FEDERAL TRADE COMMISSION REPORT ON COOPERATION IN AMERICAN EXPORT TRADE (IN TWO PARTS) PART 1. Summary and Report Ct ——————————— JUNE 30, 1916 Sil oN o [23 £3, ¥ 3 IC Bz = 3 % J WASHINGTON GOVERNMENT PRIN TING OFFICE 1916 FEDERAL TRADE COMMISSION REPORT NN COOPERATION IN AMERICAN EXPORT TRADE (IN TWO PARTS) PART I. Summary and Report JUNE 30, 1916 3, 4 2 . - J NF EA £ lea F Ae WASHINGTON GOVERNMENT PRINTING OFFICE 1016 FEDERAL TRADE COMMISSION, JOSEPH E. DAVIES, Chairman. EDWARD N. HURLEY, Vice Chairman. WILLIAM J. HARRIS. WILL H, PARRY. GEORGE RUBLEE. Leowipas L. BRACKEN, Secretary. Pi ~ EI - 3, '; Ny 4 J > ane CONTENTS. PART I.—.SUMMARY AND REPORT. Letter of transmittal. Acknowledement. Page. ] 1 SUMMARY. Advantages enjoyed by foreign exporters........ . Foreign combinations competing with American exporters... .. Foreign buying combinations which depress American export prices... ... Exportation of natural resources...... Cooperation needed in American export trade. . Prevention of misuse of cooperative export organizations. . Properly safeguarded declaratory legislation recommended 3 4 3 9 10 Chapter L.—INTRODUCTION. Sec. 1. Reason for the investigation. . Sec. 2. Limitations of the study. Sec. 3. Method of inquiry. Special reports from United States consuls Public hearings. Research...... .. . . Inquiry cards and schedules. Field investigations............. eee Assistance received from business and professional men Sec. 4. What the report deals with 11 12 13 15 15 ‘16 18 Chapter IL.—-CHARACTER AND IMPORTANCE OF AMERICAN FOREIGN TRADER Sec. 1. Character of American foreign trade. SEc. 2. Importance of the foreign trade Foreign capital. Foreign services... Foreign manufactures. ..... Foreign foodstuffs and manufacturers’ materials Broader markets 17 21 21 22 22 23 99 Chapter TIL—GENERAL COMPETITIVE CONDITIONS IN INTER-NATIONAL, TRADE Sec. 1. Introduction. . 8Ec. 2. Transportation facilities. Railroads 25 25 28 TY V CONTENTS. Sec. 2. Transportation facilities—Continued. Ocean shipping....... The merchant marine of the chief trading nation Great Britain. . Germany... France. ..... Japan........,. Other foreign nations. .. United States ....... Need of American ships for foreign trade. Dependence on foreign ships....... Need of American ships to stimulate foreign trade. Shipping lines controlled by foreign exporters. .. Delay and irregularity in shipments of American exports. Americans charged higher freights. . Assertion that foreign shippers are given information of the transactions of Americans . .. SEc. 3. Foreign banking and credit facilities. . Foreign trade financial organization of the chief commercial nations: Great Britain. . Germany. . France... Netherlands. . Belgium... Portugal. Spain..... Switzerland. Ttaly.... Greece. . .. Austria-Hungary. Russia. . . Japan. . I Advantages enjoyed by foreign traders, in facilities for banking, credit, and exchange: Facilities for financing transactions in foreign markets. Extension of credits... - [nformation of business conditions, of credit standing of customers, etc. Assertions that information is given of transactions of Americans. . Direct promotion of sales. . American conditions. ...... ... . Sec. 4. Foreign investments of the chief trading nations Course and amount of foreign investments. Great Britain. France. . .. Germany. . . Other countries. . Relation of foreign investment to foreign trade. . Sze. 5. Industrial organization. Introduction... Great Britain... Imports and exports The Board of Trade...... The commercial department. The commercial intelligence branch. Exhibitions branch Page. 29 29 29 30 31 31 31 22 32 32 34 36 37 38 39 40 40 44 49 53 53 53 53 “4 54 54 54 54 55 55 58 60 81 62 63 66 87 58 71 72 72 72 77 77 79 "0 32 82 82 ]3 xD fea] CONTENTS. Sec. 5. Industrial organization—-Continued. . Great Britain—Continued. The organization of British industry.. Chambers of commerce. - Trade assbeiations. Combinations in British industry. Spirits The Distillers’ Co. (Ltd.)... The Industrial Spirit Supply Co. (Ltd.). Distillers’ Finance Corporation (Litd.).eeee..... Export policy... Soap. Salt. The Salt Union (Litd.)...-The Northwestern Salt Co. . The British Salt Association. Organization for foreign trade. Export merchants... Export combinations. Germany........ Introduction.. Character of German foreign trade. . Imports and exports... Tariff drawbacks.. Trade associations... Combinations in German industries Kinds of cartels... .. Sellipg-terms cartels... .. Price cartels..........- een Syndicates or selling cartels............. — A member of the combine as selling agent..e.coceooo.... A mercantile house or bank as selling agent. ......... A counting house as selling agent. RE A stock or limited liability company as selling agent... Special cartels and selling agencies for export trade. Cartel arbitration boards... Legislation and decisions of the courts regarding cartels. Attitude of the Government toward cartels. State participation in cartels... The study of cartels in Germany. Cartelsin particular industries. The Potash syndicate. .... Potash law of May 25, 1910. Common. selling agency...... Concentration within the syndicate... een Relations between the syndicate and dealers’ combines. ..... Cartels among dealers. ..... .. Special organization for foreign trade .. .. Export efforts of trade associationr Cartels in export trade........ Cooperation among noncompetitors.. Prance. ...... Imports and exports. . oN Q cQ Pee Page. 83 84 86 87 88 88 89 39 90 90 91 91 93 93 04 94 95 98 98 99 99 100 101 102 104 104 104 104 105 105 105 105 106 106 106 106 107 107 108 108 109 109 110 110 111 111 112 113 114 115 115 0 mn Fe oe] OO f MM aq [Be om [8 MN C3 po oy = oN oo § ID, a ; i fo OO — <4 ip Al | 5s po. 1 oo Oo ~ — As | © Ho 1 0 < 0 oe oN <I oN om oN 0) ry m 3 VI Sec. 5. Industrial organization—Continued, France—Continued. Promotion of trade by the Government. Tariff provisions. . Chambers of commerce Combinations. ........ Forms of combination... Mergers. ...... Cartels. ........ The comptoir. ... Government regulation of combinations Export comptoirs. .. Combinations in particular industries. Pigiron._........ {ron and steel products. . Sulphur refining. ... The aluminum industry..... Société Générale des Papéteries du Limousin. Salk. ...... La Compagnie de Saint-Gobain. ... .... Ce Combination and concentration in other industries. . - CONTENTS. Belgium... Nature of Belgian products. . Commercial organizations... Promotion of foreign trade. Forms of combination. . Government regulation of combinations. . Coal industry. . Steel industry. Glass industry. Other industries daly ool Nature of Italian products [mports and exports... Drawbacks... Subventions.......... Business organization. . Forms of combination... Government regulation of combinations. Citrus fruits... Sulphur.... Causes that led to formation of compulsory syndicate Law of July 15, 1906... - Law of June 30, 1910... 5 mormon Agreement between Italian and American sulphur interests. . . . Effects of the compulsory svndicate._ . Lime and cement . Superphosphate. . Sugar syndicate... Switzerland.:.... Introduction........ Export associations...... Embroidery industry... _.._ Silk industry. . Page. 116 116 117 117 119 119 119 120 121 122 122 122 123 123 123 124 124 125 126 127 127 127 128 129 129 129 129 130 130 130 130 131 132 132 133 134 134 135 135 135 135 136 136 136 137 138 139 140 140 141 142 1492 Sz0. 5. Industrial organization—Continued. Switzerland—Continued. Watch industry. . . Chocolate industry. . . . Condensed milk. . Machinery.... Cheese syndicate... CONTENTS, Japan... Introduction.. Government encouragement and protection of industry and trade. ... The higher council of agriculture. commerce, and industry .... Guilds..oooooo hell Inspection of foreign markets. . Commercial sample museums. .......... Societies for promoting international trade... Registration of patents and trade-marks. Drawbacks and rebates... Large trading companies. . Japan's colonial trade.. .-Cooperation between American manufacturers and Japanese merchants Conditions in particular industries. Raw silk. . Tea.... Sake..... Matches. . Toys... Matting... - Other countries. Rusdia...... .. Government sales of agricultural machinery... Austria-Hungary. Sweden. ...... The Netherlands. fanada .. The Export Association of Canada (Ltd.) - United States. . Tariff Drawbacks. Department of State... Bureau of Foreign and Domestic Commerce... .. Commercial organizations for promotion of foreign trade. Chapter IV.—COMPETITIVE CONDITIONS IN SOUTH AMERICAN - TRADE. Sec. 1. Introduction. .............. Sec. 2. Present conditions in South American trade abnormal. . . ee .. Sec. 3. The need of American shipping to carry American goods... ......... Sec. 4. The influence of foreign investments on the demand for foreign goods. - Smo. 5. The competition from foreign combinations. . . Src. 6. The need of American distribution of American goods. . Sec. 7. The advantages of cooperative action by American producers in South American trade... Sxc. 8. Combinations of producers in South America The cacao association... The valorization of coffee v1 Page. 143 143 144 144 145 147 47 148 148 149 149 149 1560 150 150 50 151 151 1562 152 152 53 53 154 154 165 bb 156 L57 168 159 160 160 161 162 162 163 L863 165 167 168 172 L77 181 185 189 189 190 VIII CONTENTS. Sec. 8. Combinations of producers in South America—Continued The quebracho combination. . The iodine combination Page. 191 194 Chapter V.—COMPETITIVE CONDITIONS AND EXPORT COOPERA-TION IN PARTICULAR INDUSTRIES. Sec. 1. Introduction.... Sec. 2. Tron and steel. .. Blast furnace and rolling-mill products . Germany. . Iron. . . The Pig Iron Syndicate. Steel... The Stahlwerksverband. . Great Britain. . The Scotch Steelmakers’ Association. ........ .. The National Galvanized Steel Makers’ Association. . FU South Wales Siemens Steel Bar Association.. .......... ....... Combinations in marked and unmarked malleable-iron bars. . . British Rail Makers’ Association. .. Belgium........ Early combinations The Comptoir des aciéries belges . Other combinations France............... we Comptoir Métallurgique de Longwy, and Comptoir d’Exportation des Fontes de Meurthe-et-Moselle. Special Comptoirs for iron and steel products Austria-Hungary. .. Russia....... Italy. ........ United States. ...... Existing cooperation. . Proposed cooperation. Machinery and railroad rolling stock Germany. ........ Machine tools. . Shoe machinery. . Pump machinery. ... Railway rolling stock Typewriters. ...:... Sewing machines._ Bicycles... Great Britain. . France...... Russia...._.. [Tnited States. . Existing cooperation. . Proposed cooveration SEC. 3. Textiles. {ntroduction.. Great Britain... .._...... The merchandising of cottons 199 202 203 203 205 205 207 207 215 219 220 221 222 223 224 224 224 225 295 225 228 229 230 235 236 236 237 238 238 238 239 239 239 240 240 240 241 241 241 242 242 243 244 244 247 942 CONTENTS. BEC. 3. Textiles—Continued. Great Britain—Continued. Combinations among manufacturers. . ... The Fine Cotton Spinners’ and Doublers’ Association. The Coats combination... . The English Sewing Cotton Co American Thread Co... Position of J. & P. Coats Co. in recent years . The Linen Thread Co. . Textile dyeing. ... The Bradford Dyers’ Association (Ltd.). . Germany. .... Combinations. .... Trade associations. . . Cartels......... Spinning. . Weaving. . Embroidery and lace industry. .. Zanella and serge. . Jute... Cloth. . Silk \ France. ... The Cotton Twist Combination Restriction of output. Export bounties... The Comptoir for cotton prints... .-Flax, hemp, and tow spinnings (Syndicat des Filatures de Lin, de Chanvre et d’Etoupe de France) Italy... The Instituto Cotoniero Italiano. The silk industry....... Flax and hemp industry.. Belgium... .. Association Cotonnitre de Belgique. The Association Belge de Tissage. Combinations in the Orient..... Japanese competition in China. Japanese combinations... The Cotton Fabric Export Syndicate. . The Manchurian Cotton Exporters’ Association. Combinations in China..... Cooperation among American manufacturers for export trade Cooperation in competing lines. Cooperation in kindred lines.............. Advantages of cooperation for export trade... . .. Sec. 4. Electrical goods. . Intreduction.. Germany... Centralization through communities of interest.. The Allgemeine Elektricitits-Gesellschaft. . Organization. ..... Affiliations with banks and other enternrises IX Page. 249 250 251 252 253 2564 254 254 254 255 255 256 256 256 257 257 257 258 259 259 260 260 261 261 2692 262 263 263 264 264 264 264 265 265 266 267 267 268 269 269 270 271 272 272 27% 273 278 274 274 one CONTENTS. Sec. 4. Electrical goods—Continued, Germany—Continued. Centralization through communities of interest—Continued. The Allgemeine Flektricitits-Gesellschaft—Continued. Controlled companies... Agreements covering foreign markets. . The Siemens-Schuckert concern . Capital and dividends.. Ce. Connections with banks... c.ee Relations of the A. E. G. and Siemens-Schuckert....o..o........ Great Britain... ceeaean British investments in foreign public utilities. “open Cable, telegraph, and telephone companies.. soo Local public utilities other than telephone companies. ....... ... Combination for foreign trade. -. Organization.. Purposes...... Export activities... Cooperation among American manufacturers SEC. 5. Chemicals. . Germany..... Coal-tar dyes......... Entire industry controlled by two groups The Badische group... The Hiochst-Cassella group.. General results of concentration. . Profits..... Soda. . Alcohol...... Effectiveness of the combinations. . France. . [taly.coo....... Great Britain and other countries... .. Cooperation in American export trade in chemicals Advantages of export cooperation. Sec. 6. Phosphate rock.... Sec. 7. Portland cement.. [ntroduction.... Jermany..... 3 3reat Britain. . fees The Associated Portland Cement Manufacturers Ltd). o.oo. The British Portland Cement Manufacturers (L.td.).. feeeane Belgium.... Other countries. [nternational combinations. . Cooperation among American producers. 3gc. 8. Lumber.. The American export trade in lumber. Jooperation in the lumber export trade .. Advantages and disadvantages of proposed export combinations of lumber producers. SEC. 9. Coal....... Introduction... Page. 277 278 278 278 279 279 280 281 281 282 282 282 283 283 284 285 286 287 288 289 289 290 290 292 292 292 293 294 295 295 297 298 300 300 302 304 304 305 306 307 307 308 310 310 215 318 325 325 CONTENTS. Sec. 9. Coal—Continued. Germany... .... The Rhenish-Westphalian Coal Syndicate. Organization. Production . . Selling arrangements and price policies. . a The Coal Syndicate and transportation on the Rhine. . . . . ... Upper Silesian Coal Convention. Belgium. .... France .... Great Britain. . The Cambrian Coal Combine. Cory Bros. & Co., Ltd... The Wilson interests. . . . Great Britain and the United States in South America. . British investments in South America. . - Control of transportation, docking, storage, and distributing facilities by Great Britain. .. High quality of American coals suitable for export. American coal cheaper at tidewater. . Transportation and handling facilities Cooperation among American producers for bunker and export business... Sec. 10. International combinations. Chemicals... Iron and steel. . .. Metals other than iron and steel. Glass. ..... Plate glass. . .. Bottles. . Petroleum....... Sec. 11. Combinations of foreign buyers........ . Cooperative societies in the United Kingdom .. The Scottish Cooperative Wholesale Society (Ltd. ).. The Cooperative Wholesale Society (Ttd.)......... . Principal articles purchased in the United States. cana Buying combinations in the metal market. . SO Close interrelation of producers, traders, and larger consumers... ....... Silver... Copper... Zine...... Lead..... Aluminum..... . German metal buying combination. ......... | FR The Metaligesellschaft, Metallbank und Metallurgische Gesellschaft, and H. R. Merton & Co. (Ltd.).... The Deutsche Gold- und Silberscheideanstalt. . . Aron Hirsch und Sohn..... Beer, Sondheimer & Co X1 Page. 327 327 327 328 329 329 330 330 331 332 333 337 338 339 339 339 340 342 343 345 347 347 348 350 350 350 351 352 354 355 355 356 357 357 357 359 360 362 363 364 365 365 368 368 369 {II CONTENTS. Chapter VI.—CONCLUSIONS. Sec. 1. Staternent of the problem... Sec. 2. The findings of fact. . Foreign combinations that affect American export trade. . The need of cooperation in American export trade. Safeguards for domestic consumers and competing producers. .. Doubt as to the law now prevents export cooperation. . SEC. 3. Recommendations of the Commission. [.1sT oF Authors CITED. _. Page. 370 372 ‘372 373 376 378 379 3R3 LIST OF TABLES. PART I. Tasre 1. United States: Imports and exports, average annual value in millions of dollars, 1911-1913; 1901-1903... wk 18 Tape 2. Comparison of export rates and domestic rates on German railroads, 26 Taste 38. Public securities in British hands at the close of 1910, estimated. . 69 Tare 4. Imports and exports of the United Kingdom, 1913. . ean 81 Tapie 5. Exports of potable spirits from the United Kingdom, by years, 1900-1914. o- im TasLe 6. Salt Union (Ltd.): Output, profits, and dividends, by years, 1889-1915... TABLE 7. Imports and exports of Germany, 1913.. Tare 8. Cartels in various German industries. . Taste 9. Imports and exports of France, 1913.. Tare 10. France, imports and reexports, 1912. Tasre 11. Imports and exports of Italy, by classes, 1913.. Tarr 12. Principal imports and exports of Italy, 1913.. 2s TasLE 13. Operations of Sulphur Syndicate in Sicily, 1906-1911. Production, exports, prices, and wages..... hi Tasre 14. Superphosphates produced in Italy, by years, 1905-1914... ....... TasLE 15. Bounties granted by German Steel Syndicate, 1905-1914. ..._..... TasLe 16. Exports of principal products of United States Steel Corporation compared with total United States exports of these products, 1912. Tape 17. Cotton spindles at work in leading countries, August 31, 1913...... TaBLr 18. Value of cotton piece goods exported from principal countries, 1912 Tasre 19. Imports of cotton cloth into principal purchasing countries, 1913... TaBrE 20. Capital and dividends of Siemens concerns (German electrical manufacturers), 1912..... .-Tapiw 21. British investments in cable, telegraph, and telephone companies in Latin America (principally South America)... ........... Tare 22. British investments in Latin American local public utilities, other than telephone companies. . Tasre 23. United States exports of chemicals, 1913, 1914, 1915. a Tasie 24. Rate of profit of leading German coal-tar-dye producers, 1892-1901, 1902-1911... fem eiteeea aia. TasLE 25. Production and exports of coal of Great Britain, Germany, and the United States, 1913..... Em Tani 26. Exports to South America and the Mediterranean from the United States, Great Britain, and Germany, 1912-1918... .. TaBLE 27. Production and exports of German Coal Syndicate for certain years, 1893-1912... on TapLE 28. Comparative analyses of American and British coals. ............. TABLE 29. Comparative ocean freight rates on coal, February, 1914........... <TIT LIST OF CHARTS. PART I. ‘acing page. CrART 1. Principal connections of the Deutsche Bank of Berlin through executives and members of its board... - CHART 2. Principal connections of the Allgemeine Elektrizitits Gesellschaft of Berlin through executives and members of its board... Crart 3. The Cambrian Coal Combine. . CHART 4. The Royal Dutch-Shell Petroleum Combination. CHART 5. The German Metal Buying Combination. 62 276 334 354 66 LV LE{TER OF TRANSMITTAL. FeperaL Trae CoMMISSION, Washington, June 30, 1916. To the PresipENT OF THE SENATE AND THE SPEAKER OF THE HoUSE OF REPRESENTATIVES. Sirs: In accordance with the provisions of subsection (h) of section § of the Federal Trade Commission act, I have the honor to transmit herewith the report of the Federal Trade Commission on Cooperation in American Export Trade, in two parts, which is the result of its investigation into trade conditions in and with foreign countries where associations, combinations, or other conditions affect the foreign trade of the United States. Part I contains the summary and the report; Part IT, the exhibits. Respectfully, Josepa E. Davies, Chairman. ACKNOWLEDGMENT. The Commission wishes to acknowledge gratefully the cooperation of the Secretary of State and the efficient service rendered to this investigation by the United States consular officers throughout the world. The consuls generously placed at the Commission’ disposal their energy and their great fund of information regarding trade conditions in the countries to which they are accredited, furnishing a large number of special reports, which are incorporated in Part IT of this report and form a noteworthy contribution to the literature of the subject. Grateful acknowledgment is also made of the cordial cooperation of the Secretary of Commerce. The Commission desires to mention as especially contributing to the preparation of this report Messrs. J. D. A. Morrow, David L. Wing, Walter Y. Durand, William F. Notz, Worthy P. Sterns, John Knox Arnold, William W. Bays, and Johann G. Ohsol. 27241°—16——" REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. SUMMARY. Under the authority of the act creating it, the Federal Trade Commission has completed an extensive investigation of competitive conditions affecting Americans in international trade. The Commission finds: (1) That other nations have marked advantages in foreign trade from superior facilities and more effective organizations. (2) That doubt and fear as to legal restrictions prevent Americans from developing equally effective organizations for over-seas business and that the foreign trade of American manufacturers and producers, particularly the smaller concerns, suffers in consequence. The Commission appreciates the importance of foreign trade and realizes the need of enabling American exporters to meet foreign competitors on more nearly equal terms in international commerce. It therefore recommends as one of the necessary steps the clarification of the law so as to permit cooperation among Americans for export trade. At the beginning of this century in the three-year period, 1901-1908, the United States ranked first among the countries of the world in amount of exports, but in the period 1911-1913 it had yielded first place to England, and Germany had almost overtaken it. Its increase in export trade during the ten-year period was but 62 per cent, while England's increase was 71 per cent and Germany’s 92. American exports of foodstuffs, which were very large at the beginning of the period, had fallen off by 1911-1913, and while exports of manufactured products had increased, the increase was not sufficient to offset the total gains of Germany and Eneland ADVANTAGES ENJOYED BY FOREIGN EXPORTERS. While the United States has been absorbed in domestic development other nations have followed definite policies for the expansion of their foreign trade and have perfected efficient means for the purpose in view. Recognizing the vital influence of transportation facilities, foreign nations have built up their ocean shipping, have granted low export 2 1 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, railway rates, and have combined their land and ocean transportation facilities to give their shippers ready entrance into overseas markets. The United States, on the contrary, has neglected its merchant marine until it is dependent upon its commercial rivals to leliver its goods. In consequence the transportation of its products 's now largely controlled by powerful international combinations of foreign shipowners, who discriminate against American shippers. Realizing the necessity of banking and credit facilities to finance ‘heir transactions, foreign nations have not only established connections - with banking housés in every land, but have established oanks of their own in all parts of the world. Banks with their main offices in London, Berlin, Paris, Rome, and Vienna operate hundreds of branches and agencies in South America, the Orient, Ausiralasia, the Levant, all around the coast of Africa, and far within the interior. They give the foreign exporter information, extend sredit, finance his transactions, and constantly strive to increase the foreign business of the mother country. The few foreign branches of American banks have but recently been established, and in most markets the exporters of this country must depend on foreign bankers. Though now increasing, American investments abroad are comparatively small. British, French, German, and other foreign traders, on the other hand, enjoy a peculiar advantage from the billions of dollars of investments made by their fellow nationals in for-2ign countries, frequently on the express condition that supplies and equipment should be purchased in the country furnishing the funds. British and German investments in South American railways and public utilities, French investments in Turkey, and Japanese investments in China and Manchuria are typical examples. In consequence, American manufacturers have frequently found it impossible to sell their products abroad because the prospective customer was forced to purchase from or through interested investors. Shipping facilities, banking and credit arrangements, investment of capital abroad, and effective organization of exporters for united action, are all of great importance in international trade. Of some of these matters, other branches of the Government have special jurisdiction. The Federal Trade Commission, in accordance with the specific authorization in the act creating it, has especially directed its investigation to the effect of foreign combinations on the export commerce of the United States. FOREIGN COMBINATIONS COMPETING WITH AMERICAN EXPORTERS. In seeking business abroad American manufacturers and producers must meet aggressive competition from powerful foreign combinalions, often international in character. In Germany, Italy, Switzer- SUMMARY. 5 land, Holland, Sweden, Belgium, J apan, and certain other countries where policies concerning industrial combinations are quite diverse from that of the United States business men are much freer to cooperate and combine than in this country. They have developed numerous comprehensive combinations, sometimes aided by their Governments, which effectually unite their activities both in domestic and foreign trade. In England and Austria-Hungary, though freedom to combine is considerably abridged under the law, important tombinations have also been formed. In Germany prior to the war there were 600 important cartels, i. 8. combinations to control the market, embracing practically every industry in the Empire. Many dominated the export trade of their industries and carried on vigorous campaigns to extend their foreign business, to prevent competition among German producers in foreign markets, and to secure profitable prices. Thus the German dyecolor industry operated as a unit in foreign trade under the leadership of two great groups of allied producers, the Badische group and the Héchst-Cassella, which were working under a fifty-year agreement to avoid competition between themselves. The manufacture and exportation of electrical equipment has been made one of the bulwarks of German foreign trade by two great companies, the Allgemeine Elektricitits-Gesellschafi and the Siemens-Schuckert, working in harmony with each other, with numerous subsidiaries at home and abroad. Half of the $150,000,000 worth of coal and coke exported annually was sold by one central selling agency, maintained by the great Rheinisch-Westfilieche coal syndicate, of which some of the Prussian Government mines are members, and which controlled the bulk of all the coal and coke produced in the Empire, Practically all the rapidly increasing iron and steel export business was handled respectively by the single selling agencies of the Roheisen-Verband and the Stahlwerks- Verband, the aggressive and closely connected unions of German iron and steel manufacturers. The coal and iron and steel combinations have fostered foreign business through export bounties and other means, In France and Belgium, syndicates of iron and steel, glass, and other industries were strong factors in domestic and foreign trade. Silk-ribbon manufacturers of France and Germany conducted their export trade in accordance with a joint agreement. In Italy, Russia, Austria-Hungary, Switzerland, Sweden, Greece, Argentina, Chile, and Ecuador, central organizations unite the interests of producers in the industries characteristic of those countries, such as coal, iron and steel, agricultural machinery, oil, sulphur, superphosphates, cement, matches, chocolate, embroidery, silk goods, watches, cotton goods, condensed milk, canned fish, currants, quebracho, iodine, cacao, ete. 3 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. In Japan an export organization of textile manufacturers is rapidly obtaining the extensive cotton goods trade of North China. The trade in tea is controlled by a nation-wide “tea council.” One great Japanese firm, which in itself combines manufacturing, mining, shipping, and merchandising enterprises, is rapidly extending Japanese trade in all lines throughout the Far East, and the Japanese Government is directly assisting the development of shipping, bankng, and trading for foreign business. The long established trade in British products in many markets of the world, due to their pioneer position, the excellent representation afforded by British export houses, and the advantages of British shipping and banking facilities, have enabled their manufacturers to hold their foreign markets in many lines without such a large degree »f combination as characterizes German industry. But in various important industries combinations have grown up. Thus most of the great coal export business .is done by powerful organizations, sombining mine operators, marketing companies, coal shipping lines, and foreign distributing companies. This gives British coal its grip on the important South American market. British cement manufacturers are united in a strong and successful union for the extension of their over-seas trade. Recently a number of large British manufacturers of machinery of all sorts have formed the Representation for British Manufacturers (Ltd.), an organization to handle their business in certain important foreign markets and to carry on an aggressive campaign for its extension. Similar organizations for foreign trade are in process of formation among other British manufacturers. In the electrical, cotton-textile, pottery, tobacco, wall paper, iron and steel, and various other industries strong associations and combinations are important factors in foreign and domestic hiisiness. It is against such organizations as these, uniting powerful groups of foreign concerns, backed by great banks, aided by railway and ship lines, and assisted by foreign Governments that hundreds of comparatively small American manufacturers and producers must sompete if they engage in export trade. Moreover, in some industries such smaller manufacturers must also compete abroad with great American companies having most efficient world-wide selling organizations. In various manufacturing industries higher manufacturing costs and comparative inexperience in export trade make it extremely Jifficult at best for Americans to compete with foreigners for trade abroad. Therefore, meeting severe competition from powerful foreign combinations, and through dependence on foreign cables, telegraphs, banks and ships forced to risk exposure of the secrets of their ver.seas business to their foreign competitors and to risk effective SUMMARY. 7 discrimination against their trade, American manufacturers, and specially the smaller producers, are frequently at a decisive disadvantage In export trade. FOREIGN BUYING COMBINATIONS WHICH DEPRESS AMERICAN EXPORT PRICES. In various markets American manufacturers and producers must deal with highly effective combinations of foreign buyers. Thus exporters of lumber find such combinations in Australia .and on the Continent of Europe. Cottonseed products are handled by combinations of buyers in Holland, Denmark, and Germany; and Austrian cotton-textile manufacturers have a buying combination to import their raw cotton. The Cooperative Wholesale Society (Ltd.), an astonishingly comprehensive wholesale buying organization maintained by 1,400 cooperative societies in Great Britain, has one buyer in New York who annually purchases millions of dollars’ worth of American products. Four London firms, known as the Fixing Board, daily set the price of silver for the world, and American mining companies must sell their silver for either the English or the great Indian market to one of these four houses. For years the copper trade of the world has been ruled by a vast German metalbuying organization centering in the Metallbank und Metallurgische Gesellschaft A. G., of Frankfort on the Main. This combination has subsidiary and affiliated companies in Germany, England, France, Spain, Switzerland, Belgium, Africa, and Australia, controls copper and lead mines and smelters in the United States, Mexico, and other countries, and works in agreement with other (German metal-buying concerns. These combinations naturally make individual American producers bid against each other, and are thus able to buy at comparatively low prices. According to the president of one of the largest American copper companies, the German metal-buying combination, by such tactics as these and by the manipulation of the foreign future markets, has bought millions of tons of American copper at prices averaging, over a series of years, nearly a cent a pound below the prices paid by American consumers. EXPORTATION OF NATURAL RESOURCES. A considerable part of the export trade of the United States consists of raw or semifinished materials obtained from natural resources of limited supply. It is urged by many that if cooperation among exporters of such materials is established it will tend to increase the price received for such exports and enable the producers to reduce the wastes of production not only to the profit of the 8 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. industries concerned but also to the advantage of the public through retarding the depletion of the supply. They point out that other countries have taken measures, in connection with cooperation among producers, to increase the prices received for the products of such natural resources in the export trade and also to conserve the supply. For example, the German Government has enacted a law which fixes the quantities of potash sold both in export and domestic trade and forbids the sale for export at prices below those fixed for the domestic market. The Government potash mines are members of the producers’ syndicate. COOPERATION NEEDED IN AMERICAN EXPORT TRADE. If Americans are to enter the markets of the world on more nearly aqual terms with their organized competitors and their organized customers, and if small American producers and manufacturers are to engage in export trade on profitable terms, they must be free to unite their efforts. Without any export organization, foodstuffs and raw materials can readily be sold at some price, but to avoid needless expense in distribution, to meet formidable foreign buying organizations, and to insure profitable export prices, cooperation among American producers of such commodities is desirable. In the sale of factory products, cooperation is even more desirable. Such goods must be advertised, demonstrated, and a market created abroad, often in the face of the keenest competition from great combinations of foreign manufacturers. Obviously only strong organizations can undertake this contest. If groups of American manufacturers and producers, either. of competing or of noncompeting- goods, can combine their efforts, they can share the cost of developing new markets, establish themselves firmly, extend credit more readily to foreign customers, and compete more successfully with foreign syndicates and cartels. This cooperation among manufacturers and producers, it should be emphasized, while it will result in many lines in the system of direct representation abroad, will by no means supplant the export commission houses and export merchants. The experience of England and Germany, where a very high proportion of over-seas trade is carried on by these houses, indicates their great value as an aid not only to independents but to combinations in international commerce. Tt is not the view of the Commission that cooperation alone will insure successful entry in foreign markets. Shipping facilities, agencies for financing transactions, all under American control, and training for the production and sale of goods in foreign commerce BUMMARY. q are the first requisites. But with these provided, export cooperation will be decidedly advantageous; and it is to export cooperation as directly within the jurisdiction of the Commission that its recommendations are confined, the other primary elements of foreign trade policy being either already before Congress or within the sphere of other administrative departments. PREVENTION OF MISUSE OF COOPERATIVE EXPORT ORGANIZATIONS. Two chief dangers from cooperative export organizations of American manufacturers and producers are apparent. They may be used to exploit the home market and they may be used unfairly against individual American exporters. These dangers must be faced frankly and provided against fully. The Commission is confident that this can be done without sacrificing the essential advantages of joint action and without altering the policy of the antitrust laws or interfering with their enforcement. The only danger to the American consumer would arise if export combinations were to restrain trade in the domestic market. In order to make it difficult for export combinations even to attempt restraint of trade in the United States, the right to cooperate or combine should be limited to the export trade solely, and administrative supervision should be provided to insure that such organizations are not used surreptitiously for restraining trade at home. Such provisions of law, with the rigid enforcement of the antitrust acts, will guarantee competitive prices in the domestic market. As regards the danger to the independent American exporter, the specific extension to export trade of the present law prohibiting unfair methods of competition, and the requirement of full reports to the Federal Trade Commission from all cooperative export organizations will furnish an adequate safeguard. The Commission does not believe that Congress intended by the antitrust laws to prevent Americans from cooperating in export trade for the purpose of competing effectively with foreigners, where such cooperation does not restrain trade within the United States and where no attempt is made to hinder American competitors from securing their due share of the trade. It is not reasonable to suppose that Congress meant to obstruct the development of foreign commerce by forbidding the use in export trade of methods of organization which do not operate to the prejudice of the American public, are lawful in the countries where the trade is to be carried on, and are necessary if Americans are to meet competitors there on more nearly equal terms, 10 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. PROPERLY SAFEGUARDED DECLARATORY LEGISLATION RECOMMENDED. By its investigation the Commission has established the fact that doubt as to the application of the antitrust laws to export trade generally prevents concerted action by American business men in export trade, even among producers of noncompeting goods. In view of this fact and of the conviction that cooperation should be encouraged in export trade among competitors as well as noncompetitors, the Commission respectfully recommends the enactment of declaratory and permissive legislation to remove this doubt. This recommendation is made subject to the condition that the legislation shall be carefully safeguarded and shall make absolutely clear that the combinations for export business are subject to all the rigors of the Sherman law if they are used to restrain trade in the United States. Joserr E. Davizs, Chairman. Epwarp N. HurLey, Vice Chairman, Wirriam J. Harris, Wir H. Parry. GrorcE RUBLER. COOPERATION. IN AMERICAN EXPORT TRADE. CHAPTER I. INTRODUCTION. SECTION 1. REASON FOR THE INVESTIGATION. The importance of our foreign commerce and the need of understanding the conditions American exporters must meet in competing for the trade of the world was recognized by Congress when it gave the Federal Trade Commission wide power to investigate and to report its recommendations regarding those conditions. The act creating the Commission provides that one of its powers shall be— (h) To investigate, from time to time, trade conditions in and with foreign countries where associations, combinations, or practices of manufacturers, merchants, or traders or other conditions, may affect the foreign trade of the United States, and to report to Congress thereon, with such recommendations as it deems advisable. (U. 8. Stats, vol. 38, Pt. I, ch. 811, sec. 6h.) In view of the convulsive effect of the present war on the commerce of the world and of the difficulty of foreseeing the economic and business conditions that will result after the treaties of peace, the Commission has deemed it its duty to complete, with all possible dispatch, an investigation of the obstacles which have heretofore confronted American manufacturers and producers in world markets, and recommend such legislation by Congress as will best enable them to at least hold their ground in the fierce commercial struggle that seems imminent after the war is over. The economic map of the world is being remade. The business men of the world are seeking to forecast conditions and to readjust affairs to the greatest advantage. The next few years contain possibilities of as far-reaching and enduring consequence to American industry, commerce, and finance as perhaps any years in the history of the country. Being clothed by Congress with the authority to ascertain and report from time to time as to competitive conditions in foreign countries of the world which affect adversely the interests of American industry, the Commission felt that the present was a suitable time for the exercise of that power. Under this responsibility and with this purpose the Commission undertook the investigation. 11 12 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. SECTION 2. LIMITATIONS OF THE STUDY. Because of the vastness of the subject of foreign trade, the urgency for action, and the difficulty of getting information abroad at this ime, it was necessary to limit the inquiry to what was immediately feasible. There are many forces that determine the movements of international trade, and to analyze all, even of those that act very powerfully and widely, would require an immense amount of research of a most difficult character. Thus, international trade is powerfully affected by the natural adaptation of countries for the production of materials; by their adaptation to manufacture in general on account of physical conformation, climate, ease of developing power, and the skill, ingenuity, enterprise, and financial resources of their people. In the case of any given material or manufactured product underlying conditions of this character play an important part. Forces of this kind, obscure as their action may be, have their sure effect on the cost of production. A study of the cost of production in other countries, whether with reference to the underlying factors just mentioned or to only the more immediate factors of material cost, wages, and labor efficiency, would have been beyond the present means and time of the Commission, even had the war not prevented it. It is needless to state that cooperation in export trade, which is the feature of the subject to which the Commission by its organic act is specially directed, can not change some of the deeper currents of international commerce that are determined by physical causes which result in costs of production so low as to preclude competition. But where the nations are more nearly on a par, as they are in many of the articles of trade, the factors that depend not on natural zauses, nor on the social development and custom of a people, but on immediate action, governmental or private, may often be the Jetermining ones. It was to these lines that the Commission limited its study. It might even have confined itself strictly to the juestion of export cooperation as the means most closely within its >wn sphere, and have left other departments of the Government to secure information on the very important subjects of rail and ocean transportation, banking, credit facilities, etc. But these topics are s0 vital to foreign trade, and so much valuable information on them inevitably came to the notice of the Commission, that it has included a good deal of such data in this report. In its recommendations, however, it has confined itself strictly to the subject of the legislation it deems necessary regarding cooperation, leaving the rest for the consideration and judgment of the governmental departments more directly concerned therewith. INTRODUCTION. 13 One important factor in the success attained in foreign trade by the great commercial nations of Europe is the willingness of their young men to devote their lives to salesmanship in distant and but partly developed countries. Any discussion of this quality, whether a result of the governmental policies of European nations or of the peculiar genius of their peoples, has been omitted, as well as the consideration of what educational work needs to be done in this country before it can train up a body of efficient salesmen adaptable to conditions in Europe, the Orient, or in South America. Again, the report is limited in that no detailed description is given of the agencies by which American export trade and that of other countries are carried on—the commission houses, the manufacturers’ agents, the export merchants, the manufacturers themselves by direct representation, ete. It was not felt necessary under the cirsumstances to formally describe the various kinds of American concerns engaged in handling exports. Suggestions and information were sought from all these interests, consideration was given the data obtained, and the various aspects of cooperation as it concerns the various interests, are taken up in the appropriate chapters of the report (Part I) and in the exhibits (Part II). SECTION 3. METHOD OF INQUIRY. The methods used in gathering information were: (1) Special reports for the Commission from United States consuls; (2) public hearings by the Commission; (3) research in published material; (4) inquiry cards and formal schedules sent to American business and professional men; (5) investigations, in this country and abroad, hy the Commission’s field agents. Information had to be secured regarding so many industries and so many countries that it was impossible for the Commission to make first-hand investigations. It necessarily had to rely, in most phases of the work, on secondary sources of information and on statements of reputable men in a position to know the facts. This is sspecially true of the information regarding foreign countries. On sonditions in these countries, however, the Commission consulted published official records and the most ‘authoritative works on the subject. Much of the information regarding foreign business organizations and foreign combinations in these sources was unquestionably originally furnished, directly or indirectly, by those interested in the organizations. But, though it was impossible to test in any systematic way the accuracy of the information thus gathered, the data have been carefully scrutinized and broadly corroborated. Their reliability so far as the general situation is concerned is not subject to serious question, L4 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. SPECIAL REPORTS FROM UNITED STATES CONSULS. Through the courtesy of the State Department, the United States ~onsuls designated to submit the national reports for the countries to which they are accredited, made very valuable special reports for the Commission on conditions pertinent to the investigation in their particular countries. In order that the consuls might contribute most effectively to the inquiry, they were advised in detail as to the material already available to the Commission, and were asked to supplement this with further data on particular topics regarding which information was specially needed. These special reports form a noteworthy contribution to the subject: Much of the material was used in the preparation of this volume, and the reports themselves are printed in Part IT (pp. 1 to 250). PUBLIC HEARINGS. Hearings were held by the Commission during the summer of 1915 n Boston, New York, Chicago, Detroit, Cincinnati, Indianapolis, Minneapolis, St. Paul, Spokane, North Yakima, Tacoma, Seattle, Portland, San Francisco, Los Angeles, and San Diego. A large cumber of manufacturers, exporters, and others actually interested in export business appeared and discussed foreign trade conditions. Through these conferences with men of practical knowledge and experience much pertinent information and many valuable suggestions were obtained. Material from the hearings is given under appropriate topical headings in Part IT (pp. 251 to 327). RESEARCH. Systematic study was instituted covering all the recent published material of importance regarding foreign cartels, syndicates, combinations, and certain other factors affecting American exporters in over-seas markets. Such work was necessary, particularly in the early stages of the investigation, in order to take full advantage of all available authoritative information, to give intelligent direction to the inquiry, and to reduce further work to the minimum. Tt involved the careful study of a great mass of material in German, French, Italian, Spanish, and Russian, consisting chiefly of laws; court reports; parliamentary papers; reports by governmental departments, bureaus, commissions, and consular services; bulletins, reports, and announcements by chambers of commerce and by associations, syndicates, and organizations of producers and distributors; books, treatises, and monographs by private authorities. Tt also required the examination of similar material published in English. In addition, the files of some 250 of the more important sconomic, financial, and trade journals published in the various languages were consulted. INTRODUCTION. 15 INQUIRY CARDS AND SCHEDULES, In order to secure a wide basis of fact and opinion the Commission sent out inquiry cards, formal schedules, and special letters to thousands of American business and professional men. The desire was to reach as many individuals and concerns as possible who had suggestions on a foreign-trade policy or who had information to offer, and to make certain that the mailing list was representative of all classes and interests involved. To previously available lists totaling about 10,000 names were added names obtained by correspondence with nearly 300 associations of manufacturers, producers, exporters, and dealers; names selected from membership lists of various economic, scientific, and legal associations; and names suggested by persons who were also giving information. To these persons and concerns, totaling over 25,000 in number, a general inquiry letter with a blank card for reply was first sent out. This was designed to obtain a broad expression of opinion on the advisability of combinations among American manufacturers and producers solely for export trade. Nearly 10,000 replies were received in answer to this letter and between 8,000 and 9,000 schedules of detailed inquiries (gee Part IT, pp. 329 to 336, for the forms) were then sent to those who signified their willingness to give the Commission further assistance. From the card replies and from the 2,000 schedules filled out and returned, as well as from the large correspondence that developed, the Commission received many suggestions and a wide range of information. All this material, which is digested in Part II (see pp. 387 to 450), has been considered in preparing the report. FIELD INVESTIGATIONS. A large number of representative companies who had information on the subject were visited by the Commission’s field agents. Much of value was secured in this way in addition to the data furnished in the schedules. It was at first intended to send trained investigators to the chief European countries and to the other continents, but conditions were so disturbed that it was found impracticable to pursue these investigations except in South America. The results obtained by the Commission’s agents there are embodied in Chapter IV of the report. The chapter is of special interest because of the importance of that market for the permanent growth of American trade. L6 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. ASSISTANCE RECEIVED FROM BUSINESS AND PROFESSIONAL MEN, Not only in the public hearings, but also in the painstaking replies to the schedules, in thousands of special letters, and in interviews with field agents, a large number of representative business and professional men have given the Commission extensive assistance in this study, contributing a great fund of information covering a wide range of matters pertinent to the inquiry. SECTION 4. WHAT THE REPORT DEALS WITH. The report deals with the advisability of cooperation in American sxport trade. As a basis for the consideration of this question, Chapter IT gives the outstanding facts regarding the amount and trend of American foreign trade and its importance. The analysis shows that the United States is becoming less and less an agricultural sountry and more and more an industrial one. Imports of foodstuffs and of raw materials are increasing and exports of products of forest, mine, and factory are now more than two-thirds of all the export business of the country. Chapter III shows the broad competitive conditions which American export trade has had to meet in the markets of the world, and the comprehensive business organization of the great commercial countries who are its rivals in those markets. It shows the coordination of their transportation facilities, banks, and industrial combinations, which enables them to hold their domesfic markets and to push out into the export field in competition with other countries. Because of the special interest attaching to the South American market and the possibilities of development for trade there, Chapter [V is devoted to that subject. Chapter V takes up a number of the particular industries that are most vital, actually or potentially, to the export commerce, and discusses the operation of foreign selling combinations in those industries and the feasibility of American export combinations in them. It also takes up several important foreign buying combinations that handle as a unit the buying of raw materials or commodities for their membership. The final chapter gives the conclusions of the Commission and its recommendation that declaratory legislation be enacted so as to permit export selling combinations of American producers and manufacturers, with effective safeguards for the public interest. CHAPTER IL CHARACTER AND IMPORTANCE OF AMERICAN FOREIGN TRADE. In order to appreciate the part which cooperative action for export trade may play in the development of such trade it is necessary to understand the general character of American export and import business and to consider briefly its importance. In summarizing the outstanding facts of the foreign trade of the United States it is expedient to refer to normal conditions. The outbreak of the present war caused profound interruption and change in international commerce. This presentation, therefore, is based on the data for the years preceding the war. At the beginning of the century the United States ranked first among the three great exporting countries in the value of domestic products exported, the average annual value of such exports for the respective countries for the years 1901-1903 being, United States, $1,410,000,000; England, $1,387,000,000; Germany," $1,120,000,000. A decade later the United States had fallen to second place. The average values for the years 1911-1913 were, England, $2,379,000,000; United States, $2,290,000,000; Germany, $2,155,000,000. The progress of the other two countries had been greater than that of the United States, the per cent of increase being, Germany, 92 per cent: England, 71 per cent; United States, 62 per cent. SECTION 1. CHARACTER OF AMERICAN FOREIGN TRADE. This country buys commodities abroad which it can not produce here or which it finds it to its advantage to purchase elsewhere, and it sells abroad the surplus product of its farms, mines, and factories. Imports and exports are here classified in three great groups, viz, foodstuffs, materials for manufacturing, and manufactures ready for consumption. In making these broad comparisons it is necessary in general to use total values rather than quantities, but it is evident that in many cases the increase or decrease is largely affected by changes in the value of the unit, and does not indicate, therefore, the extent of the changes in the total quantities. A few remaining items are thrown into a small miscellaneous group, not considered in the details which follow here. The table below gives the principal statistical facts concerning American imports and exports of these oreat classes of commodities and of the chief articles in each class, The data given are average values for the three years 1911-1913 and similar averages for 1v01-1903. 1The figure for Germany is the amount of its “ special commerce,” being that classificalion of its exports that most nearly corresponds to the classification “ domestic exports" ised by the United States and England. 97941° 18-9 18 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, TaBiE 1.—United States: Imports and exports, average annual value in millions of dollars, 1911-1943; 1901-1908. ‘Percentages and totals based on actual figures.) Imports. Classes and commodities. 1911-1913 1901-1903 Per cent of Increase decrease “_ »y, Totaleeerveencenn. Foodstufls, total. ......| a1| 235 75 BOW.ooiiocnnen] 30) ieee, Prepared... . 1941 (ay Vo LL L714 048 COM. cur. tineecnennns BEAL etre rinrnes ae Fruits and nuts......... BDIHS vies wogmps 7 Tin LOB cupigviovyneniessnn ge Chocolate, cocoa and OAR Ong nunc sumasat ime Breadstuffs., oe 105 45 20 18 20 Ge 70 67 57 23 100 16 23 13 30 8 131 2 Fakd Manufacturers’ materials, total. 897 | 103 , [TE 466 56 iy 92 85 215 Hides and skins. .........| India rubber and substitutes............... Metals, drugs, dyes, I wn wnmmniing cuss aman Silk, unmanufactured... Copper.... DIB. cousgunns Precious stones. . ....... Fibers unmanufactured including yarns. tron and steel including OPO. .seunneecnnnnannnn Tobacco, unmanufac-SOMA. vos spmpmeines Wool, unmanufactured. . Paper sins and Reo pulp, pulp wi as Matern, rood 8s Wood and lumber... .. ~otton, unmanufactured Furs and skins.......... Fertilizers, ee veemnon. ... 80 81 51 47 44 2 17 58 44 23 21 26 33 25 | 17 1c 55 83 124 125 66 81 ~32 104 ” 37 37 > § 417 48 115 148 39 Classes and commodities. Total. Foodstuffs, total....... RawW.u..cvuennnnens Prepared... . Breadstuffs............ Wheat and wheat products. .... Plowre «yiiqsminnine Corn and corn prod-ULB uviervssnmane Barley ..e..cceeann.. " GIES rr Snrcenan eat ProductS.eeeese.. eats een Bacon.......... Hams and shoulders... Pork, pickled... Beef, fresh..... Fol8.sipicnnnnnnnnn Lard....cccueen Oleooil........ Fruits and nuts........ i SR, Canned, dried, etc.. Dil cake and oil-cake 88] cui ii gia vis ammen Cottonseed......... Linseed... ..ceanuen Cottonseed oil ......... gL SBE. vu hss snima nnn Dairy products ........ Manufacturers’ materials, total, 4 Cotton, raw... COPOBY. «ews vmmnamunn Wood and wood produets..... hom Lumber............ Sawed timber. ..... SAVES... ovueenn ann Coal and coke.......... Bituminous coal... Anthracite coal..... Iron and steel.......... Sheets and Jites. “ Rods of steel......, Tin plates, terne plates, otc......... Leather, etc... o.oo... Glazed kid......... Sole leather. ....... Mineral 0ils...oveenenn. LIde, . covinanannes Poraflin, «. connvacan Residuum......... BOB ve voge conusninn wn Furs and fur skins..... “ertilizers, phosphate, abe... - Tickel. .oeoiinnun. au. “hemicals, drugs, ete... aints, pigments, ete... Jement. hvdranlie Exports. Per cont of increase decrease “hy ). 1911~ 1913 2,290 1 1,410 4551 5, 140 315 167 uz 53 30 5 5 153 62 be 62 13 27 4 —25 —31 “og 168 72 39 & 4 184 108 20 ~23 14 23 ~17 ~42 -_14 23 5 25 1C 28 67 £ L ii 5 - 7 —468 —94 19 10 4 125 96 158 8 56 13 33 15 18 26 14 11 21 @ i ? 3 —§ — 1,109 572 124 549 324 40 42 21 7 4 24 15 & 5 1 2 102 76 208 88 1 66 10 6 82 39 20 48 22 8 107 164 56 61 155 163 158 956 1,887 430 5 1 19 9 23 7 ~ ® 23 2 7 1” 7.050 78 912 36 43 11 - 4 779 210 108 56 741 83 166 R10 1 Not separately reported. * This total exports of manufacturers’ materials may be subdivided as ‘ollows: 1911-1913, unmanulactured 740 million, ‘manufactured 369 million; 1901-1903, unmanufactured 416 million, manufactured 133 million; increase, unmanufactured 78 per cent, manufactured 178 per cent. * Less than one million. CHARACTER AND IMPORTANCE OF AMERICAN FOREIGN TRADE. 19 TABLE 1.—United States: Imports and exports, average ennuel value in millions of dollars, 1911-19183; 1901-1903—Continued. [Percentages and totals based on actual figures.} Classes and commodities Manufactures ready for consumption. .... Manufactures of fiber... Manufactures of cotton. . ALL WOTkS.eveunr -uonnes Manufactures of silk..... Paper and manufactures Of vain, ron and steel, manutures of sv eeaeennoe... Wogl, manufactures of . ui Iraports. 1911-~ 1913 1901-1903 391 244 67 38 66 & a 4 28) 33 201 5 al 1 161 18 Per cent of increase decrease “© __ ay, 61 78 42 096 ~-15 348 88 - 8 Classes and commodities Manufactures ready for consumption..... (ron and steel.......... Machinery......... Engines and parts of...... Metal-working . Sewing machines........ Typewriters.... Gasoline eniNOS. vrunnans Mining......... Pipes and fittings. . Structural iron and gotl.ouveineviine Rails for railways... Tools, not elsewhere specified... Wir-Oils... . © . luminating....... Lubricating, ete.... Naphthas......... Cars, carriages, and other vehicles. .... oe Automobiles and parts... i. CAI. vv icnn ge vpuwvus Setton, manufactures Of yuvmmpnp por Cloths. ..ovuvacunsne Froring apparel... Agricultural imple-MONS. enenaaanannn. Mowers and reap-Ow mimnmgm mw gin Plows and culti-TORTS nna gunsnn Flectrical machinery, Em Bigxher, manufactures Of eaviinreininnneas Boots and shoes. ... Paper and manufactures of.evneeneen.... Books, musie, maps, ete........ Wood, manufactures of. Furniture.......... Chemicals, drugs, ete... Medicines, patent...... Indiarubber, manufacfactures of............ Fibers, vegetable, ete... PING. co uroronspns Turpentine, spirits of... Photog goods.... Jousehold and personal effects. coo... 911 1913 718 230 117 21 ul 11 | 11 9 9 15 14 i3 i2 11 16 65 27 | 20 47 27 12 43 | 30 10 | 38 | 10 8 bY | 20 17 0 9 i8 7 i7 7 12 11 8 9 ¢ Exports. 1901-1903 Per cent of increase ‘decrease 6 Yo 320 95 44 7 3 5 4 124 142 166 219 345 136 204 ) ® 5 THA 435 241 3 4 4 5 67 51 1 2 1 170 109 73 27 140 1,190 344 1 v's 2,086 oy 28 22 2 19 10 56 37 324 96 89 167 159 150 157 3 B 7 11 78 4 12 4 9 3 26 51 56 83 116 204 112 157 6 { Not separately reported. Manufacturers’ materials constituted the most valuable group of commodities entering into foreign trade, the annual imports just prior to the present war averaging nearly $900,000,000 and the ex- 20 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. ports $1,100,000,000 in value. Hides and skins, rubber, chemicals, drugs and dyes, raw silk, copper, tin, sisal, wool and cotton were the leading articles of this class imported. Among those exported raw cotton alone was averaging nearly $600,000,000 in annual value and constituted by far the most valuable single export. Copper exports were valued at nearly $125,000,000, and wood and lumber, coal, leather, iron, and steel were also important. Each year some $400,000,000 worth of foodstuffs were being imported. Coffee, $111,000,000, and sugar, $105,000,000, accounted for more than half the total, but purchases of fruits and nuts, wines and spirits, tea and chocolate were also important items. On the other hand, we were exporting foodstuffs valued at about $450,000,000 annually, the chief articles being breadstuffs, $167,000,000; meats and meat products, $153,000,000. Fruits and nuts, oil cake and oilcake meal, and cottonseed oil also were of considerable importance, Of manufactured goods, our annual imports were valued at nearly $400,000,000 and our exports at more than $700,000,000. Cotton textiles, silk goods, manufactures of other fibers, and art works were among the most important of these purchases abroad. Conversely, manufactures of iron and steel, such as engines and motors, sewing machines, typewriters, and structural iron and steel, refined oils, automobiles and cars, cotton goods, agricultural and electrical ma. chinery were among the important factory products sold abroad. It is also necessary to note the trend of the recent development of American foreign trade. At the beginning of the decade the United States was selling foodstuffs valued at $522,000,000 annually and buying foods valued at $285,000,000, but 10 years later its purchases had risen to $411,000,000 annually and its sales had fallen to $455,000,000. As the urban population increases further changes in this direction may be expected. The outstanding fact in the growth of the foreign trade has been the increased importance of manufactures. Exports of manufactured articles ready for consumption increased from $320,000,000 to $718,000,000 in value, and exports of manufactured materials for further use in manufacturing increased from $133,000,000 to $369,-000,000 in value. Taken together, these groups show an increase from $453,000,000 to $1,087,000,000. At the beginning of the decade such products constituted less than one-third of the exports. At its con-"lusion they constituted nearly one-half. But the development of the manufacturing industries of the United States has also affected the import trade. The factories must have raw and semifinished materials, many of which come from other countries, and the imports of such supplies have largely increased. During the decade the total imports of manufacturers’ materials increased from $466,000,000 to $897,000,000. The details of the table CHARACTER AND IMPORTANCE OF AMERICAN FOREIGN TRADE. 21 emphasize the increased demand of the factories for such supplies. Thus, imports of crude rubber increased from $30,000,000 to $95,000, 000, hides and skins from $56,000,000 to $10,000,000, raw silk from $44,000,000 to $81,000,000, tin from $21,000,000 to $47,000,000, and wool from $19,000,000 to $32,000,000. Further industrial development will necessarily involve further increase in such imports and at the same time will probably diminish the surplus of native raw materials available for export. It is obvious, therefore, that in the future the exports of finished factory products and of such raw or semimanufactured materials as copper, cement, coal, etc., of which the country has abundant supplies available, must be more largely used to exchange for the needed products of other countries. It is in such lines that cooperative action can be made most effective in export trade. As this report shows, there are formidable combinations of foreign buyers or producers affecting international trade in many of these commodities. Cooperation for export trade among American producers is needed to enable them to deal effectively with these foreign combinations. Such action would probably materially increase the profit in the export trade in such commodities. SECTION 2. IMPORTANCE OF THE FOREIGN TRADE. The activities of different portions of the country are so interwoven and interdependent that changes in the business of any one section materially affect the prosperity of all the others. While particular items of foreign trade directly affect particular sections and interests, the indirect effects extend to all parts of the country. Certain aspects of this condition are of particular importance. Thus exports are required to pay for foreign capital, services, and goods, irrespective of what locality utilizes the capital or enjoys the services. Not only are exports important to the country as a means of paying debts, but a further advantage is derived, not only by the manufacturers but also by the public, through the broadening of the market for the products of the country. In such respects as these foreign trade is of great importance to the United States as a whole. Foreign capital.—Much of the country’s development has proceeded from the investment here of capital secured abroad. This capital has gone into railroads, public utilities, farms, mines, and industrial undertakings of all kinds. It is represented by stocks, bonds, notes, and the direct ownership of properties. Estimates of the amount of such investments here at the outbreak of the war vary, but all authorities agree that the total was large. Thus early in 1915 foreigners held approximately $2,700,000,000 par value of American railway securities. On January 1, 1915, they were said to hold $150,000,000 par value of United States Steel Corporation pA REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. shares. Similarly, large investments in other concerns were held abroad. In the long run the interest and dividends on foreign-owned bonds and stocks must be paid by exporting goods. The foreign investor, moreover, may desire to dispose .of his holdings to this country. Payments therefor must eventually be made by means of exports. Competent authorities estimate that in 1915, on account of the war, foreign-held American securities were sold to the par value of $1,500,000,000, but at the same time Europe increased its purchases of goods from this country by more than $1,000,000,000, so that these securities were absorbed without financial disaster. It is thus evident that to obtain foreign capital when needed, and to assume the obligations which this entails without inviting serious business complications, it is necessary to have an adequate export trade. It may be pointed out, however, that as this country passes to the position of a creditor nation, which it bids fair to do, there will be less and less need of foreign capital for its enterprises. Foreign services.—In addition to foreign capital for investment in American enterprises this country also makes extensive use of foreign services of many kinds. Thus it has relied on foreign shipping to convey 90 per cent of its imports and exports, it has depended on foreign cables and telegraphs, has utilized foreign banks in the conduct of its international commerce. As long as the country depends on foreigners for these services, they must be paid for by exports, as must the large sums paid by Americans to foreign musiclans, artists, scientists, physicians, etc., and the many expenditures of American tourists abroad. The aggregate cost of these commercial and personal serviees is large and in the end must be offset by the exportation of American goods. Foreign manufactures.—The United States has been accustomed to purchase many foreign manufactures, which are used in all parts of the country. Thus it imports silks from France and Japan, woolens from Great Britain, fine fabrics and dress goods from England and France, laces and embroideries from Great Britain, France, and Switzerland, porcelain and china from England, carpets and rugs from the Levant, toys from Germany, matches from Sweden, surgical instruments, drugs, and chemicals from Germany, and art works from many places. These manufactures are purchased abroad because it has been found advantageous to do so. Because of more accessible or better raw materials, superior climatic conditions, lower costs of production or other reasons there will always doubtless be many manufactured articles of this nature which will be imported. In turn it will be desirable for the United OHARACTER AND IMPORTANCE OF AMERICAN FOREIGN TRADE. 98 States to pay for these imports with goods that other countries find it advantageous to buy here. Foreign foodstuffs and manufacturers’ materials.—Since 1900 more than three-fourths of the total imports of this country have been manufacturers’ materials and foodstuffs. In that period imports of both classes have more than doubled. In recent years imports of foodstuffs have averaged more than $400,000,000, and of manufacturers’ materials about $900,000,000 annually. Great Britain 1s often thought of as peculiarly dependent on foreign raw materials and food supplies. In many commodities the United States is equally dependent on foreign sources. Following is a comparison of the net imports ® into Great Britain and the United States of a few important foodstuffs and raw materials in 1913: United States. United Kingdom. Hides and skins eae $103, 000, 000 $24, 000, 000 Sugar eee 95, 000, 000 115, 000, 000 59111117 J 77, 000, 000 28, 000, 000 Baw MIR... mmm mpi 3 C0 000 3, 000, 000 DIOMTIOB cron ii it ms i er i mm M500 5, 000, 000 PHIL eiimistonion me nse ee ii + 000 30, 000, 000 00008 mmm reese 40s WUD, 000 9, 000, 000 In addition the United States each year imports large quantities of other foods and raw materials such as fruits and nuts, liquors and beverages, sisal, tea, nitrates, dyestuffs, tropical woods, etc. There are also other commodities which are imported in relatively small quantities, but which are absolutely necessary in modern industry. Thus tungsten is required in the high-speed tool steel, without which modern machine tools would lose their great efficiency; manganese. also, is an essential alloy in steel manufacture. Coffee, sugar, tea, cocoa, bananas, etc., are needed in great quantities for domestic consumption. Hides, rubber, silk, tin, wool, ete., are essential not merely to particular lines of business, but to the prosperity and welfare of the country as a whole. Year by year the imports of these classes are increasing and will increase. In order that the people may have these foods and that the mills and factories may have the raw materials needed for manufacture, products must be exported in ever-increasing quantities and values. Broader markets.—In addition to the advantage of exports as a means of payment for foreign capital, services, and goods, the advantages of a broader market through export trade should be considered. There are corporations in various industries in the principal European exporting countries which manufacture three-fourths and more of their output entirely for foreign customers. There are relatively few manufacturing corporations in the United States whose foreign trade is more than a small fraction of their domestic trade. 1 Degree of dependence on foreign sources for each commodity is indicated by net imports. arrived at by subtracting all exports from all importa. 24 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. By securing a broader market for his output the American manufacturer should not only, through enlarging the capacity of his works, be enabled to produce at a lower cost per unit, but there would also be an increased employment of labor. Furthermore, a greater stability would be promoted in many of the industries, With a broader market, periods of local industrial depression have less effect on the business of the manufacturer. In some industries there are wide differences between the different countries in the seasonal character of their demand. For example, in the United States in the winter time the use of Portland cement falls off, and as a result the manufacture is curtailed during those months. This, however, is summer time in Argentina and Chile, when building activity is at its height. Could those markets be secured for American cement, the cement producers would have a better opportunity to steady their production, keep their workmen more regularly employed, and lower their operating costs by manufacturing and exporting their product during the dull domestic season. At the time when summer is coming on in the United States, and the demand for coal is declining, the South American winter is just beginning. What is true of the seasonal fluctuation of demand in cement and coal also applies to various other commodities. CHAPTER IIL. GENERAL COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. ’ SECTION 1. INTRODUCTION. Some discussion of the competitive conditions of international trade is necessary to understand the difficulties which confront American producers in their export trade. The factors in international competition discussed in this chapter are transportation, foreign banking and credit facilities, foreign investments, and the industrial organization of the chief commercial nations. Other important factors, such as costs of production, etc., are omitted on account of the necessary limitations of this investigation. (See p. 12.) SECTION 2. TRANSPORTATION FACILITIES. For the successful handling of foreign business a country needs adequate transportation facilities. In this respect, as compared with his European and Asiatic rivals, the American exporter is at a distinct disadvantage. Other great commercial nations make special use of their railways for the development of business overseas, and foster their ocean shipping as an integral and vital part of their foreign-trade policy. The United States, on the contrary, does not to anything like the same degree make such use of its extensive railway system, and has neglected its merchant marine until powerful combinations of foreign shipowners determine the conditions under which American imports and exports shall move in ocean traffic. Although the Commission did not conduct any special investigation of transportation conditions in the foreign commerce of the United States, business men were insistent on the pressing importance of the transportation problem and furnished a mass of information thereon. They dwell on the efforts of foreign railways to extend exports. They explain that their export trade lacks the stimulus of American ships; that they must compete with foreign exporters who have a decisive advantage in ship lines more or less directly under their own control; that they suffer from slow and uncertain sailings while their rivals enjoy fast and regular service; that 28 26 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, they are discriminated against in freight charges, and that their business secrets are in danger of betrayal by foreign shipowners to their foreign competitors. RAILROADS. Certain foreign countries have made special use of their railroads for the extension of their foreign trade. Thus, for the express purpose of fostering German foreign trade, the German state-owned railways have granted import and export rates far below the domestic rates. The export rates on steel forgings from Diisseldorf to Hamburg in 1913 were $1.29 per metric ton, while the domestic rate between these points was $2.31. In many other instances export rates of half or less than half the ordinary domestic rates have been granted. These rates are illustrated by the following comparison of carload export rates and domestic rates on certain articles from inland points to German ports in 1913: FABLE 2—Comparison of export rates and domestic rates on German railroads. Cities. Cologne to Hamburg. .....uveveenen.. 0. cnn tinennaaen Frankfort to Jamburg. Frankfort to Bremen.. frankfort to Liibeck... Trankiort to Hamburg Trankfort to Bremen... Frankfort to Liilbeck . . Miles. 267. 2 267.2 267. 2 267. 2 267.2 330.6 85. 2 158, "30. 35, 58.1 | Export] Domestic Class of goods. rate. Tate. Copper goods, lead in blocks, tubes... . Zinc in sheets, ete. .. ER Cotton g00dS. -.vumusnenennin ooo. Machinery and machine parts, ironware. Iron plates, locomotives, ete... Machines and ironware.. -...do.. —— Tron J roduste, such as beams, etc.... ....do, wy gy iy cavando., B 14 3.17 3. 64 2.52 £6.38 4.86 6.38 4, 88 1.33 07 o. 69 3.31 .67 .45 .79 3.83 6.00 5.21 6.47 4.71 4,12 5.00 In addition to the regular export rates, through rates, joint rail and ocean, were granted for shipments from German cities to certain foreign markets which were even lower than the rates quoted above. For such shipments through bills of lading were issued and every effort was made to facilitate the business. Many American business men have testified to the effectiveness of such measures for developing German business overseas, and the United States consul general in Berlin said on this subject in 1913: One of the most important factors in the development of Germany’s foreign trade is the aid extended by the railways belonging lo the various Federal States in giving reduced freight rates to the German shipping ports on goods coming from the interior and intended for export. Prior ¢o the war, Belgium was one of the great gateways of European commerce, and the transit of goods from and to interior Kuropean points contributed materially to the prosperity of the COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 27 country. In 1912 this traffic through Belgium totaled 6,600,000 metric tons (7,200,000 short tons), and the goods transported were valued at nearly $500,000,000.' France, Germany, and Holland were competitors of Belgium for the transit business. To retain this traffic and to encourage her own foreign trade, Belgium spent much capital upon her railways, more than half the total mileage being state-owned, and upon the ports to which they lead, especially Antwerp. Moreover, special import and export rates, arranged to meet the needs of traffic to and from northern and middle European points, formed a large parc of Belgian railway tariffs. Special rates were made on the traffic to and from Holland, France, and Germany. Special export rates were made on coal, metal goods, glassware, animals, explosives, and various goods shipped in bulk. Special import freight tariffs were made on kaolin, weapons, salt, grain, ores, etc. In addition to this, combined rail and vessel rates were made with various steamship lines. In Italy an elaborate system of freight rates has been applied to the advancement of foreign trade. Commercial zones are described in the tariffs and special export rates are made on goods according to the zone through which they pass. Some import rates are also made but not as extensively. The Government also makes experimental rates looking to the development of certain industries; in some cases these rates being for but one year at a time. Such, for example, are rates on dead cocoons and fresh grapes. Also, the Government collaborates with foreign administrations in making through rates.? In France special import and export rates have also been granted. In general these rates have not been so much below domestic rates as have the German export tariffs, but in the case of some commodities heavy reductions have been allowed. Thus domestic rates on lime and cement of $0.62 were cut to $0.38 for export. Various other European countries have also used special export and import freight rates on their railways to foster their foreign trade. The Japanese owe much of their rapid increase in trade with Manchuria to their development of the South Manchurian Railway. The National Review, of Shanghai, July 10, 1915, said: The possession of the South Manchurian Railway has been the greatest factor of all in the extension of Japanese commerce in Manchuria. The line is under the sole control of the Japanese and is an official enterprise. Tableau Général du Commerce de la Belgique, 1912, pp. 333, 334. 2 Continental Railway Investigations: Reports to the Board of Trade on rallways in Belgium, France, and Italy, London, 1910, pp. 21. 51-54. 248-259. 28 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. After making a similar statement, the East and West Review of Shanghai, in August, 1915, said that imports through the port of Antung of shirtings, sheetings, drills, j eans, and T cloths by America, Britain, and Japan during the last three years showed in round numbers a decrease for the United States from 62,000 pieces to 33,000 pieces; for England, a decrease from 81,000 pieces to 57,000 pieces; and for Japan, an increase from 83,000 to over 3,000,000 pieces. The railroads of the United States grant special carload rates for export on a few commodities from various inland points to the ports, but have not granted any such number of export rates as the German roads, nor do these rates make so great a reduction from the domestic rate as do the German rates. The present export rates from Chicago to Atlantic ports cover comparatively few articles and make relatively small reductions. Thus the domestic rate on agricultural implements, dump carts, gasoline engines, traction engines, windmills, and scales, from Chicago to New York, is $0.315 per hundred pounds, while the export rate is $0.28. On flour the domestic rate (reshipping) is $0.175, the export rate (reshipping) $0.148. Some of the heaviest reductions for export are found in the rates on iron and steel billets and rails (new). From Chicago to New York the domestic rate of $3.26 per long ton on billets is reduced to $3.52 for export, and on rails from $4.94 to $3.30. From Pittsburgh and Bessemer to New York the rates on new rails are $2.57 for domestic and $1.84 for export shipment. The billet rate of $3.52 and the $1.84 rate on rails will be canceled, effective October 1, 1916, after which the domestic rates will apply. While such reductions for export are material and no doubt assist inland American producers somewhat in reaching foreign markets, they are small compared to the reductions for export shipment offered by the German roads. Moreover, unless American ships are available to work with American railways for the definite object of fostering foreign business through favorable rates, such efforts by the railroads of the United States would probably be rendered ineffectual by foreign shipowners making offsetting, discriminating, freight charges against American shipments. On this subject, Vice Presient George D. Dixon, of the Pennsylvania Railroad, says: It is true that export rates lower than domestic rates apply upon 2 limited number of specific commodities, which commodities have been limited to those where the carriers believed a munificent purpose was accomplished by such a concession, and it has not been, in the opinion of the carriers, desirable or conducive to further exportation to extend this list. Such concessions in inland rates would not be likely to have any effect on the general run of exported merchandise handled by regular lines of steamships, who would be likely fo take up in their charges any reduction made by the rail carrier, so that no reduction in the through rate would result. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 29 Vice President, T. N. Jarvis, of the Lehigh Valley Railroad, says: It is a question whether special inland rates on export traffic can be extended to other articles than those already designated, and such a step if taken should only be done after careful and thorough consideration of all questions involved. OCEAN SHIPPING. Of far greater importance than any defects in the export service of American railways is the dependence of the United States on foreign ocean shipping. As a feature of foreign trade policy this is of serious concern, because it subjects the exporter to distinct disadvantages in international trade. For a clear understanding of the conditions that have obtained, a brief statement is first given regarding the principal merchant fleets. In making this statement, the Commission expresses no opinion as to the desirability of this country’s adopting methods which the countries here described have followed in encouraging their shipping. THE MERCHANT MARINE OF THE CHIEF TRADING NATIONS. GREAT BRITAIN. Great Britain has long had the greatest merchant marine in the world and has been keenly interested in its development. The relations of the Government with the shipping interests have been centralized in one single competent authority, the Marine Department of the Board of Trade, and amendments to the Merchant Shipping Act are only made as government measures which have received the assent of this body. Subsidies have been limited to the maintenance of stipulated mail service and the construction of vessels to serve as naval auxiliaries, but at no time has such aid reached more than 3 per cent.of the total tonnage under the British flag. According to Lloyd’s Register for 1915-16, the merchant fleet of Great Britain comprised nearly 9,000 steamers of more than 19,000,000 gross tons and over 600 sailing vessels of over 800,000 gross tons. Moreover, the colonies possessed 1,500 steamers of 1,600,000 gross tons and 500 sailing ships of nearly 150,000 gross tons. British passenger and cargo liners follow all the principal routes of trade and reach all the great markets of the world. Thus, in addition to many other lines, the Cunard and the International Mercantile Marine (the last a line in which American capital is heavily interested, but whose ships are under British registry? and whose policy is controlled 1G, M. Jones, Government Ald to Merchant Shipping, Special Agents Series 119, Bureau of Foreign and Domestic Commerce, 1916, p. 51. 2 The six vessels of the American line, which is controlled by the International Mercantile Marine, fly the United States flag, and the two ships at present operated by the Red Star Line, which is also controlled by the International, fiy the Belgian flag. 30 . REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, by British’ management) give Great Britain excellent connections with Canada and the United States; the Royal Mail and the Pacific Steam Navigation Co. link it with the ports of South America; the Peninsular & Oriental, a Cunard subsidiary, the British Steam Navigation, the Empire and allied lines reach to the Orient and Australasia, and to the coasts of Africa and of Europe. In addition, thousands of British tramps and freighters find every harbor throughout the world. Of the total net tonnage of the 65,000 vessels that sailed from British harbors with cargo in 1918, 59 per cent was British; and of the total net tonnage of the 49,000 ships that entered British harbors with cargo in that year, 66 per cent was British. Doubtless these percentages fairly approximate the proportion of Great Britain’s exports and imports which are carried by ships of British registry. GERMANY. About 30 years ago the German Government set about the upbuilding of a merchant marine as one of the essential elements in the expansion of German trade. In pursuance of that policy, German shipping has received much aid from the Imperial Government, principally indirect. Shipbuilding materials have been imported duty free and have had low freight rates from the State-owned railroads. Subsidies have been granted by the Government, maritime schools maintained, and other activities prosecuted for the benefit of German shipping. Moreover, the development of shipping business has been constantly favored by the Imperial Government. Direct financial aid from the Government, however, is responsible in only a small degree for the remarkable development of the German merchant marine. The chief factors in that development must be sought in the great industrial revolution in Germany since 1880, with the resultant expansion of the foreign trade, the control of much of the emigrant traffic to the United States, the development of shipbuilding by reason of the low cost of iron and steel, and the low combination rail-and-water freight rates on exports from the interior of Germany.! Within a third of a century the merchant fleet has risen from insignificance to second place and at the outbreak of the war was carrying half of Germany’s exports and imports.? Tt then comprised nearly 2,000 steamers of 4,500,000 gross tons and some 220 sailing. vessels of nearly 300,000 gross tons. The Hamburg-American and the North German Lloyd are two of the greatest lines in the world. Prior to the war the former with its subsidiary, the Hamburg-South American, was maintaining service from Germany to New York, Boston, Philadelphia, Balti-L Bureau of Forelgn and Domestic Commerce, Special Azents Serles 119, pp. 76-77. ? Nauticus : Jahrbuch fiir Deutschlands Seeinteressen, 1914, p. 724. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 31 more, New Orleans, Galveston, the West Indies, South America, China, Japan, the East Indies, Australia, South Africa, the Levant, and other markets. This company’s ocean steamers approximated 1,700,000 gross tons, or more than all the steam shipping of the United States engaged in foreign trade. The North German Lloyd had a fleet aggregating nearly 1,000,000 rross tons, and in the number of markets reached wa$ second only to the Hamburg-American. In additien to these two great companies other German lines plied between Germany and North America, Africa, Asia, and Australia. FRANCE. In 1881 France provided subsidies for all ships carrying the French flag in international trade. Since that date the encouragement of the merchant marine has been continued, and in 1915 the French fleet included more than 1,000 steamships with a gross tonnage exceeding 1,900,000 and 500 sailing vessels with a total gross tonnage of nearly 400,000. The principal French lines reach North and South America, Africa, the Levant, and the Orient. In 1913 the total imports of France aggregated 30,000,000 metric tons of which slightly less than one-fourth was carried in French vessels, but approximately one-half of the 7,700,000 metric tons of French exports was shipped in French bottoms.! JAPAN. Japan has been very energetic in developing shipping to foster the desired extension of its foreign trade, and Japanese steamship [ines are among the most heavily subsidized in the world. Its merchant marine has had a remarkable growth and now comprises 1,200 steamers of more than 1,800,000 gross tons, together with hundreds of small sailing vessels. The Nippon Yusen Kaisha operates a regular service between North America, Europe, Australia, and oriental ports, while other lines maintain sailings to North and South America and the prinripal oriental ports. OTHER FOREIGN NATIONS. The shipping of various other foreign nations is of much importance in the commerce of the world. Thus, Norway maintains a merchant fleet of 1,700 steamers of nearly 2,000,000 gross tons, as well as 500 sailing ships of 550,000 gross tons. Sweden has 1,100 steamers of more than 1,000,000 gross tons and 400 sailing ships of 100,000 gross tons. These Scandinavian ships are more than sufficient for the foreign trade of these two nations and are highly 1 Tableau Général du Commerce et de 1a Navigation, 1918, vol. 2, p. 11. - 32 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. important carriers for other countries. Even in that role, because of the geographical position of Norway and Sweden, their ships are doubtless of more advantage to the over-seas trade of Europe than to that of America. In neither of these countries, however, does direct government subsidy play an important part in the development of its merchant marine. The merchant fleet of Italy before the war exceeded 1,000,000 tons, and by far the greater part-of the total tonnage of vessels entering and leaving Italian ports was under the Italian flag. For the encouragement of the merchant marine the Italian Government paid subventions, which amounted to 12,000,000 lire in 1912, to 11 different maritime companies. Austria and Holland have taken pains to develop their ocean shipping, and each is well served by ship lines under its own flag, which assure its exporters an entry into their chief markets. UNITED STATES. The merchant marine of the United States engaged in foreign commerce ‘on June 30, 1915, included 567 steamships, aggregating 1,333,000 gross tons, and 581 sailing vessels, aggregating 390,000 gross tons. Many small ‘vessels of both kinds included in the above numbers, however, are merely engaged in Puget Sound trade and in coastwise traffic with the Canadian maritime Provinces, so that the number engaged in over-seas business is somewhat smaller. On the other hand, several vessels of foreign registry are owned by American concerns engaged in foreign trade, but even with these vessels added the total would be small beside Great Britain’s 20,000,000 tons or Germany’s 5,000,000. The United States has no great lines of vessels running to all the markets of the world, nor does it have the cargo boats it needs. Of its total water-borne exports in 1915 only 11.8 per cent was carried in American vessels and of its total imports only 18.4 per cent. Thus, for the carriage of all but a fraction of its foreign business it is dependent upon foreign ships. NEED OF AMERICAN SHIPS FOR FOREIGN TRADE. Dependence on foreign ships.—The failure to develop a merchant marine places one of the essentials of commerce beyond American control and puts American exporters at the mercy of foreign companies whose interests in international trade are often opposed to theirs. An exhaustive investigation by Congress has shown that foreign steamship companies are united in an intricate system of ! Movimento della Navigazione del Regno d'Italia, 1914, Roma, 1915, Vol, II, pp. 362-439; Sulle Condizionl della Marina Mercantile Italiana al 81 dicembre, 1912, Roma, 1914, p. 133; Annuario Statistico Italiano, 1913. p. 227. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 33 conferences and agreements; that the purpose of these agreements is to stifle competition, determine sailings, fix rates, divide territory, allot business, grant rebates, pool earnings, and fight competitors; that many of their agreements and activities are secret; and that they completely dominate the shippers with whom they deal. Some American companies, such as the Standard Oil Co. and the United States Steel Corporation, have aided their export business by providing themselves with ocean transportation under their own control. This contributes to their success as exporters. In numerous cases, however, their ships were registered under foreign flags. Many of these ships have now been requisitioned by foreign Governments and in some instances are being used to carry the goods of foreign companies into the markets formerly served by the American companies through these vessels. Under the conditions created by the war other countries having ships have protected the foreign business of their exporters, sometimes to the detriment of American shippers. Thus, American exporters have been informed by British lines running from Canadian ports that Canadian cargoes would be given preference in all demands for space, and that American shipments would only be taken after the requirements of Canadian shippers had been satisfied. Similarly, the Japanese Government has required Japanese steamship interests to give preference to Japanese demands for cargo space and has kept the freight charges to Japanese on a reasonable basis. By these requirements Japanese firms have been saved much interruption of business and have been able greatly to extend their over-seas trade. In the meantime American houses have been unable to obtain cargo space across the Pacific, and thousands of tons of freight have been piled upon the docks awaiting shipment. The American consul at Hongkong, commenting on this condition in the fall of 1915, said: Many lines of American trade in this part of the world which have been built up after years of effort and careful nursing depend very largely upon prompt communication and regular steamship service. Other lines of trade which the United States has commenced to enter with notable success are hampered and American interests restricted in their business by the lack of freight facilities and the high price of freights due to inadequate tonnage. What, therefore, was a serious shortage of available ships before, now becomes a direct and positive menace to all American trade in the Pacific. American exporters are liable to such difficulties as these under conditions of peace as well as under war conditions. Speaking of 1 Investigation of Shipping Combinations, House Committee on Merchant Marine and Fisheries, 63d Cong., vol. 4, pp. 281-314. 