The Press FRIDAY, JULY 25, 1947. Discrimination In Trade

Press, Volume LXXXIII, Issue 25245, 25 July 1947, Page 6

The Press FRIDAY, JULY 25, 1947. Discrimination In Trade

It is a little too soon to be sure ■that the report printed yesterday • correctly anticipates an American | decision to exclude Britain’s non- ! self-governing colonies from the effeet of Clause 9 of the Anglo-Ameri-can loan agreement of December, 1945, which requires either country, if it introduces or maintains quantitative import restrictions, to administer them “on a basis which does “ not discriminate against imports “ from the other country The added detail, that the “Dominions “ and India ” are not to share the exemption, raises and leaves unanswered obvious questions about the self-governing colonies and about all foreign countries but the United States. It must, however, be a fairly safe guess that any Washington concession will be limited, not because the economic case for a sweeping concession is weak but because it may be politically inexpedient to act on it at this stage. Since the loan agreement was signed, developments have more and more impressively vindicated those critics—the “ Economist ”, notably—who observed that, though the clause was designed in keeping with the new and admirable objects of freer and expanding world trade and to prevent any wilful retreat from them, conditions might easily arise in which the clause would obstruct them. If, for example, it became essential to restrict imports from the United States, the obligation to restrict imports from other countries automatically wbuld be unfortunate. All channels of trade, instead of one, would flow slcwer; the countries suffering the restrictions would themselves be forced to restrict their imports; and the longrun effect on American export trade, which the clause was intended to protect, would be worse than the one feared. Clearly, if British import trade has to be restricted, it is best to minimise the range of the

restrictive process, to sustain the volume of world trade exchanges (or to increase it, if possible), and to preserve as much *of its free, multilateral character as possible. The risks implicit in the clause, however, were not widely or officially discussed, in spite of one or two warning episodes, until the British Government announced that imports of tobacco, fruit, and vegetables, for example, would be reduced. The announcement brought forward the hard fact that Clause 9 meant, or appears to mean, that the shortage could not be made up by buying more tobacco from Rhodesia or more fruit from South Africa or more vegetables from France, though sterling would pay for these (convertible sterling, it is true); that Britain might even be called on to buy less from such alternative markets; and that an unavoidable economy in dollar imports could enforce unnecessary and undesirable

cuts in non-dollar imports. It should be remembered, before Washington is heavily condemned, that events have transformed the situation in which Clause 9 was drafted and accepted. The Americans were still thinking, well back in 1945, of a rapid recovery of British and European industry, and of a time, not far off, when American industry would encounter hard competitive resistance in world’s markets. They were not thinking of what has been a slow, limping advance, of the continuing, desperate need for American aid, of the growing and terrifying shortage of dollars. But they have begun to think of such things, as the Marshall offer proves, and as well-informed Washington comment has recognised. The clause was drawn to fit one set of conditions; it is hideously inappropriate to conditions as they are. But if Washington makes—and perhaps has been asked to make—only a partial concession, the reason may well be that it is not, at present, worth while to throw Clause 9 as a whole into the American political arena—least of all by invoking Clause 12, which entitles either party to the agreement to ask that any provision should be reconsidered if it thinks “ the prevailing conditions of ex- “ change ” justify reconsideration. Clause 9 and more important clauses than Clause 9 should not be allowed to distract Congress from the main and momentous issue shaping before it. It will probably be found that Washington’s concession will be defined in a clear and agreed interpretation of Clause 9, which has so far been wanting and could do much to prevent its being damagingly applied.