In years gone by, the occasional tranquillity of international relations has been upset by various "isms" and, more importantly, by the reaction of men and nations to these "isms." We have all lived through the growing pains of communism, socialism, Maoism, protectionism and even Americanism and Europeanism. These are all familiar "isms" to any schoolboy.

Today, a different "ism" is clouding the relationship between Europe and America, and this "ism" is not a political movement but rather a state of affairs which can only be described as an "anachronism." The dictionary describes "anachronism" as something that takes place outside of its own time frame. What I want to suggest to you today is that what has been proclaimed as our differences on trade and monetary matters, are usually not differences at all. Instead, they can more accurately be described as the extension of a set of attitudes developed in other days for other events. Despite our advanced technologies with computerized information systems, you and I as individuals and collectively as societies and nation states have so far not discovered a really effective way to keep up with the velocity of change.

A rather vocal European reaction to current American restlessness on trade policies is a perfect example of an anachronism. Our friends in Europe are throwing today's events against an historical screen that is no longer relevant. This obsolete attitude might be characterized as the Marshall Plan mentality.

At the end of the Second World War, the Marshall Plan became not only an outstanding economic success, but also an intellectual way of life which some people mistakenly believe persists today. In America, the Marshall Plan mentality is dead, and the time frame in which it was so useful has passed into history. Unless you and I understand this central fact with great clarity, it will become increasingly difficult to adjust the apparent differences between the United States and Europe on an amiable basis.

Our friends in Europe and Japan appear to be genuinely surprised and appalled that the United States Congress came within a few votes of passing some protective legislation last year, despite the fact that the European Common Market puts American exports at a disadvantage in various and not-so-sundry ways. The Common Market's exports had already exceeded those of the United States as early as 1967. Even without Britain, the Community is the world's largest trader. Somehow, Europeans have overlooked the basic facts of European trading power in their own thinking about trade relations. It would be an anachronism to assume that the European Community is still a delicate economic infant entitled to special treatment. Yesterday's mentality might suggest that the United States should be more tolerant when the Common Market or Japan acts in a manner damaging to United States trade. After all, that has been an American posture for years. Today, this belief is an anachronism and a very dangerous one at that.

My credentials as a free trader run back a lot of years, and I hold no brief for protectionism in the world. It is because of this bias of mine that when I see the world going the wrong way, I feel that it is essential to point out to our friends abroad that it would be a tragic misreading of American opinion to believe that the current wave of protectionism in America sprang up unassisted by the action of our trading partners around the world. The demise of the Marshall Plan mentality has marked the end of a too one-sided liberalization of trade.

Over the years, the United States has led the way in helping to dismantle the barriers that hinder the movement of men, money and technology across international frontiers. As the U.S. Ambassador to France, Arthur K. Watson, reminded an audience recently, America emerged from its love affair with protectionism in the Twenties and Thirties to become the champion of the free-trade position, which every Administration since then--Democratic and Republican alike--has supported wholeheartedly. President Nixon is no less a free-trade advocate than his predecessors and has recognized the intimate relationship between international economic policy and relations between nations by creating a Council on Foreign Economic Policy as an immediate adjunct to the Office of the Presidency.

Despite this philosophical belief, it would be dangerous for the United States to ignore the existence of non-tariff barriers that have reached formidable proportions around the world. The double standard used by our friends to criticize current American trade policy is as out of place in this year 1971 as is the double standard in personal conduct. This is a rather somber age, and a public sense of humor is unfortunately not very much in evidence. It doesn't really take much of a sense of humor, however, to see the irony in the statements issued by Europeans about possible American quotas on textiles aimed mostly against Japan, when, for many years, the major European countries have maintained such import restrictions on textiles, particularly from Japan. The story gets even better when you consider that Japan maintains some import restrictions against textiles, even though she has recently eased them. Against the background of these facts, much of the foreign criticism of a growing protectionist attitude in America is falling on fallow ground. When one adds to this double standard on textiles, the proliferation of preferential trading arrangements between the Common Market and other countries, the anachronism is clear.

