essential to the rebuilding of her industries. We were the leading producers of many of the needed goods, consequently, for a time at least, our sales in Europe were bound to be large, pending the gradual recuperation of the war-shattered countries. Moreover, we continued, as in war times, to supply other markets of the world with manufactured goods the like of which formerly had been obtained from the industrial countries of Europe. Such conditions were bound to be but temporary, for they were abnormal; the gradual recuperation of European industries would, in time, either terminate or lessen the demand for American goods. Whatever may have been the ultimate causes, there was a marked diminution in the excess of exports over imports in 1920 as compared with the previous year, and in 1921 the excess was considerably less than in 1920. This narrowing of the breach between the two accounts may be looked upon as a favorable sign.

Imports likely to exceed exports. The profound changes wrought by the war in our commercial and financial relations with the rest of the world will eventually be reflected in our balance of trade. Unless the situation entirely changes because of the happening of events that cannot now be foreseen, it is inevitable that ultimately the favorable trade balance which has characterized our trading relations with the rest of the world since 1874 will be overturned. There is rather general agreement upon this point by the closest students of foreign trade. So complicated is the situation, however, that it is next to impossible properly to evaluate all the present factors involved, and thus make an accurate forecast as to the time when the change will likely take place. The present indications, in the opinion of competent observers, are that this will be accomplished sometime during the present decade, but not in the earlier part.

Our capital and interest accounts. The transformation undergone by our capital and interest accounts during the progress of the war already has been noted. Were there

no other factors to be considered among the invisible items in the trade balance, we might expect that the imports would exceed the exports, in a reasonably short time, provided that the interest payments due in this country to the amount of over half a billion dollars annually were paid when due. These, however, were temporarily suspended, at least until the autumn of 1922, to enable the debtor countries to adjust their national finances before undertaking the payment of this interest. Hence there was no swelling of the imports of merchandise on the interest account until after the time mentioned above. In the meantime, however, the capital account representing loans to Europe increased somewhat, a factor which in itself would enlarge the exports.

American investments abroad. Still another factor which is likely to exert some influence on the trade balance is the probable future of American investments in the nonEuropean countries. In the years before the war, the proportion of our total export trade with Europe as compared with the shipments seeking other markets was on the decline. This means that our hold on certain markets outside of Europe was on the increase. There is reason for believing that when the normal state of affairs is again restored our trade with non-European countries will continue to expand. Since the armistice, the same general trend may be observed, and the most notable increases in our import trade have been from the countries outside of Europe. In all probability, there will be a considerable outflow of American capital to such countries to support the growing trade. If this proves to be the case, this factor will tend to increase the credit side of our international merchandise account.

Other "invisible" items. Other items in the invisible trade balance are bound to play a greater or lesser part in the final

1 At the present time (November, 1922), Great Britain is the only country that has resumed the payment to the United States of current interest on all the debt which she owes to our government.

summation. Immigrants will doubtless continue to send remittances abroad, and tourists' expenditures, an item which practically disappeared during the war, are again becoming an important factor. The probable earnings of our revived merchant marine are difficult to evaluate, so uncertain seems its future; in all probability they will never constitute the basis for a large volume of imports.

Excess of imports will not mean disaster. On the whole, it is highly probable that, for a few years at least, there will continue to be an excess of exports of merchandise over imports, but not such an overwhelming balance as was shown during and immediately after the war. Eventually, however, and probably before the end of the present decade, there is likely to be a reversal in our long-continued favorable balance of trade (p. 135). An expansion of our import trade is inevitable unless artificial obstacles to its development are imposed. The change in sentiment in this country regarding the function of imports already has been noted (p. 110). If we are to continue to sell abroad, if our export trade is to have a healthy normal growth, we must be willing to buy from abroad, for trade is reciprocal. Moreover, we must be willing to buy still further in order to enable the large interest payments due in this country and other items of foreign indebtedness in the balance of payments to be met. swelling of our imports even to the point of overbalancing the exports will not mean disaster for this country; on the contrary it is now, under the present state of affairs, the logical thing to expect. Furthermore, any attempts that may be made by our legislators to raise the tariff on imports or otherwise to increase the present difficulty to foreigners in selling their goods in American markets may be looked upon as steps in the wrong direction.

The

Opinions of experts on our future trade balance. In concluding this chapter we add a paragraph from an article, prepared for The Review of Economic Statistics, which summarizes

the opinions of two close students of the subject under consideration after they had made a careful study of the future of our foreign trade:

We may summarize such definite assertions as we have ventured to make. The ultimate consequence of our shift from the debtor to the creditor position must be an excess of imports over exports. When this will occur, whether in five years or not for a decade, will depend on the changes in the invisible items of our balance (and perhaps too upon decisions of international policy) about which prediction cannot be made with confidence. The dominant item in our balance will certainly be the capital and interest account. A moderate annual export of capital in the form of foreign investment might postpone the overturn of the trade balance to a period several years hence, say until the late twenties. As a matter of opinion, we think this likely. A wiping off of a part of the government credits would have a similar effect; if that part were very considerable the effect might indeed be long felt, and give us a "favorable" trade balance for an extended period. But there is no reason to anticipate such an occurrence. It can be asserted positively that by reason of the funding of the principal of the government credit advances and of the interest thereon for a three-year period there will be an excess of exports over imports, though of reduced amount as compared with the last five years, at least until 1923.1

1 From an article entitled "The Future of Our Foreign Trade, a Study of Our International Balance in 1919," by Frank A. Vanderlip and John H. Williams.

CHAPTER IX

THE TRANSPORTATION OF AMERICAN FOREIGN TRADE

Good transportation essential to commercial development. The exchange of commodities in both foreign and domestic commerce is dependent upon the facilities available for the distribution of the commodities. Production on a large scale and in accordance with modern methods would be useless without the development of modern systems of transportation, for, without them, there would be no means whereby the goods could be marketed. In fact, it would be entirely impossible to utilize the world's resources for more than local purposes, for population to concentrate in cities, or for civilization to advance beyond the more elementary stages without proper methods of transportation being provided. It is, therefore, almost impossible to place too great emphasis upon transportation as an indispensable factor in industrial, commercial, and social development. Fortunately, this idea has long been appreciated in the United States, so that throughout the greater part of our national life, strenuous efforts have been put forth to provide this country with adequate transportation facilities. Turnpike roads, canals, and railroads in succession occupied the attention of our people. Ports and terminal facilities in general and the inland waterways also have received attention. The enrolled shipping tonnage available for the coastwise and inland commerce has been ample; the registered tonnage for foreign trade has, at times, been more than sufficient for our own needs, but at other times it has declined almost to the point of extinction.

Foreign trade dependent upon both inland and water transportation. The foreign trade of the United States, excepting

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