97941° __16—2a 34 REPORT ON COOPERATION IN AMERICAN EXPURT TRADE. this possibility, Mr. E. W. McCullough, general manager National Implement & Vehicle Association, said: Even apart from the war conditions, the American manufacturer is always enormously handicapped in the exporting of his commodities, and whether the war is prolonged or not this handicap will continue, because they have no direct shipping facilities under their own control. We have said that the American shippers’ handicap will still exist whether the war continues or not. In explanation of this would say that when the war ceases, notwithstanding that a considerable amount of tonnage will be released, both British and German manufacturers will be making gigantic efforts to recapture their over-seas trade, which has at least been curtailed when not altogether lost during the time that these nations have been at war, and as America will stand in the light of a strong competitor, if she can get favorable shipping freights and deliveries, having already in many instances obtained a foothold with buyers who previously purchased the British or German goods that will again be on the market, it is not reasonable to suppose that these nations will continue to give America the facilities for sending further supplies to take the place of their own manufactures, while, even if they should be willing to supply the vessels, they will still hold up the freight rates on American shipping to such an extent as to make the American landed prices noncompetitive with their own; this is accentuated by the fact, which is well known, that the German mercantile marine has been, and undoubtedly will be, largely subsidized by the German Government. Need of American ships to stimulate foreign trade.— American foreign trade lacks the stimulus which comes from an active and aggressive merchant marine. Large ships under the American flag in all parts of the globe would have a great advertising value. Moreover, the increased travel which would result from improved passenger service between the United States and such markets as South America would inevitably stimulate business and would go far to offset the superior opportunity which Europe now enjoys in this respect. In addition to these advantages, American vessels in over-seas trade would operate directly to develop business. Shipowners and agents would constitute a body of men earnestly seeking to foster exports from the United States and imports into the domestic market n order to obtain freight for their vessels. On this subject, a prominent business man of Seattle said: If we have American ships in our foreign trade, then you would have agents who have their money invested in property, who are looking at all times to try to expand trade. While individually hey might not figure largely in the American trade, yet collectively, each individual trying for himself to build up a trade, they would n the end create an immense trade for vessels under the American lag. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 35 He went on to cite instances of imports of foreign goods into the United States made possible by foreign shipowners giving their nationals favorable freights. Commenting on the value of shipowners as builders of trade, Capt. Robert Dollar, of San Francisco, said: There is no merchant: that is as good a drummer for trade as the shipowner. You get a fellow with a ship in the Far East, and he has no cargo for it; anything short of stealing that fellow will resort to to get a cargo for his ship. So we often get very low rates of freight, which 1s a great advantage to the Pacific coast, for instance. If 1 was living in London do you think I would be pulling for this Pacific coast? Not at all. I would be pulling for London. If I lived in Germany, of course I would be working for Germany; and every shipowner, wherever you find him, is working to try and get his ships back home to his home port, there re-store them, pay off the crew, and do repairs and all the necessary work. Therefore, it is of the greatest importance that we should have our ships owned in our own country. It is common knowledge that Great Britain has always relied on British shipping as a vitalizing agency for the expansion of its commerce, and no one doubts that its enormous foreign trade has been greatly developed because its fleets of merchant ships were eager to sarry English products to every corner of the globe and to bring from every land the requisites for English industrial enterprises. The Japanese are keenly alive to the stimulating effect of their own ships on Japanese foreign business. Thus, early in 1915, it was announced that the Toyo Kisen Kaisha (Oriental Steamship Co.), which maintained the only regular steamship line between the Orient and South America, had taken advantage of the opening of the Panama Canal to extend its service from Honolulu so as to include Panama and various Mexican ports via Los Angeles. There are many evidences of the efforts of the German shipowners to build up German trade abroad. They have patiently furnished sailings in advance of profitable business and have made rates for the express purpose of establishing German traders and German goods in markets overseas. The British are experts in foreign trade, and their comment on this policy of the German shipowners is thus especially valuable here. In 1914, a British Diplomatic and Consular Report said: German shipping is rapidly becoming ubiquitous, much to the advantage of the German exporter but not always to the financial advantage of the shipping companies, for nobody believes that, for example, the direct service from Hamburg to the Persian Gulf at present pays even its own expenses. But as the development of German export trade encourages this policy, so it will eventually reward it, for an increasing proportion of German foreign trade is being directed to smaller countries, e. g., Chile, Colombia, Siam, Morocco, Venezuela. etc. 36 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Shipping lines controlled by foreign exporters.—In numerous instances Americans find that foreign competitors have a decisive advantage in particular markets because of their control of shipping and even of distributing facilities. The great Japanese firm of Mitsui* (Bussan Kaisha) is said to be interested in J apanese shipping enterprises, and some of the German and English houses which are of the greatest importance in the trade of those nations are closely affiliated with German and English shipping companies. One effect of this condition is illustrated by the following statement of a bituminous coal operator -engaged in building up an export business to the west coast of South America: Foreign ship companies who are interested in coal mines in Great Britain and Australia, for example, have discriminated against ug ‘n an effort to throw business to their own collieries. The coal import business of the east coast of South America is dominated by British interests who operate English and Welsh collieries, maintain direct shipping service, and have their own docks, coaling stations, and distributing facilities all along the east coast. Under conditions before the war this made it impossible for the individual American producers to compete with the British for the important coal trade of Brazil, Uruguay, and Argentina. } The manager of a New York export commission house states that certain British bankers were interested both in Portland-cement manufacture in England and in British shipping lines running to South America, and were thus enabled to obtain rates on their cement which offset the advantage conferred on American cement by. the Brazilian preferential duty. In consequence, British cement has been largely imported into Argentina and Brazil. An American cement manufacturer described this condition as follows: Without a merchant marine which is controlled by our countrymen and which will give us the same facilities that all other export countries have enjoyed we can not see how we can be permanently benefited by our export trade. We are moved to make this remark because of the fact that it has come to our notice that-certain commer. cial arrangements which have been made by our Government with the Republic of Brazil, whereby our product was admitted with a venefit of about 35 cents per barrel as against that produced in any other part of the world, have resulted, in many instances, in this oenefit being absorbed in the freight rates charged by Englishmen who controlled, through their agents, most of the steamship lines sngaged in the South American trade from here. These are but a few of the specific instances which have come to the attention of the Commission in which exporters must compete with foreigners who derive special advantages from their control of shipping facilities. re ——— i —e———— tr —— 1 See pp. 150-151 COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 87 Delay and irregularity in shipments of American exports,— No foreign customer will continue business with a seller who can not deliver goods when stipulated. One of the quickest and surest ways, therefore, to destroy the business of a rival is to subject his goods to delay and irregularity in shipment. Scores of cases have come to the attention of the Commission in which American exporters have suffered irregularity and delay in shipments. Under the present abnormal conditions it is but natural that foreign shipowners prefer to handle the goods of their own nationals, but similar disadvantages characterized our trade before the war. A few typical instances are given herewith. In the fall of 1918 a Marseille merchant said: The steamship service between New Orleans and Marseille is defective. In fact, we receive only at long and irregular intervals the lumber purchased at the beginning of the year. The number of vessels engaged in this trade is very limited and loaded with miscellaneous cargo, which occasions great complications as regards the lumber receipts. In 1914 the American consuls at Zanzibar and Mombasa were emphasizing the fact that the east coast of Africa enjoyed direct connections with Europe through six different steamship lines representing English, French, German, and Italian companies, while there was no regular direct service from America, and that accordingly American goods suffered great delays in transshipment at European ports. In October, 1913, the United States consul at Jerusalem said : American exporters may hope to extend their trade in Palestine whenever a direct steamship service from the United States becomes available. * * * American boots and shoes are well liked here, but dealers in placing trial orders have found deliveries unsatisfactory and the cost of transportation of small lots so high that the goods could not compete with European makes. Describing trade conditions in the Levant in 1914, the American consul at Saloniki stated that American goods rarely came there direct, but underwent much transshipment and rehandling, and that sometimes three months were consumed in making deliveries which should not require more than one month. At the Commission’s public hearings in Boston, Mr. Woodward Emery, of the Universal Winding Co., said : There is another difficulty which has been met, and which has been rather increasing of late, and that is preference in forwarding goods. For instance, owing to the system which exists among the English and the Germans, and their cooperation between their forwarding companies and financial powers, American goods sometimes get left and have to take the next steamer. That, of course, creates dissatisfaction on the part of the buyer, who is expecting the goods to arrive. To 38 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. remedy that we trust that we shall establish in time an American merchant marine. A member of a New York firm that exports and imports crude materials on commission. says. In my line the main thing—in fact the vital thing—of importance far in excess of any that might lie in a combination between producers in its effect on the export trade is the absence of merchant-marine service and freight room to carry goods away. That does not only apply to present conditions, where freight room has been taken up on account of the exigencies of war, but also in times of peace. The British steamship companies could give special facilities to their axporters in certain lines. For example, I recall that two years before the war we intended to open direct business with the Gold Coast. Our consul there published a little summary in the Consular Trade Report in order to help American exporters and importers to do direct business. It was impossible, we found, because there were almost no steamers at all trading direct between New York and the Gold Coast, and all business had to go through Liverpool merchants. Americans charged higher freights.—It is stated that foreign steamship interests have sometimes given manufacturers and producers of their own nationality lower rates than were given Americans for shipments to South America and other competitive markets. Several examples of such discrimination have come to the attention »f the Commission, of which a few are cited herewith. A large manufacturer of automobiles said that in an important deal in South America in which American, German, and English bids were submitted, the Germans were enabled to obtain lower freights from a German shipping company, and thus secured the business. In discussing export trade conditions in South America, a manu-Facturer of musical instruments said : The advantage that the German and English manufacturers have had over the American manufacturer, as shown by our experience of over 10 years in the South American field, is through the preferential rates given German and English manufacturers by the steamship lines running from their countries to South America over the rates that we can obtain under the German and English flags. from American ports to South America. The American consul at Vladivostgk, shortly after the outbreak of the war, described the freight-rate handicap which American exsorters had previously encountered in his territory, as follows: American manufacturers, notwithstanding their proximity to this market, have in the past been at a disadvantage in shipping facilities and freight rates. Before the war German and British shipping lines had regular boats from Hamburg, Antwerp, London, and Liverpool direct to Vladivostok and Nikolalevsk, with freight rates much lower than from America, notwithstanding the great difference in Jistance. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 39 After explaining that the low rate before the outbreak of the European conflict was partly caused by a rate war, he went on to say that after the European war the rates would doubtless be cheaper than from America. F. R. Still, secretary, American Blower Co., described the effect on his foreign business of lower freight rates to Japan enjoyed by Irish manufacturers, as follows: We have certain patent rights and trade-mark rights on a certain ine of apparatus that we make which is used in the navy in Japan. The concern from whom we acquire the patent rights is in Belfast, Ireland, and while our prices are a little lower than theirs, yet the difference they get in freight, and the arrangements for credit established in London, enables them to beat us out every time; and while they pay us a certain commission. that does not furnish us business in our shop. A manufacturer of building materials who exports one-third of his output, states that freights from Montreal to South Africa given Lis Canadian competitors are materially lower than any which he can obtain from New York to South Africa, and says further that these rates, combined with the 3 per cent. preferential tariff conressions granted the Canadian product by the South African Union, have seriously injured his business in that market. A northwestern miller, after citing specific cases in which American flour mills were unable to obtain rates to European ports as low as those given Canadian millers by English lines sailing from Canadian ports, and In consequence lost export orders that were taken by Canadian millers, said: We realize more every day that the American manufacturer or shipper is entirely at the mercy and in the hands of foreign-owned steamship lines. Assertion that foreign shippers are given information of the transactions of Americans.—It is often stated that foreign exporters have sometimes obtained information through foreign steamship agents of the transactions of American exporters, ascertaining the names of customers, the kind of goods furnished, ete., and that this information has assisted them in efforts, sometimes successful, to obtain such trade. After discussing other disadvantages arising from the use of forsign ships a retired ship broker of Philadelphia, said: Most of all, however, the American manufacturer, under present conditions, by utilizing foreign ships to carry his goods furnishes anknowingly into the hands of his competitors in the country where the ship belongs, the weapon with which to kill his trade. Various instances of this kind have been reported to the Commission. A San Francisco exporter and importer, after stating that the $0 BEPORT ON COOPERATION IN AMERICAN EXPORT TRADE. lack of steamship facilities was greatly delaying American shipments to the Orient, said that he knew numerous cases in China where buyers who had ordered American goods but had not yet received them were visited by Japanese salesmen, who disparaged the American goods and intimated that it took a very long time for a shipment to come from America and that it might never arrive, whereas the Japanese could make quick shipments of an article just as good. In this way many Chinese, although preferring to deal with Ameritans, were finally induced to take Japanese products. He stated further that, although he had no proof that the Japanese steamship companies informed the Japanese of prospective American shipments, he concluded from the number of these incidents that such action by the steamship companies seemed the only reasonable explanation. SECTION 3. FOREIGN BANKING AND CREDIT FACILITIES. The financial organization for foreign business is one of the most potent factors in the development and maintenance of trade with foreign countries. As in the case of transportation facilities, so here also the United States has been behindhand. Other countries have built up their own financial organizations for business beyond their borders, but the United States has depended upon foreign agencies for the financial transactions necessary to the conduct of its interaational trade. In consequence American traders have heen at a further disadvantage in competition. That this may be the better understood the foreign banking and credit organizations of the principal trading nations are outlined briefly herewith, and some mention is made of the advantages they have thereby in the markets of the world. FOREIGN TRADE FINANCIAL ORGANIZATION OF THE CHIEF COM-MERCIAL NATIONS. GREAT BRITAIN, As Great Britain has been the chief trading nation so has its financial organization for international trade been the most comprehensive in the world. It has provided all the financial facilities needed for its exporters and importers to do business With other men anywhere on the globe, and, conversely, through British agencies, merchants in the most remote regions have been able to transact business, not only with British subjects, but with the merchants of any other country. Traders of distant countries could thus settle their accounts promptly, equitably, and with mutual satisfaction. Quite naturally, therefore, the “bill on London” in pounds sterling has been the usual currency of commerce and London has been the financial center of the world’s trade. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 41 Without attempting to give in detail the comprehensive British financial organization for foreign trade a few of the more striking features should be sufficient to suggest its great advantage to British commerce. As practically every bank of importance in the United States has a correspondent in New York and maintains a New York account, so almost every bank of importance anywhere in the world has some British bank as its agent in London and maintains an account there. If it does not carry an actual balance in London sufficient to handle the ordinary transactions of its clients which may be settled in London it has arrangements with some other bank to take care of its London business. Many London banks are agents for scores of banks located in all parts of the world. Thus, before the war, the great London City & Midland Bank (Ltd.), was the London agent for Aalesunds Sparebank; Adams Express Co., New York; Alktiebolaget Sverige Privata Centralbank, Stockholm; Akt. Géteborgs Handelsbank; Aktiebolaget Noorlandsbanken, Stockholm; Allgemeine Deutsche Credit Anstalt, Leipzig; American Express Co., New York; Amsterdamsche Bank; Anglo and London Paris National Bank, San Francisco; Anglo-Californian Trust Co., San Francisco; Anglo-Egyptian Bank (Ltd) ; Anglo-Maltese Bank; Azow-Don Commerzbank, Petrograd and Libau; Banco Commercial Espafiol, Valencia ; Banca Commerciale Italiana; Banca d'Italia, Rome; Banco de Cartegena ; Banco de Castilla, Madrid; Banco de Chile; Banco de la Repiiblica Oriental del Uruguay; Banco de Sonora, Guaymas; Banco del Ecuador, Guayaquil ; Banco di Roma, Rome; Banco do Ceara; Banco do Commerico, Rio de Janeiro; Banco do Recife, Pernambuco; Banco Italiano, Valparaiso; Banco Nacional de Bolivia, La Paz; Banco Popular del Peru; Bank of Italy, San Francisco; Bank of the Manhattan Co., New York; Bank of Rangoon, Rangoon; Bank of Toronto; Bank fiir Handel und Industrie, Berlin; Bankaktiebogalet Norra Sverige, Stockholm; Bankaktiebolaget Sodra Sverige, Helsingborg; Bankers’ Trust Co., New York; Banque Commerciale Hongroise de Pest, Budapest; Banque Continental de Paris, Paris; Banque de Commerce de Siberie, Petrograd; Banque de Commerce de Volga Kama, Petrograd; Banque de Marchands de Moscow; Banque d’Epargne et de Crédit, Antwerp; Banque de I’ Union Parisienne; Banque de Moscou, Moscow; Banque d’Outremer, Brussels—and so on through the alphabet to the Wiener Bank-Verein of Vienna, Constantinople and Smyrna.?! This is typical of the connections which the important London banks maintain with financial institutions all over the world. 12 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. \ In addition to these relations with foreign banks, which offer axtensive foreign facilities to British traders, there is a large number of British banks established in foreign countries which specialize in foreign trade business and are of particular assistance to British merchants. Throughout Africa British trade is served by highly efficient British banks. The Standard Bank of South Africa (Ltd.), sstablshed more than 50 years ago, has 230 branches and agencies in South Africa, Rhodesia and British and Portuguese East Africa. Its paid-up capital and reserve funds total nearly $20,000,000 and its deposits approximate $110,000,000. The African Banking Corporation (Ltd.) operates over 40 branches in South Africa. All along the African coast from the Madeiras to Loanda are 58 branches and agencies of the Bank of British West Africa (Ltd.). On the upper east coast are the branches of the National Bank of India (Ltd.), and in Egypt are 11 branches of the Anglo-Egyptian Bank (Ltd.), which was established more than 50 years ago. The head offices of all these banks are in London. In addition, the National Bank of Egypt, a British institution, whose head office is in Cairo, has 20 branches in Egypt and the Sudan, and the Bank of Abyssinia, another British bank with its main office in Adis Ababa, Abyssinia, and its registered office at Cairo, has 5 agencies in Abyssinia. In addition to their branches in all the chief coast cities, these banks also have branches ii the interior; thus, there are British banks at Burghersdorp, Mafeking, Kronstad, Bulawayo, Gwelo, Umtali, Umtata, Entebbe, Ibidan, Lokoja, Nairobi, at Leopoldville, 300 miles up the Congo, Zungeru, 400 miles up the Niger, Livingstone, 800 miles up the Zambesi, Khartum, over 1,000 miles up the Nile, and at dozens of other interior points. For trade with the Levant there is the Anglo-Levantine Banking Co. (Ltd.), with a branch in Constantinople; the British Oriental Bank (Ltd.), with its head office in Smyrna; the Anglo-Palestine Company (Ltd.), with 8 branches at the far eastern end of the Mediterranean, and the Ionian Bank (Ltd.), founded in 1839, and sperating 17 branches and subbranches in Greece, the Grecian Islands and Egypt. The head offices of most of these banking companies are in t.ondon.’ i For the convenience of trade with India, in addition to a score of prominent British banks with head offices in India and branches throughout British India, there are a number of important banking companies, whose head offices are in London, which furnish excellent facilities throughout Southern Asia. Among others, the Delhi and London Bank (Litd.), established more than 70 years ago, operates 8 branches in India; the National Bank of India (Ltd.), established more than 50 years ago, has 26 branches in India; the Mercan- COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 43 tile Bank of India (Ltd.), has 18 branches and agencies in the Orient, and the Chartered Bank of India, Australia, and China, founded 63 years ago, maintains 35 branches and agencies in India, the East Indies, the Philippines, China, and Japan. In addition to the banks mentioned, Chinese and Japanese business can be handled advantageously through the great Hongkong and Shanghai Banking Corporation, established about 50 years ago, with its head office in Hongkong. This bank has more than 30 branches in China, Japan, Indo-China, the Straits Settlements, the Dutch and British East Indies, and the Philippines, as well as branches in London, Lyon, Hamburg, New York, and San Francisco. Local banking companies are well developed in Australia and through their connections with London are at the disposal of British traders. But, in addition to these local banks, there are a number of British banks with head offices in London, which together operate nearly a thousand branches in Australasia; thus, the Union Bank of Australia (Ltd.), established nearly 80 years ago, has more than 180 branches in Australia and New Zealand. The Bank of Australasia has over 200 branches. The English, Scottish and Australian Bank (Ltd.) has more than 130. The London Bank of Australia (Ltd.) has over 90. In Canada, in addition to the Canadian banks which maintain close connections with London, the Bank of British North America, tounded 80 years ago, with its home in London, operates nearly 100 branches in Canada. In the West Indies, the Colonial Bank, founded 80 years ago, with its head office in London, has 19 branches throughout the West Indian Islands; and the Bank of Mauritius (Ltd.) has two branches in the West Indies, with its head office in London. England buys great quantities of raw materials in Latin America and sells millions of dollars’ worth of manufactured articles there annually. For the accommodation of this business a network of British banks covers Latin America. The Commercial Bank of Spanish America (Ltd.), with its main office in London, has 6 vranches around the Caribbean in Central and South America, besides 2 branch in New York City. The British Bank of South America (Ltd.), founded more than 30 years ago. with its main office in London, maintains 13 branches and subbranches in Brazil, Uruguay, and Argentina. The Anglo-South American Bank (Ltd.), with its main office in London, operates more than 20 branches in Chile, Argentina, Uruguay, New York City, Paris, and Hamburg. The London and Brazilian Bank (Litd.), founded more than 50 years ago, with its main office in London, operates 18 branches, chiefly in Brazil, but also in Uruguay, Argentina, New York, Paris, and Lisbon. The great London and River Plate Bank (Litd.), established more than 50 years 44 . REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, ago, with its head office in London, has 30 branches and agencies in South America, chiefly in Argentina and Brazil, but also in Uruguay, Paris, Antwerp, and New York City. In Peru, British trade is adequately served by the Banco del Peru y Londres,! with 15 branches. While standard banking facilities are available for the transaction of business with most portions of the European Continent, British banks have been established where they add material service in furthering British trade. The Bank of Roumania (Ltd.), with a branch at Bucharest; the British Foreign and Colonial Corporation (Ltd.), with branches in Havre, Amsterdam, and Basle; the Anglo-Maltese Bank in Malta, with a branch in Gozo ; and the Russian and English Bank (Ltd.), with its main office in Petrograd, are banks of this kind. In short, wherever British imports are bought or British exports are sold, there is either a local bank intimately connected with London or there is a British bank for the accommodation of British commerce. No other nation has any such comprehensive financial organization for foreien business. GERMANY. The great German center of oversea trade is Hamburg, and here the banking offices that are concerned directly with German oversea trade are in great part gathered. The head office of such a bank, if in Germany, is apt to be in Berlin. but there will usually be a Hamburg branch.2 As a part of the German policy of trade expansion, banks under German control have been established in all parts of the world as one of the means of creating commerce and attracting it to Germany. German-controlled banks outside of Germany, whether branches of German banks or distinct corporations, have sprung almost wholly from seven great German institutions. These are. in order of age, as follows: 3 1. The A. Schaaffhausen’scher Bankverein, at Cologne, formed in 1848 by a reorganization of the old banking house of Abraham Schaaffhausen. 1 See, however, p. 52. # At Hamburg, too, are branches of many banks whose control 1s in Great Britain or other countries. Besides German banks, the following have branches at Hamburg : Hongkong and Shanghai Banking Corporation, head office, Hongkong; Bank of British West Africa (Ltd.), head office, London; Standard Bank of South Africa (Ltd.), head office, London; American Express Co., head office, New York; Anglo-South American Bank (Ltd.), head office, London; Banco Espaiiol del Rio de la Plata. head office. Buenos Aires, (Palgrave, Banking Almanac, 1916, pp. 891, 892.) 3J. Riesser, The German Great Banks and their Concentration, pp. 46, 47, 72, 492, 868 ; translation published by the National Monetary Commission ; 61st Cong., 2d Sess., S. Doc. 593. Edward N. Hurley, Banking and Credit in Argentina, Brazil, Chile, and Peru, Bureau of Foreign and Domestic Commerce. Special Agents Series. No. 90, 1914, p. 21. Die Bank, 1914. pp. 415 fol., 4783. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 45 In 1914 the A. Schaaffhausen’scher Bankverein was absorbed by the Disconto-Gesellschaft. The main reason for this fusion was to enable these two combined banks to meet the keen competition in the Rhenish-Westphalian industrial district arising out of the recent fusion of the Bergisch-Mirkische Bank with the Deutsche Bank. For the purpose of carrying out that fusion the Disconto-Gesellschaft increased its capital stock to 800,000,000 marks, and thereby became the leading German bank. The A. Schaaffhausen’scher Bankverein retains its old name under the new arrangement. 2. The Disconto-Gesellschaft at Berlin, founded in 1851. It is associated with the Rothschild group. 3. The Bank fiir Handel und Industrie at Berlin, which was founded in 1853, with the participation of the A. Schaaffhausen’scher Bankverein, among others. It first had its headquarters at Darmstadt because no concession could be obtained at that time for a jointstock banking company either in the free town of Frankfort-on-the-Main or in Prussia. It is commonly called from its original location the Darmstidter Bank. 4. The Berliner Handelsgesellschaft, at Berlin, founded in 1856. 5. The Deutsche Bank, at Berlin, established in 1870. 6. The Dresdner Bank, founded at Dresden in 1872; in 1881 it transferred its center of activity to Berlin by the establishment of a branch there. 7. The Nationalbank fiir Deutschland, at Berlin. established in 1881. The name of the Darmstidter Bank—* Bank for trade and industry ”—marked a real public purpose in the minds of its founders; and this purpose included foreign as well as domestic trade. Its first business report for 1853 said: “Its offices at home and abroad are intended to facilitate export and the thousand and one relations between German industry and the money market.” As early as 1854 it formed a silent partnership (commandite) at New York with G. von Baur & Co.! It was not till after 1870, however, that the aggressive forward movement of German trade and industry really began, and the Deutsche Bank and the Disconto-Gesellschaft were the first banking institutions to show great activity in this direction. The charter of the Deutsche Bank, established in 1870, contains the following: “The object of the company is the transaction of all sorts of banking business, particularly the fostering and facilitating of commercial relations between Germany, the other European countries, and over-sea markets.” 2 (See p. 62 and chart facing p. 62.) TC 1 Riesser, op. cit, pp. 49, 61, % Ibid., p. 421, 46 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The Deutsche Bank “ opened branches first at Bremen (1871) and Hamburg (1872), the German centers of oversea commerce, and London (1873), with the view of fostering German oversea import and export trade. These branches were to serve, so to say, as advanced posts for the observation, exploration, and winning of new territory by the German banks.” In 1872 it also opened branches at Shanghai and Yokohama, and in 1874 it took over the La Plata Bank, which had been opened by the Disconto-Gesellschaft in 1872. These early foreign ventures did not greatly prosper. The two Asiatic branches were closed in 1874, and that in South America in 1885. The London branch still exists. There are also branches at Brussels and at Constantinople. Most of the banking interests of the Deutsche Bank outside of Germany, however, are organized as separate corporations.! The early activity of the Deutsche Bank in promoting German foreign trade was soon matched, or almost matched, by that of the Disconto-Gesellschaft,? and several of the other German banlks have in later years been hardly less active. The following paragraphs give some idea of the banking interests of German banks throughout the world.? The Amsterdamsche Bank, with headquarters at Amsterdam and branches now at six other points in Holland, was founded by the Darmstiidter Bank in 1871. About the same time the Darmstidter Bank formed a silent partnership’ (commandite) in Brussels. In 1898 it participated, with the Disconto-Gesellschaft, the A. Schaaffhausen’scher Bankverein, the Berliner Handelsgesellschaft, and others, in the foundation at Brussels of the Banque International Je Bruxelles. The Disconto-Gesellschaft has stock in the Compagnie Commersiale Belge (Anciennement Albert H. de Bary & Co.), of Antwerp. The Deutsche Bank, the Dresdner Bank, and the Disconto-Gesellschaft all have branches in London, which were permitted to continue business after the outbreak of the present war. under license from the British Government. The Nationalbank fiir Deutschland took part in 1909 in the increase of capital of the Crédit Mobilier F rancais, of Paris. The Bank fiir Orientalische Eisenbahnen, at Ziirich, was established in 1890, with theparticipation of the Deutsche Bank, especially for financing the Anatolian Railway in Asia Minor. The Nationalbank fiir Deutschland acquired an interest in 1895 in the Credito Italiano, which has its head office at Milan and branches at Genoa, Rome, Naples, and 86 other places in Italy. 1 Riesser, op. cit., pp. 422, 423, 432, 433; Palgrave, op. cit.,, 1916, p. 434, 2 Riesser, op. cit, p. 421. $ Ibid, pp. 423, 432-459; Palgrave, op. cit., ef. List of Principal Foreign and Colonial Banks and Bankers; and Hurley, op. cit., pp. 21, 22. ¢ Palgrave, op. cit., extra sheet opposite p. 261, COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 47 The Darmstéidter Bank formed a silent partnership (commandite) at Milan as long ago as 1873 or 1874. The Banca Commerciale Italiana was founded in 1894 with the participation of the Deutsche Bank, Disconto-Gesellschaft, Dresdner Bank, Darmstidter Bank, Berliner Handelsgesellschaft, and A. Schaaffhausen’scher Bankverein. Its head office is at Milan, and it has 54 branches throughout Italy. In 1915 nearly two-thirds of its stock was reported to be held by Italians, and only 2} per cent by Germans and Austrians. It is stated, however, that these figures did not fairly represent the German influence in its management. This bank was founded * by the Banque de Paris et des Pays-Bas, in connection with several German, Austrian, and Swiss banks. The Darmstidter Bank has an interest in the Ungarische Escompte-und Wechslerbank, at Budapest. The Banca Generala Romana, with head office at Bucharest and branches at six other points in Roumania, was founded in 1897 by the Disconto-Gesellschaft and the firm of S. Bleichréder. The Banca Marmorosch Blank & Co., Societate Anonima, with head office at Bucharest and branches at six other points in Roumania, is controlled by the Darmstiidter Bank and the Berliner Handelsgesellschaft. The Banque de Crédit (Kreditna Banka), with head office at Sofia, Bulgaria, and two branches in that country, was founded in 1905 by the Disconto-Gesellschaft, the Norddeutsche Bank, the firm of S. Bleichréder, and several Bulgarian firms. The Banque d’Orient, established in 1904 by the Nationalbank fiir Deutschland, has its head office at Athens, with branches at Salonica, Smyrna, Cairo, and Alexandria, and seven agencies besides. The widest-spreading German bank in the Levant is the Deutsche Orientbank A. G., which was established about the end of 1905 by the Dresdner Bank, the Nationalbank fiir Deutschland, and the A. Schaaffhausen’scher Bankverein. Its main office is at Berlin, with a branch at Hamburg. It has branches at Constantinople and Adrianople, at Cairo and Alexandria and five other points in Egypt, and at four places in Asia Minor. The Deutsche Palistina-Bank, with head office at Berlin and a branch at Hamburg, maintains a community of interest with the Deutsche Orientbank. It has oriental branches in Jaffa, Jerusalem, and Beirut, besides a subsidiary company, the Levante-Kontor (Litd.), which has an office at Constantinople. The Deutsche Bank has a branch at Constantinople. The Deutsch-Asiatische Bank has its main office at Shanghai, and branches in 10 other of the most important points of the Far East: 43 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Hongkong, Pekin, Canton, Hankow, Tientsin, and Tsingtau, in China; Yokohama and Kobe, in Japan; Singapore; and Calcutta. It has branches also at Berlin and Hamburg. It was established in 1889, with the participation of seven Berlin banks; Deutsche Bank, Disconto-Gesellschaft, Dresdner Bank, Darmstidter Bank, Berliner Handelsgesellschaft, A. Schaaffhausen’scher Bankverein, and Nationalbank fiir Deutschland. In 1907 a number of German banks participated in the establishment of the State Bank of Morocco. For the promotion of trade in Tunisia, the Banca Commerciale Italiana (established partly by German banks), founded in 1907 the Banca Commerciale Tunisina, with head office at Paris. At Dar-es-Salaam, in German East Africa, and at Mombasa and Zanzibar, in British East Africa, are branches of the Deutsch-Ostafrikanische Bank, which was founded in 1905, with head office in Berlin. The Deutsche Bank, the Disconto-Gesellschaft, and probably other great German banks, participated in it, as well as the German East African Trading Co. In German Southwest Africa are three branches of the Deutsche Afrika-Bank Aktiengesellschaft, which was founded in 1905, with head office at Hamburg, by the Disconto-Gesellschaft and the firm of C. Woermann of Hamburg. In German West Africa (Togo and Kamerun) are two branches of the Deutsch-Westafrikanische Bank, which was founded in 1904, with main office at Berlin and a branch at Hamburg, by the Dresdner Bank, in conjunction with the German West-African Trading Co. and several commercial firms. In Mexico are two branches of the Deutsch-Siidamerikanische Bank Akt. Ges., or Banco Germénico de la America del Sud. This was founded about the end of 1905 by the Dresdner Bank jointly with the A. Schaaffhausen’scher Bankverein. In 1906 the Deutsche Bank, with Speyer & Co., of New York, founded the Mexikanische Bank fiir Handel und Industrie (Banco Mejicano de Comercio é Industria) with its main office in New York? The Deutsch-Siidamerikanische Bank has branches at Rio de Janeiro, Buenos Aires, Valparaiso, and Santiago. The Banco Commerciale Italo-Brasiliano, at Sio Paulo, Brazil, is partly owned by the Banca Commerciale Italiana, which in turn was founded by a syndicate in which six great German banks participated. . The Disconto-Gesellschaft became in 1890 a silent partner in the old and important banking firm of Ernesto Tornquist & Co., at Buenos Aires, which has existed since 1830. : I 1 Riesser, op. cit., pp. 438-439. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 49 In Brazil are five branches of the Brasilianische Bank fiir Deutschland, founded in 1887 by the Disconto-Gesellschaft and the Norddeutsche Bank, with main office at Hamburg. In Chile are seven branches of the Bank fiir Chile und Deutschland, or Banco de Chile y Alemania, which was founded in 1895, with main office at Hamburg, by the Disconto-Gesellschaft and the Norddeutsche Bank in connection with several business houses. In 1886 the Deutsche Bank organized the Deutsche Ueberseebank, and this was superseded in 1893 by the Deutsche Ueberseeische Bank. The last-named now has 28 branches—2 in Spain, 9 in Chile, 6 in Argentina, 4 each in Peru and Brazil, 2 in Bolivia, and 1 in Uruguay. In Spanish-speaking countries it operates as Banco Alemén Transatlantico; in Brazil as Banco Allemao Transatlantico. At Medellin, in Colombia, is transacted most of the business of the Deutsche Antioquia Bank, or Banco Aleman Antioquefio, which was established in 1912, with head office at Bremen, but specifically to do business in Colombia.. Local merchants of Medellin contributed about 25 per cent of the capital, and German merchants, principally of Bremen, about 75 per cent.? FRANCE. In comparison with England and Germany, France has a much less extensive financial organization for foreign business, and to a greater degree makes use of the banking organization of other nations. Even the European connections of France are largely effected through foreign banks. Thus numerous British banks have branches in France, and most other European countries have at least one bank of their own with branches in France. Italy is thus conpected with France by the Banco di Roma; Austria by the Allgemeine Oesterreichische Boden Credit Anstalt and the OQesterreichische Liinderbank; Hungary by the Ungarische Bank und Handels-Aktiengesellschaft; Russia by the Banque Internationale de Commerce a Petrograd, the Banque Russo-Asiatique, the Russian Bank for Foreign Trade, and the Russian Commercial and Industrial Bank; Turkey by the Imperial Ottoman Bank. The Banque de Paris et de Sudde, at Paris, was established in 1913 by Swedish capital, to foster commercial relations between France and Sweden. The United States is represented at Paris by branches of the Farmers’ Loan & Trust Co. and the Equitable Trust Co. of New York, as well as by the American Express Co. and by several international houses, such as Morgan, Harjes & Co., closely connected with J. P. Morgan & Co., of New York, and Morgan, Grenfell & Co., of 1 william H. Lough, Banking Opportunities in South America, Bureau of Foreign and Domestic Commerce, Special Agents Series, No. 106, 1915, p. 62, 27241° —16———08 50 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, London; Lazard Freres et Cie., connected with Lazard Freres, of New York, and Lazard Bros. & Ceo., of London; Harris, Winthrop & Co., of New York; Munroe & Co., connected with John Munroe & Co., of New York; Raymond, Pynchon & Co., of New York and London; Seligman Fréres et Cie., connected with J. & W. Seligman % Co., of New York, and Seligman Bros, of London. Connection with South American countries is given by various British foreign trade banks, such as the Anglo-South American Bank, the Commercial Bank of South America, the London & Brazilian Bank, and the London & River Plate Bank. The characteristic policy of the German great banks, the founding of separate but tributary banks abroad, has not been generally followed by the French, but to this rule there have been some exceptions, such as the following :* The Banque de Paris et des Pays-Bas has founded, or been concerned in the founding of, the following financial institutions :? Banque d’Outremer, head office, Brussels. Banco Espafiol de Credito, head office, Madrid, branch at Paris. Banca Commerciale Italiana, head office at Milan : over 50 branches in Italy. (But see p. 47.) Banque Générale de Bulgarie, with head office at Sofia and branches at five other points in Bulgaria ; founded by the Banque de Paris et des Pays-Bas and the Hungarian Commercial Bank of Pest, Budapest; Banco do Brazil, head office, Rio de Janeiro. Banco Nacional de Mexico, head office, Mexico City: about 40 branches and 20 agencies in Mexico. The Banque de I'Union Parisienne is interested in the following : Banque Commerciale Roumaine, Bucharest, with the Wiener Bankverein, of Vienna; the Crédit Anversois. of Antwerp; and the Crédit Général Liégeois, of Liége. Banque Balkanique, head office, Sofia ; branches at seven other points in Bulgaria. The Wiener Bank-Verein is interested in this: Banque d’Athénes, head office, Athens; a branch at Hamburg; 15 branches in Greece, including Crete. four in Turkey. and four in Egypt and Cyprus. The Banque Francaise pour le Commerce et I'Tndustrie founded the Agricultural Bank of Egypt, with headquarters at Cairo, and, in connection with London and New York houses, the Bank of Habana. The Comptoir National d’Escompte de Paris has agencies at London, Liverpool, and Manchester, in England; at Brussels, in Belgium; at San Sebastian, in Spain; at Alexandria, Cairo, and Port Said, in Egypt; at Bombay, in India: and at Sydney and Melbourne, “1 Palgrave, Banking Almanac, 1916; cf, List of the Principal Foreign and Colontal Banks and Bankers, Tp Om Hegemann, Die Entwickelung des franzésischen Grossbankbetriebes, 1908, pp. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 51 in Australia, besides numerous agencies in French territory in Madagascar and northern Africa. Of French banks the Crédit Lyonnais has the greatest number ot foreign connections under its own control. It has branches at Brussels in Belgium and at Geneva in Switzerland; at Madrid, Barcelona, Seville, San Sebastian, and Valencia, in Spain; at Petrograd, Moscow, and Odessa, in Russia; at Constantinople, Alexandria, Cairo, Port Said, Jerusalem, Jaffa, and Smyrna, in the Levant. The Société Générale pour Favoriser le Développement du Commerce et de I’Industrie en France (Société anonyme), commonly called simply the Société Générale, has two offices in London and an agency at San Sebastian, Spain. Most of its direct foreign connections, however, are with “affiliated banks,” which it enumerates as follows: Société Francaise de Banque et de Dépbts, Ostend (in summer only), Brussels, and Antwerp; Société Générale Alsacienne de Banque, Strasbourg, Mayence, Metz, Mulhouse, etec.; Société Suisse de Banque et de Depots, Lausanne, Fribourg, Geneva, and Brussels; Banque Russo-Asiatique, Petrograd, etc.; Banque Hongroise d’Escompte et de Change, Budapest; Banque de Salonique, Constantinople, Salonique, etc. ; Banque Francaise et Italienne pour I’Amerique du Sud, Paris, Santos, Sio Paulo; Banque Balkanique, Sofia. Various other French banks, with headquarters usually at Paris, have branches abroad. Such are the following, head office at Paris unless otherwise stated : Banque de Paris et des Pays-Bas. with branches at Amsterdam. Brussels, and Geneva. Crédit Franco-Portugais, with branches at Lisbon and Ovorto: founded by the Crédit Lyonnais. Caisse de Crédit de Nice, head office at Nice, branch at Grasse et Port-Maurice, Italy, and an agency at (Genoa. Banque Francaise d’Egypte, with a branch at Cairo: Banque de 'Indo-Chine, with branches at Singapore and Bangkok and six branches in China, not to speak of about 10 branches in French Indo-China and other far eastern possessions of France. Banque Franco-Japonaise, with a branch at Tokio. Banque Francaise pour le Bresil. with a branch at So Paulo and an agency at Santos. Banque Francaise et Italienne pour I’Amerique du Sud, with 12 branches in Brazil and one in Argentina. This bank began business in 1910, with the declared purpose of developing the trade of South America with France and Italy. * Its success seems to have been at-1 Carl Hegemann, op. cit., p. 72. 52 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. tained precisely as most new banks succeed in the United States, by expeditious methods and alertness in pursuit of business.” ? Banque Argentine et Francaise, with headquarters at Paris, appears, notwithstanding its name, to have no branches. Société Commerciale Francaise au Chili, with a branch at Valparaiso. Considerable amounts of French capital are invested in loeal South American banks. This is understood to be true of the two important banks of Paraguay, the Banco de la Reptiblica del Paraguay and the Mercantil del Paraguay; and also of the Banco Espafiol del Rio de la Plata, the largest bank in Argentina, except the Banco de la Nacién Argentina, owned by the Government.? The Banco de la Nacién Boliviana is managed by French interests. The managing director is a Frenchman, and there is a Paris committee which advises with the directorate. The Banco del Peru y Londres (Bank of Peru and London) is about two-thirds foreign-owned, and French interests are larger in it than English. Indeed. it is sometimes referred to as Frenchcontrolled.* In comparison with the few American banks with foreign branches or subsidiaries, the French seem to have a rather comprehensive organization, but in comparison with the British and German banking and credit facilities for foreign trade, their foreign banking organizations are limited. Thus an agent of the Department of Commerce says: At the present time there are in France, in addition to the agencies of British and German banks (such as the London & Brazilian Bank, etc.), two prominent banks, the Crédit Lyonnais, with branches in many foreign countries, particularly in Russia, North Africa, Levant, etc., and the Société Générale, doing an extensive foreign business. The. services of these banks, however, are limited as compared with the British and the German, and do not include the financing of foreign shipments on a scale commensurate with the latter. The French recognize the fact that the mere establishment of bank branches abroad does not mean immediate returns in the shape of business secured. The Crédit Lyonnais has its branches in Russia, while none of the German banks have, and yet the Germans do the bulk of the Russian business. To be of practical service in the solution of the foreign-credit problem, the national bank having branches in foreign countries must be in a position to furnish facilities such as have been evolved in Germany and in Eneland.s 1 Edward N. Hurley, Banking and Credit in Argentina, Brazil, Chile, and Peru, Bureau of Foreign and Domestic Commerce, Special Agents Series. No. 90, 1914, pp. 23. 24. * William H. Lough, op. cit.,, pp. 70. 71. 3 Ibid., pp. 64, 73. ¢ Ibid. p. 93. 8 Archibald J. Wolfe, Foreign Credits, Bureau of Foreign and Domestic Commerce, Special Agents Series. No. 62. 1912 bn. 59 COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 53 NETHERLANDS. The Dutch firm of Bunge & Co., with partners resident at Amsterdam and at Antwerp, has offices in those cities and also at London, Hamburg, and Barcelona. It is agent for the firm of Ernesto A. Bunge and J. Born, of Buenos Aires. The Nederlandsche Handel Maatschappij (Netherlands Trading Society), with head office at Amsterdam, has branches at Hongkong and Shanghai, in China; at Singapore and Penang, in the Straits Settlements; and at Rangoon, in British India; besides about 20 branches in the Dutch East Indies and one in Dutch Guiana. The Nederlandsch-Indische Handelsbank, with head office at Am. sterdam, has branches at Hongkong and Singapore, as well as about a dozen in the Dutch East Indies. Close business connection between the Netherlands and South Africa results naturally from the former political connection and from the Dutch descent and speech of a large part of the people. The Nederlandsche Bank voor Zuid Afrika, with headquarters at Amsterdam, has a head office for South Africa, at Pretoria, and branches at Cape Town, Johannesburg, Bloemfontein, and seven other South African towns.? BELGIUM. The Banque Belge pour 'Etranger (Société anonyme), with head office at Brussels, has branches at Cairo and Alexandria, at Shanghai. Pekin, and Tientsin. The Banque Italo-Belge was established in 1911 as the Banque Brésilienne Italo-Belge; its name was changed in 1914. Its headquarters are at Antwerp, and it has branches at Sio Paulo, Rio de Janeiro, Santos, and Campinas, in Brazil, at Montevideo, in Uruguay, and at Buenos Aires, in Argentina.? PORTIIGAL. The Banco Nacional Ultramarino, with headquarters at Lisbon, does business chiefly in the Portuguese colonies, but has a branch at Rio de Janeiro. SPAIN. The Banco Alem#én Transatlintico, or Deutsche Ueberseeische Bank, has branches at Madrid and Barcelona, and so affords connection with its 25 or more branches in Brazil, Argentina, Chile. Bolivia, Peru, and Uruguay, as well as with Germany. The Banco Espafiol del Rio de la Plata, with head office at Buenos Aires, and branches at some 35 other points in Argentina, three in 1Palgrave, op. cit, pp. 396, 525-527. ? Ibid., p. 376. 54 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Brazil, one in Uruguay, and at London, Paris, Hamburg, and Genoa, has branches at Madrid, Barcelona, and five other Spanish points. SWITZERLAND. The Schweizerisch-Siidamerikanische Bank, established in 1912, with headquarters at Ziirich, has a branch at Buenos Aires. ITALY. The Banco di Roma has branches at Paris, at Bargelona, Montblanch, and Tarragona, in Spain; at Malta; at Constantinople, Cairo, and Alexandria. The Societd Commerciale per ’Oriente, at Constantinople, was founded in 1908, for the promotion of trade between Italy and Turey, by the Banca Commerciale Italiana. The Banca Commerciale Tunisina, though its head office is at Paris, was founded by the Banca Commerciale Italiana for the promotion of trade in Tunisia. The Banca Commerciale Italiana also has an interest in the Banca Commerciale Italo-Brasiliano, at Sdo Paulo, Brazil. GREECE. The Bank of Athens, established in 1894, has a branch in Cyprus, seven in Turkey (European and Asiatic), and three in Egypt. The Banque d’Orient, established in 1904, with headquarters at Athens, has branches at Alexandria, Cairo, and Smyrna. AUSTRIA-HUNGARY. The Allgemeine Oesterreichische Boden Credit Anstalt and the Desterreichische Linderbank, with head offices in Vienna, have branches in Paris. The Anglo-Austrian Bank, with head office in Vienna, has an establishment in London. The Ungarische Bank und Handels-Aktiengesellschaft, with head office at Budapest, has a branch at Paris and branches also at Constantinople, Smyrna, Kiev, Salonica, and Belgrade, four in Roumania, and three in Bulgaria. RUSSIA. The Banque Internationale de Commerce de Petrograd, the Russian Commercial & Industrial Bank, the Russian Bank for Foreign Trade, and the Banque Russo-Asiatique all have their head offices at Petrograd, with branches at Paris; the first-named has also a branch at Brussels, and the three others have each a branch at London. The Russian Bank for Foreign Trade has a branch at Genoa, 1 J. Riesser, op. cit., p. 456 ; Edward N. Hurley, op. cit., p. 22. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 55 and the Banque Russo-Asiatique has branches at Yokohama, Calcutta, and Bombay and seven in China.* JAPAN. The Yokohama Specie Bank (Ltd.) (Yokohama Shpkin Ginko), with head office at Yokohama, has branches at New York, San Fransisco, and Los Angeles, at London, at Liyon in France, at Sydney, at Bombay and Calcutta, and at seven points in China. The Bank of Taiwan (Ltd.), with headquarters at Taipeh, Formosa (Taiwan), has branches at New York and San Francisco, at Manila and Singapore, at Calcutta and Bombay, and at nine points in China. ADVANTAGES ENJOYED BY FOREIGN TRADERS IN FACILITIES FOR BANKING, CREDIT, AND EXCHANGE. Facilities for financing transactions in foreign markets.—In the old days a ship might sail from London or Amsterdam with a cargo owned partly or wholly by the owners of the ship and spend a year or two or three years in a voyage around the world. It would call at various ports and at each the captain or the supercargo might sell and buy. The ship might come home at last with a cargo from the Far East, and part or all of its burden might have been several times exchanged. In such trading there was no question of banks. Sales and purchases, when they were not in the way of barter, were made for local currency, wherever the ship might be, and money balances were represented by specie in the ship’s strong box. But nowadays, if silks go from Yokohama to London and cottons from London to Yokohama, each is sent to a particular consignee by a carrier who undertakes no responsibility beyond the delivery of the goods, and each consignee in Yokohama or London must pay his consignor in money or a credit equivalent of money. This is the primary service, and perhaps the most essential service, of the bank in foreign trade. It furnishes a market for the drafts of the Yokohama exporter on the London importer and of the London exporter on the Yokohama importer. Buying the bills of exchange that are offered in each market and selling such as are needed there, the bank effects on a large scale the balancing of experts against imports which the old ship captain used to effect on a small scale by his own sales and purchases. The fewer hands paper has to go through the less the cost of handling. A bank is likely to pay more, other things being equal. for a draft on a place where it has a branch of its own, for in that case it will get the whole profit, while otherwise it must divide with at least one other bank. \ Palgrave, op. cit., pp. 376, 383, G56. 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. ’ EE ———— ME ——— COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 51 Besides the matter of exchange, direct banking connections are of rzlue in financing foreign transactions during the considerable time they necessarily consume, facilitating transfers of ownership by means of documents, and eliminating to a considerable degree the slement of personal responsibility, by reducing the terms of payment substantially to cash on delivery of goods. By way of illustration, take the following passage from Dr. J. Riesser’s book, The German Great Banks: However, the most prominent function of the branches of the German banks at Flamburg, Bremen, and London, also of the over-sea banks, is the financing of imports from over-sea countries, especially >f raw materials. This is done in the following manner: The domestic buyer of the article (importer) procures in the first place from his German bank a «draft? credit (Trassierungskredit) in the form of “rembours” credit up to approximately the amount of the invoice in favor of the over-sea seller of the article (wool, cotton, grain, rice, coffee, ore, ete.), with the understanding that the seller, or the latter’s bank, ¢hall have authority to draw upon the bank of the importer to the extent of the purchase price. The bank will accept the foreign bill, which the over-sea seller or his bank will send to it after the loading of the goods, or have presented to it for acceptance by a German banking connection, only in case a full set of the bills of lading together with insurance policy, invoice, description of weight, and quantity, and, if need be, the certificates of origin are turned over to it. In this way the delivery of the goods to the bank 1s assured, as are also the identity of the article and the terms of the sale, as described by the importer, as well as the fact that the particular transaction is a real, bona fide commercial transaction, corresponding to ‘he importer’s statement.’ The Germans have set great value on foreign banking connections of their own, and have made the establishment of such connections an important part of their campaign for foreign trade. The advantages they have derived therefrom were summarized in part as follows, in 1912, by Archibald J. Wolfe, a commercial agent of the United States Department of Commerce and Labor 2 The German banks maintaining branches and connections oversea play an important part in the furtherance of the German export trade by enabling foreign customers to provide for the financing of their shipments from Germany and by the moral force of being on the spot and in close touch with the local trade conditions. * * * The participation of German banks in the development of many foreign industrial, railway, and mining enterprises provides outlets for German exports. 13. Riesser, The German Great Banks and their Concentration, pp. 428, 429, translation »ublished by the National Monetary Commission, 61st Cong.. 2d sess.. 8. Doc. 593. 2 Welfe. op. cit., p. 43. 58 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, The establishment of a network of German banks oversea has saved to Germany a considerable portion of the tribute formerly paid to England in the negotiation of foreign bills. London, however, is still the leading center of financial exchange, and in dealing with countries like South Africa and Australia Germany still must look to London for mediation. German banks are compelled to maintain banking connections and branches in that allimportant financial center. In Japan also a close connection is believed to exist between foreign trade and direct banking connections with foreign countries. Japanese financial writers give much credit to the Yokohama, Specie Bank for the growth of Japanese commerce. “Tt is scarcely necessary to dwell upon the fact,” says the Japan Financial and Economic Monthly,* “that the development of foreign trade is attributable to this banking organization.” The Yokohama Specie Bank opened a branch at Sydney, New South Wales, in the summer of 1915; and iu this connection it was remarked that the lack of exchange facilities for direct dealing between Japan and Australia had been much felt,? Yet it is doubtless easily possible to exaggerate the importance of this matter. Mr. Wolfe, who has just been quoted on the advantages the Germans have in their foreign banks, adds the following paraoraph of caution: In certain countries Germans have no banks of their own and some of their competitors are provided with such banks. Nevertheless, the Germans are doing a tremendous business there. This particularly refers to foreign markets, which in the’ preceding pages have been left out of consideration, not being “over-sea markets.” In Russia, French banks maintain branches and Germans have no banks of their own; nevertheless they are far from being hampered by such a lack. The establishment of banks abroad is not a sole solution of success in foreign business in general and of the credit problem in particular.? No doubt it is true, as Mr. Wolfe implies, that the value of homecontrolled banks is greater as the countries concerned are more distant and as their own economic organization is less complete. The commercial importance of branches of New York banks in Canada, or of branches of German banks in Russia, would be less than the value of branches of either in China. Extension of credits.—Beyond the financing of oversea shipments in transit, the problem of credits arises. Foreign transactions are necessarily time-consuming, and under earlier conditions of transportation they were much more so than now. Partly to this, perhaps, may be due the tradition of leisureliness which prevails, especially in trade with the less developed countries. In that trade credits of 6, 9, and 12 months are common. t March, 1915, p. 45. ? Financial America, New York, Sept. 27. 1915, p. 8. 3} Wolfe, op. cit., p. 48. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 59 Neither manufacturers nor exporters are, as a rule, in a position to carry large and long credits. They do not want their money out at interest; they want to turn it over. If they are to grant long credits they must get bankers to carry them. The most satisfactory way to do this is by discounting some form of customers’ paper; and this is not readily done except through banking connections between the exporting and the importing countries. English banks have followed English traders. Without any prearranged plan or policy, they have arisen and developed as the spread of commerce has offered opportunities for profit. They have allowed the credits which custom and the conditions have demanded. In the German campaign for foreign trade, liberal credits have been a prominent feature. Thus, in an article on Argentine conditions, published in November, 1914, it is said that increasing the length of credits has been developed as a means of competition, in which Germany is reported to have been the most aggressive. A report of the Department of Commerce states: The newest comer in the foreign banking field in Rio de Janeiro is the Banco Aleman Transatlantico, which opened a branch three years ago, in charge of a German who had previously been a merchant in Rio de Janeiro. This bank energetically sought business, solicited accounts, and extended a greater measure of accommodation to merchants of Rio de Janeiro than they had been able to obtain from the British banks.? The Japan Financial & Economic Monthly for October, 1914, gave the opinion of a British commercial attaché, to the effect that the German Empire’s large share of the Japan-China trade was almost entirely due to excessive credits, and although (presumably under ordinary circumstances) he would not consider such a course desirable, it might be necessary for British interests to extend credit. In this connection Herr von Jagow, German secretary for foreign affairs, was said to have intimated officially during 1914 that it was the German Government's intention to assist in financing the commercial development of China, and that, besides the Deutsch-Asiatische Bank, a second German industrial bank was then being planned which would provide additional financial assistance for far-reaching activity in China. Even in Europe the same effects of credit facilities are observed; witness the following from Spain: One cause of the success of German exporters has been the fact that there is in Madrid a German bank that discounts 1reely commercial paper sent to it by German exporters; such exporters, there-1R. O. Bailey, in The Americas, New York, November, 1914, pp. 16-17. 8 Hurley, op. cit.,, p. 47. 60 BEPORT ON COOPERATION IN AMERICAN EXPORT TRADE. fore, have been accustomed to give credit for 90 days or longer against the purchaser’s paper, which could be readilv discounted.! Information of business conditions, ‘of credit standing of customers, ete.—The banks which do the kind of business just referred to are obliged, in their regular routine, to keep themselves informed of the responsibility and standing of houses whose paper is, or is likely to be, offered to them. Thus, for their own purposes, they accumulate a mass of credit information, which they are able to make available for the business purposes of their customers. The British banks, with their system of branches, agencies, and correspondents, extending to every important center of foreign commerce, have facilities for gathering commercial information which are perhaps greater than any other, and have till recent vears been incomparably greater. The only other banking system that rivals the British in the extent of its foreign relations is the German. Belgian, Swiss, and French banks, and those of other countries, have less comprehensive connections, reaching especially the regions with which they have axtensive trade. Thus. Foreign banks supply their home offices in Europe with the ratings and characteristics of South American firms and individuals. German trade has been extended largely by aid of longer credits than were accorded by British houses; the German banks have been more minute in their organization of this service. Latin-American business men calling upon banks at Hamburg have been astonished at the familiarity of bank officials with the character of their business. It is not to be expected that in the campaign for Brazilian trade foreign banks will give credit information as readily to American concerns as to traders of their own nationality. Americans can and do obtain credit information from foreign banks in South America, but as a rule its possession results in no material stimulation of competition. If an American lumber or flour company asks a German or British bank for the financial rating of a certain Brazilian client, or for specific information regarding the condition of his business, the bank readily may comply, for the resulting sales in lumber or flour are noncompetitive. It is doubtful if inquiries preliminary to a transaction in competitive manufactures would be so readily answered. Credit information is a prime banking asset in Brazil, acquired only by timely, painstaking, and long-continued effort. No financial institution may be expected to part with it to occasional clients. Of course, where an American firm is an old and a profitable client of a foreign bank in Brazil, it may have access to credit information on the same terms as customers of the same nationality as the bank, just as it would receive equal credit. But, however convenient such an arrangement may appear, it possesses inherent weakness? 1 Daily Consular and Trade Reports, Nov. 4, 1914, p. 581. 3 Hurley, op. cit,, pn. 11. 46 47. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 61 To British observers the activities of the German banks in foreign trade appear as follows: The banks in Germany, through their branches in foreign countries, have strained themselves to help German export trade. The general policy has been for the foreign branches of the banks to give all possible particulars to headquarters about business openings abroad, and this information has always been available for the manufacturers and merchants in Germany. If a manufacturer of, say, laundry machinery should wish to compete for business in Buenos Ayres he could get through a bank all the necessary particulars about the conditions of the laundry business in that city, the number of laundries in operation, whether or not they did good work, the kind of machinery employed, the character of the water used, and so forth. Then, if the manufacturer considered the opening was a good one, the bank would introduce him, or his representative, to the proper people. If business was secured, the bank would finance it, and ultimately collect the account. Assertions that information is given of transactions of Americans.—If assertions from many sources are to be believed, foreign banks sometimes go so far as to reveal to their home connections the details of American foreign business which has been placed in their hands on the assumption that it would be treated as confidential. A. manufacturer savs: Several years ago a small shipment of ours to South America was handled through a foreign banking house in New York. We got definite information later that the entire transaction, as far as was shown by the handling of the papers by the bank. had been reported to some of our competitors in Europe. The president of the American Locomotive Co. says: If we had to deal, for instance, through a German bank, we felt that practically everything that occurred in regard to our transaction which could be found out from the outside was known to our competitors when the next time came. The amount of money that we were paid for our locomotives was known to that bank to the last dollar. * * * They often knew all that we paid for freight, and everything of that kind, and we felt that at times we saw the evidence of that knowledge when it came to the next bidding. (Pt. IT, p. 813.) A manufacturer of glazed kid says that foreign banks often use the information which they procure through invoices and bills of lading to the advantage of the foreign competitors. Another manufacturer says he is satisfied and knows that German manufacturers know all about the prices and the names of American manufacturers’ customers in South America; that German banks let out this information by sending copies of invoices to German manufacturers. Conclusive proof of such allegations is hard to obtain and none has been sought by the Commission. Statements like the foregoing, however, represent a widespread belief. 1H T. Good. in the Financial Review of Reviews (London), June, 1915. pn. 212. 52 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Direct promotion of sales.—The great German banks are directly represented in the management of hundreds of German industrial concerns. Shortly before the present war the directors of the Dresdner Bank were on the boards of nearly 200 industrial companies. In 1910 the Deutsche Bank was represented on the boards of 116 German and foreign concerns, some of which are dominating factors in leading German and international cartels and combinations. Its connections in 1914 with such enterprises and with banks are shown by the accompanying chart. (Chart 1, facing p. 62.) In this chart only the important companies have been shown and no effort has been made to include the many subsidiaries of these companies, which usually are also more or less directly connected with the bank. Similar connections of various other German banks with indus trials are tabulated in Part IT, pages 519-533. Commenting on these relationships and their influence in promoting trade a prominent German economist says: The representatives of the banks on the supervisory boards of the industrial companies-have always taken special care to fulfill one very effective part of the “advisory function” of the supervisory board, viz, to provide for the disposal of the products of the industrial companies in question to suitable industrial enterprises on which the banks were able to exercise some influence. When such potent influence is exercised on manufacturers, trading companies and steamship lines by banks devoted to the upbuilding of German foreign trade, it is not surprising that there seems to be a remarkable unity of effort by all these agencies for the securing of business abroad. More substantial reasons than mere patriotism make German finance the advance agent of German commerce. The interlocking of financial and industrial control is not peculiar to Germany. In every country, including the United States, the several branches. of business—financial, manufacturing, mining, iransportation—are more and more controlled by the same men. Tt follows that in every country the extension of financial enterprise abroad is a means to the expansion of exports, and particularly of exports of the products of the larger industrial corporations. It is said to be a customary provision in the loan arrangements between British and German banks and their South American borrowers that the proceeds of loans shall be spent with manufacturers in the countries which advance the funds. An official report from Honduras states: Heretofore European goods have ‘been introduced because local importers or shipping agents have been in reality a combination of bank and manufacturers’ representatives, not making loans or financ-J. Riesser, op. cit. Dn. 375. PRINCIPAL CONNECTIONS OF THE DEUTSCHE BANK OF BERLIN THROUGH EXECUTIVES AND MEMBERS OF ITS BOARD pata preparec Fy IF 7 Clark of he Coizral L227 Company from Saling s BersenJahrbuch 19/4 = 15. ) - - oh IPPROXIMATE 3 3 CAPITAL NAME OF . YOOLLARS _LOMPANY soon oun Tome Broom FEET seeing ONL TRISTE 51000, 000 SiemensHalske A.6 oe ag — Mannesmanti ne Rotiren Werke zovnoon As 000,000 Ge crewertng 2 500.000 Bergmann Llektric/ 13151 toon coo Perec bein | 6.000.000 parC hatt zs0000 Fenton] — Berlin Gubener Hut - 900000 £2brik A. 6.vorm. ALokn Deutsche JuteSpinnerel 790.050 und Webereiin Meissen | —— Vereinigte Smyrna TeppichiabrikenA 6 > . Mr a. EE 137. . DEUTSCHE BAN; APPROXIMATE CAPITAL S$ 62.500,000 ] \ a \ wameor eam COMPANY IN DOLLARS maa ———] Sm Tere ssa TTT ra AEE ana ‘anpruvor<rhp Rank 1,500, gor ETT oan Sachsrsche Bank 500,000 Pregnilzerlisenbahn $00,000 ransportverarcrerempss 225.900 EET Te ETI Sona REACT Ls7r000. CE — sesellsthaftenA 6. (fhertely) ! SETHE Tot 400 rng ta? 6000000 Narturger sertsbvinen §225.007 TE ier Faserkation | 8800.000 Cermom fants 3183.90 iy me Cm Fm WEE ga5000 thor mbeny 92000 TE ——— Ty gr Whi on £07 2.4800 Seater 725990 Tr vss a00 fr = y 000000 DeVSCh-TSTaFISERE Wooo 000 Seas haSheie, vasaos EIII zavvoun PEI b-0000 eg | 2 500,000 a Masao Lon a toaaoo0 Memes Berirer } 2500.00 Jesh an 2,000.00 err eeasenett © 425000 4 EEE tonne 000.008 Steffens nA Nollc 790.000 Pelle ute domer rasaa00 Go 300,000 CE Wunderlich&lo.A.6 2 250,000 Ey 4 ey NErbay 20 Frerser Gee 000 ee ney 5225000 Go — Eu (oh $e . ? n Ui e at +2 tis Y = el Ss wa : ~, a Co» a LN 0% yy Q | et Q A XY ¥ S #3 Lk . n g S 9 Ho Ss SaonShsn bE Shsnusn dlls s & S f | " nell &l 8) ¢ ssl sleet sls) gl gl sls * ~ eS 8 3 S S \D 2 « n oN wy 8 g ba. - 2 3 = ~ ”y < R . Qo N 0 ~ ~~ <Q 3 5 = ; 3 3 | 3 - % vw & " N ~ x . FF) os] n ~~ AR™ - DEUTSCHE BANA A geprROXMATE CapITaL A’ 62,500,000 — a — — “ hb. % cr £ ~ NI Fe 2» Sy 1 ay ) y. I Tor ‘ : F 1 = $ a S © Le 303 e > R | ~~ ~ v | c o fo < Se c } oo SQ S o X * Ss J] S 9 SHEN EES] 118) s 2 [ramapersvenstmaongs 25900 oho cay rel” 2,800,000 fen werker pono *5® aco erga 4000000 i — seer 1.355.000 Ai Wallinovsr- 560.000 el evan 6000000 FRG Vereimighe 5 2-—— orborger Datfatpiken 3 226.000 ermal arany 3.183.000 So pon or 900.000 ere Ue 690.000 Sto boy 982.000 TTT ma Wb i 4070000 fea" 725,000 ere ory 335.000 pHlichta Feverversicherungs AG. Fa arse 6 000,000 veISG ES @. 000.000 nd Hessmgmentens 100.000 ang NaF, 715, 000 aur de tomo ‘6. Geir Sr Werke, 000,000 Towerhos tonne” 2ovs000 sp < { “ . . SHIN Ls (sys gL Js hidlegle) 1EpoRT nt Tue Fepgral TRADE COMMISSION ON COOPERATION IN AMERICAN EXPORT TRADE COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 63 ing enterprises except to secure the sale of goods produced by the manufacturers they represented.! Furthermore— In Italy the main agency for German economic penetration has heen the Banca Commerciale Italiana, which was established by German banks. Next to the Banca Commerciale Italiana, the Credito Italiano, which until quite recently has also been under German conirol, has been the most important organ for German economic penetration.? The great international banks and bankers have concerned themselves more and more with governmental loans and concessions. They have often been able to control in great part the expenditure of their loans, guiding it to industrial channels in which they have been interested. Concessions for railroads and other public works place the purchases of materials directly in the hands of the grantees. Loans and concessions are the basis of an enormous amount of foreign trade, especially in the products of the larger industries, such as construction materials for railroads, street railroads, and water-power and electric plants. The French banking house of Perrier & Co. recently, made a loan of $10,000,000 to the State of Minas Geraes (Brazil), the fund to be loaned out in turn by the State to various municipalities for the perfection of municipal improvements, such as tramways and electric lighting plants. The contracts executed between the State as lender and the municipality as borrower stipulated that when other considerations were equal preference should be accorded by the municipality to French materials, and that in such purchases the municipalities should avail themselves of the mediation of the house of Perrier & Co.? The German banks in South America have gone extensively into the hydroelectric field, and have introduced a vast amount of German slectric equipment. (See also pp. 273 ff.) The railroad enterprises of Germany in western Asia have furnished an outlet for great quantities of rails and machinery. The powers have contended for concessions and loans in China, and the incentive is in great part the anticipated export of construction materials. The struggle of European nations for colonies and spheres of influence belongs to the same category; the desire for concessions is probably more important than any other motive, and a concession may often be as valuable for the profits on materials as for the profits »f operation. ° American conditions.—Incorporated foreign banks with branches or agencies at New York, and sometimes at other places in the United 1 Daily Consular and Trade Reports, Dec. 4, 1914, p. 1015, The Near East (London), Aug. 18, 1915, p. 420. 3s mdward N. Hurley, Banking and Credit in Argentina, Brazil, Chile, and Peru, Burean ff Torelen and Domestic Commerce, Special Agents Series. No. 90. 1914, p. 47. 54 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, States, afforded financial connections with foreign countries before the war. Unly recently have American financiers done much in establishing banks abroad. Till the Federal reserve act was passed at the end of 1913, national banks could not establish branches, and much blame was laid on this feature of the law. It is not clear why Americans could not have established any number of banks and branches in foreign parts, either under State laws or under the laws of the countries where business was to be done. Indeed, one important institution, the International Banking Corporation with headquarters at New York, was established as long ago as 1901, especially for foreign business; and it had already, when the Federal Reserve Act was passed, three branches in Panama and two in the Philippines, one in the City of Mexico, one at Singapore, two in India, two in Japan, and five in China. The Equitable Trust Co., of New York, had branches in Paris and London, and the Farmers’ Loan & Trust Co., of New York, had branches in Paris and Berlin.z 1 Besides express companies and international banking houses not here listed, the follow-Ing incorporated foreign banks with branches or agencies in the United States are named n Palgrave’'s Banking Almanac, 1914, p. 251 et seq. : African Banking Corporation (Ltd.) ; head office, Londoh ; agency at Hamburg, and about 4¢ branches in South Africa. Anglo-South American Bank (Ltd.); head office, London; branches at Paris and Hamburg, 10 oranches in Chile, 6 in Argentina, 1 in Uruguay, 1 in Bolivia. Banco Nacional de Cuba; head office, Habana ; branches at about 30 Cuban points. Bank of British North America; aead office, London ; agency at San Francisco, and branches at about 80 points in Canada. Bank of British West Africa (Ltd.) ; head office, London ; over 50 branches and agencies In Africa. Bank of Montreal; head office, Montreal ; branches at Chicago, Spokane, City of Mexico, and about 160 places in Canada and Newfoundland, Bank of Nova Scotia ; head office, Halifax; branches at Chicago and Boston, Habana and Cienfuegos (Cuba), San Juan (Porto Rico), several places in the British West Indies, and more than 120 places in Canada and Newfoundland., Bank of Taiwan (Ltd.) ; head citice, Taipeh, Formosa (Taiwan); branches at San Francisco, Manila, Singapore, Calcutta, Bombay, T doints in China, and about 14 in Japan and its dependencies. Canadian Bank of Commerce; head office, Toronto; branches at San Francisco, Seattle, Portland (Oreg.), Mexico City, St. Johns (Newfoundland), and about 350 points in Canada. Chartered Bank of India, Australia, and China; bead office, London; branch at Hamburg, and over 30 branches in the Far East. Colonial Bank; head office, London ; nearly 20 branches and agencies in the British West Indies. Commercial Bank of Spanish America (Ltd) ; head office, London; branches or agencies at Manchester, Paris, and 7 points in South and Central America. Hongkong & Shanghai Banking Corporation; head office, Hong. tong; branches at London, Lyon, Hamburg, San Francisco, and over 25 places in the far East. London & Brazilian Bank (Ltd.); head office, London; branches at Paris, Lisbon, Montevideo, Buenos Aires, and 11 points in Brazil. London & River Plate Bank (Ltd.) ; head office, London; branches at Paris, Antwerp, and Valparaiso, and branches or agencies at 9 points in Brazil, 3 in Uruguay, and 8 in Argentina. Merchants’ Bank of Canada; head office, Montreal; nearly 200 branches and subagencies in Canada. Panama Banking Co.; head offices, Panama and Colon. Royal Bank of Canada; head office, Montreal ; over 300 branches in Canada, 2 in Newfoundland, 25 in Cuba, 3 in Porto Rico, 2 in the Dominican Republic, and 7 in the British West Indies. Standard Bank of South Africa (Ltd.); head office, London; agency at Hamburg, 3 branches in Portuzuese East Africa, and over 200 in British African colonies. Yokohama Specie Bank (Ltd.) ; head office, Yokohama; branches at San Francisco, Los Angeles, Honolulu, London, Lyon (France), Bombay, Calcutta, 6 points in China, and 12 in Japan and its possessions. The National Bank of South Africa (Ltd.), with head office at Pretoria and more than 200 branches in South Africa, opened an office in New York in 1915. + Palgrave, Banking Almanac, 1914, pp. 423. 426, 461. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 65 American banking facilities abroad have been considerably extended since the Federal reserve act was passed; but the movement has not been confined to national banks. In June, 1914, the National City Bank of New York sent agents to make investigations in South America. In November, 1914, it opened a branch at Buenos Aires, and a little later a branch at Rio Janeiro. It has since opened branches at Santos, Sao Paulo, Montevideo, Santiago, and Habana. In June, 1916, it announced that arrangements had been completed for opening branches at Valparaiso and at Genoa, and that agencies had been determined on at Bahia and Milan. The National City Co., formed and controlled by the National City Bank, has bought a controlling interest in the International Banking Corporation. The Commercial National Bank, of Washington, D. C., has established branches at Panama and Colon. W. R. Grace & Co. have established banking agencies at Lima, Callao, and Arequipa, in Peru; at La Paz, Bolivia; and at Valparaiso, Santiago, Concepcion, and Valdivia, in Chile. The Continental Banking & Trust Co. of Panama, a West Virginia corporation, formed by New York, New Jersey, and Pennsylvania men, has branches at David, Bocas del Toro, and Chorillo, Panama. and at Santa Marta, Colombia. The Mercantile Bank of the Americas has been formed by Brown Bros. & Co. and J. & W. Seligman & Co. “to provide financial and other facilities in connection with American trade to and from Central and South America.” It began by making connections with existing banks and bankers in Nicaragua, Costa Rica, Honduras, and Venezuela. The new enterprises appear to be practically confined to Central and South America. The International Banking Corporation is apparently still the only establishment with headquarters in the United States and branches in the Far East. The Federal reserve act contains a provision which may be ‘as important in its ultimate effects as the authorization of branches; namely, the authorization of the purchase of commercial acceptances. Such acceptances have heretofore been almost unknown in the United States, while they constitute the bulk of the paper in the banks of the commercial countries of Europe. It is by discounting such paper that the long credits allowed by European exporters in Latin America, Australia, South Africa, China, and elsewhere are financed. Under the Federal reserve act, and the regulations issued by the Federal Reserve Board, Federal reserve banks may discount acceptances, based on importation and exportation, up to 50 per cent of the unimpaired capital and surplus of the member banks by which the paper is 27941°— 16———8 656 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, offered; and, with the permission of the Board, up to 100 per cent of the unimpaired capital and surplus. No very great use of such acceptances has yet been made; but it seems reasonable to look for a gradual approximation to European customs, at least for the export trade. American commerce ‘could not but be facilitated by conforming in this respect to the terms on which Latin-American and Asiatic purchasers have been accustomed to buy in Europe. The American banks in foreign countries will naturally and almost necessarily supply the credit service which has been spoken of above (p- 60) as one of the important functions of European foreign-trade banks and their connections. The National City Bank plans to keep at its main office in New York a duplicate set of the credit files of its South American branches. Americans have not, however, been wholly destitute heretofore of means of obtaining credit ratings. Both the Bradstreet Co. and R. G. Dun & Co. have for years had foreign branches. Dun has more than 80, Bradstreet more than 100. These are supplemented, as in this country, by correspondents where there are no branches. The National Association of Manufacturers, with headquarters at New York, and the Philadelphia Commercial Museum have long maintained foreign credit services. Information may often be obtained also through foreign banks in New York. Nevertheless the present American banking and credit facilities available for foreign business are far inferior to the British facilities that British traders enjoy, and to the German foreign trade financial organization that was so potent in fostering German trade before the war, and to this extent American manufacturers, exporters, and importers are at a disadvantage. This can only be remedied by the continued extension of American banking and credit institutions into the foreign markets, where thev are most needed as agencies of American commerce. SECTION 4. FOREIGN INVESTMENTS OF THE CHIEF TRADING NATIONS. The investment of capital in other countries is an effective means of increasing trade with such countries. This results not only from the naturally increased demands of such countries, as their own industrial development proceeds, but also from the fact that the investors usualy purchase supplies and equipment for foreign enterprises from the fiome country. Indeed, European nations have frequently made such purchases a condition of loans and investment. The Commission does not advocate a similar policy on the part of American manufacturers or the Government of the United States. In discussing the foreign investments of the chief commercial nations it is merely presenting the facts concerning one of the important competitive factors which Americans encounter in foreign trade. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 67 COURSE AND AMOUNT OF FOREIGN INVESTMENTS. It is impossible to determine exactly the interest of citizens of any country in property outside its borders. Estimates have been attempted chiefly on three bases: Security issues, income-tax returns, and sums annually receivable and payable on account of exports, imports, services, and interest. If the sum of incomes actually derived from abroad could be determined, capitalization of this income would give a fair estimate of the amount of property owned abroad. The returns of income from such sources are, however, probably even more defective than those of domestic income, because concealment is probably easier. Moreover, not all the income which is returned, and which has a foreign origin, is tabulated as foreign. For instance, in Great Britain interest on loans abroad owned by banks and insurance companies in the United Kingdom, is confounded with domestic income. So are the returns from mines, gas and water works, plantations, etc., abroad, when the seat of direction and management is in the United Kingdom. The estimate by tabulation of security issues is perhaps even more defective. It depends primarily on stock-exchange listings or on issues of securities by banks and financial houses. By this means can be determined the amount of public loans, and of shares and bonds of the larger corporations offered on the London or the. Paris market. No doubt, these items cover the bulk of foreign investments. State and municipal bonds and railroads were the first great fields of foreign investment, and these with various public utilities—tramways, gas works, water-power and electric developments—still offer the large opportunities. But there is a considerable residuum of investments that may ce distinguished as private: Personal land purchases, unincorporated businesses,®small corporations that offer no securities in the market. On the other hand, of securities offered in London, no one can tell how many are bought by Englishmen and how many by Frenchmen, Germans, or Dutchmen. It is questionable whether better results can be obtained through the method applied by Bowley, based on exports, imports, interest, freight, and other sources of income and outgo. This method gives, subject to its inevitable errors, the amount invested in any year, and, by taking a sufficient series of years, the total investment existing.’ Bowley himself remarks: “ More reliance may be placed on the relative rates of increase than on the actual figures. The total can hardly be estimated accurately within 25 per cent.” 1 Report of the Commissioners of Inland Revenue quoted by Sir G. Paish, in Journal of the Royal Statistical Society, September, 1908, p. 469. 2 Arthur L. Bowley, England's Foreign Trade in the Nineteenth Century, revised edi-Hon 1905. pp. 76. 77 note. 79 note. 58 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE GREAT BRITAIN. As it was in England that the modern growth of large amounts of disposable capital began, Englishmen were the first to make large nvestments outside their own country. It was computed that in 1857 the sum of £30,000,000 ($400,000,000) in American railroad steck alone was held in England. In 1886 British holdings in South American banks and railways were estimated, market value, at £52,855,000 ($264,275,000) and in South American government and provincial loans, market value, at £58,223,000 ($291,115,000) ; a total for these three South American items alone of over £111,000,000 ($555,000,000).2 According to Bowley’s estimate, as long ago as 1854 British owners “had some £550,000,000 ($2,750,000,000) invested abroad, in Government loans and railways presumably;” and this may have risen to about £1,400,000,000 ($7,000,000,000) by 1875, and to £2,000,000.000 1$10,000,000,000) by 1890.% Sir Robert Giffen, starting from the income-tax returns, reached an estimate for 1885 of £1,302,000,000 ($6,510,000,000),* while Bowley’s estimate for that year would apparently be about £1,700,000,000 ($8,500,000,000). Later estimates, for which F. W. Hirst, editor of The Economist, is responsible, and which are similar in method to Giffen’s, give £1,600,000,000 ($8,000,000,000) for 1895, £2,025,000,000 ($10,125,000,000) for 1905, and £2,382,000,000 ($11,660,000,000) for 1909. Mr. Hirst regards these estimates as “a minimum rather than a maximum.” ® At the meeting of the Royal Statistical Society in December, 1910, Sir G. Paish gave an estimate of the public securities then in British hands, based partly on income-tax returns and partly on examination of the reports, balance sheets, and income statements of several thousand companies; indeed, of all Qritish companies working abroad about which official information could be obtained.” The estimate is summarized in the following table: LC. K. Hobson, The Hxport of Capital, London, 1914, p. 128. 1 The Economist, London, Jan. 23, 1886, pp. 105-106. ' Bowley, op. cit., pp. 76, 77. 'G. R. Porter, The Progress of the Nation, revised by F. W. Hirst, London, 1912, p. 701. fF Bowley, op. cit., p. 77. 3 Porter, op. cit, pp. 701, 702. ‘Journal of the Royal Statistical Society, January, 1911, pp. 167, 168, 171, 172, 185, 186. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE, 69 TasLk 3.—-Public securities in British hands at the close of 1910, estimated. THE COLONIES AND INDIA. North America: Canada and Newfoundland___..___.. Australasia: Australian Commonwealth ___.__._____ New Zealand. __._. Africa: South Africa ____.._.___ West Africa___. Asia: India and Ceylon... _.____.. Straits Settlements... Hongkong British North Borneo.__._____.___ Other British Possessions Total British Colonies and India__ A SSR $1, 862, 705, 000 1, 507, 605, 000 392. 645. 000 1, 756, 840, 000 147, 490, 000 1, 826, 995, 000 110, 185, 000 15, 520, 000 25, 655, 000 125, 120, 000 7.770. 760. 000 FOREIGN COUNTRIES. United StateS—mm— oon Cuba Philippines ___________ Argentina ___________. Mexico ____.___ BIBEI) mins ss Chile oo ____________ Uruguay — cee. Peru ._______ Other American countries... Russia. Turkey ————._. Egypt «meee Spain____._____. Italy Portugal _.._______ France oo. __ Germany ________________._ Other European countries... Japan oe China ___________ e. Other foreign countries___________ $3, 440, 390, 000 118, 500, 000 41, 010, 000 1. 349, 040, 000 436, 670, 000 472, 200, 000 281, 875, 000 176, 275, 000 159, 930, 000 112, 585, 000 191, 940, 000 91, 600, 000 218, 765, 000 94, 040, 000 57, 565, 000 40, 670, 000 35, 855, 000 30, 305, 000 181, 595, 000 268, 525, 000 134, 045, 000 309. 535. 000 Total foreign countries. eee 8,188, 420, 000 Grand total, all countries___________ __. ee 15, 959, 180, 000 After giving this table Sir G. Paish added: Of our total colonial and foreign investments 53 per cent is in the Americas, 16 per cent is in Asia, 14 per cent is in Africa, 12 per cent 1s in Australasia, and 5 per cent is in Europe. The geographical 70 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Jistribution of our investments over the various continents is shown by the following statement: A mericas........ ASIA, ow sisi nme yfrica............ \ustralasia.... - IFO. eens Total. Continents. Amount in dollars. 2, 500, 000, 000 ¥ 500, 000, 000 Y, 275, 000, 000 935, 000, 000 220. 000. 000 15 960, 000, 600 Per cent of total. 