liminary conferences have diluted and compromised their purposes. The final judgment of the United States Associates as to the ITO Charter must be reserved until the results of the Havana conference have been studied. In any event our faith in the general principles towards which the ITO was originally directed will remain unchanged. And we shall continue to support all measures of our foreign policy which are designed for the expansion of mutually advantageous trade among nations.

Central to the foreign economic policy of the United States is the reciprocal trade agreement program. Since the passage of the first Reciprocal Trade Agreements Act in 1934, the Congress has continued to empower the President to offer limited tariff concessions to other nations that would reciprocate. Agreements made bilaterally were automatically extended to other countries under the operation of a "most-favored-nation clause." Prior to 1945 such reciprocal reductions of trade barriers were negotiated with twenty-nine other nations. As extended in 1945, the Reciprocal Trade Agreements Act permitted up to a second 50 percent reduction in our tariffs to be negotiated with countries willing to make equivalent concessions. It was under this extension, and as a counterpart to the ITO negotiations, that the Interim Tariff Committee at Geneva recently negotiated 106 separate bilateral trade agreements to reduce the barriers to trade among the United States, the United Kingdom, Canada, Australia, France, Belgium, the Netherlands, Luxembourg, Brazil, Chile, China, Cuba, Czechoslovakia, India and Pakistan, the customs union of Lebanon and Syria, New Zealand, Norway, and the Union of South Africa, Burma, Ceylon, and Southern Rhodesia. Many of these agreements have been in effect since January 1948. The remainder become effective after the participating countries sign the necessary Protocol.

This is a significant achievement, particularly since it has been accomplished at a time when most of the nations involved are necessarily more concerned with their immediate problems of rehabilitation than with the longer range goals of proper trade relationships in the more distant future. It offers real hope for that future. It relieves some of the current pressures which aggravate the immediate problem.

It ought to be unnecessary at this late date to dwell on the obvious advantages of lowering the barriers to world trade the increase in real incomes in all nations which stems from freeing and extending the volume of trade among them. It is axiomatic that when several nations exchange their goods and services on mutually advantageous terms, the standard of living of each nation is thereby raised. However it is particularly relevant to the immediate future that, even though it may be temporarily necessary to finance much of the rest of the world through the ERP, programs be developed which will relieve our taxpayers from financing our exports indefinitely. In the long run the only sound way for foreign nations to obtain dollars to buy our exports is from the sale of their exports. Until Europe is rebuilt, our program to finance our own exports represents a drain on our consumption.

The interests of business, labor, and the consumer cannot be separated on this issue. American citizens, on balance, find themselves the beneficiaries of the policy represented by the reciprocal trade agreements program-whether they are exporters or importers and have a commercial interest in extending the volume of trade; whether they are employees and wage earners in an economy which can be expanded by an enlargement in the areas of trade; or whether they are consumers who know they can live more richly, have a wider choice, and buy more for their dollars in a free world economy.

If the major trading nations of the world subscribe to the ITO Charter, it is clear that we must extend the reciprocal trade agreements program. Otherwise we cannot join the ITO in good faith nor can we fulfill our responsibilities under the Charter. The ITO Charter establishes machinery for the continued negotiation among its members for the reciprocal lowering of trade barriers to the mutual advantage of all, and obligates its members to put this machinery to use.

On the other hand, if the ITO fails to come into being, if the domestic problems of other nations make it premature for them to enter wholeheartedly into this international effort, then we feel that it is equally imperative for us to continue our reciprocal trade agreements program. More than ever would the United States have the responsibility, as the major economically solvent nation of the world, to take the lead in promoting sound policies of international trade,

and to express its readiness to make bilateral concessions to such other nations as are prepared to reciprocate.

Accordingly we urge most strongly that when, in the coming weeks, the Reciprocal Trade Agreements Act approaches its expiration date it be renewed as an integral part of the fabric of our economic policy.

In our judgment, extension of the act for a single year would be inadequate and unwise. We recommend that it be extended for a period of not less than three years. Only then would it facilitate long-range business planning and establish the firmness of our intentions regarding the pattern of future trade with the rest of the world.

