in CO O Digitized by the Internet Archive in 2007 with funding from IVIicrosoft Corporation http://www.archive.org/details/commercialtreatiOOwhitrich Commercial Treaties & Trade Agreements fncident to War, Peace and Reconstruction By Fred Brown /Whitney Chairman, Deselektro Co, Chairman, American Manufacturers Export Association's Committee on Commercial Treaties and Trade Agreements Address delivered at Annual Convention American Manufacturers Export Association New York, October 30-31, 1918 1. PEACE REVIVES TREATY RIGHTS A declaration of war causes non-intercourse in trade be- tween opposing belligerents and supersedes treaties involving the rights of aliens in trade; however, unless such rights are waived by the parties to treaties or new or repugnant stipula- tions are made in other treaties, such rights revive, usually, in their operation at the return of peace. 2. BRITISH INTENTION TO DENOUNCE COMMERCIAL TREATIES (a) It is therefore important to take note of a recent re- mark in Parliament by the Chancellor of the Exchequer to the effect that Great Britain intends to follow the policy of France in denouncing ALL commercial treaties providing for the most favored nation treatment. (b) The customary most favored nation clause in a com- mercial treaty stipulates that each party thereto shall grant to the other, in respect to the subject matter of the treaty, the same rights, privileges and immunities, as may thereafter be granted, as to the same matter, to the most favored nation. (c) Such action, if taken, will leave Great Britain free to introduce a policy of preference for colonial products in the British market and adopt a general tariff under which to nego- tiate special commercial arrangements with the Allies and bar- gain with neutrals. 3. FRANCE TO ABROGATE ALL CONVENTIONAL AGREEMENTS. On May 14, 1918, the French Government announced the decision of the Council of Ministers to abrogate all conven- tional arrangements with foreign countries affecting economic relations, including those regarding commerce, navigation, and industry. 4. FRENCH-CANADIAN CONVENTION TERMINATED (a) Notice has been given that the French-Canadian Con- vention of 1908 is to be terminated on May 14, 1919. The Act required 12 months notice. Each Government granted sub- stantial tariff concessions to imports from the other country. Canada applied intermediate rates to certain French products and special rates for other articles, these rates corresponding in most cases to the British preferential rates. France applied her minimum rates to certain Canadian products. (b) France has a dual tariff system under w^hich both the general and minimum duties are fixed by law. Prior to 1909, the United States products, included under 25 different tariff numbers, were admitted into France at the minimum rates of duty. These numbers relate to animal and vegetable products. Under the Act of March 29, 1910, the President of France was authorized to admit at the minimum rates the above 25 articles, except mineral oils, and at intermediate rates 68 addi- tional numbers, of which 44 covered manufactured articles : the principal of which are; — paper, hides and skins prepared by vegetable tanning, boot and shoe uppers, trunks of wood and cardboard, articles of skin and leather, made-up furs, milling machinery, rolling mills, hoisting machinery, pulleys, bala ices, scales, material for roadway for steam and other railv;ays, presses, fine cutlery, iron and steel tubes, tools of copper, wood turners' wares, vehicles other than railways, carriages properly so called, vehicles for commerce, agriculture and cartage, cycles and parts thereof, belting, tubes, valves and other articles of india rubber or gutta percha, brush-makers' wares, and toys. These articles pay the general rates in force prior to April 1, 1910. 5. FRANCE GAVE GERMANY FAVORED NATION TREATMENT In the pre-U-boat period, Germany enjoyed in France the most favored nation treatment as a by-product of the Franco- Prussian War of 1871. The United States does not enjoy this treatment. For example, a result of this : — American paraffine required $3 more customs duty than the same article imported from Germany. A similar preference existed for the more important benzol imports into France. The same was true of any num- ber of other articles of American origin, particularly manufac- tures. France gave the United States only a very small part of the minimum tariff; however, the entire minimum tariff was granted under normal conditions to all other countries of com- mercial importance. 6. LACK OF A TREATY AND WAR SHIFTED THE U. S. TRADE STATUS in Russia. Upon the abrogation by the United States of its commercial treaty of 1832 and the tech- nical ending of the most favored nation treatment provided for therein, Russia continued to give to the United States all the tariff concessions, granted to any foreign country. The valuable concessions were the conventional rates of tariff pro- vided for by the commercial treaties between Russia and Ger- many and Austria-Hungary. War suspended these treaties and caused the withdrawal of the conventional rates and the application of the general rates plus a war surtax. The products in which France and Italy were principally in- terested in were still admitted under the conventional rates pro- vided for by the treaties with Russia ; these concessions covered specialties which were of little value to the United States. Germany did not give the United States the tariff conces- sions granted Sweden and Japan which prior to the war were extended to practically all other countries. The United States did not get favored nation treatment from Canada, Haiti and Salvador. In Canada, American products were subject to the general tariff while many commercial rivals of the United States got intermediate rates. All appreciate that our revenue policies have a great influence in the exchange of tariff conces- sions and that our officials are governed largely thereby ; how- ever, it may serve a useful purpose, to take note that if the United States, in negotiating commercial treaties, is to depend upon reference to most favored nation treatment and the tariff concessions embodied in treaties with other countries, typical American specialties may not secure proper concessions and in some cases, the general concessions that the United States gets from a given country may be minimized by a change in its commercial relations with a third country. Special separate commercial treaties adapted to the dis- tinctive U. S. articles may prove beneficial; however, expert knowledge, skill, and caution are essential to effect such a plan. 7. THE OLD GERMANY-AUSTRIA COMMERCIAL TREATY was to expire in 1917 but the war has produced a condition which indicates the formation of an economic union in lieu of the ordinary treaty relations. 8. THE BREST LITOVSK TREATY and the German treaties with the Ukraine and Finland exempt future German concessions to Austria-Hungary from the operation of the most 3 98029d favored nation treatment. Austria-Hungary made similar pro- visions in relation to Germany when peace was concluded with Russia. The Premier of Australia has stated that under the Brest- Litovsk treaty, Germany prohibits Russia from imposing duties or preventing the export of minerals and timber; however, Russia must allow Germany's goods to enter Russia under the most favored nation treatment. The events of the hour seem to lessen the importance of what the Central Powers think they have done with Russia and the Treaty of Peace may modify the contemplated relations between the Central Powers, es- pecially in relation to economic unions. 