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would, in the last analysis, do little more than maintain services already provided by law, but their maintenance can be made to express a new social objective in the national economic policy.
When we speak of the necessity for immediate action, that is, of course, true; but if we are going to postpone any permanent solution in order first to take the immediate action, and then if we postpone, also, the immediate action, we shall be in an alarming state as the months go by. It seems to me that we need to divide our people into two groups, those who will look after immediate action, and those who will think out what is fundamental; and the sooner those who think out what is fundamental get to work and have influence, +he better it will be.
I want to speak of one aspect of our foreign trade which seems to me the most hopeful for increase of employment by the only sound method, namely, the giving of orders to our own industries. I refer to the recognition of Russia. Without that recognition, it is impossible for our manufacturers, especially the smaller ones, to make the arrangements which they ought to be able to make, in order to sell goods to the Soviet Union. I speak as having been in the Soviet Union last summer, and having made an examination particularly of the second 5-year plan, and of the completion of the first 5-year plan in the mines, the factories, on the farms, and on up through the administrative agencies which have to do with planning. And I can testify, without taking the time to give the details here, that the U. S. S. R. gives evidence now of a steadily expanding demand for goods.
Although the foreign trade of the United States has always been a comparatively small part of our total production-recently about 10 per cent-it is axiomatic that the export of that surplus and the price received for it influences the selling price of the remaining 90 per cent. One of the influences which is now causing unemployment is the great reduction in world trade, including exports from the United States. In 1930–31 trade with the U. S. S. R. was beginning to assume promising proportions, but the present difficulties of doing business with the U.S. A. which has not recognized diplomatically the U. S. S. R., have turned the purchasing of the Soviet Union toward other countries. To remedy this situation would be an important element in restoring employment in the United States, not only in the industries from which the U. S. S. R. would buy, but also for those products which employees in these industries would purchase.
The U. S. S. R. alone of all the nations, offers now a steadily expanding demand for goods—what the economists have called "an effective consumers' demand”—which may be expected to continue because it is the result of national economic planning directed toward the distribution of purchasing power. A competent market analysis of the Soviet Union, would certainly show it to be a very good prospect.
The first 5-year plan, just completed, has laid the basis for industrial development by its emphasis upon providing machinery, equipment and power. The second 5-year plan, which is now in its beginnings, must continue this emphasis upon producers' goods while at the same time stressing more than in the past the consumers' goods, including the food supply.
The Soviet Union's policy with reference to exports is to sell only what is needed to make possible the necessary imports. The U. S.
S. R. has no surplus. It is not seeking a foreign market. Exports are a sacrifice made by the people in the hope of a higher standard of living in the near future. The U. S. S. R. has a plan for exports handled by a government monopoly which makes possible thoroughly rational and controlled trade arrangements with other countries.
This policy of planned exports as a means of securing imports removes all danger of "dumping.
The Soviet Union is naturally unwilling to sell below the market because it is selling so that it can buy goods in return. Therefore it is not going to sacrifice its own exports. But whatever the circumstances, the most effective way to deal with problems of world market prices is by agreement; and moreover by the extension of credits to the U. Š. Š. R., enabling that country to buy from us.
It is not impossible, also, that such a policy on the part of the United States would make unnecessary some of the exports of wheat, for example, from the U. S. S. R. to European countries which might otherwise be a market for the wheat of our own farms. The Soviet Union needs wheat at home; and if a policy of recognition the U. S. A. makes it possible without exporting it to receive the machinery and other goods which we can sell, the result of such planned international trade will give us far greater security than the present policy of inaction.
Generally speaking, our imports from the U. S. S. R. are noncompetitive with our own industries, and a mere fraction of our exports to that country. Our balance of trade with Russia has been uniformly favorable to the United States.
In 1932, American exports to the U. S. S. R. dropped almost 90 per cent compared with the preceding two years, amounting to less than $13,000,000, as compared 'with over $100,000,000 in 1931, and in 1930.
Senator GORE. What country was that?
Miss Van KLEECK. Soviet Russia. I am talking entirely about Soviet Russia.
Senator GORE. Do you mean Russia's entire trade, or her trade with us?
Miss VAN KLEECK. Her trade with us. Her trade with us dropped from $100,000,000 to $13,000,000.
