and Japan; the New York-Havana cable; and the New York-Colon cable. Throughout the world, as a whole, nearly 252,500 miles of ocean cable were in operation in 1904, Great Britain being the leading operator, followed by the United States, France, Denmark, and Germany. By making possible the telegraphic quoting of prices and terms, the reporting of sales on grain and cotton exchanges, the making of direct sales and gradual elimination of middlemen, the rapid transmission of news concerning market conditions, and the rapid adjustment of misunderstandings, and by facilitating international settlements, the submarine cables became one of the most important factors in the organization of the foreign trade.

The ocean cable service has since 1902 been supplemented increasingly by wireless telegraphy. The first transatlantic signal was transmitted by wireless apparatus in 1901 by Mr. G. Marconi, and in the following year complete messages were transmitted between St. Johns, Newfoundland, and Poldhu, Cornwall. For a time the Marconi transatlantic service was confined to news matter, but on October 17, 1907, a limited commercial service became available. Not only has the commercial usefulness of the international wireless service been extended, but the United States and foreign governments are now using it for naval, military, and governmental purposes; and deep-sea merchantvessels throughout the world have been fitted with wireless apparatus. The use of wireless telegraphy in reporting the location of and in transmitting orders to merchant vessels, and especially in the work of rescuing freight and passenger vessels which are in serious distress, has proved to be a vast benefit alike to ocean carriers, international trade, and foreign travel.

INTERNATIONAL TRADE ORGANIZATION.

Modifications in the organization for exporting and importing, the methods of purchase and sale in the foreign trade, were on the whole made less rapidly than in the domestic trade, but great improvements have nevertheless taken place. During the period of the merchant carrier, trade methods were essentially simple, exports being generally made directly by producers or by merchants, who handled exports on their own account and shipped them in their own vessels, and the import trade for the most part being handled by the same merchant carriers. When the reasons for this simple direct organization ceased, it was gradually superseded by one involving the employment of public carriers and a number of commissionmen, factors, and other middlemen. In many transactions middlemen performed valuable commercial services, especially in case of small importers and exporters who could not command sufficient initial capital to establish a direct trade organization. Export commission houses continue to this day to handle a substantial share of the foreign trade. Working on a commission basis they receive orders from abroad, fill the orders as desired, and in some

cases take complete charge of the details of shipping and financial settlement. Some export commission houses have, moreover, extended this service so as to conduct selling organizations, either sending salesmen abroad or establishing foreign branch houses. Some of them confine their activities to special commodities, others accept orders for all kinds of American wares, and some conduct an import as well as an export business.

The general tendency in the foreign trade in agricultural products has in recent years been toward the establishment of an organized export market, a movement which has been stimulated by the establishment of organized exchanges and the widespread use of the ocean cable. The activities of the grain and cotton exchanges which are discussed in Vol. I, Chapter XVII, are not confined to the domestic trade. Similar exchanges have been established abroad, and the cable has made possible the daily quoting of prices and the transmission of orders. Export transactions may also be "hedged" by the purchase and sale of future contracts in the same way that domestic transactions are protected. The commissionmen still play their part in the export grain-trade. They handle much of the grain which is shipped to the great primary grain-centers of the Middle West from the country elevators, and some of this grain they ship abroad. A relatively larger share of the foreign grain trade has, however, since the later eighties, been handled by the great central elevator men and by grain dealers and export concerns who may purchase their supply either privately in the Central West or at the ports of exportation.

The break-up of the large cotton plantations after the Civil War resulted in the organization of a system of many middlemen to handle the cotton trade, but later some of the middlemen were eliminated. Though local dealers still occupy an important place in the cotton trade in parts of the eastern cotton-belt, most of the export trade has fallen into the hands of cotton-exporting concerns, whose agents at many points purchase the cotton direct from the grower. One of the purposes of the cotton growers' unions which have been organized is further to remove middlemen from the cotton trade.

The cattle-export trade has also been well organized, most of the cattle being exported by the large meat-packing companies of the Central West and by cattle-exporting concerns. These exporters purchase cattle at the central live-stock yards to which cattle are shipped directly by the growers or feeders, the purchases being made through brokers in accordance with the rules of organized live-stock exchanges. The local cattle dealer has remained only in those parts of the country where the beef-cattle industry is relatively unimportant.

Commission houses still handle much of the foreign non-agricultural trade, but since the later nineties, when the export trade in manufactures became an important branch of the foreign trade, other (usually more direct) methods of exporting have been developed in

many quarters. Numerous export houses have been organized for the express purpose of purchasing American wares and exporting them on their own account. Some of them handle but one kind of article, for instance, some exporting concerns deal only in cotton textiles. Others purchase a large variety of goods and ship them to foreign markets in many parts of the world, and some of them are importers as well as exporters. Many so-called "manufacturers' export agents" have, moreover, entered the export trade, their function being to act as agents and salesmen for manufacturers. Ordinarily they work on a salary basis, although sometimes a commission is charged, and any one of them may act for many different manufacturers of non-competing lines of wares. They solicit orders from export companies, export commission houses, and agents of foreign importers, and in some cases they endeavor to find customers abroad. Some of them take full charge of their customer's foreign business-selling, shipping, and collection.

