CHAPTER XII

THE PROMOTION OF AMERICAN FOREIGN TRADE

Rapid growth of world's commerce. Before proceeding to consider some of the various means by which trade is promoted, attention will first be directed to a brief account of the recent growth of the world's international commerce. Its growth in about two decades preceding the World War was nothing short of marvelous; in that period it more than doubled in value and, perhaps, just about doubled in volume. For the year 1913, the total value of the world's exports was not far from twenty billions of dollars, of which Europe furnished something like sixty per cent. In the same year, the value of our domestic exports was close to two and one half billions of dollars. Some of the leading facts regarding the further progress of our trade during the World War and after already have been given in another connection and need not be repeated here.

Causes of growth. This enormous expansion of the world's commerce is the result of an intricate combination of factors. The introduction of machinery and the progress of the factory system paved the way for a tremendous increase of salable commodities at a diminishing per unit cost of production. The development of modern transportation systems by land and water made possible the cheap and rapid movement of goods from the regions of production to the markets of the world. The development of scientific agriculture and of the science of management in industry have quickened the movements toward better utilization of natural resources and better adjustment of industries to environmental conditions.

These and other factors that might be added have combined to establish the basis of an extensive trade. Moreover, a series of devices in the nature of trade-promoting machinery including, among others, international banking and credit facilities, trade conferences, and trade commissioners, have contributed more or less towards making the whole world or a large part of it, at any rate, one vast trading community, the citizens of whose political units carry on business transactions with each other every year aggregating enormous values.1 This rapid development of the world's international commerce as well as the expansion of domestic trade within its various political units has taken place in accordance with certain underlying principles governing commercial intercourse, which were outlined in the first chapter of this volume. It is well to remember, however, that modern trade is subject to manipulation and diversion through tariffs, commercial treaties, and other devices just as it always has been more or less subject to the caprices of mankind; but such manipulation has its limitations and is always subject to the influence of fundamental principles as indicated above.

Our participation in trade expansion. It is hardly necessary at this point to draw attention to the fact that the United States has played a leading part in international trade development during the last few decades. It is rather generally known that before the outbreak of the World War the United States was one of the three main competitors in the field of international commerce, the other two being Great Britain and Germany; these three nations together with France and Holland were then to be credited with fully fifty per cent of the world's foreign trade. By referring to earlier chapters of this volume, the leading facts regarding the material development of the United States and the expansion of its commerce in the last few decades may be ascertained. There

1 See article by the author in Bulletin of the American Geographical Society, Vol. XLVII, No. 9.

are no indications that either our domestic or our export trade has reached its full stature. In fact, there is reason to believe that a substantial development will take place in the future, provided that honest and strenuous efforts continue to be put forth, and that the underlying principles of trade development are intelligently followed.

Conditions of success. Under a system of competition in industry and commerce, the business unit engaged in production or in trade needs to be ever on the alert in the interests of its own affairs, for only by the continual exertion of care and attention may success be attained. Conscious efforts must be made to promote the enterprise in question, that is, to resort to policies and lines of action which will contribute to growth and prosperity. This general principle is applicable in both the domestic and in the export trade and, as is well known, is consistently followed by successful business men. The export business of a firm or individual will no more look after itself than will the domestic business of such firm or individual; neglect or carelessness in either case will inevitably result in disaster. On the other hand, it is safe to affirm that when continued success attends an industrial or commercial enterprise, whether engaged in domestic or foreign business, a careful investigation would show that such success may be attributed primarily to the conscious pursuit of a policy based on honesty, integrity, intelligence, foresight, and liberality. Other factors may have contributed to success, to a greater or lesser degree, but these are fundamental.

And in the pursuit of prosperity by our separate business enterprises it should be recognized to the full that production costs should be adjusted, in so far as possible, to meet the existent economic conditions. This necessitates the elimination to the last degree of waste and of easy-going methods, and a frank recognition on the part of both labor and capital that the return for each should be adjusted not on the basis of war conditions but in the light of conditions as they now exist.

Promotion of domestic trade. Discussions on the subject of trade promotion are likely to center upon the business of exporting and, in this chapter, a good deal of space will be given to this topic. But the domestic trade is subject to promotion as well, and may be influenced by factors which, consciously or unconsciously, contribute to its growth and prosperity. Certain of these influences are referable to the individual or business unit engaged in industry or trade, others to groups, such as business men's organizations, and still others to the government. Strenuous efforts are continually being put forth by those engaged personally in American industry and in the domestic and foreign trade to develop and increase the efficiency of their various lines of business. The spur of competition is always an impelling motive for still greater effort to increase output and sales, to reduce costs of production, and to increase efficiency in general within the business unit.

Increasing the effectiveness of labor and capital. Efforts thus put forth to make American labor and capital more effective in production and in trade help to promote our industry and trade and, at the same time, to improve the general welfare of the country provided the business in question in which the labor and capital are applied is socially desirable. Increasing the effectiveness of labor and capital is vastly more inclusive, more comprehensive in its significance, than one might assume at first thought. It includes not only all the various factors which play a part in producing the final product but those which figure in putting it upon the market as well. American labor and capital from this standpoint can, therefore, be made more effective in production and in trade by a great variety of means such as an increase in the education and general efficiency and skill of the separate workers, progress in the achievements of engineers and inventors, an increase in the general ability and foresight of those who locate and organize plants, an increase in the general level of

production and sales managers, a betterment of the transportation agencies, and an increase in the capacity and efficiency of the captains of industry. In a word, increases in the effectiveness of our labor and capital in industry and trade, provided the labor and capital are applied in the right direction and in accordance with the principle of comparative costs (p. 14), should result, ultimately, in reduced costs of production, increased output, increased sales both in the domestic and in the foreign trade, and in the general welfare of the country and of the world at large.

It would seem, therefore, that efforts to increase the effectiveness of American labor and capital, whether they arise from within the business units themselves, or on the part of trade associations or other types of business men's associations, or from contributions of research laboratories, or from governmental agencies or from any other influence whatsoever, tend to promote our industry and our trade both at home and abroad. Moreover, such well-directed effort is indispensable to continued material progress; without it all other movements to expand a country's industry and commerce will be less effective than they otherwise would be.

Instances of domestic trade promotion. There are various specific ways of endeavoring to promote the domestic trade, many of which are too obvious to need consideration here, so that only two or three instances will be mentioned in passing. Advertising plays a leading part in this connection whether its aim is to induce the public to buy this brand of goods instead of that, or whether its purpose is to increase the sales in general of a certain type of product. Efforts to induce the public to buy "American-made goods" rather than similar goods originating in other countries are designed to promote the domestic trade. Sometimes this type of

1 See article by F. W. Taussig on "How to Promote Foreign Trade," in the Quarterly Journal of Economics, Vol. XXXII, 1917-1918, pp. 425-426; also contained in Free Trade, The Tariff and Reciprocity, by F. W. Taussig, The Macmillan Company, 1920.