New tremors in the world economy threaten to put a stop to the painstaking efforts by which American trade policy is being, with much uncertainty, adapted to modern times. The danger should be fought off-but that will require still more adaptation.

After a period of unprecedented continuity, from 1934 to the mid-1960s, American foreign trade policy entered a time of great uncertainty. The implications for the world economy were serious, since American policy had been the lever by which a high degree of trade liberalization had been achieved. The strong unilateral action taken by the United States in the summer of 1971-ending the convertibility of the dollar into gold and imposing a surcharge on imports-dramatically suggested how disruptive an American turn to clear-cut economic nationalism might be. In retrospect, it can also be seen as a watershed beyond which American policy made a new start toward the further liberalization of world trade. Ambiguities, uncertainties and obstacles remained, other countries were slow to respond, but a process was under way. Now, suddenly, the entire effort is imperilled by new, dramatic events that seem likely to bring out the worst in everyone.

The questions are not just those of Watergate, foreign oil, Russian wheat, the wounds of Vietnam, traumatic reactions in Japan, and the year of Europe that was, though all these are part of the picture. To understand the present position, we need to look not only at recent events but at some fundamental changes in the political dimensions of American foreign trade policy. International relations, domestic politics, and changes in the nature of international trade policy itself are all involved. A few new developments are clear-cut and have predictable consequences for trade policy. For the most part analysis runs up against developments that are more sensed than demonstrated, and must deal with vivid events that may not have anything like the same significance in the long run that people now ascribe to them. The best that one can do at this point is to try to clarify the issues. In international economic affairs, "thinking makes it so" more often than is generally realized. Therein may lie the difference between a zero-sum game (in which one nation or group gains only at the expense of others) and a game in which all can gain if they do the right things. Both kinds exist in the world economy, and it helps to know which one is playing.


Let us start with some points that were already clear before mid-1973. Since the end of the Kennedy Round in 1967 it has been clear that the politics of international trade policy will never be the same again, at least as regards the trade among the industrialized countries with market-oriented economies. In about 25 years, North America, Western Europe and Japan dismantled most of the structure of tariffs, quotas and exchange controls that restricted the large share of world trade that they carry on among themselves. In other ways as well these economies became more open to one another. While some important tariffs remain, any further progress in trade liberalization among these countries will have to concentrate on the impediments loosely labeled "nontariff barriers."

Differing greatly from one another in form, purpose and effect-the list includes subsidies, customs classification, "buy-American" laws, tax rebates on exports, and conserving endangered species, among other things-these trade-distorting practices cannot be dealt with by the sweeping and more-or-less uniform methods that have been so successful in reducing tariffs and eliminating quotas. Often the interference with trade is quite incidental to so worthy a purpose as enforcing the pure food and drug laws or making automobiles safer. Hidden protectionism exists side by side with perfectly overt efforts to keep foreigners from dominating certain industries.

Many of these practices can only be dealt with by agreements on rules and principles that will then have to be applied to cases in a continuing process of international negotiation. Rulings that one subsidy paid to a shoe company is acceptable while another violates an agreement will lack the drama or political force of a commitment to abolish tariffs (as in the Common Market) or even just to cut them across the board (as in the Kennedy Round). Even more important, the fact that so many nontariff barriers are connected with the regulation of national economic activities means that foreign trade negotiations will impinge directly on domestic issues and on what may already be serious struggles among politically important interests. Consider, for example, disputes about environmental controls that raise production costs at home. Should fear of foreign competition influence the decision? While it has not been easy to remove tariffs, this kind of choice sounds more thorny.

Of the remaining tariffs, some may prove no harder to remove than those already dismantled (these things are often more formidable in anticipation than in practice). Others may present great difficulties because they shelter economic activities that governments have been reluctant to expose to international competition-for good reasons or bad. If these tariffs are not to be left standing, governments may well try to work out international arrangements to deal with the difficult problems of adjustment they will face. Gradual liberalization and assistance to workers for changing jobs might be accompanied by temporary arrangements limiting competition and by agreements on the international structure of an industry, under which, for example, two countries might specialize in making components while a third puts them together.

Even if governments indulge one another and leave the existing protection of "hard cases" intact, they will not escape the problem of adjustment. The structure of production is always changing, probably more rapidly than in the past and often in big, irregular jumps as technology decrees larger units of production. The new trade flows threaten established producers. Governments are pressed to erect new trade barriers. Unless these are to become permanent, something has to be done to help bring about adjustment. Once again a combination of international acceptance, help and pressure is called for.

These observations add up to the conclusion that future international trade negotiations are going to be politically more difficult than those of the past. If they are to bring about further trade liberalization, or even just to maintain what has already been accomplished, governments will have to commit themselves to a close and sustained process of coöperation. Much of what has to be done will be complex and tedious, without the glamor of striking accomplishment. When issues are dramatic that will be because they seem to jeopardize someone's job, and perhaps even national security. The international trade negotiations will, more than ever before, involve problems that already cause domestic controversy and that are not generally thought of as being the proper business of foreigners. Unfamiliar questions will arise that cannot be dealt with by such simple principles as that we should reduce tariffs reciprocally. And all this will go on continuously, without many moments of high political feeling that can be used to get public support for measures that promise long-run gain at the possible cost of short-run sacrifices.


The second clear-cut change in the political dimensions of trade policy lies inside the United States.

