o s a l s 11 t h a t t h e s u g g e s t i o n

was p u t f o r ­

e s t a b l i s h an I n t e r n a t i o n a l T rad e O r g a n iz a t i o n t h a t

co u ld c o o rd in a te and a s s i s t th e e f f o r t s in

in

im proving t h e i r

econom ic p o s i t i o n

o f m em b er c o u n t r i e s

by e a s in g th e s t r a i n s

o f i n t e r n a t i o n a l comm erce. The P r o p o s a l s w e r e p u b l i s h e d and s e n t to f o r e i g n

in th e U n ite d S t a te s

c o u n trie s as a b a s is

for d isc u ssio n .

Upon b e i n g i n f o r m e d t h a t F r a n c e , G r e a t B r i t a i n ,

and o th e r

1 5 11The U n i t e d S t a t e s R e c i p r o c a l T r a d e A g r e e m e n t s P r o g r a m And The P r o p o s e d I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n . ” U n i t e d S t a t e s D e p a r tm e n t o f S t a t e , B u l l e t i n (M arch 2 1 , 1 9 4 8 , No. 4 5 5 ) , p . 5 7 1 . 1® ”A m e r i c a n T r a d e P r o p o s a l s . ” U n i t e d S t a t e s D e p a r t ­ ment o f S t a t e , C om m ercial P o l i c y S e r i e s 88 (W ash in g to n , 1 9 4 6 ) ,

p. 1*

57 c o u n t r i e s w ere i n a g r e e m e n t w i t h t h e more i m p o r t a n t p o i n t s and t h a t t h e s e

co u n tries

n a tio n a l d iscu ssio n s, them i n

its

would s u p p o r t t h e docum ent i n

in te r­

th e U n ite d S t a t e s th e n e l a b o r a t e d upon

p r e p a r a t i o n o f th e "S u g g e ste d C h a r te r f o r an

I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n o f t h e U n i t e d N a t i o n s ."1*7 In F e b r u a r y 19 4 6 , th e U n ited N a tio n s, c allin g

at

its

t h e Econom ic and S o c i a l C o u n c i l o f f i r s t m eetin g , a d o p ted a r e s o l u ti o n

f o r a n i n t e r n a t i o n a l c o n f e r e n c e on t r a d e

m ent to c o n s id e r th e O rg an izatio n *

It

and em ploy­

c r e a t i o n o f an I n t e r n a t i o n a l Trade

a l s o e s t a b l i s h e d a P r e p a r a t o r y C om m ittee

o f n i n e t e e n countries*^® t o a r r a n g e

f o r the c o n fe ren c e and to

p re p a re a d r a f t c h a r t e r f o r such an o rg a n iz a tio n * T h is com m ittee began

its

work a t London i n O c t o b e r

1946 u s i n g a s b a s i c w o r k i n g d o c u m e n ts t h e " P r o p o s a l s " a n d t h e " S u g g e s t e d C h a r t e r " a s p r e p a r e d by t h e U n i t e d S t a t e s * F u rth er m o d ificatio n s

were w r i t t e n

by a s p e c i a l d r a f t i n g

c o m m itte e o f th e P r e p a r a t o r y C om m ittee

t h a t m e t i n New Y o r k i n h earin g s

in to

the proposed c h a r te r

J a n u a r y an d F e b r u a r y o f 1947*

were th e n h e l d on t h e d r a f t c h a r t e r

U n ite d S t a t e s D epartm ent o f S t a t e , (No. 4 5 5 ) , o p . c i t . , p . 3 7 2 .

P ublic

by t h e U n i t e d

B u lletin

18 T h e s e w e r e : A u s t r a l i a , B e lg iu m , B r a z i l , C a n a d a , C h ile , C hina, Cuba, C z e c h o slo v a k ia , F ra n ce , I n d ia , Lebanon, L u x e m b u r g , N e t h e r l a n d s , New Z e a l a n d , N o r w a y , S o u t h A f r i c a , G reat B r i ta i n , U n ited S t a t e s , and R u ss ia . A l t h o u g h a member, t h e U . S . S . R . d i d n o t p a r t i c i p a t e i n t h e work o f t h e P r e ­ p a r a t o r y C om m ittee.

58 S tates

G overnm ent d u r i n g F e b r u a r y a n d M arch, 1947 i n w h ic h

c ritic ism

and s u g g e s tio n s

ra is e d a t th ese hearin g s draft

were s o l i c i t e d . were l a t e r

M ost o f t h e p o i n t s

in co rp o rated

in the f i n a l

c o m p l e t e d by t h e P r e p a r a t o r y C o m m itte e a t Geneva w h ic h

had been in s e s s i o n from A p r i l to A ugust o f 1947. ch arter

f o r an

The d r a f t

I n t e r n a t i o n a l Trade O r g a n iz a t i o n , h a v in g been

c o m p l e t e d , was t h e n s u b m i t t e d t o t h e U n i t e d N a t i o n s C o n f e r ­ e n c e on T r a d e a n d Em ploym ent w h ic h c o n v e n e d a t Havana on November 2 1 , IV .

1947.19 THE GENERAL AGREEMENT ON TARIFFS AND TRADE

An i m p o r t a n t a d j u n c t t o t h e d e v e l o p m e n t s l e a d i n g t o t h e U n i t e d N a t i o n s C o n f e r e n c e a t H a v a n a was t h e n e g o t i a t e d t a r i f f r e d u c t i o n s em bodied in t h e T ariffs

and T ra d e .

on N o v e m b e r 1 0 ,

G e n e r a l A g r e e m e n t on

The m a c h i n e r y was s e t i n m o t i o n w h e n ,

1946, and in a cc o rd a n c e w ith th e p ro ce d u re

e s t a b l i s h e d u n d e r th e T rade A greem ents A c t, D epartm ent o f S t a t e announced i t s w ith e ig h te e n

n a tio n s

th e U nited S ta te s

in ten tio n s

to n e g o tia te

^0 f o r a r e c i p r o c a l t r a d e agreem ent

in v o lv in g re d u c tio n o f tra d e b a r r i e r s

and th e e lim in a tio n

of trad e d isc rim in atio n s.

19 U n i t e d S t a t e s D e p a r t m e n t o f S t a t e , (No. 4 5 5 ) , o p . c i t . , p . 3 7 2 .

B u lle tin

2 0 T h e s e w e r e t h e same c o u n t r i e s n a m e d by t h e E c o n o m i c a n d S o c i a l C o u n c i l o f t h e U n i t e d N a t i o n s a s m em b er s o f t h e P r e p a r a t o r y C om m ittee t o d r a f t a c h a r t e r f o r t h e p r o p o s e d I n t e r n a t i o n a l T rade O r g a n iz a tio n . R u s s ia , how ever, r e f u s e d to p a r t i c i p a t e in th e n e g o ti a t i o n s .

59 Trade ag re em en ts p ro ce d u res fo llo w e d were a d h e r e d t o

in n e g o tia tin g

In th e p a s t

t h e G e n e r a l A g re e m e n t on

T a r i f f s a n d T r a d e w i t h o n l y s u c h m o d i f i c a t i o n a s was r e q u i r e d by t h e f a c t t h a t s e v e r a l c o u n t r i e s were i n v o l v e d . f e r e n c e o p e n e d a t G e n e v a on A p r i l 1 0 , th e

The c o n ­

1947 a n d was c o n c lu d e d

fo llo w in g O ctober 1947. The f i n a l a g r e e m e n t r e a c h e d c o v e r e d m o r e t h a n 4 5 , 0 0 0

item s and a c c o u n te d f o r t w o - t h i r d s o f th e th e n e g o tia tin g c o u n tr ie s .

im port tr a d e o f

I t a l s o em bodied th e u s e o f th e

u n c o n d i t i o n a l form o f t h e m o s t - f a v o r e d - n a t i o n c l a u s e a ll

co n cessio n s g ra n te d

became a v a i l a b l e to

in t h i s

a g re e m e n t by any one c o u n tr y

to a l l o th e r s ig n a to ry c o u n tr ie s .

en ter d e fin ite ly

in to

in t h a t

It

is

f o r c e upon d e p o s i t w ith th e S e c re ­

t a r y - G e n e r a l o f t h e U n i t e d N a t i o n s o f f o r m a l a c c e p t a n c e by c o u n tries

t h a t com prised e i g h t y - f i v e

p er cen t of th e fo re ig n

t r a d e o f a l l n e g o t i a t i n g c o u n t r i e s . 21 The i m p o r t a n c e o f t h e G e n e r a l A g r e e m e n t o n T a r i f f s and Trade l i e s

in th e f a c t t h a t th e m ajor tr a d in g n a tio n s o f

th e w orld h a d g iv en

ev id en ce

in advance o f th e U n ite d N atio n s

C o n f e r e n c e on T r a d e a n d E m p l o y m e n t a t H a v a n a t h a t

th ey stood

2 1 The A g r e e m e n t h a s b e e n o p e r a t i v e s i n c e J a n u a r y 1948 and h a s been a c c e p t e d by t w e n t y - t h r e e c o u n t r i e s , G r e a t B r i t a i n h a v i n g c o n d u c t e d n e g o t i a t i o n s on b e h a l f o f Burm a, C eylon, S o u th e rn R h o d e s ia . S y ria jo in e d Lebanon, and P a k ista n jo in e d In d ia in n e g o tia tin g t a r i f f r e d u c t io n s .

60 ready to

Im plem ent t h e

I t a ls o ev id en ced , p a rt of these

p ro v isio n s o f the proposed c h a r t e r .

to a c e r t a i n d e g re e ,

c o u n tries

econom ic s a n i t y

in

to s t a r t

on t h e

the

d esire

on t h e

long ro a d back to

i n t e r n a t i o n a l r e l a t i o n s . 22 V.

THE HAVANA CHARTER

The U n i t e d N a t i o n s C o n f e r e n c e o n T r a d e a n d E m p l o y ­ m e n t w h i c h h a d b e e n i n s e s s i o n a t H a v a n a s i n c e N o v e m b e r 1 947 com pleted i t s

work i n M arch 1 9 4 8 .

The r e s u l t o f t h e m e e t i n g

was t h e e s t a b l i s h m e n t o f t h e C h a r t e r f o r a n Trade O rg a n iz a tio n

In tern atio n al

(ITO ).

The ITO i s a p r o p o s e d s p e c i a l a g e n c y o f t h e U n i t e d N a t i o n s w ho se p u r p o s e of p rin cip le s

in

is

t o a d m i n i s t e r and im plem ent a code

in te rn atio n al trad e.

The b r o a d p u r p o s e o f t h e C h a r t e r i s t o p r o m o t e t h e exp ansio n o f i n t e r n a t i o n a l t r a d e , to encou rage the e c o n o m i c d e v e l o p m e n t o f b a c k w a r d a r e a s , a n d t o im­ prove s ta n d a r d s o f l i v i n g th ro u g h o u t th e w o rld . The C h a r t e r s e e k s t o a c h i e v e t h i s g o a l b y ( a ) e s t a b l i s h i n g a code o f f a i r d e a l i n g in i n t e r n a t i o n a l t r a d e t h a t w i l l a v o i d e c o n o m ic w a r f a r e , a n d (b ) by en couraging c o u n tr ie s to red u ce a r t i f i c i a l tr a d e b a r r i e r s and to e s t a b l i s h a m u l t i l a t e r a l , non­ d i s c r i m i n a t o r y t r a d i n g sy ste m .25

22 u n i t e d S t a t e s D e p a r t m e n t o f S t a t e , (No. 4 5 5 ) , o p . c i t . , p . 3 7 2 - 5 7 3 i

B u lletin

2 3 ttT w e n t y - f i v e Q u e s t i o n s a n d A n s w e r s o n t h e P r o p o s e d I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n 11, U n i t e d S t a t e s D e p a r tm e n t o f S t a t e ( O f f i c e o f P u b l i c A f f a i r s , December 1948), p . 1.

61 The m a i n g o v e r n i n g / b o d y o f t h e O rg an izatio n is n atio n s,

t h e C o n f e r e n c e w h i c h i n c l u d e s a l l mem ber

each h a v in g one v o te .

m a jo r ity vote fo u rth s v o te),

I n t e r n a t i o n a l Trade

(in c e r ta in

D e c is io n s a r e .reach ed by a

cases by a tw o -th ird s or th r e e -

a n d no m em ber h a s a v e t o .

th e C onference a re

Some f u n c t i o n s o f

g r a n t e d , . a n d o t h e r s may b e d e l e g a t e d ,

to

an E x e c u t i v e B oard24 on w hich t h e U n i t e d S t a t e s w i l l h a v e perm anent r e p r e s e n t a t i o n H ere a l s o ,

because o f

e a c h member i s

its

econom ic i m p o r t a n c e .

t o have one v o t e .

The C h a r t e r s p e c i f i e s

t h a t th e C onference s h a l l m eet

a n n u a lly in r e g u l a r s e s s io n and in s p e c i a l s e s s io n s upon th e c a l l o f t h e D i r e c t o r - G e n e r a l when r e q u e s t e d t o do s o b y t h e E x ec u tiv e B oard.

F urtherm ore,

th e O rg an izatio n

s h a l l be b ro u g h t i n t o r e l a t i o n s h i p w i t h th e U n it e d N a t i o n s a s s o o n a s p r a c t i c a b l e a s one o f t h e s p e ­ c i a l i z e d a g e n c i e s r e f e r r e d t o i n A r t i c l e 57 o f t h e C h a rte r o f the U n ite d N a tio n s . T his r e l a t i o n s h i p * s h a l l be e f f e c t e d b y a g r e e m e n t a p p r o v e d b y t h e C o n f e r e n c e .25 The ITO w i l l t a k e A g ric u ltu ra l O rg an izatio n , tio n ,

the

the

p l a c e b e s i d e t h e Food and I n t e r n a t i o n a l Labor O rg a n iz a ­

I n t e r n a t i o n a l B ank f o r R e c o n s t r u c t i o n a n d D e v e l o p ­

m ent, and th e

I n t e r n a t i o n a l M o n e t a r y F u n d , among t h e

24 c o n s i s t s Y ork;

its

o f 18 m e m b e r s s e l e c t e d b y t h e C o n f e r e n c e .

2 5 c i a i r W i l c o x , A C h a r t e r F o r W orld T r a d e The M a c m i l l a n C o m pany , 1 9 4 9 ) , p . 3 0 5 .

(New

62 s p e c ia liz e d ag en cies

of th e U n ited N a tio n s ,

The e s t a b l i s h ­

ment o f su ch an o r g a n i z a t i o n h a s been c o n te m p l a te d s i n c e p lanning f o r p o st-w a r r e c o n s tru c tio n The A t l a n t i c

C h arter

in 1941 and t h e l e n d - l e a s e

i n 19 4 2 p l e d g e d a c t i o n

t h a t w ould be d e s i g n e d t o

red u ctio n o f th e b a r r ie r s

to tr a d e .

b y t h e B r e t t o n Woods C o n f e r e n c e req u ired , under th e

and reco v ery began.

It

was a l s o

in 1944.

envisaged

F urtherm ore, it

in to

U n ited S t a t e s and each o f th e c o u n tr ie s European R ecovery Program .

is

long a s

it

betw een t h e

p a rticip a tin g

As a m a t t e r o f f a c t ,

an i n t e g r a l p a r t o f t h e l a r g e r p a t t e r n as

effect a

p r o v i s i o n s o f t h e E conom ic C o o p e r a t i o n

A ct o f 1948, by th e a g reem en ts e n te r e d

stru c tio n ;

agreem ents

is

lack in g ,

in th e

" T h e ITO i s

o f econom ic r e c o n ­

the

p a t t e r n w i l l be

i n c o m p le te ."26 The ITO p r o v i d e s a c o n v e n i e n t f o r u m a n d a i d s c o n s u l t a t i o n betw een i t s d isp u tes

to s e t t l e

in a c c o rd a n c e w ith th e p r o c e d u re s o u t l i n e d

C h a rte r and th e d e c is io n s w ish such a d e c i s i o n , giv in g s ix ty title d

m e m b e r s who a g r e e

IT O.

It,

th en ,

trad e in th e

I f a c o u n try does n o t

i t may l e a v e t h e o r g a n i z a t i o n ,

days n o t i c e .

to th e b e n e f i t s

o f the

in

a fter

w i l l no l o n g e r be e n ­

t h a t t h e r e m a i n i n g members e x t e n d t o

each o th e r .

26 C l a i r W i l c o x , "Why The I n t e r n a t i o n a l T r a d e O r g a n ­ izatio n ?" The A n n a l s o f t h e A m e r i c a n A c ad e m y o f P o l i t i c a l and S o c ia l S c ien ce (V ol. 264, J u ly 1 9 4 9 ), p . 68.

63

In t h e U n ite d S t a t e s , to C ongress f o r d e c is io n as fied ,

t h e C h a r t e r m u s t be s u b m i t t e d

to r a t i f i c a t i o n *

an in s tru m e n t o f a c c e p ta n c e w i l l ,

th en ,

If it

a r e a c h i e v e d by t w e n t y g o v e r n m e n t s ,

a c c o r d i n g l y , w i l l b e co m e o p e r a t i v e m ents.

When the

ch arter,

fo r th o se tw enty g o v e rn ­

O ther governm ents o f th e re m a in in g t h i r t y - f o u r

c o u n tries,

whose r e p r e s e n t a t i v e s

b e c o m e m em bers u p o n r a t i f i c a t i o n lativ e

rati­

be d e p o s ite d

w ith th e S e c re ta ry -G e n e ra l o f th e U nited N a tio n s . ratific atio n s

is

ag re ed to

the C h a rte r,

by t h e i r r e s p e c t i v e

may

leg is­

b o d i e s . 27

27 lfT w e n t y - f i v e Q u e s t i o n s a n d A n s w e r s o n t h e P r o p o s e d I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n 11, op* c l t . ,

pp. 2-3

CHAPTER V OBSTACLES TO AGREEMENT The n a t i o n s

t h a t m et a t H a v an a in t h e w i n t e r o f 1947

1948 p ro v e d b ey o n d a shadow o f a d o u b t t h a t is

not n e ce ssa rily

illu so ry ,

w ith in th e realm o f the

p o ssib le .

nom ic a n d p o l i t i c a l c r i s i s o f W o r l d War I I ,

but th at,

co n certed a c tio n

actu ally ,

it

N otw ithstanding

lie s the eco ­

t h a t p re v a ile d as a consequence

the d e le g a te s

proceeded w ith th e s e n s i t i v e

t a s k o f e s t a b l i s h i n g an i n t e r n a t i o n a l t r a d e o r g a n i z a t i o n t h a t was i n t e n d e d t o b e c a p a b l e o f g u i d i n g a n d r e g u l a t i n g t h e flo w o f i n t e r n a t i o n a l com m erce.

W hether o r n o t t h e p r o ­

posed I n t e r n a t i o n a l Trade O rg a n iz a tio n of

such m agnitude w i l l c o n s t i t u t e

quent ch ap ters.

S u ffice

i t h ere

when o n e c o n s i d e r s t h e o b s t a c l e s

the d is c u s sio n

in s u b s e ­

to say t h a t th e C o n fe re n ce , i t had to f a c e ,

l o n g way i n c a p t u r i n g a n d r e g i s t e r i n g n a tio n a l co o p eratio n

can m eet a c h a l l e n g e

went a

a s p ir it of in te r­

t h a t may s t a n d t h e w o r l d i n g o o d s t e a d

in th e y e a rs to fo llo w . A g r e e m e n t o n e c o n o m i c p o l i c y on a d o m e s t i c l e v e l u su a lly d if f ic u lt the

to a c h ie v e ,

b u t on a n i n t e r n a t i o n a l

d i v e r s i t y o f c o n d itio n s and th e c o n f l i c t s

w hich o b s t r u c t

le v e l,

of in te rest

s u c h a g r e e m e n t s a r e m u l t i p l i e d many t i m e s .

The d e g r e e o f d i f f e r e n c e are d if f e r e n t

is

in a r e a ,

among n a t i o n s m a k e s t h i s

p o p u latio n ,

and r e s o u r c e s .

d e g r e e o f i n t e r n a l econom ic d e v e lo p m e n t, t h e i r

so.

They

T heir

id eo lo g y and

65 w orld o u tlo o k a r e trie s

are ric h

in v a r ia n c e w ith one a n o t h e r .

in r e s o u r c e s w h ile th e

barren or n early

so.

To m a n y , t h e

very e x is te n c e , w hile A ll these

to o th e r s ,

of the v a rio u s p articu larly

th at

f lo w o f t r a d e means t h e i r is o f m inor im p o rta n c e .

t h e econom ic p o l i c i e s

d iffic u lt. i n t e r n a t i o n a l a g r e e m e n t on

to govern t r a d e r e l a t i o n s

t a k i n g m ost any tim e . t o d a y makes

in flu e n ce

n a t i o n s a n d t e n d t o make a g r e e m e n t among t h e m

The t a s k o f o b t a i n i n g

e ffo rts

of o th ers a re

a n d u n d o u b t e d l y t h e e x i s t e n c e o f m any o t h e r d i f f e r ­

e n c e s loom l a r g e a s f a c t o r s

ru les

it

lands

Some c o u n ­

would b e a d i f f i c u l t u n d e r ­

T he t r o u b l e d w o r l d i n w h i c h we l i v e

s u c h an a c c o m p lish m e n t d o u b ly d i f f i c u l t .

The

t o w a r d p o s t - w a r r e c o n s t r u c t i o n h a v e b e e n im peded

m ain ly as a r e s u l t o f th e u n s u c c e s s f u l a tt e m p t to a c h ie v e an h o n e s t peace and b e c a u se o f th e atm osphere o f c r i s i s p rev a ils.

The p a s t w a r h a s c o n t r i b u t e d t o a r i s e

alism ra th e r

than to

s p r e a d am ong t h e tio n

its

abatem ent;

and th e

less-d ev elo p ed c o u n tries

b e lief

th at

th at

in n a t i o n ­ is

w ide­

in d u stria liz a ­

can b e s t be a c c o m p lis h e d t h r o u g h a p o l i c y o f r e s t r i c t i n g

trad e.

Many c o u n t r i e s

f e e l a deep d i s t r u s t o f th e a b i l i t y

of

in d u s tria l n atio n s

to av o id d e p re s s io n s ,

is

w e ll-d e m o n s tra te d by t h e i r

too c lo s e an i n t e g r a t i o n co u n tries.

These,

and t h e p o i n t

la c k o f eagerness

w ith th e s e h ig h ly

in th e m ain,

to perm it

in d u stria liz ed

were t h e o b s t a c l e s

th a t had

66 t o be overcom e in n e g o t i a t i n g ex am in atio n

in g r e a t e r d e t a i l w i l l c o n s t i t u t e

upon w hich t h i s I.

t h e Havana C h a r t e r ,

ch ap ter

t h e em phasis

is b ased .

