NARROWLY interpreted, national defense means simply preventing hostile armies from landing on our shores and keeping hostile airmen from bombing our cities. If this definition be accepted, then the area to be defended might be limited to the United States and its possessions. But in the broader sense in which we find the term generally used today, national defense means protecting ourselves against a variety of threats to vital national interests, not only threats to our physical security but also threats to the stability of our economic organization and to the permanence of our free institutions. As the content of "defense" is thus expanded, we find that the territory we are concerned with defending is enlarged. We begin to think about Canada, the Western Hemisphere and the British Empire. We begin to realize, also, that the methods of defense at our disposal include more than battleships, airplanes and tanks. We have powerful financial and economic weapons, and these have the advantage that they can be used now while our rearmament program is still in its preparatory stages. It is with the use of these weapons, our buying and selling power in foreign trade, and our lending capacity, that this article will chiefly deal.

The Nazis have now brought under their political and military control practically all of Continental Europe, except Russia and the Baltic states. The extension of German power over the entire Mediterranean basin and the Near East seems not improbable. The economic potential of this area, assuming that Germany could integrate its industries and agriculture, is enormous. To find a combination of nations which would be equally self-sufficient and equally powerful, judged by the ability of their economies to sustain modern armies and navies, one would have to bring together practically the entire non-German world.

The 400 million inhabitants of this German-dominated area would include some of the world's best disciplined and most productive industrial workers. The vast expanse of the area, lying between the North Sea and the Black Sea, and between the Baltic and the Desert of Sahara, comprises great varieties of soil and climate -- the great wheat-growing regions of Germany, France, the Danubian states and northern Africa; the potato and sugar-beet areas of Poland, Czechoslovakia and Germany; the vineyards and olive and orange groves of Spain, Italy and southern France. The coal and iron ore so essential to heavy industries are available in abundance. The iron and steel producing capacity of the area, in 1937 and 1938, was approximately equal to that of the United States. Its shipbuilding capacity exceeded ours in the ratio of four to one.

Import and export statistics show that Europe already is a well-integrated economy, with possibilities for increased self-sufficiency. In 1937, the total external trade of the 26 sovereign states which then composed Europe was valued at around $20 billions. Of this amount, about 60 percent was intra-European, comparable to trade between our 48 states, and only 40 percent extra-European. Since 1937, the active pursuit of bilateral trade policies by Germany, reënforced since September 1939 by the British blockade, has tended to raise very considerably the proportion of intra-European exchanges. It seems certain that Germany, if she should succeed in maintaining political and military domination of the Continent, would aim to perpetuate the self-sufficiency which war has enforced. By requiring that each formerly sovereign state should satisfy its demand for foreign goods as far as possible by purchasing from some other European state, and that, conversely, each state should sell its export surpluses as far as possible within the European bloc, the ratio of intra-European to external trade could be raised from 60 to something like 75 percent. If such a policy had been enforced in 1937, the value of the European products finding markets outside the Continent would have been practically cut in half.[i]

The centralized control of import and export trade could accomplish a good deal in reducing Europe's dependence on imports from other areas, particularly in foodstuffs, but self-sufficiency in industrial raw materials would be more difficult to attain. Taking the area which we have designated as "Continental Europe" as a unit, we find that in 1937 the production and consumption of rye, wheat and potatoes were roughly balanced. This was also true of two important fodder crops, barley and oats. There were net exports of meats, butter and cheese, but they were not indications of real self-sufficiency, for cattle and hog raising and the dairy industries were all heavily dependent on imports of corn, oilseeds and oil-cake. In general, even if a forced redirection of trade reduced purchases from non-European sources to a minimum, the diet of Europeans would have serious deficiencies. It would lack sufficient animal and vegetable fats and sugar. It would have no tea, coffee or cocoa, the stimulants which help to make the life of the masses tolerable when on scanty rations. Tobacco consumption, if supplied entirely from European sources, would be cut in half.

