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

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THE old maxim “in time of peace prepare for war” has a new meaning and a new application. The situation created by the European conflict has emphasized the necessity for preparedness to meet emergencies which may arise, affecting the commercial requirements and financial conditions of countries whose trade we seek.

Many a country whose usual sources of supply have been cut off and in which we might find a new market for the products of our factories, is terra incognita to a large number of our manufacturers, and valuable time is being lost and false moves will be made because of the altogether too nearly universal ignorance of the conditions, needs and business methods of important commercial centers abroad. And there is really no excuse for such ignorance.

Twenty years ago a manufacturer had few aids to the acquirement of such knowledge. Information regarding the local demands, the present supply, the names and reputation of possible customers and similar data necessary to conduct business intelligently and safely could be obtained only by personal investigation and experience. To-day he has at his disposal means of securing the fullest details at a cost so small as to be insignificant.

Through departments of the United States government, institutions like the Pan-American Union, and through such bureaus of information as that conducted by the Philadelphia Commercial Museum, he can obtain the most detailed information regarding any market in the world. Information on such subjects as shipping, invoicing, packing, banking and customary terms of sale is readily obtainable, while efficient and responsible translation bureaus provide our manufacturers with means of communicating with merchants and importers in all parts of the world in their own language.

We hear much of the aid given to German exporters by their government, and comparisons are frequently made, unfavorable to similar efforts on the part of our own government. It is nevertheless a fact that in many ways the United States is doing more to assist our manufacturers than is done by any other country in the world, Germany not excepted. There even is danger that American manufacturers may expect too much from the departments at Washington engaged in this work. It is one thing to ask such departments to investigate, report and advise, it is another to expect them to place orders in our manufacturer’s hands.

The Agricultural Department conducts investigations, reports results to the farmers of the country, and gives them much valuable advice. It does not and can not till the soil, plant the seed, and reap the harvest for each farmer, although there seem to be many who expect the government to do all this for our manufacturers in the cultivation of export trade. The government can do much preliminary work, institutions like the Commercial Museum can lend valuable aid, there are export commission houses which can handle the shipping and financing of orders, but if a manufacturer is to secure a lasting hold on foreign markets he must do the selling himself. The assistance which is offered to the manufacturer to-day is in some respects like that which a physician gives to his patient. He may prescribe the remedy, but it is useless for the patient to expect satisfactory results unless he does his own part by following the accompanying instructions as to diet and exercise.

There is a vast difference between the world to-day and the world 50 years ago. Distances have been shortened—almost eliminated—and what were but a brief lifetime ago separate groups of human beings, in a large measure independent of each other, now form one great body—dovetailed and interwoven so closely that any serious shock to one of the component parts is distinctly and immediately felt by all.

For a time at least the whole commercial mechanism of the world is thrown out of gear by the European war. Important parts have been crippled, and it will be some time before the rest of the machinery can adequately perform its usual functions. The situation thus created has been called a very paradise for the pessimist. But there are those to whom the ill wind may blow some good. Opportunities have been created for the marketing of the products of our factories and farms which did not formerly exist.

Germany’s great export trade of some two thousand millions of dollars is practically killed, for the time being, exports from the other countries engaged in the war have been cut off entirely or materially diminished, and many orders from neutral countries, heretofore sent to Europe, will doubtless come to the United States. It is the time for prompt but not for precipitate action on the part of our manufacturers. It may not be surprising, however, if some of them neglect to look over the fence to see what fruit may be ready for the plucking in the adjoining field, for there is that little item of nearly two hundred million dollars worth of goods which Germany has been sending to the United States which is worthy of some consideration, and in certain lines the best opportunities created by the war are right at our own doors.

It is the new markets in other countries, however, which we are considering at this time. South America seems to appeal most strongly to a majority of those studying the question, and there are good reasons for this. It is not because of proximity; we are practically no nearer the leading markets of South America than the great European manufacturing nations. It is not because of any sentimental reason arising from the fact that we are on the same side of the globe, any more than the fact that we are on opposite sides of the equator should act as a deterrent factor in our trade relations. It is certainly not due to any blood relationship; some European nations are much closer of kin to the people of South America than we. It is mainly due to the non-existence of trade competition. Neither in the home market nor abroad do we enter into competition in any considerable degree. When competition does enter, it is in natural and not manufactured products. It is, nevertheless, a fact that the greater markets for our manufactured products are found at present in countries which are our keenest competitors.

But there are other markets than those of South America, markets which are sometimes called neutral because in them we meet the other manufacturing nations on a plane of equality not assisted nor hampered by discriminating customs tariffs nor other governmental aid or impediments to trade. Some of these markets are growing rapidly in importance, and their future prospects are quite as bright as those of South America. The far and near east present alluring opportunities for the future if not for the immediate present. The English colonies, although giving preference, in the matter of customs duties, to English products, are large, growing, and in many respects safer than the Latin-American fields of endeavor.

There is, however, a great economic problem which may be solved to the advantage of this country by prompt but conservative action in connection with the development of our trade with South America. It is possible that this country may replace England and Germany in the growth of South America to an extent greater than is possible in other parts of the world, but this can only be accomplished if the United States takes a greater financial interest in the development of South America’s resources. In other words, we must become larger creditors of the countries to the south of us if we hope to retain the trade which may be temporarily forced into our hands under the stress of unusual circumstances arising from the present European conflict.

