NEW FRONT IN THE COLD WAR

(3 of 5)

SINCE 1939, world trade has been out of joint. Buffeted by war and cold war, it limps along a narrow defile between the face of the Iron Curtain and the perils of the "dollar gap." This year there has been marked improvement. Europe is back on its feet (TIME, Nov. 29), and eleven of its trading nations, accounting for three-quarters of its imports from North America, are quietly dismantling their restrictions on free trade. In some cases (e.g., Benelux) controls have been removed on almost 90% of all dollar imports. The vast sterling area, which accounts for 40% of all world trade, is slowly and cautiously approaching the day when the pound (and with it, most other currencies) will be declared freely convertible into dollars.

What happens next rests squarely with the U.S. "As the strongest economic power," said the influential Committee for Economic Development last month, "the direction which our tariff policy takes will . . . determine whether the free world moves ahead to widening markets and expanding production."

Cheese & Scarves. Many U.S. tariff policies are still geared to the outdated habits of a nation trying to get onto its economic feet. Others are contradictory, and even self-defeating. Examples: CJ U.S. Marshall Plan experts helped the Danes expand their blue-cheese industry, so that Denmark could earn the dollars it needed to buy U.S. goods. But when the Danes started selling their cheese, the U.S. imposed a quota to keep all but a sliver of foreign blue cheese out. CJ The U.S. lays great stress on the 1921 Anti-Dumping Act, which protects domestic markets from the unfair competition of foreign products sold below cost. Yet under the burden of its surpluses,* the U.S. is peddling abroad $1.4 billion worth of food, some of it in 6,000,000 Christmas parcels to be distributed free by U.S. troops, much more at cut-rate prices that undermine its allies markets.

Complaints about these, and countless other anomalies, pour into Washington each week. Last month GATT (General Agreement on Tariffs and Trade) censured the U.S. for restricting dairy imports by quota. The London Economist wrote: "The U.S. is seeking two worlds—one where it can sell its sur pluses freely, and another where no other country can sell farm products freely to it." Said an angry Japanese businessman: "The Americans tell us not to trade with the Communists, then they turn around and raise their duties on silk scarves. It doesn't make sense."

Foreign businessmen consider these the biggest U.S. obstacles to expanding world trade:

¶ The U.S. Tariff Wall. Yearly, the U.S. imports about $11 billion worth of goods: of these, half enter duty-free, and two-fifths pay duties of less than 30%. Yet cheap sun glasses pay 335.7% ad valorem, pocket knives with folding blades 89.5%, concentrated lemon juice 85%.

¶ The Buy American Act, which prohibits the U.S. Government from buying foreign products unless the equivalent U.S. product costs at least 25% higher. Cost to the U.S. taxpayer in unnecessary federal expenditures: $100 million per year. Already, in individual cases, the Eisenhower Administration is seeking ways to get around this depression measure.