c 
 
 C) 
 
GIFT 
 
 Our New Place in 
 World Trade 
 
 SXaTJ?* 
 
 IVERSIT'PJ 
 
 Guaranty Trust Company 
 of New York 
 
J 
 
Our New Place in 
 World Trade 
 
 Guaranty Trust Company of New York 
 
 140 Broadway 
 
 FIFTH AVEME OFFICE MMIISON AVENUE OFFICE 
 
 Fifth Avrniie and 44th Strict Madistm Avenue am) 60ih Street 
 
 GRAM) STRfXT OFFICE 
 268 Grand Sir ret 
 
 LONDON LIVERPOOL PARIS IIWKL 
 
 BRUSSELS CONSTANTINOPLE 
 

 COI-VltKillT, lO'il 
 <il AUANTV TIM ST COMPANY <>l' NKW YOUK 
 
so 
 
 ;•-•'.:•;;•.: 
 
 \'ital Importance of Foieion Trade 
 
 SI\('K tlif hi'^iiiniiiii 111' lilshii-y iiitcr- 
 iiational trade lias jjlayed a very iiii- 
 Ijortant jiart in the pr<)S|)erity and |)n>- 
 gress of all great states. The PluTenicians 
 were traders with far countries more than 
 three thousand years af>;o; the Greeks 
 were eager nierrhants and sailors, as well 
 as architects and statesmen; the Roman 
 Empire was a powerful economic state. 
 \'enice had her glorious period of trade 
 domination, lost when rivals in Spain and 
 Portugal overcame her conunercial ad- 
 vantages. The Hanseatic League also 
 had its long career of leadership in com- 
 merce and in shipping. The Dutch in 
 turn with their skill in manufacture and 
 finance and their merchant fleets wrote 
 another hrilliant page in this chronicle. 
 
 Then (ireat Britain began her wonder- 
 ful .series of commercial concjuests that led 
 directly to political empire in many coun- 
 tries. Her adventure in India had its 
 origin in the enterprise of a great trading 
 company and the initiative of her mer- 
 chant sailors won for her. one after an- 
 other, colonies and dependencies through- 
 out the entire world. Her fleets were 
 found in the most remote ports and one 
 by one her sons established themselves in 
 trading outposts in every rich dominion. 
 Her iron and coal, her wool and other 
 raw materials, coupleil with industrial 
 skill, gave scope for the development of 
 manufactures. As her wealth grew, her 
 interests abroad nuiltii)lied, and London 
 l)ecame the financial center of tiie world, 
 as well as the greatest of all clearing 
 hou.ses ff)r commodities. 
 
 Prior to 1914. Great Britain's position 
 in shipping, in finance, and in trade was 
 not seriously challenged by any other 
 country, although (Jermany was striving 
 
 l<i (ixcrlake her by cH'oi'ls llial were 
 directed with great iTilelligeni c and com- 
 l>ined all the powerful economic resources 
 of that nation. Leadership in Germany 
 iiad a complete coni])rehensi(>n of the 
 elements that mu.st form the basis of suc- 
 ces.sful international commerce — a great 
 merchant marine, foreign investments. 
 i)anking and trading organization, highly 
 develo])ed domestic industries, and the 
 control of sujjplies of raw materials, as far 
 as pos-iible, in the primary markets of the 
 world. Her success in these efforts was so 
 great that it will always be surjjrising to 
 the future generations that she should 
 have been willing to risk her assured posi- 
 tion in the costly and ruthless speculation 
 of the great war. 
 
 Must Decide Future Policies 
 
 The lessons of this record of the past are 
 clearly written for those who study the 
 ])re.sent position of our own country. The 
 I'nited States, blessed with resources 
 both natural and industrial that are 
 beyond comi)arison, richer and more i)ow- 
 erful than any other, must now make the 
 great decision as to her future jwlicies. 
 All the weajions for peaceful and legit i- 
 nial<' leadership are within her grasp. The 
 war has strengthened the United States 
 where she was weak. Her merchant fleet 
 emjjloyed in foreign trade in 1913 was 
 only 1,019,15.5 tons. Now it is .second 
 only to that of (ireat Bril.iiii and coni- 
 ])ri.ses .some 15,000,000 tons. 
 
 Since our earliest days as a nation, it 
 has been a tradition, carried ahnosi to 
 extreme, that we should maintain a ])()si- 
 tion of aloofness in international aft'airs, 
 and this attitude has influenced our poli- 
 cies towards foreign trade and shipping, 
 
 [3 
 
 M54236 
 
A sugar mill in Cuba. Considerable American capital is mrcslcil m Ihc Cuban augar indu-ibij 
 
 as well. We have always liad a foreifjii 
 commerce, but never as a primary in- 
 terest, as in Great Britain and Germany, 
 where such trade has been \ital to them 
 for many years. Our own domestic mar- 
 ket has been so great that it absorbed by 
 far the greater ])ercentaf;c of our produc- 
 tion of every kind anil, similarly, the op- 
 portunities at home for the use of capital 
 for the development of our abundant re- 
 sources ha\e not only absorbed all our 
 own surplus funds for investment, but 
 have also drawn upon the capital of other 
 countries, (ireat Britain especially, to a 
 lotal of billions of dollars. 
 
 Financial Position Changed 
 
 It is true that mines in Mexico, (liilc 
 and j'cru. Ihc meat freezing' plants in \v- 
 gcntina, I rnguay and Paraguay, and Ihc 
 paper industry in Canada, for exani|)le, 
 have attracted sc\eral huTidred millions 
 of our inxcstments abroad, but we were 
 heavily indebted to other countries for 
 (■apital they had loaned to lis during niaiiy 
 
 years. Today the change in this financial 
 situation of the country is very marked. 
 We have rebought a large proportion of 
 our foreign-owned securities and, in addi- 
 tion, ha\e loaned about fifteen billions to 
 foreign governments and to municii)al 
 and ]>rivate creditors, ni.niily in Piiropeaii 
 countries. 
 
 Banking Organization Extended 
 
 '{'he Federal Reserve Act has given us a 
 foreign banking organization that is (|iiite 
 ade(|Uate for the needs of our interna- 
 tional position and is constantly being ex- 
 tended. The large American banks lia\-e 
 numerous branches abrojid. and in e\ery 
 country there are direct banking connec- 
 tions with New York. Whatever may he 
 t lie de\'elo])ment of oiu' foreign trade, it 
 will surely be accom|)anied by a similar 
 growth and strengthening of this great 
 financial organization. u|)on whose ser\ice 
 must rest the orderly and successful con- 
 duct of ox'erseas commercial transac- 
 I ions. 
 
The record of tho wonderful rebirth of 
 our merchant marine is so recent and 
 striking that it is known to everyone. 
 For years we had been lamenting the fact 
 that the glory of our great fleets of speedy 
 clipper ships, which formerly carried the 
 American flag to every port, had passed 
 from the seas. But every effort to re- 
 establish a merchant fleet had been de- 
 feated by a provincial political attitude 
 towards the problem or by our national 
 inditference to our position as a trading 
 nation dependent upon commercial rivals 
 for the trans]50rtation of our exports and 
 imports. 
 
