Evening star., 1934-04-15

nlsh one more illustration OF the ba-
sic incoherence of all congressional
thinking upon the question of for ign
trade. For upon the tariff NE ure
has been imposed a rider TO- Ading
all cancellation or reduction Of debts
as a detail of bargaining.
The President is then to be author
lied to go out and make bargains to
get business. But he is denied one
OF the major resources for such an
operation. Today the United States
is great creditor Nation alike in the
matter of public and private loans.
1t is also the possessor of a favorable
trade balance-that is, it sells more
abroad than it buys, when all the
various visible and invisible items are
reckoned into the calculation. Even
in this period of world depression we
export more than we import and take
in more on foreign investments than
We pay out to foreigners holding
American securities.
How is the world going to pay us
the difference between what we buy
and pay and what we sell and collect?
That is the basic problem of foreign
trade. As the matter stands, were we
being paid what we are owed and at
the same time we're our trade balance
anything like normal, we should have
to buy billion dollars more of for
eign goods or sell a billion less than
We do now of our own to establish
balance. For foreign trade and pay
mentS can only be balanced by sales
and purchases.
Foreign Goods or Loans.
If We won't take foreign goods to
cover this gap, we shall have to make
foreign loans. Evidently the idea of
the President in asking for the tariff
legislation was to go out and arrange
new swaps in goods and commodities.
They would be swaps at evens, we
to take, for example, SO much whisky
from Britain, the British to take so
much pork from us. But that would
leave the basic problem untouched.
1t would be useful thing-no doubt
Of that-but it would accomplish
nothing in the way of ending a stu
alton which in no long time is bound,
If unsettled, to bring about a fresh
crisis. Under our existing tariff pol
icy, it is manifest that We cannot now
increase our imports of foreign goods
to such a disproportionate degree as
to enable the world to pay its debts
or its current bills to us in goods
and commodities. Under the John
son measure we cannot lend the ma
tions in arrears-which are the chief
trading countries-the money to meet
these claims. Under the rider of the
tariff measure we cannot, through
the President, reduce those debts.
What. then, is to be the outcome?
Obviously, in so far as the public
debts are concerned, the way is al
ready foreshadowed. Unable to per-
suade us to compromise. the debtor
nations have fallen back upon open
or slightly concealed reputation.
Britain and Italy have made insig-
nificant token payments, France and
Belgium have stopped all payment.
Thus the italian token payment has
stabilized at 100000 a year and the
British. which has been something
less than $200O0.000. will doubtless
fall to S10,000,OO0 in the current year.
Two or Three Per Cent.
In place of something like $500 ,000,-
900 annually, rising sharply to S4OO,-
100000 in no long time, as the debt
installmentS increase, We can hence
forth expect at most no more than
S10.O00,000; that is, from 2 to 8 per
cent. But that in itself will not re-
store the balance. We shall still be
ahead both in our trade and invest
ment returns when this form of debt
repudiation has stabilized. What will
come next? Obviously the progressive
reduction of what is owed us on ac-
count of our private investments and
loans. Germany is already doing that
and doing it quite frankly with the
excuse that she can only pay to the
extent she has a surplus in trade
balances.
In a word, what is happening, since
we won't open our markets to foreign
goods or lend abroad to permit bal
ancing of international payments, is
that Europe is proceeding to apply the
loan method backward. 1t isn't bor-
rowing any more, because it can't, but
it is arriving at the same result by
progressively repudiating what it has
borrowed in the past. In the end.
however, it comes to the same thing.
We are going to pay the difference
between what We buy and sell. Con-
gress, of course, will not face that fact.
On the contrary the speeches on Cap
itol Hill leave the country with the
conviction that the whole question is
as simple as the domestic relation be-
tween debtor and creditor. The
wicked debtors won't pay. the honest
Congress cannot make them, but it
can punish them by eloquence and by
legislation forbidding future loans.
Ultimately, Of course, the thing will
work out this way: Europe has already
reduced it governmental debts to us
by the token method to mere
shadow. For all practical purposes an
annual payment averaging over the
years, $400, 100000 has been cut to
S1O,OO0,O00. That takes care of the
$4,000, 100000 of war debts. Next
there are some $5,000,000, 900 in pri-
vate loans to Europe. These are being
reduced by non-payment
of interest and by scaling down, as the
Germans have done. Roughly speak
ing that will represent the elimina-
tion of payments which might amount
annually to $750,O0O,0O0.
Opportunity to Pay.
That $75O,o0O,000 we might, of
course, have had or, in part at least,
can still have, If we were prepared to
take it in goods, commodities or serv-
ices. If the United States Govern
ment would approach the debtor ma
tions and propose that they ship us,
in addition to what they now send,
some S750,000,0OO in various wares,
they would have no choice but to
agree or, on their own claims, confess
themselves to be fraudulent debtors
because then, at least, we should offer
them, for the first time, a real oppor-
tunity to pay us.
Naturally, however, it would not
much aid the Presidents recovery plan
TO have three-quarters of a million
dollars worth of foreign goods annually
dumped into the American market,
goods in large mart peceSSariIv coy,,-