THE COMING BATTLE OVER TRADE

...Though our exports of goods have been exceeding our imports by a strong margin—$20 billion to $15 bilHENRY S. REUSS, Demorcatie Representative from Wisconsin, has a wide background of experience in private and public finance...

...Its actions in cer-tain major polity areas are not reassuring and, if persisted in, may diminish or nullify U.S...

...These built-in advantages—discriminations against outsiders—cannot fail to affect U.S...

...I think so...

...How will the President's trade program fare in Congress...

...West Germany and France could be allies, not enemies...

...The adventure could be what the West needs to recover its spirit over the next two decades...

...Prosperity within the Common Market—an internal market of 170 million people—is without precedent...

...Its domestic consumption is more than 110 million tons annually...

...when organization is completed, the area could have a population of close to 270 million...

...For the first time since 1934, our trade proposals are less a sentimental curtsy to Adam Smith and more a hard-headed imperative for America's international solvency...

...With all the old protectionist arguments once again advanced, with much of the South deserting free trade, with a high plateau of unemployment—how can the Administration get even a timid trade act through Congress, much less the ambitious bill presented...

...Nearly half of this is spent for the defense of Western Europe...

...During the third quarter of 1961, we were in deficit to Europe by $i.5 billion...

...The President is proposing, instead, that we face the realities of a new international situation with a fresh and aggressive tariff policy aimed at expanding our foreign trade, even at the cost of some temporary dislocations here at home...

...Until very recently, Europe's bilateral foreign aid expenditures consisted almost entirely of grants or loans to colonies, former colonies closely tied to the mother country's economy, or export credits and guarantees...

...In the fiscal year ending June 30, 1961, we spent more than a billion dollars in Germany, France, and Italy, three of the countries which have gained most in reserves from us in recent years...

...Now, the Common Market is beginning to hurt...

...As the sharp edges of age-old European nationalism are removed, the chances of conflict diminish...

...The United States could lead a Spartan life, keep wages and prices stable, and make admirable productivity gains, yet see much of our export trade gobbled up by countries to which the Common Market accords a sweeping discriminatory advantage...

...let's wait until Britain is safely in the Common Market...

...The President and the people have sensed an historic tide, and Congress must move with it, too...

...The Common Market is moving faster than even its originators dreamed...

...These figures are for the most recently available quarter...

...The Committee opposes the "trade adjustment" program almost as vigorously as it opposes low tariffs...

...Once this is accomplished, the Committee loses a constituent—perhaps accounting for its lack of enthusiasm for "trade adjustment...

...As late as last November, it seemed dubious that there would be any foreign trade program presented to this Congress...

...The U.S...

...Europe has renounced colonialism and has moved to erase national economic boundaries on the Continent...

...The deficit was not due to our inability to sell goods to European customers...

...Third, they could, directly or indirectly, pay much more as their share of the defense of Europe...

...These "trade adjustment" procedures would include unemployment compensation, retraining, and relocation allowances for workers, tax benefits and loans to industries to encourage diversification...

...What he has asked for represents a sharp break from the cautious aims of earlier reciprocal trade agreement acts...

...The United States does not expect gratitude for past favors from Europe, nor does it need to ask for'aid out of weakness...

...The President's proposals, if approved by Congress, will not in themselves solve our foreign payments problem...

...Its sense of responsibility has not grown in pate with its prosperity and growing power...

...reductions) are twenty-nine per cent for automobiles, twenty per cent for radio and TV sets, nineteen per cent for washing machines, and eighteen per cent for automatic dishwashers...

...exports of $100 million...

...The President's request for greater freedom in negotiating tariff reductions is designed primarily to enlarge our opportunities for trade with Western Europe, but it is also conceived as a bargaining power of considerable strength in achieving a more equitable sharing of responsibilities in foreign aid and the common defense...

...There are many constructive steps Europe could take to correct this situation...

...West Germany's gross national product doubled in the five-year period 1955-1960...

...Will Congress give the President the powers he seeks...

...exports adversely...

...It exports $6 million of certain kinds of leather to the United States, yet holds down imports of similar leather from the United States to $50,000 per year...

...The fundamental reason for such relatively radical powers to be placed in the hands of the President is the astonishing economic and industrial development of Western Europe in the past decade, culminating in the creation of the unprecedentedly successful Common Market...