BRIEF FOR EXTENSION OF UNMODIFIED RERIPROCAL TRADE AGREEMENTS BY PEOPLE'S LOBBY INC., BENJAMIN C. MARSH, EXECUTIVE SECRETARY The basic, but seldom expressed reason for opposition to the 3-year extension of the reciprocal trade agreements, is that these agreements recognize faintly, the fact America must use her prodigious and increasing capacity to produce, to meet demands for higher living standards throughout the world, even without immediate financial returns to America.

It is not an accident that simultaneously with the opposition to such extension, a vigorous campaign is being waged for vast armaments and air forces, and a large army.

The proponents of the supreme waste of armaments know their program is an alternative to dispensing some of our present and potential peace production to peoples who cannot pay for it. The war-scare conditions the American people to higher taxes more easily than an appeal to help the victims of a plundered planet, and blinds them to the unadulterated folly of substituting bullets for bread.

Trade cannot, in the future, be directed merely to maintaining maximum profits for the owners of America's 48 corporations with assets of 1 to over 8 billion dollars, and of the half of the Nation's farms which produce 85 percent or more of total farm production.

Trade must be directed to the specific purpose of fostering world welfare, including of course the welfare of America's producers and consumers.

Over 4 years ago, in January 1944, the United States Department of Agriculture Committee on Postwar Policies stated that after the war farm production in the United States must be directed by government with due regard for probable exports and desirable imports. The same standard must be adapted for all production here, for the alternative is major nations armed to the teeth in an alarmed truce, and small nations constrained to determine in what alliance there is least insecurity for them, a condition which must lead to general conflict if not war.

Acceptance of America's role to help the world by producing for it, instead of ruining it by an armaments race, has another threat to special privileges here. It will compel the reduction of costs of production by getting a fair valuation of corporations and other business enterprises, the reduction of inflated selling prices of land-city and farm-and adoption of more efficient methods of production and distribution.

It involves much more government controls, including major price fixing and rationing, and also a large degree of public ownership of natural resources, and other natural monopolies.

Our temporary boom is largely due to the fact that millions of families are spending part, or much of their war savings. The Federal Reserve Board has just reported that although consumer income, as a whole, was about 10 percent larger in 1947 than in 1946, large numbers of families in the $3,000 to $5,000 income class overspent income in 1947, while in 1946 this was largely confined to those with incomes under $3,000.

About 3,000,000 more families or individuals completely cashed out their holdings of savings bonds.

The export surplus fell to about one-half the rate in the last quarter of 1947, in the first quarter of 1948, from a rate of 8.2 billion dollars to 4.2 billion dollars. Congress can help the American economy and the American people, by stopping inflation, not by interfering with the administration of reciprocal trade agreements, nor by interfering with imperative world reconstruction, by threatening the abrogation thereof, through imposing a 1-year limit thereon, and administrative handcuffs.

Not even greed for large campaign contributions, justifies Congress in rocking the world boat by semiscuttling of the reciprocal trade agreements.

STATEMENT OF JOHN B. TREVOR, PRESIDENT, AMERICAN COALITION ON RECIPROCAL TRADE AGREEMENTS SUBMITTED TO THE SENATE FINANCE COMMITTEE Under the Reciprocal Trade Agreements Act of 1934, the President was given the power to cut the tariff rates on imports, provided for in the Hawley-Smoot Act of 1930, by an amount up to 50 percent. The Doughton bill sponsored by the administration in 1945 enlarged this power by conferring upon the President authorization to cut all tariff rates, effective on January 1, 1945, by an additional amount up to 50 percent, if, in his judgment, he deems such action expedient.

The theory upon which the Reciprocal Trade Agreements Act is based is wholly at variance with the policy which brought about the evolution of the United States from a nation primarily devoted to the production of food stuffs and raw materials into the greatest industrial nation of the world. That is to say, it was a policy which has made it possible for the United States to produce, on an unprecedented scale, the guns, tanks, and other mechanical equipment essential to the winning of the war. Conversely, the policy underlying the Reciprocal Trade Agreements Act, if it had been pursued in the past to its logical conclusion, would have left us helpless before the armed might of Germany and Japan.

It should be, of course, obvious from current events that an era of eternal peace is a figment of the imagination. Therefore, any policy which fails to take into account the possibility that the United States may be involved in another war is utterly indefensible. As a matter of fact the policy pursued by the present Administration in loaning the taxpayers' money to foreign countries for the development of industrial projects to compete with American industry is likewise indefensible. It is even more indefensible when we take into account that we are now, through the Economic Recovery Program engaged in paying for the deficiencies and inefficiencies of the socialist regimes of western Europe, which are, and will be in the future, industrial competitors of free enterprise in the United States.

