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how essential the domestic production of this and other products are to our national life. Other industries not to be classed as essential, such as venetians and sueded gloves, may be entitled to consideration from the Government that will enable them to compete on equal terms with foreign rivals. The diversification of the industrial life of a nation is desirable, and it may be wise public policy to protect industries that develop the natural and human resources of the nation even though there may be, temporarily, a slight economic sacrifice.

Not the least interesting, because an unexpected, result of the war was the direction of public attention to the pre-war control by Germany of a number of important industries and to the development under war conditions by other countries of competition therein. Some cases, which have been discussed in this chapter, illustrate this point, but even more conspicuous, interesting, and important from the standpoint of national policy are cases in the chemical industry to which we now turn.

CHAPTER III

THE CHEMICAL INDUSTRIES: I, UNDER BLOCKADE AND

EMBARGO

Curtailment of imports of chemical products from Central Europe - The situation in the dye industry in 1914- Effect of the shortage of dyes on American textile mills - Growth of the American dye industry-Tariff on intermediates and dyesEffect of America's entrance into the war in April, 1917, on the dye industry - Germany's natural advantage in potash Growth and nature of the American potash industry- Potash beds in Alsace - Germany's pre-war control of thorium nitrate Its production in the United States Undesirability of dependence upon one nation for supplies of essentials.

Germany in 1914 held undoubted supremacy in many branches of the chemical industry, particularly those requiring scientific knowledge and technical skill. In the production of some chemical products her position. may fairly be described as monopolistic. The importance to her of this advantage was increased by the fact that chemicals are frequently the raw materials of other industries. By controlling these chemical products Germany actually or potentially controlled in some degree industrial activities in other countries. Before the war consumers in the United States found it profitable to purchase the German product because it was reasonable as to price and of high quality. In some cases there was no alternative source of supply, even if quality and price were not altogether satisfactory. The national significance of our dependence upon Germany for essential products was not appreciated, even if known, by the public.

The effect of the war on the chemical industry due

to the curtailment of imports from Germany should be distinguished from that due to the demand for war supplies which will be considered in the following chapter. Before the United States entered the war, permanent changes had come about in the American chemical industry as a direct result of the German embargo and the British blockade. The isolation of Germany brought our dependence upon her for essential products dramatically to America's attention. In some industries, for example, the textile industries, there resulted what were almost panic conditions. To American business men and chemists was given an opportunity to demonstrate what their resourcefulness could accomplish in an emergency. The curtailment of imports from Germany taught us more about the interrelationship of industry than we could have learned in years of normal conditions. The shutting off of German supplies has led to the establishment in the United States of industries which will be permanent and which will end the monopoly formerly enjoyed by Germany in some lines. The characteristic effect of the war conditions was most strikingly evident in industries producing coal-tar dyes, potash, and thorium nitrate, and these three, therefore, will be considered in some detail.

When war came upon the world in 1914, Germany was producing approximately three-fourths of the world's supply of coal-tar dyes. Even this, however, does not indicate the full measure of the world's dependence upon Germany. Dyes are made from intermediates, which in turn are made from crude coal-tar products. The making of these products, and particularly the

1 The world's production of coal-tar dyes in 1914 was as follows (Department of Commerce, Special Agent Series No. 96, p. 30):

manufacture of the intermediates, involves in many cases technical knowledge of the highest order. Secrecy and protection through patents of the processes elaborated by German chemists after many years of intensive and painstaking research made competition difficult. The intermediates were the keystone of Germany's dye monopoly. Through the dye combines Germany directly controlled one-half of the dye production in foreign countries and was in a position to threaten the remainder. Germany, to a large extent, owned and operated the dye factories in Great Britain and France. In America coal-tar colors valued altogether at $2,470,096 were produced in 1914 by seven establishments. But these establishments were almost entirely dependent upon Germany for intermediates and one was owned by a leading German dye firm. It is true that since 1910 one firm had provided a small part of the domestic consumption of nitrobenzol and anilin and that several other inter

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2 The coal-tar dye industry in the United States as reported in

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mediates were produced in this country in small quantities. But these instances only tended to emphasize our During the fiscal year ending June 30, 1914, we imported over 10,000,000 pounds of intermediates.

lack of self-sufficiency.

As is well known, the organization of cartels was encouraged by the German Government and became a leading factor in the advance of German industry. It was particularly effective in the chemical industries. Because of the interrelation of products and the utilization of by-products, close organization effected large economies. It made the protection of patent rights easier, it made it possible to purchase raw materials at greater advantage, and it enabled the industries more effectively to meet and to suppress competition abroad. Unquestionably, a large part of the success of the German dye industry was attained through the painstaking research of German chemists and the processes which they discovered and patented by the thousand. financial control and business organization were also large factors in its supremacy. Before the war it was controlled by two communities of interests, the one known as the Badische group, the other as the HochstCassella group. The dividends of four of the large German dye concerns from 1902 to 1911 ranged, it is reported, from 196 to 300 per cent. This financial strength must be kept in mind when we are considering the competition that our industries will be called upon to face.

But

The dye industry is not large and its importance was not realized until the war brought our dependence upon Germany forcefully to the attention of the textile manufacturers and other consumers. Color is often the determining factor in the saleability of goods. Ink and

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