Evening star., 1936-07-31
BY CRESTON b. MULLINS.


program, is the possibility that the
major benefit Of an agreement conces-
sion may be diverted to countries
other than the one for which it was
intended.
Although this might appear to
jeopardize most the interests Of the
other party to an agreement, roper.
cussions In the American domestic
market are possible If q duty reduc-
ton enables non-agreement countries
to flood the United States with goods
If the commodity involved is compett-
tive with American products, such rs
some iron and steel manufactures,
lumber. cement and glass, there Is
danger that the reduced tariff win at
tract large quantities Of goods from
countries which receive the lower duty
by virtue Of an unconditional most
favored-nation treaty.
With this peril in mind, the State
Department has taken the precaution
in negotiating its agreements to in
sert clause permitting withdrawal Of
any concession from all countries II II
Is found TO operate chiefly to the ben
eft Of countries other than the "prin-
cipal supplier" with which the agree
ment was made, and to the disad-
vantage Of American industry.
Typical Example.
The wording Of Article XIV Of the
Swedish agreement is typical:
'The government Of each country
reserves the right to withdraw the
concession granted ON any article un-
der this agreement, or to impose
quantitative restrictions on any such
article If at any time there should be
evidence that, as a result of the ex-
tension Of such concession to any
third country. such country win obtain
the major benefit Of such concession
and in consequence thereof an unduly
large increase in importations of such
article will take place: ."
This Is the safety valve, but so far
1t has not been invoked, although in
several kinds Of imports third coun.
tries have received the major benefits.
One Of the best examples Of this Is
the reduction Of duty on Swedish
matches from 40 cents to 17h cents
per gross Of boxes. During the first
10 months Of the Swedish agreement
from August 5, 1885, to May 81,
1936-Sweden's exports Of matches to
the United States amounted to $122,-
244, a 80 per cent increase over the
corresponding period a year previously.
However. Russia came in for q greater
share Of American business than did
Sweden, replacing the latter as the
principal exporter of matches to the
United States. From $s3,454 In the
1s34-s4 1o-month period Russia's
exports to the United States climbed
to $135,s46. up SO per cent, in 1856.
Japan Pays for Rise.
In spite of these huge gains, total
imports Of matches by the United
States did not advance as rapidly,
for the gains of Russia and Sweden
were made largely at the expense Of
Japan, whose shipments fell of by
$45,740 or SO per cent.
This phenomenon has occurred in
several other classes Of commodities,
notably the metals and their manu-
factures, where reductions accorded
Belgium and Sweden in some cases
stimulated shipments from third
countries to q greater extent than
from the agreement countries. This
Is the result Of the operation of the
unconditional most-favored- nation
clause, which Is the heart Of the
reciprocity program, for through this
means tariff concessions are general
lied to all nations which do not dis
criminate against American merchan-
disc. The reciprocal trade act Of 1894
specifically provides for withdrawal
of concessions from countries deemed
to be discriminating against Arneri-
can goods. Germany and Australia
have been 50 adjudged by this Gov
eminent and the old rates Of duty, in
effect before the new agreements
came into force, are applied to all
goods from those two countries.
Involves Peek Issue.
The question of whether to make
tariff reductions available uncondi-
tionally or only In return for o "quid
pro quo" was the issue between Sec
retary Of State Hull and George
Peek, former special adviser TO the
President on foreign trade, in which
the former came OF victor. And this
is precisely the distinction between
the two schools Of economists, split
between the barter system and the
reciprocal trade program.
Whereas the Hull policy is to loosen
up all world commerce In order to
restore Americas share to its former
volume, the Peek theory, and the
theory Of the barter economists, is
that trade should be revived on a BIZ
lateral-not q multilateral-basis, by
making concessions only In return for
concessions, thus channelidng COM
merce between pairs Of countries.
This system Is often coupled with
special means for balancing trade be-
tween each pair Of countries, such az
clearing and compensation agree
ments, whereby each country Is paid
for its exports from the proceeds Of
imports from the other country. It's
payment for exports is limited to the
amount Of money available from the
sale Of foreign products in the do
mestic market. Where such an agree
ment comes into force between two
countries whose trade Ia unequal, the
effect Is for the country with the
favorable balance to reduce its exports
to the level at which imports from the
other party to the agreement VIII
make full payment.
Such O plan links exports and i'm.
ports more directly than does the Hull
program. by making 1t necessary for
a country to buy proportionately more
In order to maintain the volume Of its
foreign sales, If it has q favorable bal
ance Of trade.
Insurance Against Discrimination.
If the unconditional most-favored-
nation clause has proved faulty by per-
mitting heavy importations from coun.