14 APRIL 1961, Page 37

American Goals

By RICHARD BAILEY Athe time of the Presidential election a num- ber of economists and other specialists from the universities and elsewhere, several of whom are now in the Kennedy Administration, were invited to put down their views in a symposium,* charting American policies over the next decade. This ambitious exercise was organised by the American Assembly at Columbia University. The resulting papers were arranged under the broad headings of 'American Fundamentals,' 'Goals at Home,' and 'The World We Seek.' Some of the goals described are of concern only to Americans. But in the light of the meeting between the President and Mr. Macmillan the chapter in the third section on foreign economic policy seems to have been a piece of better-than- average crystal-gazing.

This sets the economic scene in a fairly modest way. The position of the United States in the free world economy, in spite of the fact that it accounts for 40 per cent. of all industrial pro- duction, is not a dominating one. Western Europe imports far more goods than the United States. World prices are influenced but by no means * GOALS FOR AMERICANS, Spectrum Books, Pren- tice Hull Inc.

Controlled by dealings in the American market And in a nuclear age no country, not even one as big as the United States, can stand alone in either a military, political, or economic sense. In short, the report agrees that this is the age of interdependence.

What are the foreign economic policy goals that the United States should aim for in this situation? Mr. John J. McCloy, the former President of the World Bank, who contributed this chapter to the report, sees four broad areas in which action is necessary They are very much the same as those discussed at last week's meet- ing at the White House. They concern the un- developed countries, the growing strength of the Soviet bloc, and the, problem of the regional groups in Western Europe—the Six and Seven.

Of these objectives the practical question of most immediate concern to Britain is just how United States trade policy is going to develop in the 1960s and the problem of the Six and Seven. The big snag in the way of a more liberal Ameri- can trade policy is the Reciprocal Trade Agree- ments Act. It can be claimed, as Mr. McCloy asserts, that since this measure came into opera- tion in 1934 the average duty on imports has been considerably reduced, 'perhaps as much as halved.' But any such statement must be quali- fied by some description of the level of United States tariffs before the war. In fact the Smoot- Hawley tariff of the 1930s was the highest in American history. The bulk of the reductions since then were made in the years immediately after the war when few countries had anything to export anyhow, and it was possible to cut exist- ing high rates of duty painlessly so far as Ameri- can industry was concerned. In the last ten years effective tariff rates have fallen by barely 1 per cent. This high level of stagnation is due to the operation of the 'peril point' and 'escape clause' provisions of the Reciprocal Trade Agreements Act which provide interests affected by tariff cuts with a very effective means of keeping reductions to the minimum. As Mr. McCloy says, 'they put a floor under reductions in tariffs—a floor which for the most part has now been reached.

The way out of this impasse must be by way of new tariff legislation. This will involve developing new bargaining techniques. The report suggests that these should follow the lines of those used by Europe's. Six and Seven, whose members have agreed to make specific percentage reductions on groups of products rather than on individual items. The problem remains, however, of persuading Congress, which contains a con- siderable protectionist element, to accept the long-term goal of trade liberalisation. Mr. McCloy thinks the way to agreement is by 'a series of small steps over a period of time.' By this he means allowing time for adjustments by industry so that the workers are not called on to make all the sacrifices involved. In the long term, freer trade is regarded as the only logical policy

for a creditor nation such as the United States is today.

How is this need for an expansionist trading policy affected by the development of the regional groups in Europe, the Common Market and the EFTA? On this question the report claims a broad-minded understanding of the position of the United Kingdom. But there is no intention of leaving 'the divided nations of Europe to come together of their own accord. The United States is urged to encourage Britain and. the other EFTA countries 'to join or asso- ciate with the Six in an enlarged grouping.'

From the trade point of view the United States is of course, interested in the level of protection of the two European groups. A Common Market with a single external tariff is much easier to bargain with than a free trade area, like the EFTA, whose members retain their own tariffs against third countries. United States preference for the Six has been very much resented in some quarters here. It was believed that the appointment of Mr. George Ball (who - had been the Six's US adviser on legal matters) to the Kennedy Administration was likely to per- petuate and even increase this anti-Seven bias. Few who heard Mr. Ball speak during the meet- ings of the Development Assistance Group in London recently, however, are likely to retain that view. It now looks as though the meeting in Washington has cleared up this particular mis- understanding, if the statement that the United

States and Britain are in agreement on the urgency and importance of further steps towards the economic and political unity of Europe means what it seems to say. It now remains to be seen whether General de Gaulle takes the same view of interdependence as Mr. Kennedy If so. this particul3: goal might be reached much sooner than anyone, including its authors expected.