 " Merchant Marine Revived 
 
 American vessels carried 94. "^ per cent, 
 of our imports and 80. 5 per cent, of our 
 exports in 1830. In 1860, these percent- 
 ages had fallen to 60.1 and 70 per cent., 
 respectively. This diminishing contin- 
 ued until in 1910 only 10 per cent, of 
 our imports and 7^2 P^r cent, of our ex- 
 ports were carried under our own flag. 
 The shipping los.ses of the Civil War de- 
 pleted our fleets, and the absorption of our 
 interest in the development of our internal 
 resources and the competitive advantage 
 
 held by Great Britain in the production 
 and control of iron and steel ships led to 
 our almost complete witlulrawal from the 
 high seas. 
 
 Our shipping legislation also, however 
 well intentioned, actually o])eratetl to 
 handicap the growth and movement of 
 American-owned shipping through the im- 
 position of recjuirements and restrictions 
 that rendered costs of maintenance rela- 
 tively higher than those of our competi- 
 tors. The exigencies of the war, however, 
 forced upon us the construction of an ade- 
 quate fleet and thus rounded out the na- 
 tional equipment for primacy in interna- 
 tional commerce. 
 
 Foundation for Foreign Trade 
 
 Now we have all the foimdation stones 
 for any international trade structure that 
 we may decide to erect: We have ships, 
 a world-wide banking organization, illim- 
 itable ca])acity for production of both 
 raw materials and manufactures, and cap- 
 ital resources far beyond any competitor. 
 We have ceased to be a debtor nation and, 
 in addition to a record of actual favorable 
 trade balances of billions for the last two 
 or three years, we shall have an invisible 
 
 .1 nilmli- t/{ir<l in Chile. Large amounts of American capital are invested in the ChiUan 
 
 nitrate industry 
 
 [5 
 
ItV tioir hnve a great n,ei\)i(iiit iiiarinc to carrn our (joads orcr the .seren .sfu-s 
 
 export reijreseiiteci V)y interest on the vast 
 sums tliat liave lieen loaned ahroatl. 
 
 Hifjli |)rices liave heen an inii)ortant 
 factor infiueiicing' this wonderful record 
 of exports, but in si)ite of that element, 
 the figures of our present trade disclose an 
 unusual story of commercial activity. 
 \'astly increased capital, ample shipping, 
 and an enf)rmous foreign trade were all the 
 immediate result of the stimulus of the 
 war, conil)in('(l with our exce])tional re- 
 sources as an agricultural and manufac- 
 turing nation. 
 
 Courageous National Policy Needed 
 
 We arc now at the parting of the ways. 
 What are to he our policies in this new 
 relation which we hold in the world of 
 trade!' All of the elements re(iuircd to 
 control and cxicnd our commerce arc al 
 our coininau<l. .\r<' we ui th<' mood lo 
 
 0] 
 
 .seize this greatest of all our op] xirt unities!' 
 In fact, we must go forward, or wc shall 
 inevitably he forced to retreat from our 
 ])resent j)osition with heavy losses all 
 along the line — in shipping, hanking am' 
 trade. We arc already \igorously chal- 
 lenged by competitors in foreign markets. 
 .V courageous national policy of legiti- 
 mately aggressive dcxcloimient of all these 
 newly coordinated resources for the con- 
 duct of foreign trade is essential. With- 
 out constant initiative and ])ositive effort 
 we shall gradually be <lrivcn out of our 
 advantageous situation. 
 
 Th(>rc is no one .Vnicrican — merchant, 
 manuf.icturcr, banker, farmer or laborer 
 who h,is not sonic stake in this strug- 
 gle. Our sales abroad of two billion dol- 
 lars worth of food products anmially is 
 a fact of im])ortMiicc to every farmer, 
 <'ithcr in direct interest op in effect u|)on 
 
prices. Exports of two Iniiulred million 
 dollars worth of tohacco ami more than a 
 billion dollars in value of cotton add force 
 to this argument. 
 
 Surplus Production 
 
 Further, our vast industries when fully 
 employed now ])roduce such a surplus 
 over domestic demands that loss of a for- 
 eign outlet for this surplus would mean 
 serious lalior de])ression. It is no longer 
 true that we can look with comparative 
 indifference upon our exports of manufac- 
 tured articles as comprising too small a 
 part of our total trade to be a matter of 
 serious concern when they fall ofT. For 
 man}^ years the ratio of exjjorts of manu- 
 factures to our total manufacturing pro- 
 
 duction has been increasing, until now it 
 has reached an amount that probably 
 spells the difference tietween prosperity 
 and failure in many industries. Sales of 
 nearly three hundred million dollars worth 
 of automo})iles abroad are a case in |)oint, 
 or, for example, the total sales of leather 
 products valued at nearly two hundred 
 million dollars. 
 
 It is well to examine the recent de- 
 velo])ment of our trade in some detail, for 
 as we study the situation, at every 
 turn we |)erceive the urgency of a nation- 
 wide comprehension of these facts — our 
 need for foreign markets and, further, our 
 reliance upon foreign sources of supply of 
 essential raw materials to keep our factor- 
 ies employed. 
 
 • ■I.yright hy Un.lerwomt i l-i.,)erwo..d 
 
 \eiv York, ihrnugh irliith /;(7.s.se.s miirhi half of tlif unports nn/i crportu of the countnj 
 
 \1 
 
During and After the War 
 
 WHEN we review tlie course of our 
 foreign trade duriuj; tlie war and 
 since the signing of the Armistice, it is ob- 
 vious tliat we aic dealing with a period 
 whioli is abnormal, as compared with any 
 ])eriod of our peace time exjierieuce. Dur- 
 ing the nineteenth century our merchan- 
 dise trade grew steadily larger in value. 
 During the years 1915 to 920, inclusive, 
 this increase was tremendous and exports 
 grew so much more rajjidly than imports 
 that we ijiled up an astonishing excess of 
 outgoing goods. 
 
 Our foreign trade may be conveniently 
 divided into three large classes: Food- 
 stuH's, including wheat, flour, meat, fruits, 
 dairy produce, etc.; raw materials, includ- 
 ing cotton, coal, tobacco, lumber, copper, 
 zinc, iron, steel, leather, oil, etc.; and 
 manufactures, including agricultural im- 
 
 |)lenients, textiles, machinery, automo- 
 biles, locomotives, and other finished 
 products. Each of these may be further 
 subdivided as minutely as the interested 
 I)erson may desire, but for the sake of sim- 
 plicity we shall consider here only the 
 broad divisions mentioned. 
 
 Changes in Character of Trade 
 
 An effect of the war upon our export 
 trade was an immediate increase in the 
 shipment from this count rj- of foodstuffs 
 and of finished manufactures. As Euro- 
 pean industry turned from its normal pur- 
 suits to the production of munitions, a 
 decline took place in shipments of raw 
 materials as a whole, though certain raw 
 materials, such as copper, were in greater 
 demand than formerly. Cotton, which had 
 comprised the bulk of raw exports, was then 
 
 One hundred years of our 
 
 B 
 
 1 , 
 
 
 
 7 
 
 
 
 6 
 
 Chart of the 
 
 
 5 
 
 FOREIGN MERCHANDISE TR.\DE 
 OF THE UNITED STATES 
 
 
 4 
 
 1820-1920 
 
 
 3 
 
 By Fiscal '^ears ending June 30th. 
 Silver Inchuled after 1873. 
 
 
 2 
 
 fnit .?i.()i)i),ooo,()nn. 
 
 Drawn to sbow 
 
 
 1 
 
 Proportional \"ariat:ons. 
 