The total trade of the twenty Latin-American Republics amounts to about three thousand million dollars, approximately one half of which consists of exports and one half of imports, under normal conditions, the exports exceeding imports by about two hundred million. We already predominate in the combined trade of ten of these republics. In the trade of the ten countries in South America we stand third, ranking very close to Germany in exports to, and second to England in imports from them. We buy from them fourteen million dollars’ worth more than Germany buys. Our purchases from these countries exceeds Germany’s sales by sixty million and our own sales by about ninety million. Great Britain’s sales top ours by 120 million, exceeding her own purchases by twenty-seven million. We are the only one of the three nations which buys from them more than we sell. Our large purchases of rubber and coffee from Brazil are mainly responsible for this condition.

It is with no desire to belittle the importance of this trade that I express the fear that we may be overshadowing the possibilities of other markets through disproportionate attention paid to those of South America. For immediate results and greater certainty of securing payment for what we sell, I believe that some of the European countries, including Great Britain, who has been a purchaser of German goods to the amount of some 350 million dollars annually, and the British Colonies, offer greater immediate inducements and better possibilities of increasing our trade along lines of the least resistance.

Australia, for instance, buys from Germany about thirty-five million dollars’ worth each year. These and other markets are too important to be lost sight of through over attention to those of South America. At least there is no valid reason why we should reject a good fat trout or two because we are fishing for eels.

I want to say a few words regarding the use of official statistics in estimating foreign trade possibilities and prospects. Before we had recovered from the first shock of the news of the European war, a number of ingenious newspaper writers and some men, whose reputation for knowledge of foreign trade conditions is rather widespread, figured out a golden harvest for our manufacturers and exporters.

Their predictions of great and immediate profits were based on statistics of the trade of the contending countries with the rest of the world—a trade which they prophesied would necessarily fall into our laps. They arrived at their conclusions in this manner:

The exports of Germany, Austria-Hungary and Belgium amount to three thousand million dollars.
This is totally cut off.
The exports of France, United Kingdom and Russia total five thousand million dollars.
This will be reduced by say two thousand million dollars.
Add this two thousand million to the lost trade of the other belligerents and we have five thousand million dollars—which represents our opportunity.

If we succeed in securing only one half of this we shall double our export trade in one year. Side issues were lost sight of. The fact that of Europe’s export trade of some twelve thousand million dollars, two thirds or eight thousand million represent sales of European countries to each other, was ignored altogether. In this connection, the circumstance that 80 per cent. of Belgium’s exports were to European countries and 75 per cent. of the exports from Germany went to her immediate neighbors in Europe is of interest. England alone sold and still sells the bulk of her products to countries outside the continent, only 35 per cent. of her exports being shipped to that part of the world. The decreased purchasing power arising from the loss of their most valuable markets by other countries and the withdrawal of European capital, which financed a vast majority of the industries and public enterprises of many countries, was not considered.

“Figures can not lie” is an old adage, but they can be made to perform most amazing contortions. Let us consider for a moment the application of statistics to the study of a single commodity. Robinson & Company—for instance—makers of picks and shovels, discover that the Argentine imports, annually, $500,000 of these necessary implements, and that Germany has divided the trade in this line with England, each sending about $250,000 worth a year. Because of the war, Germany is eliminated—consequently Robinson & Company have but to slip in with their goods and fill the vacuum caused by Germany’s forced withdrawal.

That is the situation as it appears after a careful study of the official statistics, but when their representative arrives in Buenos Aires he finds, to his surprise, that while it is true that 500,000 minus 250,000 equals 250,000, is it equally true that 250,000 minus 250,000 equals zero. (That last 250,000 represents the diminished purchasing power and decreased demand arising from the same cause which brought about the elimination of German competition.) Moreover, he discovers that practically the entire local trade in picks and shovels has been in the hands of two firms, one representing a German manufacturer, the other representing a British manufacturer. The German firm is out of business, but the English house is on the ground and prepared to supply the limited extra demands made on it through the failure of its German rival. Robinson’s representative learns, therefore, what many of our manufacturers are learning, that while the time is ripe for a general campaign of education and promotion, the prospects of securing large immediate results are more remote.

I sometimes wonder whether we are not apt to give too great prominence to so-called international competition and to forget the more active and practical competition of the individual. Is it not, after all, Peter Smith & Company of Liverpool, and the Actiengesellschaft Hans Fleischmann, of Hamburg, that Robinson & Company must consider, with all due references to the possible competition of Jones & Company, whose factory is perhaps just across the street.

“How can I sell in competition with English and German manufacturers when they pay no more for their raw material and less for labor than I do?” said a hosiery manufacturer to me recently. “I give it up,” was my reply, “but a manufacturer in your line, whose factory is not two miles from yours, is doing so.” And when I produced the proof, his only reply was essentially that of the countryman who saw a giraffe for the first time—“They ain’t no such animal.”

Competition is largely a personal matter, and he who wins is not necessarily the one whose goods are the cheapest. Salesmanship, honesty, liberality, courtesy, fair treatment, persistency, compliance with specifications as to packing and shipping, which may at first glance seem trivial and unnecessary, but are often most important, are all great factors, not only in winning trade in foreign markets, but also in keeping it when once won.