POST-WAR ECONOMIC AND POLITICAL CONFLICTS

The e n d o f W o r l d War I I d i d n o t b r i n g sta b ility ,

and a g e n e r a l f e e l i n g o f s e c u r i t y .

econom ic and p o l i t i c a l in te rn a tio n a l scene,

c o n flicts

a fee lin g

d e v e l o p e d am ong t h e n a t i o n s I t was in t h i s were c o n d u c te d w h ic h , m any o b s t a c l e s

w ith

o f im pending c r i s i s

as

g rad u ally

o f th e w orld.

atm osphere t h a t n e g o t i a t i o n s to a c e r ta in

degree,

acco u n ts

a t Havana f o r the

In t h e p o l i t i c a l r e a l m , in w orld

and th e r e had developed an in c r e a s in g doubt th a t co u ld p re s e rv e th e p e a c e .

alo n e p re se n te d a s e rio u s o b s ta c le because th e e x is te n c e

pro sp ects

peace,

c o n tin u e d to dom inate th e

i t h ad to overcom e.

th e U n ited N ations

p o licy ,

it

In stead ,

th e p o st-w a r y e a rs have w itn e sse d a dangerous r i f t p o litic s,

and t h e i r

T his

situ atio n

to a g re e m e n t on com m ercial

of such u n c e r ta in ty as to the

f o r p e a c e h a s a l w a y s made n a t i o n s

r e l u c ta n t to

d e p e n d i n c r e a s i n g l y on f o r e i g n m a r k e t s a n d s o u r c e s o f s u p p l y . I t has ten d ed ,

a lso ,

to

encourage th e a d o p tio n o f s t a t e

c o n tr o ls and to d is c o u ra g e th e r e - e s ta b lis h m e n t o f m u l t i l a t e r ­ alism

i n i n t e r n a t i o n a l t r a d e .^

T hese ”n o rm a l r e a c t i o n s ” t o

1 C la ir W ilc o x , A C h arter For World Trade (New York: The M acm illan Company, 1U 4§), p . 2 7 .

67 tro u b led to

t i m e s w e r e t a k e n t o a c o n f e r e n c e t h a t was d e d i c a t e d

th e accom plishm ent o f q u i te th e o p p o s ite r e s u l t l F urtherm ore,

t h e econom ic f u t u r e was in d o u b t , and

t h i s u n c e r t a i n t y p l a y e d no s m a l l p a r t problem s to

so lv e.

in p o s in g d i f f i c u l t

E c o n o m i c d i s o r g a n i z a t i o n s u f f e r e d by

co u n tries

t h a t were d e v a s t a t e d b y t h e w a r was o f m a j o r p r o ­

portion*

" P l a n t a n d man p o w e r h a v e b e e n

m ents and m a rk e ts h av e been l o s t ;

co u n tries

c h a o s * u^

There

in w orld t r a d e a s m ost

so u g h t th e m ark e ts o f th e w orld f o r goods and

i n d u s t r i a l m ach in ery m ost u r g e n t l y needed to recovery*

fin an ­

c o sts and p ric e s have

c u r r e n c i e s h av e been throw n i n t o

developed a pronounced u n b alan ce

in v est­

d e b t s h a v e m ounted;

c i a l s t a b i l i t y has been d e stro y e d ; risen ;

im paired;

I t was a l m o s t a x i o m a t i c , t h e n ,

effect

a speedy

f o r m an y o f t h e

c o u n t r i e s r e p r e s e n t e d a t Havana t o f e e l t h a t

th e m ost p r e s s ­

in g o f econom ic p ro b lem s w ere t h o s e o f r e c o n s t r u c t i o n , such q u e s tio n s

t h a t d e a l t w ith lo n g -ru n com m ercial p o lic y

w ere t o be r e l e g a t e d

to a p o s i t io n o f secondary

N eedless to s a y , th e

and

the

im portance*

p r e v a i l i n g a tm o s p h e re u n d e r w hich

C o n f e r e n c e was h e l d was f a r f r o m c o n d u c i v e t o t h e r e a c h ­

ing o f q u ic k ag reem en ts

in th e f i e l d

c ia l rela tio n s.

Many d e l e g a t e s

th e ir resp ectiv e

co u n tries*

2 Ibid..

p. 27.

o f I n t e r n a t i o n a l co m m er­

w ere n o t d i s p o s e d t o commit

p a rticip a tio n

in com m ercial

68 p o lic ies

in w h ic h a d v a n t a g e s were t o a c r u e y e a r s h e n c e .

u n certain ty

i n t h e econom ic and p o l i t i c a l s p h e r e s

o f the n a tio n s ed ly ,

The

l e d m an y

t o move w i t h g r e a t c a u t i o n , a n d t h i s , u n d o u b t ­

was t h e g r e a t e s t f a c t o r t h a t p r o d u c e d t h e o b s t a c l e s

w h i c h made a g r e e m e n t p a r t i c u l a r l y II.

d iffic u lt

BRITISH- RECONSTRUCTION PROBLEMS

G reat B rita in * s u nique p o s itio n f o l l o w i n g W o r l d War I I a n d t h e a t t i t u d e m ajor s ig n if ic a n c e

a s an o b s t a c l e

t h a t she had to fa c e th r e a te n e d R e stric tio n s th a t

she h ad

to

b eco m e o v e r w h e l m i n g .

im posed on im p o r ts

some m e t h o d w e r e c o n t r i v e d

she were a b l e t o

her export tra d e . strid es by th e

s h e a s s u m e d was o f

T he b u r d e n o f r e c o v e r y

o f h e r w a r - t i m e d e b t c o u l d be r e l i e v e d . be o b ta in e d i f

in w o rld r e c o n s t r u c t i o n

t h a t had to be c le a re d

b e fo re agreem ent co u ld be r e a c h e d .

rela x ed u n less

to a c h ie v e .

c o u ld h a r d l y be

whereby th e b u rd e n Much r e l i e f c o u l d

d o u b le th e p r e - w a r volume o f

F o r by d o i n g s o ,

she c o u ld ta k e g r e a t

in r e g a i n i n g th e l o s s o f p u r c h a s i n g power o c c a s io n e d sharp d eclin e

of earn in g s

and s h ip p in g s e r v i c e s . export trade

from f o r e i g n

She m u st s t r i v e

inv estm en ts

f o r a h i g h volum e o f

in o r d e r to s e r v i c e h e r l a r g e f o r e i g n d e b t and

in o r d e r to pay f o r th e h e a v y

im ports t h a t she r e q u ir e s

fe e d h e r p eo ple and r e c o n s t r u c t h e r

in d u strie s.

I f she

to is

t o a c h i e v e t h e n e c e s s a r y volume o f e x p o r t s , s h e m u st p r e s s fo r th e

p r o d u c t i o n o f new a n d b e t t e r

goods a t

low er c o s t s

69 and p r i c e s and s e l l them in c o m p e t i t i o n w i t h o t h e r p r o d u c e r s o f th e w orld. U n f o r tu n a te ly , how ever, h e r s l o w l y become o b s o l e t e ; has

it

lack s

in d u s tr ia l p lan t has

its

form er d r iv e , and i t

d e v elo p ed a grow ing f e a r o f h a v in g to f a c e

C o n seq u en tly ,

she has

been f o r c e d to

seek p ro te c tio n under

th e s h e l t e r o f m a rk e t-s h a rin g and p r i c e - f i x i n g tic

and i n t e r n a t i o n a l c a r t e l s .

p o lic ies

o f th e

co m p etitio n .

t h r o u g h dom es­

F u r t h e r m o r e , many o f t h e

p o s t- w a r g overn m ent hav e worked t o th e d i s ­

advantage o f B r i t i s h f irm s ,

to the

ex ten t of

c o m p etitiv e p o s itio n w ith re s p e c t to in o t h e r c o u n t r i e s .

im pairing t h e i r

com parative

in d u strie s

As M r . W i l c o x s a y s ;

In c e r t a i n i n d u s t r i e s , t h e e v e r p r e s e n t t h r e a t o f n a t i o n a l i z a t i o n i n h i b i t s new i n v e s t m e n t , t h e e n h a n c e ­ ment o f e f f i c i e n c y , and t h e r e d u c t i o n o f c o s t s . The i m m i g r a t i o n o f b a d l y n e e d e d l a b o r h a s b e e n r e s t r i c t e d ; w orking tim e h a s b een c u r t a i l e d ; con­ s u m p t i o n h a s b e e n s u b s i d i z e d ; g o o ds h a v e b e e n r a t i o n e d an d p r i c e s c o n t r o l l e d ; t h e i n c e n t i v e t o work h a s been im p a ire d ; th e governm ent h a s gone fo rw a rd , t o o , w ith s o c i a l program s t h a t , however la u d a b le , ex ceed t h e r e s o u r c e s now a t i t s com m and. P r o j e c t s f o r h o u s i n g , m e d ic a l c a r e , and e d u c a t i o n , i n v o lv in g la r g e - s c a le c o n s tru c tio n , se rv e both to in c re a se im p o rts and to check e x p o r t s , t h u s , im peding th e r e s t o r a t i o n o f b a l a n c e in e x t e r n a l t r a d e . 3 It

is

program l i e s reasons,

sp ecu lativ e,

n ev erth eless,

to say t h a t such a

a t t h e v e r y i?oots o f h e r t r o u b l e .

Yet th e se

t o g e t h e r w ith m i l i t a r y com m itm ents t h a t h av e p l a c e d

3 Wilcox, op. c i t . ,

p. 29.

70 a groat fin a n c ia l s tra in re ta rd in g h e r progress In th e f a c e

on h e r b u d g e t , h a v e g o n e f a r

to w a rd econom ic s t a b i l i t y .

o f such a p l i g h t ,

B r i t i s h o p in io n has

b een s h a r p l y d i v i d e d on t h e q u e s t i o n o f a l o n g - r u n p o licy .

trad e

One s c h o o l o f t h o u g h t c o n t e n d s t h a t G r e a t B r i t a i n

w ill fin d b asis,

in

it

ex ceed in g ly d i f f i c u l t

w ith th e o t h e r n a tio n s

t o com pete,

o f the w orld.

on an e q u a l

Her o n ly hope

f o r e x p o r t s m u st c o n t i n u e t o be s o u g h t in m a r k e ts p r o t e c t e d by p r e f e r e n c e s , d eals.

b i l a t e r a l ag reem en ts, and b a r te r

She m ust u s e h e r t r a d i n g p o s i t i o n

when t r a d i n g w i t h w e a k e r n a t i o n s . of m u ltilateralism

in h eren t

in t h i s

to good a d v a n ta g e

She m ust a v o id th e r i s k s

and seek h e r s a l v a t i o n

and s y s te m a tic p r a c t ic e

th a t are

in th e d e lib e r a te

of d iscrim in atio n .

course to o ,

because B r ita in

But r i s k s

are

cannot hope to

f o l l o w i t a l o n e w i t h o u t r e t a l i a t i o n f r o m more p o w e r f u l t r a d i n g n atio n s

such as th e U n ited S ta te s . F o rtu n ately ,

the

long-run p o lic y of b ila te r a lis m

n o t h e l d t o be t h e o f f i c i a l v i e w o f t h e Y et,

the p o s s i b i l i t y o f rea p in g

a b ila te r a l trad e

p o licy ,

she f e e l s m u l t i l a t e r a l i s m th is

tim e g iv e h e r , h a s

is

B r i t i s h G overnm ent.

im m ediate a d v a n ta g e s u n d e r

vifoich s h e s o r e l y n e e d s a n d w h i c h and n o n - d is c rim in a tio n

been th e

cannot a t

c a u s e o f much d e l a y

in

r e a c h i n g a f i n a l a g r e e m e n t among t h e c o n f e r e e s a t H a v a n a . B rita in a c tu a lly re a liz e s t o g a i n by t h e

t h a t she s t a n d s u l t i m a t e l y

o p en in g o f m ark e ts and t h e f r e e i n g o f t r a d e .

71 M u ltilateralism , seeks*

But s u c h a p o l i c y

So l o n g a s sists,

is

th e

she w i l l be c o n v in c e d

to

felt

in the

trad e p er­

its

to su ch a com m ercial p o l ic y w ith o u t

u ltim ate

but r a th e r ,

e f f e c t s , and is

preo ccu p ied not

t h a t w i l l be

In o r d e r s e v e r a l

w i t h t h o s e whose r e s u l t s

im m e d ia te weeks o r m o n th s t o com e.

th e p re s e n t circu m stan ces c ertain

ex tern al

t h a t a p o l i c y w hich e s p o u s e s

w ith the fo rm u la tio n o f p o lic ie s years hence,

in h e r

and d i s c r i m i n a t i o n rem a in s a b a s i c n e c e s s i t y *

p resen tly ., ad h eres

m u ch r e g a r d

l o n g - r u n g o a l w hich she

is u n q u estio n ab ly a lo n g -ru n g o a l.

th e p r e s e n t U nbalance

re stric tio n ism She,

th erefo re,

w i l l be

And u n d e r

in w hich she f i n d s h e r s e l f ,

degree o f n e a r-s ig h te d n e s s

a

i s n o t too d i f f i c u l t

to

u n d erstan d .^ III.

DESIRE FOR TARIFF PROTECTION A nother m ajo r o b s ta c le

d e v elo p m e n t o f an

W

UNDEVELOPED NATIONS

th a t has

ten d ed to

impede t h e

i n t e r n a t i o n a l com m ercial p o l i c y h a s

been

th e u n d e r s ta n d a b le d e s i r e o f e c o n o m ic a lly backw ard c o u n t r i e s to

d e v e lo p and d i v e r s i f y

n a tio n a l conferences,

th eir

p ro d u ctio n .

At r e c e n t

i n d u s t r i a l i z a t i o n h a s been th e r a l l y i n g

c ry o f the r e l a t i v e l y u n d e r-d e v e lo p e d c o u n tr ie s th e w o rld ; and a t w ith th e fo rc e

in te r­

tim es,

th e

idea has

of o b sessio n .

4 Wilcox, op. c i t . ,

pp. 29-30.

throughout

been expounded upon

72 There

i s no d o u b t t h a t a p r o s p e r o u s a n d p e a c e f u l

w orld r e s t s upon th e co u n tries. essary.

in d u stria liz atio n

Su ch an u n d e r t a k i n g

But t h e

is

o f the u n d e r-d e v elo p e d

both d e s ir a b le and n e c ­

i s s u e a c q u i r e d an e m o tio n a l c o n te n t a n d ,

as a consequence, d is c u s s io n s

p e r ta in in g to

in d u stria liz atio n

h a v e b e e n c o n d u c t e d i n a much t o o s e r i o u s v a n e . Haw kins f c r i t i c i s m

o f the a t t i t u d e

t a k e n by t h e

developed c o u n tr ie s re p r e s e n te d a t th e th r e e were

P rofessor lesser

conferences

in th e s e w ords: W h i l e i t h a s b e e n d i s c u s s e d d i s p a s s i o n a t e l y by many d e le g a te s a t th e i n t e r n a t i o n a l m ee tin g s a t London, Geneva, and H avana, i t h a s a ls o a t tim e s l e n t i t s e l f to o r a t o r i c a l o u tb u rs ts of a h ig h ly co n fu sin g and u n en lig h ten ed s o r t . Inasm uch a s i t is s im p le r to a n a l y s e a com plex p ro b lem o f t h i s k in d in te rm s o f someone e l s e ' s b e i n g t o b lam e f o r l a c k o f p r o g r e s s , th e r e is a ten d e n cy to c a s t th e i n d u s t r i a l c o u n tr i e s in th e r o l e o f o p p r e s s o r s , w ith th e u n d e rd e v e lo p e d the oppressed, or a t le a s t th e v ictim s of i n d if f e r ­ ence and n e g l e c t . I t is th e s o r t o f problem t h a t t e n d s t o b e co m e a c a u s e . 5 S ince

i n d u s t r i a l i z a t i o n h a s become t h e b a t t l e

th e w o rld o f econom ic r e l a t i o n s , developm ent i s in e v e ry h eld

very

lik e ly

th e q u estio n

cry

in

of in d u s tria l

t o command a p r o m i n e n t p o s i t i o n

i n t e r n a t i o n a l m e e t i n g on e c o n o m i c s u b j e c t s t o b e

f o r a lo n g tim e t o

come.

5 Seymour E . H a r r i s , e d i t o r , F o r e i g n E conom ic P o l i c y F o r The U n i t e d S t a t e s (C am bridge, M a ss .: H a rv a rd U n i v e r s i t y P ress, 1948), p. 283.

73 The U n i t e d S t a t e s , a h ig h ly

e n jo y in g

in d u s tr ia l n atio n ,

o p p o sitio n

concerning th e

th e p o s itio n

was f o r c e d

issues

of

she does as

to m eet very a r t i c u l a t e

in d u stria liz a tio n .^

The p o i n t o f d i s a g r e e m e n t d i d n o t r e s t u p o n t h e q u e s t i o n ■whether i n d u s t r i a l i z a t i o n Recent U nited S ta te s tria liz a tio n

o f backward c o u n t r i e s

p o lic y has been

was d e s i r a b l e .

to prom ote su c h i n d u s ­

o n a s o u n d b a s i s a n d by a l l a p p r o p r i a t e m e a n s .

I t d id n o t r e s t upon w h e th er i n d u s t r i a l i z a t i o n prom oted b u t ,

sh o u ld be

r a t h e r , how t h e p r o g r a m s h o u l d be a c c o m p l i s h e d .

D uring th e London-G eneva-H avana t r a d e

d iscu ssio n s,

became a m a j o r one a s a r e s u l t o f t h e

proposed p ro v isio n

red u cin g t a r i f f s

and o t h e r

o f the p ro v is io n s re stric tio n s

b arriers to

p ro h ib itin g

f o r p ro tec tiv e

the use

trad e

and,

the

issu e

p articu larly ,

of q u a n tita tiv e

trad e

purposes.

The u n d e r d e v e l o p e d b l o c o f c o u n t r i e s h e l d t h a t o r d e r to u n d e rta k e a program o f i n d u s t r i a l d ev elo pm en t, should have a t progress,

v iz .,

in th ey

t h e i r d i s p o s a l means o f e n c o u r a g i n g i n t e r n a l t h e power to

impose im p o r t r e s t r i c t i o n s

w h e n ev e r t h e y deemed s u c h a c t i o n accused th e advanced n a tio n s n a tio n al

for

to be n e c e s s a r y .

They

o f f o s t e r i n g a program o f i n t e r ­

c o m m e r c i a l c o n d u c t t h a t was d e s i g n e d t o

11d e n y t o

6 O p p o s i t i o n came m a i n l y f r o m I n d i a a n d m a n y o f t h e L a t i n A m erican c o u n t r i e s .

74 undeveloped n a tio n s th e

freedom to u se th e v ery d e v ic e s

i n d u s t r i a l pow ers h a d e s t a b l i s h e d t h e i r

by w hich

p r e e m i n e n c e . ” *7

The p o s i t i o n a s s u m e d b y t h e U n i t e d S t a t e s G o v e r n m e n t a n d v o i c e d t h r o u g h o n e o f o u r d e l e g a t e s a t H a v a n a was t h a t : I f QR i s t o b e f a s t e n e d o n t h e c om m e r c e o f t h e w orld w ith o u t l e t o r h in d r a n c e , th e r e s t r i c t i o n ­ i s m o f t h e f i f t i e s a n d t h e s i x t i e s w i l l m ak e t h e r e s t r i c t i o n i s m o f the t h i r t i e s lo o k lik e a b so lu te free trad e. I f t h i s is t o be t h e outcom e o f o u r n e g o ti a t i o n s h e r e , I say t h a t a l l o u r h opes f o r expanding t r a d e , f o r r a i s i n g s ta n d a r d s of l i v i n g , f o r p r o m o tin g econom ic d e v e lo p m e n t, f o r a c h i e v i n g e c o n o m i c p e a c e a r e doom ed t o f a i l u r e . 8 The U n i t e d S t a t e s p o sitio n

i t had ta k e n ,

d e l e g a t i o n was n o t a l o n e

fo r o th er c o u n tries

in th e

con ten d ed a ls o

t h a t t h e u s e o f s u c h r e s t r i c t i v e m e a s u r e s w ould u n q u e s t i o n ­ a b ly c au se th e d e s i r e d developm ent to f a i l . i t would b r i n g a b o u t a r i s e liv in g standards.

in p ric e s

pressure

consum ers and re d u c e

They w ere c o n v in c e d t h a t t o g r a n t u n b r i d l e d

u s e o f p r o t e c t i v e m e a s u r e s w ould g iv e te c tio n ist

to

F urtherm ore,

’’f r e e r e i n

g r o u p s who a l w a y s l u r k

when n a t i o n a l p o l i c i e s

to pro­

in th e background

a r e made, a n d t h a t u n b r i d l e d econom ic

n a t i o n a l i s m w ould d e s t r o y t h e t r a d e a n d t h e p r o s p e r i t y o f the w o rld .”9

7 W i l c o x , ojp. c i t . ,

p . 31*

8 C l a i r W i l c o x , ’’H a b a n a M e e t i n g o f U . N . C o n f e r e n c e On T r a d e a n d E m p l o y m e n t . ” U n i t e d S t a t e s D e p a r t m e n t o f S t a t e , B u lletin (N o.4 4 5 , J a n . 11, 1 9 4 8 ) , p . 3 9 . ^ H a r r i s , op. c i t . ,

pp. 284-285.

75 To g r a n t a f r e e h a n d i n r e s t r i c t i n g m ent p u r p o s e s w ould d e s t r o y of serv ing it

its

lik e l y pro v id e

tio n

f o r econom ic w a r .

o u t,

is

those

or c o rru p t th e C h a rte r.

In stead

avowed p u r p o s e o f p r o m o tin g econom ic p e a c e ,

w ould more t h a n

in te rn a tio n a l le g a l sanc­

Of no l e s s

im portance, th e y p o in te d

th e f a c t t h a t each co u n try ,

C h arter,

trad© f o r d e v e lo p ­

w ould b u i l d up i t s

w ith th e sa n c tio n o f th e

own i n d u s t r i e s

by t e a r i n g

down

in o t h e r c o u n t r i e s . N e v e r th e le s s , th e opponents o f th e use o f tr a d e

re stric tio n s

f o r p u r p o s e s o f econom ic d e v e lo p m e n t f e l t t h a t

t h e r e m ig h t a r i s e

circ u m stan ces

m ig h t r e a s o n a b l y be c o n d o n e d . cases,

in w hich r e s t r i c t i v e They c o n c e d e d t h a t

w h e re a p r o p o s e d i n d u s t r y showed p r o m i s e ,

tric tio n s

p rac tic es

" i n some trad e r e s ­

s h o u l d be p e r m i t t e d f o r a t l e a s t a lo n g enough

p erio d to give

it

a sta rt.

S u c h a c o n c e s s i o n wa s n o t w i t h o u t q u a l i f i c a t i o n , how ever. the

They h e l d t h a t a n y su c h a c t i o n

in c o n s is te n t w ith

c o m m e r c ia l p o l i c y p r o v i s i o n s o f t h e C h a r t e r would be

p e rm itte d only a f t e r

p r io r ap p ro v al o f the

T rade O r g a n iz a tio n h ad been o b t a i n e d .

In tern a tio n al

Such a p r o v i s i o n ,

was b e l i e v e d , w o u l d i n s u r e m o r e c a r e a n d s e l e c t i v i t y

in th e

use o f such m easu res. W ith r e s p e c t t o t h e ob stacle

t h a t ran

its

im portance o f t h i s

p articu lar

c o u r s e f r o m L o n d o n t o H a v a n a , Mr.

Haw kins s a i d : 10 H a r r i s , oj>. c i t . ,

p. 285.

it

76 In t h e c o u r s e o f e x h a u s t i v e an d e x h a u s t i n g d i s ­ c u ssio n s a t th r e e p r o t r a c te d i n t e r n a t i o n a l m eetin g s t h i s q u e s t i o n came t o b e known s i m p l y a s t h e p r i o r approval is s u e , 01113 i s s u e m o r e t h a n a n y o t h e r h a s t r o u b l e d t h e d i s c u s s i o n s a t London an d Geneva a n d was s o u r c e o f d i s a g r e e m e n t d u r i n g t h e d i s c u s s ­ i o n s a t H a v a n a , 11 IV.

PEAR OP UNITED STATES DEPRESSION

A nother p o in t o f concern t h a t i n t e r e s t b y m any n a t i o n s h a s

been t h a t o f a d e p r e s s io n a r i s i n g

in a m ajor p ro d u c in g c o u n tr y . term s o f th e

effect

ing to re g a in t h e i r

it

was r e g a r d e d w i t h g r e a t

The f e a r was e x p r e s s e d

w ould h a v e upon o t h e r c o u n t r i e s

econom ic h e a l t h d u r i n g t h e

An o u t g r o w t h o f t h e d e p r e s s i o n o f t h e b e e n t h e d e t e r m i n a t i o n o f m any c o u n t r i e s nal sta b ility

to

striv ­

post-w ar y e a rs . th irtie s

has

em phasize i n t e r ­

and s e c u r i t y r a t h e r th a n e f f i c i e n c y and p r o g r e s s .