In industrial raw materials, imports and exports of coal and iron ore were balanced, indicating a possible self-sufficiency in these two essentials of modern industrial life. The same situation existed for two critical non-ferrous ores, magnesite and bauxite. But for many raw materials generally regarded as essential to an industrial economy, a unified Europe would have to depend on outside sources. The extent of this dependence is indicated roughly by the following calculations from 1938 data:[ii]

Percent of
Commodities Consumption Supplied
by Imports
Copper ore 81
Lead ore 17
Zinc ore 59
Manganese ore 84
Tungsten ore 76
Chrome ore 18
Crude petroleum 55
Cotton 65
Wool 69
Raw silk 37
Crude rubber 100

By conquering the Near East and by developing synthetic processes, the Nazis could solve Europe's oil problem. The reclamation of scrap metals, and the development of substitutes for rubber, cotton and wool go far in periods of emergency to plug the gaps in raw material supplies. Most important of all the emergency measures is the restriction of civilian consumption, which frees the limited supplies for military uses. But emergency conditions cannot be expected to last forever. Substitutes are expensive; they require large expenditures of labor and of power. The synthetic products, moreover, are often much less satisfactory to consumers than those derived from imported materials. All of these considerations must be taken into account in estimating the effectiveness in the postwar period of a European economy organized for maximum self-sufficiency.

II

Granting that the Nazis intend to take maximum advantage of Europe's natural resources and to develop internal trade so as to reduce dependence on outside areas, and granting that they will be reasonably successful in this type of economic policy, what does this mean in terms of the interests of the United States? What policies could be devised to protect these interests?

It seems certain that Germany will seek to become the principal, if not the exclusive, supplier of manufactured goods for European consumption. The result would be a heavy loss in our export sales to the Continent. For several decades, owing to changes in our economy and to hostile tariff policies on both sides of the Atlantic, our European market has been declining in relative importance. Yet in 1937, it still took $345 millions of manufactured goods and $463 millions of semi-manufactured goods and raw materials. These sales accounted for 19 and 31 percent, respectively, of all exports in these classes.

Even under the new régime Europe will need, if its economy is to function effectively, raw materials and feed for livestock to the value of $2 billions annually. Payment naturally will be offered in the products of European factories. Consequently, we may expect intensified competition of European goods in world markets, particularly in South America. A two-way trade is already strongly established. Continental European markets before the present war took over half of South American exports outside the hemisphere. By exercising coördinated control over Europe's vast purchases, Germany might monopolize the foreign trade of certain of the republics, by bilateral agreements and bulk purchases, so as practically to exclude United States' goods. Further, we may expect that German economic power would be utilized to influence to our disadvantage unstable political situations whenever they appeared.

How can the United States best defend the interests which are thus endangered? It would be a stupendous undertaking to endeavor to set up under our leadership a bloc whose economic and military potential would be equal or superior to that of Europe. Trade and production statistics indicate that we should have to bring together the Western Hemisphere, the British Empire, the Dutch East Indies and Japan -- practically the entire non-German world, excepting the U. S. S. R. But Germany's Europe would still have the military advantage of occupying contiguous areas. Our rival bloc would be scattered over the seven seas. Moreover, before it could be made to function effectively, we might have to fight a major war with Japan.

Better results, in the opinion of the present writers, can be achieved by less spectacular methods. We should concentrate attention less on what the Nazis might be able to do, and more on what we, practically speaking, can do. In place of a mechanical process of bloc building, we should substitute a biological process of proliferation. We should begin with the area in which our traders can now operate freely, and enlarge it as rapidly as possible by bringing into closer association countries, complementary in their economic organizations, whose political ideals and institutions are harmonious with ours.

III

Any plan for safeguarding an area in which the United States might conduct its foreign trade free from the restrictions of barter and bilateral trading should logically begin with improving our trade relations with Canada and the Caribbean countries. Our close political association with Canada has already been emphasized by the establishment of a Permanent Joint Board on Defense. The investment of 2 billion dollars of United States capital in Canadian enterprises, and the great volume of trade passing every day across our northern border, are evidences of a firm basis for closer economic and political relations. In the trade agreements of 1936 and 1938, tariff barriers were lowered on both sides. As a result of these changes, added to the fact that Canada's economic organization and our own are in many respects complementary, our trade with Canada in 1939 amounted to 15 percent of our total foreign trade. We took in the same year 42 percent of Canada's exports, and supplied 66 percent of that country's imports. The volume of trade might be increased by reducing our import duties and enlarging our tariff quotas on Canadian dairy products and cattle.