FINANCING FOREIGN COMPETITION

Indeed, as a prelude to the ERP, the New Deal went so far as to promote the development of a steel industry in Brazil, which must inevitably destroy the market for American steel products on the whole continent of South America, by reason of not only the cheap sources of supply for raw material, but also because of the large supply of cheap labor. What we have done in Brazil is, of course, insignificant, bad as it is, compared to what we may reasonably expect as the fruits of ERP. To what we have done, or perhaps it should be said, what we are about to do through ERP, and our previous action in developing the Brazilian steel industry as a threat to our export market and our domestic industry, must be coupled Mr. Wallace's theory, which unfortunately is held by others, that our synthetic-rubber production should be curtailed so as to supply a market for the major part of the natural product exported by Malaya, Sumatra, and Ceylon. In spite of our production of synthetic rubber, there will be unquestionably a market for some natural rubber in the United States. The reason for this prospective demand lies in the fact that it appears to be essential to mix natural rubber with synthetic in order to produce tires of the best quality. This limited demand, however, fails to satisfy those among us whose test of civic virtue is that a good American should love another country, perhaps all other countries, better than his own. As a matter of fact, a stronger case can be made out for the encouragement of production of natural rubber in Brazil, but, even so, our experience in this war demonstrates beyond dispute, that the United States must now, and forever, be independent of foreign sources for our supply of rubber.

To sum up this phase of the argument from the standpoint of national defense, any essential industry, regardless of the fact that it may be producing on a less efficient basis than the corresponding industry in a foreign nation, must be maintained upon a basis of effective and continuous operation. This applies. to the growing of hemp and the production of optical glass, industries which.

owe their existence now to the necessities of war. Obviously, the production of these commodities demands the maintenance of an adequate price. It is to be expected that in order to assure an adequate return to labor and capital, it will be necessary to impose tariffs on imports of such items at a sufficient rate to take care of the differential cost of production.

DOMESTIC UNEMPLOYMENT UNDER RECIPROCAL TRADE

From a purely economic standpoint, it would be difficult to find a poorer time to lower protective duties on imports as this policy threatens the continued existence of marginal industries, to which we must look for the continued employment of our own people, if economic stability is to be maintained in the United States. In this connection it must not be forgotten that up to the outbreak of war, despite the existence of reciprocal trade agreements and their alleged benefits, 10,000,000 people, more or less, were unemployed. On this basis alone, the theoretical benefits of the reciprocal trade agreements policy are utterly vitiated.

Furthermore, it is demonstrable that the reciprocal trade tariffs would have brought about the complete destruction of some American industries, had these industries not been saved by artificial protection resulting from the war having dried up foreign sources of supply.

INEPT BARGAINING BY STATE DEPARTMENT

As an illustration of the practical operation of the Reciprocal Trade Agreements Act, consideration should be given to the following statement of facts in a letter to the editor of the New York Sun, published in the April 28, 1945, issue of that paper:

"Our State Department negotiated a trade agreement with France in 1936, after the French Government had raised its tariffs, avowedly for bargaining purposes, and despite the fact that Mr. Hull stated he would not trade under such circumstances. The net result of this shrewd Yankee trading was an honest reduction in American duties of 85 items and actual increases in thousands of French duties.

"The American duty on laces was one of those reduced under the treaty. By 1939 the imports from France of one of the lace items, our duty on which was reduced, had increased from 5,000 pounds in 1934, the year the Trade Agreements Act became law, to 248,000 pounds in 1938, and to 300,000 pounds in 1939. The French press and the United States Consul in the lace-making center of France attributed, unequivocally, this 6,000-percent increase in lace exports to America to the Franco-American treaty.

"The American lace industry in 1938 found its employment at 34 percent of that in 1935, the last year before the French treaty. That meant two-thirds of our workers were out of jobs while the demand for their product was tremendous but being supplied by French workers. By 1935, 5 American lace mills were forced to close, and 45 other mills were in a precarious financial condition. The State Department refused to act, despite evidence of injury so preponderant as to deny even the most meager refutation.

