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Popular Science Monthly/Volume 86/April 1915/The War and Foreign Trade

< Popular Science Monthly‎ | Volume 86‎ | April 1915

THE WAR AND FOREIGN TRADE
By H. E. MILES, Racine, Wis.

VICE-PRESIDENT OF THE ASSOCIATION OF MANUFACTURERS

WE of the United States are nothing if not trade-getters and trade makers. Within our boundaries are forty-eight separate states and commonwealths, with great diversity in tastes, habits and requirements. Within these boundaries has been developed the greatest volume of trade and of production, both agricultural and manufacturing, of any nation in the world, by far the greatest accomplishment being in the single generation just passing.

The small manufacturer is constantly adding another state or territory as his factory grows and trade expands. He "takes on" Texas, New England or Wisconsin. He is thoroughly accustomed to meeting the special requirements of a district new to him as respects goods, credits and trade customs. He is indifferent whether the distance is a hundred miles or two thousand.

I can not accept the often-repeated statement that the American manufacturer lacks adaptability; that his attitude toward any market he cultivates is that of "take it or leave it." Fashion is fickle in the United States; invention is inconsistent and startling. Wherever either have extensive play, or territories vary in their demands, American manufacturers are chameleon-like in their easy and quick adaptability. It is so much a cardinal principle with them always to have "something new" that the trade has almost come to demand "something new" even if not so good as the old. I know many factories into which samples are frequently brought and perfectly duplicated. When the American manufacturer refuses to change his patterns it is because it will not pay to do so from the evidence in hand.

Nor need we talk longer about packing, as if all South America, for instance, would be at our feet if only we would pack our goods acceptably. Only yesterday I heard of an American shipment that slid down a mountain side without damage to package or contents. Packing must be paid for, like any other service, and the American who makes good goods is very thoughtful of his packing. He has only to know what is needed in any foreign market, as some now do, and as all do in the home market.

In short, the American has only to put his mind upon the foreign market with that intensity with which he has developed the home market near and far and in all its aspects, when he will be in the way of making himself at home and his customers happy wherever it will pay so to do. The question is rather where will it pay now and what can be done to make profitable such other trade as we are not now entitled to in those products in which for any reason Europe excels us, and in what manner shall we go about the problem.

Our great corporations have led the way in masterful fashion. They have the resources in men and money to master any problem. It is, however, neither fair nor wise to leave each manufacturer however small, to seek foreign markets individually and unaided. The one supremely great American corporation, the government itself, must do for the innumerable smaller manufacturers what our greatest corporations alone are able to do for themselves. We must follow the example of Germany and other of the more successful European countries.

May I illustrate by a personal experience? For years I have been provoked or amused by government and other bulletins announcing that some lone firm in the Argentine, or South Africa, wants a plow or a wagon. Knowing that a plow perfectly adapted to one district may be worthless a hundred miles away; knowing of thousands of dealers in this country who want plows and just what specifications are needed in each case; with full information at hand as to financial standing and other particulars, I have no sufficient reason to interest myself in this lone individual on the other side of the world and I take no chances of annoying mistakes and failures.

There are two or three hundred implement-makers in the United States. Working as they do in the greatest agricultural country in the world, they rightly excel all others in inventive skill, as is partly evidenced by their present exports and by their government estimate that the American crops are produced at a saving of $700,000,000 annually over the cost of raising a like crop of fifty years ago. Our implement manufacturers are driving men off the farms by labor-saving machinery faster than intensive cultivation is bringing them on. This is one reason, but only one, why our population is increasing relatively much faster in the cities than in the country. One of these implement manufacturers wisely sent to the Argentine his most trusted designer and shop man. He secured splendid orders and perfect specifications, with one fatal exception. He failed to note that the plows were drawn from the foreheads of oxen the "hitch" being around the base of the horns. Consequently the plows were pulled out of the ground and the company lost the entire shipment and hundreds of dollars besides, and only with difficulty retained the good will of its customers. It is such experiences that bring upon us the many criticisms about packing and "making what the customer wants."

I have said we must follow the European example. There are only four very great manufacturing nations; England, Germany, France and the United States. Of these four the United States is the greatest in the volume of its product and, in my judgment, even in adaptability and grasp, but the other countries are organized for foreign trade, while we are not. Generally speaking, we have not wanted it. We have legislated to hinder and prevent it rather than to develop it. We have. therefore, "now a reputation to overcome as well as a reputation to establish.