After Vietnam, Watergate, and arguments over presidential privilege and impoundment, the first question about trade policy was whether there was any chance that Congress would give President Nixon the extensive, and to some degree discretionary, powers he would need if he was to enter into a period of hard bargaining. The initial, though partial, answer was remarkably positive. The Ways and Means Committee reported and the House passed by a substantial majority a trade bill that gave the President most of what he asked for (except in the matter of most-favored-nation treatment for the U.S.S.R., which raises a separate set of questions). Why the House endorsed this strong move in the direction of further liberalization instead of adopting something like the restrictive Burke-Hartke bill is a matter of considerable interest that will have to be passed over to get to the second question: How would the difficult relations between the President and Congress affect the way the United States tried to deal with the complex matter of nontariff barriers?

In the great procedural innovation of the Hull Trade Agreements Act of 1934, Congress granted power to the President to reduce tariffs when he could satisfy the standards laid down in the law. This made tariffs a subject of international negotiation in a way that they could not be so long as Congress interpreted its constitutional mandate to regulate foreign trade to mean that every specific change in the tariff had to be made by legislation. That method naturally made domestic considerations dominant in almost every specific issue. Repeated renewals of the Trade Agreements Act have made the 1934 innovations established practice, but have also tightened or loosened the rein on the President. The question for the future is what procedure should be used to deal with nontariff barriers.

The variety of such barriers makes it hard to imagine writing criteria that would cover all of them. The links of many of them with other kinds of activity make it unlikely that any Congress would delegate all its power over them to the President. He would in effect become legislator as well as executive and could alter domestic arrangements to conform to international agreements. But if no power was granted and every case had to be treated on an ad hoc basis and if Congress had to go through the normal legislative process every time an American trade-distorting practice was rooted in a statute, the prospects of trade liberalization would be very poor.

President Nixon asked for some delegation of powers, particularly to deal with measures already linked with other trade barriers and presumably having no other purpose than protection. Much more important was the proposal that if the President negotiates an international agreement on trade practices that would normally require legislation, he should lay it before Congress with an explanation of his purposes and the advantages of what was proposed to the United States. If within 90 days neither house of Congress had disapproved the agreement by a simple majority, it would become law. The House made some modifications in this procedure but accepted its basic feature. If the Senate accepts something like this (and otherwise there can hardly be any broad trade negotiations) a new era will have opened in American trade policy.

To use the new procedure, any administration will plainly have to work much more closely with Congress during trade negotiations than has been usual in the past. Otherwise, it will not know what measures are likely to be acceptable. To a degree, the law already anticipates this, as Congress must be notified of use of the new procedure three months before any agreement is submitted, thus giving an opportunity for advice and consultation. It does not take much imagination to see that members of Congress will use their part in the new procedure to influence matters beyond those for which their assent is technically required. That would be natural in any case, but the nature of the international agreements encourages it. American agreements affecting nontariff barriers will often be closely related to other understandings in which foreign concessions are balanced against American measures that lie within the President's power. Moreover, American interest groups will press Representatives and Senators to make their assent to specific agreements dependent on other features of the Administration's trade policy as well. Obviously one can spin these connections out indefinitely. How far they will in fact be carried, and to what effect, depends on circumstances. Carried too far, no one will gain, because the international bargains, too, will have their limits. Nevertheless, to a degree not known in recent years, it will be prudent for the executive to keep in close touch with Congress, which feels about the fait accompli much as nature does about vacuums.

Well done, this process may involve some members of both houses in the negotiating process sufficiently to make them fully aware of the reasons for striking particular bargains and perhaps to give them some sense of shared responsibility as well. Indeed, the course of wisdom may be for an administration to find ways of working with at least part of Congress along a much wider front than just that provided for in the new procedure for dealing with nontariff barriers. This presumably is already foreshadowed in provisions in the House bill that are intended to make the participation of congressional advisers in international negotiations more meaningful than it has usually been. In addition, the President is called on to explain many of his specific actions and this should create opportunities for the expression of congressional opinion.

There are some difficulties on the congressional side. Neither the House nor the Senate will always accord foreign issues the same importance the executive does. A division of labor among committees anchored in the past, no longer corresponds to the requirements of contemporary trade policy. There may, therefore, be a need for some new organizational arrangements on the congressional side. A Joint Committee on Foreign Trade Policy would not only cut across the separate characteristics of the two houses but also the widely diffused committee responsibility in each chamber for the many different issues that come into modern trade policy. Beyond the organization of Congress lie questions about new kinds of "steering committees" bridging the gaps between Cabinet members, White House and the loci of power in Congress.

Will even the best arrangements work? Among those whose minds go back far enough, there is a negative reflex related to the horrors of congressional tariff-making in 1931 and before. Others draw back from the prospect of conducting delicate or technical negotiations through delegations that include members of Congress who-unlike most negotiators-have independent political power and at the same time cannot escape a special sensitivity about certain subjects, depending on the make-up of their districts. It is also no exaggeration to suppose that sometimes otherwise reasonable bargains will be put askew by someone's burning interest in a matter remote from trade policy, such as Soviet emigration, the stationing of American troops in Europe or the status of Okinawa.

All these dangers are real. If they all eventuated, American trade diplomacy would be hobbled. But if that is what Congress intends, it has shorter and more direct ways to accomplish it. So one must assume that there is a wish to make the new arrangements work. There are, after all, members of Congress who appreciate the disadvantages of being too closely drawn into the intricate process of trade negotiation and who know that influence may in the long run be gained more by reasonableness than by the arbitrary assertion of will. In any case, there is no real choice. The constitutional and legal systems of the United States require the two branches of the federal government to work together in both foreign trade and domestic legislation. When those two subjects have merged as much as they have in the present interdependent world new ways have to be found to get around old difficulties.