 
 
 
 
 18; 
 
 JO 18 
 
 40 18 
 
 50 18 
 
 60 
 
 IB 
 
 
 81 
 
desired in the finished rather tliiui the raw- 
 condition. 
 
 Dnring 1919 and 1940, on the other 
 iiand, the major increase in onr export 
 trade is tracoahle to the demand of the 
 old industrial nations for our raw mate- 
 rials and our foodstuffs, which were needed 
 to reestablish their manufactures. Our 
 shi{)ments of raw materials, especially cot- 
 ton and tobacco, began to increa.se, though 
 coj^ijer and steel decreased. At the same 
 time, the exports of foodstuffs and of 
 many manufactures increased very rapidly. 
 
 Inii)orts also grew in the Armistice 
 years more rapidly than at any previous 
 time of our history. However, the princi- 
 pal increase was in imports from Latin- 
 .\merica and the Orient, rather than in 
 those from Europe. A very large percent- 
 age of the total increase is represented by 
 raw materials and foodstuffs, such as 
 hides, rubber, silk, coffee and sugar. The 
 importation of such articles had been re- 
 stricted when shipping was diverted from 
 ordinary mercantile channels to the trans- 
 jjort of our army and its sujiplies to France. 
 
 With the return of shipping to its trade 
 routes, imports of these articles became 
 so large that the country was rapidly 
 flooded with more than it could consume 
 at high prices. In consetjuence, these im- 
 ports have now been jjractically suspended, 
 and the countries of which they are staple 
 exj)orts are undergoing severe commercial 
 readjustment to more normal trade condi- 
 tions. As industrial Europe returns to its 
 pre-war manufactures and regains its 
 former re-export trade, it is probable that 
 a considerably larger percentage of our 
 imports will be from that quarter. 
 
 Changes in Volume of Trade 
 
 Great changes have taken place not 
 only in the character and value but also in 
 the volume of our foreign trade. By con- 
 sidering for a moment the changes in vol- 
 ume, we can see more clearly what is 
 abnormal in our present situation and how 
 far we have progressed on a sound and 
 permanent basis. 
 
 Our foreign merchandise trade grew 
 enormously in value during the war and 
 
 Foreign Trade 1820 to 1920 
 
 s 
 
 
 
 a 
 
 y 
 
 7 
 
 
 
 7 
 
 / 
 
 6 
 
 
 
 6 
 
 J 
 
 5 
 
 
 
 
 
 5 
 
 
 
 Exports "^^^^^^Z 
 Inipurts ^ 
 
 
 4 
 
 
 
 4. 
 
 / / 
 
 3 
 
 
 
 3 
 
 / j 
 
 
 
 
 
 2 
 
 
 
 2 
 
 y^ / 
 
 1 
 
 
 
 — <^ 
 
 
 70 
 
 18 
 
 80 18 
 
 90 19 
 
 00 19 
 
 10 
 
 [8 
 
si ill iiKM'c (hiring tlic two years of tlic 
 Annistifc. No small part of the growth. 
 of course, has been due to price inflation: 
 consequently, we can not expect to main- 
 tain this growth in the present period of 
 declining prices. Studies which have been 
 made by the Harvard Review of Eco- 
 nomic Statistics of the ])hysical volume of 
 our foreign trade during the war show a 
 real expansion, though by no means as 
 great as the apparent expansion indicated 
 by the value figures. They also show that 
 tiic maximum expansion in volume was 
 reached in 1!)17, and that there has been 
 a slight falling off since. If we take the 
 
 adjusted average of exports for which 
 ipiantities are reported in the fiscal years 
 1<)11 to 19U as lOO't, the following table 
 will afl'ord a comparison between the rela- 
 tivc increases in value and in volume: 
 
 I.')ll-14 1915 1.910 1.017 1918 1919 
 
 A verage 
 
 Value lOO'-f 123% 191% 279% 261%, 317%o 
 
 Volume 100' c 122% 157%, 171% 12.5% 142% 
 
 Such a comparison serves to correct the 
 idea that our foreign trade at ])re.sent is 
 really growing. It does not otherwise 
 affect the discussion about to be taken up 
 of how our foreign trade is balanced by 
 so-called "invisible"' .services. 
 
 C'upyrtglil bjlUiiilvrMoiMl A ( ii<1(tm-m.i 
 
 Unloaliiig goods from the i'nikd stales in ]'(ii( nuJa 
 10] 
 
Financing" Excess of Exports 
 
 THE most remarkable feature of the 
 expansion of our foreign trade is the 
 wide (iitt'ereiu-e between the vahie of our 
 exports and imports of merchandise. 
 From the outbreak of the war in 1914 to 
 the end of 1918 tlie excess of our exports 
 over imports reached a total of more than 
 $ll,0(t(),()()0,000. This excess has con- 
 tinued to grow until for the whole period 
 of the war and Armistice to the end of 
 19'-2(» the total excess is nearly $19,000,- 
 ()()(), 000. Tile question is naturally raised 
 of how foreign buyers pay for our goods 
 which they buy in such enormous amounts. 
 It is obvious that the exports of mer- 
 chandise from a country are in effect paid 
 for in large part by the imports of the 
 country, and that only so much of the 
 total exports as is in excess of imports 
 must be liquidated by other forms of pay- 
 ment. Such trade deficits are usually and 
 normally met by the shipment of gold be- 
 tween countries. This method was u.sed 
 to a great extent during the first few years 
 of the war, as the following table of gold 
 exports and imports indicates. Most of 
 the gold came from the Entente coun- 
 tries, while most of our shipments of the 
 metal went to Latin-America and the 
 Orient to liquidate the debt we owed in 
 those parts of the world. 
 
 GOLD EXPORTS AXD IMPORTS OF THE 
 
 UNITED STATES FROM 1915 TO 1918 
 
 (Units of $1,0I)<),()00) 
 
 Excess Excess 
 of of 
 
 Fiscal y ears Exports Imports Exports Imports 
 
 1915 . . . 
 
 1916 . . . 
 
 1917 . . . 
 
 1918 . . . 
 191S (July to 
 
 December). 19 6 
 
 146-2 175.0 28. S 
 
 90.4 494.0 .... 403 6 
 
 291.9 977.2 685 3 
 
 190.8 109.8 81.0 
 
 11 9 
 
 Total . . 738 9 1767.9 
 
 1029 
 
 Yearly Average 164.2 392.9 
 
 228.7 
 
 It was not desirable, however, that 
 France and Great Britain should pay all 
 their debts to this country in gold; the 
 metal is the basis of most of the world's 
 important currencies and stocks of gold 
 should accordingly be diffusetl. By the 
 end of 1917, we had $3,041, .500,000 in 
 gold, or about one-third of the world's 
 total stock of gold in banks, ])ublic treas- 
 uries and circulation. This was more than 
 enough for our needs and to have con- 
 tinued to take gold from our associates in 
 the war would only have disrupted their 
 currencies and rendered them jjowerless 
 to carry on. 
 
 In fact, all the gold in the world would 
 have been insufficient to pay for our goods 
 which had been exported in excess of our 
 imports. Such a situation, of course, had 
 been foreseen, as we had not relied en- 
 tirely upon gold payments. Rather, we 
 placed our main reliance in the export of 
 our capital in support of our foreign trade. 
 
