550.S1 Economic Commission/9: Telegram
The Chairman of the American Delegation (Hull) to the Acting Secretary of State
[Received July 2—9:14 p.m.]
91. For the President. The following is the result of a long session this afternoon with Moley, Feis and Day in regard to the economic section of the Conference work.
1. As you know, the fifth resolution10 regarding removal or reduction of trade barriers as drawn in our instructions has been presented to the Conference. Various committees and subcommittees have been engaged in seeking to formulate and agree upon concrete measures and possible agreements in accord with these governing principles. The delegation has been doing little more than observing the discussion in this field during the past few days for it has difficulty in seeing its way clear.
The difficulty is brought home in connection with the concrete measures that are taking shape in the subcommittee discussions; for example, suggestions for the prolongation of the tariff truce and for a revised agreement for the gradual reduction of quota and similar restrictions. It is difficult, being away from Washington and somewhat out of touch with the course of current decisions, to be certain as to how to proceed while avoiding representations here which may not be in accord with the planning of domestic recovery measures in Washington. I realize that all the import regulation powers conferred upon the Executive by that Act are optional. However, current reports that Executive exercise of these powers may be judged necessary in order to effect the purposes of the Act naturally makes the delegation desirous of knowing your expectations in this regard. In order to participate in the further efforts to carry the purposes of the fifth resolution into effect the delegation would welcome further instructions.
The idea of the prolongation of the tariff truce perhaps is the first step towards which the delegation may have to take a definite attitude. The present truce11 is only for the period of the Conference and subject to denunciation on 1 month’s notice beginning July 31. American participation in an extension of the truce would mean that no additional restrictions on the entry of goods into the United States could be made except (a) possibly under some emergency clause which would not cover changes of duty, et cetera, made merely because a competing [Page 677] commodity was entering the United States in increasing quantities, and (b) for protection against dumping in the strict sense of selling at lower prices than in country of origin. Can the American delegation join in such a move?
The second proposal which is gaining headway is a rather complicated agreement designed to check any further quantitative restrictions upon imports and to reduce progressively existing restrictions. Introduction of import quotas in the future administration of the Industrial Recovery Act would conflict with agreements now under consideration in subcommittees. With regard to quotas and other quantitive restrictions [upon?] international trade the American delegation will have to indicate a position. Before this is done further instructions are urgently needed.
2. In regard to tariff rates no definite proposal has yet taken shape. However, the matter is under discussion. In the Washington conversations with representatives of foreign governments during April and May12 we consistently took as you know a strong position against excessive restrictions on international trade. This was generally and I think reasonably interpreted as an indication of willingness on our part to share in attempts to moderate prevailing restrictions including manifest exaggerations in our own present tariff system. To abandon this position now would enormously strengthen the world-wide forces already making for economic isolationism and would be universally regarded as heralding the adoption by the American Government of a policy of national self-containment. I cannot believe long range American interests lie in this direction. Can the delegation, however, in present exigencies of American recovery program properly reaffirm position taken in Washington conversations with all that this implies with regard to later concrete action on the American side?
3. In this connection I am of the opinion that undue emphasis has been placed at the Conference on monetary issues. A smoothly operating international monetary system is impossible if conditions do not permit sufficiently easy international movement of goods and capital to effect the easy adjustment of balances of payments between countries. Stability in the foreign exchanges has in the past been maintained only because temporary lack of adjustment in balances could be overcome by merchandise and capital movements that the unbalanced situations themselves produced. Sufficient scope for movements of goods and capital is the only firm foundation for stable arrangements on the financial side.
Thus in my judgment the Conference can only achieve permanent benefit if it paves the way towards an increase of international commerce [Page 678] to more normal levels. Current conditions make immediate measures to this end extremely difficult to obtain but it may prove feasible to seek to bring the governments together in support of principles and measures undertaken for a longer period.
These views also assume importance in my mind because of their bearing upon the American program for national recovery. It is to be hoped and expected that the Agricultural Adjustment and Industrial Recovery Acts12a will for the immediate future enable us to take care of the problems of employment created by the decline in international commerce. But if this problem of employment must be grappled with as a permanent one and the labor and resources that the American people have been applying to production for export must permanently find occupation elsewhere I fear that the task of the Government will grow increasingly more difficult. These fundamentals clearly should be weighed in the development of American policy.
4. I am very anxious that the views expressed and the positions taken by the delegation should accurately represent the Administration’s policy as far as can be forecast at the present time. I am ready to assist in every possible way in bringing your views effectively to bear on the Conference program in the general area covered by the fifth resolution. It may be that the immediate requirements of the domestic program are judged to call for a moderation of substantial alteration of the position taken in the fifth resolution. In considering this possibility I hope that appropriate weight will be given to the facts that (a) the 1930 Tariff Act was passed when costs and prices in the United States were substantially higher than at present and that prices in the United States have since fallen more than in most countries; and (b) American currency meanwhile has depreciated in relation to gold currencies.
In dealing with all of these fundamental matters the delegation is greatly in need of your further advise. The Conference is in a critical state. If we are to work effectively it is essential that we have our way cleared immediately. The earliest possible reply is earnestly requested.