9. THE GERMAN - AUSTRIA-HUNGARY ECONOMIC UNION MOVEMENT naturally comes from the economic isolation of the Central Powers and the fear of economic dis- criminations from the Allies in accordance with the resolu- tions adapted at the Economic Conference of the Allied Gov- ernments at Paris on June 14-17, 1916. Among such resolu- tions, is the following: "The Allies declare themselves agreed to conserve for the Allied countries, before ALL others, their natural resources during the whole period of commercial, in- dustrial, agricultural and maritime reconstruction, and for this purpose they undertake to establish SPECIAL ARRANGEMENTS to facilitate the interchange of these resources." 11. THE UNITED STATES IS NOT A PARTY TO THE ECONOMIC CONFERENCE, although it has since June 14, 1916, joined the Allies in fighting with arms, the Central Pow- ers ; hence the United States now stands technically in the ''all other'-." class so far as the conservation and interchange after the war of economic resources is involved. What action, if any, the United States may take in regard to becoming identified with the policies outlined by the Paris conference of the Allies or in using economic boycotts and trade discriminations against the Central Powers or any other Nations is of great interest and consequence to all American international traders, especially manufacturers. 12. SOME TYPICAL AMERICAN VIEWS OF ALLI- ANCES AND BOYCOTTS are disclosed in the following public statements: — (a) On October 31, 1916, shortly after the Economic Con- ference of the then Allies, the American Manufacturers Ex- port Association, in annual convention assembled, unanimously adopted the following resolutions: "The export manufacturers of the United States seek in international trade, only such gains as this Country 4 is economically entitled to and have neither desire nor design to profit unfairly by conditions created by the European conflict. It is hoped that the armed conflict in Europe will not be followed by an economic war that will place arbitrary restrictions on international commerce and in- dustry and the export manufacturers believe that, in the formulation of commercial treaties, we should insist upon due regard for our rights and our opportunities, thus assuring to our commercial and financial interests full protection to our rights abroad. The economic basis of our foreign trade is our ability to produce goods to meet the requirements of international mar- kets at competitive prices and the mutual interests of the export manufacturers and the employees thereof demand efficient workmanship as well as adequate wages." (b) On October 10, 1917, after the United States had joined the Allies in the armed conflict against the Central Powers, the American Manufacturers Export Association unanimously adopted the following resolutions at the 1917 annual conven- tion, **The Association endorses especially that part of President Wilson's answer to the Pope which states, 'Punitive damages, the dismemberment of empires, the establishment of selfish and exclusive economic leagues, we deem inexpedient and in the end worse that futile, no proper basis for a Peace of any kind, least of all an enduring Peace'." The 1917 resolutions then repeated the 1916 resolutions which you have just listened to and then resolved further, "With the hope of securing ultimate tranquillity in international trade and freedom of individual action for all, the Association favors: 1. The establishment of a tribunal to decide international differences; 2, The United States taking the initiative in agreeing with other Nations to bring economic pressure on any Nation or Nations which resort to military measures without first submitting their differences to an international tribunal and to use concerted military force in the event that this economic pressure be not sufficient to compel Na- tions which have proceeded to war to desist from mili- tary operations and submit the questions at issue to an international tribunal." The 1917 resolutions were adopted after a referendum questionnaire had been considered by each of the some 700 odd members of the Association. The questionnaire speci- fically asked whether or not the members' present views dif- fered from the 1916 resolutions in respect to economic restric- tions and boycotts. No member expressed a change of views since the United States joined in the conflict at arms. (c) THE U. S. CHAMBER OF COMMERCE VOTED AN ECONOMIC WAR, under certain conditions, against Germany, on February 26, 1918, by the adoption, by a vote of 1,204 to 151, of its referendum, number twenty-three, resolu- tions which are to the general effect that the Chamber calls German business men's attention to the conditions, that the size of Germany's future armament depends on her after-war receipts of raw materials and profits from her foreign trade and to prevent an excessive armament, the American people will enter an economic combination against Germany unless Germany's Government becomes a responsible instrument con- trolled by the German people. The resolutions further urge German business men to study the situation and to cooperate to avert a disastrous eco- nomic war and to make certain a lasting Peace. The American Manufacturers Export Association, the Associated Manufacturers of Electric Supplies, the Associated Manufacturers and Merchants of New York State, the Silk Association of America, the Ohio Manufacturers Association, the Philadelphia Board of Trade, the Philadelphia Bourse, and the Philadelphia Maritime Exchange declined to vote on the referendum. The National Association of Manufacturers voted in the negative and took the position that an economic boycott would be an unwarranted interference in a matter of international relations. The Merchants Association of New York voted in the negative and took the position that the proposition is not the most appropriate of effective means of obtaining the coopera- tion of the business men of Germany in an endeavor to avert a disastrous economic war after the termination of the present hostilities. The Association indicated that its opinion was that the preambles were so drawn as to convey a suggestion of threat that failure to cooperate might result in a declaration by the United States of an economic war in order to cause changes in Government conditions in Germany. The affirmative vote came largely from the many local chambers which have little, if any substantial technical knowl- edge of international trade. The affirmative vote resulted apparently from a sentimental desire to try to hit the Kaiser and his kind in any and all ways anybody suggested. As indi- cated, the great American business and manufacturing asso- ciations, which are expert in foreign trade affairs, did not look with favor upon an economic war by the United States to limit the armament or cause changes in one Government in Germany. It would seem that the normal American manu- facturer and international trader regards the armament or dis-armament of Germany or any other country more of a political or military problem than an economic one. 13. GENERAL PERSHING AND ADMIRAL SIMS ARE HANDLING GERMANY, with their American armed forces and foreign brothers-in-arms, in such a military manner, that Germany's armament and Government will not vitally concern the World for a few generations, at least, after Peace; hence many hope that the subjects raised by referendum number 23 of the U. S. Chamber of Commerce can be set aside safely in order that all international economic and trade subjects may be treated solely upon their technical merits and regulated by normal commercial treaties, rather than by war treaties or eco- nomic alliances which might add to the puzzle of the political balance of power in Europe, the economic balance of power of the Globe, or the division thereof into trade zones to be dominated by this or that group of nations. 