The United States already occupies a preponderant position in the trade of Mexico and the entire Caribbean region. Many of the principal products of this region -- bananas, coffee, henequen, chicle -- are complementary rather than competitive with our agricultural products. Sugar, petroleum and copper are competitive, but we can absorb them in large amounts without serious derangement of our economy. Trade figures show how closely the economies of these regions are geared to ours. In 1937, we supplied over half the imports of Cuba, Mexico, Honduras, Nicaragua, Venezuela, the Dominican Republic, Panama and Haiti, and between 40 and 50 percent of the imports of Colombia, Guatemala, Costa Rica and El Salvador. We furnished a market for over half of all the exports of all these countries, except Venezuela, the Dominican Republic, Haiti and Costa Rica. There are definite possibilities, moreover, of expanding this trade if we are willing to make tariff concessions on such commodities as lead, zinc, copper, petroleum and sugar.[iii]

Considerations of military defense make a quarter-sphere policy attractive; but on the economic side this policy offers no adequate solution of American trade problems. Even the freest type of trade relations with Canada and the Caribbean republics would not afford a market for the $1,500 millions of American manufactured goods which we regularly sell abroad. Nor would it solve the very troublesome problem of finding purchasers for 200 to 250 million bushels of Canadian wheat produced annually in excess of Canadian consumption. We must remember that almost two and a half million people in Western Canada derive one-half of their income from wheat exports.

The Caribbean countries have their export surpluses, too. Even those whose economies are most closely geared to ours are accustomed to sell sugar, coffee, petroleum and copper to the value of over $500 millions annually outside the hemisphere. Obviously if the American and the Canadian economies are to function smoothly, they need a wider horizon.

The logical next step in enlarging the area where multilateral trading might be carried on would seem to be the addition of the remaining countries of South America. Politically, this would be in accord with our policy of hemisphere solidarity. Economically, however, the addition of southern South America would seem to complicate rather than simplify our trading problem; for in order to be effective a bloc must meet two tests: (1) its basic industries must be reasonably supplementary as evidenced by an active intra-regional trade; (2) it must be able to furnish from internal resources most of the raw materials essential to modern industry and modern military defense.

The Western Hemisphere fails to satisfy these requirements. If we take the foreign trade data of the 21 republics, plus Canada, and analyze them in the same way we did the trade data of Continental Europe, we get very different results. The total imports of the Western Hemisphere group in 1937 were valued at $5,601 millions. Of this amount, only $2,385 millions, or 43 percent, represented intra-hemisphere trade. On the export side, the total of all shipments across national borders was $6,790 millions. Out of this total, $2,656 millions, 39 percent, was intrabloc trade. In other words, the problem of arranging in the Western Hemisphere a free-trading area is the problem of finding sources of supply for $3,200 millions of imports and markets for $4,100 millions of exports.

Even were we to apply to Western Hemisphere trade the drastic policies which we assumed the Nazis might use in Continental Europe, we would produce a considerably lower degree of self-sufficiency. If we insisted that each of the 22 states should purchase all of its imports from another state in the hemisphere, and conversely that each state should sell its exports first to its neighbors, we would reduce the imports from outside areas to something like $1,882 millions, and the exports to extra-hemisphere markets to $2,959 millions.

The weakness of a Western Hemisphere economic bloc is briefly this: The aggregation of 20 Latin American republics, plus the United States, plus Canada, contains two great areas in the northern and southern temperate zones which are among the world's largest exporters of industrial raw materials and foodstuffs. There is, on the other hand, only one great industrial population in the Western Hemisphere, only one great aggregation of consumers of cotton, wheat, meat, hides, copper, oil, sugar and coffee. It is the United States. As things stand now, a Western Hemisphere bloc would be a lop-sided economy in which the production of primary products and crude foodstuffs would far overbalance consumption. Furthermore, on the production side it would not furnish in nearly adequate volume the following raw materials essential in peace and in war: antimony, chromite, magnesite, manganese, manila fiber, mercury, potash, quinine, rubber, tin, tungsten, vegetable oils.

