ECONOMIC WAR

Wairarapa Times-Age, 3 May 1941, Page 6

ECONOMIC WAR

SUPPLIES FROM UNITED STATES FOR AXIS POWERS MOVE TO ENSURE RESTRICTION. BRITISH PLEA FOR TOTAL EFFORT. It is reported on good authority thtTl early in the year a plan was drawn up by the President's advisers for the creation of an American Economic Defence Board, drastically to restrict the use by the Axis Powers of the United States as a source of finance and supply for the pursuit of their war effort, writes the Washington correspondent of the "Sydney Morning Herald." President Roosevelt was understood to be prepared to create the necessary organisation, but differences of opinion between the Treasury Department and the Department of State as to methods of procedure caused the plan to be held in abeyance. Immediately after taking up his post as Ambassador for Great Britain Lord Halifax presented proposals for cooperation between the two countries in a scheme of “economic warfare” as an essential part of America's all-in aid to Great Britain. Pending the passage of the Lease-Lend Bill, however, it was felt by the American authorities that no action could be taken in this direction.

The financial resources of Germany, Italy, and Japan, augmented by transfers of American holdings by the Governments and citizens of occupied countries to Germany, have given the Axis Powers an enormous reserve of dollar credits in the United States. Oft repeated threats of the “freezing" of such resources by America forewarned the totalitarian Powers, and there has been a steady transfer of such dollar exchange to Latin American countries, where, of course, it becomes free. BUYING SUPPLIES. In spite of some United States blocking of funds of the conquered nations of Europe, it is believed that the Axis controls in- excess of 2,000.000,000 dollars in free funds in the western hemisphere, and this money is employed in the purchase of essential war supplies—petrol, cotton, copper, principally, but myriad other items yet not wholly under licence and of use lo the totalitarian belligerents—in the United Stales or Latin America for shipment to Russia and Japan in chartered American or neutral vessels, and in Russian and Japanese boats, whence these supplies find their way to Germany and Italy, via Vladivostock. The funds are also used to bolster up Japan's failing resources in the western hemisphere for the purchase of supplies for her own use in the pursuit of her East Asia policy. That the flow of war material is in the direction indicated cannot be gainsaid. For instance, Russia, which in 1939 imported ■ only 56,600,000 dollars' worth of goods from the United States, in 1940 imported 86.900,000 dollars’ worth. Argentina’s importations of copper ingots from the United States has tripled, obviously not for Argentina's own use, but for re-export. To stop this perversion of the “arsenal of democracy” for Axis use, the United States has done two things—it has instituted a system of licensing of exports and, as has alreadj' been said, has frozen some the credits of conquered European countries. Both have been only partial measures. Scrap iron, steel, and petrol, for instance, are under only limited embargo through licensing chiefly because the American authorities envisage total embargo of these materials as probably too provocatory of Japan, with the possible consequence of Japanese measures in the south-west Pacific to assure herself uninterrupted supply. COTTON EXPORTS. Such items as cotton are free to leave in unlimited quantities. One of the essentials in the making of munitions, an over-supply of that commodity in the United States has been a longstanding and serious problem in agricultural policy. The Government, therefore, hesitates to limit this vital export until such time as a well-de-vised total plan of "economic warfare” is put into force. In the field of credit freezing, it is widely admitted that it is difficult or impossible for the Treasury to reach more than a small portion ■ of Axis funds. For instance. Germany , obtains control of the American . equities held by a country she con- j

quers. These are not transferred to Germany; they are, instead, transferred to a neutral, which, in turn, serves as an agent for Germany in their dis-

posal. It is understood that British proposals for co-operation with the United States in the prosecution of economic warfare against the Axis include the following: — (1) Transfer to the United States of Axis and conquered nations’ ships, estimated to total 800.000 tons.

(2) Government control of the charter of American vessels, thus making it possible to divert American bottoms from Russian and Japanese ports. Britain would be prepared to purchase such vessels or to charter them for sailings in areas not. prohibited by the neutrality law. (3) The denial of. American port| facilities to vessels supplying the enemy directly or indirectly.

(4) Permission to establish a British blockade control in the Caribbean. (5) The pooling of Anglo-American resources for the purchase of export surpluses, principally in the western hemisphere. This would be an extension of the cartel proposal made by President Roosevelt shortly after the opening of the war, to assist Latin American countries whose economy was badly disrupted by the elimination of important European markets for their products. (6) Total freezing of Axis credits to stop the steady exodus of such funds from the United States to the comparative safety of Latin America. AMERICAN RELUCTANCE.

If the United States were an active belligerent against Germany, Italy. Japan, and Russia, these proposals would probably all have been accepted and put into force. But. at present, although clearly dedicated to the proposition that all-in aid to Britain is a first principle in America's foreign policy, the United States Government conceives some of the stops indicated ns dangerously provocative of Japan: as unnecessarily provocative of Russia: as seriously deflationary in effect on American primary production (as yet barely convalescent from the disastrous effects of the 1930-40 depression), and as putting on the United States a burden altogether out of alignment with her present position as still a non-belligerent. This does not mean that President Roosevelt and his advisers are not ready to accept a considerable part of the plan advocated by the British,

The logic of the position makes this inescapable. But the problem of dissolving contradictions and resolving conflicts of aim is a difficult one. and will be solved only slowly. The passage of the Leasc-or-Lend Bill, the clear hardening of American public opinion toward no further compromises of policy in the Pacific, the growing awareness of the country that risks, grave risks, of direct involvement in tlie war arc unavoidable, no matter what course America pursues, can be expected to bring in their train some well-conceived plan for AngloAmerican co-operation in economic warfare mid the creation of a Government body with wide powers to carry the plan out.