14. PRESIDENT WILSON OPPOSED ECONOMIC COMBINATIONS on September 27, 1918, in opening the Fourth Liberty Loan at New York; he stated in part, ''Fourth, and more specifically, there can be no spe- cial selfish economic combinations within the league and no employment of any form of boycott or exclu- sion except as the power of economic penalty by exclusion from the markets of the World may be vested in the league of nations itself as a means of discipline and control." These are precisely the principles favored in the 1916 and 1917 resolutions of the American Manufacturers Export Asso- ciation. President Wilson's third of the so-called fourteen Peace terms, is as follows, "The removal, as far as possible, of all economic bar- riers and the establishment of an equality of trade conditions, among all the Nations consenting to the Peace and associating themselves for its maintenance." Among others, the Central Powers have unconditionally accepted President Wilson's principles on economic combina- tions regarding international trading. 15. CUSTOMS TARIFFS ARE NOT CLASSED AS ECONOMIC BARRIERS unless their purpose is to discrimi- nate, as such, between Nations. It would seem possible to remove all economic alliances and combinations between Nations; however, it would prob- ably be impossible to remove, if anybody classifies them ?s barriers, customs tariffs formulated to meet the needs of rev-- enue, the protection of a standard of living or a national insti.nct 7 of self-preservation through the conservation and use at home of natural resources of a Nation. 16. WHAT FOREIGN COMPETITORS ARE DOING during hostilities, and apparently planning to do thereafter, interests the average American international trader more than the unsettled economic features of a Peace treaty or of a league of Nations. 17. BUSINESS MEN DETERMINE TREATIES in the last analysis in reference to commerce and trade. The ordinary business man creates international situations and conditions which form the basis of international inter- course and the foundation for treaties and tariffs regulating the same. Trade customs and practices often cast a die that cannot be altered ; hence it may be beneficial to briefly make a 18. REVIEW OF THE INTERNATIONAL TRADE SIT- UATION. (a) The American situation, during hostilities, and there- after, is outlined in the words of James A. Farrell to the For • eign Trade Council: — "The sacrifices that are being cheerfully endured today by men engaged in foreign commerce in the necessary curtailment of their business through the conservation of shipping are an earnest of the eleva- tion of method and of purpose which will control the conduct of our external trade in the future.'* (b) On September 16, 1918, before the Senate Finance Com- mittee, a manager of a Chamber of Commerce controlling one of the great American industries stated in effect: — that the export markets of the World so long controlled by Germany are now open to the United States industry and can be forever held if the demands can now be filled; that exports must be and properly are the salvation of that American industry ; that a foreign Government has requested its manufacturers to ex- port, if possible, sixty per cent, of their production ; that the American industry has today upon the wharves of New York City three hundred units which were purchased for shipment to a far distant South Pacific Ocean port; that the American industry cannot get the Commission of that foreign Govern- ment in the United States to let the units go forward to its colony; that the American industry is in a position to supply eighty-five per cent, of the demand in districts named; how- ever the manufacturers abroad, with the sanction of their Gov- ernment, have formed a corporation and Germany has done identically the same thing; that these corporations are for the express purpose of controlling the export business of the World in these articles after the war. (c) This incident perhaps reveals the international desires and designs of traders abroad. (d) It has been announced that Germany and Austria- Hungary have drafted a common customs tariff for the two countries; however, no substantial detailed information is public. A natural presumption is strong that an economic union is provided for 'and that any disparity in industrial development will be offset by a temporary tariff and the use of cartels to keep competition within certain districts. There are substantial indications of control by the Govern- ment during reconstruction of hides, leather, fats, oils, textile fibers and rubber. Apparently there will be Government domi- nation of the purchase, distribution, manufacturing, warehous- ing, sale, and consumption and prices, of textile raw materials, semi-manufactures and finished products, involving cotton, wool, silk, artificial textile fibers, flax, hemp, jute, paper and cellulose yards. German interests in Libau, Russia, are trying to make an agreement with Russia with regard to common railway tariffs to all Baltic ports in the hope that Libau's competitive possi- bilities will be further strengthened. A German committee of experts has been studying the Baltic provinces of Russia to develop their agricultural resources. (e) The FRENCH GOVERNMENT has long main- tainel a Government monopoly in tobacco and. matches. There are indications that there may be added to these monopolies, petroleum, sugar and spirits. In the past, commercial treaties have largely been to regu- late individuals in international intercourse; the introduction on a large scale of Government monopolies. Government con- trol, and Government participation in business, creates new conditions in negotiating commercial treaties arid trade, agree- ments. The reconstruction in France is a Government business. Before the war, the French lands invadtd by the enemy furnished France with production, as follows : iron ore 00% ; pig iron 83% ; steel 75% ; coal 70% ; combed wool 94% ; linen thread 90% ; sugar 65%. A greater part of the buildings and machinery therefor in these industries will probably have to be repaired or replaced ; also innumerable chemical and fer- tilizer works, textile plants, flour mills, printing plants, pot- tery works, glass works, and ice-making plants. The replacement cost is estimated at at