 Exporting American Capital 
 
 Payments in various invisible ways, 
 rather than in gold, were the means used 
 for li(iuidating the great excess in our 
 merchandise export trade. American cap- 
 ital has been exported in large amounts 
 tluring the last six years for investment, 
 for speculation and develoj)ments, for 
 charity, freight, insurance, and travel. It 
 is possible to specify definite amounts for 
 only one of these item.s — investment 
 loans; the remainder must be estimated, 
 because their private nature makes it 
 [>ractically impossible to secure accurate 
 data concerning them. In this way we 
 have made it possible for foreigners to 
 paj' for the great quantity of our goods 
 they have i)urcha.sed. The transfers of 
 
 [11 
 
still more durili;; the two years of tlic 
 Arniistif'o. \o .small part of tlio growth. 
 of course, has been due to ])rice inflation: 
 consefjuently, we can not exi)eet to main- 
 tain this growth in the present period of 
 declining prices. Studies which have been 
 made by the Harvard Review of Eco- 
 nomic Statistics of the ])hysical volume of 
 our foreign trade during tlic war show a 
 real cx|jaiision, though by no means as 
 great as the apparent expansion indic-ated 
 by tlie value figures. They also show that 
 tiic maximum expansion in volume was 
 reached in 1!)17, and that there has been 
 a slight falling off since. If we take the 
 
 adjusted axcragc of c\|)orts for wliich 
 quantities are reported in the fi.scal years 
 li)ll to 19U as lOO't, the following table 
 will afi'ord a comparison between the rela- 
 tivc increases in value and in volume: 
 
 lflIl-14 1915 1.910 urn WIS 19I9 
 
 A rerage 
 Valup lOO'-f 123% 191% 279% 261% 317% 
 \oIunie 100% 122%c 157% 171% 125% 142% 
 
 Such a conipari.son serves to correct the 
 idea that our foreign trade at ])re.sent is 
 really growing. It does not otherwi.se 
 afi'ect the discussion about to be taken up 
 of how our foreign trade is balanced by 
 so-called "invisible" .services. 
 
 UnloaliiKj goods from the i'tiilcd States in Venezuela 
 
 10] 
 
Financing Excess of Exports 
 
 TflE most remarkable feature of the 
 expansion of our foreign trade is the 
 wide ditt'erence between the vahie of our 
 exports and imports of merchandise. 
 From the outbreak of the war in 1914 to 
 the end of 1918 the excess of our exports 
 over imports reached a total of more than 
 $11,000,000,000. This excess has con- 
 tiiuied to grow until for the whole period 
 of the war and Armistice to the end of 
 V.HO the total excess is nearly $19,000,- 
 000, 000. The ((uestion is naturally raised 
 of how foreign buyers pay for our goods 
 which they buy in such enormous amoimts. 
 It is obvious that the exports of mer- 
 chandise from a country are in eifect ]>aid 
 for in large part by the imports of the 
 country, and that only so much of the 
 total exports as is in excess of imports 
 must be liquidated by other forms of pay- 
 ment. Such trade deficits are usually and 
 normally met by the shipment of gold be- 
 tween countries. Tiiis method was used 
 to a great extent during the first few years 
 of the war, as the following table of gold 
 exports and imports indicates. Most of 
 the gold came from the Entente coun- 
 tries, while most of our shipments of the 
 metal went to Latin-America and tlie 
 Orient to liquidate the debt we owed in 
 those parts of the world. 
 
 GOLD EXPORTS .\ND IMPORTS OF THE 
 
 fXITED STATES FROM 191.5 TO 191S 
 
 (Units of $1,000,000) 
 
 Excess Excess 
 of of 
 
 Fiscal 1 ears Exports Imports Exports Imports 
 
 1915 .... 1402 175.0 28 S 
 
 1916 ... 904 494.0 4031) 
 
 1917 .... 291.9 977.2 (5S5 :i 
 
 1918 .... 190.8 109.8 Sl.O 
 
 1918 (July to 
 
 December) . 
 Total . . 
 
 19 6 
 
 11 9 
 
 738.9 17(>7.9 
 
 1029.0 
 
 Yearly Average 164.2 392.9 
 
 228.7 
 
 It was not desirable, however, that 
 France and Great Britain should ])ay all 
 their debts to this country in gold; the 
 metal is the basis of most of the world's 
 important currencies and stocks of gold 
 siiould accordingly be diffu.sed. By the 
 end of 1917, we had $3,041, .500,000 in 
 gold, or about one-third of the world's 
 total stock of gold in banks, public treas- 
 uries and circulation. This was more than 
 enough for our needs and to have con- 
 tinued to take gold from our associates in 
 the war would only have disrupted their 
 currencies and rendered them powerless 
 to carry on. 
 
 In fact, all the gold in the world would 
 have been insufficient to pay for our goods 
 which had been exported in excess of our 
 imports. Such a situation, of course, had 
 been foreseen, as we had not relied en- 
 tirely upon gold payments. Rather, we 
 jjlaced our main reliance in the exjjort of 
 our capital in support of our foreign trade. 
 
 Exporting American Capital 
 
 Payments in various invisible ways, 
 rather than in gold, were the means used 
 for li(|ui(lating the great excess in our 
 merchandise export trade. ATnerican cap- 
 ital has been exported in large amounts 
 during the last six years for investment, 
 for speculation and devel()])nuMits, for 
 charity, freight, insurance, and travel. It 
 is ])ossible to specify definite amounts for 
 only one of these items — investment 
 loans; the remainder must be estimated, 
 because their private nature makes it 
 |)ra(tically impossible to secure acciu-ate 
 data concerning them. In this way we 
 have made it possilile for foreigners to 
 j)ay for the great quantity of our goods 
 they have purchased. The transfers of 
 
 [11 
 
The uater-frunt 
 of Havana 
 
 Along the ilocks 
 of Liverpool 
 
 The lliirhor of (Iciioa 
 
 Ports of Kntrv for Americ 
 
The biisi/ port of 
 Rio dr Janeiro 
 
 Xeirchwang 
 Harbor, a 
 gateway for 
 future 
 American 
 trade iu 
 Manr.huria 
 and Siberia 
 
 CopyriKht by E. M. Newui;in 
 
 Constantinople, the Golden Horn, and Slamboul 
 
 n Goods the World Over 
 
riin(l> fur tlit'sc iiil;mj;il)le services, etc., 
 wliicli are the so-called iiivisil)le items of 
 trade, are as truly coiiiinodities as are 
 the visible materials of commerce. 
 
 Private Loans 
 
 The invisible items of which the amounts 
 are known are the loans of capital made 
 by the United States to other countries. 
 These are of two kinds — loans made l)y 
 individual citizens through banking and 
 investment houses to foreign states, mu- 
 nicipalities and corporations, and loans 
 made by our Government to other govern- 
 ments. 
 
 The task of insjiiring confidence in the 
 future ability of countries at war to 
 repay borrowings was not easy, and 
 could not have been accomplished had we 
 not been somewhat accustomed to foreign 
 investment. Some of the loans made 
 were secured by pledge with a trustee of 
 collateral securities, such as the United 
 Kingdom of Great Britain ami Ireland 
 o]/2%j Gold Notes issued November, 1910, 
 for which the Guaranty Trust Company 
 acted as trustee. Others, such as the 
 .%50(),0()(),()()() Anglo-French 5% Loan, re- 
 payed October 15, 1!)'20, were floated 
 without other security than the faith and 
 credit of the borrowing governments. 
 