53 16 14 12 5 100 In conclusion, I would ask you to note that this great sum of £3,192,000,000 ($15,960,000,000) of capital which Great Britain has supplied to the nations is not the total sum her people are employing in other lands. I have taken no account of the great sum of what is termed private capital employed abroad by the British people in a variety of ways, such as the purchase of land, loans on mortgage, deposits in banks, branch manufacturing, mercantile, and frade undertakings, etc. If allowance be made, on the one hand, for the foreign capital employed in British companies both at home and abroad and in British loans, and on the other, for the vast amount of private capital which the British people have placed abroad, I think the net total of our investments in other lands would be not much short of £3,500,000,000 ($17,500,000,000). But, inasmuch as the amount of the private capital employed abroad can not be ascertained, I have ignored it, and have confined myself to that portion of our capital investments in other lands for which there is documentary evidence. “ Qver 60 per cent of our foreign investments,” said Sir G. Paish, “has been employed in the construction of railways, either directly by British companies or indirectly by means of the loans with which we have provided the Governments of the various countries.” About [4 per cent has gone into mines, nitrate, oil developments, tramways, telegraphs, and telephones, gas works and waterworks, electric lighting and power plants, canals, and docks, and nearly as much into financial, land, and investment companies, commercial and industrial companies (among which breweries and distilleries are especially prominent), and banks. Sir G. Paish concluded that the new capital supplied by Great Britain to other lands was £130,000,000 ($650,000,000).in 1908, £160,000,-300 ($800,000,000) in 1909, and £165,000,000 ($825,000,000) in 1910; and that about 53 per cent of this went into railways. An estimate by C. K. Hobson,! based on the balance of imports and exports, freights, miscellaneous services, and income from foreign investments, places the net sum of new foreign investments at £130,000,000 ($650,000,000) in 1908, £110,000,000 ($550,000,000) in 1909, and £150,000,000 ($750,000,000) in 1910. This is an average of \ Hobson, op. cit., p. 204. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 1 £130,000,000 ($650,000,000), while Paish’s average is nearly £152,000,-200 ($760,000,000). But Hobson gives estimates of £192,000,000 ($960,000,000) for 1911, and £226,000,000 ($1,180,000,000) (subject to some undetermined shrinkage) for 1912. ’ If Paish’s final estimate of “not much short of £3,500,000,000” ($17,500,000,000) be taken for the end of 1910, and additions at about £200,000,000 ($1,000,000,000) a year be allowed to the middle of 1914, the result is about £4,200,000,000 ($21,000,000,000). It seems safe to conclude that British. investments outside the British Isles, at the beginning of the present war, were not less than £3,500,000,000 (roughly $17,500,000,000), quite probably £4,000.000.-900 (say, $20,000,000,000), and perhaps more. The mere statement of the amount of British capital invested in foreign countries does not measure the full influence of such investments. In many companies British capital is associated with other capital—French, German, Belgian, Spanish, or local. But when British capital controls such a company, as it frequently does, British manufacturers usually have the best opportunity to sell the supplies it may need. In Part II, pages 541-574, is a list of companies organized or controlled in Great Britain which are operating in countries outside the British Isles, Canada, and the United States. This list is by no means a complete presentation of such enterprises, nor of British investments therein, but covers only those concerning which data are available in published sources. In consequence, many are omitted from that tabulation. Even so, the companies included in the list have an aggregate capitalization of over $8.000,000,000. FRANCE. Up to 1850, French foreign investments were of little account; yet at the time of the Franco-Prussian war of 1870, Léon Say estimated the coupons on foreign securities payable in France at 600 to 700 mil-Lion francs ($120,000,000 to $140,000,000). This would give a capital value, at 5 per cent, of 12,000 to 14,000 million francs, or say $2,400,000,000 to $2,800,000,000. Many French holdings were sold after the Franco-Prussian War. Yet Leroy Beaulieu thought it probable that France had $3,000,000,000 invested abroad in 1880. French holdings of foreign securities in 1910 have been estimated at a minimum of 40,000,000,000 francs, or say $8,000,000,000.2 To this should apparently be added whatever foreign investments are not represented by stocks or bonds; but far the largest part of French funds appear to go into Government and municipal issues.” 1 Hobson, op. cit., pp. 139, 141, 142. i Walter Zollinger, Die Bilanz der internationalen Wertiibertragungen, 1914, p. 112, t Hans Henger, Die Kapitalsanlage der Franzosen in ‘Wertpapleren, 1913, pp. 10. 1. 89: Hobson, op. cit, p. 163. 72 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, GERMANY. The Refchs-Marine-Amt, in a report of December, 1905, on “The Jevelopment of German marine interests during the last decade,” gave an estimate of German foreign investments, on the basis of consular reports. This placed foreign securities in the possession of German holders at not less than 16,000,000,000 marks ($4,000,000,000), and the amount of German capital in foreign undertakings, plants, business enterprises, and participations, at 7,700,000,000 to 9,200,-000,000 marks ($1,925,000,000 to $2,300,000,000). The report says: “In these amounts (7,700,000,000. to 9,200,000,000 marks, or $1,925, 000,000 to $2,300,000,000) the current German merchandise credits, which amount to at least one-fourth to one-third, perhaps even to one-half, the amount of the yearly German exports—that is, to 1,500,-900,000 to 2,750,000,000 marks ($375,000,000 to $687,500,000)—are included only in part, and the same is true of the credits frequently advanced on account of imports.r Taking the figures as they stand, they give total foreign investments by Germans, in 1905, of about 24,000,000,000 to 25,000,000,000 marks, or say $6,000,000,000. The net increase was estimated in 1913 at $200,000,000 to $300,000,000 a year? On the basis of these figures, German foreign investments at the beginning of the present war may be taken roughly at $7,500,-000.000 or $8.500,000,000. OTHER COUNTRIES. Belgian foreign investments in 1911 were estimated at 2,700,000,-000 francs, or about $540,000,000. Foreign investments of Switzerland are estimated at about 2,602,000,000 francs ($520,400,000). The foreign holdings of the Dutch are considerable. The capitalists of Austria-Hungary have such holdings, and, of course, no country lacks them altogether; but no other country has an amount comparable with the holdings of the English, the French, or the Yermans. RELATION OF FOREIGN INVESTMENT TO FOREIGN TRADE. Large fixed investments in foreign countries have grown chiefly since 1850. This is the period of the great development in the iron and steel industry, and of the vast consumption of iron and steel in fixed plants; first railroads, then tramways, water-power and electric developments, mining and miscellaneous machinery. The flow of sapital is very largely from industrial to agricultural states. . It moves largely in the form of rails and construction material, railroad equipment, and machinery; though other manufactured goods also play Tag. Riesser, The German Great Banks and Their Concentration, pp. 545-546, wanda Hon published by the National Monetary Commission, 61st Cong., 2d sess, S. Doc. §93. t Hobson, op. cit,, p. 161, 8 Walter Zollinger, op. cit., pp. 110, 147. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 78 an important part. The capital ownership which emerges, vested in citizens of the capital-exporting countries, is chiefly in two forms: State and municipal bonds, and shares and bonds of railroad, publicservice, and, to a minor extent, manufacturing companies. There is a close relation between this ownership and the export of material. It is said “in the case of a certain Indian railway in 1857 that the expenditure in England was a little more than two-thirds of the whole capital, while somewhat less than one-third was spent in India. The expenditure in England was chiefly on iron and timber.”* An English railway secretary calculated in 19092 that, out of certain investments in South American railways, amounting to £12,000,000 ($60,000,000), 33 per cent, or £4,000,000 ($20,000,000) had gone abroad in the shape of materials (rails, locomotives, etc.) manufactured in the United Kingdom and that 4 per cent went in the shape of materials manufactured abroad. Ownership and control of foreign enterprises furnish a constant stimulus to exports. Several circumstances contribute to this result. Managers and engineers are in most cases of the same nationality as the owners of the capital. They are accustomed to the machines and the materials of their own country, and prefer for that reason to use them. This preference is strengthened, no doubt, by feelings of patriotism. But back of engineers and local managers are the home officers and directors, with whom rests the final control. They are men of large and varied property interests, often including steel works and machine works which turn out the materials that the foreign enterprises use. Indeed, the direction of their investments to foreign countries may have been guided by the nature of their property at home. It is well known how widely the manufacturers of electric apparatus have extended their interests in electric installations. When the controlling powers in a railroad, a gas works, a waterpower or electric plant, are largely interested in the production of machinery and supplies which such enterprise consumes, they will naturally see that their products are favored. A South American railroad manager, whose road is controlled in England, says that all important machinery and supplies are required to be bought there, and gives as a reason that the road has never paid, and the stockholders consider that they ought therefore to profit by its expendikures. A large American company making a steel specialty states that the influence of ownership of public utilities is sometimes so strongly em —— oe _—° 1 Select committee on East Indian Railways, Minutes of Evidence Q., 1914, cited by C. K. Hobson, op. cit., p. 7. 2 Lord St. David's speech in the House of Lords, Nov. 24, 1809, cited by Hobson, op. sit. Dp. T. 74 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. favorable to national interests as to disregard considerations of price, even when the possible saving mounts to six figures. It says: In the Argentine, in particular, we have encountered serious difficulty in selling to the railroads, as these are largely controlled by British financial interests. Every possible preference is given to British materials—even though substantial economies may be possible by employing American construction methods and materials. The consulting engineers in Londen receive a percentage on all materials purchased on designs which they prepare or which may be prepared by the engineers of the railroad and are approved by them. Their antagonism toward everything American even led them in one case to adopt a very expensive and antiquated construction, using local materials, rather than approve a design which we submitted and which would have effected a saving of upward of $100,000. Our design was approved and urgently recommended by the chief and assistant engineers in Buenos Aires, but their recommedations were promptly overruled by the consulting engineers and the directors in London. Another striking case was in connection with a group of large structures. Here again our design, which showed a saving of $60,000 to $70,000, was accepted and approved by the engineer in Buenos Aires, but his decision was immediately set aside by the German directors, who advised him that the financing of the project by German capital was conditioned upon German materials being employed throughout. A large American concern making metal-working machinery and exporting some of it, states that where foreign capital has been invested it is often impossible to secure orders even at a heavy discount on prices. It says: This condition is most emphasized in South America, where it is very difficult to sell American metal-working machinery, due to the fact that most of the large enterprises, such as railroads, mines, etc., are owned by English or German capital. These concerns maintain a resident manager at the property, and all buying is done through some trading concern or organization in England or Germany that is friendly to or controlled by the capital. We now and then are able bo trace some of our special machinery to South America which was shipped to Europe and bought from our European agent by these trading companies at a price from 10 to 25 per cent higher than we would have been willing to deliver directly. A manufacturer of electrical supplies makes the following points: (a) In the Argentine: The electric lighting and power companies of Buenos Aires, financed by German capital and equipped with (German machinery. The electric tramways of Buenos Aires, developed and financed by German and English capital and equipped with German machinery. (6) In Chile: The lighting and tramway developments in Valparaiso and Santiago, financed by German capital and equipped with German machinery. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 75 (¢) In Montevideo: One of the important tramways was financed by German capital and equipped with German machinery. (d) In other parts of South America are syndicated power and lighting companies owned by Italian, French, English, and German groups, with the result that orders for machinery and supplies are placed in the respective countries of the owners. (e) In Hongkong and Shanghai: The tramways are English owned, and orders for equipment are for the most part placed with English manufacturers, (f) In China: The Government railways have been largely financed by capitalists of the principal European countries, with the result that orders for materials have been placed with the nationals of these countries, such disposition of the orders usually being a condition of the loans to the Chinese Government. Another manufacturer states: In the South American market we are greatly handicapped by the fact that the gas business is largely in the hands of British and German syndicates. These gas companies generally do their buying through the home offices, making it extremely difficult for American manufacturers to compete. A manufacturer of power transmission appliances, dealing directly with their foreign customers and thus coming in actual contact with the situation, says: In several South American countries and in Mexico, English, German, and American investments in industrial plants, railroads, and public utilities, insure in a large measure orders for machinery pnd plant equipment being being placed with the merchants or manufacturers of the country having the investment. For instance, the investment of Chieago capital in packing houses in Buenos Aires insures the installation of American machinery in these plants, while houses controlled by English capital are equipped with English machinery. In Chile, American mining interests buy American machinery, often at a higher price than similar machinery could be bought for in Europe. Our investments in Mexico, as much as our proximity to that market, is the reason for our having the lion’s share of the foreign trade of that country. An immense amount of capital goes abroad in public loans. Such loans are often spent unproductively, as in war; and when they are productively employed, as in railroads or.other public works, the control of the properties does not remain in the owners of the capital, as in the shareholders of a corporation. In the less advanced countries, however, engineers for such public works are often brought from the country where the capital is obtained; and that country profits by their preferences, their knowledge of home products, and their ignorance of the products of other countries. The certain way to make trade profit from a public loan, however, is to introduce conditions in making it. This policy is well recognized in 16 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Germany. For instance, Prof. Riesser, of Berlin, in his work on the German Great Banks and Their Concentration, lays down as one of the “ fundamental requirements for a sound policy ” in handling foreign securities: “International commercial dealings as well as international flotations ought to be but the means for attaining national ends and must be placed in the service of national labor; ” and again: “ Furthermore, in cases where the purpose of the loan permits it, such, pressure as we are able to exert should be brought to bear in order to provide in the loan contract that any orders for works and contracts, the expense of which is to be defrayed by the loan, be placed in Germany, in the interest of our industry.”? . A recent writer says: In France an express stipulation is often inserted in loan contracts between the banks and foreign Governments that the latter shall order part of the equipment which they require in France. It was recently proposed to render the insertion of such a provision compulsory. The following paragraph in the Manchester Guardian also indicates that the practice of specifying where the capital goods shall be purchased 1s not confined to France: “The Lower Austrian Discount Company Has granted the Chinese Government a loan of £300,000 ($1,500,000), China undertaking to give the Poldihiitte Cast Steel Works during the next 10 years an order for tool steel, rifle barrels, and gun parts for an amount equal to that of the loan. The Poldihiitte works will establish a branch at Pekin.” 2 The French ministry of finance, by an order of 1880, assumed the right to forbid the quoting of foreign loans on French bourses and to exclude transactions in any foreign security. This regulation was nominally intended to give French investors some protection against fraud, but it is also used to get advantages for French industry. In 1908, in a competition between the Krupps, and the Schneider works at Le Creusot, France, the Argentine Government gave a preference to the Krupps which the French company thought unfair. As a result the French Government, about the beginning of 1909, forbade the listing on the Paris Bourse of the Argentine internal loan of 1895, and also of an Argentine loan which was to be placed on the Paris market through the Barings. Another example is the refusal of the French Government in 1909 to admit a Bulgarian loan, because no orders were to be placed out of it in France. This loan, a hundred million franes ($20,000,000), was taken up in 1910 by a German-Austrian syndicate, but was only admitted to the German exchanges in 1911, after Bulgaria had consented to a series of commercial agreements.® 1 J, Riesser, op. cit, pp. 384, 386. 3C. EK. Hobson, The Export of Capital, London, 1914, p. 16, note 2. I Sigmund Schilder, Entwickelungstendenzen der Weltwirtschaft, 1912, pp. 343, 844. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. (Ki ‘The Irench Government threatened a few years ago to withdraw the listing privilege from the Turkish state bonds unless certain contracts were awarded to French industry.? SECTION 5. INDUSTRIAL ORGANIZATION. INTRODUCTION. A factor of great importance in foreign trade is the industrial organization of the country engaging in such trade and of the counfries in which it seeks markets. The relative advancement of industrial progress and the effectiveness of organization strongly influance any country’s ability to extend its business activities into foreign markets in competition with the producers located there or with producers of other countries striving for trade there. Likewise, it strongly affects the opportunities which other countries coming Into its home market may have for trade there in competition with the home producers. Thus the general organization of business and industry in Great Britain and the special organization for foreign trade directly affect Great Britain's success in competing with, say, Chinese and American manufacturers for the cotton-goods trade of China. Similarly, the organization of industry, in general and 1n particular, in Germany directly affects the success of American manufacturers in competing with German manufacturers in such foreign markets as South America, for example, in electrical goods. In respect, therefore, to the trade of the United States with the relatively undeveloped markets, such as Latin America, China, the East Indies, Turkey, etc., the business organization of countries with which American exporters must compete is of obvious importance, which will increase as the demands of these markets grow. It is of even more importance, however, in respect to the trade between the United States and the great commercial countries themselves. These countries are now, and will be for years to come, the most important foreign markets for the United States. In 1913 American exports to the United Kingdom were valued at $600,000,-000, to Canada at $415,000,000, to Germany at $330,000,000, to France at $146,000,000, to Italy at $76,000,000, to Belgium at $67,000,000, and to Japan at $58,000,000. While it is true that the major part of American exports to most of these countries, except Canada, are foodstuffs and raw materials, the United States also sells to them in the aggregate large quantities of manufactured articles. According to the official Annual Statement of Trade of the United Kingdom in 1913 Great Britain imported from all countries manufactured articles alone valued at $800.000.000 for its own consumption. MantJ. Riesser, The German Great Banks and Their Concentration, p. 544; translation rublished by the National Monetary Commission ; 61st Cong, 2d sess.. 8. Doc. 503. 8 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, ufactures imported by it from the United States were valued at $112,000,000. In the year that the United States exported this $112,-000,000 of manufactu.ed articles to Great Britain, it exported to South America only $146,000,000 of all classes of commodities. In 1912 Germany imported from the rest of the world over $383,-000,000 worth of manufactured articles. France imported manufactures worth $314,000,000, Netherlands $307,000,000, Italy $167, 900,000, Belgium $157,000,000, and Japan $60,000,000. While these totals cover groups not strictly alike and not comparable as to details, they are sufficient to show the great value of these countries as foreign markets for manufactured goods. British official publications show that in 1913, of total imports of iron and steel products into the United Kingdom amounting to $74,000,000, those from the United States were valued at $6,000,000, and those from Germany at nearly $37,000,000. Total imports for consumption of machinery and parts were valued at $29,000,000, while those from the United States were valued at $13,000,000. Since the United States must regard the great commercial countries as highly valuable customers, as well as rivals for the trade of the less developed lands, the business organization which American industry must encounter, either when doing business within the borders of those countries or when meeting them in competition in other countries, has a direct bearing on the extension of American export trade. The German organization, for example, is of importance to American manufacturers not only because they must meet that organization in South America but also because they must meet it in England, France, Austria, etc., and in Germany itself. In certain respects the industrial organization of the great commercial countries is necessarily much the same. Their major manufactures are conducted under the factory system, they use modern methods of communication, they have modern financial systems, etc. But in many important respects, affecting foreign trade particularly, there are marked differences between one country and another. This is especially true of the degree of concentration and unification of Industry, which materially modifies the character of competition which American exporters must meet from different foreign manufacturers. In some cases individual American exporters compete with individual foreign concerns; in other cases they must compete with powerful groups of foreign manufacturers acting as units in foreign markets. The success of American efforts to engage in foreign business is obviously affected by such conditions. There follows a brief discussion of the salient features of the industrial organization of the chief commercial countries. This is given merely to show the general character of industrial enterprise, organization, and interrelation in these countries as a background for COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 79 the better understanding of underlying basic competitive conditions in international commerce. In this connection a few combinations are discussed briefly under each of the countries taken up in detail herewith. They are usually combinations of some importance either because they illustrate some characteristic of industrial organization, or because they affect domestic or export trade of the countries in question. F oreign combinations which are of importance because they specially affect American exporters are discussed in Chapter V as a part of the treatment of competitive conditions in certain industries which actively or potentially are significant factors in American: export trade. GREAT BRITAIN. British invention first applied steam power to manufacturing, and made the first textile machinery operated by steam, which has resulted in the establishment of the factory system of production. British business men reaped the first profits from these developments and first saw the possibilities of far greater profits in broader markets and larger output. British cotton, woolens, iron and steel products, because of low prices and excellent quality, found an ever increasing sale, and it soon became the accepted view of British business that the market for English wares extended throughout the world. For years in England firms have been established expressly to manufacture goods for foreign customers; from the outset perhaps 90 per cent of the sales of such manufacturers would be for foreign account. In the United States production is nearly always primarily for the domestic market and only the surplus, usually but a fraction of the total production, is exported. From the beginning Great Britain was forced to import various important raw and semi-finished materials and, as manufacturing increased both in quantity and variety, greater and greater quantities and more and more kinds of materials had to be imported. Cotton was and still is the chief such material imported, but rubber, wool, copper, iron, tin, zinc, hides and skins, lumber, and many others are brought from overseas in great quantities. These are obtained from all over the world—cotton from the United States, India, Egypt, and more recently to some extent from Brazil and West Africa; copper from the United States, Spain, and Australia; rubber from the Amazon, the Kongo, and the East Indies; wool from Australasia, South Africa, and Argentina, etc. These materials are manufactured and consumed in part in Great Britain and in part are exported, to the mutual profit both of British producers and of domestic and foreign consumers. 30 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Similarly, as population increased, the United Kingdom was forced to draw upon other countries for necessary food supplies that could not be produced in Britain, either because of climatic conditions or limited area. Thus, British beef and mutton had tc be supplemented by importations from the United States, Australia, and South America. Grain had to be brought from the Americas, India, Russia, and Australia. Tea and coffee were bought in China, India, the East Indies, and Brazil. Sugar and molasses have been imported from the West Indies since colonial days, but the heavy consumption of more recent years was made possible by beet sugar imported: from the Continent, especially from Germany. These importations were paid for largely by the export of manufactured goods. Except for coal and iron, Great Britain had to buy from foreign sountries most of its raw materials and its food supply and had to find some means to pay for these imports. The only available payment was to offer other goods in return and to offer services. The goods were necessarily manufactures; the services were naturally those connected with trade, viz, the furnishing of ocean shipping, the development of foreign countries by British brains and capital, ‘he establishment of banking and financial facilities, and the acting as a merchant for all the world, i. e., buying products from one foreign country to sell them to others. British export trade, therefore, is not merely the seeking of an outlet for surplus manufactures from time to time, but the everyday task of business, to be performed with businesslike preparation and determination. Imports and exports.—The relative position of the United Kingfom in international trade is indicated by the fact that in 1913 her sombined imports and exports totaled nearly $7,000,000,000,* those of Germany nearly $5,000,000,000, and those of the United States more than $4,000,000,000. France and the Netherlands each had a total of about $3,000,000,000, followed by Belgium, Russia, Austria-Hungary, and Italy, with $1,700,000,000, $1,500,000,000, $1.300.000.-700, and $1,200,000,000, respectively. In the trade of the countries mentioned above, imports for domestic consumption or use exceeded exports of domestic goods in value in every case except the United States and Russia. For the United Kingdom the difference was $650,000,000 in 1913, for Germany $160,000,000, and for France $315,000,000. As already explained, this difference is mostly paid for by Great Britain through ocean freights, income from foreign investments, and the trade in commodities among the countries. I —————— ee 1 Includes $533,000,000 worth of foreign and colonial products imported and reaxnorted. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 81 The following table gives the statistics of imports and exports for the principal articles comprising the trade of the United Kingdom, and differentiates between the import and export trade proper and the trading business of importing for reexport:* Tapre 4—Imports and exports of the United Kingdom, 1913. Imports. All imports... eeunaan Food, drink, and tobacco......... . wir, won Raw materials and articles mainly unmonul cturec Articles wholly or mainly manufactured. ..... Miscellaneous or unclassified. .. Total. Millions. $3,741 1,412 1,372 942 Retained , in United Kingdom. Miltions. $3, 208 1,335 1,060 799 14 Reexported. Millions. $533 77 312 143 1 Chief minor groups. Grain and flour... Cotton (Faw ).eeeeo.ooouue Ment and animals for food... Yarns and textile fabrics.......... . Oil seeds, nuts, oils, fats, and gums . Wool, mohair, alpaca, etC................ . Wood and timber and manufactures thereo:r............ . opie and manufactures thereof, other than iron and steel... .......... MEET viii spue prune vagmnn sans io Sugar (refined and unrefined)... - . Rubber (unmanufactured)... Exports. All exports. .c.ocunenne.. Food, drink, and tobaceo. cco ccueeiracerannnn.. Raw materials and articles mainly unmanufactured.. Articles wholly or mainly manufactured... Micpallaneons or unclass ~~ 116 343 276 228 202 84 -82 156 117 £12 100 Total. Millions. $3,089 236 652 2,145 68 108 399 266 191 175 18 75 “16 114 112 2% Domestic nroducts. Millions. $2, 556 159 340 2,002 8A 4 10 *7 wn 36 7 40 3 1) "2 Foreign and colonial nroducts. Millions. $533 77 312 143 1 Ohief minor grouns. Sotton yarns and cotton fabries........ {ron and steel and manufactures thereof. ... Coal, coke, and manufagtured fuel... ..... ...-Wool yarns, woolen and worsted fabrics. Machinery and machine tools..... “hemicals, drugs, dyes and colors... .ccooiiiniann... Metals and manufactures thereof, other than iron and steel... Wool, mohair, alpaca. ote LL VE SRR Rubber (unmanufactured)........cueee. - Railway carriages and trucks. ete.. Ships (Dew). -.-.. 330 266 261 29 oy 319 264 61 2 30 07 65 22 30 55 Ei 41 2 ®) 8 3 8 10 66 4 72 _B 1 Less than half a million dollars. This table clearly indicates the character of British foreign trade, huge imports of raw materials and foods, and correspondingly large exports of manufactured goods. Thus, on the one side are raw cotton imports valued at $343,000,000 and on the other are exports of cotton manufactures valued at $630,000,000. The predominance of manufactured articles in British export trade is further shown by the totals for manufactures of iron and steel, $266,000.000; ma-HE -— 1 Annual Statement of the Trade of the United Kingdom with Foreign Countries and British Possessions, 1913. 97941°__.168—"T $2 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, chinery, $186,000,000; woolen and worsted yarns and fabrics, $189, 700,000; ships and boats, $54,000,000, etc. One of the most significant features is the extent of the British resxport trade. In 1913 articles were imported for reexport to the value of about $530,000,000, a striking indication of the manner in which Great Britain acts as a merchant for other countries. THe principal reexports were rubber, wool, cotton, and metals, but numerous other articles also entered into the total. The Board of Trade. —The greater part of such supervision of commerce and industry as the Government exercises in the United Kingdom is in the hands of the Committee of the Privy Council for Trade, which is usually called the Board of Trade. and the president of which is a member of the British Cabinet. With one or two small exceptions the legal constitution of the Board of Trade is regulated by an order in council of 1786. Its duties originally were connected mainly with commercial treaties, tariffs, customs duties, and prohibitions, but they have been continually extended by acts of Parliament. The commercial department.—This department deals with a wide range of subjects, including commercial questions generally, commercial treaties, sugar bounties, tariffs and tariff returns, commervial intelligence; a great variety of statistics, consular reports, patents, designs and trade-marks, merchandise marks, and international axhibitions. The commercial intelligence branch.—This subdepartment maintains a reading room, a sample room, and an inquiry room. In the reading room the latest official publications and other important publications may be consulted. In the sample room are exhibited sgecimens of manufactured goods competing with British products in foreign markets or the British possessions, and of raw materials likely to be of interest to British manufacturers. In the inquiry room personal inquiries may be made on the various subjects dealt with by the branch. The information collected from all available sources, part of it furnished by commercial attachés, trade commissioners, and the excellent British consular service, is available to British manufacturers and merchants. It includes notices of foreign and colonial contracts open to tender, and other openings for British trade, laws of foreign countries affecting business transactions, etc. The branch answers as far as possible all questions on commercial subjects addressed to it. Information which can be given to the public without detriment to the interest of British trade is published in the Board of Trade 1The description of the Board of Trade is taken chiefly from Commercial Organiza-Hons in the United Kingdom, by Archibald J. Wolfe, Special Agents Series, No, 102, Bureau of Forelgn and Domestic Commerce. See also Encyclopedia Britannica, 11th ed., Vel. XX VII pp. 127-128. COMPETITIVE CONDITIONS IN INTERNATIONAL TBADE. 83 Journal. Certain important information is distributed confidentially to chambers of commerce or individual firms. A special register is kept in which are entered the names of British firms desirous of obtaining confidential information on trade openings abroad in regard to specific branches of trade. In deciding on applications for admission of names to the register the chief consideration is whether the business of the firm making the application is carried on mainly in the interest of British trade. Confidential information is generally placed at the disposal of the chambers of commerce of the United Kingdom, when, in the opinion of the Commercial Intelligence Branch, reasonable discretion will be used in its distribution. Exhibitions branch—This is the other subdepartment of the commercial department, and is comparatively new. At the head of if is a director who acts as secretary for royal commissions specially named for each exhibition. He superintends the preparations for exhibitions and the details of organization, and later controls the staff and gives exhibitors the benefit of his advice. At other times it is his duty to make the records of past exhibitions available for refsrence, to keep himself informed in regard to prospective exhibitions, and to keep in touch with principal manufacturers and traders and with chambers of commerce and other trade associations. It is also his duty to provide information for the India office and the Colonial office, when required by the Government of India or any of the Colonies. The organization of British industry.—A survey of the development of English industry and commerce reveals many forias of organization, which have held supremacy successively, according as they seemed to answer the needs and conditions of the periods to which they belonged.! The fact that English industry was becoming in the eighteenth century dependent for its markets and to some axtent for the supply of its raw materials on distant countries, required the initiative and energy of the individual employer to maintain the quality of the materials and workmanship and to decide on the fashion of the goods worth while to produce.” In the old days of guild regulation and trade monopoly there had been little room for the personal skill and judgment of the individual manufacturer. But with the spread of the Industrial Revolution the individualistic character of English industry asserted itself most vigorously. English manufacturers obtained greater freedom from Government restriction. At the beginning of the nineteenth century a spirit of independence had permeated British trade organizations, making them distinct from the merchants’ and manufacturers’ guilds of France 1G. R. Carter, The Tendency Toward Industrial Combination, London, 1913, p. 2. 3'W. Cunningbam, The Growth of English Industry and Commerce in Modern Times, ot. 1. The Mercantile System, Cambridge, 1903, p. 4986. 84 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. and Germany, which continued as semi-government institutions exercising certain administrative functions and enjoying advisory powers in commercial legislation. Chambers of commerce.~—Joint action in various fields became so obviously desirable, however, that organizations were perfected to secure such concerted action. Thus chambers of commerce and trade associations have developed. British chambers of commerce, like those in this country, are mndependent, voluntary associations of business men and manufacturers without official connection with the Government. They are supported by membership fees, receiving no subsidies from the Government. Their purposes are similar to those of our own chambers of commerce, namely, the promotion and protection of general trade interests rather than those of special trades. Most of the British chambers of commerce were formed during the latter half of the nineteenth century, though some were established much earlier. The London chamber was not organized, however, until 1881. British chambers of commerce meet several times a year. Their special trade sections meet from time to time to discuss their special interests, and are represented on the executive committees of the chambers to which they belong. The form of government of British chambers of commerce is apparently in the main like that of our own organizations of like character. In spite of their unofficial character, they are frequently consulted by the Government authorities in regard to the commercial interests or the industries of the localities which they represent. They frequently organize courts of arbitration for commercial disputes and conciliation boards for the settlement of labor troubles. There are about 125 chambers of commerce in the United Kingdom, but many are relatively weak and unimportan{. The London Chamber of Commerce, with more than 5,000 members, is one of the most representative. It is divided into a large number of trade sections, each of which has a separate organization and its own chairman, elected by the section, subject to the approval of the general council of the chamber. The chamber is connected with a number of mercantile associations, which preserve their separate organizations and independence, but cooperate with the chamber for general or special purposes. The Liverpool Chamber of Commerce works on lines similar to those of the London Chamber. Its African trade section has been the leading voice in all matters relating to West Africa since its organization in 1884. Chambers of commerce representing British interests have been established in several foreign countries. They are self-supporting COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 85 and not under the control of the home chambers of commerce or subsidized by them. The British Chamber of Commerce in Paris, organized in 1878, is the oldest. Prior to the war such chambers had been established and were active in the following countries: Argentina (Buenos Aires) ; Belgium (Brussels); Egypt (Alexandria and Cairo); France (Paris and Nice); Italy (Genoa, with branches at Milan and Leghorn); Persia (Bushire and Mohammera); Portugal (Lisbon) ; Russia (Petrograd, with branches at Odessa and Warsaw) ; Spain (Barcelona, with branch at Madrid) ; Tunis (Tunis) ; Turkey (Smyrna and Constantinople; the latter the British Chamber of Commerce of Turkey and the Balkan States). The various chambers in the United Kingdom and abroad are federated in the Association of Chambers of Commerce of the United Kingdom. In 1915 there were 109 chambers that had joined it, estimated to represent 28,000 members. In addition to the annual meetings of the foregoing central organization there have been in recent years biennial meetings of the chambers of commerce of the entire British Empire, for the discussion of matters affecting the interests of British trade as a whole. The Association of Chambers of Commerce has limited its work to the United Kingdom, but the London Chamber of Commerce has, from time to time, organized congresses of chambers of commerce of the Empire, some of which have been held in the Colonies. A number of foreign and colonial ehambers of commerce have been organized in the United Kingdom by foreign business houses represented there. In 1915 there were 12 chambers of this character.” 1 Archibald J. Wolfe. Commercial Organizations in the United Kingdom, Bureau of Foreign and Domestic Commerce. Special Agents Series No. 102. The list given is as follows : Anglo—Portuguese Chamber of Commerce in London, founded in 1906, with about 100 English and 60 Portuguese members. Australian Chamber of Commerce in London, founded in 1901, membership 158. Austro-Hungarian Chamber of Commerce and Industries in London (Inc.), founded in 1894 and incorporated im 1910, membership 270 to 800, subsidized by the Austro-Hungarian Government. Belgian Chamber of Commerce in London (Inc.), organized in 1890 and incorporated fn 1913, membership about 100. Canadian Chamber of Commerce, London. Chambre de Commerce Francaise de Londres, founded in 1883, subsidized by French Government, about 231 members resident in England and 634 in France. Ttalian Chamber of Commerce (Inc.), founded in 1886 and incorporated in 1890, subsidized by the Italian Government, more than 500 members. _ Netherlands Chamber of Commerce in London, organized in 1891 and incorporated in 1904, about 340 members. Norwegian Chamber of Commerce in London (Inc.), organized in 1906 and incorporated in 1908, membership 497. Salvador Chamber of Commerce in London (Inc.), organized and incorporated in 1903, about 60 members. Spanish Chamber of Commerce in London, founded in 1886, more than 200 members. Swedish Chamber of Commerce, founded in 1906 and incorporated in 1807, about 640 members. 86 ~~ REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Trade associations.—There have been associations among manufacturers and employers of labor in Great Britain for the last century, but it is doubtful if these bodies in general have developed as varied activities as those in the United States and Germany. In the newer industries, however, such as the electrical, and in industries particularly interested in foreign trade, some comprehensive and active associations have been formed which have influenced conditions in both domestic and foreign business. In the iron and steel industry one of the most important associations is the British Iron Trade Association. It was established in 1876 for the purpose of securing a means of communication between members of the iron and steel trades of Great Britain upon all matters bearing upon the commercial interests of these industries. It circulates among its members detailed statistics of the trade at home and abroad, and attends to matters connected with foreign tariffs, commercial treaties, and home parliamentary business that may have a bearing upon the position of the iron and steel trades, and looks after all matters of general interest to those trades. It does not, however, concern itself with questions of wages or purely local questions. This association had in 1915 about 160 members, representing more than 250 leading firms, and including a large part of the chief concerns in this business. Membership is open to persons, firms, and corporations in the colonies or dependencies as well as in the Kingdom. It supplies its members with its annual report, reports of special conferences, and weekly with the Iron and Coal Trades Review, with which its bulletin is incorporated. The Iron and Steel Institute also affords a means of communization among the members of this industry, but its attention is given shiefly to technical rather than industrial or commercial subjects. There are also a number of other associations in the iron and steel industry, such as the Cleveland Iron Masters’ Association, the North of England Iron & Steel Manufacturers’ Association, and the Iron, Steel & Allied Trades Federation, but their activities are chiefly with labor matters, legislation, and the circulation of information of value to the trade. In respect to foreign trade in machinery, the British Engineers’ Association (Inc.), is one of the most important associations in Great Britain. Tt was organized in 1912 and now has a membership of 300 engineering and allied firms, all entirely British ‘in their character and representing about $500,000,000 in combined capital. It is the policy of the association to encourage the development and extension of the trade promotion activities of the Government, especially the Board of Trade, the consular service, and the service of commercial attachés. To aid export trade the association has COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 87 established representatives in Peking and Petrograd, who advise purchasers in the interests of members, but do not solicit for individual firms. It publishes a directory of its members in different languages for the information of buyers, selects agents in foreign countries for British firms in addition to the aid furnished by its own representatives, and had planned a form of financial organization to secure for members necessary financial aid (through. bank loans) in developing foreign commerce. This last-mentioned service was interrupted by the outbreak of the war. The association also issues confidential bulletins to its members containing reports of foreign trade opportunities and similar material, and has devised a trade-mark or “chop” for their use in China, purchasers being advised that articles bearing this “chop” are purely British products and that the association will aid in maintaining cordial relations, ste. In the great textile industry there are a number of associations covering different branches and having different purposes and activities, such as the Cotton Spinners & Manufacturers’ Association, of Manchester, a federdtion of local associations formed more than 40 years ago, the Cotton Waste Spinners & Manufacturers’ Association, the Nottingham Lace Manufacturers’ Association, the Linen Merchants’ Association, etc. While these loose associations play their part in bringing about a certain unity of action among manufacturers of textiles, the effective combinations among the manufacturing concerns in this industry are of more direct importance to this inquiry and are discussed in detail later. (See pp. 249-255.) In other branches of British industry there are also numerous trade associations, the total for all industries for the United Kingdom approximating 1,200 organizations. Examples are the associations in the paper, pottery, boot and shoe, saddlery, brush, cycle, automobile, mining, and tobacco industries. Combinations in British industry.—Practically the only law affecting combinations in England is the ancient common law under which agreements in restraint of trade are null and void. The policy of the law is to encourage competition, but it does not prohibit combination. * Furthermore, while agreements in restraint of trade are invalid, the English courts give a wide scope to freedom of contract, and they have never interfered with a consolidation of competing industrial enterprises into a single company on this ground.” * In spite of its strongly individualistic character, British industry has developed a number of highly effective combinations. Some of these have concerned themselves primarily with the home market, but 1 Francis Walker, Annals of the American Acaaemy of Political and Social Science, July, 1912. Dp. 192. 88 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. since British trade in many products is world-wide, a number have quite naturally projected their activities into foreign trade—were doubtless organized with that purpose expressly in view—and have built up international organizations to carry out their objects. In general, British combinations have been largely effected in two ways: (1) through agreements, and (2) through amalgamation. Amalgamations have been common in British industrial development, but they have established monopolies in only a few branches of manufacture, e. g., in thread. (See p. 251.) In this chapter only a few combinations are discussed to indicate the general character of such organizations in British industry. The combinations of far more importance in the commerce of the world, such as those in iron and steel, textiles, chemicals, coal, petroleum, electrical equipment, etc., are discussed more fully in Chapter V. (See pp. 215-293; 247-255; 280-284; 295 ; 332-838; 852-354.) Sreirrrs.—In the manufacture of potable and industrial spirits in the United Kingdom there have been three distinct combinations, organized in part at least by the same interests, for the control of the business. The first was to unite Scotch distillers, the principal producers of potable spirits; the second was to combine English distillers, making principally industrial spirits; and the third was intended to unite Irish distillers and blenders of Irish whisky and to bring related industries under control. The Distillers’ Co. (Ltd.).—This company was fortfied in 1877 by the amalgamation of the businesses of six of the principal Scotch distillers.* In 1878 the company bought a large distillery in Dublin. Since then the businesses of three English firms and several additional Scotch firms have been acquired, as well as nearly a half interest in a large Belfast concern; new distilleries have been erected, and blending and bottling works established? In addition to its principal office in Edinburgh, the company has branch offices in London, Glasgow, Liverpool, Dublin, Melbourne, Sydney, Montreal, and Buenos Aires. The production of spirits in the United Kingdom amounts to about 50,000,000 proof gallons per annum, divided among Scotland, England, and Ireland roughly in the proportion of 25, 13, and 12, respectively. While there are various independent companies in the industry, some of which are strong concerns, and while no data have been found covering sales and costs for the Distillers’ Co. or showing its output, it apparently occupies a dominant position, and for more than 15 years has paid 10 per cent dividends regularly on the ordinary shares. For the period 1907 to 1914 inclusive. its 1 Harper's Manual, 1914, p. 404. * ibid, p. 404, and The Stock Exchange Official Intelligence, London. 1909, p. 478. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 89 profits available for distribution to the ordinary shareholders averaged over £200,000 per annum, and fell below £175,000 in only one year. Much of this has not been distributed, however, but has been set aside in reserve funds. At the end of the fiscal year 1913-14 the share capital consisted of £1,300,000 in £10 ordinary shares and £287,000 in £10 five per cent preference shares. There was a debenture debt of £820,000, a reserve fund of £550,000, and a fund of £80,000 for fire insurance. The company regularly maintains its plants in the “ fullest state of efficiency ” and in this year wrote off £46,488 for works depreciation and placed nearly £60,000 in reserves. The profits for the year, before making these last two deductions, amounted to £265,073, which is something over 8 per cent on the capital and debenture liability and reserves combined.? The Industrial Spirit Supply Co. (Ltd.)—This organization is a sales association or convention of the distillers of industrial spirits or spirits used for methylation. It was incorporated in 1907 with a nominal capital of £1,000, held by the combining producers, and included all but one of the distillers interested in industrial alcohol. Even this one concern, although not a member of the combine, arranged for the sale of its product by the central selling agency. The organization is connected with the Distillers’ Co. (Ltd.) through membership in it of some of that company’s subsidiaries. This combination, it was stated at the time of promotion, was formed for the regulation of output, the maintenance of prices, and the increase of profits by effecting economies in distribution. It is said the combination is not a “trust” in the sense in which that term is used in America, but since the parties to the arrangement include all the manufacturers of plain British spirits for industrial purposes it may be described as a “trust” in so far as it is intended to restrict competition and maintain prices.? Distillers’ Finance Corporation, (Ltd.)—In the summer of 1913 a project for the uniting of Irish distillers under one control was launched by the organization of the Distillers’ Finance Corporation (Litd.), with a share capital of £1,000,000, all subscribed by the firms interested. Eight distillers, including the largest, and a number of blending houses in Belfast and Dublin, are connected with the organization, the purpose of which is to standardize the quality of Irish whisky, regulate the output, and increase profits by the reduction of working expenses and the elimination of competition. It is intended to unite the industry by acquiring a share interest in a 1 Harper's Manual, 1914, p. 404, and The Times (London), June 26, 1914, p. 24, and June 27, 1914, p. 21. 2The Times (London), Nov. 14 and 15, 1907, and Manchester Guardian, Mar. 5, 1909, 3% The Times (London). Nov. 15, 1907, p. 124. 30 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. number of undertakings rather than by taking over completely particular concerns, and the company is not limited by the articles of association to the acquisition of distilling concerns, but may invade the fields of related industries.* Export policy.—By far the larger part of the production of spirits in the United Kingdom is used for home consumption, although this proportion is now materially less than formerly. A very small part of the niethylic spirit produced is exported ; not as much as 5 per cent in any year. The exports of potable spirits, on the other hand, sre quite important and are steadily increasing. The following state nent shows the exports of such spirits in proof gallons, and the declared value in shillings per proof gallon.” Tale 5.—Exports of potable spirits from the United Kingdom, by years, 1900-191}. nna fer Proof gallons. , 721,434 208, 975 '506, 775 i, 248) 736 622,832 1101, 237 1310, 836 2819 839 Shillings mer proof egllon., 3.2€ 3.48 8.62 8.48 8.19 7.4 8.17 7.97 nos... ng a Yaar. Proof gallons. 2,247,701 7, 846, 987 5799, 753 0,077, 197 (0; 194, 009 10, 089, 937 10.103. 096 Shillings per proof gallon, 7.31 7.93 7.08 7.51 8.32 8.30 7.91 There is apparently no organization in this industry for the promotion of the export trade as distinct from the domestic. The large organizations seem to cooperate in maintaining a high standard of quality and the distinct types of product peculiar to each producing locality; that is one of the reasons sometimes assigned for consolidation. The Distillers’ Co. (Ltd.) maintains offices and depots in several of the large cities of North and South America and Australia. Two-thirds of the exports are taken by the British possessions and about half the remainder by the United States. Soap.—Lever Bros. (Ltd.) is the most important unit in the manufacture and sale of soap in Great Britain. This company began business in 1886 with an output of 20 tons a week. It was incorporated in 1894 and in 1899 had an output of 2,400 tons a week, with profits in excess of £200,000. In that year it took over the business of Benjamin Brooke & Co. (Ltd.), and it has since absorbed R. S. Hudson (Ltd.); Hodgson & Simpson (Ltd.); Vinolia Co. (Ltd.) ;* and A. and F. Pears (Ltd.) ; all large and well-established concerns. The company has stockholdings, valued in 1914 at 1 The Times (London), June 14, 1913, p. 23f, and June 16, 1913, p. 18e. 1 Statistical Abstract for the United Kingdom, 1914, pp. 180-181 and 272-278. 8 Macrosty, The Trust Movement in British Industry, London, 1907, p. 203. t The Stock Exchange Official Intelligence, London, 1914, p. T42. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 91 £0,815,581, in over 60 associated companies throughout the world. Through these associated companies factories have been built and equipped for the manufacture of soap and glycerin in France, Belgium, Germany, Holland, Switzerland, United States, Japan, Australia, New Zealand, Canada, and South Africa. In connection with the supply of materials used in their manufactures, the company or its associated companies own oil mills in West Africa, Australia, South Africa, and Japan; cocoanut plantations on islands in the Pacific, and concessions in West Africa, including a convention with the Belgian Colonial Government whereby that Government has granted to the Société Anonyme des Huileries du Congo Belge rights to cultivate and collect palm fruit and manufacture oil in five regions of the Belgian Kongo where palm forests exist. This organization is an international combination, but it is net a world monopoly such as Borax Consolidated. (See p. 347.) It is not an amalgamation of competing foreign interests, but the development of a large parent concern with many subsidiaries formed for the purpose of better meeting local laws and conditions in the countries in which they operate. These subsidiary companies are largely concerned in procuring raw material, although in some countries they are formed to manufacture and sell finished products. The company’s business in the United States, although important, is comparatively small, but it apparently controls the soap trade in the United Kingdom and is the largest factor in the foreign soap trade in South America. Sarr.—The great center of the salt industry in the United Kingdom is in Cheshire. This natural concentration in the industry has facilitated close cooperation among producers, and for some time the control of the trade has been in a few hands? Exports have usually been between 500,000 and 600,000 tons yearly.® The Salt Union (Ltd.).—The most important factor in the industry is the Salt Union (Ltd.), a combination of 64 firms formed in 1888 and controlling at that time about 90 per cent of the output. The purpose of the amalgamation as stated in the prospectus was “to consolidate the undertakings of the salt proprietors in the United Kingdom with a view of ending the reckless competition which injuriously affects the salt industry without conferring any adequate advantage on the public.” The share capital of the organization was originally £3,000,000, consisting of one-third 7 per cent preference shares and two-thirds ordinary shares. In addition to this, there were £1.000.000 of 43 per cent debentures. The properties taken over 1 The Statist (London), Mar. 6, 1915, p. 388. 2 Foreign Salt Market and Industry, Special Consular Report No. 52, Bureau of Manuactures, 1912, pp. 63 and 65: and H. Levy, Monopoly and Competition, London, 1911, p. 243. 7 8 Statistical Abstract for the United Kingdom, 1914, p. 180. 32 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, were valued at a little over £3,700,000, and the vendors took in part payment therefor £900,000 of the ordinary shares.! The company apparently was considerably overcapitalized, and in 1902 the share capital was reduced to £1,400,000 by writing off as lost £6 per ordinary and £4 per preference share. This with £1,200,000 of 4} per cent debentures constitutes the present (1914) outstanding capital.? Although the Salt Union still exists, and is an important producer, it has not wholly dominated the industry for several years. As long ago as 1898 it did not have more than 50 per cent of the business. In the earlier years of its existence and while its position was monopolistic this combination made fair or even large profits, but in later years its profits have been much smaller. This has been due in part at least to decreased production, resulting from changes in the chemical industry which lessened the demand from chemical concerns by 500,000 tons per annum.® The following table shows the yearly output, profits, and dividends of the combination from the time of its organization to the end of the fiscal year 1915, Tare 6.—S8alt Union (Lid.); output, profits, and dividends, by years, 1889-1915 2 Dividends paid. Deliveries. Net profit. Debenture interest. Preference dividend. Remainder. Preference. |Ordinary. £802 a9... 391... 92110. 2 To femaner Tons. ,946,000 ,629,000 ,472,000 | 354,000 240,000 284,000 ,217,000 066,600 | 014,000 , 967, 000 924, 000 353,000 303, 000 125, 000 398, 000 °a0, 000 161, 000 "10, 000 0, N00 1,400 rn “0 EA] wy £368, 512 306, 447 243,911 715,919 76, 860 70,482 62,155 45,293 36, 823 37,342 #601 | “0277 5,543 ~093 L620 1023 2 400 105 075 1799 "438 | 774 -& mg 0.114 £2,791 £9, 443 140’ 524 £123,124 45, 000 45,000 15, 000 15,000 15, 000 31,075 4,000 000 000 00 300 000 we 00 AY Per cent. £70,000 70,000 70,000 70,000 70,000 70,000 70,000 12) 250 £245, 388 191,447 128,911 100,919 61, 860 55,482 41,080 21,293 573 116, 65¢ 4,601 8,277 1543 6,093 5,620 =, 022 J 40¢ 3 10¢ 1,075 + 799 138 “74 % Per cent. 10 - 0 2 2 i "ii JOO *,000 30,000 30,000 15 000 n. 06 ,000 ’ 000 000 noo ne Eu , 200 ra, 000 54, 000 1, 00> 25, 000 25,000 37, 500 ed Sod 2 Lu 2%, + Compiled from the Statist, Nov. 16, 1901, p. 915; Mar, 16, 1912, p. 576; and Mar. 18. 1918, p. 498. i ip ires cover 14 months’ operations. ! Loss. ! The deliveries for these years are not reported, but from the statements of the chairman the output for 1914 would seem to be under that for 1913, and he said at the ordinary general meeting in March, 1916, that the deliveries for 1915 had been 21,000 tons under those for the preceding year.—The Statist, Apr. 3, 1915, p. 36, and Mar. 25, 1918, p. 556. ! Macrosty, op. cit., p. 182, and Levy, op. cit, p. 243. *The Stock Exchange Official Intelligence, London, 1914, p. 854. - The Statist (London), Mar, 16, 1912, p. 576. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 93 For several years the Union effectively controlled the industry; but by 1893 the production of independents ‘had again become of sufficient importance to affect prices, which began to drop and continued until in 1898 the export price reached the low level of 13.36 <hillings per ton. The Union then began entering into agreements with its competitors for the regulation of prices, and from 1900 to 1904 a level of between 16 and 17 shillings per ton for export was maintained. The lagest of this series of agreements expired in June, 1905, and the price for that year shows a marked decline, which continued through the next year. The Northwestern Salt Co.—TFollowing a short period of destructive competition, the Union and outside producers again came together late in 1906 and formed the Northwestern Salt Co., a “limited liability company which was to act as sales department for the salt trade.” This organization, which included practically all the manufacturers, was understood to be for the purpose of regulating prices nnd output, and the annual sales of each firm in the association were limited on a basis determined by its average output in a certain number of past years.! Following the organization of the syndicate, prices again advanced bo 15.52 shillings per ton in 1907 and 16.11 shillings in the following year. It was stated at a general meeting of the Salt Union in March, 1907, that “a thoroughly sound and practical working scheme for regulating the tonnages and prices of the salt trade as a whole had been found.” In that year the profits of the Union increased nearly 50 per cent, as compared with 1906, although the output remained the same. Again, in 1909, it was reported that the “ Northwestern Company had worked effectively, * * * pag carefully considered the circumstances attending the trade at home and abroad. and had from time to time arranged prices accordingly.” 2 The British Salt Association.—During the existence of the Northwestern Salt Co. a stable condition in the industry was maintained and increased profits were enjoyed by its members. It expired, however, in 1910, and in 1911 a new organization, the British Salt Association, was formed “to regulate tonnage and prices.” Although this new association covered 84 per cent of the tonnage it did not have as complete control as its predecessor. Some of the concerns that did not join increased the capacity of their plants and held out for a larger share of the business as a condition precedent to their cooperation. Confronted with this condition of affairs and unwilling to accede to the demands, the association was dissolved at the end of December, 1912. Fe Tee 1 Macrosty, op. eit., pp. 186-187, and Special Consular Report No. 52, pp. 63 and 67. "Levy, op. cit., p. 245. 94 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The war has caused such‘an increase in demand and sich a rise in prices that apparently the producers have not deemed it necessary to form another general combination since the dissolution of the British Salt Association. Organization for foreign trade.—Great Britain has the most comprehensive organization for foreign trade of any nation. As already stated, it includes a network of foreign trade banks, the great British merchant marine, and all the hundreds of enterprises in foreign countries all over the world which ar® under British control or management by virtue of British investments. The British manufacturers, also, have the specialized knowledge of foreign customs, demands, markets, and trade conditions that are slowly built up from years of experience in export business. The special agencies for the development of foreign trade are chiefly of two kinds—export merchant houses and combinations among manufacturers to provide direct representation and organizations of their own in foreign markets. Export MERCHANTS. —British export trade has been built up, in general, by merchants; men not concerned with manufacture, but with buying and selling only. In various lines, strictly mercantile houses still control the business. In others, manufacturers have gone more or less into the export trade. The newer branches of manufacture may perhaps have a greater tendency toward direct representation, while the older lines, with channels of trade long established through the export houses, tend to continue in them. Electrical manufacturers, for instance, representing the newest great industry, appear to look after their own foreign interests, while the export trade in cotton goods passes almost wholly through the hands of Manchester merchants. (For a description of conditions in the cotton trade, see p. 248.) There are also, however, inherent differences between these two industries which strengthen the divergence of exporting method. A very important part of the electrical trade consists of special installations, furnished on bids, which only the men directly concerned in such work can intelligently make; while cotton goods are made for the market and must reach their consumers through mercantile channels. The movement toward a more direct connection of British manufacturers with foreign buyers has taken two general directions; on the one hand, manufacturers, as in electrical and other engineering trades, have themselves gone after foreign business; on the other hand, export merchants have added to their mercantile business some financial interest in manufacturing. This second development is especially noteworthy in such great merchant houses as Jardine, Matheson & Co. This is one of the oldest houses in the China trade, with an organization extending COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 95 through all the treaty ports. “They are closely allied with the Hongkong & Shanghai Banking Corporation, and with that bank are the representatives in China of the British & Chinese Corporation, so largely interested in the railway and other loans, acting as purchasing agents of these railways under their loan agreements, and at the same time tendering on purchase requirements from these lines; maintaining at Shanghai alone an establishment with an office force of about a hundred; with extensive import, export, and engineering staffs; serving as general managers for cotton mills, silk mills, ete.; operating coast and riverine steamer lines, and agents of the Royal Mail Steam Packet Co. and the Indra Line; agents of the Russian Bank for Foreign Trade, Petrograd, and the Mercantile Bank of India; agents of extensive wharves and warehouses, of marine and fire insurance companies; engaging in the past in the opium trade; and holding a great share of the British enginering and railway business in China, besides being large importers and exporters of all character of foreign and native goods.”? Jardine, Matheson & Co. may be taken as typical of a large class of British firms, though few have reached so great a development. Several operate in China, and many others in other fields. In the River Plate region,sfor instance, Agar, Cross & Co. (Ltd.) is very prominent. This was a private concern up to 1913. but is now inzorporated with a capital of £750,000. Export CompIinaTiONS.—In various industries producers have gone directly into export trade without utilizing the medium of export commission houses, brokers, or merchants. In some instances this has been done by large combinations within a particular industry, such as J. & P. Coats (Litd.), the Fine Cotton Spinners’ & Doublers’ Association, the Cambrian coal combination, the British Electrical & Allied Manufacturers’ Association, etc. Some of these are discussed later in connection with the international competitive conditions in the industries affected. (Chap. V.) More recently British manufacturers of noncompeting but complementary products have been forming organizations for the handling of their export business. This was brought about largely by the inroads of corbinations of German manufacturers on British trade. As long ago as 1906, there were two large organizations engaged in promoting British engineering interests in Egypt. One is the British Engineering Co., of Egypt, composed of five firms banded together for this particular purpose only. The other is the Egyptian Engineering Co. (Ltd.), an alliance of 24 British engineering firms representing every branch of the trade in Egypt and the Sudan. These two were practically the only organizations for foreign trade ’ 1 Special report of Consul in Charge. ¢. HH. Gauss. Shanghai. Pt. II. p. 218. D6 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, xisting among British engineering firms until the recent combinations for the China trade discussed in the following paragraph. With these exceptions British firms formerly competed on foreign business. In 1914 a powerful and well-organized corporation was formed, known as the “ Representation for British Manufacturers (Ltd.)”. It is composed of numerous important engineering firms, with its head offices in London and Peking, and branch offices at Shanghai, Hankow,and Canton. Some of its more important members are John Brown & Co. (Ltd.), Sheffield; Dorman, Long & Co. (Litd.), Midlesbrough ; and Thos. Firth & Sons (Ltd.), Sheffield. The following lines are represented: Forging presses, boilers, steam hammers, bridges, harbor works, shipbuilding, steel forgings and castings, brass castings, armor plate, sheets, plates, telegraph wire, railway roaches and wagons, structural steel work, tool steel and projectiles, marine and locomotive engines, machine tools, railway and tramway rolling stock and appliances, screening and conveying plants, briquette plants, aerial ropeways, coke ovens, and coal washers. The sole object of this organization is to maintain staff representatives in certain foreign countries, particularly China, for the sale of manufactured goods, combining the features of # propaganda agency and a selling organization. The countries other than China which are covered, or were to be covered, by its activities are Eastern Siberia, Korea, Formosa, Turkey, Roumania, Greece, Bulgaria, Servia, and the Philippine Islands. Working expenses are provided by the manufacturers, and funds sufficient to cover estimated expenses for five years have been guaranteed. An important feature of this associated representation is that the economies effected tend to make possible a reduction of selling prices. It was reported in 1915 that the Anglo-Chinese Engineers’ Association was being formed with the object of securing an outlet for British machinery, engineering stores and plant of all descriptions. It was designed to give a group of British manufacturing engineers a sales organization in China more effectivesthan any existing one and to safeguard them from aggressive foreign competition. It is strictly a noncompeting group and is thus described in the London and China Telegraph of June 1, 1915, page 458: Put briefly, we learn that the proposed organization will consist of 10 noncompeting manufacturing engineers who make plants suitable for the needs of the market and from 25 to 85 firms of engineering material and tool makers. Fach of these firms will be required to take stock in the combine, the value of which is determined in each separate instance by the ratio that the line under consideration bears to the whole of the imports of machinery, engineering plant, and i ——————— 1 Macrosty, op. cit.,, p. 83. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 97 material imported into China in any one average year. Each of the firms eritering must agree to work in unison with other members of the combine in the case of contracts for combined plant, and no firm will be accepted for more than two lines of its manufacture; and no two firms in the combine will be accepted for similar plant. For instance, if A. B. are represented by the combine for textile machinery, no other house will be represented for this line. The organization in China will, we understand, be similar to that used by the most successful of our competitors, as follows: At each of the selected ports and industrial centers there will be a godown in charge of a junior Chinese-speaking European assistant, assisted by a market compradore, and staff, all of which will be guaranteed men, which will deal with the local trade and sell mill, builders’, carpenters’, and general hardware, mining steel, high-speed steel, bars, etc., mill gearing, shafting, rigging, anticorrosive and other compounds, plates, sheets, corrugated sheets, electrical stores, engineering stores, etc., which materials will be the property of the material members of the combine, and which will be necessary for the trade of the particular center; and the selling center will act as a head office for the district that it is in and as a buying depot for ores, metals, and country produce, and attached to this depot will be a senior local asistant, who, together with a local compradore, will be employed exclusively in endeavoring to obtain plant contracts in the district to which he is attached. For instance, in the case of Hankow the senior assistant would be required to know Hupeh and the surrounding districts thoroughly and would be required to keep in close touch with the Sino-Japanese directorate of os to watch the developments of the Chenshih copper area, the Kweichow and Wuchang mining and industrial districts, the Yingcheng spelter field, the Hupeh oil, cotton, and other local industries, and to keep close touch with the local Government officials, and generally, through his compradore, to use his best endeavor within his district to infAuence orders for all kinds of plant. To commence with, it is proposed to put such depots at Hankow, Mukden, Canton, Shanghai, and Peking, and the last named place, owing to its being the seat of the Federal Government and in close touch with Hankow, Mukden, Shanghai, and Tientsin by rail, will be the headquarters of the managing director in China; and this office will also be the office of the general compradore, who through his assistant compradores throughout the country, will be in a position to obtain information and influence orders in the same way as our competitors do. Attached to the Peking, Canton, and Hankow offices will be competent mechanical engineer assistants, all of whom have had Chinese experience; and the whole of the staff employed will be men of experience in the different localities in which they are used, whilst the general compradore will be a Chinese gentleman of high position and ability. In practice the method used will be to make the selling godowns pay the ost of the traveling organization of representatives, so that the profits arising from the sale of plant will be net profits. The cost of such an organization being considerable, manufacturers joining will be asked to guarantee the cost, or a proportion of the zost, during the first period of five years, after which the organization will be self-supporting; and as this cost is estimated at £60,000 27241°—16———8 98 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. during the period, shares will be issued in the form of £10 six per cent cumulative preference, payable £2 per annum per sharé, whilst a certain number of ordinary shares will be issued to preference holders, which will give such holders a share in the profits arising from the operations of the company. No shares of any kind will be issued to the public, and no underwriting or other flotation expenses charged, save the costs of registration, and the policy of the company will be directed by a committee in Britain consisting of the directors of individual firms making up the combine, with an office controlled by a practical engineer, elected by. the directors. The managing director in China will, we are informed, be a gentleman of the highest attainment, with a thorough knowledge of China, its resources and officials, who is acquainted with the methods used by the German and continental houses, and the purpose of the whole organization will be to obtain orders for engineering plant, machinery, materials, and contracts at the least possible cost in the most efficient manner. We may add that we are willing to put British engineers who desire to-obtain some share in this market, which during the last three years has let over £90,000,000 of engineering contracts, in touch with the organizers of the movement. GERMANY. Introduction.—The outstanding feature of German industry is the high degree of its organization. Technically production is highly perfected, is thoroughly systematized and efficiently conducted. Producers are usually united in cartels, syndicates, closely affiliated groups, and other forms of combination. Limitation of output, agreement as to prices, and regulation of terms and conditions of sale are the custom. In most lines dealers are likewise united, and relations between producers and distributors are broadly governed by these organizations. From these conditions it follows therefore that there is a notable unity of action among manufacturers and distributors in Germany. Moreover, as has already been shown, the relations between industrial undertakings and the chief banks in Germany are very close. Not only do these banks assist in the financing of such enterprises but they are directly represented in the management of industrial enterprises. They use their power actively to foster the profitable growth of the companies in which they are interested. One of their functions is to promote close cooperation between competing or complementary companies which are within their influence. In foreign trade, organization is carried still further. The combinations of manufacturers and distributors extend their closely knit and efficient organizations into foreign business, and the banks assist them in establishing branches abroad, in furnishing information and advice, in financing foreign transactions, in carrying foreign credits, and in actively developing German trade abroad. The German state railways and the great ship lines facilitate the import and export of goods. Thus for foreign trade the great in- COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 99 dustrial combinations, the German traders, the German banks, and the German merchant marine work together in an effective way for the business in hand. By reason of this organization of effort, other commercial countries have been impressed with the largeness of operation, the intelligence of direction, and the increasing aggressiveness in the extension of German commerce. Character of German foreign trade.—The import and export trade of Germany has had a rapid growth in the last 80 years, the increase from 1887 to 1918 being about 230 per cent. Up to the present war Germany’s trade was second only to that .of Great Britain, and was typical of an industrial country. More than half the imports were raw materials for the use of German manufacturers, while two-thirds of the exports were manufactured articles. In 1912 Germany’s exports were valued ‘at $2,200,000,000 and her imports at $2,700,000,000; of the total imports about $400,000,000 worth were finished manufactures ready for consumption, and the remainder was made up of animals, food products, and raw and crudely manufactured products for further use in manufacturing. On the other hand, finished goods ready for consumption made up $1,400,000,000 of the total value of exports. Imports and exports.—The principal imports and exports of Germany in 1913 are listed in the table on page 100. German business men, economists, and statesmen have regarded the development of foreign trade as necessary to the desired industrial progress of the country. For German industry to expand normally such materials as cotton, hides and skins, wool, silk, jute, flax, lumber, rubber, saltpeter, petroleum, copper, etc., and such foodstuffs as wheat, barley, corn, oats, eggs, coffee, rice, vegetable oils, cocoa, fruits, etc., had to be imported in great quantities. The most practical means of paying for these imports was by the export of manufactured articles. Accordingly the policy of developing foreign markets for German manufactured products has been vigorously and consistently supported by the German Government. The success of these endeavors permitted the great expansion of German industry, and the rapid increase in the material well-being of the German people. As long ago as 1900 a prominent German writer estimated that one-fifth of the entire population of the Empire participated directly in foreign trade. The excess of German imports over exports is paid for by an income derived from investments in other countries estimated at about 14 billion marks ($875,000,000) annually, and such investments have been an important factor in the growth of German foreign trade.* - = i Germany's Economic Forces, Berlin, 1913, p. 24. 3K. Helfferich, Germany's Economic Progress and National ‘Wealth, p, 38, ' 2. ; Aral, Deutschlands Stellung in d. Weltwirtschaft, 1918, p. 11. 100 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Tariff drawbacks.—The German Government has used its tariff neasures for the encouragement of export trade by allowing duty free importation of raw materials to be used in the manufacture of export goods; and by allowing in exceptional cases where it may be expected to benefit the German industry involved, duty free importation of manufactured articles made from German materials and exported to be finished or improved abroad. The remission of the duties on such imports is made upon the submission of satisfactory proof of identity. masLE T.—Imports and exports of Germany, 1913. [Millions of dollars.} Exports.t Imports.t Articles. Total... Principal items. Cotton, raw. - Wheat. .....---Wool (raw, sheep).... Barley ..e-eeeecsmnaonanees Copper, Iaw.. Hides... - TON OTB. .ccn-ue 20ffee (Breen). ....oeusar-s Joal, semibituminous. ..-Eggs and yolks..... fur skins. ..... Nitrate of soda... .. Raw silk, undyed...... Bran, and rice Waste. .......oecei-eeene Caoutchouc, gutta-percha and balata gum. Tard and similar fats. .ea--emeeaaranneasn. Joft woods, sawn ...... oe Leaf tobacco. Linseed... JOPTB nase rommann onan Butter and butter fat... Dil cake. ene we JOTSE8. wcecnmanmonmnnss wr Cotton yarn and thread... w WOOleN JAIML..neenmsonnans anor nesses >glm kernels... - F— ce... . ABIZ6. oenneene. wo 3oft woods, logs .. we wan Calfskins. .eceenaononen - Raw jute, oakum, etc. . — Sattle (beef). ooosecencn- SAERR Machinery of all kinds... ..c.ccaomaerees Fresh fruits and berries, edible. .......... Lamb, sheep, goat, and kid skins ........ Cotton goods.......- eemeaememer aes Refined mineral oil..... - Soal, subbituminous ....-- . Jacao i ces Wool (combed)..... a Dats...ou-nnn we Fish, fresh... .occcamaaaccaciianeaen oon Animal intestines, stomachs, bladders ... Tin, raw, waste, etc....... we Flax, raw hackled, a -. Live poultry. . . cee Wine in cast . [9111 1 PR . Clover, Lucerne, etc. ....... Mineral lubricating oil ... Woolen goods... Rye... Value. 2,563 44 99 ve Articles. Total... Princinal tfems. Machinery of all kinds, including parts. TONWAIG. cc ceavennsavemr-t me "tcaencess Joal, semibituminous. pee Cotton goods... - .-Woolen goods. ww Paper, cardboard, and manufactures. .... furs, unmanufactured. .....- Ve Malleable iron..... Go 3ilk goods... . 0 J sms ‘\niline and other rosl-tar dre ye AYO. arannzaaazae nevus ce Jothing and millinery. ....c.ocoov-vee-“Lanufacturesof copperand copper alloy. Leather for uppers.....- vn (UNET BOOS oo oe deCOROT on Coys and Christmas-tree decorations. ... Sheet iron. seaccecmeene- Cees Oats. .aeniaane wr Woolen yarn. . ceiaeraas Wheat. ....... sa .ron pipe. ve Jides.... ine [ron Wire.eesovesoeus--: we Books, maps, and MusiC..........ec.nze Electrical apparatus for lighting and POW, eas rnnnarcaszznssnrrcecnse “on Steel rails, sleepers, fishplates, ete... -..., Motor ears, passenger igus evegs wewen] 2ig iron an non-malleable iron alloys. . 3looms, bars, ingots... sin >otash, etc. .eeee--Iollow glassware....... ; Cotton yarn and thread... or “hioride of potassim.....coeumzeeeent. Soft rubber manufactures, not including vehicle parts... reemeanaes Electrical machiner. cenenan JOtEOR, PAW csc ana cmannee I Pianos, organs, and parts.....-s.ceeeeeas Zine, raw, etc. — [NAO vn ceacrsanmorsanacsmnrassanannns Porcelain ware (except insulators)....... Wool (raw, sheep).....ece-u-r per ‘neandescent electric 18mpsS.. canna Wool, other animal hair, combed or QUITO. +e es mesccmnranmrsnsssnenaananns 3riquettes of subbituminous coal vovrnee Wheat flour. .... i ce, polished. .... - Slectrical a Jaoutchouc, tta-percha, balata gum... “ane 1 10 Value. 2,403 162 155 123 108 C 1 18 18 + 12 11 Ia I" 1 1 9 1 Statistisches Jahrbuch f. d. Deutsche Reich, Berlin, 1915, pp. 251. 253. Gold and silver bullion and sadn not included. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 101 In 1913 total imports $f raw materials admitted duty free for manufacture into export goods were valued at 329,000,000 marks, or about $80,000,000, and the total duty-free imports of articles finished or improved abroad from German materials were valued at 55,000,000 marks, or about $18,000,000. The principal raw materials thus imported were rice, lumber, mineral oils and their products, and scrap iron. Trade associations.—Trade associations have flourished in Germany and are highly developed. In 1913 there were between 500 and 600 general associations of manufacturers and producers and over 5,000 branch organizations in the Empire. Practically every kind of industry is organized into one or more associations, some covering large portions of the Empire and others embracing particular districts. Thus the Association of German Iron and Steel Manufacturers (Verein Deutscher Eisen- und Stahlindustrieller, Berlin) has almost 400 members and is organized in six groups—the Northwestern, the Eastern, the Northern, etc. In addition, there are probably a dozen other important associations among the iron and steel manufacturers. Among machinery manufacturers there are a number of important associations such as that of the machine tool manufacturers, of the manufacturers of agricultural machinery and implements, of piano manufacturers, of chemical manufacturers, etc. In addition to these associations in particular industries there are a number of district associations in which manufacturers of various lines unite for the promotion of trade in their particular regions. Thus the Bavarian Manufacturers’ Association, with headquarters at Munich, has 700 members; the South German Manufacturers’ Association, with headquarters at Mannheim, has 700 members and 12 branch organizations and is affiliated with two or three other manufacturers’ associations. These numerous associations are federated in three great general organizations. These are the Centralverband Deutscher Industrieller (Central Association of German Manufacturers), the Bund der Industriellen, and the Hansa-Bund. Prior to the war the first named had a meinbership of some 200 associations and 600 individuals and was a very comprehensive and active organization. The Bund der Industriellen had some 5,000 individual manufacturers and 80 associations representing 30,000 concerns. The Hansa-Bund was a new but large and vigorous organization. It had over 700 provincial, district, and local bodies, and possibly 900 associations and other organizations allied with it. It was sending out annually nearly 70,000 confidential bulletins to members, and its annual conventions had been attended by as many as 10,000 members. A reeset 18tat. Jahrbuch f. d. Deutsche Reich, 1915, p. 247. 102 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The German trade associations carry on much the same kind of work as do similar bodies in the United States. They publish trade papers, carry on technical and economic investigations and cooperate with the German State and Federal Governments in regard to legislative and administrative measures.! It is noteworthy, however, that they give special attention to export trade, the study of commercial treaties, customs, tariffs, etc. and in this respect are far in advance of most American trade associations. In fact nearly every German manufacturer is a member of at least one active association which is assisting German foreign trade, and many concerns are members of several such organizations. The work of these organizations in promoting foreign trade is discussed on pages 112-113. Combinations in German industries.—Industrial combination has developed more extensively in Germany than in any other country.? The distinctive form of combination has been the cartel. While somewhat indefinite in meaning, a cartel may be described as a combination to control the market. A German writer speaks of cartels as “associations, founded by contract for certain periods of time, of independent enterprises belonging to kindred branches of industry, or of branches of industry with nearly identical interests, the individual members of the association retaining their irdependence but joining for the purpose of regulating production and sales according to common points of view and in the common interest.” The word * trust ” usually, though not always, implies merger. Some cartels have made a considerable approach to merger, but the name “cartel” is apparently not applied to any organization where the process is complete. Moreover, all cartels appear to be limited in time; the members can at some future date recover their complete independence if they choose. In the typical American trust, on the other hand, all final authority 1s centralized in a single organization, and this authority is permanent; the trust is actually or practically a single corporation. A few great organizations similar in type to the American trust exist and flourish in Germany, but they are not zalled cartels. Cartel development began with the industrial and financial crisis in the middle seventies of the last century, though a few scattered cartels existed before that time.* In the Reichstag session of November 4, 1902, Dr. Pachnicke indicated the growth of German cartels as follows: 1879. 14 cartels: 1885, 85; 1890, 210; 1902, more than 400.5 11, Miiffelmann, Die wirtschaftlichen Verbiinde, 1912, p. 13. 2 §, Tschierschky, Kartell und Trust, 1911, pp. 14 and 35 v J. Riesser, The German Great Banks and their Concentration, p. 167; translatiow sublished by the National Monetary Commission, 61st Cong. 2d sess.. S. Doe, 598. « R. Liefmann, Kartelle und Trusts. 1910, p. 22. 3 Sten. Berichte fl. d. Verh. d. Reichstags, 19800-1903, 7 Band, p. 6115. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 103 According to the official report of the investigation (Enquéte) of industrial cartels made by the German imperial department of the interior in 1903-4, there existed 385 cartels at that time in Germany, which were distributed among the different industries as follows:? Tarre 8-—Cartels in various German industries. Coal meee Iron. eee mmm Metals (excluding iron) ..————.— Chemicals momma TRE LI E8.. m mimirsish imiirmsig m s sms Leather and rubber meee WOO eee mem me meme Paneer ——__. Cartels. 19 62 23 AR 1088... covery sioner Bricks ee—-Stones and earths. oo cece 0) FX 2 ———— Foodstuffs vem Electrical meme Ot hOrS eee ee me mmm nnn Cartels. eee 10 mmm 132 - 27 4 7 2 7 These 385 cartels comprised about 12,000 plants, not including the numerous brickyards. With regard to extent, size, and output capacity, the mining and the chemical industries ranked first. In 1911 a German cartel expert, Dr. Tschierschky, editor of the Kartell-Rundschau. estimated the number of German cartels at from 550 to 600. The number of cartels in any country gives only the most general indication of the degree to which competition is restricted. A single cartel in an industry may mark the highest degree of concentrated control. On the other hand, in a local industry like bricks, a large number of local cartels may control each its local market. The importance of cartels in general, or in any particular industry, is not shown by their number. The large German banks have played a potent part in the development of cartels and combinations, particularly in the mining, the iron and steel, the electrical, the potash, and the chemical industries. The four great Berlin banks, viz, the Deutsche Bank, the Dresdner Bank, the Darmstidter Bank, and the Disconto-Gesellschaft, dominate the German banking world? Until recently there was a fifth, the A. Schaa ffhausen’scher Bankverein, now absorbed by the Disconto. The A. Schaaffhausen’scher Bankverein was formerly particularly active in organizing cartels, and maintained a special organization, the “ Syndikatskontor d. A. SchaafThausen’schen Bankvereins G. m. b. H.,” to act as selling agency and clearing house for industrial combines.t With their extensive system of directors among industrials, and with their participation in financing such enterprises, the great 1 Denkschrift ber d. Kartellwesen, 1906, v. 24. 1S. Tschierschky, op. cit.,, p. 52. 31, Pohle, Die Entwicklung d. deutschen Wirtschaftslebens 1m letzen Jahrhundert. 1913, pp. 31 and 145. & Otto Jeidels. * Das Verhiiltnis 4. deutschen Grossbanken zur Industrie,” pp. 123-125. 104 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. banks have been able strongly to influence German industry, and they have used this influence to eliminate competition and to encourage concentration. Thus the German electrical industry, a debtor industry, has been dependent at all times upon the cooperation of banks in its development and concentration. The widely ramified organization of investing, operating, and subsidiary companies of all kinds within the two groups that dominate the German electrical industry has been developed and promoted largely by banks interested in the various companies and backing these two great groups! In the metal trade the Metallgesellschaft of Frankfurt a. M., in which the Merton interests are centered, has built up and controls its world-wide business enterprises through a number of financial institutions, banks, or holding companies in different countries. These have been organized for the special purpose of obtaining outside and foreign capital for investment in new mining and similar enterprises and to maintain control over them through majority stock ownership. (See pp. 365-368.) The potash industry offers another good example of the potent influence of banks in fostering combination. (See p. 110.) Kinds of cartels.—The German cartels may be divided, for practical purposes, into the following three classes.® (1) Agreements covering selling terms; so-called “ Konditionen ” cartels. (2) Price cartels. (3) Selling cartels or syndicates. SerriNe-TERMS CARTELS.—The selling-terms cartels represent the lowest form of cartel organization. Their purpose is chiefly to establish a uniform regulation of terms of payment, of samples, and of other conditions of sale. Cartels of this kind have been organized in the silk, umbrella goods, and worsted-spinning industries, and in various branches of cotton cloth and woolen cloth weaving.* Price cARTELS—Under this head may be grouped all cartels that undertake to influence prices without centralizing sales or purchases. They are the most numerous class, and they are divisible into several subclasses, according to their methods. Some fix prices directly; some fix a maximum output and allot a quota to each member; some divide their territory, alloting to each member an area in which no other member is allowed to sell; some allot to each member the prouction of certain lines of goods.® SYNDICATES OR SELLING CARTELS. — The syndicates or selling cartels are the most highly developed type of cartel. with the most rigid and — ar —— ———————————— 13. Riesser, op. cit, pp. 718 and 719. 2 See p. 865. Also, R. Liefmann, Die Internationale Organisation d. Frankfurter Metall-Handels, in Weltwirtschaftliches Archiv, 1918, L pb. 112, 3 8. Trchierschky, op. cit. D. 42 fol. 4 Tbid., pp. 42, 48. Ibid. p. 45. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 105 centralized organization. The leading feature is the central selling agency, in which the entire selling business of the syndicate is united. Only the process of production is left to the syndicate members, and even in this they are frequently subject to considerable control. There are four types of central selling agencies? A member of the combine as selling agent~—This system was adopted by the Upper Silesian Rolling Mills in 1887, the sale of {heir entire output being negotiated for a certain period by the Vercinigte Konigs & Laurahiitte, the largest member of the combine. Such an arrangement appears, as a rule, only where one company exercises a predominant influence and reserves the selling agency for itself. A mercantile house or bank as selling agent.