Memorandum by the Ambassador in the United Kingdom (Winant)46

Memorandum on Article VII

(Prepared by Ambassador Winant with the assistance of Mr. Hawkins and Mr. Penrose.)

The period between the wars was one of international trade warfare. Each country, by raising tariffs, imposing quota restrictions negotiating preferential arrangements, utilizing restrictive and discriminatory exchange controls, and by subsidizing exports tried to take care of its own producers at the expense of those in other countries. In consequence international trade was in large part destroyed. Since all countries are in varying degree dependent upon it for their prosperity, all suffered. The international economic policy of nations became a struggle for a shrinking world trade, and the very policies whereby each sought to save itself caused world trade to shrink still further.
The economic strength of the United States is greater than that of any other country. Its production and consumption is a large part of the production and consumption of the entire world. It is the greatest creditor nation. The policies it pursues and advocates will be decisive in determining whether mutual impoverishment or mutual prosperity will characterize economic policies in the postwar world.
The opportunity to do something about this is unparalleled but fleeting. When the war is over production and trade will be disorganized. Production in the United Nations must be converted from wartime to peacetime purposes. We speak of reconversion but it would be a tragic mistake if we and other countries merely went back to what we had before the war; if each country again sought to produce what it consumes without regard to the fact that it might more economically import more of its requirements from other countries and thus benefit itself and the countries from which it buys. The trade policies which nations adopt when the war is over will determine to a large extent the pattern of production which will develope throughout the world as production for war gives way to production for peace. Tragic and costly as this war has been it has for the time being destroyed much that is bad. The fact that the world economy is in a state of flux gives us the opportunity to create a new and better pattern. But it is an opportunity which we will have only for a relatively brief time. If things are allowed to drift, production and trade will tend to revert to what they were and will solidify into the prewar pattern [Page 23] that Secretary Hull and the present Administration sought so persistently but found so difficult to change because of the resistance of vested interests.47
We should seek now international agreement on a code of rules to govern trade relations. The code should outlaw high pre-war tariffs; prohibit quota systems; rule out discriminatory trade arrangements; forbid subsidies whereby Governments throw their financial strength behind their own producers to crush the competition of those in other countries; prevent private interests through cartel arrangements from frustrating the efforts of governments to stimulate international trade. At the same time agreement should be sought on the principles to govern arrangements for stabilizing the position of primary producers who have suffered so seriously from the wide swings and erratic behavior of staple commodity prices and at the same time permit customer needs to be efficiently served. An international trade organization should be established to harmonize trade policies of nations and to study the technique whereby trade policies can be made mutually helpful rather than mutually destructive, and to formulate and supervise the operation of intergovernmental arrangements having these ends in view.
We have had extensive discussions of an exploratory sort with British officials on these questions and fine [find] a large measure of agreement on what needs to be done. They recognize that a solution of the problems of trade relations is essential; that the mutually destructive rivalry of the past created friction and ill-feeling and that if this continues in the future, it will do much to destroy the spirit of cooperation on which success in organizing a peaceful world must rest. But the difficulty of the problems presented is also recognized; these problems have defied solution in the past.
The following steps are suggested for consideration:
Complete our discussions with the British with a view to reaching agreement in detail on the principles that should govern postwar international trade relations; the kind of measures which nations should adopt and the commitments they should make to implement those principles; and the kind of world trade organization that should be set up to foster the application of these principles and the acceptance of these commitments.
Message by the President to Congress advocating the adoption of the foregoing as the policy the U.S. should seek to implement. The fact of agreement having been reached with the British should not be stated although reference might be made to the fact that extensive exploratory discussions with them and other countries indicates the [Page 24] possibility that there is good prospect of wide acceptance of what we advocate.
The U.S. should then put forward to other countries a statement of principles on commercial policy to serve as the basis for a United Nations conference the aim of which would be,
to secure general adoption of a fairly detailed set of principles on commercial policy;
to establish at once an International Trade Organization, or at least an Interim Trade Organization which would soon be replaced by a permanent organization;
to direct the Trade Organization to translate these principles into a detailed multilateral convention to which all United and Associated Nations would be invited to adhere.
If the President of the United States should take the lead in advocating well thought out policies and concrete proposals in the field of international trade policy, public opinon throughout the world might well fall in behind him, and plans for reconversion to peacetime production might in large measure be made in the light of the principles and policies enunciated by him.
  1. Copy obtained from the Franklin D. Roosevelt Library, Hyde Park, N.Y. For subsequent consideration of this memorandum, see telegram 1844, February 22, 7 p.m., from London, infra.
  2. Reference is to Cordell Hull, Secretary of State, March 4, 1933, to November 30, 1944, and his efforts to liberalize United States foreign trade policies, particularly by reciprocity measures as outlined in the Trade Agreements Act, June 12, 1934, 48 Stat. 943; see Foreign Relations, 1935, vol. i, pp. 536 ff.