Toward Freer Trade

June 4, 1962

The president has been eloquently and rightly pleading that we should not move toward economic isolationism but toward greater freedom of international trade. But the Administration’s Trade Expansion bill bears little relation to this plea. It is not primarily a bill to reduce trade barriers. It is a bill under which Congress would abdicate its constitutional tariff powers and turn them over to the President—including the power to raise as well as lower tariffs, to impose import quotas, and to decide which firms and workers should receive special and discriminatory doles and which should not. Every such determination by the President and the “administering agencies” would be final and conclusive, and not reviewable by any court.

A bill primarily designed to reduce international trade barriers would not have to be an enormously complicated 61-page document. It need have only two main provisions: (1) It would abolish all import quotas and similar non-tariff impediments to trade. (2) It would provide unilateral tariff reductions. These reductions would be smooth and gradual, extending over a considerable period, say ten years, to allow time for adjustment and to minimize disruption. They would contain the most-favored-nation clause.

AMENDMENTS

I made essentially these suggestions in previous Newsweek articles in the issues of Dec. 25 and Jan. 1 last. Similar recommendations have been made in a remarkable article by Prof. Milton Friedman in National Review of May 22. But they may sound academic in view of present sentiment in Congress and 28 years of reciprocal tariff negotiations. The more immediate question is what are the minimum changes in the Trade Expansion bill that would lead toward real freedom of trade and retain constitutional processes and protections.

1—The bill should abolish all import quotas or provide for their abolition over a reasonable period. These are today a far more serious barrier to trade than tariffs. We have had for years a creeping quota system. We now have import quotas on some agricultural products, notably sugar, on petroleum, and on lead and zinc, as well as “voluntary” export quotas on textiles imposed on Japan and Hong Kong. As between quotas and tariffs, tariffs are in every way to be preferred. Quotas are discriminatory, require individual allocations, lead to growth of bureaucracy, become weapons of punitive action or of favoritism, and breed corruption.

2—Of the 61 pages of the original Administration trade bill, 38 are devoted to “adjustment assistance.” These provide for discriminatory doles to workers laid off or business firms injured because of tariff reductions. All these provisions should be stricken out. This discrimination cannot be justified. As chairman Mills of the House Ways and Means Committee asked: “Why should a worker who is out of a job due to import competition be placed in a more favorable light . . . than a worker who is unemployed due to cancellation of defense contracts . . . or technological advances?” It would be impossible to know, moreover, which plants shut down just because of import competition. As the First National City Bank of New York has pointed out: “Curtailments of operations in industry have multiple causes; import competition could almost always be figured as playing some part even though other causes might be paramount—shifting desires of consumers, bad management, exorbitant labor demands, or excessive taxes.”

3—Congress should provide that every trade agreement be subject to Congressional veto, but would automatically go into effect unless within 60 days after submission either House of Congress voted against it. This would be the same provision as that now in the Reorganization Act.

Finally, the Administration itself should adopt a consistent policy of freer trade. It should not try to impose punitive taxation on firms doing business abroad. As for our so-called “balance of payments” problem, it is caused solely by our own inflationary policies (combined with an inflexible exchange rate), and the first step to any cure is to halt these policies. Any other course (such as government speculation in foreign currencies) is a dubious gimmick that can only postpone the day of reckoning.