Outside the United States, there are also changes in the political dimensions of international trade negotiations. Western Europe and Japan were transformed from weak spots in the international economy at the end of the war to major centers of strength by the 1960s. For both, foreign trade was economically more important than for the United States, but for reasons that are now fairly well understood neither was inclined to take the lead in improving the international trading system. Indeed, in the post-Kennedy Round period, their preoccupation with other problems exacerbated the rather widespread American sense that others were not carrying their share of the burdens of managing international matters, and that the coöperative system the United States had worked so hard to create was a one-sided affair that gave the United States no advantages when it was weak though it had forgone privileges when it was strong. The troubles with the international monetary system added to the difficulties, with foreigners seeing the dollar as privileged while Americans came to regard its function as a world currency as rather burdensome.1

The dramatic action of the United States in the summer of 1971 and the language that accompanied it served a double purpose. For other countries, it was something like the blow on the head by a mallet traditionally required to get the donkey's attention. For the United States, it started a process that set the dollar free, raised the exchange rates of other currencies, and led to further floating so that eventually-and perhaps only for the time being-adjustments took place that reduced the strains that were setting in around trade policy. As time passed the U.S. balance of payments strengthened, American resentment eased, and pressure to demand one-sided concessions from the rest of the world dropped. Europeans and Japanese acquired a greater interest in access to the American market for their products. But they did not quickly change their attitudes. Fear that the United States would link economic issues with security arrangements and political coöperation caused Europeans to hold back. So matters teetered back and forth, but it became ever more apparent that in one way or another trading arrangements of the world would have to become the subject of serious international negotiation.

Some deep-seated factors abetted immediate considerations in creating this widespread reluctance to push ahead with the process of international economic coöperation. One was general affluence, which seemed to make people more willing to bear the cost of misusing resources rather than face the political strain of adjusting to large changes. The great reduction of trade barriers that had already taken place meant that the gains that could be expected from further liberalization seemed small compared with those of the past. Malaise and discontent, common to the industrial countries, made governments and people focus on issues that seemed far more urgent than the distant promise of good results from international negotiations. The feeling grew that governments were rarely as well occupied as when they were knitting up their raveled societies. For those looking after the domestic welfare, international interdependence seemed a source of constraint and distraction. For some people nationalism took on a benign hue, while the gains of past international coöperation were more or less taken for granted.

At the same time, it became a commonplace to say that economic issues were coming to occupy a larger place than ever in international affairs and thus had become "politically" more significant. Whether it makes any sense to call the welfare of a people "economic" or "political" may be beside the point, but the commonplace has probably earned its status by being largely true. But then what? Will governments now pay more attention to devising policies that will contribute to the welfare of their people? Or will they try to give reality to the old cliché and make economic policy the handmaiden of foreign policy, letting the ends of the latter dictate the means of the former? The questions suggest quite different courses of action, but not everyone who subscribes to the thesis of the increased political importance of economics seems to realize this. Part of the difficulty is that policies directed toward the long-run economic welfare have to come to terms with the world as a whole, while foreign policy measures more often than not have to deal with specific countries. Economic measures used to serve the latter purpose often seem contrary to the former. They are also likely to induce others to use economic influence in the same way. When this process gets going, we are only one step away from the rivalries of bloc-building, and rather far from the benign nationalism that is mainly concerned with domestic welfare.

These unresolved tensions-hardly new but more prominent in the last decade than in the years right after World War II-provide still another change in the political dimensions of foreign trade policy, and one that cannot be so sharply characterized as those that have been set out before. Perhaps because these issues are not posed in quite the same way in foreign offices and chancelleries, ministers of the main trading countries in the world-and quite a few others as well-were able to put their names to the Declaration of Tokyo in September 1973. Hardly a guarantee of what could be accomplished, that carefully negotiated document announced a comprehensive and complex set of negotiations under the aegis of the General Agreement on Tariffs and Trade (GATT), aimed at reducing trade barriers further.


Even before it was signed, and more markedly right afterward, striking events took place which raised questions about whether the Declaration of Tokyo provided an adequate framework to deal with the biggest problems that were besetting international trade.2 Before long, people began saying that it looked as if the world had once more prepared itself to fight the battles of the last war. In fact, however, there was a lot more to it than that.

A sharp increase in world demand for farm products during 1973 was accompanied by substantial price increases and the running down of American stocks. There was a sharp reaction in the United States against massive sales of grain to the U.S.S.R. What were once seen as welcome gains in the export balance began to be regarded as a domestic deprivation. Up to a point the shift seemed to improve the prospects for successful trade negotiations between the United States and the European Community, by extracting the venomous teeth of the American insistence on gaining a freer access to the Community's protected farm market, which Europe was not about to provide. Anything that strengthened exports made it easier for American negotiators to agree to balanced bargains. More generally, rising prices and fears of shortages might encourage a recently manifested willingness to remove import barriers to ease inflation. As part of their efforts to fight inflation during the early 1970s, governments in Western Europe, Japan, Canada and the United States on several occasions unilaterally removed tariffs and quotas to increase domestic supplies and reduce the strains on prices. The logic of such a step was obvious, but it was rare that it should be transferred from the textbook to policy.