From the time it began to participate in international trade, the Western Hemisphere has occupied the position of a colonial economy, furnishing foodstuffs and raw materials to Europe in exchange for manufactured products. Even now, notwithstanding the rapid industrial development of the United States, this kind of exchange is still of primary importance. The hemisphere still finds its dominant market for foodstuffs and raw materials in Continental Europe and in the United Kingdom. The following table lists the principal exports of the Western Hemisphere absorbed primarily by Continental Europe and the United Kingdom in 1937 (figures in millions of dollars; source, "Foreign Commerce Yearbook, 1938"):

Argentina Colombia
Commodity United States Canada and Brazil Chile and Total
Uruguay Venezuela a
Wheat (incl. flour) $ 64 $148 $164 .. .. .. $ 376
Meat 43 58 101 11 3 .. 216
Cotton 369 .. .. 64 .. .. 433
Tobacco 135 3 .. 6 .. .. 144
Corn .. .. 196 .. .. .. 196
Linseed .. .. 93 .. .. .. 93
Copper 94 55 .. .. 104 .. 253
Petroleum 376 .. .. .. .. 195 571
------ ---- ---- ---- ---- ---- ------
  Totals $1,081 $264 $554 $81 $107 $195 $2,282
a Figures for Venezuela are for 1936.

IV

True, we do not have to accept the economic organization of the Western Hemisphere as immutable. Given enough time, we can change it; we can give new direction to the utilization of its natural resources and of its labor forces. But such changes will prove expensive.

The costs of readjusting the economic structure of the Western Hemisphere would fall principally on Canada, and on Argentina and other areas in southern South America. Canada would have to cut down its wheat production drastically. Argentina would have to convert to other uses much of the land, labor and capital now used in growing wheat, corn, flaxseed, and in producing meat, wool and hides. Chile would have to reduce its production of wool and fruits. Having lost a large portion of their export markets, these countries would have to reduce their imports of automobiles, tires, sewing machines, typewriters, refrigerators, and clocks and a thousand other conveniences and luxuries. To reëmploy the millions of agricultural workers thus deprived of their livelihood would require a huge program of new capital investment in Latin America, financed, of course, by the United States. The program would be directed partly toward supplying factories in the United States with the rubber, tin and other raw materials formerly imported from outside the hemisphere, but partly also toward increasing production of manufactured goods in such countries as Mexico, Brazil, Argentina and Chile.

Rubber furnishes a good example of what we mean by the costs of readjustment. Our factories use 500,000 tons of crude rubber each year. We can, if necessary, spend several hundred millions of dollars building plants to produce synthetic rubber. But if we do, we cannot use the same funds, which means the same labor, in building armament or airplane factories. Natural rubber can be grown in its original habitat, the Amazon basin. About 15,000 tons were produced there in 1938. Given time, this output can be enlarged; but first forests must be cleared, plantations made and brought to maturity, native labor recruited and trained in the discipline of a new economic system.

Again, the United States uses each year about 70,000 tons of tin. Bolivian mines, the most important source in the hemisphere, produce 25,000 tons. Various obstacles, including labor shortage, high transportation costs and the lack of adequate smelting capacity, would have to be overcome before we could attain hemisphere self-sufficiency. Granted these can be overcome, the stimulation of Bolivian tin mining does not touch (any more than does the stimulation of Brazilian rubber production) the problem of reëmploying the gauchos of the Argentine pampas, or the wheat farmers of Alberta and Saskatchewan, or the tobacco growers in Virginia and the Carolinas. Programs of development in one part of the hemisphere can create activity there. However, the labor force deprived of its earning power through the loss of exports may be situated thousands of miles away. More than the lure of high wages is needed to move hundreds of thousands of workers from the temperate zones in South and North America to the tropics. We should find that the forced contraction of certain major enterprises such as wheat farming, and the forced expansion of others, would be a terribly expensive process, reckoned either in terms of the necessary government subsidies, or in the hours of labor lost in acquiring new skills, or in the disturbances of home and community life resulting from mass transfers of workers, or in the wholesale substitution of government direction for private initiative.