The m a i n i s s u e h a s

been t h e p r e v e n t io n o f d e p r e s s i o n ,

success,

th ey h e ld ,

p o lic ies

t h a t a p p e a re d to g u a ra n te e

”f u l l em ploym ent” .

the s t a t e

ro le

i n t e r n a l econom ic a c t i v i t y ,

o f g u id in g

the

c o u l d h a r d l y be p r e v e n t e d . s t a b i l i z a t i o n m ig h t e a s i l y in creased .

It

more e a s i l y m a i n t a i n e d

11 I b i d . .

and

c o u l d b e a c h i e v e d by m e a n s o f a d o p t i n g

F urtherm ore, u n le s s

im ports

in

i t s e l f were t o

assum e a m a jo r d ep ressio n

How ever, t h e b e s t l a i d p l a n s f o r be u p s e t

i f exports

dropped or

was r e a s o n e d t h a t e m p l o y m e n t c o u l d b e in a c l o s e d economy.

p. 285.

Thus,

th e m ajor

77 e m p h a sis p l a c e d upon em ploym ent h a s

been a s o u r c e o f d i s ­

a g r e e m e n t on m e a s u r e s d e s i g n e d t o e x p a n d t r a d e . argues

for

pendence*

independence;

freedom o f tr a d e

i f both a re to be so u g h t,

"S ta b ility

created

in terd e­

t h e c o n f l i c t betw een

t h e m m u s t b e c o m p r o m i s e d 12 Of m ajo r s i g n i f i c a n c e nom ic s t r e n g t h o f

i n s u c h a dilem m a i s

th e U n ited S ta te s *

is o f such m agnitude a s

Her p ro d u c tiv e c a p a c ity

to p ro v id e h a l f o f th e w orld*s o u tp u t

o f m a n u f a c t u r e d g o o d s a n d t o consume h a l f o f i t s raw m a t e r i a l s .

When i n d u s t r i a l a c t i v i t y

th e need f o r raw m a t e r i a l s brin g s about a f a l l and s in c e

the eco­

falls

o u tp u t of

in A m erica s l a c k e n s ,

o ff p ro p o rtio n ately *

i n demand f o r

T his

im p o rte d raw m a t e r i a l s ,

t h e y can be p ro d u c e d in i n c r e a s i n g am ounts a t home,

o u r demand f o r

im ported m a t e r i a l s

o th er c o u n tries,

p rices

em ploym ent m o u n ts . tra n s p o rte d to

the

W ilcox p o i n t s o u t ,

fall,

falls

o f f even m ore.

p ro duction d e c lin e s ,

Thus, d e p re s s io n

and u n ­

in th e U n ited S t a t e s

c o u n t r i e s f r o m w h i c h we "they

In

buy.

fin d th em selv esdragged

is

As Mr. u p a n d down

a s we move t h r o u g h s u c c e s s i v e p h a s e s o f t h e b u s i n e s s c y c l e . And t h e y come t o t h e c o n c l u s i o n A m e ric a n economy i n v o l v e s

12

W ilcox,

13 W i l c o x ,

op.

t h a t clo se

a heavy r i s k

c i t ., p.

32.

oj). c i t . , p . 3 3 .

. ”13

d e p e n d e n c e on t h e

A m erican econom ic s t r e n g t h

is

id en tified

a lso as a

h in d ra n c e to a g e n e ra l accep tan ce o f a p o lic y o f f r e e r tra d e th ro u g h o u t th e w orld.

Such a p o lic y ,

th e p re s e n t a d m in is tr a tio n to ex ag g erated fe a rs is

w hich i s

asse rte d

in th e U n ited S t a t e s ,

o f A m erican c o m p e t i t i o n .

by

gives r is e

T rep id ation

w id e s p re a d t h a t h e r p r o d u c t i o n w i l l overw helm th e m a rk e ts

o f t h e w o rld l a y i n g w a ste t h e num erous p l a n s o f o t h e r co u n ­ trie s

to a c h iev e

sta b ility

and to p re v e n t

They f e a r t h a t m a r k e t s f o r t h e i r e x p o r t s them w hich t h e y m u st h a v e needs. less

w i l l be ta k e n from

in o rd e r to m eet t h e i r

im port

A l l t h i s h a s h a d a t e n d e n c y t o m ake o t h e r c o u n t r i e s

recep tiv e

w hich h a s trad e

in te r n a l d ep ressio n .

to

th e p o l i c y o f th e U n i t e d S t a t e s Governm ent

been t o f o s t e r

f r e e r co m p etitio n

in

in tern atio n al

•^ The A m e r i c a n i n d u s t r i a l p l a n t p o s s e s s e s t h e p o t e n t i a l

s tr e n g th to e x p o rt a la r g e has also

c o n trib u te d to

s h a r e o f t h e w o r l d fs n e e d s .

an economy t h a t m akes t h i s

l u c r a t i v e m ark et f o r th e goods o f o t h e r c o u n t r i e s . U nited S ta te s th at i t

could co n v in ce th e o th e r n a t i o n s

w ould n o t

be g i v e n .

n atio n a I f the

o f th e w orld

be v i s i t e d a g a i n b y a v i o l e n t d e p r e s s i o n ,

one o f th e m a jo r o b s t a c l e s p o lic ies

It

w ould b e re m o v e d .

t o a g r e e m e n t on l i b e r a l

com m ercial

But s u c h an a s s u r a n c e c a n h a r d l y

The U n i t e d S t a t e s G overnm ent w i l l

certain ly

79 a tte m p t to seek s t a b i l i t y , m ent. atio n

T herefore,

o th er n a tio n s,

and o u r c a p a c i ty to

th e power to

but it

in su late

do s o ,

cannot g u aran tee

f e e l t h a t th e y m ust r e s e r v e

th em selv es a g a in s t u s .

m ajo r spokesm an in s u p p o r t o f t h i s

A u stra lia .

At m ost o f th e m ajor c o n fe re n c e s

the

a tta in ­

who d i s t r u s t o u r d e t e r m i n ­

A

d uring

its

th e sis has

been

t h a t were h e l d

th e p o s t - w a r y e a r s and a t e a c h o f t h e m e e tin g s where

I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n C h a r t e r was p r e p a r e d ,

she h a s

been m ost a r t i c u l a t e

o f em ploym ent p o l i c y . W ilcox,

on t h e

in te rn atio n al

Im p o rtan ce

One o f o u r d e l e g a t e s a t H a v a n a , Mr.

w rites; She h a s i n s i s t e d t h a t a g re e m e n t to m a i n t a i n e m p lo y ­ m e n t i s p r e r e q u i s i t e t o a g r e e m e n t on t h e r e d u c t i o n o f b a r r i e r s to t r a d e and h a s u rg e d t h a t e v e ry n a t i o n commit i t s e l f , t h r o u g h d o m e s t i c a c t i o n , t o preserve s t a b i l i t y . And i n e v e r y c a s e s h e h a s o b t a i n e d r e c o g n i t i o n f o r h e r p o i n t o f v i e w . 15 I t c a n n o t be d i s p u t e d t h a t A u s t r a l i a h a s a b a s i s

her

I n t e r e s t in t h i s m a t t e r ,

th e argum ent assum es t h a t

th e U nited S ta te s

o f th e problem o f s t a b i l i t y d ep ressio n

strik es,

n o tw ith sta n d in g the f a c t is

and i n d i f f e r e n t to

the p ric e s

o f raw m a t e r i a ls

th an th o se o f m an u factu red goods, and th e p r ic e th ro u g h o u t the b u sin e ss flu ctu atio n s

cy cle,

is

th at

both ig n o ra n t it. fall

When farth er

o f w ool,

s u b j e c t t o more v i o l e n t

than o th e r raw m a t e r i a l s .

15 Wilcox, op. c i t . ,

for

p. 53.

Now, A u s t r a l i a n w o o l

80 com prises n i n e - t e n t h s U n ited S t a t e s . ing,

of her

C o n seq u en tly ,

she en jo y s p r o s p e r i t y .

in to d e p re ssio n .

to ta l export trad e

when A m e r i c a n m i l l s When t h e y c l o s e ,

nS h e h a s a s t a k e ,

the

c a u s e d h e r to emerge a s

are o p e ra t­ is fo rced

in th e m ain­

And i t

is

th is

t h e m a j o r spokesm an f o r

d e p e n d e n t e c o n o m i e s . M^

16 Wilcox, op. c i t . ,

she

therefo re,

t e n a n c e o f em ploym ent in t h e U n i t e d S t a t e s . th a t has

to the

p. 34.

CHAPTER VI ATTEMPTS AT REGULATING TRADE BARRIERS P re se n t-d a y m easures nom ic

rela tio n s

of

o f re g u la tin g th e e x te r n a l .eco­

a co u n try a re c h a ra c te riz e d

by m e th o d s o f f a c i l i t a t i n g

n o t so much

i n t e r n a t i o n a l exchange as by th e

n u m e r o u s i m p e d i m e n t s p l a c e d i n t h e way o f s u c h e x c h a n g e . There

is

sc arc ely a n atio n

in th e w orld to d a y t h a t does n o t

place

o b stacles

m erce

w ith f o r e ig n n a t i o n s .

o f one,

i n t h e way o f f u l l d e v e l o p m e n t o f i t s

or s e v e r a l ,

restric tio n s:

o f the

tariffs,

change c o n t r o l s ,

The m e t h o d c h o s e n i s

c le a r in g a g reem en ts,

buy-at-hom e cam paigns, and a c o n g e rie s

c e n tu ry to

use

q u o tas,

fo reig n ex­

b o u n ties,

su b sid ies,

of abuses of its

Prom t h e m i d d l e o f t h e n i n e t e e n t h

th e f i r s t w o rld war,

a p o lic y o f fre e

th e

i n g e n i o u s d e v i c e s o f m odern t r a d e

p ro h ib itio n s,

custom s a d m i n i s t r a t i o n .

com­

trad e .

G reat B r ita in a lo n e fo llo w ed

But t h e n e e d s and p r e s s u r e

o f war

a n d r e c o n s t r u c t i o n on h e r e c o n o m y f i n a l l y f o r c e d a b a n d o n m e n t o f h er lo n g -trie d p o lic y o f fre e A ttem pts lac k in g .

T his

e stab lish m en ts,

to encourage w orld tr a d e have not

i s e v i d e n c e d by e x p o r t b o u n t i e s , p re fe re n tia l freig h t rates

s id iz e d m erchant m a rin e s, the

tr a d e f o r one o f p r o t e c t i o n . been

co n su lar

on e x p o r t s ,

sub­

a n d m an y o t h e r m a n i f e s t a t i o n s

of

d e e p l y - r o o t e d p h i l o s o p h y o f m e r c a n t i l i s m w hich h a s

encouraged e x p o rts o n ly . a s a means o f p a y in g f o r h ave n o t been w a n ted .

E x p o r ts h av e n o t been lo o k e d upon im p o rts,

because

im p o rts sim p ly

E vidence abounds o f n a ti o n s

t h a t have

82 don© s o m uch t o e n c o u r a g e e x p o r t s a d o p tin g s tro n g m easures

to

w h i l e , a t t h e same t i m e ,

curb th e flo w o f im p o rts.

Two

o u tstan d in g cases

i n p o i n t h a v e b e e n Germany a n d t h e U n i t e d

S ta te s.

spent larg e

Each has

f o r t h e i r products a t th e w alls a g a in s t tio n s

in g e n e r a l ,

to

v ery tim e t h a t p r o h i b i t i v e

im p o rts were b e in g e r e c t e d .

on i m p o r t s t e n d t o

reaso n ab le

sums t o d e v e l o p f o r e i g n m a r k e t s

curb e x p o rts

sin ce r e s t r i c ­

ju st as w ell,

it

is

c o n clu d e t h a t m odern-day com m ercial p o l ic y

re stric tiv e

i

3

,

to n a t u r e .

I t was p r e c i s e l y f o r t h i s fifty -sev en

B ut,

ta riff

re a s o n t h a t d e l e g a t e s from

n a t i o n s met a t London, Geneva,

and H avana.

T h e i r t a s k was t o d e s i g n a c h a r t e r t h a t c o u l d e f f e c t i v e l y d e a l w ith the d i v e r s i t y come t o p l a g u e

of r e s tr ic tiv e

m ethods t h a t h a v e

i n t e r n a t i o n a l c o m m e r c e s i n c e W o r l d War I .

The p r e s e n t c h a p t e r w i l l d i s c u s s effects

of th ese

th e C h arter

to o ls

in ten d s

of re stric tio n

to n u llif y I.

Of t h e duty has

three

the n a tu r e

and t h e manner

or to e ff e c t

th eir

by f a r ,

in w hich

elim in atio n .

IMPORT DUTIES

form s o f custom s d u t i e s , ^

the

lo n g re m a in e d t h e c h o se n m ethod o f t r a d e

and h a s been,

and

th e m ost u n i v e r s a l l y u s e d .

1 These a re t r a n s i t ,

im port reg u latio n A lthough

im p o rt, and e x p o rt d u t i e s .

83 many c o u n t r i e s ,

p articu larly

i n E u r o p e , h a v e a d o p t e d new a n d

more d i r e c t m e th o d s o f t r a d e r e g u l a t i o n s u c h a s c o n tr o ls and q u o ta s , an im p o r ta n t f a c t o r

th e in

As a m a t t e r o f f a c t , 1939,

im p o rt t a r i f f has

D uring th e y e a r s and m o n etary t r a d e

co n tro ls

ta riffs

th e

th e m ost im p o rta n t

2

t h a t f o l l o w e d 1 9 3 1 , when q u a n t i t a ­ im pedim ents r e a c h e d t h e i r p e a k in

rem ained c l o s e l y

l i n k e d w i t h t h e n ew

and stood a t u n u s u a lly h ig h l e v e l s .

c o u n tries,

it

is

But i t

ab le b a r r i e r s

th a t th e

is e q u a lly tru e

trad e

in e x c h a n g e - c o n tr o l

t a r i f f has

l o s t m ajor s i g n i f i ­

th at ta r if f s

rem ain a s , f o r m i d ­

co n n ectio n ,

one m ig h t f i n d

i t d i f f i c u l t to

d e g r e e o f i m p o r t a n c e t h a t m u s t be g i v e n

e i t h e r exchange c o n tro ls o r to t a r i f f d u tie s i n t e r n a t i o n a l c o m m erc e i s t h a t both a re

H ow ever, as

to any a tte m p t to resum e norm al t r a d e .

In t h i s determ ine th e

tru e

trad e

B r i t i s h C o m m o n w e a lt h a n d

A m e r ic a .

a c h ie f in stru m en t f o r r e s t r i c t i n g

cance.

reg u lated th e ir

r a th e r th an q u o tas,

E m p ire, an d o f m ost o f L a t i n

im portance,

be

u n t i l W o r l d War I I b e g a n i n S e p t e m b e r

ones b ein g th e U n ited S t a t e s ,

tiv e

c o n tin u ed to

i n t e r n a t i o n a l com m ercial r e l a t i o n s .

t h e g r e a t e r number o f n a t i o n s

by m eans o f t a r i f f s

exchange

d esired .

to

i f expansion o f

P ro fesso r C o n d liffe f e e ls

o f m a j o r s i g n i f i c a n c e a n d s h o u l d be t r e a t e d

2 J . B. C o n d l i f f e , The R e c o n s t r u c t i o n o f W o r l d T r a d e (Hew Y o r k * W. W. H o r t o n a n d C o m p an y , I n c . , 1 9 4 0 ) , p . 1 7 8 .

84 w ith e q u al v ig o r

in o rd e r to e f f e c t a r e v iv a l o f i n te r n a tio n a l

com m ercial a c t i v i t y .

He s a i d ;

W h i l e a n y a t t e m p t a t t r a d e r e v i v a l m u s t , b y common c o n s e n t , b e g i n w i t h a r e l a x a t i o n o f t h e new d i s ­ c r i m i n a t o r y t r a d e c o n t r o l s , s u c h a n a t t e m p t w ould q u ic k ly encounter th e f a c t t h a t t a r i f f s a t t h e i r p r e s e n t l e v e l s , and in t h e i r p r e s e n t c o m p le x ity , a re fo rm id ab le o b s ta c le s . I t is not s u f f i c i e n t , t h e r e f o r e , to c o n c e n tr a te a t t e n t i o n upon ex ch an g ec o n tr o ls and quota sy stem s. S t i l l less is i t p r a c t i c a l to c o n tem p late th e re p la c e m e n t o f such c o n t r o l s by c o n s o l i d a t e d and h e i g h t e n e d t a r i f f b arriers. I f e v e r t r a d e i s t o f l o w more f r e e l y , t a r i f f s m u s t come down t o o . 3 It is

is

an u n d i s p u t a b l e

a d v e r s e l y a f f e c t e d a s more a n d more d u t i e s a r e

upon a r t i c l e s

th a t e n te r trad e

com m odity," w r i t e s com m odity i s e la stic ity the

f a c t t h a t t h e volume o f t r a d e

P r o f e s s o r T ow le,

subjected to

of

ch an n els.

" Im p o rts o f any

" w ill d eclin e

an i m p o r t d u t y .

And

when t h a t

u n less

t h e d o m e s t i c demand f o r t h e a r t i c l e

a m o u n t s p e n t on i m p o r t s o f t h e a r t i c l e

placed

the

is u n ita r y ,

w i l l undergo

a l t e r a t i o n ."4 One c a n r e a d i l y

see th e

consequences

th e resu m p tio n o f w orld tr a d e

if

la te r a l actio n

its

Thus, a t

the

in d e te r m in in g

th ree

in s t o r e

each n a t i o n u n d e rto o k u n i ­ fo reig n

com m ercial p o l i c y .

p r o t r a c te d m eetin g s o f d e le g a te s

3 C o n d liffe,

op.

c i t .,

p.

for

at

179

4 L a w r e n c e W. T o w l e , I n t e r n a t i o n a l T r a d e a n d Commer­ c i a l P o l i c y (New Y o r k ; H a r p e r a n d B r o t h e r s , 1 9 4 7 ) , p . 2 3 2 .

85 London, Geneva, a n d Havana a t w hich t h e d r a f t

ch arter for

a n I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n was d i s c u s s e d , t h e In v o lv in g the lo w e rin g o f t a r i f f atten tio n . is

d u t ie s r e c e iv e d m ajor

The a g r e e m e n t r e a c h e d among t h e

em bodied in A r t i c l e

t h a t members o f t h e

conferees,

17 o f t h e C h a r t e r i s

tow ard th e s u b s t a n t i a l r e d u c t i o n o f t a r i f f s .

so s h a r p l y a s t o

should r e s u l t

cause or th re a te n

producers,

a m em ber may s u s p e n d

in p a r t . 6

The m e m b e r s a g r e e ,

fa v o r o r advantage given

its

w hich

to th e e f f e c t

ITO m u s t c a r r y o u t n e g o t i a t i o n s

p a r tic u la r red u ctio n

issue

d irec te d

How ever,

if a

in an i n c r e a s e o f i m p o r t s serio u s

in ju ry

o p eratio n

fu rth erm o re,

to

to d o m estic

i n w hole o r ex ten d any

t o a n y mem ber c o u n t r y t o a l l m e m b e r s

im m e d ia te ly and u n c o n d i t i o n a l l y ,

and also n o t to

increase

e x i s t i n g m argins o f p r e f e r e n c e . 6 T h e s e p r o v i s i o n s do n o t d e a l d i r e c t l y w i t h t h e p r e ­ v en tio n o f f u r th e r p o in ts o u t,

in creases

In t a r i f f s .

B u t , a s M r. P e i s

fta n y s u c h a c t i o n , u n l e s s a l l o w a b l e u n d e r o n e o f

t h e m any o t h e r q u a l i f y i n g

p ro v is io n s o f the C h a rte r,

be c o n t r a r y t o

and i n t e n t . " 7

its

sp irit

would

6 "Havana C h a r t e r f o r an I n t e r n a t i o n a l T rade O rg a n iz a t i o n , " U n it e d S t a t e s D ep artm en t o f S t a t e , C om m ercial P o l i c y S e r i e s 114 (W ashington"; 194 & ), p . 4 6 - 4 8 . I t s su sp en sio n is p ro v id e d f o r in A r t i c l e 40. 6 H e r b e r t F e i s , " T h e G e n e v a P r o p o s a l s F o r An I n t e r ­ n a t i o n a l Trade C h a r t e r , " . I n t e r n a t i o n a l O r g a n i z a t i o n , V o l. I I , No. 1 ( F e b r u a r y 1 9 4 8 ), p . 4 3 . 7 Loc. C it .

86 II.

IMPORT QUOTAS OR ( Q . R . )

The a p p l i c a t i o n

of ta riffs

on im p o rte d g o o d s

th e o n ly form o f t r a d e r e s t r i c t i o n s co u n tries

o f the w o rld .

h a s been em ployed q u i t e p erio d ,

is

fo r the

e m p lo y e d by t h e

A n o th e r m ethod o f c o n t r o l , ex ten siv ely

d u rin g the

is not v ario u s w hich

in ter-w ar

i m p o r t i n g c o u n t r y t o e s t a b l i s h an u p p e r

l i m i t on t h e q u a n t i t y o r v a l u e o f i m p o r t s o f a s p e c i f i e d c o m m o d i t y w h i c h may b e a d m i t t e d w i t h i n a g i v e n p e r i o d o f tim e .8

Many g o v e r n m e n t s h a v e f o u n d i t

effectiv e

weapon f o r t h e e x e r c i s e

d u c tio n , m ark etin g , It

and the

to be a p a r t i c u l a r l y

o f c o n tro l over

its

pro­

flo w o f im p o rts and e x p o r t s . ^

should be p o in te d o u t t h a t

i m p o r t q u o t a s may b e

a d m in iste re d w ith o r w ith o u t the h e lp o f a lic e n s in g sy stem . H ow ever,

the confusion th a t h as g e n e ra lly r e s u l te d

co u n tries has

in w hich im p o r t l i c e n s e s h a v e n o t b een r e q u i r e d

tended to

c o u n tries,

in

in flu e n c e th e u se o f such a system .

to d ay ,

the lic e n s in g

who e m p l o y t h e

im port q u o ta,

Most

now r e g a r d

s y s te m a s an e s s e n t i a l a d j u n c t and a means

w hereby a d d i t i o n a l

c o n t r o l o f i m p o r t s may be o b t a i n e d .

8 E r n e s t M. P a t t e r s o n , An I n t r o d u c t i o n To W o r l d E c o n o m i c s (Hew Y o r k ; The M a c m i l l a n C o m p a n y , 1 9 4 7 ) , p . 3 2 0 . 9 M a r g a r e t S . G o r d o n , B a r r i e r s To W o r l d T r a d e (Hew Y o r k : The M a c m i l l a n C o m p a n y , 1 9 4 1 ) , p . 2 2 9 .

87 The l i c e n s e may be u s e d t o s p e c i f y t h e t o t a l v o l u m e o f goods w hich th e

im p o rter is

p erm itted to b rin g in to th e

c o u n try d u rin g the quota p e rio d ; req u ired In t h i s

to o b ta in a lic e n s e

or,

th e

i m p o r t e r may b e

fo r each in d iv id u a l tra n s a c tio n s *

c a s e , t h e g o v e r n m e n t may c h o o s e n o t t o a n n o u n c e t h e

t o t a l am ount o f a n y com m odity a d m i s s i b l e

in any p a r t i c u l a r

perio d .

W hether o r n o t s u c h an announcem ent i s made,

u ltim ate

p u rp o se o f th e l i c e n s i n g sy stem ,

to a s t r a i g h t q u o ta sy stem , the

nis alm o st

w hich i s

c o u n try

sim ilar

in v a ria b ly to r e s t r i c t

q u a n t i t y o f im p o r ts t o an amount l e s s

w ould e n t e r t h e

the

than

t h a t w hich

i n t h e a b s e n c e o f c o n t r o l . 11^

The i m p o r t q u o t a

is not o f recen t o rig in .