No such depression was shown in trade between the U. S. S. R. and other countries. It is true that in 1932 there was a contraction in foreign markets and that the drop in world market prices reduced the monetary value of Soviet exports, but nevertheless Germany, Great Britain, Italy, and other leading European countries maintained their sales to the U. S. S. R. at almost the level of 1931.
Senator GORE. But Germany and the Scandinavian countries guaranteed part of the sales to Russia; guaranteed that their people who made sales to Russia would collect at least, say, 60 per cent.
Miss Van KLEECK. Yes. They gave a guarantee for that amount.
Senator GORE. And Germany borrowed the money from us to guarantee it.
Miss Van KLEECK. Yes. As some one has expressed it, we permitted our loans to Germany to be turned into "a good note (credits to the U. S. S. R.) with a bad indorsement (Germany's incapacity to repay us). There has been no default in payment on the part of the Ù. S. S. R.
Senator GORE. Germany has discontinued the policy of guaranteeing these payments.
Miss Van KLEECK. I am sorry I can not answer that question, but German sales to the Soviet Union are now much larger than ours.
Senator GORE. There is no doubt, Miss Van Kleeck, that we could sell goods to every country on earth if we ourselves would guarantee payment for the goods.
Miss VAN KLEECK. I am not proposing such a guarantee of payment for the goods in trade between the Soviet Union and the United States, but recognition which would facilitate credit arrangements.
Senator GORE. Do you think it was necessary on the part of Germany and the Scandinavian States to make the guarantee, but it would not be necessary with us?
Miss Van KLEECK. I am not familiar enough with the policy which led to that arrangement in Germany to answer the question. I am somewhat familiar with the situation in this country, and the fact that manufacturers are ready to do business as they have in the past with the Soviet Union. But the lack of recognition, of course, creates many difficulties which are reflected in the present decrease.
Senator GORE. There is no doubt of that.
Miss Van KLEECK. Such drop as there has been in Soviet purchases has been borne by American manufacturers, affecting primarily industrial and electrical machinery, which constitutes the principal group of American exports. Naturally, the loss of some $80,000,000 of possible sales which might have increased considerably about that figure affects not only our sale of industrial and electrical machinery but the purchasing power of all employees in those industries who would otherwise be purchasing from American manufacturers of consumers' goods.
By the way, some one asked Governor Smith for some data in connection with his testimony favoring recognition of the Soviet Union; and I am glad to put into the record the figures which I have in my manuscript here, but which I shall not read at this time.
Some one made the statement that it is rather mercenary to put favored trade as the reason for diplomatic relations with the Soviet Union. Of course, I do not think it is mercenary to advocate trade relations. They are fundamental in the life of the people. They go beyond the mere selling of goods to the Soviet Union. What we want is economic cooperation on this globe of ours. We need international economic cooperation, both for the sake of our own institutions and for the sake of what it would mean to world trade as a whole to have these two big, growing, enthusiastic, and, on the whole, optimistic, countries working together.
In contrast with this decline in actual trade, is the possibility of economic cooperation which would not only give trade to the United States but would put us in a position to cooperate in international relations generally more effectively than is possible without these diplomatic relations with the U. S. S. R. Recognition would of course be merely a first general step which would be followed by negotiations dealing with unsettled questions between the two countries and agreements laying the basis for future relations. These agreements would have their basis in trade agreements already existing between the Soviet Union and other countries.
In answer to questions which are raised as to the Soviet Union's good faith, and as to the danger of propaganda for communism, I want to call attention first, to the pact of Paris, signed November 29, 1932, between the U. S. S. R. and France, in which they bound themselves:
To participate in no international agreements which would have the practical consequence of prohibiting purchases to be made of the other party, or the sale of goods, or the granting of credits to the other, and to take no measures which would result in excluding the other party from any kind of participation in its foreign trade.
Incidentally, this is a practical expression of the principle in article 23 of the covenant of the League of Nations--which Woodrow Wilson succeeded in having inserted-calling for "equitable treatment for the commerce of all members of the league.' It is a pity that we and the league have made no effort to enforce that principle.
