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RECIPROCAL TRADE AGREEMENTS PROGRAM

TUESDAY, APRIL 15, 1947

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D. C.

The committee met at 10 a. m., pursuant to notice, in the hearing room of the Committee on Ways and Means, New House Office Building, Hon. Daniel A. Reed presiding.

Mr. REED. The committee will be in order. At this time we will call the first witness.

Mr. DOUGHTON. At this time I will ask unanimous consent to insert in the record the address by the President on the subject, "Peace, Freedom, and World Trade."

Mr. REED. That is perfectly all right, if there is no objection. (The address is as follows:)

PEACE, FREEDOM, AND WORLD TRADE-ADDRESS BY THE PRESIDENT 1

It is with a real sense of gratification that I meet with you today on the beautiful campus of Baylor University in Waco. I congratulate you on the outstanding achievements of this great university during the 101 years of its existence. I am sincerely grateful for the degree of Doctor of Laws that you have bestowed upon me, and I am honored to become a fellow alumnus of the distinguished men and women of this institution who have contributed so much to make our country great.

At this particular time, the whole world is concentrating much of its thought and energy on attaining the objectives of peace and freedom. These objectives are bound up completely with a third objective-reestablishment of world trade. In fact the three-peace, freedom, and world trade-are inseparable. The grave lessons of the past have proved it.

Many of our people, here in America, used to think that we could escape the troubles of the world by simply staying within our own borders. Two wars have shown us how wrong they were. We know today that we cannot find security in isolation. If we are to live at peace, we must join with other nations in a continuing effort to organize the world for peace. Science and invention have left us no alternative.

After the First World War, the United States proposed a League of Nations, an organization to maintain order in the world." But when our proposal was accepted and the League was established, this country failed to become a member. Can any thoughtful person fail to realize today what that mistake cost this nation and cost the world?

This time we are taking a different course. Our country has taken a leading part in building the United Nations, in setting up its councils, its committees and cominissions, and in putting them to work. We are doing everything within our power to foster international cooperation. We have dedicated ourselves to its success.

This is not, and it must never be, the policy of a single administration or a single party. It is the policy of all the people of the United States. We in America are unanimous in our determination to prevent another war.

But some among us do not fully realize what we must do to carry out this policy. There still are those who seem to believe that we can confine our coop

1 Delivered at Baylor University, Waco, Tex., on Mar. 6, 1947, and released to the press by the White House on the same date.

eration with other countries to political relationships; that we need not cooperate where economic questions are involved.

This attitude has sometimes led to the assertion that there should be bipartisan support for the foreign policy of the United States, but that there need not be bipartisan support for the foreign economic policy of the United States.

Such a statement simply does not make sense.

Our foreign relations, political and economic, are indivisible. We cannot say that we are willing to cooperate in the one field and are unwilling to cooperate in the other. I am glad to note that leaders in both parties have recognized that fact.

The members of the United Nations have renounced aggression as a method of settling their political differences. Instead of putting armies on the march, they

have now agreed to sit down around a table and talk things out. In any dispute, each party will present its case. The interests of all will be considered, and a fair and just solution will be found. This is the way of international order. It is the way of a civilized community. It applies, with equal logic, to the settlement of economic differences.

Economic conflict is not spectacular at least in the early stages. But it is always serious. One nation may take action in behalf of its own producers, without notifying other nations, or consulting them, or even considering how they may be affected. It may cut down its purchases of another country's goods, by raising its tariffs or imposing an embargo or a system of quotas on imports. And when it does this some producer in the other country will find the door to his market suddenly slammed and bolted in his face.

Or a nation may subsidize its exports, selling its goods abroad below their cost. When this is done, a producer in some other country will find his market flooded with the goods that have been dumped.

In either case, the producer gets angry, just as you or I would get angry if such a thing were done to us. Profits disappear; workers are dismissed. The producer feels that he has been wronged, without warning and without reason. He appeals to his government for action. His government retaliates, and another round of tariff boosts, embargoes, quotas, and subsidies is under way. This is economic war. In such a war nobody wins.

Certainly nobody won the last economic war. As each battle of the economic war of the thirties was fought, the inevitable tragic result became more and more apparent. From the tariff policy of Hawley and Smoot, the world went on to Ottawa and the system of imperial preferences, from Ottawa to the kind of elaborate and detailed restrictions adopted by Nazi Germany. Nations strangled normal trade and discriminated against their neighbors, all around the world.

Who among their peoples were the gainers? Not the depositors who lost their savings in the failure of the banks. Not the farmers who lost their farms. Not the millions who walked the streets looking for work. I do not mean to say that economic conflict was the sole cause of the depression. But I do say that it was a major cause.