It

was

w i d e l y u s e d d u r i n g t h e m any y e a r s t h a t m e r c a n t i l i s m f l o u r ­ ished,

a n d i t s u s e was c o n t i n u e d

i n m an y i n s t a n c e s

e a r l y y e a r s o f the n in e te e n th c e n tu r y . sy ste m began t o

L ater,

chose to

a w a r tim e t o a p e a c e - t i m e economy an d a s g u a r d in g key i n d u s t r i e s . in th e

late

w orld w ar.

Many

c o n tin u e th e use o f im port q u o tas a f t e r

t h e war a s a m ethod o f e f f e c t i n g an o r d e r l y

use

th e quota

d i s a p p e a r a s an in s tr u m e n t o f com m ercial

p o lic y o n ly to be r e v iv e d d u rin g th e f i r s t c o u n tries

in to the

tw en ties

tran sitio n

from

a means f o r s a f e ­

The s y s t e m came i n t o w i d e s p r e a d when i n t e r n a t i o n a l c a r t e l s

and

com bines began to em ploy b o th im p o rt and e x p o r t q u o ta s as

10 I b id .,

p. 230.

88 to o ls

for e ffe c tiv e ly

d iv id in g

m an y E u r o p e a n c o u n t r i e s te c t a rap id ly

th e w o rld ’s m a rk e ts ,

ad o p ted th e sy stem

d e clin in g a g ric u ltu ra l

D uring th e

w hile

in o rd e r to

pro­

in d u stry .

in te r-w a r p erio d of th e

th irtie s,

the

q u o t a s y s t e m was e x t e n d e d t o

c o v e r an e v e r - i n c r e a s i n g r a n g e

o f com m odities, and by 1939,

tw en ty -eig h t

found to

be e m p lo y in g

In a d d i t i o n

to

th is

c o u n t r i e s were

im port q u o tas or l i c e n s i n g s y s te m s .H

form o f tr a d e

c o u n t r i e s w hich h e r e t o f o r e

restric tio n ,

m any E u r o p e a n

le a n e d h e a v i ly upon exchange con­

t r o l also

began to em ploy th e q u o ta s y s te m .

In t h i s m anner,

im p o rters

in th o s e c o u n t r i e s n o t o n ly were r e q u i r e d t o

s e c u r e a l l o t m e n t s o f f o r e i g n exchange from t h e i r g o v e rn m e n ts, but a lso

Im port p e rm its The d e g r e e o f

b e fo re goods could be b ro u g h t i n .

im p o rtan c e p la c e d upon th e q u o ta system

may b e s e e n b y t h e p r e f e r e n c e g i v e n

it

by many g o v e rn m e n ts

d u rin g th e d e p re s s io n y e a r s o f the t h i r t i e s . u sed in t h i s

p e r i o d o f econom ic s t r e s s

e s t a b l i s h e d and f a m i l i a r

Q u o ta s were

r a t h e r t h a n t h e more

to o l of t a r if f

d u ties

f o r m e r w ere c o n s i d e r e d t o be more a d e q u a t e ,

because

the

o r b e c a u s e many

g o v e rn m e n ts were n o t a lw a y s g iv e n a f r e e h a n d In t h e u s e o f tariffs.

I t h a s been fo u n d ,

more e f f e c t i v e T h e y may b e p u t

in r e s t r i c t i n g in f o r c e ,

fu rth erm o re, tra d e th an

t h a t q uotas are im port d u t i e s .

o r r e d u c e d , m e r e l y by a d m i n i s t r a -

11 Gordon, op. c i t . ,

pp. 248-249.

89 tiv e

p ro clam atio n ,

and u n c e r t a i n t y C o n seq u en tly , sin ce its

and th u s a re

in h e re n t d elay

w hich a c c o m p a n ie s p a r l i a m e n t a r y p r o c e d u r e .

t h e y a r e m uch m o r e f l e x i b l e

th e governm ent i s

p o lic ies

fre e of the

before

free

than t a r i f f s ,

to a c t w ith o u t h av in g to

leg islativ e

defend

bo d ies.

There a r e o t h e r a d v a n ta g e s t h a t a c c ru e to t h e m e n t s who e m p h a s i z e

im port q u o tas r a t h e r th a n

a s a means o f r e s t r i c t i n g p o s s e s s e d by q u o t a s th an d u t i e s . th at

The d e g r e e o f c o n t r o l

i s m ore p r e d i c t a b l e a n d more p r e c i s e

w illin g

to a d m it,

a n d no m o r e .

c a n be p r e d i c t e d

F urtherm ore,

w ith r e a s o n a b le p r e c i s i o n .

in a p e rio d o f f a l l i n g

w orld p r i c e s ,

o f d u t i e s a s a means o f p r o t e c t i o n b e g i n s th e e f f e c tiv e n e s s

An i n c r e a s e

in t a r i f f s

in te rests.

to

the e f f e c t

d im in ish ,

o f q u o ta s rem ain u n c h a n g e d .

possesses a d e fin ite

v ested

in t a r i f f s

p o l i t i c a l advantage over t a r i f f s .

alw ays p l e a s e s

But p o p u l a r r e a c t i o n

th o se

w ith c e r t a i n

to su ch m easures

means h i g h e r d o m e s tic p r i c e s f o r

on w h i c h a t a r i f f in th e f a c t

increase, has been l e v i e d . th a t th ere e x ists

q u o t a s h a v e no s u c h e f f e c t . re la tiv e

ease,

w hereas

The q u o t a

e q u a lly as c r i t i c a l because to th e a v erag e c i t i z e n ,

lie s

But

can h a r d l y be l e v i e d w hereby t h e r e s u l t i n g q u a n t i t y

o f im ports

a lso

d u ties

Q u o ta s f i x t h e e x a c t amount o f a com m odity

a governm ent is

d u ties

im ports.

tariff

govern­

is

a rise

th o s e com m odities The a d v a n t a g e

a fallacio u s

b e lie f th at

T hu s a g o v e r n m e n t c a n , w i t h

d e cree a p o lic y o f q u o tas and l ic e n s in g ,

90 w hereas a s i m i l a r a tte m p t to by r a i s i n g

tariffs

impose a d d i t i o n a l r e s t r i c t i o n s

m ig ht e a s i l y m eet w ith s t i f f

p u b lic

r e s i s t a n c e •12 The w i d e s p r e a d a n d u n c o n t r o l l e d u s e o f may v e r y w e l l u n d e r c u t a n y a t t e m p t t o b r i n g retu rn

to

i n t e r n a t i o n a l econom ic o r d e r .

th e adverse e f f e c t

it

im port q u o tas

about a speedy

One c a n r e a d i l y

see

would h a v e upon a s l o w l y r e v i v i n g

system o f i n t e r n a t i o n a l

trade

if

co u n tries

th e w orld o v e r

began in e a r n e s t to l i m i t th e q u a n t i t y o f goods t h a t co u ld en ter trad in g

ch an n els.

The p o i n t was w e l l c o n s i d e r e d by

the d eleg ates

a t London,

Geneva,

and H a v a n a ,

and c o n s t i t u t e d

t h a t p o r t i o n o f t h e a g e n d a u p o n w h ich much d e b a t e a n d c o n ­ t r o v e r s y was b a s e d . Many c o u n t r i e s

clu n g to

q u o t a was a n i n d i s p e n s i b l e could be a cc o m p lish e d , a b ility

the b e l i e f

im port

t o o l by w h ich i n d u s t r i a l i z a t i o n

w hile o th e rs

was a n e f f e c t i v e

t h a t the

"defense

felt

th at

its

av ail­

in d e p th ” m easure

th at

c o u l d a f f o r d an a d d i t i o n a l l a y e r o f p r o t e c t i o n t o d o m e s t i c e c o n o m y when a n d i f t h e c o llap se.

econom ic s i t u a t i o n

H ow ever, t h e U n i t e d S t a t e s ,

fe re n c e s , m aintained a p o s itio n upon any p r o v i s i o n tiv e

restric tio n s.

th ro u g h o u t th e

con­

t h a t look ed w ith d is f a v o r

t h a t w ould a l l o w f o r She,

were a g a i n to

n ev erth eless,

th e use of q u a n tita ­ was f o r c e d t o

compromise

12 T o w l e , o p , c i t . , p p , 4 3 1 - 4 3 6 , An e x c e l l e n t a g e o f I m p o r t Q u o t a s may b e f o u n d i n G o r d o n , o p , c i t . , C h a p t e r IX.

cover­

91 h er p o sitio n ,

in th e f a c e o f overw helm ing o p p o s i t i o n and

d e t e r m i n a t i o n on t h e p a r t o f t h e o t h e r d e l e g a t e s , tan tly

a g re e in g to th e u se o f q u a n t i t a t i v e

”fo r purely p ro te c tiv e ap p ro p ria te

purposes

by r e l u c ­

re stric tio n s

in e x c e p t i o n a l c a s e s

w ith

s a f e g u a r d s . ” 1^

The d i s p u t e w a s f i n a l l y r e s o l v e d a t H a v a n a b y w r i t i n g in to

th e C h arter the g e n e ra l r u le ,

ex cep tio n s,

th at

I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n members

s h a l l n o t em ploy q u a n t i t a t i v e from o r e x p o r ts A rticles are

q u a l i f i e d by num erous

re stric tio n s

to o t h e r m em bers.

2 0 t o 23 o f t h e C h a r t e r

so e x t e n s i v e t h a t

it

The r u l e

on e i t h e r

im p o rts

i s em bodies in

in w hich ”e x c e p t i o n s .

. . .

i s n o t e a s y t o w eigh t h e s i g n i f i ­

c a n c e o f t h e g e n e r a l c o m m i t m e n t . ” 14 An e x c e p t i o n o f m a j o r s i g n i f i c a n c e u se o f im port q u o tas d iffic u ltie s.

a p p lies

to

th e

i n c o n n e c t i o n w i t h b a la n c e o f paym ents

A rticle

21 p r o v i d e s

th at;

N o tw ith sta n d in g the p ro v is io n s o f p arag rap h 1 o f A r t i c l e 2 0 , a n y member, i n o r d e r t o s a f e g u a r d i t s e x t e r n a l f i n a n c i a l p o s i t i o n and b a la n c e o f p ay­ m e n t s , may r e s t r i c t t h e q u a n t i t y o r v a l u e o f m e r c h a n d is e p e r m i t t e d t o be im p o r te d . . . . ( i n o r d e r ) ( i ) f o r e s t a l l t h e im m inent t h r e a t o f , o r s t o p , a s e r io u s d e c lin e in i t s m onetary r e s e r v e s ,

13 ”H a v a n a M e e t i n g o f U n i t e d N a t i o n s C o n f e r e n c e On T rade and E m ploym ent.” U n ite d S t a t e s D epartm en t o f S t a t e , B u l l e t i n , V o l. 38, No. 445 ( J a n u a r y 11, 1 9 4 8 ), p . 3 9 . 14 M a r g a r e t S . G o r d o n , ” P r o b l e m s o f t h e ITQ” , A m e r i c a n E c o n o m i c R e v i e w , V o l . 3 9 , N o . 3 (May, 1 9 4 9 ) , p . 2 4 4 .

92 o r ( i i ) i n t h e c a s e o f a member w i t h v e r y l o w m onetary r e s e r v e s , to a c h ie v e a r e a s o n a b le r a t e o f i n c r e a s e i n i t s r e s e r v e s . 15 O ther n o ta b le t r o l schem es,

ex cep tio n s d e a l w ith a g r i c u l t u r a l con­

i n t e r g o v e r n m e n t a l com m odity a g r e e m e n t s ,

program s o f econom ic d e v e lo p m e n t. th at

What s e e m s t o

i m p o r t q u o t a s may n o t be e m p l o y e d i n

p u rely fo r the

p ro tec tio n o f e stab lish ed III.

rem ain is

lie u of ta r if f s in d u strie s.

EXCHANGE CONTROLS

A broad i n t e r p r e t a t i o n a l l attem p ts a t re g u la tin g In i t s

and

o f e x c h a n g e c o n t r o l m i g h t be

the

exchange v a lu e o f a

n a r r o w e r a n d m o r e common i n t e r p r e t a t i o n ,

d i r e c t form o f exchange c o n t r o l i s

currency.

th e most

th e a tte m p t to

in flu en ce

t h e s u p p l y o f o r demand f o r f o r e i g n e x c h a n g e t h r o u g h m e a s u r e s th at r e s tr ic t

the range o f a c t i v i t y o f

in buying o r s e l l i n g

In d iv id u a ls engaged

exchange.

The i m p o r t a n c e o f e x c h a n g e c o n t r o l s t h a t ^ftierever c u r r e n c y managem ent e x i s t s , tends

to

b e co m e A r t i f i c i a l ” ,

conform to

the r a t e

ab so lu tely

free

in th e se n se

w hich w ould p r e v a i l

in co n v ertib le

in

lie s

in th e f a c t

the r a t e th at

it

o f exchange does n o t

th e c a s e o f an

paper cu rren cy .

Thus,

the

more n o rm a l u s a g e o f e x c h a n g e r e s t r i c t i o n s h a s b e e n f o r t h e

114,

D epartm ent o f S t a t e , o p . cJL t. , p p . 5 3 * 5 4 .

Com m ercial P o l i c y S e r i e s

93 p rev en tio n o r a n a tio n a l currency from f a l l i n g

in v a lu e ,

th at

a rtific ia lly

high l e v e l.

The v e r y n a t u r e

is,

in the exchange m arkets

to m aintain

its

v a lu e a t an

o f the o b j e c ti v e s o f exchange c o n tr o l

r e q u i r e s a th o r o u g h g o i n g sy s te m w hich b r i n g s u n d e r c o n t r o l a ll

tran sac tio n s

exchange.

effectin g

t h e demand f o r a n d t h e

T his a ll - e m b r a c i n g sy stem is

by g r a n t i n g a m onoply o f f o r e i g n ag en cy , m ost f r e q u e n t l y

the

supply o f

co m m o n ly a c h i e v e d

exchange to

c e n tra l bank.

some g o v e r n m e n t

A ll fo reig n

e x c h a n g e a c q u i r e d t h r o u g h t h e medium o f e x p o r t t r a n s a c t i o n s m u st be s o l d t o

th is

agency a t th e o f f i c i a l r a t e .

a g e n c y th e n becomes r e s p o n s i b l e

for a llo c a tin g

The

th e lim ite d

q u a n t i t y o f e x c h a n g e among t h e v a r i o u s d e m a n d s . As a d e v i c e f o r

c o n tro llin g fo reig n

c o n t r o l i s o f m u ch b r o a d e r s c o p e t h a n latter

exchange

im port q u o ta s .

d e a l e x c l u s i v e l y w i t h com m odity t r a d e ;

exchange c o n tr o l d e a ls

The

w hereas,

w i t h t h e m any f o r m s o f i n t e r n a t i o n a l

com m ercial t r a n s a c t i o n s w ell as

trad e,

com m odity t r a d e .

--

serv ices

and c a p i t a l movem ents a s

T his d i f f e r e n c e

in

th e scope o f

t h e s e two fo rm s o f c o n t r o l h a s b r o u g h t a b o u t t h e u s e o f qu o tas

i n some c o u n t r i e s

and exchange c o n t r o l

W here t h e p a r a m o u n t o b j e c t i v e

in o t h e r s .

in th e u se o f t r a d e r e s t r i c t i o n s

was t h e m a i n t e n a n c e o f d o m e s t i c e c o n o m i c a c t i v i t y o r t h e

^

Gordon, op. c i t . ,

pp. 4 9 -5 1 .

94 im provem ent o f t h e

b alan ce o f tr a d e ,

favor o f

im port q u o ta s .

req u ired

co rrectio n ,

be p r e v e n t e d ,

t h e c h o i c e was i n t h e

W here a n a d v e r s e b a l a n c e o f p a y m e n t s

or th e f l i g h t o f fo re ig n

cre d its

was t o

e x c h a n g e c o n t r o l was t h e f o r m o f r e s t r i c t i o n

s e l e c t e d .17 The u s e o f e x c h a n g e c o n t r o l a s a f o r m o f i n t e r n a t i o n a l trad e

re stric tio n

be i n u s e

is not o f recen t o rig in .

in E ngland as

tee n th c e n tu rie s.

H ow ever,

d u r i n g W o r l d War I ,

its

s i x t e e n t h and s e v e n ­

w i d e s p r e a d a d o p t i o n came

and q u i t e a number o f c o u n t r i e s

i t necessary to r e ta in a fter

e a rly as th e

I t was f o u n d t o

exchange r e s t r i c t i o n

found

f o r many y e a r s

th e w ar. The t e m p o r a r y r e t u r n

c o u n trie s during

the l a t e

exchange r e s t r i c t i o n s .

t o t h e g o l d s t a n d a r d by m a n y

tw e n ties reduced th e n e c e s s ity fo r

But t h e f i n a n c i a l c o l l a p s e o f 1929

s ig n a le d th e o c c a sio n f o r a q u ick r e v i v a l o f exchange con­ t r o l w h i c h f r o m t h e y e a r 1 9 3 1 on wa s u n d e r t a k e n on a n u n p r e ­ ced en ted s c a l e •

T h ere were few c o u n t r i e s

n a l econom ic s t r u c t u r e

was c a p a b l e o f " w e a t h e r i n g t h e s t o r m "

o f the g r e a t d e p re ssio n w ithout r e s o r t to exchange r e s t r i c t i o n s .

I n many c o u n t r i e s ,

r e a c h i n g s y s te m s o f c o n t r o l were a d o p t e d . , re stric tio n

was r e f i n e d

i n d e e d whose I n t e r ­

and e la b o r a te d ,

17 Towle, op. c i t . ,

p. 459.

some f o r m o f s e v e re and f a r "The t e c h n i q u e o f

and a c o m p lic a te d

95 m ass o f a d m i n i s t r a t i v e r e g u l a t i o n s g r e w up*

The m e a s u r e s o f

t h e W o r l d War p e r i o d a p p e a r . s i m p l e b y c o m p a r i s o n . !fl® b e in g an incum brance to has

in te rn atio n al

b e e n a d o p t e d b y m any c o u n t r i e s

its

as a con­

u tiliz a tio n

o ften

i n n a t u r e . 19

Thus i n t h e l i g h t o f t h e re stric tio n s,

exchange c o n tr o l

and u t i l i z e d

v e n i e n t weapon o f c o m m e r c ia l p o l i c y , d iscrim in ato ry

trad e,

B esides

the d e le g a te s

in te r-w a r u se o f exchange

a t Havana d i r e c t e d

them selves

th e d ev elo p m en t o f m a c h in e ry w hich c o u ld e f f e c t i v e l y

to

prevent

a r e c u r r e n c e o f w i d e s p r e a d a b u s e s o f c u r r e n c y managem ent* A lth o u g h problem s t h a t

stem from th e

in trica c ie s

of

f o r e i g n e x c h a n g e a r e h a n d l e d w ith c o n s i d e r a b l y more d e t a i l in

the

I n t e r n a t i o n a l M o n e tary Fund A g re e m e n t,

n ev erth eless, Its

l a y s down c e r t a i n r u l e s

own m e m b e r s .

fo r th e guidance o f

To b e g i n w i t h , A r t i c l e

clo sely -lin k ed re la tio n sh ip

the C h a rte r

24 e s t a b l i s h e s

w ith t h e Fund and t h e

n a t i o n a l Trade O r g a n i z a t i o n .

It

a

In ter­

says:

The O r g a n i z a t i o n s h a l l s e e k c o - o p e r a t i o n w i t h t h e I n t e r n a t i o n a l M onetary Fund t o t h e end t h a t th e O r g a n i z a t i o n a n d t h e F u n d may p u r s u e a c o - o r d i n a t e d p o lic y w ith re g a r d to exchange q u e s tio n s w ith in t h e j u r i s d i c t i o n o f th e Fund . . . . In a l l c a s e s i n w h ich t h e O r g a n i z a t i o n i s c a l l e d upon to c o n s i d e r o r d e a l w ith p roblem s c o n c e rn in g

1® G o r d o n , £ £ . , 19 G o r d o n , o p .

c i t ., c it

.9

p.

53

p . 53

96 m o n e ta ry r e s e r v e s , b a la n c e o f paym ents o r f o r e i g n arran g em en ts, the O rg a n iz atio n s s h a l l c o n s u lt f u l l y . w i t h th e Fund. * . .20 I n t h e r e a l m o f i n d i v i d u a l m em b er o b l i g a t i o n s , ch arter sp e c ifie s

t h a t "members s h a l l n o t ,

a ctio n ,

fru strate

the

a ctio n ,

th e

in ten t

A greem ent o f th e members o f t h e

in ten t of th is

e n ter

in to

of

F urtherm ore,

I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n who do n o t jo in

it

or,

failin g

a s p e c ia l exchange agreem ent w ith th e

ITO s h a l l t h e r e u p o n b e c o m e p a r t o f

under th is

by t r a d e

o f the A r tic le s

and any s p e c i a l ex change a g re e m e n t e n t e r e d o f the

nor,

I n t e r n a t i o n a l M o n e t a r y F u n d , 11

b e lo n g t o t h e Fund a r e r e q u i r e d t o to

by e x c h a n g e

S ectio n ,

of the p ro v isio n s

the

in to its

th is,

ITO,

b y a m em ber

o b lig atio n

C h a rte r. IV.

INVISIBLE TARIFF

I n t h e y e a r s p r e c e d i n g W o r l d War I ,

th e manner In

w hich g o v e rn m e n ts p r e s e n t e d an o u tw a rd m a n i f e s t a t i o n o f a steady r i s e

i n p r o t e c t i o n i s m was i n

and h e ig h te n in g th e

tariff.

th e form o f expanding

In t h e y e a r s f o l l o w i n g t h e w a r,

p r o te c tio n is m underw ent c o n s id e ra b le a c c e l e r a t i o n , ta riffs

c o n tin u ed

its

im p o rtan t r o l e ,

In w hich

b u t i n w h i c h an i n ­

c r e a s i n g a p p e a l w a s made t o m o r e d i r e c t r e s t r i c t i o n s im p o rts-p ro h ib itIo n s, q u otas, and paym ents a g r e e m e n ts .

exchange

How ever,

20 D epartm ent o f S t a t e , op. c i t ., pp. 62-62.

th e

co n tro ls, tru e

upon

clearin g

scope o f p ro -

C om m ercial P o l i c y S e r i e s

114,

97 tectio n ism ,

in e i t h e r

p e r i o d , h a s rem ained

incon sp icu o u s

b e h i n d t h e s e m ore d i r e c t fo rm s o f r e s t r i c t i v e T ogether w ith t h i s

form o f v i s i b l e

w hich a r e b o rn o f l e g i s l a t i v e after

istra tiv e

stru c tu re .

c o n tro ls over

w ithout e x te n siv e press.