...But there is no question that the balance is tipped toward Europe by a substantial margin...

...The potential European market for U.S...

...Meanwhile, thousands of workers in the district whose end-products go into export are never heard from...

...The protectionists are effectively organized into the Nationwide Committee on Import-Export Policy...

...The most constructive single way in which the United States can get rid of her persistent payments deficit—a deficit brought about mainly by our assuming our world responsibilities for defense, aid, and investment—is by expanding our exports...

...But this favorable balance failed by a huge margin to cover $2 billion in other payments to Europe, mainly because of large tourist expenditures, private capital investment, money transfers to Americans living in Europe, troop pay and other defense expenditures, and short-term capital movement...

...Since the Treaty of Rome was signed in 1957 by the "Inner Six" —France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg—internal tariffs have been reduced fifty per cent, and will disappear by 1966...

...By forming a customs union, the six countries of the Common Market —Germany, France, Italy, Belgium, the Netherlands, and Luxembourg— have gained tariff advantages over the United States...

...Our payments position has been deteriorating for almost a decade...

...An expansion in coal exports of ten million tons per year could mean an increase in U.S...

...Second, they could greatly enlarge foreign aid expenditures on an untied basis, and try to channel purchases to the United States...

...These tariffs, it should be emphasized, will in most cases be considerably higher than the previous tariffs of some of our best and fastest-growing European customers, such as Germany and Benelux...

...f Instead of the usual timid tariff-cutting powers of twenty per cent or so, the President asks for power, over a five-year period, to reduce tariffs by 100 per cent on goods produced mainly in the United States and Western Europe, such as automobiles, consumer durables, machine tools, machinery, and most chemicals...

...Congressmen are always tempted to export unemployment—"Let's keep up our exports, but let's protect our domestic industries from cheap foreign labor by high tariffs...

...Since World War II, the United States has steadfastly traveled away from narrow nationalism and isolationism in its major actions affecting other countries...

...Again, this attempt to increase agricultural production through higher tariffs comes when labor shortages in European industry are multiplying, and a shift away from inefficient agriculture to industry would be advantageous...

...Consumers, who stand to benefit from varied and cheaper goods, are similiarly unorganized and silent...

...lion in 1961, our overall deficits, taking into account our military expenditures abroad, our foreign aid, and our private capital investment overseas, have been around $3 billion a year for each of the last four years...

...But President Kennedy sensed, as he did on the eve of his decision to enter the West Virginia primary two years ago, that "there is a tide in the affairs of men, which, taken at the flood, leads on to victory...

...THE COMING BATTLE OVER TRADE by HENRY S. REUSS When President John F. Kennedy sent his foreign trade program to Capitol Hill late in January, his message to Congress accompanying the recommended proposals gave them added stature and importance...

...The immediate and urgent need for such wide-ranging powers is to give the President the strongest possible bargaining power in his efforts to open up Western Europe's growing market...

...The principle of non-discriminatory, most-favored-nation treatment which we have followed ever since 1934 is retained...

...First, the European countries could substantially lower their tariff walls so as to buy more goods and services from the United States...

...and purchase their own equipment and materials from the United States...

...The argument among these countries now turns on how high that protection should be...

...efforts in the free world community...

...A Congressman whose district includes a bird-cage factory employing seven workers will hear plenty about the threat of Italian imports...

...Moreover, since there is every likelihood that the customs union will soon expand to include the United Kingdom and the remaining European countries, Western Europe will have combined to place obstacles to an expansion of imports from the United States just when more imports will be needed...

...The United States has consistently supported the Common Market, "even if it hurts us...

...internal market for automobiles, TV and radio sets, refrigerators, and washing machines is ninety per cent or better "saturated," except for replacements...

...pay for local base operating expenses, such as pay for civilian personnel, land rental costs, construction, and locally purchased goods and services...

...To reverse this flow, the countries which are in current surplus payments position could increase their troop support in NATO, making it less necessary for this country to send troops from the United States...

...They could also open their markets to Japanese exports...

...What the United States and the rest of the free world do expect are a sense of responsibility and a sense of common purpose on the part of the European countries...

...Now Great Britain, Denmark, and Ireland have applied for membership in the Common Market...

