11 MAY 1929, Page 14

The League of Nations

The A B C

of European Economics


The World Economic Conference of 1927 left behind it two important organisms whose raison dare is to give effect to

its recommendations and to watch the development of the economic policies of States. The first of them is the Economic Committee, consisting of Government experts. This body examines those problems which were ventilated at the Con- ference, prepares draft conventions when required, and maintains contact with the respective Governments. The other body is the Economic Consultative Committee, com- posed of representatives of sundry economic interests and economic opinion in general. It meets once a year for a short session, and actually its task consists in examining results achieved and then bringing forward fresh suggestions, which are then referred to the Economic Committee for study. The Consultative Committee is at present holding its second meeting. This is, therefore, perhaps a good moment to survey the economic work of the League.

We must preface our remarks by stating definitely that the League has achieved substantial results in all those questions which come directly within its province. Examples are the Conventions on the execution of arbitral awards made abroad, on the abolition of Import and Export Prohibitions and Restrictions, on the treatment of alien subjects and foreign firms, also numerous agreements dealing with tariff systems, the most-favoured nation clause, collective action for the lowering of tariff barriers, the unification of statistics and of customs nomenclature, veterinary police measures, &c. This is not the place to examine these questions in detail, but the mere enumeration of them gives some idea of the work already achieved in the direction of a more sane elabora- tion of the customs system and a better organization of the world's economic activities. If, indeed, in practice, these results are scarcely discernible, the explanation must be sought in the fact that Government action has not developed accordingly. At least, however, the Economic Conference produced a frame of mind which has materially assisted the commercial negotiations of certain States. It will be generally admitted that certain commercial agreements concluded by France, particularly the Franco-German Commercial Treaty, were greatly influenced by the decisions of the Conference, and that treaty, it should be said, had some political as well as economic importance.


Nevertheless, we have to admit frfnkly that the first wave of enthusiasm quickly passed. Several of the conventions concluded under the auspices of the League, and from which we were entitled to expect an improvement in the international situation, have been ratified by only a very few States. It is not too much to say that the work of the Economic Committee itself has received a check during the last few months and that some of its members are becoming discouraged by the endless difficulties that crop up. What is the explanation for this change ? Undoubtedly, it is due to some extent to the fact that public opinion, on which the whole action of the Economic Committee depends, suddenly seems to have lost all interest in these questions. There was at the Conference a consensus of opinion that the nations were sick and tired of the exaggerated Protection of recent years and that all would welcome a system of freer trade, which would be bound to bring down the cost of living. The truth is that in practice neither consumers' organizations nor even exporters' associaz tions have given much attention to what is being done at Geneva. Industrialists and agriculturists on the other hand, whose interests are bound up with Protection, have ranged themselves solidly against the policy advocated by the Conference.

The Governments have thus been subjected, not, as it was hoped, to pressure from the ranks of those who are in favour of freedoni of trade, but on the contrary to pressure from vested interests that thrive on Protection. The gospel preached at Geneva has therefore had the opposite result to that which' was intended. It has provoked its opponents without con- triving to maintain the enthusiasm of its friends. Under these

circumstances, there need be no surprise that the Governments, whose tendency is always to take the line of least resistance, have yielded to the pressure applied.

Perhaps, too, there is a deeper reason for this discouraging state of affairs, and in saying so, we come to the real difficulty of all the economic work of the League. What is, after all, the sense of the recommendations of the Economic Confer. ence ? They are destined in their essentials to create in Europe an international market for the benefit of certain interests. The European markets are too restricted and too scattered. They were so before the War and they have become now even more so, owing to the creation of new States which are definitely small economic units. It is an illusion to suppose that there can be any uniform and schematic reductions of customs barriers. But it was seriously con- sidered possible to bring about plurilateral understandings within certain definite spheres, the effect of which would be to permit certain industries to expand their national market.

When such a policy comes to be applied, those Governments whose interests are affected, demand, in return for throwing open their frontiers to the industrial products of other coun- tries, that the latter shall provide a market for those States' agricultural products. There you have in a nutshell thd persistent quarrel between Germany and Poland.

The peasants in industrial countries, on the other hand, maintain that working as they are under unfavourable conditions, with farm labour an expensive item owing td the competition of industry, with an average standard of living higher than that of Eastern European countries, they cannot hope to compete successfully in the marketS unless they too are protected by customs tariffs.

In the last analysis then, the problem with which the States of Western and Central Europe are faced, resolves itself into whether they choose rather to sacrifice their peasant class so as to extend their industrial market or to let the industry suffer for the sake of guaranteeing the interests of their agriculture. This is a serious dilemma, all the more so since, in the majority of the countries concerned, the Governments need the peasant vote to main their position in Parliament. When these things are stated bluntly, we ought no longer to be surprised that the economic work of the League should meet with a check.


But consider the alternative for a moment. Whatever else the future may have in store, it is clear that Europe will be subject to increasing pressure from American com- petition. The home market in America has reached saturation point ; that is to say, further development of American industry is not to be reckoned with. In order to maintain her present production and to bring down cost prices, it is absolutely necessary that America extend her export trade. It may be that American exports represent only a meagre percentage of her production ; they constitute, however, just that margin allowing of compression of costs of pro- duction. That is the reason why American industry is in a position to sell goods outside America, even at unremunera- tive prices.

To meet this impending invasion, Europe has only two methods of defence from which to choose : either to organize herself by extending her industrial markets through inter- national agreements—namely, the method advocated by the League—or to' put up barricades of customs duties to such a point that the tariffs become prohibitive for American importers. It is surely evident that this second method would be in the nature of an unfriendly attitude to the country with which it is manifestly Europe's greatest interest to maintain a policy of conciliation. It would be, too, an appalling thing to adopt a policy having the effect of setting up hurdles all over the continent, and producing a state of affairs which the economic life of Europe itself could not possibly bear.

May this sobering reflection encourage us, therefore, to hope that in spite of all the difficulties that appear on the surface, the economic work of the League will finally achieve