FOREIGN TRADE: No. 19

In the huge gilt-&-white East Room of the White House, Cordell Hull last week proudly set his name to the most important achievement of what many believe is the New Deal’s most successful program—its reciprocal trade pacts. Into effect for three years at least went trade agreements between the U. S. and Great Britain, between the U. S. and Canada.

The agreement with Canada is an improved revision of the reciprocal pact which Secretary Hull and Prime Minister William Lyon Mackenzie King signed three years ago; that pact (along with improving world business) has brought a 42% rise in U. S. exports to Canada. Far more important is the brand-new agreement with Great Britain, already the biggest foreign buyer of U. S. products; in the first half of 1938 about one-sixth of all U. S. exports went to the United Kingdom.

If the 18 other trade pacts already in effect— are good precedent, there should be a substantial increase in U. S. trade with Great Britain. Since 1934 U. S. exports have risen 57%. During this period, exports to treaty countries have increased 66.2%, to non-treaty countries 47.7%.

Last week, after the first flurry of discussion about the agreements, came a flurry of activity among traders. When the State Department first announced its intention of negotiating the British and Canadian pacts last November, buyers began to order from hand to mouth, waiting to see what would happen. With the fog lifted last week, U. S. manufacturers of office equipment, electrical appliances, tractors, oil pumps, leather goods, silk hosiery charted plans to benefit by the most favorable concessions in the pacts. Automobile manufacturers, although disappointed at not getting duty concessions, thought that gains for U. S. farmers might mean an improved domestic market for motors.

Loudest groans against the agreements came from textile manufacturers in New England, farmers in Old England. Because concessions to English producers of finer cotton goods and woolens would probably hurt New England’s none-too-flourishing textile industry, Governor George D. Aiken of Vermont cracked: “It looks like a plan to turn New England into a solely recreation area.” On the other hand, British farmers complained because Britain, already the principal outlet for U. S. farm goods, abolished duties on U. S. wheat, corn (except flat white), lard, certain canned fruits and fruit juices, and reduced by as much as one-third the duties on rice, apples, pears, other canned fruits. Britain also boosted the quota for hams and gave guarantees that ham and cotton would remain duty free.

Although the State Department was especially proud of having wangled Britain’s removal of a 6¢-per-bushel duty on wheat, U. S. traders were inclined to believe that Canadian as well as Argentine dumping programs might negate the importance of the concession. Day after the treaty was signed, Chicago wheat prices actually fell. Lesser disappointments were registered by lumbermen, coal and metal miners, tanners, papermen.

Though businessmen were highly vocal, the ultimate index of their attitudes—the stockmarket—showed no response one way or the other. For this the reason was clear: the new trade treaty has been in the wind for several months and Wall Street discounted it in advance by rising, knowing that, though certain individual concerns might be hurt, any broad revival of international trade could not help but benefit U. S. industry as a whole.

*With Belgium, Haiti, Sweden, Brazil, Canada, The Netherlands and colonies, Switzerland, Honduras, Colombia, France and colonies, Guatemala, Nicaragua, Finland, Costa Rica, Salvador, Czechoslovakia, Ecuador. Special pact: Cuba.