Nationalism and American Trade

"SO THINGS are getting back to a wholesome state again," wrote Canning in 1823. "Every nation for itself and God for us all. The time for Areopagus and the like of that is gone by." Canning called the turn correctly. The pious aspirations of the Tsar of Russia—"this Holy Alliance"—had been treated by Metternich as a "loud-sounding nothing," by Castlereagh as a "piece of sublime mysticism and nonsense." Even that other pact, the Grand Alliance itself, specific in its obligations and definite in its aim to keep the peace and maintain kings on their thrones, could not withstand the marchings of many little men. First in the Americas, as Canning boasted, then in Spain, Greece, Italy, France, Germany, a new nationalism, democratic in spirit, sprang into being to redress the balance of the old.

A hundred years later, in 1918, the time for Areopagus and the like of that rolled around once more. Again there had been a general war and again there was a peace. For the next fifteen years states tried to solve their common problems by common action, through the machinery of the League of Nations, through the process of conference at Washington, Locarno, Paris, Lausanne, Stresa, Rome, Geneva and London. But at the close of 1933 the terms of the Washington naval agreements were being edged upwards, the hopeful professions of Locarno had become a mockery, the Pact of Paris was scattered for hare and hounds on the Manchurian plain, the reparations settlement at Lausanne hung upon the uncertain action of the United States regarding war debts, the economic program worked out at Stresa had been violated in every quarter, Mussolini had given up trying to find a new framework for peace, the Disarmament Conference had petered out and the World Economic Conference had died at its birth. "During the Nineteen Twenties," writes Owen Young, "I held the conviction that the world was to experience a period of great international coöperation in every field. . . . Looking at the world today, one wonders." Perhaps the conventions of our Western civilization do not permit us to be more pessimistic than that. But Tarchin Baboo, of Kalimpong, Tibet, has no such inhibitions. Editing the one and only newspaper of that very detached country, he calls it "The Mirror of the New Vicissitudes of Every Corner of this Universe."

It has recently become the vogue to say that the régime of internationalism is over. The statement is certainly ambiguous, and quite possibly foolish as well; for as soon as one has attached a precise meaning to the word "internationalism" one finds that, as a régime, it never came into being at all. The expression signifies something more than action in common by governments, for governments have acted in common for centuries, sometimes for peaceful ends, more often to wage war. During the years 1918-1933 joint action was a familiar phenomenon; and, in fact, on the very instant when the World Economic Conference expired and word went round that "internationalism" was finished for good and all, joint action secured an inter-governmental wheat agreement and a similar agreement on silver. What did die, still-born, was the illusion that within this generation separate governments might surrender certain sovereign powers to a superstate, that this organism would police the world to prevent war and to punish the infraction of peace, and that certain national groups might sacrifice some part of their higher standard of living in order that other groups of people could be benefited. This was, and is, the essence of internationalism. One may regret its eclipse, or rejoice at it—or merely note it. In any event, and in spite of Senator Borah, the ideal ("the idol" as Dean Donham calls it) is not ignoble, and it is entitled to as much or as little consideration as one wishes to pay to the teachings of Jesus Christ, of which it is obviously the political extension. A passage from Arnold Toynbee's "Survey of International Affairs" tells that side of the story in fitting prose:

The living generation, like Peter at Joppa, was seeing in a trance the vision of a great sheet let down from Heaven by four corners, which contained all the abundance of Physical Nature; and, like Peter, this generation was hearing a voice that seemed to invite them to take their fill. Would they answer, as Peter had answered, that they would rather reject God's bounty than renounce, as the price of receiving it, those cherished barriers of caste and race by which they loved to divide themselves from their brothers? In 1932 the final, irrevocable answer was perhaps not yet declared; but the magic sheet had now been let down the traditional three times, and it was manifest that, if it were rejected once again, it might be drawn up this time for ever into Heaven.