Germany faced the problem, when almost without foreign trade some forty years ago, with a thoroughness born of extreme need and a wonderful appreciation of opportunities. She organized, through governmental and trade agencies, for trade, even as she organized her fighting forces of war. She sent out, at government expense, as the agents of all the people, to develop her industries, her payrolls and her wealth, men carefully chosen from the respective trades into each of the great foreign markets. These men made exhaustive studies of the requirements of each market. They sent home samples of goods used, together with lists of responsible buyers and quantities purchased. These samples were placed in commercial museums; the information distributed, sometimes very freely and at other times confidentially, where it would do the most good. Our governmental agency for this work is naturally the Department of Commerce and its Bureau of Foreign and Domestic Commerce. Following the German example, it is for this department to discover precisely what farm implements, for instance, are used in the Argentine; to secure samples and place them, for example, in the Field Museum in Chicago, the center of the farm-implement industry, where the makers frequently gather from all parts of the country. Imagine the change of attitude of the men who have been careless of the single distant individual who wants a plow, when these men can take their foremen and others to Chicago and there see exact samples of various tools and learn fully of buyers who all told use $50,000,000 annually of these tools. Such information visualizes vividly an entire market and delightful opportunities. It leaves the very minimum of hazard as respects packing or any other feature. The single government expense is utterly inconsiderable as against the individual expense and the hazard of mistakes if each of two hundred manufacturers is to go by himself for this information.

With such information as a basis, there would be need of restraint rather than of encouragement as the American industry goes after the market thus disclosed.

The Department of Commerce after this fashion sent an expert in the cotton trade to China some years ago. He sent home 5,800 samples with a world of definite, necessary information, with many surprises. Among other things England had been sending millions of yards annually of an extremely thin and open cotton fabric loaded with sizing that gave it apparent weight and character. Some of our manufacturers had felt too proud to make anything that seemed to them so valueless. It was disclosed, however, that this cloth was for only two purposes, to clothe the dead and to wear next the skin to prevent the scratching of the very coarse outer garments worn by the poor. Our cotton makers were greatly stimulated, but for a time unable to take full advantage of the information because of the Boxer uprising and the boycott of American goods. There are, however, a few American factories running exclusively on cotton goods for the Orient.

So the Department of Commerce has been eager for years to give this service and has been giving it in such very limited measure as its funds permitted.

We may take a lesson from the Department of Agriculture. When Secretary Rusk succeeded Secretary Morton in this department, he first looked the department over and said to Secretary Morton, "What is the good in all this, anyway, Mr. Secretary?" to which Secretary Morton replied, "Why, you've got the appropriations." The department was in its infancy. There seemed little to do but distribute the funds. It has grown, however, until it uses with great wisdom $17,000,000 annually, and $4,000,000 of this amount for purely development work, searching out new cereals from all over the world, studying soils, fighting pests, and in the most intimate way serving every last farmer in the land. And it gets a thousand times better returns on this $4,000,000 than it ever got on the little sums appropriated in the earlier days. So the vision has come to the Department of Commerce and to its friends throughout the country. It can give no service to American manufacturers, but the service is of value to all other citizens. Against the $4,000,000 given the Department of Agriculture for purely development work the Department of Commerce until recently was given only $40,000, but recently, with no thought of war but solely of the general welfare, Congress gave to the department $50,000 to lead in the development of the markets of South America with their annual imports of $1,043,000,000, of which we have been favored with only seventeen per cent. So it gave the department $100,000 with which to develop the trade of all the rest of the world with its annual purchases of some three and a half billions of dollars, and another $100,000 for the establishment of some fourteen commercial attachés in the great capitals of the world.

There is no American but wishes that the present war would stop to-morrow, and it is well to note that the vision came to us of foreign opportunities and of the demands that foreign trade may properly make upon us before there was any thought of war. The present Secretary of Commerce and all with whom he cooperates have long cherished the vision and begun the larger development in such excellent manner as may well make Congress wish to extend the appropriations as fast as the department, with its conservative judgment, will ask for them.

In similar spirit and with the same vision, substantially, all of the business organizations of America, large and small, cooperated in the establishment of a central organization, or clearing house, known as the Chamber of Commerce of the United States, and in this central organization, with its headquarters in Washington, American business two years ago found itself, nationally and internationally. So far had this new movement developed that President Wilson said of it last September:

This furnishes acceptable proof to the country that the antagonism between government and business has disappeared and that there has come upon business the spirit of generous rivalry and cooperation, which is the essence of statesmanship.

