Europe

ON THE WORLD TODAY

THE Continent is heading into a long-expected “dollar crisis.” The delegates who assembled at Geneva in April to construct the International Trade Organization found their project stuck in the doldrums, thanks to a threat of high tariffs from Washington, which shows signs of reverting to the ostrich policy of the nineteen-twenties.

Under Secretary of State Will Clayton, leader of the American delegation, had to scurry home in May to do battle for his country’s trade policy. The whole gigantic international effort mustered behind the project, from Bretton Woods to last winter’s London Conference, is under fire from powerful special interests eager for new tariff protection, and from all the avowed foes of reciprocal trade pacts.

The jeopardy facing the International Trade Organization is serious for all European nations. It highlights the possibility that adequate corrective measures may not be taken to prevent open and furious trade war between the United States and the rest of the world. Such a struggle, induced by economic unwisdom and the pressures of economic distress following World War I, led to disaster. Now Europe is wondering if the hopes for liberation of world trade, which were built up on t he thesis of the International Trade Organization, are to be dashed by the country which originated the idea.

A second European perplexity stems from Secret a ry of State Marshall’s reluctant admission that the Greek-Turkish aid program marks the limits of American intentions with respectto large foreign loans and grants-in-aid for reconstruction purposes, at least during the present session of the Congress. These developments are being interpreted in Europe — rightly or wrongly — as new evidence of ebbing enthusiasm in the Uited States for an adequate foreign-assistance program.

Last winter, when the United States retreated from its original agreement to adhere to the International Relief Organization, and instituted unilateral action, there were forebodings in Europe. The growing coolness of Congress toward the Administration’s substitute program, and the stormy course of the $350,000,000 foreign-relief appropriation, make Europeans question whether the United States has a policy which can weather the next critical year.

Neither in England nor on the Continent is there much optimism that the urgent pleas of Henry Wallace for a broad policy of planned expenditures for rehabilitation will be heeded, or that Harold Stassen’s more conservative proposals along the same line will win substantial support, or that there will be action to implement Dean Acheson’s blunt warnings that assistance on a huge annual scale is essential to American domestic stability and to world recovery.

The race for reconstruction

This situation develops at an unusually awkward moment for the economy of Europe. There is little doubt that hunger can be withstood until the harvests begin to come in next month. The deeper question concerns reconstruction plans. Unless these can be speeded up, the forces generating social and political explosion may prove unmanageable next winter. Dwindling dollar reserves and due dates on shortterm credits are worrying almost every capital on the Continent.

The Norwegians, who foresaw these difficulties, have negotiated the first private bank loan arranged by any European country since the start of the recent war — $10,000,000 from a New York bankers’ group headed by Kuhn, Loeb and Harriman, Ripley. The Dutch have been close behind the Norwegians. But these loans are relatively small. Even France, which obtained a $250,000,000 credit through the International Bank in May, finds her ambitious Monnet Plan, drifting toward the reels.

Until Secretary Marshall indicated the growing coldness on Capitol Hill, Paris had hoped to obtain four times that amount — all of which France sorely needs for new development of her agriculture and industries. Europe is more sharply aware than is Washington of the tremendous pressure of present economic and social facts. Europeans simply do not believe that the efficient way for us to combat political extremism is to export arms and talk tough.

Borrowed money and rising prices

The financial difficulties produced by the “dollar crisis” are reflected in other ways. Rising American prices have diminished the value of loans which commit the borrower to purchase in the American market. Europe’s economic hazards are dramatized further by difficulties in getting payments really flowing in the form of exports to the United States. Here is a phenomenon that reminds Europeans unpleasantly of the nineteen-twenties.

American policy in Greece and the Middle East, and certain hints dropped by Washington about pooling resources for joint development, have raised alarm. In every capital in Europe lively fears are expressed that political conditions attached to future American credits may “impair sovereignty.” That is a polite way of saying that American interests, driven by immense surplus productive capacity, have an eye on economic preserves hitherto viewed as exclusively national. Turkey’s wariness about conditions attached to her $100,000,000 military loan received significant applause in the European press, though scant attention in the United States.

Despite the continuing crisis at home and political enigmas throughout her empire, France has taken the precaution to enact a law which forbids any foreign enterprise to operate in her territories unless more than half the ownership is French. To supplement this safeguard, the French are pressing energetically the export of industry to Morocco and other colonies. During March, 124 new French companies, capitalized at nearly 300,000,000 francs, opened operations in Morocco. Previously, fewer than 50 old French companies were in business there.

