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ADDRESS 
 
 ON 
 
 INTERNATIONAL FINANCE 
 AND TRADE 
 
 TO THE 
 
 Association of Foreign Press Correspondents 
 in the United States 
 
 BY 
 
 Eugene \ Meyer, Jr. 
 
 Managing Director of the War Finance Corporation 
 
 NEW YORK 
 JANUARY 3, 1920 
 
Digitized by the Internet Archive 
 
 in 2007 with funding from 
 
 Microsoft Corporation 
 
 http://www.archive.org/details/addressoninternaOOmeyerich 
 
Hcs7 
 
 "INTERNATIONAL FINANCE AND TRADE" 
 
 By Eugene Meyer., Jr.^ 
 Managing Director of the War Finance Corporation. 
 
 When your President did me the honor to invite me 
 to address you on international finance I was glad to 
 accept his invitation, for I earnestly believe that the sub- 
 ject is assuming a position second in importance to none 
 of all the world's great and pressing questions. Frankly, 
 I seek to interest you in these matters because I know 
 that if you are interested you will be helpful. 
 
 Conditions of trade and of the finances that facilitate 
 it, never were of such vital importance as at this moment, 
 for upon the intelligent understanding of the facts that 
 underlie the present economic conditions of the world, 
 upon the prompt adoption of the policies that are neces- 
 sary to meet these conditions, and upon decisive action in 
 carrying out those policies, depends, I believe, the result 
 for which your countries and ours have struggled during 
 the war. How may the world reconstruct the devastated 
 areas and the destroyed industries, renew transportation 
 systems, restore full production and secure an adequate 
 food supply, with sufficient heat and light and power, and 
 the ordinary comforts of life? These questions must have 
 their urgent appeal to you gentlemen of the press. It is 
 for you to make clear to all the peoples the nature of the 
 problem, and to follow the steps that may be taken and 
 those that may be neglected. 
 
 In addressing you, .1 speak to you as one who has a 
 small part to play in this great and dramatic moment 
 
 aA 
 
in international affairs, but I desire to make it clear that 
 I speak only for myself, and I shall discuss tonight inter- 
 national finance especially with reference to the rela- 
 tions of the United States with France, England, Italy, 
 and Belgium. I do not mean that our relations with the 
 other countries are not of great importance, or that their 
 desperate needs should be delayed in calling forth our 
 sympathetic and prompt consideration, but it seems to 
 me, so far as strictly commercial matters are concerned, 
 more practicable first to meet the needs of the countries 
 named, and then at the right time — and I hope it may be 
 soon — to take up the needs of the others. 
 
 A bill shortly to be sent to the Congress is intended to 
 cover the urgent relief requirements in parts of Europe 
 where the suffering is greatest, and we hope that the 
 prompt passing of this bill may do what can be done only 
 as relief. But my discussion with you to-night concerns 
 only questions of finance and of the commerce that de- 
 pends upon it. 
 
 Demoralized exchange markets forced the attention 
 of the thinking world to the difficulties inherent in this 
 situation, which had been lurking in the background 
 ever since the day of the armistice. Various circum- 
 stances prevented for a long time the urgency of the prob- 
 lem from making itself manifest. In Europe the hard- 
 ships of demobilization during the winter season, the dis- 
 location of industry, and widespread unemployment due 
 to cancellation of war contracts, and the political and ter- 
 ritorial debates of the Peace Conference, occupied people's 
 attention exclusively. In America we also had our 
 
8 
 
 period of industrial confusion, and in addition to the 
 problems of demobilization, we had the great task of 
 bringing home two million soldiers from distant lands. 
 
 Then, too, subsequent to the armistice, loans from 
 the United States Treasury to the extent of |2,365,- 
 000,000 that were made to the governments of the coun- 
 tries associated with us in the war, facilitated a continua- 
 tion of exports of supplies which although purchased for 
 war were useful for peace industries. The large sums 
 spent in Europe to maintain our armies and the sales on 
 credit of our stocks of army supplies also helped to tide 
 over a situation that has now become acute. The value 
 of our exports to England, France, Belgium, and Italy 
 for the first ten months of 1919 reached a grand total of 
 13,305,000,000— against a figure of |3,043,000,000 for the 
 same period in 1918, an increase of |262,000,000, although 
 military operations were over. 
 
