Table Of ContentAN ANALYSIS OP THE FOREIGN ECONOMIC POLICY
OP THE UNITED STATES IN ITS RELATION TO
THE INTERNATIONAL TRADE ORGANIZATION
*«- ■£* •JJ*
AN INQUIRY INTO THE LIKELIHOOD OP
AMERICAN ADHERENCE
A Thesis
Presented to
the Faculty of the Department
of In te rn a tio n a l R elations
The U niversity of Southern C alifo rn ia
In P a rtia l F u lfillm en t
o f the Requirements fo r the Degree
M aster o f A rts
by
V ictor A. Fahre
June 1950
UMI Number: EP59891
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i V a
This thesis, written by
V ictor A. Pabr©
under the-guidance of h%M.... Faculty Committee,
and approved by all its members, has been
presented to and accepted by the Council on
Graduate Study and Research in partial fulfill
ment of the requirements for the degree of
M aster of A rts
..........................
Faculty Committee
K^nmrman
TABLE OP CONTENTS
CHAPTER PAGE
I. INTRODH CT IO N .......................................................................... 1
II. THE TARIFF PROBLEM IN RECENT AMERICAN
HISTORY.............................. 12
Wilson-Gorman Act o f 1894• ........................ 15
The Dingley Act o f 1 8 9 ? .............................. . 16
Payne-A ldrich Act of 1909 « • • • • • • 17
Underwood Act o f 1 9 1 3 .......................................... 18
T a riff Commission Act of 1 9 1 6 ........................ 19
Fordney-McCumber Act o f1 922 21
Hawley-Smoot Act o f 1930 . . . . . . . 23
I I I . RECIPROCAL TRADE AGREEMENT ACT OF 1934 . . 25
Background of the Act .............................. 26
S a lie n t featu res .................................... 29
Escape clauses .......................................... 32
An evaluation ......................... 36
IV. THE HISTORY AND FOUNDATIONS OF ITO . . . . 44
Economic debacle of the th ir tie s . . . 45
Economic d iso rd er of post-W orld
War II . . . . 54
The American proposals • • • • • • • • 55
The G eneral Agreement on T ariffs and
Trade ............................................................. 58
The Havana C h a r t e r ............................................. 60
ii
CHAPTER PAGE
V. OBSTACLES TO AGREEMENT....................................* . . 64
Post-w ar economic and p o litic a l
c o n f l i c t s .............................................................. 66
B ritish reco n stru ctio n problems . . . . 68
D esire fo r t a r i f f p ro tectio n by
undeveloped nations . . . ..................... 71
Pear o f U. S . depression . . . . . . . 76
VI. ATTEMPTS AT REGULATION TRADE BARRIERS . . 81
Import d u ties . . . . . . ...................... ♦ 82
Import quotas • • • • • • • • • • . • • 86
Exchange co ntrols • • • • • • • • • • • 92
In v isib le ta r if f s . . • • • • • • • • • 96
V II. LOOPHOLES IN CHARTER..................................................... 103
Exceptions to q u a n tita tiv e
re s tric tio n clause • • • • • • • • • 104
P ro tectio n o f Infant in d u strie s . . . . I l l
S ta te -tra d in g monopolies . • • • • • . 115
In te rn a tio n a l c a rte ls • • ............................... 120
V III. CONCLUSIONS . * . . . ................................................ 125
BIBLIOGRAPHY . . .......................................................................... 132
CHAPTER I
INTRODUCTION
At the end of World War I, the U nited S tates found
h e rs e lf in p o sitio n to play the leading p a rt in the era of
global reco n stru ctio n th a t was to follow . She had become a
c re d ito r nation in the m idst of a h eav ily indebted w orld.
It was u n fo rtu n ate, then, th a t America, a t such an auspicious
tim e, fa ile d to grasp the sig n ifican ce of h er new ly-acquired
position* Trading became in creasin g ly more d if f ic u lt as the
U nited S tates constructed higher and higher b a rrie rs to the
flow of in te rn a tio n a l commerce.
In g en eral, re h a b ilita tio n o f the w orld’s economic
i l l s re ste d squarely in Am erica’s lap . Had she chose to
open h er ports to the exportable goods o f her deb to rs, th ere
would have been a gradual lessening of the adverse economic
pressure bearing down on a l l other c o u n trie s. Productive
cap a citie s throughout the world then, would have found an
expanding market through the mechanics of in te rn a tio n a l tra d e .
I t would be u n fa ir to conclude, however, th at the
d if f ic u lt years th a t follow ed World War I were so lely the
re s u lt of the economic p o lic ies adopted by the U nited S ta te s.
Many European co u n tries, in addition to re ta lia to ry moves
taken ag ain st the U nited S ta te s, e stab lish ed higher t a r i f f
b a rrie rs ag ainst each o th er in an e ffo rt to discourage im
ports and to encourage ex p o rts. By adding to th is the rap id
spread o f economic nationalism th at developed among the
2
economic nationalism th a t developed among the new ly-created
s ta te s of Europe, one m ight rea d ily id en tify the underlying
forces th a t led to a dim inution of in te rn a tio n a l trade which
brought with i t world-wide depression and fin a lly World
War I I .
The afterm ath of the second world war found the
U nited S tates again as the country most eagerly sought a fte r
for fin a n c ia l aid and lead ersh ip . This tim e, however, w ell-
f o rtifie d with the lessons learned from the p a st, the U nited
S tates government quickly proposed, among o th er th in g s, the
establishm ent o f an in te rn a tio n a l trade organization as a
c e n tra l agency clothed w ith au th o rity to guide an influence
the trad in g nations o f the world.