Unfortunately for these happy prospects, the other side of the farm boom of the summer of 1973 was the erection of new trade restrictions. The United States imposed export embargoes on the shipment of soybeans-its greatest export crop-and other feed-stuffs. This too was a response to inflationary pressure and a not unnatural one. Not altogether unprecedented, the step was unusual enough to be quite disturbing. It upset many expectations in the United States and abroad about the nature of interdependence, once more shook the Japanese, and encouraged those who thought the European Community's Common Agricultural Policy should be more rather than less protective.

Dependability of supply became the focus. The subject was not entirely a new one to Americans who had been debating whether it made sense to offer credits to the Soviet Union to be repaid in oil and gas in years to come. Neither the Americans nor many other trading nations had thought to ask the same questions about themselves. GATT had rules on export limitation but not much attention had been paid to them. And no one, it seemed, had tried to work his way through the problem systematically. Should countries be free to impose export controls at will? Or were there to be criteria about the degrees of inflation and shortage that would justify controls? Did it make any difference whether there were contracts? Should there be rules about allocation between domestic demand and exports or only among foreign customers? Were traditional trade flows to be treated differently from new or exceptional ones? Plainly, there was something to be added to the agenda set out in the Tokyo Declaration. And if nothing else had happened, perhaps that is just what would have been done. But before that point had been reached, other commodity problems were blotted out by concern over energy. Difficulties there had been building up for some time-but then came the oil embargoes of the fall of 1973.

Dark visions arose in the cities of the industrial world-cuts in power, cuts in production, cuts in employment, the very prescription for depression or at least recession on a scale unknown since the end of World War II. And if those who controlled the supplies would release them at a less-than-recession-causing rate, what did one have to pay-or do-to become a favored customer? The cost of oil, it was freely predicted, would so burden the balances of payments of the consuming countries, and particularly Japan and Western Europe, that all hope of trade liberalization would be lost. Not only could they not import more freely but the diversion of demand from other things to pay for oil would sharply contract trade among themselves. At the same time, each would be fostering its own exports to get the wherewithal for imports. Competitive devaluation would be the order of the day. The Japanese would try to push billions of dollars worth of quickly marketable consumer goods into Western markets to earn dollars. Market disruption would be apparent; governments would not let imports create unemployment; new barriers would be thrown up and they would generate retaliation. A trade war among the major industrialized countries was just around the corner.

The situation did not make for calm judgment, and soon the difficulties with energy amplified existing concern about the possible scarcity of raw materials generally. Old fears revived and were reinforced by much recent discussion of the long-run depletion of irreplaceable resources and the pressure of man on his environment. With the loss of precision and qualification that seems unavoidable when the vulgarization of careful work (and perhaps some not so careful) takes place, proper concerns for the future become nightmares of the present, as in Goya's picture of the dream of reason that produces monsters.

The new circumstances seem almost enough to put all past trade policy on a shelf, if not to destroy it completely. Certainly if there is a serious recession the only trade policy problem for some time to come will be how to keep to a minimum the damage that will undoubtedly be done to trade relations among all countries. This will be extremely difficult, and regaining lost ground afterward will be even harder. Similarly, if the oil producers stick together and the oil consumers find no better way of conducting themselves than to scramble for favors, there will be trade warfare. And the zero-sum game that they will have made out of trade is likely to carry over into the rest of their relations as well. In such circumstances one could say that trade policy has taken on a new political dimension-but that will be equally true if the extremes of recession or trade warfare are avoided.


Put another way, new political dimensions for trade policy arise from the need to give far more attention than anyone thought necessary in recent years to energy and raw materials and their possible scarcity. Some of these issues can be sketched in a single article but not in any depth. Yet even at a very general level, the discussion of what trade policy may have to become is subject to two very considerable limitations.

The first is uncertainty. We do not know whether a major problem of scarcity exists or how long it might last. The energy cartel is real enough, and dear instead of cheap energy is a probability for the future. The great surge in raw materials prices is impressive but we can be less sure what it portends. There have been raw materials booms before and, while there are good reasons to suppose that this one will have some durable effects, to say what they are is guesswork. A general rise in raw materials costs presents a different set of problems from those of shortages of individual materials. The expectation of specific scarcities may itself induce at least partial solutions. To many shortages, the market provides an adequate response, and it is rare for producers to organize as effectively as the Organization of Petroleum Exporting Countries (OPEC).3 With so much uncertainty, it would be rather foolish to embark on a complex series of international negotiations to work out potentially acceptable principles for situations that may not arise. But it would be even more foolish not to have prepared for such situations if they do arise. Consequently, a double-track policy has to be devised, one track to be followed if things go along much as they used to, the other to be ready if the fears of 1973 and 1974 become realities.

The second major limitation is that if one is trying either to avoid scarcity or to find the best way of living with it, the main weapons are almost certainly not to be found in trade policy. They concern production, investment, conservation, limits on consumption, research and development, and national or international agreement on the principles of equitable sharing and distribution. Here one must recognize that markets do not do very well in giving price signals about the scarcities that may exist a decade hence-nor are the projections of the most affected industries likely to be more reliable than they have proved in the case of energy. Thus, if we have reason to expect scarcity, the market's function in allocating, guiding and balancing demand and supply has to be supplemented by the acts of national, international or private entities in a position to influence production and demand. To find and insert the public interest, vital though it is, is not easy.