 May I say here that almost upon the very signing of 
 the armistice the directors of the War Finance Corpora- 
 tion began the consideration of the question which I am 
 discussing tonight — that is, how to help to finance 
 foreign trade during the reconstruction period? It was 
 early in January that the amendment giving the War 
 Finance Corporation power to extend aid to our export 
 trade for a period of five years was presented to the 
 Secretary of the Treasury, and realizing that assistance 
 to foreign trade was essential to the situation, he 
 promptly approved our recommendation. By this 
 amendment, which the Congress passed on March 3, 
 1919, the War Finance Corporation was authorized to 
 lend to American exporters and to American banks that 
 
finance American exporters an aggregate of one billion 
 dollars. 
 
 Our anticipations soon began to be realized. Begin- 
 ning in April, 1919, the excess of Europe's imports over 
 exports was reflected in a sharply declining exchange 
 market. The pound sterling, which on March 1, 1919, 
 was quoted at |4.76, is today |3.80. The quotation for 
 French exchange which on March 1, 1919, was 5.48 francs 
 to the dollar, is today 10.80 francs to the dollar. Belgian 
 and Italian exchanges have likewise declined greatly. 
 
 There is nothing mysterious about international ex- 
 change, if it is approached from a common sense point of 
 view. Goods bought in a foreign country can be settled 
 for only by the sale of other goods or of services, by the 
 shipment of gold, the international medium of exchange, 
 or through the use of some form of credit. At present, as 
 you well know, the buying countries have not sufficient 
 goods to sell in exchange for those they wish to buy. They 
 have not enough gold to settle their balances, and ade- 
 quate credit machinery is not yet in operation. 
 
 It would be superfluous to discuss the reasons why 
 the productive powers of European countries on a scale, 
 which would make possible larger exports of goods, are 
 so slow to recuperate, and the gold situation is clear — 
 all the available gold in Europe would not pay for the 
 goods that are needed. Therefore, credit alone remains 
 as a means to finance the flow of supplies necessary to 
 feed the people and to restore their industries. 
 
 Let us now look at the credit situation from the two 
 points of view — that of America, the seller and lender, 
 and that of Europe, the buyer and borrower. 
 
Assuming, as seems to be clear from the annual report 
 of the Secretary of the Treasury, that credit from the 
 United States Government is no longer desirable or ob- 
 tainable, except in cases of relief, there are still avail- 
 able three forms of credit from America: (1) credits 
 from bankers; (2) credits from commercial and indus- 
 trial sources; (3) credits obtainable from the investment 
 market in this country. 
 
 Taking the first form, it is obvious that the usual 
 banking credit is necessarily a short term credit, exceed- 
 ingly useful in financing ordinary transactions of export 
 and import, but totally inadequate to meet the existing 
 difficulties. The Edge Law, recently passed by the Con- 
 gress and signed by the President, is designed to facili- 
 tate the creation of banking institutions to extend long 
 term credits for foreign trade, of a kind appropriate 
 under present circumstances. 
 
 As yet it is uncertain how promptly and how exten- 
 sively these institutions may become effective. At the 
 time that the bill was presented the investment markets, 
 from which it was expected funds would be obtained, 
 were in better condition than at the present time, and 
 the sale of securities to large investors by these proposed 
 Edge Law banking corporations is materially hampered 
 by the present high surtaxes on income. 
 
 The President and the Secretary of the Treasury, how- 
 ever, have called the attention of the Congress to the 
 question of taxation, and it is to be hoped that such 
 action may follow their recommendation as will open 
 the investment markets more widely to the financing of 
 foreign credits. 
 
6 
 
 In the second class are the long credits which strong 
 commercial and industrial companies may be in a posi- 
 tion to grant to their foreign customers in order to help 
 tide over the present emergency. Among such are some 
 of the more important producers of raw and semi-finished 
 materials, as well as a large number of manufacturing 
 corporations supplying goods fundamental to reconstruc- 
 tion. 
 
 There have been some credits already granted in this 
 form, and I am glad to be able to tell you that more are 
 being arranged for now and in considerable amounts; 
 some of the industrial companies are applying and 
 getting their funds from the War Finance Corporation. 
 Among these are loans for such fundamental needs of 
 reconstruction as ^ye million dollars for agricultural 
 machinery, five million for locomotives, and five million 
 for electrical machinery. I hope that at no distant date 
 additional amounts may be arranged and for similarly 
 useful purposes. 
 
 In the third class are credits, obtainable in the 
 investment market, which should be by far the most 
 important source of assistance, if it can be enlisted on 
 a large scale. A number of loans in dollars have been 
 issued in this country, and this is one good method 
 by which the American investor is helping. But one 
 method is not sufficient, and for some time I have been 
 advocating the opening of our public markets, under 
 proper safeguards, to the internal loans of foreign coun- 
 tries, in addition. 
 
