Capital Comment

Washington.

Since the German cotton barter proposal sponsored by George N. Peek, head of the Export-Import Bank, faded out of the picture as a result of opposition by both Secretary of State Hull and President Roosevelt, Southern Congressmen and others have been studying the basis on which the plan was rejected with a view toward making needed changes and eventually consummating a cotton deal between the United States and Germany and other countries in a similar financial situation.

Of course, this study did not concern itself entirely with the obstacles which prevented the barter scheme with Germany from going through. Other countries in Germany’s financial condition are anxious to obtain American cotton, but do not have the money with which to pay. As a result of this situation, the United States has lost heavily in its cotton exports. In August, 1934, the exports of cotton from this country were eighty-three per cent of the average for the ten years from 1923 to 1933. At present cotton exports are around sixty per cent of this average.

The cotton barter deal with Germany involved a number of points concerning the handling of exchange. One of the main points which prevented the proposal from going through, concerned importations of goods from Germany which on the basis of that country’s monetary policies would permit those goods to come into the United States at a price lower than the price prevailing within Germany.

Government lawyers studied this angle of the plan and found that admission of goods from Germany; on such a basis conflicted with our anti-dumping laws. It was because of this and because of Secretary Hull’s objection that the barter plan was not in keeping with the reciprocal trade policy already adopted by this country, that the German barter proposal was turned down.

Now, the Senate Agricultural Committee is investigating the cotton export situation in an effort to determine what legislative or other action may be taken to stimulate exports. Public hearings opened here last week for the purpose of obtaining the views of government officials, farm leaders, and representatives of the cotton industry in general.

Among those who appeared at the hearing was Secretary of Agriculture Henry A. Wallace who made a suggestion which cannot help but receive the serious consideration of the members of this committee. Secretary Wallace suggested a change in our anti-dumping and countervailing duty legislation “which now seems to be having a very restrictive effect upon imports particularly from the countries still on the gold standard.”

Secretary Wallace firmly believes that foreign countries are able to buy more from the United States, this country must buy more from them. “In considering means of expanding foreign buying power we must take into account the fundamental problem of our balance of payments,” he said. “The United States is now and will probably continue to be, a creditor nation. Payments by foreigners of interest and dividends on American investments abroad will probably definitely exceed our payments of interest and dividends on foreign investments in this country. A considerable part of the purchasing power made avaliable to foreigners through our purchases abroad will then have to be used to make these payments. This would seem to point definitely to a large increase in our imports of goods and services as the only hopeful basis for a substantial recovery in our exports.”

He emphasized that this country must, therefore, explore every possibility of expanding imports, so as to give our foreign customers the dollar exchange needed to buy our cotton and other goods. This country already permits entry to a considerable volume of imports free of duty and an expansion in the quantity and value of these imports would depend largely upon improvement in our business conditions. He added that aside from the products now on the free list, our tariff and other policies tend greatly to restrict imports into the United States.

The problem of restricted imports, Secretary Wallace pointed out, is being attacked at the present time through the reciprocal trade agreements program which contemplates securing a reduction in trade barriers foreign countries in reciprocal exchange for concessions made by the United States.

“This is undoubtedly a step in an effort toward import-expansion,” he said, “but, so far as the current season is concerned, it does not seem likely that the trade agreements program will result in any substantial increase in imports.”

It was at this point that Secretary Wallace, in his testimony before the Senate committee, urged changes in the anti-dumping laws. “While the trade agreements program should continue to be pushed vigorously, other possible means of increasing imports should also be considered,” he said. “I should like to mention one possible approach—a change in our anti-dumping and countervailing duty legislation which now seems to be having a very restrictive effect upon imports particularly from the countries on the gold standard.

“It appears that many exporters in the gold standard countries are in a position to quote competitive world prices but importers in the United States in many cases refrain from purchasing at such prices because of the penalties under our anti-dumping legislation. In its present form this legislation allows little leeway for administrative action. It might be a good idea to make a change in this legislation which would provide more flexibility.’

Although not citing any particular country, Secretary Wallace said “we know of several cases where most of our cotton and other products might be sold in particular foreign countries if we would accept larger imports from these countries and where such increased imports are made difficult or impossible by our anti-dumping laws.

“At the present time we consider it dumping if a country exports at below its own internal level of prices. Changing our law so as not to call it dumping so long as the goods offered by gold standard countries were not offered below the world level of prices might do much to break the export congestion which now impedes sales by gold-standard countries.” he said.