 The disposition and amount of the vari- 
 
 C.T.v'll 
 
 AgricuUural machinery from the United States 
 arriving in Peru 
 
 ous foreign loans floated through iiixest- 
 inent bankers in the United States sin<-e 
 July, 1014, and outstanding December .'51, 
 1920, may be conveniently summarized as 
 follows : 
 
 Great Britiiin . . S6S,S,4<.)4,.500 
 
 France 22;5,7.5.S,000 
 
 Russia I07,.")0().000 
 
 I5el}iiuni .... Sfi.Odd.OOO 
 
 Italy L'.-),0()0.000 
 
 tieniiaiiy .... 2,000,000 
 European neutrals. 166,000,000 
 
 Total European .§1,29.S.7.52,.500 
 
 Canada .540,021,877 
 
 Latin-America r2i>,6',)3,3.50 
 
 Pacific Countries 24,2.50,000 
 
 Total .§1,989,717,727 
 
 This total is exclusive of $-l'26,4.>8,-l..58 
 loaned before July, 1914, and still out- 
 standing, and of loans or credits extended 
 and repaid within the period, such as the 
 ii!.5()l).0()(),000 Anglo-French ','", already 
 mentioned. 
 
 Government Loans 
 
 l$y the spring of 1917, the task of financ- 
 ing our huge ex[jort trade had taxed the 
 resources of our private investment insti- 
 tutions to their limit, and new sources of 
 funds had to be found if our foreign trade 
 was to be carried on upon the scale which 
 the war demanded. Once in that strug- 
 gle, we sent our men and our material to 
 Europe to win it. 15nt we did more. Our 
 Government, appealing to the patriotism 
 of its citizens, raised hitherto iniheard-of 
 sums— a total of $-.'(!. .•>!)(>, 701, (MS i)y Au- 
 gust 31, 1919— and of this total loaned 
 more than one-fourth to our asso<'iates in 
 the war. For the period of our partici])a- 
 lion in the war. United States Govern- 
 ment loans to other govermneiits jirac- 
 lically supplanted all private investment 
 in foreign securities, and the total of these 
 loans soon greatly exceeded all prixate 
 Id.iiis of this character. 
 
 Money a(l\aiiceil against credits estab- 
 lisiied by I lie United States (ioxernment 
 from Ai)ril '.'4, 1917, to November l.j, 
 
 14 
 
.1/1 Anitncaii lucuiiiiiliii in Jiirii. Aiiitiiiiiii <ii(/iiics are used the world over 
 
 19'2(). in t:i\(ir of foreign govermnents, to sary for the Government to continue 
 
 enahle tlieni to meet commitments made granting credits to ot'her countries until 
 
 in tiiis country in connection witli tiie private financing could again take uj) tlie 
 
 prosecution of the war, is shown in tiie task. 
 
 following table: These credits were expended by the 
 
 C'».s/i Advanced Rcpni/mcnts govermnents which received them for the 
 
 Belgium . . $349,214,467.89 .^lO.OOO.OO |)ur<iuise in this country of cereals, cotton, 
 
 Cuba .... 10,000,000.00 .500,000.00 tobacco, horses and munitions, and also 
 
 Czechoslovakia 61,2.56,20(5.74 f,,,. transj)ortation, shii)ping, interest, 
 
 France . 2,997,477,800.00 31,449,:5.57..5.5 „,.,t,„.ities ^iid reimbursements of various 
 
 Cireat Britain. 4,277,000,000.00 ,S0,1.S1,641..56 ,. , ,,^, ,.^ , , 
 
 ,, ,-nnnnnr.nr. kuids. Uthcr crcdit advauccs wcrc madc 
 
 Greece . . . lo, 000,000. 00 
 
 jjjjjy 1631338,986.99 on account of the sale of surjilus war mate- 
 Liberia . . . 26,000.00 rials and for European civilian food relief, 
 
 Rumania . . 25,000,000.00 1,794,180.48 which are not included in our computa- 
 
 Russia . . . 187,729,750.00 ^i,,,^^ ,^1,,^.^ ^j^p materials were sent to 
 
 Serbia . . . 26,780,465.56 605,326.34 „ . . ^ » i 4.1 
 
 [ huro|3e m Army transports and, there- 
 
 S9,.580,823,677.18 .«1 14,540.505.93 fore, do not appear in the compilation of 
 
 Precisely as the loaning of money to the our export trade made by the customs 
 
 Powers with which we became associated authorities. 
 
 in the jjrosecution of tiie war was one of We nuist, however, include amotig our 
 
 the first forms of aid rendered by the invisil)le items of foreign trade $1,4!)(),- 
 
 United States, so it was one of the last. -J.JT.lll, representing English, French and 
 
 During the first six months of the Armis- Italian currencies jjlaced at the disposal 
 
 tice, our Government needed all the funds of our Government l)y tho.se countries for 
 
 that could be raised in the home market, the purchase abroad of materials needed 
 
 Therefore, it would probably have been by our Army in the prosecution of the 
 
 imjiossiblc for foreign governments to war. This represents additional remit- 
 
 raise by loans through American invest- tances abroad of American funds, as the 
 
 ment bankers funds sufficient to pay for <lollar equivalents were provided for the 
 
 the even larger quantities of American u.se of the respective governments to meet 
 
 goods which were needed l)y the entire their war expenditure in the United 
 
 world immediately upon the cessation of States. Therefore, the total of govern- 
 
 hostilities. ment ex|)enditure directly su])porting our 
 
 foreign trade from 1917 to 19''20 reaches 
 
 Use of Government Loans ,^,,^^q^^ $11,000,000,000. If we add the 
 
 The excess of our exports over our amounts due from other governments for 
 
 imports grew rapidly in this period. In the purchase of surplus war material and 
 
 order to support this trade it was neces- food relief, the total of actual loans ex- 
 
 [15 
 
tended by our (ioveriimciit will rcacii 
 $11,G0(),1,54,'2")7; hut, if tliis l)e done, the 
 sum of $G49,.'5 13.975 must be added to 
 the total of our exports, representiiifj tlie 
 value of American materials sent al)r<)a(] 
 but not accounted for in the compilation 
 of the customs authorities. 
 
 For convenience, we may now sum uj) 
 the known items, both visible and in- 
 visible, of our foreign trade balance dur- 
 ing the six and a half years from July 1, 
 1914. to December 31, 19'20. 
 
 A table showing items in our foreign 
 trade balance between July 1, 1914, and 
 December 31, 1920, of known amounts 
 follows: 
 
 CREDIT 
 
 Visible 
 
 Exports of nierchaiitlise 
 
 and silver 
 Exports of gold , 
 
 S39,477,S31.159 
 1.429,262,624 
 
 Invisible 
 Interest received on government lo:uis 
 
 DEBIT 
 
 Visible 
 1 mports of iiiereliundise 
 
 and silver . . . $20,528,606,984 
 
 Imports of gold . 2,259.323,817 
 
 $40,907,093,783 
 
 437,349,431 
 
 $41,344,443,214 
 
 Invisible 
 Government loans less 
 
 repayments 
 Government purchases of 
 
 foreign currency 
 Private loans 
 
 $22,787,930,801 
 
 $9,406,283,171 
 
 l,490,fl.-)7,lll 
 1,989,717,727 
 
 Leaving a debit liquidated bv other items 
 of ■ . . 
 