But all such measures will have trade elements, and trade policy can be important; while it cannot by itself ensure the avoidance of scarcity it can help the equitable adaptation to it. It is not easy to tell, however, just how trade policy should fit together with other measures. Surely a "trade policy for scarcity," which people say we need, cannot ignore the need to use resources efficiently, which is the basis of the argument for removing trade barriers.

Subject to these limitations, it seems clear that one new objective of trade policy in a time of scarcity must be to provide for "access to supplies"-a concept that looks like a reasonable counterpart of the "access to markets" that is provided by removing trade barriers. The thought is not new; access to raw materials on equal terms was one of the main features of the Atlantic Charter. Roosevelt, Churchill, and their advisers were worried about the cartels of the interwar period, the restrictive policies of some colonial powers and the belief that German and Japanese aggression was fueled at least in part by their drives as have-nots. But of all the great principles that found some kind of expression in the postwar economic arrangements, this was the least honored and least well defined. There were shortages right after the war and during the Marshall Plan; the Korean War called forth international allocations; the Paley Commission predicted an increasing American dependence on imported raw materials. These predictions came true. The United States continued, for a time, to have pieces of a raw materials policy-stockpiling, barter for supplies of surplus agricultural products, tax laws favoring mineral exploration and extraction-but for the most part the subject disappeared from the agenda of international negotiations and U.S. foreign economic policy. There seemed to be no problem so far as the consumers were concerned. It was the producing countries which complained that they could not sell enough at high enough prices.

Now the industrialized countries are worried and they talk of access to raw materials. But the old slogan sounds a bit hollow. Why should the producing countries pledge allegiance to this high-sounding principle at the moment when they are being told that their possessions are scarce, their bargaining power has grown, and the ability of the industrial nations to avoid recession and the ruin of the coöperative attitudes that have grown up since the end of the war depends on not falling over one another in a scramble for raw materials? If the hewers of wood and the drawers of water are suddenly told that they are in fact operating a public utility of vital importance, they are not likely to respond by simply working harder. And if they are also poor countries, the sensible question they ask themselves is: "How can I use my new-found advantages to get a larger share of the good things of the world?" It seems unlikely that much of the answer will be found in reverting to a principle that the rich countries have extracted from their memory books and dusted off for the occasion.

There are tangible benefits that the industrial countries can offer, but these have their limitations. How to provide guaranteed markets at remunerative prices has been discussed for years. The problem has been to interest sellers in these arrangements when exports are strong and profitable and to interest buyers when the products are plentiful and the prices low. The industrial countries may now be readier than they were in the past to make commitments, but by the same token the sellers are likely to think it is better to wait. The industrial countries can also offer access to their markets for other exports of the producing countries. This approach is promising if a country has a variety of things to export, but it does not fit a number of raw materials-producing countries, on the one hand, or Singapore and Hong Kong, on the other. There is a good deal of talk about getting access to raw materials by offering to help the producers to industrialize. This is plainly desirable but no great concession; those well enough off to buy have long been able to command the technical resources that are needed to develop industry. Still, the approach would be a healthy one, and still greater progress could be made if the rich countries would promise to open their markets to the products of the industries yet to be built in the raw materials-producing countries. A start might be made by shifting more processing industries to producing countries.

All of these approaches will probably fit one situation or another. None will fit all. They hardly add up to a raw materials trade policy. They may reduce the incentive to producers of other materials to emulate OPEC, and they may help one country or another to assure itself of supplies of certain raw materials. However, even otherwise constructive economic measures can be manipulated to the detriment of third parties. That is probably what will happen if the industrialized countries pursue purely national policies.

To avoid this, some people will prefer a more general approach, such as that embodied in the chapter on commodity agreements in the abortive Charter of the International Trade Organization (ITO) back in 1945-47. Reflecting the dual experience of the 1930s with raw materials cartels and the instability of raw materials markets, these provisions still read rather well as principles. They defined the circumstances in which restrictive arrangements could be made, limited their duration, and suggested the best methods to be used. Consumers and producers shared responsibility for running the agreements; there was a trade-off between stability of prices and markets and access to supplies. After the ITO failed, these principles were discussed further, but one reason they have never been widely followed up is that it is so hard to get governments to apply them to cases. Apart from the differences in national interests, commodities differ greatly from one another; devices that would work well in one case are unworkable in another. The last surge of American interest in commodity agreements came at the beginning of the Kennedy administration, but its only accomplishment was the coffee agreement, a rather special case.

Although the long-run objective must be arrangements that satisfy both producers and consumers, the difficulty of reconciling their interests means that trade policies based on coöperation among the consuming countries alone also need to be explored. The energy difficulties have shown how hard it can be to get consuming countries to work together even when their common interests are clear, but few commodities touch as many political, social, and economic nerves as energy. Moderate steps aimed at avoiding the emergence of new OPECs may be easier to arrive at than the hard decisions of dealing with them once they have shown their strength.

Even in dealing with a cartel once formed, consumers are not powerless. With the present changing situation, this is not the time to try to describe possible strategies, but it is at least worth noting that the history of international cartels is one of failure. Someone cheats; some outsider becomes too important to be ignored; the value of selling more becomes greater than that of holding the price line; prices are held too high to keep the market from shrinking; new producers appear; substitutes are developed; technology permits users to get more out of the same quantity. All these possibilities apply to OPEC. But before something happens to make monopoly less monopolistic, the cartel works, consumers suffer, and Mr. Micawber looks the fool if all he does is wait for what turns up. When each consumer "does something" on his own, so long as he acts separately he is really only acting the way competitors are "supposed to" in the face of a monopolist. He is at best the most intelligent rat in the maze, perhaps better fed than the others but still at the will of whoever is in charge.