It

These r e s t r i c t i o n s

p ro v isio n s o f t a r i f f a c ts ,

th ere has rise n

composed m a i n l y o f a d m in ­

the

become la w

leg islatu re

or

in th e

found in th e a d m i n i s t r a t i v e

in custom s r e g u l a t i o n s , in th e r e g u l a ti o n

in

the

of v ario u s

e x tra -le g a l re s tric tio n s

on t h e

such as c o n su m ersf b o y c o tts and union la b o r* s

r e f u s a l to han d le

im ported goods.

o f im p o rt r e s t r i c t i o n s nam es,

im pedim ents,

d ep artm en ts, and o th e r a d m in is tra tiv e

and in c e r t a i n

im p o rt t r a d e ,

is

in

are

d e c i s i o n s o f custom s c o u r t s ,

ag en cies,

d iscu ssio n ,

im p o rts w hich u s u a l l y

d iscu ssio n s

governm ent b u r e a u s ,

trad e

a c t i o n a n d become la w o n l y

weeks a n d m o n th s o f p u b l i c

a second t a r i f f

p rac tic es.

has

come t o

T his m u l t i f a r i o u s

group

b e r e c o g n i z e d b y many

th e m ost d e s c r i p t i v e o f w hich i s

the

11i n v i s i b l e

ta riff.” The i n h e r e n t p o t e n t i a l i t y effectiv ely

to r e s t r i c t

by P r o f e s s o r C o n d l i f f e

trad e

o f the

in v isib le

tariff

is brought in to sh a rp focus

who w r i t e s ;

In n o r m a l t i m e s , a r o u t i n e t e n d s to be s e t u p , re g u la tio n s are in te r p r e te d l i b e r a l l y r a th e r th an l i t e r a l l y , and t h e r e i s a good d e a l o f s a m p lin g or acceptance of v erb al or w ritte n s ta te m e n ts. Most c u s to m s ( o r o t h e r ) s y s t e m s w ould i n f a c t be un w ork ab le i f a l l o f f i c i a l i n s t r u c t i o n s and r e g u l a t i o n s were l i t e r a l l y e x e c u t e d . The m o r e

98 c o m p lic a te d t a r i f f f o r m a l i t i e s become, h o w e v e r, and t h e w i d e r becomes t h e r a n g e o f t a r i f f l e g i s ­ l a t i o n as d i s t i n e t from th e t a r i f f sc h e d u le s t h e m s e l v e s , t h e more l i k e l i h o o d t h e r e i s t h a t in a n a t i o n a l em ergency th e s e f o r m a l i t i e s o f p r o c e d u r e may be u s e d t o h a r a s s a n d r e s t r i c t trad e* T h e r e i s a l s o more l i k e l i h o o d t h a t , f o r p o l i t i c a l , o r even a t tim es f o r p e r s o n a l , re a s o n , o f f i c i a l s may be a b l e , w i t h i n t h e l a w , t o h a m p e r t h e movement o f p a r t i c u l a r k i n d s o f t r a d e , o r t r a d e f r o m a p a r t i c u l a r c o u n t r y *21 There

is,

n ev erth eless,

w hich g overnm ent a c t i o n

is

an a r e a o f r e g u l a t i o n

som ewhat j u s t i f i e d *

sovereign s ta te has th e r ig h t to put in to m easures a p p e a r, w elfare o f i t s

in

its

in

That a

effect

w hatever

judgm ent, n e c e s s a r y to p r o t e c t th e

c itize n s

is h ard ly d isp u ta b le .

C o u n tries

have long e s t a b l i s h e d

c o n t r o l and r e g u l a t i o n s g o v e rn in g th e

movement o f a l c o h o l i c

liq u o r s and n a r c o t i c s .

drug l e g i s l a t i o n s

and r i g i d

in sp ectio n o f p la n ts

to m ention o n ly a few a re d e f i n i t e l y w ith in a sovereign

sta te .

"E x tra -ta riff

Y et,

co n tro ls

in

and anim als

th e purview o f

t h e o p i n i o n o f Mr. B i d w e l l ,

o f im ports a re o b je c ts o f s u s p ic io n .

In e v e r y c u sto m s r e g u l a t i o n ,

every s a n ita r y r e s t r i c t i o n

im p o rta tio n o f a n im als and p l a n t s , is

P u re food and

i t is p o s s i b l e

on

th a t th ere

c o n c e a l e d a m e a s u r e o f e c o n o m i c p r o t e c t i o n . 1122 I t h a s been too f r e q u e n t l y th e

designed o r i g i n a l l y

to a ffo r d b io lo g ic a l p ro te c tio n

21 C o n d l i f f e , Y ork:

case t h a t m easures

op. c i t .,

p.

to

19 7

2 2 P e r c y W. B i d w e l l , The I n v i s i b l e T a r i f f C o u n c i l on F o r e i g n R e l a t i o n s , 1 9 3 9 ) , p . 3*

(Hew

99 d o m estic p la n ts

and a n im a ls,

from u n f a i r c o m p e titiv e

or to

p ractices

sh ield

from a b ro a d , have been

e m p lo y e d a s a means t o p r o t e c t d o m e s t i c fo reig n

co m p etitio n w h atso ev er.

w hile p e rm ittin g

to

em bodied in r e g u l a t i o n s c itize n ,

in th e

evidence

t h a t have been u se d as p rodu cts

th e e n try o f pro d u cts

from

c o u n tries. In a d d i t i o n

the

from any

f o r d is c r im in a to r y p urposes - to r e s t r i c t th e

o f one c o u n try , o th er

in te rests

As a m a t t e r o f f a c t ,

abounds o f a d m i n i s t r a t iv e m easures to o ls

d o m estic p ro d u ce rs

th e re has

those p ro te c tiv e desig n ed to

d ev ices

w hich a r e

sa feg u ard the w elfare o f

d e v e lo p e d a n o t h e r m ethod o f r e s t r i c t i o n

f o r m o f c o m p l e x c u s t o m s l a w s t h a t h a v e made c u s t o m s

a d m in istratio n in te llig ib le

to

so t e c h n i c a l a n d i n t r i c a t e th e laym an.

th at

it

is h a rd ly

One who s u m m a r i z e s t h e com­

p l e x i t y o f custom s a d m i n i s t r a t i o n

w rites:

The c o n s e q u e n t n e c e s s i t y o f h i r i n g s p e c i a l i z e d custom s b r o k e r s and custom s la w y e rs i n c r e a s e s th e c o s ts o f im p o rtin g , and th u s te n d s t o d is c o u r a g e it. The c u s t o m s f o r m a l i t i e s i n c i d e n t t o a p p r a i s e ­ m ent, th e e x p e n se s o f f i l i n g bonds, and th e d e la y s , and som etim es u n s a t i s f a c t o r y r e s u l t s , o f custo m s d e c is io n s a l l c o n s t i t u t e o b s ta c le s to im p o rtin g , e v e n t h o u g h t h e a d m i n i s t r a t i o n may b e c a r r i e d o u t in th e b e s t o f f a i t h . B u t t h e y may b e c o m e i n s i ­ d io u s m edia f o r i n c r e a s i n g p r o t e c t i o n - w ith o u t a p p e a r i n g t o b e - when i t i s d e s i r e d t o p r o v i d e p r o t e c t i o n in e x c e s s o f t h e amount g r a n t e d in t h e t a r i f f law s. D u t i e s o n g o o d s s e n t b y p o s t may b e made p a y a b l e a t t h e f r o n t i e r , i n s t e a d o f a t th e o f f i c e o f d e l i v e r y - an o b v io u s, and f r e ­ q u en tly c o s tly , n u isa n ce . N o tices o f changes in r a t e s o f d u t i e s , q u o ta s , t a r i f f c l a s s i f i c a t i o n s , a n d r e g u l a t i o n s g o v e r n i n g i m p o r t p r o c e d u r e may b e d i f f i c u l t to o b t a i n , so t h a t im p o rte rs can n e v e r

100 be c e r t a i n what t h e r a t e s and cu sto m s f o r m a l i t i e s a c t u a l l y a r e - a s i t u a t i o n w hich o f f e r s l i t t l e encouragem ent to im p o rtin g . The i n v e s t i g a t i o n o f c l a i m s may be made e x p e n s i v e , a n d may b e p e r ­ m i t t e d t o d r a g on f o r a l o n g t i m e , w h i l e h i g h 's u p p le m e n t a r y * f e e s a r e c h a r g e d f o r exam ing t h e g o o d s . 23 The e f f e c t i v e n e s s or prevent the

of in v isib le

flow o f tra d e

tariffs

to r e g u l a te

i s r e a d i l y s e e n when o n e r e f l e c t s

u p o n t h e maze o f i n t e r n a l r u l e s

and r e g u la tio n s t h a t have

surrounded the d e s ire

to

c o u n try 's

and in th e a d m i n i s t r a t i o n o f custom s

in h ab itan ts

procedure.

the w e lfa re o f a

Much a t t e n t i o n a n d c o n c e r n was d i r e c t e d

so lv in g of th is th e d e le g ates in t h i s

provide fo r

p a rtic u la r aspect of in te rn a tio n a l

a t Havana;

and th e r u l e s

th e

t r a d e by

th at fin a lly

ev o lv ed

r e s p e c t a r e s o num erous a n d c o m p re h e n s iv e t h a t t h e y

a p p e a r as an i n t e r n a t i o n a l c o n v e n tio n The r u l e s and A r t i c l e o f th e

to

are

45 o f t h e

in th e m s e lv e s .

em bodied in A r t i c l e

18, A r tic le s

C h arter.

who become m e m b e r s

C o u n tries

I n t e r n a t i o n a l T rade O r g a n iz a tio n w i l l

selv es, C h arter,

save where s p e c i f i c

ex cep tio n s

to o b serv e th e fo llo w in g

23 T o w l e , o p .

c i t .,

are

33-39,

c om m it t h e m ­

co n tain ed

in the

r u l e s : 2 4

pp. 355-356.

2 4 The f o l l o w i n g e x c e r p t s o f r u l e s t h a t a t t e m p t t o c u r b t h e e f f e c t i v e n e s s o f i n v i s i b l e t a r i f f s were t a k e n from ; C l a i r W ilc o x , A C h a r t e r F o r W orld T ra d e (Hew Y o r k : The M a c m i l l a n C o m p an y, 1 9 4 9 ) , p p . 7 4 - 8 0 a n d p p . 1 7 1 - 1 7 3 .

101

1)

th at

i n t e r n a l ta x e s and r e g u l a t i o n s

be u s e d a s a m eth o d o f p r o v i d i n g p r o t e c t i o n co m p etitio n . or use

M em bers m u s t n o t

o f im p o rted goods la w s, r e g u l a t i o n s ,

more o n e r o u s t h a n of lik e

th o se

d om estic goods 2)

to

impose on t h e

to g iv e

are

d istrib u tio n o r req u irem en ts

d istrib u tio n

a t the e a r l i e s t

and p ro c e d u re s f o r

i m p o r t e d g o o d s when v a l u e

custom s d u t i e s

a g a in st fo reig n

or use

(18).

e ffect,

common d e f i n i t i o n s

valu e of

I m p o s e d on t h e

should n o t

lev ied

is

p rac tic ab le

d a te ,

d e te rm in in g the

t h e b a s e upon w hich

(35). a,

3)

to a f f o r d

f r e e d o m o f t r a n s i t t o g o o d s m oving

a c r o s s member t e r r i t o r i e s ,

w ith ou t d is c r im in a tio n

ship,

o r means o f t r a n s p o r t a t i o n

o rig in , 4)

to

to

d estin a tio n ,

in ju r y and to

th e m a rg in o f dum ping o r t h e designed to o f f s e t 5)

(33).

co n fin e anti-d u m p in g and c o u n te r v a ilin g d u tie s

cases o f a c tu a l

th ey a re

as to ow ner­

l i m i t them ,

to

v alue o f th e b o u n ty o r s u b s id y (34).

t h a t custom s f o r m a l i t i e s

docum entation re q u ire m e n ts

in am ount,

s h o u l d be m i n i m i z e d ,

s i m p li f i e d and i n c i d e n t a l fe e s

and c h a r g e s re d u c e d

in number and l i m i t e d t o

serv ices

T he I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n may

rendered.

recommend m e a s u r e s

designed to

sim p lify

th e v alu e o f

custom s f o r m a l i t i e s

and e l i m i n a t e u n n e c e s s a r y custom s r e q u i r e m e n t s 6) goods

(36).

to p re v e n t th e re q u ire m e n t o f m arking

in such a m anner as

to m is r e p r e s e n t th e t r u e

im ported o rig in

of

102

a p ro d u ct, its

cost

damage t h e p r o d u c t ,

reduce

its

v alu e,

or in crease

(37)• 7)

to

p r o t e c t human,

p re v e n t th e use o f r e g u la ti o n s ado p ted to an im al, o r p la n t l i f e

w hich w ould c o n s t i t u t e

or h e alth

a means o f a r b i t r a r y o r u n j u s t i f i a b l e

d i s c r i m i n a t i o n b e t w e e n mem ber c o u n t r i e s . gu ised r e s t r i c t i o n 8)

on i n t e r n a t i o n a l

9)

trad e.

• .o r a d i s ­ .

su itab le

. . w (45-1).

fa c ilitie s

w ith a d m in is tr a tiv e a u t h o r i t i e s to p u b lis h ,

law s, r e g u l a t i o n s ,

f u l l y and p ro m p tly ,

ju d ic ia l d ecisio n s,

and i n t e r n a t i o n a l a g re e m e n ts a f f e c t i n g 10)

.

t o a d m i n i s t e r t r a d e r e g u l a t i o n s u n i f o r m l y and

i m p a r t i a l l y and to a f f o r d t r a d e r s co n su ltatio n

n in a m anner

to m ain tain or e s t a b l is h

or procedures fo r a d m in istrativ e

(38). sta tistic s,

ad m in istrativ e ru lin g s , w orld tr a d e

(38-39).

independent t r ib u n a ls

t h e prom pt r e v ie w and c o r r e c t i o n o f

a ctio n

(38).

for

CHAPTER VXI LOOPHOLES IN THE CHARTER T hroughout th e p o stw a r y e a r s

In which t r a d e and

m o n e ta ry d i s c u s s i o n s were f r e q u e n t l y h e l d ,

th ere has p re­

v a i l e d a common p a t t e r n o f d i f f e r e n c e s o f n a t i o n a l a t t i t u d e s * On t h e o n e h a n d ,

th e r e h a s been th e a t t i t u d e

o f the U n ited

S t a t e s a t t e m p t i n g t o l e a d t h e way t o w a r d m u l t i l a t e r a l t r a d e and re a s o n a b ly s t a b l e and c o n v e r tib le

currencies*

o th e r h an d , o th e r n a tio n s have endeavored to

On t h e

s a f e g u a r d them ­

s e l v e s a g a i n s t what th e y c o n s i d e r f o r m id a b le t h r e a t s in te rn al s ta b ility

to t h e i r

and econom ic p l a n n i n g t h a t a m u l t i l a t e r a l

system and c o n v e r t i b i l i t y

in v o lv e*

As a c o n s e q u e n c e o f t h e c l e a v a g e t h a t h a s d e v e l o p e d a m ong t h e s o c i e t y o f n a t i o n s , p ro m is e docum ent*

It

t h e C h a r t e r h a s b e c o m e a com­

is very d o u b tfu l,

s i n g l e n a t i o n w ould h a v e d r a f t e d fin a lly

it

in

ind eed ,

th a t any

th e form in w hich i t

em erged from t h e Havana C o n feren ce*

In o r d e r to g a in

w ider a d h e re n c e , t h e o r i g i n a l d r a f t o f th e C h a r te r a s

it

drawn u p by t h e S t a t e D e p a rtm e n t o f t h e U n i t e d S t a t e s

was

fo rc e d to undergo

was

c o n sid erab le change.

This n u m b e r a n d v a r i e t y o f e s c a p e c l a u s e s h a v e g r e a t l y in creased sin c e

t h e o r i g i n a l P r o p o s a l s were p u b l i s h e d *

th an a tte m p t to ap p ly r i g i d

p rin cip les

R ath er

in a d o c t r i n a i r e

m anner, th e a r c h i t e c t s o f th e C h a rte r have so u g h t to b asis

f o r g e n e r a l a g r e e m e n t t o w a r d two m a j o r g o a l s

trad e

b a r r i e r s and n o n - d is c r im in a tio n .

fin d a

- m in im u m

Where s t e a d f a s t r u l e s

104 are

l a i d down f o r t h e g u i d a n c e o f i t s m e m b e r s , t h e y a r e

i n v a r i a b l y q u a l i f i e d by e x c e p t i o n s a n d e s c a p e c l a u s e s n e c e s s ­ a r y t o m ak e t h e m g e n e r a l l y a c c e p t a b l e .

But t h e y a r e e q u a l l y

c a p a b l e o f b eco m in g more i m p o r t a n t t h a n

the r u l e s

t h a t th ey

m o d ify . C o n seq u en tly ,

th e C h a rte r has been c r i t i c i z e d as

b e in g m erely a c o l l e c t i o n o f escap e c la u s e s t h a t san ctio n s

the r e s t r i c t i v e

h a p s some new o n e s .

in e f f e c t ,

p ra c tic e s o f the t h i r t i e s

and p e r­

Words o f s t r o n g c o n d e m n a t i o n a r e f r e ­

q u en tly h e ard t h a t c r i t i c i z e

th e C h a rte r fo r

its

failu re

to

d e a l e f f e c t i v e l y w i t h t h e menace o f q u a n t i t a t i v e r e s t r i c t i o n s . It

is

sa id th at

use o f t a r i f f s ;

th e C h arter f a i l s th at

it

p re fe re n tia l trad in g ;

p erm its

th at

it

to p rev e n t in d is c r e tio n a r y

th e c o n tin u ed p r a c tic e o f

i s weak i n c o n t r o l l i n g o r

e lim in a tin g th e u n fa v o ra b le fe a tu re s p o lie s;

and th a t

it

o f s t a t e - t r a d i n g m ono­

i s weak i n p r e v e n t i n g t h e f o r m a t i o n o f

in te rn a tio n a l c artel* The f o l l o w i n g p a g e s w i l l i n v e s t i g a t e more s e r i o u s featu res

at I*

c ritic ism s

tio n s.

o f the

b rin g to l ig h t th e

v d i ic h o b j e c t i o n s h a v e b e e n l e v e l e d . EXCEPTIONS TO QUANTITATIVE RESTRICTIONS

One o f t h e h ib itio n ,

in o r d e r t o

certain

b asic te n e ts

in p r i n c i p l e ,

I t p erm its

its

o f th e C h a rte r

is

o f the u se o f q u a n ti t a t iv e m em bers, h o w e v er,

the p ro­ restric ­

t o l a y down

105 re stric tio n s

on t r a d e

form o n ly o f d u t i e s ,

so l o n g a s s u c h im p e d im e n ts a r e tax es,

r u l e , how ever, d ev elo p ed Tflhich a p p e a r t o n u l l i f y ed to

o r o th e r charges*

in the

The b a s i c

i n t o a m a t r i x f o r num erous e x c e p t i o n s the e ff e c t

it

was o r i g i n a l l y

desig n ­

produce* One p o i n t o f v i e w r e l a t i n g

to the red u c ed e f f e c t i v e ­

n e s s o f Q*R*‘ w h i c h was b r o u g h t a b o u t b y t h e n u m e r o u s e x c e p ­ tio n s

w ritten

in to

th e r u le

was v o i c e d by P r o f e s s o r H e n d e r s o n :

The C h a r t e r a l l o w s q u a n t i t a t i v e r e g u l a t i o n i n s o many d i f f e r e n t f o r m s a n d f o r s o m any d i f f e r e n t purposes as to obscure the f a c t t h a t th e o r i g in a l i n t e n t was t o p r o h i b i t t h e u s e o f t h i s m e t h o d , save in th e m ost e x c e p ti o n a l c irc u m s ta n c e s* It i s u n d e r t h i s h e a d i n g more t h a n any o t h e r t h a t e x c e p t i o n s and e s c a p e c l a u s e s were m u l t i p l i e d * * • a n d i n p r a c t i c e . * * • t h e C h a r t e r may w e l l d o more t o s t i m u l a t e th a n t o c h e c k t h e s p r e a d o f quota r e s t r i c t i o n . ! One o f t h e m a i n e x c e p t i o n s a l l o w s f o r t o be p l a c e d on a g r i c u l t u r a l a n d f i s h e r i e s

im port q uotas

p ro d u cts.

T his

i s d e s i g n e d t o p e r m i t members t o c a r r y o u t a d o m e s tic p r i c e s u p p o r t program f o r a g r i c u l t u r a l p ro d u c ts w ith o u t h a v in g to com pete w ith i n c r e a s e d a g r i c u l t u r a l below th e d o m e s tic p r i c e Item s*

lev e ls

im p o r ts whose p r i c e s a r e

f o r com parable a g r i c u l t u r a l

T hree r e q u i r e m e n t s , h o w e v e r, m ust b e m et b e f o r e su c h

q u o t a s may b e i m p o s e d :

(1) R e s t r i c t i o n upon d o m e stic p r o ­

d u c t i o n m ust accompany im p o rt r e s t r i c t i o n s ;

(2) R e s t r i c t i o n

1 S i r H u b e r t H e n d e r s o n , nA C r i t i c i s m O f The H a v a n a C h a r t e r , ” The A m e r i c a n E c o n o m i c R e v i e w , V o l . 3 9 ( J u n e 1 9 4 9 ) , p. 613. .

106 upon d o m e s tic p r o d u c t i o n m u st com pare p r o p o r t i o n a t e l y w i t h th e r e s t r i c t i o n upon th e n o tic e m ust be g iv en ad m itted , to

im po rted prod uct* and

(3) p u b l i c

in a d v a n c e a s t o t h e amount t o

a n d t h e m em b er a p p l y i n g t h e r e s t r i c t i o n

be

is

req u ired

c o n s u l t w i t h a n y m em ber who c o m p l a i n s o f n o n - c o m p l i a n c e

w ith th e above s t i p u la t io n s * In g e n e r a l , a m em ber i s f r e e re stric tio n

the re q u ire m e n ts

to em ploy t h i s

t h a t m u st be m et b e f o r e

ex cep tio n to q u a n tita tiv e

le a d to a c e r t a i n m easure o f c o n tr o l

in

its use.

But t h i s

i s m e r e l y o n e s i d e o f a c o i n a s P r o f e s s o r Towle i s

prone to

b e liev e .

one t h i n g ,

C o n t r o l o v e r p o s s i b l e m is u s e o f Q .R .

b u t th e o v e ra ll

im p licatio n

use under p re sc rib e d c o n d itio n s

in s a n c tio n in g

is q u ite a n o th er.

is

its

He w r o t e

th at: The d a n g e r i n s u c h a n e x c e p t i o n l i e s i n t h e p o s s i b i l i t y o f f r e e z i n g w orld t r a d e in a c c o rd a n c e w i t h t h e p a t t e r n o f a p r e v i o u s p e r i o d , w hich w ould endanger th e achievem ent o f a b ala n ce d i n t e r n a t i o n ­ a l economy in a dynam ic w o r l d . The m a i n t e n a n c e o f dom estic p r ic e s and p ro d u c tio n o f a g r i c u l t u r a l com m odities by a c o u n tr y l i k e th e U n ite d S t a t e s , f o r ex am p le, m igh t p r e v e n t h e r fro m i n c r e a s i n g th e r a t i o o f h e r raw m a t e r i a l im p o rts to d o m estic p ro d u c tio n as h e r p ro b ab le f u tu r e b alan ce of paym ents a n d t h e i n c r e a s i n g im p o rta n c e o f h e r i n d u s t r i a l e x p o r t s w o u l d s e e m t o demand.2 M r. W ilc o x i s w i l l i n g

to uphold th e e x ce p tio n s

t h e g e n e r a l p r o h i b i t i v e u s e o f Q .R . by c l a i m i n g t h e r e

to is a

2 L a w r e n c e W. T o w l e , S u p p l e m e n t To I n t e r n a t i o n a l T r a d e a n d C o m m e r c i a l P o l i c y (New Y o r k ; H arper and B r o th e rs ,

j&m,— mr.-------------

107 need f o r q u o ta s whenever d o m estic a g r i c u l t u r a l program s a re o p e ra tin g are

to

support th e

to be e f f e c tiv e ,

w ise,

p rice

stru c tu re .

t h e p ro g ram w ould f a i l . ” 3

i n t e r n a l econom ic s y s t e m .

prolongs

its

e x iste n ce ,

become p e r m a n e n t . it

c o rre c t a m alfunction

in

in n a tu r e ,

w hich t h e r e f o r e

t h e n e e d th e n f o r q u o t a s seem s t o

H is p o s i tio n

i s more o f a r a t i o n a l i z a t i o n

t a c i d l y s a n c t i o n s d o m e stic program s t h a t s u p p o r t

a rtific ia l to

H is argum ent i s v a l i d

B u t where a p r i c e - s u p p o r t i n g

p r o g r a m t e n d s t o become p o l i t i c a l

sin ce

P r i c e s w ould be

assum es th e g e n e r a l p rem ise t h a t such program s a r e

tem porary e x p e d ie n c ie s d e sig n e d t o th e

O ther­

c o n t r a c t i o n o f o u t p u t a n d s a l e s a t ho m e w o u l d b e o f f s e t

h e l d do w n ; it

such program s

im p o rts m ust a l s o be c o n t r o l l e d .

by an e x p a n s i o n o f i m p o r t s fro m a b r o a d .

if

11I f

p rice le v e ls

w hich,

in tu rn ,

c a ll for

the p r iv ile g e

im pose im p o r t q u o t a s . Perhaps th e e x ce p tio n o f g r e a te s t

im port to th e

general ru le

p r o h i b i t i n g £|.R . i s

re stric tio n s

on im p o r ts w henever a c o u n tr y * s b a l a n c e o f

paym ents i s

t h a t w hich p e r m i t s p l a c i n g

s e r io u s ly endangered.

