Approximate accuracy of current annual national trade turn projection is maintained by averaging Department of Commerce "revised" figures of the previous 2- or 3-year cycle. Since 1910 "normal" annual national trade turn has increased "permanently" 1 to 12 percent per year (equal technological improvement) depending on prevailing economic conditions.

These periodic "advance" estimates on current national income "produced" have, as you know, since 1939 recovery been in the beginning of the year 2 to 8 percent higher (and as borne out) than the comparable currently reported Department of Commerce estimates. Semifinal estimates at the fall of the year have varied 1 to 11⁄2 percent "high" or "low" compared to Department of Commerce final figures usually published 6 months later.

Mr. WOODRUFF. Thank you. That is all, Mr. Chairman.
Mr. REED. Mr. Mills?

Mr. MILLS. Mr. Chairman, I ask the unanimous consent that I may insert in the record at the conclusion of the testimony and questioning of the witness before the committee a telegraphic report of the press conference of Under Secretary Clayton on his arrival in Geneva, which was received by the State Department on April 18. Mr. REED. With no objections, it will be inserted at the end of this witness' testimony.

Mr. Gearhart?

Mr. GEARHART. I have just a question or two. Mr. Wilken, I cannot sit idly by and allow my friend, Mr. Woodruff, to speak too highly of his relations with you without availing the opportunity of including myself. I think we have had many very interesting conversations on the subject of economics down through the years, and I want to truly concede that I have learned a great deal of this intricate subject at your knee, so to speak.

There are just one or two questions I would like to ask you. They have to do with these barriers, discriminations, which so many witnesses who appear here in support of the reciprocal trade agreement program constantly allude to, barriers, discriminations, and they run into a frenzy of denunciation of the use by foreign nations of import quotas, exchange permits, license permits, and things of that kind. These foreign nations do not indulge in those practices because they hate us and simply want to annoy us, do they?

Mr. WILKEN, No; it is economic self-protection.

Mr. GEARHART. You pointed out a short time ago that the United States alone does about 47 percent of the dollar business of the world. That means all of the rest of the world has got to share the remaining 53 percent, does it not? We are in a much stronger economic position than they are, and we produce at greater efficiency and at lower cost than they.

If they did not indulge in these so-called import quotas, exchange permits, various barriers, and discriminations of different kinds, it would not be any time until we would destroy their markets, is that not true?

Mr. WILKEN. Well, the position in the world is roughly this: Suppose that this theory that is now being considered and with the trade-agreement policy of reducing all tariffs were put in operation. Suppose all tariffs were taken away. The United States, because of its efficiency of production would have the whole world market for manufactured goods. We cannot use it.

We have only got 6 percent of the population of the world, and we produce 95 percent of everything we need right here in the United States.

The question I have often asked is: with the United States doing 47 percent of the dollar business of the world, how much are we entitled to?

We are not satisfied with that. We are going out and taking foreign trade way from somebody else.

Mr. GEARHART. And if any one of those countries on the outside world level has higher barriers on the free flow of American goods into their markets, that nation would be in bankruptcy in no time. We would close all of their local factories and the people of that country would be on the streets, would they not?

Mr. WILKEN. You would have complete world chaos.

It would be an ideal foundation for communism.

Mr. GEARHART. If all lifted barriers, it would simply be a question of how much the United States could extend its production to accomplish their destruction.

Mr. WILKEN. That is right.

Mr. GEARHART. So we should not hate them because the people in these various countries devise ways or means of protecting their standard of living, their economic sphere, and the jobs of their work

men.

We should not hate them for that, should we?

I

Mr. WILKEN. No, we should not hate them, and we never have. do not think any nation has ever hated us on account of our tariffs, because at no period in our history have we ever had any problem of buying things we needed if they were available, that is, if they had not been shut off by war. We have always been able to trade with the rest of the world to the fullest extent.

In round figures, we have been doing about 15 percent of the world trade. We have only 6 percent of the population of the world. We have had more than our share of world trade.

As far as the tariff is concerned, it did not have any more to do with bringing about the war than the woodwork used in building the rostrum.

Mr. GEARHART. When we do get ourselves into trouble, it has always turned out that our allies were countries that had higher tariff barriers than we had ourselves, is that not true?

Mr. WILKEN. We, for some reason or other have been classed as a high-tariff nation, but we are not. The real facts are today if you evaluate your tariff properly and take into consideration currency devaluation, we do not have any tariff.

Sixty-five percent of our products come in duty free, and because of the currency devaluations we are actually paying an import bounty on that part of our import.

If you were to assess that currency devaluation over our whole import structure, our tariff is less than nothing. For all practical purposes we have no tariff.

Mr. GEARHART. When we got into this last war, American soldiers, Russian soldiers, and British soldiers fought valiantly side by side.

The Russians have the highest tariff that is possible for a government to erect. They do not let anything come in except on a permit. The British have a higher tariff than we have. The three of us fought this war together.

Do you think that the tariffs had anything to do with the continuation of that war?

Mr. WILKEN. No. In fact, I think our failure to have proper tariff protection in the late 1920's brought on the depression. We could have maintained our price and prosperity. That depression in the United States created the groundwork in the rest of the world for the growth and development of the ideologies of Hitler, Mussolini, and Russia.

It might be interesting in this connection to make this point: under the Marxian doctrine they believe in free trade. They do not believe in free trade for the purpose of creating peace. Marx, in his speech in Brussels in 1848, said he was for free trade because it was destructive and would hasten the day of revolution.

That is a very interesting statement.