True, there are separate national actions that can help the common cause of the consumers. High prices cut demand and bring forth new supplies, whether of oil or substitutes. New supplies may mean new suppliers. One's increase in self-sufficiency frees supplies for others; fading markets may beguile a producer into selling more than good cartel management says he should (or than his less needy partners want him to). All increases in world supplies do consumers some good. But such gains-which may be slow-will be cold comfort if they are accompanied by the strains resulting from the interplay of wholly separate national trade policies. Unless there is an agreement on self-restraint, trade barriers will be used as bargaining weapons, as devices to exploit (or resist) monopolistic positions and as means of granting discriminatory favors. The zero-sum approach will tend to dominate; the use of measures resembling economic warfare in one field will stimulate them in others.

Thus, if disputes about energy and raw materials are not to poison all relations, there will have to be continuing exploration of ways to reconcile real and imagined conflicts of interest. This will require extensive discussions between producers and consumers, among consumers and among producers. Even such often-scorned marshmallows as international study groups have a place. They may be a little less vulnerable to partisan manipulation than national or industry-based studies. But before much can be accomplished by this approach, the United States has to arrive at at least the rudiments of a national trade policy on raw materials. This it lacks.


A start has been made under the impact of the energy crisis. The United States, President Nixon has announced, will aim at creating the capability of self-sufficiency. How quickly this can be done, how best and at what cost are matters of great debate. But whether something resembling self-sufficiency in energy supplies is achieved in five, ten or fifteen years, it is not too early to consider the kind of trade policy that goes with such an energy policy. At first glance, zero trade seems the natural counterpart of autarky, but that is neither logically necessary nor very realistic. There is no need to rule out exports-of coal, now in solid, perhaps later in gaseous form, nuclear materials, and maybe some day something else. But decisions will have to be made as to whether exports are to move only when domestic demand is fully met even if long-term contracts have to be broken.

Even the policy toward imports is not obvious. They could be either forbidden or encouraged. If world prices are lower, imports might be taxed to protect the domestic price level, or American energy producers might be subsidized. If the costs of achieving self-sufficiency in energy make American manufactured goods less competitive in world markets, should exports be subsidized and compensatory taxes put on imports? Ways might be found to put the "capacity" for self-sufficiency on a stand-by basis so that American users could buy the cheapest energy in the world while the country could be kept immune to blackmail. All this sounds like a prescription for a great deal of government intervention. Such issues may sound recondite, but they must be faced before too long.

Whatever, in the years to come, may prove to be the most intelligent American policy concerning energy supplies, it will not be sensible to apply the same standards to all raw materials. Self-sufficiency is not physically possible for some, the creation of substitutes not economically sensible for others. With regard to some materials-not to mention farm products-the United States will probably remain an exporter. In this mixed position, there is both strength and weakness for the United States. It may be possible to devise a selective policy that will both fit American needs and be acceptable to other countries. But if so, this will be because the United States has learned to accept that even as it is heavily dependent on others for many key raw materials, so others are entitled to rely on the United States in food and other areas. This is a condition of interdependence that the United States has not consciously thought through.

Two examples will illustrate some of the problems of a mixed policy. Some people are already asking: "How can I persuade anyone to favor liberal trade measures if the President calls for self-sufficiency in energy?" Will the public-or Congress-believe that it is right to protect the coal miner's job if the auto-worker is told to find something else to do when the new plants in his "simple" industry are located in Algeria or Mexico? Internationally, the choice of self-sufficiency-the acme of "going it alone"-can easily be made to appear as a kind of non-coöperation that makes working together on other matters impossible. In fact, though, U.S. self-sufficiency in oil would ease the problem of others by removing American demand from the market. Much depends on how this approach is conceived. Secretary Kissinger's speech of February 12, 1974, laid out in some detail a program of coöperation with other oil consumers which was broadly compatible with concurrent American efforts at achieving self-sufficiency.

The second example concerns uniformity of rules. As consumers of energy annoyed at the Arabs, Americans find it easy to champion "access to raw materials." In that mood they will support international agreements to limit the use of export controls. But is not easy to imagine enthusiastic congressional support when it becomes clear that any uniform rules would operate to prevent the United States from limiting the purchase of food by others in the American market-even if such purchases meant that the supply on the supermarket shelf would be reduced and probably more expensive.

To be sure, rules do not have to be uniform for all products but what the United States withholds in one category is likely to be matched by what other countries are unwilling to agree to in other matters. Again the rest of the world might easily view the Americans as hypocritical. (In ITO days, it used to be said that a commodity agreement was a cartel that the U.S. Department of Agriculture wanted to belong to.) There is bound to be trouble if American support of sharing turns out to apply just to the goods that move in international trade and takes no account of differing levels of consumption. Secretary Kissinger seemed to recognize this when he admitted that the United States was "the world's most profligate energy consumer."

