Popular Science Monthly/Volume 86/April 1915/Foreign Trade of the United States I

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FOREIGN TRADE OF THE UNITED STATES
By A. B. FARQUHAR

MANUFACTURER, YORK, PA.

THREE years ago it would have been a comparatively simple matter to address you upon the foreign trade of the United States and how best to promote it, the topic named in your secretary’s courteous invitation. But a change came with the Balkan war and the resulting strained financial conditions, accumulation of public debts, private hoarding of money, and curtailing of loans in fear of a general European catastrophe. One of the prominent business men of Europe wrote me at that time that we might look for a great war, involving most of the European continent, about 1914, and he added that he was preparing for it. Well, his war has come, the most inexcusably diabolical that has cursed the world since the creation, involving the heaviest loss of life and of property. European statisticians estimate the average daily cost of it, including property and trade destroyed, from fifty to seventy millions of dollars, and the killed and wounded at from twenty to thirty thousand a day.

The nations now are so closely linked together that our hemisphere has already had to bear a portion of this heavy cost, and more yet awaits it, but our yoke will be easy and burden light compared with the crushing weight that has fallen upon Europe. Our country is on the whole happily situated compared with any of the warring nations, but when it is considered that three fourths of our exports had been taken by the nations now at war, and that they had financed most of the other fourth, it will readily be seen why our export trade is crippled, except in articles needed for war purposes.

At the outbreak of the war our indebtedness to Europe, mainly for loans to aid our railroads, amounted to over five thousand million dollars, several hundred millions of it falling due within four months. Thanks to the Federal Reserve Act and our improved currency system, which came at just the right moment, even as a godsend, to restore confidence, we were saved from the throes of a great panic. The Stock Exchange remained closed, fearing a large unloading of securities from Europe, but there never was any real danger of that. Our friends there felt that their money was safer when invested in this country than anywhere else.

That the causes of financial crises are largely psychological is almost a truism, so abundant are the proofs of it shown in every business panic; and even, as at present, without a panic. For instance, people are jubilant over the New York bank statement of over a hundred millions in excess of legal requirements on the 18 per cent. basis, when under the previous 25 per cent. basis the same reserve would be some millions below the legal requirements, thus showing a large deficiency instead of a surplus.

The condition of Mexico is quite a factor in our foreign trade. Their imports from the United States have been much more than from any other country, coming largely of an accompaniment of our increasing investments there. We have already a thousand million dollars or more invested in Mexico. When the troubles there are over, and a government controlled by the intelligent classes and accepted by the whole people is established, we may expect a revival of trade in that section. Mexico the great Humboldt ranked as the richest portion of the world, and it must eventually become a large field for trade.

Nearly all those who know Mexico,—I have known it for many years—regarded our failure to act with most of the other nations in promptly acknowledging Huerta as a serious mistake. He was certainly far better qualified for the position of president than any of those who opposed him. He had control of 17 of the 23 states, to begin with, and with the acknowledgment of the United States could readily have established peace: we could thus have been saved all responsibility, to say nothing of our waste at Vera Cruz and on the border of ten or fifteen millions of dollars and a score of lives. We have no proof that Huerta had anything to do with murdering Madero, but, if he did, as a prominent Mexican remarked, he would be only following the custom of the country, which should not concern us.

The destruction of property is so great in Europe that we shall doubtless be called upon for large supplies, and at the close of the war a vast amount of material will be needed, which we can furnish if there is any money left to pay for it. From all this we may draw temporary profits, but, in the long run, we in common with all the world are bound to suffer from this wasteful and wicked war. We may perhaps congratulate ourselves on suffering less than any other nation. If the war continues much longer all Europe must approach bankruptcy, for its national debts before the war were already enormous. France owed over six thousand millions of dollars, Germany, five thousand millions, Russia, four thousand five hundred millions, England, three thousand five hundred millions, Austria-Hungary, two thousand millions, and Belgium, seven hundred and fifty millions. This indebtedness has already been increased by over seven thousand millions of dollars, about the estimated expense of our civil war. Our recovery after the war was rapid, only for a time interfered with by the great ’73 panic, but we disbanded our armies and stopped the expense of militarism, except for pensions, which by the way for a number of years were comparatively small. If Europe will follow our example in this they may be saved from bankruptcy and recover sooner than expected, but it is probable it will not recover its former status during the life of those here present, although it is barely possible with energy and economy and by resolute suppression of militarism, the progress towards recovery may be more satisfactory. To be sure, the Napoleonic wars and our Civil war cost their thousands of millions of dollars each, and ruin was prophesied in both cases, but the debts are almost paid. Let us hope the war will end with a genuine trial of the experiment of Christianity and an abolition of the worship of Mars and Moloch. There is nothing to be said in favor of war as a means of settling difficulties. It has never settled anything except that the strongest and most savage usually wins. The real settlement comes afterward, by arbitration, which could better be done before the war commences, with nations as with individuals. There is nothing that so easily provokes war as to prepare for it. Had Germany not been so carefully prepared, there would have been no war this year. In the old days when every one went round armed, prepared for defense, there were in consequence countless duels and homicides. No sensible man maintains that the way to preserve peace among citizens is by preparing for private wars. No sensible man can believe in war among nations, unless brought up to it, any more than he could agree with the sixteenth-century theologians that there were children in Hell not a span long.