The business men of Germany, of England, and other successful countries, perform a very great part in governmental, economic and social development. It is only by this union of the elements of practical experience with philosophy and sociology that the best national development is possible. The future historian will probably find nothing of more consequence in our present history than this new spirit with .which business cooperates, as in other countries, in true greatness of spirit and vision with the forces of government and society. Its effect upon the foreign trade is of supreme consequence.

When government and business cooperate as government and agriculture have, we shall visualize foreign markets, measure them, and go after them with a degree of intelligent service and enlightened accomplishment that will be as helpful and satisfactory to the foreign buyer as to ourselves.

The Tariff.—We must be friendly if we would have friends. The American tariff for generations has been made for the purpose of preventing imports and decreasing foreign trade. Taking us at our clear intent, substantially every other country, free-trade England excepted, has made a target of our trade. Needing revenue, wherever there was a choice the foreign country has, even though unconsciously at times, made its rates high on our products and lower for countries that courted its good will. Repeatedly, foreign countries have evidenced a willingness to reduce their rates on various American products whenever we would be fairly reasonable in reducing our rates on their products, Germany, for instance, offering to lower her rate on our bacon, and materially to modify her restrictions on our beef under which she was, and is, prohibiting its importation, greatly to our detriment. For the American eats willingly only the choice cuts and one fourth of the beef carcass. These would be much cheaper could we favorably market the poorer cuts in countries that want them, these poorer cuts including, as they do, three fourths of the animal.

One of the strangest things in our history was the McKinley Bill and the purpose that actuated McKinley in its making. Said Colonel George Tichenor, general appraiser, who framed the bill under McKinley's direction, as he later did the Dingley Bill, in a letter to Mr. Dingley:

The controlling idea in the preparation of the McKinley Bill was to dispose of, and prevent, the accumulation of surplus revenue. It was in that view that duties upon certain articles were made prohibitive, upon others higher than they otherwise would have been.

In truth, McKinley did not decrease the revenues; the people paid more than ever before, but the major part of their payments was diverted by the McKinley Law from the public treasury, into the coffers of the great combinations and trusts which that law "mothered." I say "mothered" because when McKinley prohibited imports of manufactured necessities, and made other imports very difficult, he permitted, if he did not invite, home producers to combine and consolidate as they did with excellent business judgment and fateful consequence. Think of the good roads, conservation, waterways, and many other blessings that we might have had with the moneys McKinley was afraid to receive, and unwittingly diverted. Think of the ill-will and lack of respect other nations had toward us. The Dingley Bill was no lower. This, is mentioned only to indicate the just prejudices we have to overcome, and the need of doing so quickly.

In international trade the first bargain is properly the tariff bargain that opens doors and makes entrance easy. Our present tariff has done away with ill-will. It is honest, but it was made so hastily that there was no time, even if there was thought of, securing the many concessions that had long been waiting for us. Any other of the nations we emulate would think itself insane to make its tariff inconsiderately, or without most exhaustive study and bargaining. It is impossible that we shall long fail to do so. We must study and negotiate with each country exhaustively, and admit such of its products as we can use to advantage at the same time that we secure the best possible terms for such of our products as she can use. For we must buy if we sell. Just as we must pay for our imports by our exports, and in addition pay hundreds of millions of interest and dividends on our securities held abroad, so other nations must export to us very largely if they buy from us largely, and the newer countries must export more than they import. We must, with extreme good judgment and care, ascertain just what we can buy without hurt to our home products, at the same time that we induce the foreigner to buy from us all that he can without hurt to his own production. This means that there must be established a tariff commission (call it by some other name if you will), a devoted body of able men, consecrated to this work, impartial, high-minded, who shall develop the facts in each case and submit the facts to Congress and the President, in whom alone rests the power of making tariffs.

We had an example in the tariff board established by President Taft. This board was so limited in its term of office and otherwise that its findings are not to be taken as conclusive as respects the need of a commission. Where, however, it was able properly to develop a schedule its findings were of tremendous value. In the cotton schedule, for instance, its findings were final and fixed the judgment of all who studied them. There can never be again any such uncertainty as formerly obtained in this schedule which represents a domestic consumption of $500,000,000 per year. Much the same may be said of woolens, though the work there was much less thorough.

