Price Supports Stifle Trade

February 8, 1954

The report of the Randall Commission on Foreign Economic Policy runs to more than 100 single-spaced typewritten pages. It makes scores of detailed recommendations—on the so-called dollar problem, foreign aid, foreign investment, agricultural and raw-material policy, tariff and trade policy, East-West trade policy, merchant-marine policy, tourism, and currency convertibility. Overall judgment is difficult within any short space. I find much of its discussion of currency convertibility, foreign aid, and foreign investment, for example, disappointing; but the report makes so many contributions to clarity and common sense that it is more profitable to begin with these.

Particularly good are the sections on agricultural and raw-material policy and on tariff and trade policy. On the farm program, the report courageously points out that “inflexible price-support programs which hold domestic prices above world prices become price-fixing programs and result in accumulations of surpluses that would otherwise have moved into consumption here or abroad. To maintain such price-fixing programs it may become necessary for the U.S. to apply trade restrictions of various kinds, including import quotas, to keep down foreign importations. To move high-priced surpluses into export markets it may seem necessary to use export subsidies or dumping procedures that, if practiced with respect to imports into this country, would involve the application of our antidumping and countervailingduty laws. Price fixing, particularly with reference to commodities moving in international trade, is inherently incompatible with a pattern of private trade, free enterprise, and nondiscriminatory commerce among nations.”

The commission is highly critical of the existing International Wheat Agreement. It “does not believe that extensive resort to commodity agreements will solve the problem of price instability. . . . Such agreements introduce rigidities and restraints that impair the elasticity of economic adjustment and the freedom of individual initiative, which are fundamental to economic progress.” It also “finds the same objections to the proposals for unilateral buffer stock action by the U.S. to stabilize world prices of raw materials and foodstuffs.” The commission’s recommendations with regard to tariffs and trade deserve praise for more than one reason. They acknowledge the need of “moving toward greater freedom of trade.” But they recognize that complete “free trade is not possible under the conditions facing the United States today.” They acknowledge that “the United States employs impediments to trade, primarily through tariffs and in only limited fields through quotas.” But: “Other countries also employ these devices. Beyond this, they employ the quota procedure far beyond our use . . . and also employ exchange controls and many other devices not used here. . . . We fully recognize the dangers of using averages; yet it seems clear by any test that can be devised that the United States is no longer among the higher tariff countries of the world. Taken by and large, our trade restrictions are certainly no more of a cause of payment imbalances than the rigidities maintained by other nations.” It is high time this reply was made by an official body to the countries that have been self-righteously demanding a one-sided reduction of trade barriers by the U.S.

Finally, the report is to be praised because it recommends an immediate but gradual reduction of our trade barriers. The extension of the Trade Agreements Act for at least three years; authority to the President to reduce present tariff rates, in trade-agreement negotiations, by 5 percent a year during the next three years; to reduce tariff rates by not more than one half of rates in effect Jan. 1, 1945, on products being imported in negligible amounts; to reduce, over a three-year period, to 50 percent ad valorem, or its equivalent, any rate in excess of that ceiling—these are moderate objectives on which agreement should be possible if we are to arrive at any sensible solution of the foreign-trade problem at all.