How America Can Help

October 19, 1953

The slogan “Trade, Not Aid” was coined by the British, but most of them do not really mean it. What they still want, as I have pointed out here before is Trade Plus Aid; and their conception of Trade is one-sided rather than reciprocal. Some of them are candid enough to admit, when pressed, that what they want us to do is to abolish our tariffs entirely, while permitting them not only to keep theirs but to continue to discriminate against American goods by quotas or prohibitions. All this is necessary, they blandly explain, to permit them to “close the dollar gap,” to “restore the balance of payments,” and to “build up reserves.”

And they cannot, some of them insist, make the pound convertible unless America is ready not only to abolish its trade barriers but to make them a loan or gift of, say, some $2,500,000,000 to add to their present “totally inadequate” gold and dollar reserves of $2,500,000,000.

The American observer abroad finds, in fact, that our tariff is Europe’s great alibi. For most Europeans it explains why they buy so much more from us than they sell to us; why they have a “dollar shortage”; and why their currency is weak. And they talk, usually, as if the American tariff were fantastically high, and as if their own countries had merely nominal trade barriers or were virtually practicing free trade.

A few facts might somewhat correct these notions. A study by the United States Tariff Commission has shown that the level of our tariffs dropped from 10.6 percent on all imports and 25.8 percent on dutiable items alone, before the Reciprocal Trade Agreements were adopted to 5.4 percent on all imports and 13.3 percent on dutiable items alone in 1951. By contrast, the American Tariff League has published figures to show that ratio of duties to all imports of the United Kingdom in 1951 was 25.6 percent.

Such crude averages, taken merely by themselves, provide inadequate comparisons. But they are enough to indicate that America is today not the sole or even the chief culprit in the matter of tariff barriers. Compared with the exchange controls, bilateralism, quotas, and prohibitions now prevailing in Europe, in fact, the American tariff is today a minor factor in restricting two-way international trade. As a result of a careful study, for example, Howard S. Piquet, formerly chief of the economics division of the United States Tariff Commission, has estimated that if all our tariffs and quotas were suspended it would mean an increase in our imports today of only $800,000,000 to $1,800,000,000 a year.

Nevertheless our British and other European friends have a case: and it would be well for us to heed it. It concerns immediately not so much the absolute level of our tariff as the uncertainties surrounding its future. A British manufacturer, for example, may hesitate to expand his output or sales for our market, as long as he fears that our customs officials may suddenly make some new adverse decision or that Congress may suddenly increase the tariff rate. So if any of us may presume to anticipate the report of the Randall commission (which, judging from that body’s composition, is likely to be split or ambiguous anyway) I should like to suggest that the President call upon the present Congress to pass a resolution pledging itself not to increase any import duty or impose any further quota restriction during its term. The worldwide economic and political effect of such an act could not fail to be wholesome.

Further measures would of course be desirable. The first of them would be to wipe out all our import quotas. And then we might do well to emulate what we did in the tariff of 1833. This provided for a gradual reduction of rates over ten years to a general level of 20 percent. Why couldn’t we now, say, provide for a gradual reduction over ten or twenty years of all tariff rates above 20 percent down to that maximum level, with the sole exception of rates on items vital in time of war, the continued production of which could not be assured in any better way?