—More commonly the selling agency is an outside firm; for instance, a large mercantile house or bank. Thus the Silesian and west German cellulose combine and the German soda manufacturers’ combine made mercantile houses their selling agents. A large Dresden bank serves as selling agency for the Saxon cellulose combine. The banking house of Delbriick, Leo & Co., Berlin, was in 1888 made the selling agency of the German wire nail manufacturers’ combine. In making collections the selling agency deducts a uniform amount for its expenses and commission. Sometimes the function of soliciting and distributing orders is separate from that of collecting payments. In the middle German salt works’ combine the collections are made by two association bankers. In addition, a committee of the members exercises control over the selling agency. A counting house as selling agent.—Frequently the selling agency consists simply in a counting house or office. The management may be vested in a committee of members elected for that purpose, as in the old potash (Kali) cartel or the Briinn brickyards, or special officers may be employed by the combine for this purpose; e. g., in the Silesian middle German rolling-mill combine two directors and assistants under the supervision of the chairman of the combine. Numerous selling agencies of this kind exist; for instance, in connection with the south German cellulose combine, upper Silesian and middle German Portland cement cartels, etc. A stock or limited-liability company as selling agent.—The selling agency may also consist of a company, formed by the members of the combine, and possessing the rights of a legal person according to the Commercial Code. The company is only the organ of the combination, doing nothing but soliciting and distributing orders, and serving only the purpose of giving to the selling agency the character 18, Tschierschky, op. cit, p. 46. 1 R, Liefmann, Die Unternehmerverbinde, 1897, p. 103 fol. Also, Denkschrift fiber d. Kartellweren. 1606. p. 26. [06 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, of a legal person. The form of organization usually chosen is that f the Aktiengesellschaft (stock company), the Gesellschaft mit beschrinkter Haftung (limited-liability company), or the Kommanditgesellschaft (commandite company; limited partnership). The Aktiengesellschaft approximates in legal character the ordinary American corporation. The Gesellschaft mit beschrinkter Haftung is also a corporation, a legal person, with the peculiarity that its stock can not be sold or transferred without the consent of the shareholders to anyore who is not already a shareholder. The Kommanditgesellschaft is a limited or special partnership, with some partners fully liable for its debts and others liable only for fixed sums. Special cartels and selling agencies for export trade.—Most of the important cartels engage in export trade, and in some instances special selling agencies have been formed to handle the export business. These are discussed later in connection with the special organizations for foreign trade. (Pp. 113-114.) Cartel arbitration boards.—The German Code of Civil Procedure cermits members of a cartel to settle difficulties arising from their cartel agreement by a beard of arbitration outside of the regular government courts. This system makes it possible to procure expeditions and final rulings by experts, and obviates protracted litigation.? Legislation and decisions of the courts regarding cartels.—The German civil law recognizes the complete validity of industrial combinations, while the criminal code contains no prohibition against sartels, nor any special law concerning them. There is no cartel law proper in Germany. A cartel contract is put on the same basis as any other contract by the German law, and the courts have expressly declared them valid, including the penalty clauses embraced therein for violation of such agreements.® Various provisions of the Unfair Competition Law of 1909 and of the Penal and Civil Codes have been applied successfully by the German courts to suppress objeciionable cartel practices.* Attitude of the Government toward cartels.—The attitude of the German Government toward cartels may be characterized as one of benevolent watchfulness. In discussing syndicates and monopolies in the Reichstag on March 4, 1912, the Minister of the Interior, Dr. Delbriick, stated in substance that cartels on the whole had not abused their power, but, as some of the syndicates were beginning to 1 Reichsgesetzblatt, 1898, p. 846 fol. L. Silberberg, Handbuch d. Deutschen Kartellrechts, Berlin, 1910, p. 168. A. F. Schuster, The German Commercial Code, London, i911, p. 65 fol. : 3. Tschierschky, op. cit., p. 88. 3. Walker, * The Law Concerning Monopolistic Combinations in Continental Europe.” n Political Science Quarterly, March, 1905, p. 15 fol. 4 Report of the Commissioner of Corporations on Trust Laws and Unfair Competition, Washington, March 15, 1915, Dp. 620. COMPETITIVE CONDITIONS IN INTERNATIONAL ef AR ’y wn » = assuine the character of private monopolies, the State might, 1G vurse of time, be obliged to change the private monopolies into State monopolies. In our modern economic development, Dr. Tetgricck contended, syndicates are inevitable and to a certain degree -useful. He stated that by concentrating the supply, commodities may be utilized more efficiently, and a stabilization of prices stabilizes wages, even though not all the other activities of syndicates are above criticism; that as long as they do not abuse their power, the State has no occasion to interfere, and under certain conditions the State may even be compelled to become a member of a syndicate.? That the German Government seeks to keep itself informed on cartels is evident from its official investigations of them, as well as from frequent discussions in the Reichstag. In 1903 it instituted an official investigation of cartels. A stenographic report of the hearings was published in the « Kontradiktorische Verhandlungen iiber deutsche Kartelle,” while a comprehensive report of the investigations conducted by the Imperial Department of the Interior is contained in the official “Denkschrift iiber das Kartellwesen,” Berlin, 1906. In 1912 the Imperial Department of the Interior collected new statistics for an official cartel register. State participation in cartels.—As owner of some coal and potash mines the Prussian State has been more or less closely interested in cartel matters relating to these products. The Imperial German Government has twice been instrumental in the formation of compulsory syndicates. Through the Imperial potash law of 1910 the owners of potash mines were combined into a compulsory syndicate, and in 1915 the Rhenish-Westphalian Coal Syndicate renewed its syndicate agreement under pressure of the Imperial Federal Council.® The study of cartels in Germany.—The importance ascribed in Germany to cartels and théir bearing on German economic problems in general may be gauged not only by the wide and general attention given them in the German trade and commercial journals and by the daily press, but also by the scientific study of the economic, legal, and historical phases of the cartel question in the ever-growing cartel literature. A monthly publication, the Kartell-Rundschau, Diisseldorf, is devoted exclusively to the subject of cartels. The leading ~hambers of commerce and other commercial bodies include special reviews of cartel matters in their annual reports, and in recent years the beginning has been made of collecting all documentary sources relating to cartels in special cartel archives and museums. t Berliner Jahrbuch fiir Handel u. Industrie, Jahrg., 1912, Bd. I, p. 124 fol. ' Kartell-Rundschau, 1912. p. 950. . 4S. Tschierschky, op. cit. p. 51; R, Liefmann, op. eit., p. 205; Kartell-Rundschau, 1915. ». 252 fol. 108 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Cartels in particular industries.—The adaptability to cartelization is greatest in the field of raw materials and semifinished prodacts. In general, staples and bulk articles or goods manufactured in large quantities, and not subject to frequent and wide variations in quality, are most readily covered by cartel agreements. Products of art and articles of style showing individual skill, technique, and taste are but infrequently syndicated.! On the other hand, in the manufacture of glass, cellulose, printing paper, leather, skins and furs, food products, and beer, flourishing cartels exist. Even in “ specialties produced by artistic handicraft,” where it was impossible to establish a uniform price list, a price cartel was organized by having an expert appraiser establish the price of each individual article.? The mining industries, the coal, iron and steel, the chemical and iye-color industries, lend themselves readily to cartel organization, and in such industries cartels have been highly developed. The Rhenish-Westphalian Coal Syndicate is the chief feature of the German coal mining industry. The Stahlwerksverband dominates the steel industry and has been one of the chief agencies in the rapid axtension of Germany’s foreign trade in steel products. These :artels, as well as those in the textile and chemical industries, are described in detail in the discussion of competitive conditions in these industries in Chapter V. Moreover, the special report of Consul General Lay, Berlin, contains descriptions of the more important sartels. (See Pt. II, pp. 3-89.) - The only cartel discussed here is the potash combination (Kali Syndikat). It is different from other German cartels because a special law of the Imperial Government with regard to this indus try facilitates its organization, but it illustrates the attitude of the Imperial Government toward combination, the regulation of ouput, the fixing of prices, etc. The Potash Syndicate.*—The German Potash Syndicate occupies a unique position in that it has virtually an absolute monopoly * as no commercially important deposits of potash have yet been discovered in any other country. The capital invested in this industry up to 1912 has been estimated at 766,535,000 marks [$190,000,0001].° Potash being more or less indispensable in agriculture, medicine, 1 8. Tschierschky, op. cit., p. 48, 1Tbid., p. 34; Kartell-Rundschau, 1908, p. 323. 1 Tor a discussion of the production and sale of potash salts, with special reference to the German industry and the German potash syndicate, and to sales in the United States, see Report of Federal Trade Commission on the Fertilizer Industry, 1916, pp. 104-119. + H. Bonlkowsky, Der Einfluss d. indastriellen Kartelle auf d. Handel in Deutschland, 1908, p. 45. sH. A. Giebel. Die Fimanzierung d. Kaliindustrie, 1912, p. 20, COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 109 painting, photography, dyeing, bleaching, weaving, soap manufacturing, and in the electrical, pyrotechnical, gunpowder, match, and numerous other industries, close interrelations have been established amcng all these industries, mainly through the medium of banks and interlocking directorates. Since 1910 this industry has been controlled completely by the Potash Syndicate, with its main office in Berlin. In that year the old potash syndicate, which had existed for 80 years, collapsed.? The owners appealed to the State for assistance, which was ren-Jered through the Imperial potash law (Reichskaligesetz) of May 25, 1910.8 PorasH LAW OF MAY 25, 1910.—The essential features of the potash law of May 25, 1910+ are that it limits sales of the potash works up to t.e end of 1925, and fixes maximum selling prices. It does not provide for a common selling agency. A board of distribution fixes the total quantity of potash to be produced and allots to each mine owner a certain quota. It also determines the quantities to be sold at home and abroad. For any output in excess of the allotted quota, a tax has to be paid into the State treasury. Maximum selling prices are determined by the Federal council for periods of five years each. Only the owners of potash works are permitted to sell potash salts to foreign countries. Export prices may not be lower than the fixed domestic prices. Mine owners are allowed to transfer their quotas in part or in whole to other potash works and to exchange certain grades of potash. The importance of this provision lies in the fact that it facilitates the formation of a combination.’ In order to prevent unnecessary expansion, the law provides that new works shall be allowed only a very low quota of production during the first two years after they have begun operation, and for three more years only a gradually increasing proportion of their full and final quota. Government-owned works are excepted from this five-year period of output limitation.: CoMMON SELLING AGENCY.—While the potash law does not estab-Jish a compulsory syndicate in form, nevertheless certain provisions of the law have resulted in what is practically equivalent to a coma yourael des Economistes, 1915, p. 379 fol. ; Schénemann, Die deutsche Kali-Industrle 1. d. Kaligesetz, 1911, pp. 17, 85, fol.; H. A, Giebel, op. cit., pp. 85, 117. 2 K. Wiedenfeld, in Schmoller’s Jahrhuch fiir Gesetzgebung, ete.» 1911, p, 1971, s 7. Kestner, Der Organisationszwang, 1912, p. 182. J. Flechtheim, Die rechtl Organisation d. Kartelle, 1912, p. 128. K. wiedenfeld, op. cit., p. 1972. + Reichs-Gesetzblatt, 1910, p, 775 fol. sR. Passow, Materialien f. d. Wirtschaftswissenschaftliche Studium, 1911, I. Band, > J ol, hai. Die rechtliche Organisation der Kartelle, Mannheim, 1912, p. 131. 110 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, pulsory syndicate! The present syndicate was incorporated June 7, 1910, as a stock company with limited Liability, with a capital stock of 741,800 marks. On March 30, 1915, this was increased to 1,267,700 marks. Tt is organized similarly to the Coal Syndicate. A separate selling agreement of the same date constitutes the Potash Syndicate (Litd.) the exclusive selling agency of syndicate members, and provides a heavy penalty for violations of the selling contract? CONCENTRATION WITHIN THE SYNDICATE.—A marked trend toward concentration within the syndicate has been noticeable for some years. Through interlocking directorates, the influence of banks and the absorption of smaller by larger works, certain large groups have gradually succeeded in obtaining a dominating control. The leading omnes are the so-called “ Fiirstentrust,” operating through the Paléistinabank; the Deutsche Kaliwerke concern; the A. Schaaffhausen’scher Bankverein; and the Burbach concern.* Several of these large groups have adopted the holding-company form of organization, and this type of concentration is apparently becoming more and more characteristic of the potash industry.’ Behind these concerns stand several large banks, especially the Deutsche Bank and the “mining banks” controlled by it, to whose support is due in large part the rapid development of the potash industry.® Largely through these banks the leading interests in the coal and iron industries have established connections with the potash industry. RELATIONS BETWEEN THE SYNDICATE AND DEALERS’ COMBINES. Among the potash dealers several combines have been formed, of which the “Kalikontor,” combining nine wholesale dealers, is the most important.” The syndicate grants certain rebates to the dealers, but imposes numerous restrictions upon them: for instance, the requirement of a bond deposit as security for fulfilling their obligations, and the filing of a list of their customers as well as their prices.® The potash law of 1910 seems not to have given entire satisfaction. The chief complaints have been (1) that the number of new potash works, for which there was no need, has increased continuously since the passage of the law; (2) that the State-owned works tJ. Flechtheim, op. cit, pp. 129, 133. !R. Passow, op. cit.,, p. 214 fol. and p. 228 fol. For a copy of an agreement hetween the Potash Syndicate Co., Ltd., and an Algerian firm, making the latter exclusive sales agent of the former in Algeria, see Pt. II, pp. 479-482. Tor a copy of the contract of the Potash Syndicate with American buyers of potash salts, see Pt. II, pp. 509-515. 3H, A. Giebel, op. cit., p. 89 fol. 4K. Wiedenfeld, op. cit, p. 2014 fol. Berliner Jahrbuch fiir Handel und Industrie 912, I, p. 140. : 5 Berliner Jahrbuch fiir Handel und Industrie, 1912, 1, p. 127. 8 Kartell-Rundschau, 1914, p. 386. TJ. Schdnemann, op. cit, p. 90 fol, YH. Bonlkowsky, op. cit., p. 103! 165, COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 111 were given, under the law, unfair advantages with respect to initial production. A period of overspeculation set in, as a result of which in 1912 more than 100,000,000 marks were invested in the potash industry, which, without this increase, could easily produce ‘double the amount necessary to supply the world’s demand at the prices asked. To remedy these conditions the Federal Council drafted a bill to amend the potash law, while at the same time the Potash Syndicate, in order to prevent any further government intervention, took steps to bind its members not to open new works up to January 1, 1926. As a result of the outbreak of the present war the whole matter has been kept in suspense.? Cartels among dealers.—The development.of cartels has not been restricted exclusively to the sphere of production; in trade also they are developing with increasing success. Dealers’ cartels are found in nearly every branch of industry, some of them, like the coal and iron dealers’ combines, encompassing the whole Empire. Although a majority are but local price agreements, some are organized like the producers’ syndicates with a common central business office. Most dealers’ cartels are in branches of industry in which the producers are also combined. It is impossible to give even an approximate number of these dealers’ cartels, because most of them are local and observe great secrecy regarding the nature of their compacts. Special organization for foreign trade.— Before the war one of the features of Germany’s foreign trade was the extent to which special organized effort was applied by German business men to the development of advantageous export and import business. Associations, cartels, special export selling agencies, special export cartels among allied or complementary manufacturers, active aid by the German financial organizations and by the German merchant marine, together with the support of the Imperial Government—this was the system which had pushed German export trade into all the markets of the world. Equally effective methods were employed in the business of buying cheaply the raw materials that Germany was compelled to import, and in some cases very comprehensive buying combinations with world-wide international branches and subsidiaries were developed to purchase these materials. (See pp. 857-369.) Such organized effort made it possible for the Germans to publish a daily paper in Constantinople, printed in both French and German, for the promotion of an interest in all things German and for the improvement of German trade in the Levant. Similarly it per-“3 Bertolt Bandai, 1913, p. 39. Berliner Jahrbuch fiir Handel und Industrie, 1913, g 2 WB 1914, pp. 106, 195, and 1915, pp. 48, 124. * H. Bonikowsky, op. cit., p. 213 fol. 112 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. mitted the education of promising young Chinese as engineers at schools and universities in Germany at the expense of German business organizations, as well as the establishment of an engineering school in Shanghai with German engineering equipment and German instructors for the training of young Chinese in China in German engineering standards, methods, equipment, etc., all for the fostering of German trade in the Orient. It colonized German business agents all over the world and used German residents abroad to aid the evelopment of foreign trade. EXPORT EFFORTS OF TRADE ASSOCIATIONS.—German trade associations devote special attention to export business. Practically all the more important associations in the manufacturing industries which engage in exporting make this one of the features of their work. The Association of German Machine Tool Manufacturers has made a study of export trade with special reference to the comvetition of American manufacturers and has actively opposed the srade of the latter. The Electrical Manufacturers’ Association has made special studies of the tariffs and commercial treaties of foreign countries. and has obtained many changes in both which have beneted German exporters of electrical equipment. It keeps its members informed of new street railway and power-plant projects in other countries, suggests valuable foreign connections and representatives and performs other functions for the extension of the foreign trade of its members. The Centralverband Deutscher Industrieller endeavors to promote export trade, issues foreign trade directories and bulletins, and supports a bureau for the study of commercial intercourse with other nations and for the preparation of commercial treaties favorable to German trade. German business men have felt the great importance of commercial treaties and in addition to the activities of the Centralverband and other associations there is also a special organization for this particular purpose. It is called the Commercial Treaty Association (Handelsvertragsverein) and has some 9,000 members, including perhaps 150 associations. It publishes a regular paper entitled Deutscher Aussenhandel, as well as special bulletins from time to time, and makes a constant and careful study of German commercial relations. Realizing the value of proper representation at important expositions and fairs, the German export interests prior to the war maintained a permanent exposition commission. This body advised German manufacturers whether representation at any particular exposition would be likely to prove beneficial. When it approved of an exhibit being made it assisted in the preparation, and worked hand in hand with the Imperial Government, which was represented on COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE, 113 the commission, although the latter was not an official body. German ambassadors, ministers, and consular agents were instructed to furnish their services to the commission whenever required. In recent years there have also been a number of purely export associations formed such as the Exportverein im Konigreich Sachsen, Dresden, with over 1,000 members; the Vereinigung der Export-Firmen, Berlin ; the export associations of Frankfort, Bremen, Hamburg, ete. Some of these maintain sample warehouses, distribute catalogues for the members, inform members of foreign trade opportunities, recommend desirable representatives anywhere in the world, maintain credit and collection bureaus, notify members of changes in foreign tariffs and other matters of interest to exporters, provide traveling salesmen, organize trade-getting trips, maintain translation bureaus, etc. Prior to the war there were also special associations of business men to promote trade with particular foreign nations, such as a German-Russian association, a German-Brazilian association, etc. CARTELS IN EXPORT TRADE.—As already said, most of the important sartels engage in export trade, and their organization has been developed with this function definitely in view. This is particularly true of such cartels as the Stahlwerksverband, in which a single selling agency for the members is one of the features of the combination. This permits united action for foreign business, the financing of long advertising and development campaigns in foreign markets, the employment of expert demonstrators and salesmen, and the maintenance of an extensive organization in foreign markets. The close connection of such cartels with the great banks having foreign branches and subsidiaries facilitates the securing of valuable information concerning customers, business conditions, etc., and enables the central selling agency to carry the foreign credits granted. Many cartels have fixed prices for export to particular morkets. Thus in 1913 the enamel-ware combination had a most highly detailed uniform export price agreement, entitled “World Price List” (Welttarif), which made a book of some 300 pages, profusely illustrated, so that each manufacturer understood clearly the prices listed for different articles. Tn other cases special export cartels and selling agencies are mainsained to promote and extend export trade. Thus, the pump manufacturers exporting to Turkey organized a selling cartel which handled all their business in that market. Similarly, before the war the « Selling Agency for the Export of Enameled Ware to China,” located at Berlin, was maintained by the “Verband europiischer Emaillierwerke.” Largely as a result of the activities of this export selling agency, the exports of enameled ware from Germany 97941 ° —16—O0 114 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. fo China increased from 2,205 quintals in 1912 to 6,758 quintals in 1913. The syndicate later established an additional central selling agency to handle its total export business, and was said to be planning separate agencies for individual export districts.! Further examples of the numerous German syndicates that have centralized their export business in this way are the Export Syndicate for Sheet-iron, Cologne;® the Export Cartel for Railway Rolling Material; ® the Spirits Syndicate: * and the German Ammeorium Syndicate, Bochum.’ COOPERATION AMONG NONCOMPETITORS.—In numerous instances groups of manufacturers of noncompeting but kindred products have deen formed for the better extension of foreign trade. The most striking examples of these combinations are those which are alleged to have operated in China prior to the war. In that market it would be difficult for a single firm manufacturing machinery, railway supplies, etc., to represent itself. British authorities state that to remedy this difficulty combinations of complementary German concerns were formed. They say that one such organization embraced 47 engineering firms, besides Krupp & Co., two shipping houses, one marine insurance company, one life insurance company, and one fire and building insurance firm; that it had branches with one or more Chinesespeaking Germans in charge at Shanghai, Canton, Tientsin, Hankow, Yunanfu, Peking, Hongkong, Chengtu, Wuhu, Tsingtao, T'sinanfu, Mukden, and other places, besides 14 other offices in China where Chinese staffs were maintained; that in the several provinces only men who could speak the language and who understood the local customs, manners, and usages were used ; that in addition to the regular staff a number of Chinese merchants were employed as compradores; and that the organization kept in close touch with the local Chinese officials. While the American and British competitors were endeavoring to sell their products individually the Germans began by saving the Chinese trouble. Thus, if there was a mining venture to be exploited the representative of the allied German manufacturers would go to the local governors or parties interested and offer to take the whole job, i. e., to sink the shafts, develop the mines, put in all the equipment required, build any railways or boat lines needed, erect power plants and equip them, put up workmen’s dwellings, and would finance the undertaking, if necessary. The Chinese did not have the rouble of contracting for each part of the installation separately. All they had to do was to take their share of the profits. { Handelsmuseum, 1914, p. 413. * Kartell-Rundschay, 1912, Pp. 438, 440, 481. ¥Kartell-Rundschau, 1911, p, 82, ¥ Kartell-Rundschau, 1914, p. 518. }Kartell-Rundschau, 1914, p. 368. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 115 With these organizations, which were “self-contained,” the Gernans could sell a Chinaman a 5-cent handsaw, or they could develop a province, all within their own circle. British observers state that in their opinion such organizations were one of the chief reasons for the rapid extension of German trade in China, and this 's emphasized by the fact that recently British manufacturers have been forming similar organizations of allied and complementary, but not competing firms, for the development of their trade in the Orient. FRANCE. The general reputation of French products is that they are artizles of special refinement, such as fine dress goods, silke, laces, gowns, millinery, glassware and china, art works of many kinds, wines, liqueurs, etc. Even in the case of French machinery there is often the same feeling that it is of finer technical excellence, of more graceful design and better finished. To a marked degree this is doubtless true. The French have specialized in distinctive creations that appeal to discriminating purchasers, and they have built up and kept a valuable foreign trade in such special lines. At the same time there is an important French foreign trade in manufactures that hold their market because of solid merit and not through grace of Jesign or superior outward finish. While France is an important agricultural producer, it is for the purpose of domestic consumption. In manufacturing France ranks in continental Europe next to Germany. Before the war she was the fourth nation in the world in the production of iron, and the production of silk, cotton, and woolen goods was a most important branch of manufacturing. In the production of the elegant and artistic creations known as ‘Articles de Paris” France surpasses all the rest of the world. Imports and Exports.—In the table below are given the values of the principal imports and exports of France in 1918.1 TABLE O.—Imports and exports of France. 1918. Article Wool........ Coal and coke.. Raw cotton... 01) 1 I: SR Jrains and oily fruits Raw silk........ Yachines, etc... - Ines. conpooans Yang and hides.. Lumber..... Imports. Value (in million francs). 549.1 384.0 577.2 365. 8 387.6 $1.1 7.4 nb 23.9 210.1 Exports. Article. lk textiles. ..-Cotton textiles. 3aW Wool. i voit Jiojhng ape lingerie..... Automobiles... ... Woolen textiles... >hemical products Vines...... aris goods... Skins and hides... Value (in million franes), 385.8 385.5 310.5 252.6 227. 4 220.2 212.8 203.1 201. 5 180.3 l Tableau Général du Commerce et Navigation, 1918, Vol. 1, pp. 50-65. 116 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The general nature of French trade is indicated by the foregoing statement. In 1918 imports of raw materials were valued at 1,946,000,000 francs ($989,000,000), foodstuffs at 1,818,000,000 francs ($364,000,000), and manufactured articles at 1,658,000,000 francs '$332,000,000) ; exports of manufactured articles in that year were valued at 4,183,000,000 francs ($837,000,000), raw materials at 1,851,-000,000 francs ($370,000,000), and foodstuffs at 839,000,000 francs ($168,000,000). Promotion of trade by the Government.—Promotion of trade b) the Government is a definite tenet of French policy. It is applied tc commercial treaties, tariff provisions, maintenance of commercial museums, participation in subventions to chambers of commerce, expositions, maintenance of national commercial institutions, -encour-1gement to trade associations, ete. Tarirr pPrOVISIONS.—The French Government by means of its tariff takes a protective attitude toward its industries, such as agriculture, metallurgy, spinning and weaving, sugar manufacture, ete.* In 1910 the French tariff law was revised, in general the duties being increased. The maximum or general tariff rates were increased with a view to inducing countries which had no commercial conventions with France to seek such conventions in order to have the advantages of minimum duties. By means of bounties, subventions, and drawbacks the Government stimulates French industry to no inconsiderable degree. In 1912, for example, it distributed more than 2,000,000 francs in bounties for sericulture, the growing of flax and hemp, and olives; more than 2,449,000 francs were paid in bounties to silk spinners. Moreover, in certain cases raw materials which ordinarily are subject to duty are admitted free, provided they are to be transformed and reexported. In 1912 temporary admission was given to 17 Jifferent classes of articles, the total value of which was 182,600,000 francs, as the result of which 18 different classes of articles were reexported, valued at 259,000,000 francs ($52,000,000). The chief imports and reexports of this nature were as follows: —_— = J RE Sp — LG. Schelle, Le Bilan du Protectionnisme en France, 1912, p., 31. * The London Economist (London), Apr. 2, 1910, p. 725. d Tableau Général du Commerce et Navigation, 1912, ». 80, COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 117 TABLE 10.—France, imports and reexports, 1912. Imports. tem’ Nheat.......... Crude olive oil........ Jnbleached silk (woven).. Spun silk. veeeiaccannnn. [ron forge pigs. .-Cast iron... Lead......-All other. . Total Talue (1n million ‘rancs). 31.¢ 16.0 14.7 8.¢ 0.8 8.8 9.1 33.2 %,.. 8 Reexports. tom. Flour and foodstuffs. . Refined olive oil. . ae Noven silk, dyec wine 3pun «tk, dyed... o.oo... iwi Derivatives of pig and cast iron ......... Machines, ete. ..ovveieniriinnrcncannas Articles made from iron bars...... aw AN other... Total Value (in mullion francs). 72.3 17.4 16.8 11.4 h3.4 4.8 12.1 60.8 259.0 CuaMBERS OF COMMERCE.—The chamber of commerce in France seems to have a marked influence in the business of the country. According to the law of 1898 every department in France must have at least one chamber of commerce, established by Government decree, such a body being required to furnish the Government with information concerning industrial and commercial matters, to offer suggestions as to how industry and commerce may be promoted, etc. There are now about 155 such institutions in France. They establish and manage various institutions, such as warehouses, permanent exhibitions, departments for export information, associations for the encouragement of exports, and for locating young Frenchmen in foreign countries. Under the supervision of the chambers of commerce four transportation offices have been established which supply information along business lines and assist in protecting business interasts with regard to rail and water transportation.* In like manner chambers of commerce have been established in foreign countries and the colonies. The chambers of commerce are sonsidered as representatives of the Government; they render annual reports to the Minister of Commerce, they regulate the stock and produce exchanges, issue certificates of origin for exported goods, etc.” Combinations.—France has not developed cartels or syndicates to the extent that Germany and Belgium have, yet of the various torms of combination for the regulation of production or sales there are in France perhaps 100 to 150. These combinations embrace coal and iron mines, iron and steel products, plaster, cement, superphosphates, sulphuric acid, petroleum, dynamite, flour, textiles, silk, tiles, dye works,® and horticultural and floricultural products. Comparatively speaking, the number of such combinations in the country is not 1 Archibald J. Wolfe, Commercial Organizations in France, Bureau of Foreign and Deoxmestic Commerce, Special Agents Series, No. 98, 1915, pp. 10-11, 28-29, and 46. 2 Ibid., pp. 30 and 47-48. 2 J. Carlioz, Les Comptoirs de Vente en Commun, Paris, 1905, p. 118. | 0. Longuet, Des Syndicats d'Exportation en France, Paris, 1909, p. 86 fol. 118 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, large, despite the fact that France is in close proximity to countries where combinations have grown and flourished. This condition is probably due in large part to the character of the industrial products of France. In the industries whose products may be produced as easily by one factory or mine as another, combinations have flourished. Such, for example, are coal and iron mining, the production of pig iron, iron and steel rolled products, wrapping paper, petroleum, etc. But a large part of the French products, especially those which are exported, consists of manufactures de luxe, fancy articles, etc., which appeal to personal taste and do not conform to a type. It is difficult to bring such industries together in a central selling bureau, as the manufacturers are unwilling to give up their clientele and the individual quality of their products, or their prand. The French do not like to abandon their individual designs and trade-marks for the generic term “ Made in France.” There are exceptions, however, and even in the textile industry, where individual mark and clientele are considered above everything else, some of the combinations have been successful, as among the manufacturers of flax in the Department of Nord, the cotton spinners in the Vosges, and the wool combers at Roubaix. At Lyon a silkfinishers’ combination was organized. Tt still remains to be determined, however, whether those products for which France is so well known abroad can be successfully placed on the market under the regulations of a comptoir or cartel. All efforts, for example, to centralize one of the principal industries of France, that of wine growing, have thus far failed; the sale of gloves is not conducted by a central selling agency; and that of many fancy articles is free of the influences of combination. In discussing this phase of the subject the Annales des Douanes. under date of December 15, 1915, remarks as follows: The type of the syndicated product is coal, and that is why the Rhenish-Westphalian syndicate (of Germany) in 1903 absorbed 98.7 per cent of the total production of the basin. On the other hand articles of luxury or fancy articles do not enter the cartel. They do not depend immediately upon an industry’s organizing or not organizing in a cartel. The existence of a legislative obstacle, like that which certain articles of our code oppose to the formation of cartels, is only one of the elements in the case. The formation of the cartel is essentially bound up with production by series. In France its adoption would immediately run against two obstacles, the character of our industry and the manner in which we dispose of our products. We are in a state of inferiority face to face with Germany so far as common products are concerned, and our individualistic character, as well as our legislation, opposes the formation by our industrials of associations of this kind. While the fear of certain provisions of the penal and civil codes undoubtedly has impeded the progress of these combinations in COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 119 France, the courts are more favorable to them than formerly and have declared certain forms to be altogether legitimate. (See pp. 121-122.) Fors or CompinatioN.—The term “syndicate” is used in France in a generic sense to indicate all kinds of combinations, whether commercial or industrial organizations for fixing prices or selling through a central agency, or associations of employers or employees for regulating conditions of employment. It is only with producers’ industrial syndicates that this discussion deals. Of such organizations there exist in France various forms, most important among which are the simple trade agreement or cartel, the selling company or comptoir, and the merger. Mergers—This form of combination has not been as popular in France as in England and the United States, though some notable examples of it have attracted considerable attention. In the electrical industry, for example, four combinations have developed, which by means of banking concerns and holding companies have come to dominate the whole industry in France, including the development of electrical power and traction companies and the manufaeture of electrical appliances. La Compagnie de Saint-Gobain, a notable example of consolidation in the glass and chemical industries, is described later. (See pp. 125-126.) A merger of about 15 manufacturers of paper was effected in Trance about 15 years ago, but it has not secured a monopoly of the product. The same is true of the silk industry, where 17 manufacturers of unbleached and dyed silk merged in 1898 under the title of La Soie and attained considerable success in France and abroad. but never became a dominant factor in the industry.® Cartels—Most combinations in France have the simple form of a trade agreement or cartel, under which each concern preserves its administrative, technical, and commercial independence.’ The ordinary French cartel has no central selling agency. Each member takes care of his own clientele, makes his own contracts, and ships under his personal invoices; but he does this within the price and selling limitations of the agreement. Such an organization has its general assembly and appoints committees to supervise certain phases of its operations. Usually there is a head office to which members report contracts, sales, etc., and to which their accounts and correspondence must be open. Usually production is not limited, but prices for certain territories are rigidly set, sales are limited to the 1p, Passama: L'integration du Travail. Formes Nouvelles de Concentration Tndustrielle, Paris, 1910, pp. 14, 55-57. 2 J. Chastin, Les Trusts et les Syndicats de Producteurs. 8. Laur: De ’Accaparement, Paris, 1900, vol. 3, pp. 420-429. ¢ Revue économique internationale, vol. 51, pp. 109-110. » Jules Gernaert: Associations industrielles et commerciales, D. 15. 120 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. quotas assigned, and selling territory may be divided according to the exigencies of the industry as related to imports and exports, and penalties are imposed for the violation of the regulations. This form of organization is less effective than that of the comptoir, or central selling agency. It can not so well enforce the obligations of the agreement; it has less cohesion, and is consequently more easily disrupted. As representing this form of organization in France the Office Statistique des Houilléres du Nord et du Pas-de-Calais, or the coal cartel ; the Comité Francais de la Filature de Coton, or the cottonspinners’ cartel; and the Syndicat des Filatures de Lin, de Chanvre, ot d’Etoupe de France, or the flax, hemp, and tow syndicate, have attracted a good deal of attention. The comptoir—The comptoir is a form of industrial combination which has been effectively developed in France. It has largely covared the iron and steel industry, has long been a dominant form of organization with the salt manufacturers,’ and has been adopted by horticulturists and floriculturists who export garden products and Aowers to the neighboring countries.? The comptoir is an incorporated trading company, composed exclusively of the manufacturers who turn over to it the sule of their products. The purposes of such an organization, as defined in its statutes, are usually the purchase from the members and the sale to customers of a specified product, either in France or abroad, or both. The capital stock is generally small as compared with the aggregate capital stock of the component companies, and is divided exclusively among the members; and it is forbidden for one holder to transfer his shares to another without the permission of the gensral assembly. The comptoir usually has at least three administrative bodies: The general assembly, composed of all the stockholders; the administrative council; which is chosen by the general assembly from its own membership for establishing prices, contracts, etc.; and the commissioners of accounts and direction. The comptoir does not ‘usually agree to sell all that a member san produce, but a quantity is fixed which it is deemed will satisfy the demand, and this is apportioned among the members, the latter agreeing to make no sales in the territory reserved to the comptoir. Prices are fixed by the comptoir. It makes no profits, but merely maintains the selling price at a remunerative level, the profit going to the producers. Orders are assigned to the members according to geographic position, cost of transportation, and previous commercial relations of producer and consumer. The comptoir audits the books 1 De Leener, L'organization syndicale des Chefs @’industrie, Bruxelles, 1909, pp. 64-66. » Longuet, op. cit., Chs. IV and V. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 121 of its members, and they in turn have the right to examine the accounts of the comptoir. In making shipments the producer sends an invoice to the comptoir, at a price provisionally established by the general assembly. The comptoir remits to the member and sends the purchaser another invoice containing the actual selling price. The producer’s invoice price is not final, but is adjusted at the close of the year, according to the expenses of the comptoir. Infractions of the rules of the comptoir are penalized, and members are required to deposit a collateral to insure their payment when imposed. Should a member wish to appeal from the imposition.of a fine, provision is made for a court of arbitration to act upon the appeal. Ordinarily the purchaser may make his choice between long-term and prompt payments, the latter carrying the benefit of a discount. In the majority of cases the purchaser pays 90 days from the end of the month of delivery, or one month from the end of the month of delivery with 2 per cent discount. Some comptoirs give no discount. GOVERNMENT REGULATION OF COMBINATIONS.—Irance attempts no special regulation of combinations other than such as may fall under the sections of the penal and civil codes, which made provisions against monopolies long before the modern form of industrial combination had become known. The principal provision of the Penal Code against cartels is found in article 419, namely: Arr. 419. All those who by false or calumnious reports sown by design in the community, by offers of prices higher than those asked by the vendors themselves, by union or coalition among the principal possessors of the same merchandise or commodity not to sell or to sell at a certain price only, or by whatever fraudulent ways and means, shall have effected the advance or decline of the prices of commodities or merchandise or of public securities above or below the prices which the natural and free competition of trade would have fixed, shall be punished with imprisonment of one month at least or of one year at most and with a fine of five hundred francs to ten thousand francs. The culprits may, further, be placed by Jecree or judgment under the surveillance of the superior police during two years at least and five years at most.? But as far back as 1830, and again in 1834, the court of Paris held that it was no offense to agree to maintain a price, but not to raise it.> Within the past few years a number of cases have been 1 Carlioz, op. cit, pp B59 to 70. 2 Report of the Commissioner of Corporations on Trust Laws and Unfair Competition, Washington, March 15, 1915, pp. 269-270. 3 P. Obrin. Le Comptoir Métallurgique de Longwy, Paris, 1908, p. 177. 122 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, ‘ried involving the rights of comptoirs to limit production and fix prices, the courts generally upholding the comptoir.? France attempts no compulsory organization of syndicates such as those under consideration ; the Government itself, however, maintains a very rigid monopoly of tobacco and matches. Exporr comprorrs.—As has been stated above, the most important exports of France do not readily lend themselves to combination among producers. It happens, therefore, that purely export comptoirs exist for the most part in industries in which French exports do not take a prominent part in the world’s international trade, but some of those developed have been quite successful in extending French foreign trade. In the iron industry the Comptoir d’Exportation des Fontes de Meurthe-et-Moselle operates in close connection with the Comptoir de Longwy for the exportation of pig iron. . By the end of the third year of its operation this exporting bureau was handling nearly three-fourths of the French pig-iron exports. Within recent years a special export comptoir for the sale of the various manufactured iron and steel articles controlled by the separate comptoirs in this industry has been established and has quintupled the export business of its members, having been able to gain a footing for them in a number of South American countries. Combinations in particular industries. Pie tron.—France produces about 5,000,000 tons of pig iron a year, of which about 3,500,000 come from the department or region of Meurthe-et-Moselle in the northeast, that is to say, about 70 per cent of the total. Operating in this region is the Comptoir Métallurgiqué de Longwy.® (See p. 225.) It has a membership of 18 concerns of which the aggregate capitalization is about 177,000,000 francs.* The capacity of their plants is more than 30 per cent of the total French production and about 45 per cent of that of the region in which they operate. Figures for the annual domestic sales of pig iron in France are not available, but they are probably not very large, comparatively, as many concerns which produce pig iron consume their output by converting it into other iron and steel products. Hence, the fact that the comptoir sells between 350,000 and 400,000 tons of pig iron annually probably gives it a dominant position in the market. . This comptoir has been in operation since 1876. It is alleged to have effected many economies in shipping so heavy a product, and to have cut down general expenses,” besides maintaining prices. 1J. Carlioz, Comptoir de Vente en Commun, Paris, 1905, pp. 38-55. 2P. de Rousiers, Les Syndicats Industriels de Producteurs en France et & 1'Etranger, Paris, 1912, p, 222. 8 Chastin, op. cit, p T3. $P, Obrin: Comptoir Métallurgique de Longwy, p. 221. 8 P. de Rousiers, op. cit, pp. 210 and 211 COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 123 IroN AnD sTEEL PrRODUCTS.—A much larger per cent of iron and steel products is found under control of various organizations, as many of these are placed on the market instead of being consumed by the producers. The comptoir for beams includes all the steel-producing cénters in France and comprises all the important producing concerns. The basic Bessemer (Thomas) steel comptoir comprises the most important producers in France; the hinge-plate comptoir has as members svery important producing concern in France but one. There are also axle and carriage-spring comptoirs, and others, each handling a special product. The rail syndicate, prior to the war, was a member of the international rail pool. In other industries, notably in that of plate glass, the comptoir form of organization has been established, but none of them seems to have attained such prominence as those in the iron and steel industry. Suvrenur REFINING.—The majority of the sulphur refiners in France made an agreement in 1909, limiting the output of each to a quantity named in the agreement, and providing that all their crude sulphur must be bought from an importing company which they formed. On any sulphur which a refiner might buy outside, he had to pay the importing company 5 francs a ton; and for any bought beyond his quota, from whatever source, he had to pay 15 francs a ton. The combination came to an end in December, 1912, but most of its members have still an understanding the exact nature of which is not known. Moreover, consolidation has proceeded so far that 10,000 tons out of an annual consumption of 95,000 tons in France are refined by two concerns! Tae ALUMINUM INDUSTRY.—During the closing years of the nineteenth century new processes of production caused the prices of aluminum to fall to the point where it was possible to use the metal widely for industrial purposes. In 1910 all the French producers combined for the purpose of selling in common both at home and abroad, all the sales being made through the Metallgesellschaft, Frankfort-on-the-Main. (See p. 358.) The combined output of the concerns was then about 15,000 tons annually, and a high import duty gave them protection for an increase? The French producers operate under the title of the Société Aluminum Francaise. In October, 1912, an international syndicate was formed. It included all the prominent producers in Europe, especially France, 1 See Consul General Gaulin’s report, Pt. II, p. 108, * Weltwirtsthafts Archiv., 1913, p. 115. * The membership was as follows: Société Electro-Métallurgique Francaise, Compagnie des Produits Chimiques d’Alais, Forges, Pecheiny, Société d'Blectro-Chimique, and So-:lété des Forces Motrices de I'Arve, (Kartell-Rundschau, 1911, pp. 82, 85.) 124 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Switzerland, and England, and it made an agreement with the Canadian producers. Société GENERALE DES PapfrermEs pu LiMousiv.—In 1899 seven manufacturers of wrapping paper, representing a'total production of 15,800,000 kilograms, were incorporated for 65 years® under the name of the Société Générale des Papéteries du Limousin, with a capital stock of 5,074,000 francs. Afterwards eight new members, including the manufacturers in Dordogne and Corréze, were drawn into the combination, so that the trust secured control of about 80 per cent >f the production in its reigon.® This organization in contrast with its American models has a small capitalization of only 5,000,000 francs. The main office of the sombination is located at Saint-Junien (Haute-Vienne). The affairs of the company are administered by a council of at least seven and not more than 12 members, who hold office for six years and may be reelected by the general assembly. This latter body is composed of all the stockholders, and its decisions are obligatory upon all members. There is also provision for one or more commissioners, who have the rights of verification and surveillance over members. The paper trust does not seem to have affected prices to a very sreat extent, on account of the competition of factories in its own territory which are not members, and of producers in other regions, but it does seem to have increased the profits of its members by specialization of work and reduction of the price of raw materials. The product of the factories in the combination is heavy wrapping paper, used principally by sugar refineries.? Sarr—French salt works are, or have recently been, nearly all controlled by four combinations—Association des Salines de l'Est, Association des Salines du Midi, Comptoir des Sels de Bayonne. and Société Saliniere de 1’Ouest. These divide the country into zones, and secure each zone to one of the four free from competition of the others. Before 1901 the salt marshes were in the hands of small producers. They had no capital, and were unable to employ labor in their salt works outside of that furnished by various members of the family. The price of salt by 1901 had fallen to 5 franes (97 sents) a ton. At this price it is estimated that a full day’s labor netted each working member of the family 7 or 8 cents. The whole profit in the business went into the hands of the salt merchants. who acted as intermediaries between the producers and the retail-1 See Consul General Lay’s Report, Pt. II, p. 82. ? Report of the Industrial Commission, Vol. XVIII, p. 81, 3 Chastin, op. cit., p. 87 COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 125 ors. In 1901, at the instigation and with the help of the Association des Salines de ’Est, whose own market was depressed by the competing low-priced salt from the western salt makers, a selling company, called the Association Syndicale des Salines de Ouest, was formed. This company brought together about nine-tenths of the salt producers of western France. The plan worked for four years, but in 1905 and 1906 the competition of unsyndicated producers brought the price below 15 francs per ton, which was the price at which the company had agreed to take the product from the syndicated producers. The company was unable to fulfill its obligations. The Association des Salines de I’Est came to its aid, and a new company, the Société Salinitre de I’Ouest, was formed, which succeeded to the business. The new company offered to buy the output of syndicated as well as unsyndicated producers at 15 francs a'ton. This agreement came to an end in 1911; but bad weather greatly reduced the output of salt, and the price rose to 23 francs a ton. The i5-franc contracts were therefore not renewed. War conditions appear to have raised the price enormously. In November, 1915, the price to the producers was reported as 60 francs a ton. La CoypacNie bE St.~Goparn.—Founded 250 years ago as a plateglass manufactory, La Compagnie de St.—Gobain now is not only one of the chief producers of plate glass in the world, but has engaged in the manufacture of chemicals, and in that line is the chief producer in France. It is international in character. About two-thirds of the establishments owned by the company are located in France, the remainder being in Germany, Belgium, Italy, Spain, Austria, and Bohemia. The branching out of this concern into other lines than plate glass appears to have been the result of a policy of securing control of sertain raw materials essential to its manufacture of glass: In pursuance of this object it established or bought works for marketing the various necessary chemicals, and it bought large tracts of forest land as fuel reserves. It has followed the policy of establishing a monopoly along chemical lines by either purchasing competing glass and chemical concerns or entering into agreements with them. For a more detailed description of its operations, see pages 293-294. It was a prominent member of the international plate-glass syndicate, which existed prior to the war. Besides this international affiliation, it established, with three other producers, a French plate-glass comptoir in 1903, to continue for 15 years. This comptoir presents the peculiarity that, while all sales are made through the central bureau (8 rue Boucry, Paris), each member retains his particular mark of manufacture on his goods. Hence four distinct distributing 1 See Consul Patton's report, Pt. II, pp. 118-114, 126 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, depots have been established in Paris, and purchasers make their choice of products. COMBINATION AND CONCENTRATION IN OTHER INDUSTRIES.— Besides the foregoing combinations, which have been examined in more or less detail, there exist or have existed in France many others in the various industries. The lace manufacturers of Calais, for example, formed an exporting comptoir for handling the foreign sales of their 50 or more factories. In the Department of Seine-et-Oise the syndicates of Pecq, Bonniéres, Bennecourt, and Limetz are agricultural organizations for centralizing shipments to customers. The Syndicat des Maraichers de Tourlaville (market-gardeners) was formed for the sale of vegetables in common, and the Syndicat des Fermiers fraisieristes de Plougastel-Daoulas for the sale in common of strawberries.’ In the dye-color industry, in 1910, there was more or less concentration of the business, two of the leading concerns being the Manufacture Lyonnaise de Matitres Colorantes and the Compagnie des Matiéres Colorantes et Produits chimiques de Saint-Denis. In the case of perfumery, there was a tendency a few years ago toward vertical concentration along two lines. The great perfumery houses, such as Piver, Gallet, and Chiris, invested in large farms for growing aromatic plants, and also sought to establish retail houses. Both attempts failed; chemical essences, with or without a mixture of floral essences, are being so widely employed that the manufacturers find it more economical to purchase their materials from chemical concerns; the establishment of large department stores set at naught the efforts of the manufacturers to carry on retail branches. Piver tried to operate six stores in Paris, but was compelled to close them. Hence, the manufacturers content themselves with selling directly to coiffeurs and to the large stores through their own agents. They also sell at retail from their individual headquarters. The great shoe manufacturers in France in 1910 had formed important retail companies in common, incorporated with capital of from 1,000,000 to 5,000,000 francs, and established numerous retail stores where the goods of all of them are sold. Thus, the concern known as the Incroyable has 20 branch stores and Fayard 30. They found this system economical for the manufacturers, and held that when a purchaser had been displeased with shoes of one make and tried another brand, the manufacturer of the first make still had a chance to get the trade of this customer, on account of the fact that he was a stockholder in a number of these retail concerns, and in seeking a company of a different name the customer might still pur-1C. Longuet, Des Syndicats d'Exportation en France, Paris, 1909, pp. 78, 80, 81. *P. Passama, Formes Nouvelles de Concentration Industrielle, Paris, 1910, p. 48. 4 Ibid, D. 54. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 127 chase shoes made by the same manufacturer. Some of the French and many of the American and English concerns in France operate their own retail stores. BELGIUM. Prior to the war Belgium was an important competitor of much larger countries in world markets for many products. In the case of several articles Belgium had more trade in South America, for example, than did the United States. To an important degree, this success was due to effective organization. Nature of Belgian products.—The population of Belgium was divided according to occupation approximately as follows: Manufactures and commerce 53 per cent, agriculture 21 per cent, all others 26 per cent. More than half the total area of the country was under cultivation. Grain, potatoes, and sugar beets were grown in great quantities, and on the dry lands of the eastern part of the country sheep were pastured to such an extent that wool had become one of the chief articles of Belgian export. The chief source of the prosperity of Belgium, however, was her deposits of coal. Her chief products were those of her mines and factories; the principal industries being artificial silk, glass, iron and steel, lace, linen, and gloves. Commercial organizations.—In 1907 about 17 of the Belgian cities had chambers of commerce,? which were established by the communal councils for the purpose of studying economic questions. The chambers rendered annual reports upon the situation of commerce and industry, and gave advice thereon to the communal and national governments. The commune placed a certain sum of money for expenses at the disposition of the chamber of commerce. Belgium began to take part in Chinese trade only about 20 years ago, but this trade grew to such an extent that a Chinese-Belgian Chamber of Commerce was formed in Brussels, having as its object the grouping together of all interested industries, and the development of their relations with the Orient. In like manner the Société d'Etudes Belgo-Japonaise was maintained to promote Belgian trade in Japan, and the Société Belgo-Russe and the Société Belgo-Persane to establish better trade relations with Russia and Persia, respectively.* There existed in Belgium also travelers’ associations and clerks’ clubs, which founded special courses in the schools for the study of “1p, Passama, Formes Nouvelles de Concentration Industrielle, Paris, 1910, pp. 72 ny ann des Chambres de Commerce et Chambres Consultatives des Arts et Manu. factures, France, 1907, pp. 436-437. 3 Chambre de Commerce et des Fabriques de Gand, 1914, pp. 5-7. $ Export Trade Exploitation, Bureau of Manufactures, 1911, pp. 26 and 27. 128 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. commerce and languages, to the expense of which the Government sontributed a third. Promotion of foreign trade.—Belgium had many commercial schools which were subsidized by the State, such as the High School of Commerce at Antwerp, the Commercial and Consular School at Lidge, similar institutions at Mons and Louvain, and other cities. These and various industrial institutions the Government subsidized with more than 5,000,000 francs a year.? A system of traveling endowments which were awarded annually to graduates of the Belgian universities and commercial schools was maintained, whereby the recipients were sent abroad to study economic conditions and render reports on the results of their studies? The Belgian Government maintained a very elaborate commercial museum which was a division of the bureau of commerce and consulates of the foreign office, and had at its service the entire consular and diplomatic staff of the Government. The museum collected samples of the products of foreign countries and kept them on exhibition for the benefit of Belgian business men. Two lines of goods were collected—those which Belgium could export and those which it could import to advantage. Special appropriations were made for the use of consular officers in purchasing these samples. The museum also collected samples of goods that superseded those of Belgian origin, showing why the domestic goods failed to succeed abroad, on account of poor packing, failure to be finished according to the taste and usage of foreign countries, etc. An elaborate library was maintained by the museum; railroad, textile, and agrisultural experts were retained ; and commercial agents were stationed in the most important manufacturing centers to report on the offerings and needs of manufacturers.* As far back as 1865 Belgium adopted the unrestricted mostfavored-nation policy with regard to Germany, whereby every favor, every immunity, every reduction in import or export duties, which one of the high contracting parties accorded to a third power, was immediately and unconditionally extended to the other. Similar treaties and special treaties looking to the interests of Belgian commerce have been made with more than 40 different nations, including the United States, 11 South American countries, and all the principal nations of Europe, China, and Japan.® 11a Belgique Minist2re de I'Industrie et de Travail, 1905, p. 394. 2 Annuaire Statistique de la Belgique, 1912, p. LXIIL 8N. I, Stone, Promotion of Foreign Commerce in Europe and the United States, 1907. p. 16. t Ibid., pp. 16 and 16. } Fisk, International Commercial Policies, 1911, p, 171. , VPraités de Commerce et de Navigation. 8rd ed., Novembre, 1900, pp. 1-427. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 129 Forms of combination.—~That form of industrial combination which had gained most headway in Belgium was the comptoir, or sentral selling agency, such as exists in France. The looser form of cartel agreement and the merger had not made progress comparable with that of the comptoir, or “syndicat,” as it is generally called in Belgium.* The comptoirs were in many cases more highly developed than they are in France. Just as in that country the comptoir fixed the price at which it took the goods from the producer and also fixed the price at which it sold them to the consumer, apportioning the total sales among the members and dividing the profits among them, so the comptoir in Belgium did; but it also took a further step and placed a limit upon production, closing down operations for a certain period frequently being a means to this end. So great had been the growth of such combinations in Belgium that almost every important industry felt their influence. Government regulation of combinations.—Article 6 of the Civil Code of Belgium and article 310 of the Penal Code exercised a restraining influence upon combinations in the Kingdom, the former providing that conventions contrary to the laws made in the interest of public order might be revoked and the latter forbidding interference with the free exercise of industry. Article 811 of the Penal Code provided punishment for those who fraudulently raise or lower prices. However, the Belgian combinations seem to have had little trouble with the law. The state exercised no immediate supervision over them, attempted no fixing of prices itself, and had not made the formation of any industrial syndicates a matter of compulsion. In those cases where the state was a customer of a syndicate, it took measures to impose moderation upon the combination by inviting bids from foreign concerns when the domestic price seemed too high. Coal industry.—In the coal industry a number of combinations were formed. Each mining basin had its combination by which prices were fixed, production limited, and selling zones established. These regional syndicates in turn entered into interregional agreements respecting prices which were to apply to common markets, and rising above these was the Société Générale de Belgique, which was national in extent.® The operation of these svndicates is discussed in more detail on page 330. Steel industry.—In the steel industry the Comptoir des Aciéries-Belges was the dominating factor. Numerous comptoirs handling 1 De Leener, L'Organisation syndicale des Chefs d’'Industrie, 1909, Vol. II, p. 211. "Ibid. pp. 544, 548. ‘De Leener, op. cit, Vol. I, p. 88. 57941° —168—u10 130 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, various steel products were gradually brought into its membership antil it controlled the foreign and domestic sale of semifinished steel, rails, beams, ete. Every Belgian steel works manufacturing such products was a member of the comptoir. Many of the steel products not comprehended by this comptoir were controlled by separate organizations, such as the syndicates for tires and axles. for steel rods, steel moldings, etc. The activities of this and other Belgian steel combinations are discussed in detail later. (See p. 224.) In 1908 nine Belgian firms combined and formed the Consortium Belge-Japonais for the purpose of developing their business relations with Japan. The firm of Mosle & Co., Ltd., of Tokio, was made the common agent in Japan, and the Société Cockerill for Europe. The products of this combine included locomotives, tenders, war material, rails, tubes, explosives, and various iron. steel, copper, and zine products. Glass industry.—Belgium in some respects led the world in the production of glass, and syndicates were formed in each particular line of glass manufacture. The Belgian plate-glass manufacturers were members of the international plate-glass syndicate. The Comptoir d’Exportation des Verres & Vitres, or window-glass comptoir, was a highly developed organization for exporting this product. I'he goblet manufacturers were syndicated, as were also the makers of vials, and the bottle makers. Other industries.—About four-fifths of the cotton spindles of Belgium were controlled by the Association Cotonnitre de Belgique, which was looser in organization than the comptoir form of combination, but which sought to adjust prices. The Association de Fabricants Belges de Cement Portland Artificiel was a selling comptoir, all sales being made through its medium, prices being fixed, and selling quotas assigned. Still other industries in which such organizations existed were chemicals, pottery, porphyry, granite, marble, phosphate rock, and foodstuffs. ITALY. Nature of Italian products.—Italy has always been an agricul-‘ural country. Among its chief products are wheat, Indian corn, ax, hemp, silk, olives, oranges, lemons, and grapes. As an exporter of wine Italy stands next to France. Italy has no coal mines, but is rapidly developing its possibilities in water power. Sicily produces a large part of the world’s supply of sulphur, Carrara is famous for its marble, borax is found in 1 De Leener, op. cit., Vol. I, pp. 120-123, B "Japon et Belgique, 1908, p. 8, fol. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 131 Tuscany, and small quantities of petroleum and lignite in the Apennines. The country is poor in other minerals, except what are found in the islands of Sardinia and Elba, where zine, lead, and iron are mined, and smelted with imported coal. Ttaly, especially the northern part, is advancing very rapidly as a manufacturing country, due to the development of water power. The chief industries are textiles—silk, cotton, wool, and flax. All but the first are largely consumed at home, but that, together with raw silk, makes up a large part of the exports. Imports and exports.—In 1918 the imports were valued at 3,645,600,000 lire, and exports at 2,511,600,000 lire; imports being thus nearly 60 per cent of the total value of the foreign commerce of the country.! The following table classifies the imports and exports of Italy for the year 1913, and shows the percentage relation of the various classifications to the total: TABLE 11.—Imports and exports of Italy, by classes, 1913.2 Class. Materials for industrial use: Raw, .....coou- TT Semifinished.... wy Manufactured g00dS.....eeeuaeennnns Foodstuffs and living animals... Total Imports. Value 1,000 lire). Per cent. 391, 459 699, 641 851,937 202. 802 38 10 or 0 Exports. Value | 11.000 lira). Per cent. 360, 672 530, 444 798, (91 T62 43° el a IN 4 Total. Value 1.000 Lie). | Per cent. ,752,131 "290, 085 650, 023 465’ 034 28 21 27 24 100 6, 107,78 1 Movimento Commerciale del Regno d’ Italia. 1913, Vol. I. p. xxx vi. The table shows that raw materials constituted the class of imports of greatest value, with 88 per cent of the total, manufactured goods standing next at 28 per cent. In exports manufactured goods constituted 32 per cent of the total, foodstuffs and living animals 80 per cent, and semifinished materials 24 per cent. Movimento Commerciale del Regno d'Italia, 1918, Vol. I, p. xxxv. [32 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, The following table indicates how the 10 most important articles of Italian import and export rank according to value: TABLE 12.—Principal imports and exports of Italy, 1918.2 Articles. Minerals, metals, ete....... | Broads, 00. co oiig meme Stones, glass, 6tCoveennnnnn.. SOHEOR, op vos wane. ww smmame Mle ccs cus i Wool, hair, etc. ............ Animals and animal prod-Ck... o.oo caaall Wood and straw... .... .. SKINS. «eter cee rrananas “hemieal products.... ” All other Total...... Imports. Value. | Per cent. Willion lire. 578.0 568.9 175.6 389.4 222.6 202.4 15.9 15.6 13.0 10.7 6.1 5.6 189.9 172.5 151.8 147.2 547 2 5.2 " 0 Avticla. Jereals and vegetable products’ 5517 SS, Animals and animal products Spirits, beverages, and oils.. Hemp, flax, jute, etc. . ...... Stones, glass, 4C.u.ne.eo ua... Minerals, metals, and their products. . earn “hemical products... .. All other. Tata Exports. Value. | Per cent. Lillinn lire. 530.0 473.3 256.4 246.4 161.2 109.2 108.7 21.1 18.8 10.2 9.8 8.4 4.3 4.3 105.8 85.8 78.4 356.4 4,1 3.4 3.1 14.5 100.0 511.6 t Movimento Commerciale del Regno d'Italia, 1913. Vol. I. p. xx%v. Of the eight leading nations of southern and central Europe, for the period 1904-1913, inclusive, Italy shows the greatest rate of in-:rease in imports; the increase of 1913 over 1904 being 94 per cent, against 89 for France, 81 for Belgium, and 68 for Germany. In exports the increase in the same period was 60 per cent, placing Italy fourth in rate of increase, after Germany 93 per cent, Great Britain 75, Belgium 70.1 Drawbacks.—For the encouragement of industry, the Italian law provides for drawbacks on the temporary importation of goods, raw or semifinished, which are to be transformed or altered and then reexported, and also for the exportation of goods which are to be similarly treated in foreign countries and reimported.? In 1913 such temporary imports amounted in value to 95,083,019 lire, and the value "of the reexportations to 159,087,378. The greater part of the temporary .imports were raw materials, valued at 78,081,864 lire, the most important being wheat, iron and steel, and sugar. Of the semifinished importations, valued at 22,001,155 lire, the chief were certain forms of silk, straw, etc. The temporary exports were semifinished products, chiefly silk, valued at 20.929.968 lire. and :ereals valued at 24,306 lire’ Subventions.—The Italian Government promotes industry and commerce by bounties and subsidies for expositions, agricultural purposes, olive raising, maintaining an office of commercial information, chambers of commerce, etc. In 1913, for example, 16,500 lire were provided for a bureau of commercial information, 15.000 lire for t Movimento Commerciale del Regno d'Italia, 1918, Vol. ! Leggi e Regolamenti sulle Importazioni ed Esportazioni '* Movimento Commerciale 1913, Vol. I. pp. ccxxx—cexxxil I, p. xxxiii, Temporanee, pp. 7. 55. 56. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 133 expositions, 218,000 lire for chambers of commerce. Commercial and industrial schools secured in contributions and subsidies 2,352,800 lire, in addition to which various extraordinary subventions were made.? Business organization.—The system of chambers of commerce and industry in Italy is regulated by law. Such chambers were instituted by the law of 1862, their central offices and peculiar territory being established by royal decree, and their purpose, as defined by the later law of 1910, being to represent before the government the commercial and industrial interests of their respective districts and to develop commerce therein. Among other duties, these chambers of commerce study commercial problems and present suggestions for their solution to the Government; at the reouest of the Government they collect and furnish statistical data upon the commercial situation in their districts; they appoint arbitrators in commercial disputes; they control the stock exchanges; by authorization of the minister of agriculture, industry, and commerce, they may assume direction of the commercial museums; they offer premiums for the encouragement of commerce and industry; they provide for institutions of commercial instruction, and organize industrial and commercial expositions at home and abroad. Regular reports are made to the (Government by these chambers touching their various operations.? There are more than 75 institutions in [taly, situated in the chief towns of the Provinces and districts. Italian chambers of commerce are also established in foreign countries. ‘These render reports to the home government for the purpose of informing the business men upon economic conditions abroad, pointing out the causes which hinder the development of Italian trade and how these hindrances may be overcome. There are 18 or more of these foreign chambers of commerce, situated in the various important commercial centers, among which are three in the United States and five in South America and Mexico. The Italian Government pays such organizations a subsidy.’ The Government also sends abroad commercial agents to secure information for the good of Italian commerce. There are 18 or more such agents in as many capitals of the world. In Milan, Turin, and Venice the Government subsidizes commercial museums for the development of commerce. In Ttaly, also, resort has been made to the export syndicate. In 1897 more than 100 firms became the initial members of such an organiza-"1 Rendiconto Generale Consuntive della Amministrazione dello Stato, 1912-13, vol. 13, op. 2308, 2308, 2332, 2340, 2364. * Leggi Usuall, Vol. II, Part I, p. 429, and Vol. II, Appendice, pp. 92-94. 'G. Jaja: L'Italia, Milan, 1912, p. 359. V Azlone del Ministero di Agricoltura, Industria e Commerclo, 1909, p. 85, fol ¥Jaja, op. cit, p. 860. A Azione del Ministero di Agricoltura, Industria e Commercio, 1909, p. 98. 134 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, tion for the purpose of developing trade in the Orient. The main office was established in Milan, where a committee of five administer the work of the syndicate. Its main function is the arbitration ot disputes. Members who have oriental trade are required to employ the agents of the syndicate.* Forms of combination.—It is only in recent years that commercial sombinations have attracted much attention in Italy. Aside from the compulsory combinations established by the Government in the sulphur and citrus-fruit industries, but three or four other organizations have come into prominence. These are the Agenzia Commissionaria Metallurgica, established in Florence in 1896 by a dozen or more iron and steel concerns; the Unione Siderurgica, a later metallurgical combination which was formed, together with its selling agency, Societa Ferro e Acciaio Laminati, in. 1911; the Istituto Cotoniero Italiano, 2 cotton combination; and the Unione Italiana Concimi, a superphosphate combination. All these combinations have followed the French somptoir plan, as illustrated by the Comptoir Métallurgique de Longwy, by establishing a central selling agency, apportioning sales, and fixing prices. They have also taken a step further and placed limitations upon production, as in the case of the cotton and the superphosphate combinations. Special attention has also been paid to the evelopment of exports, the Istituto Cotoniero Italiano having succeeded, during its short period of operation prior to the European war, in materially increasing its foreign trade. Some account of the iron and textile combinations is given on pages 235 and 263. The persistence of economic alignments brought about by the old divisions of territory, and the slow industrial development of Italy, are held to have prevented that country from moving forward along this line as certain other European countries have done.” The movement, however, while recent is not the less powerful: Even prior to 1901 the concentration of business within the hands of a few was going forward by means of mergers in such industries as matches, medicinal and industrial oils? and the electrical industry.* Government regulation of combinations.—In the Italian codes, both penal and civil, provisions are made which are applicable to the operations of combinations on prices, etc. But the law has been liberally interpreted, and no decisions have been made against somptoirs and kindred combinations.’ The Government itself seems to have made no official investigations into the operations of such organizations. + G. M. Fisk, International Commercial Policies, New York, 1907, pp. 211 and 212. 13. Chastin, Les Trusts et Syndicats de Producteurs, p. 98. 3s Cossa, I Sindacatl Industriali, 1901, p. 56. +f) Martin Saint-Léon, Cartells et Trusts, 1909, p. 108. 5 Report of the Commissioner of Corporations on Trust Laws and Unfair Competition, Washington, March 15, 1915, pp. 273-276. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 135 The Government has, on the other hand, established two cartel organizations, one in the sulphur and the other in the citrus-fruit ‘ndustry. Citrus fruits.—By the law of July 5, 1908, a commission was established for the promotion of the citrus-fruit industry. This body furnishes certificates of analysis for shipments of such fruits, no shipment being allowed without the certificate; it sells for the producers, and advances money to them; it fixes a minimum price 2ach year, and levies a tax on the products analyzed by it. It is not compulsory that sales be made through the commission, but the Government analysis is required. Sulphur.—CAUSES THAT LED TO FORMATION OF COMPULSORY SYNDIcATE.—As a result of the great crisis which in 1895 befell the Italian sulphur industry, the Anglo-Sicilian Sulphur Co. was formed. In 1905 another crisis ensued, due to the Union Sulphur Co., of Louislana, shipping sulphur to .Europe. This American competition, together with a large overproduction, caused the collapse of the Anglo-Sicilian Sulphur Co., leaving stocks of sulphur amounting to about 360,000 tons. In 1902 the Sicilian production represented 90 per cent of the world production. In 1905 it fell to 60 per cent, as a result of the increased production in the United States.? To safeguard this, the leading industry of Sicily, against ruin through competition and overproduction, as well as to protect the interests of the Sicilian laborers, the Italian Government intervened, and by a special law established a compulsory sulphur syndicate, of which all producers became members by operation of the statute. Law of July 15, 1906. —The law of July 15, 1906,% combines the sulphur producers under the name of Compulsory Association for the Sicilian Sulphur Industry (Consorzio obbligatorio per l’industria solfifera siciliana) for a period of 12 years. The purpose of the syndicate is to sell crude sulphur on joint account and in the mutual interest of all members. The law provides that the syndicate shall fix a uniform selling price for definite periods of time, and it may also limit the production, providing the market conditions require it, and subject to approval by the Minister of Agriculture. The syndicate is also authorized to establish a separate organization for the purpose of erecting and maintaining warehouses for storing sulphur, and provisions are made for the taking over by the syndicate of stocks of sulphur on hand at the time when the law went into effect. se iit, pur se —— i ————————————— ———— 1 Report of the Commissioner of Corporations on Trust Laws and Unfair Competition, Washington, March 15, 1915, p. 277. * Rivista Internazionale, Genn.-Apr., 1914, p. 208; Kartell-Rundschau, 1907, p. 817. 'L. p. 333, 15 luglio 1906, of. Collezlone celerifera delle leggi, etc., I .ma, 19086, p. 1348 fol. A translation is given in the Report of the Commissioner of Corporations on Trust Laws and Unfair Competition, March 15, 1915, pp. 781-789. [36 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. A credit bank, Banca autonoma di credito minerario per la Sicilia, is authorized in order to provide credit to the sulphur producers at a rate of interest not exceeding 5 per cent. The sum of 50 centesimi per ton is to be deducted from the selling price and turned over to a special old-age and invalid pension fund for the mine workers. Railroads are allowed to transport such sulphur only as is consigned to syndicate warehouses, or for which a syndicate waybill is furnished. The administrative organs of the syndicate were to be: (1) The director general, appointed by the Government; (2) a council of administration; (3) a committee of delegates, to consist of 50 members, representing the general assembly of the members of the syndicate. Law of June 30, 1910.—On June 30, 1910, an additional law was anacted,! which aims to simplify the administrative organs of the syndicate and gives it more the character of a commercial organizaion? The new law makes Palermo the seat of the syndicate. It also provides for grading the sulphur, and authorizes the syndicate to sell sulphur below the normal price, for the purpose of promoting its se in certain industries. Concessions for opening up new sulphur mines are to be given only to those who furnish evidence of possessing the necessary financial means for mining sulphur efficiently and under adequate technical direction. Concessions are to be given by the Minister of Agriculture, Industry and Commerce. The number of members of the committee of delegates and of the council of administration is decreased, and their respective duties are specified. The sredit banks are authorized to advance loans on certificates of deposit, for sulphur stored in syndicate warehouses, up to four-fifths of the value of the sulphur. AGREEMENT BETWEEN ITALIAN AND AMERICAN SULPHUR INTERESTS.— Soon after the formation of the compulsory syndicate a secret agreement is alleged to have been made between the Italian syndicate and the Union Sulphur Co., of Louisiana., Under the terms of this agreement the American market was reserved for the Union Sulphur Co., while the European market was reserved for the Italian syndicate.? EFFEoTs OF THE COMPULSORY sYNDICATE—The following table, which covers the first six years of the compulsory syndicate, shows how the price of sulphur and wages have steadily increased since the sulphur law went into effect. The production of new sulphur and the accumulated sulphur stocks have been decreased. Exportation has in--reased. The number of mines in operation has been reduced almost one-half. 1L. pn. 3861, 80 giugno 1910, concernente i provvedimentl per l'industria golfifera siciliana, Collezione celerifera delle teggi, etc., Roma, 1910, p. 533 fol. # Rivista Internazionale, Roma, Genn.-Apr., 1914, p. 476. iLa Riforma Sociale, 1909, p. 728. VY, Riforma Sociale, 1913, pp. 733 and 734. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 13% TABLE 13.—Operations of Sulphur Syndicate in Sicily, 1906-1911. PRODUCTION, EXPORTS, PRICES, AND WAGES. 906. - 907. a08. on 91C... 1° ( ear. Produetion in icity (in :housand tons). Exportaion from Sicily (lu ‘housand tons). Sales made by syndicate (in thousand tons). Accumuiated sul->hur stocks rredited to ‘he syndicate (in housand tons). J Average selling price per ton (an lire). Number of mines in operation in Sicily. Average daily wages of workmen in Sicily (in lire). 2.12 2.13 2.18 2.22 2.37 9 589 Some sulphur is also produced on the mainland of Italy, though the total amount is inconsiderable in comparison to the sulphur produced in Sicily. From 1906 to 1911, inclusive, the total quantity of sulphur produced on the Italian mainland amounted to approximately 177,000 metric tons. The ‘quantity of sulphur exported from Italy to the United States and Canada decreased from 117,423 tons in 1889 to 8,585 tons in i911. During the same period the production of sulphur in the United States increased from 450 tons in 1889 to 269,648 tons in 1911. These figures show clearly the loss to the Italian export trade which was caused by the development of the American sulphur industry. According to the official Italian statistical yearbook of 1912; France was the leading buyer of Italian sulphur in 1911, taking 118,025 metric tons, valued at about $2,300,000. Then followed Austria-Hungary with 89,628 tons, Germany with 33,066 tons, Russia with 23,485 tons, Switzerland with 23,969 tons, Greece with 18,865 tons, and Great Britain with 20219 tons. Portugal, the Netherlands, Australasia, and Belgium imported from 11,000 to 16,000 tons each. Lime and cement.—In January, 1910, a syndicate of manufacturers of lime and Portland cement was established in Italy. According to the Kartell-Rundschau the following concerns were members: Unione Italiana Cementi, with works at Casale Monferrato; Osano e Morano Po; Marchino e C., Casale Monferrato; Societa Anonima Ottavi e Morbelli, Casale Monferrato; Societa Anonima Cementi Po, Trino; "Societa Anonima Calce e Cementi di Valle Brembana, Serralunga; Moroni Pietro Succ. Valle Seriana, Ozzano; Fratelli Buzzi, Trino; Cementi Popolo, Casale Monferrato. The purpose of the organization is to regulate prices, insure the Jelivery of standard material, and encourage the development of the 8 Annuario Statistico Italizno, Vol. II, 1912, Roma, 1913, p. 160. = 138 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. industry. The combined nine establishments have a capacity for producing each 24 hours, 8,000 quintals (about 600 long tons) of lime and 18,000 quintals (about 8,400 long tons) of Portland cement. In order to insure uniform standards, all shipments, before they are dispatched, are subjected to a test by a controlling office of the syndicate. The syndicate handles three kinds of cement, the delivered prices for which in 1913 were as follows: 6 lire for No. 1 slow-hardening Portland cement, 4.50 lire for No. 2, and 4 lire for quick-hardening cement. These prices are for delivery in sacks of 50 kilograms, if the sacks are returned; if not returned, an additional charge of 0.60 lire is made per sack. For long-distance shipments new sacks are always used, not to be returned, and a charge of 0.80 lire is made per 100 kilograms shipped. All shipments bear the word « Sindacato,” which is the mark of the organization.! Superphosphate.—The superphosphate industry in Italy, which, until the latter part of the nineteenth century, was scarcely known, passed through a period of prosperity from 1890 to 1900 which led to such an overproduction in 1902 that the manufacturers sought relief in the organization of the General Italian Society for the fertilizer business, with headquarters at Milan. This combination represented about 150,000 cubic meters of lead chambers for producing sulphuric acid and a total production of 4,000,000 quintals of superphosphate. During the next two years the combination sharply reduced production, and obtained materially higher prices. The selling quotas which were assigned were unsatisfactory to many of the members, not permitting them to sell more than half their capacity. As a result, dissensions arose and in 1903 the combination came to an end.? In the same year, however, two large fertilizer concerns—Magno Magni & Co., of Vicenze, and Ducco & Alessio, of Florence, came together and formed the Unione fra i consumatori e fabricanti di prodotti chimici (Union between Consumers and Manufacturers of Chemical Products), with a capitalization of 15,000,000 lire, which was later increased to 25,000,000.° (See also p. 294.) The table below shows the production of superphosphates in Italy for the period 1905-1914: 1 Kartell-Rundschau, 1913, p. 331. 2 1’Engralis, 1902, pp. 163 and 1048; 1904, p. 783. I’Engrais. 1903, p. 1073; 1908, p. 427: 1910, pn. 1221 COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 139 TABLE 14.—Superphosphates produced in Italy, by years, 1905-1914." Yaar. 1905. . 906... 907. cuerececrecacnanne 1908. _.. goo Quantity. 2uinials. 4, 800, 000 B, 150, 000 7.770, 006 10, 640, 00C 9, 368, 000 B10. coccincnnnnnn-1 Year, Quantity. Quintals. 10, 502, 000 9,447,000 10,193,000 9, 725, 000 5,139, 980 1 Annuaire international de statistique agricole, 1913-14, p. 674. During this period there was a steady increase in production from 4,800,000 quintals in 1905 to 10,640,000 in 1908, the year in which the combination showed a large profit. From that time on the output varied but little, being held in the neighborhood of 10,000,000 quintals for the period 1908-1913. This was due in part, possibly, to the combination’s policy of limiting production. In 1914 the production declined nearly 50 per cent, but that year, of course, was not a normal one in Europe. Sugar syndicate—The Italian sugar industry is almost wholly controlled by stock companies, which in many cases own several factories, and are united in groups. Most of these groups are members of the Sugar Union (Unione Zuccheri) which fixes the sugar prices. The center of the sugar industry is Ferrara, while Genoa is the center of the sugar trade. The total capital invested in the Italian sugar industry is estimated to amount to about 125,000,000 lire. The most important groups of sugar producers are:* . (1) The Secieth Ligure Lombarda per la Raflinazione degli Zuccheri, Genoa, with a capital stock of 24,000,000 lire. It owns factories, refineries, distilleries, and a jute mill for the manufacture of sugar bags. This concern is also financially interested in other groups. (2) The Societd per Industria dello Zucchero indigeno, Rome, with a capital stock of 18,000,000 lire. (8) The Societd Industriale Anonima “Eridania,” Genoa, with a capital stock of 7,000,000 lire. (4) The Zucchereria Nazionale. (5) The Societh Romana per la Fabbricazione dello Zucchero, Rome. (6) The “ Gulinelli ” group. In 1913 the combine resolved to close 12 of the 38 sugar factories in order to reduce the large accumulated stocks of sugar.? 1 Das Handelsmuseum, 1811, p. 672. 8 Kartell-Rundschau, 1914, p. 62. 140 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, SWITZERLAND. Introduction.—So far as foreign trade is concerned Switzerland In many respects surpasses all other countries. Without either coal or extensive water transportation, without a seaport, and forced to import nearly all its raw materials, it has succeeded in developing a remarkable export trade! In proportion to the total value produced the value of its articles exported doubtless far exceeds that of any other industrial country. Its economic life is largely dependent upon foreign trade.? Two of its leading industries are textiles and watchmaking; and five-sixths of the textile production and 86 per cent of the watches manufactured are exported. Of the total Swiss exports in 1912, foodstuffs valued at 198,100,000 francs ($39,620,000) made up 14 per per cent, raw products valued at 149,300,000 francs ($29,860,000) made up 11 per cent, and manufactures valued at 1,010,200,000 francs ($202,040,000) made up approximately 75 per cent. If cheese, condensed milk, and chocolate are included in manufactures, the latter will amount to about 89 per cent, which is unequaled by any other country.* England is the chief export market for Swiss products. In 1912 approximately one-fifth of the total Swiss exports went to England; chiefly silk goods, embroidery, watches, condensed milk, and chocolate. Three-fifths of the Swiss exports to Germany, the second largest buyer, are semimanufactured goods. The United States ranks third. In 1912 goods valued at 132 million francs ($26,000,000) were exported to this country from Switzerland ; chiefly embroidery, silk goods, cheese, watches, and dye colors. The value and importance of the principal Swiss exports were as follows in 1912 : Embroidery, 219 million francs ($43,000,000) ; watchmaking, 178 million ($35,000,000); silk goods, 115 million ($23, 900,000) ; machinery, 108 million ($21,000,000); cheese, 64 million ($12,000,000) ; chocolate, 55 million ($11,000,000); condensed milk, £7 million ($9,000,000) ; silk ribbons, 41 million ($8,000,000; cotton goods, 87 million ($7,000,000); spun silk and twist, 31 million ($6,000,000) ; colors, 27 million ($5,000,000); dyed silk 22 million ($4,000,000) ; cotton yarn, 17 million ($3,000,000). Among the chief factors that have contributed to the expansion of foreign trade are the following: (1) The high-grade quality of Swiss manufactures, (2) small profits and low prices, (3) efficient business organization and cooperation, (4) cooperation of banks with manufacturers and exporters; (5) the exceptionally hich commercial LP. H. Schmidt, Die schwelz. Industrien im internationalen Konkurrenzkampfe, 1912, p. 265. ?T. Geering u. R. Hotz, “ Wirtschaftskunde d. Schweiz,” 1014, p. 42, 'J. Grunzel, * Uber Kartelle,” Leipzig, 1902, p. 813. AT. Geering u. R. Hotz, op. cit, p. 74. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 141 and industrial activity and energy of the Swiss people, resting upon long training for export business. Export associations.—Associations for promoting over-sea trade have long existed among the Swiss, and it is alleged that Switzerland’s export trade has been built up chiefly by their means. In 1918 the Swiss Trading and Industrial Company for Brazil was organized, with a capital stock of 5,000,000 francs ($1,000,000). Its main office is in Ziirich. This company is to promote chiefly the export of Swiss machinery and to act as representative for Swiss manufacturers of noncompeting industries? In 1912 the Société Suisse d’Exportation was organized” at Lausanne, with the special purpose of promoting Swiss export trade to Argentina. In 1911 an 3xport association for Emmental cheese was organized in Brugg.* To Swiss banks is due in large part the growth of Swiss commerce and trade. In the instructions issued by a large Swiss bank to its branch managers one provision specifies that no business is to be transacted by which Swiss interests might be injured to the gain of foreign enterprises.® The electrical industry, in particular, owes its extensive development largely to the assistance of banks. Several of these are closely affiliated with foreign, especially German, electrical interests, and thus their influence is international in scope. The following are the most important: (1) Bank fiir Elektrische Unternehmungen, Zjirich, controlled by the German Allgemeine Elektricitits Gesellschaft. (See p. 274 fol.) (2) Schweizerische Gesellschaft fiir Elektrische Industrie. Basel, connected with the German Siemens concern. (8) Société Franco-Suisse pour I'Industrie Electrique, Geneva. (4) A.