UNITED STATES TRADE AND INVESTMENT POLICY IN AN INTERDEPENDENT WORLD Prepared by the Department of State I. INTERNATIONAL TRADE, INVESTMENT AND FOREIGN POLICY. OF POLICY. IV. NEW DIRECTIONS I. INTERNATIONAL TRADE, INVESTMENT AND FOREIGN POLICY This submission deals with problems confronting the United States in the fields of international trade and investment and changes in policy that may be desirable for the decade of the seventies. The subject, however, must be considered in the context of our overall foreign relations. Since the end of World War II, the great trading nations of the world have joined in a continuing effort to reduce barriers to international trade. The United States has been a leader in this effort. Direct controls on trade and investment have been greatly reduced from the highly restrictive postwar situation; tariffs, with limited exceptions, are now at modest or inconsequential levels. Although the process is far from complete and even despite occasional backsliding on the part of every participant-the success and the benefits of the basic policy are well known: an unprecedented expansion in world trade and the longest period of sustained and rapid income growth in history. The significance of these developments is evident in the course of U.S. relations with particular countries or groups of countries: Western Europe, Canada, Japan, and the developing countries. For much of modern history Western Europe was the world tinderbox. In the aftermath of World War II, the exhausted and separated West European democracies were threatened by internal instability and external Soviet aggression. Today that has changed. Western Europe is strong and self-confident. Stable democratic governments are in power. The threat of economic and social collapse is remote. The threat of Soviet aggression is small. And, for the first time in centuries, the threat of armed conflict among the traditionally antagonistic European states is non-existent. To an important extent, this dramatic change is a result of economic prosperity and the closer economic integration of the continent brought about by a sharp reduction in barriers to trade and investment. This has benefited other countries as well. As a result of the Dillon and Kennedy Round negotiations, the average industrial tariff of the Common Market is only about half as high as it was when the Common Market was formed over a decade ago; for France and Italy, the reduction has been over 60 percent. American investment for the most part has been well received and treated in Europe. Special problems, particularly in agriculture, persist. Basically, however, the relationship between the United States and Western Europe is one of cooperation between the world's two largest industrial regions. This is a far more favorable relationship than existed 25 years ago when the United States dominated the world economy or during the period of economic nationalism that prevailed in the 1930's. Problems will continue to arise, but our economic interdependence is high and both areas are determined to act jointly and responsibly to reach reasonable and constructive solutions. In economic terms, Canada is one region of a single North American market. Trade and investment relations between us are important to the United States but vital to Canada. In no other area of our economic relations are economic incentives toward completely integrated economies so compelling or restrictions so disruptive. Japan is the economic miracle of modern times. In addition to being our major overseas market, it is also a major competitor, both abroad and even in our home market. But it is also the strongest Asian country, with a broad concert of interests with the United States. There are many difficult problems that The United States faces in Asia. One of the few elements of stability and strength is postwar Japan. We must accordingly seek and obtain reasonable solutions to the trade and investment problems we have with Japan. Clearly, today's vigorous economic competition between two friendly and democratic Pacific powers is greatly to be preferred to the intense nationalism and antagonisms of the 1930's or the weakness and instability which marked Asia after World War II. The needs of the developing countries have been stressed in several recent reports on foreign aid, notably the Peterson Task Force report. We must bear constantly in mind that, from a foreign policy point of view, our policy toward the developing countries can be relevant only if we respond to their central concern-development. And trade and investment policies are, together with aid, the principal vehicles by which we can further their economic progress. II. TRADE ISSUES A large number of specific questions will undoubtedly require detailed study over the coming year. This initial submission singles out six areas of concern. |