It would be hard to say when, if at all, an irrevocable answer was given; but in any event the vision has disappeared and the world seems to have gone nationalistic. In its political aspect the new spirit shows itself in Japan's self-confident expansion by force of arms on the Asiatic continent and in the violent convulsions through which Nazi Germany is achieving its own conception of unity and power. In its economic aspect the manifestations of nationalism are legion and they are everywhere: they are in the Soviet régime, in the American experiment, in the Fascist state. They are seen in the tariffs which have lately been raised up in every quarter of the globe to protect home industries and to preserve the exchange value of home currencies. They are seen in the deliberate debasement of monetary standards, in the use of subsidies to stimulate exports, in the limitation of imports by quota, and in the repudiation of national obligations as coolly as if you were whistling down the wind. Finally, the whole difficult situation is embittered by charges of dishonest trade practice and by official acts of retaliation.

II

These are days of disillusionment. John Maynard Keynes, in a noteworthy article in the Yale Review, turns his back on the old order of international capitalism. "It is not intelligent, it is not beautiful, it is not just, it is not virtuous—and it doesn't deliver the goods." He lines up with Dean Donham of the Harvard Business School, Samuel Crowther of the Saturday Evening Post, Stuart Chase and Lawrence Dennis, as an advocate of self-sufficiency. Now whether or not autarchy, Sinn Fein, self-sufficiency (by whatever name you call it) can "deliver the goods" is a question in itself: but how anyone, looking about him today, can suggest that autarchy wears intelligence, beauty, justice and virtue upon its countenance is beyond human comprehension. A true state of complete isolation, if it were attainable, might be a happy one, especially for publicists. They would no longer be expected, even by women, to know about the Ogpu and the Gran Chaco, Mustapha Kemal and the Aaland Islands, inflation, deflation and the modified gold standard. It would be a relief in this happy valley to take the air beneath the orange bower like the old worthy in Candide, and reply as he did: "I do not know and I have not known the name of any Mufti, nor of any Vizier. I am entirely ignorant of the event you mention. I presume in general that they who meddle with the administration of public affairs die miserably, and that they deserve it; but I never trouble my head about what is happening at Constantinople." Perhaps the ideal self-sufficient state will offer this priceless boon; if it does, there will be no difficulty in recruiting labor to erect Stuart Chase's chromium steel wall one mile high around it. In the meantime on the way to becoming self-sufficient, your realistic autarchist is talking turkey to the Japanese about their inroad on the world markets, saying with J. L. Garvin of the London Observer: "We cannot allow the livelihood of British labor to be sacrificed either to the virtues or the vices of a rival. Mr. Runciman made reference in the House of Commons to negotiations in progress. But we have found that an ounce of retaliation is equal to a pound of negotiation in these matters."

In Dean Donham's view, "the road to freedom from world wars and to prosperity lies in working out most problems at home. In this way we may reduce the necessity of international coöperation to a minimum within the capacity of human nature and remove most sources of friction." It is a piece of paradox to argue that international coöperation makes for bitterness; and the Dean, of course, is aware of it. But the paradox is not a sound one. International conferences have engendered high hopes, and most of those hopes have been snuffed out: but it is by no means clear that the world is worse for the effort, nor that the disclosure of hostile points of view has intensified the hostility. It was not in the atmosphere of international coöperation that the massacres of 1914-1918 began: and the war tension of today feeds on the air of autarchy. To admit the failure of international effort to prevent war is one thing: to assert that the effort is the cause of war is another thing. And the second thing is palpably false. It is further argued that competition for international markets leads to war, and that the United States should abandon the struggle, surrender the questionable advantages which she now possesses and leave the field to England, France, Germany and Japan. Assuming that the United States could first become self-sufficient by annexing sources of coffee, rubber, tin, mica, manganese, sugar and tungsten, or by developing some of them, it would then be unnecessary for us to do any further annexing: in fact, the position of the United States is singularly favorable in this respect. Our foreign export trade could be abandoned, after vast dislocations to be sure, but probably without destroying the republic. On the other hand, this policy would call for a deliberate sacrifice of agricultural and industrial interests in foreign trade for the sake of avoiding war, and it is highly improbable that a people till now unwilling even to adhere to the World Court in the interest of international peace, would voluntarily forego markets and profits—however fickle they may be—for the sake of avoiding commercial rivalry. It is not the American's habit to leave his car in the garage for fear he may run into somebody if he takes it out on the road. Nor is it anybody else's habit.

