Richard Schüller, Commercial Policy between the Two Wars: Personal Observations of a Participant (1943)

Richard Schüller’s journal article combines diplomatic recollection with an analysis of interwar commercial institutions. Drawing on his experience negotiating Austria’s trade relations, he moves from post-1918 reconstruction through Depression emergency measures, bilateral clearing, and regional agreements to the prospects for postwar multilateral trade. His central argument is that monetary stabilization and formal nondiscrimination could not by themselves restore international exchange. Trade required accessible markets, workable currencies, and political willingness to reduce protection. Institutions ostensibly defending equal opportunity could obstruct liberalization, while emergency expedients could harden into costly systems of discrimination.

Austria supplies the article’s organizing problem: the dissolution of the Habsburg economic territory separated producers from established markets. Schüller gives less explanatory weight to particular peace-treaty restrictions than to new tariffs and the conflicting ambitions of neighboring states. His proposed customs and monetary union with Italy in 1922 promised both market access and monetary relief, but international opposition redirected Austria toward League of Nations financial reconstruction.

This plan became a full success as far as Austria's finance and currency were concerned. But it did not solve our economic problem, caused by the dismemberment of our former economic territory, for new tariffs separated us from our most important markets.

The distinction between financial recovery and commercial viability governs the subsequent narrative. Trade treaties yielded limited concessions; proposals for closer regional relations encountered political resistance. Rising exports nevertheless made recovery appear sustainable by 1929. Beneath this apparent normality, agricultural protection encouraged surplus production, while European borrowers financed long-term and sometimes unproductive investments with short-term foreign credits. Schüller therefore presents the Depression as exposing structural weaknesses rather than simply interrupting a healthy trading order.

The crisis multiplied tariffs, quotas, and exchange controls. Quotas, he argues, resisted any satisfactory application of most-favored-nation treatment: global allocations encouraged a race to import, equal national shares disregarded established trade, and historical shares provoked disputes over the reference period. Exchange control likewise arose from specific circumstances. Memories of inflation made Austrian and German governments fear depreciation, although the monetary conditions of 1931 differed fundamentally from those of 1922. Maintaining official exchange rates depleted reserves and left importers without the currency required for purchases.

Schüller’s account is unusually self-critical because he helped devise the Austrian response: bilateral clearing agreements, beginning with Switzerland in November 1931.

The new clearing was bilateral, and had to be balanced without transfer of gold. Its primary object was to make imports possible without using foreign exchange.

Unlike multilateral settlement through money markets, clearing confined payment flows within paired national accounts. Its apparent simplicity concealed continually changing trade volumes, inappropriate exchange rates, commodity quotas, and allocations among firms. Historical figures could not anticipate shifting demand or business structures; administrative flexibility invited favoritism, while rigid allocation produced shortages and arrears. Exporters evaded compulsory surrender of foreign currency at unfavorable official rates. Austria eventually acknowledged depreciation, relaxed exchange control, and abandoned clearings with free-currency countries, after which confidence and reserves improved.

Germany provides the test of claims that authoritarian power could make such machinery efficient. Schüller counters with declining relative trade performance, inflated clearing prices, export subsidies, bureaucratic burdens, and persistent leakages. He separates the economic capacity to acquire armament materials from the political uses of controlled commerce:

The Nazis achieved their armaments in spite of, not because of, their trade policy.

He nevertheless recognizes that clearing enabled Germany to redirect trade and pressure dependent suppliers, particularly in southeastern Europe. Commercial privileges supported sympathetic businesses and Nazi organizations. His qualification is that this penetration did not determine countries’ eventual wartime alignments. Economic leverage, economic efficiency, and political allegiance must therefore be assessed separately.

The regional section contrasts customs unions, requiring extensive political and economic integration, with more practicable preferential arrangements. Schüller recounts the failed Austro-German union project, the more successful Austrian-Hungarian-Italian subsidy agreements, and the limited results of League conferences and preferential schemes. Even arrangements that increased trade remained constrained by domestic protectionism and diplomatic rivalry. His participant perspective also challenges the claim that American withdrawal and dollar devaluation alone wrecked the London Conference of 1933: conflicting national interests had already blocked substantial agreement.

These episodes culminate in the article’s central institutional paradox:

By its weakness this clause helped to initiate the regional experiments, and by its strength it caused their ineffectiveness.

The most-favored-nation clause could neither prevent discretionary restrictions nor readily permit preferential tariff reductions that might improve actual trading conditions. Schüller nevertheless defends equality of opportunity as the indispensable organizing principle of multilateral commerce. His criticism concerns its rigid application amid discriminatory practices, not the principle itself. The conclusion gives the argument its wartime relevance: the United States could shape a freer postwar order, but declarations required substantial tariff concessions and a trade policy appropriate to a creditor country. Reconstruction would offer an opening for reform; failure to use it promptly would allow restrictive interests to recover their strength.