-G. Motor, Baden i. A., connected with Brown Boveri & Co. (5) Schweizerische Eisenbahnbank. A recent trend in the development of Swiss foreign trade is to be seen in the increasing number of branch establishments founded by large Swiss industrial concerns in foreign éountries. This method of trade expansion has been resorted to mainly in order to avoid heavy transportation expenses and high protective tariffs in certain countries. The close relations maintained by these foreign branches with their home establishments, as well as the profits realized from these foreign investments, constitute a considerable source of Switzerland’s national wealth, and serve at the same time to keep the whole economic life of that country in close touch with foreign markets. !T. Geering u. R. Hotz, op. cit., pp. 72, 75, 83 fol. 2K. Welter, Die Exportgesellschaften u. die assoziative Exzportférderung in d. Schweiz m 19, Jahrhundert, Bern, 1915, pp. 17, 110. *Das’ Handelsmuseum, 1913, p. 77. 'P. H. Schmidt, op. eit., p. 50. 4 Ibid., pp. 124, 125. 'T. Geering, u. R. Hotz, op. cit, p. 127 fok 142 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Swiss firms in Eastern Asia largely control the world market in Japanese and Chinese raw silks and silk waste. These are the main factors that have made Ziirich an international center for the silk industry, and similarly St. Gall for the embroidery industry.? Several of the large Swiss export industries are affiliated with international cartels. For instance, the lace ‘and embroidery manufacturers are members of the international cartel of that industry, which was formed in Munich in 1913.2 Embroidery industry.—Embroidery is the leading industry in Switzerland, both for value of total product and for value of goods exported. In 1912 the value of the total production was 229,000,000 francs ($45,000,000), and exports were 219,000,000 francs ($43, 000,000). The United States and England are the chief buyers. In St. Gall is located the Swiss embroidery exchange, and that city is also the seat of the Association of Swiss Embroidery Exporters. The St. Gall manufacturers have the leadership over their competitors throughout the world; they originate the new styles and designs for the whole embroidery industry. The Swiss embroidery industry is organized into cartels, of which the leading ones are: The Association of Owners of Swiss Shuttle-loom Factories, the Association of the Eastern Swiss Chain Stitching Industry, the Association of Shuttle-loom Embroideries of Switzerland and Vorarlberg. . The last-named cartel was organized in 1913, and its main office is in St. Gall. The purpose of this combine is to cooperate with exporters, to regulate output and prices, and to establish agreements with similar combines at home and abroad.* Silk industry.—The total value of the silk goods produced in Switzerland in 1912 amounted to 120,000,000 francs ($24,000,000), while the exports were valued at 115,000,000 francs ($23,000,000). In the same year the total value of the silk-ribbon production was 43,000,000 francs ($8,600,000), and the exports amounted to 41,500,000 francs ($8,300,000).° In 1905 the Swiss silk manufacturers formed the Verband Schweizerischer Seidenstoff-Fabrikanten. In 1907 the Verband der Cachepezfabriken der Schweiz und Deutschlands was organized, with headquarters at Ziirich. The leading Swiss, south German, and Saxon firms belong to this cartel.® In 1907 six of the largest manufacturers of silk bolting-cloth combined and formed the A.-G. Seidengaze-Fabrik, Ziirich und Thal. 1, Geering u. R. Hotz, op. cit, p. 184 2 P. H. Schmidt, op. cit., p. 204 fol. ® Das Handelsmuseum, 1913, p. 447. + Kartell-Rundschan, 1913, p. 866. s T. Geering u. R. Hotz, op. cit., p. 75. yHandworterbuch der Schweizer, Volkswirtschaft, 1911, Vol. 3, p. 986, COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 143 Swiss silk bolting-cloth is exported chiefly to the United States, but also to Germany, Austria-Hungary, England, Russia, and France. The value of the exports in 1912 amounted to 4,631,000 francs ($926,000) .2 Basel is the center of the important Swiss silk-ribbon industry, which is in keen competition with American manufacturers. In addition to the exports, valued at 41,500,000 francs ($8,300,000) in 1912, about 20,000,000 francs ($4,000,000) worth of silk ribbons was produced by factories controlled by Swiss interests in foreign countries. England is the chief buyer.? The Swiss silk-ribbon manufacturers are well organized in the so-called Seidenband Konvention, which fixes prices. The Swiss manufacturers of spun-silk yarn are also combined in a syndicate, which has price agreements with similar manufacturers in Lyon, France, and in Milan, Ttaly. . Watch industry.—In the manufacture of watches Switzerland is one of the leading countries of the world. The total value of watches manufactured in 1912 amounted to-183,000,000 francs ($36,600,000), and the export of watches was valued at 173,000,000 francs ($34,600, 000).? In 1904 the four large watch-crystal factories formed the Société des Fabriques de Verres de Montres Réunies for the purpose of raising prices. This combine developed into an international cartel, whose main office is in Strassburg.* In 1904 the manufacturers of watchcases combined, and in 1905 the manufacturers of “ Roskopf ” watches formed a cartel combining 11 establishments. Both of these combines are price cartels.* There is also a syndicate of manufacturers of gold watches. In 1913 Swiss jewelry and watch manufacturers organized an association for regulating credits and for promoting their common interests. The main office of the association is at La-Chaux-de-Fonds, and 150 firms are members.® Chocolate industry.-—The Swiss chocolate industry, especially the manufacture of milk chocolate, has developed into a world industry during the last 20 years. Switzerland leads the countries of the world in its exports of chocolates, the value of which in 1912 amounted to 55,000,000 francs ($11,000,000). In 1906, 17 of the 24 Swiss chocolate manufacturers organized the Freie Vereinigung der Schweizerischen Schokolade Fabrikanten, 1 Handworterbuch der Schweizer. Volkswirtschaft, 1911, Vol. 3, p. 985. 27, Geering u. R. Hotz, op. cit., pp. 45, 53, 84. sm, Geering u. R, Hotz, op. cit., pp. 45, 56 fol. «+ Kartell-Rundschau, 1906, p. 198. 5). Steiger, Trusts und Kartelle im Ausland und in der Schweiz, Ziirich, 1907, p. 23. 8 Das Handelsmuseum, 1913, pp. 563, 586. TP. Geering u. R. Hotz, op. cit., p. 62. 144 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. vith an office at La Chaux-de-Fonds, for the purpose of establishing miform selling prices. In 1913 a cartel was formed by all Swiss chocolate factories except he Cima, Villars, Favarger, and Croisier factories, for regulating prices. Discounts are to be given only to dealers who buy exclusively from the cartel? The price agreement was to run till the end of 1916. A number of Swiss firms, together with German firms, 17 in all, have formed the Cocoa Buying Co. (Ltd.) at Hamburg. This company was organized to make the chocolate industry independent of speculators in raw cocoa in London, Lisbon, and Bahia by dealing directly with the cacoa planters.® In the chocolate industry a tendency to concentrate by fusion is noticeable. In 1911 two of the largest factories—the Peter und Kohler A.-G. in Vevey and the F.L. Cailler A. G. in Broc—were consolidated, their combined capital stock being 6,500,000 francs ($1,300,000) .* Condensed milk.—The Swiss condensed-milk industry has assumed international proportions. In 1912 the exports amounted to 47,000,000 francs ($9,000,000).5 The two largest producers—the Anglo-Swiss Condensed Milk Co. and the Société Anonyme Henri Nestlé in Vevey—having together 20 factories and controlling about 90 per cent of the total Swiss output, were combined in 1905. The new concern has a capital stock of 40,000,000 francs ($8,000,000). Its main sales office is in London, and the office of the administrative president in Paris, while the general management is located in Switzerland. The chief markets are the British and Dutch East Indies and Brazil. In Eastern Asia American competition is encountered. Most of the factories are now located outside of Switzerland. In 1907 the concern bought the largest condensed-milk factory in Australia, the Cressbrook Dairy Co., of Brisbane, together with several other condensing Factories and stock farms, thereby acquiring the © Cressbrook,” the largest colonial brand.” Machinery.—The Swiss machinery industry has been growing rapidly in recent years. Its important bearing upon the export trade of Switzerland may be seen from the fact that of a total machinery production valued at 200,000,000 francs ($40,000,000) in 1912, machinery valued at 110,000,000 francs ($22,000,000). was exported® The firm of Sulzer Bros, Winterthur, is said to have the most efficient export organization in the country. Machinery for LJ. Steiger, op. cit., p. 21 fol. ; Kartell-Rundschau, 1907, p. 136. - 'Kartell-Rundschau, 1914, p. 144, + J. Steiger, op. cit., p. 28 fol, } Kartell-Rundschau, 1911, p. 831. 5 T. Geering u. R. Hotz, op. cit., p. 45. 1]. Steiger. op. cit.,, p. 26. y rp. H, Schmidt, op. cit, p. 232 fol. sT. Geering u. R. Hotz. on. cit.. pn. 45. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 145 spinning and weaving is exported in considerable quantities to Italy, France, Austria, Russia, and Spain, but electrical machinery forms the largest part of the Swiss machinery exports. In the Swiss machinery industry but few cartel agreements are known to exist. IHowever, in the important branch of steam-turbine manufacture, agreements for restricting competition have been made between the two leading Swiss firms—Brown Boveri & Co., and Escher, Wyss & Co., Ziirich—and the two large concerns that control the German industry. Brown Boveri & Co. have made a syndicate agreement with the Allgemeine Elektricitits Gesellschaft, which in--ludes an exchange of the Brown-Boveri-Parsons patents; and Escher, Wyss & Co. have combined with the Siemens-Schuckert concern. The firm of Brown Boveri & Co., Baden i. A., has developed into one of the largest manufacturing concerns in Switzerland, and has established branches in Italy, France, and Norway. In 1909 its capital stock was 20,000,000 francs ($4,000,000). The firm of Escher, Wyss & Co., of Ziirich, a joint-stock company, capitalized at 10,000,000 francs ($2,000,000), makes a specialty of manufacturing water turbines, and ranks first among all the manufacturing firms of this kind in Europe. The water turbines which it manufactured in 1909 comprised a total horsepower of 1,560,000, which number represents about half of the water power developed in Europe during that year.? Several Swiss machinery manufacturers have agreements with co-called “alliance firms” in foreign countries, according to which the Swiss firms get orders for certain articles which are their specialties.? Cheese syndicate.—The present Swiss cheese syndicate is a noteworthy example of the prompt and effective cooperative measures Swiss business men take to safeguard their interests in times of stress. The sale of Swiss cheese for export and home consumption is controlled at the present time by a syndicate composed of the principal dealers in this product in Switzerland. This syndicate is the Genossenschaft Schweizerischer Kise-Export-Firmen, with headquarters at Berne, and was established at the outbreak of the present European war. Its officers are empowered to fix and regulate the prices of Swiss cheese for export and home consumption. The syndisate also regulates the price of milk. The professed purpose is to give the farmer a good price for his milk. in comparison with the high price of feed, and to give good 1p, H. Schmidt, op. cit. pp. 253, 256. 3B. Lincke, Die schweiz. Maschinenindustrie u. ihre Entwicklung in wirtschafilicher Beziehung, pp. 117, 141, 144, 203 fol. 1p. H. Schmidt, op. cit, p. 257. 97941 ° —16———11 146 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. profits to cheese makers and dealers; and to accomplish these things at the expense of foreigners, so far as possible, thus moderating the burden of high prices for the home consumer. This syndicate is not controlled by the Swiss Government, and the Government has no voice in fixing prices, ete., but the object and the means of regulating the industry are sanctioned by the Government. The syndicate has issued capital stock to the extent of 5,000,000 francs ($1,000,000), of which the Schweizerische Exportgesellschaft fiir Enimentaler Kise, of Zollikofen, holds 10 per cent, and the other 90 per cent is distributed among the various cheese dealers and exporters in Switzerland, in proportion to the amount of business which their books show was done during the years 1912-1914. Any future increase in capital is also to be distributed in this manner. The firms or companies which constitute this syndicate do not lose their identity as individual cheese merchants, but all orders received by them for cheese must be turned over to the syndicate at Berne, where they are sanctioned and approved and the prices fixed, and no orders can be accepted by the individual dealers except at the prices and under the conditions promulgated by the syndicate. The syndicate by-laws provide for 5 per cent interest on stock, and any further profits are shared by the directors of the syndicate and the Swiss Government, according to a plan ratified by the stockholders. The business of handling and shipping the cheese still remains in the hands of the individuals, and all salaries paid out by these individual firms are refunded by the syndicate. These salaries, etc., are fixed on the basis of the amounts paid out by the individual members during 1918-14 and according to their turnover. The syndicate permits cheese for home consumption to be sold at lower prices than for export, and no dealer is allowed to buy cheese at the lower prices prevailing for home consumption and ship it to foreign countries, under a penalty or fine of 20,000 francs ($4,000) in each instance. In order to make this condition operative a certificate for export is given for all cheese the export of which has been sanctioned by the syndicate. The officers of the syndicate have the power under the by-laws to forhid the export of cheese. The syndicate’s price policy may be illustrated by the prices fixed September 14, 1915. For first-quality cheese, the prices for home consumption ranged from 216 to 225 francs ($41.69 to $43.43) per hundred kilograms (220 lbs.), according to size of order. For shipment to the United States, the prices were 260 and 267 francs ($50.18 and $51.53), according to size of order; and for other countries, 275 frances ($53.07) less 2 or 4 per cent, according to size of order, giving COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 147 net prices of 264 and 269.5 francs ($50.95 and $52.01). The export of second-quality cheese was forbidden; its home price was from 206 to 215 francs ($39.76 to $41.49). In order to control the sales and prices the syndicate not only issues an export permit for the exact amount which is known to be purchased by the foreign buyers, but it also demands advance payment together with the original order, so as to prevent any dealer from purchasing export stock for speculation, in anticipation of an increase in price. JAPAN. Introduction.—Although 58 per cent of Japan’s population is still engaged in agriculture? its industries have been developed in such a way in recent years that it is rapidly becoming a manufacturing country.” An analysis of the marked growth of its industrial enterprises goes to show that increase of capital and a movement toward industrial combination and centralization are two of the main underlying factors. A tendency toward new forms of business organization, such as cartels or trusts, is observable in an increasing number of industries, such as hemp manufacturing, spinning, beer brewing, paper manufacturing, and others® The total amount of the industrial products and manufactures of Japan is estimated at over 1,000,000,000 yen ($498,000,000).# During the four decades, 1870-1910, the volume of Japan’s foreign trade increased over 19 times® This progress in commerce, industry, and trade has been going on in spite of serious handicaps, especially a relative absence of iron deposits, and the scarcity of skilled labor. For machinery the country is largely dependent on foreign sources.® Japanese manufacturers have whatever advantage there is in low wages for men, and in the unlimited employment of women and children. There are 18 per cent more female than male workers. Japan’s foreign trade is hampered by the fact that its industries are still carried on chiefly in the home and by hand. This makes it hard to produce uniform staple products and to observe definite periods of delivery.” Besides, Japanese industry is obliged to accommodate itself to the Asiatic and the American-European trade. Manufactures for home consumption are mostly made without machinery, 1 The Japan Yearbook. 1914, p. 338, * Canada, Department of Trade and Commerce, Weekly Report, Sept. 28, 1914, p. 1632, *Japan As It Is, compiled by His Imperial Japanese Majesty’s Commission to the Panama-Pacific International Exposition. San Francisco, 1915, p. 157; Weltwirtschaft. liches Archiv, 1915, I, p. 72. * Weltwirtschaftliches Archiv, 1915, I, p. 153. $ The Japan Yearbook, 1914, p. 435. 8 Ibid., pp. 885, 386. T Weltwirtschaftliches Archiv, 1915, I, p. 72. 148 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. but for American and European consumption with machines. This results in constant collision between old and new methods, and seriously hampers technical progress in general! These difficulties have been overcome very largely by the systematic cooperation of the Japanese Government with the industrial and financial leaders of the country in aiding and promoting industry and trade. With respect to Government initiative and participation in trade and industrial expansion by means of legislation, subsidies, model factories, trade investigations, commercial training, etc., the Government of Japan has taken a leading réle among the commercial nations of the world.? From considerations of administrative expediency, or to furnish a model for a new industry, or for both purposes, the Japanese Government is operating a number of undertakings. In 1895-1897 it established a steel plant. Tobacco, salt, and camphor are State monopolies, and the State also owns nearly all the railways and a woolen factory.® Government encouragement and protection of industry and trade.—Many of Japan’s new industries owe their inception to encouragement and protection by the Government. The spinning, shipbuilding, cement, glass, match, weaving, and other industries are all traceable to Government initiative. Most of the factories originally owned by the Government were sold later to private individuals.* In an address made in 1912 the Minister of Agriculture and Commerce stated that the expenditure of the Government for the encouragement of local industry had increased from 8,200,000 yen in 1902 to 9,400,000 yen in 1912, and that the Department of Agriculture and Commerce had in view the granting of subsidies to the manufacturers of staple commodities for export and planned other work calculated to encourage foreign trade, particularly the export trade. Besides, he stated the Government encourages the use of homemade in preferance to imported articles so as to encourage domestic industry. The higher council of agriculture, commerce, and industry. —Since 1896-97 the Government has set apart an item for foreign-trade :xpansion in the budget. This includes the appropriation for the newly created higher council of agriculture, commerce, and industry, with the object of devising measures for encouraging foreign trade. The council is composed largely of business men of note. Some of the matters relating to foreign trade in which the council has been interested have been the following: (2) The dispatch of commissioners to l Weltwirtschaftliches Archiv, 1915, I, pp. 72, 73. *K. Rathgen, Die Japaner in der Weltwirtschaft, 1911, pp. 22, 28, 24, fol. "The Japan Yearbook, 1914, pp. 393, 608; Japan As It Is. p. 377. ! The Japan Yearbook, 1914, p. 385. The Japan Financial and Economie Monthly, Mav. 19812. n. 7. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 149 the Yangtse-kiang region of China to investigate the navigation route there; (2) the extension of banking facilities in connection with foreign trade; (3) the establishment of bonded warehouses under supervision of the customhouses; (4) the expansion of sales of the principal exports; (5) information on the situation of foreign markets; (6) marine insurance; (7) the control and protection of workmen; (8) the operation of the gold monetary system and its effect at home and on foreign trade; (9) the encouragement of the business of tea exporting; and (10) the encouragement of exportation of silk. Guilds—TFor the purpose of encouraging the combination and harmonious working of those engaged in industry and trade the Japanese Government enacted special legislation in 1897 relating to the staple exporters’ guilds and in 1900 relating to the staple producers’ guilds. In 1913 the guilds existing throughout Japan numbered 916, with a volume of production or sale totaling one and a half billion yen for 649 guilds reported. The principal producers’ guilds are distributed as follows: Raw silks, 207 guilds; rice, 67; fertilizers, 29; paper, 25; porcelain, 23; weaving, 188; timber, 80; soy and miso, 28; charcoal, 24; and matting, 25.2 Many of the guilds are credit guilds, which supply thelr members with funds for developing their business at a low rate of interest, and may be compared with the neople’s banks existing in Germany.? Inspection of foreign markets—At frequent intervals since 1895 the Japanese Government has sent officials and commissioners to foreign countries to investigate foreign markets, especially with the object of promoting direct exports by Japanese merchants, and also of inquiring into other matters connected with the interests of foreign trade. Besides, student commercial agents and student manufacturers, as well as private individuals experienced in particular lines of trade, have been dispatched on similar missions, the chambers of commerce supplying them with either a part or the whole of the traveling expenses. From 1895 to 1901, 124 persons in all were sent abroad on such errands, some of them to China, others to Europe, and still others to North and South America, the South Seas, Straits Settlements, Siberia, Korea, India, the Philippines, ete.* Commercial sample musewms.—Japan possesses 38 commercial sample museums, comprising samples of commodities that at present constitute the principal items of export, or are likely to become so in the near future; also of those that are competing with imported goods in the domestic market or are qualified to do so. The establishment of commercial sample museums in foreign countries is another item in the Government’s foreign-trade-expansion activity. " 1japan in the Bopseind of the Twentieth Century, 1904, p. 474. 2 The Japan Yearbook, 1914, p. 433. 3 Japan in the Beginning of the Twentieth Century, 1904, p. 112, $Ibid., pp. 475. 477. 150 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. These museums are placed under the control of the Japanese consulates, and are left in charge of merchants properly qualified to act as mediums in business transactions between Japanese and foreign merchants or manufacturers. Such museums were organized in Russia, India, Mexico, Turkey, and elsewhere. Societies for promoting international trade—Japan’s foreign trade has been materially encouraged by societies formed in foreign countries for the purpose of developing thé mutual economic relations. A society of this kind formed by Belgian and Japanese merchants several years ago maintains a Belgian representative in Japan, publishes a review in the languages of both countries, and has carried on a fruitful publicity campaign.? Registration of patents and trade-marks—Japan revised its laws of patents, designs, and trade-marks in 1909. In 1899 it joined the International Union for the Protection of Industrial Property. Regarding trade-marks Japan has followed the continental European system, with priority of registration as the basis of its legislation. Foreign makers, not realizing this, sometimes neglect to register their trade-marks, and as a result have found them not only copied but registered by some Japanese fifm.* The purpose of the Commission in noting this matter here and not in the.case of other countries is simply that American manufacturers may realize, more fully than they seem to have done, the necessity of careful attention to registration of their trade-marks in Tokio. Drawbacks and rebates—In its policy of promoting domestic industries and foreign trade the Japanese Government has made liberal use of the drawback system. The toy, paper, glassware, match, iron, and other industries have been given material aid in this manner.? To give Japanese millers a better chance to compete with Americar millers in Chosen, Manchuria, and China the government has rezently decided to include imported wheat among the articles on which the Japanese import duty will be entirely paid back to the importer when the flour manufactured from it is exported. American flour is regarded as the strongest rival of Japanese flour. Large trading companies.—A considerable share of Japan’sindustry and comunerce is concentrated in.the hands of a few large firms which, for the greater part, represent large family possessions. Some of the leading ones are the Mitsu Bishi Co., Mitsui & Co., or Mitsui Bussan Kaisha (Ltd.), the undertakings of the Sumitomo family, the Okura-Gumi, Takata & Co., Suzuki & Co., and the Nippon Shogyo i Japan in the Beginning of the Twentieth Century, 1904, p. 478 fol. TT + Saint-Maurice, La Civilisation Economique du Japon, 1908, p. 100 et seq. Japan As It Is, 1915, p. 181, + Canada, Department of Trade and Commerce, Weekly Bulletin, June 7, 1915, p. 1382. ¥ Canada, Department of Trade and Commerce, Weekly Report, July 6, 1914, pp. 987 and 1401. COMPETITIVE CONDITIONS [N INTERNATIONAL TRADE. 151 Kaisha (Ltd.)—Japan Trading Co. (Ltd.)—composed of Japanese and foreign business men. These firms are not only export and import commission houses; their business activities comprise nearly every field of industry and commerce, and they own, operate, or control plantations, mines, factories, shipping companies, and banks, and also undertake private or public contracts on a large scale. The firm of Mitsui & Co., which is representative.of this type of Japanese business corporation, through its branch office in London, is one of the largest exporters to Japan from England of machinery, metals, cotton and woolen piece goods, coal, fertilizers, etc. The works and interests of the Mitsuis are so extensive and varied that they embrace nearly all of Japan’s principal commercial concerns, and, therefore, they have no ordinary influence on the general economic welfare of Japan. This concern is engaged in almost every line of export and import trade, with a chain of branches that encircle the globe. In 1908 their coal business amounted to one-third of the whole annual production of Japan. Their specialty is the supply of bunker coal to steamers at all the coaling stations in the Orient. The firm also owns its own fleet of steamers. It represents several well-known European and American manufacturers in the Orient, e. g., Vickers (Ltd.), the General Electric Co., the American Locomotive Co., etc.t (See Pt. II, p. 255.) Japan’s colonial trade.—Japan’s colonies—Formosa (Taiwan), Korea (Chosen), Saghalien (Karafuto), and Manchuria (Kwantung)—are not as yet of great importance as markets for Japan's industrial products. Their commercial importance lies in the fact that they constitute important supply centers for foodstuffs and raw products, sugar, rice, beans, and cattle, and possibly serve as outlets for Japan’s surplus population. Both in volume and in value Japan’s trade with these colonies is slowly but steadily increasing. In view of the fact that rice is such an important factor in the daily food of the Japanese, the Government pursues the policy of encouraging its production, as well as that of sugar, in the colonies, especially in Formosa and Korea. The importance of Manchuria, rich in minerals but sparsely populated, lies in its location between Russian and Chinese territory. The Manchurian Railroad, originally built by Russia, is becoming a great carrier of Japanese exports to Russia? Cooperation between American manufacturers and Japanese merchants.—A considerable degree of success has been attained by a number of American and other manufacturers cooperating with Japanese merchants. The General Electric Co., for instance, is 1 Kotaro Mochizuki, Japan To-Day, p. 449 fol. ) Weltwirtschaftiiches Archiv, 1915, I, p. 78. 152 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. manufacturing and selling American machinery in Japan in cooperation with the Shibaura Works, of Tokyo. The Western Electric Co. is in similar cooperation with the Japan Electric Co. Vickers (Ltd.), of England, has established a steel foundry in Japan in cooperation with the Hokkaido Colliery and Steamship Co., of Japan. The usefulness of the Japanese in these cooperative arrangements comes from the exact knowledge of the requirements of the consumers and of ways to comply with those requirements. Conditions in particular industries.—An analysis of the leading manufacturing industries and their paid-up capital in 1912 shows that saké brewing, with 369 establishments, surpassed all others as to number, followed by raw silk with 807, and soy and miso with 225. In paid-up capital the cotton-spinning business, with 65 million yen, ranked first, followed by the mining and metallurgical with 50 million, gas with 54 million, coal mining with 43 million, shipbuilding with 28 million, petroleum boring and refining with 26 million, and paper mills with 22 million yen, respectively. One of the most important industries in foreign trade is the textile. In this line particularly, in the markets of North China and Manchuria, the Japanese are winning the trade from American producers. Conditions in the textile industry are discussed on pages 265-269. Some account of a few of the other important industries is given in the following paragraphs: Raw siuk.—The raw-silk industry in Japan is one that has made the greatest development in recent years, largely because it has been actively encouraged and fostered for many years by the Government. Practically one-third of the total exports of Japan consists of raw silk* Japan and China at present are the greatest raw-silk produeing countries, and in the volume of exports Japan is the first among the countries of the world, supplying about 28 per cent of the total consumption of the world and about 60 per cent of that of the United States.® The value of her raw-silk exports in 1914 amounted to 161,797,411 yen. Since 1894 the United States has been the best rustomer; France comes next. and Italy, Russia, and England follow.® Tea—Tea comes next to raw silk as the most important agricultural product for export trade. The total exports of tea in 1914 were valued at 12,709,985 yen. By far the largest amount, 11,075,558,7 went to the United States. It has been alleged that syndicates of i George H. Blakeslee, Japan and Japanese-American Relations. 1912, pp. 134 and 185. The Japan Yearbook, 1914, p. 387. - *Japen in the Beginning of the Twentieth Century, 1904, p. 135, fol. + J. Morris, Japan and Its Trade, 1902, p. 72. } The Japan Yearbook, 1914, p. 346; Japan As It Is, 1915, p. 102, The Fifteenth Financial and Economic Annual, 1915, p. 107. !Ibid., p. 106. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. - 1538 producers seek to control the export trade. The Japanese Government has been very active in promoting the expansion of the tea industry, and in 1897 granted for the time being a state aid of 70,000 yen a year for this purpose. In compliance with the instructions of the Government, the Central Tea Guild maintains branch offices in several countries to investigate the condition of the market and to stimulate the trade.? - Numerous other measures have been adopted by the Government for promoting the tea industry, such as for the improvement of the quality, for providing against deterioration, and for informing those interested as to market conditions? For the improvement of manufactured tea and to extend its market, tea trade associations have been established. There are now one central chamber, 20 associated chambers, and 218 tea trade associations.* The Imperial Establishment of Tea Industry at Nishigahara, which is controlled by the Government, not only concerns itself with the cultivation of the tea plant, but also carries on inquiries into the state of the tea industry at home and abroad. Sarf.—Saké, the national beverage of Japan, is one of the principal manufactures of that country. In 1913 the production of saké was valued at 198,000,000 yen. The export of saké shows a tendency to increase year by year with the improvements in the method of brewing and in the quality of the product. The National Brewing Experimental Station, in conjunction with expert officials, is making strong efforts to improve and develop the industry. In 1913 the export of saké was valued at 3,962,242 yen. Marcues.—Japan’s match industry has attained a considerable degree of importance, dominating the match trade in the markets of eastern Asia.’ In 1913 there were 189 factories, producing 51,731,-010 gross of boxes,® valued at 14,188,183 yen. In 1914 the value of matches exported amounted to 11,052,254 yen. The principal markets are China, British India, Hongkong, the Dutch Indies, Straits Settlements, French Indo China, Siam, the Philippines, and the United States.’ It is chiefly on the strength of their relative cheapness that Japanese matches compete with those of other countries; they are quoted in Chinese and near-Asiatic markets about tH, A. Heber, Japanische Industriearbeit, 1912, p. 128. : 'Japan in the Beginning of the Twentieth Century, p. 154. fol. +Ibid, p. 158. | Japan As It Is, 1915, p. 107. $Japan in the Beginning of the Twentieth Century. 1904, p. 174 fol. ' Japan As It Is, 1915, pp. 157, 167, fol. Bali Totelsh, Japans Internationale Handelsbeziehungen, p. 66; HE. A. Heber, op, it, p. 1 "The Fifteenth Financial and Heconomic Annual, 1915, p. 70. "Japan As It Is. 1915, pp. 174, 175. 154 +REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. 45 per cent lower than their competitors.’ Several years ago Japanese competition is said to have ruined four out of five large Norwegian match factories. The cheapness of the Japanese matches seems to be due largely to female and child labor predominating in the factories? A number of factories have in recent years united into large concerns, one of which, with a capital of 4,000,000 yen, combined 51 match factories of Osaka and 60 factories in Kobe.® A similar combination was formed with the aid of British capital by several large match exporters for the purpose of promoting the export of Japanese matches to Australia and Europe.* As a result of the expansion of the match industry, the imports of paraffin and chemicals have increased considerably.® Toxs.—In the toy trade Japan has for a number of years been making considerable headway. Nearly every kind of toy is now manufactured there, and toys from Japan find their way all over the world. The rapid development of the toy industry is due largely to the fact that labor is very cheap and particularly well adapted to the requirements of this industry. In 1913 the exports of toys amounted to £254,200. From 1909 to 1913 the value of these exports increased £154,600. The United States, Great Britain, China, and India are the chief markets. Some of the raw materials for the toy industry must be imported, especially pigments and dyes, tin plate, wire, and steel ribbon for making springs. To overcome this handicap and in order to promote the toy industry, the Government grants irawbacks on certain of these materials.® Marrine.—The fancy-matting industry of Japan has developed into a considerable export business. In order to unify the quality of the goods, compulsory examination of fancy mattings for export has been established by the Government at Kobe. In 1913 the exports amounted to 4,054,405 yen; in 1914, to 2,813,873 yen. A decrease in exports has been noticeable for several years, owing to a change of taste and to competition in foreign markets by Chinese matting, which are similar in quality and general appearance and much cheaper. The principal destination is the United States, to which over 70 per cent of the exports are shipped.” 1 The Japan Yearbook, 1914, p. 401, 2 Sajiro Tateish, op. cit., pp. 66, 67. * 3 Archiv fiir Sozlalwissenschaft u. Sozialpolitik, 24, Band. 1907, p. 673. s Kartell-Rundschau, 1907, p. 744. $ K. Rathgen, Die Japaner in der Weltwirtschaft, 1911, p. 112. 8 Canada, Department of Trade and Commerce. Weekly Report, Feb. 22, 1915, pp. 444 145; also July 6, 1914, p. 987. 7 Japan As It Is, 1915, p. 178 fol.; The Japan Yearbook, 1914, p. 412 fol.; The fifteenth Financial and Economic Annual, 1915, p. 109. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 155 OTHER COUNTRIES. In addition to the countries discussed above, several others are worthy of serious discussion, such as Russia, Austria-Hungary, Sweden, Holland, Australia, Canada, etc. The limits of this report, however, make it impossible to describe the industrial organization of these countries in detail. Only brief mention is made here, therefore, of some of their salient characteristics, though im the later discussion of competitive conditions in particular industries, such as iron and steel, some further details are given concerning a few of them. Moreover, in the special reports of United States consuls, published in Part IT of this report, excellent information is contained for some of these countries and for a number of others not referred to in this volume. Russia.—Russia is still largely an agricultural nation and its manufacturing is in its infancy. Accordingly, Russia is an importer of manufactured articles and an exporter of food supplies and raw materials. Prior to the war Germany was the principal exporter into Russia. This was due in part to favorable commercial treaties and in part to proximity and knowledge of the market. In 1912 the number of combinations in Russia was estimated® at 82, and the total number of syndicate agreements .at from 140 to 150. These syndicates included both incorporated and unincorporated selling agencies, export syndicates, combinations for the apportionment of Government orders and international cartels. Purely local agreements among dealers were not included in this number. Although the Russian law? is unfavorable to combinations, yet the administration has in certain instances encouraged the organization of industrial combinations, especially for the purposes of fostering export trade and eliminating competition in placing Government orders when this is considered to the national interest. The Ministry of Finance advised the sugar producers to form a syndicate in 1885, it approved of the petroleum refiners’ syndicate in 1893, and in 1902 it encouraged the organization of the iron and steel combination “Prodameta.” In a special report of June 14, 1916, on sales organizations and trade combinations in Russia, Commercial Attaché Henry D. Baker stated that the Government makes no interference whatever with the holding of meetings by the various community of interest organizations and does not require any official scrutiny of the records kept by the secretaries of such meetings. In the iron and steel industry effective combinations, such as the Prodameta, have been developed, financed by groups of Russian, 1 J. M. Goldstein, Ekonomicheskaia politika, 2d ed., Moscow, 1918, p. 253. 2 Report of the Commissioner of Corporations on Trust Laws and Unfair Competition. Washington. March 15, 1915, p. 287. 156 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. French, German, and Belgian bankers, embracing about 100 firms organized in 19 sections or syndicates, and covering everything in the industry from ore to finished iron and steel and various products made therefrom. (See pp. 230 and 241.) In the Russian coal industry the French banks have been very active in organizing the coal combination, “Produgol”; and in the textile industry, particularly in cotton-yarn production, British capital has played and is still playing an important part. In the Russian electrical industry the Germans formerly led;through the Russian branches of the Allgemeine Elektricitits Gesellschaft. Various combinations have also seen formed in the petroleum industry. In the manufacture of agricultural implements various combinations have been in effect, some of them international arrangements smbracing Austrian and German manufacturers. The earliest combination was an international pitchfork syndicate (Russischer Gabelverband) organized in 1908 by German, Austrian, and three Russian works. This syndicate apportioned the sales so that the syndicate of the German factories received 13% per cent, the syndicate of the Austrian factories 3% per cent, and the three Russian factories 83 per cent of the entire Russian sales.* This syndicate also fixed prices and sales conditions. The syndicate agreement lasted until October 19, 1904, and was never renewed. In 1907 the Russian Government organized the “ Convention of the Manufacturers of Agricultural Machinery and Implements” as a permanent organization for the protection of the interests of that industry. It has made contracts with Russian works for the production of certain kinds of agricultural machinery which up to that time had been imported from abroad, and it fixes prices on certain kinds of agricultural machinery.? - Government sales of agricultural machinery—Of great importance in the marketing of agricultural implements and similar supplies in the Russian Empire are the sales through government bodies. It is said that in Siberia alone there are 300 government depots for the sale of farming implements and tools. In European Russia sales by the Zemstvos constitute an interesting feature of the business. The Zemstvo is a sort of local self-government institution in Russia. The provincial Zemstvo acts for the whole Province, the district (county) Zemstvo is in charge of the district or of the next smaller administrative unit of the Province. The Orel provincial Zemstvo has been in the business of distributing agricultural machinery since 1900. In 1904 it began to buy roof sheet iron wholesale and to distribute it among the farmers at retail. iI, B. Kafengaus, Sindlkaty v russkol zheleznoi promyshlennostl, Moscow, 1910, p. 112, fol. 'Kafengaus, op. cit, p. 111. Canada, Department of Trade and Commerce, Russian Trade, 1918, p. 48. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 157 In 1905 the operating capital of the Orel Zemstvo for the distribution »f agricultural machinery and iron reached 50,000 rubles ($25,000). Although the Zemstvos had formed no legal combination or syndicate, yet the Orel Zemstvo and the Moscow Zemstvo had acted more than once as agents for several other Zemstvos. The profits from the sales are very small, the gross earnings of the Orel Zemstvo being 2.1 per cent in 1899-1900, and in 1905-6, 6 per cent on the total sales. The Zemstvos allow liberal terms to their customers, usually from three months to eight years. The prices on iron sold by the Orel Zemstvo during the period 1900-1906 were about 17 per cent below those charged by iron manufacturers to small customers. ; The amount of agricultural machinery sold through the 34 Zemstvos of European Russia has grown quite considerably within recent vears. The sales expressed in rubles and dollars were: 2 1909 eee LOI. cc mmm msi meme iti rie 101]. en mrs iii ms 1912 ___ Rubles. Dollars. eee 9,924,700 4,962, 350 mm 11,770,300 5, 885, 150 12, 058, 800 6, 029, 400 13, 936, 800 6, 968, 400 Including the sales of iron and steel wares of other kinds the total in 1912 was nearly $10,000,000. The various syndicates of Russian iron manufacturers regard the Zemstvos and the present Zemstvo union as formidable competitors and opponents in certain lines of business. Indeed, in 1914 thirty members of the Duma alleged that a syndicate of the manufacturers of agricultural machinery and implements was actively endeavoring to handicap the Zemstvos in selling machinery. Austria-Hungary.—Austria-Hungary has very different types of industrial combinations. The cartel or the elementary form of injustrial combination fixing sales conditions and sometimes prices is the most common form. During the 10 years prior to 1912 the number of Austro-Hungarian cartels increased fourfold. In 1902 Grunzel® counted 50 cartels, and Baumgarten and Meszlény 100 in 1906, and Tschierschky made ap in 1912 a list of 200. The list of the most highly developed combinations with central selling agencies (syndicates) does not include the heavy industries (coal, iron, and steel), but represents such industries as brick, glass, porcelain, small iron wares, chemicals, and textiles. The influence of German industrial interests has been instrumental in helping to organize a number of Austro-Hungarian combinations. 1 Vestnlk Finansov, 1909, N 28, p. 49. ! Vestnik Finansov, 1914, N 5, p. 207. 33. Grunzel, Ueber Kartelle, Leipzig, 1902, p. 198, ete. 1 Kartell-Rundschau, 1912, Heft 1, p. 59. [58 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Another ‘characteristic feature of the industrial organization of Austria-Hungary is the large number of small producers who belong io cartels. These producers regard the cartel as a device to protect their just economic interests by decreasing or eliminating overproduction, price cutting, excessive credits, expensive advertising, numerous commercial travelers, rebates, and large losses through Jepreciation of stock and through dubious accounts.” Moreover, many middle-class producers look upon the cartel as a sort of mutual insurance against trusts. They think it gives a fair chance to all and prevents the big concerns from absorbing the smaller ones. The banks have assumed a leading part in the organization of sartels in Austria. Some bank usually finances the organization and enforces the agreements entered into by the parties to the cartel. Such influence of banks is especially strong in the textile cartels. As early as 1907 the Allgemeine Verkehrsbank in Vienna organized a new credit institution, the “ Zentralverkauf,” for the purpose of selling on commission and consigning merchandise of noncompeting firms and uniting of competing concerns into common sales agencies? The numerous industrial interests of the Anglo-Oesterreichische Bank in Vienna chartered in 1863 include railroads, coal, sugar, electricity, petroleum, canned goods, rice, salt, fertilizers, and panking enterprises.® The Deutsche Bank is the promoter of the large, newly organized Ungarische Erdgas Gesellschaft (the Hungarian Natural Gas Co.) which is expected to become a member of the petroleum combination. Since 1914 there has existed in Austria a special cartel bank, the so-called Kontrollbank, which is in its turn controlled by the Austrian bank cartel.* The function of this Kontrollbank is to regulate the collection of payments due to the various cartels by the banks. This function was previously in the hands of the Oesterreichisch-Ungarische Bank. Up to the time of the organization of the Kartellhank the Oesterreichisch-Ungarische Bank had received no complaints from the cartels of irregularities in collections. But it is supposed that the new bank will handle the matter of enforcement of cartel agreements with more rigor. Sweden.—In Sweden industrial concentration has been carried far, and has taken the form of trusts rather than of cartels and syndicates. While there are cartels among manufacturers of lime, brick, beer, etc., and syndicates in the window-glass, artificial fertilizer, paper and other industries, nearly all the leading industries 18, Tschierschky, Grundlagen der Kartellentwicklung in Deutschland wi Ussterveioh, May 14, 1912, Wien, p. 21. 1 Handels-Museum, Feb, 14, 1907. 3. Marowitz, Fiinfzig Jahre Geschichte einer Wiener Bank, Zeltschrift f. Volkswirtachaft, Sozialpolitik u. Verwaltung, Wien, V. 23, 1914, p. 660. s Rartell-Rundschaa, 1914, Heft 3, p. 229. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 159 are controlled by trusts with holding companies. By merging together nearly all of the manufacturing plants in the country in their respective industries, some of these trusts have obtained what amounts to virtual monopolies. In the metal industry, for example, whose exports in 1913 were valued at 16,412,512 kroners (over $4,000,000), two concerns produce approximately 80 per cent of the total annual output, and operate under a price agreement. The sugar trust (Svenska Socker Fabriks) controls 59 per cent of the sntire Swedish production of beet sugar—raw and refined. It is capitalized at 135,000,000 kroners. In the canned fish business, one of the important export industries, a trust has absorbed 15 companies and has agreements with still others. Its capital stock amounts to 1,000,000 kroners. The textile trust has succeeded in the building of a very powerful organization. It combines 18 companies. The cork trust has a capital of 6,840,000 kroners. Its exports go chiefly to Russia, Finland, and Denmark. The coal trust completely controls the Swedish output of coal, and in addition it has succeeded in controlling the deposits of fire clay in Sweden. Its capital amounts, to 15,000,000 kroners. - One of the largest and most powerful trusts is the iron-ore trust. It controls 80 per cent of the entire production of iron ore in Sweden. Its capital stock amounts to 91,000,000 kroners. The Netherlands.—The people of the Netherlands are engaged largely in commerce and excel in special lines of agriculture and intensive farming, while manufactures have not been developed to the same extent as in the neighboring countries. Consequently, the movement toward industrial combination is not so pronounced among them and has less influence upon their economic activities. In 1912 the imports of articles of food and live animals amounted in round numbers to $435,000,000, and exports to $420,000,000; raw materials imported, $640,000,000; exported, $470,000,000; manufactured articles imported, $305,000,000; exported, $255,000,000. The total imports reached $1,450,000,000, and total exports, $1,250,000,000. Manufactures, therefore, constituted only about one-fifth of the total sxports. The Government maintains a tolerant attitude toward industrial and trade combinations, forbidding fraudulent agreements affecting prices, but recognizing the validity of cartel contracts. International syndicates exert a considerable influence upon the industries of the country. The Rhenish-Westphalian Coal Syndicate, controlling coal dealers’ cartel associations,’ sold in Holland in 1909 nearly five million tons of coal, coke, and briquets, or over one million tons 1 British Statistical isteact for Foreign Countries, 1912, p. 102. The figures are for # gpecial trade.” 3 Report of the Commissioner of Corporations on Trust Laws and Unfair Competition Mar. 15, 1915, pp. 283-284. s Baumgarten & Meszlény, Kartelle und Trusts, p. 176, and PF. M. Wibaut, Trusts en Rartellen, Amsterdam, 1903, v. 108. 160 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, more than it exported to either France or Belgium. (See Pt. II, p. 21.) The International Shipping Pool is represented by the Holland-American line;* the dynamite and explosives combination, through a branch establishment;? the European Petroleum Union,, through the Société belgo-hollandaise Schibajeff & Co.;® and the merger of the oil interests of the “ Shell ” Transport & Trading Co. (Ltd.) and the Royal Dutch Co.,* is known as the Royal Dutch Shell combination. There is a Dutch-Belgian syndicate of manufacturers of crockery ware, which is concerned principally with the regulation of prices, and has three factories in the Netherlands and two in Belgium; ® the Nederlandsche Cement Syndikat;® the Potash Syndicate; the cartel of Dutch and Belgian superphosphate factories; and there are cartel agreements among steamship lines and also among fire insurance companies.” Agreements in the nature of cartels but local in scope exist in several industries. Such is the “ Bond van Nederlandsch-Grossiers in Fruit” in Amsterdam? and district understandings for fixing the price of sugar beets, which have at times been extended so as to include numerous factories in a union which has the effect of a_cartel. There are conventions of salt makers and of shell-lime factories,” and one company controls the peat-moss industry.? There are domestic cartels for gravel, tiles, earthenware pipes, and an extensive and apparently important organization of the manufacturers of potato meal,” but it may be said generally that combinations in domestic industries are comparatively unimportant. Canada.—For a general consideration of the combinations in Canadian industry reference is made to Part II, pages 141 to 169, where the special reports of Consul General Foster of Ottawa, Canada, and of Consul General Mansfield of Vancouver, British Columbia, are printed in full. Tae Export Association oF Cawapa (Lap.).—This association is incorporated under the laws of Canada with an authorized capital of $100,000 in shares of $100 each, with headquarters at Montreal, Canada, and branches at London, England, Aukland, New Zealand, and Melbourne, Australia, and is composed of 95 of the leading manufacturers and producers in the Dominion of Canada, covering practically all lines. Business is done on a percentage basis, and orders are sent direct to the manufacturer or throuch the head 1 Baumgarten & Meszlény, op. cit., p. 179. 2 Report of the Industrial Commission on Industrial Combinations in Emrope, 1901, Vol. XVIII, p. 201. 8 R. Liefmann, Kartelle und Trusts, p. 168, ¢ Stock Exchange Official Intelligence, Vol. XXXII, 1914, p. 1460. 5G. De Leener, L’organisation syndicale des Chefs d’industrie, Vol. I, p. 258. ' Nederlandsche Jurisprudentie, 1918, p. 808. "PF. M. Wibaut, op. cit., pp. 106-124, 8 Report of the Commissioner of Corporations on Trust Laws and Unfair Competition, Mar. 15. 1915. pp. 283-284. COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 161 office at Montreal. That the association is accomplishing results seems to be indicated by the increase of more than $1,500,000 in New Zealand’s imports from Canada during the vear 1915 over the preceding year. . The purpose of The Export Association is to build up for Canada a permanent trade with other portions of the British Empire and allied countries by continuing along economic lines the bond of interest which the war has given them. It is believed that this will be strengthened after the war through preferential tariffstand the provision of adequate transportation facilities, in conformity with 1 general plan of commercial and industrial development. The functions of the association are to create a favorable strategical position in outside markets for Canadian industry as a whole; to secure detailed information and actual orders for its members; to introduce the representatives of Canadian firms to the most impor-. tant buyers in other markets; to find reliable export agents for its members; to collect and make shipments of export orders and, where possible, to finance the same; and to organize production in Canada for the execution of large export orders. Shipments are regularly made to New Zealand and Australia and arrangements are being made to extend the operations of the association to South Africa. A large sample room is to be opened in London to exhibit Canadian products and facilitate sales, and a joint general manager there is getting in touch with important purchasing interests in France, Russia, Belgium, and Italy. The shareholders have decided to call a National Export Trade Convention in Canada to inaugurate a national movement for cooperation of the large producing interests, the transportation companies, and the banks in uniting the whole economic strength of the Dominion in the support of its foreign trade. UNITED STATES. It is not necessary in this report to describe the industrial organization of the United States in detail as has been done in the case of the other countries discussed in this chapter. The broad outlines of American industrial organization are commonly known and detailed information on its various features is readily available to Congress and to the public. It is sufficient to point out here that in several important lines of finished and semi-finished products a large proportion of the export business is done by great aggregations of capital, such as the United States Steel Corporation (through the United States Steel Products Co.), the various Standard Oil companies that export, International Harvester Co., General Elec-*Prospusins of The Export Association of Canada (Ltd.). P7241°-—16—-—12 162 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. tric Co., Singer Sewing Machine Co., National Cash Register Co., and others. Large concerns like these are now able to compete with foreign combinations. It is the smaller concerns who are now at a disadvantage in competing for export trade. THe present statement is therefore confined to a brief summary of the activities of the United States Government in the promotion of American export trade, as well as of similar activities of chambers of commerce and trade associations. Tarrrr prawsacks.—Inasmuch as in a few instances in the above discussion the drawback features of the tariff legislation of foreign countries have been referred to as among the advantages enjoyed by exporters of those countries, it is proper to mention briefly here the drawback provisions of the tariff law of the United States (par. 0, sec. IV, of the tariff act of Oct. 3,1913.) In substance, this provides for the allowance of drawbacks upon the exportation of articles manufactured or produced in the United States wholly or in part from imported materials. The refund of duties in such cases is 99 per cent of the duties paid on the imported materials used. The amount paid for account of such drawbacks by the United States during the fiscal year ending June 30. 1916, was somewhat over $15,000,000. DzrparTMENT oF StaTE.—The Diplomatic and Consular Services are subordinate to this department. By means of representations to foreign governments, made through the diplomatic missions, the Department of State secures to American trade and to American enterprises in foreign countries the protection and the equal rights to which they are entitled under the provisions of treaties or by international law or usage. Through the Consular service this department obtains information concerning conditions in foreign markets affecting the sale of American goods. Individuals and firms in the United States are at liberty to address any of the 300 consular posts requesting general information as to market conditions or exact data respecting specified points involved in the marketing of their products. In addition to answering these inquiries, consular officers prepare, both on their own initiative and at the direction of the Secretary of State, comprehensive reports on economic subjects of timely interest, always with particular reference to the possible sale abroad of American goods. They exert themselves in every possible way to adjust differences arising between merchants in their districts and American exporters, and in general to increase the local prestige of American products and smooth the way for their importation and sale. The letters and reports of consular officers are transmitted to the Department of State, which edits them with a view to making the information therein contained available to the private individuals or firms, and to the governmental depart- COMPETITIVE CONDITIONS IN INTERNATIONAL TRADE. 163 ments which can most advantageously use it. A great amount of timely and practicable trade data is furnished to the Bureau of Foreign and Domestic Commerce for publication in its daily and other issues. Bureau or Foreren ano Domestic Commerce—This bureau was created by Congress in 1912 by consolidating the Bureau of Manufactures and the Bureau of Statistics. Among the important duties of the bureau, under the direction of the Secretary of Commerce, are “to foster, promote, and develop the various manufacturing industries of the United States, and markets for the same at home and abroad, domestic and foreign, by gathering, compiling, publishing, and supplying all available and useful information concerning such industries and such markets and by such other methods and means as may be prescribed by the Secretary or provided by law.” The bureau secures its information from United States consuls through the State Department, as explained above; from its own commercial agents and attachés abroad; from its own agents in the larger cities of the United States; from the United States customs districts; from other executive departments in Washington; from American commercial organizations at home and abroad: and from official and other publications. This information is published in Commerce Reports, Monthly Summary of Foreign Commerce of the United States, Commerce and Navigation of the United States, Statistical Abstract of the United States, Foreign Tariff Notes, special commercial monographs, trade directories of various countries, etc., all readily available to she business men of the country. The bureau maintains offices with competent representatives in the principal cities of the United States. On request the bureau’s publications, samples of foreign-made products, plans and specifications of construction work abroad, lists of foreign dealers in various lines, manuscript consular reports, and similar documents will be forwarded to these offices for inspection by those interested. CoMMERCIAL ORGANIZATIONS FOR PROMOTION oF FOREIGN TrADE.— There is a growing tendency on the part of those directly or indirectly concerned to associate themselves into commercial organizations which promote general trade relations with specific foreign markets or which gather information and provide sound specialized advice for members or which undertake to push American wares in foreign lands. The American chambers of commerce in various foreign countries are prime factors in the promotion of American commercial and 132 U. 8. Stat. L.,, p. 827. 2 Promotion of Commerce Bureau of Foreign and Domestic Commerce, Miscellaneous Series, No. 6B. 1914, pp. 3-9. 164 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. financial relations with specific markets. One of the largest and oldest of these is the American Chamber of Commerce at Paris, organized in 1894. In 1912 it had an enrollment of 500, only American citizens being eligible to active membership. This body cooperated with the Chamber of Commerce of the United States and with the United States Government whenever possible in the furthering of closer commercial and financial relations between France and the United States. This association is typical of many others in different parts of the world. Several of these organizations maintain branches in neighboring markets or in the United States. The American Chamber of Commerce of China, at Shanghai, has affiliated branches throughout the Far East; the Russian-American Chamber of Commerce at Moscow has a branch at Petrograd and contemplates establishing one in New York, etc. In most cases the associations are composed largely of Americans, but sometimes native importers or business men interested in trade with this country make up the membership. While the primary objects of these associations are the same, their special activities differ with the conditions prevailing in their respective localities. A number of associations throughout the United States are interested in aiding American manufacturers to develop their foreign trade. Many of them, like the American Manufacturers’ Export Association, the New" York Exporters’ Association, the Export Club of America, the Philadelphia Commercial Museum, and the National Foreign Trade Council, are interested exclusively in matters of fors eign trade. . The greatest usefulness of such bodies lies in the information they are able to put in the hands of manufacturers desirous of exporting their products. They concern themselves also with the larger problems of policy, tariffs, shipping, credit, ete. Another kind of association is found in a number of manufacturing cities where local chambers of commerce, formed primarily for domestic interests, are interesting themselves in educating local manufacturers in the needs, incidents, and opportunities of foreign trade. The Chicago Association of Commerce has a foreign trade division with a foreign trade commissioner. An office was maintained for several years in Buenos Aires to facilitate negotiations between buyers and sellers, to place new orders on products, to secure salesmen, and to advise home manufacturers of trade possibilities. A sample room showing a number of Chicago products was installed, and the agent of the association made extensive tours of important countries in the interests and for the information of the manufacturers he represented. Another interesting phase of the movement is illustrated by certain railroads and express companies which supply foreign trade informa. tion and suggestions to American merchants and manufacturers, CHAPTER IV. COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. SECTION 1. INTRODUCTION. Owing to the importance which South America now has as a market for American goods, the Commission has devoted particular attention to the competitive conditions in the trade with these countries. The following discussion of conditions is based both on published data and on special investigations made by representatives of the Commission in South America in the early part of 1916. The salient facts regarding the conditions of trade between the United States and the principal South American countries may be summarized as follows: 1. The growth of American trade with South America has been and still is greatly hampered by the lack of American shipping. By discriminating against American trade, both in the matter of service and freight rates, owners of foreign vessels carrying goods between the United States and South America have given and still give the European shippers a marked advantage in the South American markets over their American competitors. 2. In certain industries the system of combinations, trade agreements, and export rebates enjoyed by European manufacturers is the principal reason for their ability to sell such goods in South America at lower prices than the American manufacturers. 3. One of the greatest obstacles to the growth of a permanent demand for American goods is the heavy investment of foreign capital in the economic development of the South American countries and the scarcity of similar American investments there. The demand for many articles in South America is much more influenced by the ngtionality of the capital invested there than by the prices or character of the goods. 4. Whenever practicable the American manufacturer should establish a competent personal representative in each foreign market where his own present trade or the future prospects of the market will warrant such a step. This is advisable to insure the proper pushing of the sales of his goods, independent of whether he desires the distri-165 166 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, bution to be controlled by him direct to the local retailer or consumer or to be handled through the present distributing facilities afforded by established local importing houses and by American exporting houses. 5. Cooperative effort by American producers of many commodities, especially staple goods of all sorts, should do much to offset the advantages of European combinations selling in South America and to maintain the trade of the United States in that market. 6. American manufacturers whose South American trade has greatly increased during the war in lines which formerly had to compete with goods manufactured by European combinations of manufacturers should prepare to meet the severest kinds of competition in those markets after the war. 7. Most of the local importing houses, whose primary interest has always been the distribution of goods of European origin, are only temporarily handling American goods to keep up their organization and hold their customers. They frankly state their intention to return to their European source of supply at the first opportunity. 8. The American manufacturers who at present find a large and profitable cash market in the sale of their goods to such houses can not expect to build up a future market through them. They are merely helping their foreign competitors to ‘retain a hold on the South American markets. This is particularly true of those American manufacturers who are engaged in supplying such houses with goods which are not only close imitations of the European styles in which such houses had established a trade before the war, but which, furthermoro, are misbranded in respect to their place of origin. 9. Much of the present heavy demand for American goods in South America is due to conditions temporary in character and is the result of urgent necessities. The opportunity which it offers to introduce American goods in South American markets should be used to build up permanent business. Complaints against the methods of many American manufacturers in conducting their South American trade are not infrequent. While some are due to a lack of appreciation by the foreign buyers of difficulties at present confronting the American manufacturers in their home markets, and in the shipping situation, others may be better founded. No attempt was made by the Commission at the time of its field investigation to determine the justice of such complaints as were brought to its attention. Since that date, the action of the Union Industrial Argentina and the Buenos Aires press, in voicing certain complaints, has brought this matter into some prominence, and an investigation of the subject is being made by the American consul COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 167 SECTION 2. PRESENT CONDITIONS IN SOUTH AMERICAN TRADE ABNORMAL. At the time of the outbreak of the present war many of the firms handling European goods in South America had large stocks on hand. The buying power of the South American countries was affected by the financial crisis which followed the outbreak of the war. As a result of their stocks on hand, taken in connection with the diminished demand, such firms were able for a time to supply their customers with European goods. Where unusually large stocks were in existence they were still holding the market in certain lines of goods in 1915. For example, it was reported in Brazil that before the war considerable stocks of German, Belgian, and British structural iron and steel had been accumulated. The freight and import duties had been paid and the material was in storage. Due to the financial depression in Brazil, the demand fell below normal. Notwithstanding the increased demand elsewhere for iron and steel, consequent bo its use for war purposes, there could be no corresponding rise in price in the Brazil market since there was little new construction in progress. Some of the firms holding the stocks were under pressure fo sellin order to realize on their investment. As a result, the prices and the trade prospects in Brazil have not been particularly attractive 0 American manufacturers of structural iron and steel, since much higher prices for their product could be obtained elsewhere. On the other hand, in Brazil the European stocks were early exhausted in certain other lines of iron and steel products. The only available source of supply was the United States. The demand, while diminished from normal times, has continued, and is of so insistent a nature that not only the high prices current for such goods in the United States are paid, but, in addition, the excessive ocean freights charged to carry them to South America. Similar conditions exist in other kinds of goods. As a rule, stocks of European goods in South America are now very low. In some instances the firms that handled them have been able to buy similar goods in the United States, and thus continue in business. In other instances they have practically retired from the field. Obviously fewer goods have been obtainable from Germany than goods from the entente allies. The trade of the latter, however, has been much diminished by the withdrawal from the commercial field of many factories needed for the manufacture of war material and the restrictions placed on the exportation, or the absolute prohibition of exportation, of certain classes of goods, because of their use for war purposes or their necessity for supplying the home demand. As a result of such changed conditions, at the present time American trade in the South American markets is much less hampered by the 168 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. competition of the European combinations than was the case before the war. In some lines, especially in cases where the cartel or combination was international in character, there is reason to believe that there will be a new alignment of interests after the war is over. In other lines there are evidences that as soon as peace is restored the combination will again be active. In fact, such combines will probably make use of their advantage of unity of action to an even greater extent than before and will wage a fiercer competition in order to regain markets now largely supplied by American goods. They are endeavoring to make contracts with the prominent importers to handle their products exclusively and guaranteeing them in that case prices lower than any price that might be offered by an American manufacturer. Some of the European combinations which were formerly active in the South American market are now dissolved, others are in a state of suspended animation, while others are keeping up their distributing organization and their hold on their customers by supplying the latter chiefly with goods of American origin. At present, therefore, the competitive conditions are very different from what they were prior to the war. As to these former conditions, the Commission has collected a variety of information. Obviously, the practical value of such information is dependent on how far these conditions will be resumed upon the conclusion of peace. In Brazil, Uruguay, and Argentina, at least, the conditions will be changed. The recent marked increase in the use of goods of American origin, the efforts of American manufacturers to exert a larger measure of control over the distribution of their products in these markets, and the present as well as prospective investments of American capital in those countries are the chief factors in assuring the change. By far the most important of these factors is that relating to the investment of Amercan capital. SECTION 3. THE NEED OF AMERICAN SHIPPING TO CARRY AMERICAN GOODS. For many years a combination has existed between the different British lines of steamships running between the United States and various ports in Brazil, Uruguay, and Argentina. This combination has used its control of the carrying facilities to restrict the growth of American trade and to favor instead the British trade, which was carried over their lines between the same South American ports and Great Britain. The lines belonging to the combination are usually known as the Conference lines, and their rebate agreement as the Conference agreement. Under this agreement a rebate of 10 per cent on the freight charges is paid to those shippers who make shipments only on boats of the Conference lines. The payments COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 169 for the rebates are made at six months intervals, and the payment is always six months in arrears of the period covered by it. The shipper, before he can receive it, must prove that he has made no shipments on other than Conference line steamers, not only during the six months for which the rebate is paid but during the subsequent six months as well. Unless he can do that he forfeits the rebate on any freight shipped during the entire period, i. e., one year preceding the date on which the payment for the six months is made. The effect of this was that the shipping combination monopolized the carrying of freight by steamers between the United States and the east coast countries. Often the freight rates were excessive when compared to the rates which it was possible to get by using tramp steamers. But the shippers did not dare to avail themselves of such steamers and thereby lose their rights to the 10 per cent rebate on the Conference lines. The supply of tramp steamers available for charter or on which part cargoes could be shipped was variable and their times of sailing uncertain. On the other hand, the Conference lines, during the period before the war, offered a sure and regular although high-priced service. Any shipper who had forfeited his Conference rebate, and yet was forced to make shipments on their steamers in order to get his goods to their market, was at a great disadvantage when compared to competitors who enjoyed the rebate. Before the war there had been various attempts made to establish lines of steamers between the United States and the east coast countries, to run in competition with the Conference lines. The control which the Conference lines had over shippers, both in the United States and the east coast countries, by reason of their rebate system and their ability to arrange the sailing schedules of their various lines so that there would usually be a Conference line steamer competing for cargo to the same destinations whenever a steamer of the independent line was loading, was generally too great a handicap, and in nearly every case the independent line had to retire from the field. Since the war began the power of the Conference lines is said to have been much weakened. Many of their steamers have been requisitioned by the British Government for military purposes or withdrawn for the trans-Atlantic carrying trade. Some of the lines formerly in the agreement are said to have withdrawn and’ to be operating on an independent basis. Informants in Brazil stated that the rebate system had been abandoned, that shippers are now sending their goods on any steamer they are fortunate enough to get. In the Argentine shipping situation, however, the Conference agreement 170 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, and rebate system was in operation at least as late as December 15, 1915, as 1s evidenced by a joint circular letter issued by the Houston, Lamport & Holt, and Barber Lines. This letter gives in detail the Conference rates and the conditions under which the rebate was to be paid. An example of the difference between the rates of the Conference lines and those charged by independent carriers is shown by the recent experience of a prominent shipper in Buenos Aires who had a shipment to make to the United States. He was offered a rate of $25 per ton on an independent steamer. The lowest rate he could get for this shipment on a Conference line boat was $40. He sent his goods by the Conference line, as the amount he would lose by forfeiting his accumulated rebate was much greater than the saving in freight on this particular shipment. Because of the nature of his business he had to be sure of getting regular service at frequent intervals. This made it imperative to make most of his shipments on Conference lines. He stated, however, that the service on the Conference lines, due to the war, was getting so irregular and the difference between their rates and those on independent boats getbing so large that he might decide in the near future to forfeit the rebate and ship on any steamer available. Many American informants criticized the action which the Conference lines took at the time preferential duties on certain American products were put into effect by Brazil. It was cited as an example of the way foreign control of the shipping facilities between the United States and Brazil has been used to hamper the development of American trade. The annual Brazilian budget law authorizes the government to reduce customs duties a maximum of 20 per cent on one or more products (and up to 30 per cent on wheat flour) which originate in countries that make compensating concessions to products of Brazilian origin. Under this provision of law, a reduction in duty is extended annually by executive decree to certain American products, amounting to 30 per cent on wheat flour, and to 20 per cent on condensed milk, certain manufacturers of rubber, time pieces, specific inks and colors, except writing ink, varnishes, typewriters, refrigeraters, pianos, scales, windmills, cement, corsets, dried fruits, school furniture and desks. This preferential treatment is accorded the American products enumerated in return for the admission duty free of Brazilian coffee and other products to this country. The American informants stated that about the time this preferential duty went into effect the Conference lines raised their rates on some of the commodities carried from the United States to Brazil by an amount sufficient to absorb the advantage intended to be con- COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 171 ferred by the preferential duty. This action benefited the European trade in those articles, particularly the British trade, which then had and still retains an advantage over American competitors by reason of much cheaper freight rates. The greatest obstacle at the present time to the maintenance of trade in American goods in South America is the lack of ships to carry the goods already sold to South American purchasers. With the German merchant fleet inactive, and a large portion of the British merchant fleet withdrawn from the carrying trade between neutral nations, the situation is acute and becoming worse. Most stocks of imported merchandise accumulated in South American countries before the war have been already consumed. Supplies for current needs have to be bought in the United States, often at prices made excessive because of the war. There is not enough shipping available to carry the necessary current supplies to the South American countries, even though the demand for them, curtailed by the high prices and the exorbitant shipping rates, is much below normal. Only a fraction of the American goods already sold can be transported at the present time. In all classes of goods the exportation of which is permitted from the various European countries the American trade is placed at a disadvantage because of its lack of carriers. This applies not only to goods of British origin but also to those of all the other European countries, including some originating in Germany which are exported through neutral countries. Many informants, in discussing the situation, made the charge that the interests controlling the British shipping were, under the pretext of military necessity, deliberately endeavoring to hamper American trade in South America; that they were doing this in the interest of the future British trade, to offset, as far as possible, the present American advantages in being able to supply the goods. It was charged that they were using two methods—giving much lower rates on merchandise shipped from Great Britain than on similar merchandise from the United States, and not allowing enough British vessels to engage in the carrying trade between the United States and South America. It was pointed out that on classes of goods which it is still possible to export from Great Britain, the American exporter has to pay freight rates from 30 to 40 per cent higher than the British exporter pays. It was also pointed out that British merchants can take orders and make prompt deliveries, while it is practically impossible to secure early deliveries, or even safely to set a date for delivery, on goods from the United States. Most of the ships from England to the River Plate region, it was said, are coming out partly loaded, or even in ballast, while if they were allowed to cross to the United States and take a cargo on their trip down they could come with full cargoes at the present abnormally high freight 172 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, rates. This would go far to relieve the difficulties now encountered in delivering American goods. On the other hand, other informants, usually British, stated that the imperative need of the entente allies for supplies from South America and from the United States, together with the shortage of ships, made it necessary that every ship, as far as possible, should be used in carrying supplies direct to Europe, and then should return by the quickest route to get more. They pointed out that a number of ships available for the carrying trade had been sunk and others withdrawn for military purposes by requisition of the British Government. They also stated that the high rates paid for carrying cargoes to Europe (much higher than from Europe to South America and even higher than from the United States to South America) made it more profitable for most ships under neutral flags to carry such freight, instead of carrying goods between the United States and South America. The discrimination in freight rates in favor of shipments of British merchandise to South America was explained as being the result of the relatively small amount of merchandise offered for shipment, compared with the large amount of carrying capacity available on steamers going to South America for the return cargoes of foodstuffs, meats, hides, etc. Whether the present difficulties atfending the shipment of American goods to South America are wholly due to exigencies of the situation confronting the British Government, which is now controlling the operations of the British mercantile marine, or whether there is an attempt to use this power incidentally to restrict American trade is not of primary importance. The outstanding fact is that, because of insufficient shipping facilities, American trade in South America is being blocked and hindered on everv hand. SECTION 4. THE INFLUENCE OF FOREIGN INVESTMENTS ON THE DEMAND FOR FOREIGN GOODS. The South American countries possess vast natural resources, yielding products which are in great demand. They lack, however, the store of accumulated capital needed for the development of these resources. ‘This must be borrowed in foreign countries and invested in enterprises which will make this great potential wealth available, and, at the same time, build up permanent industries. Much of the habitable area of the countries is sparsely settled, and, as has been the case in western United States and Canada, in many regions railroads must be built to open up the country for economic development. Large-scale enterprises of other kinds are often necessary before the resources can be developed to the point of profitable returns. COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 173 Almost all of the foreign capital invested in the South American countries before the war came from Europe, principally from Great Britain, France, Germany, Belgium, and Spain. For example, in Argentina at the end of 1914 there were in operation 33,272 kilometers (20,674 miles) of railroad. Of this about 14 per cent, all narrow-gauge road, was owned by the State and 72 per cent was British investment. While British capital probably predominates in such public utilities as street railroads, light and power plants, gas plants, the German, French, and Italian interests are very extensive. The investment in the great meat packing and freezing plants, which make possible the utilization of one of Argentina’s greatest natural resources—its grazing lands—was originally chiefly British, although in the last few years large amounts of American capital have also been invested. Of the total foreign capital in investments in Argentina in 1913, it is estimated that about 53 per cent was British, 27 per cent French, 10 per cent German, 6 per cent Belgian, 3 per cent Spanish, and about 1 per cent American, the American being chiefly confined to the meat industry. In general, the demand for foreign goods in all these enterprises follows the nationality of the investment. It is the almost invariable rule that where such public utilities as railroads, light and power plants, street railways, etc., are financed by foreign capital, the equipment 'and supplies must come from the country financing the investment. And, in enterprises not of the public-utility type, this rule largely holds true. The demand for foreign goods is not limited to the equipment and supplies of the enterprises financed by foreign capital. It is increased by the requirements of the employees, many of whom come from the investing country, and by the demand from a large portion of the native population, not connected with such enterprises, who become acquainted with the foreign goods. The handicap which the development of trade in American goods has to overcome is therefore a serious one. While the value of imports from the United States to Argentina in 1913 formed about 15 per cent of the value of that country’s total imports, over 40 per cent of the American goods imported consisted of petroleum products and lumber, commodities in which no European nation can compets, because they do not possess in sufficient abundance the natural resources which produce them. Obviously, the demand for such goods in Argentina does not follow the nationality of investment. Agricultural machinery formed 10 per cent of the imports. In this line, also, there has been little effective foreign competition, and American goods are the only ones available. One-half the American imports consisted of goods which are urgently needed by consumers in Argentina, and which it is impossible to supply from Europe. The other half of the American imports (or 74 per cent of the total imports 174 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. into Argentina in 1913) had to be sold in the face of European competition in the same lines. It is the demand for such classes of goods which is chiefly influenced by the investment of foreign capital in Argentine enterprises. . In the making of their foreign investments the European capitalists possess a marked advantage over their American competitors, through being allowed a much greater liberty of combination. In many-of the public-service investments the equipment and supplies are purchased from companies which are closely connected through ownership of stock, common stockholders, and similar mutual interest with the financing and operation of the enterprise. In fact the evidence collected in many specific instances indicates that one of the principal objects of investing foreign capital in such enterprises is to create a market for the goods of the investing company, or of certain important stockholders therein. The direct return, through lividends from the operation of the property, appears to be of secondary importance, at least for the early years, before the enterprise is well established on a paying basis. Specific examples of the type of investment which creates a market for its principal stockbolders are the numerous British-owned railroads in Latin America, which have as their consulting engineers the firm of Livesay Son & Henderson. The purchase of equipment and supplies for the roads is dictated by this firm, who are supported in their action by the boards of directors of the different roads. This firm, as well as many of the directors, is closely connected with the interests which control supply companies, such as the Birmingham Railway Carriage & Wagon Works, Metropolitan Amalgamated Railway Carriage & Wagon Co., and Beyer, Peacock & Co. Almost invariably orders for material on the controlled roads have to be placed with such companies. According to information gathered in a number of special instances in Brazil, Uruguay, Argentina, and Chile, the railroads were forced, not merely to give their business to the British firms, but to pay a much higher price for their equipment and supplies than if there had been no restriction as to the origin of the goods. This condition is not confined to the British roads whose purchases are controlled by Livesay Son & Henderson. One informant, an agent for equipment not of British origin, stated that he was solicited by the manager of a British-owned railroad, not controlled by the interests above described, who requested him to submit a bid for equipment needed by the railroad. At the same time the manager explained to him that unless the bid was at least 10 per cent lower than the lowest British competitor the contract would have to go fo the British firm. The reason for this was stated to be that certain prominent stockholders were interested in railroad-supply firms, Since the road had paid small dividends, the manager felt it necessary COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 175 to place his orders with those firms unless an important price differance was shown. The extensive use of British equipment and supplies on the railroads owned by British capital has given the firms supplying it an advantage over their competitors when it comes to bidding on contracts for the supply of State-owned roads in various South American countries. In many cases, although the contracts are nominally let under competitive conditions open to all bidders, the specifications placed in such contracts are so framed as to favor certain foreign bidders and exclude others. Often the contracts follow closely those of the British-owned roads. For example, in various contracts for equipment on the Chilean national roads the specifications require that only Yorkshire iron be used for certain parts, although any other iron of equal grade would equally serve the purpose. Sometimes the contracts provide that the equipment must conform to certain British standards—which in turn specify definitely that certain material of British origin must be used. Possibly the inclusion of some such specifications may be due to sollusion between the writers of the specifications and the supplying companies. The fact, however, that a large part of the operating force on the State roads have gained their railroading experience on the British-owned roads and are thoroughly familiar with the British equipment and supplies has great influence on the character of the specifications. This influence has been shown repeatedly in the demand for American equipment in the case of various Americanbuilt roads on the west coast, particularly where many of the operating force are Americans. The investment of British capital in railroads has, therefore, not only the direet result of securing to the foreign supply companies a large noncompetitive market for their goods, but also it has given them an advantage in competing for the business of the State-owned roads. A German locomotive-manufacturing company known as the Borsig Co., has often been successful in securing contracts for equipment from State-owned roads in various Soutk American countries. Various explanations were offered to account for this, inasmuch .as the investment of German capital in railways is relatively small. Among the reasons generally given were the aid of the German diplomatic staff in making arrangements whereby the contract would be awarded in return for assistance in placing State loans abroad; or the subvention of the Borsig Co. through the Deutsche Bank, by helping to finance the transactions and by giving an export bounty of £400 to the Borsig Co. on every one of its locomotives that it was able to place abroad. Of the imports of railroad material into Argentina in 1913—including rolling stock and material for construction—over 80 per cent 176 REPORT ON COOPERATION IN AMERICAN. EXPORT TRADE. came from the United Kingdom, Germany, and Belgium, the United Kingdom alone furnishing over one-half. Of the imports of locomotives, 75 per cent came from the United Kingdom, 20 per cent from Germany, and about 2 per cent each from Belgium and the United States. Of the imports of passenger and freight cars, about 57 per cent came from Great Britain, 11 per cent from Germany, 19 per cent from Belgium, and 12 per cent from the United States. The imports from Germany and Belgium were almost wholly confined to steel freight cars. -Recent events in Uruguay have furnished an example of the importance attached by the British to the retaining of a dominating position in the railroad investments of that country. In order to keep out all American investments in such lines, the British railroad interests in Uruguay went to great lengths in their endeavor to prevent the Uruguayan Government from having one of its State roads built by Americans. They were not successful, although, in order to keep the American competitor out of a country which they claimed as their exclusive field, they put in a bid much below the American firm. Their avowed purpose in making this bid was to prevent the investment of any foreign capital except British in Uruguayan sailroads. The present situation in the foreign investments in railroads in South American countries clearly indicates that if the trade in American railroad equipment and supplies is to be put on a stable basis and steadily developed a permanent demand must be created through the ownership of railroads built, equipped, and operated by Americans. This will serve as a solid base of operations from which to develop the trade in railroad supplies, and in time will lead to the development, in the territory served by such roads, of other enterprises financed by American capital. This will stimulate the demand for American goods of all kinds. To succeed, in the face of the present strong combinations of British railroad capital and the advantages which the cartel systems have given German and Belgian manufacturers, more complete organization of American financial and manufacturing interests will be needed than exists at present. Only large and powerful concerns can enter the field with any prospect of success against such competition. The fact that in 1913, under the conditions of competition existing before the war, the imports of railroad material from the United States into Argentina amounted to over 10 per cent of the total imports of such material, leads to the belief that, with equal facilities of combination in the fields of investment and exportation, the development of the American trade will proceed rapidly. In the development of projects calling for electrical installation and supplies a condition exists similar to that in the railroad invest- COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 177 ments. German capital has been the leader in promoting and finaneing such projects. The German firm most prominent in this work in Brazil, Argentina, Uruguay, and Chile has apparently been the Siemens-Schuckert Co., although the Allgemeine Elektricitéts-Gesellschaft has shared largely in such business. The success of the Germans ih obtaining contracts for installation in cases where bids were on a competitive basis was attributed by numerous informants to the support of the German Government, through the Deutsche Bank. This, it was stated, enabled it to make a practice of underbidding any competitor, and, through control of the field and the installation of German electrical apparatus, to develop a permanent large market for German electrical supplies. Some informants stated that it was the practice of their German competitors, after seciiring stich 8 contract, to obtain modifications in the specifications which allowed the substitution of cheaper material than originally called for. In consequence the German installations have frequently given unsatisfactory service, because of inability to do work up to their specified capacity. On the other hand, other informants, who claimed to be acquainted