Our contention that the Western Hemisphere does not possess the characteristics of a self-contained economic area, and could not be converted into such an area except by economic revolutions in the United States, Canada and South America, does not imply disapproval of efforts now being made by the United States Department of Agriculture, the Department of Commerce and other government agencies to stimulate intra-hemisphere trade. Certainly, we need to increase our knowledge of the resources of the Latin American countries. We should give technical aid in the development of new agricultural and industrial products and in the exploitation of mineral resources. The stimulation of manufacturing in South America and the improvement of inland transportation would furnish an enlarged market for exports of American heavy machinery and industrial equipment. Industrial progress would decrease the dependence of the South American countries on markets outside the hemisphere. There is an important field here for action by the Export-Import Bank, and, if adequate guarantees can be obtained, for private capital as well.

Much could be accomplished by the mutual reduction of tariffs between countries in this hemisphere. A promising beginning in this direction has already been made in our trade agreements with Canada, Brazil, Cuba and some of the smaller Latin American states. Negotiations with Argentina, Chile and Uruguay, begun several years ago but interrupted by the clamor of protected interests in the United States, should be resumed. In addition to stimulating intra-hemisphere trade, tariff reduction at this time would afford a safeguard against the inflationary influence of our rearmament program. Latin American states could well lower the tariff barriers they have raised against each other. Argentina, Brazil and Colombia have already taken steps in this direction. But such measures produce results only over a period of years. We may have to supplement them with emergency schemes such as commodity cartels or other methods of "orderly marketing" for hemisphere surpluses.

V

The danger in these and other plans for developing inter-American trade is that, forgetting the fundamental weakness of the Western Hemisphere bloc, we shall expend all our energies on a project which in the long run is visionary and impracticable. It seems impossible, in the opinion of the present writers, to create inside the Western Hemisphere new conditions of trade which would replace, satisfactorily to ourselves or to Canada or to our Latin American neighbors, the century-old trade relations of this hemisphere with Europe.

Continental Europe in recent years purchased about 37 percent of all Central American exports to points outside this hemisphere, and 55 percent of the corresponding exports of the South American republics. Should this war end either in stalemate or in a German victory, Hitler stands ready to resume this trade on an imposing scale. Any interference with this trade on our part, either by economic pressure or by force, would destroy the delicate fabric of Pan Americanism which we have striven so sedulously to weave. In certain of the South American republics, as Mr. Arthur Krock has observed, "there is no especial objection to relations with European dictators, no such distaste for their methods or such love for democracies on the American and British models as exist here." [iv] They will naturally suspect any scheme we devise for substituting hemisphere markets for European ones of being more in our interests than in theirs.

We do not need, however, to prevent Brazil, Chile or Argentina from selling their coffee, meat, wool, hides, wheat or any other surpluses to Germany, or to countries that may be under German control. All that we need to do is to prevent the development of a situation in which the Germans can exercise monopoly of buying power. In other words, American policy should aim to provide all major South American exports with alternative markets sufficiently large so that our Good Neighbors to the south shall not lack ample bargaining power.

We have already indicated that adequate alternative markets are not available in the Western Hemisphere. They can be found in only one place, namely in the United Kingdom. For many years the United Kingdom has been the world's greatest market for foodstuffs and primary products. In 1937, the 45 million in-habitants of the British Isles bought $1,400 millions of Western Hemisphere products -- an average of $31 per capita. Continental Europe, the area now controlled by Germany, bought $1,600 millions, only $5 per capita. English markets in 1937 took 62 percent of all the wheat and flour exported from the Western Hemisphere to European markets, and 58 percent of the meats. It bought between 30 and 50 percent of all European purchases of Western Hemisphere cotton, tobacco and corn. These are some of the striking facts to be learned from the following table giving European imports of the principal commodities exported by Western Hemisphere countries (figures are for physical quantities imported 1935-1937):

Proportion imported by
Commodity Proportion imported by Leading Continental
United Kingdom European Countries
Wheat (including flour) 62 percent  38 percent
Lard 58 "  42 "
Meats 90 "  10 "
Cotton 37 "  63 "
Tobacco 32 "  68 "
Corn 40 "  60 "
Coffee  0 " 100 "
Copper a 49 "  51 "
Petroleum a 38 " 62 "
a Proportion based upon value.

