Message to Congress on the Trade Agreements Act.

To the Congress:

The coming victory of the United Nations means that they, and not their enemies, have power to establish the foundations of the future.

On April 25 their representatives will meet in San Francisco to draw up the Charter for the General Organization of the United Nations for security and peace. On this meeting and what comes after it our best hopes of a secure and peaceful world depend.

At the same time we know that we cannot succeed in building a peaceful world unless we build an economically healthy world. We are already taking decisive steps to this end. The efforts to improve currency relationships by the International Monetary Fund, to encourage international investments and make them more secure by the International Bank for Reconstruction and Development, to free the air for peaceful flight by the Chicago civil aviation arrangements, are part of that endeavor. So, too, is the proposed Food and Agriculture Organization of the United Nations.

We owe it to the vision of Secretary Hull that another of the essential measures we shall need to accomplish our objective has been tested and perfected by ten years of notably successful experience under his leadership. You are all familiar with the Trade Agreements Act which has been on the books since 1934 and which on three occasions, since that time, the Congress has renewed. The present law expires in June of this year. I recommend that it again be renewed so that the great work which Secretary Hull began may be continued.

Under him the reciprocal trade agreement program represented a sustained effort to reduce the barriers which the Nations of the world maintained against each other's trade. If the economic foundations of the peace are to be as secure as the political foundations, it is clear that this effort must be continued, vigorously and effectively.

Trade is fundamental to the prosperity of Nations, as it is of individuals. All of us earn our living by producing for some market, and all of us buy in some market most of the things we need. We do better, both as producers and consumers, when the markets upon which we depend are as large and rich and various and competitive as possible. The same is true of Nations.

We have not always understood this, in the United States or in any other country. We have tried often to protect some special interest by excluding strangers' goods from competition. In the long run everyone has suffered.

In 1934 this country started on a wiser course. We enacted into law a standing offer to reduce our tariff barriers against the goods of any country which would do the same for us. We have entered into reciprocal trade agreements with 28 countries. Each one of these agreements reduced some foreign barriers against the exports of this country, reduced our barriers against some products of the other party to the bargain, and gave protection against discrimination by guaranteeing most favored Nation treatment to us both. Each agreement increased the freedom of businessmen in both countries to buy and sell across national frontiers..The agreements have contributed to prosperity and good feeling here and in the other contracting countries.

The record of how trade agreements expand two-way trade is set forth in the 1943 report of the Committee on Ways and Means. This record shows that between 1934-35 and 1938-39 our exports to trade-agreement countries increased by 63 percent, while our shipments to non-agreement countries increased by only 32 percent; between these same periods, our imports from countries increased by 22 percent as compared with only 12 percent from non-agreement countries. The disruptions and dislocations resulting from the war make later comparisons impossible. The record published in 1943 is, nevertheless, as valid today as it was then. We know, without any doubt, that trade agreements build trade and that they will do so after the war as they did before. All sections of our population—labor, farmers, businessmen have shared and will share in the benefits which increased trade brings.

Unfortunately, powerful forces operated against our efforts in the years after 1934. The most powerful were the steps of our present enemies to prepare themselves for the war they intended to let loose upon the world. They did this by subjecting every part of their business life, and especially their foreign trade, to the principle of guns instead of butter. In the face of the economic warfare which they waged, and the fear and countermeasures which their conduct caused in other countries, the success of Secretary Hull and his interdepartmental associates in scaling down trade barriers is all the more remarkable.

The coming total defeat of our enemies, and of the philosophy of conflict and aggression which they have represented, gives us a new chance and a better chance than we have ever had to bring about conditions under which the Nations of the world substitute cooperation and sound business principles for warfare in economic relations.

It is essential that we move forward aggressively and make the most of this opportunity. Business people in all countries want to know the rules under which the postwar world will operate. Industry today is working almost wholly on war orders but once the victory is won, immediate decisions will have to be made as to what lines of peacetime production look most profitable for either old or new plants. In this process of reconversion, decisions will necessarily be influenced by what businessmen foresee as Government policy. If it is clear that barriers to foreign trade are coming down all around the world, businessmen can and will direct production to the things that look most promising under those conditions. In that case a real and large and permanent expansion of international trade becomes possible and likely.

