The Case for Free Trade

In the last half of the 19 century, U.S. businessmen wanted and got high tariffs. There were good reasons for this. Many fledgling U.S. industries still needed protection from Europe's factories, which could undersell them, and the U.S. itself was still a debtor nation (i.e., U.S. debt abroad exceeded foreign debt in the U.S.).

IN 1953, more & more businessmen want lower tariffs, even though the Administration and Congress seem in no mood to get to the job of cutting them. Again, there are good reasons.

The U.S. is now a creditor nation, and most of its industries no longer need protection. Furthermore, most businessmen are well aware that a tariff is actually only a concealed subsidy to a particular industry paid for by all consumers. Since World War IPs end, the U.S. has spent $38 billion on foreign aid. In the same period, the amount of the excess of U.S. exports over imports has totaled $34 billion.

In effect, much of this has been a subsidy which all taxpayers have paid to industry because U.S. tariffs have not permitted foreign nations to earn their own way by imports to the U.S.

For these reasons, support for freer foreign trade has snowballed. Such pioneer free traders as the Committee for Economic Development and the U.S. Council of the International Chamber of Commerce have been joined by the National Association of Manufacturers, the U.S. Chamber of Commerce, the Detroit Board of Commerce, the New England Council, the New York Board of Trade, New Orleans International House, Indianapolis Chamber of Commerce and by groups as diverse as the Brotherhood of Railroad Trainmen, the National Grange, League of Women Voters, and religious publications ranging from the Catholic Commonweal to the Methodist Christian Advocate.

Some would drop all tariffs; others would merely lower them. But most agree on certain specific barriers that should be eliminated immediately: P: Repeal the "Buy American" Act of 1933, which forces the Government to buy domestic goods even when foreign bids are far cheaper.

P: Modernize and overhaul the 23-year-old Hawley-Smoot Tariff, which is still the basis for 1953's regulations.

P:Enlarge the President's powers to negotiate lower tariffs on specific items.

(But in lowering them, most free traders would want reciprocal concessions, such as removal of heavy foreign export taxes on hides, coffee, etc.) P:Simplify tariff schedules, which now cover some 8,000 rates, and recodify confusing customs regulations which help keep out imports.

Among businessmen, there are still protectionists. But their once mighty Washington lobby is now made up of small groups which speak with a megaphone voice, e.g., Lobbyist Oscar R.

Strackbein, an ex-economics professor who gets $20,000 a year plus expenses for running three separate high-tariff organizations out of a small office.

Some of the lobby's arguments still make sense. However, few foreign industries can offer serious competition to the U.S. for the simple reason that U.S. productivity and efficiency are so much greater that U.S. industry can carry the nation's high wage standard and still outsell foreign competitors.

This tremendous efficiency has turned many of the onetime valid high-tariff arguments into meaningless cliches.

Sample cliche: Products of cheap labor would undermine the U.S. living standard. Sample fact: In France, American refrigerators cost 50% more to produce though wages are only one-fourth as much. Another cliche is that foreign competition would "dislocate" U.S. industry.

Actually, U.S. industry is continually dislocating itself by its own feverish search for new markets. It is the genius of U.S. industry to dislocate itself and thus find new and better ways of making things. Industries which do not find better ways of doing things fall behind anyway, even with tariffs.

The troubles of the protected coal industry, now demanding a boost in tariffs on imported oil, are largely due to the fact that oil technology and research have outdistanced that in coal.

Perhaps the best answer to the protectionists is that the U.S. has steadily reduced tariffs in the last 20 years (e.g., tariffs have been cut 50% on the average) without any great effect on industry. And in a recent tariff study by the Truman-appointed Bell commission, it was estimated that elimination of the Buy American Act, simplification of customs, etc., would not displace more than 90,000 U.S. workers.

Instead of putting into action this program--or the best parts of those recommended in dozens of other studies--President Eisenhower recently asked Congress to appoint still another commission to study the problem for another year. Instead of asking for lower tariffs, he asked only for an extension of the New Deal's 19-year-old Reciprocal Trade Agreements Act.

Congress, acting on long-conditioned reflexes, is still frightened by the tariff lobby's megaphone voice, and it looks as if the President will be lucky to keep the powers to cut tariffs that he now has. Instead of moving forward in this session of Congress, it looks as if the Administration will be fortunate to stand still.

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