Balancing the 'Dumbbell'

...This in itself indicates that Britain will be our major competitor not only within the Common Market but in domestic and world markets as well...

...make relatively little impact on its domestic employment or on its viability as a nation...

...Before too long, however, European wages as a whole can be expected to rise to the American level...

...Trade Expansion Act as a step in that direction, but he has emphasized that the less developed countries of the world should not be forced into reciprocal trade negotiations...

...The operative word, however, is "may...

...As the Kennedy Administration's new Trade Expansion Act shows, the U.S...

...Indeed, Lord Gladwyn, a former British ambassador to France, recently predicted that by the end of the century a highly industrialized Western Europe would rank with the U.S...

...Thus, whatever tariffs Europe raises against the U.S...

...To prevent such a contingency, under the terms of the Trade Act President Kennedy may reduce by 50 per cent, or eliminate entirely, duties on any tropical agricultural commodity or primary product, providing the Common Market makes comparable reductions and the commodity or product is not produced in significant quantities in the U.S...

...The Common Market was intended from the outset to serve as an economic cement with which to build a politically united Europe...

...This would be true even if the Common Market's outer tariffs were maintained at their highest levels and even if U.S...

...At present, wages in the Common Market are little more than half what they are in the U.S...

...The GATT official has been warm in his praise of the U.S...

...and a united Europe providing the weights and their common interests the connecting rod...

...But to expect the Six to abolish all trade barriers with Latin America is out of the question...

...In fact, on the very day that the EEC Commission in Brussels recently called for a speed-up in the development of its own customs union, Griffith lohnson, U.S...

...Trade among West European nations accounted for two-thirds of the world increase in exports, and the EEC alone was responsible for half the world increase...

...But now that Europe is achieving the hoped for union, the even balance of the dumbbell appears precarious...

...In recent years they have tended to outstrip productivity gains, whereas in the U.S...

...find much comfort in Lord Gladwyn's vision of a European super-state by the year 2000...

...Taken as a whole, the Latin America economy is competitive with, rather than complementary to, that of Africa...

...might well ask itself whether this reaction to the European Common Market is, after all, such a good thing, especially in an area which absorbs one-fifth of all U.S...

...firms have invested most heavily...

...This was notably true for Latin America, where the United States is committed to a $20 billion Alliance for Progress, and where an additional $10 billion of American capital is already invested...

...both productivity and wages have tended to rise at roughly the same rate...

...The United States' share was 16 per cent...

...For though it is the world's greatest trading nation, the U.S...

...This entitles their exports to free entry into the Common Market while at the same time allowing them to maintain certain tariffs on imports from the Six to protect their own infant industries...

...It is an advantage that must nonetheless be weighed against the fact that EEC countries will be selling to each other without any impeding tariff barriers...

...does not live by trade...

...Assistant Secretary of State for Economic Affairs, was preparing to charge France, Italy, West Germany and Belgium with obstructing imports of American agricultural goods by means of quota restrictions...

...The question is whether the Act in itself will altogether dispel that possibility...

...This concept became known as "Operation Dumbbell," with the U.S...

...A greater export surplus would narrow the gap between what the United States earns in commerce and what it spends on foreign aid, maintenance of military bases abroad and capital exports...

...In the minds of State Department planners, such a Europe was to form a geographical and political entity equal in size and strength to the United States and linked to it by common interests...

...The U.S...

...Otherwise the number of items in the 80 per cent category would be relatively few...

...Now that the two trading blocs appear to be merging, the EEC is unlikely to dismantle its tariff walls for the benefit of the outside world...

...exports more goods than it imports in the 80 per cent category, there was little reason to fear being unable to retain that advantage in the future...

...It might be added that the same argument was used by some of President Kennedy's own advisers in relation to U.S.-Common Market trade...

...and the Common Market supply 80 per cent of the world's trade, the new legislation was predicated on the assumption that Britain would join the EEC...

...And in the face of European exclusion they have set up their own free trade area as well as a common market in Central America...

...The motive, which was the same whether the American firms wished to sell in the Six or the Seven trading area, remains just as significant now that the two areas appear to be merging...

...Faced with an enlarged Common Market whose tariff walls may be lowered, American manufacturers at home will still be confronted by Europe's advantage in lower unit labor costs...

...But they do affect the country's overall financial position...

...Considering the pattern of world trade, one might go even further and ask whether the concept of the dumbbell is really tenable any longer...

...Yet it is precisely in Britain that U.S...

...President Kennedy was also concerned lest the trade of the underdeveloped countries, many of whom are recipients of American aid, be harmed by European tariffs...

...At best, its commercial exports account for less than 4 per cent of its Gross National Product, while the net outflow of U.S...

...AND THE COMMON MARKET Balancing the 'Dumbbell' By Morris Harth Ever since the days of the Marshall Plan, the United States has been firmly committed to an integrated Europe that could stand on its own economic and military feet...

...exports and whose economic and political stability are of immediate concern...

...Since the payments deficit incurred by the United States was due to economic aid and military expenditures which benefited Europe as well as the U.S., a prosperous Europe should now return the favor...

...firms were to continue to set up plants inside those tariff walls...

...Nevertheless, President Kenendy was confident that since the U.S...

...The prospect has not been lost on Washington...

...The members of the Common Market have made special arrangements for those African countries which were once their colonies to enjoy associate membership...

...What drove these firms to invest in Great Britain in the first place was the hope that lower operating costs would enable them to compete with their European rivals on more favorable terms...

...Consequently, the Trade Expansion Act was as much-if not moreconcerned with improving the unfavorable U.S...

...capital for direct foreign investment represents less than 3 per cent of gross domestic investment...

...Against such advantages the Latin American countries are helpless...

...and Russia as one of the world's super-states...

...With the establishment of the sixmember European Economic Community (EEC), or Common Market, and its imminent expansion to include Britain and her six partners in the European Free Trade Association (EFTA), European economic integration is proceeding apace...

...For the United States, the continued existence of European external tariffs would not in itself be critical...

...The EEC itself recently took steps to lower some of the duties on Latin American imports which compete with similar products from Africa...

...In other words, according to the Americans, the dumbbell has to be brought into balance...

...Obviously, if Latin America is cut off from European markets, the aid provided through the Alliance for Progress will be greatly nullified...

...From the standpoint of competitiveness, the balance is therefore in America's favor...

...During the early postwar period, they argued, when Europe was chronically short of dollars, the United States lowered its tariff restrictions while Europe's were raised...

...The same charge was made last week by Secretary of Agriculture Orville L. Freeman at a meeting of the General Agreement on Tariffs and Trade (GATT) organization in Geneva...

...According to GATT'S annual survey of international trade, the Common Market was the only major part of the world that substantially expanded its foreign commerce in 1961...

...Against such odds in 1961 -a year marked by a general slowdown in economic expansion-can the U.S...

...Morris Harth is a freelance writer, based in Paris, who specializes in European economic affairs...

...While Western Europe as a whole accounted for 41 per cent of the world's exports, the EEC alone was responsible for 25 per cent...

...At the same time, GATT'S president has been urging member nations to seek a solution to world tariff problems, particularly those related to agricultural trade and the underdeveloped countries...

...is aware that a super-state of Western Europe might some day compete with it in a way that would make the European end of the dumbbell far heavier than America ever intended...

...Both continents produce such raw materials and foodstuffs as coffee, cocoa, sugar, tin, iron and petroleum...

...By empowering the President to work toward the gradual elimination of tariffs on those goods of which the U.S...

...balance of payments than the balance of trade per se, which is already highly favorable...

...It was largely because of its common external tariff that Europe as a whole fell out at Sixes and Sevens...