A U.S. trade policy adequate to the new needs of the world must deal not only with subjects already touched on in this article, such as access to raw materials, the use of export controls and commodity agreements, but also with many other questions. Among these are stockpiling, national or international, against shortages, natural or man-made, and a whole collection of domestic measures, not least the tax laws, which in a rather higgledy-piggledy way now help shape national performance in these matters. If security of supply is to be an element in policy-and it usually is, at least with regard to some materials-criteria have to be developed regarding the nature of security when the supplier is foreign. Is security geographical, political, or economic? Should some foreign producers be helped, encouraged, and made more secure by being tied more closely to the American economy than others? Would more security be gained by leaving producers on their own? The further one pushes these different lines of questioning, the more political dimensions of trade policy one discovers.

This is not a particularly attractive prospect. The knitting together of the economies of the industrialized countries in the first quarter-century after World War II was in large part due to the sheltering of trade measures from the disturbances of short-run international politics. Thus it was possible to devise rules that were well understood by a limited and generally like-minded group of nations.

In dealing with raw materials problems we do not yet have agreed rules and we are working with a very different cast of characters. For a number of reasons, only some of them concerning the value of trade, the most important trade policy accomplishments of recent decades have concerned the exchanges among the industrialized countries of the northern hemisphere. The problems of the developing countries have been set aside in a special category. Conceived first as a form of the classical infant industry problem, and then seen more broadly as a facet of development, the trading practices of developing countries were exempted from the common obligation of reciprocity and from most other rules as well. Still later, the developing countries were conceded a special position, receiving from most countries preferential tariff treatment, though of a circumscribed kind. They have benefited rather little from this special treatment. If in fact we are entering a period of widespread raw materials scarcity, many developing countries may benefit. But not those that lack raw materials. As they industrialize, these poor countries--the new Japans to come?--are concerned with quite different kinds of trade issues. Some energy producers have already entered another category: rich but underdeveloped; and some of their income comes from poor countries without energy resources.

The line-up for dealing with raw materials problems is clearly different from anything we have seen before. Canada, Australia and the Soviet Union are among the major producers. So is the United States. Japan and the countries of Europe (Eastern as well as Western) are far more heavily dependent on imports of raw materials. But the division between producer and consumer, importer and exporter (which is not necessarily the same thing) differs from one product to another and according to whether food is in question or not. No existing international economic organization quite encompasses the issues. GATT, UNCTAD, FAO, OECD all deal with some of them. It would be a shallow approach to concentrate on drawing up the terms of reference for yet another organization. Before we know what needs to be done, there will have to be quite a few sets of negotiations of different sorts, in different places, about different issues.

The lines are not drawn-except for the time being in energy. For the rest, shifting coalitions, the essence of balance in a changing world, arise naturally in world trade in raw materials and foodstuffs. American policy should make the most of that fact. To do so will require us to break a good deal of new ground. In the process, trade policy will acquire still other political dimensions. Perhaps the most important long-run question is whether this new mix of producers and consumers-among whom the distribution of wealth and power is shifting markedly and will be quite different in the future from what it was in the past-will be able to discover a broad enough area of common interests to accept arrangements that can be seen to give all parties a reasonable share of the continuing benefits of coöperation, even if at any given moment someone is held back from making the most of his short-run advantages.


Though we are dealing with long-run developments, the analysis has short-run implications. Some are domestic. A trade bill lies before the Senate. What shall be done with it? There is no doubt that interest has flagged. "The Senators," one hears, "will see no point in legislating about nontariff barriers or the authority to bargain with Europeans and Japanese when the real question is how to get oil supplies and whether the copper producers are going to follow the example of OPEC. The bill is as good as dead." If it can be saved, according to this view, this will only be by writing in provisions to deal with the new and frustrating problems that beset us. Abroad, one hears that governments have no time to think about trade negotiations under the Tokyo Declaration; the real question is how to assure supplies, what imports to restrict, and what exports to push to obtain the wherewithal to pay for them. In any case, the foreign governments need make no decisions about the older program as long as the Senate does not put the United States in a position to negotiate.

Understandable as they are, such attitudes are wrong-headed. They are out of focus as to the continuing importance of trade among the industrialized countries. Even with huge price increases in raw materials and food, trade among them will long remain one of the largest segments of international exchanges, and the terms on which it takes place will require attention. The consuming countries can hardly be expected to work together to avoid a scramble for energy and other scarce resources if they cannot accommodate one another as they adjust to rather brutal changes in the world economy. This they will not be able to do if each can take with impunity whatever measures he wishes, however damaging to the trade of others. Unless they recognize an interest in coöperation of the sort envisaged in the Tokyo Declaration and can act on it (which requires American legislation), they can hardly be expected to do anything except strike at one another when that seems necessary.

That the proposed American law and the Tokyo Declaration do not deal adequately with all the requirements of the new situation is clear. But they cannot be adequately modified in the short run. The issues are too complex. An agreement among the main consuming countries on some language about access to raw materials would mean little without long negotiations with producers. But the energy difficulties show that the consumers are far from agreement on anything. Even if we think of the Senate bill as merely stating American policy, it cannot quickly be made into a good instrument for dealing with raw materials problems. This article has suggested some possible approaches. All are controversial. None will work if the ground is not well prepared, within the bureaucracy, in Congress, among interest groups, and in public opinion. As both a great consumer and great producer of raw materials and food, the United States has harder choices to make than many other countries. To postpone passage of the trade bill until the United States decides what it really wants in these new fields has nothing to recommend it.