least three ^times the original cost which exceeds one billion dollars. The Government has announced that the war damage to these factories is a charge on the National as a whole. The Central Bureau for Industrial Purchases for the Invaded Regions has been established. The Government has voted already fifty million dollars to be used by the Bureau, which is authorized to buy, store, and distribute materials and ma- chinery among the damaged factories. Much machinery must be made to order. There will be needed immense amounts of construction materials such as iron, steel, bricks, lumber, cement, copper, and zinc. Stocks of iron ore, pig iron, cotton, linen, and wool, will be accumulated as soon as possible. The Bureau will pay freight, insurance, and handling. Nothing is being bought yet. There is a desire to have group selling by American manu- facturers because it is difficult to deal with innumerable Amer- ican factories in each line. Pending the reconstruction of the French factories, the people must import to a substantial degree the articles which the factories will ultimately produce for domestic and foreign consumption. The subject and items are of interest to the American manu- facturer because of the trade opportunities and because France may find it expedient to make tariflf modifications for at least a period after the war. (f) According to a statement by the President of the Board of Trade, the British Government may decide to pro- hibit, except under license, the importation of all foreign dyes for ten years. The Government has contracted with the Australian Gov- ernment for the control of the whole output of zinc concen- trates for ten years after the war. A Board of Trade Committee has decided that a general embargo on exports to enemy countries after the war or a continuation of the present system of rationing neutrals is iniTjracticable and inexpedient but that a policy of joint control by the British Empire and the Allies during the transition period of certain products might be adopted to carry out the resolutions of the Paris Economic Conference. The products mentioned are cotton, cotton yarns, wool, tops, and yarn, jute, coal, oil, seeds and nuts, hides and tanning materials, flax, hemp, and timber. (i) There has been introduced in Parliament a bill to continue, with modifications, for three years after the war, certain powers in relation to imports and exports. The pow- ers are the usual war powers of prohibiting the importation or exportation of goods of any class, description or origin, or produced, or manufactured in whole or in part, in any coun- try specified in an order by the Board of Trade which can make exceptions and grant licenses. Any proclamation or order made during the present war prohibiting or restricting the importation or exportation of goods shall continue in force until three years after the war; subject to licenses granted or revoked. 10 I ' War embargoes usually end with a treaty of peace; how- ever, this bill, if enacted, will project the war restrictions, three years beyond the termination of armed hostilities, to such persons, countries and goods as the Board of Trade in its wisdom may determine. (j) The President of the British Board of Trade in April, 1918, announced that at the close of war practically the whole of the trade and industrial activity of the country would in some form be controlled directly or indirectly; the control to be abandoned when the national position would permit. He did not see how it was possible in the national interests that the railways and canals should revert to their pre-war s.tate. The London Chamber of Commerce has criticised the Government for its methods in controlling the import trade during the war and for its failure to cooperate with the busi- ness interests. Its official pubHcation has warned the pubhc against the danger of, ''perpetuating after the war the methods of expediency which may have been justified during the war." The London Economist and the Manchester Guardian have argued against the resolutions of the Paris Economic Conference. (k) Lord Balfour's Committee has pointed out that the United States has entered the war since the Paris conference in June, 1916, thereby causing very important changes in inter- national relations. Lord Balfour's Committee's report states, "It is ''^ * * * * a question how far a temporary community of political interests — and even the long duration of such a community of political interests as we may hope for in some cases — can in itself afford a secure basis for a permanent com- mercial policy." (1) In September, 1918, the American Commercial Attache at London reported in effect that the Chancellor of the Exchequer has announced to Parliament, that arrange- ments being made with the Dominion representatives for the control of essential raw materials are to be the basis of begin- ning negotiations with other countries. The Attache remarked that it is expected that representa- tions will be made to the United States and other Allied Countries for common action. Lord Robert Cecil, Undersecretary of State for Foreign Affairs and Minister of Blockade recently upheld the right of each friendly power to protect its own economic interests by protective tariffs and other safeguards. (m) The possibility of Great Britain adopting a protec- tive tariff policy is foreshadowed in a recent statement by the American Chamber of Commerce in London. The attitude of Lord Cecil may be of more importance than was attached to it at the time in England or abroad. • II (n) Recently an American newspaper correspondent re- ported from Paris as follows : "the facts of the past few days make it necessary to come back on the economic policy which the present Allies are bound to follow after the war. Some weeks ago, Mr. Rutherford in the House of Parliament gath- ered up all these facts into a natural conclusion — 'DIF- FERENTIAL TARIFFS AND PREFERENTIAL TREATMENT.' Lloyd George, in the name of the British Government, has now adopted, this conclusion within the British Empire, that is, for England and all British Dominions. This translated into American terms means that the United States will have to MAKE SEPARATE COMMERCIAL AGREEMENTS AND TREATIES with EVERY foreign country and dominion." If this American correspondent's conclusions are correct, it would seem that our Government officials and the Senate are to have a rather large task on their hands and that it is to the interest of American manufacturers to keep a weather eye to windward. (c) The American Government has stated in a current public document that, (o) "The State Department has long been engaged in drafting commercial treaties — work to which the com- paratively new United States Tariff Commission is sub- stantially contributing in its recognized field of survey- ing various American industries with a view of ascer- taining their tariff needs. All told, there has been a very considerable amount of quiet and effective work done toward the future." (p) No particulars have been made public; however, President Wilson has announced these general principles : — "Each member of the Association of Nations may have to protect its citizens in one way or another after the war, but our aim must be a comprehensive arrange- ment of hberal intercourse with all members of the As- sociation by which each one of us, while preserving his own natural security, may contribute to meet the needs and aid in the development of his fellow members. Nor of course, can our arrangement for mutual assistance exclude all competition, though we are most anxious that cooperation should be the keynote of our commer- cial relations." 