Conference Conundrums
{division of the. work of the World Economic Conference between two, committees; financial and economic, has laid bare at once the two main issues which the Conference must face before it gets down to figures and details : how, and in ,what measure; is currency stabilization to take place',4 and by what method of international agreement are world tariffs to be reduced. The wind of stabilization has blown hot and cold. There was Mr. Chamberlain's opening statement of British policy, declaring for a progressive return to the gold standard subject to provision for the satisfactory operation of the standird. Next we were infornied by the Press that the central banking experts of Great Britain, France and Abe United States had reached a working agreement • for _nutual stabilization, which' it was hoped would be ratified-by their Governments.. The Government of the United States at least was not so compliant, and any suggestion that its representatives would put forward a plan for the stabilization of exchange rates was repudiated. Now we have, per contra, from Senator Pittman a detailed draft resolution beginning : , • "It is in the interests of all concerned that stability in the inter- national monetary field be attained as quickly as possible, and that . gold should be re-established as -the international measure of exchange values."
This equivocation on the part of the United States lies at the root of the problem of stabilization, and what is to come of it is still obscure.
It is significant that President Roosevelt as quickly repudiated the unofficial Cordell Hull proposal for an all-round 10 per cent. tariff cut as he repudiated the bankers' stabilization plan. Senator Couzens said frankly at South Kensington on Monday :
"Developments in America seem to indicate that internationalism will conflict quite severely with our national economic programme. If my analysis is correct we cannot carrythrough bothprogrammes."
If, indeed, the conflict is so acute, there is no doubt .which course the American public will force the Adminis- tration to take. •Happily, national and international interests are not in reality so-divided. A stock market boom can for a while (as in 1929) overshadow industrial stagnation,. but if American prosperity is to mean anything it must mean a big industrial revival. That is impossible without a restoration- of export markets, which can be achieved- only through a general reduction of tariffs. A falling exchange may temporarily promote exports, but the rise in internal prices is always -treading on its heels, and such fluctuations of exchange value as the dollar is now suffering can only hamper trade. But perhaps the most important consideration of all is that • Europe is far from content with 'present -price levels, and would gladly .march with the United States in raising them ; what is more, the determination of the American Government to raise internal prices 'makes the European authorities willing to stabilize their currencies at a higher dollar-value than they would otherwise contemplate.
At any rate, if prices are to rise anywhere, commercial confidence must be restored, and one Of- the vital con- ditions of commercial confidence is stability of exchanges. It is difficult to believe that the Conference will make no progress in that -direetion. - - ' Financial and economic problems go hand in hand. Without currencystabilization,• countries will be unwilling to cut their.tariffs ; . without a general liberation of trade, the gold standard holds out more threats than advantages. Meanwhile; discussion - in 'the -Economic Committee has -naturally. centred- round the Means whereby, the general liberation of.trade maybe achieved.- Three main methods are open : a universal percentage cut, such as Mr. Cordell Hull. suggested ; agreements -between .pairs . of countries, such as the British Government advocate or group agreements, as exemplified in the Belgo-Dutch convention fOr the progressive reduction of the mutual tariffs of the signatories, and in the proposals for aiding the Danubian countries by regional preferences. The first method has, for various reasons, little chance of acceptance. It is between the two latter alternatives that the real conflict arises.
The British Government, affirming its support of the method of bilateral negotiations, declares that they must be reinforced by the application of the most-favoured- nation princiNe.- The most4a,voured-nation clause, of course, in trade treaties assures to each signatory no worse tariff treataiiient at-the hinds of the other signatory than the latter accords. to any third party. When we . were a free trade country, unable to give any tariff concessions ourselves, this was of great value to us in preventing discrimination in favour of our competitors ; and it assures to the world that the benefits of tariff • reductions, secured through compromises between pairs of countries, will be generally diffuSed. But the most- favoured-nation clause is itself a hindrance to such reductions, precisely because they ,have to be accorded to countries who have given nothing in return by way of reductions of their own tariffs. Mr. Chamberlain recognised this in asserting that countries which were unwilling, to adopt a reasonable policy in framing their own tariffs could no longer be allowed to enjoy most- favoured-nation benefits. This suggests a regime of a . double tariff—a lower, most-favoured-nation, tariff and an upper tariff against the illiberal countries. There is another possibility, which might be :combined with the first, namely, special relinquishment of most-favoured- . nation rights in favour of those countries who were prepared among themselves (by, say, a low-tariff union Or an agreement along the lines of the Belgo-Dutch Convention) to go beyond the average in tarisl reduction. Within the group- there would thus be a tariff level actually lower than the :most-favoured-nation level.
This policy has been consistently opposed by the British Government, although it is exactly the policy they put into practice themselves at Ottawa. , Mr. Chamberlain would only countenance ". temporary and limited exceptions not • prejudicial to British interests.7 Mr. Runeiman on Mon- day went a little further, in declaring that the Government were not prepared bo sacrifice bilateral arrangements by an unequivocal adherence to the most-favoured-nation method. Does this mean that the Government wants the best of both worlds,- yetoing any derogation from the most- favoured-nation principle (as they did in the case of Belgium and Holland) when they do not care to join the low-tariff-group concerned, but insisting on the derogation .when they, do? Do they really: ask that we should be -allowed-to discriminate in favour of; say, Argentina, while the Danubian countries, or Belgium and Holland, are not allowed to:discriminate in favour of. each other ? If so, 'then the claim is of a piece with Mr. Runciman's fantastic claim that by bilateral methods the British Government 'had- succeeded in lowering tariffs in the last year or so.
-Where, in our trifling adjustments with Germany, with Argentina and with the Scandinavian countries, is there anything to match our 10 per cent. general tariff, the supplementary protective duties, the retaliatory duties and quotas abroad, and the raising of tariffs against foreign countries • as a .result of Ottawa ? We entered late into the world tariff war ; if our entry is really to result in a general lowering of tariff levels, we must clear our ,commercial :policy of such cant.
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