No Need for OTC

May 23, 1955

Senator Byrd, as the event proved, showed good sense in putting aside the President’s proposal for an international “Organization for Trade Cooperation” and getting quick action to extend the Reciprocal Trade Act on its own merits.

The OTC proposal places a serious question before Congress. Indeed, it places a serious question before all those who, like the present writer, earnestly wish a lowering or removal of international trade barriers, but doubt whether the creation of one more permanent international organization is the way to get it.

Does the world need, does any single nation need, an elaborate multilateral trade agreement, requiring the consent of 34 nations, and an elaborate bureaucratic machinery, in order to lower trade barriers? Obviously not. The world has already had the old General Agreement on Tariffs and Trade (GATT) since 1947, and international trade barriers where never more fantastic. Yet prior to the first world war, and for that matter prior to the second, the barriers to international trade were far less serious than they are today. If each individual national understands that free trade or at worst only moderate trade barriers are primarily in its own interest, then each national will follow such a policy in its own interest and no international agreement will be necessary. And unless such an understanding exists within individual nations any international agreement or organization will be worthless.

The President’s message to Congress of April 14, advocating U.S. membership in the proposed OTC, was not convincing. Its reference to our membership in the International Monetary Fund, for example, mainly recalls the futility, and worse, of that organization. Mr. Eisenhower’s argument that OTC could “help establish conditions favorable to convertibility of currencies” is depressingly familiar. The IMF was established precisely to stabilize currencies and make them convertible; its actual effect has been to prolong for ten years completely inexcusable policies of internal inflation, external exchange control, trade discrimination, and state control of industry.

All this is not to deny that the revised GATT is in some respects an improvement over the old GATT (and of the proposed ITO), and that in it 34 nations have embodied many sound principles likely to appeal to proponents of freer trade. But the new GATT also embodies and gives official sanction to some thoroughly unsound principles.

Even the new GATT expressly denies the right to require the removal of any country’s quantitative import restrictions which are the result of balance-of-payment difficulties caused by “full employment policies” or by a country’s “underdevelopment.” This is economic claptrap. Can we, or any nation, afford to give it official sanction? So-called “balance-of-payment difficulties” are almost invariably the result of internal inflation combined with exchange control; the country brings them on itself by its own bad policies. It is no consolation to learn that the United States succeeded in obtaining a special concession allowing it to impose quantitative import restrictions itself to protect its farm price-support program. This again gives official sanction to thoroughly unsound policies. These provisions alone, not to mention many others, are enough to invalidate GATT. Why embody this dangerous nonsense in a permanent agreement with an enforcing organization?

The OTC in fact, seems to represent just one more example, not of any real tendency toward international freedom, but a tendency to create ever new supranational bureaucratic organizations for world centralization of power. And the OTC would also deprive Congress of still more of its proper powers under the Constitution. There seems to be no good reason why Congress should vote to establish the OTC. On the contrary, it is rather time that we should start withdrawing from the thoroughly unsound international organizations, typified by the IMF, that stand in the way of freedom, stability, and sound economic progress.