The newspapers have made much of our great export trade in November, but the figures show that, because of the falling off in value of cotton shipments, instead of being greater it is thirty million dollars less than in November of last year. While the rest of our crops have been unusually good, with a farm value of more than three hundred million dollars over the crops of last year, the effect of the war in our cotton crop leaves a deficiency, compared with 1913, of about twenty-five million dollars for the total value of the crops. And the cotton crop is our money crop, the sale of which abroad pays a large share of our indebtedness, and in addition turns the tide of gold shipments to this country. The cotton states are suffering far more than any other portion of the country. The impossibility of selling the cotton at remunerative prices, owing to the curtailment of the foreign demand, coupled with the size of the 1914 cotton crop, estimated at over 16,000,000 bales, the largest in history, makes the financial situation there quite serious. This will not be an unmixed evil, if it urges our southern friends to more diversified farming, and cultivate economy in production and living expenses.

The success of our foreign trade depends largely upon our ability to finance it. After the outbreak of the war it was assumed by many that since three fourths of the supplies of South America, which is our most important field of exploration, came from Europe (a large portion from Germany) the war would at once greatly increase our trade there; not realizing that South America had been financed by Europe and the war made it temporarily bankrupt. We can not expect much immediate trade from South American customers unless we can give them credit, filling the place of the European bankers. This we are now unable to do to any great extent, on account of the large amounts we owe to Europe. However, with industry and economy our indebtedness there should rapidly be reduced, when we can aid them. The branches now to be established in South America by the National City Bank of New York, under the federal reserve act will assist, by making loans and by enabling exchange to be bought and sold there (in dollars instead of pounds as at present), but it will probably be some time before our trade with South America even reaches normal proportions.

But I must not forget that I was invited to address you on our foreign trade and not on general conditions, because of my personal experience of nearly 60 years as a manufacturer, and 45 years as an exporter of implements and machinery. Some practical knowledge won from such experiences is doubtless what is here desired. To bring this strictly to date, let me recall its most recent chapter.

I visited Europe last summer—Germany, Austria-Hungary, the Balkans and Italy—went on a semi-official mission of the Southern Commercial Congress under auspices of the Secretary of State to study municipal conditions, and particular advantages were consequently given me. I found all apparently peaceful and prosperous, no thought of war or apparent preparation for war. There is a large field for the sale of our products in all that region. Hungary seemed especially prosperous.

I spent two weeks in Bulgaria, thoroughly examining conditions there. The Balkans will be a great field for our export trade when peace is declared and the Dardanelles opened. Bulgaria, Roumania and Servia are accessible by water via the Dardanelles and Bosporus, for goods may be landed direct at various ports on the Black Sea, and at reasonable rates. The country is rich and prosperous and rapidly recovering from the ravages of recent war. Bulgaria is determined to keep out of the present war if possible. I had several conferences at the palace. King Ferdinand is a botanist, much interested in conservation and the improvement of his country. Queen Elenora is a wonderful woman, understands a number of languages, is alive to all that concerns her people, was chief nurse in the army during the war, even caring for cholera patients. I went with her to their principal hospital, which is up-to-date. She arranged when I was there to have three of the nurses sent over to America to take a postgraduate course. Although Bulgarians, all spoke English. The Queen was anxious to come herself to examine American institutions and look after Bulgarians here, but the war put an end to this, as there was no way of getting over. Sofia, the capital of Bulgaria, is a handsome and prosperous city, fine buildings, streets beautifully paved. One of them, by the way, is named after Andrew Carnegie, whose benefactions seem to extend throughout the world. There is a large field also in Roumania, which was not concerned in the late Balkan wars.

Our opportunities in Russia are practically boundless. Vodka was the greatest enemy of the Russian peasantry. It is said they will probably gain more from its prohibition than they will lose by the war. Russia will always look to us for a large portion of the merchandise formerly bought in Germany.

In conference with members of the Chamber of Commerce in Constantinople, and with government officials, I was assured that the markets there would be open to us, especially for agricultural implements and machinery. Judging from their up-to-date institutions, notably Robert College and the American College for Girls on the shores of the Bosporus (the latter largely assisted by Mrs. Shephard, formerly Miss Helen Gould, and by Mr. Rockefeller), in which the people and the government seem to take a deep interest, there would appear to be a genuine awakening; but this war will probably end with Russian control of the Dardanelles-Bosporus waterway and suzerainty over Turkey.