But if the signs are otherwise, if it appears that no further loosening of barriers can be expected, everyone will act very differently. In that event we shall see built up in all countries new vested interests in a system of restrictions, and we shall have lost our opportunity for the greater prosperity that expanding trade brings.

I have urged renewal of the Trade Agreements Act. In order to be fully effective the Act needs to be strengthened at one important point. You will remember that as passed in 1934 it authorized reductions in our tariff up to 50 percent of the rates then in effect. A good many of those reductions have been made, and those rates cannot be reduced further. Other reductions, smaller in amount, leave some remaining flexibility. In-other cases, no reductions have been made at all, so that the full original authority remains.

You will realize that in negotiating agreements with any foreign country what we can accomplish depends on what both parties can contribute. In each of the agreements we have made, we have contributed reductions on products of special interest to the other party to the agreement, and we have obtained commensurate contributions in the form of concessions on products of special interest to us.

As to those countries, much of our original authority under the Act has been used up. We are left in this situation: Great Britain and Canada, our largest peacetime customers, still maintain certain high barriers against our exports, just as we still have high barriers against theirs. Under the Act as it now stands we do not have enough to offer these countries to serve as a basis for the further concessions we want from them. The same situation confronts us, although in a lesser degree, in the case of the other countries with whom we have already made agreements: these include France, The Netherlands, Belgium, Turkey, Sweden, Switzerland, and most of the American Republics.

I therefore recommend that the 50 percent limit be brought up to date by an amendment that relates it to the rates of 1945 instead of 1934. Then we shall have the powers necessary to deal with all our friends on the basis of the existing situation.

The bill which the Chairman of the Ways and Means Committee has introduced in the House of Representatives, H. R. 2652, would accomplish the objectives I have in mind, and has my support.

This legislation is essential to the substantial increase in our foreign trade which is necessary for full employment and improved standards of living. It means more exports and it also means more imports. For we cannot hope to maintain exports at the 'levels necessary to furnish the additional markets we need for agriculture and industry—income for the farmer and jobs for labor- unless we are willing to take payments in imports. We must recognize, too, that we are now a creditor country and are destined to be so for some time to come. Unless we make it possible for Americans to buy goods and services widely and readily in the markets of the world, it will be impossible for other countries to pay what is owed us. It is also important to remember that imports mean much more than goods for ultimate consumers. They mean jobs and income at every stage of the processing and distribution channels through which the imports flow to the consumer. By reducing our own tariff in conjunction with the reduction by other countries of their trade barriers, we create jobs, get more for our money, and improve the standard of living of every American consumer.

This is no longer a question on which Republicans and Democrats should divide. The logic of events and our clear and pressing national interest must override our old party controversies. They must also override our sectional and special interests. We must all come to see that what is good for the United States is good for each of us, in economic affairs just as much as in any others.

We all know that the reduction of Government-created barriers to trade will not solve all our trade problems. The field of trade has many fronts, and we must try to get forward on each of them as rapidly and as wisely as we can. I shall continue therefore to explore the possibility also of reaching a common understanding with the friendly Nations of the world on some of the other international trade problems that confront us. The appropriate committees of the Congress will be fully consulted as that work progresses. The purpose of the whole effort is to eliminate economic warfare, to make practical international cooperation effective on as many fronts as possible, and so to lay the economic basis for the secure and peaceful world we all desire.

When this Trade Agreements legislation and the other legislation I have recommended to this Congress is adopted, and when the 'general organization of the United Nations and their various special agencies, including one on trade, have been created and are functioning, we shall have made a good beginning at creating a workable kit of tools for the new world of international cooperation to which we all look forward. We shall be equipped to deal with the great overriding question of security, and with the crucial questions of money and exchange, international investment, trade, civil aviation, labor, and agriculture.

As I said in my message of February 12 on the Bretton Woods proposals:

"The point in history at which we stand is full of promise and of danger. The world will either move toward unity and widely shared prosperity or it will move apart into necessarily competing economic blocs. We have a chance, we citizens of the United States, to use our influence in favor of a more united and cooperating world. Whether we do so will determine, as far as it is in our power, the kind of lives our grandchildren can live."