Incidentally, this tariff board was invaluable in the development of costs of production. The cost of maintaining the board was $250,000 per year. Its study of the cost of raising wool might be worth to a single state annually one or two millions of dollars were all the facts known.

It is as necessary that a tariff be reasonably low as that it be protective. Next to ours, the tariff of Germany is the highest of any great nation, and yet her tariff averages about one fifth of the Dingley rates. Her manufacturers are glad to have the tariff such as steadies their trade and conditions their success upon their extreme industry and development of progressive methods. Our nation can not afford to trifle with tariff figures. It can only afford to develop them with utmost judgment and study.

Trade Training.—As no man would enter a race with an untrained horse, so surely no nation can enter the international race for trade supremacy with untrained industrial workers. We must rival the best of European nations in the development of our working people. We must cease to draw from Europe the majority of our most skilled workers and foremen. We must share the profits and advantages of both domestic and foreign trade with our working people, not in ways that weaken the workers, for that end would only destroy itself; but in those respects which bring strength, initiative and the joy of superior accomplishment to the workers and to their employers. We must train for the occupations and through the occupations. We must link education with industry, with the day's work. We may well remember that for generations in Europe, and in several countries even now, trades are taught on Sunday as well as week days. For a trade—the day's work—rightly considered is only religion applied, and no day is too good for its right instruction. We gladly believe that our working people are the best in the world in initiative, in natural ability and energy. We are frightfully wasting all these virtues, however, by permitting substantially all of our industrial workers to leave the public and other schools by the end of the sixth grade with no connection between their meager schooling and the life they are to lead as industrial workers and citizens. We are all of us coming to see that the supreme value of education is in its application and use day by day in work and play.

There are some twenty million children in our common schools. More than half of them will get no further than the three E's when school will be foreclosed upon them forever under the present custom. These children are receptive, imitative and obedient. They are giving nothing; receiving everything. There are some sixty millions of older people outside these schools who are the burden bearers, in whom rests every whit of the fear and the hope and the accomplishment of the present day. There must be schools for this larger number. After the European practise, we must have day schools and night schools wherein our workers will develop their varied abilities in and through their occupations and adapt themselves to the changing requirements of invention and fancy. Nothing will more vitally better our national life and nothing will more contribute to the betterment of our foreign trade relations. In some parts of the country these industrial schools have been established by force of law, and all children out of school and at work under sixteen years of age are required to attend not less than a half day a week, there to be instructed in the employment in which they are engaged or, when that employment is unfortunate, instructed in a better occupation. Similar schools are opened for the voluntary attendance of adults in the evening, and in the daytime when unemployed. The working people are taking great advantage of this new opportunity, new to us but hundreds of years old in European countries. There is no doubt but these schools will be established generally in the near future and Congress is now considering extensive federal aid and guidance for such schools.

Our Present Foreign Trade.—A study of our present exports of so called manufactured products is illuminating. I quote from a report of the National Association of Manufacturers which I was privileged to write in 1913.

In 1911 we exported $1,189,536,724 of manufactured products, but of this, 56 per cent., or $666,582,970, were of crude and semi-crude materials, including such food stuffs as flour, meat, cottonseed, cake, etc., $282,016,883; copper in bars, wire, etc., $104,000,000; iron and steel in bars, billets, rails, etc., $71,000,000; petroleum and other mineral oils, $92,000,000; wood in its crude forms, $72,000,000; leather, furs, and fur-skins, $45,000,000, etc. Such exports carry only from 3 to 15 per cent, of factory labor. German, French and English exports carry 40 to 80 per cent. This left exports of only $523,000,000 of more highly finished manufactures. According to the Bureau of Statistics this equaled only one sixtieth of our total product of farm and factory, and one fortieth of our manufactured products.

As a people we are ignorant of foreign trade. America has been likened to a huge stevedore bearing down to the ships of the sea crude and semi-crude material for the use of the capital, labor and intelligence of foreign nations. Such exportation is a depletion of our natural resources, the heritage of the ages, and irreplaceable. Until a few years ago we were always speaking of our "limitless natural resources." We now see that under present processes those resources will be exhausted within a period that to the far-sighted is as a day. We have been proud of our agricultural exports; the scientists now tell us that every bushel of wheat exported carries with it 27c. worth of phosphorus; every bushel of corn, 13c.; every pound of cotton, 3c. These figures equal the supposed profits in the transaction. As President Wallace said at the recent Conservation Congress, "The Nineteenth Century farmer was no farmer at all; he was a miner, mining the fertility of the soil, and selling it for the bare cost of the mining." We sell our cotton to Switzerland at 14c. a pound, with scarce any labor in it. We buy it back in the form of fine handkerchiefs at $40 a pound, all labor. We export bar iron and import razor blades; export hides and import gloves; export copper and import art bronzes. We must acquire the skill of the foreigner to the end that our exports shall carry the maximum and not the minimum of high-class labor.