19. If, as some of the American correspondents abroad be- lieve, we are to face protection in England, denunciation of commercial treaties, bargaining tariffs and the general elimi- 4 I nation of the most favored nation treatment among Nations, it may prove beneficial. TO TAKE AN INVENTORY OF UNITED STATES RE- SOURCES, financial, raw materials, and manufactures, with the hope that our vision may be clearer and our cooperation greater when the foreigner presents his trading points in nego- tiations for special tariff conventions or new commercial treaties. (a) The United States' estintated wealth exceeds the com- bined wealth of Great Britain, France, Russia, Italy and Japan — our Allies in the armed conflict with the Central Pow- ers ; the national wealth of which is about forty-two per cent, of the wealth of the United States. (b) At the start of the Fourth Liberty Loan, the national debt of the United States was about five per cent, of its na- tional wealth, while the Central Powers averaged ten times that of the United States. Japan's percentage was about 4.6 per cent. The average percentage of our other Allies was eight times that of the United States. (c) Since the war started in Europe, the United States perfected its Federal Reserve system under which there has been gathered a mass of gold as colossal and impregnable as Gibraltar, and upon which there has been based a flexible cur- rency system of an imperishable type. Nothing in the world is more secure than the bonds of the United States Government. (d) The National City Bank of New York, the Guaranty Trust Co. of New York, and other combinations of no less progressive and energetic banks have pioneered abroad with branch baiiks which were made possible by the Federal Reserve Act, and amendments thereto. England is consoHdating her great banks in order to meet the post-bellum trade needs ; it is fair to presume that the United States bankers will do what- ever is essential in the way of consolidation and coordination. (e) Before peace comes, the indications are that the United States will have loaned its AlHes at least eight bilhon dollars at rates which will produce an annual interest of be- tween say three and four hundred million dollars. The United States has reduced its pre-war obligations to Europe to a neg- Hgible sum and has created a Merchant Marine second to none with the result that the United States can cart its own products to foreign markets without paying freight to Europe ; the net result is that the principal and interest on the war loans must be paid by Europe in the form of securities, or gold, or goods, or the same must be reinvested abroad in the reconstruction work or other foreign enterprises and securities. (f) If paid in gold, the inflation of our currency might bring undesirable conditions and the drain on Europe might 13 render foreign systems so unstable that the reflex action would be harmful to many interests in the United States. (g) If paid in goods, American labor will not get the wages resulting from the production and fabrication of such a class of goods. (h) If paid in raw materials from the colonies of Euro- pean countries which have few, if any, materials for export themselves, the American producer of like competitive ma- terials will not make the gains therefrom and American labor will not be employed thereon. (i) Being now the great creditor Nation of the world, the natural tendency will be to emulate England's example of the past in the form of investing abroad and developing great for- eign enterprises which will, presumably to a substantial de- gree, use American manufactures and men, to manage the same. (j) Fair commercial treaties will be essential to protect the investments of the Unitecf States abroad and safeguard our interests in the raw materials' markets of the world, especially if there is to follow the war, economic alliances based upon preferential distribution of such classes of materials. (k) Excepting Canada's nickel, India's jute, France's an- timony, Germany's potash salts and to some extent the rubber and wool of some British colonies, the United States so far as the European Powers are concerned, is practically a self-sus- taining economic unit. Offsetting the exclusive use of nickel, jute, antimony and potash salts, the United States largely dominates the industry of Europe and the world in cotton, copper and petroleum. Cot- ton is still king in the economic world and will reign until there is a fundamental change in the soil, climate and population of the globe. (1) Without the foodstuffs and raw materials of Russia and the Americas, Europe might, in a comparative sense, fam- ish and fade away industrially ; hence it is not likely that any serious discriminations or economic alliances' measures will militate seriously against the substantial interests of the United States. Europe has little, if anything, herself, with which to drive tariff bargains with the United States, as will appear from a consideration of the following domestic production of impor- tant food-stuffs and industrial raw materials of the countries now at war. (m) The United States stands first in the production of corn, coal, pig iron, iron ore, copper, lead, zinc, silver, alumi- num, phosphate rock, tobacco and mineral oils, and second in wheat, oats and gold. (n) Russia stands first in wheat, rye, barley, oats, flax fiber, hemp, wool, and manganese, and second in mineral oils and tobacco. 14 (o) Germany and Austria-Hungary combined stands first in sugar, potatoes and potash salts, and second -in barley, rye, coal, pig iron, iron ore, lead, zinc and flax fiber. Germany pur- chased in ore state a number of non-ferrous metals and refined them. (p) The United Kingdom stands first in tin and nickel from her colonies, while France stands first in antimony and second in phosphate rock and aluminum. (q) The exports of the United States, based upon pre- war conditions, were about as follows : — (r) Cotton and petroleum normally furnished more than a third ; provisions and bread-stuffs one-eighth ; copper together with tobacco, one-twelfth; unfinished manufactures (raw ma- terials exclusive of those mentioned) approached one-fifth. (s) Foreign countries must buy from the United States the foregoing products and consequently about three- fourths of the United States exports sold themselves and tended to control their own terms of sale and delivery. (t) The United States exports in normal times of finished manufactures approximated one- fourth of the total exports ; this is a very small percentage in comparison with England and with Germany, whose principal exports just before the war were manufactures and not raw materials and staples which enabled the United States to be the world's second export nation. (u) Little England was the first export nation before the war. (v) A substantial but diminishing part of the United States manufactures exported were patented articles which like staples tended to control their own terms of sale and delivery. (w) Based upon pre-war figures, and conditions, the per capita exports of the United States as a whole were at least a quarter less than those of Germany and of England, each of which was increasing total exports at a rate which was much greater than that of the United States. (x) The bulk of the English and German exports being man- ufactures, the comparative increase of the United States fin- ished manufactures was insignificant.