Evening star., 1932-12-25

WIFI WHICH W Duy OQl SOoQS, anu aAS
it without selling us as many goods in
return. How was this accomplished:
1t was accomplished by a thoroughly
unscund financial development. Wher
President Harding put in a persona
appointea as governor of the Federal
Reserve Board in the place of w. P. G
Harding, he broke the boards indie
pendence and sense of responsibility
The new political influences in the
board worked steadily for a cheap
money policy which made bank credit
multiply and enabled the United State:
to absorb an enormous volume of for
eign securities. We would not let for
eigners earn the dollars to pay us Their
debts; but we cheerfully lent them dol
lars to pay us the interest.
In 1928 Mr.. Hoover undertook to re-
ply to criticism on this score, saying
that it was not necessary that exports
be paid for by imports, because of the
"invisibles" of foreign trade. He listed
the S770.000,000 paid out in 1927 bJ
our tourists and the $240,000000 sent
abroad by immigrants, and mentioned
"a hundred other items" Among theS2
hundred other items, however. was the
one all-important item-the net cash
figure for our foreign investments. In
the previous year. 1927. it had amount
ed to $1.648000.Oo0 On it our export
prosperity rested Mr.. Hoover's argu-
ment is typical of the new era eco
nomics of 1928 and 1929. which implied
that debts can be created without con-
sideration Of how they are going to be
paid. Foreign trade and foreign loans
collapsed together. If this was 'the
American system" We are well through
with it.
Mr. Hoover has not admitted the ex-
istence of any general problem in the
tariff. In his speech of acceptance on
August II. 1882, he said: IF our op-
ponents will descend from vague gen.
eraiizations to any particular Schedule.
If it be higher than necessary to p o.
tect our people or insufficient for their
protection. it can be remedied by this
bipartisan tariff commission The
only tariff problem in his eyes con-
Germs the particular schedules which
the Tariff Commission shall fix after
ascertaining costs of production at
home and abroad, and recommending
equalizing rates.
Interested in Schedules
Now this principle of equalizing costs
carried out logically, would remove all
incentive to foreign trade, the whole
basis of which lies in the comparative
of different countries in diff
ferent lines. In the United States,
where land and capital are relatively
abundant and labor relatively scarce
We concentrate on mass production. In
Europe, handwork and specially pro-
duction are more economical. Wages
have been comparatively high in
bacauSe men have been scarce
and resources abundant. Our immigra-
tion restrictions. and not our tariffs
have safeguareed our wages. Nor do
our high wages mean that our cost OF
production is high. since the labor cost
per unit of output is low.
The past three administrations have
been interested only in adjusting ind1-
vidual schedules. But the true tariff
problem is a general one-the problem
OF how to enable foreigners to earn
enough dollars here to pay their debts
and take our exports, without the
necessity of foreign loans According
to present schedules. foreign countries
must pay us something like $780,
100000 year on what they have al
ready borrowed from the American
people. We must permit them to pay
us without having to borrow more
money from us. They can pay partly
in goods, partly in services. partly in
GOLD. We must adjust our tariff policy
so that our foreign lending will BE- safe,
while at the same time our domestic
are adequately protected
against undue competition MANY
schedules must be reduced moderately.
and some sharply. I am not proposing
Tree trade, or even tariff for revenue
only but rather the competitive tariff
for revenue" called for in the Demo-
cratic platform. This will still leave
us protective tariff, but not a prohihi-
tive tariff. If foreign goods are ad-
mitted on a competitive basis. our
farmers will regain their foreign mar
ketS and our manufacturers will regain
their farm markets. incidentally, a
moderate tariff which admits foreign
goods brings in revenue to the Govern
ment. whereas prohibitive tariffs do not.
Canadian Relations Cited.
The first argument against our post
war tariff policy, then, is that it makes
our customers unable to obtain the dol
lars which they need to pay their debts
and buy our agricultural products and
the manufactured goods in which we
excel. The second is that it produces
retaliatory measures abroad. A war OF
is in process between al
most every country and every other
country. AS Newton D. Baker said in
his admirable campaign address in
Brooklyn. this war has existed since
the Hawley-Smoot tariff bill was passed
in the Congress of the United States.
Take as a case in point the present
state OF our relations with Canada.
our closest neighbor and best customer.
The resentment and loss caused in
Canada by our recent tariff policy was
the last straw needed to turn the
British Empire into protectionist
unit. That was momentous event.
and one which will have most unfortu-
nate results for the United States. We
have only ourselves to blame.
The tariff war is partly retaliatorv:
partly it is based on false theories:
partly lin countries struggling to main
tain their currencies with Inadequate
gold reserves) it is almost a matter
CT necessity. Quotas and restrictions
on foreign exchange dealings are added
to tariffs; currencies fall as a result of
the stoppage of trade, and then ex-
for new tariffs, with further exchange
AS SPiCSAdtAOAi do q lCoult. IL Id d ldtldcV
to believe that the depreciation of a
foreign country's currency justifies
raising tariffs against that country. A
country whose currency is depreciating
and fluctuating is seriously handicapped
in its whole economic life, including its
export trade. Our experience since
the war is proof of this fact, which was
emphatically confirmed by the chair
man Of the United States Tariff Com
mission. Robert L. O'Brien, a Republic
an and protectionist. in his testi-
mony last May before the House Ways
and Means Committee.
The creditor countries must break the
present vicious circle. The United
States should lead the way. The Inter-
national Conference to Reduce Tariffs,
which Gov. Roosevelt has announced
his intention of calling, may prove a
turning point in world history.
War Debts Allied.
A second tariff reform should be dis
cussed either at this conference or at
the projected World Economic Confer
ence. Almost as much as they need
reduction in tariffs, the nations need
tariff stability, so that their manufac-