 $12,946,558,009 
 $35,7.34.488,810 
 $.),609,954.404 
 
 The last debit in the table consists of 
 invisible items representing payments for 
 .services, etc, the amounts of which can 
 only be estimated. 
 
 Estimated Invisible Items 
 
 To present a complete and accurate 
 balance sheet of foreign trade during the 
 l)eriod of the war and Armistice is imjjos- 
 sible, not only because of the number of 
 invisible items which must l)e estimated, 
 but also because foreign trade is dynamic 
 and continuously changing and does not 
 lend itself to periodic balancing. There- 
 fore, it is only desired to call attention to 
 the fact that among the estimated invisi- 
 ble items of our lialance at this time are 
 several of considerable moment, which are 
 not only peculiarly the result of an ab- 
 normal situation but are also novel in our 
 experience. 
 
 On the credit side of the balance slmnld 
 be added items of payments covering in- 
 terest and dividends upon American capi- 
 tal in use in other countries, bankers' 
 profits, freights and insured los.ses paid. 
 The total of these and other payments will 
 raise somewhat our debit balance of 
 $5,6n9,9.54.404, wliich must be met by 
 invisible items of unknown total amounts. 
 
 On the debit side we must j)lace the 
 
 Tin siilt'sriHUii iif ti Idi'tff Anirrifdu fhrlrinil rontiyinij in lirazil 
 
 10] 
 
AiiiiiLCan products displiiijiil in a slurc nj ( 'nlmithni 
 
 various forms of American capital trans- 
 ferred to other countries. This represents 
 the use of our funds abroad, for which the 
 owners receive returns either in profits or 
 services. 
 
 Repurchase of Securities 
 
 The principal item of American capital 
 sent overseas during the war was for the 
 purpose of repurchasing the securities of 
 American companies in which investments 
 had been made by European capitalists 
 before 1914. Witli the fall of European 
 exchange, which occurred early in 1915, 
 American securities held abroad went to 
 a premium on the European markets and 
 holders began to sell them to American 
 purchasers in large quantities. According 
 to the most reliable estimates, approxi- 
 mately A'-2.n(t(),0()().nOO of such securities 
 had been repurchased by America before 
 our entrance into the war. This move- 
 ment has continued because exchange 
 rates, which had been pegged by the dif- 
 ferent governments, fell to low levels in 
 1919 and 19'20, thus placing a very high 
 
 premium on our securities in Europe. The 
 high relative value of the dollar made 
 large profits possible for those in Europe 
 who .still had American securities which 
 they could sell us. It seems reasonable to 
 suppose that not far from $3,000,000,000 
 of American securities had been repur- 
 chased up to the end of 19'-20. This 
 repurchase was actually the first form in 
 which American capital was ex])orted in 
 support of our foreign trade, and resulted 
 in reducing our capital indebtedness abroad 
 by more than fifty per cent. 
 
 Other Remittances 
 
 Charges for interest and dividends on 
 American .securities remaining in the 
 possession of foreign holders form another 
 invisible item of the balance. In the same 
 class are charges for insurance premiums, 
 for freights, and for travelling expen.ses of 
 American tourists abroad. Such pay- 
 ments were very considerable before the 
 war, though it is impossible to estimate 
 them now with assurance of even approx- 
 imate accuracy. 
 
 Manv Americans are living in Europe, 
 
 [17 
 
as fonneilv. ;in( 
 from every clas 
 
 aj;aiii travelling ahroad speiKliiig large 
 siiiiis. Tn these expenditures may he 
 added the sums of money left in France 
 hy the members of the American Ex])edi- 
 tionary Forces. Also, during the larger 
 part of the period under review, we did not 
 have the great merchant n>arire we now 
 possess. Our new 
 
 I lie tourists who come merchandise, which can be .seen most 
 of our po])ulation are cicarly in the ca.se of our trade with 
 
 (iermaiiy. Our export to (lermany of 
 $;511,4;57,;{77 worth of goods in tiie calen- 
 dar year lO-iO, more than three-fourths of 
 which consisted of cotton, other raw 
 materials, and food-stuffs, exceeds the 
 amount during any previous year except 
 V.)\'i and litis. As we imj)orted from 
 ('•ermany only $88,- 
 8;50,'-280. the balance 
 of $^22'-2,()(»l .()!)? 
 could not have been 
 (inanced entirely by 
 ordinary short -term 
 banking. 
 
 The remittances 
 of immigrants and 
 of our relief or- 
 ganizations form 
 another invisible 
 item of no .small 
 amount . In t he 
 name of cliarity, 
 .American funds 
 have gone abroad 
 in the form of food, 
 
 fleet of cargo car- 
 riers did not engage 
 in trade until l!»l!t, 
 and, therefore, the 
 principal j^art of the 
 liigli ocean freight 
 rates of I li<' war 
 ]H'rio(l was paid to 
 foreign shi])|)ing 
 companies. With 
 regard to insurance 
 premiums, it must 
 be remembered t ha t 
 our laws |)re\eiit 
 the adetpiatc dis- 
 tribution among 
 our com])anies of 
 risks written by them. Therefore, a great clothing, medicines, and other supplies for 
 
 ('nil Jul [iiukintj fit (jouds fill tsjiuii is rti'i/ 
 essential 
 
 amount of ,\merican reinsurance is taken 
 annually by British concerns 
 
 American funds have also been sent 
 abroad for the purpose of purciiasing de- 
 preciated foreign currency bonds, bank 
 
 the relief of distress in Europe, the Near 
 East and the Far East. Not only is this 
 an entirely new item in our balance, but 
 it is an evidence that our symi)athies are 
 as wide as our trade. Our inunigrants. 
 
 notes, and exchange. AVith European ex- too, have sent money either in the form 
 
 changes abnormally low, dollar values of of food drafts or postal money orders to 
 
 all securities ])ayal)le in European curreu- their relatives at home, or have themselves 
 
 cies have greatly depreciated. Americans returned to their native lands with the 
 
 have ])urcha,sed on a considerable scale for savings of their war wages. 
 ])rofits to be made out of the return o'' the An important invisible item is thai of 
 
 foreign exchanges to former levels. 'I'hey floating credits. The estimates of I lie 
 
 have bought Japanese and Chinese ster- amoiml of this item vary greatly, but. 
 
 ling l)onds, French and Mclgian internal 
 loans, and (Icrman nuuiicipal bonds and 
 bank notes, etc., as well as foreign ex- 
 change bills in large amoimts. 
 
 in view of the large total amounts 
 which till' oilier items discussed nui.st 
 reach, it is extremely doubtful if the total 
 of unfunded or short-time credits can 
 
 The transfer to Europe of American be extraordinarily large, 
 fimds through such jjurchases has had a .\merican enterprise cajjital, allractcd 
 
 considerable influence upon our ex|)orts of \>\ tiic hope of profits in the comparatively 
 
 18 1 
 
iiiulfNcldpfcl parts of tlie earth, is tlio last 
 iii\isil)l(> ilt'iu of considoraljle importaiico. 
 It lias goiu' into oil ami milling develo])- 
 meiits ill Ci'iitral ami South America, into 
 Cuhaii sugar plantations, Chilean nitrate 
 lieds, l,a Plate, Brazilian and ('oloml)iau 
 |)a(kini; houses, into the rubber and hemp 
 lilautations of the Far East, the transpor- 
 tation system of China, Euroi)ean indus- 
 tries, aiul esi)ecially into the establish- 
 ment of branch factories across the Cana- 
 dian bonier. Such capital will helj) de- 
 velop the vast untouched resources of the 
 world. It is necessary that we search in 
 the new storehou.ses of raw materials for 
 oppnrtunitit's of harnessing water-]jower 
 and utilizing fertile soils by irrigation. 
 It is in these enterprises that opportunity 
 is beckoning many American investors: 
 ami their |)ioncer s])irit is leading tlieui to 
 
 blaze new trails in other countries. The 
 building of a greater America, which in a 
 business, financial and moral sen.se will 
 have world-wide interests, is of such sig- 
 nificance to our whole economic structure 
 as to merit the active cooperation of all 
 our citizens. 
 
