DURING much of the period between the two world wars the search for economic solutions for the problem of world peace centered on methods of reforming international trade. Today, however, many economists, as they work on plans for reconstructing the world economy when this war is over, are focusing their attention on methods of developing industrially backward areas. They relegate trade policy to the background. In their view, the expansion of world trade is to be stimulated directly through capital investment rather than indirectly through removing the obstacles to importing and exporting.
The reasons for this shift in emphasis are not far to seek. The failure of attempts at tariff reform after the First World War either through multilateral or unilateral action was most discouraging. The World Economic Conference of 1927, for all its brave resolutions, produced only an abortive tariff truce. Within a few years, tariffs were moving rapidly upward. Then the onset of the Great Depression drove many nations to seek economic salvation by nationalistic policies. The United States in 1930, with the Hawley-Smoot Tariff, and the United Kingdom in 1932, with the Import Duties Act and the Ottawa Agreements, led the retreat toward autarky. Attempts to achieve international coöperation at London in 1933 ended in disaster, and from that date until the outbreak of the Second World War the increase in restrictionist measures of all kinds was practically universal. In the United States, it is true, trade agreements concluded under the Act of 1934 checked the upward surge of tariffs and facilitated the reduction of barriers to imports, both in the United States and in certain foreign countries. But it cannot be claimed that the Hull program accomplished a major and general reform in commercial policies.
A second reason for the recent neglect of commercial policy by many economic planners is their mistaken notion that the diffusion of technical knowledge to industrially backward countries will remove the raison d'être of foreign trade. They base it on the false assumption that international
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