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Relation of Foreign Trade to Domestic Business 1

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RELATION OF FOREIGN TRADE TO DOMESTIC BUSINESS 1. Decision to enter foreign trade must be based on careful American business man has sometimes been accused of shortsightedness and lack of enterprise for having allowed English and German manufacturers to attain a dominant position in the markets of the world without a serious struggle on his part. Especially has he been blamed for his failure to develop more fully the markets of Latin America, to wards which it would seem, on account of their geo graphic location, he should have directed his best efforts. The critics sometimes talk in terms of the business profits sacrificed by this neglect and some times in terms of patriotism, as if to imply that na tional pride affords a sound foundation for business policy.

Much of this literature of discontent finds its in spiration in misinformation and a lack, of analysis, and overlooks the fact that the neglect of profitable fields of commerce may under certain circumstances be jus tified. The reason why the American business man has paid so little attention to foreign markets is that he has not had to do so. He has been too busy keep ing pace with the enormous growth of the domestic demand. He has been too prosperous to care about the benefits to be derived from foreign trade.

What foreign trade did develop was either in raw materials, 43r else frequently, of an accidental char acter designed to serve as a means for the unloading of a temporary surplus. The market for raw ma terials requires no great amount of development. To a large extent such products sell themselves. Manu facturers' agents scour the earth for sources of sup ply. Little or no selling organization and practically no selling ability is required to trade them off. In respect to manufactured products, however, the situa tion is different. The market here is subject to the severest competition. In weighing the relative ad vantages and disadvantages of foreign trade we shall, therefore, confine ourselves to the trade in manufac tured products.

No business man can be expected, it is plain, to enter a new field of activity until he is certain that the benefits in doing so will outweigh the costs. It is

possible to make out a convincing case for patriotism. We might easily prove that the welfare of the nation is promoted by foreign trade. But few men could afford to engage in exporting or importing for the good or glory of the country alone. Profits for the individual are the only argument that carries con viction or assures permanence of service.

2. Foreign trade requires investment.---From the outset it must be understood that the developing of foreign markets is slow and expensive work. The manufacturer who has decided to enter them must be prepared to make a large investment and wait pa tiently for the returns.

It is frequently necessary, when placing American products on foreign markets, to create the realization of the need for them. Many articles regarded at home as necessaries are either wholly unknown abroad, or looked upon as luxuries. Take for ex ample the many time- and labor-saving devices avail able to the American housewife. It seems strange that they should not take the European markets by storm. But the European housewife, who is suffi ciently well to do to be able to buy them, has one or more servants, and she is not very much interested in making a fairly large investment for the purpose of saving a servant's time. Idleness, she would say, is the mother of evil ; why place temptation in the way of the servant when she can be kept out of mischief by using the old methods? It takes careful analysis of the nature of the mar ket, careful planning of sales and advertising cam paigns and a patient development of the desire for the products in question before a return on the investment can be expected. After the demand has been created, constant vigilance and sales cultivation are required to hold the market, to prevent local and other foreign competitors from reaping the fruits of the initial, heavy outlay. The danger of cheaper substitutes and infringements on patent rights is a constant cause of anxiety.

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