Evening star., 1939-06-24
Compoundine q Mistake


175,000,000 pounds of British rub
ber is not likely to encounter any
serious opposition in Congress for
the simple reason that it's benefits
are immediate and tangible, while
the disadvantages are largely theo-
retical so far as this one trans
action is concerned
Among the undesirable aspects of
the deal which might be mentioned
is, first, the fact that it does not
harmonize with the principle of Sec
retary Hull's reciprocal trade pro-
gram. The agreement reached yes
| terday is direct exchange of goods
between governments, while the es-
sence of the reciprocal trade pro-
| gram is the stimulation of more free
trade among private individuals. We
cannot blow hot and cold at the
same time
Both British and American officials
say that the new agreement cannot
properly be described as barter be-
cause it will not interfere with ordi-
nary commercial trade and cannot
conceivably hurt the trading inter-
eSts of third parties. AS to the first
contention it seems obvious that
ordinary commercial trade" sooner
or later must lose the business of
selling 100000 bales of cotton and
175,000,000 pounds of rubber, assum-
ing the British and American gov
ernments need and ultimately would
nave to acquire such quantities of
these commodities The best answer
to the second argument-that the
trading interests of third parties will
not be injured-lies in the fact that
American wheat, included in the
tentative proposals, was eliminated
after Canada had protested that
inclusion of the grain would curtail
her own exports of wheat to Britain.
With wheat included, it is safe to
assume that Canada would have
considered the transaction akin in
spirit and substance to the barter
deals for which we have so roundly
condemned the Germans and Ital-
| ians.
There is also the objection that
the agreement contemplates an ex-
change of goods without making use
OF the private facilities already in
existence for the handling of such
international transfers. The effects
OF this one transaction in that re-
spect will be unimportant, but the
consequences would be serious indeed
should the Government turn to
barter on an extensive scale.
On the other side of the ledger are
the benefits to this country, and they
are substantial. We acquire a re-
serve stock of rubber at reasonable
price. Should general war break
out we might be unable to buy rubber
at all, and certainly would have to
pay an excessive price for it. The
stock acquired in the deal with
Britain will be held off the market
until there is a war, or in any event
Tor seven years. That means that
the normal rubber trade-and the
same Is true of cotton-will not be
Immediately affected. It is hoped by
the adoption of proper safeguards
10 avoid serious repercussions if it
becomes necessary to market the
rubber and cotton after the seven
year period, but that is a question
for the future.
The transaction is also beneficial
to this country to the extent that it
will reduce the cotton surplus of
some eleven million bales. The Gov
ernment has made large loans to
the growers of this cotton and. for
all practical purposes, is now it's
oWner-an unpleasant fact which
has caused many a headache among
the New Dealers. With our current
cotton crop still at around twelve
million bales and the export market
shrinking all the time, the problem
OF how best to dispose of this surplus
has proved difficult indeed. Its out
right destruction would involve an
appalling economic waste and it's
sale on the world market through
the device of export subsidies, al
though favored by some of the New
Dealers, contemplates. use of a vi
clous and economically unsound
trade practice.
The best immediate answer to our
present difficulty seems to lie in the
type OF barter deal just consummated.
But In the long run there can be no
real solution until we discover some
satisfactory means of restricting
domestic production or of increasing
cotton consumption at home and
abroad. Certainly, our present un-
happy position amply demonstrates
that policy of price-pegging cotton
loans constitutes worse than no
answer to the problem.