At th e

tim e t h e o r i g i n a l P r o p o s a l s f o r an I n t e r ­

n a t i o n a l T ra d e O r g a n i z a t i o n were p u b l i s h e d by t h e U n i t e d S t a t e s Governm ent in December 1 9 4 5 , t h e g e n e r a l c o n c e n su s o f o p i n i o n wa s t o t h e

Y ork:

e f f e c t t h a t c u r r e n t b a la n c e o f paym ents

3 C l a i r W i l c o x , JU C h a r t e r F o r W o r l d T r a d e The M a c m i l l a n C o m p a n y , 1 9 4 9 ) , p . 8 5 .

(New

108 d iffic u ltie s th e

m ig h t be o v e r i n a few y e a r s .

"tran sitio n

w o rld .

p e r i o d ” f r o m w a r t o some k i n d o f n o r m a l

T he d i s t u r b a n c e , h o w e v e r , was m o r e p r o f o u n d t h a n i t

a c t u a l l y a p p e a r e d , a n d i t now l o o k s a s to

T h i s was t o b e

if

the tr a n s itio n

is

l a s t q u ite a w h ile. The A m e r i c a n o f f i c i a l s

who p r e p a r e d t h e C h a r t e r

r e c o g n i z e d t h a t c o u n t r i e s e x p e r i e n c i n g b a l a n c e o f paym ents d iffic u ltie s

w ould r e q u i r e

sp ecial p riv ile g e s .

i m p o r t a n c e wa s t h e f a c t t h a t s u c h c o u n t r i e s im pose q u o t a s

in o rd e r to r e s t r i c t

h o w e v er, h ad to b e q u a l i f i e d ,

th e

would n e e d t o

im p o rts.

Such p e r m is s io n ,

and th e re a ro se

o f th e d eg ree o f d e p a rtu re from th e r u l e

Of p a r a m o u n t

th e q u e stio n s

to be p e rm itte d ,

le n g th o f tim e in v o lv e d f o r such d e p a r t u r e ,

and p r e c i s e l y

uf o er e t h e l o c u s o f d e c i s i o n - m a k i n g s h o u l d r e s t t o

perm it

th ese e x c e p tio n s.4 The C h a r t e r d e a l t w i t h t h e s e q u e s t i o n s o f com plex p r o v i s i o n s of

w hich g r a n t to

im p o sin g Q .R . u n d e r c e r t a i n

in a s e r i e s

c o u n tries th e p riv ile g e

circu m stan ces.

A co u n try

w h i c h i s e x p e r i e n c i n g b a l a n c e o f p a y m e n t s d i f f i c u l t i e s may restric t

its

rep len ish b alan ce

im p o r ts by q u o ta s t o

its

its

th e e x te n t n e c e s s a ry to

g o ld and fo re ig n exchange r e s e r v e s ,

f o r e i g n a c c o u n ts u p s e t by th e w a r.

or to

The I n t e r ­

n a t i o n a l T rade O rg a n iz a tio n w i l l a c c e p t th e o p in io n o f th e

4 P e r c y W. B i d w e l l a n d W i l l i a m D i e b o l d , J r . , " T h e U n i t e d S t a t e s a n d t h e I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n , 11 I n t e r n a t i o n a l C o n c i l i a t i o n , N o. 449 (M arch 1 9 4 9 ), p . 195 .

109 I n t e r n a t i o n a l M o n etary Fund w henever t h e f o r m e r to re n d e r a d e c is io n as low enough to

ju stify

is req u ire d

to w hether a c o u n try * s r e s e r v e

th e

is

im p o s itio n o f im p o rt q u o tas*

T h e I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n w i l l a l s o h e a r com­ p lain ts tio n s

f r o m m em b e r c o u n t r i e s

p la c e d upon t h e i r

to n ote h e re

is the

ex cep tio n s.

H ow ever,

in to

force,

the

concerning u n w arran ted r e s t r i c ­

e x p o rt m ark ets.

fact

lh at

is

t h a t no t i m e - l i m i t i s

tw o y e a r s a f t e r t h e

im portant

s e t f o r th ese

C h a r t e r comes

I n t e r n a t i o n a l Trade O rg a n iz a tio n i s

req u ired

to re v ie w a l l o f them . A c e rta in degree o f d isc rim in a tio n t h e num erous e x c e p t i o n s w r i t t e n Q .R .

the r u le

A c o u n try em ploying im p o rt q u o ta s a s

tec tin g

its

in c e r t a i n

S w iss f r a n c s . to h a rb o r

a means o f p r o ­

p rin cip le o f e q u ality ,

on a d i s c r i m i n a t o r y b a s i s . d eficien cy

its

In t h i s

T h i s may a r i s e

but rath er

as a r e s u lt o f a

”h a r d c u r r e n c i e s ” s u c h a s d o l l a r s o r situ atio n ,

a c o u n try w i l l be in c lin e d

s u p p l y o f h a r d c u r r e n c i e s a n d may b e w i l l i n g

pay a somewhat h i g h e r p r i c e

th em w i t h m ore p l e n t i f u l ” s o f t

f o r goods

if

cu rren cies” .

under c e rta in

circu m stan ces, a u th o riz e s t h i s

crim in atio n .

I t a lso

a fte r

p ro h ib itin g

f o r e i g n e x c h a n g e r e s e r v e s may c h o o s e n o t t o do

so in a c c o rd a n c e w i t h t h e

to

in to

i s s a n c t i o n e d by

provides

th e end o f th e po stw ar

m ined f o r e a c h c o u n t r y by t h e

for

its

it

can purchase

The C h a r t e r , type o f d i s ­

”v i r t u a l e lim in a tio n

tra n sitio n

p eriod* as

d eter­

I n t e r n a t i o n a l M onetary Fund.

110 The o u t s i d e o b s e r v e r h o w e v e r c a n o n l y k e e p h i s c r o s s e d , rem em bering t h e t a c i t a s s u m p tio n s term

’t r a n s i t i o n In th e

ab le

fin g ers

in v o lv ed in th e

p e r i o d 1 . 1,5

lig h t o f these

ex cep tio n s,

it

is not unreason­

to conclude t h a t any co u n try e x p e rie n c in g a b a la n ce o f

paym ents d i f f i c u l t y w i l l be f r e e , p l a c e Q .R . on i t s are p riv ileg e d

im ports.

co u n tries*

t h a t m ost c o u n t r i e s w i l l be f r e e t o

I n m any c a s e s , s u c h c o u n t r i e s

to d is c r im in a te

from s o f t c u rr e n c y

in f a v o r o f goods e m a n a tin g In r e a l i t y , t h i s

in E u ro p e, and

restric t

f o r some t i m e t o c o m e , t o

is to

in th e r e s t o f t h e

say w orld,

im p o rts from th e U n ite d S t a t e s ,

even go so f a r a s t o d i s c r i m i n a t e I t m ust be r e c o g n iz e d , o f em ploying q u o ta r e s t r i c t i o n s o f paym ents can b e ab u sed *

a g a i n s t A m erican goods*

fin a lly , to

and

th a t th e p riv ile g e

c o r r e c t an a d v e r s e b a l a n c e

As o n e a u t h o r p o i n t s o u t ;

A c o u n t r y vihich e m b a rk s on a f u l l - e m p l o y m e n t p o l i c y , a wage p o l i c y , a n i n v e s t m e n t p o l i c y , o r a n i n ­ f l a t i o n a r y m o n e t a r y p o l i c y h a s some d e g r e e o f c h o ic e i n t h e e x t e n t t o w hich t h e n e c e s s a r y b u rd en o f e c o n o m i c a d j u s t m e n t s h a l l be i n t e r n a l o r , t h r o u g h i m p o r t r e s t r i c t i o n s , s h a l l b e m ad e t o f a l l o n Im­ p o rts. No m em b er i s r e q u i r e d , h o w e v e r , t o w i t h ­ d r a w o r t o m o d i f y i m p o r t r e s t r i c t i o n s on t h e g r o u n d t h a t a change in i t s d o m e stic em ploym ent, r e c o n ­ s t r u c t i o n , d e v e lo p m e n t, o r s o c i a l p o l i c i e s w ould r e n d e r u n n e c e s s a r y th e r e s t r i c t i o n s w hich i t is a p p ly in g f o r th e p r o te c tio n o f i t s b alan ce o f p a y m e n t s *6

5 B id w ell and D ie b o ld , a g . 6 T ow le, £ £ ,

C it.,

p. 774.

c i t .,

p.

196.

I ll II.

PROTECTION OP INFANT INDUSTRIES

A nother group o f e x c e p tio n s

to th e C h a r te r 's

ru les

was p r o v i d e d a s a r e s u l t o f p r e s s u r e f r o m t h e s o - c a l l e d "underdeveloped c o u n tr ie s " up th e ir

in d u strie s.

was p u b l i s h e d raised

i n December 1945,

c alle d

were

C h in a, and I n d ia a g a i n s t th e p r o ­ as a p ro tec tiv e

T h e s e a n d o t h e r c o u n t r i e s whose p o s t w a r p l a n s

fo r a larg e

th a t p ro tec tiv e th eir

Im m ediate o b j e c t i o n s

l i m i t th e u se o f im p o rt t a r i f f s

m easure.

b u ild

Not lo n g a f t e r t h e p ro p o se d C h a r te r

in L a tin A m erica,

p o sal to

w hich h a v e l o n g d e s i r e d t o

e x p a n s io n o f i n d u s t r y w ere d e te r m in e d

tariffs

w ere t o p l a y an i m p o r t a n t r o l e

in

i n te r n a l developm ent. C harges were h u r l e d a t t h e U n ite d S t a t e s

h e r to want low er b a r r i e r s

so t h a t she m ight f lo o d th e m ark ets

o f th e w orld w ith h e r g o o d s. c o u n te r e d by s a y in g i t

The U n i t e d S t a t e s G o v e rn m e n t

favored in d u s tria liz a tio n o f under­

developed c o u n tr ie s , and t h a t i t in ju ry p erity .

to

claim in g

saw b e n e f i t s r a t h e r t h a n

t h e U n i t e d S t a t e s by a g e n e r a l I n c r e a s e

in p ro s ­

Spokesmen f o r t h e U n i t e d S t a t e s G o vernm en t w a rn ed

th at ta riffs

to

p ro tect

in fan t

f o r m u l a w h ich would r a i s e They s a i d t h a t

i n d u s t r i e s was no m ag ic

new f a c t o r i e s

t o o m uch p r o t e c t i o n

a d v an tag e o f th e p eo ple

out o f the e a r th .

would w ork t o t h e d i s ­

in u nderdeveloped c o u n tr ie s

by

m ak in g e v e r y t h i n g th e y b o u g h t , o r m ade, m ore e x p e n s i v e .

112 I t seem ed s t r a n g e , m uch p r o t e c t i o n

Indeed,

to h e a r w a rn in g s o f to o

c o m in g f r o m t h e U n i t e d S t a t e s ,

w h i c h f o r m an y y e a r s h a d h e e n b u i l d i n g u p i t s b e h in d th e h i g h e s t t a r i f f w a lls to

"a c o u n try own i n d u s t r i e s

in th e w o r ld ." 7

r e t r e a t a lo n g d i s t a n c e fro m th e p o s i t i o n

sh e h a d assum ed

i n t h e e a r l y y e a r s o f t h e C h a r t e r ’s d e v e lo p m e n t* b a r g a i n i n g a t H a v a n a w as o v e r ,

B u t s h e was

1/Vhen t h e

th e s c o re fa v o re d th e r e p r e ­

s e n t a t i v e s o f th e u n d e rd e v e lo p e d c o u n tr ie s

mho h a d s u c c e e d e d

in s e c u r i n g a num ber o f c o n c e s s i o n s u p h o l d in g t h e i r p o i n t o f v ie w * As a c o n s e q u e n c e , t h e C h a r t e r c o n t a i n s n o t h i n g i n th e

way o f a c t u a l l y

ta riffs*

p re v e n tin g

T h u s , t h e r e r e m a in s room f o r

h o n o red fo rm o f i n f a n t lie s

in d u stry p ro te c tio n *

c irc u m s ta n c e s ,"

its

th e u se o f t h i s

in th e f a c t t h a t th e C h a rte r re c o g n iz e s

p ria te fo r

a c o u n try fro m r a i s i n g

tim e -

Such a p o s i t i o n th a t "in ap p ro ­

t h e em p lo y m en t o f p r o t e c t i v e m e a s u r e s

t h e e n h a n c e m e n t o f i n t e r n a l e c o n o m ic d e v e lo p m e n t i s

ju s tifie d . In g e n e r a l , C h a rte r s t a t e s

th e o b lig a tio n as

th a t;

is n o t fo rb id d e n

la w e d by t h e C h a r t e r ;

(2)

is

w ritte n

by i t s

d e siro u s

I t may n o t u s e a n y m e t h o d f o r b i d d e n

g iv e

c o n se n t;

It

th e

t r a d e a g re e m e n ts o r o u t ­

ag reem en t u n le s s o th e r p a r t i e s (3 )

in to

p r i v i l e g e d to u s e any

by a t r a d e th e ir

is

( 1 ) An u n d e r d e v e l o p e d c o u n t r y ,

o f e s t a b l i s h i n g a new i n d u s t r y , m e th o d t h a t

it

to

th e ag reem en t

I s n o t f r e e t o u s e a n y m eth o d

113 o u t l a w e d by t h e C h a r t e r u n l e s s

i t o b ta in s

p r i o r c o n s e n t of*

t h e m em b ers who w o u l d b e a f f e c t e d o r , u n l e s s p e rm is s io n fro m th e

r e le a s e fro m i t s

by an u n d e v e lo p e d c o u n tr y i s

in to d i r e c t n e g o ti a ti o n s w ith

o th e r p a rtie s

t o t h e a g re e m e n t w h ereb y r e l e a s e

th ro u g h t h e i r

c o n se n t,

is o b ta in e d

o r b y m eans o f an IT Q -s p o n s o re d co n ­

f e r e n c e w ith a l l p a r t i e s

co n cern ed .

s u b s t a n t i a l a g reem en t i s

o b ta in e d ,

s u b je c t to

de­

t r a d e a g r e e m e n t o b l i g a t i o n s may b e

o b t a i n e d by e i t h e r e n t e r i n g

a re le a se

o b ta in s

ITO*

W here p r o t e c t i o n sire d ,

it

W here, th e

in th e l a t t e r ,

ITO may t h e n g r a n t

s u c h c o n d i t i o n s a s may b e a g r e e d u p o n .

W here p r o d u c t s a r e n o t c o v e r e d b y t r a d e a g r e e m e n t s , p e r m i s s i o n may b e o b t a i n e d t o

im p o se d e v i c e s

q u o ta s o r m ix in g r e g u l a t i o n s .

such as

B efo re th e r e l e a s e

h ow ever, c e r t a i n

c o n d it i o n s m u st be f u l f i l l e d .

is

if

to

be g r a n t e d

th e

ITO f e e l s

c e rta in

im p o rt

is g ra n te d ,

(1 ) R e l e a s e

t h a t th e m easu re

p roposed is

t h e m o st s u i t a b l e m eans f o r a c h i e v i n g t h e p u r ­

pose and Is

" u n lik e ly to

tra d e

b e m o re r e s t r i c t i v e

o f in te rn a tio n a l

th a n any o th e r p r a c t i c a b l e and r e a s o n a b le m easu re p e r ­

m itte d under th e C h a r te r ." in v e s tig a tio n te c te d

is

to

by th e engage

(2 )

ITO f i n d s

It

is

to be g r a n t e d

th a t th e

i f an

in d u s tr y to be p ro ­

in th e p r o c e s s in g o f a n

11i n d i g e n o u s

p r i m a r y c o m m o d ity " o r a b y - p r o d u c t t h a t o r d i n a r i l y w o u l d b e w a ste d ;

t h a t th e m easu re p ro p o se d f o r

n ecessary ;

th a t i t

w ill r a is e th e

its

p ro te c tio n

sta n d a rd o f liv in g

is and

114 w i l l n o t prove d e tr i m e n t a l t o r e l e a s e m ust b e g r a n te d first

if

th e

in te rn a tio n a l tra d e . in d u stry

F in a lly ,

to be p r o t e c t e d

was

e s t a b l i s h e d b e t w e e n 1 9 3 9 a n d 1 9 4 8 .® I t s h o u ld be n o te d t h a t t h e

C h a rte r p r e s c r ib e s

a g r e e m e n t am ong m em ber n a t i o n s b e f o r e e x c e p t i o n s a r e sa n c tio n e d .

T hus, th e

n o t m e re ly w ith th e

c ritic s

p rio r

to be

o f th e C h a rte r a re c o n ce rn e d ,

s h e e r num ber o f i n f a n t - I n d u s t r y

e x c e p tio n s,

b u t by t h e v o t i n g pow er i n t h e h a n d s o f t h e u n d e v e lo p e d c o u n trie s .

In an a r t i c l e

r e f le c t th is

th a t ap p eared r e c e n tly ,

its

a u th o rs

f e a r by s a y i n g :

They f o r e s e e a l a r g e b lo c o f u n d e r d e v e lo p e d c o u n t r i e s v o t i n g t o g e t h e r i n t h e IT O , l o g - r o l l i n g t o g r a n t e ac h o th e r l i b e r a l u se o f im p o rt d u t ie s and q u o ta s . T he d a n g e r i s r e a l . T h e r e a r e m o re u n d e r d e v e l o p e d th a n d e v e lo p e d c o u n tr ie s in th e w o rld . W e ll o v e r h a l f t h e s i g n a t o r i e s o f t h e H avana a g re e m e n t a r e p r o p e r l y c l a s s i f i e d a s U n d e r d e v e l o p e d c o u n t r i e s 1, a n d t h e r e a r e s e v e r a l o t h e r s t h a t m i g h t o f t e n be e x p e c te d t o v o te w ith th e m .9 4 m a t t e r o f c o n c e r n , h o w e v e r , w h ic h i s g e n e r a l l y o v e r l o o k e d , a n d i n som e r e s p e c t s th e

is

w orse t h a n

th e

f a c t th a t th e C h a rte r p ro v is io n s

d e v e lo p m e n t i s a p p l i c a b l e n o t o n ly t o u n d e rd e v e lo p e d c o u n tr ie s , b u t a ls o in d u s trie s

in

c o u n trie s

c ritic s

re a liz e ,

f o r i n t e r n a l e c o n o m ic in fa n t in d u s trie s

pp . 1 5 0 -1 5 1 .

® B i d w e l l and D i e b o l d ,

0£

.

in

to th e r e c o n s tr u c tio n o f

t o r n by t h e r e c e n t w a r .

® W ilc o x , Q£. c i t . ,

is

c i t .,

p. 201.

115 III.

STATE TRADING MONOPOLIES

One o f t h e m o s t i m p o r t a n t i n t e r n a t i o n a l e c o n o m i c phenom enon o f r e c e n t y e a r s h a s been th e e m e rg e n c e o f s t a t e c o n tro lle d o r sta te -c o n d u c te d fo re ig n is

one t h a t r e p r e s e n ts a r e tu r n

but

its

tra d e .

T he d e v e l o p m e n t

to m e r c a n t i l i s t c o n c e p tio n s,

d eg re e o f re fin e m e n t exceeds a n y th in g e x p e rie n c e d

in th e p a s t few c e n t u r i e s . G o v ern m en t c o n t r o l s tra d e

in t h e f i e l d

can be e f f e c t i v e l y u se d n o t o n ly

im p o rts b u t a ls o t o

of

in te rn a tio n a l

in t h e r e g u l a t i o n o f

p l a n a n d p ro m o te e x p o r t s .

T he e s t a b l i s h ­

m ent o f e x p o r t s u b s i d i e s a n d e x p o rt l i c e n s e s a r e q u ic k ly i n t r o d u c e d by th e s t a t e fo re ig n tr a d e .

w henever i t assum es c o n t r o l o v e r i t s

E x p o rt lic e n s e s a re c lo s e ly

tie d

to

exchange

c o n t r o l s a n d s e r v e a s a u s e f u l c h e c k on i n c o m i n g f o r e i g n e x c h a n g e , p r e v e n tin g e x p o r te r s fro m m a in ta in in g t h e i r b a la n c e s ab ro ad in s te a d o f s e l l i n g HVhat i s o f s e r i o u s

co n cern

th e m t o

t h e i r own c e n t r a l b a n k .

is th e f a c t t h a t vhen tr a d e be­

co m e s a m o n o p o ly i n t h e h a n d s o f t h e s t a t e , d u c tio n

l o s e m uch o f t h e i r e f f e c t i v e n e s s

m in in g th e q u a n t i t y an d s t r u c t u r e

c o n c lu sio n . th e ir

fo llo w s

its

co n seq u en ce to

o f p ro ­

as a fa c to r d e te r­

o f e x p o rts.

w hose w r i t i n g e v id e n c e s a s t r o n g d i s l i k e fo re ig n tra d e ,

c o sts

One a u t h o r ,

o f sta te -c o n tro lle d its

u ltim a te

^ E c o n o m ic r e l a t i o n , ” s a i d M r. H e i l p e r i n ,

”lo se

s i g n i f i c a n c e a n d a r e r e p l a c e d by p u b l i c a d m i n i s t r a t i o n

116 a t hom e a n d b y r u t h l e s s su b s id ie s, le a d

strife

ab ro ad .

im p o rt r e s t r i c t i o n s , a n d v a rio u s d i s c r im i n a t io n s

to r e t a l i a t i o n

and c o u n te rm e a s u re s .

a m id st th e r u in s o f a f r e e

A ju n g le grow s

e c o n o m y •" 1 0

T he g r o w t h o f s t a t e - t r a d i n g d u rin g th e

F o r e v i d e n t l y d u m p in g ,

reach ed

in te r-w a r p e rio d o f th e tw e n tie s

its h e ig h ts and t h i r t i e s .

The w i d e s p r e a d m ovem ent f o l l o w e d c l o s e l y on t h e h e e l s o f R u s s i a fs s u c c e s s e s th e ad v erse

in t h i s

c o n d itio n s

fie ld a fte r

1917, and t h e r e a f t e r ,

o f t h e w o r ld econom y s e r v e d t o

ju stify

th e e s t a b l i s h m e n t o f s t a t e - t r a d i n g m o n o p o lie s by an e v e r i n c r e a s i n g num ber o f c o u n t r i e s

d u rin g th e p e rio d .

The

o u t b r e a k o f w ar in 1959 d rew a d d i t i o n a l c o u n t r i e s

in to

f o l d a s a m eans f o r

its

e ffe c tiv e

p ro se c u tio n .

th e

One a u t h o r

w rite s: D u rin g t h e w ar y e a r s a l l c o u n t r i e s , i n c l u d i n g th e U n ite d S t a t e s , s u b je c te d t h e i r f o r e ig n tr a d e to s t a t e c o n t r o l in o r d e r b e t t e r to m a r s h a l r e s o u r c e s f o r th e needs o f w ar. The g r e a t e c o n o m ic d i f f i ­ c u lt i e s fac ed by G reat B r i ta i n , F ra n c e , and o th e r c o u n t r i e s as a r e s u l t o f th e w ar and in c o n n e c tio n w ith r e c o n s tr u c tio n a ls o c a l l f o r o v e r - a l l n a tio n a l p la n s o f im p o rts and e x p o r t s . Now a s i n t h e t h i r t i e s , th e re is advocacy o f s t a te c o n tro l over f o r e i g n t r a d e a n d f o r e i g n p a y m e n ts a s c o r o l l a r y o f t h e w e l f a r e p l a n n i n g f o r ff u l l e m p l o y m e n t 1. And, f i n a l l y , th e i n s e c u r i t i e s o f th e p o s t-w a r w o r l d , i n w h ic h h o s t i l i t i e s a r e o v e r b u t p e a c e is n o t y e t f ir m ly e s t a b l is h e d , le a d to c o n tin u e d

Y ork ;

1 0 M i c h a e l A . H e l l p e r i n , T he T r a d e o f N a t i o n s A l f r e d A . K n o p f, 1 9 4 7 ) , p . 1Q9.

