Evening star., 1940-04-14
Sees Revival Of War
Loon Issue
By OtDe,. L. Scott.

Trouble lies ahead for this country's
neutrality law. Neutrality, as written
into law, requires that nations at war
pay cash for everything they buy in the
United States. Out Of that requirement
Is flowing whole series Of developments
that have been unexpected and that
are going to have an increasingly I'm
portant influence.
The idea In Congress has been that II
only the British and French could be
required to pay cash for the things they
buy in this country. then there would be
less likelihood that the United States
might become involved In the war. This
idea flows from the belief that the
United States was drawn into the last
war in order to avoid the shock to busi-
ness that would come when the allies
no longer could borrow. The supposi-
ton now Is that II the allies must use
cash they always will have plenty OF
that cash to carry on the normal sort
Of peacetime trade that would keep the
war from meaning much to this country.
Now, however. 1t turns out in practice
that the British and French figure diff
ferently.
Those countries are not so sure about
the unlimited nature of their supply of
dollars. They have to plan for long
and costly war. They are forced by the
uncertainty Of this war to decide how to
get the most out of their dollar supply
and how to get the biggest possible num-
ber of dollars from the foreign trade
that they still are able to carry on.
They have very definitely made up their
minds that the dollars in their gold
supply and the dollars in their stock and
bond investments-when realized-will
be spent only for strictly war expenses.
In addition, Britain and France have
decided that they simply cannot go on
using their cash dollars to buy the VOL
ume Of products that they bought from
the United States In peacetime.
It Is this decision that gives rise to the
current trouble. In accordance with
their decision the British have curtailed
their purchases Of American tobacco and
fruit They are curtailing their pur-
chases Of American pork products and
of corn and wheat. They have conclud-
ed their buying of American cotton and
will not be in the market for more until
many months have passed. The French
have taken somewhat similar steps. The
result is that exports Of American farm
products, other than cotton, have fallen
drastically since the war started. These
export crops already had given rise to
the country's farm problem and now that
problem is to be accentuated.
The attitude in Congress is that some
thing should be done to make the Brit
ish and French buy the farm products
that they had been buying. The allies,
however, are letting it be known that
their supply Of dollars is not inexhausti-
BILE and that those dollars can be spent
only for those vital war goods that only
the United States can supply.
~ HA
There now are just two ways that the
allies can get the dollars they need to
buy American products.
One way is to sell goods and services.
Normally the British and French get
large quantities of American money, not
alone from the products that they sell
here, but as well from spending by
American tourists and from the income
that shipping yields. In war the tourist
trade is ended and shipping Yields much
less than normal. This means that fewer
dollars are being realized as a result Of
trade and as a result of services per-
formed. The second of the ways by
which dollars can be raised is through
the sale of capital. The allies own bill
lions of dollars worth of securities in
American and Canadian and Latin
American industries. They also own
vast quantities of gold Those possess
sions can be sold and are being sold to
get dollars
But the governments financing this
war are forced to regard those capital
possessions as last reserve. They are
determined to use the proceeds from the
sale of gold and of securities only for
the most vital war products, such as
airplanes and guns and machinery and
shipping that cannot be obtained any
place other than from the United States.
The same rule is being applied to dol
lars earned through the sale to the
United States Of those raw materials it
must have, such as rubber and tin and
tea and jute.
All Of this means that American trade
with the allies gradually will be concen-
trated In strictly war materials In the
first seven months of the war the export
OF products for strictly war purposes
amounted barely to IS per cent of this
country's total exports to Britain, France
and Canada. That percentage will grow
and with its growth will come trouble
for those American industries that had
depended on the peacetime demands of
the allied countries
Here the neutrality law figures in the
picture.
The suggestion is being made that, If
long-term loans could be obtained, then
the allies probably would be willing to
buy an increased quantity of American
farm products and Of other products
that are not vital for war purposes. The
suggestion also is made that If loans
cannot be obtained the allied countries
are going to be forced to curtail dras-
tically all purchases Of what might be
called peacetime goods
AS result. the issue that is gradually
developing is this:
Should the United States prepare to
cive larger s1,hsidies and tn iropoea