The probable consequences of following a protectionist
policy can be summarized as follows: first, retaliation by other
nations and a reduction of the volume of our products sold
abroad; second, continued and perhaps increased demands for
United States dollar aid abroad in order to bolster the economies
of our allies; and finally, protection for certain American indus-
tries, but at the expense of higher prices to consumers and a
somewhat smaller volume of goods available for distribution
throughout the world. A reduced foreign trade might have the
effect of weakening our allies and lead to more foreign aid.
Now let us turn to the second alternative. Suppose the
United States decided to follow a modified free-trade policy,
what might be the consequences? We can be quite certain
that if the United States were to reduce tariffs, eliminate import
quotas and licenses, and improve our customs procedures, the
volume of goods sold by foreign nations to American customers
would increase. This would give foreign countries more dollars
with which to buy American-made goods. Other countries are
eager to buy our goods, but they do not have enough dollars
at the present time to pay for the things they want. If foreign
countries were able to earn additional dollars by selling more
goods and services to the United States, they would buy more
of our machinery, perhaps additional wheat and cotton, and
probably larger quantities of luxury items such as automobiles,
nylon stockings, and fruit.
Of course, no one can deny that a modified free-trade policy
would make it more difficult for some American firms who
now benefit from tariff protection to continue selling the same
products. But such firms would not necessarily have to go out
of business. These firms merely would have to shift production
to some new product or service which foreign countries want
from us. Readjustments of this type, of course, would be noth-
ing new to American business. Changes in consumer tastes, the
discovery of new products or production techniques, and im-
proved methods of transportation, have necessitated continual
changes in the pattern of both agricultural and industrial
production in this country during the. past 150 years. Fortu-
nately, our American economy is still flexible enough to meet
the challenge of changing market conditions. We cannot be
sure just how much the present pattern of industrial produc-
tion would have to be altered if the United States were to
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