through experience with such installations of German electrical machinery, stated that it not only was cheaper but gave satisfactory results. It was stated, in Argentina, that the result of the struggle of the German electrical construction and supply firms to secure control of the trade by systematically underbidding on all contracts for installation and supplies had resulted in a heavy financial loss to the German firms and little business for their competitors. Of the importations of electrical goods into Argentina in 1913, over 50 per cent were of German origin, 34 per cent of British, and 6 per cent from the United States. The establishment of a permanent and extensive demand for American goods in these lines appears dependent directly on the investment of American capital in street railways, light and power companies, and other important consumers of electrical supplies. SECTION 5. THE COMPETITION FROM FOREIGN COMBINATIONS. As has already been pointed out, the European war has seriously interfered with the South American trade of many of the European cartels and combinations. This is particularly true of the Belgian and German organizations, which seem to have been most effective aids to the development of the foreign trade of those countries. As a result, they have at present little or no competitive effeat on the American trade. The same is, to a considerable degree, true of British and French combinations, many of which covered products which no longer can be exported freeiy. M941° ~16——13 {78 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The present activities of the British alkali combination which controls a large part of the trade in caustic soda, soda ash, and allied products illustrate the efforts of such organizations to retain their hold on their trade. The principal members of this combination have been the Brunner Mond Co. and the United Alkali Co., which in turn control a number of other companies. Late in May, 1916, it was reported that the combination had been still further strengthened by a merger between the firm of Brunner, Mond & Co. (Ltd.) and the Castner-Kellner Alkali Co. For several years the latter company was understood to be acting in harmony with Brunner, Mond & Co. (Ltd.) and the United Alkali Co. The combined capital of Brunner, Mond & Co. (Litd.) and the Castner-Kellner Alkali Co. will be more than £8,500,000 ($42,000,000). One of the principal objects of the merger is stated to be the extension of the British foreign trade in the chemicals manufactured. The combination is reported to have had trade agreements with German manufacturers in the same lines and to have controlled 80 per cent of the British output. Before the war it monopolized the South American trade of its various products, particularly in caustic goda, a chemical needed by soap makers. For example, in 1913 caustic soda of British origin formed 85 per cent of the total imported into Argentina and 96 per cent of the total into Brazil. Since this chemical is in great demand for war purposes, at first its exportation from Great Britain was restricted, and later on absolutely prohibited. The demand for it in Europe became so great that large quantities of the American product were imported for British and allied consumption. The American price, stimulated by an increased domestic demand and an unprecedented foreign demand, both from belligerent and neutral countries, soon doubled and trebled. For a time, while their exportation was merely restricted, the British combination, in order to retain its hold on the South American trade, made sales of caustic soda to its customers there at a price substantially less than that at which the chemical was being bought for European consumption. The British manufacturers in the combination contemplated, in case the war came to an early end, being able by this procedure to hold their markets. There was no inducement for an American manufacturer to attempt to develop a market in Argentina at a time when the European market offered much higher prices. The prolongation of the war, however, and the enforcement of an absolute prohibition of exportation made it impossible for the British companies to continue their export trade. As a result, the United States is to-day the only source of supply for the South American markets. Before the war South American soap makers demanded a certain popular British brand of caustic soda, of 70° to 72° test, which was COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 179 manufactured by one of the firms in the combination. This brand was so well established that it practically had a ‘monopoly in the market. The soap makers had based their formulas on its use, and their workmen were accustomed to the use of certain measures in determining the quantity used. The American caustic soda which they have been able to obtain has generally been 76° to 78° test. Their attempts to use it in the same manner as they were accustomed to use the lower-test British brand resulted unsatisfactorily and created a prejudice against the American product. When all supplies of the British brand had been exhausted and it became absolutely necessary for the manufacturers to use the American caustic soda, if they were to continue to make soap, the formulas and measures were altered, and after some experimentation perfectly satisfactory results were obtained. At first there was much trouble with the American methods of packing caustic soda for export, but this difficulty seems largely to have been overcome. Certain soap makers in the River Plate region state that now that they have changed their manufacturing methods to use the higher test caustic soda they think it was a step toward a marked economy in their business, since it takes a less bulk of the American caustic than of the British brand formerly used to accomplish the same results in soap making. With the high shipping rates now prevailing, this permits a considerable saving in freight. They also state that they would prefer to continue the use of the higher-test caustic soda after the war if they can get it at a suitable price. Itis apparent, therefore, that the value of the British brand of 70° to 72° caustic soda, which formerly practically monopolized the market, has greatly diminished, and one obstacle in the development of trade in the American product has been largely overcome. Agents of the British alkali combination for some time have been trying to make arrangements to shut out the American companies as soon as the British prohibition of the exportation of caustic soda is removed. For this purpose they are endeavoring to get the prominent importers to enter into contracts to handle the British product exclusively, and in consideration of this exclusive contract are guaranteeing that the British prices will be lower than any that might be offered by the Americans. Thus the combination is preparing to use the united resources of its members in a vigorous price-cutting war against the individual American manufacturers who now have this trade. In spite of the war-curtailment of the supply of European Portland cement, the American manufacturers, because of high freights and the lack of shipping, have been materially handicapped in their efforts to extend their trade. At the present time in Chile and Argentina severe competition is met from Swedish and Danish cement. During 1913, 1S0 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. »f the imports of cement into Argentina, 52 per cont came from Belsium, 15 per cent from the United Kingdom, and 13 per cent from France. Imports from the United States amounted to. 1 per cent. Of imports in 1913 into Brazil, Germany furnished 48 per cent, the United Kingdom 21 per cent, Belgium 18 per cent, and theo United States 5 per cent. In Chile, in 1913, Germany furnished 66 per cent, the United Kingdom 19 per cent, Belgium 11 per cent, and the United States 5 per cent. Eighty per cent of the total cement exports from Germany were handled by the cement cartels, which marketed their surpluses by selling at a much lower price abroad than at home. The Associated Cement Manufacturers of England includes practically all of the cement exports of that country and operates as a unit in South America. In Belgium the trade is controlled by cement syndicates which follow the methods of the German cartels. Furthermore, all of the European manufacturers have enjoyed substantially lower shipping rates to South America than their American competitors. Hence the small American trade before the war is easily explained. In fact, the advantage in shipping rates, and not a lower cost of production, has been the chief reason why the European manufacturers have had the business. Information gathered concerning the effect of the competition of the British Portland cement combination (The Associated Portland Cement Manufacturers, Ltd.) indicates that its ability to undersell its American competitors in the South American markets is based, in normal times, primarily on its ability to secure very much lower shipping rates than are available to the American producers. According to a prominent importer in Buenos Aires, the prices of cement, arade for grade, are often considerably lower f. 0. b. New York than f. 0. b. London or Liverpool, but this is much more than offset by the difference in freight. Much of the success of other European combinations in other lines than cement in marketing their goods in the South American markets has been due to the advantageous shipping rates they have obtained in comparison with American rivals. The American export trade in coal to Brazil, Argentina, and Chile has had to meet conditions similar to those in cement. Of the coal imported in 1912 into those countries, exports from the United Kingdom amounted, in the order of countries named above, to 84 per cent, 94 per cent, and 64 per cent, while those from the United States were, respectively, 15 per cent, 3 per cent, and 4 per cent. Of the British coal with which American coal competes about 85 per cent came from Wales. The conditions under which Pennsylvania and West Virginia coals, which compare favorably with Welsh coal in quality, can be placed on vessels at seaboard make their price at points of shipment normally less than the price at which the Welsh coal can be put on board ship at Cardiff. COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 181 The Welsh colliers have an advantage, however, in lower freights to South America, and in the combinations which unite the interests of the owners of mines, ships, docking and delivery facilities, and large foreign consumers of coal, such as British-owned railroads, ras works, and similar enterprises. A large part of the British export trade from Wales is in the hands of a few powerful combinations, such as the Cambrian Coal Combine, which includes coal operators, distributors, railways, and ship lines, and the Wilson interests, an important group of English producers and exporters. (See pp. 333 and 338.) The connection of the coal-producing interests with the shipping interests assures them not only favorable freights but sufficient carriers. The following incident concretely illustrates this advantage: In February, 1916, in Buenos Aires, a large consumer of coal endeavored to contract for a cargo of American coal. The American firm applied to was not able to find a vessel which could be chartered, even at the high rates then being required. At the same time, however, the Buenos Aires company received the offer of three vessels, loading with coal in Wales. The American firm lost the sale of its coal through its inability to get a ship. Certain lines of American manufacturers do not appear to have been hampered to any great extent by European combinations. In such articles as typewriters, adding machines, cash registers, sewing machines, and agricultural machinery the American trade has no reason to fear the competition of any form of European combination. In fact, in most of the articles known as American “‘specialties” the development of the trade seems to have been independent of the size of the company producing them, so long as the sale of the articles was adequately pushed in the foreign markets. It isin regard to the class of articles known as staples, which have to meot competition from similar goods produced in other countries, that the European manufacturers, by virtue of the greater liberty allowed for combinations, price agreements, and division of territory, have an advantage over their American competitors. SECTION 6. THE NEED OF AMERICAN DISTRIBUTION OF AMERICAN GOODS. The greater part of the goods of American origin sold in Brazil, Uruguay, Argentina, and Chile are imported into those countries sither through American export houses, dealing either as merchants or commission men, or through local importing houses. In practically all cases the distribution of these goods to the consumer, after their importation into the foreign countries, is not in the hands of Americans. The importing houses are almost all owned and managed by Europeans. The British lead in this line, the Germans come next, and the French. Italian, and Spanish houses are numerous. Com- 182 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, paratively few of the importing houses are owned by native capital, and almost none by Americans. The retail houses, which are supplied with American goods by the local importing houses and the American exporting houses, are operated by native and European capital. In two of the countries visited—Brazil and Argentina—a number of American manufacturers have recently established direct agencies in charge of personal representatives. Their agents sell the goods to the local firms and generally confine their activities to promoting their trade through those channels. In a few instances, as in the case of a large shoe-manufacturing company, manufacturers have astablished chains of stores for the retailing of their products. For many years the foreign importing houses and the American axporting firms have held agencies from American manufacturers, under the terms of which they were expected to promote the sale of the lines of goods in the countries for which they held the agency, and in return were generally allowed control over the sales in their allotted region. This form of agency must be distinguished from the agency where the direct representative of the American manu-*acturer, working only in the interest of his principal, is considered. The primary interest of the importing houses and the American axporter is not the development of the trade of every manufacturer for whom they hold an agency. The importing houses and, as far as they do a merchandising business, the American exporting houses are concerned primarily in buying goods cheaply and reselling them at a higher price. The commission house is concerned primarily with the volume of business it’ can transact in all the various lines handled. In both cases such concerns are primarily interested in handling only goods which will yield them the largest returns, capital invested and expense of doing the business taken into account. To attain their ends successfully, they endeavor to move on lines of least resistance. If the goods of a particular manufacturer for whom they hold an agency fail to sell readily after being introduced to the local trade, or meet with severe competition from similar goods manufactured by others, there is no particular inducement to continue the business in that line. Certain classes of American zoods, particularly the kind known as American “specialties,” are much in demand and require little pushing. They “sell themselves.” Also, they are of a character which necessitates a wide distribution of relatively small quantities to the retail trade. The large importing houses and the exporting houses, by virtue of their facilities for widespread distribution through their markets and their trade in several different lines of goods to the same retailer, are often the most suitable channels that can be used by an American manufacturer of the kind of goods above described. In point of fact, in COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 183 many instances where an American manufacturer has his personal representative stationed in Brazil or Argentina to push his trade, he avails himself of the facilities of the local importing houses or local branches of the American exporting houses to market his products. In some classes of American goods much effort is required to establish and maintain a profitable trade. In such cases the direct-representation agency, if the volume of business that can be developed in the country will warrant it, is the desirable method for the American manufacturer. Members of two of the largest British importing houses in the River Plate region have stated that the handling of such lines is unsatisfactory both to the manufacturer and to the importing house. Each house held agencies for a large number of American manufacturers, covering a wide range of articles. All goods were bought outright by the importing firms, payment being made in the United States at time of shipment. Both firms had specialized for years in the introduction of American manufactures and had built up a large trade in them. Each informant pointed out specific examples of American goods in which the trade developed had been very profitable to both manufacturer and importer. In some instances the volume of trade developed had become so large and the demand so constant that eventually the manufacturer established a direct agency under his own control and handled all his business in the country through that medium. In other cases, while the total volume of the sales was very large and the business highly profitable to both manufacturer and importer, the character of the business required the use of the distributing facilities of the importing house to be successful. Mention was made of specific American manufactures in which their houses were no longer in a position to give satisfactory service. It was said that such lines should be handled by men acting in the direct interest of the manufacturer. Only in that way could the personal attention and energy necessary to the successful development of a demand for such goods be obtained. The informants stated that their own houses, because of their wide range of activities, could not afford to give the requisite personal attention for pushing the sale of such goods. They had adopted a policy of refusing to take new agencies covering such lines and were not renewing their old agencies, preferring to handle such goods solely as traders. They emphasized the fact that the question whether direct representation or an agency is the better method of handling the foreign trade of an American manufacturer must be determined by the special circumstances involved in each particular case. The character of the article, the consuming power of the market sought, both actual and potential, the expense of developing the business, the nature of the 184 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. competition encountered, and the extension of credit are some of the factors to be considered. They pointed out in a number of instances what they considered the unreasonable attitude of some American manufacturers both in respect to the granting of agencies and to the sbligations thereby incurred by both sides. The statements of the aforesaid informants, which related primarily to conditions of their trade in Argentina and Uruguay, were borne out by information gathered in Brazil and Chile. While at the present time the system of direct representation of American manufacturers has made considerable progress in the commercial centers of Brazil and Argentina, it has thus far made little progress in Uruguay and Chile. There is reason to believe that in Uruguay shanging conditions will eventually lead to the establishment of more Jirect representation. On the other hand, in Chile most informants acquainted with the local conditions considered that the large imnorting houses would continue to control the trade in most lines of American goods for many years to come. The dominating position of the foreign importing houses in the past and present commercial life of the South American countries is ‘ounded on a firm basis. Many such houses were established 50 or 50 years ago, and the management is now in the hands of descendwil of the founders. ‘The present generation—born, brought ‘up, and having their homes and all their interests in the country—are peculiarly well fitted to cope with the local conditions. They are thoroughly identified with the economic development of the country, being participants in many local enterprises throughout their marketing territory. Their knowledge of credits is based on years of experience. Many of them are engaged in handling for export the products of their customers for imported goods. To such customers they are in a position to extend liberal credits. The American export houses, whether operating as merchants or as commission men, play a large part in the trade of American goods in the countries mentioned above. Much criticism of the methods followed by some houses prevails in each country, while methods of other houses were highly commended. How far the criticism frequently expressed was deserved by the houses in question or how far the blame really should rest on the American manufacturer appears to be an open question. The specific instances of improper business methods related by informants, while showing that certain houses may have been at fault, do not appear to be the result of the ~ommission-house system. They gave no warrant for the sweeping sondemnation of the whole system often heard from persons interasted in other methods of handling the trade in American goods; nor were they more deserving of criticism than the alleged business COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 185 methods of certain direct representatives of American manufacturers doing business in Brazil and Argentina. At the present time a large proportion of the trade of the foreign importing houses in South America, in many lines of manufactures, consists in the distribution of goods of American origin. It can not be expected, however, that after the war is over such houses will continue to handle American goods to the present degree. Those which for years have made a specialty of American goods, have built up a large trade, and have established advantageous connections with the American manufacturers will continue good customers. The other houses, which have been forced into the distribution of American goods simply because of the scarcity of similar goods from Europe and the necessity of holding the trade of their customers and keeping up the organization of their business, will return to their former sources of supply. Some such houses are at present being supplied by American manufacturers with goods made in imitation of the European goods formerly handled. The American manufacturer has gone so far as not only to copy the style, but to use the label “Made in Germany.” The goods, according to the informants, who claimed to have personal knowledge of this subject, were of a type which in ordinary times can be made much cheaper in Europe than in the United States. It is obvious that such importing houses will not be ‘1 the market for those American goods after the war. SECTION 7. THE ADVANTAGES OF COOPERATIVE ACTION BY AMERICAN PRODUCERS IN SOUTH AMERICAN TRADE. Not only is joint action by American producers, particularly the smaller concerns, obviously necessary to meet the competition of European combinations operating in South America, but in some lines of staples in which there is no such competition the local conditions in certain South American markets make some closer form of cooperative action on the part of American manufacturers necessary to develop their trade. A good example is furnished by the conditions in the marketing of American lumber in the River Plate market, i. e., Uruguay and Argentina. An agent of the Bureau of Foreign and Domestic Commerce, Mr. R. E. Simmons, has recently made a careful and detailed study of conditions in this market. His statements concerning the obstacles which impede the American lumber trade are fully borne out by information collected by agents of the Federal Trade Commission. The sale of yellow-pine, spruce, and white-pine lumber, either manufactured in the United States or shipped from American ports, though of Canadian origin, is well established in the River Plate market. The quantity of lumber entering this market in 1913 was about 530,000,000 feet, of which about 186 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. 140,000,000 was softwoods and 90,000,000 hardwoods. Nearly 90 per cent of the softwoods and about 7 per cent of the hardwoods came from North America, yellow pine from the United States forming 62 per cent of the total softwood imported; spruce from the United States and Canada, 18 per cent; and white pine, principally of Canadian origin, though shipped from United States ports, 7 per cent. About 7 per cent of the softwoods came from Paraguay and Brazil, In spite of the preponderance of yellow pine among the exports and the popularity of this wood among consumers, the present conditions under which the trade is handled leave much to be desired. The distributing trade is controlled, in large measure, by a small number of importing houses, who handle several other lines besides lumber. Much of the lumber is bought through brokers in Europe and the United States, and not direct from the manufacturers in the United States. The chief obstacles in the development of the trade are the complaints that constantly are raised by the importers over cases of short measurement and off-grade stock and by the manufacturers over the deductions made in settlements by the importers because of such claims. Were the yellow-pine manufacturers able, by a closer form of cooperation than now exists, to establish a better control over the marketing of their product, matters might be much remedied. An organization of the exporting manufacturers might promote a more direct trade between them and the River Plate lumber dealers. By supervising the export shipments of its members and, through its branches in Uruguay and Argentina, being in a position to insure fair treatment in the settlement of claims between its memabers and the local dealers, it could eliminate some of the present lifficulties. Very little Douglas fir is imported into the River Plate market. In 1913 the total was less than 800,000 feet, or less than two-tenths of 1 per cent of the total softwoods used in that market. The relatively small amount imported is confined to timbers of large dimensions not readily procurable in other woods. No use is made of this wood in general construction and as a finishing wood. The reasons locally assigned for the lack of the fir trade embracing all the grades and sizes which it might be expected that this market could consume are that the local builders are not generally familiar with the use of the wood except in the form of large timbers; that attempts to use it in other forms have proved unsuccessful, due sither to unsuitability because of the climatic conditions encountered ar the lack of knowledge of how to handle it to best advantage. It is stated that other woods available to this market, particularly yellow pine, have given much better satisfaction and are demandedby the consuming trade. Since fir and yellow pine can be delivered in COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 187 the River Plate market at prices which are substantially competitive, the local preference for yellow pine is at present a deciding factor in the competition between these two woods. Inasmuch as Douglas fir gives good service, as a general utility and finishing wood, in parts of the United States where climatic conditions are similar to those in the River Plate region, it is probable, as was stated by prominent informants well acquainted with the lumber trade in the River Plate market, that the principal difficulty in developing a fir trade is the ignorance of the consumer regarding its possible uses and the proper methods of handling it. It was maintained that if the fir manufacturers should make an organized and concerted effort to establish trade in all sizes and grades of fir lumber it would be successful. It was suggested that the fir exporters should establish agencies in Uruguay and Argentina which would import the lumber direct, maintain local supply depots and mills for the reworking of the stock where the demand was for dressed lumber, and control the distribution of their product to the yardmen or the builders. It was pointed out that such a project would need strong financial backing. The expense of a propaganda campaign for popularizing the use of fir would be heavy. If successfully carried out, the result would be the creation of a demand for fir lumber. In order that this expense should be borne by those who would profit from this demand, it was held that the organization must include all of the principal fir manufacturers engaged in the export trade, and must have the exclusive sale of their product destined for the River Plate market. The conditions under which the importation of lumber is handled in certain of the South American ports are such as to facilitate local trade agreements between the relatively few importing houses which control the business. Information that was gathered indicates the existence, from time to time, of temporary agreements between the principal importers to act in concert for the purchase of cargoes shipped to their port on consignment or thrown on the local market for some reason or other. Also, there is some evidence of concerted action on the part of the importing houses to prevent American lumber manufacturers from building up a direct trade with the local yardmen, in the few instances where such attempts have been made. No evidence was found, however, of an organized combination primarily used for cooperative buying. The organization in Buenos Aires known as the “Centro de Importadores y Anexos,” comprising the principal importers of lumber, while forming a medium for concerted action in some matters, is reported not to be interested in agreements covering the purchase of incoming cargoes, or selling prices: but to act rather as a lumber board of trade for the promotion of common interests of the members. 188 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Another example of the need for closer cooperative action in promoting the control by American manufacturers of the distribution of their product in foreign markets is furnished by the trade in American canned salmon in Argentina. The market there for highgrade salmon is supplied from England, through the local importing houses, by two prominent British companies. They have established their brands and have a general reputation for goods of fine quality. The salmon they sell is packed on the Pacific coast, but the tins bear the firms’ labels, with nothing on them to indicate the origin of the goods. Some cheap grades of salmon have been marketed in Argentina under American brands. It has not been possible, in the face of the competition from the established brands of the English firms, to create a demand for high-grade salmon under American brands. This is largely due to the belief, on the part of consumers, that England is the only source of high-grade salmon, and that American-canned salmon is an inferior product. The Argentine import duty on canned fish is high, and being specific and levied on the weight of the goods the same amount of duty falls on the low-grade as the high-grade salmon. This means that the duty forms a larger relative proportion of the cost in marketing the cheaper goods, and prevents their being retailed to consumers at a proportionately lower price, grade considered. than the more expensive kinds. It was the opinion of an informant who had long studied the question that the interests of the American fish packers in the Argentine market would be best promoted by an organization controlled by them, which would direct the distribution to retailers of all goods packed by them. He advocated the establishment of a selling combination which would handle the entire export business of the principal salmon packers in the Puget Sound and Alaska regions. This agency would establish its own brands and market everything under them. The goods would be packed for it, according to uniform specifications, by its member companies. By means of a propaganda campaign, vigorously pushed in Argentina, a demand for all grades of canned salmon, bearing the agency brands, would be created, and it would be demonstrated to the Argentine consumer that he could get ‘‘American’’ canned salmon in all grades. By securing direct control of the distribution of their high-grade product, the American salmon packers would acquire that portion of the canned salmon trade which is under the present Argentine tariff conditions the most profitable part of the business. It would also be directly interested in attempts to extend the sale of all grades of canned salmon in competition with other kinds of fish products. What has been sald of lumber and canned salmon applies with equal force to a number of other lines of goods. Thus canned goods COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 189 of varjous kinds could and should be handled by any organization taking up the trade in salmon. Concerted action by coal operators could do much to increase the exports of American coal to the east coast, and a cooperative organization of Portland-cement manufacturers should materially increase the sales of American Portland cement in South America, where the individual manufacturer must meet the vigorous competition of the strong alliance of British cement manufacturers. SECTION 8. COMBINATION OF PRODUCERS IN SOUTH AMERICA. In certain important South American industries the producers have formed effective combinations for the control of output and prices. Of especial interest in this connection are the coffee valorization arrangement in Brazil, the quebracho combination in Argentina, the iodine combination in Chile, and the cacao agreement in Ecuador. The United States is a heavy consumer of Brazilian coffee, Argentine quebracho (used in tanning), Chilean iodine, and Ecuadorian cacao. The combination of the producers of each of these commodities is the result of their attempt to take advantage of a great natural resource, largely peculiar to their own country, and through combined effort to secure the maximum return for their product in the markets of the world. THE CACAO ASSOCIATION. Cacao is the name for the bean from which both cocoa and chocolate are manufactured. Ecuador and the Dominican Republic are the chief sources of cacao supply. The exports of cacao from Ecuador normally constitute from three-fourths to four-fifths of the total value of that country’s -exports. This single commodity is its chief product and its chief export. The United States annually imports large quantities of cacao, cocoa, and chocolate, approximating $20,000,000 in value. The prosperity of Ecuador is largely dependent on that of the cacao growers. The latter in 19M formed an association, which was approved by the President of Ecuador on January 25, 1913, to unite their interests against speculators, to maintain more profitable prices, and to promote the consumption and production of cacao. For this purpose it is authorized to enter into agreements with associations of producers in other countries. The organization has the support of the Government and is semiofficial in character to the extent that it is permitted to collect a tax of 1 sucre (48 cents) per 100 pounds exported. The association does not attempt to handle all the sales or exports of cacao, but in periods of low prices uses its funds, credit, and authoritv to obtain and hold off the market the excess supplies of cacao. It 90 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. also exports at such times, but uses its control of the supply to improve prices. It is only active when prices fall below a certain agreed minimum. Thus it may export cacao during several weeks or months, or it may ship none for a whole season. The organization is popular, since it undoubtedly works for the betterment of conditions in the important cacao industry, and since it does not discriminate against the independent exporters of cacao but endeavors to accomplish increases in price from which they have every opportunity to profit. (See Pt. II, pp. 183 and 504.) THE VALORIZATION OF COFFEE. A combination of suitable soil and climate has made the region tributary to So Paulo, Santos, and Rio de Janeiro the center of the world's coffee-growing industry. TFour-fifths of the world’s supply comes from the States of Sao Paulo, Rio de Janeiro, Espirito Santo, and Minas Geraes, more than one-half of the world's supply being produced in the State of So Paulo alone. Some years ago, following a period of poor crop yield, high prices of coffee stimulated the clearing of much new coffee land and a large increase in the number of coffee trees planted. The world demand did not keep increasing in corresponding degree, and a bumper crop, added to the increased area planted, caused coffee prices to fall to a low level. Much of the crop remained unsold when the prospects of another bumper crop threatened to depress prices still further. Many of the planters faced ruin, since coffee growing necessitates a comparatively large outlay of capital, and the prices of coffee bad already fallen so low that they had lost heavily on the crop of the previous year. The prosperity of Brazil is largely dependent on the coffee industry. Out of total exports amounting to about $310,000,000 in 1913 exports of coffee were nearly $200,000,000. The Brazilian Government, to relieve the situation by holding the surplus production off the market until the reduction of supply and the growth of demand brought about @igher prices, established the =offee valorization scheme. Briefly described, the Brazilian Government arranged for the financing of a commission which bought the coffee from the planters and held it back from the market. As the available supplies of coffee in the world's coffee markets diminished, the demand for consumption began to send prices up. The commission sold some coffee on the rising market, but not enough to cause prices to drop back. In the meanwhile effective measures were being taken to restrict the production of coffee. Up to the time of the outbreak of the war the valorization scheme, combined with the control of production, had been successful in artificially maintaining prices at a profitable level for the planters. Buyers in the United States, which consumes about half the coffee exported from Brazil, COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 191 have had to pay higher prices for coffee than they would have otherwise paid. THE QUEBRACHO COMBINATION. ““Quebracho” is a name applied to more than one species of wood found in the subtropical forests of southern South America. The red quebracho, belonging to the species Quebrachia Lorentzii, is found chiefly in the northern part of Argentina and in part of Paraguay. This species is probably the richest of all woods in tannin content. It is principally used in making quebracho extract for tanning leather. The demand for quebracho extract has led to a great development of the industry in Argentina since 1901. In that year exports of solid (crystallized) quebracho extract amounted to 4,310 metric’ tons, and of quebracho logs, 198,919 tons. In 1913 the exports of extract were 79,684 tons and of logs 383,964 tons. The value of the exports quadrupled during that period. The United States is Argentina’s principal customer for quebracho extract. Of nearly 80,000,000 pounds of extract imported into the United States in 1913, about 94 per cent came direct from Argentina and 6 per centfrom Europe. The United States and England together took about two-thirds of the quantity of extract exported from Argentina. Exports of quebracho logs to the United States were relatively small, The United Kingdom was the nominal destination of 74 per cent of the log exports, Italy about 7 per cent, and Germany about 6 per cent. As a matter of fact, practically all of the logs credited to the United Kingdom were manufactured into quebracho extract in German and Austrian factories. Neither quebracho extract nor logs entering the United Kingdom are subject to any import duty, but while the import duties on logs imported into continental nations, especially Germany and Austria, are small, the duties on quebracho extract are very heavy. As a result the English consumers preferred to import the solid extract from Argentina instead of the logs, and the European manufacture of the extract was practically limited to factories established on the Continent. The Forestal Land, Timber & Railway Co., a British-owned company, is the dominant factor in the production of quebracho extract in Argentina and in the export of quebracho logs. It owns about 5,000,000 acres of forest land, operates over 200 miles of railroad, and has a fleet of river barges and tugs. The annual consumption of its quebracho extract factories is estimated at about 300,000 metric tons of wood, and it exports over 200,000 tons of its own logs. In addition to the dominant position it has obtained in Argentina, which it reached in large measure by buying out or consolidating with rival firms or by contracting to handle all their output, as has been the case with the Sociedad Anonima Quebrachales Fusionados and the Argentina Timber & Estates Co., it has had working arrangements with the 192 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. European manufacturers of quebracho extract, who buy the quebracho logs exported to Europe. In the annual report of the company for the year ending December 31, 1914, the acquisition by the Forestal company of the New York Tanning Extract Co. and of the Argentine Quebracho Co. is described. After mentioning the financial details of the purchase, it is stated: The properties of the late Argentine Quebracho Co. are now included in the item “Freehold timber and pastoral lands, etc.” whilst the Factory and real estate in New York, acquired from the New York Tanning Extract Co., have been incorporated into a new American company, entitled ‘The New York Quebracho Extract Co. (Inc.),” the shares and bonds of which owned by us are included in “Holdings in associated undertakings and other investments.” In the course of a speech made at the annual meeting of the company on June 18, 1915, its chairman, Baron d’Erlanger, discussed the large interests in the company of German shareholders and the retention of Germans in the company’s employ in Argentina, and pointed out that the English tanners and those of the allied countries were absolutely dependent on the use of quebracho extract to fulfill their war contracts. He pointed out that years before the formation of the present company the Argentine Forestal Co., which he characterized as having been the only successful quebracho enterprise established in Argentina, had been formed to take over the joint interests of a Franco-German group composed of Messrs. Portalis & Co. on the one side, and Messrs. Harteneck and Renner on the other side. Messrs. Portalis had an interest in the Argentine Forestal Co. of about 30 per cent, and the German interest comprised 70 per cent. In 1907, the Forestal Land, Timber & Railways Co., an English company, was formed to take over the assets of the Argentine Forestal Co. Owing to increases of capital which have since been made, the vendors in the latter company lost their controlling interest in the English company along time ago, and according to Baron d’Erlanger’s estimate, the real distribution of shares according to the nationality of the owners was, in 1915, as follows: 1,325,000 shares in English hands, 866,000 shares in German, 400,000 shares in French, 386,000 shares in American, 86,000 shares in Dutch, and the remaining shares, about 36,000, in the hands of persons of other nationalities. In discussing the reasons for the retention of German employees by an English-controlled company, at a time of war between the two nations, he pointed out that, because of the success obtained by the management of the Argentine Forestal Co., it was made a condition of the purchase contract that the management of the company should be retained. Therefore Baron Frederic Portalis and Messrs. Harteneck and Renner became members of the board of the English company. According to Baron d'Erlanger:! 1Review of the River Plate, July 23, 1915, pp. 210 and 215. COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 193 Thus was it also for the same reason that the local board was constituted mainly of the representatives of Messrs. Harteneck and Renner, the original pioneers, who created the quebracho industry, and thus was it also that a great deal of the staf of the Jorestal Co. was then German. But it was not only owing to the nationality of Messrs. Harteneck and Renner, not only owing to the fact that they were the largest shareholders of the company, that the staff was to a great extent German. It was due to causes inherent to the quebracho industry, and causes which I think it only my duty to explain to you. We sell the product of the quebracho forests, from which we derive our greatest revenue, in three forms—in the form of raw material— that is to say, the logs which are used to make tannin extract; we sell it in the form of solid quebracho extract, which we make in our own factories; and it is also sold in the form of liquid extract, either pure extract of quebracho or mixed extract of quebracho and other ccmosite extracts, so that it may go in a prepared form to the tanners. bt so happens that there can not be a single factory in England making quebracho extract from the raw material—the log. Both logs and quebigsiha extract are introduced into England free of duty, and therefore it would not pay the English manufacturer to introduce fogs into this country. He buys the solid quebracho extract frcm Argentina, and he converts it either into pure quebracho extract or the composite extract. On the other hand, on the Continent, where there are either small duties or no duties on logs and where the duties on the quebracho extract are high, there are a number of factories which make quebracho extract by importing the logs from Argentina, and which sell it on the Content either in the form of solid extract in competition with ours or as liquid extract. Nearly all, if not all, the quebracho factories on the Continent, be it in Germany, be it in Austria, be it in Russia, or be it in France, were either owned, or controlled by, or were in alliance with Messrs. Renner & Co., and consequently it was in those factories that the personnel were educated, selected, and recruited for the factories of the Forestal Co., and, I may say, greatly to our advantage. After describing the changes brought about by the war in the personnel of the English board of directors and the local (Argentine) board of of directors, and the selling organization, Baron d’Erlanger stated that the British Government was informed that— If any further measures were to be taken we shoutd have to decline rpogsibiliny as to furnishing English tanners and the allied countries with the material called quebracho extract, which is absolutely imperative to the tanners if Tr are to comply with their war contracts. Baron d’Erlanger described the relations of the Forestal Land, Timber & Railways Co. (the English company) with Messrs. Renner % Co., the firm which, as he had already pointed out, cither owned, controlled, or were in alliance with nearly all, if not all, the quebracho factories on the Continent, whether in Germany, Austria, Russia, or France. He said: 27941°—16——14 194 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. There is another question in relation or in connection with our relations with Germany to which I think it is but meet that I should call your attenticn and remind you of what has been done in the past. A fow years ago we entered into a contract of community of interests with Mo, Renner & Co., in order to obviate, if possible, or at least alleviate, the competition existing on the continental market between our Argentine-produccd extract and the extract produced in the continentul factories. What is the position of that contract to-d.y? Is it in existence? Is it suspended during the war? Is it inoperative ? Will it continue and be considered operative during and after the war? Those are questions which I can not answer because the lawyers are not in a position to give us an authoritative statement upon the point. I must tell you that in normal times Germany and Austria are by far and away the greatest consumers of our products. They are by far and away the greatest consumers of logs—that is to say, the raw material which is extracted from our forests—and, after the United States, they are by far the largest consumers of extract. There have been some changes in the quebracho industry since the time of Baron d’Erlanger’s speech to the stockholders. As a result of the war the price of quebracho extract has risen from about £15 to nearly £50 per ton. The demand for the material is such that the exports of Argentina in 1915 were 111,583 tons, nearly 23,000 more than in 1914, in spite of the fact that the price has risen over 300 per cent and the freight on it to Europe 1,500. per cent. The British Government has imposed certain regulations for the ¢onduct of the business of the Forestal Land, Timber & Railways Co. It requires it to sell to tanners in the United Kingdom all the extract that they need at a price not over a certain fixed maximum price. It permits any surplus to be marketed in the United States to certain tanners who agree not to use it for the manufacture of supplies for Germany. The price which such tanners pay must be not less than a certain fixed minimum price, which has been fixed at a point substantially higher than the maximum price permitted to be charged the English tanners. It is stated that all sales of extract to the American tanners must obtain the approval of the British consul at New York. THE IODINE COMBINATION. The extensive nitrate fields in the north of Chile form the greatest known available source of sodium nitrate. The great demand for this article in many lines of manufacture and as a fertilizer in agriculture has developed the most important industry in Chile. Of the total exports from Chile the value of the products of this industry forms 75 per cent; and through the operation of a heavy export tax and from royalties received from mines on State lands, the Chilean Government derives more than half its revenues from nitrate. COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRADE. 195 Although Chile possesses practically a monopoly of the available supply, the producers have not been able to control the price of this commodity. There are wide fluctuations in demand, and tc a certain extent other substances are available as substitutes. Because of the diversity of interests involved, it has not been possible to secure for any length of time any concerted curtailment of output on the part of the producers, although from time to time there have been various combinations and agreements. About half of the cost of the nitrate delivered on board ship at the point of shipment is made up of the export tax levied by the Chilean Government. In periods of poor demand nitrate has been frequently sold at prices which netted a return to the producer below his actual cost of production. Not only the concerns directly engaged in operating the nitrate “oficinas,” as they are called, but the commercial life of all Chile is affected by a depression in the nitrate industry.! One of the important by-products obtained in the preparation of the nitrate for shipment to market is iodine. This is obtained from the “mother liquor,” which remains after the nitrate has crystallized in the boiling vats. The quantity of iodine which can be secured in this way varies greatly with the raw material obtained from different sources. For many years there has been a definite and fairly constant demand for iodine in the markets of the world. Before the process of obtaining it from Chilean nitrate was developed the principal supply was obtained from kelp. This method, however, is much more expensive than its manufacture from the Chilean source, and the market is now in the hands of the Chilean producers, who arbitrarily fix both the price and the supply. This is done through a combination of iodine producers known as the “Combinacion de Yodo” (the Iodine Combination). This combination was formed in 1894 and has continued active and effective up to the present time. Its objects are to control the quantity of iodine produced not only in Chile but elsewhere, to sell it all through one common agency, and to increase, by means of a suitable propaganda, the consumption of iodine. The combination includes every producer of iodine in Chile. In the case of some “oficinas’’ the “mother liquor” obtained in their operations has too small an iodine content to pay to extract. In the case of others no attempt is made to secure the iodine, though it is contained in the “mother liquor” in quantities which would warrant extraction. The quantity of iodine which each producer in the combination is allowed to produce is definitely fixed by the officers of the combi~ nation. Each quota is supposed to be determined on the basis of . " 18ee Report of Federal Trade Commission on the Fertilizer Industry, 19186, PD. 17-32. [96 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, productive capacity of the member. All iodine produced must be consigned to the agent of the combination, which thus far has been the firm of Antony Gibbs & Co. Any member who sells iodine outside the combination must indemnify the other associates at the rate of £50 for each quintal sold. All sales must be made through the consignee agent. The combination is considered to have been very successful in controlling the world’s trade in iodine and in maintaining prices which left large margins of profit for its members. How far the combination is international in character and has agreements with producers of iodine outside of Chile could not be ascertained. As stated in article No. 4 of its constitution, one of the objects of the association is to reach an agreement with the producers of iodine in other countries, so as to furnish all the iodine that may be needed for consumption. Clauses I and J of article No. 18 specifically refer to arrangements existing with the European producers of iodine at the time the combination was formed. (See Pt. II, p. 501.) At the office of Antony Gibbs & Co., in Valparaiso, all information relating to the operations of the Iodine Combination was refused, further than the statement that the combination was still active and was conducted in accordance with the agreements set forth in its constitution. From other persons well acquainted with the nitrate and the iodine situation considerable information was obtained hearing on the power of the combination and its practical effects. Through the limitation of production enforced on the members, only » small part of the iodine which could be made is allowed to be manutactured. The rest is lost by allowing the surplus “mother liquor” bo go to waste. The price varies from time to time, but it is usually from three to four times the cost of placing the iodine on the market. The demand for iodine is not subject to much fluctuation. The price at which it is sold bears no relation to the cost of production in Chile, but is fixed by the combination at the point of maximum -eturns, i. e., as high as the demand will permit. [t might be expected that owners of nitrate properties capable of producing iodine, and dissatisfied with the quota allowed them, would seek to take advantage of the high prices thus established. There is aothing in the laws of Chile to prevent such an attempt. But in all the years of its existence few efforts have been made to manufacture iodine outside of the combination. and no such attempt has been successful. There was a unanimity of opinion among all the informants as to the cause of the combination’s power. It lies in the conn ction of the nitrate industry with the general prosperity of Chile, That indus- COMPETITIVE CONDITIONS IN SOUTH AMERICAN TRABE. 197 try contributes more than half the revenues of the Government; furnishes the chief means of paying for the imports; governs the rates of oxchange, which affect all the commercial life of Chile; and employs a large part of the population, either directly in the extraction and export of nitrate, or indirectly in providing a consuming market for native products used in the nitrate region, which is a barren and absolutely rainless country. In the nitrate industry times of prosperity have alternated with times of great depression. It is popularly believed that often the only thing that has kept the nitrate producers from ruin has been the steady and extremely profitable return derived from the iodine branch of their business. Every informant considered that the operations of the Iodine Combination had worked a great benefit, not only to the nitrate producers in it but also indirectly to all the commercial interests of Chile and the laboring men. The pressure that would be brought to bear against any producer who undertook to manufacture iodine outside of the combination was considered to be irresistible. Such a producer would have difficulty in marketing his iodine, due to the control by the combination of the regular channels of distribution for that chemical throughout the world and its ability to undermine his trade by excessive price cutting wherever he could find customers. His greatest difficulty, however, would occur in the nitrate branch of his business. He would have to meet at every step a systematic boycott. In the first place, he would have difficulty with his workmen in his “oficina” through inability to secure competent employees and through strikes fomented from outside. At his shipping port the longshoremen who load the bags of nitrate in lighters and deliver them on board the vessels would probably refuse to handle his shipments, or if they did take them would mishandle them in such a manner that there would be an excessive amount of every shipment received on board in damaged condition. It was further asserted that the would-be independent producer would have difficulty in getting ships under charter to carry his nitrate and that he would not be able to sell through brokers on the Valparaiso market, which is the principal nitrate market. If, for some reason, he was unable to make deliveries of his own nitrate, sold under contracts, he would find no broker willing to sell him nitrate to fulfill such contracts. If, as is often the case, the producer were also interested in an importing house, he would find that the boycott against him would be extended to include that house's activities. Retail merchants in all lines would agree not to trade with his house. Furthermore, the producer weuld have difficulty in securing credit accommodations at the banks. A number of informants, in support of their views, cited an event which occurred several years aco when one of the most powerful im- 198 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, porting and exporting houses in Chile undertook to oppose the combination. The boycott which was established included a series of agreements, signed and made public by all the other nitrate producers and by all the principal business houses in Chile, to have no dealings with the firm in question. Its action was regarded as a public menace to the country’s interests. According to the informants, the boycott was an effective one. The company held out 10 days and then gave in and joined the combination. As far as could be learned, there has since been no other attempt on the part of any nitrate producer to manufactuse iodine outside of the comhination, CHAPTER V. COMPETITIVE CONDITIONS AND EXPORT COOPERATION IN PARTICULAR INDUSTRIES. SECTION 1. INTRODUCTION. The present chapter has a double purpose. In the first place, it is intended to supplement the discussion of competitive conditions in international trade and the industrial organization of the chief commercial nations which is given in the two preceding chapters. To this end, a number of important industries are taken up by countries and the organization of each industry in each country is discussed with special reference to combinations and methods of selling which affect trade in the home market of each country and which project themselves into international trade. At the same time, international combinations of producers and combinations among buyers of American exports are also discussed. In the second place, it is intended to present the facts as to the part which cooperation, solely for export trade, among American producers might play in the extension of our foreign trade in these particular lines of production. The industries selected for such discussion here are iron and steel and their products, textiles, electrical goods, chemicals, phosphate rock, Portland cement, lumber, coal. petroleum, and metals, such as copper, lead, and zinc. These are all of actual or potential importance in the export trade of the United States, but it should not be inferred that these are the only industries in which American producers meet severe competition in export business from combinations of their foreign competitors, or that cooperation among American producers in other industries would not be of material advantage. On the contrary, the conditions portrayed for the Industries discussed in this chapter and the advantages of export cooperation also hold broadly for numerous other industries not mentioned here. Before entering on the specific discussion of cooperation in particular industries it is advisable to present a general discussion of the attitude of American business and professional men toward this means of assisting export trade. One of the facts that stands out sharply as the result of the Commission’s inquiry is the strength and character of the demand for 199 200 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. cooperation among manufacturers and producers in export business. Four-fifths of all replies received were in favor of such joint action. These replies represented all interests and sections of business and professional men in the country, manufacturers, wholesalers, jobbers, retailers, export commission houses, manufacturers’ export agents, importers, lawyers, economists, publicists, engineers, contractors, ete. They furnish a striking expression of the convictions of these men whose knowledge and experience of competitive conditions in international markets dictated their answers. The group comprising export commission houses, manufacturers’ export agents, export merchants, etc., was least in favor of such cooperation; yet 64 per cent of the replies from this group was specifically in favor of cooperation and only 36 per cent opposed. (For details, see Pt. II, pp. 339-341.) Another noteworthy fact in connection with this demand is the attitude of the smaller manufacturers and producers. They have felt keenly their disadvantage in attempting to enter foreign markets single handed in the face of the powerful, united, and long-established competitors of other nations. They realize that for them export trade must be done largely through the medium of export commission houses and export merchants. But they realize the advantages—in some sases the necessity—of their own direct representation and their own foreign organizations if they are to build up an enduring export trade. At present cooperation with other small manufacturers is the best solution of the difficulty before them. They desire in some instances to combine with noncompeting but complementary manufacturers to conduct joint foreign selling campaigns and establish foreign selling agencies. Examples are combinations of paper makers, type founders, and manufacturers of ink and other printer's supplies, or combinations between manufacturers of builders’ hardware, makers of cutlery and tools, and producers of other kinds of hardware. Insuch cases, the products do not compete. They supplement each other, and one salesman can advantageously handle them all. In other cases, small producers of competing products desire to form joint exporting agencies, where such concerted action is manifestly to their mutual advantage in the promotion of export business. At this point it is well to call attention to the fact that in many lines there is need of direct representation of manufacturers in foreign business. In some cases, the export commission houses are well fitted to introduce and develop foreign trade, but in many lines of manufacture they are inferior for this purpose to the manufacturer's own agents. This is especially true of products such as many kinds of machinery, electrical supplies and equipment, etc., which require special demonstration and installation. In general it is to be expected that a manufacturer, who has capital invested in plants and equipment CONDITIONS IN PARTICULAR INDUSTRIES. 201 snd must market his output, will push the sales of his goods more vigorously than any outside party who has no such investment and whose business includes the sale of many other wares. In one case energy and effort and purpose are divided, in the other they are conrentrated. While much of the export business of smaller manufacturers will continue to be done by export houses, nevertheless direct representation will in many cases have a decided advantage. The smaller American business men frequently emphasize the fact that the most efficient American exporting organizations are those of a few of the great corporations, whose resources permit the maintenance of direct representation. They complain that their lack of concerted action prevents them from developing similar effective joint exporting organizations of their own and results in giving the larger American companies an undue share of the export trade. The Commissioni has been strongly impressed with the effect that the doubt as to the application of the antitrust law has had in the formation of cooperative export organizations among American manufacturers and producers. There are a few such organizations, but they are nearly all among noncompetitors. Most manufacturers decline to join any such association or cooperative organization so long as there is any doubt as to its legality. This is true even of those who believe such organizations legal for export trade. It thus results -hat this doubt acts as an effective preventive of the formation of cooperative export organizations among manufacturers and producers, and particularly keeps the smaller business concerns from participating in foreign trade as freely as they should. It is a striking fact that the great majority of the respondents to the Commission’s inquiries believe that cooperative organizations for export trade should be restricted to some degree in the general public interest. Two chief dangers are pointed out: First, the possibility of improper use of such organizations in the domestic market and, second, their use unfairly against other Americans in foreign trade. (See Pt. IL, pp. 368, 377-378, 384, 434-436, and 142-450.) The first of these dangers is regarded as rather remote by most respondents, but as safeguards ¢hey suggest the advisability of restricting such organizations solely to export trade, and the wisdom of subjecting them to the supervision of some branch of the Government competent to deal with improper activities in the home market. Business men are emphatically of the opinion that these organizations should not be permitted to use their power unfairly against other Americans in foreign trade, 202 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. SECTION 2.. IRON AND STEEL. Only a few of the most highly developed nations industrially are yreat producers of iron and steel and their manufactures. All the cest of the world is dependent upon them for iron and steel products. Such articles therefore comprise one of the greatest classes of commodities entering into international commerce. At the beginning of the last century Great Britain was far in the lead of other countries in the production of iron and steel. By 1896 Germany had developed her industry, and secured a substantial lead over Great Britain. By 1900 the United States was producing more than twice as much steel as Great Britain, and nearly one-half of both the iron and steel manufactured throughout the world. The United States now holds the lead in this industry, with Germany in the second place, Great Britain third, and with France, Russia, Belgium, and Austria-Hungary: following! In 1918 the United States produced 61,980,437 long tons of iron ore; 30,966,152 tons of pig iron; and 31,300,874 tons of steel? Most of this enormous production was consumed in the domestic market. During the year ending June 30, 1914, there were exported from the United States about 800,000 long tons of iron and semifinished steel in the form of pig, bars, rods, sheets, and plates, and 47,000 long tons of tin plates, terneplates and taggers tin. In addition about 900,000 long tons of iron and steel products ready for consumption, such as structural steel, rails, nails and spikes, wire, pipes and fittings were exported.® The tonnage of iron and steel which entered into such exports as machinery, hardware, and other articles exported ready for consumption is not reported, but there is reason to believe that it does not equal that of the other exports of iron and steel products. It is obvious, therefore, that only a small fraction of the tonnage produced annually in the United States enters into its export trade. The value of the exports of manufactures of iron and steel was about $251,000,000, of which about $33,000,000 covered materials for further manufacture, and $218,000,000+ articles ready for consumption. Total exports of iron and steel manufactures to Canada amounted to over one-third ($76,700,000)® of the total amount. Of materials for use in further manufacture, about 60 per cent ¢ of the 1 Statesman’s Year Book, 1914, p. Hi; J. 8. Jeans, The Iron Trade of Great Britain (London), 1906, p. 13; W. J. Ashley: British Industries (London), 1903, pp. 2, 8. 17, S. Geological Survey, Mineral Resources of the United States, 1913, Part I, pp. 318, 325, and 333. 3 Commerce and Navigation of the United States, 1914, pp. 727-730. i Tbid., Table X. pp. XL-XLI. sTrade of the United States with other American Countries, 1913-14, Bureau of Forsign and Domestic Commerce, Miscellaneous Series No. 23 (1915), pp. 14-16. 8 Commerce and Navigation of the United States, 1914, Table X, pp. XL-XLL CONDITIONS IN PARTICULAR INDUSTRIES. 203 United States exports went to Canada. Exports of materials ready for consumption were as a rule much more widely distributed, although in some articles such as structural steel the proportion taken by Canada was relatively high, being in that instance about 55 per cent. The reasons for the relatively small export trade in iron and steel products from the United States to the other foreign nations, when its leadership in production in the industry is considered, are to be found chiefly in the conditions under which the European branches of the industry are conducted, and which give them so large a share of the world’s commerce in iron and steel products. Aside from differences in the cost of production, these conditions are briefly set forth herewith for the chief producing nations. BLAST FURNACE AND ROLLING-MILL PRODUCTS. GERMANY. The chief seats of German iron and steel manufacture are in Prussia (Rhine Province, Westphalia, and Upper Silesia) and Lorraine. In 1912 (the latest year for which figures are available), the production of iron ore in Germany (including Luxemburg) was reported at 82,190,000 tons; of pig iron, at 17,582,000 tons; and of steel at 17,024,000 tons. It exported in 1912 about 3,600,000 tons of iron and steel in the form of pigs, ingots, bars, plates, sheets, etc., valued at about $104,000,000, and other forms of iron and steel products (including machinery, railroad rolling equipment, etc.) to the value of $380,000,000. Producers of iron and steel in Germany are organized into two principal combines, the Roheisenverband, G. m. b. H. (Pig Iron Syndicate), and the Stahlwerksverband (Steel Syndicate). These syndicates, besides being closely connected with each other, and with a large number of lesser producers’ combinations in the industry, also have close trade agreements with combinations of retajlers and consumers, and with combinations in other industries, such as the Rheinisch-Westfilisches Kohlensyndikat, which dominates the coal industry. The Pig Iron Syndicate and the Steel Syndicate are not trusts in the American sense, inasmuch as the firms which make them up are bound together by contract for limited periods only. Combinations in the German iron industry are of ancient date, and have assumed forms adapted to the contemporary economic organization. The distinction between the early methods of combination and the modern system lies not only in the more compre-1 Statistical Abstract for the Principal and other Foreign Countries, No. 39 (London) 914, Table 26, p. 135. 204 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. hensive character of the latter, but also in the fact that the modern iron industry is established on a stupendous scale, and operates for the world market. This process of evolution is marked in the iron and steel cartels, and has resulted in the most advanced types of industrial concentration on a capitalistic basis. The tendency toward the formation of large concerns, and away from the ordinary cartel form of organization, with its more cooperative character, is said to be due to three causes: (1) Technical development; (2) competition and conditions of production resulting from the cartels and syndicates themselves; and (3) the effort of large banks to promote combinations that could compete with American producers in the world markets. The history of the combination movement in the iron and steel industry in Germany is a long one. Rail pools existed over 50 years ago.* One of the earliest of the German cartels, the tinplate combination, was formed in 1862. It was not until the seventies, however, that they acquired much importance. There was an overdevelopment of the iron industry at the beginning of that decade, and during the following depression the producers resorted to combinations to restrict their output and to maintain prices. These sarly cartels were quite limited, with the exception of the rail pools, but in 1886 the combination of German rolling mills expanded to include the whole country. During the nineties fundamental changes in the industry took place. In 1893 the powerful coal syndicate was formed which dominated that industry and laid the foundations for a mew régime in the iron trade. During this period the cartels for pig iron, half products, heavy sheets, rods, wire nails, and other products were formed. The culmination of this movement was the formation in 1904 of the Stahlwerksverband, next to the Rhenish-Westphalian Coal Syndicate, the leading German cartel.® The iron and steel cartels in general fall into two classes. Those of the first class are loose combinations without a central selling organization, and some of the products covered are malleable iron, weld iron, band iron, wire ware, screws, cast-iron ware, building hardware, and skelp. The cartels of the second class are those having a central organization with a selling office. In addition to the pig iron and the heavy steel products covered by the steel syndicate there are cartel combinations of this class for shipbuilding steel, sheets, tinplate, rods, wire cables, woven wire, steel springs, car parts, and cast-iron pipe. There are also many dealers’ cartels or unions. "1 Francis Walker, The German Steel Svndicate, Quarterly Journal of Economics, Vol. KX, May, 1906, D. 360. 2R. Liefmann, Kartelle u. Trusts (Stuttgart), 1910, p. 26. ' 8. Tschierschky, Kartell und Trust (Leipsic), 1811, p. 138. \ Walker, op. cit, p. 360-362. SRB. Liefmann. op. cit.. pp. 26 and 151. CONDITIONS IN PARTICULAR INDUSTRIES. 205 In the German iron industry there are more than 100 different articles covered by cartel agreement, while the number of iron cartels, according to official report in 1905, numbered 62.* Iron.—The history of the iron combinations in Germany shows a great deal of grouping and regrouping, of organization and dissolution.? An example is the Roheisen Syndikat zu Diisseldorf, which was formed in 1899 from the Rhenish-Westphalian Pig Iron Syndicate and the Verein fiir Siegerlinder Roheisen, and undertook the sale of pig iron for the entire German territory. Its activities were much condemned in 1900 because of the contracts it forced upon its sustomers, and in 1993 it was involved in the imperial parliamentary inquiry into cartels.® Shortly afterwards it was reorganized, but was finally dissolved in 1908. The Pig Iron Syndicate~—At present the most important combination for pig iron is the Roheisenverband G. m. b. H., Essen a. d. Ruhr. This union or syndicate was formed in Essen in 1910 and is composed of iron producers in Rhineland, Westphalia, Upper Silesia, and the so-called seaboard works. Later the Siegerlinder group and the Lorraine-Luxemburg works joined the syndicate, with the effect of creating a monopoly of pig-iron production in the entire German Empire. This syndicate expires on December 31, 1917, unless previously renewed. It is now composed of three groups: Group A, consisting of 27 members participating in the production of pig iron to the extent of 2,260,000 tons; group B, containing 13 Siegerlinder works, producing for the syndicate 538,604 tons per annum; and group C, consisting of certain Luxemburg and Lorraine works, which participated in the production to the extent of 535,000 tons in 1912, and whose share was to be increased until it reached 610,000 tons in 1915. These figures represent the quantity of pig iron available for the general market and for export purposes. A certain quantity of pig iron may be produced by all groups for consumption at works. A fax is collected by the syndicate on each ton of production within the limits of the quantity assigned for general market purposes, in order to furnish a fund for the furtherance of export trade:* The syndicate, which includes all of the producers but four, handles the following products: Pig iron; gray iron; malleable iron; spiegel ; and controls about 97 per cent of these products in the German market? No smelters are excluded, and any furnace so desiring may join at any time. 1 Denkschrift {iber das Kartellwesen, Part I, pp. 24, 27. 3 The history of some of these combinations is briefly stated in Part II, p. 31. 3 A J. Wolfe, Commercial Organizations in Germany, Bureau of Foreign and Domestic Yommerce, Special Agents Series, No. 78 (1914), pp. 40. 92. 93. + Ibid., p. 93. 5 Pt. II. ». 32. 206 REPORT ON COOPERATION IN AMERICAN EXPORT THADE. The following combines supplement the Roheisenverband rather than compete with it: (1) Siegerlinder Eisenstein Syndikat (Siegerland Iron Ore Syndicate). This syndicates the products of the mines of the Siegerland district, which, owing to their high percentage of phosphorus, are distinctive. (2) Vereinigung Oberschlesischer Hiitten (Association of Upper Silesian Smelters). This unites the syndicated mines of the upper Silesian industrial district. (3) ‘Schrottvereinigung (Scrap Iron Syndicate). This combines 10 firms and was formed to regulate the prices 8 scrap iron.: (4) Ostdeutsches Roheisen Syndikat (East German Pig Tron Syndicate). This is a syndicate for the crude-iron production of east Germany. ° (5) Rhbeinisch-Westfiilische Schweisseisen Vereinigung (Rhenish-Westphalian Malleable Iron Syndicate). The relations of the Roheisenverband to other business interests in Germany are close, inasmuch as the great firms, who not only mine ore and coal but also smelt ore and make steel, are members of all the syndicates controlling these various products. The link between the coal and iron syndicates is formed by the so-called smelter mines (Hiittenzechen). For the domestic market, iron is marketed through five dealers’ unions, dividing the German-Luxemburg territory into five parts, which are almost exactly similar to those for steel. (See Pt. IT, p. 32.) As the ores of the different mines and therefore the pig iron of the different blast furnaces vary more or less, the large foundries are desirous always of having their pig and spiegel from the same blast furnaces in order to have as nearly as possible a uniform raw material. About 20 per cent of the entire pig-iron production of Germany goes into castings. The supplying of a uniform product to the customers of the union is, therefore, the main factor of the domestic sales problem, although price is an important element and is in-Auenced to a marked extent by foreign competition in connection with transportation facilities. For the foreign market the syndicate has fixed the export quotas of members so as to prevent unnecessary dumping. It controls about 97 per cent of all pig-iron exports. Export competition from German firms outside the organization is of no importance. The Pig Iron Syndicate, like the other strong cartels in Germany, maintains a firm export policy, regularly making use of foreign markets as an outlet for excess production, though the exportation is larger when the domestic market is poor. To accomplish this it exports at prices Kartell-Rundschau, 1913, p. 760 fol, {i - Bb Ro, CONDITIONS IN PARTICULAR INDUSTRIES. {2 ff}gl i ' - lower than are charged home consumers. These low ex cpprices - worked a hardship on consumers of pig iron in Germany Cyaan manufacturing semifinished and finished articles to be sold abr," as they could not meet the cost price of their foreign competitors. In self-defense they formed consumers’ cartels and the syndicate was forced to adopt a policy of granting rebates or bounties on pig iron purchased from it and used to manufacture articles for export.! This bounty, which included the coal bounty of 1.50 marks, was in July, 1918, 4.75 marks and in October was raised to 6.25 marks per metric ton.? This bounty applies to finished cast-iron articles, such as radiators, stoves, and many other products for which the iron was hought from the Pig Iron Syndicate. The results claimed to have been attained by the syndicate are (1) a regulation of production to meet the demands in the market without exceeding them; (2) reduction of the cost of selling; and {3) the maintenance of a price which nets a reasonable profit. Steel.—The Stahlwerksverband.—The most important combination for steel is the Stahlwerksverband (Steel Syndicate), organized in 1904, which practically monopolizes the production and distribution of steel in Germany. It united a number of combinations of manufacturers, the Halbzeugverband (semifinished steel), the Triigerverband (beams), the Schienengemeinschaft (rails), and the Schwellengemeinschaft (railway ties), comprising in all 27 companies with a total production at the time of its foundation of 7.900,000 metric tons. In 1912 the membership included 81 companies, including all the German basic Bessemer (Thomas) steel works and a number of the open-hearth (Martin) steel works. The capital value of the concerns in the steel syndicate, which also included most of the large coalproducing concerns, was estimated in 1905 to amount to about $362,000,000. In forming the syndicate the guiding principle was to combine as far as possible all products of the steel works and the rolling mills. Tt has succeeded in combining the production and distribution of semifinished railroad and structural steel into an almost absolute monopoly. With respect to other rolled products it has been much less successful. Most of the works belonging to the syndicate are concerned in the production of coal and coke and a wide range of semifinished and finished iron and steel products, and are the chief factors in other cartels for the marketing of such products.? !'W. L. Saunders, Official Report of the Second National Foreign Trade Convention, St. Louis, Jan. 21, 1915, pp. 62-63. * Australasian Hardware and Machinery, June, 1915. Sup. p. 63. #J. Riesser, Die deutschen Grossbanken u. ihre Konzentration, 3d ed. 1910, pp. [41 fol.; J. Singer, Das Land der Monopole: Amerika oder Deutschland? (Berlin), 1913, pp. 154-159; FF. Walker, op. cit., p. 374. 208 REPORT ON COOPERATION -IN AMERICAN EXPORT TRADE. The products of the Steel Syndicate were originally divided into two classes, A and B. The A products include (1) semifinished steel, such as steel ingots, slabs, blooms and billets, and puddled blooms; (2) railroad material such as rails, ties, fishplates, spikes, bed plates; and (3) structural steel, including T, U, and I beams of more than 80 mm. section. The B products include bars, bands, hoops, rods, plates, sheets, tin plate, tubes, cast steel, railroad axles, steel forgings, etc.! The Stahlwerksverband has a monopoly of the A sroducts only. It buys them from the steel works owners and sells them for the general account. The B products are not sold by the steel syndicate, but formerly this production was apportioned by the combination. For certain of these products there were independent price cartels. In spite of numerous efforts it proved impracticable to establish a successful cartel for steel bars.? The syndicate agreement was renewed in 1907 and again extended on May 1, 1912, up to June, 1917. At its last renewal only the A products were syndicated, the sale of certain of the B products in various territories continuing to be taken care of by various indi-7idual syndicates.? Efforts have been made at various times to establish a combined sontrol of the so-called B products similar to the control of the A nroducts through the Stahlwerksverband. During 1914 and 1915 serious efforts were made to perfect such an organization. The steel combination, like the coal combination, is organized by means of an agreement between the steelworks owners. The Stahlwerksverband A. G. is merely the selling company of the combination. The capital stock of the Stahlwerksverband A. G. at the time of its incorporation in 1904 was $95,000. The capital is needed only for the expenses of operating the office, selling agency, etc., and is in no comparison to the total volume of annual business, which amounts to more than a billion marks ($238,000,000). The stock is exclusively in the hands of the owners of the steelworks, and may be transferred only with the consent of the general assembly.* The administration of the Stahlwerksverband is vested in a general assembly of all members of the syndicate, a supervisory council, and the managing directors of the incorporated sales agency (Stahlwerksverband A. G.). In the assembly of steelworks owners each member has one vote for every 10,000 tons quota of production.® The members of the syndicate are held together by double contract. The first, the syndicate contract, designates the relation of the selling 1 Zgllner, Eisenindustrie und Stahlwerksverband (Leipsic), 1907, p. 78 fol, and Pt. II, pp. 9-10. 8 Kartell-Rundschau, 1914, p. 290 et seq. 3 J, Singer, op. cit, pp. 156, 167; Bureau of Foreign and Domestic Commerce, Special Agents Series No. 78, p. 94. 4 A, Zollper, op. cit,, pp. 52, 77. 5B. Walker, op. cit., p. 367. CONDITIONS IN PARTICULAR INDUSTRIES. 209 rompany to the steelworks in the combination, while the second contract specifies the relations of the steelworks to one another.! Each member of the combination has a quota allotted to him based on the amount of crude steel originally allotted to him by the agreement.? All orders placed with the Stahlwerksverband are distributed among the members according to their quotas, but with due consideration for the geographical location of the works and also for the specialties of certain works which may be particularly desired by the customer.? If a plant exceeds its assigned production quota or in any other way violates the syndicate agreement, it becomes liable to a fine. The A products have been standardized by the Stahlwerksverband, which has established a technical bureau to test the products »f its members and, if possible, help to increase the uniformity and improve the quality. The tendency is toward a standardization of the products in the open market and a specialization of certain plants in particular lines, thus bringing about a standardization and concentration of the entire steel production which entails a more economical division of labor and plant organization. The Stahlwerksverband has a successful selling method. It attempts to harmonize as far as possible its own business policy, and more especially its price policy, with that of the cartels following or preceding it in the process of production. In particular its aim is to fix the price of all syndicate products in accordance with the prices of the raw materials in such a manner as to partake of the benefits of the German protective tariff duties, while showing at the same time the utmost regard for the interests of the industries of the more highly finished products.® The selling company buys the A products from mills on its own account and disposes of the same at wholesale on its own account, the profit being distributed amoiig the members at the close of each fiscal year, after deducting the selling expenses, the costs of administration, discounts, and sinking fund, as a reserve. The surplus is distributed among the stockholders of the company as a dividend. The result is an extremely low selling cost for the distribution of the products of the mills, amounting during recent years to from 6.4 to 9.7 cents per ton. By reason of its relation to dealers and dealers’ associations (discussed below) competition from the syndicate to the consumer has been practically eliminated. A member of a former American structural steel company in speaking of the experience of his company in purchasing Tag 4 Flechthelm, Die rechtliche Organisation der Kartelle, 1912, p. 18. Co 'F. Walker, op. cit., p. 367. 3 A, Zollner, op. cit, p. 82, and Pt. II, p. 10. * Kartell-Rundschau, 1914, p. 91, ’ See Pt. II, p. 10. 8J. Riesser, The German Great Banks and their Concentration, pp. 174-175; trans. ation published by the National Monetary Commission; 6lst Copg., 2d Sess., 8S. Doc. No. 593.. 272411 6——1L> 210 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. rolled structural shapes in Germany for further manufacture in this country stated it was impossible to buy raw material from any of the producers in Germany direct when the material was destined for export shipment. Quotations were made by the Stahlwerksverband only and no quotation would be made unless the syndicate knew the country for which the manufactured goods were ultimately intended, because, apparently, there were different prices for the different countries of ultimate destination. The Stahlwerksverband is closely allied with other combinations ‘n the steel industry, dealers’ organizations, manufacturers’ associations, cartels in other industries, and competitors in foreign countries. These alliances are effected by means of agreements or contracts, interlocking directorates, and other ways that aid in controlling the domestic market and extending the foreign trade. Some of the most important of the cartels and syndicates that are grouped about the steel syndicate and more or less closely allied with it through interlocking directorates, agreements, etc., are the following :* The Verein Deutscher Eisengiessereien (Union of German Tron Foundries), including all Germany, which is important because about 18 to 20 per cent of the entire pig-iron production is used in casting. There is also a radiator combination and a combination in temperedsteel castings closely allied with this union. Verkaufsstelle fiir Verpackungsbandeisen G. m. b. H. (Central Selling Agency for Iron Packing Bands (Ltd.)). The Rohrenkonvention (Convention of Tube Manufacturers). The Mannesmann-Réhrenwerke-Verkaufsgemeinschaft (Mannesmann Tube Works Selling Union), organized to supply the market for seamless tubes. Deutsche Abflussrohr-Verkaufsstelle (German Drainage Pipe Selling Office), a central selling organization for the drainage-pipe industry. The Weissblechkontor (Tin Plate Office), which has no specified quota of production and does not attempt to limit production, but is organized to concentrate selling to meet English competition. Deutscher Feinblechverband G. m. b. H. (German Light Sheets Union (Litd.), reorganized in 1904 with the Stahlschwarzblechverpinigung (Black Sheet Steel Union), to take advantage of the export bounty paid by the Stahlwerksverband. The Walzdrahtverband (Rod Union) was organized in 1908 under {he name of Drahtwalzwerke Aktien-Gesellschaft (Rod Rolling Mills Co.). It has been reported recently that this syndicate has been dissolved. 1 Pt. YI. pp. 5-8. CONDITIONS IN PARTICULAR INDUSTRIES. 211 The Verkaufsstelle der Vereinigten Deutschen Drahtgeflechtfabricen G. m. b. H. (Central Selling Office of the United German Woven Wire Manufacturers (Ltd.)), which includes most of the woven-wire industry. The Deutsche Draht-Verband G. m. b. H. (German Wire Co. (Ltd.)), in Diisseldorf, which was organized as the result of a contract entered into June 6, 1914, and was planned to run for at least three years. Its object was to improve the manufacture of wire and to further its sale at home and abroad. The combination is composed of six rod rolling works and about 85 finished wire works. Verband Deutscher Federstahlwerke (Union of German Spring Steel Works), which is related to the wire industries. The Schirmstahlfabriken (Umbrella Steel Factories). Schiffsbaustahlkontor (Office for Shipbuilding Steel), founded in [908 to supply materials for the growing German shipbuilding industry and replace the English product. Vereinigung Deutscher Edelstahl Werke (Association of German High Grade Steel Works), Diisseldorf, founded in December, 1914, which combines all works producing tool steel and high grade steel for construction.’ The relation of the Stahlwerksverband to dealers is worth noting, for it deals directly with a few large dealers’ associations, and was even instrumental in the formation of some of them, for instance, that for structural iron and steel. The size and importance of these dealers’ firms may be seen from the fact that one member of the Berlin association, the Vereinigte Ravené ’sche Stabeisen u. Trigerhandlung (dealers in merchant bars and structural shapes) consolidated 42 large wholesalers and increased its capital stock from 8% to 23 million marks ($2,023,000 to $5,474,000).® The jobbers who deal exclusively with the syndicate are divided into four geographical groups. Kach dealer receives from the syndicate a fixed discount of 2.50 marks on every ton purchased by him. Below the large dealers’ associations, there is a group of dealers who do not buy directly from the syndicate and who receive a fixed discount of 1.50 to 2 marks per ton. Finally, there are the local associations of retailers, which have been very closely organized by the syndicate, and which receive a discount of 50 pfennigs per ton on the dealers’ prices.* The Stahlwerksverband has a seat in the general assembly or directorate of each dealers’ association, but has no vote. It also reserves the right to veto the wholesale prices set by a dealers’ asso-1 Yolkswirtschaftliche Chronik, August, 1914. ? Volkswirtschaftliche Chronik, December, 1914, "Pt. II, p. 12. IR. Liefmann, op. cit., p. 108. 212 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. ciation. The wholesalers also assign to each retailer his definitely prescribed territory, so that from the syndicate to the consumer competition has been practically eliminated. There is another class of organizations in Germany, somewhat analogous to the trade associations in the United States, some of which devote a portion of their energies to foreign trade problems, to influencing the scope of the German protective policy, to furthering preferential tariff treaties with other countries, to advocating transportation tariffs favorable to export products, and to other ines. Some of these associations even enter into various agreements with cartels and syndicates. A few of the more important of these commercial organizations in the iron and steel industry are the Verein Deutscher Eisenhiittenleute, Diisseldorf (Association of German Iron Smelters) ; the Verein Deutscher Eisengiessereien (Association of German Iron Foundries), Diisseldorf; the Verein Deutscher Eisenand Stahlindustrieller, Berlin (Association of German Iron and Steel Manufacturers) ; the Verein Deutscher Tempergiessereibesitzer, Hagen, Westphalia (Association of German Annealed Casting Manufacturers) ; the Vereinigung zur Wahrung der Interessen der Rohsisen und Halbzeugverbraucher (Association for the Protection of the Interests of the Pig Iron and Semi-finished Steel Consumers) ; Meppen, Westphalia; the Verein der Mirkischen Kleineisenindustrie, Hagen (Association of the Small Hardware Industry of the Mark) ; the Verband Deutscher Eisenwarenhindler, Mainz (Association of German Hardware Dealers); as well as associations of machinery manufacturers, vehicle manufacturers, and those of other lines. Other associations of iron and steel manufacturers are the Association of the Iron and Steel Industry of Alsace-Lorraine and Luxemburg; Association of the Rhenish Westphalian Rolling Mills; the Bergische Fabrikanten Verein, Remscheid (Association of the Manufacturers of Berg); the Association of German Pin Manufacturers, Aix La Chapelle; and association of spring steel manufacturers at Hagen, screw manufacturers at Diisseldorf, sad-iron manufacturers at Hagen, knife manufacturers at Solingen, shear manufacturts at Solingen, lock manufacturers at Velbert, etc. : The Stahlwerksverband is also associated with nearly every allied industry through personal union or interlocking directorates. The combines in the three fundamental branches—coal, iron, and steel— are composed in the main of the same men, and nearly every combination for purchasing, manufacturing, selling, or exporting, in these lines shows among its directors representatives of the interests of Thyssen, Krupp, Stinnes, de Wendel, Haniel, Stumm, etc., while these interlocking combinations themselves are composed of interlocking firms.? 1 Bureau of Forelgn and Domestic Commerce, Special Agents Series, No. 78. pp. 88-45, Pt, i. ». 11. CONDITIONS IN PARTICULAR INDUSTRIES. 213 In 1913 the sales of A products by the Stahlwerksverband amounted to 6,339,000 tons, of which total semifinished steel comprised 1,681,000 tons; railway material, 2,880,000 tons; and structural shapes, 1,778,000 tons. The proportion of the production of the Stahlwerksverband to the total production of Germany is estimated at about 90 per cent.! The distribution of the B products is highly complicated by the fact that the different works which carry on the manufacturing processes organized themselves into cartels, unions and syndicates, which in turn, have their own selling organization independent of the Stahlwerksverband. These smaller cartels cover such products as drawn wire, woven wire, nails, castings, radiators, pipes, ete. One of the purposes of the establishment of the Stahlwerksverband was the elimination of competition among Gterman works in foreign markets,? and it has succeeded in practically dominating the export trade of the entire steel industry. It nas given a great deal of attention to pushing the exports of German steel products and its success is inferable from the marked increase in the exports of these products following the formation of the Stahlwerksverband in 1904. It is generally conceded that it has been one of the most important factors in German exports during the past decade.? According to the annual report of the year ending March 31, 1913, while the domestic sales of semifinished steel in that year were about 20 per cent less than in 1906-7, the export sales of such products during the same period increased about 115 per cent, so that the proportion of export sales to total sales was increased from 18% to 38 per cent.