Carried to its logical conclusion, the doctrine of self-sufficiency for the United States involves the complete elimination of our foreign trade; first, to avoid that international commercial competition which is said to breed war; second, to make sure that if war should come in spite of our self-denying policy, we shall not be dependent upon a single foreign source for anything required either for military operations or for the maintenance of our civilian population; and third, to protect, in peace and in war, that delicately balanced national economy which we are now trying to build—that equilibrium between agriculture and industry, capital and labor, producer and consumer—insulating it from shocks caused by wars elsewhere, exchange fluctuations, speculative overproduction, surplus dumping, foreign tariffs and those disparities in the cost of production which exist among the different nations of the world. All this can be done. Japan did it up to the time of Commodore Perry's visit in 1853. A simple Act of Congress could accomplish the end in view; or if that course is not practicable we can arrive at the same result by merely sitting in the middle of the waterspout and letting prevailing governmental policies carry us to the bottom of the spiral. As a writer in the Economist puts it: "The successive moves in the game and the inevitable stalemate at the end are now painfully familiar to us all: exchange depreciation; export bounty; antidumping duties abroad; retaliatory duties at home; quotas, prohibitions and subsidies; and finally, to the perfect content of all protectionists' hearts, trade balanced at zero."

The United States, with other nations, might have embraced internationalism, at a price—the pooling of sovereignties and the levelling off of standards of living. For the more powerful and more prosperous nations the choice was never a living one: internationalism was an illusion. The United States can now attain self-sufficient isolation (not a "certain degree" of self-sufficiency, nor a "considerable measure" of it, but the real thing) at a price. The minimum cost to us would be as follows: the government would give up the interest and principal of the war debts. The private investor would relinquish the greater part of the present and potential value of his foreign securities. The housewife would have to find substitutes for tea, coffee, chocolate, tropical products and certain food luxuries. The state would have to subsidize the production of sugar, synthetic rubber and manganese to keep prices within bounds. Tin, mercury, mica, tungsten and copra would be imported (for a period): but their commercial use would be forbidden, since they would have to be conserved as war stocks. The shipping industry would collapse. The railroads would lose the traffic they now carry to the ports: commercial banks and middlemen would lose the business they are doing on goods for export; the motor industry and its related units would be restricted with resulting unemployment: the manufacturer of capital goods and producers' goods would be limited to replenishment orders for the local market. Copper and oil producers would either have to cut to the amount required for local consumption, or else the accumulating surplus would suffocate their business. Some two million American families, dependent in normal times on industrial export production would have to quit their work; but they could not go into farming, because at the same moment 40,000,000 acres of cultivable land would have to be removed from production and the families who subsist on those acres would have to leave them, though obviously they could not go into industry. This would be the minimum cost of making the United States self-sufficient. To use Mr. Keynes' phrase, this "doesn't deliver the goods" either; and any notion that the people of the United States would pay the price or that the government would exact it is just one more illusion.

The advocates of self-sufficiency do not go to this extreme. Keynes' article, being primarily a disavowal of his former free-trade faith, does not lay down a program. Crowther would apparently admit certain commodities needed for warfare plus certain other goods pending their production in the United States; also, noting that payment of foreign debts, in the main, can only be made by the shipment of goods to us, he would make import concessions to square this account. One gathers that Dean Donham would permit the importation of commodities which can not now be produced here. He would admit luxuries and specialties; he would let other goods come in if they would not disturb the stability of any important social group. But in spite of these exceptions, the trend of all arguments is toward restricting foreign trade. Keynes writes: "Ideas, knowledge, science, hospitality, travel, these should be international. But let goods be homespun." Donham entitles his paper "National Ideals and International Idols," and Crowther calls his book "America Self-Contained."