"Our workers abandoned by our Government were saved, ironically, by our enemy's bringing about the fall of France."

How in the light of the facts set forth above, it was possible for Mr. Clayton,. Assistant Secretary of State, to assert before the Committee on Ways and Means of the House of Representatives that "the 11 years' experience under the present law has shown that no injury has been done because of it" is beyond the comprehension of the unofficial mind.

FOREIGNERS HAD THE MONEY TO BUY-BUT DIDN'T

There is another phase of this question to which insufficient thought was given by Congress at the time the reciprocal trade agreements policy was thrust upon it by the Roosevelt administration. The basic argument of the proponents of this legislation was that because the United States was a creditor nation, this policy was necessary in order to build up our international trade. The fundamental fallacy in this argument lies in the assumption that because we increase our imports, our exports will automatically rise also. This assumption completely ignores the fact that the resources accruing to any nation exporting its goods to the United States may be diverted into investment channels

rather than apply to the purchase of American goods in the American market for export. This fact is demonstrable that in the peace years, 1934 to 1938, inclusive, our excess of exports over imports totaled only $2,145,000,000; whereas during that same period the United States international investment position on private account showed a decline from a net creditor position of $8,700,000,000 to $3,100,000,000, a decline of $5,600,000,000. That decline is $3,455,000,000 greater than our favorable export balance, indicating that there were ample funds for additional purchases of exports if foreign nations had chosen to utilize their credits for this purpose. (Economic Almanac, 1948, published by Conference Board, p. 371.)

BRITISH IMPORTS NO STIMULUS TO EXPORT

If any further proof is needed of the absurdity of the arguments offered by the proponents of the Reciprocal Trade Agreements policy, it can be found in a study of the British experience with foreign trade. It is notorious that Britain over a period of many years has maintained an adverse trade balance without developing a compensatory flow of exports. It has thus been demonstrated that foreign nations during the years of peace, 1934 to 1938, had the means to make purchases in the American market had they deemed it expedient to do so; also, that the making of concessions with regard to imports did not automatically stimulate the purchase of exports.

REGIONAL SPECIALIZATION OF DECLINING IMPORTANCE

The chief argument in behalf of the Reciprocal Trade Agreements is based upon the theory of regional specialization; that is to say, there are some parts of the world in which it is peculiarly advantageous to produce certain commodities. It is upon this theory that Mr. Wallace justified his argument that we should buy our rubber in Malaya instead of producing it in the United States. However, what Mr. Wallace and others who hold his viewpoint fail to recognize is the fact that modern engineering processes have completely destroyed the theory of regional specialization, except insofar as it applies to minerals, and, possibly, certain vegetable products, for which no synthetic substitutes are available.

LOW WAGES MAKE LOW PRICES

The truth is that regional specialization today is largely a question of difference in standards of living. Conclusive evidence of the fact that labor operating under the American standard of living cannot compete with labor living under what we regard as substandard conditions, is to be found in the experiences of our textile manufacturers who discovered that, prior to the outbreak of the present war, they were being undersold by their Japanese competitors in every market of the world.

AMERICAN INDUSTRY HAMPERED TO BENEFIT FOREIGNERS

It is a curious fact that the fallacy of regional specialization has so persisted in certain governmental circles that there has been definite opposition to the development of any substitute in the United States for commodities imported from abroad. Take for example, the development of the production of paper from southern pine as a result of the financial support of the Chemical Foundation. When this process was perfected, a paper of a quality comparable to that formerly imported was produced from southern pine at a lower cost than the foreign competitive article. In the development of the production of paper from southern pine, Mr. Francis P. Garvan, the president of the Chemical Foundation, claimed that he met nothing but opposition from the Government. Here is what Mr. Garvan had to say on May 22, 1937, in the course of an address to the National Farm Chemurgic Council:

“But why did our own Government oppose this pine paper development? Will anyone answer me that? Why would any loyal proper-thinking American oppose this development? Was there anything criminal about it? And yet, from the first moment, this present administration has opposed this development bitterly. At whose behest?

"You know the Mordecai Ezekiel letter, and he is supposed to be the economie adviser of the Secretary of Agriculture.

“Would an economic adviser advise against this on the ground that we must continue to import newsprint? To whose interest is it that we must continue to