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Mr. WILKEN. That is right.
Mr. Martin. Suppose our foreign trade should suddenly be increased. How long would it take for that effect to take hold?
Mr. WILKEN. That is problematical for this reason: Taking the past as an example, in the period from 1922 to 1929, we went into a higher price level, and during that period the prosperity in the United States just carried the world along. If we were to go on for year after year furnishing 3 or 4 billion dollars of credit to other nations so that they could buy from us, we could probably go along 10 or 12 or 15 years before we had a depression.
Mr. Martin. In other words, substituting our extension of credits or our donations for the exchange of goods is one alternative to offset the damaging effect of an increased foreign trade.
Mr. Wilken. But under ordinary circumstances, that is, just a normal condition, if you reduced the tariffs, starting next fall and from then on you would have a gradual reduction in your agricultural income and your national income in proportion. That would be the natural effect.
But if you superimpose upon that a buying power to the rest of the world, it might take years before that thing came about.
Mr. MARTIN. Have you and Mr. Ray made any effort to anticipate what may be the result of credit extensions on this field of reciprocal trade?
Mr. WILKEN. Well, on a factual basis, you have roughly this: the English empire has a wage level of about 40 percent of ours. Then you go down to 10 or 15 cents a day in India, China, and some other parts of the world.
So, on an over-all basis, you might say that the price level based on what they can pay would be about half of ours.
So, with our agricultural prices dropping back to the 1940 level, which is prewar and which was established by the world market on the basis of the trade agreements, then instead of having $175,000,000000 of national income, we would have about $80,000,000,000. That would be a loss, which would put us in a very serious condition with the $260,000,000,000 of national debt we have.
Mr. MARTIN. You do not have any advance information or way of getting that information as to what may transpire at Geneva, have you?
Mr. Wilken. I have no way of knowing what they are going to reduce and what they are not going to reduce. I know this, however: That we are the only nation, in my opinion, that is going to do much reducing.
Russia, for example, has got a large area in the world under her control. She is not interested in it.
England cannot afford to give up her empire preference system, and the South American countries are not going to give up their preferences.
If they agree to tariff reduction, they will use some other medium as an internal excise tax or something to circumvent it, and we will do the reducing.
Mr. MARTIN. I am very much interested in your observation as to the effect of an increase in trade and its effect upon our economy, and then the immediate reflection of our difficulties here at home in
cutting off our home market for our own goods, not only demoralizing our market, but also reverberating this demoralized condition throughout the world.
Mr. WILKEN. I might point out this fact, Congressman: world trade as far as the physical quantity is concerned does not fluctuate much. For example, in the period from 1920 to 1929, using the years 1923 to 1925 as 100, our imports were 105. Then in 1930 to 1939, much of which was under the trade agreements, our physical imports were 102.
As I pointed out, your tariff reduction will not increase your foreign trade. The principal effect of your tariff reduction and your whole psychology of free trade is to reduce price levels.
If you reduce price levels, you reduce income in proportion, and of course you reduce your ability to consume in proportion.
Going on an item basis, let us compare, for example, 1929 with 1939. We imported more pounds of copper in 1929 than we did in 1939. We imported more pounds of fats and oils, all along the line.
Then on our imports in 1930 to 1939, if we had a tariff, it would have protected our market. Had our economy been geared to the parity price level, our imports from 1930 to 1939 would have been about 10 percent above 1920 to 1929 because of the growth of population, and it would have required that much more goods.
We do not produce all we need. The same thing is going to be true in the future. You are going to continue to import. There is no question about it.
You can pay a good price for it, an American parity price of it in the exchange ratio.
This idea of a tariff at our American level blocking foreign trade is fallacious. There is nothing to it, and there never has been anything to it.
Mr. Martin. I want to say I have read your prepared statement very carefully, and this little discussion we have had here goes further to impress me with the fact that there are many factors involved in this entire trade balance and trade adjustment. It is all too easy for anyone to go off on a tangent and ascribe effects to so-called reciprocal trade that cannot be substantiated, and they do that at the peril of our continued, smooth-working economy.
I am quite impressed by your bringing out so many factors that other witnesses have completely overlooked in the analysis of this field.
We should be most cautious in surveying the entire field to make sure we have not overlooked something that will be very devastating in its effect.
We have no proper right to experiment and tamper recklessly with the trade balance, especially now in the reconstruction period following the war.
I want to thank you very much for your analysis and for your statement.
