56 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE.

As each country has in general a different currency from any other,
foreign settlements usually involve conversion of moneys. If an
exporter draws for goods shipped to an importer in another country,
he may draw in his own home currency or in the importer’s or in one
Jifferent from either. Through the long predominance of England
in seaborne commerce, the pound sterling became the basis of foreign
exchange. Its position has declined in recent years, but it is still
the recognized international unit. Settlements between Germany
and Japan or China, for instance, were usually made in pounds till
the present war put a stop to such transactions, and dealings between
Germany and South or Central America were often in pounds.
The value of the pound, or any other money of account, necessarily
varies at each foreign point. with the conditions of the market. If
the supply of bills on London is small at Yokohama and the demand
large, the price of the pound sterling will be high; if the supply is
large and the demand small, the price will be low.
This introduces an element of uncertainty in international trade.
The uncertainty is doubled when a merchant in Yokohama makes a
payment in sterling exchange to one in New York. There is then a
conversion from pounds to dollars as well as a conversion from yen
to pounds, and at New York as well as at Yokohama sterling exchange
 may be high or low. Neither the buyer in Yokohama nor the
seller in New York can tell beforehand exactly what his bill will
amount to.
Under normal conditions the variations of exchange between
countries whose money is defined in terms of a certain weight of
gold are of minor importance, being limited to the cost of shipping
gold one way or the other; but during the present war the losses in
exchange, even between such countries, have been serious. The benefit
 which American exporters would have derived from dollar exchange
 in 1915 are illustrated by the following:
The Irving National Bank announces that the Bank of New
Zealand has established direct relations with them and other financial
institutions of this country. The establishment of dollar exchange
with Australasia will be of much interest to exporters of goods to
Australia and New Zealand, as many have during the last few
months sustained severe losses of exchange, owing to the steady decline
 in the value of pounds sterling during the transit period between
 Australasia and the United States. * * * The most disturbing
 factor in Australian trade with the United States in recent
months has been the marked variation in the rate of conversion from
dollars into sterling. The lowest rate advised was $4.48 to the pound
which represented a loss of about 10 per cent to the purchasers of
goods invoiced in dollar currency.
The same trouble has occurred in trade with other countries.
1 Exporters’ Review. New York, Nov., 1915, p. 33. ’

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