III

During recent months, however, certain forces have been working against this trend, both in the United States and in other countries. First of all there has been a substantial recovery in world production and world employment. The fact and measure of this recovery were summarized in October in the Loveday report rendered to the League, and were amplified in December by a statement made by Mr. H. B. Butler, Director of the International Labor Office at Geneva. Secondly, while improvement has been mainly felt in the home trade of the reporting countries, the January Bulletin of Statistics of the Economic Intelligence Service of the League contains significant figures regarding the state of world commerce. With the gold dollar value of world trade in 1929 taken as equal to 100, the average figures fell to 80.8 in 1930, to 57.7 in 1931, to 39.0 in 1932. The low point was reached in April 1933 at 32.5 percent of the 1929 norm. From this low point in April the figure advanced to 36.6 in November, indicating that for the present the decline has been arrested, and suggesting the possibility of a cyclical upturn. Lastly there has been a change from the psychology of despair and defeatism to that of hope and determination in the principal industrial countries, excepting France. The recovery is marked in Great Britain and the accompanying spirit is vigorously voiced by Garvin: "In 1933 we have done it. Amongst exporting nations we have recovered first place which we seemed to have lost forever. In this age of super-competition it will take us all our time to maintain that primacy magnificently recovered. We can hold it beyond doubt if the mass of the country can be made to understand that all sporting competition is thrown into the shade by this kindling fight to hold the greatest of all 'records' in the sphere of world commerce."

In the United States there has been such intense and anxious preoccupation with our domestic program that the external relations of this country seem to have been shelved while the domestic crisis is being worked out. But, in fact, it is little short of amazing what the Roosevelt administration has accomplished in political and economic relations with other countries during the past six months, proceeding, not upon nationalist principles, but in the spirit of international comity. The wheat agreement and the silver agreement may prove to be short-lived in their influence, but they were brought into being by give and take. The recognition of Russia closed an old breach and promises some increase in trade. The "token" payments by Great Britain on debt account were received by the President with courteous expressions of personal good-will. Unexpectedly strong and concrete support was given by the White House to Mr. Norman Davis in his final efforts to bring about a disarmament agreement. Notice that the American fleet would be withdrawn from Pacific to Atlantic waters was a dramatic sign of friendly intentions, and the cordial reference which the President made to the League of Nations on the anniversary of Woodrow Wilson's birthday was a gratuitous effort to give that institution its due.

In matters relating to the Central and South American republics the policy of the Roosevelt administration has been cordial in the extreme. American troops will be withdrawn from Haiti before the end of 1934. The State Department, joining with the governments of Costa Rica, Nicaragua, Honduras, and Guatemala, has recognized the Martinez government of Salvador after a delay of more than two years. At the outset of Cuba's civil troubles President Roosevelt consulted with diplomatic representatives of the principal Latin American powers, and at all stages of that difficult development the steps taken by Washington seem to have been suggested by rare intuitive judgment. Conversations with the new Cuban government looking toward the increase of their sugar import quota and to the possible abrogation of the Platt Amendment, coupled with the loan of $10,-000,000 in the form of emergency food and clothing, all give practical meaning to the intention of the United States government to act as a "good neighbor." When with the cordial approval of Washington, a League of Nations Commission arrived in Leticia to arbitrate the dispute between Colombia and Peru, the Monroe Doctrine was modified, if not in letter, then in spirit: and the fact that it flew a flag, "a white rectangle with the inscription in dark blue—'League of Nations Commission, Leticia'" was not resented by Congress. On December 28, at the close of the Pan-American Conference, President Roosevelt laid the basis for such solidarity between the American republics as has not existed since the days of Monroe. He declared that "the definite policy of the United States from now on is one opposed to armed intervention" involving "the occupation of the territory of other republics even as a temporary measure." And to this he added: "The maintenance of constitutional government in other nations is not a constitutional obligation devolving upon the United States alone. It is only if and when the failure of the orderly processes affects the other nations of the Continent that it becomes their concern; and the point to stress is that it becomes the joint concern of the whole continent in which we are neighbors."