Mr. WILKEN. I would like to stress this one point: we talk about national defense. Every item we have in our economy is really necessary to national defense because it completes our economic balance.
One of the things I am very much concerned about at the present time is the tendency of the State Department and our Interior Department to go off on a program of developing other petroleum fields than our own.
I do not see any particular logic in it. There is no profit in it if you analyze it properly.
For example, in the Iran and Iraq area, they can produce petroleum and they pay an annual wage of $500 a year. In the United States, the petroleum industry has to pay $2,700 a year.
By taking a barrel of petroleum produced in the United States and comparing it to the per capita income we have in the United States and then taking a barrel of petroleum in Iran and Iraq and comparing it to the income of Iran and Iraq, our petroleum is cheaper on the basis of per capita income than theirs is.
That is really the proper way in which you should determine whether an item is cheap or not, not on a basis of price, because that is meaningless. It is on the basis of ability to pay.
You can analyze it in your own mind in this way: If our price level was too high, how could we consume 70 percent of the automobiles produced in the world, half of the telephones, half of the radios, half of the lead, wool, copper, and silk that the world produces?
It is because on the basis of per capita income all of those items are cheaper. That leaves us money to buy the others. That is the factor they are overlooking entirely in this foreign trade situation.
They are thinking in terms of price levels.
Mr. REED. We thank you very much for your fine contribution on the subject, Mr. Wilken.
According to Mr. Mills' request, we will insert the 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, 1947, at this point.
(The telegraphic report is as follows:)
REPORT OF PRESS CONFERENCE OF UNDER SECRETARY CLAYTON UPON ARRIVAL
IN GENEVA--RECEIVED BY STATE DEPARTMENT APRIL 18, 1947 Clayton, opening his first press conference in Geneva, said "I am very glad to be in Geneva and very glad to see all of you. I come here with confidence that we are going to be able to achieve our objectives which I am sure you all know are to eliminate discriminations in international trade and to reduce barriers to such trade and to finally work out the charter for the I. T. 0. for submission to the world conference on trade and employment which will be called by the U. N. for some later date.
Obviously this is a Herculean task full of difficulties. In fact as far as we are concerned in the United States, the road up to this point has not been too easy a one but we are very happy to have come along that road and I think (*) the full approval of the American people. The reciprocal trade agreements program has been in effect now since 1934. It has proven its value and its worth and I think the American people are firmly behind it and will support what we are able to do here to achieve the objectives of which I have spoken.'
Queried regarding underdeveloped countries imposing restrictive tariffs and whether industrially developed nations should lead in making reductions and concessions, Clayton replied, “our position is that countries which wish to develop industrially should have opportunity to do so. United States subscribes to charter provision covering this. We think that the imposition of tariffs in cases where such countries wish to establish new industries should be of a moderate character and a more or less temporary character. Each case needs examination.”
Queried whether, if United States reduced tariffs 50-percent, United States tariff would still be high, Clayton replied this true in very few cases. United States tariff substantially reduced since 1930. (*) Apparent omission.
Queried regarding British obligations regarding empire preferences as result Anglo-American loan agreement, Clayton replied agreement provides both countries will negotiate reduction tariffs and elimination preferences. Asked whether confident Geneva conference achieve elimination preferences, Clayton said United States not particularly interested complete elimination all' preferences, now especially interested reduction or elimination preferences in respect certain commodities. Added United States has a few preferences, i. e., Philippines and Cuba.
Questioned whether economic arrangements between United States and Philippines subject Geneva negotiation, Clayton replied, “No”, because agreement with Philippines provided automatic reduction preferences with elimination in 28 years. Asked if United States satisfied if empire preferences ended in 28 years, Clayton said, “No”, we would like to get rid of them in much shorter time.
Asked why personally favorable free trade, Clayton replied not in favor free trade at this time; recognizes that United States and other countries not prepared free trade. Now favors freer trade than we now have to expand interchange goods and services with inevitable result rising standard of living in world benefiting people everywhere and peace. Pointed out United States Constitution preventing tariff barriers between 48 States made possible great economic development United States; impossible otherwise.
Queried whether state trading can possibly be consistent with charter, Clayton replied, theoretically it can be in practice extremely difficult since state trading presents temptation use discriminatory and protective devices. However, hopeful can arrive agreement with state trading countries.