If the markets of the United Kingdom, alone, could be preserved for the Western Hemisphere, its export surpluses of food and raw materials would be reduced from $2½ to approximately $1 billion.

Earlier in this essay we pointed out that the economic disequilibrium in the Western Hemisphere arose principally from the fact that two of its great areas specialize in cereals and meats and other products of the temperate zone, whereas it contains only one great specialized industrial area. In the rest of the world, outside of Continental Europe, there is only one other great industrial area -- the United Kingdom. Thus in our search for a wide field where liberal trading practices might be effectively exercised, we are led to include the United Kingdom with the Western Hemisphere. But the close economic, political and sentimental ties binding the United Kingdom to the Empire make it impossible to deal with the mother country separately.

Canada we have already considered as a charter member of the association of freely trading nations. India's exports, except for cotton, are largely non-competitive with Western Hemisphere products. But the inclusion of Australia, New Zealand and South Africa, countries in the south temperate zone, would seem to destroy the balance which we have been seeking between producing and consuming areas. The southern countries, however, already market a large share of their wool, wheat, dairy products and meat either in the United States or in the United Kingdom. Cut off from supplies of Dutch and Danish butter and cheese, the United Kingdom might well increase its purchases from Australia and New Zealand.

Offsetting the disadvantages of surpluses in certain agricultural products, we find that the addition of Empire countries in the southern hemisphere safeguards important markets for United States exports of machinery, automobiles, iron and steel products.[v] Balancing all the factors, it appears that the inclusion of the entire British Empire in a trading area with the Western Hemisphere would roughly reduce by one-half the export surpluses of that area. The addition of Empire countries, moreover, would assure supplies of essential raw materials in which the Western Hemisphere is deficient: the jute and manganese of India, the rubber and tin of the Malay States, the chromite and tungsten of South Africa.

The combined Western Hemisphere-British Empire bloc would not provide complete self-sufficiency on the import side. Judging from 1937 figures, it would still need to purchase from other areas such items as dairy and poultry products, meats, timber and lumber, pulp and pulpwood. But its needs would not be so critical nor so extensive as to place the area in a position of inferiority if it had to bargain with, or to fight against, other areas.

VI

The two foci of American foreign policy at present are (1) the economic and military defense of the Western Hemisphere, and (2) the support, by all methods short of war, of the British Empire in its struggle against the Axis Powers. The people of the United States demonstrated in the recent presidential campaign that they overwhelmingly support these policies. But they really are not two policies. They are one policy. Hemisphere self-sufficiency is an impracticable dream. The attempt to realize it would weaken the economic basis of our rearmament program; it would endanger our political relations with Latin American countries. If our argument is sound, there is no way of defending adequately either our interests in the Western Hemisphere, or the interests of other member states, except in close association with the British Empire. The British area furnishes the markets and supplies the materials which can keep the Western Hemisphere a going concern. We are interested, therefore, in preserving the British Empire as a political entity so that its markets may remain open to our exporters and so that its raw materials may remain accessible to our importers.

Discussions of American trade policy after the war are generally premised upon three alternative outcomes: (1) a British victory, meaning the overthrow of the Nazi power and the liberation of the European democracies; (2) a German victory, meaning the incorporation of the United Kingdom in the Continental European bloc, with the dismemberment of the British Empire and the destruction of the British fleet; and (3) a stalemate or negotiated peace, leaving Hitler supreme on the Continent and the English still in possession of their fleet and their Empire.