Now, as in the year 1920, we have reached a turning point in history. National economies have been disrupted by the war. The future is uncertain everywhere. Economic policies are in a state of flux. In this atmosphere of doubt and hesitation, the decisive factor will be the type of leadership that the United States gives to the world.

We are the giant of the economic world. Whether we like it or not, the future pattern of economic relations depends upon us. The world is waiting and watching to see what we shall do. The choice is ours. We can lead the nations to economic peace or we can plunge them into economic war.

There must be no question as to our course. We must not go through the thirties again. There is abundant evidence, I think, that these earlier mistakes will not be repeated. We have already made a good start. Our Government has participated fully in setting up, under the United Nations, agencies of international cooperation for dealing with relief and refugees, with food and agriculture, with shipping and aviation, with loans for reconstruction and development, and with the stabilization of currencies. And now, in order to avoid economic warfare, our Government has proposed, and others have agreed, that there be set up, within the United Nations, another agency to be concerned with problems and policies affecting world trade. This is the International Trade Organization.

This organization would apply to commercial relationships the same principle of fair dealing that the United Nations is applying to political affairs. Instead of retaining unlimited freedom to commit acts of economic aggression, its members would adopt a code of economic conduct and agree to live according to its rules.

Instead of adopting measures that might be harmful to others, without warning and without consultation, countries would sit down around the table and talk things out. In any dispute, each party would present its case. The interest of all would be considered, and a fair and just solution would be found. In economics, as in international politics, this is the way to peace.

The work of drafting a world trade charter was begun by the United States. It was carried forward by a Preparatory Committee of 18 nations meeting in London last fall. It should be completed at a second meeting of this committee in Geneva, beginning on April 10.

The progress that has already been made on this project is one of the most heartening developments since the war.

If the nations can agree to observe a code of good conduct in international trade, they will cooperate more readily in other international affairs. Such agreement will prevent the bitterness that is engendered by an economic war. It will provide an atmosphere congenial to the preservation of the peace.

As a part of this program, we have asked the other nations of the world to join us in reducing barriers to trade. We have not asked them to remove all barriers. Nor have we ourselves offered to do so. But we have proposed negotiations directed toward the reduction of tariffs, here and abroad, toward the elimination of other restrictive measures, and the abandonment of discrimination. These negotiations are to be undertaken at the meeting which opens in Geneva next month. The success of this program is essential to the establishment of the International Trade Organization to the effective operation of the International Bank and the Monetary Fund, and to the strength of the whole United Nations structure of cooperation in economic and political affairs.

The negotiations at Geneva must not fail.

There is one thing that Americans value even more than peace. It is freedom: Freedom of worship, freedom of speech, and freedom of enterprise. It must be true that the first two of these freedoms are related to the third. For throughout history freedom of worship and freedom of speech have been most frequently enjoyed in those societies that have accorded a considerable measure of freedom to individual enterprise. Freedom has flourished where power has been dispersed. It has languished where power has been too highly centralized. So our devotion to freedom of enterprise, in the United States, has deeper roots than a desire to protect the profits of ownership. It is part and parcel of what we call American. The pattern of international trade that is most conducive to freedom of enterprise is one in which the major decisions are made not by governments but by private buyers and sellers, under conditions of active competition, and with proper safeguards against the establishment of monopolies and cartels. Under such a system, buyers make their purchases, and sellers make their sales, at whatever time and place and in whatever quantities they choose, relying for guidance on whatever prices the market may afford. Goods move from country to country in response to economic opportunities. Governments may impose tariffs, but they do not dictate the quantity of trade, the sources of imports, or the destina-. tion of exports. Individual transactions are a matter of private choice. This is the essence of free enterprise.

The pattern of trade that is least conducive to freedom of enterprise is one in which decisions are made by governments. Under such a system, the quantity of purchases and sales, the sources of imports, and the destination of exports are dictated by public officials. In some cases, trade may be conducted by the state. In others, part or all of it may be left in private hands. But even so the trader is not free. Governments make all the important choices and he adjusts himself to them as best he can.

Countries that
Their

This was the pattern of the seventeenth and eighteenth centuries. Unless we. act, and act decisively, it will be the pattern of the next century. Everywhere on earth, nations are under economic pressure. were devastated by the war are seeking to reconstruct their industries. need to import, in the months that lie ahead, will exceed their capacity to export. And so they feel that imports must be rigidly controlled.

Countries that have lagged in their development are seeking to industrialize. In order that new industries may be established, they, too, feel that competing. imports must be rigidly controlled.

Nor is this all. The products of some countries are in great demand. But. buyers outside their borders do not hold the money of these countries in quanti

? For text of United States draft charter for an international Trade Organization, see Department of State. publication 2598.

For text of London draft charter for an International Trade Organization, see Department of State. publication 2728.

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