Foreign Relations of the United States, Diplomatic Papers, 1933, General, Volume I

550.S1 Agenda/42

The American Representatives on the Preparatory Committee of Experts (Day and Williams) to the Secretary of State

New York, February 24, 1933.
[Received February 28.]

Dear Mr. Secretary: We have the honor to submit herewith the official version of the Draft Annotated Agenda¹⁸ for the International Monetary and Economic Conference, as prepared by the Commission of Experts in Geneva, January 9–19th, 1933. This document does not differ materially from that which we delivered in person and discussed with you in some detail upon our return from Geneva in late January.

We take this opportunity to indicate once more what we conceive to be the salient features of the agenda and to interpret these features in terms of the principal contributions which each country might make toward the program of world recovery. In the view of the commission this depression is without precedent in its world-wide scope and severity. Whatever its origins, which are complex, the depression represents the repercussions upon international and domestic trade of the severe and protracted fall of prices, which repercussions in turn depress prices further. Escape from this vicious circle, which threatens the very existence of the world’s social system as we have known it, can be achieved only by vigorous, courageous, and concerted action upon an international scale. Such action, to be successful, must be based upon the principle that nations must make mutual sacrifices in order to achieve mutual benefits.

The fall of world prices, with attendant conditions of panic, has upset the equilibrium of international trade and capital movements and has threatened (and in many instances accomplished) the breakdown of national monetary systems. To protect their national economy so far as possible from these external strains and maladjustments, the nations have been driven to defensive measures designed to lessen international payments accruing against them and to increase international payments receivable by them. The chief of these measures are:

(1) Depreciation of currencies, involving departure from the gold standard;

(2) Control of foreign exchanges, permitting a purely nominal adherence to the gold standard at a par of exchange artificially maintained by means of restrictions upon the outflow of payment in the form of currency or foreign exchange balances;

(3) Direct restrictions upon international trade, by prohibitions, quotas, contingents, clearance agreements, licenses, and similar devices;

(4) Indirect restrictions on trade, by tariff rates.

It is important to recognize that these defensive measures, while differentiated in form, are essentially one in origin, purpose, and effect. It is also important to recognize that they are not in the main the result of deliberate, voluntary action but are the outcome of an unbalanced situation from which each nation is forced to defend itself by actions which force others to take like recourse. The general effect is that of destructive economic warfare resulting in a progressive strangulation of international trade, which in turn produces severe repercussions upon domestic trade and employment. The total value of world trade is now less than one-third of that in 1929, and the physical volume has fallen by at least 25 percent, by far the largest decline on record. World unemployment is estimated as at least thirty millions, exclusive of dependents. National incomes have fallen by more than 40 percent.

The Preparatory Commission discussed two main methods of attacking this vicious circle. One is a direct attack upon the world price level; the other, an attack upon the system of defensive measures which depress prices. The agenda gives a qualified approval to the first method in so far as a rise of prices can be accomplished consistently with balanced budgets and sound monetary measures, but places chief reliance upon the second method. The agenda stresses the fact that, in the nature of the case, remedial action cannot be undertaken by any one nation without supporting and compensating action on the part of others; what is required is “a broad solution by concerted action along the whole front.”

In terms of countries and key situations such a solution, in our judgment, would mean such contributions to the common program as the following:

(1) By England, a de facto stabilization of the pound sterling, looking toward the ultimate restoration of the gold standard. Such action would probably result fairly promptly in the stabilization of exchanges in the entire group of countries whose currencies are closely related to sterling. It would remove the depressive effects upon world prices which result from exchange instability, with its attendant threat of further depreciation. The Commission recognizes that there may be difficult technical problems in determining the time and the rate of exchange at which sterling should be stabilized, and it sets forth in some detail the steps which should later be taken in order to insure the better working of the international gold standard.

(2) By Germany, the relaxation of exchange control. As indicated in our first report, last November, the German delegates took the position that such relaxation could be undertaken provided sterling were stabilized, international trade made freer, and the Standstill Agreement modified to remove the danger of undue withdrawals of short term credits. We understand that the Wiggin Committee has completed such a modification. Relaxation of exchange control in Germany would have a salutary effect upon other central and eastern European countries where similar conditions exist to a more acute degree than in Germany itself.

(3) By France, relaxation of direct, artificial restrictions upon trade, such as quotas, clearance arrangements and licenses. This policy has been carried by France to an extreme degree, so that today some eleven hundred articles of commerce are under special restraints of this character. It seems fair to state, also, that France’s action has been less the result of compelling external pressure and more the result of deliberate intent than is the case in other leading countries.

(4) As to the United States, it is the Commission’s opinion, in which we concur, that our main possible contributions to the common program lie in a satisfactory settlement of the war debts and in the field of tariff policy. What definite action can be taken at the conference itself with respect to tariff rates it is difficult to determine, but it is clear from our conversations in Geneva that Europe profoundly believes that American high tariff policy is one of the root causes of the world’s economic difficulties, and that any action looking toward a relaxation of this policy would enhance the possibilities of international cooperation.

With respect to the war debts, the Agenda states: “The problem of inter-governmental indebtedness has not been included (in the Commission’s program of reconstruction), because it lies outside our terms of reference. In our opinion, however, it is essential that this question shall be settled and that the settlement shall relieve the world of further anxiety concerning the disturbing effects of such payments upon financial, economic and currency stability. Until there is such a settlement, or the definite prospect of such a settlement, these debts will remain an insuperable barrier to economic and financial reconstruction.”

From the American viewpoint it would seem desirable: (1) that advantage be taken of the forthcoming discussion of war debts with the British government to survey the whole range of questions considered in the Agenda for the world conference, and to reach, in so far as may be possible, an Anglo-American understanding of these questions; (2) to time the world conference in such wise as to make the best use of such power to influence the decisions of other nations as the debt question affords to us. A debt settlement which formed a part of the fulfilment of a general program of reconstruction toward which each of the leading countries made an important contribution on the lines previously indicated would probably gain stronger public support in all the countries concerned, and lead to broader constructive results, than a debt settlement made without the background of this wider setting.

We have [etc.]

• Edmond E. Day
• John H. Williams

18. League of Nations, Monetary and Economic Conference, Draft Annotated Agenda (Official No.: G.48.M.18.1933.II [Conf. M.E.I.]).