Two things might usefully be added to the bill. Provisions concerning the use of export controls have been proposed by several Senators and accepted in principle by the Administration. It would also be reasonable for Congress to indicate concern about the problem of raw materials and foodstuffs and to recognize the inadequacy of the legislation and the Declaration of Tokyo in this regard. The President could be directed to do something about the problem. (He might get in first by announcing such activity.) Perhaps broad principles could be set out to indicate the sense of Congress in the matter, though here the ground is made treacherous by current confusion and short-run preoccupations.

If such a bill were passed, what could be done with it? Probably not very much very soon, but one suspects that would have been true in the absence of an energy crisis as well. For the reasons set out earlier, significant negotiations among the industrial countries are likely to be slow-but without the U.S. legislation, hardly anything could be done. Its defeat would almost certainly be taken as a sign that the United States was not seriously interested in coöperation. The most immediate advantage of passing the bill would be to equip the President to deal with the multitude of trade issues that are bound to arise as each major trading country adjusts itself to the substantial changes in the world economy resulting from higher costs of energy and perhaps other raw materials as well. From a longer-run point of view, the main advantage of passage of the bill may well be the consolidation of the work-intellectual and political-that has gone into it. Even if disturbances in the world economy postpone the comprehensive negotiations envisaged in the Declaration of Tokyo, there is an advantage in recognizing that the major features of the bill embody steps that need to be taken sooner or later if the United States is to cope with the trade problems of the modern world. The constellation of forces that has brought matters to the present state cannot be put into suspended animation. Not to legislate now is to reopen for an indefinite period all the doubts that made the United States such an unhelpful presence in world economic issues between the late 1960s and the latest crises.

While no one could seriously argue that passage of the trade bill is the most important decision before the U.S. government in 1974, failure to pass it would needlessly muddy the waters just when a new current is running that may once again put the United States in a position of constructive leadership. Some of the powers given the President in the bill may well be usable in dealing with countries other than our main trading partners. They will not suffice to cope with all the issues raised by the energy, food, and raw materials problems in the short or long run, for reasons already made plain. Uncertain as it is just how these problems will develop, the shaping of contingent national policies concerning them has a new priority. It will be done best if it is accompanied by international explorations, through whatever channels seem most promising. The aim should be to find how much common ground there is between the United States and other countries, both producers and consumers, on how the world's raw materials economy should be ordered in the long run.

More is involved than just securing adequate supplies for American needs or avoiding unnecessary disputes with friends. Secretary Kissinger struck just the right note when he told the international oil conference in February 1974 that all countries were affected by the problem before them and that the partial solutions any one of them could find would be inadequate. The United States sees it "as a matter of enlightened self-interest-and moral responsibility-to collaborate in the survival and restoration of the world economic system." It has taken some time for the United States to get back into that frame of mind, and any observer would be excused for saying he would like to wait and see whether the mood persists and what its practical consequences may turn out to be. It is rather sad that phrases such as Kissinger used should sound somewhat old-fashioned, for it has been as plain as plain can be for quite a long time now that the absence of such attitudes contributed greatly to the danger of collapse of the system of international economic coöperation that has brought such extensive benefits to the participants since the end of the war.

In the past, the main difficulties arose among the main beneficiaries of the system, the industrialized countries. Now, in energy and raw materials, the problems arise in the sectors where coöperation was weak, and the challenge comes from countries that benefited less than those which were considered to be in the seats of power. Perhaps the new challenge will sharpen people's consciousness of the importance of protecting the old arrangements. Inevitably it poses a new problem: to build a new system, covering neglected areas, accommodating a changed distribution of power, dividing benefits more equitably than in the past and-above all-providing effective ways of dealing with common problems, ways that convince those whose stakes and power are great enough to upset the system that they are better off not doing so.

This task is an additional political dimension of trade policy. Still another is connected with the reassessment of the American position in the world. Much has been said since the end of the Kennedy Round about the changed distribution of power and the impossibility of the United States' any longer providing the kind of leadership that had shaped the postwar world economy. This correct diagnosis was often taken to support the false conclusion that, therefore, there could be no effective American leadership at all. The new situation opens new possibilities.

Though one can hardly take seriously the view that in some Machiavellian way the United States has manipulated the oil crisis to restore the dollar to its old prominence and otherwise give Washington a helping hand, it is certainly true that the United States has proved less vulnerable than Japan and the European countries. The same is likely to be true of raw materials more generally. While an American effort to go it alone would be highly undesirable, for the United States as well as the rest of the world, this disparity in strength confers both bargaining power and responsibility. As a leading industrial power, the United States can speak as a consumer. As a major producer and exporter of raw materials and foodstuffs, it can see the other point of view. For its own welfare it needs to broaden its concept of trade policy to deal effectively not only with more problems but more countries. Others may come to the same view. As André Fontaine remarked in Le Monde of January 23, 1974, the counterpart of "everyone for himself" is "God for the strongest."

One cannot be very optimistic. What has to be done is difficult; short-run achievements may be more in the nature of staving off worse results than demonstrating impressive gains. But if, instead of trying to find some new rules to live by, governments act as if the conduct of international economic policy is a zero-sum game, they may prove themselves right.


2 For help in clarifying my views on the questions discussed in this and the remaining sections of this article, I am grateful to the members of a Current Issue Review Group at the Council on Foreign Relations where some of the issues were discussed in early 1974. In helping prepare material for that group and in many other matters concerned with this article, I had invaluable help from Helena Stalson.

3 See Bension Varon and Kenji Takeuchi, "Developing Countries and Non-Fuel Minerals," in this issue of Foreign Affairs.

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