(New

117 p l a n n i n g f o r n a t i o n a l s e c u r i t y , w h ic h c a n n o t f a i l to e f f e c t th e c o u rse and th e s t r u c t u r e o f f o r e ig n t r a d e *11 The c o m p l e x i t y o f t h e

p ro b le m s p o s e d by t h e e x i s t e n c e

o f s t a t e - t r a d i n g m o n o p o l i e s was a s o u r c e o f m u ch d i s c o m f o r t t o t h e m akers o f th e H avana C h a r t e r . sta te -tra d in g th e

sy ste m an d t h e

The c o e x i s t e n c e o f t h e

sy ste m o f f r e e

c o n stru c tio n o f a m u lt i la t e r a l tra d e

d i f f i c u l t to a c h ie v e .

A sta te

tra d e w ill not re a d ily

su b m it

se t o f ru le s it

its e lf

to

a t r a d e m o n o p o ly t o

For th e se a re

sta te -tra d in g

b a sic

fo re ig n

th e a d h eren ce o f a p ra c tic e s ;

any r e g u la tio n

th a t

serv e p o l i t i c a l p u r­

t e n e t s upon w h ic h t h e

sy ste m o f

re sts.

N e v e rth e le s s th e C h a rte r a tte m p ts p ra c tic e s

p a rtic u la rly

in c o n tr o l o f i t s

c o n s i d e r i t s e l f a m en ab le t o

p re v e n ts u t i l i z i n g poses.

p a tte rn

d e sig n e d to p re v e n t d is c r im in a to r y

✓

nor w ill

e n t e r p r i s e m akes

in to th e

to f i t

p a tte rn o f m u ltila te ra l tra d e

by p r i v a t e e n t e r p r i s e an d a l s o

to m a in ta in , a t

sta te -tra d in g co n d u cted

t h e sa m e t i m e ,

th e m u l t i l a t e r a l c h a r a c t e r o f i n t e r n a t i o n a l t r a d e a s a w h o le . In S e c t i o n D, A r t i c l e s m a tte rs r e la tin g o lie s

to

s ta te -tra d in g .

in f o r e ig n t r a d e

It

su b je c ts

s t a t e m o nop ­

to th e g e n e ra l c o n s id e ra tio n o f non-

d isc rim in a to ry p r a c tic e s .

11 I*>ld. ,

2 9 -3 2 , th e C h a rte r d e a ls w ith

Such e n t e r p r i s e s ,

p. 106.

I® W ilc o x , o p . c i t . ,

pp. 9 4 -9 7 .

i n m ak in g

118 fo re ig n

p u rc h a se s and s a le s o f any p ro d u c t, a re to

in flu e n c e d s o le ly p rie e s,

by c o m m e rc ia l c o n s i d e r a t i o n s ,

q u a lity , a v a ila b ility , m a rk e ta b ility ,

and o th e r te rm s o f p u rc h a se ag ree n o t to or p riv a te ,

or s a l e .”

p rev en t e n te r p r is e s , fro m a c t i n g

sid e ra tio n .

”be

such as

tra n s p o rta tio n

Member c o u n t r i e s m u s t

w h e th e r s t a t e - c o n t r o l l e d

in a c c o rd a n c e w ith

co m m ercial c o n ­

Member n a t i o n s who p u r c h a s e f o r t h e i r g o v e r n ­

m e n ta l u s e , h o w e v e r, a r e exem pt fro m t h e e x e r c i s e o f th e p ro v isio n .

T h u s , a n y m em ber g o v e r n m e n t i s

any p o lic y fo r

i t d e sire s

when p u r c h a s i n g f o r

its

te c tio n a ffo rd e d to

is

c o n d u c tin g a s t a t e t h e m arg in i t se lls

th e

d ire c te d

arm ed f o r c e s ,

fo re ig n

th e am ount o f p r o ­ by a s t a t e

tra d e .

to add to

im p o rte d p ro d u c t in

f o r th e r a is in g

th e

its

m em ber c o u n t r y f i l e s

d o m e stic m a rk e t.

in t a r i f f s

such a r e q u e s t.

to p e rm it th e c o u n try to

its

re d u c tio n

p u rch ases.

N e g o tia tio n

N e g o tia ­

is to fo llo w

w henever a n o th e r

The r e s u l t i n g sa tis fy

d o m e s tic dem and, a n d i t m u st p l a c e no o t h e r q u a n tity o f

d e c la re

i m p o r t i n g p r i c e w hen i t

o r lo w e rin g o f t h i s m a rg in

i n m uch t h e sa m e way a s r e d u c t i o n

w h ic h

A m em ber n a t i o n

t r a d i n g m o n o p o ly i s r e q u i r e d t o

in te n d s

m ust be such a s

to

d o m e s tic e n t e r p r i s e s

m a i n t a i n s a m o n o p o ly o n i t s

th e

to f o llo w

s to c k p ilin g p u rp o ses, or fo r o th e rs o f a s im ila r n a tu re . A n o th e r p r o v is io n

tio n

free

p ric e

th e f u l l

l i m i t on t h e

is re q u ire d a ls o

o r rem o val o f any b a r r i e r p la c e d

i n t h e way

o f e x p o r t s b y a n y m em ber p o s s e s s i n g a m o n o p o ly i n t h e

fo r

119 e x e rc ise

of its

fo re ig n

t r a d e . 15

t h e w eakness o f t h e s e p r o v i s i o n s s ta te -tra d in g

a c tiv itie s

is

An e v a l u a t i o n p o i n t i n g t o in e f f e c t i v e l y

p u t f o r t h by s e v e r a l c r i t i c s .

Many o f t h e m h a v e g o n e s o f a r a s

to

c o n te n d t h a t th e C h a r te r

s a n c tio n s th e sy ste m o f s t a t e - t r a d i n g and t h a t in th e d i r e c ti o n p rod u ction . is

c o n tro llin g

i t goes f a r

o f f a v o r i n g g o v ern m en t c o n t r o l o f t r a d e and

A more r e a l i s t i c and v a lid c r i t i c i s m , however,

v o i c e d by P r o f e s s o r T o w le who s a y s ; I t i s q u e s t i o n a b l e m h e th e r th e p r a c t i c a l d i f f i ­ c u l t i e s o f a p p l y i n g t h e s e p r i n c i p l e s c a n be s u rm o u n te d , e s p e c i a l l y w here t h e b l e n d i n g o f d o m e s ti c a n d i m p o r t e d m a t e r i a l s and t h e c o m p lex p r o c e s s in g b e f o r e th e s a le o f th e im p o rte d m a te r­ i a l s a re in v o lv e d . The v e r y e x i s t e n c e o f s t a t e t r a d i n g m o n o p o l i e s w i l l a l m o s t c e r t a i n l y do v io le n c e to th e p r in c ip le s o f m u l t i l a t e r a l tra d e and o f c o m p a ra tiv e a d v a n ta g e in t r a d e . S ta te tra d in g e n te r p r is e s a re In stru m e n ts o f n a tio n a l p o lic y . T he a c t i v i t i e s o f t h o s e a g e n c i e s c o n ­ c e r n e d w i t h f o r e i g n p u r c h a s i n g a r e l i k e l y t o be c o o rd in a te d w ith th o s e c o n ce rn e d w ith f o r e ig n s e l l i n g ; t h e r e w i l l th u s be an i n e v i t a b l e t e n ­ dency f o r s t a t e - t r a d i n g e n t e r p r i s e s t o e n te r in to b i l a t e r a l a rra n g e m e n ts w ith o t h e r s t a t e t r a d i n g c o u n t r i e s , o r even w ith c o u n t r i e s in w h ic h f o r e i g n t r a d e i s in t h e h a n d s o f p r i v a t e e n te rp ris e .

P r o f e s s o r T o w le r e c o g n i z e s t h e p o l i t i c a l d i f f i c u l t i e s in a tte m p tin g to tra d e .

c o n t r o l a s t a t e 9* a c t i v i t y

in th e f i e l d

He g o e s o n t o s a y : W here b r o a d n a t i o n a l p o l i c i e s a r e i n c o n f l i c t w ith th e r e a l i z a t i o n o f t h e p u r e ly c o m m erc ial a d v a n ta g e s o f I n d iv id u a l f o r e ig n - tr a d e t r a n s -

13 I b i d . .

pp. 9 8 -1 0 0 .

in v o lv e d of

120 a c tio n s , s ta te -tr a d in g p ra c tic e s w ill in e v ita b ly le a d to th e v io la tio n o f th e s p i r i t , i f n o t th e l e t t e r , o f th e c h a r te r * The c h a r t e r d o e s p r o v i d e a m ec h an ism f o r c o n s u l t a t i o n r e g a r d i n g t h e p r a c t i c e s o f s t a t e - t r a d i n g c o u n tr ie s and w i l l p ro b a b ly re d u c e th e e x te n t o f v io le n c e to th e p r in c ip le s o f m u lti­ l a t e r a l i s m in v o lv e d in s t a t e - t r a d i n g o p e r a t io n s . B ut i t w o u ld a p p e a r t h a t t h e p r o b le m o f d i s c o v e r i n g a s u ita b le p a tte rn o f re g u la tio n of in te rn a tio n a l t r a d e f o r a w o rld c o n ta in i n g s t a t e - t r a d i n g n a t i o n s s t i l l a w a i t s s o l u t i o n . 14 The s o l u t i o n th e so v e re ig n

p e o p le ,

t h e d ile m m a s e e m s t o r e s o l v e a r o u n d

c o n cep t o f th e

lo n g a s a s t a t e w e ll-b e in g ,

to

is

p re se n t-d a y s ta te

i t m ust r e s e r v e f o r

sta n d a rd o f liv in g

i t s e l f th e r i g h t to

own m e t h o d o f a c h i e v i n g t h i s

p u rp o se,

w h e th e r i t

fo r its choose i t s be in th e

i n t h e e c o n o m ic r e a l m . IV .

INTERNATIONAL CARTELS

The r e m a in i n g c h a p t e r lo o p h o le s a re

So

ch arg ed w ith th e t a s k o f p ro v id in g s e c u r i t y ,

and a r e s p e c t i b l e

p o litic a l or

sy s te m .

in th e C h a rte r

c la im e d to e x i s t

is

in w h ic h s e r i o u s

t h a t w h ic h d e a l s

w ith

in te rn a tio n a l c a r te ls . H istro ic a lly ,

th e ta s k s o f i n t e r n a t i o n a l c a r t e l s have

been m a in ly th e d i v i s i o n o f th e t h e i r m em bers, t o p r ic e a g re e m e n ts

i n t e r n a t i o n a l m a r k e t am ong

d o m i n a t e t h e hom e m a r k e t , a n d t o o b t a i n in c o m p e titiv e a r e a s .

w hose s u p p ly o f c a p i t a l i s

1 4 T o w le , o p . c i t . ,

T hus, c o u n tr ie s

l i m i t e d a n d in w h ic h i n d u s t r i e s

pp. 7 7 8 -7 7 9 .

121 a re

s m a l l o r u n o r g a n i z e d a r e no m a t c h f o r c o u n t r i e s w i t h

o rg a n iz e d in d u s tr ie s . A g re em en ts in d e p r e s s i o n s a r e c h a r a c t e r i s t i c o f th e e x is te n c e o f i n te r n a t i o n a l c a r t e l s . V ery f a te f u l fo r in te rn a tio n a l p o litic a l re la tio n sh ip s h a s been th e f a c t t h a t th e n a tio n a l c a r t e l s a re s u p p o r t e d by t h e i r n a t i o n a l g o v e rn m e n ts w i t h a l l th e p o l i t i c a l a n d , i f n e c e s s a r y , m i l i t a r y pow er t h a t c a n be m u s t e r e d . A n u m b e r o f c a r t e l s h a v e b een c o n c lu d e d e v e n b e tw e e n t h e g o v e rn m e n ts o f v a rio u s c o u n t r i e s , a s in th e c a se o f th e I n t e r ­ n a t i o n a l R u b b e r C a r t e l s . 15 The i n t e r n a t i o n a l c a r t e l , o p e ra te s

to e lim in a te

lik e

th e d o m e stic c a r t e l ,

t h e r i s e o f n ew e n t e r p r i s e s .

to r e t a r d t e c h n o l o g i c a l d e v e lo p m e n t, p r o d u c tiv e and to

c h e c k c o n su m p tio n .

v e n tin g a r i s e re s tric tiv e

T hus,

t r a d e d e v i c e v e r y m uch l i k e is

te n d s

e ffic ie n c y ,

i t h as th e e f f e c t o f p r e ­

in th e le v e l o f l i v i n g .

it

It

I t o p e ra te s as th e t a r i f f .

u n lik e

th e t a r i f f ,

ends.

C o n se q u e n tly ,

p la c e s

t h e d e t e r m i n a t i o n o f f o r e i g n e c o n o m ic p o l i c y

a

B u t,

s e t up by b u sin e ssm e n f o r p r i v a t e

i t u s u r p s g o v e rn m e n ta l a u t h o r i t y a n d in to

p riv a te hands. C h a p te r V o f th e on a n i n t e r n a t i o n a l s c a l e

C h a rte r r e p r e s e n ts th e f i r s t to

h a v e ste m m e d f r o m r e s t r i c t i v e e n te rp ris e s . is

d e a l w ith th e p ro b le m s t h a t b u sin e ss

p ra c tic e s

o f c o m m e rc ia l

E a c h c o u n t r y t h a t b e c o m e s a m em b er o f t h e

c o m m itte d to

Y ork;

a tte m p t

ta k e a p p r o p r ia te m easu res and to

ITO

c o o p e ra te

15 c . A d d i s o n H i c k m a n , W o r l d E c o n o m ic P r o b l e m s P itm an P u b l i s h i n g C o r p o r a t i o n , 1 9 4 7 ), p . 1 7 6 .

(Hew

122

with, th e O r g a n iz a tio n in an e f f o r t t o p r e v e n t p r iv a t e or p u b lic com m ercial e n t e r p r i s e s from a d o p tin g b u s in e s s p r a c t ic e s t h a t r e s t r a i n c o m p e t it io n , l i m i t a c c e s s t o m a r k e ts, o r su p p o rt m o n o p o lis t ic c o n t r o l o f in t e r n a t i o n a l t r a d e , w henever su ch p r a c t ic e s h a v e an a d v e r s e e f f e c t on th e e x p a n sio n o f p ro­ d u c tio n o r tr a d e * Upon c o m p l a i n t b y a n y o f i t s e m p o w e re d t o

in v e s tig a te

t h e m o s t co m m o n ly u s e d w e a p o n s o f

an d c o m b in e s in r e c e n t y e a r s .

f i x i n g o r te rm s to b e o b s e rv e d l e a s e o f any p ro d u c t* b u sin e ss a c t i v i t y ,

in

a llo c a tio n

These a r e :

th e p u rc h a s e , o f m a rk e ts ,

th e

p a te n te d or u n p a te n te d ;

sa le ,

or

a g a in st

lim itin g o f p ro d u c tio n o r th e

f ix in g o f p ro d u c tio n q u o ta s ; d e v e lo p m e n t o r a p p l i c a t i o n

p ric e -

sp h eres o f

o r c u sto m e rs; d is c r im in a tio n

p a rtic u la r e n te rp ris e s ;

ITO i s

t h e h a r m f u l b u s i n e s s p r a c t i c e s w h ic h

e x p e r i e n c e h a s sh o w n t o b e c a rte ls

m em b ers, t h e

p r e v e n t i o n by a g r e e m e n t o f t h e

o f te c h n o lo g y o r in v e n tio n ,

and th e m isu se o f p a t e n t s ,

w h e th e r

tra d e m a rk s,

a n d c o p y r i g h t s . 16

A.

m em ber who i s a d v e r s e l y a f f e c t e d

by c a r t e l p r a c t i c e s

c a r r i e d o n i n o t h e r c o u n t r i e s may c o n s u l t w i t h s u c h c o u n t r i e s d ire c tly .

I t m ay, on t h e o t h e r h a n d , r e q u e s t th e

ITO t o

c o n s u l t d i r e c t l y w i t h t h e o t h e r m e m b e rs w i t h a v i e w t o r e a c h ­ in g a m u tu a lly s a t i s f a c t o r y

16 T o w le , o g . c i t . ,

s o lu tio n .

p. 7 8 3 .

An

a f f e c t e d m em ber may

123 c h o o se to a c t on h i s p la in

in w r itin g

own b e h a l f ,

of c e rta in

a n d i n d o i n g s o , m ay com­

b u sin e ss

in a tio n and d isc o v e ry t h a t th e

p ra c tic e s .

c o m p la in t is

i n v e s t i g a t i o n w i l l t h e n b e c o n d u c t e d by t h e p a rtie s

i t may p u b l i s h t h e

th e p r a c t ic e s

In t h e

is e x c e ssiv e

th e

I f th e O rg a n i­

le v ie d

a t th e se

p ro v isio n s have b een ,

and t h a t ,

on t h e o t h e r

t h e y do n o t go f a r e n o u g h i n d e a l i n g w i t h i n t e r n a t i o n a l

c a rte ls.

to

la tte r

first

in sta n c e ,

i n 11l i m i t i n g

p a rtic ip a te

in g i t

ITO i n w h i c h a l l

in q u e s tio n a r e h a rm fu l,

in t h e m a in , t h a t th e y go to o f a r ,

to

fu rth e r

fa c ts.

T he c r i t i c i s m s

hand,

ju s tifie d ,

c o n c e rn e d w i l l be g iv e n e q u a l h e a r i n g .

z a tio n d e c id e s th a t

U pon e x a m ­

b o th

it

is

s a id th a t th e C h a rte r

th e free d o m o f d o m e s tic b u s in e s s

in f o r e i g n m a r k e t - s h a r i n g schem es and s u b j e c t ­ i n t e r n a t i o n a l a n d n a t i o n a l c o n t r o l 11. 117

in s ta n c e , th e

charge

is

In

th a t

i t m e re ly c r e a t e s a fo ru m f o r i n t e r n a t i o n a l d i s ­ c u s s io n in s te a d o f o u tla w in g c a r t e l s p e r s e . . . ♦ t h a t r e s t r i c t i v e p r a c t i c e s a r e to be ju d g e d , n o t by t h e i r fo rm , b u t by t h e i r e f f e c t s ; t h a t a c t i o n on a c a s e - b y - c a s e b a s i s w i l l be s lo w ; t h a t r e ­ c o m m e n d a tio n s , in i n d i v i d u a l c a s e s , w i l l b e p a s s e d u p o n , n o t be a j u d i c i a l b ody, b u t by p o l i t i c a l a p p o i n t e e s r e p r e s e n t i n g m em ber s t a t e s ; t h a t t h e s e r e c o m m e n d a t i o n s may b e i g n o r e d ; a n d t h a t e n f o r c e ­ m ent i s l e f t t o n a t i o n a l g o v e r n m e n ts .1 8 The p o s i t i o n

ta k e n by th e N a t i o n a l A s s o c i a t i o n o f

M a n u f a c tu r e r s on t h e q u e s t i o n o f c a r t e l s

17 W i l c o x , £ £ . c i t . , 18 I b i d . ,

p . 111.

p p . 1 1 1 -1 1 2 .

is v o ic e d th ro u g h

124 C u r tis E . C a ld e r in an a r t i c l e

o f re c e n t p u b lic a tio n *

He

h o ld s t h a t : C h a p t e r V, o n R e s t r i c t i v e B u s i n e s s P r a c t i c e s * d o e s n o t a p p r e c i a b l y m o d ify t h e p o s i t i o n on c a r t e l s i n t h e w o r l d e co n o m y * I t a llo w s c o m p la in ts t o be m ade, and o u t l i n e s a p ro c e d u re f o r d e a l in g w ith th e m . But n o th in g in th e C h a r te r re s e m b le s even d i s t a n t l y a m o d e r a t e v e r s i o n o f a n t i - t r u s t c o m m it­ m e n ts . F u r t h e r m o r e , C h a p te r V I a l l o w s w id e s c o p e t o i n t e r - g o v e r n m e n t a l c o m m o d ity a g r e e m e n t s , w i t h a l l th e ir v a st p o te n tia litie s fo r r e s tr ic tin g p ro d u c tio n and tra d e * These p r o v i s i o n s a r e e s p e c i a l l y d a n g e ro u s t o an e x p a n d in g w o rld econom y. • • • *1 9v In an a r t i c l e

a p p e a rin g

i n t h e A m e r i c a n E c o n o m ic

R e v ie w , P r o f e s s o r C o rd o n s y n t h e s i s e s t h e a r g u m e n ts e x p o u n d e d by t h e p r o t a g o n i s t s on t h e one h a n d , th e o t h e r . p ro v isio n s

In e f f e c t , h e r p o s i t i o n s triv in g

n e v e rth e le ss, sy s te m o f

to re g u la te

and t h e a n t a g o n i s t s on is

c a rte ls

one o f d o u b t t h a t s u c h w ill be e f f e c tiv e ,

s h e v i e w s w i t h som e d e g r e e o f a p p r o v a l ,

i n v e s t i g a t i o n w h ic h t h e C h a r t e r s e t s u p .

th e

As s h e

says; The p o w e r o f t h e ITO t o c o n d u c t i n v e s t i g a t i o n s may n o t o n l y e x e r c i s e a r e s t r a i n i n g i n f l u e n c e o n m o n o p o listic p r a c tic e s b u t a ls o le a d to th e a c c u ­ m u l a t i o n o f a b o d y o f i n f o r m a t i o n w h i c h may e v e n t u a l l y f o r m t h e b a s i s o f a m o re e f f e c t i v e sy s te m o f i n t e r n a t i o n a l r e g u l a t i o n . H e re , as in t h e c a s e o f s o m any o f t h e C h a r t e r ’ s p r o v i s i o n s , m uch w i l l d e p e n d o n t h e m a n n e r i n w h i c h t h e p o w e r s o f t h e ITO a r e a d m i n i s t e r e d . 2 0 ^•9 C u r t i s E . C a l d e r , nW h a t* s W rong W i t h T h e I T 0 , M U n i t e d N a t i o n s W o rld , V o l. 3 (J u n e 1 9 4 9 ) , p . 5 3 . 2 0 M a r g a r e t S . C o r d o n , MP r o b l e m s o f t h e ITO**, A m e r l o a n E c o n o m ic R e v i e w , V o l . 3 9 , N o . 3 , (May 1 9 4 9 ) , p . 2 4 7 .

CHAPTER V III CONCLUSIONS The a d o p t i o n o f a f o r e i g n c o m m e r c i a l p o l i c y b y a n y o n e n a t i o n h a s b e e n , t h r o u g h o u t t h e m an y y e a r s , a u n i l a t e r a l p ro c e ss fo r th e

purpose o f s e c u rin g s p e c i f i c

ages v is - a - v is o th e r c o u n tr ie s ♦

T he r e s u l t

tra d in g a d v a n to f such a c tio n

h a s b een to f o s t e r th e g ro w th o f a body o f r e s t r i c t i v e

m ea­

s u r e s w h i c h , when p l a c e d a t t h e d i s p o s a l o f a n a t i o n f i r e d w ith th e d e s ir e

o f p r o te c tin g th e

d e v e lo p m e n t o f i t s

econom y, h a s p la y e d h a v o c w ith t h e o r d e r l y

in te rn a l

flo w o f i n t e r ­

n a tio n a l tra d e * I n t h e y e a r s f o l l o w i n g W o r l d War I , u n d erw en t c o n s id e ra b le re fin e m e n t to

th e e x te n t t h a t n a tio n s

e m p lo y in g th em a s a m eans o f i s o l a t i n g th e

"dangerous e le m e n ts M lu r k in g

th e s e m easures

th e ir

eco n o m y f r o m

in t h e i r m id s t a c t u a l l y

h a s t e n e d th e a r r i v a l o f a w o rld d e p r e s s i o n .