Providence has been kind to us, but Providence is likely now to leave us a little more to our own intelligence. We must henceforth sell more brains and less material. We must, to the utmost degree, develop our human efficiencies. In them is our supreme natural resource, and the only one that increases with use and will increase forever and immeasurably. Other nations, lacking our raw materials, make the cultivation of their human resources the substantial basis of their prosperity and happiness.

We are going in the right direction. The percentage of these semi-crude products in 1906 was 63 per cent. Last year it was near 50 per cent. And our great captains of industry have shown the way, for we note in passing that substantially half of our total manufactured exports are of the four items, food-stuffs, crude copper, mineral oils, and the cruder products of iron and steel. Our manufacturers of shoes, typewriters, sewing machines and agricultural implements have made as clear a demonstration of the coming development wherein American Inventions and comforts may be everywhere accepted. Professor Fisher of Yale estimates the value of our human resources, the brain and spirit and muscle of our people, at two hundred billions of dollars,-or five times the value of all other resources combined. What a tragedy that we have, as a nation, been careless of this resource; that we have been inconsiderate of the happiness of the average worker; of his right to highly developed self-expression and citizenship. In this the American democracy has been more careless than the monarchies of Europe. Our captains of industry find their joy of life in the development of the day's work. When 35,000,000 operatives find a similar joy derived from a developed intelligence we shall be an irresistible force in the world's betterment.

Many other things may be said, and have been, as to the development of foreign trade. We must have banks in foreign countries and a merchant marine. We must stop generalizing and be specific. We must get over our provincialism and be catholic in our sympathies. We must realize that the ocean which used to separate the countries, now binds them together. The $1.25 which carries a ton of freight one hundred miles on land, carries it a thousand miles on water. Merchandise delivered at the nearest salt-water port is almost as good as delivered at any other port in the world. The day of the brotherhood of the nations is at hand.

We may well thank Providence that not all men are as we are; that the men of the Argentine have their own very rare qualities and appreciations; that the people of Brazil differ from all others in other splendid respects, and so of the other nations. A cosmopolitan recognition of these national differences and values is evidence of that intelligence which is the basis of trade and of all other values.

But my paper is too long. I leave other considerations to others, emphasizing only these upon which I have dwelt so long: (a) the widest cooperative effort with a very considerable leadership in the government and its Department of Commerce; (b) intensive study of each market, with samples and specifications secured under the leadership of the department supported and supplemented by the various business organizations; (c) the establishment of commercial museums or centers where the precise goods needed in the various markets are displayed with descriptions and lists of buyers, at which places manufacturers and distributors may assemble for study and estimates; (d) industrial schools and trade training that will give skill and leadership to our working people quite as much as to their employers; (e) an appreciation and cordial good fellowship with those children of God who inhabit the various foreign lands, that catholic appreciation which we so greatly lack and which is a mark of intelligence and good character, which appreciation the nations we would rival have in superior measure, based upon long time proven experience.

Let us remember that other nations must live as well as ourselves. The nations that we would rival will always get their share of foreign trade and will make prices that will keep it, A man or a nation will work for half price, or less, if it can not do better. We must have entire good-will, and always will have, towards every other nation, and the measure of that good-will will be the measure of our own intelligence. In the due distribution of world trade there is and must be room for each of the warring nations equally with ourselves. We look not for temporary advantage, but rather for that superiority of accomplishment and development among our own people that will increase and hold, upon the basis of strict desert, an ever larger and larger share of the world's bounty.

The foregoing takes less account than some may wish of war's short lived and lurid opportunities based upon temporary distress and apparent ruin. We are acting with utmost promptness and with all our strength in out-of-hand benefactions to European non-combatants and in trade extension to all non-combatant nations who are in extreme distress for want of those trade relations that we can establish for them. These things are being marvelously well done now by our leaders in legislation and commerce. They are a magnificent precursor to the stable processes of peaceful times near at hand.