One or other of the outcomes is assumed as data, and then a hypothetical American policy is fitted to it. But mental gymnastics of this type give no satisfactory answer to today's pressing question. For the American people today, the vital issue is not: "On what terms can we trade with Europe after the war is over?" It is: "How can we bring about the struggle to the conclusion which will be most advantageous to us?"

Certainly a sweeping German victory would impose on the United States a serious limitation of its freedom of action in foreign trade and in foreign affairs generally. Our traders would find their activities confined in a network of Nazi trade agreements. We might be forced in self-defense to accept a quarter-sphere or hemisphere policy, with ensuing painful readjustments in our economy.

But we should frankly recognize that neither a stalemate nor an outright British victory would in itself, without positive and constructive action on our part, reëstablish liberal trade policies in the world. The revolutionary disturbances which the war has produced in the English economy, internally, and in its relations with the outside world, will require the continuance of wartime controls of trade into the postwar period. Trends toward bilateralism already in evidence before 1939 will be emphasized. But whether such policies actually become permanent depends in large measure upon what trading conditions are offered in the Western Hemisphere, on whether we have succeeded in preserving an area of liberal trade, or whether we have ourselves gone over to totalitarian methods.

These considerations lead to two conclusions: (1) American aid to Britain should be extended immediately by every means in our power. We should enlarge the proportions of our output of planes and ships which are made available. The restrictions of the Johnson Act and the Neutrality Act on the grant of credits and on the use of American ships should be removed. (2) To supplement such aid while the war continues, but particularly to forestall the lapse of the English area into tightly controlled trade on Nazi lines after the war is over, we should set in motion now plans for an economic union which would include the Western Hemisphere and the British Empire.

A year ago, such a proposal might have seemed unnecessary. Six months ago, it might have been considered useless. Today, knowing both the extent of the Nazi menace and the British capacity for resistance, we should be prepared to proceed from that knowledge to bold and far-reaching measures. The association here proposed would be based on a substantial community of economic interest. On the political side, not pretending to be an exclusive union of simon-pure democracies, it would associate a few powerful states, in which democratic traditions are strongly entrenched, with others which have shown that they sincerely strive toward democratic ideals.

To sketch the organization of the proposed union would go beyond the scope of this paper; however, it would obviously have to include a system of preferential tariffs and an agreement looking toward the stabilization of exchange rates. The purpose of these and other arrangements should not be to cement the member states into a water-tight bloc, with trade with the outside world reduced to a minimum. Trade with other nations or blocs should be welcomed if conducted under adequate safeguards. Other nations should be admitted to membership if they agree to trade on liberal principles. The union thus would provide a genuine Lebensraum for all who love peace and freedom. Within it they might lend and borrow, migrate and trade without fear of exploitation or oppression.

[i] The estimate is based on an analysis of import and export trade in leading commodities and commodity groups. The net exports to other areas, according to our calculations, would have been about $1,900 millions. Trade of the United Kingdom is, of course, excluded from "Continental European" calculations.

[ii] The figures are taken from "European Foreign Trade in, and Production of Principal Commodities, 1938," a publication of the Bureau of Foreign and Domestic Commerce, and from publications of the League of Nations. The data are imperfect since they do not take account of the amounts of the materials imported and exported in the form of semi-manufactured and finished products, e.g., copper pipes, electrical appliances, cotton and woolen yarns, etc. See also, Percy W. Bidwell, "The Battle of the Metals," FOREIGN AFFAIRS, July 1940.

[iii] For a discussion of the possibility of a Western Hemisphere bloc, see Professor Alvin Hansen's article, "Hemisphere Solidarity," FOREIGN AFFAIRS, October 1940.

[iv] New York Times, November 19, 1940.

[v] In recent years 60 percent of all United States exports have been marketed in the Western Hemisphere and the British Empire; while about 65 percent of our imports came from these areas.

You are reading a free article.

Subscribe to Foreign Affairs to get unlimited access.

  • Paywall-free reading of new articles and a century of archives
  • Unlock access to iOS/Android apps to save editions for offline reading
  • Six issues a year in print, online, and audio editions
Subscribe Now