T hus, th e f e a r

t h a t t h e p o s t - w a r y e a r s o f W o rld War I I w o u l d a g a i n w i t n e s s th e r e t u r n

to

th e w id e sp re a d u se o f tr a d e b a r r i e r s ,

c a s e r e c o n s t r u c t i o n w o u ld b e h a r m f u l l y U n ite d S ta te s fie ld

in

c a llin g

im p e d ed ,

f o r a code o f f a i r

in w h ich

p ro m p te d t h e

p ra c tic e s

in th e

o f i n t e r n a t i o n a l com m erce. The t r a d e

c h a r t e r t h a t em erged fro m H avana a f t e r t h r e e

y e ars o f in te n siv e p re p a ra tio n o f th e p a r t i c i p a ti n g n a tio n s

is

a n o b l e a t t e m p t on t h e p a r t

t o d e a l w i t h a p ro b le m w h ic h

t o u c h e s t h e s e n s i t i v e n e r v e s o f s o m an y c o u n t r i e s .

But in

t h e l i g h t o f t h e e c o n o m ic a n d f i n a n c i a l c o n d i t i o n s o f t o d a y

12 6 and w hat su c h c o n d itio n s a r e cannot h e lp but to

lik e ly

to be in

th e f u t u r e ,

one

c a s t d o u b t upon th e l ik e l ih o o d o f th e

C h a r t e r b e co m in g a n i n s t r u m e n t f o r

su ccessfu l in te rn a tio n a l

e c o n o m ic c o o p e r a t io n * One c a n o n l y c o n j e c t u r e a s w i l l be re n d e re d tio n , to

in o p e ra tiv e

by p r o v i n g i t s e l f

w h e th e r t h e C h a r te r

by d e f a u l t o r , a f t e r r a t i f i c a ­

f a u l t y and in a d e q u a te

in th e y e a r s

come w hen i n t e r n a t i o n a l t r a d e r e s u m e s a m o re n o r m a l

p a tte rn .

N e v e rth e le ss,

o u t th e b e l i e f t h a t th e if

to

it

succeeds

p re se n t in d ic a tio n s life

seem t o b e a r

e x p e c ta n c y o f th e H avana C h a r te r ,

i n b e co m in g a n i n t e r n a t i o n a l i n s t r u m e n t ,

be d e te r m i n e d b y t h e s p e e d w i t h w h ic h t h e n a t i o n s w o rld r e t u r n

to enhance th e d riv e

p rey to a l l

th e in g e n io u s d e v ic e s d e s ig n e d

in d iv id u a l n a tio n s

o f th e w o rld

e n d o f W o rld War I I ,

th e U n ite d S ta te s

r e m a i n e d t h e o n l y m a j o r p r o d u c i n g c o u n t r y w h o se p l a n t w as u n t o u c h e d b y t h e r a v a g e s o f w a r . expand to

a lly

in d u stria l

In d eed ,

it

w as

s u c h p r o p o r t i o n s t h a t a s u d d e n c o n t r a c t i o n w o u ld

have p r e c ip ita te d hand,

in t h e i r

to w a rd a n a rc h y .

At th e

to

o f th e

t o n o r m a l c y «• a t i m e w hen i n t e r n a t i o n a l t r a d e

w i l l a g a in f a l l

se lfis h

w ill

w id e s p r e a d u n e m p lo y m en t.

On t h e o t h e r

t h e r e w ere c o u n t r i e s t h r o u g h o u t t h e w o r ld * d e s t r o y e d by t h e w a r, fo u n d th e m s e lv e s

0

,

c ritic a lly

n e e d o f fo o d and m a c h in e ry w ith w h ic h t o r e v i v e t h e i r T he s i t u a t i o n ,

th e n , as

it

p re v a ile d

v irtu ­ in econom y.

d u rin g th e C h a rte r

127 n e g o t i a t i o n s w as t h e e x i s t e n c e , o n t h e o n e s i d e , U n ite d S ta te s * o s e to e x p o rt h e a v ily On t h e o t h e r ,

d ia te

a c q u isitio n

in o r d e r t o m a in ta in

its

c o u n trie s

in te rn a l s ta b ility *

w h o se n e e d s w e r e

t h e i r v ery s u r v iv a l depended upon th e

in th e

th e

to g e t* lig h t

o f such p o st-w a r c o n d itio n s ,

U n i t e d S t a t e s G o v e r n m e n t was q u i t e w i l l i n g

th e

to p re s s f o r th e

e sta b lish m e n t o f an in te r n a tio n a l tra d e o rg a n iz a tio n its

imme­

o f t h e m eans o f p r o d u c t i o n a n d o f a l l

f o o d t h e y w ere a b l e T hus,

e x p a n d e d econom y dem anded t h e f r e e d o m

t h e r e w ere t h o s e

so num erous t h a t

o f th e

w ith

c o n c o m ita n t p r i n c i p l e s o f an o v e r - a l l r e d u c t i o n o f th e

num erous

im p e d im e n ts t o w o rld t r a d e .

in th e y e a rs

For th e U n ite d S ta te s ,

im m e d ia te ly f o llo w in g th e w ar, c o u ld h a r d l y

hav e been co n ce rn e d w ith a sudden r i s e

o f an e x p o r t a b l e

s u r p l u s o f g o o d s f l o o d i n g t h e A m e ric an m a r k e ts fro m c o u n t r i e s o t io s e c a p a c i t y t o p r o d u c e u n d e r w e n t c o n s i d e r a b l e The r e m a i n i n g c o u n t r i e s w e r e e q u a l l y a s w i l l i n g

d e stru c tio n * to

e x p e d ite

t h e f lo w o f i n t e r n a t i o n a l com m erce, s i n c e t h e l o w e r i n g o f tr a d e b a r r i e r s m eant l i t t l e

i f any h arm t o

c o u n trie s

w h ic h

p l a c e d m a j o r e m p h a s is on t h e q u a n t i t y o f g o o d s t h e y w ere a b le to s e c u r e . But th e s e

are s h o rt-ru n

m e m b e rs d e s i g n e d t o

c o n s id e r a tio n s by a l l

g a i n f o r th e m s p e c i f i c a d v a n t a g e s

p e rio d o f d ir e need and r e c o n s tr u c tio n c o n te m p o ra ry i n t e r n a t i o n a l sc e n e *

th e in a

th a t c o n stitu te s

th e

Vvhat w i l l t h e a t t i t u d e

be

128 o f th e se

sam e c o u n t r i e s

in term s o f th e r e d u c tio n o r e lim in a ­

tio n o f r e s tr ic tiv e

m e a s u r e s t o w o r l d t r a d e w hen a n d i f

p ro d u c tiv e c a p a c ity

o f th e p re s e n tly -im p o v e ris h e d n a tio n s

rec o v er to

th e e x te n t th a t th e r e

w ill be su rp lu se s

th e

to d i s ­

posed of? In th e to

lig h t o f th is

suppose t h a t v o ic e s

o th e r re a so n a b le sp irit,

is not u n re a so n a b le th e

F or a r e f l e c t i o n upon th e h i s t o r y

of ta r if f

le g isla tio n

c o n c lu sio n th a n th a t

« h ic h c o n tin u e s to p r e v a il

a g a in r i s e

it

w i l l a g a in be h e a r d e x t o l l i n g

v ir tu e s o f p ro te c tio n ism * o f A m e ric a in t h e f i e l d

reco v ery ,

can l e a d to no

th e p r o te c tio n is tic .

in A m e ric an s o c i e t y ,

to r e a c t v e h e m e n tly a g a i n s t an y t h r e a t to

w ill

its

i n d u s t r y o r m a rk e t* We h a v e s e e n h o w t h e U n i t e d S t a t e s G o v e r n m e n t h a s a tte m p te d to r e v e r s e th e t r e n d to w a rd h i g h e r

im p o rt d u t ie s

by e n a c t i n g th e R e c i p r o c a l T ra d e A g re em en ts A ct and by s tr o n g ly a d v o c a tin g o rg a n iz a tio n * lis h e d

little

b a rrie rs• as h ig h ,

in te rn a tio n a l tra d e

B ut th e T ra d e A g re em en ts P ro g ra m h a s accom p­ in

t h e way o f s u b s t a n t i a l l y

re d u c in g tra d e

T he l e v e l o f d u t i e s o n m any i t e m s c o n t i n u e t o b e o r n e a rly

t a r i f f a c t* b o d ie d in

th e fo rm a tio n o f an

so, as

t h e y w e re u n d e r t h e H aw ley -S m o o t

F u r t h e r m o r e , t h e n u m b e r o f e s c a p e c l a u s e s em­

th e tr a d e

a g re e m e n ts c l e a r l y

re fle c ts

th e s e n t i ­

m e n ts o f t h e U n i t e d S t a t e s G o v ern m en t to w a rd s t h e s p i r i t o f p ro te c tio n ism *

129 N o tw ith sta n d in g

th e n o b le e f f o r t s

put fo rth

by t h e

A m e r i c a n G o v e r n m e n t i n p r o m o t i n g t h e IT O , t h e C h a r t e r w i l l pro v e i n e f f e c t i v e , o f p re c lu d in g

a ssu m in g i t

th e u se

com es i n t o

f o r c e , a s a m eans

o f p r o te c tiv e d e v ic e s

i f a n d w hen t h i s

c o u n try

is

c o n f r o n t e d w i t h s u r p l u s e s a t hom e a n d f r o m a b r o a d *

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s i t u a t i o n , th e U n ite d S t a te s h as t h e

d ir e c tio n s to

fo llo w ,

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b o th o f w h ic h a u g u r i l l

c h o i c e o f tw o f o r th e fu tu re

When g o o d s b e c o m e i n c r e a s i n g l y m o re

s h e may c h o o s e n o t t o

b e g u i d e d b y H ie p r i n c i p l e s

o f t h e C h a r t e r b u t t o t a k e w h a t e v e r s t e p s s h e deem s n e c e s ­ sary

to p r o t e c t h e r i n t e r n a l econom y.

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to

th e C h a rte r to

p re v e n t such a c tio n

do s o t o g e t h e r w i t h t h e w e a k n e s s o f

s o m u ch o f a p o s s i b i l i t y . sa m e r e a s o n s c o u n trie s

ta k e n

I t is h e r p re ro g a tiv e

t h a t m akes t h i s

a ttitu d e

S im ila r s te p s f o r p r e c is e ly th e

in itia lly

o r i n r e p r i s a l b y o t h e r m em ber

w i l l o b v io u s ly r e n d e r t h e C h a r te r u s e l e s s a s an

i n s t r u m e n t f o r e c o n o m ic c o o p e r a t i o n .

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on t h e o t h e r h a n d ,

t h e U n i t e d S t a t e s G o v e r n m e n t d e c i d e s t o t e r m i n a t e h e r m e m b er­ s h i p In th e

ITO a s a r e s u l t o f p r e s s u r e

t e c t i o n i s t g ro u p s,

fro m i n t e r n a l p r o ­

th e O rg a n iz a tio n w ill c o lla p s e

w i t h o u t h e r m e m b e rsh ip ,

it

w i l l be m e a n in g le s s .

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sin c e

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c o n fro n te d w ith th e r e t u r n

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of

t o w ard o f f a n y i m i n e n t

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ITO w h e n e v e r a d v e r s e

F u rth e rm o re , h i s t o r y

c o n d i t i o n s c o n f r o n t th em *

b e a rs o u t th e f a c t th a t

j u s t n e v e r seem t o g ro w u p ; a n d a s t h e m ore i n t e n s e ,

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t h e d e v e l o p m e n t o f n ew i n f a n t

i n d u s t r i e s a s a m eans o f

e n h a n c i n g n a t i o n a l s e c u r i t y w i l l b e co m e t h e f o r t h o s e m em ber n a t i o n s t o th e flo w o f tr a d e

in fa n t in d u s trie s

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t h a t t h e y may c h o o s e *

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is

n o t to be reg ard ed as

d e m n a tio n o f th e H avana C h a r te r p e r s e *

a s h a rp con­

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s h o u l d b e com m ended f o r p r o d u c i n g a n i n s t r u m e n t t h a t d e l v e d so c o m p re h e n s iv e ly w ith w hat i s p ro b le m t h a t f a c e s th e n a ti o n s t io n upon th e v a s t a re a s

p r o b a b l y t h e m o s t co m p lex o f t h e w o rld to d a y *

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o f d isa g re e m e n t can r e a d i ly p o in t

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th e ty p e o f o r g a n iz a tio n

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m akers h a d in te n d e d

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th e ir re s p o n s ib ility

f u n c t i o n i f we a r e t o does n o t a p p e a r lik e l y

p re d ic t i ts

to w a r d m a k in g t h e

success o r f a ilu r e .

in ITO

It

t h a t th e n a tio n s o f to d a y a r e w i l l i n g

p la c e even a sm a ll f r a c t i o n

h a n d s o f a n o u t s i d e body* th e

to be*

p a r t i c i p a t i n g m e m b e rs a n d t h e m a n n e r a n d l i m i t a t i o n s

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to

it

of t h e i r so v e re ig n ty

in th e

E s p e c i a l l y w o u ld t h e y f r o w n u p o n

s u r r e n d e r o f t h e i r r i g h t t o d e t e r m i n e e c o n o m ic p o l i c y

w hen t o d a y i t

i s re g a rd e d as an in d is p e n s ib le

h a n d s o f g o v ern m en t to a c h ie v e and m a in ta in

to o l in

th e

t h e i r freed o m

and s u r v iv a l. A lth o u g h th e C h a r te r ,

in i t s

p r e s e n t fo rm , r e p r e ­

s e n t s a c o m p ro m ise i n s t r u m e n t d e v o i d o f a n y e f f e c t i v e o f c o n stra in t over i t s

m em ber n a t i o n s ,

it

is

pow er

s t i l l an im p o r­

t a n t s t e p f o r w a r d to w a r d s t h e e v e n t u a l a b a n d o n m e n t o f e c o n o m ic a n a r c h y in o u r c o n te m p o ra ry fin a l a n a ly sis,

In te rn a tio n a l s o c ie ty .

th e su c c e ss o f th e

w illin g n e ss o f i t s

ITO r e s t s

m e m b e rs t o m ak e I t

In th e

w h o lly upon th e

s u c c e e d .* ^

^ E v id e n c e o f s u c h a d e s i r e i s t h e f a c t t h a t th e U n i t e d S t a t e s d i d n o t d e v a l u e i t s c u r r e n c y when G r e a t B r i t a i n d id so an d h a s n o t p r o t e s t e d to o s e r i o u s l y a g a i n s t B r i t i s h r e s t r i c t i o n s on U n i t e d S t a t e s e x p o r t s .

132 BIBLIOGRAPHY A.

O FFICIA L PUBLICATIONS

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And W rong June 1949,

R ig h t

" B u i l d i n g A New W o r ld E c o n o m y .” U . S . D e p a r t m e n t o f S t a t e , C o m m e rcia l P o l i c y S e r i e s 9 4 , W a sh in g to n , 1946. C la y to n , W illia m L ., " G e n e v a D r a f t o f ITO S e t s a P r a c t i c a l P a t t e r n f o r W o rld T r a d e . ” U . S . D e p a r t m e n t of S ta te , B u lle tin , V o l. X V II, N o. 4 2 9 , S e p t . 2 1 , 1947, p p . 5 9 2 -5 9 4 . " D r a f t C h a r t e r F o r T h e ITO O f T h e U n i t e d N a t i o n s . ” U .S . D e p a rtm e n t o f S t a t e , C o m m ercial P o l i c y . S e r i e s 106, W a sh in g to n , 1 947, ”H a b a n a M e e t i n g o f U .N . C o n f e r e n c e On T r a d e A nd E m p l o y m e n t . " U .S . D e p a rtm e n t o f S t a t e , B u l l e t i n , V o l. X V III, No. 44 5 , Ja n . 11, 1948, p p . 39-4 2 . "H avana C h a r te r f o r a n I n t e r n a t i o n a l T rad e O r g a n iz a t i o n ." U .S . D e p a r tm e n t o f S t a t e , C o m m e rcia l P o l i c y S e r i e s _ 114, W ash in g to n , 1 948. "New H o r i z o n s f o r W o rld T r a d e . ” U . S . D e p a r t m e n t o f S t a t e , C o m m e rcia l p o l i c y S e r i e s 9 0 , W a sh in g to n , 1 946.

133 " P r e lim in a ry D r a f t - (c h a rte r f o r th e I n t e r n a t i o n a l T rade O r g a n i z a t i o n o f t h e U n i t e d N a t i o n s . 11 U . S . D e p a r t m e n t of S ta te , C o m m e rcia l P o l i c y S e r i e s - 9 8 , W ash in g to n , D ec. 1946. " P r e lim in a r y P r o p o s a l f o r an I n t e r n a t i o n a l T rad e O rg an ­ i z a t i o n . ” U .S . D e p a rtm e n t o f S t a t e . C o m m ercial P o lic y S e rie s 99, W ash in g to n , 194 7 . n P r o p o s a l s F o r E x p a n s i o n O f W o rld T r a d e And E m p l o y m e n t . ” U .S . D e p a rtm e n t o f S t a t e , C o m m e rcia l p o l i c y S e r i e s 79, W a sh in g to n , 1 9 4 5 . "S u g g e ste d C h a rte r f o r an I n t e r n a t i o n a l T rade O rg a n iz a tio n o f th e U n i t e d N a t i o n s . ” U .S . D e p a rtm e n t o f S t a t e . C o m m e rcia l P o l i c y S e r i e s 9 3 , W a sh in g to n , S e p t . 194 6 . ” T h e G e n e v a C h a r t e r F o r An I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n : I n t r o d u c t i o n a n d G e n e r a l C o m m e rcia l P r o v i s i o n s . ” U .S . D e p a rtm e n t o f S t a t e , B u l l e t i n , V o l. X V II, No. 430, S e p t. 2 8 , 1947, p p . 6 0 3 -6 0 6 . ” T he G e n e v a C h a r t e r F o r An I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n : Q u a n t i t a t i v e R e s t r i c t i o n s . ” U .S . D e p a rtm e n t o f S t a t e , B u lle tin , V o l. X V II, N o .-4 31, O c t. 5 , 1947, p p . 6 6 3 -6 7 0 . ” T he G e n e v a C h a r t e r F o r An I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n : S u b s i d ie s an d S t a t e T r a d i n g .” U .S . D e p artm en t o f S t a t e , B u lle tin , V o l. X V II, N o. 4 3 2 / O c t .’ T 2 , 1 9 4 7 ,' p p . 7 1 1 - 7 1 4 . ” T he G e n e v a C a rte l IT O .” x v ii,

C h a r t e r F o r An I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n : a n d C o m m o d ity P o l i c y a n d C o n s t i t u t i o n o f t h e U .S . D e p a rtm e n t o f S t a t e , B u lle tin , V o l. N o ; 4 3 -4 7 ' O c t”. 2 6 ", isar; p pV7 5 7 - 7 9 4 .

” T h e G e n e v a C h a r t e r F o r An I T O . ” U . S . D e p a r t m e n t o f S t a t e , C o m m e rcia l P o l i c y S e r i e s 1 0 7 , W ash in g to n , 1 9 4 7 . ” Th@ I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n - How W i l l I t W o rk ? ” U .S . D e p a rtm e n t o f S t a t e , C o m m e rcia l P o l i c y S e r i e s 92, W a sh in g to n , 1 9 4 6 . ” T he T a r i f f And I t s H i s t o r y . ” U n i t e d S t a t e s T a r i f f C o m m issio n , M isc . S e r i e s , G overnm ent P r i n t i n g O f f i c e , W ash in g to n , D .C ., 1934, 109 p p .

134 "The U n i t e d S t a t e s R e c i p r o c a l T r a d e -A g r e e m e n ts P ro g ra m And T he P r o p o s e d I n t e r n a t i o n a l T r a d e O r g a n i z a t i o n . " U. S. D e p a rtm e n t o f S t a t e , B u l l e t i n , V o l. X V III, No. 4 5 5 , M arch 2 1 , 1 9 4 8 , p p . 367 -3 7 3 . " T w e n t y - f i v e Q u e s t i o n s A nd A n s w e r s o n t h e P r o p o s e d I n t e r ­ n a t i o n a l T rad e O r g a n i z a t i o n .” U. S . D e p artm en t o f S ta te , O ffic e o f P u b lic A f f a i r s , D ec. 1938, 16 p p . , W a sh in g to n , 1 9 4 8 . U. S . C o n g ress. S e n a t e C o m m itte e on F i n a n c e . In te rn a tio n a l T rad e O r g a n iz a tio n ; h e a r i n g s , 8 0 th C o n g ., 1 s t . s e s s . , on T r a d e A g r e e m e n t s S y s t e m a n d P r o p o s e d I n t e r n a t i o n a l T rade O r g a n iz a tio n C h a r te r : M a rc h 2 0 - A p r i l 3 , 1 9 3 7 , W a s h in g to n , G overnm ent P r i n t i n g O f f i c e , 1947 2 v . W h i t e , E r i c W ., "ITO - T a s k O f I n c r e a s i n g W o r l d T r a d e . ” U. N. B u lle tin , V o l. V I, Ja n . 1, 1949, p. 42. , " P ro g re s s A t A nnecy: U . N. B u l l e t i n , V o l. V II,

An I n t e r i m R e p o r t . ” Ju ly 1, 1949, p p . 1 7 -1 9 .

W ilc o x , C l a i r , "B a sic P r i n c ip l e s in E s ta b lis h m e n t o f I n t e r n a t i o n a l T rad e O r g a n iz a tio n ." U .S . D e p a rtm e n t of S ta te , B u lle tin , V o l . XV, N o . 3 8 2 , O c t . 2 7 , 1946, W a sh in g to n , 1946. , " T h e A m e r i c a n T r a d e P r o g r a m , W hat Do We H av e At S ta k e ? " U .S . D e p a rtm e n t o f S t a t e , C o m m e rc ia l P o lic y S e rie s 100, W a sh in g to n , 1 9 4 7 . _____________ , " T h e G e n e v a C h a r t e r F o r W o rld T r a d e . " U .S . D e p a rtm e n t o f S t a t e , B u lle tin , V o l. X V II, No. 4 3 5 , Nov. 2 , 1 9 4 7 , p p . 8 8 1 -8 8 6 , W ash in g to n , 1 9 4 7 . W i l l o u g h b y , W o o d b u ry , " P o s t w a r C o m m e r c i a l P o l i c y O f T he U .S ." U. S . D e p artm en t o f S t a t e , B u l l e t i n , V o l . X IX , N o . 4 8 0 — S e p t 7 " T 2 r i S I S , — p p . 3 2 B - 3 2 5 I -----------B.

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G a y e r, A r th u r D ., and C a r l T. S c h m id t, A m e r i c a n E c o n o m ic F o r e i g n P o l i c y . New Y o r k ; A m e ric an C o o r d i n a t i n g C o m m itte e F o r I n t e r n a t i o n a l S t u d i e s , 1939. 286 p p . G o rd o n , M a rg a re t S . , B a r r i e r s To W o r l d T r a d e . The M a c m i l l a n C o m p an y , 1941. 530 p p .

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H a r r i s , S eym our, F o r e i g n E c o n o m ic P o l i c y F o r T h e U n i t e d S t a t e s . C a m b rid g e: H a rv a rd U n i v e r s i t y P r e s s , 1948, 490 p p . H e l l p e r i n , M ic h a e l A ., A lf r e d A . K nopf,

The T ra d e Of N a t i o n s . 1947, 234 p p .

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136 P a t t e r s o n , E r n e s t M ., An I n t r o d u c t i o n To W o rld E c o n o m i c s . New Y o r k : The M a c m illa n C om pany, 1947. 704 p p . S a y re , F r a n c is B ., T h e Way F o r e w a r d . New Y o r k : M a c m i l l a n C o m p an y , 1939. 230 pp.

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