Direct foreign sales are frequently made to those foreign importers who have established branch houses or agents in the United States, the agents sometimes buying directly from the American producer. Likewise an increasing number of shipments are made directly to foreign countries by American manufacturers. Their foreign sales arrangements differ widely. Many shipments have been consigned to foreign merchants and jobbers, who dispose of them on their own account, and others have been consigned to foreign commission agents, who handle them on a commission basis. The tendency on the part of the largest exporting manufacturers is to establish their own foreign selling organization, either by sending out salesmen or opening branch houses abroad. Many of the American exports which have been especially successful in foreign markets, as refined oils, agricultural implements, steel wares, cash registers, typewriters, meat products, tobacco, and others, have in recent years been sold abroad by American salesmen and branch houses. Exporters who feel unable to open their own foreign establishments have frequently utilized the service of "combination salesmen," who handle the non-competing wares of various manufacturers. They act as the exporters' agents, using the names, letterheads, and invoice blanks of their employers.

FINANCING INTERNATIONAL TRADE.

Still another phase of foreign trade organization was the development of the machinery for financing exports and imports. During the colonial era and for some years later a considerable portion of the foreign trade required no detailed methods of settlement, because the great merchantshippers commonly made a direct exchange of American wares for foreign wares, their profit arising from the sale of the imports which

'Hough, Elementary Lessons in Exporting, 39; Ocean Traffic and Trade, chaps. xiii, xiv.

they brought to America. Frequently also they would carry with them on the outward voyage specie and bullion or (in the case of the Oriental and Philippine trades) Mexican dollars, to pay for the foreign wares which they purchased. In the well-developed trade with Great Britain, some of the European countries, and the West Indies, all of these practices prevailed to some extent, but banking methods were here more commonly applied. Bills of exchange had been used in Europe since the thirteenth century,' and they were used to some extent in the early foreign commerce of America. However, it was only gradually, after the international commerce of the world was better organized and international banking arrangements were generally established, that bills of exchange became the common method of international settlement.

Various types of bills of exchange have been evolved, the two great classes being those which are drawn on a bank or banker, and those drawn directly on the purchaser of the exported or imported wares. The former class is, on the whole, the most commonly used, for the buyers and sellers of the wares in the foreign trade are frequently almost unknown to each other. This method of financing ordinarily implies the establishment of bankers' credit with some large bankinghouse, usually at London, Paris, or New York, the shipper being notified that the bank will accept for payment bills of exchange with documents attached up to a specified amount. In the Chinese and Japanese export trade the bankers' credit is sometimes displayed by so-called letters of credit, which do not signify that credit has actually been opened, but are merely an advice to the London, Paris, or New York banks from their Chinese or Japanese correspondents that the drawee is regarded as "good for the amount and likely to honor such drafts." Many bills of exchange are drawn directly on the buyer of the exported or imported wares, although they are, of course, negotiated through banks. They must have attached to them, as must also the drafts drawn on banks, the order bill of lading which represents the wares, indorsed by the shipper, an invoice, and an indorsed insurance certificate. They may be payable at sight or at 30, 60, or 90 days or any other period, thus constituting a safe method of extending credit to foreign buyers. Time drafts, moreover, may be either "D. P." or "D. A.," that is "documents for payment" or "documents for acceptance.' The consignee, before he can obtain the wares from the carrier, must present the indorsed order bill of lading, and this he can not do until he makes satisfactory arrangements at the bank to which the bill of lading and draft have been sent. In the one case he is required to pay the amount of the bill of exchange before obtaining the bill of lading, while in the other it is given to him upon his formally accepting the draft for payment at the time when it will fall due.

'Day, History of Commerce, 120.

Hough, Elementary Lessons in Exporting, 99.

It is estimated that 75 per cent1 of the foreign trade is transacted subject to the terms of documentary bills of exchange; the remainder is transacted in a variety of ways. Open accounts are sometimes established when buyer and seller are well known to each other, collections being made at certain specified times. Large business concerns of good standing sometimes utilize two or three months' bills drawn on a European bank or banker as a commercial credit. No documents are required in this transaction, the banker merely accepting the bills drawn on him with the understanding that his customer will supply the necessary funds before the bills fall due. Sometimes so-called "finance bills" are used, but their only importance in the foreign trade of the United States is in case of those drawn by American firms on their own European branch houses. Such bills, which are then known as "house bills," have been popular in the past, but in recent years, owing to antagonism on the part of European discounters, they have been used less freely.

MARINE INSURANCE.

The foreign trade organization would be very incomplete without means of insuring the cargoes shipped abroad, the freight due on cargoes, and the vessels in which they are carried. The many risks incurred in deep-sea shipping and the limited liability of the ocean carriers in case of loss or damage make it essential that shippers should protect themselves by taking out marine-insurance policies. The most approved methods of international settlement, moreover, require that a marine-insurance policy or certificate shall accompany the bill of exchange, invoice, and bill of lading. It is stated that marine insurance was practiced many centuries before the origin of other forms of insurance.3

The development of marine insurance in the United States is divisible into four main periods. During the first period, which extended throughout the colonial era and until 1793, marine insurance was written by personal underwriters, and American shippers and vesselowners depended very largely upon the private underwriters of Great Britain. The first marine insurance office in Philadelphia was not established until 1721, and the first one in New York not until 1759. The organization at Philadelphia of the Insurance Company of North America in 1794 marks the beginning of the second period. This period, which extended to 1840, was characterized by the rise of corporate underwriters and by great fluctuations in the volume and condition of their business. The marine insurance business, a large share of which

1Hough, Elementary Lessons in Exporting, 99.

"Warburg, The Discount System in Europe, 12. (Publications, National Monetary Commission.) S. S. Huebner, "Development of Marine Insurance," in Annals of American Academy of Political and Social Science, Sept. 1905, p. 243.

Ibid., 252.