...But it need not hurt long, if we have the courage to make the bold policy changes necessary...

...The need for cotton exports formerly carried the day, but now the textile industry, hit by competition from Europe, Japan, and Hong Kong, commands increasing protectionist strength...

...Yet the new external tariff of the Common Market will contain some staggering discriminations against our goods...

...there is too much risk of defeat in Congress...

...Others in the "Outer Seven" are expected to follow...

...Protectionist safeguards are considerably watered down...

...The measure by which prosperous Western Europe still fails to live up to its responsibilities is readily seen in the U.S...

...Almost none of the aid was given in a way which could result in purchases outside the aid country, and so did nothing to correct payments imbalances...

...goods is impressive...

...What is inspiring about the Common Market is its power to move men's preoccupation away from narrow nationalism...

...Germany, with more than full employment and confronted with the need to import labor from other countries, persists in protecting a high-cost, inefficient domestic coal industry and in limiting annual coal imports from the United States to five million metric tons...

...But from testimony before the Joint Economic Committee last December, "saturation" in Western Europe is only about twenty-two per cent for automobiles, twenty-two per cent for radios, thirteen per cent for refrigerators, and sixteen per cent for washing machines...

...and by fifty per cent on other industrial products...

...In the traditional trade battle the protectionist voice is always disproportionately loud...

...They may overstate the extent of the current dollar outflow to Europe...

...And the burgeoning Western European market is the most promising area in which to expand...

...Even more than economic, the Common Market's purpose is political...

...If we choose to sit on the sidelines and do nothing, we could watch the Common Market, as enlarged, further divide the free world...

...Yet, paradoxically, the President's clearest chances of persuading Congress to adopt his recommendations rest on his ability to depict the program less as an economic trade measure than as a means of furthering the unity of the free world...

...But it must be said candidly that Europe does not yet have a world view...

...Ironically, in 1962 boldness may succeed where timidity would surely fail...

...Pessimists over the prospect for the President's trade proposal can point to two other factors: ¶Congressmen from the South, formerly the citadel of free trade, have become increasingly protectionist in the last decade...

...For the last two years, our exports to Western Europe exceeded $6 billion a year, almost one-third of our total exports...

...The advantages come from the fact that member countries of the union will gradually reduce their tariffs to each other while working toward a common set of duties toward the outside world...

...The reason is the Common Market, and the revolution it has wrought...

...exports to Europe over imports—of $532 million in these three months...

...If, on the other hand, we seize its logic and apply it broadly, we can play our part in the creation of a community of free nations that can grow beyond our dreams...

...Under the President's current plan, industries jeopardized by import competition would be helped primarily by methods other than tariff-raising...

...Only such a strong community is capable of meeting the requirements of the underdeveloped countries, of offering a magnet to the peoples back of the Iron Curtain...

...balance of payments with continental Europe...

...Japan's extra earnings would tend to be spent in the United States for more food, raw materials, machinery, and other goods...

...Unemployment still hovers around six per cent, our most persistent domestic economic problem...

...But they will give him a powerful tool with which to negotiate with an increasingly unifying Western Europe, not only on trade and tariffs, but on other world responsibilities where the European countries have been dragging their feet...

...Most of the President's advisers were counseling caution: The public is not yet ready...

...He chose to call the trade program "the greatest challenge of all...

...The "trade adjustment" plan attempts to rescue a victim of import competition by helping it to switch to other lines...

...Indeed, we had a merchandise trade surplus—an excess of U.S...

...The area's gross national product is rising at close to six per cent a year, twice the recent rate of the United States' and Great Britain's...

...The Common Market countries want more tariff protection on wheat, feed grains, and other agricultural commodities important to U.S...

...They have been approved and applauded by the United States...

...These are huge steps forward...

...The proposed Common Market external tariffs (subject to reductions up to twenty per cent in return for reciprocal U.S...

...Apart from a new program in Germany, there appears to be little prospect in the near future for foreign aid of the kind which would help the U.S...

...The United States spends about $3 billion per year outside this country for defense...

...Fourth, to protect the dollar while all these adjustments were being made, the more prosperous European countries could join in an adequate international credit agreement...

...Given the ability of one Common Market country to enter the other without tariffs, our exports to Europe—if nature is allowed to take its course—will contract rather than expand...

...balance of payments...