 In years past, when the United States needed foreign 
 capital, Europe bought our American dollar securities, 
 
and it was only as an exception that the American bor- 
 rower was called upon to issue obligations in foreign 
 currencies. The public markets of England, France, 
 Belgium, Holland, Germany, and Switzerland took our 
 American investments practically in the form in which 
 we issued them. In Holland it was customary in certain 
 cases to issue a Dutch certificate for the Dutch investor, 
 but these were merely local certificates in the Dutch lan- 
 guage issued to represent the deposit of the American 
 certificate. 
 
 American investors are accustomed to certificates that 
 are engraved and that are certified by responsible trans- 
 fer agents and registrars for purposes of protection, and 
 there is no reason why they should not get this protection 
 by American bankers and trust companies issuing local 
 certificates which represent the deposited foreign certifi- 
 cates. 
 
 Any dealer in international securities should be able 
 to buy these foreign securities in the open markets of 
 Europe and at a moderate charge to have his European 
 certificate exchanged for an American certificate, which 
 would be good for delivery in our markets. The results 
 would be ( 1 ) furnishing, through the investment market, 
 large aggregate amounts of funds for financing our trade 
 with European countries; (2) material broadening and 
 consequent stabilization of the exchange market, which 
 would enable business men to make calculations based on 
 very much less erratic fluctuations in exchange quota- 
 tions; (3) helping the European markets for their in- 
 ternal loans because the European investors would have 
 the advantage of an international market, rather than 
 
8 
 
 merely a national market for their own issues; (4) mak- 
 ing the internal loans of foreign countries available as 
 collateral for securing shorter or longer accommodation 
 from various sources in America, including the War 
 Finance Corporation. 
 
 There is nothing original in this idea. However, it 
 will be new for this country to have public markets for 
 foreign securities in foreign currency terms. Our posi- 
 tion has changed from that of a debtor nation to that of 
 a creditor nation and our banking machinery and our se- 
 curity markets must reverse the processes and the ma- 
 chinery designed to facilitate business when we were bor- 
 rowers of capital. We must build up a new financial 
 structure for our altered commercial relations, and the 
 establishment of an international public market for inter- 
 national securities is, in my opinion, the most logical, 
 the quickest, and the most important single step that can 
 be taken now. 
 
 I have emphasized the advantage of opening our mar- 
 kets to the internal obligations of foreign governments, 
 but with proper exemption from foreign taxation, such 
 as exists already in the case of some of the internal loans, 
 and other safeguards to American holders, the prime 
 municipal and industrial securities of the borrowing 
 countries would quickly and logically follow. 
 
 Coming now to the European countries, the buyers 
 and borrowers, let us consider for a moment what they 
 can do to cooperate with us, and what obligations they 
 can give. The foreign governments or municipalities 
 may be the borrowers, the bankers of Europe may be 
 the borrowers for the shorter periods, and commercial 
 
and industrial organizations may borrow for shorter 
 or longer periods. Or combinations of any of these 
 may act together. By this I mean, for example, that in- 
 dustries may create combined obligations so strong as to 
 be satisfactory to the American sellers and lenders, or 
 these obligations may, to some extent, be guaranteed by 
 their bankers or their governments. 
 
 In addition to the above, there is the opportunity to 
 sell in our markets investments held in outside coun- 
 tries by the country that desires to increase its fund of 
 dollar exchange. And as some of the countries we are 
 discussing hold large amounts of such investments in 
 other lands than their own, this form of financing may 
 help materially. 
 
 Stated in general terms, gentlemen, these are the pos- 
 sible solutions. I do not think that there are any others. 
 We and the European borrowers will have to study the 
 facts of the situation and determine which of these vari- 
 ous methods seem expedient in each of the countries and 
 to what extent. 
 
 May I now say a word with regard to the attitude on 
 both side of the water? In June, moved by a vision of 
 impending economic impasse, I visited France and Eng- 
 land, and conferred with some of the leading bankers and 
 Government officials, and with some of the representa- 
 tives of Belgium and Italy assembled in Paris. No defi- 
 nite plans appeared to have been formulated by the bor- 
 rowing countries to meet the difficulties in international 
 trade which all agreed were bound to arise with the 
 cessation of loans from the United States Government. 
 Europe's easy method of covering purchases made in 
 
10 
 
 America by loans from the United States Government 
 seemed to have brought about a state of mind which 
 made it difficult to conceive of other methods, yet ob- 
 viously at some time other ways would have to be found. 
 