The EEC's variable import levy system of restricting imports is in a class by itself. Its effect has been to raise the level of tariff protection on the agricultural products to which it applies to about three times the level it was at before the common agricultural policy went into effect. It is estimated that the variable levy system for agricultural products in the EEC is equivalent to a tariff of about 35 percent, which is much higher than the agricultural tariff of any other industrial country. This is not meant to imply that the EEC has a monopoly on agricultural protection. Some other countries protect agriculture as much as the EEC does, by means of quotas. But I suggest that it does herald the maturity of the Community and the loss of its amateur standing.

Despite this protection, the Community argues that the level of U.S. and other countries' agricultural exports to the EEC would continue to rise. The fact is, U.S. agricultural exports to the EEC of items subject to variable levies fell 47 percent in value between 1966, when the common agricultural policy became fully effective, and 1969, while nonvariable levy items more or less held their own.

In addition, more than 22 preferential trade arrangements are already in effect with African and European countries which are not presently members of the EEC. Three more, with Kenya, Tanzania and Uganda, have been signed and are awaiting ratification. Another, with Nigeria, has been signed and may be ratified soon.

The Community has somewhat similar preferential arrangements with Spain and Israel and exploratory talks have been held with Egypt, Libya, Lebanon and Malta. Algeria has requested negotiations and Austria is hoping to conclude an association agreement with the EEC involving preferential trade arrangements.

In addition, the United Kingdom, in its discussions about entry into the EEC, has already asked for preferential trading arrangements with certain Commonwealth members in Africa and the Caribbean. The multiplication of these preferential arrangements carries the world in just the wrong direction. No less an authority than the GATT Director General has characterized this development as a return to the law of the jungle.

In yesterday's time frame, when the trading power of the United States was disproportionate to that of other trade blocs, the double standard was understandable, if not equitable. Today, it is an anachronism. I do not mean to suggest that European and Japanese quotas justify American quotas, but I am constrained to say that excessive European reaction could turn a manageable controversy into a rapidly escalating trade war.

The problem of U.S. direct investment in Europe is harder to define. For despite all the talk of technology gaps and U.S. domination, the fact is that the competitive strength of European companies and industries has been growing fast, in domestic markets and in export markets. There is no longer--perhaps there never was--an across-the-board technological superiority on the part of U.S. companies. Perhaps this is why, according to the latest figures, the 200 largest corporations outside of the United States turned in a better profit performance than America's top 500. U.S. companies increased their sales by nearly 10percent; non-American companies topped out at over 16 percent. And profits outside of the U.S. grew nearly 16 percent, while softness in the American economy yielded a profit gain of only 2 percent for the 500.

Nevertheless, a general gap, to the extent one exists, is in management rather than technology. There is a difference between the best U.S. management and some of its European competitors in concept, vigor and style. Also, European firms have been handicapped by national laws and tax rules which impede the creation by merger or acquisition of large, diversified multinational companies across frontiers.

Yet these are surely problems which are within Europe's means to solve. They will, I am convinced, be solved not by restrictions on U.S. investments, but by a combination of innovation and legal reform. The European answer to the U.S. multinational firm must be and, I believe, will be, the European multinational firm. After all, like many of today's most successful ideas, the multinational corporation was invented in Europe.

But the anachronistic attitudes that trouble transatlantic trade relationships, reach beyond trade to cloud monetary affairs as well. This is evident in the disproportion between Europe's burgeoning economic strength and trading power on the one hand, and its growing reliance on using dollars as a significant part of monetary reserves.

Paradoxically, the dollar is perceived to be both weaker and stronger now than it was a decade ago. It is weaker because the U.S. competitive position in world trade is weaker, partly owing to inflation in the United States and partly to the faster growth and the technological innovation by European countries and Japan.