 We have now seen that our huge excess 
 of merchandise exports over im|)orts has 
 been balanced by a variety of invisible 
 items representing capital loans, remit- 
 tances abroad of funds, and payments for 
 many ])urposes. In six ami a half years of 
 the war and post-war period, the.se in- 
 visible items reached a total of nearly 
 .$^20,000,000,000. The reader may well 
 ask if this means only a growth in the size 
 of our trade, or if it also signifies a funda- 
 mental change in its character. 
 
 Shipping cotton from a Southern port 
 
 [19 
 
A Creditor Nation's Opportunities 
 
 IN the widest sense, the comiiKxhties 
 which nations have to offer their 
 neighbors fall into three general cate- 
 gories: those commodities representing 
 natnral resources — the product of field, 
 forest and mine; manufactures — the prod- 
 uct of machinery and the factory worker's 
 skill; and cajjital — the accumulated sur- 
 plus of industry of every description. 
 
 So long as we were a country with a 
 great area of new land in the West inviting 
 the development of our energetic citizens 
 and attracting the investment of ff)rcigii 
 ca])ital in our growing transportation 
 system, we were, as regards other coun- 
 tries, a debtor nation. We liad not capital 
 enough ourselves to carry out the huge 
 development we were undertaking and 
 we called in the assistance of those nations 
 with money to lend. Foreigners invested 
 in the United States not only because they 
 had confidence in the future prosperity 
 of tiie nation and the fidelity of the people 
 to their engagements, but also because 
 they recognized that upon the ])rosperity 
 of countries other than theirs rested their 
 own export trade. By investments they 
 were creating a demand for, and sui)i)ly- 
 ing the means to buy, their goods. Tlicre- 
 fore, we furnished an excellent market for 
 the products of our creditors. 
 
 Payment Made In Goods 
 
 Creditor nations as a rule do not seek 
 payment of their interest or their principal 
 in money, as they are apt to reinvest 
 where experience has [jroxcd I hat loans 
 may be placed 1o atlvantage. Rat her, they 
 want payin<Mil in merchandise, since the 
 larger manufacturing nations, while rich 
 in many fundamental natnral rcs(>ur(<'s, 
 such as coal and iron, arc oflcn lacking in 
 20] 
 
 raw materials, such as cotton, wool, or 
 copper. So the lenders of capital took 
 their pay from the United States in such 
 of our goods as they needed for their 
 economic exi.stence; we in turn received 
 pay for our goods .sold in foreign countries 
 ])artly in merchandise, partly in capital 
 loans, and partly in other services, such as 
 those for which .Vincrican tourists spent 
 money so lavi-shly. 
 
 Hut the countries which were exporting 
 capital and manufactures on a large scale 
 were getting their eeinivalent in some way. 
 This was — let it be especially noted — in 
 the form of merchandise imported greatly 
 in excess of their goods exported. The 
 most consi)icuous example of such coun- 
 tries was England, which in 191'-2 had an 
 excess of merchandise im])orts for home 
 consumption over exports of domestic 
 production of $700,000,000. 
 
 Under the powerful stinnilus of (■a|)ital 
 investments and energetic and intelligent 
 workers, the United States became not 
 only one of the world's largest sources of 
 raw materials, but also one of its largest 
 producers of manufactured goods, the 
 quality of which was constantly being ini- 
 I)roved. Manufactured articles of every 
 de.scrii)tii>n were being exported in im- 
 portant ([Hantities long l)cfore the war cre- 
 ated a greatly increased demand for such 
 goods. 'I'licn, toil, nuiiiy of mu- exports of 
 foodstull's went out of the country in the 
 form of Tnanufactures, such as conden.scd 
 milk, oiconiargarinc and canned salmon. 
 Hcforc 1014 we became a country with a 
 surplus over domestic consuni|)tion ot 
 nianufaclurcil uoods for export in addition 
 to our already large suri)lus of raw mate- 
 rials, ibit we remained on the whole a 
 debtor couiilrx-, as we used more capital 
 
-4r — y-^w ^ 
 
 lluniUing heavy freight ut Xcw Yurk for loading onto a transatlantic slean 
 
 tlian we ourselves could supply. For for- 
 eign capital investments we paid with 
 merchandise exports greatly in excess of 
 our imports. 
 
 Nevertheless, just before the outbreak 
 of the war there were signs that we were 
 approaching a period of fundamental 
 change in the relations of our economic 
 life. All our unoccupied territory had 
 been opened to exploitation and we were 
 turning to more intensive development — 
 the larger and better utilization of the 
 things which we were already using. In 
 addition to our excess of merchandise ex- 
 ports over imports we were beginning to 
 export capita! on a small scale. In fact, we 
 were already finding foreign investment, 
 particularly in the neighboring countries 
 to the North and South, a tempting field 
 
 of profit. This change from a debtor to a 
 creditor country, w-hereby the export of 
 capital would become one of the principal 
 items in our foreign trade balance, might 
 have continued slowly. But the war ac- 
 celerated the movement, and the whole 
 change was coniijleted in the short space 
 of six years. 
 
 A Fundamental Change 
 
 We have definitely reached the position 
 of other highly developed nations. For- 
 eign countries have borrowed from us to 
 the extent of more than $i;!,()()(),()00,00(), 
 of which huge amount $'2,.')()(),()()(),()00 of 
 funded debt is owed to private lenders in 
 this country. Moreover, the movement 
 of capital from this country to other 
 lands is still going on, for foreign loans of 
 
 [21 
 
a total of nearly $100,000,()(tO were i)laccd 
 ill this market in the first two months of 
 10'-21. In short, the change has taken 
 plac'e hy the pressure of circumstances 
 beyond our control, and it is doubtful if 
 we could return to our former status with- 
 out retrogression in all our agricultural, 
 mainifacturiu};-, and connnercial indus- 
 tries. We must continue on the path of 
 development wiiich we are treading, or we 
 shall lose our place of economic and |)oliti- 
 cal power in the world, and with it our 
 high hopes and ideals of service to mankind. 
 
 If we set out to travel eon.sciously and 
 wisely the ])atli of foreign trade which 
 o])ens before us, building firmly on the 
 foundation of our own experience, we may 
 reasonably expect in the future to pass 
 througli certain other changes. These will 
 be no more tiian other creditor nations 
 found they nuist uiiderg(( in (jrdcr to sus- 
 tain their prosperity. 
 