In the atmosphere created by this acceptable change of political front on the part of the United States, a reciprocal trade agreement has been made with Colombia. The Department of State undertakes that internal taxes affecting interstate or federal commerce, so far as they are subject to federal control, will not be increased; and the Colombian government, after making the same engagement, agrees to reduce duties on certain articles and not to increase them on others. Similar reciprocal contracts with Argentina and Brazil are under discussion. Thanks to the power delegated to President Roosevelt by Congress, he has arranged favorable treatment for American imports with England and France in exchange for licenses to export stated amounts of alcoholic beverages to the United States; and while their effect upon the volume of our exports is not great, they are encouraging examples of the advantage to be gained by bilateral agreements. "I have the feeling," wrote Secretary Wallace three months ago, "that a changed attitude toward world trade in this country, when and if it comes, will come much more quickly than anyone now anticipates."^[i] Certainly the President, in his conduct of foreign affairs, has given a long lead in this direction.

IV

The platform on which Mr. Roosevelt was elected to the Presidency in 1932 promised a reduction in tariffs. Before the World Economic Conference, at the instance of this government, an agreement was made not to increase tariff schedules for a limited period of time, pending the outcome of the Conference. At Montevideo in December, Mr. Cordell Hull proposed "that a general understanding among all important countries should at the earliest possible date be brought about in concert for the elimination of the more useless and hurtful trade barriers and for the reduction of tariffs in accordance with a moderate policy." He outlined "two important methods of carrying such a policy into effect. The first would be by the immediate adoption of the policy of bilateral reciprocating commercial treaties based on mutual concessions to be entered into by nations of this hemisphere among themselves and other nations as well: and the second by proposed understanding with other important countries that we and they proceed simultaneously to bring down these trade barriers to a level dictated by a moderate tariff policy." Secretary Hull's program was unanimously approved with the understanding that it should be held in abeyance during the emergency period of domestic recovery programs, but put into effect as soon as practicable thereafter. Subsequently President Roosevelt in his Message to Congress observed that the United States must import more goods in the future than in the past if it hoped to retain foreign markets, and added, "all of us are seeking the restoration of commerce in ways which will preclude the building up of large favorable trade balances by any one nation at the expense of trade debits on the part of other nations."

The policy of the Administration is clear, but the difficulties of making a complete and logical plan, of getting it accepted by Congress, and of providing the machinery by which it can be carried out are so great as to seem at times insurmountable. For it follows from the President's statement of policy that when any country, such as the United States, already has a large "favorable" balance of trade, either its imports must be increased or its exports reduced, or both. There are, of course, several ways to increase the total of the items that appear as "imports" on the international books. Americans could spend more money traveling abroad than they now do; people living in the United States could make larger remittances to relatives abroad; or foreign shipping, insurance and financial companies could receive a windfall in the shape of more business from American houses. None of these items however seem likely to increase to any important extent in the near future. Visible imports increase of course as general conditions improve; but any material increase is almost invariably offset by additions to exports; thus the only important way in which the trade unbalance can be rectified is by lowering all tariffs generally or by lowering certain schedules to the point at which foreign goods in very substantial volume can compete with and supplant goods of American make in the domestic market.

There seems to be general agreement that if private foreign debts owned in the United States are to be serviced, and if surplus domestic stocks of cotton, wheat, tobacco and packing house products are to be sold abroad, this country will have to admit at least a billion dollars' worth more foreign goods than it imported in 1929. There, as ever in the history of the United States, is the rub: and the mere mention of the principle, to say nothing of the amount involved, is enough to call down the wrath of industry. On the other hand, the present lop-sidedness of our trade can be corrected by limiting the production of certain commodities in order to avoid an export surplus. This drastic action has not been suggested with respect to industrial output: but the Secretary of Agriculture, perhaps on the theory that a lowering of tariff barriers would have that effect, has suggested the possibility of reducing productive agricultural acreage by 20,000,000 acres, and permitting the importation of foreign goods in the amount of half a billion dollars more value than were imported in 1929.