On the other hand, the increasing private use of the dollar abroad, in conjunction with the creation of the two-tier gold system, has made the world more dependent on the dollar as a reserve asset and as private international currency. Consequently, the freedom of action of the United States with respect to its balance of payments has been enhanced. The parity of the dollar has been rendered relatively more remote from a direct link to the reserve position of the U.S.

Taken together, these developments make it possible for the United States to exert a large and somewhat one-sided influence on monetary conditions in Europe--so long, as least, as European countries adhere to a system of pegged exchange rates.

Europeans are understandingly unhappy about this state of affairs. Their malaise has been greatly intensified by the experience of the last few years. Excessive monetary expansion in the United States in 1965-68 and the inflationary impact in Europe made Europeans more aware than they had been previously of the transatlantic monetary leverage of a large U.S. payments deficit.

Europe has a right to expect responsible financial management in the United States. I think that the policies of the past two years service that expectation. We have taken stiff medicine to get rid of our inflationary fever. The results were painful--a recession with high unemployment, depressed output and reduced profits. We are now in the recovery phase, and the prospects are bright that, with the moderate growth anticipated for 1971, inflation will subside further.

The chances are also good that we will witness a substantial improvement in the overall U.S. payments balance this year too. But even if, as I expect, our official settlements deficit falls this year to about half of last year's record level, the outflow of dollars will remain large. In part, this will reflect a further reversal of the exceptional short-term capital inflows of 1968 and 1969. But part of it will be attributable to policies of countries with international payments surpluses.

In balance-of-payments matters, it takes two to tango, and both the countries with deficits and surpluses must do their part. Some surplus countries complain about American deficits while at the same time helping to perpetuate them. In this context, I might again refer to the Common Market's agricultural policy and burgeoning preferential arrangements as barriers to American exports. The U.S. is still paying a disproportionate share of the costs of military defense in Europe. And Europe could do more toward untying aid and opening government procurement to international competition.

But in the last analysis, no one needs to have a balance-of-payments surplus who doesn't want it. A country in surplus can always upvalue its exchange rate--as Germany did in 1969 and Canada is doing with its floating rate.

The choice of whether to go on living with the dollar on the present basis, or to find a working alternative is up to the Europeans. The Common Market's decision two weeks ago to move from talk to action on monetary unity is evidence of a strong desire to explore the possibilities. The initial steps are modest, and the practical problems great. Still, it is a long step in the right direction.

The change I have described is vast. In the words of Jacques Ellul, it does not "involve the simple addition of new values to old ones. It does not put new wine into old bottles; it does not introduce new content into old forms. The old bottles are all being broken." Such change calls for new responses. Will appropriate responses be found? Or will the old Marshall Plan mentality cloud the thinking of everything we do? How will we answer a number of hard questions that are already upon us?

The beginning of wisdom does not lie in the belief that children do not grow up and that value systems are not changing. The central reality today is that we all live in a tough, competitive world where it is no longer appropriate that the United States enter the game with a handicap. The fact that a handicap was appropriate in the early postwar days is a bit of history, not a reliable guide today. All of today's value systems in the world are in constant transition, and the velocity of that change is so great that it becomes increasingly difficult to understand the magnitude of the change. The free market in ideas is as tough and demanding a market as any other type around the world.

An anachronistic idea cannot long survive in an intellectual free market any more than yesterday's product attracts today's consumer. It was a great Frenchman, Victor Hugo, who wrote that "Nothing in this world is so powerful as an idea whose time has come." As a corollary to that thought, one might say that there is nothing as dead as an idea whose time has passed, because then it becomes an anachronism. The new "ism" is not quite as dangerous as some other "isms" of the past, but only providing that you and I understand its true meaning.

And so, we would all profit from Raymond Aron's advice that "It is wiser to understand the diversity of worlds than to dream of a world which no longer exists, because one does not love the world that does."