CHAPTER IX

FOREIGN TRADE OPPORTUNITIES AND THE PASSING

OF OUR PROVINCIALISM

HE present European war has given us an un

TH

precedented opportunity for developing our ex

port trade. When peace is again restored we shall, for a few years, be the leading export nation of the world. Whether we retain this supremacy will depend largely upon the efficiency of our merchandising and industrial organization and the coöperation of our government with business. These opportunities for trade exist in Latin America, in the Orient, in Russia, and elsewhere.

A very substantial number of our industrial plants have increased their gross manufacturing capacity as a result of war business. Many of them have so quoted their prices, restricted their dividends, and written off depreciation, that much of the plant can be scrapped, after war orders cease or are filled, without affecting their normal prosperity.

But if it is possible to sell this increased production in new and permanent markets, both business and labor, will profit. Export markets should, therefore, be sought for the excess in our manufactured products. The domestic market cannot absorb this sur

plus immediately, nor can a permanent export demand for it be created overnight, and yet the possible disintegration of these plants, even temporarily, would represent a deplorable economic waste. Some hope for a solution of the immediate problem is held out by the demands, already being made, for aid in reconstructing the shattered industrial districts of Europe.

The conclusion of the war will bring with it the problem of reviving the industrial life of some 20,000 square miles in France and Belgium. A large part of this area is made up of densely populated and centralized manufacturing communities. In the eastern war zone, also, lie important industrial centres such as Warsaw, Lodz, Vilna, and others. Computed by the number of employes and horsepower active in all industries located before the war in what is now the war zone of France, it is claimed that about 40 per cent. of the French manufacturing industry fell into enemy hands. Included in this estimate were mines and quarries, iron and metal plants, agricultural and food production, the chemical, textile, paper, electrical, printing, clothing, and furniture industries, potteries, glassworks, tanneries, rubber factories, and factories for products made of straw, feathers, hide, leather, and hair.

Material losses in buildings, factories, and livestock destroyed in the war zone depreciation of industrial plants and railways that have not been utterly destroyed, and machinery removed-must

be replaced immediately after the war. The loss of operatives in men means recourse to machinery. All signs point to a demand without precedent for machinery and construction materials, which must be satisfied before industrial activity in the war zone of Europe can be resumed. The industries of the United States will be called upon to assist in this rehabilitation of Europe and to supply in great measure the new machinery and materials required.

But this repair of waste, while profitable, is not the foundation for permanent export trade. In a measure we shall be arming our competitors. Like a part of the business in war supplies, it will be temporary in character-the outcome of abnormal conditions. We must look to other channels for our permanent export markets. Our chief efforts must be directed toward capturing our share of that foreign business which we can hold permanently.

Our Latin-American trade, and particularly our commerce with South America, has been made the subject of active propaganda in the last two years. In Mexico, in Venezuela, Central America, and in the West Indian republics, we are fairly well entrenched commercially, although there is still room for the expansion of our trade. With reference to the rest of our South American trade, it is enough to restate broadly the fundamental conditions under which this trade must be developed and held.

We must have in mind certain cardinal points when dealing with Latin America. One is the more

prompt and economical delivery and distribution of our goods. The shipping law paves the way.* We must face in all South America the thoroughly organized and old-established competition of Europe, and in the West Coast countries the increasing commercial activity of Japan.

We must cease to think of the ten South American republics as one entity, with climatic, social, and topographical conditions common to them all, with identical requirements, and with an economic development equally spread over that vast continent. We do not associate Alexandria in Egypt, or Tunis, with Johannesburg in the Transvaal, or Durban in Natal, and we must not confound Caracas in Venezuela with Buenos Aires in Argentina.

Our merchants must have agents who understand and speak the language of those countries; we must study the people, and cater to their wants and preferences-must manufacture according to their standards if this is necessary in order to hold their trade. We must acquaint ourselves with their commercial laws. We must make some concessions to the goods produced by their nascent domestic industries fostered and protected by certain Latin-American tariffs, and must expect to meet them as a factor in competition. We must learn something of their tariffs and customs regulations, or have representatives who are familiar with them, in order that we may manufacture, pack, and ship our goods to best advantage. *Approved by the President, September 7, 1916.

Successful merchandising in Latin America, in short, requires a sympathetic appreciation of the needs of the people, and an accurate knowledge of the methods by which competition is carried on in these markets.*

Finally, we must leave behind us, definitely, the idea that these trade requirements are vexatious obstacles to be overcome. We must accept in a tolerant spirit conditions in South America as they exist. Instead of being impatient at ways different from our own we must learn to adapt our goods to their ways. Adaptation to these ways is simply a part of systematic business getting.

We sold $10,165,769 more of goods in China last year than we did in 1910. In 1905, total imports of American goods into China amounted to $27,884,518; in 1910, $29,990,370; and in 1915, $40,156,139. But the growth of our Chinese shipments has not kept pace relatively with those of other countries. Ten years ago we enjoyed 14 per cent. of the trade, while in 1915 we controlled a scant 9 per cent. In China we have had to meet the traditional prestige and influence of the British in Asia. This is backed by British banking organization in China, and supported by the British free port of Hong Kong. While the Germans have wrested trade from the British in part by extending long credits, few British merchants agree that this is a sound practice and it is a fact that many German

*See "Trade and Tariffs in South America," June 30, 1916, Federal Trade Commission.