The same idea is embodied in the draft protocol for economic nonaggression put forward by Litvinoff, Commissar for Foreign Affairs of the Soviet Union, at the session of the League of Nations Commission for the Study of European Union at Geneva, May 18, 1931. He called first for a reaffirming of the principle proclaimed at the International Economic Conference in 1927, "of the peaceful coexistence of countries, irrespective of their social, political, and economic systems. Acting upon this principle, the proposed draft protocol would require of all countries— the complete cessation of all forms of economic aggression, both avowed and concealed, by any countries or groups of countries against any other countries or groups of countries.
If that had been adopted in Europe to-day, we would have less risk of economic warfare, instead of cooperation; and the other kind of warfare that comes out of it.
The draft further declares that:
The cessation of economic aggression is an essential condition for the peaceful cooperation of States in the sphere of economics, irrespective of their political and economic systems.
The spirit of this declaration which was put forward by the U.S. S. R. opens the way for exactly the policy of recognition which has always controlled the United States of America.
Senator GORE. Have you that declaration in full?
Miss VAN KLEECK. I have. You mean Thomas Jefferson's declaration ?
Senator GORE. No. The soviet declaration in favor of the cessation of economic aggression. Have you set that out in full?
Miss Van KLEECK. I shall be very glad to file the full protocol with this committee.
Senator GORE. I wish you would. (Printed at close of testimony.)
Miss VAN KLEECK. The spirit of this declaration which was put forward by the U. S. S. R., opens the way for exactly the policy of recognition which has always controlled the United States of America. This principle was first pronounced on March 12, 1793, in an instruction issued by Thomas Jefferson, Secretary of State, to Gouverneur Morris, Minister to France, in these words:
We surely can not deny to any nation that right whereon our own Government is founded—that every one may govern itself according to whatever form it pleases, and change these forms at its own will; and that it may transact its business with foreign nations through whatever organ it thinks proper, whether king, convention, assembly, committee, president, or anything else it may choose. The will of the nation is the only thing essential to be regarded.
That will in the Soviet Union has now been expressed in a form of government which has lasted 15 years and which is so intertwined with the economic administration of the country and so shared by the mass of the workers in the Soviet or the council in each work place that no one who has had an opportunity-as I am glad to say I had last summer-to observe the Soviet Union at work to-day in the shops, mines, and factories can doubt the stability of its present form of government grounded in economic planning.
Although it is clear that recognition would not imply approval, it should be pointed out that recognition would open for us in the United States a valuable opportunity to study the methods of administration of industry in this new economic system. We in the United States are forced to-day to a fresh study of economics. There are two ways of studying economics: (1) By reading books; (2) by observing a system different from our own and comparing its results with ours in order to see where ours may be made to work better. It is especially challenging to us, with our millions of unemployed, to study the reasons why in the Soviet Union there is no unemployment, but rather a shortage of labor.
Recognition would give to the United States and to its travelers in the U. S. S. R. sources of service and of information which are always provided by embassies and consuls; opportunity for observation of economic developments; a chance to watch more closely such international developments as are now occurring in the Far East; trade relations which for the moment at least would place orders and give employment to thousands of American workers in a form more fundamental than any program of relief; and finally, the opportunity to set at rest the fears and the district which arise through our inability to negotiate differences by established methods of international conference and agreement.
We are tremendously handicapped in our policy in the Far East because we are not cooperating with the Soviet Union, whose purposes are like ours, a desire to maintain the territorial integrity of China. The Soviet Union is strong in the Far East, and is informed about it. We are weak. There is nothing more important that could be done for the peace of the world to-day than the recognition of the Soviet Union.
As to the fears of some in the United States that there will be propaganda directed by the U. S. S. R., it is important to quote the following Article V from the Franco-Soviet Non-Aggression Pact, signed in Paris, November 29, 1932, to which reference has already been made. Article V reads as follows:
Each of the high contracting parties undertakes to respect in all relations the sovereignty or dominion of the other party over all its territories as defined in Article I of the present treaty, in no way to interfere in its internal affairs, and in particular to refrain from any action inclining toward incitement or encouragement of any kind of agitation, propaganda or attempts at intervention which would have the aim of violating the territorial integrity of the other party or of changing by force the political or social structure of all or part of its territory.
There have been instances where charges of communist propaganda by the Soviet Government have been officially investigated; and in