The National Aspect of Foreign Trade 1

investments, american, united, exports, country, argentina and invested

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The amount of capital which has been invested by the large industrial nations in foreign lands is con siderable. It has been estimated that the British in vestments before the war amounted to about $17, 500,000,000 ; French investments, $8,000,000,000; and German, $4,000,000,000. The rate of foreign investment of the countries of Western Europe prior to the war was estimated by C. K. Hobson at $1,500, 000,000 yearly.

These investments reflect the national character. The investments of the French are largely in gov ernment securities. The frugal French peasant or shop-keeper asks for a safe, be it moderate, rente. The German investor was more reckless, encouraged no doubt by the phenomenal success of industry at home, aided by powerful industrial and financial com binations and backed by the "mailed fist" of the gov ernment. The German investments were mainly in the industrial securities and government securities which did not find a ready market in other countries. The English, on their part, have chosen the develop ment of agricultural and mineral resources of foreign lands. The chief direction of English investments has been Canada, the United States and Argentina, tho Mexico, Brazil, Chile and South Africa were also benefited by them.

American investments have been steadily on the increase. In the reconstruction period since the ar mistice some $700,000,000 have been invested in Eu ropean loans. The American investments in Canada are placed at $1,600,000,000 and between $1,000, 000,000 and 2,000,000,000 has found its way into Mexico. Of the South American countries some $20,000,000 has been invested in Brazil by American investors. Investments have also been made in Ar gentine, Chile and Peru.

10. The balance of attention is de voted in discussions of international trade relations to what is called the "balance of trade." A country is said to have a "favorable" balance when it has an ex cess of exports over imports, that is, appears to be selling more than it buys, while the opposite condition is called an unfavorable balance.

Evidently, if exports mean sales and imports mean purchases, and their statistics represent all that is going on, then indeed a country importing more than it exports is running head over heels in debt and is heading fast for bankruptcy. Fortunately, the two

sets of figures do not tell the whole story.

As has already been stated, considerable sums of money are invested by bankers and private investors in foreign industries. Suppose, for example, that American financiers were to undertake the building of a railroad line in Argentina. This would mean a flow of American capital to that country. Very lit tle of it, however, would be actual money. Railroads, of course, are made up of rails, bridges, cars, loco motives, etc. These will be largely, if not wholly, supplied by manufacturers in the United States. The money, in other words, does not go out of this country, but there is instead a flow of goods to Ar gentina.

We do not expect a return on this investment for some time. The exports from Argentina will not be immediately increased by the investment. The statistics of the United States will record an increase in exports. Argentina's imports are materially in creased for a term of years, and its exports, we saw, have remained the same as before. An unfavorable balance, therefore, has been established. But is not Argentina already better off than before? Does not the railroad increase the national wealth and the gen eral comfort of the people? Some, years later, let us hope, the investment has begun to throw off a net income. The dividends and the interest on the capital invested form a source of revenue to the American investor. As in the first instance, this transfer of wealth from the Argentine company to the owners in the United States does not take place by the transfer of funds, but rather by the sending of products produced in Argentina, which can be turned into cash here—or the transaction may be a. three-cornered one—the products may be shipped to some other country and sold there, the proceeds being used to purchase the goods of that country for shipment to the United States. But whether the returns of the investment reach the United States di rectly or in a roundabout way the general effect is the same. There has taken place an increase in the ex ports of Argentina and in the imports of the United States.

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