* A manufacturer of iron and steel products in the United States says that the Germans, through the Stahlwerksverband, are formidable competitors, not only because of the advantages of export bounties and freight rebates, but because they keep in close touch with the requirements of the foreign markets through effective and expensive representation on the ground, and because the syndicate backs up the credits granted by individual manufacturers to secure initial business. The Stahlwerksverband, by reason of its organization and of its attitude toward the export trade, has been in a position to pave the way for international agreements with the chief exporting countries.’ (See Pt. IT. +,. 81.) 1 Kartell-Rundschau, 1914, p. 91; ¥. Walker, op. cit., p. 373. TF. Walker, op. cit.,, pp. 373-374. 8 Pt. II, pp. 13, 18. + Kartell-Rundschau, 1913, p. 654. $J., Riesser, The German Great Banks and their Concentration, p. 182; translation published by the National Monetary Commission. 61st Cong, 2d Sess.. 8. Doc. No. 593. #14 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The home market for the Steel Syndicate is the German Empire and Luxemburg. All else is considered the foreign market. Prior to the founding of the syndicate in 1904 individual firms had their own agents, commissioners, or branch officers abroad. This led to price cutting among the German firms against one another, as well as against non-German firms. Upon the formation of the syndicate steps were taken at once to consolidate the German steel-works selling interests in all the foreign markets. The most important foreign markets are Great Britain, Holland, Scandinavia, Switzerland, and South America; also Turkey, Asia Minor, and, to some extent, Russia. In 1912 the syndicate maintained foreign offices in London, Amsterdam, and Brussels. It has also organized into associations wholesale dealers in Denmark, Norway, Sweden, Switzerland, England, Belgium, and Holland? For the purposes of systematically promoting and regulating the export trade in the common interest and to equalize the disadvantages at which the German export industry has been placed with respect to manufactured products in consequence of the low export prices of the raw material cartels, the Steel Syndicate, in conjunction with the Rhenish- Westphalian Coal Syndicate, maintains a special clearing house for exports at Diisseldorf (Abrechnungsstelle fiir die Ausfuhr). The office computes, regulates, and pays export bounties to the cartel members, based on a calculation of the amount of raw material consumed in making them.* The bounties granted by the steel syndicate from 1905 to 1914 on exports of finished products amounted to the following per ton of half-finished products consumed : 4 TABLE 15.—Bounties granted by German Steel Syndicate, 1905-191}. Marks. 15 10 5 ~ mE eb — eee 15 ER || ssi. 2 _- 15 10 17 From Jan. 1, 1905, to Mar. 31, 1906. From Apr. 1, 1906, to June 30, 1906 From July 1, 1906, to Mar. 31, 1907 From Apr. 1, 1907, to June 30, 1907 from July 1, 1907, to Sept. 30, 1907 From Oct. 1, 1907, to Dec. 31, 1908. From Jan, 1, 1909, to Mar. 31, 1910 From May 19, 1910, to Dee. 31, 1911 From Jan. 1, 1912, to May 81, 1912 rom June 1, 1912, to May 31, 1913 From June 1, 1918, to*_________________ From Oct. 20. 1914. to Mar. 5. 1915 These export bounties have been increased or decreased in response to the fall or rise in the home demand, the primary object being to 1 Ppt. IT, p. 11. "A. Zéllner, op. cit., p. 88 fol. iF, Walker, op. cit, pp. 393-394. W. Morgearoth, * Die Exportpolitik der Kartelle.” 1907, p. 53 fol. i Kartell-Rundschau, 1915, p. 118. ¥ Not availahle. CONDITIONS IN PARTICULAR INDUSTRIES. 215 effect full employment for the mills when home trade has been slack, and the secondary to secure a permanent trade in foreign markets. Largely through these bounties German iron and steel goods have gained a foothold in the markets previously regarded as British preserves,! and have materially affected British trade. The assumption which guides the syndicate is that if all the industry is to remain efficient and produce at a minimum cost the plants must work at a maximum capacity. During times of depression the home market can not absorb the natural surplus without a reduction of putput, and as a reduction in production in one allied line causes loss and disorganization in other lines, the “ dumping” of the surplus is sonsidered the more economical policy. This policy has at times led to very low export prices. Steel rails, for example, have been sold abroad $7.50 below the ordinary price. An exporting firm in New York cited an instance where a reinforced concrete-steel company in the United States was a bidder for a contract to erect warehouses in Uruguay which were to cost between 2 and 4 million dollars. Two German firms were in the field for the contract. One of them entered a bid which would have been considered a fair offer in comparison with the other bidders, but the second German firm submitted a bid which was so low it precluded even the slightest chance for other firms to compete with it. Subsequently the two German firms did the work. A member of a firm in the Southern States stated that he had seen Belgian and German bars offered in New Orleans at $6 per ton below the lowest figure at which his company was able to manufacture and deliver them. GREAT BRITAIN. About seven-tenths of the iron ore used in the blast furnaces of Great Britain is produced in that country and the rest is imported. The principal districts for the production of iron ore are the Cleveland district in Northern Yorkshire, the Northwest Coast district (West Cumberland and Northwest Lancashire), and the Kast Midlands district. In 1912 the production of iron ore in Great Britain was 18,790,000 long tons, of pig iron 8,751,000 tons, and of steel 6,903,000 tons. The value of iron and steel products, including mashinery, railroad rolling equipment. etc., exported during that time was about $392,000,000. The position of supremacy which Great Britain held in this industry up to the last quarter of the nineteenth century was largely attained through the efforts of individual organizations and manufacturing establishments—independent firms operating in isolated 1 Consul General T. St. Jobn Gaffney, Dresden, 1911, quoted by W. L. Saunders, Nfficial Report of the Second National Foreign Trade Convention. St. Louis, 1815, p. 62. 2 Phe Beonomist (London), Nov, 9, 1907, pp. 1909-1911, tpt. II, pp. 14-15. The Indian Trade Journal (Calcutta), July 16, 1915, p. 108, 216 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. fashion in the various branches. But the introduetion of new inventions and new methods of production, the development of new markets and new branches of the industry, the altered condition of industrial organization generally, and the fundamental change in the international position of the English iron and steel business since the seventies compelled great changes in the structure and prganization of the producing units in both the national and local aspects. The special stimulus for this change came from the pressure of foreign competitors in markets hitherto almost exclusively held by the British, and later even in the home market itself. The movement toward combination has not gone nearly as far as in Germany and a few other countries, but within the last 10 or 15 years there has been a very active movement toward the concentration of industry into large single corporations. Many of the small iron producers of an earlier period have disappeared, and in some cases the process of integration is nearly completed. Independent pig-iron firms, for example, no longer exist unless possessing some privileged markets or special supplies of raw materials. As early as 1903 a few companies had developed to the point where they owned their ore deposits and coal mines, made their coke, constructed their own plants, manufactured their iron and steel products, owned railway lines, had their own jetties or harbors, possessed their own ships, and carried on affiliated businesses.? The tendency to embrace a whole line of manufacture from the raw material to the finished product within the control of a single company is characteristic of the iron and steel industry of Great Britain. This has been brought about to a considerable extent through the amalgamation of competitors. The following companies, manufacturing mainly blast-furnace and rolling-mill products, typify the results of this movement. Bell Bros. (Ltd.), now controlled jointly with Dorman, Long & Co. (Ltd.), was originally established in 1844 and early acquired important iron mines and collieries and extensive deposits of iron ore, coal, and limestone in the Cleveland district. By 1899 it had hecome an influential factor in the production of pig iron and, with the assistance of the neighboring firm of Dorman, Long & Co., undertook the manufacture of finished steel. Dorman, Long & Co. (Ltd.), had begun business in 1876 in Middlesbrough, where they had puddling furnaces and made bars and angles for shipbuilding purposes. In 1879 they acquired the Brittania works, specializing in girders, and in 1899 absorbed the sheet works of Jones Bros. and the wire os R. Carter, The Tendency Towards Industrial Combination (London), 1913, pp. ¥ Carter, op. cit, pp. T2-75. VW. J. Ashley, British Industries (London), 1903, pp. 18-14, CONDITIONS IN PARTICULAR INDUSTRIES. . 217 works of the Bedson Wire Co. In 1902 a complete union of the interests of Dorman, Long & Co. (Ltd.) and Bell Bros. (Ltd.) was 2ffected, the former acquiring all of the ordinary shares of the latter. In 1903 Dorman, Long & Co. acquired all the ordinary shares of the North-Eastern Steel Co. (Ltd.), with a basic Bessemer plant and rail mills, thus becoming a producer of everything from iron ore to various rolled steel products. The total capital represented by this combination is over $16,000,000. The firm of Guest, Keen & Nettlefolds (Ltd.), is one of the largest in Great Britain. In 1900 the firm of Guest, Keen & Co. was formed by the amalgamation of the Dowlais Iron Co., Guest & Co,, and the Patent Nut & Bolt Co. The properties acquired consisted of collieries, blast furnaces, open hearth and Bessemer steel plants, and rolling mills for the production of rails, sleepers, plates, etc., and works for the production of bolts, nuts, railway equipment material, etc. In 1902 the firm became Guest, Keen & Nettlefolds (Ltd.), through the absorption of the firm of Nettlefolds, screw makers. Later the firm of Crawshay Bros., which made steel rails, was acquired. The motive in seeking the absorption of these last two firms, according to A. Keen, was to eliminate the competition met from their products. There is a group of amalgamated companies associated with the name of the late Baron Furness (Sir Christopher Furness). The Weardale Steel, Coal & Coke Co. (Ltd.), incorporated in 1899, took over the business of the Weardale Iron & Coal Co., which possessed collieries, blast furnaces, rolling mills, and deposits of coal, iron ore, limestone, and other minerals. In 1901, to better the competitive situation, the Cargo Fleet Iron Co. (Ltd.) was bought, and in 1905 control was secured of the South Durham Steel & Iron Co. (Ltd.), itself an amalgamation of three competing ironworks. In 1906 the Weardale Co. acquired a controlling interest in the Talbot Continuous Steel Process (Ltd.), now reconstructed as the Steel Developments (Ltd.).® Prominent in the manufacture of armor and ship plates is William Beardmore & Co. (Ltd.), of Glasgow, owning steelworks at Parkhead and Dalmuir near Glasgow. In 1900 they acquired the shipbuilding business of R. Napier & Sons and in 1905 bought the Mossend Steel Works. In 1914 their issued capital, share and loan, was over $19,000,000. Nearly half of the ordinary shares of Beardmore & Co. are held by Vickers (Ltd.), the great ordnance and shipbuilding con-1 H. W. Macrosty, The Trust Movement in British Industry (London), 1907, pp. 26-30, "Ibid. pp. 37-39. 3 Ibid., pp. 32-34, and Stock Exchange Official Intelligence, London, 1914, p. 1237 et seq. 218 REPORT OX COOPERATION iN AMERICAN EXPORT TRADE. sern, itself an amalgamation, whose share and loan capital is nearly $45,000,000. There is one large combination in the tube trade, Stewarts & Lloyds (Ltd.), of Glasgow, which, however, on account of the strong sompetition prevalent in that trade, does not completely dominate the situation. In 1890, three firms combined as A. & J. Stewart & Clydesdale (Ltd.), later becoming A. & J. Stewart & Menzies (Litd.), and the largest tube company in Scotland on the inclusion of a fourth frm in 1894. In 1902, for the express purpose of eliminating competition, a union was effected with Lloyd & Lloyd, of Birmingham, the largest tube makers in England, the combination being called (as stated above) Stewarts & Lloyds (Ltd.). Their tube output was more than half the total output of the United Kingdom. In the same year, a financial alliance was made with the Wilson’s & Union Tube Co., itself an amalgamation, but after a year this was dissolved. In 1914, the issued capital of the combination, share and loan, was about $10,600,000. About 70 per cent of the tube trade is for export and bitter competition over the disposal of the surplus product exists between firms producing mainly for export and those producing mainly for the home market. In the sheet industry a combination was formed in 1902 called Baldwins (Itd.), which united the galvanized sheet businesses of Alfred Baldwin & Co., E. P. & W. Baldwin, and the Blackwall Galvanized Iron Co. with the Bryn Navigation Colliery Co. and the blast furnaces, steelworks, ore mines, and collieries of Wright, Butler & Co., of Swansea, Wales. Baldwins (Ltd.), while a large company, capitalized at over $6,500,000, does not dominate the sheet industry, there being another large company in the same field. Other prominent examples of amalgamations are Sir W. G. Armstrong, Whitworth & Co. (Ltd.), John Brown & Co. (Ltd.), and Cammell, Laird & Co. (Ltd.). These companies, however, carry their production beyond the rolling mill stage.* The development of these firms which control all the raw materials and processes requisite for the manufacture of their products is very effective in increasing their productive efficiency and in increasing their competing strength in both domestic and foreign markets.’ Another method by which concerns in the different stages of production are brought closer together and more or less control of the 1 Macrosty, op. cit, p. 42, and Stock Exchange Official Intelligence, London. 1914, pp. 1227 and 1296. 2 Macrosty, op. cit, pp. 46-47, 76, and Stock Exchange Official Intelligence, London, 1914, p. 1290. s Macrosty, op. cit., p. 47, and Stock Exchange Official Intelligence, London, 1914, p. 1226. s Macrosty, op. cit., pp. 40-486, » Carter, op. c¢it., p. 103 et seq. CONDITIONS IN PARTICULAR INDUSTRIES. 219 jifferent units is secured is the mutual stockholding system, by which the same individuals are largely interested in several companies. In addition to the development of large corporations, which combine in their work all the various steps in production and manufacture from raw material to the finished product, there is hardly a branch of this industry in which the producing units have not been combined under temporary syndicates in order to keep the prices of their products at remunerative levels, but many of these, e. g., for pig irom, tubes, tin plates, and finished iron products, have not been very successful. In other branches combinations have met with considerable success. The manufacturers of ship and boiler plates, galvanized plates, tin-plate bars, rails, bar iron, and other branches of the iron and steel trades of Great Britain have formed such organizations. Thus it was stated as long ago as 1898 that in the rail, ship-plate, boiler-plate, bar-iron, and other products, agreements or understandings as to prices, representing forms of temporary combination, were in such a degree of operation that prices were fairly well maintained and cutting largely prevented.? These combinations usually assume the form of an association. Only about half a dozen of these associations have exercised, under certain conditions of trade, really effective and systematic regulation of prices. Combinations in the English iron and steel industry have not become the significant factor that they have in other countries. The English producers are characteristically individualistic; the combinations lack centralized control. Generally they are mediums for united action as to grades, prices, output, and territory, but exercise no control over actual processes of production or distribution, and rarely become selling combinations. Since the home market may at any time be made a dumping ground by foreign producers, most of the combinations have been formed as a means of protection from foreign competition. While some combinations bend their energies toward the export fields, the large foreign trade of Great Britain in iron and steel has been built up mainly through the medium of strong individual companies. The principal combinations in the iron and steel industry have been the associations for boiler plates and ship plates, galvanized steel plates, steel bars, malleable iron bars, and steel rails. The Scotch Steelmakers’ Association.—This association and its main rival, the North of England Makers, composed of manufacturers of ship and boiler plates, in recent years have had agreements which assign certain territory to each, thereby making it ——————————— 1 Carter, op. cit, pp. 135-136. }H. Levy. Monopoly and Competition (London), 1911, p, 233; Carter, op. cit, p. 197. 290 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. possible at times to maintain prices within such territory! Scotland withdrew from the North of England markets and in return was given Belfast. Dumping was resorted to by the Scotch combifiation to meet the competition of an Irish firm which refused to join. One instance is reported where orders received by certain members were divided with another member who had no orders, for the purpose of maintaining the combination. As soon as the first signs of a falling demand were noted in 1907, works were closed under a general agreement, and compensation paid to their owners by the remaining firms. The association also appears to have agreements with certain outside firms for the supply of half-finished materials.? In 1908 the Midland steel makers came into the combination. The Midland consumers then attempted to buy from the Clyde makers, but were forced by quotations specially priced to meet the situation to return to the combination in their own district.? The export prices of the combination have been lower than its domestic prices, but the long distance from the countries of importation has prevented reimportation into England. Products not included in the combination showed much less of an increase in price than those which were included, and during the depression of 1907 the price of plates went down more slowly and with much longer pauses.* In 1913 the association was partially dissolved by the withdrawal of two firms and the discontinuing of the agreement covering angle bars. The rebate scheme, which had proved unsuccessful, was also abandoned. This change proved a serious disturbing factor. It is reported that in 1914 plates were also freed from the combination control. The National Galvanized Steel Makers’ Association.—The National Galvanized Steel Makers’ Association, composed of the manufacturers of galvanized plates, is a combination organized similarly to that composed of the ship and boiler plate manufacturers. Galvanized plates form one of the chief English steel exports. Early in 1908 the association adopted a basis price, f. 0. b, Liverpool, and the price was maintained unaltered throughout the year in various sections of the country, a fact which a trade paper characterized as evidence of “the smooth working of the association.” The 1 That these associations were able to exercise control over prices is shown in the acsount in the Statist for June 1, 1907 (p. 1111), of a meeting held hy the North East England Steel Makers in 1907 to discuss the advisability of advancing the price of steel materials. 1 Levy, op. cit, pp. 226-231 ; Macrosty, op. cit., pp. 71, 72; Carter, op. cit., p. 128. t Levy, op. cit, p. 229. + Ibid., pp. 229-231. i Iron and Coal Trades Review (London), Jan. 2, 1914, pp. 13, 27, and Jan. 1, 1915, n. 11. CONDITIONS IN PARTICULAR INDUSTRIES. 221 small number of important firms in each district made it comparatively easy to secure adherence to the agreements, but the fact remains that prices were steadier during a year of bad conditions ‘han anywhere else in the iron and steel trade.’ After a successful career of over four years this association in July, 1909.2 collapsed and a sudden depreciation in price was the immediate consequence. The cause of the failure was attributed to outside competition? In December, 1913, following a year of low prices, the association was reestablished, all the producers in the country joining.* Instead of merely agreeing to a minimum quotation, the reconstructed association proposed to control prices through the regulation of output. The increase in price of galvanized sheets during 1914, when the prices of iron generally remained stationary, is attributed to the association. Following the reestablishment of the association, business conditions in this branch of the industry were improved and export trade greatly expanded, especially to India, Argentina, and Australia. Ordinarily 90 per cent of the galvanized steel manufacture is exported. South Wales Siemens Steel Bar Association.—Up to 1900 the Welsh steel manufacturers enjoyed a monopoly in tin-plate bars, but since that time the English market has been invaded, first by German and later by American manufacturers.® For some years dumping from Germany had prevented the formation of combinations, but when this ceased in 1904 the cartel movement began to spread. In 1906 the tin-plate bar combination, known as the South Wales Siemens Steel Bar Association, was formed for the purpose of raising and regulating Welsh prices; and the conditions of manufacture and trade were so favorable that its efforts were largely successful for a time. Production, and consumption as well, is largely concentrated, there being, when the association was organized, only 13 firms in that section making tin-plate bars. The association, while making no attempt to control output, did control prices and succeeded in increasing them for a time, but with the renewal of German competition and unfavorable markets there came a radical drop in prices between 1907 and 1909.7 The loss of Canadian and other markets to the American manutacturers has necessitated the reduction of the Welsh output. This was accomplished by an agreement or combination in February, 1914, 1 Levy, op. cit.,, pp. 231, 232. 2 Carter, op. cit., p. 244, gives the date as 1910. 8 Iron Age, Jan. 15, 1914, p. 196. t Tron and Coal Trades Review (London), Jan. 2, 1914, p. 27, and Jan. 1, 1915, p. 9: the “hamber of Commerce Journal, Trade Review, January, 1914, p. 15. 5 Iron and Coal Trades Review (London), Jan. 1, 1915, p. 9. 8J. H. Jones, The Tin Plate Industry (London), 1914, p. 156. 1Levy, op. cit., p. 232; Carter, op. cit,, p. 211; Jones, op. cit., pp. 162-163. )99 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. in essence a consolidation plan or pooling of production, the sosalled “ paying-in and taking-out pool.” Each firm was allotted a -ertain percentage of the production of the country; for any excess of this quota the firm paid a prescribed amount into the common fund, while for any underproduction it was allowed to draw from the fund. The syndicate includes 95 per cent of all the works of importance. Combinations in marked and unmarked malleable-iron bars.—-The oldest and most successful combination in the malleable-iron trade is an informal ring or combination of some half-dozen old, astablished concerns known as “ marked-bar houses.” These concerns command a special market, have old, established trade connections, are in convenient proximity to one another, and are practically unaffected by foreign competition. Because of the quality of their product and the small number of firms engaged, they have been able to maintain prices for long periods without fluctuation. This branch »f the industry is combined in the Midland Marked Bar Iron Assosation.” While these few firms were free from competition in marked bar iron, this special product was subject to the competition of second quality, or unmarked bars, which ‘were also made by most of the marked bar houses. To control such competition the Unmarked Bar Association was formed in 1895, composed of the makers in seven counties. The most important rule of this association provided for the quarterly compilation and adoption of a minimum price list, with standard rates of discount. Exported iron was specifically excepted from the agreed prices. The Lancashire makers formed a separate organization in 1898, and in 1900 the National ‘Consultative Council of the Iron Trade of Great Britain was organized for the purpose of harmonizing the policy of the various bar-iron associations. It attempted to fix prices several times but was rather unsuccessful owing to unfavorable market conditions. The Unmarked Bar Association became dormant for a time, but was rerived in 1904.2 Other bar associations, the South Yorkshire Bar Iron Association and the Scotch Bar Association, are active and exert an influence ver prices.* The iron and steel bar manufacturers of England have had to contend with a great deal of dumping in both home and foreign markets, particularly by the German and Belgian competitors.’ 1 Kartell-Rundschau, Nos. 1-2, 1915, p. 73. 1 Carter, op. cit., pp. 201, 209 ; Macrosty, op. cit, pp. 60-62. 8 Macrosty, op. cit., pp. 60-62, $Tron & Coal Trades Review (London), Jan. 2, 1914, p. 13; Jan. 1, 1915, p. 11; and Dec. 81, 1915, pp. 808, 809. s Chamber of Commerce Journal, Trade Review (London), January, 1910, p. 16; and January, 1914, pp. 23, 50. CONDITIONS IN PARTICULAR INDUSTRIES. 223 Combinations in the Scottish malleable-iron trade have been mown for nearly thirty years, but these combinations were of a ose and temporary character. In 1910 an agreement was reported to have been concluded among the Scottish malleable-iron makers for the regulation of output for both home and export trade and for an advance in the export price.! British Rail Makers’ Association.—The history of the combination of British manufacturers of steel rails is intimately connected with that of the international rail pool or agreement (discussed under the head of International Syndicates, pp. 348-350), which had its beginning in 1883. This international agreement, generally, left the home and some of the colonial markets exclusively to the British manufacturers. The protection given by the agreement to the English makers is seen in the statistics of imports and prices. In 1900 and 1901, when the United States works were not included in the syndicate, a difference of less than $4 per ton in the average* prices of the two countries led to an export of over 20,000 tons from America to England. In 1907, after the United States works were alleged to have entered into the agreement to respect the home markets of the other members of the syndicate, only 474 tons were exported from America to all Europe, notwithstanding a greater difference in price and about the same quantity of total exports.® The first form of the combination in Great Britain was a temporary one which proved unable to restrict competition between English rail-making firms, and so a form of joint sales agency was adopted. The number of firms which manufacture rails is about 20, but only about a dozen manufacture all classes of rails, and most of these are large concerns, engaging in all the steps, from the raw material lo the finished article.® Practically all of the rail producers of Great Britain belong to the combination. The regulation of production has been very effective, and the combination has succeeded in maintaining the price of rails at a remunerative figure when the potential output was largely 'n excess of the demand. While rails are not as important an item as they once were in the British steel output,® England still enjoys an extensive foreign trade in this product because of a practical monopoly of colonial markets and sometimes in countries in which a great deal of railway construction is carried out by means of English capital. 1 C. Hood, Iron and Steel (London), p. 135. : 2H, Levy, Monopoly and Competition (London), 1913, p. 262, 1 Carter, op. cit., pp. 209, 253. t Levy, op. cit, p. 261; Carter, op. cit, p. 258; Hood, op. cit, Dp. 141, JIron and Coal Trades Review (London), Jan. 2, 1914, p. 27. 224 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. BELGIUM. In 1912 the production of iron ore in Belgium amounted to only 165,000 long tons. Imports of iron ore and pig iron amounted to about 7,200,000 tons. "The output of pig iron was 2,300,000 tons; of manufactured iron, 300,000 tons; of steel ingots, 2,500,000 tons; and of steel rails and other finished forms, 1,900,000 tons. The exports were 1,500,000 tons, valued at $60,000,000, of which semifinished products amounted to $2,770,000. Excluding the output of the blast furnaces, prior to the war, Belgium exported about 75 ner cent of its iron and steel products.? Various unsuccessful attempts were made from time to time to combine the pig-iron manufacturers, as well as the manufacturers of various iron products, such as slit iron, iron rods, and nail rods. The manufacturers of steel products were more successful. Early combinations.—The first permanent combination to be made in the iron and steel industry ® in Belgium was the Syndicat belge des rails pour chemins de fer, which combined all of the steel rail makers in the country. It was formed in 1880 and continued until 1905, when it fused with the Comptoir des aciéries belges. Prior to this fusion the rail syndicate was limited in its operation to the national market; and the members agreed on prices, apportioned orders, and, to some extent, limited production; also, agreements were made with certain French steel works concerning imports of rails into Belgium. Little change was made in the national rail situation when the fusion oceurred.* The Syndicat belge des accessoires de voie, composed of manufacturers of sleepers, locking plates, fishplates, and other railway accessories; and the Syndicat belge des rails 4 gorge, composed of three companies producing grooved rails for street-car tracks, were taken over also by the Comptoir des aciéries belges.* The Comptoir des aciéries belges.—In 1905, a central selling gency, the Comptoir des aciéries belges, was organized as an incorporated concern, the initial membership consisting of eight manufacturers of steel products. For the first two years it was concerned only with foreign and domestic sales of girders and steel rails, but in 1907 an agreement was made whereby the sales of semifinished steel products, such as ingots and blooms, were included with rails and beams, the agreement being de separately with each producer by the comptoir and the date of expiration being June 30, 1911. All the Belgian steel works producing the forms of steel mentioned 1 Statesman’s Year Book, 1914, pp. ii and 692; and Statistical Abstract for the Prinrlpal and Other Foreign Countries (London), 1914, No. 39, pp. 141, 143, ou De Leener. L’Organisation 8yndicale des Chefs d'Industrie (Brussels), 1809, vol. I, p. 104. Ibid, p. 118. 17Thid.. pb. 114. CONDITIONS IN PARTICULAR INDUSTRIES. 225 above were members of the comptoir, so that it had absolute control of domestic and foreign sales and became the most powerful organization of the kind in Belgian iron metallurgy. Soon after the comptoir came into existence the dealers in beams organized the Union professionnelle des marchands de poutrelles de Belgique, which made an agreement with the comptoir by which the latter refrained from dealing with the dealers’ customers and bound itself to increase its retail prices. It was also agreed that no one dealer should be given a better price than another, that the quantities contracted for should be delivered, and that the dealers would buy only from the comptoir.? Other combinations.—The comptoir did not include all the steel organizations in Belgium. Those for steel tires, axles, moldings, rods, and sheet steel operated independently of the comptoir. - Combinations for tires and axles and for steel moldings existed for different periods, but were dissolved. Down to 1909, and probably thereafter, two organizations, one for sheet steel and the other for steel slabs, were in operation, and once a month the directors of the works interested met at Brussels to discuss the market and fix prices.? While the Belgian syndicates were not as compactly organized as the cartels of Germany, yet they exerted a vigorous influence in the foreign sales of iron and steel products. Several American manufacturers have stated their inability to compete successfully in foreign markets with the Belgians in such articles as steel beams, steel lath. ete. FRANCE. In 1912 France produced 18,700,000 long tons of iron ore, of which about nine-tenths came from the mines of the Department of Meurthe-et- Moselle; 4,870,000 tons of pig iron; and 4,330,000 tons of steel. It exported iron and steel products, including machinery, railroad rolling equipment, etc., valued at about $51,000,000. The general form of combination in the iron and steel industry in France is the comptoir. The most important of these are the Comptoir Métallurgique de Longwy, Comptoir d’Exportation des Fontes de Meurthe-et-Moselle, Comptoir des Poutrelles, Comptoir des Essieux, and the Comptoir d’Exportation des Produits Métallurgiques. Comptoir Métallurgique de Longwy, and Comptoir d’Exportation des Fontes de Meurthe-et-Moselle.—These combinations, located in the department of Meurthe-et-Moselle, are the oldest and L De Leener, op. cit, Vol. I, pp. 120, 121. ® Ibid, p. 122. 311bid., p. 123. ¢ Statistical abstract for the principal and other foreign countries (London), 1914. No. 39, p. 149. 97941° _18— 18 226 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. most typical of the French comptoirs. The Comptoir Métallurgique de Longwy handles the domestic sales of pig iron for its members, and the Comptoir d’Exportation des Fontes de Meurthe-et-Moselle \ransacts the business of foreign sales. The membership of the two is practically the same, as are also the officials, the organization? and operation? The capitalization of each is comparatively small. The domestic combination, Comptoir Métallurgique de Longwy, was organized in 1876 by four pig-iron producers, the central office being at Longwy, Department of Meurthe-et-Moselle.® In 1915, 18 concerns were members.* Some producers are not affiliated with the comptoir, because they consume all the pig iron that they proluce; hence they have no need for the services of a selling agency. In general, however, the plants turn out more than they use, and at certain times those who are not members make a temporary arrangement with the comptoir to dispose of their stock. There are also semiofficial members who do not sign the agreement, but who unreservedly carry out its regulations, e. g., certain Belgian concerns who are prohibited by law from establishing contractual relations with the comptoir.® An administrative council in which all the members are represented has general direction of the work of the comptoir, and appoints a managing director to carry out the measures adopted.’ In case disputes arise as to the execution of the regulations of the somptoir, a provision exists for resort to arbitration.” The comptoir does not in any way restrict the production but merely divides the domestic orders among the members according te a fixed proportion. What the members wish to sell abroad may be disposed of without its mediation.® Members, however, must reserve a certain amount of space in which to store material for the comptoir in order that its deliveries may be promptly made, and a maximum and a minimum is set for the stock held in reserve for the somptoir® While the comptoir fixes the quantities to be sold, it accepts no commission. To defray the actual expenses of its work, the members usually deduct from each invoice 2 per cent for the somptoir and one-half per cent for the reserve fund. At the end of sach six months overprovisions are returned pro rata.’* It is able to 1 Comité des Forges de France: Annuaire, 1914-15, p. 701. 'P. Obrin, Le Comptoir Métallurgique de Longwy (Paris), 1908, p. 159. 3p, de Rousiers, Les Syndicats Industriels de Producteurs (Paris), 1912, p. 181; f. Laur, De 'Accaparement, vol. IIL, p. 167; Comité Des Forges de France, Annuaire, 1914-15, p. 699. t See Pt. II, pp. 97-98, for names of officers and members. 5 Obrin, op. cit, pp. 76-79. 8 Ibid., p. 85. 7 Laur, op. cit., Vol. III, p. 185, 1P, de Rousiers, op. cit., pp. 175, 176, 180, and 181, ) Obrin, op. cit., pp. 51-59, 61-63. Pt. II, p. 98. CONDITIONS IN PARTICULAR INDUSTRIES. 297 know in advance almost exactly what will be the requirements of the slientele, and it consequently keeps the members advised several months in advance as to what the situation will be. The purpose for which the comptoir was formed was to purchase from the associated companies and to resell in France, in the French colonies, and in the countries under the French protectorate all the pig iron which they manufacture, except that used in their own plants or exported abroad. The comptoir also studies possible improvements in the production of pig iron, and aims at the reduction of transportation costs, the exclusion of foreign pig iron, the reduction of selling costs by eliminating middlemen, and the lessening of net -osts by a joint purchase of fuel.? It has been claimed for the comptoir that it has effected great savings in transportation expenses through the geographic distribution of the orders, and in selling expenses as a result of handling the sales of all its members through a central office. It has sought to enlarge the home market, and seems to have been able to render the domestic selling prices more stable than they were prior to its formation. It is claimed that the lower selling prices prevailing are due largely to the lowering of the members’ costs under the régime of the comptoir. In preference to restricting their output, the members have usually thrown their excess production on the foreign market, even at a sacrifice.? : The Comptoir d’Exportation des Fontes de Meurthe-et-Moselle, the comptoir of the pig-iron manufacturers of Meurthe-et-Moselle, was organized in 1905, with the main office at Longwy, and has the same offices, membership, personnel, and management as the Comptoir Métallurgique de Longwy.* The comptoir was organized for selling abroad for its members that part of their production which they do not use themselves and which is not to be sold to the French clientele by the domestic comptoir. The comptoir also seeks by means of its organization to regulate the sale of pig iron abroad and to render prices more stable in foreign markets. While the members of the domestic organization are not required to sell their foreign orders through the exporting comptoir,® the producers, judging from the list of members, seem to find it advantaceous to sell through the exporting medium, rather than to attempt the sales individually. The comptoir probably succeeded in establishing uniform current prices and a normal disposition of the pig iron of its members in 1 Obrin, op. cit, pd. 51-59, 61-63. * Laur, op. cit., Vol. IIT, p. 188. 3p. de Rousiers, op. eit., pp. 210-213 ; Obrin, op. cit., table in appendix; Laur, op. cit., ol. 111, p. 179; Chastin, op. eit., p. 74. ¢ Comité des Forges de France, Annuaire, 1914-15, p. 701; Chastin, op. cit, pp. 74, 80. $ Laur, op. cit, Vol. III, p. 171. 3 Obrin. op. cit., p. 159. 298 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. proportion to the demand and in places where demands are more numerous.! Special comptoirs for iron and steel products.—In addition to the pig-iron comptoirs described above, numerous other comptoirs have been organized for the sale of the various pig-iron derivatives. A concern that produces a surplus of pig iron, which it sells at home and abroad, and also produces a variety of iron and steel products, such as beams, carriage springs, axles, etc., may be a member of as many domestic comptoirs as there are separate classifications of its products. Metallurgy in France has offered excellent opportunities for the formation of these various selling agencies owing to the concentrated condition of the industry, especially in those branches the products of which do not run to great varieties, such as beams, iron and steel pipes, etc. These products are, as a rule, manufactured without the individual mark of the producer, and the articles of one manufacturer may be interchanged with those of another. On the whole these comptoirs are modeled after the Comptoir de Longwy, although with variations in organization and operation which result from the peculiarities of each branch of the industry. The more important of these organizations are: The Comptoir des Poutrelles > (beams), the Comptoir des Aciers Thomas (basic Bessemer steel), the Comptoir des Paumelles (hinge plates), Comptoir des Essieux (axles), Comptoir des Ressorts de Carrosserie (carriage springs), Comptoir des Fers 3 Cheval (horseshoes), Comptoir des Toles et Larges Plats (sheets and slabs), Comptoir des Tubes en Fer et en Acier (iron and steel tubes), Comptoir des Quincailleries Réunies de I'Est (hardware), Comptoir des Grillages en Fil de Fer Galvanisé (galvanized iron screens), Comptoir de la Clouterie (nails). In 1914 another combination was formed embracing steel products which had been hitherto nonsyndicated, especially commercial steel.® Regarding the steel-rail industry, it can not be said that there is in France a regularly organized syndicate in the manufacture of rails; for “those interested, considering that this product was gensrally sold: to large railroad companies or to departments and communes, feared that the State would take offense at the monopolizing by the iron masters of an article of such prime necessity for public administration. Therefore their syndical organization with respect + Obrin, op. cit., pp. 157-159. 1 Chastin, op. cit., p. 81. }H, Prévost, Les Ententes entre Producteurs en France (Charleville), 1904, pp. T4, 20-99, 211; Comité des Forges de France, Annuaire, 1914-15, p. 705. + Obrin, op. cit., pp. 122, 123. I Kartell-Rundschau. May, 1914, p. 428. CONDITIONS IN PARTICULAR INDUSTRIES. 229 to this article is limited to a tacit understanding for the fixing of prices and the division of orders.”* The Comptoir d’Exportation des Produits Métallurgiques {(metallurgical products) centralizes the sales abroad of many of the prodacts which have separate comptoirs for the domestic business, chiefly rails and their accessories, metal ties, small beams, joists, girders, and channels. It has a virtual monopoly of the trade in its line and its business is on a purely commission basis? The comptoir has been able greatly to increase the export business of its members, which in a period of six years rose from 40,000 tons to 200,000 tons. This development has been largely due to the reduction in selling cost resulting from a unified representation abroad. The markets of Brazil, Argentina, and China were opened to French metal interests, as they were able to execute in unison orders that it would have been impossible for them to fill singly. Many of the large producers are unable to fill a rush order for 6,000 tons of rails for Brazil, for example, but the comptoir by judicious apportioning is able to accept and fill the engagement. The centralization of orders permits of their being distributed in a normal way and useless transportation expenses are saved. Some concerns which are favorably situated work almost altogether for the export business, while the others serve the customers near at hand.® AUSTRIA-HUNGARY. In 1911 Austria-Hungary produced 4,600,000 long tons of iron ore, and manufactured 2,100,000 tons of pig iron and 2,600,000 tons of steel. Iron and steel products, including machinery, railroad rolling equipment, etc., amounting to about $9,900,000, were exported. The iron and steel industry in Austria-Hungary is organized in a head cartel with several subsidiary cartels. The Head Cartel of the Austro-Hungarian Iron Works (Das Hauptkartell der osterreichischen Eisenwerke, or Ubereinkommen zwischen den Osterreichischen und ungarischen Eisenwerken) has been in existence since 1881. The Austrian iron cartel originated in 1878 as a rail cartel, but in 1881 most of the Austrian iron works came together and included also the separately organized cartel of Hungarian iron works. The original rail association was continued as a subsidiary. In 1891 the general Austro-Hungarian iron cartel effected a closer 1G. De Leeper, L’organisation syndicale des chefs d’industrie (Brussels). 1909, p. 67. 1 pt. II, pp. 101-102. sp, de Rousiers, op. cit., p. 222. + Statesman’s Year-Book, 1914, p. li, and Statistical abstract for the principal and “ther forelzn countries (Londen), 1914, No. 89, p. 171 230 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. organization, under which it was agreed that Austria should be the sales territory of the Austrian works and Hungary of the Hunzarian works, although the works of each country were to be allowed to export a stated amount to the other. The agreement was last renewed in 1905, to run to December, 1917. In 1912 there were 34 large companies in the cartel.? The Hauptkartell is in the nature of a production cartel, apportioning production and sales, in order to guard against overproduction, with its resultant price cutting. The cartel represents the individual participants in the form of a free agreement, unregulated by any legal provisions. It guarantees to each member his sales quota for the sale of his products in direct trade with his established customers, and assures each and every individual member not only technical, but also absolute mercantile, independence.? It makes no provisions for the general fixing of prices, but has in the course of time established the custom of fixing, in free agreement, price adjustments for the head cartel according to market conditions for the time being. Only in the case of the individual subsidiary cartels are provisions made for temporary price fixing. The Hauptkartell seeks to increase the domestic sale of iron and steel products. It also seeks to encourage exportation by exempting all products directly or indirectly exported by the members of the cartel from the apportionment, or share quota of the individual members’ sales. The subsidiary or secondary cartels are:* Schienenkartell (rails), Feinblechkartell (sheets), Gussrohrkartell (cast-iron pipe), Kartell fiir schmiedeiserne Rohre (wrought-iron pipe), Draht- und Drahtstiftenverband (wire and wire nails), Stahlgusskartell (cast steel), Achsenkartell (axles), Tireskartell (tires), Rider- und Riderpaareverband (wheels and trucks), and Schienennagel- und Schraubenkartell (rail spikes and screws). The Austrian iron works generally are granted by their cartels export bounties not to exceed the customs duties put upon the goods by the countries of importation. These bounties are granted because the Austrian costs of production are relatively higher than those of competing countries, but they have not been very effective sxcept in the case of certain articles, such as wrought-iron pipe. RUSSIA. In 1912 Russia produced about 8,000,000 long tons of iron ore, 1,100,000 tons of pig iron, 4,400,000 tons of half products of iron 1K, K. Kartellenquéte, Vienna, 1912, VIII, p. 247. s Ibid., p. 12. 31bid.. p. 217 fol. CONDITIONS IN PARTICULAR INDUSTRIES. 231 and 3,600,000 tons of finished iron and steel. At the same time imports of iron and steel products amounted to about $40,000,000. Combinations in the iron and steel industry in Russia relate chiefly to,production and the sale of native and foreign products in the domestic market. They take the form of syndicates, which may be >lassed as follows: (1) Syndicates for the sale of their output in the home market to private consumers. (2) Syndicates for the sale of railroad material and other goods to the Government. (3) Exportation syndicates. During the period of 1902 to 1909 there were 19 syndicates formed in the metallurgical trade—1 controlling sales of iron ore, 1 of manzanese ore, 1 of pig iron, 1 of cast iron, 10 of finished iron and steel, and 5 of articles made of iron and steel.2 The principal cartelled products were ore, pig iron, cast-iron pipes, sheet iron, tires and axles, rods and drawn wire, nails, beams and ties, metal roofing, rails, and assorted iron, including rails for mines.? The “ Prodameta ” or the “Association for the Sale of the Product of Russian Metallurgical Works” has for its purpose the sale of pig iron, wrought iron, steel, and generally of every kind of product of the metallurgical industry both on its own account and on commission. It is a joint stock corporation acting as the exclusive sales agent of several manufacturers who have made agreements with it. The management of the syndicate is in the hands of both a council, consisting of representatives of all members of the syndicate, and a board, elected by the stockholders of the incorporated company. The Prodameta consisted in 1910 of 10 sections embracing altogether 30 iron works.* The first section included two mills which agreed to turn over to the Prodameta five articles (assorted or bar iron, sheet iron, beams, ties, and rails) ; the second section, seven mills which had agreed to turn over to the Prodameta the sale of four articles (assorted or bar iron, sheet iron, beams, .and rails) ; the third section, one mill (assorted or bar iron, beams, and rails) ; the fourth section, three mills (assorted or bar iron, sheet iron, and beams) ; etc. In 1912 the total sales of the Prodameta were apportioned by territorial or regional groups, as follows: (1) To the iron mills located in South Russia, 74.10 per cent. (2) To the iron mills located in Poland, 18.60 per cent. (3) To the iron mills located in central Russia, 2.44 per cent. 1 §tatesman's Year-Book, 1914, p. Mi; Russia, Ministry of Finance, Bzhegodnik (An. ual), 1914, Petrograd, 1914, p. 641; and Statistical abstract of the principal and other foreign countries, No. 39, London, 1914, p. 113. 31, B. Kafengaus, Sindikaty v. russkol Zhelegnoi promyshlennosti, Moscow, 1910, p. 74. 11. M. Goldstein, Ekonomicheskaia politika, second edition. Moscow, 1913, pp. 243-244, \ @livitz, quoted by @oldstein, op. cit., p. 244, footnote, 282 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. This arrangement would leave to the rest of the mills 4.86 per cent of the Prodameta’s sales. Some of the mills belonged to several syndicates if they produced articles which the Prodameta did not market. One of the largest ironworks of South Russia, the Yuzhno-Russkoe Dneprovskoe Obshchestvo, belonged to seven different syndicates; another belonged to six, five belonged to four, and five belonged to three.” Having established a central sales agency, first at Kharkov, then at Petrograd, the Prodameta fixed the sales prices and laid down conlitions of payment more favorable to the manufacturers than to the zonsumers. On the whole the Prodameta raised the prices on the syndicated article as soon as there was no competition in sight. If there was a competitor the prices were lowered to force him to go out of business or to join the syndicate. After that the prices rose again. This was especially the case when the Prodameta took over the exclusive right to sell beams and ties in 1907 and assorted bar iron in 1908.2 The competitive prices used against the Polish iron syndicate in 1909 forced the latter, consisting of eight works. to enter as a body into an agreement with the Prodameta.? The Prodameta comprises the most important works, particularly in the south of Russia, and controls most of the business in manufactures.t The orders received by the syndicate have increased in volume year by year. Additional capital has been devoted to strengthening the productive resources of the companies, and to the acquisition of new coal and iron-ore mines. The orders received by the syndicate in 1912 were given, provisionally, as 1,959,806 tons. It supplies more than 90 per cent of the native assorted iron girders and sleepers, about 80 per cent of the trusses, 88 per cent of the sheet iron made in Russia, all of the axles of domestic make. and a large part of the iron rails used in the Empire. At the beginning of 1912 certain of the agreements were renewed for three years. This large combination has been financed by four groups of banking interests—Russian, French, German, and Belgian.” It has been reported that on January 12, 1916, the “ Prodameta ” was dissolved, owing. to the failure to renew the agreements and 1 Kafengmaus, op. cit, p. 148. . 3 Promyshlennost 1 Torgovlia (Petrograd), 1909. No. 6; also Kafengaus, op. cit, 12 32-84, 86. 2 Torgovo-Promyschlennaia Gazeta (Petrograd), 1909, No. 21, + Iron and Coal Trades Review (London), Nov. 27, 1914, p. 676, 5 J, H. Snodgrass, Russia, 8 Handbook on Commercial and Industrial Conditions, Bureau of Foreign and Domestic Commerce, Special Consular Report No, 61 (1913), p. 129: also Goldstein, op. cit., p. 245. ® Bureau of Foreign and Domestic Commerce, Special Consular Report No. 61, p. 129, and Kartell-Rundschau, March. 1912, p. 336, 1 Qoldsteln, op. cit., p. 232. CONDITIONS IN PARTICULAR INDUSTRIES. 233 owing to the withdrawal of several members who regarded the syndicate as a depressing influence on the market. The “ Krovlia” (roof) was organized by the roof-sheet-iron manutacturers of Ural as a result of the poor sales of iron at the Nizhni Novgorod fair in 1904. The agreement was signed by 12 big Ural iron mills controlling 80 per cent of the entire Ural roof-iron industry, only three big mills and a few small ones remaining outside. This agreement was soon broken,* but a new one was made in January, 1907, when the Krovlia began its operations as a jointstock company for the sale of roofing iron. This agreement was antered into by 13 members, controlling 75 per cent of the Ural output of roof sheet iron and about 60 per cent of the total Russian output, but by the end of 1912 all but five of the members had withdrawn and the syndicate controlled less than 40 per cent of the total output of the Ural region. The Krovlia also sells on commission nonsyndicated iron wares, such as tin plate, ete. The Gvozd (nail) was originally organized in 1903, and after its dissolution reorganized in 1908 as Provoloka (wire). It now controls the total sales of iron and steel wire, iron wire nails, shoe tacks, wheel bolts, and furniture springs. This syndicate includes both manufacturers of half-finished products and manufacturers of fnished articles of the same industry. Some of its members are producing wire only while others are turning out both wire and nails. This syndicate controls the sales and purchases of wire and wire iron by its members, as well as the output, the members having agreed—* (1) Not to erect new rolling mills during the term of the agreement. (2) Not to become partners in new works intended for the production of similar articles. (8) Not to organize competing concerns. (4) Not to change the grades of articles offered at the signing of the agreement. The syndicate encourages the production of nonsyndicated articles by giving rebates to members who purchase iron and steel for the production of articles other than wire and nails. Typical examples of the second group of iron syndicates are the railroad-equipment syndicates. These combinations are a direct outgrowth of the Government apportionment policy, whereby a special committee of ministers and other officials of the Government apportions the orders of the Government among the various mills, and fixes prices on railroad equipment for three years in advance. As the Government owns over two-thirds of the railroad tIron Age, Feb. 17, 1816, p. 457. - TT 1 Kafengaus, op. cit.,, p. 98. } Secs. 14 and 8, clause (b), of the agreement, Kafengaus, op. cit, p. 104. 234 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. mileage of the country it is the largest single user of rails and rolling stock, and purchases over 70 per cent of the output of the carbuilding factories, locomotive works, and rail mills of the country. The committee also includes orders placed by private railroads in ‘he quotas allotted to each mill. These railroad-equipment syndicates are the “Prodvagon” or railroad-car syndicate, the locomotive-works syndicate, and the rail-mill syndicate. Attempts have been made to build up an export business in iron ind steel products. Thus far the amount of exports has been pracically negligible. An important feature of the Gvozd, or Provoloka, was the compulsory participation of its members in the export trade subject to the regulations of the board of the syndicate approved by the general meeting of the stockholders. The agreement! provided that any losses which the syndicate should sustain in the export trade should be refunded to the member whose product was exported in proportion to his share in the syndicate, but that such refund should in no case exceed 20 per' cent of the surplus obtained from price increases and additional payments due to the respective member after the approval of the annual report of the syndicate by the stockholders. There is quite a marked difference between the export pricé and the domestic’ price of many iron and steel products. The export prices on rails are much lower than the Government purchase prices. While the Government pays 112 copecks per pood (1 5/9 cents per pound) for rails, the foreign orders have been executed at 66 copecks per pood (11/12 cent per pound).? The “ Prodameta ” sells iron parts of railroad cars intended for export 20 to 30 per cent below the price quoted for the home market. The losses sustained in the foreign trade are made up by the profits secured from the high prices paid by the Government. The Government representatives have admitted that they are paying 22 per cent more than the export prices, and a representative of the metallurgical mills has stated that the difference exceeds 25 per cent.* The railroad freight rates in Russia are fixed for the purpose of increasing export trade. The export freight rates to the ports of Nikolaiev and Mariupol, on the Black Sea, are from 4 to 10 copecks per pood (5/18 of a cent to 7/18 of a cent per pound) lower than the general freight rates. These lower rates are granted upon the production of customs certificates of exportation.®* Furthermore, the Government permits to car-building works producing for export free importation of the necessary raw materials. { Sec. 18, Kafengaus, op. cit, p. 145. ! Promyshlennost 1 Torgovlia (Petrograd), 1908, No. 22, p. 563. ! Stenographlic reports of the Metallurgical Conference, 1907, p. 81. Quoted by Kafengaus, op. cit, p. 144, b Ibid., p. 143. * Torgovo-Promyshlennala Gazeta (Petrograd), 1907, Ne. 17, } Ibid., 1908, Neo. B57 ; also Kafengaus, op. cit, p. 142. CONDITIONS IN PARTICULAR INDUSTRIES. 235 ITALY, In 1912 Ttaly produced 573,000 long tons of iron ore, 874,000 tons of pig iron, and 903,000 tons of steel. Italy exported no iron and steel products, but imported them to the value of about $19,000,000. Combinations in Italy are concerned with the domestic trade, but are of importance to American manufacturers attempting to sell in Italy. The Unione Siderurgica was formed early in 1911, embracing all the important Italian plants except the Societd Altiforni, Fonderia ed Acciaieria di Terni? Through the efforts of the director general of the Bank of Italy six iron and steel companies which produce the bulk of the metal in Italy were brought together in the union? the members being the Societd Anonima Siderurgica di Savona, Societdh Altiforni e Fonderia di Piombino, Societd Anonima Ferriere Italiane, Societd Anonima di Miniere e Altiforni Elba, Societd “Ilva,” and Societdh Anonima Ferriere di Sestri.* The main office of the combination is at Milan and the capital is 2,000,000 lire? A lean of 96,000,000 lire was negotiated. The agreement provides that the Ilva company shall exercise a regulating authority over the other members from July 1, 1911, until December 81, 1922.¢ This company is also given the exclusive right of purchasing raw materials, including waste iron from old ships, rails, etc., which are imported for the use of the Italian plants.’ The combination is practically in the hands of the Italian banks, the Bank of Italy in floating the loan having secured the cooperation of the principal institutions of the country such as the Credito [taliano, Banca Commerciale, Banco di Roma, Banco Zacaria Pisa, and some of the large savings banks. There was also established a selling bureau under the title of Societad Ferro e Acciaio Laminati, also with a capital of 2,000,000 lire. All the products of the Italian iron and steel industry which do not come from the companies mentioned above are sold through this central agency, which apportions the orders to the different works and also admits to membership the chief Italian middlemen.” The products controlled by the syndicate are chiefly cast steel, tubes, boiler plate, etc.’® This selling agency, composed of about 32 members, regulates the Italian market, its prices being based on the L Statistical abstract of principal and other foreign countries (London), 1914, No. 39, 3 Stati und Elsen, 1911, vol. 31%, p. 211. #* The Economist (London), 1911, vol, 73, pp. 528 and 529, + Stahl und Eisen (Diisseldorf), 1911, vol. 313, p, 1523, # L’Industria, 1911, p. 447. ? The Economist (London), 1911, vol. 78, p. 528. "Some Aspects of the Iron and Steel Industry in Europe, Bureau of Foreign and De. mestic Commerce, Special Consular Report No. 71, p. 13, Leghorn, Italy, 8 Iron Trade Circular, Sept. 23, 1911, p. 398. : » Stahl und Bisen (Diisseldorf), 1911, vol, 318%, p. 1163. ® Revista Minera, Metalurgica y de Ingeneria (Madrid), 1911. bp. 112 236 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. competition of foreigners. Its members are not permitted to purchase foreign supplies of certain kinds of goods; but the unusual conditions which prevail in the Italian market have compelled thera to seek affiliations with foreign manufacturers and exporters.* The organizing of the Italian iron and steel industry was held to be necessary for a number of reasons. The financial condition of the industry was uncertain; producers. were overloaded with stocks and were short of funds; and economy in production and distribution needed to be effected. However, with the organization of the industry in Italy, production was regulated, competition brought to a standstill, and expenses reduced. The result was an agreement between the Italian syn-Jicate and the German combination whereby dumping was reduced, the Getmans agreeing to sell first at 124 lire and later at a still higher figure.? UNITED STATES. Existing cooperation.—Most of the export trade in blast-furnace and rolling-mill products from the United States is already highly organized. One company—the United States Steel Products Co.— handles a large proportion of the total of such exports. This company, a subsidiary of the United States Steel Corporation, handles all of the foreign business of the latter corporation. The Steel Products Co. has, for the Steel Corporation, in respect to its foreign sales, a somewhat analogous relation to that of the central selling agency, the Stahlwerksverband A. G., to the large steel syndicate of Germany. The United States Steel Products Co. was organized in 1903. In 1904 its export shipments were 1,123,323 net tons, valued at $31,388,139, and in 1912 the shipments were 2,587,436 tons, valued at $91,984,289.* In 1913 this company had 268 foreign agencies, in about 60 countries. About 20 of the larger offices were situated in cities like London, Antwerp, Paris, Copenhagen, and Stockholm. Tt also had about 40 foreign warehouses, situated in Antwerp, Johannesburg, Sydney, Copenhagen, Barcelona, Singapore, Valparaiso, Rio de Janeiro, and other places. It ordinarily had under charter from 35 to 40 steamers for the transportation of its goods, which are sold as far north as Iceland and as far south as the Straits of Magellan and the South Sea Islands. To develop its foreign business, it has a corps of men trained for their special work. In Buenos Aires it maintains engineers and a construction force to design and build steel structures and buildings. In this way the foreign business has been increased at a much lower percentage of cost. Prior to the "1 Some Aspects of the Irom and Steel Industry in Europe, Bureau of Foreign and Domestic Commerce, Special Consular Report No. 71, p. 18, Laghorn, Italy. 1 Riforma Soclale, 1914, p. 219. 3 Transcript of Record, United States v. United States Steel Corporation, Defendant's Brhibits. Vol. II. No. 88. CONDITIONS IN PARTICULAR INDUSTRIES. 237 formation of the products company the cost to the various subsidiary companies of the steel corporation to carry on their foreign trade was between 7 and 11 per cent of the invoice value of these foreign sales. In 1905 it cost the products company 8 per cent, whereas by 1912 the cost had been reduced to eight-tenths of 1 per cent.* The following table gives the exports for 1912, in gross tons, of the principal products of the United States Steel Corporation, and the total exports of these products from the United States, together with the percentage which the Steel Corporation’s exports formed of the total In each case: TapLE 16.—Ezports of principal products of United States Steel Corporation compared with total United States exports of these products, 1912. Pig iron...c........ crap iron and steei...... Billets blooms and ingots.. Steel rails. .. Wire rods..c.ee. oun. Steel bars, hoops, and bands.............cooeeer Plates and sheets iron and steel fnobefing skelp). Structural shapes and work (iron and steeD..... - Tin and terne plate. Wire barbed... Wire all Other... ..eedieecaieeneanereceonmnzancenans Wire nails cut nails, tacks and all other nails and spikes. - Pipe tubing and fittings... Total lor above. United States Steel Cornoration.l Fross tons. 37,221 9,133 264,786 392, 438 60,021 175, 269 505, 225 297,485 74,919 199 ag € -y Total United Qtatag { (ross tons. 272, 676 105,965 204, 818 146,473 64,978 220,770 346, 521 88, 164 81, 694 98, 059 ne 853 72, 35 540° RA Per cent of total. 13.65 8.62 89. 81 87.90 92.37 79.39 02.4 8.04 91.71 83.49 77.81 76.94 73.27 75. 51 Transcript of Record United | States v United States Steel Corporation Defendant’s Exhibits VoL IT Monthly Summary ol the Foreign Commerce of the United States, December, 1914. Tt will be noted that with the exception of pig iron and scrap, the exports of the United States Steel Products Co. were from 73 to 92 per cent of the exports in each class. The only existing forms of cooperation among manufacturers of such products that have come to the attention of the Commission are the American Pig Iron Association and the American Iron and Steel Institute. These associations are primarily engaged in promoting the interests of the industry in the domestic trade. Proposed cooperation.—Manufacturers and exporters of blastfurnace and rolling-mill products, not connected with the United States Steel Corporation, have expressed themselves to the Commission generally in favor of some further measure of cooperation among themselves for the export trade than at present exists, though no definite projects for export organizations were proposed. Three of the largest of such manufacturers have stated their conviction that commoners, roti on — ——— ee ————————— 1 Transcript of Record, United States v. United States Steel Corporation. Testimony nf? Tames A. Farrell, Vol. X, pp. 3783-3828. 288 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. heir export trade would be increased if they could join with all, or a large part, of the other independent producers in a company organzed along lines similar to those of the United States Steel Products Co., and empowered to fix prices. Another concern which favors a voluntary export combination or association in its line advocated that activities should be confined strictly to joint Selling. Among the advantages which were hoped from such increased cooperation is a broader market, which would stabilize prices, keep the furnaces and mills in more continuous operation, and by running the plants at capacity lessen overhead expenses. Lower selling costs sould also be expected through the greater economies resulting from a» common selling organization. By such an organization and the economies and activities possible thereunder, the smaller producers in the United States believe they sould materially extend their export trade, and could obtain a larger share in the foreign trade in iron and steel products. MACHINERY AND RAILROAD ROLLING STOCK. In addition to the products which may roughly be classed as blast furnace and rolling-mill products, iron and steel enters into a large number of highly developed finished articles, such as machinery of all kinds, railroad rolling stock equipment, etc. International commerce in such lines, in point of value, far exceeds that of the semifinished products, and of rolling-mill products ready for consumption. European manufacturers of many kinds of machinery and railroad rolling stock equipment have established various forms of combinations for the control of their domestic and foreign markets. They comprise such articles as machine tools, weighing machines, shoe, brewery, textile, and printing machinery, motor vehicles, typewriters, sewing machines, locomotives, cars, and rolling equipment parts. GERMANY. Machine tools.—There were about 250 works manufacturing mashine tools in Germany before the war, representing a capital inrestment of nearly $210,000,000.* The total exports of machine tools in 1913 were 77,000 tons, a slight increase over the corresponding figures for 1912.2 The makers are organized in the Association of German Machine Tool Manufacturers (Verein Deutscher Werkzeugmaschinenfabriken, Diisseldorf), which was formed in 1898 and has about 100 members. This is a highly important organization. It has actively opposed "iron and Coal Trades Review (London), Aug. 13, 1915, p. 190, q . Statist abstract for the principal and other foreign countries (London), 1914, CONDITIONS IN PARTICULAR INDUSTRIES. 239 foreign competition, particularly of American origin, is very influ-.ntial in the matter of German customs duties, and is frequently sonsulted by the authorities in connection with the import and export valuations of machine tools and other matters relating to the industry. It has established standards for machine tools supplied jo German Government railways, and its opinion in certain technical matters has been accepted as final by the authorities.” It has also carried on a systematic and extensive propaganda in favor of (terman machines for German shops at home and abroad. Shoe machinery.—Manufacturers of shoe machinery in Germany formed a combination in 1915 styled the * Verband zur Abwehr des Schuhmaschinentrusts E.-V.,” with the object of meeting more successfully the competition of the United Shoe Machinery Co. of the United States, and its European branches. The combination is composed of manufacturers of shoe machinery, lasts, skiving knives, syelets, lacing hooks, and needles.” Pump machinery.—German pump manufacturers exporting to Turkey are organized in the “ Fluegel Pumpen Kartell,” which includes in its membership all such makers. All of the important patents in air pumps are owned by the great German electrical concern, the Allgemeine Elektricitits-Gesellschaft. They will license anyone to make and sell the article who will agree to maintain a certain minimum price, and business is apportioned among the various manufacturers according to the capacity of their plants. Railway Rolling Stock.—Among formal organizations of German manufactures of railway equipment may be mentioned the Association of Railway Carriage Manufacturers (Verband Deutscher Waggon Fabrikanten), which controls 90 per cent of the total German production. The Orenstein-Koppel Aktien-Gesellschaft represents a syndicate of producers of narrow-gauge railway materials. It has practically eliminated French and Belgian competition in Turkey which formerly constituted the Turkish supply. Several associations of German steel works, principally railway rolling stock, were prolonged in 1914 for a term of years. The products represented were wheels, rims, axles, loose wheel parts. sectional locomotive wheels, and switches. An American manufacturer of well-known engineering specialties assigned the general spirit of cooperation resulting from the highly organized condition of German industry as a factor militating against ‘American export trade. His products are standard on railroads in practically every country in the world with the exception of 1 A. J. Wolfe, Commercial Organizations in Germany, Bureau of Foreign and Domestic Commerce, Special Agents Series No. 78, 1914, p. 43. 3 The Shoe and Leather Record (London), Apr. 30, 1915, p. 29. 240 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Germany, where he had never been able to make sales. The reciprocal cooperation among Germans prevents the introduction of foreign devices. Typewriters.—Practically the only opposition to the supremacy of the American typewriting machine in foreign trade comes from Germany, and this is of recent origin. The president of a prominent American concern stated (1915) that a few years ago Americanmade typewriters had the whole field to themselves, but now had to meet the competition of 26 German machines. An association or league of German typewriter manufacturers and dealers has recently been formed. A large number have already joined, and an effort will be made to include all dealers in Germany and Austria-Hungary. The object of the league is to secure a greater recognition for German typewriters as an example of German skill and industry, to advance their sale, etc. Sewing machines.—In Germany there is an association of sewingmachine manufacturers (Verein Deutscher Nihmaschinenfabrikanten and Interessenten, Dresden), formed in 1899, and practically all German sewing-machine makers are members. In recent years it has actively opposed the importation of American sewing machines, and has issued over its name frequent appeals in the press urging German buyers to favor the domestic product. Bicycles.—The Association ‘of German Bicycle Manufacturers (Verein Deutscher Fahrradfabrikanten, Frankfurt, a. M.) has 47 members. It has been very successful in lessening imports of foreign bicycles, which at one time were much favored by the German consumers at the expense of the domestic product, and has been very active in the discussion of the customs tariff as affecting the industry, and in standardizing selling prices. Other German machinery organizations are the Association of German Machine Builders (Verein Deutscher Maschinenbau Anstalten, Diisseldorf), the Association of German Brewery Machinery Manufacturers (Verband Deutscher Maschinenfabrikanten fiir die Brauindustrie, Berlin), the Association of German Mill Builders (Verband Deutscher Miihlenbauanstalten, Berlin), the Association of Weighing Machine Manufacturers,” renewed in 1914 (Verein Deutscher Brueckenwage Fabrikanten), and the Association of German Printing Machinery Manufacturers (Vereinigung Deutscher Schnellpressenfabriken, Berlin). Many of these associations appear to be cooperative organizations engaged in promoting the trade of their members, but not having a cartel or syndicate character. 1 Bureau of Foreign and Domestic Commerce, Special Agents Series No. 78 (1914), pp. 43. 44. CONDITIONS IN PARTICULAR INDUSTRIES. 241 GREAT BRITAIN. The North British Locomotive Co. (Ltd.) was formed in 1903 by three former competitors and capitalized in 1918 at over $8,500,000. This combination, together with five other works, handles nearly the whole private production of British locomotives. As the British railway companies, however, build and repair most of their own rolling stock, the private makers of locomotives and cars are dependent principally upon the export trade and private owners, such as ironworks, collieries, etc.! Another amalgamation is the Metropolitan Carriage, Wagon, and Finance Co. (I.td.), formerly called the Metropolitan Amalgamated Railway Carriage & Wagon Co. (Ltd.), formed in 1902 from five of the leading eompanies making railway rolling stock for industrial plants and mainly for export. A few months after its formation a blast furnace and steel-smelting concern was added, enabling the company to make its own axles and tires. In 1913 it was capitalized at over $9,000,000.2 There is known to be a very close and monopolistic combination among firms manufacturing cables for street railways, etc., and other railway equipment industries are understood to have a complete understanding as to many important trade policies. FRANCE There is a French association, apparently composed of all the manufacturers of locomotives, which fixes the prices on the various types of locomotives which the railways, both State and privately owned, must pay. Orders are apportioned among all of the manufacturers in proportion to their output. The association has had a successful experience for 10 years. There is also a railway-materials syndicate (“Chambre Syndicale des Fabricants et Constructeurs de Matériel pour Chemins de Fer et Tramways”) which is one of the principal constituents of the central organization of the metal industries (Union des Industries, Métallurgiques et Minidres. etc.)? RIINQTA As the Russian Government owns over two-thirds of the railroad mileage of Russia, it 1s the largest single consumer of rails and rolling stock in the country, absorbing over 70 per cent of the output of the car-building factories, locomotive works, and rail mills. It permits to car-building works producing for export, free imvortation of the necessary raw materials.¢ 1H. W. Macrosty, The Trust Movement in British Industry (London), 1907, pp. 51-52, and H. Levy, Monopoly and Competition (London), 1911, p, 258. 2 Macrosty, op. cit, p. 52, and Stock Exchange Official Intelligence (1914), p. 776. 8 Archibald J. Wolfe, Commercial Organizations in France, Bureau of Foreign and Domestic Commerce, Special Agents Series No, 98 (1915), pp. 22-23. +L. B. Kafengaus. Sindikaty wv russkoi zheleznol promyshlennosti (Moscow). 1910, Pp. 142, 97041°_ 14> 242 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Beginning with 1900, free competition for Government orders was abolished and the apportionment of orders among the various mills vas placed temporarily in charge of a special committee of ministers. The committee fixes prices on railroad equipment for three years in advance; it excludes foreign competitors and includes orders placed by private railroads in the quotas allotted to each mill. It collects nformation as to the capacity of iron works, as to their equipment and efficiency, and the amount of orders received both from the {rovernment and private roads. The railroad-equipment syndicates are a direct outgrowth of the Government apportionment policy, and they are typical examples of the second group of iron syndicates. The railroad-car syndicate “Prodvagon” was first organized in £904 as a selling agency under a joint-stock corporation charter. It :mbraced 13 mills, controlling over 95 per cent of the total sales of railroad cars. The syndicate of locomotive works embraces seven or eight factories and exists by virtue of a simple agreement. It seems to work 2ffectively, because its members are represented on the Government >ommittee on apportionment. The “ Prodameta ” (see pp. 281-232) sold iron parts of railroad cars intended for export from 20 to 30 per cent below the price nuoted for the home market.? UNITED STATES. Existing cooperation.—There are a number of manufacturers’ associations which deal with different classes of finished products. Examples are the National Railway Appliances Association, the Association of Manufacturers of Chilled Car Tires, the National Machine Tool Builders’ Association, the American Supply and Machinery Manufacturers’ Association, and the National Automobile Chamber of Commerce. Such associations are primarily interested in various problems met in the domestic trade. In certain lines there are large companies having world-wide selling organizations. Some of these are: International Harvester Co., United Shoe Machinery Co., National Cash Register Co., Singer Sewing Machine Co., American Locomotive Co., The Burroughs Adding Machine Co., and several large typewriter companies. In a number of instances, manufacturers and producers of finished iron and steel factory products in noncompeting, but usually kindred lines, have cooperated for export trade in a joint selling arrangement, primarily in order to reduce their individual selling expenses. In some cases the cooperation was for the purpose of carrying on some advertising or other promotional campaign for foreign trade. ! Sec. 11 of the by-laws of the committee. Kafengaus, op. cit, p. 122, t Kafengaus, op. cit., p. 144. CONDITIONS IN PARTICULAR INDUSTRIES, 243 ~~ . . No instances of cooperation among manufacturers of strictly competing lines were reported in this branch of the iron and steel industry. Some examples of the present forms of cooperation follow. A New York firm is the salaried agent for 10 principals, manufacturing chiefly noncompeting machinery lines and is at all times under their direction. The export business of each concern is carried on under the name of this firm. The manufacturers have no contract or definite combination, but they have an understanding among themselves to cooperate through this firm. This firm does not guarantee the accounts but sells on terms and under instructions laid down by the principals. Another New York firm represents about a dozen manufacturers of machinery and agricultural implements. This firm sends salesmen around the world, each of the concerns represented advancing a certain amount of money toward their monthly expenses. The total sales and the percentage of expense for each concern is determined at the end of a certain period. This method has been used for 23 years. The lines handled are more or less allied. A group of hardware and tool manufacturers have been and are sharing in Russian trade in the following manner: Some 20 manufacturers got together and arranged to establish agencies in about 15 commercial centers in Russia. These agents were mainly merchants buying on open account and not on commission. The organization is financed by a prominent New York banking house, through which all payments by agents in Russia are made. A feature of the plan is that annually a joint representative of these manufacturers visits these centers for the purpose of pushing the trade and looking after the interests of the members of the organization. All expenses of establishing these agencies and for their supervision by the representatives periodically wre shared by the members. Starting with some 20 members the number has increased to about 62. A manufacturer of tools in the East reported that for some years his company had cooperated with from three to five other factories handling associated but not competing lines in obtaining Australian business. Their plan has consisted in sending a joint representative and in sharing the expenses. Five or six companies interested in builders’ hardware, heavy hardware, and kindred lines are represented in Buenos Aires by one representative with two assistants. The representative is paid on the basis of the business done and the cooperating companies agree that in the lines handled by him, all sales in his territory shall be made through him. Proposed cooperation.—The manufacturers and exporters of fin-‘shed iron and steel factory products whose views were obtained by the Commission in general were favorable to cooperative organizations for export trade. Over 80 per cent of those replying directly )44 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, selieved such organizations should include manufacturers of competing lines. The majority of those who would confine the membership to manufacturers of noncompeting lines only, apparently had in mind organizations composed of manufacturers of kindred noncompeting lines. Those who advocated association with manufacturers angaged in industries other than iron and steel products were few ‘n number. The principal form of cooperation in the mind of those proposing any form of cooperative organization was the joint selling agency. A number, however, suggested a more comprehensive plan of cooperation covering all phases of export business and having to do not only with the selling end but with the fixing of prices and control of output. As a rule those advocating a cooperative organization among -ompetitors would delegate to such organizations the power to fix axport prices, and if there should be a selling arrangement that it should be for the purpose of distribution and handling of the goods rather than for the actual solicitation of customers. They would have the manufacturers each individually carry on his own direct solicitation for new business. Some believe in a joint advertising agency for competitors. A number of manufacturers and exporters were of the opinion that cooperative organizations among producers of finished iron and steel factory products should be confined to lines noncompeting but kindred in their character. Several suggested that manufacturers who were handling competitive lines might combine and form an organization to handle certain of each competitor’s products that were kindred but noncompetitive with other lines selected by any sther of the members. In certain lines, like machinery, it was contended that the individual manufacturer specializes in his product and therefore a joint selling agency would not be effective as the individual superiority of the particular machine would not be promoted primarily as is now done by the individual selling agents of the several manufacturers. SECTION 3. TEXTILES, INTRODUCTION. Textiles constitute one of the most valuable classes of goods entering into international commerce. The United States, as the leading producer of cotton and one of the largest manufacturers of textile goods, as a large importer and one of the smallest exporters of such goods, has a particular interest in textiles in connection with foreign trade. The textile industry may be divided into the following eight branches: (1) Cotton goods; (2) worsted, woolen, and felt goods; (3) carpets and rugs; (4) hosiery and knit goods; (5) silk #nd silk CONDITIONS IN PARTICULAR INDUSTRIES. 24H goods; (6) cordage and twine and jute and linen goods; (7) shoddy; (8) dyeing and finishing textiles. Textile manufactures in the United States annually are valued at more than $1,800,000,000, of which cotton goods represent $700,000,000, or about 39 per cent; woolen, worsted, and felt goods, $432,000,000, or about 24 per cent; hosiery and knit goods, $264,000,000, or about 15 per cent: silk and silk goods, $254,000,000, or about 14 per cent. While exports of textile manufactures from this country are large, the trade is small in proportion to the quantity manufactured and in comparison with the textile exports of Great Britain, Germany, and France, which lead the world. In 1918 exports of textiles from the United States were valued at less than $75,000,000, of which about three-fourths were manufactures of cotton. But the textile exports of Great Britain in that year were valued at $885,000,000, of Germany at $280,000,000, and of France at $280,000,000.% The United States produces roughly 70 per cent of the world’s commercial supply of raw cotton and American mills consume about onefourth of the world’s total commercial production, or more than those of any other country. In the year ending August 31, 1913, the mills of the United States consumed 5,553,000 bales of American cotton. The mills of the leading European countries used the following amounts of American cotton, respectively: British, 8,281,569 bales; German, 1,258,507 bales; French, 787,594 bales; Austrian, 626,704 bales; and Italian, 537,917 bales. British mills used a greater proportion of American cotton than those of any other foreign country of large consumption. The mills of Russia and India are largely supplied by home production, and those of Japan by Indian cotton.? Great Britain has a very much larger number of spindles at work than any other country, but owing to the fineness of the yarn spun, a smaller quantity of raw cotton is consumed than in the United States. The estimated number of spindles at work in the chief cotton manufacturing countries in the cotton year 1913 is shown in the following table. TABLE 17.—Cotton spindles at work in leading countries, August 31, 1918. United Kingdom____ mmm 55,653,000 United States ..——-— ee 31,520,000 Germany .mee—ee—— 11,186,000 RUSSIA ome 9,213,000 France .—ceeem—mm———————- 7,400,000 British India. comm. 6,084,000 Austria-Hungary -ee-eeea—- 1,909,000 TAlY cme re em mmmme -,300,000 Japan ome 2,300,000 1 Monthly Summary of the Foreign Commerce of the United States, Dec. 1914; Trade of the United Kingdom, 1914, vol. 1, p. 6; Statistik des Deutschen Reichs, Auswlirtiger Handel, 1913; Annuaire Statistique (Paris), 1918, p. 1985. 2 International Federation of Master Cotton Spinners’ and Manufacturers’ Assocla-Hons—Statistics of Consumption of Cotton, 1913. Figures for the United States are tor bales of 500 pounds; for other countries they are for actual bales. 3 Census Bulletin 117, Supply and Distribution of Cotton, 1913, p. 80. 246 REPORT ON COOPERATION IN AMERICAN. EXPORT TRADE, The total number of spindles in the world was 143,398,000, of which the United Kingdom had 38.8 per cent and the United States 22.0 per. cent. The position of the United States as a manufacturer and exporter of cotton goods is, however, not commensurate with its importance as a grower of cotton. American exports of cotton manufactures. amounting in 1913 to $55,519,267, represented only about 5 per cent of the world’s trade in those commodities, while Great Britain had 70 per cent of the business. Cotton piece goods or cloths are the most important items exported in this trade by the United States and ty the United Kingdom, amounting in 1918 to about 75 per cent of the British and 58 per cent of the American exports of cotton manutactures. The cotton piece goods exported from the United Kingdom for the year 1912 were more than four times in value those of Germany, France, and the United ‘States combined, as shown by the following table:? Tani 18.—Value of coiton piece goods exported from principal countries, 1912. United Kingdom. ——__. $445,889,000 Germany mmm 35,066,000 France. ome 39,155,000 United States ome ev. 30,859,000 The United Kingdom’s domestic exports of cotton yarns and fabrics in 1913 were $619,000,000, which was about one-fourth of all its domestic exports.2 About 80 per cent of all the goods produced by English cotton mills are exported.® Although the United States, Great Britain, and European nations trade among themselves in cotton goods to a certain extent each is largely self-sustaining in these articles, and therefore the greatest export markets are found in the Orient, in Africa, and South America. The largest market for piece goods is British India, while China is the world’s greatest customer for cotton yarns and the second largest for piece goods. In 1913 imports of cotton cloths into some of the principal purchasing countries were valued as follows: * TABLE 19.—Imports of cotton cloth into principal purchasing countries, 1913. British Indi momo mem - $186,861,000 DIN. crirrimmmmic mma 73, 896, 000 Australia come 23,937,000 Argenting eee 23,542,000 BED em 18,075,000 Immediately prior to the war about 20 per cent of the American and 10 per cent of the British exports of cotton piece goods went to 1 Statistical Abstract of the United Kingdom, 1014, p. 205; British Statistical Abstraet for Forelgn Countries, 1912, pp. 133 and 149; Monthly Summary of the Foreign Commerce of the United States, Dec. 1914, p. 478. # See Table 4, p. 81. 4 United States Tariff Board Report, Cotton Manufactures, p. 201 Lt Oficial trade statistics of the respective countries. CONDITIONS IN PARTICULAR INDUSTRIES, 247 China. In 1913 about 30 per cent of the cotton manufactures exsorted from the United States were unbleached cloths, about half of which (approximately $8,000,000 in value) went to China. This trade in unbleached cloths seems to be the only one in which Americans have been able to successfully compete in over-seas foreign markets. Manufacturers of other cotton goods export only to neighboring or contiguous markets. In 1913 about 70 per cent of the exports of colored cloths went to Canada, West Indies, and the Philippines; 55 per cent of the bleached cloth went to Canada and the Philippines; and one-third of the wearing apparel was exported to Canada. Compared with the export trade in cotton manufactures, American exports of woolen, worsted, and felt goods and of silk goods are unimportant. Though the United States is a very large producer of manufactures of wool and leads the world in manufactures of silk, the production is almost wholly to satisfy the domestic market. Manufactures of cordage and twine and jute and linen goods in 1909 were valued at $61,019,986 (see above). Exports in 1913 amounted to $11,260,757, about 72 per cent of which was binder twine sent to Canada, Argentina, Russia, and France, in the order named. In such a report as this limitations of space forbid a full discussion of all the competitive conditions in the textile trade of the world, and only a few of the more important aspects of such conditions can be touched upon. Accordingly the ensuing discussion is largely confined to a description of some of the more important combinations in the textile industry of the principal producing countries, to some of the salient features in the distribution of textiles, and to the part which cooperation among American manufactures might play in extending the exports of textiles from the United States. For the sake of convenience the discussion is subdivided by countries. GREAT BRITAIN. The textile industry is one of the historic bulwarks of English foreign trade. From the United States, Egypt, India, Brazil, and West Africa, raw cottons are brought to Lancashire and made into every kind of fabric. Similarly, wool is brought from Australia, South America, South Africa, Spain, Turkey, Persia, and other coun~ tries to supplement that grown at home, and is woven into woolens that have long been known over all the world. For years Irish linen has been a synonym for the finest product of the flax fiber. Since the cotton manufacturing industry is the leading branch of the British textile industry, and since it is also of much more interest to the United States in connection with the development of an export trade in fextiles, the description of conditions in Great Britain is jargely confined to the cottom industry. 248 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, The merchandising of cotton goods.—On the Manchester Royal Exchange, with its membership of 10,000, practically the whole of England’s immense home and export trade in cotton cloth and yarns is done. Every mill in the country has its representative there, and almost every foreign-house of importance is directly or indirectly represented, many of the resident export houses being merely buying branches of large establishments abroad. A number of these foreign firms maintain large warehouses and purchase goods for shipment to many countries. Generally speaking, British cotton manufacturers do not embark on the direct export business. There are a number of cotton manufacturers who of late years have started exporting, but they are comparatively few. The usual method of doing business is through merchants in Manchester called “shippers.” These send out travelers all over the world and obtain orders on sets of patterns that have been supplied by hundreds of manufacturers. On receipt of the orders the merchant places them with the supplier of the original pattern, or if he thinks the price is too high or delivery too long, he will get another maker to imitate the pattern. When special lines have been established in certain markets, the merchants will often give out contracts on their own account, when they consider the state of the market suitable, speculating that thev will receive orders for such cloth in due course. The export business has developed on these lines because a highly specialized knowledge of the markets is necessary, and, moreover, sxtensive credits have to be given. Broadly speaking, the manufacturer in England specializes on the manufacture, and sells his goods for payment within a week, or a month, to merchants in Manchester. The merchant checks the goods in his own warehouse, makes them up according to the requirements of the different markets, complies with customhouse regulations, etc., and gets paid for them in 30 days, 3, 6, 9, or even 12 months. The merchant exporter must know every detailed requirement of every country to which he would export, the weight and fineness of cloths required by the consuming public, the colors, the class of patterns demanded by the fashions of the respective countries, the customs and requirements as to credits, the tariff imposed upon pach class of goods, the port charges, the kind of packing required, the size of package to which dealers are accustomed, length of piece required by purchaser, the color of paper in which the package should be wrapped to conform to the custom of the trade, and all minute details which form so large a factor in determining success or failure in foreign markets. These details, which the manufacturer has no time to work out, are said to be absolutely necessary to trade successfully in countries differing so radically from those of Europe or the United States, as do Asia, South America, and the tropical sections, where most of the cotton cloths are marketed. CONDITIONS IN PARTICULAR INDUSTRIES. 249 There are a few large manufacturing concerns in Manchester, such as Tootal, Broadhurst, Lee Co., Ashton, Hoar & Co., The Fine Cotton Spinners’ & Doublers’ Association (Ltd.), the English Sewing Cotton Co., and others who trade direct with buyers abroad, but even these will sell to Manchester merchants at a lower price than they make to their own foreign customers. Combinations among manufacturers.—The British textile industries are distinguished by very thorough specialization and concentration. The cotton manufacturing industry of the country is said to be more highly differentiated than that of any other country. Importing, spinning, weaving, dyeing, printing, bleaching, merchandising, all constitute separate trades carried on by separate groups, and only in a comparatively few instances are spinning and weaving carried on by the same firms. Practically all the cotton manufacturing is done in Lancashire, spinning in the southern, and weaving in the northern portion. The manufacture of woolens and worsteds, while less restricted in locality than the cotton manufacture, is largely centralized in Yorkshire and in the Tweed district. Bradford, in Yorkshire, is the largest worsted manufacturing town in the world and the chief market for raw wool.! There is also a high degree of specialization in the worsted industry, but less differentiation in woolen manufacture. In this branch carding, spinning, and weaving are generally carried on by the same firm. Linen shows a separation between flax growing and preparing, spinning, and weaving. Carpets, curtains, lace, hosiery, sewing cotton are all separate industries. There is also considerable specialization among individual firms in cotton and wool. It results from this organization of the textile industry that those combinations which exist in it are not such as to produce highly integrated concerns. Combinations very generally take the “horizontal” form, i. e., they are associations among firms and companies in the same line of trade, having as their chief object the elimination of competition rather than increased efficiency of a single concern. After the combination is secured, however, the management is driven so seek efficiency.