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TRADE RESTRICTIONS BY PRIVATE AGREEMENTS

Trade may be diverted and limited by private agreements which are in many cases as destructive as government action.

Groups of producers controlling a significant part of the production
or distribution of important products often get together to divide
markets among themselves, to limit production, to fix prices, or to agree
to delay or prohibit the introduction of new techniques. Such agree-
ments protect inefficient producers, block full utilization of efficient
plants, reduce the volume of trade, and tend ultimately to lower the
standard of living.

An example of the effects of such agreements can be found in the
operations of the prewar tungsten carbide cartel made up of U.S.
interests and the Krupp firm in Germany. Tungsten carbide is a hard-
metal composition of great industrial importance in cutting tools,
extrusion dies, and wear-resistant surfaces. It was sold in the U.S. in
1927 for $50 a pound. After the agreement with the Krupp firm, the
price in the United States increased eight times. In April 1942, after
the cartel had been dissolved, the price per pound ranged from $27 to
$45. The cartel-maintained high price discouraged the development of
tungsten carbide technology and reduced the use of the product by
industry.

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TRADE RESTRICTIONS BY GOVERNMENTS

Equality of opportunity to compete contributes to a high level of international trade. Discrimination and special treatment, on the other hand, divert trade from the most productive channels and tend to reduce the level.

Maximum trade results if exporters and importers can deal freely with each other and are free to find the places where they can best buy and sell.

Government regulations or agreements that interfere with this process—giving special treatment to the goods of one country as compared with that of others-divert trade from its natural channels, prevent new trade contacts from being developed, and perpetuate uneconomic trade movements. Such measures hurt the which are discriminated against and lead to ill feeling, bitterness, and retaliation.

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ITO'S PLACE IN THE U.N.

The development of the ITO is based upon a belief that trade problems can be more easily solved by the long-range planning of a United Nations organization in the field of international trade than by unilateral or bilateral action. The relationship of the ITO to the United Nations, like that of other specialized agencies, will be determined by an individual agreement between the two organizations.

As part of the United Nations structure there are already specialized agencies in such fields as foreign exchange (the International Monetary Fund), banking (the International Bank for Reconstruction and Development), and food and agriculture (the Food and Agriculture Organization).

The ITO aims to establish trading conditions that will contribute to a maximum expansion of world trade on a multilateral basis. work of the Fund and the Bank is to create financial conditions that will contribute to the same end. Thus the ITO, the Bank, and the Fund supplement each other within the structure of the United Nations.

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