Richard Schüller, Great Britain’s Trade Policy (September 1944)

Richard Schüller’s journal article examines Britain’s prospective postwar payments difficulties and challenges the claim that these require a lasting system of exchange controls, import quotas, and discriminatory regional trade. Its immediate targets are the Federation of British Industries’ February 1944 report and the Economist’s series on “The Principles of Trade.” Schüller accepts their objective—expanding British exports while sustaining imports and employment—but argues that their proposed machinery would defeat it. His two-part argument moves from a critique of quantitative controls to an alternative combining commercial treaties, imperial preference, and regional freer trade.

The opening reconstructs proposals for a sterling-centred grouping whose members would exchange concessions unavailable to outsiders. Trade with the United States would depend on available dollars, while most-favoured-nation treatment would cease to govern commercial relations. Schüller notes the conflict with Anglo-American commitments against discrimination, but initially brackets questions of principle to ask whether the system could accomplish its economic purposes. These influential proposals had neither been approved nor rejected by the British government; he treats them as policy arguments, not official decisions.

Section I questions the statistical foundations of postwar pessimism. Lost investment income presents a concrete difficulty, but projecting prewar import-export ratios into the future mistakes historically variable trade balances for fixed relationships. Schüller nevertheless concedes that Britain faces a considerable payments gap. He also accepts the case against sharply reducing imports, largely composed of food and materials, and the dangers of competitive depreciation. Where he challenges the Economist’s employment argument is its failure to consider that other countries’ pursuit of full employment could increase their imports and create opportunities for British exports.

The decisive distinction is between expanding exports and balancing accounts through contraction:

Exchange control and quotas tend to restore the balance of payments by shortening the long leg, not by lengthening the short.

Wartime controls offer no proof of their suitability for peaceful expansion: they operate amid military priorities, shipping shortages, and restricted supplies. Nor does the intention to avoid German practices remove the structural difficulties of control. Germany had also sought increased trade, yet armaments production and elaborate administrative requirements obstructed it. Schüller acknowledges that British officials might administer controls competently; his objection concerns the system’s inherent burdens rather than their ability or intentions.

Exchange control requires decisions about rates, competing uses of scarce dollars, and allocations to firms and individuals. Enforcing surrender of foreign receipts also raises problems of evasion and surveillance: wartime censorship cannot simply become an acceptable peacetime institution. Quotas introduce another rigidity, fixing access through historical trade shares while demand, supply, and business relationships change:

This distribution of licenses is generally based on the business done by the firms in former years, and cannot be adapted to the constant changes in business life; thus the basis of the distribution is obsolete even before it begins to work.

Administrative delay is therefore integral to Schüller’s economic critique. A regional system might redirect a larger proportion of trade towards its members without increasing total trade. Free circulation of sterling would not itself balance their accounts; correcting deficits through negotiated quotas would create a complicated multilateral clearing arrangement. Proposals to cancel unused credits, direct development lending towards deficit countries, or require assurances against depression leave unresolved questions of feasibility and consent. Exceptional controls may sometimes be useful, but their limited successes do not justify making restriction the general organizing principle.

Section II offers an alternative that recognizes Britain’s bargaining power without accepting the necessity of a discriminatory control bloc. American opposition would reflect material damage to its trade, not simply Cordell Hull’s doctrinal “orthodoxy.” Conversely, Americans must recognize Britain’s need to enlarge exports. Britain’s importance as a purchaser could secure concessions through ordinary commercial treaties across an area wider than the proposed regional group. Schüller also argues that postwar competitive conditions might favour Britain more than pessimistic extrapolations allow.

His alternative accommodates existing imperial preference, which he considers effective and a defined exception to most-favoured-nation treatment. He then develops a more innovative proposal from the Oslo and Ouchy conventions: reciprocal freer trade linking Britain with Denmark, Norway, Holland, and Belgium.

Reciprocal free trade would mean that Britain, Denmark, Norway, Holland and Belgium would pledge themselves to admit duty-free the goods produced in the participating countries.

Unlike a customs union, this arrangement would leave each country with its own external tariff and authority to negotiate foreign agreements. No common parliament or foreign office would be needed, reducing smaller states’ fears of British domination. Schüller proposes clarifying the most-favoured-nation clause if necessary and using certificates of origin to prevent third-country goods from exploiting differing external tariffs. He allows exceptions for British agriculture, imperial suppliers, and selected partner industries rather than presenting unrestricted trade as immediately attainable.

The governing contrast is thus not simply universal trade against regional organization. It is between regional arrangements that make restrictions normal and those that make freer exchange normal:

In any case, free trade within the European sterling group would be the rule, and restrictions would be only exceptions, while under exchange control and import licenses restrictions would be the rule and freer trade the exception.

The article’s distinctive contribution to wartime reconstruction debate is to separate legitimate objectives—employment, payments equilibrium, and export growth—from instruments that Schüller regards as self-defeating. His practical internationalism combines worldwide bargaining with regional liberalization, while treating administrative burdens and national political autonomy as central conditions of economic cooperation.