Anglo-Russian trade pact

A direct consequence of the European “dollar crisis” is visible in the tremendous power drive for trade pacts throughout the entire European area during the past three months. By this means, in the view of many economists in England and on the Continent, the dollar problem can be to some extent bypassed. The motivating idea behind this drive is to trade, wherever possible, directly in raw materials, goods, and services, under arrangements devised to bring about a more or less balanced exchange.

It is not surprising that Great Britain, Europe’s most experienced large-scale trader, is taking the lead in this movement. The British are trying to reopen commerce with the Soviet Union for the first time since 1938. Britain’s trade mission to Moscow, headed by Harold Wilson, has succeeded in ironing out difficulties which during the past two years have prevented trade between the two nations.

Having broken the technical impasse between private British firms and the Soviet Foreign Trading Corporation, Mr. Wilson returned to London with the outline of a broad agreement. It covers both immediate and long-term commercial programs, though there is still much technical work to be done on details.

The Anglo-Russian treaty will provide for large purchases of lumber and timber equipment by the So\ iet Union and, eventually, heavy compensatory shipments of lumber to Britain. Russian cotton — the acreage of which is to be greatly expanded during the next two years — and British rubber, wool, machine tools, and electrical machinery and equipment are involved.

The Anglo-Russian commercial pact is not expected to move into real operation for several months, after the Russian harvests are in and some of the present strains caused by food shortages are relie\ ed. As an indication of the effort of directors of Britain s high policy to moderate the tensions between East and West, its significance is unmistakable.

While at Moscow, the British trade delegation conferred with Bulgarian, Yugoslav, and Hungarian trade missions which were also at the Russian capital on commercial missions. Great Britain does not intend to permit the political blockade instituted by differences between Russia and the United States to stand in the way of resumption of commercial activity beneficial to her strained economy.

Poland dickers

The Poles have negotiated a three-year trade treaty at London, Here, again, part of the war-torn fabric of European commerce has been skillfully rewoven. The new Anglo-Polish trade treaty, already agreed upon in principle, follows adjustment of the longstanding dispute between the two countries over disposition of the Polish gold reserves deposited in London during the war, and a new policy on the part of England, furthering the return of Polish exiles to their native land.

This trade pact will involve British exports of wool, rubber, tin, and graphite, in return for Polish eggs, poultry, bacon, butter, textiles, and furniture. Simultaneously, Poland has resumed trade relations with Finland, and has negotiated with Jugoslavia a highly important commercial pact which will operate during the next five years.

Norway seeks to balance her trade commitments in the dollar area with similar agreements. Within the past six weeks the Norwegian-French trade treaty of 1946 has been entirely overhauled and expanded. The new treaty envisions exchanges of whale oil, cod liver oil, fish, pulp, lime, zinc, paper, wines, chemicals, textiles, machinery, glass, and other items on a 6,000,000,000 franc basis over the next year.

In the Danube basin

The nations in the Danube basin are working like beavers to restore the trade structure in that area. This trend is the more notable because of the fact that the whole Balkan area is still bubbling with political unrest and in almost every country the maneuvering for control over government and policy continues. The one great lesson which most of the Danubian states seem to have learned from the recent war, and from the convulsions which have followed it, is that regional development of Danubia offers them their one best prospect for the future.

Czechoslovakia’s plans for a huge new river port on the Danube at Komarno, to be built by Skoda, indicates substantial expansion of water-borne traffic on that greatest of Europe’s inland waterways. Her new accord with Yugoslavia, like the commercial treaty she has just inaugurated with Poland, is an earnest of energy which can be measured by the rapid growth, these past six months, of her export trade to the whole Danube area.

The Czech trade treaty and another lately framed by Yugoslavia and Hungary bear direct relationship to Tito’s campaign for new industries in the federated Yugoslav republic. This drive is proceeding despite the great handicaps of food shortages, poverty, and political strife.

Yugoslavia’s new five-year plan is probably beyond her capacity. Its value is that it sets a target for the people and provides the country with a clear idea of what it wants to do. All of Yugoslavia’s recent trade treaties are geared to this program. She is sending ores to Czechoslovakia in exchange for machinery, and ores to Hungary in return for the services of Hungarian electrical engineers who will build her power plants. Almost all these exchanges represent direct deals in goods and services — without the use of currency.

The recent Communist-directed shifts in Danubian governments have sharpened the division between East and West, but they are unlikely to halt the development of present trade trends in the Danube Valley itself. The real victims of the Communist coups, unhappily, are the genuinely democratic elements. They are now cut off and surrounded. And Austria, for some months longer at least, will remain a battleground for big-power politics.