The ensuing C harter fo r an In te rn a tio n a l Trade Organi
zation (ITO) was drawn up by rep resen tativ es of 54 cou ntries
during the four-m onth U nited n ation s Conference on Trade and
Employment a t Havana, Cuba, in the w inter of 1947-48.1
This conference clim axed over two years of in ten siv e in te r
n a tio n al n e g o tiatio n s, by the m ajor trad in g co u n tries, in
preparing the C harter.
The ITO C harter does two th in g s. It e sta b lish e s a
code o f p rin cip le s and ru le s of f a ir dealing th a t coun tries vol
1 Of the 54 co u n tries represented a t Havana, only two,
to d ate, have r a tif ie d the C harter, v iz ., A u stra lia and L ib eria.
3
u n ta rily agree to follow in th e ir conduct of trade with each
o th er. I t creates an o rg an izatio n , composed of a l l govern
ments th a t accept the C harter, to h elp them carry out these
p rin cip le s and ru le s in actu al p ra c tic e . The basic principle
of the C harter is th a t co u n tries, by agreeing in advance
upon d e fin ite procedures, can work together to solve th e ir
common problems so as to expand world trad e and hasten world
recovery.
The C harter is a means of reg u latin g economic war
fa re . It was born of pre-w ar experience, when th e many
co untries o f the w orld, with d iffe re n t economic stru c tu re s,
problems and o b je c tiv e s, each attem pted to solve its own
problems reg ard less o f the e ffe c t of its actio n upon the
economy of the others * The re s u lt was economic w arfare th a t
shrunk in te rn a tio n a l trade in the th ir tie s , th a t created
economic d is tre s s and unemployment in many c o u n tries, and
co ntrib uted to the ste a d ily mounting p o litic a l tensions th a t
led , fin a lly , to World ?sfar I I.
The ITO C harter also is an outward expression and
continuation of American foreign commercial policy as i t has
evolved under the wNew Deal” A dm inistration of the la te
P resid en t R oosevelt. In a statem ent issued by Mr. W illoughby,
the close asso c iatio n o f the o b jectiv es of th e Havana C harter
with the p rin cip le s which have guided recen t U nited S tates
4
foreig n economic p o licy is brought into c le a r focus. He
said :
The o b jectiv es o f the ITO C harter epitom izes the
basic p rin c ip le s which have u n d erlain a se rie s of
tr e a tie s , agreem ents, and other in te rn a tio n a l in stru
ments to which the U nited S tates has become a party
since the outbreak of World War I I . These p rin cip les
may be found in the A tlan tic C harter of 1941; in the
len d -lease agreem ents; in the a rtic le s o f agreement
of the In te rn a tio n a l Monetary Fund and the In te r
n atio n al Bank fo r R econstruction and Development in
1944; in the Anglo-American fin a n c ia l agreem ent of
1948; and in various o ther in te rn a tio n a l documents
. . . . They are incorporated in o th er commercial
tre a tie s already in e ffe c t . . . . A ll o f these
documents s p e ll out in clear and unm istakable terms
the d e sire of the U nited S tates to make in te rn a
tio n a l trade as unhampered and nondiscrim inatory as
p o ssib le .s
What the proposed ITO means in term s o f b e n efits to
be derived therefrom by the U nited S tates and the re s t of
the world was brought out in clearly -ex p ressed term s by
S ecretary Acheson. In a recent address in which he called
fo r support o f the Havana C harter, he sta te d :
The C harter o f the In te rn a tio n a l Trade O rganization
is thus the beginning of law in the realm of world
commerce and the v eh icle fo r the growth o f a s p ir it
of m utuality and interdependence in trade re la tio n s .
I know of no o th er road to the development o f the
kind of world trad in g system in which the w orldfs
productive energies can be transform ed into the
h ig h est lev e ls of m aterial w ell-being.
^Woodbury W illoughby, 11 Commercial Foreign Policy of
the U nited S ta te s .” U nited S tates Department of S ta te ,
B u lletin (Sept 12, 1948, Ho. 480), p. 325. Mr. W illoughby
Ts C hief, D ivision o f Commercial P olicy, O ffice o f In te r
n a tio n al Trade P olicy, Department of S ta te .
The C harter o f the In te rn a tio n a l Trade O rganization
is worthy o f the support o f a l l those who believe
th a t peace and progress may be pursued by enabling
the people of the world to secure the means to a
b e tte r l i f e .3
I t is evident from the foregoing statem ents th a t the
proposed ITO is viewed by the makers o f our foreign economic
policy with g reat favor - as an o rg an izatio n th a t can suc
c e ssfu lly fo ste r and m aintain a system of conducting sane
in te rn a tio n a l a c tiv itie s b e n e fic ia l, in the long run, to a l l
concerned. However, its opponents are not few in number.
Many c ritic s are heard who are anxious to point out its
shortcom ings, ^hey warn us ag ain st becoming too o p tim istic
or e n th u sia stic in our a p p ra isa l of the ITO, fo r i t w ill
only f i l l us with fa ls e hopes as to its capacity to perform
as proponents would lik e to have us b e liev e . In th is con
n ectio n , Mr. K illh e fe r, who in c id e n ta lly was a member o f the
American delegation a t Havana, had th is to say concerning
the proposed ITO:
Proponents of the Havana C harter are s t i l l talk in g
in the a ttra c tiv e g e n e ra litie s of the prospectus.
But the C harter is the co n tract which e ith e r does
or does not impliment those high hopes. And I say
th a t a c a re fu l study o f the document shows th a t i t
does not do s o .
^Dean G. Acheson, "Economic Policy and the ITO
C h a rte r.” U nited S tates Department of S ta te , B u lletin
(May 15, 1949), p. 627.
