OTTAWA AND ANGLO-AMERICAN _RELATIONS

By H. V. HODSON

IT has become almost a commonplace of political thought in the British Commonwealth that mutual understand- ing and co-operation between the two great English-speaking democracies are a vital condition of world peace and progress. On the means of securing them there may be greater differ- ences of opinion. But it is growing steadily clearer that economic bathers, including the barrier of the unsettled war-debt problem, must be removed as part of the approach to closer political understanding• The economic aspect itself has many angles-currency stabilisation, war debts, neutrality embargoes, capital movements, as well as the more obvious question of commodity trade. One particular aspect, British imperial preference, is being forced upon our notice today by the Conclusion of a new Anglo-Canadian trade treaty and by the approach of a revision of the whole Ottawa system of agreements. ' To what extent does that system stand in the way of a commercial pact between Great Britain and the United States, on the lines of a mutual freeing of trade ?

The question may be interpreted in two ways. We may ask, first, whether the whole scheme of imperial preference is a liberal or a protectionist element in world trade relations, of which Anglo-American trade relations are an important part. Did the Ottawa Conference succeed, as one of its resolutions boasted, in promoting world commerce by " clearing out the channels of trade " (Mr. Baldwin's definition of its aim) among the participant countries ? Or did it, on the contrary, impede world trade by artificially diverting its flow, and by raising tariffs on foreign goods as a means of enlarging preferences for Empire goods ? What answer we give to these questions depends partly on whether we treat Great Britain's policy of protection as a separate issue, or as essentially linked up with the imperial preferential arrange- ments that were held out as one of the reasons for abandoning free trade ; in other words, on whether we take as the platform of comparison with post-Ottawa conditions the general 'state of British tariffs in August; 1932,- or their state in October, 1931. On the latter basis, the net change has undoubtedly implied a hindrance to world trade revival, including a revival of Anglo-American trade.

The second interpretation of the question is more straight- forward. In detail, did the Ottawa agreements divert a large body of our import trade from the United States to Empire channels, and does their maintenance therefore preclude a far-ranging grant of mutual concessions between ourselves and the United States ? An answer may be found in a comparison between the figures for 1930 and 1934, which are equidistant from the period during which the present system of protection-cum-preference was erected. In 193o, our imports of United States goods totalled £44 million, and is 1934 £77 million, a fall of £67 million. In the same interval there was a fall of only £16 million in our imports from Empire countries, from £2.59 million to £243, million kow_far was this contrast due to a direct diversion, of our purchases from the United States to the Dominions and Colonies ? The first step towards an answer is to examine the four outstanding items in our imports from the United States-wheat, cotton,- tobacco, and oil.

RETAINED IMPORTS,

(In £ millions.) Wheat and wheaten

From U.S.A.

Inc. (-I-) or

1930. 1934. DeC. (-). From British Empire.

Inc. (+) or 193o. 1934. Dec. (-).

flour Raw cotton

.. and

10.9 0.1 -102 . . 22.0 19.5 -2.5 cotton waste .. 19.5 , 12.6 - 6.9 .. 6.6 5.4 --1.2 Tobacco ..

12.6 + o.8 1.8 2.1

-1 o.3

Petroleum .. 20.2 5.1 -15.0 . . I.I 1.8 -0.7

62.4 304 -32.0 .

. 31.5

28.8 -2.7

Only one of these items-petroleum-gives any suggestion of increased purchase from the Empire as a corollary of decreased purchase from the United States, but imperial preference cannot be responsible for our spending £15 million less on American oil and £700,000 more on Empire oil. Of the other three commodities, imports from the United States and from the Empire moved in the same direction, either upward or downward.

If we tabulate similarly all remaining items of which we imported more than £300,000 worth from the United States in either year, and pick out those for which a fall in purchases from the United States was matched by an increase in pur- chases from the Empire, we find the list surprisingly short. It comprises fresh fruit other than apples ; barley ; bacon and hams ; meat other than beef, mutton or pig meat ; tinned or bottled fruit ; sugar and molasses ; sawn wood (both soft and hard) ; chemicals, drugs and dyes ; manu- factures of iron and steel ; aluminium and its alloys ; copper ; paraffin wax ; motor-cars ; and manufactures of. wood. These items account for £34 million of imports from the United States in 1930, falling to £18 million in 1934 ; and for £25 million of imports from the Empire in 1930, rising to £40 million in 1934. Omitting copper, for which the development of the Rhodesian fields has been a much more important influence than tariff preferences, the figures are : from the United States, £28 million in 1930 and £16 million in 1934 ; from the Empire, £24 million in 193o and £35 million in 1934. This, then, is roughly the area of direct diversion. Much the most important items in it (taking the volume of trade and the extent of diversion together) are bacon and hams, wood and timber, and motor- cars. If imperial preference stands in the way of freer trade with the United States, it stands in the way chiefly as regards those three groups of commodities. The following table analyses the whole of British imports from the United States in the same way : RETAINED IMPORTS. (In k millions.)

From U.S.A.

Inc- (-I-) or 1930. 1934. Dec. (-).

Four chief com-

From British Empire.

Inc. (+) Or

1930. 1934. Dec. ( -).

modities .. 62.4

30.4

- 32.0

• •

31.5

28.8 - 2.7 Copper . . . . 5.1 1.2 - 3.9

0.9 4.5 + 3.6 Diverted items .. 28.4 164 - 12.0 .. 23.8 35.0 11.2 Non-diverted items :

(a) 3.1 4.3 1.2

. .

2.8 3.3

+ 0.5

(b) 4.3 1.6 - 2.7

. .

(c) . . . . 28.9

14.8

-14.1

25.4 22.6 - 2.8 Remainder .. II.S 8.o

- 3.8

• •

174.4

148.6 -25.8 Total . . 144.0 76.7 - 67.3 . . 258.8 242.8 -16.0

The " remainder " consists of items of which imports from the United States were small-less than £300,00o in either year, The " non-diverted " items comprise (a) those of which imports from the United States increased, (b) those of which imports from the Empire were at all times negligible, and (c) those of which imports both from the United States and from the Empire fell between 1930 and 1934. The table shows how small is the area of direct and patent diversion compared with the whole volume of trade-the fraction is almost exactly one-fifth. It is fair to conclude that imperial preference on roughly its present plan is no final obstacle, though it may be a partial obstruction, to Anglo-American economic co-operation. If these figures are to be trusted, the difficulty lies more , in our system of protection than in our SySleut of preference, more in our economic nationalism than in our economic imperialism. Protection on both sides has a great deal to answer for, and the deterioration of Anglo-American relations is one of its major responsibilities.