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International Trade and Foreign Exchange

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INTERNATIONAL TRADE AND FOREIGN EXCHANGE Baance of trade.—Before the European war the general public in the United States seldom heard very much about international trade except during presidential campaigns. At such times the discus sion was largely limited to the tariff, and the emphasis was placed upon the protection of the home market against foreign competition. There was a tendency to portray imports as something harmful, and popular opinion came to look upon exports as the all-impor tant element in foreign commerce.

Men of affairs have to some extent shared in this view. They have been concerned almost exclusively in the development of the home market. So far as foreign trade enters into their calculation it appears only- as an opportunity for wider markets abroad. They too have been interested chiefly in the export side of foreign trade.

The European war has brought about a better understanding of fundamental relations. Comment ing on conditions at the close of 1914 a financial paper stated that nothing had been more clearly proved during the past few months than that no nation can sell more than it buys. It went on to say that if the United States hopes to supply the foreign demand with the commodities that it can produce, the country must be able to buy the things that foreigners have — to sell, whether they are goods, securities or promises tom: Here are two distinct points of view which must receive consideration in this chapter.

2. Relative importance of foreign and donzestic the public authorities in all countries give very definite statistical returns for exports and imports there is little information available with re (-Yard to the volume of domestic trade. Thus we know that in the fiscal year ending June 30, 1917, the mer chandise exports and imports of the United States amounted to nearly nine billion dollars. As com pared with the domestic trade of the same country, even this vast sum is quite insignificant. What the internal trade of the United States may be no one really knows, but it is significant that one authority places the foreign trade of the United States at five per cent and another at eight per cent of the domestic trade of the country.

If then foreign trade is relatively insignificant, it follows that its complete stoppage would not repre sent a formidable loss to the national welfare. In considerable measure, such a loss would be made up by the stimulation of home production. This was one of the effects in the United States which was trace able to the European war. Certain imports were almost if not wholly cut off. The result was that

for purposes formerly supplied by foreign products substitutes of domestic origin were used, and new in dustries were established. This was not, of course, the only effect of the war upon business in the United States, for not only was strong impetus given to domestic production, but the needs of the people for foodstuffs and raw materials led to much larger im / ports than before the war.

Despite its relatively small importance, if judged by its value, international trade has always played a large part in the discussions of the economists. Tbis importance is probably due to the slight divi sion of labor in the older economic order. In those days the immediate community supplied the simple wants of the inhabitants and such products as were manufactured were often produced in the homes of the people. There was really no domestic trade. Only those nations that had a favorable seacoast were able to develop any considerable commerce, and the diversification of industry that accompanies it. It was a natural. result that foreign trade preceded domestic trade, and came to be emphasized in com mercial policy.

3. American and British trade.—The records of foreign trade in the United States show that in the past thirty years there have only been three in which the value of the merchandise imports exceeded that of exports. The excess of exports in the United States appears to be a normal condition of foreign trade. War conditions have in recent years vastly increased this excess. Trade records are given by the government fiscal years which end on June 30th. To the merchandise figures are very frequently added those for (Fold and silver and the total is desiomated as visible exports and imports. The enormous growth of such visible exports and imports of recent years is shown in the following, table: The figures for the United Kingdom are an in teresting contrast to these figures. In the year 1913 which may be taken as a normal year in foreign trade the total British trade, excluding movements of gold and silver, amounted to X1,403,555,095. In the same year the merchandise imports were valued at X768,734,739, while the exports were X634,820,326. English comments upon these figures dwelt with par ticular satisfaction on the evidence of a large surplus of imports over exports. If in Great Britain the surplus of imports over exports is considered most satisfactory, while in the United States the exact opposite view preN-ails, the question naturally arises as to what is a favorable balance of trade.

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