Queried regarding progress on conference procedural agreement, Clayton said naturally little disappointed more countries not ready proceed but through questionnaire and setting up of committee that matter should be achieved in a few days so that real work conference can get under way.
Queried regarding Dalton speech on tobacco taxation consistency with charter, Clayton said difficult to answer Britain spends 350 to 400 million dollars tobacco im ports may have to decide between this and more necessary items. Queried if British import American tobacco fell would support price program come into operation, Clayton said not necessarily. Other factors enter tobacco market price. British reduction might tend bring about condition which might make it necessary to invoke program.
Queried regarding achievement United States balance of payments, Clayton stated United States hopes balanced trade will come through greater increase imports not through reduction exports. United States today can absorb great deal more imports with actual benefit. Reason not getting more imports now not due to protective tariff but inability rest of world to produce enough to sell United States. Pointed out protective device United States uses to limit imports is largely tariff. Other countries use additional devices such as quotas, exchange controls, embargoes. Clayton uncritical regrading use these devices during war immediate postwar period. Geneva conference seeking discontinue these methods controlling imports and trade quickly as possible.
Queried regarding United States reduction imports natural rubber in view growth new synthetic industry, Clayton declared United States importing greater volume many commodities postwar because expanded industry does not know whether national policy fixed regarding rubber but certain tonnage productive capacity synthetic rubber as absolutely essential to be maintained in the United States as security measure would be much smaller than present productive capacity reported. United States commerce study recommending maintenance 250,000 tons productive capacity. Clayton sees link between Geneva conference and economic pattern for former enemy countries.
Queried regarding requests of American agriculture producers for increased tariffs on wool imports, Clayton said not informed on such action. Said wool producers are not particularly concerned as to the type of protection they get; protection available through Government purchase of wool or by subsidy. I think they are pretty well convinced that have to have it in some way other than tariff.
Queried regarding need for improvement United States customs administration and relation trade agreements, Clayton said cannot be negotiated here. United States working on simplifying bettering administration. This all countries can do likewise.
Queried regarding charter criticisms, Clayton reviewed hearings data. Questioned whether charter exceptions escape clauses contradicted principles, Clayton replied exceptions necessary, now unthinkable we could take radical step this sort without providing flexibility because times abnormal.
Mr. REED. Mrs. Margaret F. Stone, National Women's Trade Union League of America, Washington, D. C. STATEMENT OF MRS. MARGARET F. STONE, REPRESENTING THE
NATIONAL WOMEN'S TRADE UNION LEAGUE OF AMERICA, WASHINGTON, D. C.
Mrs. STONE. May I make a comment on the testimony of the gentleman preceding me before I make my statement? Is that in order?
Mr. REED. It is in order.
Mrs. STONE. It seems to me that his whole argument was based on the premise that trade is static. Well, all of us know that there are millions of people in the world that have never had enough money to buy the things that would make life worth living for them.
We have millions of people here in the United States that have a thousand dollars or less a year for their annual wage. They have never had the things that make life worth living, and there are millions of people in all other parts of the world.
Some of us would like to see these conditions improved, and if we can improve them, there will be an immense potentiality of increased consumption. There is an immense potentiality of increased consumption in the world.
If we can make this come true, there certainly will be a demand for increased production, so that trade is not static and never was; and to say that the United States has 47 percent of the world trade and we do not want any more is, to my mind, fallacious.
I represent the National Women's Trade Union League of America, which is a federation of trade unions with women members, with an individual membership of those persons in sympathy with its objectives. We organize women wherever we find them in industry, whether AFL or CIO, and we have local leagues scattered over the United States.
The National Women's Trade Union League has actively supported the trade agreements program since January 1938, and our membership, therefore, has had 9 years in which to watch the program being administered and which certainly provided an opportunity, if the members had wanted it, to change their minds about support of the program.
However, when the national office sent out word about the hearings to be held by the State Department early this year on the proposed charter for an International Trade Organization, members in four widely scattered cities offered to testify for the league in behalf of the trade agreements program and the ITO charter. The cities where the league was represented, besides Washington where I testified, were Boston, New York, Chicago, and San Francisco.
The great majority of our members depend on their jobs for their livelihood and, since women are, by and large, the workers to be laid off when jobs are scarce, our members are obviously concerned that there shall be an approximation to full employment in the United States. They have seen, over the years, that to approach this goal there must be a steady and ample two-way flow of international trade.
Our industries have been stepped up during the war to a higher rate of production than at any time in our history, and they will need