European Isolationism

December 7, 1953

It is hard to see how the seventeen-member Randall Commission on Foreign Economic Policy, composed both of protectionists and low-tariff spokesmen, can possibly turn in a unanimous report. But if it is looking for sensible and practical compromise proposals on which a substantial majority might unite, I recommend its earnest attention to the suggestions put forward by Juan T. Trippe, president of Pan American World Airways, Inc., at the recent convention of the National Foreign Trade Council. Trippe proposes extension of the Reciprocal Trade Agreements Act for two years; repeal of the Buy America Act; further customs simplification along the lines of the Jenkins bill, and encouragement of private investment abroad by permitting the President “to conclude reciprocal treaties with other nations, exempting income earned abroad from domestic taxes.”

I should personally prefer, of course, to see the Randall report go much farther than this in the direction of lowering tariff rates and other trade barriers. In fact, I should regard as more urgently necessary than any of Trippe’s proposals the total abolition of our present import quotas.

But while Trippe’s practical suggestions are all in the right direction, his assignment of blame for the present world-trade situation, like that of so many other Americans, is oddly one-sided in its self-reproachfulness: “Many Americans are still isolationists in their economic thinking. . . . Much of our past world-trade policy makes little sense. . . . Twenty-five years ago, our imports amounted to 5 percent of the annual value of our national income. . . . Today, with the rest of the free world in need of dollars to buy our goods and products, our imports are but 3 percent. A generation ago, when Great Britain was the world’s great creditor nation, her businessmen invested abroad each year some 2.5 percent of her national income. Today, we Americans invest abroad but ⅓ of 1 percent.”

The implication here is that this comparative situation is solely or chiefly America’s fault. It is chiefly, on the contrary, the fault of Europe and the rest of the world. Bad as our international economic policies have been in some respects, those of most European and Asian countries have been incomparably worse. Their exchange controls, artificial currency valuations, bilateralism, import quotas, license requirements, and direct prohibitions, not to speak of their network of internal restrictions, have done far more to throttle two-way trade than the American tariff barrier. Indeed, at one point Trippe himself points out that our average tariff rate of 5 percent on total imports compares with an average of 13 percent on total imports for the fifteen Western European countries. Even when tariff barriers are considered merely by themselves, in other words, ours may be less restrictive.

And our comparatively small amount of foreign private investment is certainly far more the result of hostility to private capital in the would-be borrowing countries—with their confidence-destroying policies, such as vexatious laws, excessive taxation, exchange control, currency inconvertibility, and outright expropriation—than of any lack of eagerness of Americans to invest abroad. In fact, as long as these foreign countries get American taxpayers’ money as a gift, they do not need to pay for their imports from us with equivalent exports to us. And as long as these foreign countries get American taxpayers’ money as a gift they have far less need to make the reforms necessary to attract private American capital.

The greatest barrier to a free flow of international trade today, in brief, is not American economic isolationism but European economic isolationism and Asian economic isolationism. That most of Europe, following more isolationist policies than at any time since the seventeenth century, should have succeeded in turning the isolationist charge primarily against us, is certainly not the least remarkable example of the Alice-in-Wonderland ideological climate of the present age.