‘Foreign Economic Policy’

September 7, 1953

President Eisenhower and Congress have jointly appointed a seventeen-member Commission on Foreign Economic Policy, under the able leadership of Clarence B. Randall, which is to make a thorough study of the subject and report to Congress next spring.

Actually, the subject is not nearly as intricate and baffling as it is usually made out to be. Most of what is worth saying on the subject has already been said many times. Lewis W. Douglas, for example, our former Ambassador to Great Britain, has already turned in a report to the President that covers most of what the commission is likely to find out. Given the mixed political composition of the commission, indeed, the country will be fortunate if its report turns out to be, on the whole, nearly as sensible and balanced as the Douglas report. Obviously, the best way to increase the volume of world trade is to reduce or remove the barriers to it. And as it is always sound ethical policy to extract even a mote from our own eye before calling attention to even a beam in our neighbor’s, the first thing for us to do, as Douglas insists, is “to commence to remove from our own policies the impediments to freer trade and currencies.” The Eisenhower Administration has already made a good start by continuing the reciprocal-trade treaties and by some simplification of customs procedures. But to set a good example it should reduce tariffs even further. Certainly it should abolish import quotas, which are far more disruptive to foreign trade and good relations than even a formidable tariff barrier.

Nevertheless, if we were to wipe out the last vestige of our own tariffs and quotas, it is doubtful whether, except in a few special items, our imports would increase very much. For by far the major barriers to our foreign trade today are erected by other nations. Bilateral treaties, import quotas, and prohibitions, and above all, exchange control, which are practiced, with our tacit approval, by most of our aid recipients, not only reduce and disrupt foreign trade incomparably more than tariffs do, but inevitably lead to “planned” and regimented domestic economies.

The Douglas report also emphasized the need of restoring international private investment. This would promote the most rapid world economic expansion, particularly the expansion of the so-called underdeveloped areas. But what is still not generally recognized is that the greatest obstacle to the restoration of international private investment is the existence of governmental handouts from the United States. For private investment is made only where the political and economic climate is attractive. This means, among other things, assurance against socialization, seizure, excessive taxes, onerous price-fixing, wage-fixing, or profit limitation, and obstacles to the transfer of profits or currency. But it has been found by experience (what should have been obvious anyway) that as long as an “underdeveloped” country can cajole or blackmail the United States Government into giving it handouts, it need not make, and will not make, any of the reforms necessary to attract private capital.

Iran provides a perfect illustration. Mossadegh having impoverished both the government and the country by seizing the British oil refineries, his successors demand our aid while still insisting that they must keep the stolen property. And if (under their threat or our fear that they will otherwise go Communist) we are foolish enough to give them this aid without demanding the return of the expropriated property to its British owners (or at the very least reasonable compensation for it), then we shall not only be condoning but encouraging such seizures everywhere, thereby still further postponing any restoration of international private investment. The policy of making U.S. Government handouts to foreign socialistic governments not only fails to enrich the world but tends to impoverish it, because it sets back the economic recovery of the recipient country as well as our own.