Richard Schüller, “Rejoinder” (September 1945)

Richard Schüller’s journal rejoinder answers Professor Morgan’s objections to his proposals for British trade policy after the war. Its central distinction is between expanding particular transactions and expanding trade as a whole: exchange control might facilitate selected imports while imposing restrictions that outweigh those gains. Schüller defends an alternative combining ordinary trade agreements, imperial preference, and closer trading relations with several northern European countries. The argument proceeds through these three methods before distinguishing the temporary continuation of wartime controls from their adoption as a permanent system.

Morgan’s example concerns Britain increasing imports from Belgium without reducing trade elsewhere. Schüller challenges the inference from that possibility to the effectiveness of exchange control:

He does not take account of the possibility that the expansive effect of such single transactions might be overbalanced by the restrictive effects of the control system on the total sum of British and world trade.

The relevant scale is therefore aggregate British and world trade, not an isolated bilateral exchange. Schüller acknowledges that the restrictive outcome cannot be proved mathematically, but regards it as highly probable. Payments outside the sterling area would require official licenses, while multilateral clearing within it would introduce considerable complications. He invokes the experience of countries operating controls in the 1930s and adds a political objection: discrimination against American trade would provoke conflict between British and United States trade policies. His case combines administrative burdens, historical experience, and the international consequences of discrimination.

The first alternative is to exploit Britain’s purchasing power through normal trade agreements based on the most-favored-nation clause. Morgan compares this approach with Schacht’s German policy, questioning whether British bargaining could achieve better results. Schüller insists that Schacht’s scheme differed fundamentally from ordinary agreements and that the comparison also overlooks the composition of British trade. Britain’s imports exceeded its exports by almost 75 percent on average in 1936–38:

Surplus of imports is the most essential element of a strong bargaining position, and in this respect no country is more favorably situated than Great Britain.

Import dependence becomes, in this argument, a negotiating resource: access to the British market matters to exporting countries. Schüller rejects the claim that using this leverage would set a bad example, presenting bargaining as a normal practice of trade diplomacy. His contrast with the United States clarifies the mechanism. An export-surplus country must increase imports or offer loans to obtain concessions for its exports; Britain already possesses substantial purchasing leverage.

Schüller nevertheless does not claim that ordinary agreements would necessarily close Britain’s postwar balance-of-payments gap. Supplementary measures remain necessary. He defends imperial preference under the Ottawa system against Morgan’s contention that industrialization within the empire would diminish its benefits. His answer is brief: exchange control cannot stop or slow that industrialization, and replacing preference with controls would both leave Canada outside and introduce the broader restrictive effects already identified.

The third proposal is closer economic cooperation with Denmark, Norway, Holland, and Belgium, potentially including reciprocal free trade. Morgan’s interpretation of this arrangement as a Zollverein prompts an important institutional clarification:

Professor Morgan's supposition that this would mean a Zollverein arises from a misunderstanding, for, according to the proposal, every country would have its own tariff, and would independently conclude trade agreements with countries not belonging to the group.

Internal liberalization need not entail a common external tariff or surrender of independent commercial negotiations. Nor, Schüller argues, must free admission of Dutch and Danish agricultural products disadvantage the Dominions: Britain could admit Dominion products equally freely. Butter quotas could allocate imports between New Zealand and Denmark while protecting domestic production. His proposal thus allows negotiated exceptions while treating free trade within the sterling group as the rule. He acknowledges unresolved economic problems and recommends investigation rather than presenting a finished institutional blueprint.

The conclusion makes the rejoinder’s practical qualification explicit. Immediate abolition of exchange and trade controls is unlikely, but prolonged retention could sacrifice opportunities for expansion:

And it would be unpropitious if they tried to establish exchange control and licensing of imports as a permanent system of trade policy, because these controls are trade restrictions which cannot be turned into means of trade expansion.

The note’s significance lies in this distinction between transitional necessity and permanent policy. Schüller seeks negotiated routes to trade expansion without assuming that bilateral gains under a control regime establish its overall benefits.