- It was about 18 per cent. (z) The United States is about thirty times larger in area than England and seventeen times larger than Germany, whose population before the war was about a third less than that of the United States, whose population was about twice that of England. 20. LITTLE LAND AND MANY PEOPLE forced England to colonize and exploit many parts of the globe and Germany to send many to Africa, South America and the Far East. J5 The comparatively little European countries demanded big armies to keep ^ut next-door neighbors and the net result was that immense sums had to be raised annually for the army and navy. The farming and mineral lands in European countries, ex- cepting Russia, could not fill the war chests, but the factories, with foreign fields to exploit, could and did largely and at the same time kept the dense population profitably employed. All Europe was at its wits' ends to preserve the balance of power and at the same time make both ends meet ; for those purposes it was a matter of life and death to have foreign mar- kets in which the immense over-production of the factories could be disposed of; the result was that the United States had no easy task when trying to increase exports of finished manufactures in markets that Europe appropriated for her needs, which were real and not fancied. More than a half of the English population was engaged in factories and about a quarter of the United States population worked in factories. England's exports of prime importance were cotton goods, iron and steel, coal, woolen goods, machinery, chemicals and miscellaneous textiles. 21. THE COST OF LIVING IN THE UNITED STATES was about a fifth higher than in Germany and forty per cent, higher than in England. Nominal wages in the United States were about double those in England. The average wages were at least a fifth lower in Germany than in England. I base my remarks upon personal experi- ence of more than a decade in Europe and the United States, where I was engaged in manufacturing enterprises. The American workman got more and better food. The American workman had a better home and more time for recreation and in the last analysis probably saved more than his foreign com- petitor got. The people of the world constantly strive for less working hours and greater wages per hour. Combination, consolidation and coordination in industry is a world-wide movement. Economic self-sufiBciency and na- tional control of industry are attracting many minds in Eu- rope. The extension of Government participation into trade and industry are subjects- of the hour abroad. The United States' population is yearly increasing and de- manding more domestic food-stufifs and more work in the American factories; an economic result is that the United States must send less food-stuffs abroad and will want to ex- port more finished manufactures. South America and Russia may do much for England in supplying food-stuffs and raw materials ; however, the natural tendency may be that the cost of Hving will increase faster in England than in the United States, which can greatly increase food-stuffs and materials for domestic use. An economic tendency may be that England will i6 'have to make greater efforts to compete in foreign markets with manufactures in order to secure funds or means to ob- tain the ever-increasing-in-cost food-stuffs which are not grown at home. Competition in many cases may mean cheaper prices and a resultant lowering in wages and the standard of living in order to overcome the handicaps in food-stuffs and the costly importation of raw materials for manufacturing. England's needs of raw materials are imperative and the suggested plans of closer economic relations with the colonies are the outgrowth of necessity which is a law unto itself. What will be the effect upon American wages of men work- ing on manufactures that enter competitive international mar- kets is a subject of grave concern. What will be the ultimate standards of living and comfort for the American artisans, is a question for all to answer. 22. TREATIES MAY REFLECT THE ECONOMIC WANTS OF NATIONS because in one form or another com- parative wages, standards of living and comfort and degrees of health and the preservation thereof, may find expression either in commercial treaties, customs tariffs, or possibly the Treaty of Peace. (a) Prince Max of Germany has stated, already, "At the peace negotiations the German Government will use its efforts to the end that the treaties shall contain provisions concerning the protection and in- surance of laborers ; which provisions shall obligate the treaty-making states to institute in their respective lands within a prescribed time a minimum of similar or at least equally efficient institutions for the security of life and health as for the care of laborers in the case of illness, accident and invalidism." (b) Excepting on Federal work, such questions are within the rights of States in America ; however, such institutions cost money and if the cost is paid by the manufacturer, the same must enter into the cost of production and hence have an ultimate effect in the competitive prices of manufactures in the international markets. Germany has gone far in this line and the cost is great. The American manufacturer has done much in the way of fixing up the safety devices in the factory and insurance sys- tems ; however, when it comes to maintaining great hospitals and recuperation places in the mountains, etc., Germany has been far in the lead. American Labor has seemed to prefer high wages, and to take care of the health as an individual matter. (c) JAPAN'S OBJECTIONS TO BRITISH DOMINA- TION OF RESOURCES may become a factor in the Treaty of Peace and other commercial adjustments and agreements. 