The National Aspect of Foreign Trade 1

american, colonies, english, firms, german, country and supply

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In the past, when a country has been lacking in certain important and essential new products, it has sought to secure for itself a safe source of supply by obtaining control of colonies where this raw material is obtainable. A colonial policy is, therefore, closely linked to the foreign trade question. The possession of colonies lies at the bottom of the commercial power of England and Holland. Its colonies once made Spain great.

But colonies are no unmixed blessing. Spain was forced to go to war to defend hers and lost them at last. The people at home, depending entirely upon the easily won riches from overseas, had neglected to develop the resources of the home country, but in stead indulged in habits of ease and luxury, which three centuries of decline have still been unable to over come. Possession of colonies is useless unless the colonies are well managed and developed, and unless the nation control's the seas. A colonial policy and a strong navy go together. The colonial expansion of Germany, dating from about 1884, went hand in hand with a demand for naval expansion.

9. Foreign materials. may be obtained, however, under normal conditions by an ex change of goods with other countries. A certain de gree of control may in such case be obtained by under taking the development of the resources of these countries. This serves a twofold purpose. It in creases the amount of available raw material and as sures good management. Unless the foreign govern ment interferes with the exploitation of the products, or subjects them to prohibitive export duties, the pro prietary interest is assured an ample supply. The oil fields in Mexico are a good example of this. Their development by American and English firms assures operating efficiency. The attitude of the Mexican Government is, however, a serious factor to be reck oned with. An embargo on oil, if it had been imposed during the late war, would have driven the English and American fleets from the ocean.

The development of the resources of foreign coun tries has other advantages. The machinery, the tools, even the technical staff needed will be supplied from the investing country. The South American mines, managed by English engineers, receive their mining machinery and narrow-gauge railroad equip ment from English firms almost exclusively.

Charles M. Muchnic, former vice-president of the American Locomotive Sales Corporation, New York City, testified before the Federal Trade Commission : Of the railways in Argentina fully 90 per cent belong to British companies, and it is tacitly understood by the local engineers, as well as by the London boards, that no foreign manufacturer would be allowed to supply equipment for the Argentine railroads—except the British—unless it is a ques tion of urgent need and delivery. These English roads pur chase anywhere from 200 to 300 locomotives from England annually.

The Dutch engineers who were called upon to im prove the harbors of Chile sent to Holland for the cranes, dredging machinery and floating drydocks. Anyone familiar with the railroads of Europe will have little difficulty in telling who supplied the cap ital for the many foreign-owned railroads in China: French, Belgian, English and German locomotives and rolling stock advertise the nationality of the financial syndicate.

The practice, started, it is said, by the Germans, has now become fairly general for the financiers supply ing funds to foreign governments or private firms to require that they be spent only in purchasing the products of the country supplying the capital. Out of the practice have grown gigantic schemes of inter national finance. A German syndicate of bankers had undertaken before the war to raise the funds ne cessary to build certain harbor improvements in some South American country, with the understanding that only German goods were to be purchased with the funds. The German syndicate then floated the loan in France. The French investors thus supplied the funds by which German firms secured large contracts at such favorable figures that they could afford to undersell French firms in other markets. The Ger man bankers would retain only a small share of the South American development securities, but enough to control the company, by making sure that the ma jority of the shares were so widely distributed that they could exert little or no influence.

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