ADMINISTRATION OF THE , FOREIGN DIVISION Characteristics of Foreign Commerce Foreign commerce embraces the mercantile and financial transactions between the citizens of different countries as well as some direct transactions between their governments. Though foreign commerce closely resembles domestic commerce in most respects, there are important differences. With the exception of trade with Canada and Mexico, the foreign commerce of the United States is by sea and over long distances; hence it is almost completely dependent upon the mercantile marine, and the channels of trade are through a limited number of ports.
Domestic commerce is conducted under one commercial language, and one system of currency, customs, and laws, whereas foreign commerce is between countries which differ in these respects. Commerce within a state is subject to state law; com merce between the states is subject to federal law; but in inter national commerce there is no super-government, no international courts of commerce, no international laws establishing legal tender, no laws fixing uniform rates for carriers, and no laws com pelling carriers to insure their ladings. Payments must, there fore, be made in a tender acceptable to the debtor; shippers must bargain with carriers for rates and service and must insure their shipments; disputes must be settled by arbitration or by chan cery under the laws of the state of the debtor or creditor, and so on.
Foreign commerce is vitally affected by the foreign policies of the trading countries. For reasons of military protection, national pride, and political and economic considerations, the trading nations encourage, by means of bounties, lower freight rates and the like, the exportation of certain commodities, and discourage by means of tariffs, embargoes, quarantine, and similar measures, the importation of other products. A nation may allow the formation by its citizens of combinations for the purpose of engaging in foreign business and prohibit similar combinations in domestic business.
The collection of import duties requires the examination by custom officials of all imports. The foreign trader uses invoices, manifests, clearances, custom-house bonds, insurance and inspec tion certificates, and other necessary papers, whereas domestic trade is carried on with comparatively few commercial papers. The financing of international commerce tends to concentrate in a few cities, particularly London and New York.
The conduct of foreign commerce is facilitated by numerous agencies both public and private. The government provides a consular system, a Bureau of Foreign and Domestic Commerce, a Weather Bureau, a Bureau of Navigation, a foreign mail service, improved channels, ports, lighthouses, etc. Private citizens
provide a merchant marine, banking and marine insurance facilities, cables and wireless telegraphy, and other aids.
The personnel and mechanism of the foreign trade embrace exporters and importers, freight-forwarders, commission houses, resident and traveling buyers and sellers, branch houses, mer chandise brokers, advertising agencies, marine underwriters, insurance brokers, shipping companies, ship-brokers, custom house brokers, bankers, note-brokers, and others. It is apparent, therefore, that the conduct of foreign commerce is divided among highly specialized groups. The evolution of foreign trade has been characterized by this specialization of functions. The early English merchants performed all these functions to the degree that they were then performed; they were at one and the same time shipowners, importers, merchandisers, underwriters, bankers, etc. In the process of their evolution their financial operations tended to absorb their attention, and the term "mer chant banker " or simply "merchant " came to signify "banker." It is so used today.
Institutions Engaged in Foreign Banking Operations The phase of foreign commerce treated in this book is its finance. Some of the financing is done by the import and export mercantile houses. Occasionally such a house is closely affiliated with a bank and conducts mercantile operations which are largely financed by that bank, as, for instance, the Mercantile Oversea Corporation, affiliated with the Mercantile Bank of the Americas. The express companies handle the remission of money and issue travelers' checks. The post office conducts an international postal money order business. Foreign banking in the United States is very largely performed by private and commercial banks and by agencies of foreign banks. In London many acceptance houses specialize in the issuance of letters of credit and the accept ance of bills drawn under them. Similar houses have been slow to arise in New York, as have also the discount houses which specialize in the purchase, distribution, and sale of discount paper. A few of our large commercial banks, both state and national, have developed branches and agencies abroad, but most American banks rely upon a system of correspondents. The recent development of the discount market, of the federal reserve banks, and of American marine insurance companies has done much to promote foreign banking.