"Gentlemen's Agreement"

W1111am Humble Eric Ward, 3rd Earl of Dudley, is a spruce widower of 44 who sports a mustache arid has a huge fortune founded upon the British iron and steel industry. Fourteen years ago the Earl of Dudley arrived in the U. S. as equerry to the Prince of Wales. Two years ago the Earl visited the U. S. in a futile attempt to get the U. S. steel industry to join the European Steel Cartel. Last week the Earl of Dudley once more sailed into New York Harbor on the same errand.

A good definition of a cartel is "an agreement, usually in writing, among manufacturers, which regulates production and prices." Before the World War it has been estimated that there were some 114 international cartels. One of the first and most successful was the International Rail Makers' Association which appeared in 1884. The European Steel Cartel has been turbulent but relatively successful. It was formed in 1926 by Germany, France, Belgium, Luxembourg and the Saar to overcome through production quotas the disastrous effects of post-War overproduction. In the past dozen years it has been abandoned and revived, depending on the world demand for steel and on the relative production costs in the various countries (those that stayed on gold longest had their throats cut). In 1935 Great Britain signed up, leaving only the U. S., Russia and Japan as major nonmembers.

Until last year this caused the cartel no great worry because all three non-members exported only a fraction of their production, leaving the cartel in command of an estimated 90% of the export market. With the current recession in the U. S., however, and the consequent falling off of domestic steel orders, certain U. S. makers have been dumping steel abroad, undercutting cartel prices and taking advantage of the steel hunger of nations preparing for war. For the first eleven months of 1937 U. S. iron & steel exports were 36% above 1929, 192% above 1936. Rolled steel exports amounted to 2,337,970 gross tons against 1,040,630 for the first eleven months last year. Hence the arrival last week of the Earl of Dudley and a committee including Hector Dieudonne, director general of Comptoir Metallurgique Luxembourgeois, sales organization of the cartel.

Early attempts to get the U. S. to join in international cartels were thwarted by the anti-trust laws. But in 1918 the Webb-Pomerene Act was passed which had the effect of enabling U. S. businessmen to join up provided that no restraint of trade within the U. S. was involved. U. S. businessmen joined up both officially and unofficially in many cartels, including those for heavy chemicals, rubber and copper. But steel has refrained chiefly for the reason expressed by onetime President W. A. Irvin of U. S. Steel: "With 49% of the world's capacity, we had at home in 1935 but 35% of the world's consumption. On this basis alone we are justified in seeking to preserve, as far as possible, our markets for our own mills and workers."

Last year, however, the big U. S. steel companies are supposed to have made a "gentlemen's agreement" with the cartel not to undersell them abroad. Last week when the Earl of Dudley arrived it was generally assumed that if he could not wangle actual U. S. participation in the cartel he would try to get the big steel concerns to force the little ones now engaged in foreign dumping to join in the "gentlemen's agreement." Last week the only fact that emerged from a great cloud of secrecy was that the Earl would do his negotiating with the Steel Exporters Association of America, an organization of big steel concerns. The Earl of Dudley was asked point-blank if he wanted to arrange price-fixing. Said he coyly but mistakenly: "You have laws here to prevent that sort of thing, you know."

This file is automatically generated by a robot program, so reader's discretion is required.