That the after-effects of the increase in tonnage and the new avenues of international trade thus opened up by the war will prove to be permanent factors in our economic life is hardly open to doubt. Our ships, built to help win the war, will after peace has come be active agents in promoting the interchange of goods between the United States and every other nation, which by reason of its geogra* cal situation, soil and climate, or the peculiar training of its people, is able to produce for us goods that we cannot so well produce for ourselves. International trade promoted by the war will not cease with its termination. To sell to others we must in turn buy of them and consequently the stimulation of international trade by the war will after peace has been declared tend to promote freer trade relations with the rest of the world than has prevailed in the past.
The first effect of the war was to check in ternational trade, but not for long. Soon the demands of the nations at war for war ma terial began to be felt and with this demand in ternational trade began to revive but at the same time its character changed both in quan tity, in direction of flow and in kind. In the case of the United States the war checked ex ports to such an extent that for August 1914 the balance of trade was against us by over $19,000,000. Late in September foreign buyers began to appear and gradually exports began to flow out in ever-increasing quantities until limitations imposed by lack of shipping served to cause a temporary check. In September 1914, the balance of trade was again in our favor and for the last five months of the first year of the war the total excess of exports from the United States over imports was $264, 000,000. Despite the submarine warfare, the lack of shipping and the high rates for freight and insurance, both exports and imports con tinued to increase year by year and generally month by month until at the present time the total of our foreign trade is approaching $10, 000,000,000 per year with an excess of exports of over $3,250,000,000. The following table i shows the important facts in regard to the quantity of our international trade since the outbreak of the war: From these tables it may be noted that while our imports increased in each of the four great classes into which the commodities are here grouped, the marked increases are confined to raw materials and food. With re gard to the exports the effect of the war has been to lessen the export of raw materials and to increase measurably both foodstuffs and manufactured goods. Comparing the two periods with respect to the quantity of inter national trade, it may be noted that while the total of both exports and imports more than doubled, the balance of trade for the four years of the war was almost five times that of the preceding four years. The change in the character of the trade necessarily affected our industries by throwing new burdens upon those where the balance of trade in our favor in creased most rapidly. How well our agricul tural classes and our manufacturers have met the call upon them ;c evidenced by the partial failure of the railroads and the shipping facili ties to move the goods to the ports and across the Atlantic as fast as they are made ready for the transportation agencies.
The increasing balance of trade in our favor, proving our power to assist in feeding, clothing and arming the nations at war while at the same time providing for our own needs, has raised questions in international finance that before the war had been thought to be of little practical importance. Writers on international
trade have taught that exports from any country are limited by its ability to pur chase goods in exchange, for the reason that otherwise the country exporting becomes short of goods and overstocked with money, thus making goods dear and money cheap. The exporting country then becomes an importer, exchanging its surplus money for the goods which it needs and the balance of trade then turns against it. Before the war the United States was using the credit due it from the ex cess of its exports in various ways. In the first place, it was hiring its goods freighted across the water in the ships of other nations and it was also to a large extent purchasing insurance of the English and German com panies. In the second place, it was paying in terest on approximately $6.000,000,000 of European capital that had been invested in American railways and other industries. In the third place remittances to friends and travel in European countries accounted for another portion of considerable size; and in the fourth place, it imported regularly a small amount of gold, the last resort in settling foreign trade balances. When the balance in our favor continued to grow despite the use of the ordinary methods of settlement it be come evident to the American financiers as well as to those representing the various European countries with which we were trading that other means of adjusting our growing credit must be employed. The first means actually used was the repurchase of American securi ties. At first it was feared that securities held abroad would be dumped in quantities upon the market at a time when conditions for their purchase were so unfavorable that the prices would break far below intrinsic levels and to guard against such a catastrophe the stock ex changes in all the leading commercial countries were closed for a time. It was, however, found that the European holders were loth to part with their American securities and when after borrowing and purchasing a considerable quantity for the purpose of securing a loan the English government thought it desirable to sup port sterling exchange by the further sale of securities it was found necessary to impose a special tax of 10 per cent upon the income of all foreign securities held in England in order to encourage their holders to part with them and thus help settle the debts arising from the excess of imports. Mr. Loree's investigations showed that of the $5,000,000,000 to $6,000,000,000 of American securities held abroad at the begin ning of the war only about $1,000,000,000 were repurchased before 30 June 1915, and not over $1,250,000,000 were sold here during the period 1 Aug. 1914 to 31 Jan. 1917. The difference between the value of the exports and the value of the imports, plus freights, insurances, remit tances to Europeans, travel in foreign coun tries, the value of purchased securities. and the importation of gold, notably in the latter part of the year 1916, has been paid for out of the proceeds of loans placed in this country directly or through the medium of the United States government.