So far, the United States government has taken no steps of a permanent nature along either line—of limiting agricultural production for export or of admitting imports by lowering tariff walls. Current crop reduction programs have been adopted in order to raise the price of agricultural products by limiting the supply and working off surplus stocks. Current negotiations looking to the admission of alcoholic beverages are frankly of a temporary character; as cotton is being limited to correct a surplus, so whiskey is being admitted to correct a shortage. To extend either or both of these policies beyond the time and circumstances of the emergency they are designed to correct, would inaugurate a major political battle. What a tariff fight can be, we all know: and the recent informal suggestion from Washington that, for the next crop, farmers might have to obtain licenses for output rather than premiums for reduction of acreage, has raised a hornet's nest in the wheat belt. The government's program to retire marginal lands from cultivation is, of course, another matter. It is a program for clearing what Secretary Wallace has called "the rural slums." But the occupants of these miserable acres must go somewhere—either into industry which already owes work to some eight million men out of a job, or into the ranks of the unemployed, or into farming again under favorable physical conditions. The first prospect is formidable, the second is distressing, the third is attractive in itself, but it complicates rather than simplifies the problem of surplus agricultural production.

It is understood that two comprehensive plans to further foreign trade have been laid before the President. Neither document has been made public: but the New York Times of January 4 carried an account of recommendations made by Mr. George N. Peek involving the creation of a new government corporation to "find outlets for this country's surplus products, at the same time arranging with importers for larger purchases of products of countries providing the outlets." It has been suggested that such a semi-public company, operating under the President's authority, and free from the delays of departmental action and the uncertainties of Congress, could expedite special trade arrangements. But what the scheme is, and whether it might encounter political obstacles, is still impossible to say. In any event, the life of the corporation would probably be limited to the present emergency, with perhaps two years in which to function; and being "opportunist" in character, would probably neither act upon the basis of a permanent national program nor devise one.

The second plan on the President's desk proceeds from the Executive Commercial Policy Committee, composed of officials from the Departments of State, Treasury, Commerce and Agriculture, the A.A.A., the N.R.A., and the Tariff Commission. In this case also there is no satisfactory information available, but the New York Herald-Tribune of January 14 describes a draft which is said to have been considered by the Committee in reaching its conclusions. American industries are divided into six groups on the basis of their social and economic values. "Starting with the top grade and working slowly downward," says this account, "commodities would be selected for which foreign markets would be sought. Then starting from the bottom and working upwards, domestic markets would be selected and offered to each nation according to its interests as an inducement to take more of the American products agreed upon." The plan is ingenious and the groupings seem to have been drawn up with great care: but whether this draft was materially modified before it went up to the President is not known; nor whether he is in accord with the program; nor whether Congress would delegate the necessary powers to the Executive. Tariff history leaves this last large question in grave doubt.

With the approval of the President and with funds supplied by the Rockefeller Foundation an independent group has been formed under the chairmanship of President Hutchins of Chicago to examine international tariffs and loans, capital movements and monetary systems. The Chairman says: "What it hopes to do is twofold: to frame a practical program, recommending to the people policies which the country may adopt; and to help educate the people, along with ourselves, regarding a working program for the solution of these problems." Hearings are to be held soon, and it is hoped that a report will be rendered in October. The task, of course, is colossal: but the committee is of first quality. Some of the questions which come to mind indicate the difficulty of formulating a comprehensive national program for international trade relations: What time shall be fixed for the run of the program—five years, ten years or a generation? Is another general war to be presumed in the meantime? Are we to have an independent central banking system or one dominated by political forces? What estimate of population growth shall be chosen? Which of the present recovery and reform measures may be expected to outlive the emergency? What is the probable future for old age, sickness and unemployment insurance in the United States? It would seem that some estimate would have to be made of the rate at which rayon may be expected to supplant cotton and silk, here and abroad and the rate at which African copper may be expected to oust American copper in the foreign markets. All these elements are both vital and conjectural. A presumption will have to be made as to whether the world will return to the gold standard or pass on to some other medium of domestic and international exchange, and conclusions will be affected by the opinion of the Committee as to whether the budget of the United States will be in true balance or not by 1936. The task seems almost superhuman: but there is great need for such a survey if we are trying to formulate permanent national policies for international trade.