Mr. GEARHART. Healthy trade is a trade balance on need as you pointed out a moment ago. Therefore, a scientific tariff would be one which made it possible for the American people to obtain abroad those things which they need and cannot produce for themselves, or if producing some for themselves, cannot produce enough to supply their needs.

Healthy export trade is a trade which gives to the people of the outside world from the American productive capacity the things they need.

Is that not correct?

Mr. WILKEN. That is right.

Mr. GEARHART. If trade is kept on that basis, it is healthy and it is economical. If a situation is created where improper barriers are raised by nations where countries are compelled within their own borders to face competition and classifications of activities where they produce enough, that is an artificial situation and is bound to cause trouble, is it not?

Mr. WILKEN. In the history of the United States, if you review it, taking in the various tariff laws we have had going back to the first Congress, up until about 1900 all our revenue to carry on the Government came out of tariffs, except a few excise taxes on alcohol and tobacco.

Every time we reduced a tariff in that period, two things happened: one was that it reduced our price levels, which of course brought on the depression.

It took 2 or 3 years, but it brought it on. The other thing was our Government ran short of money.

Then they revised the tariff upward, and our price level was restored and our Government had money to function.

The same principle holds true today. The only effect a tariff reduction will have is to temporarily start a flow of goods to the United States, but with the United States producing 95 percent of everything it needs, it will force our price level down to compete with them.

We will lose half of our income. Then after our price structure is leveled off at a lower level, we will actually lose the income we might have had.

Mr. GEARHART. Let us consider the situation of outside countries, say, Great Britain. I read in the columns of the London Daily Mail that the cost of an American automobile in British pounds was $635; that the cost of a British-produced automobile was about £800. If we were to be allowed by the British to ship our American automobiles

into the British market without the restraint of a tariff, what would happen to the British automobile industry they are endeavoring to develop?

Mr. WILKEN. They would not have it.

Mr. GEARHART. All the workmen that are working in those factories producing British automobiles would lose their jobs also. Mr. WILKEN. That is right.

Mr. GEARHART. Dislocation would be caused in the British market immediately. They have to do something about it. They do that something by erecting a barrier which equalizes the competition of an American automobile with the British.

Can anybody blame the British for that?

Mr. WILKEN. No.

Mr. GEARHART. It is necessary for the general stability of the world market that that be done by all the different countries with respect to the different items of production, is that not true?

Mr. WILKEN. That is true. I might point out this factor. I think Great Britain is committing economic suicide by devoting all of her attention to the export market.

As I pointed out in the beginning, her export trade is not as profitable as her own domestic trade. She is rationing her own people just for the sake of exports. She is not going to make any profit that way.

Mr. GEARHART. Some Britishers get some foolish ideas too. As Americans fight for the reciprocal trade agreement here, Britishers fight for the British export trade.

That is equally fallacious, is it not?

Mr. WILKEN. Their greatest problem is their internal problem. They are rationing their people for the sake of exports. Their export trade does not go through their complete cycle, and it is not as profitable as trade within their own empire.

That is true over here. Our exports will never be as profitable because we lose some of our trade cycle. We lose some part of it from the factory through the trade channels to the consumer.

Any imports of raw materials we have will not create the national income of our raw materials.

When we import them, they go to the factory, and we have the factory to consumer cycle and lose the cycle from the raw material producer to the factory.

Mr. GEARHART. Thank you.

Mr. REED. Mr. Martin?

Mr. MARTIN. Mr. Wilken, you were speaking a moment ago about having a chart from 1921 up to 1945. Has that been introduced in the record?

Mr. WILKEN. I do not think it has, but I could introduce it in the record.

Mr. MARTIN. I would like to ask that that chart be included.

Mr. REED. Without objection, it will be included.

(The chart is as follows:)

Comparison of ratio of gross farm income to national income

Source of data: Gross farm income and national income from the Agricultural Yearbook, 1935, for the years 1921-32. Gross farm income and national income for the years 1929-45 from the Statistical Abstract, 1945 (gross farm income used consists of farm products sold plus farm products consumed on farms). NOTE.-Average ratio of gross farm income to national income, 1-6.8 for the period 1921-46. Carl Wilken, economic analyst, Raw Materials National Council, Sioux City, Iowa.

Mr. MARTIN. If American foreign trade were suddenly increased to 10 percent of our total trade, what imports would comprise such a volume?

Would they be manufactured articles, or would they be raw materials?

Mr. WILKEN. They would have to be raw materials, Congressman, because 85 percent of the rest of the world is primarily agricultural and other raw materials.

For example, in our own Nation, we are 65 percent agricultural, the farms furnishing 65 percent of our raw materials. We are much more highly industrialized than the other countries, so it is a quite safe assumption to say 85 percent of the economy of the rest of the world is agriculture. That is all they have to pay with.

Mr. MARTIN. So agricultural America could anticipate the greater increase in the volume of imports of agricultural products rather than of manufactured products.

Mr. WILKEN. There just is no other way for them to pay us.

Mr. MARTIN. And it is your belief that any sudden increase in the volume of imports of raw materials would directly affect the national income of our nation?

Mr. WILKEN. It will affect it very rapidly, because as I pointed out, for example, if that competitive situation should reduce our farm income $5,000,000,000, that is, the competition from imports, that would mean a loss of $35,000,000,000 in our national income and the loss would go out to every group.

Mr. MARTIN. And the farm income, the income of the Nation which the production of raw materials has been so constantly reflected over the years in our national income, that would immediately be reflected in the total national income.