 At the present time we are in the anom- 
 alous position of ex|)orting botli cajjital 
 aiul merchandise in excess of our mer- 
 chandise inujorts. Such a ccmdit ion can- 
 
 American steel for European reconstruction work 
 221 
 
not coiitiiiiu' irul(>(iiiit('ly, for it would lead 
 far a\v;iy from any true halamc of trade. 
 Already the lialaiice is over-weighted, and 
 foreigTi countries are finding great diffi- 
 eulty in ])aying their dehts to us. Interest 
 payments on our loans to otlier nations 
 are now very large and will he enormous 
 when payment temporarily suspendeti on 
 the Government loans is resumed. Gold 
 is a latent factor in the lialance, since it is 
 now embargoed by nearly all the priuci- 
 ])al countries in the world; and it may re- 
 main so temporarily, as there is not 
 enough gold to licjuidate the present for- 
 eign indebtedness to this country. 
 
 It is obvious, then, that when those 
 countries which owe us for our goods and 
 capital are again reestablished financially 
 and economically, they will have to pay 
 us with something more tangible than 
 new or refunded loans. Obviously, there 
 are only two methods by which this in- 
 debtedness can be li(iuidated. 
 
 One considerable means at hand for 
 payment of the enormous sums owed to 
 us is in the form of goods imported in ex- 
 cess of our exports. Clearly, other nations 
 cannot sell goods to us in sufficient amounts 
 to liquidate their huge indebtedness, if our 
 international trade is to be saddled with 
 burdensome duties. This, however, is 
 now more of an economic than a political 
 question, which must be dealt with in such 
 a way that differences in cost of produc- 
 tion will not prevent the competition in 
 foreign markets of our goods with those 
 from other countries. 
 
 The onlj' other considerable means at 
 hand by which foreigners can pay their 
 debts to us is by our continued export of 
 capital on a large .scale. Among the in- 
 visible items discussed in the foregoing 
 are several which other creditor nations 
 do not have to any considerable extent in 
 their trade balances. Our peojjle tour 
 abroad for education as well as pleasure, 
 spending their money more or less freely. 
 Many of our immigrants still have close 
 
 tics with their relatives at home. In the 
 future as in the past our generous impulses 
 are likely to be stirred by the appeal of 
 distress from distant lands. 
 
 More im])ortant than all these, however, 
 is the likelihood th^t we will continue to 
 reinvest in the bonds of foreign govern- 
 ments, municipalitips, and cor])orations, 
 and that interest on our government loans 
 will remain suspended for several years. 
 While these and other items, such as spec- 
 ulation in foreign currency bonds andbills, 
 remain of considerable importance on the 
 (lci)it side of our foreign trade balance, it 
 is (piite conceivable that our exports of 
 merchandise will remain in exce.ss of our 
 merchandise imports. It is entirely prob- 
 able, however, that the enormous excess 
 which is characteristic of our pre.sent trade 
 will be considerably diminished. 
 
 Export Trade Can Be Maintained 
 
 Such a change in our foreign trade bal- 
 ance need not, and probably will not, be 
 made at the expen.se of our exjwrt trade. 
 The world still retjuires things which we 
 can best supply. What men need they 
 will ])urcha.se if they are able to pay there- 
 for. When the present reaction in prices 
 has run its course our export trade in mer- 
 chandise can, if adequately supported by 
 credit and banking facilities, be increased; 
 though the present great excess over im- 
 ]K)rts cannot be carried for long. 
 
 The banker is charged with the duty 
 of devising machinery for carrying and 
 settling international balances, and the 
 banker feeling his responsibility is already 
 at work on the task. Several of our larger 
 financial institutions have been furnishing 
 many banking facilities and information 
 services to their customers doing busi- 
 ness in other lands. These have met 
 our inunediate requirements and have 
 taught our merchants that credit, when 
 granted wisely, is a universal commodity. 
 
 But our banks are not e(|ui])ijed for 
 long-term financing of foreign trade. The 
 
 [23 
 
cliicf iR'cossity of tlio sitiuitinii, in fat-t, is 
 for American bankers and business men 
 to develop adequate credit and commer- 
 cial inacliincry to meet the demands of 
 present exigencies. Already \arious ef- 
 forts have been made in this direction, 
 iiiclndiiig the revival of tiic War Finance 
 ('or|)oration, the e.staiilisiunenl of the 
 Federal International Banking Corpora- 
 lion, the Foreign Credit Corporation, the 
 International Acceptance Bank, the Cop- 
 per Export Association, the First Federal 
 Foreign Banking .\ssociation, and the 
 propo.sed establi.shment of the Foreign 
 Trade Financing Corporation with a capi- 
 tal of $1()(),()00.()00 for the jnirpose of 
 furnishing long-term credit to foreign 
 purchasers of our merchandise. 
 
 Duty Rests On All 
 
 By and large, however, the duty of sup- 
 porting our foreign trade does not rest 
 entirely on the banker. Our banks cannot 
 work alone; they must have the coopera- 
 tion of their cu.stomers, if our trade is not 
 to sutler a decline as spectacular as has 
 been its rise. If they tied up their liquid 
 funds in long-term investments, no mat- 
 ter how good the security, there would 
 soon be no more liquid capital and the 
 wants of our agriculturists and manu- 
 facturers could not be supplied. 
 
 The variety of our foreign trade is now 
 .so wide that an excess of production over 
 consumption reacts upon every class of 
 our population. The duty, therefore, of 
 supi)orting our foreign trade in this time 
 of readjustment to the more permanent 
 conditions of the future, rests on every in- 
 dividual citizen — whose welfare and pros- 
 perity arc not independent of the economic 
 position of his country. 
 
 The fact that the time of our national 
 political and economic exclusiveness has 
 passed is being more impressively illus- 
 trated every day. We have done a great 
 foreign business in the past, but we can- 
 not expect the conditions of that business 
 241 
 
 to remain stationary. We have sold vast 
 (|uantities of our commodities to custom- 
 ers outside of our own country; we have 
 extended them liberal credits and loaned 
 them nnich capital. But it is obvious that 
 there must be .some limit to their buying 
 I)()wer unless we in turn j)urchase what 
 they have to sell in quantities equal to 
 their purcha.ses of goods and capital from 
 us. 
 
 If we go on taking measures to |)r('\-ciil 
 the sale of foreign commodities in our 
 country, if we try to erect barriers which 
 retard the flow of commerce, we will in the 
 long run handicap ourselves and work in- 
 comparable injury to our future ])rosi)er- 
 ity. Already we are seeing the products of 
 field and factory piling up in granary and 
 warehouse. The real problem, therefore, 
 is the maintenance of the volume of our 
 trade. 
 
 The future rests not so much on gov- 
 ernment and politics as upon the wisdom 
 and sagacity of business men. Foreign 
 exchange rates were "unjieggetl"" by the 
 governments concerned in their regulation 
 in March, 1919, and in .\pril of the same 
 year it was announced that the I'nited 
 States would make no further advances to 
 foreign countries. Thus the busine.ss of 
 financing our foreign export trade is again 
 in the hands of the .\merican i>eo()le with- 
 out expectation of either the interference 
 or the hcl|) of the Inited States Treasury, 
 except such as may be gixen by the re- 
 vived War Finance Corporation. 
 
 The American dollar now stands at a 
 l)reminm in cNcry iuiporlaiit (iiiancial 
 market of the world. It is, therefore, re- 
 peated tiiat ill I lie iigiit of the foregoing 
 account of our foreign tratle balances an 
 im|)erati\c duty rests upon e\ery .Viiieri- 
 caii who would see his country maintain 
 its prosperity to take thought of how 
 its future foreign trade maybe properly 
 financeil. Surely we have the energy and 
 intelligence to solve the problem. 
 
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