Wonderland Trade Policy

January 31, 1955

President Eisenhower has renewed his request to Congress to extend the trade-agreements act for three years, and to authorize him, in trade-agreement negotiations, to make gradual and moderate tariff reductions over that period. Congress should grant the President these powers. But it must be added in all candor that even if it does so, its action under present conditions will prove largely academic and all but futile in bringing about the results that the President intends.

The truth is that the President’s “foreign economic policy” message is confused, and that the policies we have actually been following are self-contradictory. Mr. Eisenhower, in pleading for lower tariff barriers, bases his case largely on the wrong reasons. The main reason for reducing the American tariff is to benefit the American consumer—to enable him to buy foreign goods cheaper. But the President bases his case, as the Truman Administration did, mainly on the argument that it is our duty to lower trade barriers in order to gain the good will and increase the prosperity of foreign countries. Lower American tariffs would, incidentally, have these effects. But to stress this philanthropic argument is far less effective politically than to stress the argument that we ought to reduce tariffs directly for the advantage of our own people.

Moreover, Mr. Eisenhower once more accompanied this request for lower tariffs with a request for continuance of our huge foreign giveaway program. This creates needless confusion and helps to give Congress the impression that more trade, like more handouts, is primarily a favor to foreigners.

On the other hand, Mr. Eisenhower wrongly separated his argument for lower American tariffs from other necessary changes without which such lower tariffs would be meaningless. He did not point out, for example, that trade is necessarily two-sided, and that European economic isolationism has been and still is a far greater barrier to its expansion than our own policy. He did not point out that European countries still directly discriminate against American goods and put them under import quotas. He did admit, rather indirectly, that most European currencies are still inconvertible; but he spoke of this as if it were an affliction imposed on them from without, rather than a policy deliberately adopted by European governments to conceal the extent of their inflation and to bolster their economic nationalism.

And finally, the President’s message did not point out, except by a vague and slight hint, that the tariff policy he recommends is directly contradicted by our farm policy. In order to protect our farm-price supports we have put quotas on agricultural imports that have created resentment in half a dozen foreign countries (to many of which we are giving aid). And in trying to get rid of the appalling farm surpluses that our government has piled up through its price-support policy, we are proposing to “dump” part of the surplus abroad, undercutting world prices and disorganizing export markets, and thereby alarming and antagonizing scores of nations.

The Randall commission, a year ago, courageously and clearly faced up to this contradiction. The President glosses over it. His flexible farm-support policy, it is true, is not as bad as the ultrahigh supports on which the farm bloc is still insisting; but even the present flexible policy will continue to do great harm. Since the middle of last year our government has succeeded in getting rid of more than $800 million of farm surpluses, by selling them below cost, giving them away at home, or giving them away to foreign countries. But in spite of this huge loss to the taxpayer, the government on Nov. 30, through new acquisitions, still held about $7 billion worth of farm surpluses, compared with about $6 billion in July. If we had the courage to abolish this program, we would make a far greater contribution to freedom of trade and to regaining the good will of foreign countries than we could do merely by acting directly on tariffs, and leaving our farm-price support policy unchanged.