 Today in Europe the problem is fully recognized. The 
 recent visits of the economic missions of England, 
 France, Belgium, and Italy indicate great interest in 
 considering what may be done. But, to speak frankly, 
 I feel that too much time is being lost. The situation 
 needs the clear grasp of facts, the concise definition of 
 purpose and the courage and decision to take the neces- 
 sary steps to bring about satisfactory conclusions. Yet I 
 have faith and believe that the great problems of peace 
 and reconstruction must command in every country such 
 leadership as Clemenceau, brought to the war problems 
 of France. 
 
 I do not believe it possible that the leaders of 
 government and finance in these same countries, who 
 stood the terrific strains for so long a period, who had the 
 dogged determination to carry on over every obstacle, 
 the unflinching will to surmount every reverse, will now 
 yield to the difficulties of peace, which are great, it is 
 true, but which are inconceivably small compared with 
 the tremendous efforts of war. 
 
 In this country, apart from a few extremists, I be- 
 lieve that our people approach the subject realizing that 
 we are, as never before, a nation among nations, with 
 our part to play in world affairs. They realize that every 
 force of nature is driving us outward to take our place 
 in international relations — commercial, financial, and 
 political — that we cannot reverse the process if we 
 would, and that we should not if we could. 
 
n 
 
 I believe that the great body of American citizens ap- 
 proach the problem of international trade and finance 
 with a strong sense of responsibility to the rest of the 
 world. They desire to do their part at this time of recon- 
 struction, as they desired to do their part in war. They 
 are not motivated by greed or by dreams of economic 
 domination, nor do I believe that they regard the situa- 
 tion as of a purely sentimental character. They approach 
 it in all seriousness as a problem in which a heavy obli- 
 gation rests on the American business man and the 
 American banker, and they are ready and willing, nay 
 even anxious, to live up to the rightful expectations of a 
 watchful world. 
 
 When I addressed the Finance Committee of the 
 Senate in February of last year on the subject of an 
 amendment to the War Finance Corporation Act, I 
 stated that "a prompt restoration of international trade 
 will enable Europe to restore its industry and employ- 
 ment of labor, and thus to hasten its political and 
 social peace. Unemployment and hunger are the surest 
 sources of social disorder. In extending credits at 
 this time to foreign countries to enable our industries 
 and theirs to resume normal activity promptly, I believe 
 we would be making a most important contribution to- 
 ward international peace and prosperity, and that the 
 results arising would benefit alike the country extending 
 the credits and the countries which received them", and, 
 gentlemen, I cherish the idea that this is the attitude of 
 the country. 
 
 In considering Europe's needs, do not forget that 
 there is work to be done in America: goods are in de- 
 mand; materials, labor and capital are needed in 
 
12 
 
 amounts so great as to make it appear almost impossible 
 to meet the foreign as well as the domestic requirements. 
 A report of the Department of Agriculture states that 
 road work amounting to $633,000,000 is required. An 
 investigation by the Department of Labor shows that 
 building construction work to a total of |1,750,000,000 
 was deferred during the war and that only a small part 
 of this has been started. Steam railroad systems of 
 the country, at a conservative estimate, could use 
 $2,000,000,000 as soon as the funds are obtainable. 
 Electric railway construction has been at a standstill, 
 and power plants and other fundamental needs of our 
 industrial life are waiting everywhere for a supply of 
 capital, labor, and material to allow essential develop- 
 ment. The construction needs of our rapidly growing 
 population compete in urgency with the reconstruction 
 requirements of Europe. 
 
 Now, gentlemen, if the people, the industries, and the 
 bankers of Europe, on the one hand, and the people, the 
 industries, and the bankers of America, on the other hand, 
 know the problem, and if, as I believe, the possible solu- 
 tions are clearly defined — and they comprise only a small 
 range of possibilities — then there is needed only a decision 
 with regard to the policies that are necessary and the 
 energy to put them into effect. 
 
 In great crises the weakness of human institutions is 
 in the delay in making the adjustments necessary to meet 
 new conditions. The question today is whether we shall 
 do the necessary things with sufficient promptness or 
 whether it will be once more "too late'\ 
 
 January 3, 1920. 
 
 C7244 
 
Manu/actuted bu 
 
 GAYLORD BROS. Inc. 
 
 Syracuse, N. Y. 
 
 Stockton, Calif. 
 
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