I also visited Asia Minor, but the land and the people are poor and the field there is limited. Mesopotamia, once the great granary for supplies of grain and fruit, is now being irrigated, and there may be good trade there later on. It was made a desert by the forest being cut away.

There is a large opening for us in Italy, however, including machinery, improved implements and mechanical appliances generally. Although Italy is neutral, it has suffered greatly on account of the war, as has the rest of the world, with factories closed and thousands of idle men. This is made worse by Italians, to the number, it is said, of at least a hundred thousand, sent home from the warring nations. These can find no work to do, and must be supported by the government. We can not expect to do much business there until the war is over.

We have trade also with Australia. The war has temporarily paralyzed business there, but I believe it will soon revive, and the opening is exceedingly bright. The same may be said of South Africa, where we have been shipping largely for many years past. That region is rapidly improving, and we had expected a large business this year, but the civil war there and the European cataclysm put an end to it for this season.

There is no part of the world where the products of the United States may not find a market. We have only to go after it. Business with foreign countries is done very much as it is here. People are a good deal alike. We have only to furnish them what they want, as they want it, giving careful attention to packing, stenciling, and adaptation to available means of carriage. If we send men abroad they must understand the language of the country, and above all else be courteous and considerate with every one they meet. This is important in domestic business, but essential in dealing abroad, especially with the Latin countries.

Owing to the great expense of introduction, small manufacturers will find direct trade in foreign markets impracticable. As a rule, they had better deal through our great commission houses. Their travelers represent many different varieties of merchandise, thus greatly reducing the cost of selling any special line. By the exercise of proper care in making goods, in packing and shipping as directed, risk is practically eliminated; bills being usually paid when goods are delivered on board in New York, or at least payment guaranteed. But they also may largely increase their trade by sending out a well-equipped traveler who understands the language and who will work in connection with the commission merchants in introducing their goods.

Valuable information as to export trade may always be obtained from the Department of Commerce by addressing Mr. E. E. Pratt, Chief of the Bureau of Foreign and Domestic Commerce, who is a most obliging and able official. He is appointing attaches to represent the business of this country in various leading commercial cities of the world, who will be a great aid. We can also get assistance from the Pan-American Union in Washington, the Philadelphia Commercial Museums and the National City Bank of New York. At the Philadelphia Museums samples may be found of nearly everything wanted abroad.

In short, to earn success in foreign trade it is only necessary to follow the examples of European nations that have made a success, and to persuade our politicians to cease from hampering us. As an indication of the value of this foreign trade I may say that our exports of manufactures abroad amounted in 1913 to one billion five hundred million dollars, and the total exports to two billion four hundred sixty millions. Our exports to Latin America were two hundred and fifteen million dollars. We furnish two thirds of the cotton raised in the world, yet South America imports from us but about 2 per cent. of her supply. We are far away the largest steel-manufacturing country in the world. South America buys about 20 per cent. In fact, but about 15 per cent. of her purchased manufactures, all of which might be made in this country, are bought of us. The major portion of this came from the warring nations. It is especially this trade we must look after and prepare ourselves to obtain.

May I suggest in passing that we should prepare for hard times by restoring the simple life of our fathers? Waste less. Three cents a day saved by every inhabitant of this country would amount to more than the thousand million dollars a year that it takes to support the national government. Less than ten cents a day per capita would pay the total expenditures of governments, federal, state, municipal, dispense with further taxation and greatly lessen the cost of living. Astonishment is often expressed that France is able not only to finance its heavy public expenditures, but loan hundreds of millions of dollars abroad. This is explained by the economy of the people there, who save the three cents a day that we waste.

When discussing commerce it is necessary to speak at length of war, as it is the greatest enemy of trade. The dark cloud of war still rests over us, with no sign of breaking or lifting. Many of our factories are closed or working short time, and there are hundreds of thousands out of employment. Our goods are needed abroad, especially in Latin America, to take the place of those formerly supplied by the warring nations; we need their orders to start up our wheels of industry, and some means must be found to secure them. Export markets are necessary to economical manufacture, as they lower the unit cost of production, as our total domestic trade will only keep our factories running about two thirds full and the profit largely rests on the remaining third. Export work, therefore, can be done cheaper than domestic trade. Although we have the advantage in raw material and can compensate for higher wages by increased efficiency, we have had to compete with nations that have made foreign trade a study, who have a better merchant marine than we can ever have under present restrictions. We must compete with nations that encourage business, the bigger the better if lawfully conducted, instead of persecuting them as though success was criminal rather than a proof of merit. The political opposition to those who succeed through ability must die out before we can hope to permanently hold the lion’s share of export business.