17 In September, 1918, a member of the Japanese Parliament stated, "In England, the League of Nations is finding strong support. A League cannot be realized when Britain, which possesses so much of the earth, adopts an exclu- sive policy in her own territory. Should all the natural resources in British possessions be monopolized per- manently by their own nations, it would seem inevitable that the non-British nations would pursue a militaristic aggressive policy against her. America is fighting to safeguard the independence and rights of the small na- tions, it claims. This must mean that the small nations are to be given the right of developing their own des- tiny without molestation or interference. It is not cal- culated to guarantee the independence and rights of small nations, for strong powers to monopolize the bene- fit accruing from their vast resources." Mr. Sudsuki, President of a Japanese friendly society and quite well known to many American labor leaders, recently stated, "It is not difficult to predict that once the war is brought to an end, advanced industrial countries like Great Britain and the United States will show the keen- est activity in trying to extend their commercial inter- ests in China, the South Seas, and India, which countries at present time, are the best markets for Japanese goods. In such an event Japanese interests, which are defective in many respects, will soon be depressed and a panic will set in, bringing in its train many disputes arising from the over-supply of labor and unemployment. It is there- fore most important that the Government and the people should give this question earnest attention and devise plans for meeting the post-bellum situation." The member of the Japanese Parliament stated, "The policy of confining a large number of people within their own territory of limited dimensions, such as Japan, does not tend to assist the civilization of the world nor is such a policy calculated to bring about the peace of the w^orld. Japan also must insist that Hawaii be made a neutral zone. The independence of the Phil- ippines and the neutrality of Hawaii are not questions which are important for their own sake but Japan must contrive for their realization as a means to give effect to America's principle of safeguarding the independence and rights of small nations and also as the first step in the direction of enforcing the open door principle in regard to immigration. Japan's efforts to carry this great principle at the peace conference may pave the way for the establishment of a great international ideal." THE UNITED STATES DOES NOT EXTEND TO ::EIGN countries, entitled to the most favored na- i treatment, Philippine or Cuban concessions. Apparently certain interests in Japan want an open door to Hawaii and the Philippines for their goods and people. The United States abrogated the Russian commercial treaty of 1832 because Russia would not let the Russian-Ameri- can Hebrews re-enter and other Hebrews enter Russia under an American passport. If questions of race or religion are to become factors in the peace treaty or commercial treaty re- adjustments, the problems offer many difficulties for solution. The Russian-American commercial treaty was abrogated seven years ago and no solution of the difficulties which caused its abrogation have been announced. A Hebrew is in supreme power in Russia, however, at present, his efforts seem confined, principally, in trying to drive out all classes of American citi- zens who compose our army which is trying to bring order out of chaos in Russia, which, potentially, offers incalculable trade opportunities for American manufacturers, especially of ma- chinery and leather products; provided, a proper commercial treaty can be worked out to wipe out any animosities created in Russia by the abrogation of the 1833 treaty by the United States. 24. UNEASY IS THE HEAD THAT WEARS A CROWN in Europe today; uneasier will be the heads of the Govern- ment representatives who sit down to a peace table to write a treaty. Seated, there will be personified, the hatreds, passions, prejudices, racial and religious differences, sacrifices, maimed bodies, spirits of the noble dead, economic wants, desires and hopes, and the ambitions of warriors, statesmen, diplomats, merchants, manufacturers and artisans. Harmony must even- tually prevail, but how it will come about and in what definite form is a matter of conjecture today. President Wilson has announced the great general principles of peace and life there- after among nations ; how these principles will work out in a practical form is the subject of deliberation. (b) Presumably the immediate questions to be decided will be more military and political than economic. (c) How far the Peace Treaty will enter into economic fields concerns manufacturers greatly. How far the League of Nations will participate in economic affairs is attracting the minds of manufacturers and others. (d) How far the Peace Treaty and the League of Nations' provisions will effect existing treaties and trade agreements is difficult to surmise; however, it is important to carry in mind certain facts concerning the present status of treaties. 19 (e) COMPULSORY ARBITRATION TREATIES were concluded in 1914 and 1915, by the United States with France, Great Britain, Spain, Russia, Italy, Norway, Sweden, Denmark, Portugal, Peru, Paraguay, Uruguay, Equador, Bolivia, Guatemala, Costa Rica, Honduras, Haiti and China. Such treaties were not made with Germany, Austria-Hungary or Turkey. (f) So far as these nations enter into the League of Na- tions, it is presumable that the League of Nations' provisions will render the compulsory arbitration treaties of the United States unnecessary and naturally they will stand as dead letters ; however, as to the nations that do not become a party to the treaty creating the League of Nations, such treaties will be available. It is natural to suppose, however, that the stability created by the League of Nations will eliminate the need of invoking the compulsory arbitration treaties between the United States and nations which may not be a party to the League. (g) So far there has been no indication that the organi- zation of a League of Nations will do away with the necessity of separate commercial treaties between nations or commercial policies adapted to the economic needs of each country. 25. THE AMERICAN ATTITUDE ON TREATY RE- ADJUSTMENTS, possibly, can be surmised, by foreigners, who grasp the American way of looking at the history of Eu- rope under autocratic kings; and the facts that the United States can meet with clean hands and a clear conscience any na- tion that thinks it wants to abrogate, amend, renew, or nego- tiate new treaties of all characters, as incidents of the war, peace, and. reconstruction; and that the United States will come out of the war just as it went in, for one principal pur- pose; namely, to protect, perpetuate, and make progress for, the democratic principles upon which the Republic is founded and rests secure. Materials, money and men, it has lost, not gained. No such gains were expected, wanted, or needed. Just as the United States sympathized with the nations that are fighting against the "rule and ruin autocracy" in Germany, the United States sympathizes with these nations in their loss of materials, money, and men, and fully appreciates their needs of ma- terials and money to reconstruct their damaged facilities, in order that those who have survived may pursue happiness and have an honorable livelihood. The United States naturally wants in Europe strong nations with governments absolutely controlled by the citizens thereof, so that they can defend the faith of those who believe in democratic rule rather than auto- cratic. Many of the people of our RepubHc firmly believe that the doctrine of the divine rights of kings is fast sinking into ob- 20 the greater part of Europe will have gov- unconditionally by the people and peace everlasting, b<;cause it is not Hkely that countries which are run by the citizens thereof will war with each other over the pri- vate squabbles of the citizens thereof, or what a private citi- zen of one may do to the head officials of another. The President of our Republic was shot by Czolgosz. President Roosevelt