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Cooperation for Foreign Trade 1

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COOPERATION FOR FOREIGN TRADE 1. Foreign competition will be keener than ever.— Mr. Frank A. Vanderlip, former president of the Na tional City Bank of New York, said during the war : So long as the war goes on, the world will be so tipped askew, in all probability, that the gold holdings of other countries will continue to fall into our lap. As the gold falls it will be added to our reserves. As those reserves grow, so will grow our credit structure based upon them. When the war is ended we will find all Europe depleted of its gold, staggering under a weight of inflated bank and government paper and under the direct stress to rebuild its stock of gold. The point of attack will be our gold reserves. The methods will be every means known to trade and commerce by which merchandise, securities, and credits can be ex changed for gold.

These words describe from the point of view of the banker, the situation in which the United States found itself after the war. From the point of view of the foreign trader, it may be stated in slightly dif ferent terms. The United States, thru the inflow of gold and the consequent increase in the price level, had become a good selling market, but a poor buying market. The level of wages, the prices of raw ma terial and of transportation had advanced, placing the American business man in a very unfavorable position to do business abroad.

The situation became the more serious since the amount of gold which had flowed into the banks was but the first instalment of a debt which our allies owe us. On October 2, 1919, these loans were as follows : This amount and the interest must be paid in gold or in goods.

The differences in price level will aid the foreign nations in settling their bills by the importation of goods, or will make it possible for them to settle their account thru triangular trade. They can sell in the Orient or in South America and pay the United States with the proceeds. This will make the com petitive struggle in the foreign field extremely hard for the American business man.

2. The way of the American business man is to meet this competition he can do so only by superior management; labor, raw material, and power all being high. American business has in the past competed successfully in lines in which, at first thought, competition seemed most hopeless, on ac count of the heavy labor costs. But better machines,

better factories, better fed, better educated, and bet ter spirited workmen, better cost systems and better selling methods have more than once offset the dis advantages of high prices and high wages.

They are all the more needed now when the Eu ropean nations are keenly awake to the situation. The more general utilization of natural resources abroad, the greater development of hydro-electric power in France, England, Norway and Italy; the reorganization of factories on the American plan for production en series, as the French call it, are all sig nificant of the new day.

3. Combination makes for economy.—Unless an American manufacturing concern is large enough to maintain an extensive sales organization, it may prove more efficient and economical to leave the selling to a separate organization which specializes in that. By uniting in a cooperative selling campaign, manufac turers may give less individual attention to distribu tion, reduce their outlays for that purpose and be able to concentrate upon production.

4. The position of the small concern.—The prin cipal reason why the International Harvester Com pany, the Corn Products Company, and the U. S. Steel Corporation have been successful in foreign trade is because they are large. No small organiza tion could have built up the necessary selling organiza tion. The small manufacturer cannot afford to de velop the foreign trade field. He may even not be able to fill foreign orders when they come to him. They are often for large amounts and to fill one such order, which might never be duplicated, a small plant would have to sacrifice something of its domestic trade. In one of the publications of the Federal Trade Com mission it is said : The small producers of cement, for example, are not now able to get very much foreign trade for two reasons. In the first place, they cannot afford to maintain representatives in South America, but such representatives are necessary in order to sell cement. As a result these companies have to sell thru an exporting commission house. In the second place, they cannot take large orders ; no one of them can guarantee deliveries of the quantities required. If they un dertook to do it they would have to sacrifice domestic business in order to fill the contract abroad.

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