V

Lacking such a plan today, certain steps might be taken which would help at this stage of recovery without injuring the longer program.

It seems to be agreed that exchange ratios between the dollar, the pound and the franc must be stabilized before lasting improvement in foreign commerce can take place. There seems to be an almost equally strong opinion that stabilization must be based upon the gold standard, modified perhaps, but not in such a way as to destroy its function as the medium of international exchange and trade. Stabilization is surely the first step.

It might then be advantageous to declare a moratorium on all war debt payments, whether on interest or principal account, for a period of five years. We know that an agreement to scale them down cannot now be reached, since any figure acceptable to us would be unacceptable to our debtors. To press the case would result in total default. Our net proceeds would be nil, and though there would be an orgy of resentment on both sides of the Atlantic for a period, a default in these circumstances would carry no stigma and would not affect the financial credit of the defaulting countries one jot. On the other hand, a five year moratorium would provide a powerful stimulus to world recovery. If recovery should continue, the way would be open to reach a mutually agreeable settlement; if recovery should collapse we would be no worse off with respect to the debts than we are today.

Study might be made of the advisability of purchasing and storing stocks of key minerals required in time of war, which are not available in the United States, or not available in sufficient quantity. Government expenditure for this purpose would create purchasing power in the countries exporting minerals to us, and would provide markets for American exports to be designated in bilateral trade agreements. Perhaps the presence of such stocks on American territory would relieve the emotional nationalist of some of his fears.

It would seem desirable to conclude trade arrangements with Soviet Russia, advancing credits, if need be, in such form as will distribute the risk of loss between the United States Government and the exporting manufacturers. According to a recent statement by Stalin, the external commercial debts of Russia stood at 1,400 million rubles two years ago: they are at 450 million rubles today, and preparations have been made to pay off the greater part of the outstanding balance by the end of this year. Their gold reserve stood at 180,000,000 rubles in 1929: in September 1932 it amounted to 700,000,000 rubles, and it is said that every commercial account with the Russian authorities since the Soviet régime was established has been paid on due date or has been anticipated.

As in the case of Russia, the United States Government might assist in promoting the export of producers' goods to South American countries. The trade of the world has been chiefly between the great industrial states: in the pre-war period fifty percent of the world's commerce was shared between the United States and four other nations. To assist certain South American countries to manufacture what they now import from us, looks, at first blush, like a shortsighted policy, but it is one which in other cases has proved advantageous in the long run.

Whatever the permanent program may be, it seems necessary to continue the reduction of cultivable acreage, particularly wheat land. At present the American grower is handicapped by domestic surplus stocks of 360,000,000 bushels, which, even at the current rate of acreage reduction, cannot be absorbed in less than two or three years' time. His prospects for sales abroad are not bright. In England, Germany, France and Italy domestic production is being stimulated by import quotas, subsidies and the low cost of fertilizer. Russia stands at the door of the world's market with a huge potential export surplus. Whatever the future policy of the United States may be in foreign trade matters, the outlook for the export of American wheat looks unpromising, and the government can ease the decline by campaigns for crop diversification, by education of the local banker who could influence the nature and quantity of wheat production, and by continuing the crop reduction program.

Finally, it would appear desirable to rally representatives of those American interests which enjoy trade relations with Canada. The amiable assumption that we can take the good will of Canada for granted does no credit to either our intelligence or our sensibilities. Part of our vast market has been lost through the Ottawa agreements; but a considerable trade remains, and it is capable of development. Our casual attitude toward that nearest of all countries, that second best of all markets, that closest of all people, has been misinterpreted across the border, and it is time we met Canadians halfway to establish for perhaps the first time in our history a relationship of mutual concession and mutual advantage.

^[i] "American Agriculture and World Markets," FOREIGN AFFAIRS, January, 1934, p. 230.