did not cause the United States to de- clare war on the Poles in Europe. Twelve just men condemned to death the one guilty, and millions of innocents did not suffer the tortures of hell to atone for the crime of one fanatic. A stupid peasant shot a super-prince and tnereafter two kings, apparently believing that mere men were challenging the divine right of a "near-king," ordered war against all the guilty ^jeasant's innocent countrymen and thereby caused hell to reign on earth for many millions of innocent men, women, and chil- dren in many countries. Such are the methods of a republic and autocracies ; it has been ever so in Europe because history reveals that; (a) The war of WilHam the Conqueror against France was precipitated by the King of France who made personal reference to the obesity of the enormously strout and there- fore exceedingly sensitive William who was so stung to the quick that he swore his favorite oath, "By the splendor of God, I will light one hundred thousand candles when I go to my churching mass," and proceeded to personally lead his army against France. He died shortly after from a wound inflicted by the pom- mel of his saddle. (b) The Hundred Years' War resulted largely from the kings of England and France taking up the petty quarrels of their rival fishermen. (c) The Thirty Year's War was caused by the attempt of the King of Bohemia to avenge the pitching from a window into a moat, of two of his favorites who had engaged in a religious squabble, which by the King's actions, was turned into a pub- lic war that was one of the bloodiest in history. (d) The length of the Seven Years' War resulted largely because Mme. de Pompadour, a favorite of Louis XV. of France, hated Frederick-the-Great of Prussia who resented this favorite's flattering messages, and thereby caused her animosity which led her to influence Louis XV. to join Austria against Prussia. (e) The Franco-Prussian War of 1870 was precipitated by a trivial action of King William of Prussia, who met the French Amabssador on the promenade of a watering place. The Ambassador brought up a dead diplomatic subject, the King referred the Ambassador to his Chancellor, turned on his 21 heel and walked away without attaching then to the incident; however, the version was gis'^^y- 'U. '.- ^-e effect that the King had insulted the Ambassador ot France. France was aflame and cried, *'On to Berlin." Napoleon III declared war and the Germans came on to Paris. (f) The Russian- Japanese War was influenced somewhat by the general attitude of Nicholas toward everything Jap- anese. When Nicholas was Czarowitz he visited Japan where, in a sacred temple, a religious fanatic assailed him with a club and dagger. Prince George of Greece knocked the fanatic down and saved the future Czar of all the Russias, who, when he ascended the throne, joined with France and Ger- many to depRve Japan of the fruits of victory over China, and later hstened to those counselors who argued in behalf of a war between Russia and Japan. The American attitude, expressed in the resolutions of the Chamber of Commerce of the United States, in reference to a popular form of government for Germany, must be discounted by anybody who seeks to alter the commercial relations of the United States with any country which is dominated by an auto- cratic king. It is essential that treaty makers grasp why the free people of America prefer the will of a free government to the whim of any autocratic king and understand the predisposition of a democracy in making treaties with government, of, by, and for the people. 26. SPECIFICALLY WHAT THE UNITED STATES WILL DO RE TREATIES incident to war, peace, reconstruc- tion, and thereafter, is a subject of the future; however, a study of the facts, figures, and opinions, you have heard, may naturally lead one to beHeve that the substantial indications are to the general effect that the United States : — (a) Will come out of the war one of the richest and most powerful nations in history. (b) Has no desire or design to use that power or wealth for any purposes other than beneficial to the gen- eral welfare of mankind. (c) Will gain solely what it entered the war for: — the protection, perpetuation, and progress of the demo- cratic principles upon which the Republic is founded. (d) Will not discriminate economically or other- wise between nations that respect and observe the prin- ciples, that the humblest citizens thereof possess the inahenable rights of fife, liberty, and the pursuit of hap- piness and from such citizens a government derives its just powers. (e) Will not enter into any treaty, alliance or con- federation to give preference by regulations of com- 22 je in order to practice discriminations, as ^..,.^.... lations. (f ) Will not propose changes in commercial rela- tions or treaties until the same have been considered scientifically by experts familiar with the economic needs of the country, the diplomatic relations between the countries involved, and the character of legislation needed to meet the terms proposed. (g) Will, in making any commercial readjustments, seek to secure concessions especially adapted to the United States products rather than to depend upon con- cessions embodied in treaties with other countries which may change their treaty relations without regard to, or for, the economic needs of the United States and to accomplish the foregoing, will want distinctive sched- ules and highly specialized classifications in order to prevent any discriminations against typical American specialties and to eliminate the innumerable assimila- tions to other articles in which the United States has little, if any, interest in common. (h) Will not favor the continuation after the war of any war restrictions on exports and imports ; except, possibly, for a short time, in case such restrictions are imperative to adjust abnormal exchange situations,, transport troops home, and to equitably ration essential materials in the event the supply thereof cannot keep up with the demand therefor. (i) Will liberally and adequately cooperate with the nations seeking to reconstruct their war-damaged in- dustries for the purpose of giving remunerative em- ployment to the artisans thereof. (j) Will not lend itself to measures designed to en- able foreign employers to pile up unreasonable profits from industry or commerce. (k) Will so use its resources as to try to preserve the standard of living of the American workmen. (1) Will not become a party to any treaty or trade arrangement incompatible with the foregoing principles or with the political, economic and other principles an- nounced as essentials of peace by the President of the United States of America. Washington, D. C, October 21, 1918. 23 RETURN TO the circulation desl< of any rj University of California Library or to the NORTHERN REGIONAL LIBRARY FACILITY BIdg. 400, Richmond Field Station ~ University of California P, Richmond, CA 94804-4698 B( - ALL BOOKS MAY BE RECALLED AFTER 7 DAYS _ • 2-month loans may be renewed by calling (510)642-6753 fi • 1-year loans may be recharged by bringing books to NRLF ~ • Renewals and recharges may be made 4 days prior to due date DUE AS STAMPED BELOW FC 5C" SEP 3 ?nn:^ U DD20 15M 4-02 THE UNIVERSITY OF CALIFORNIA LIBRARY 5^': .v-':C.: m A'