® Combinations varying in size, activity, and importance are operative in the several branches of the British textile industry. Such combinations as the Bleachers’ Association, or the Wool Combers, Limited, whose relation to export trade is indirect, or those which, like the United Velvet Cutters’ Association, cover minor branches of the industry, are not described here. Only the larger outstand-1 Ww. J. Ashley, British Industries (London), 1903, pp. 93, 94. G. G. Chisholm, Commercial Geog., 6th i., p. 238. 3H. W. Macrosty, The Trust Movement in British Industry, London, 1807, p. 117; United States Tariff Board Report, Cotton Manufactures, p. 468, * Macrosty. op. cit.. p. 123- 250 REPORT ON, COOPERATION IN AMERICAN EXPORT TRADE, ng organizations which predominate in the manufacture of cotton textiles, or which directly affect the export trade in textiles, are rutlined below. Ture Fine Corron SPINNERS’ & DOUBLERS’ ASSOCIATION was formed in May, 1898, to amalgamate 31 companies and firms engaged in spinning fine (sea island) cotton, or in doubling yarns from this and other staples of cotton. Its success has been attributed to the external conditions in the industry favoring combination and :0 certain advantages which have been utilized to the full by very sfficient methods of business organization and management.? In the first place, this branch of the cotton industry, which is of very great dimensions, is said to be practically free from foreign competition, and also in a measure protected against the establishment of new firms in England, particularly outside of Lancashire. This comparative protection is due to the following circumstances: The necessity that the fine spinning and doubling processes be carried on near the other branches of the cotton industry; the skill of the Lancashire weavers, the workmen being of the highest standard of efficiency; the suitable climate of Lancashire, the humidity of which facilitates fine spinning. Furthermore, when this combination was formed, its branch of the industry was in the control of a relatively few large firms. Another circumstance favoring a more or less monopolistic combination is the scarcity of the raw material used. Fine spinning and doubling require the finest qualities of raw cotton. These are found in the finer grades of American and Egyptian cottons, of which the supply is very limited. By means of its large resources the Fine Cotton Spinners’ & Doublers’ Association is generally able to secure an advantage in obtaining its supplies.’ In the first year after its organization, in May, 1898, the spinners’ sombination purchased five additional businesses, including a Lisle company, and shortly afterwards the Musgrave Spinning Co., of Bolton, with 377,000 spindles. This gave the combination a total of 2,873,000 spindles in the United Kingdom besides 220,000 in France. In the next two years five more businesses were added, and a dominant interest was purchased in the most prominent French competitor,-La Société Anonyme des Filatures Delebart Mallet Fils, an oldestablished firm with £400,000 capital. In 1900 the Bradford Colliery Co. was purchased by the issue of £450,000 debentures, thus zonsiderably mitigating the effect of the high price of coal on the cost of production. By the end of the fourth year there were 42 asso-4 Macrosty, op. eit., p. 137. 2G. R. Carter, The Tendency Towards Industrial Combination (London), 1913, p. 310. » Carter, op cit., pp. 310-311. CONDITIONS IN PARTICULAR INDUSTRIES, 251 -inted companies, besides subsidiary companies, and by March 31, 1905, there had been five further acquisitions.' For the past eight years the association has paid an annual dividend of 8 per cent on the ordinary shares and 5 per cent on the preferred. Profits for the year ending March, 1916, were £675,854. The present total issued share and loan capital is £8,450,000.% The modern English tendency to coneentrate interests by grouping a number of small concerns under one management instead of building large individual plants is evident in the Fine Cotton Spinners’ Association which, in 1911, led the British Empire with 100 mills totaling about 4,000,000 spindles.® The success of the Association and its importance in the industry are estabiished and increasing. Tae Coats CoMmBINATION.—The first combination in the British textile industries which assumed the scope and importance of a trust in the ordinary sense of the term appeared in the thread business, in the absorption by #. & P. Coats (Ltd.) of its chief competitors in 1895-96. The business of J. & P. Coats originated in 1826 and grew to such proportions that when it was incorporated in 1890 as the limited liability company of J. & P. Coats, the purchase price was £5,750,000. Messrs. Coats took one-third of the debentures and stock issued and received in cash £3,833,350. Besides the mills at Paisley the company owned the Conant Thread Co. with works at Pawtucket, R. L., through which they were able to take advantage of the United States protective tariff. In order to decrease competition a great amalgamation of interests was effected in 1896. In that year Coats & Co., who had acquired the firm of Kerr & Co., of Paisley, in August, 1895, bought out their chief rivals, Clarke & Co., of Paisley, and two English concerns, James Chadwick & Co., of Bolton, and Jonas Brook & Co., of Meltham, near Huddersfield. For some time previous these four great rival concerns, all of which were old and well established, had been allied through the Central Thread Agency, a sales association which marketed the products of all its members. At the time of the amalgamation the company had 16 factories, including mills in the United States, Canada, and Russia, 60 branch houses, and 150 depots. Later a coal mine was acquired, and control over supplies of cotton yarn, the chief raw material, made more secure by the acquisition of 200,000 ordinary shares in the Fine Cotton Spinners’ and Doublers’ Association.® (See p. 250.) 1 Macrosty, op. cit., p. 138. 1 The Statist (London), May 22, 1915, pp. 488, 489; May 20, 1918, p. 921. $3. M. Hause, English Cotton-Goods Trade, Bureau of Manufactules, Special Agents Series No, 47 1911), p. 4. + Macrosty, op. cit., pp. 125-127; Carter, op. oit., pp. 256 and 314-315, iMaerosty. op. cit, p. 137. 252 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The English Sewing Cotton Co.—Outside of the Coats combination, there were 20 thread-making firms in the United Kingdom, about 40 on the Continent, and two large and many small firms in the United States. Reckless price cutting among these outsiders in Great Britain resulted in their combination in 1897 as the English Sewing Cotton Co., the outgrowth of an Association of English Sewing Cotton Makers, formed in 1888 for trade purposes. The new combination embraced 14 firms, including three subordinate companies, one of which was in France and one in Montreal. Eleven of the 14 concerns were sewing-thread manufacturers, among them Sir Richard Arkwright & Co. The other concerns included were a firm of linenthread manufacturers, one of sewing-silk manufacturers, and a firm of silk throwsters. These were included for “trade reasons.” J. & P. Coats became associated with the combination through acquisition of £200,000 of ordinary shares. It was the purpose of the new organization that the combining companies, in order to retain their individuality, should be formed into subsidiary limited companies, all the sharés of which were to be held by the English Sewing Cotton Co. At least one representative of each of the old firms was to remain in responsible management of his branch, and the board of 17 directors contained representatives of all but one of the separate firms. The Glasgow firm of R. F. & J. Alexander, formed in 1892, an active competitor in Central and South American markets, was absorbed. In 1899 the business of L. Ardern of Stockport was purchased and monopoly of the British thread industry became almost complete.! Prior to the formation of the Coats combination in 1896, the Central Thread Agency had managed the sales of the four concerns which were brought together in that combination. t+ This central agency continued after the formation of the combination and controlled the selling machinery of the constituent concerns without in any way interfering with the manufacturing or corporate functions of the company? In 1900, following a disagreement between the Coats Co. and the Sewing Cotton Co. over an alleged violation by the latter of a sales apportionment agreement for foreign markets, the Sewing Cotton Co. consented to transfer the foreign sales business of its numerous branches to the Central Thread Agency. A few years later the home selling business was similarly taken over. In 1902, owing to internal dissensions and charges of mismanagement and inefficiency, a reorganization of the English Sewing Cotton Co. was effected which practically put the company under the tutelage of J. & P. Coats. The new management took steps to place the ia Macrosty, op. cit., pp. 120-131, 2The Economist (London), Dec. 2, 1899, p. 1695, CONDITIONS IN PARTICULAR INDUSTRIES, 253 company on a firm financial basis and since 1906 it has paid regular and substantial dividends on the ordinary shares. American Thread Co.—In March, 1898, the American Thread Co. was incorporated under the laws of New Jersey, and took over the businesses of 14 American concerns, manufacturing spool, crochet, knitting, mending, and other cottons, including in some cases allied branches of the industry. All the common stock was acquired by the English Sewing Cotton Co., which thus gained the entire voting power of the corporation. J.& P. Coats (Ltd.) subscribed for 100,000 shares of the preferred stock. In 1899, the American Thread Co. purchased 125,000 ordinary shares of the English Sewing Cotton Co. The three managing directors of the English company had seats on the American board of directors, Through the alliance of these three great units—J. & P. Coats (Litd.), the English Sewing Cotton Co., and the American Thread Co.—complete domination over the world’s trade in sewing thread seemed to have been attained. The United States Government began suit on March 3, 1913, against the American Thread Co. and others, including the English Sewing Cotton Co. (Litd.), alleging a conspiracy in restraint of trade in violation of the Sherman Act. A decree was entered by consent June 2, 1914, against these companies and other defendants, in which they were adjudged to have formed an illegal combination, which was ordered to be dissolved and certain practices pursued by them were forbidden. The American Thread Co., the Thread Agency, and the English Sewing Cotton Co. (Ltd.) were restrained from acquiring or holding after January 1, 1915, any interest in the stock or other securities of the Spool Cotton Co., J. & P. Coats (Ltd.), Clark Thread Co., Clark Mile-End Spool Cotton Co., Geo. A. Clark & Bros., J. & P. Coats (Inc.), James Chadwick & Bros., and Jonas Brook & Bros., and so long as one or more of the defendants in the one group had the same controlling stockholders or any of the same officers and directors as one or more of the defendants in the other group both groups were enjoined from engaging in interstate trade within the jurisdiction of the United States. The second group was also restrained from acquiring any interest in the first group. J. & P. Coats (Ltd.) was required before January 1, 1915, to dispose of any interest it held in the American Thread Co. and the English Sewing Cotton Co. to persons not its stockholders or officers. This dissolution decree did not affect the financial relations between the English Sewing Cotton Co. and the American Thread Co.,—the former still owns all the common stock of the latter. In the year 1913-14 the American Thread Co. paid 18 per cent on its common and 5 per cent on its preferred stock; 1'Macrosty, op. cit., p. 135. :Moody’s Manual of Corporation Securities, 1902, p. 1336, and Macrosty, op. eit., p. 131. ie —————— ———— 254 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. tts profits totaled $2,086,115! On May 6, 1916, its preferred stock, par value $5.00, was quoted at 17 shillings on the Manchester Exchange. Position of J. & P. Coats Co. in recent years.—This company is said to be one of the most successful, if not the most successful, of the industrial concerns in Great Britain. Good management, reflected in low costs, abundant capital and a splendid manufacturing plant, is assigned as the chief cause. Other factors are the reputation of its goods, the efficiency of its selling organization, and the conservative financial policy of the board of directors. Substantial sums are set aside annually for various betterment purposes, important reserve funds have been accumulated, and the company has kept itself well supplied with ample working capital without increasing its sapital account. . While a considerable amount of the business of the Coats company is done at home, the great bulk of its trade is carried on outside of the United Kingdom. More than one-half of its profit is made on goods manufactured in foreign mills, and of the output of the home mills by far the greater part is exported, only one-fifth being sold at home.? Tae Linen Tareap Co., formed in 1898-99, united six firms, namely, Wm. Barbour & Sons (Ltd.), of Lisburn (near Belfast); Barbour Bros. & Co., New York; Barbour Flax Spinning Co., Paris and New Jersey; Finlayson, Bousfield & Co., Johnstone, Scotland, and North Grafton, Mass.; W. & J. Knox, Kilbirnie, Scotland; and the Marshall Thread Co., New York. The Barbours were said to be the largest manufacturers of linen thread in the world. The Coats company is connected with the undertaking and is represented on the board of directors by Sir T. G. Coats. The company manufactures linen and other thread, nets, twines, ete. Its authorized share capital is £3,300,000. It normally pays a dividend of 6 per nent on its ordinary shares.? Texte pYEING.— The Bradford Dyers’ Association (Ltd.).—The textile dyeing business in Great Britain is thoroughly organized in a number of combinations that control its various branches, such as the British Cotton & Wool Dyers’ Association, the English Velvet & Cord Dyers’ Association and the Bradford Dyers’ Association (Ltd.). No description of these combinations is given here, because the dyers do not trade in the goods they dye, but do all work on a commission basis. However, the Bradford Dyers’ Association (Lid), which is one of the most successfully managed combinations in the 1 The United States v. The American Thread Co, et al., record of the case, and Moody’s Manual, 1915, op. 2093-2099. ! The Statist (London), Nov. 28, 1910, p. 1268, and Dec. 6, 1913, p. 652. ' Maarosty, op. eit., p. 186, and The Stock Exchange Official Intelligence (London), 1914, p. 745. 4 Prospectus of the Bradford Dyers’ Association (Ltd.). Report of the U. 8. Industrial Commission, Vol. XVIII. p. 49. CONDITIONS IN PARTICULAR INDUSTRIES. 255 textile industries of Great Britain, takes an active part in fostering the export of British textiles. The Bradford dyers dye finished cloth and therefore can establish proprietary names and make them known not only to the merchants to whom they deliver the goods but also to the ultimate consumers. Consequently it pays the Dyers’ Association to send travelers abroad to spread the knowledge of its specialties and to study the tastes and demands of purchasers. It is as much concerned with these matters as are its merchant customers who actually sell the goods.! GERMANY, Germany occupies third place in the textile industry of the world. It has approximately 162,000 plants, 16,000,000 spindles, and 500,000 mechanical looms. The value of the total annual production amounts to over 2,000,000,000 marks (over $475,000,000).*> In 1912 there were 348 joint-stock companies in the German textile industry, with a total paid-up capital of 651,600,000 marks and net profits amounting to 34,800,000 marks.? The large bulk of Germany’s export trade in textiles passes through the ports of Bremen and Hamburg. The Bremen Cotton Exchange was organized in 1872 by merchants, shippers, and manufacturers of Germany and was joined later by allied interests in Austria and Switzerland. It has become the center of a national German cotton market, and virtually all German spinners buy American cotton through the Bremen Exchange. Combinations.—In no branch of Germany’s industries has the cartel form of organization during the past 10 years been developed as extensively as in the textile industry. The Berlin Yearbook for Trade and Industry mentions 55 textile cartels in 1913. This growth has taken place notwithstanding the fact that there are few large industries which offer greater obstacles for cartelization than most branches of the German spinning and weaving industries. The great number of small and medium-sized plants, the diversity in qualities and grades of the various products, constantly changing styles, and the dependence upon foreign markets for raw products are some of the main factors which make it difficult to establish uniform standards and thereby to combine the conflicting textile interests into cartels.® This split-up condition of the textile industry has tended to increase competition and to give a predominant influence to the 1 Macrosty, op. cit., p. 159, and The Statist (London), Mar. 2, 1912, p. 468, and Feb, 28, 1014, p. 446. 2A, Oppel, “Dis Deutsche Textilindustrie” (Leipsic), 1912, p. 9. ¢K. Helfferich, Die wirtschaftlichen Krifte Deutschlands, 2. Ausgabe, 1914, p. A. 4W. Lochmiiller, Zur Entwicklung der Baumwollindustrie in Deutschland Jena. 1906, p. 37, and Jppel, op. cit., pp. 59 ahd 116. . 5 Kartell- Rundschau, 1909, pp. 771, 773; Kartell-Rundschau. 1914, p. 3; Berliner Jahrbuch fiir Handel 1. Industrie. 1913. 1. p. 132 fol. )56 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. middlemen and dealers.! Whereas in other industries the dealers as a rule are controlled by the manufacturers, the very opposite is the case in the textile industry. The absence of cohesion between the producers and the dealers has become characteristic for the textile industry and has at different times resulted in keen conflicts between these two interests—for instance, in the case of the Cloth Convention (Tuchkonvention).? The very difficulties that beset the German textile industry have saused the need and desirability of closer organization and centralization to become all the more cogent. In consequence numerous strong organizations were formed, both trade associations for promoting the common interests in a general way and cartels of projucers and dealers. TrADE AsSOCIATIONS.—Of the textile trade associations some of the leading ones are the following: *® (1) “Verein der deutschen Textilveredelungsindustrie,” Diisseldorf, with about 200 members; (2) “Verband Deutscher Leinen-Industrieller-Bielefeld,” its membership includes several linen, hemp, and jute cartels; (3) “Verband der Textil-Industriellen,” Chemnitz, with about 180 members; (4) «Verband Schlesischer Textilindustrieller, E.-V.,” Breslau, with 114 members; (5) ‘‘Vogtlindisch-Erzgebirgischer Industrieverein zu Plauen,” with 531 members; (6) ‘‘ Verein Siiddeutscher Baumwoll-Industrieller,” to which 107 firms belong; (7) *‘ Verband Deutscher Baumwollgarn-Verbraucher”; (8) “Verband Deutscher Flachshindler,” Breslau, the chief aim of which is to promote the interests of the German flax trade with Russia. The *“ Handbuch’ of the Hansa-Bund for 1913 enumerates 74 trade associations in the German textile industry. However, a number of these are regular cartels and not mere trade associations. CARTELS. —Most of the textile cartels regulate merely terms and conditions of sale and prices. This is a significant characteristic of the German textile industry, for here the evolution from loose cartel agreements to the higher form of syndicate organization has not ocourred as in other equally large and important industries. Syndicates with common selling agencies are very rare.* Spinning.—Of the numerous cartels existing in the spinning industry may be mentioned the ““Vereinigung Sachsischer Spinnereibesitzer,”’” Chemnitz, with 53 members. It combines nearly all of the cotton-spinning, twine, and thread mills of Saxony. The “Ver. einigung Elsiissischer Baumwollspinnereibesitzer,” Miilhausen, has ¢ membership of 23. It issues a weekly price schedule. The “ Verband \ Kartell-Rundschan, 1914, p. 3. 1V. Stern, Die Kartelle in der Textil-und Bekleidungs- Industrie, Carlsruhe i. B., 1009, pp. 14, 16. 3 Handbuch wirtschaftlicher Vereine und Verbidnde des Deutschen Reichs, herausgeg. v. Hansa-Bund. 1913, p. 204 fol. & Kartall-Rundschan. 1000. p. 773. CONDITIONS IN PARTICULAR INDUSTRIES. 25% Rhein.-Westfilische Baumwollspinner, E.-V., M.-Gladbach,” has 70 members! » Weaving.—Several well-organized cartels exist in the weaving industry. The ‘Verband Sichsisch-Thiiringischer Webereien, E.-V.,” Leipzig, hes 297 members. It was organized in 1904 by six associations of manufacturers. The cartel maintains uniform, minimumprice schedules and regulates conditions of sale and shipping. It also has agreements with several wholesale dealers’ associations and with the Association of Hamburg Exporters and the ‘‘Associated Exporters of Saxony and Thuringia.””? The South German and Alsatian cotton weavers are organized and control about 85,000 looms. In order to stabilize market conditions, the members of this combine agreed to shut down their factories for one day each week during the first quarter of 1914.3 Embroidery and lace industry.—Germany’s export of linen lace coods and laces in 1913 was valued at 3,884,000 marks ($970,000), of which the bulk, valued at 2,036,000 marks ($500,000) went to the United States. The total export of cotton lace goods and laces was valued at 48,329,000 marks ($12,000,000). The value of the embroidered cotton, woolen, and linen goods exported was valued at 33,726,000 mar’ = ($8,400,000). These goods come mostly from Saxony, where the wanufacturers are combined in the “Fabrikantenverein der Sichsischen Stickerei-und Spitzenindustrie,” Plauen i. V., which has 274 members. This cartel purposes, among other things, to promote the common interests of the embroidery and lace industry of Saxony by joint agreement and action among the manufacturers in practical matters of trade and business. Violations of the cartel provisions and resolutions, which include also regulation of selling conditions, are subject to fines of from 50 to 1,000 marks. Zanella and serge—The manufacture of zanella (a mixed twilled fabric for umbrellas and lining) and of serge has become an important branch of the German textile industry. It is centered mainly in the Wupper Valley, in Elberfeld and Barmen, and in Saxony and Alsace. Cotton goods are manufactured mostly in Alsace, woolen in Saxony, and half woolen in the Wupper Valley. In the latter district 25 firms, combining 44 plants and about 10,000 looms, are engaged in this industry. In 1894 a well-organized cartel, the ‘‘ Allgemeine deutsche Zanellakonvention,” Elberfeld, was formed by 26 firms engaged in the “iw. Lochmiiller, Zur Entwicklung der Baumwollindustrie in Deutschland, Jena, 1908, p. 66; 1 Hand. such wirtschaftl. Vereine u. Verbinde d. Deutschen Reichs, herausgeg. v. Hansa-Bund, 1913, p. 302. : Handbuch wirtschaftl. Vereine u. Verbinde d. Deutschen Reichs, p. 304. t Berliner Jahrbuch fitr Handel u. Industrie, 1913, vol. II, p. 391. Statistisches Jahrbuch f. d. Deutsche Reich, 1914, p. 216. /Handbuch wirtschaftl. Vereine u. Verbinde 4. Deutschen Reichs, p. 311. iLeon Mirus, Die Futterstofiweberei in Elberfeld und Barmen (Leipsic), 1909, p. 29 fol. 279419 16——18 258 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. nanufacture of zanella. Ever since its organization this cartel has sroved a success and has been renewed several times.! Prior to its formation the absence of joint observation of market »onditions frequently resulted in overproduction, falling prices, and anderselling. Finally a combination formed by the dyers, the ‘“ Stiicktirberei-Konvention des Wuppertales,” which included eight of the leading firms in the dyeing and finishing (Appretur) industry, led the weavers to organize the above-named Zanellakonvention. Both cartels then entered into a joint agreement, providing, among other :hings, for exclusive dealing and a joint board of arbitration for settling disputes? The main provisions of the cartel agreement of the Allgemeine deutsche Zanellakonvention are the following: (1) Regulation of prices for half-woolen zanellas; (2) obligatory selling by a central selling agency of remainders and job lots; (3) fixing of sonditions of payment for linings by the central selling agency; 4) fixing the quota of production of zanella for each firm.® The Zanella Konvention differs from most other textile cartels in its rigid organization. The cartel agreement covers domestic sales only and not export sales. Each member of the cartel must, upon demand to that effect, furnish proof that shipments to foreign coun-.ries are made in such a way as to preclude any duty-free reimpor-.ation without his being a party to it. Subsequent to the formation of the cartel, numerous complaints arose that zanella was sold cheaper abroad than at home by members of the cartel. All attempts to get the cartel to cover export sales also have proved futile. In course of time the outside manufacturers shaped their prices in accordance with the cartel prices, but they allowed a discount of from 3 to 5 per cent higher than that of the cartel. In recent years the demand for zanella has declined, and the manutacturers have turned largely to the production of serges. An analysis of the prices of zanella goods since the formation of the cartel shows a steady increase, notwithstanding the fact that the cost of production, wages, selling expenses, as well as profits, apparently have remained the same. From 1894 to 1907 prices increased 55.7 per cent, and competent authorities attribute this exclusively to the increase in the price of yarn. Jute.—The jute industry is almost wholly syndicated and practically the whole German market is controlled by the jute cartel, the «Verband Deutscher Juteindustrieller, G. m. b. H.,”” Braunschweig. In 1913 Germany’s imports of jute amounted to 162,063 tons, valued at 93,997,000 marks. Most of this came from British India. The axports amounted to 7,822 tons, and went chiefly to Russia. Jute yarn amounting to 4,771 tons and valued at 4,066,000 marks, was i Mirus, op. cit., p. 42. 8 Kartell-Rundschau, 1909, p. 737, ! Tbid.. 0. 40. fol. Mirus, op. Cit, p. 42. fol. CONDITIONS IN PARTICULAR INDUSTRIES. 259 imported chiefly from Belgium and France, and the exports amountng to 4,687 tons and valued at 3.253.000 marks, went nearly all to Austria-Hungary. In 1911 the jute cartel comprised 32 factories, including 148,916 spindles and 7,614 looms, The cartel regulates the production, sales, purchases, and prices of its members through a common selling agency.! Cloth.—The German manufacturers of woolen goods for men’s clothing in 1912 formed the ‘‘Deutsche Tuchkonvention.” This cartel combines 470 firms with a total of 25,000 looms, or approximately 98 per cent of the total number of looms. Recently the cartel made an agreement with the wholesale cloth dealers. In 1915 a community of interest was also effected among the following combines in this industry: ‘‘Arbeitgeberverband der Herren u. Knabenkleider-Fabrikanten Deutschlands, E.-V.,” ‘Verband Deutscher Kleiderfabrikanten, E.-V.” Rheydt; ‘‘Fabrikanten-Verband der Ber-Berliner Knaben u. Burschenkonfektion, E.-V.”’? Silk.—The silk industry leads all other branches of the textile industry as regards cartelization. All of its important branches are organized into selling-terms cartels. The velvet-material, velvetribboi, and silk-ribbon conventions are among the best organized price conventions, and have assumed an international character. The eight leading silk cartels are: * (1) The association of manufacturers of velvet and plush in Germany (Verband der Sammt-und Plischfabrikanten Deutschlands). (2) The confederation of manufacturers of velvet ribbons (Versinigung der Sammetbandfabrikanten 1910). (3) The association of manufacturers of silk goods in Germany (Verband der Seidenstofffabrikanten Deutschlands). (4) The confederation of hatband manufacturers (Vereinicung der Damen-und Herrenhutbandfabrikanten). (5) The confederation of German manufacturers of umbrella coverings (Vereinigung deutscher Schirmstofffabrikanten). (6) The association of manufacturers of cravat materials (Verband der Krawattenstofffabrikanten). (7) The agreement of German and Swiss muffler manufacturers (Konditionenverband der deutschen und schweizerischen Cachenezfabrikanten). ‘8) The association of “Turquoise” silk manufacturers (Verband der Turquoisefabrikanten). 1 Kartell-Rundschau, 1911, p. 139; Statistisches Jahrbuch f. d. Deutsche Reich, 1914, pp. 185, 216; Oppel, op. cit., p. 147: J. Singer, Das Land der Monopole: Amerika oder Deutschland? (Berlin), 1013, p. 218. 3 Jahresbericht d. Handelskammer zu Elberfeld, 1913, I, p. 28; Kartell-Rundschau, 1915, pp. 4, 734. 3 Kartell-Rundschau, 1913, p. 257 fol. ‘4. von Beckerath. Die Kartelle der Deutschen Seidenweberal-Industrie, 1811, p. 56, fol. 260 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Two plans of coordinating on a large scale the different branches oi the German textile industry have been widely discussed in recent years, and may be realized in the near future. One relates to the formation of a central national organization for the whole German textile industry, including trade associations as well as cartels. The sther purposes the organization of a special credit institution for the textile industry similar to the German agricultural credit banks.' FRANCE, Textiles are normally one of the principal exports of France, their value in 1913 equaling $250,000,000. Some of the more important ~ombinations in the industry are described below. The cotton twist combination.—The cotton twist combination, called the Comité Francais de la Filature de Coton, was established in 1899 to cover the three principal cotton-spinning centers, the Departments of Vosges, Normandie, and Nord, to the end, according to the statutes of the organization, “of promoting proper measures to safeguard the common interests of this industry,” and more specifically, of diminishing stocks on hand by (1) reduction of production and (2) by exportation. Spinners making use of some two and a half million spindles which spin American cotton became members, 1,100,000 spindles being in Normandie, 900,000 in Nord, and 600,000 in Vosges. While the agreement, which was of the simple cartel form, sought to coordinate the work of these three departments, it was provided that “each group maintain its own autonomy in such a way that it may be organized and may operate according to its peculiar views.” The spinners »f Nord, exercising this prerogative, imposed upon themselves not only the means of diminishing stocks, above mentioned, but made a price agreement whereby a minimum price was established. Provisions were adopted to prevent violation of the tariffs established, such as disguised price cutting and indirect commissions to purchasers. But no fines were established for infractions, and in spite of precautions the members began to break away from the agreement in 1901, and in 1902 it was abandoned. It was, however, revived in 1905 with improved provisions, including a certain form of exporting hureau, and at last accounts (1907) was still in existence. In order to carry out the purposes of the cartel, a monthly statistical bulletin was issued which summarized the information submitted by members relative to stocks, total production, deliveries made, orders received, etc., and by this means the situation of the market was kept clearly before the members.? | Kartell-Rundachsu, 1909, p. 775; 1915, p. 6, Revie Economique Internationale, January, 1008, vol. §, pp. 117-118, 123-130, 143, 144. CONDITIONS IN PARTICULAR INDUSTRIES. : 261 REsTRICTION OF OUTPUT.—One of the surest means of decreasing stocks is what is known in France as ‘“chémage,” or shutting down; but it is expensive, as the fixed expense per spindle is 2 centimes, or 1,000 francs a day for the ordinary factory of 50,000 spindles. The cartel accomplished its purpose by requiring each factory “to stop spinning altogether for one day in each week”; but it also provided that ““ the spinners who prefer not to reduce their work may turn over to the common treasury each week a contribution of 1 centime per spindle.” Thus the producer who had the money and the business might prefer to pay the indemnity which was less than the loss resulting from chémage; but those who had difficulty in disposing of their spinnings during a period of “dead sales’ or sales at a loss, resorted to chOmage rather than lose by the low prices and the indemnity. An effective restriction of output was thus accomplished which was of course superseded by industrial activity as soon as prices warranted the change. When the cartel was formed in 1899, the stocks had run ap to 5,500,000 kilograms, but during the five or six months that chémage was practiced, production was reduced by about 1,500,000 kilograms. EXPORT BOUNTIES.—As the cartel had no comptoir or central selling bureau, it adopted the plan of giving export bounties whenever the situation demanded it in order efficiently to reduce surplus production by exportation. In 1899 the bounty was fixed temporarily at five centimes per kilogram, then raised to 10 centimes and later to 15. The first bounty was not large enough to have much effect, but when it was doubled an immediate increase in exports was secured. - Eventually stocks at home were so reduced that domestic prices advanced and exports diminished; whereupon the bounty was increased to 15 centimes and exports increased for a time, only to relapse for the same reason as before. During the period of the operations, how=-ever, the Nord spinners had exported nearly a million kilograms, so that by means of both chdmage and bounties the surplus had been reduced by about 2,500,000 kilos. For a number of years following, the surplus continued to decrease. The home market became normal, exports declined, and the bounty was reduced to 5 centimes. In 1905 in a number of countries cotton spinning experienced a period of prosperity; but in France prices continued low, and as the spinners were not equipped for exporting they did not share in the increase of business. Stocks began to increase and the cartel was compelled to make use of artificial means again, but this time only the export bounties were employed. All three of the cotton-spinning departments agreed on a bounty of 5 centimes for certain grades of the product and 10 centimes for others, with the result that a large exportation ensued. In the Department of Nord the figure went to 3,527,000 kilograms as against 920,000 in 1899. 262 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. In one month 528,000 kilograms were exported. The bounties were continued in 1906 and 1907, at the end of which year business conditions were such that the cartel again suppressed them. The experience of the members of the cartel has been that frequently when the bounties were cut off, the trade that they had succeeded in building up under their influence was retained.! In 1912 the fund which was established by the spinners to encourage exports was not sufficient to make it worth while to export in large quantities. The situation became crucial when the margin between the raw material and the finished product was so slight that the prices obtained abroad plus the bonus was equal to, if not better than, the domestic price. The bonus fund was entirely exhausted early in 1913. A meeting was then held in Paris and plans for raising another fund for premiums were perfected. The spinners formed a joint stock company to continue for a period of three years. The capital stock of the company is 414,000 francs, and the main office was located, prior to the outbreak of the present war, at Roubaix, in the department of Nord, a branch being established at Rouen? The comptoir controlled approximately 600,000 spindles, and in a period of five months it exported more than 5,000,000 kilograms of cotton yarn, bounties ranging from 10 to 15 centimes per kilogram being paid.? The comptoir for cotton prints.—On January 20, 1913, the Comptoir de Vente des Tissus Frangais Imprimés, a central selling agency for French cotton print goods, was established for 20 years by seven of the most important establishments at Rouen, Epinal, Bolbeck, and Valenciennes. This is a selling bureau which takes the place of a former comptoir that had been abandoned.* Flax, hemp, and tow spinnings (Syndicat des Filatures de Lin, de Chanvre et d’Etoupe de France).—The industry of spinning flax, hemp, and tow in France is practically concentrated in the department of Nord, and therefore offers a situation favorable to the formation of a cartel. Organization among the spinners took place first in 1887, then in 1899, and finally in 1901. The cartel comprises ninetenths of the French spindles, or 450.000 out of the 500,000 in operation. Like the cotton cartel, this organization resorted to chdmage and axport bounties. In 1899 these latter had very important results, as members were able to export one-sixth of what they manufactured. For the quarter, June-August, 57,000 skeins of spinnings, the product of about 40,000 spindles, were sent abroad, the bounty being 1 franc per skein. Previously these French twists had been limited to the 1 Revue Economique Internationale, 1908, vol. 5, pp. 120-123, 131-134, t Board of Trade Journal (London), June 13, 1913, p. 634; July-September, 1913, p. 484, }Karteli-Rundschau, 1913, p. 420. Tbid., p. 603. CONDITIONS IN PARTICULAR INDUSTRIES, 263 national market, but once they had succeeded in reaching the foreign market, aided by bounties, business relations there established continued after the export bounty had been withdrawn. A price agreement was made in 1902 by the members of the cartel, which was renewed several times, and at last accounts (1908) was still in existence. It was difficult to elaborate a tariff of prices sufficiently varied to suit the great variety of twists of the same number in flaxspinning; but prices were fixed for the ordinary quality as a base, and the members in a series of conferences with the sworn agent of the syndicate succeeded in establishing satisfactory prices for the varieties ©f spinnings.t ITALY. The Istituto Cotoniero Italiano.—The Italian Cotton Institute was organized in May, 1913, by an agreement among the producing mills with the immediate object of relieving the pressure of a crisis which had resulted from overproduction in 1908 and 1909. The geographical situation of the spinning mills was very favorable to such an organization, as out of four and a half million spindles three and fourtenths millions were concentrated in the Provinces of Piedmont and Lombardy. The terms of the convention provided for the division of the combination into certain sections, according to their functions, spinning and twisting to embrace 3,800,000 spindles; weaving, 100,000 looms; printing, 9 printing machines; dyeing and finishing, about threefourths of the concerns. All members were required to stipulate in their contracts for conditions of payment in conformity with a fixed uniform standard. Members were also obliged to furnish such statistics of their business as might be required by the syndicate in order to obtain an exact knowledge of the state of the industry. It was provided that as soon as organization took place an initial “short time” period of 1 day out of 15 should be instituted, the power being conferred upon the council to make whatever further reduction in output it might deem necessary after having examined the statistics submitted by each of the members. At the same time, however, it was made incumbent upon the council to use every means possible to increase exports and thereby avoid any further reduction of output. A provision was also made whereby, if the council agreed, the spinning and weaving mills were permitted to pay an indemnity instead of observing the ‘‘short time’ regulation, if they wished to keep their production up to its normal level. The plan provides for export bounties and the formation of exporting ‘‘consorzii’” or bureaus. The establishment of price cartels and selling agencies is another feature. In order that strict observance of the terms of payment as agreed to by the members might be carried Revue Economique Internationale, 1808, vol. 8, pp. 149, 152-157. 264 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. out, a central treasury, to which all payments were to be made, was included in the plan. When organization took place in 1913, a large proportion of the 700 cotton manufacturing establishments in Italy, representing a fixed capital of between 500 arid 600 million lire, became members. Of the 4,582,000 spindles in the country, representing 135 establishments, 3,870,000, or more than 84 per cent, came under the control of the combination. During the six or eight months preceding the outbreak of the European conflict the institute was successfully carrying out and working toward its desired objects by instituting a short time régime and limiting the term of contract to seven months. The silk industry.—While no great syndicate seems to dominate the [talian silk industry at present, cartels have been formed among the producers, and demands have been made for a well-developed organization that would do for the industry in Italy what combination of interests has done for other countries. As far back as 1907 a syndicate comprising 53 of the most important silk ribbon manufacturers of Italy was organized, the chief object being to bring about a uniform increase in selling prices, on account of the high cost of raw materials; also in 1909, and probably through subsequent years, the silk manufacturers were bound together by a convention which fixed prices, regulated salaries, and discouraged the counterfeiting of models and designs of fabrics? Flax and hemp industry.— With headquarters at Milan, five of the most important flax and hemp spinning mills in Italy organized a selling comptoir in 1911 under the title of Commissionnario di Lino e Canape. The combination was made for a period of 12 years.® BELGIUM. Association Cotonnidre de Belgique.—Until 1899, competition in sotton spinning in Belgium was unrestrained, but in that year, as she result of overproduction, conditions became so bad that the spinners held a meeting where each reported the stocks he had on hand. The quantity was so great that it was deemed expedient to agree upon a period of ‘“chomage,” and for two months 350,000 spindles ceased operation. This led to the organization of the Association Cotonniére de Belgique, which eventually comprised fourfifths of the spindles in Belgium. The members of the association followed a common scale of prices, made up each week by an appointed committee, the prices being based upon the price of raw cotton in Liverpool. As soon as new 11/Industris, 1912, p. 545; 1913, pp. 797, 798; Réforme Economique, 1913, p. 777. L’Industris, 1913, pp. 702-703; Le Monde Economique, vol. 17, p. 590; E. Martin Saint-Léon: Kartells ®t ‘frusts, 3d ed., 1909, p. 107. YRéforme Economique, 1913, p. 873. CONDITIONS IN PARTICULAR INDUSTRIES, 265 prices were made up by the committee, they were telegraphed to the members who bound themselves to observe them under penalty of a fine equal to double the difference between the quoted and actual price where the violation was voluntarily reported, and fivefold in a case of recognized fraud. A sworn comptroller was designated, to whom the spinners were obliged to submit their accounts. The regulation of prices, however, had to be abandoned, as the members feared that parliamentary action would be taken to lower the tariff which protected the industry. But the members continued to meet once a week at Ghent. General conditions of sale were adopted and fines for violation of them were imposed, ranging from 20 to 500 francs. The Association Belge de Tissage.—This combination was organized in 1903 among the cotton weavers of Ghent and surrounding territory, and by 1909 out of 34,000 looms 12,000 were members. Chémage was made obligatory when it was demanded by three-fourths of the members; but those who did not wish to follow the decision to suspend operations were permitted to run full time by paying not less than 10 centimes a day per loom during the period set for chémage. An exception was made in favor of those looms which were weaving goods for exportation, provided at least a quarter of them were so engaged. Combinations have also been formed among the finishers and printers of cotton and linen goods mixed, among the wool spinners, and the manufacturers of hosiery and of artificial silk. COMBINATIONS IN THE ORIENT. In 1913 the largest buyer of cotton goods from the United States was China. The trade was in piece goods only, largely unbleached cloth, consisting’of sheetings and drills. It represented, however, but 7.9 per cent of the total imports of cotton piece goods into China, Great Britain furnishing 53.3 per cent, and Japan 20.2 per cent. In gray sheetings and drills, Japan is the principal competitor of the United States. The trade of Great Britain is in other kinds of piece goods, namely, gray shirtings, plain white shirtings, jeans and Italians, Venetians, crépe, and lastings—lines in which the United States exports very little to China. Competition in the cotton goods trade in the Far East is most acute, particularly mm China and Manchuria, where the traders of Japan, Germany, Great Britain, and the United States, before the war, were struggling for the market.- The Orient is a field for the operations of some of the largest foreign trading organizations in the world. Jardine, Matheson & Co. (British), Arnhold, Karberg & Co. (German), Tie D6 Lewes, Liorganisution syndicale des Chefs industrie, Brussels, 1909, pp. 200, 201, 1De Leener, op. cit.. pp. 203. 207. 211. 217. 218 266 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Carlowitz & Co. (German), and Mitsui & Co. (Japanese), are allembracing in their activities, importing and exporting every class of manufactures. The trade in cotton goods represents an important part of their business and in many instances they are actively interested, as general managers, agents, or majority or large stockholders, in cotton mills. Jardine, Matheson & Co. are general managers and probably majority owners of three cotton mills at Shanghai, with a total of about 100,000 spindles. This company maintains engineering, insurance, shipping, import and export, and finance departments all more or less related in the one vast trading combination. (See Pt. II, pp. 206, 217-218.) Mitsui & Co. are the principal distributors of Japanese cotton piece goods in Manchuria! According to the American consul general at Shanghai, one of the principal advantages enjoyed by other foreigners over American traders in China is the existence of these large commission and trading houses, capable of representing foreign manufacturers, with large sales and technical staffs, good financial connections, with liberal credit facilities, specialized departments, ownership and management of local industries, etc? It is to these general trading organizations that the success of British and Japanese sotton goods in the Orient is largely attributable. For many years prior to the war a combination between British manufacturers of cotton piece goods and German import and distributing houses in China is said to have been one of the strongest obstacles to the extension of American trade. The war has, of course, terminated this alliance.? A method of business successfully employed by the Germans is the system of technical bureaus. Groups of noncompetitive manufacturers in Germany, who are unwilling to incur the expense of individual representation in China, send out a joint representative, with axpert knowledge of their products, to join an established and wellconnected merchant firm in China. That firm supplies the representative with special knowledge of the Chinese and their ways of business, and he does the work of advising and suggesting. When orders are forthcoming they go direct to the manufacturers of the group. Japanese competition in China.—The greater part of Japan’s cotton piece-goods trade in China is with Kwantung, Northern China, and Manchuria. This trade has been developed largely through the firm of Mitsui Bussan Kaisha (see p. 150) with its numerous connections, IW. A. Graham Clark, Cotton Goods in Japan, Bureau of Foreign and Domestic Commerce, Special \gents Series, No. 86, 1914, pp. 124-125. 1 See Pt. I, p. 221. Commerce Reports, Hongkong, Dec. 10, 1915, p. 987. Commerce Reports, Feb. 7, 1916, p. 525. CONDITIONS IN PARTICULAR INDUSTRIES. Ti both in Ching and Japan.! For the years 1907 to 1912 the value of this cotton trade increased from about $1,400,000 to $4,660,000 for Kwantung; from $1,560,000 to $3,630,000 for Northern China: and from $480,000 to $1,280,000 for Manchuria. In Manchuria proximity to the market and increased facilities for transportation have favored the Japanese piece-goods trade in competition with American and English goods. The opening of Antung as a port of entry and the arrangement effected by the J apanese Government with the inspector general of customs, whereby a special reduction of one-third the customs duty is allowed on all goods entering Manchuria by way of Antung, have aided Japan, as practically all the merchandise so entering is of Japanese origin. In North Manchuria a similar reduction is granted on goods carried by the Russian Railway? But the possession of the South Manchuria Railway is said to have been the greatest factor in extending the Japanese trade. This line is under the sole control of the Japanese and is a semiofficial concern. Practically all the American cotton goods exported to China are first shipped to Shanghai and then distributed through Chinese dealors in the north and Manchuria. So long as American sheetings and drills predominated in thé market this method was satisfactory, but since the Japanese have entered the field, Americans have been at a disadvantage in being so far from the market.* Japanese Combinations.—While transportation has been a large factor in the success of the Japanese, two combinations among the Japanese manufacturers and exporters of cotton goods operating in Manchuria have also greatly facilitated the efforts of the Japanese to sxtend their export trade in Manchuria. Tee CorroN FaBric Export SYNDICATE.>—This organization, formed in 1906, was composed of the leading Japanese spinning and weaving companies. Its selling agent was the Mitsui Bussan Kaisha, Japan’s largest commercial concern in Manchuria. The syndicate was enabled on a Government guaranty to borrow money at 4 and 43 per cent per annum on four months’ sight drafts, thereby greatly aiding the merchants in a business way. It also received special rates for its members from steamship lines to Manchuria and special facilities for transportation of syndicate goods over the South Manchuria Railway. The mills in this assqciation, it is stated, agreed they would together ship 1,000 bales of cloth a month to Manchuria, and would sell it cheaper than the American sheeting and drill in order i Ralph M. Odell, Cotton Goods in China, Bureau of Foreign and Domestic Cornmerce, Special Agents Jeries, No. 107, 1916, p. 106. *B8pecial Agents Series, No. 86, 1914, p. 133. 3 National Review, Shanghai, July 17, 1915, p. 50. Bureau of Foreign and Domestic Commerce, Special Agents Series, No. 107, 1916, p. 111, + Sometimes referred to as the Cotton Cloth Export Association, the Manchuria Export Guild, or Export Suild. 268 'REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. to win the market, whether they made a profit in the first year’s business or not. This association of manufacturers, however, broke up in 1912} Tue MancHURIAN CorTOoN EXPORTERS’ ASSOCIATION.>—This organization was formed April 1, 1914. Its declared object was to enhance the reputation of Japanese cotton goods in Manchurian markets by stopping the export of goods of inferior quality and to maintain standard prices. The members of this association were favored for a time by the Government with rebates in freight and steamer rates and also by a remission of duties and charges assessed against traders of other nations.! The Mitsui Bussan Kaisha, known as Mitsui & Co., is connected with this association as it was with the Export Syndicate. Through it and its branches the Japanese merchant and exporter is kept in touch with all variations in market conditions. The company and the members of the association get a 10 per cent freight rebate on the Mitsui Co.'s ships on cotton piece goods to various points in Chosen and China. Moreover by a special arrangement between the Mitsui Co. and the tax officers located in the principal markets of Manchuria the former by paying to the latter a stipulated amount per annum become exempt from the payment of the local taxes, thereby obtaining an advantage over foreign competitors who pay the local taxes.* Thus the development of Japanese commerce in Manchuria is stimulated not only by an efficient organization but also by the cooperation of the Japanese Government, Japanese merchants and Japanese financiers, whereby subsidies are allowed to steamship companies, rebates made to Japanese shippers by the railways, and capital provided by the Government on advantageous terms for merchants. The South Manchuria Railway Co. will, it is stated, grant a reduction in freight rates of 10 per cent to customers who will guarantee a certain number of loads of freight per year. The Exporters’ Association is in a position to take advantage of this offer while the ordinary foreign firms are not. A large American manufacturer of cotton goods ascribes the competition he has met in China to Japanese combination. He says: The Japanese combination fostered by the Government has seriously interfered with our business in China, and has practically supnlanted us in that market. In Japan practically every branch of the textile industry, including cotton goods, has its guild of manufacturers, buyers, and sellers, t Pt. II, p. 224; and Bureau of Foreign and Domestic Commerce, Special Agents Series, No. 86, 1914. 3p. 124, 125, 256. © Also referred to as Japanese Colton Exporters’ Association. sCommerce Reports, July 22, 1015, p. 355, and Pt. II, p. 225. $Pt. 11, pp. 225-227: Bureau of Foreign and Domestic Commerce, Special Agents Series. No. 107, 1916. pn. 106-107: and Special Agents Series. No. 86, 1914, pp. 145, 148, 240, 256. CONDITIONS IN PARTICULAR INDUSTRIES. 269 covering this or that territory. These organizations undoubtedly are additional factors in the cooperation of the Japanese in their export trade. The Japan Cotton Spinners’ Association, organized in 1882, has been important in the export trade. By a system of premiums to merchants or mills on exports of coarse yarns and cloths, and even by a lottery system tried for a while in 1908, the association has undertaken to stimulate exports.! Other factors named as contributing to the success of Japanese over American goods in China are (1) the lower cost of production and transportation, (2) the presence on the ground of Japanese firms with extensive facilities for the distribution of goods, enabling the Chinese dealers to obtain supplies in quantities as small as they desire, while in buying American goods through Shanghai importers it is necessary to contract for considerable quantities at a time—more than most native dealers are able to handle, and (3) the difference in time required for filling a contract. American cotton goods, it is said, are recognized by the Chinese as. superior in quality to those made in Japan.? Combinations in China.—There is in China a strong movement toward retaining trade among the domestic mills. These have the advantage of cheap labor. They are organized as the Cotton Mill Owners’ Association, which, it is claimed, is an organization similar to those in the United States, devoted solely to such objects as recommendations for special tariff or taxation treatment. Organization among the cotton-goods dealers in China usually takes the form of guilds, which exist in nearly all the important cities. Practically the entire distribution of cotton goods from Shanghai is controlled by the local piece-goods guild. The importance of this is evident when it is recalled that American goods are purchased mostly for cash in Shanghai by dealers and sold to importers in Newchwang, who in turn sell to dealers in the interior, whereas the Japanese ship direct to Tientsin and Manchuria, because they are nearer to these markets than to Shanghai, and sell direct to Chinese dealers.? COOPERATION AMONG AMERICAN MANUFACTURERS FOR EXPORT TRADE. To facilitate and make more effective the textile export operations of the United States and, in particular, to meet the foreign competitive conditions outlined above, American manufacturers and pxporters of textiles have expressed themselves generally as favoring some sort of organization for export trade. A few believe such organizations should be confined to noncompeting lines in the 1 Bureau of Foreign snd Domestic Commerce, Special Agents Series. No. 86, 1914, pp. 58-64, 88-103 and 128, Pt. TI, pp. 227-228. i Bureau of Foreien and Domestic Commerce, Special Agents Series, No. 107, 1916, vp. 52. 119-120. 270 REPORT ON.COOPERATION IN AMERICAN EXPORT TRADE, textile industry, but a majority favor the inclusion of competing lines as well. Some urged an organization embracing only manufacturers of wholly noncompeting and nonkindred articles. (Out of more than 60 replies of textile manufacturers or exporters to the schedule question less than 10 favored the exclusion of competing products from export combinations.) Nearly all of the manufacturers and exporters thought that such combinations, if formed, should be open to everyAmerican-owned concern in the United States, but should be permitted to exclude any controlled by foreign interests. Several respondents asserted that any sort of combination in the textile industry would be injurious. Most of the proposals for export organization center upon some form of joint selling agency, but in several instances looser organizations simply for fixing export prices are urged. Cooperation in competing lines.—In the cotton manufacturing industry the most complete plan suggested was that outlined by W. S. Kies, of the National City Bank, at the public hearings in New York City. This plan, which involves a joint-selling agency and a system of competitive bidding by members, is printed in Part II (pp. 272-273). To cope with the situation in Manchuria described above, a report of the Bureau of Foreign and Domestic Commerce, discussing the trade of the United States with China, outlines a plan for an export organization which would control most of the sales of sheetings, drills, and other American cotton goods in China. The organization, instead of selling to rethilers would deal only with the large houses in Manchuria, thereby simplifying the problems of credit and finance. One or two American managers would be employed vith competent Chinese compradores or agents under them.! Other proposals for a joint-selling agency came from a number of manufacturers and exporters of cotton goods, hosiery, knit goods, and of wearing apparel. =A modification of this plan is the suggestion of an exporter of cotton goods that cotton manufacturers be permitted to combine to the extent of sending a salesman to the actual field of operations. A manufacturer of ginghams proposes that existing commission houses, either jointly or singly, should establish branches in foreign countries. Combinations which would fix the price for export sales are proposed by two manufacturers. One, a manufacturer of men’s clothing, would have the organization confined to fixing the price for export and to matters of legislation and tariffs, leaving the advertising and soliciting of business to the individual member. The other, a manufacturer of flags, thinks export combinations, merely t Bureau of Foreign and Domestic Commerce, Special Agents Series, No. 107, 1916. p. 114. CONDITIONS IN PARTICULAR INDUSTRIES. 271 by regulating prices, could show whether it were possible for Americans to compete with a margin of profit. The establishment of an American textile exchange in New York simila in plan to the Royal Manchester Exchange in England (see p. 248) is suggested by a prominent exporter and importer of cotton goods in an address before the National Association of Cotton Manufacturers. ‘‘Industrial consolidation and centralization,” he said, “including the buying and selling under one roof of everything that goes into or comes out of our mills, would bring about savings unthought of by most of us * * * ' It was further claimed that under such an organization foreign competition could be met with a stronger hand and aggressive campaigns for foreign trade could be waged. In the silk industry a combination among competing lines was suggested which should fix a bottom price, advertise abroad, and study foreign markets. Itwas thought that the Silk Association of America, which now concerns itself with matters of policy and legislation, might be made the nucleus of such a combination, which should be open to all silk manufacturers. One manufacturer asserts that the only need for combinations in the silk industry is to meet similar combinations in other countries— or, possibly, to cooperate with them—and put the American industry on an equality with foreign industries. Cooperation in kindred lines.—A joint selling agency composed of six noncompeting manufacturers of ladies’ high-class wearing apparel is proposed by a merchant carrying on a large export trade in corsets. The combination should have offices in South America, Australia, China, Japan, and other important countries. The headquarters in South America would be located at Buenos Aires where there would be an exhibit and salesroom and a combined stock of $45,000 to $50,-000. By this system, it is urged, the American manufacturers could deal directly instead of doing their export business through agencies as at present. In order that manufacturers might deal directly through such a combination, however, the guarantee of American banks would have to be secured on 60, 90, 120, and 180 day terms, the banks taking the same chances as the export agencies now do. The establishment of a direct selling agency in Argentina by several American manufacturers of noncompeting lines of cotton goods is a proposal appearing in the Commerce Reports of the Bureau of Foreign and Domestic Commerce. The idea is thought to be practicable in view of the importance of Argentine cotton imports.! A manufacturer of silk proposes that one or two merchants or manufacturers of each variety of silk join in employing a representative to sell for all of them, thereby saving expenses of selling and keep-{ Bureau of Foreign and Domestic Commers, Commerce Reports, May 5, 1015, ». 501. 79 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, ng in better touch with the credit of customers. Orders received would be distributed among the members. Another manufacturer of silks thinks, however, that it would be almost impossible in the case of textiles to differentiate between competing and noncompeting products as the shades of difference are so fine. A combination of competitors in which the several lines of goods sould be so divided up as to have only noncompeting lines handled by the combination is a suggestion that comes from a member of a frm of cotton manufacturers.! A manufacturer of men’s clothing suggests two organizations—one, composed of producers of noncompeting but kindred lines, for advejtising and soliciting trade; and another, made up of competing manufacturers, with power to fix prices for export and to look after matters of legislation and tariff. He thinks it impractical to consider a selling combination of comvetitors, as “no one of them could get full value out of the arrangement.” A manufacturer of waists and dresses also advises that any such organization must be composed of noncompetitors only. Manufacturers in his line, he says, would never permit their samples to be inspected by anyone representing a competitor. Advantages of cooperation for export trade.—In addition to thegeneral advantages of export combinations there are a number which apply particularly in the case of textiles. The range of fabrics used by the foreign buyer is so immense and differences in construction, design, and many other characteristics are so numerous that no one manufacpurer can make more than a small fraction of the many varieties likely to be called for. Goods are sold on sample and different buyers may prefer the product of one manufacturer over that of another, some feature making a particular appeal or answering some special purpose. Furthermore, the terms or speed of delivery which one manufacturer can offer may not suit, while those of another may. A combination comprising a great many manufacturers could bring the buyer into relations with the particular variety of goods, terms, and conditions he desired, at the same time representing all its memhers, by attempting to bring each into touch with the buyer whose tastes call for his particular styles or terms. SECTION 4. ELECTRICAL GOODS. INTRODUCTION. Since the demonstration of the electric current by Volta in 1800, slectricity has become one of the most important factors in communication, illumination, transportation, and industrial power. Its value as a heating agent is being steadily developed. It is the essence of speed, and cleanliness is its characteristic attribute. This natural force touches the welfare and comfort of millions. Pt, II, p. 267 for details. CONDITIONS IN PARTICULAR INDUSTRIES. 273 New devices and different purposes served by electrical energy are matters of frequent discovery. With the inevitable accumulation and multiplication of these the electrical industry looks forward to oreat future expansion. The utilization of electricity, however, from its very earliest praetical application has been associated with colossal investments of capital. So its extension broadcast, the dissemination of its bene-~ fits, has meant that financial initiative must keep pace with inventive genius. The ultimate conversion of electric energy for every need is continsent on the cost of its production and efficiency of distribution. Hydroelectric generation at natural sources has solved one phase of the problem, and alone has been responsible for the shifting or crea~ sion of entire communities. Science is directing its efforts toward achieving the economical transmission of high voltage over long distances, and this obstacle to the diffusion of cheap power must yield in time. The location of natural water power in export markets, therefore, is an index of electrical trade routes of the future. German and British competition is the most serious encountered by American manufacturers in the electrical export trade. Even the greater American companies are not on an equal plane with the German or British system of merchandising, and can not avail themselves of the same opportunities offered for the creation of mark ts. The smaller, detached American concerns, of course, occupy a still more difficult position in contending with the German and British organizations. The salient facts concerning the organization of the industry in these two countries particularly with reference to export trade. are discussed briefly herewith. GERMANY. Centralization through communities of interest.—From its inception, the German electrical industry has tended to concentrate in large groups or communities of interest rather than in cartels. The chief obstacles that made it difficult to organize cartels were a lack of uniformity and homogeneity of the various plants and enterprises, as well as the diversity of interests. The problem of raw materials, labor, transportation, and lack of geographical concentration also to a degree made the formation of cartels difficult and largely impossible.! Two great companies, the Allgemeine Elektricitits-Gesellschaft, called A. E. G., and the Siemens-Schuckert, called Siemens in the trade, have succeeded in concentrating about 80 per cent of the sntire electrical business of Germany into their own hands. Of this - “UE. Noother, Vertrustung u. Momomolirage in der deutschen Elektricitits Industrie, 1913 p. 66fal, 97941°—-16——19 274 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. about 45 per cent is controlled by the A. E. G. and about 35 per cent by Siemens.! The products made by both the A. E. G. and the Siemens-Schuckert concern cover everything in the electrical industry from lamps and motors to the great electric street car and lighting systems for entire rural or urban districts. The A. E. G. also manufactures aeroplanes and automobiles, and the Siemens-Schuckert have built dirigibles.? The activities of these two concerns are international in character and of great importance in the electrical industry of the world. By process of concentration the 28 leading companies in the slectrical industry in Germany had up to 1900 combined in seven groups,® viz: (1) The Siemens & Halske group, with four members; (2) The Allgemeine FElektricitits-Gesellschaft group, with four members; (3) The Schuckert group, with four members; (4) The Union Electric Co., Berlin, with two members; (5) The Helios group, with five members; (6) The Lahmeyer group, with two members; (7) The Kummer group, with seven members. As a result of the disastrous crisis in 1900, due largely to overproduction, the Kummer group collapsed and the Helios disintegrated. The powerful banks allied with the industry then promoted a policy of concentration.* In the end this resulted in the domination of the entire German electrical industry by the Allgemeine Elektricitié ts-Gesellschaft and the Siemens-Schuckert Co.’ The Allgemeine Elekiricitiits-Gesellschaft.—OraanzaTion.—The Allgemeine Elektricitéts-Gesellschaft had already been organized as parly as 1883 as a stock company. The company had been evolved from the German Edison Co. for Applied Electricity (Deutsche Edisongesellschaft fiir angewandte Elektricitat), founded by the elder Rathenau. This enterprise was based on the Edison—principally the incandescent lamp—patents, previously acquired by Rathenau. In the main the A. E. G. intrusted the manufacturing activities to Siemens & Halske, its chief competitor and at that time the largest electrical concern in Germany, under an operating agreement, and bent its energies to the creation of plants for the delivery of electric current. Under this arrangement the A. E. G. was restricted to the manufacture of incandescent lamps, small dynamos, and small supplies, while’ the rest of the field was left open to Siemens & Halske. Later the Thomson-Houston Co., through the Union Elektricitdts-~ 1 Bee Pt. II, p. 48. :R. Liefmann, Kartelle und Trusts (Stuttgart), p. 163. 1], Riesser, Die deutschen Grossbanken und ihre Konzentration, 3d ed., 1910, p. 543. 'W. Koch, Die Konzentrationsbewegung in d. deutschen Elektroindustrie, 1907, pp. 22, 30, 49. ‘J. Singer, Das Land der Monopole; Amerika oder Deutschland? Berlin, 1913, pp. 195, 200. Ibid., p. 5, CONDITIONS IN PARTICULAR INDUSTRIES. 275 Gesellschaft appeared as a competitor of the A. E. G., Siamens & Halske and the other German companies, and although specializing in electric traction, did mot abstain from activity in other lines. Indications point to a readjustment of the relations between the A.E. G. and Siemens & Halske not long after the Thomson-Houston Co. became active, under which the A. E. G. entered upon the unrestricted manufacture of electrical media and products. Still later the old Edison and the Thomson-Houston patents were centered in the A. E. G. for exploitation in the territory assigned to it. The Allgemeine Elektricitits-Gesellschaft in 1904 got control of the Union Elektricitats-Gesellschaft, Berlin, and of the Felten, Guilleaume-Lahmeyer interests in 1910. In 1907 the number of separate agreements combining the different members of the A. E. G. was about 50. Members of the A. E. G. manufacture and produce dynamos, motors, and transformers, lamps, conductive material, semifinished products and raw materials, and engage in general machine construction. To these divisions of the company, identified directly with its operation, a not insignificant number of enterprises should be added that are only juridicially independent, and lie without the industry proper. Thus the A. E. G. controlled at that time about 800,000,000 marks of capital? These agreements chiefly relate to joint division of work and profits, it being specified that the ‘‘individuality” of the parties is to be maintained.? The annual report of 1914-15 shows a dividend of 11 per cent on a capital stock of $36,890,000 and bank deposits of $24,514,000, There are 66,000 employees. It maintains 38 installation offices, 12 engineer offices, and over 100 branches in other European countries, with 60 branch offices in the rest of the world.4 AFFILIATIONS WITH BANKS AND OTHER ENTERPRISES.—One of the distinctive features of the German electrical industry is the extent to which it is supported by banks. The concentration of the industry in the hands of two great groups was promoted by banking interests, and behind the industrial groups stand the greatest banking interests of the Empire. The banks are directly connected with the management of the electrical companies through numerous common directors. This is strikingly exemplified in the case of the A. E. G. Through Ludwig Born, Eugen Gutmann, Hugo Landau, T. M. Guilleaume, T. von Guilleaume, jr., F. G. von Brockdorf, M. von Klitzing, A. von Blaschke, the late E. Rathenau, his son, W. Rathenau, W. vom Rath, Albert Ballin, Louis Hagen, A. S. von Oppenheim, F. von F. Fuld, A. Salomensohn, Oskar Oliven, M. Kempner, K. Fiirstenberg, W. Oswald, members of its board and i Singer, op. cit., p. 198. 38. Tschierschky, Kartell und Trust (Leipsic), 1911, p. 134, *W. Koch, op. oft., pp. 44-46, 80, ¢ See Pt. II, pp. 49-50. 276 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, executives, the A. E. G. is related to banks and banking groups representing $533,234,000. These are the National- Bank fiir Deutschland, $26,400,000; the Central-Bank fiir Eisenbahnwerthe, $8,444,000; Baubank fir die Residenzstadt Dresden, $1,000,000; Mitteldeutsche Kredit-Bank, $17,250,000; Bank fiir Handel und Industrie, $48,000,000; Bank fir Elektrische Unternehmungen in Ziirich, $34,000,000; Bank des Berliner Kassen-Vereins, $2,590,000; Disconto-Gesellschaft, $75,000,000; Deutsche Grund-Credit-Bank, $6,000,000; Rheinisch-Westfilische Boden-Kredit-Bank, $5,800,000; Reichsbank, $63,600,000: Dresdner Bank, $65,000,000; Deutsche Bank, $62,500,000; Preussische Hypotheken - Aktien - Bank, $20,000,000; Deutsche Hypotheken-Bank A. G., $9,500,000; Mittelrheinische Bank in Coblenz, $5,150,000; Banca Generala Romana in Bucharest (Roumania), $3,000,000; Brasilianische Bank fiir Deutschland, $5,300,000; Allgemeine Deutsche Kredit-Anstalt, $39,000,000; Preussische Central-Bodenkredit A. G., $15,000,000; Ostbank fiir Handel und Gewerbe, $7.500.000; and the Elektro-Treuhand A. G., $13,200,000. These relationships are graphically shown on the accompanying chart prepared from data submitted by William J. Clark, of the General Electric Co., and arranged according to a design suggested by O. C. Merrill, of the same company. (Chart 2.) : This close connection with great banking groups has assisted the A. E. G. in the promotion of its foreign trade. These banks are directly interested in the success of the company; they are also interested in the promotion of German foreign trade, having branches abroad for this express purpose. Accordingly they have assisted the A. E. G. in financing many foreign undertakings in which electrical equipment was required, such as power plants, street railways, clectric light plants, etc. They have also assisted in the organization of special banks and trust companies for electrical enterprises ! (Banken fur elektrische Unternehmungen), preferably abroad, whose especial function is the financing of foreign electrical enterprises through the issuance of bonds. These banking connections also account for the credit extended in foreign trade by the A. E. G. and the Siemens-Schuckert concern. which is similarly supported. The chart also shows the extonsive connections of the A. E. G. with other important German business enterprises. Some of these, such as insurance companies, add to its financial strength. Others are companies manufacturing chemicals, glass, fabrics of various kinds, iron and steel products, etc. Others are ‘mining companies, metal buying and refining concerns. These all facilitate its purchase of materials and supplies. Still others are transportation, light, power, _—————— ee. { W. Koch, op. cit., p. 17. FRINCIRAL CONNECTIONS OF THE ALL GEMEINE ELEAKTRICITATS GESELLSCHAFT OF BERLIN TROUGH LXE TES 0 7° BERS OF 7S BOARD A —— J b APPROXIMAT, NAME OF CAPITAL COMPANY DOLLARS BERLINER ELEXTRICITATS WERKE $4000.000 OEUTSCH LUXEMBUR - SCHE BERGWERRS -U. 56,000,000 HUTTEN 4.6. GEBR KORTING AG. 8,500,000 RUTCERSWFRIE AS. 7,150,000 SCHLESISCHE NLEINBRHN A 6. 5629000 SCH ESSAE A.6. FUR BERGBAU I. 9,250,000 ZINKHUTTENBETRIES RUSSISCHE EISENINDUSTRIE 3,862,000 ARG ZU GLEIWITZ RYBNINER STEINKOHLEN GEWERKSCHAFT, 4,662.00 ZU. RADLIN —ll ro ROSSITZER ZUCKER -RAFFINERIE 2.000.00C Ab FUR VERKEWRSWESEN *159.00¢ ENGLISCHE WOLLEN WRAREN 1.1 73,00¢C MANUFRETUR — MANUPARTUR IEFEAT U. - NALTEINDUSTRIE A 6. /, 400,00 VORNM GEB~4pnT & KOENIG & SAUERBREY MASCHINENFABRIK 6. ©00.00C ZECHARY -NRIEBITZ SCHER HOHLENWERNE GLOCKAUF,, E-72000C VEREINIGTE STANLWERKE VAN DER ZYPEN U WSS - 6,150,000 ENER EISENFITTEN, AG, NOLN - NEUESSENER BERGWERKS - VEREIN ~~ 560.000 HALBERSTADT - BLANKENBURGER — 3,97.5.00C E/ISENRA: NATIONAL BANK FoR DEUTSCHLAND £0-490.0K POSENER STRASSENSAWN 1,250,000 HAMBURGER STRASIENLISENBAHN 7.700000 GES. - EISENGIESSERE! AG. vorm. KE vLING & THomas 790.090 GEBR. BOHLER € CO.R.G 5,160000 AG HEF ECKERT 1,860,000 BERLINER ” BocKBRAVERE! A.6. 797700 STAHNSDORFER TERRAIN AG An TELTOwaNal | 900 GRUBE LEOPOLD BE/ "DOERITZ At IN EDOERITZ 2900.000 LIEGNITZ RAWITSCHER EISENBAMN 2.300002 UNGARISCHE ZUCKER-WOUSTRIE AG. ~~ “150.000 CENTRAL BANK For 8,444,000 ISENBRHNWERTHE DEUTSCH - Kk OESTERREICHISCHE 5.625000 ERCHERKSCEIELLSCHAFT AGL LRUCHRAIMMER 3. 475,000 BAUBANK FUR DIE RESIDENZSTADT -DRES DEN » PO09K VK -BODENBACHER LiSENBG #25000 Rd ALLGEMEINE ELEXTRICITATS GESELLSCHAFT APPROXIMATE CAPITAL f95 000 000 — "PALI gygy - APPROXIMATI NAME OF CAPITAL COMPANY DOLLARS Se Si, SROSSE BERLINER STRASSFNBAHN ~~ #4P00.000 VESTLICHE BERLINER VORORTBAHN 3,250,006 BISMARCKHUTTE 7.50000C | ORESONFR BANK 65,000,000 GELSENKIRCHENER m= VERKS 80,000,000 I A DEUTSCHER LLOYD, TRANSPORT VERSICH~- 1,500,000 |ERuwcs Ad ORENSTEIN & KOPPEL ARTHUR KOPPEL 18,000,000 ’ AG. DEUTSCHE EISENBANN-SPEISEWASEN-GESELL- 787,00C \SCHAFT ] BREITENBURSER PORTLAND 1,120,00( CEMENT FABRIN LANDKRAFT WERKE LEIPZIG AG. 2,500,00¢ 1 IN KULKWITZ J NECKARWERNE AG 5125,00° VEIDERSCHLESISCHE ELERTRICITATS 2,55000¢ | uv wLE™VBANN A.6. COBLENZER A STRASSENBAWN-GES, 2r200.00C 1 DEUTSCHE BANK 62.500,00( PREUSSISTHE HYPOTHEKEN 20,000,00¢C 1_ACTIEN BANK ALNALIWERKE ] RONNENBLERG AG. ~0900K LICHTENBERSER J ao INBERLIN ~~ 465.00C TERRAINGE SELLSCIAFT AM NEUEN 900,000 BOTANISCHEN GARTEN AG. STETTINER | cramor eras AG 4.900.000 VEREINIGTE CHAMOTTEFABRIN. 1,070,000 (YORM. C. KULMIZ) GMBH. VEREINIGTE CHEMISCHEWERNE 844,000 AG. [ mamwoverscrE WASEONFABRIN 940,000 AG. (VEREINIGTE KAMMERICH’ «0 BELTER UND 988,000 SCHNEEVOGLSCHEWERKE, 2.6. ACTIEN ~VEREIN DES ZDOLOGIS CHEN OARTENS 1,50Q00C ZU RERLIN DEUTSCHE HYPOTHEREN BANK $,500,000 OSTBANK FUR HANDEL J U. GEWERBE 7,500,000 mami [a riEBECK SCHE MONTAN WERKE AG. INHALLE A. S. &000,00' AG.IN FIRMA SAAR U. J MOSEL -BERGWERNS ~ 9,500,000 GES. ZU. HARLINGEN UM remreL HOPER FELD A.G. FUR 5,000,000 “UA NSTUCKSVERWERTUNG 6 FUR 61 AS-INDUSTIIE VORM FRIC~ ~=mENs 000.000 WLIANZ “VERSICHERUNGS 6,000,001 4.6. NOMEN -EISENBANN 4000 NNO WESTDEUTSCHE 2 ASR EIAS he 4 IREN 1,175,000 ri . Ver ab U NALTEINDUSTRIE A 6. 1,400,004 ORM. GEEBHAROT § NOENKG 6. SAUERBREY MASCHINENFAERIN AG. 00.000 ZECHAU-KRIEBITZSCHER ; KOHLENWERNE GLOCKAUF,, &-9201000 6 VEREINIGTE STANLWERKE YAN DER ZYPEN U. WISS- 6,150,000 ENER LISENNUTTEN. AG. NOLN - NEUESSENER BERGWERKS -VEREIY — >-360.000 HALBLRSTADT ~ BLANKENBURGER 3,975,000 EISENBANN NATIONAL BANK Fur DEUTSCHLAND 46-490.000 POSENER STRASSENSAMN 1,250,000 HAMBURGER STRASSENEISENBAN 7,700,000 GES. EISENGIESSERE] AG. Vorm. KE VLING § THomas 100.090 GEBR BOWLER € CO.R.G 5,160,000 AG HEECKERT 1,860,000 BERLINER BockBravERE! A.6. 990.990 STAHNSOORFER TERRAIN AG An TELTOWKANAL 700.000 GRUBE LEOPOLD BEI “DOERITZ AG. IN EDOERITZ 2:900.000 LIEGNITZ RAWITSCHER NEN 2.500.000 UNGARISCHE ZUCKER-WOUSTRIE AG 750.000 CENTRAL BANK Fur 8.444.000 EISENBAPNWERTHE DEUTSCH - OLSTLERREICHISCHE 5.625,00C OLRGWERK SCE SELL SCHARF AG LAUCHHAMMER 3.475.000 . BAUBAMK FUR OIE RESIDENZ STADT -ORESDEN *» 000.000 (UX -BODENBACHEI ZISERBOHN Arsene (VEREINIGTE EISENBANN-AU - UND BETRIEBS ~ 1,936,000 GES. TERRAIN -A.G. KLEINBURG 2UBRESLAY £80.00¢ MITTELDEUTSCHE crepireanx | 17,250.00 BANK FUR HANDEL UV INDUSTRIE 48,000,006 ELENTROCHEMISCHEWERKE GESELLSCHAFT MIT 2,500,000 BESCHRANKTER HAFTUNG KRAF TUBER TRAGUNGS ~ - WERKE REEINFELOEN — &F0000 BERLINER HANDELS - 36,500,000 COINLOE &£C0,A6 7000, 000 ALLGEMEINE ELEXTRICITATS GESELLSCHAFT APPROXIMATE CAPITAL $95 000 000. — a 4 NECKARWERNE AG 525,000 NEIDERSCHLESISCHE ; ELEKTRICITATS 2.550000 \ U. KLEINBAHN A.G. COBLENZER STRASSENBAHN-GES, 200.000 DEUTSCHE BANK 62,500,000 PREUSSISCHE HYPOTHEKEN 20,000,000 ACTIEN BANK ALNALIWERKE TONNENBERS AG. 3,000,000 LICHTENBERGLER : a6 INBERLIY 465.000 TERRAINGESELLSCHAFT | AM NEUEN 900,000 SOTANISCHEN GARTENA.G. STETTINER | HAMOTTEFABMIK AG *900.000 VEREINIGTE CHAMOTTEFABRIN. 1,076,000 VORM. C.KULMIZ) GMBH. ae TE oe ert VEREINIGTE CHEMISCHEWERKE 844,000) A.6. HANNOVERSCHE WAGEONFABIIN 940,000 | __ AG VEREINIGTE KAMMERICH V0. BELTER UND 985,000 | JCHNEEVOGLSCHEWERNKE, A.6. | ACTIEN VEREIN DES | 2 aoscneh SAFTZNS 1,500,000 I DEUTSCHE HYPOTHEREN BANK 9,500,000 \ OSTBANK FUR HANDEL - U. GEWERBE 7,500,000 — ARIEBECK SCHE MONTAN WERKE A.6. INHALLE A.S. 8000,000 A.G.IN FIRMA SAAR U. MOSEL -BERGWERKS - 9,500,000 GES. 71, KARLINOEN. TEMPELHOPER FELD 4.6. FUR 5,000,000 GRUNDSTUCKSYERWERTUNG a6. FUR GL AS-INDUSTRIE VORM FRIEDR SIEMENS 000.000 ILLITE oRsReRinas 6,000,000 ] NAMERUN -EISENBAHN 4,000,000 [ WESTDEUTSCHE EISENBAKN - GES. 000.000 MITTELRHEINISCHE BANK %,/50,000 IN COBLENZ ROMBACHER HOTTENWERNE ~~ 2#000.000 A.5FUR NOHLENDESTILLATION 720,000 ZU DUESSELDORF HARPENER BERGBAU, A.6,31,000.000 TT RYEINISCH ~ WEST FALISCHE 20.000.000 FLENTRICITATSWERKE AG WERSCHEN WE/SSENFELSER 4,800,000 BRAUNKOHLEN, A.6. AHEINISCHE A.6. FUR SRAUNNOHLENBERG EAU 3.000.000 EANIKETTFABRINATION 2U C “PHOENIX ~ A.6. FUR BERGBAU U. 50,000,000 HUTTENOETRIES SCHANTUNG ISENBAWN GES. 17,000000 DEUTSCHE WAFFEN -U. MUNITIONS FABRINEN 000000 GESELLSCHAFT FUR ELEXTRISCHE 28,000,006 UNTERNEHMUNGEN — = ed wv NUL KWIT 250v vu 5 t L CHART v y x: 3 y ¥s 1IEDNDRT AC THE FEDERAL TRADE COMMISSION IN [Ss Fx TION IN AMERICAN EXPORT TRADE CONDITIONS IN PARTICULAR INDUSTRIES. 27 and public-utility companies, with which connections are advantageous for the securing of business. CoNTROLLED cOMPANIES.—The A. E. G. maintains a most extensive organization throughout Germany and many foreign countries by means of subsidiary companies. Some of these are banks for the financing of electrical enterprises; others are operating, managing, and selling companies. All in all they represent a capital investment of approximately $500.000.000. The more important are the following: Elektricitits-Lieferungsgesellschaft, with 27 branches in Germany and abroad. Allgemeine Lokal und Strassenbahngesellschaft, which operates 12 street-car systems. Bank fir elektrische Unternehmungen, Zirich, which, with the Société Franco Suisse pour P'industrie électrique in Geneva, operates and controls 50 large enterprises. On June 30, 1915, the paid-in capital stock was 75,000,000 francs, and 8 per cent nt were paid. The total book value of stocks held on that date amounted to 139,030,212 francs. A. E. G. Unternehmungen A. G. in Frankfurt. Treuhandbank fiir die elektrische Industrie. A. E. G. Union in Vienna. Aktien-Gesellschaft fir elektr. Bedarf, Vienna. Union, Ungarische Elektricitits A. G. (for Hungary). The Russian A. E. G. : 3: E. G Thomson-Houston Societda Italiana di Elettricita (for taly). SJoiotd Elettrotecnica Commerciale Italiana (for Italy). Allgemeine Elektricitits-Gesellschaft in Basel (for Switzerland). Société Francaise d’Electricité A. E. G. (for France). A. E. G. Union Electrique (for Belgium). A. E. G. Electric Co. (for England). also the Electrical Co. of England. A. E. G. Thomson-Houston Iberica, Madrid and Lisbon. A. E. G. Societate Generale Romana de Electricitate (for Roumania). A. E. G. Bulgarian Electrical Co. A. E. G. Dansk Elektricitets Aktieselskabet (for Denmark). Elektriska Aktiebolaget A. E. G. (for Sweden). Elektricitets Aktieselskabet A. E. G. (for Norway). A. E. G. Electrical Co. (for South Africa). A. E. G. Compaiia Sudamericana de Electricidad in Buenos Aires. A. E. G. Compaiiia Sudamericana de Electricidad in Rio de Janeiro. A. E. G. Compaiia Mexicana de Electricidad (for Mexico). Nationale Automobil Gesellschaft, Berlin. A Berlin (for electric taxicabs). Elektro-Chemische Werke in Bitterfeld. Capito & Klein A. G. “ Beleuchtungskodrper.” 1 Zwanzigster Geschiftsbericht d. Bank fir eloktrische Unternehmungen in Ziirich, vom 1. Juli 1914, bis 30. Juni 1815 (Ziirich), 1915. 278 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, ‘“ Elektromotor,”” Union Schreibmaschinen, G. m. b, H. “Isolierrohr” G. m. b. H. Metallwerke Oberspree G. m. b. H. Quartzlampen G. m. b. H. Electro-Stahlges. m. b. H. in Remscheid. Gesellsch. {. Elektrische Zugbel. m. b. H. Luftfahrzeugsgesellschaft. A. E. G. Electrical Clocks Co. A. E. G. Fast Train Co. (Schnellbahnaktiengesellschaft). Elektro Nitrum Aktiengesellschaft, Elektro Werke A. G., formerly Braunkohlenwerke Golpa-Jessenitz A. G. zu Halle, a. S. AGREEMENTS COVERING FOREIGN MARKETS.—In 1903 the A. E. G. santered, it is said, into an agreement with the General Electric Co., of America, by which certain territories are respected. The A. E.G. was given the exclusive trade in Germany, Luxemburg, Austria-Hungary, European and Asiatic Russia, Finland, Holland, Belgium, Sweden, Norway, Denmark, Switzerland, Turkey, and the Balkan States, while the United States and Canada were apportioned to the General Electric Co. In addition, the A. E. G. was given the right bo use the Curtis patents for steam turbines and the General Electric Co. that of the Riedler-Stumpf patents.! This agreement, however, binds only the General Electric Co., and other American concerns were not parties to it. The neutral districts, which are open to both, are said to be Mexico, Central America, South America, and Japan. The extent of agreement and competition between ‘the A. E. G. and the Siemens and Schuckert group is discussed later. The Siemens-Schuckert concern—The only large German competitor of the A. E. G. is the Siemens-Schuckert concern, which was organized in 1903 by the Siemens & Halske Co., combining with the Schuckert interests.? In 1912 the Siemens group gained financial control of the Bergmann Electrical Co., which had been an effective competitor. So far as the market is concerned, the Bergmann Co. has continued to exist as a separate company. The Deutsche Bank, which was the bank for both Siemens and Bergmann, negotiated the deal. There being much talk of a monopoly in the electrical industry at that time, the Siemens group made a special point of the fact that the health of the entire German electrical industry depends upon sharp competition among two or three large concerns which encourages invention and develops technical and commercial organization in the competing plants. Carrrar AND DIvIDENDS.—The capital and dividends of the principal Siemens concerns in 1912 are shown in the table following. 1 Koch, op cit., p. 72. 2E. Noether, Vertrustung u. Monopolfrage in d. deutschen Elektricitits-Industrie, 1913, p. 56, ¥Ibid., p. 61 fol. ’ CONDITIONS IN PARTICULAR INDUSTRIES. 219 Tassie 20.—Capital and dividends of Siemens concerns (German electrical manufac turers), 1912. Siemens & Halske, yr 31,1012... ..... .-Siemens-Schuckert, July 31, 1912........... Schuckert & Co., July 31, 1912... Bergmann, Dec. 31, 1912 Capital stock. Marks. 33, 000, 000 30, 000, 000 "0, 000, 000 52, 000, 000 Bonds. Marks. £5, 308, 500 98, 650, 000 35, 700, 000 20, 000, 000 Total assets. SATKS. 188, 112, 499 284,678, 144 132, 726, 496 104, 238, 991 Dividends 1811-12, Per cent. 12 10 8 B CONNECTIONS WITH BANKS.—As in the case of the A. E. G., the Siemens-Schuckert group is closely connected with powerful banking oroups which aid in promoting its business. Considering the Siemens-Schuckertwerke and the Siemens-Halske A. G. as an entity—the Siemens-Schuckert concern—and eliminating duplication of connection with the Deutsche Bank, the Essener Kredit-Anstalt, the Elektro-Treuhand A. G., and the Reichsbank, it appears that German banking interests aggregating $300,000,000 support the organization. The Siemens-Schuckertwerke alone, through interrelated directors, has direct connection with banking institutions representing $200,000,000. Contact is held as follows: Through C. Kiénne and C. von Siemens with the Deutsche Bank, $62,500,000; through C. Klénne and G. Gillhausen with the Essener Kredit-Anstalt, $28,600,000; through C. Klénne with the Elektro-Treuhand A. G., $13,200,000; through H. R. von Maffei with the Bayerische Noten-Bank, $2,800,000, and the Bayerische Hypotheken und Wechsel-Bank, $31,000,000; and through A. von Siemens with the Reichsbank, $63,600,000. Through agencies of the same kind the Siemens-Halske A. G. is related to banks capitalized at $266,845,000, as follows: Through C. Mommsen with the Bank des Berliner Kassen-Vereins, $2,590,000; through E. Heinemann, C. von Siemens, E. Berve, and C. Klénne with the Deutsche Bank, $62,500,000; through E. Berve with the Schlesischer Bankverein Commandit Gesellschaft auf Aktien, $17,560,000; through E. Heinemann with the Deutsch-Asiatische Bank, $5,000,000, and the Deutsche Ueberseeische Bank, $10,000,000; through C. Kléonne with the Essener Kredit-Anstalt, $28,600,000; through C. Kloénne, A. Berliner, and C. Mommsen with the Elektro-Treuhand A. G., $13,200,000; through A. Kirdorf with the Rheinisch-Westfilische Disconto-Gesellschaft, $28,345,000; through C. Mommsen with the Mitteldeutsche Kredit-Bank, $17,250,000; through A. Koechlin with the Bank fiir Orientalische Eisenbabnen in Ziirich, $18,200,000, and through A. von Siemens and C. Mommsen with the Reichsbank, $63,600,000. Relations of the A. E. G. and Siemens-Schuckert.—By some authorities it is said that these two great concerns are in sharp competition 280 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, throughout Germany and in many other parts of the world! On the other hand, various Americans who are well informed as to the conditions of the electrical industry of the world state that in foreign trade at least there seems to be little or no competition between them, but that frequently they operate jointly. It has also been said in Germany that there is more or less agreement between the two and that for several years they have not been unlimited competitors, but that the chief staple products of the two groups have been sold on the basis of a fixed schedule, all larger products, oversea as well as domestic, being handled according to mutual agreement, frequently on sommon account.? The tendency toward working agreements between the great companies when large undertakings were involved, was evident even before 1907, and prior to the acquisition by the A. E. G. of control of the Felten and Guilleaume-Lahmeyer interests. The contract for sonstruction of the Hamburg City & Suburban Railway was divided among the A. E. G., the Siemens-Schuckert concern, and the Felten and Guilleaume-Lahmeyer interests. A similar arrangement was soncluded respecting enterprises in Valparaiso and Warsaw.? The two groups are also said to have entered into a secret agreement sovering bids for furnishing high-potential power in Germany.* The two are also jointly interested in various important enterprises. Thus they organized a joint banking enterprise, the Elektro-Treuhand A. G., Hamburg, in 1912, with a capital of 30,000,000 marks, owned half each by the A. E. G. and Siemens-Schuckert.® This is a credit institution, whose object is the financing of electrical undertakings by making loans on securities issued by electrical companies and deposited with the Treuhand.® In connection with Siemens & Halske of the Siemens concern, the A. E. G. is also interested in the following factories: Accumulatoren Fabrik A. G. in Hagen and Berlin, which has a monopoly of the manufacture of storage batteries in Germany. Deutsche Betriebsgesellschaft fiir Drahtlose Telegraphie G. m. b. H., which has a monopoly for Germany for wireless telegraphy. German Oversea Electrical Co. Ozongesellschaft in Berlin und Petersburg. Vereinigte Kabelwerke in Petersburg. GREAT BRITAIN. The British electrical industry in foreign trade is of peculiar interost, first because it illustrates the influence of British foreign invest-| E, Noether, op. cit., p. 56. See also Pt. II, p. 48. 1 Kartell-Rundschau, 1912, p. 485 fol. YW. Koch, Die Konzentrationsbewegung in der deutschen Elektroindustrie, 1907, p. 113. 18. Tschierschky, Kartell und Trust (Leipsic), 1911, p. 135. ! 33. Singer. Das Land der Monopole: Amerika oder Deutschland?, Berlin, 1913, p. 199. 33, Riesser, op cit., p. 545 fol. Noether, op. eit., pp. 36 fol., and 58. 7E. Noether, Vertrustung u. Monopolirage in der deutschen Electricitéts-Industrie, 1913, p. 72, and Pt. IT, p. 50. CONDITIONS IN PARTICULAR INDUSTRIES. 281 ments on British export trade; and, second, because the manufacturers have organized to obtain effective direct representation in foreign trade and have thus radically departed from the time-honored British method of relying upon export merchants and commission houses in foreign business. British investments in foreign public utilities.—British investments in foreign public service or utility corporations related to or dependent upon the electrical industry, not including the United States and Canada, are in excess of $1,000,000,000. The British organization and control of these undertakings is reflected in the British export trade, for British factories are the chief feeders of these consumers of electrical goods. It is but natural that contract specifications dictated by British executives and engineers call for British or British-standardized equipment and supplies. Moreover, instances are reported where British capital was supplied for the installation of plants at cost, conditioned upon the subsequent purchase of operating supplies and equipment as directed by the financing company or group. Thus initial profits sometimes are sacrificed in the installation per se, and the plant is used to create a steady and profitable demand for complementary supplies and apparatus. Certain details are given herewith concerning the investments in cable, telegraph, and telephone companies and in other local public utilities in South America. (For additional details see Pt. II, p. 537 fol.) CABLE, TELEGRAPH, AND TELEPHONE COMPANIES. —It is difficult to sstimate the total British investment, in enterprises of this kind, but the total capitalization of those listed in the standard British financial publications is more than $170,000,000; of this total more than $43,000,000 is invested in Latin American (principally South American) enterprises, divided among different countries as follows: TaBLE 21.— British investments in cable, telegraph, and telephone companies in Latin America (principally South America). Argentina and Uruguav... Brazil...........-Brazil (to Senegal). ... Chile...... Colombia. . Cuba. .... Uruguay...--Venezuela....... South America (Western Telegraph Co., Ltd West coast of South America.... West Indies & Panama Telegraph Co. (Ltd.). Total.. LA $11, 485, 000 2, 663, 000 1, 235, 000 1, 650, 000 169, 000 1, 100, 006 800, 000 958, 000 14, 490, 000 2, 255, 000 6, 780, 000 43, 585, 000 )&2 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. LOCAL PUBLIC UTILITIES OTHER THAN TELEPHONE COMPANIES.— The total capitalization of those listed in published sources is $973,367,000. Of this amount $621,585,000 is represented by electric tramways, light and power companies, located in Latin American countries, as follows: TABLE 22.— British investments in Latin American local public utilities, other than telephone companies. Argentina !... Bolivia... Brazil. ... +45 330 Chile (Chilean Electric Tramway & Light Co. (Ltd). ..... Costa Rica..... Mexico......_ Paraguay... Peru..... Uruguay..... Venezuela... Youth America (International Light & Power Co. (Ltd.)) $184, 684, 000 1, 750, 000 272, 504, 000 7,675, 000 2, 083, 000 120, 229, 000 3, 500, 000 12, 207, 000 9, 913, 000 1, 700, 000 5, 340, 000 .. 621, 585,000 Combination for foreign trade.—In the export of electrical supplies und equipment British manufacturers cooperate in a comprehensive and effective organization known as the British Electrical and Allied Manufacturers’ Association. Colloquially it is referred-to as the 3. E. A. M. A. and the Beama Journal is its official organ. While the national trait of adhering to individual initiative and ndependence of effort in export business has had its influence in the form of organization and methods of work of the B. E. A.M. A, ‘his has not interfered with the union of effort and resources where necessary to meet the solidarity of foreign competitors in export trade. However, the close connection with banks is not so apparent in the case of the B. E. A. M. A. as in the organization of :he German electrical industry. . OrcanizaTioN.—The British Electrical and Allied Manufacturers’ Association was formed about six years since, and in effect was a reorganization of a former association of electrical manufacturers which had been relatively inactive. A number of the strongest British firms, among them the Brush Electrical Engineering Co. (Litd.), the British Westinghouse Electrical & Manufacturing Co. (Ltd.),® Dick, Kerr & Co. (Ltd.), Siemens Bros. & Co., (Ltd.), Crompton & Co. (1td.), Lancashire Dynamo & Motor Co., British Thomson-Houston Co. (Ltd.),* accompanied by "1 Includes two companies capitalized at $115,482,000, which, although organized and registeredas British, n reality are now German concerns. See Pt. II, pp. 543-544. * Now a German concern. “The American affiliations of the British Westinghouse Electrical & Manufacturing Co. (Ltd.), are identijed by its style or title. The American General Electric Co. has a corresponding representation in the agsociation through the British Thomson-Houston Co. CONDITIONS IN PARTICULAR INDUSTRIES. 288 others, led in reforming the association. It has grown rapidly and now includes practically all of the important British firms in the plectrical field. It consists of bona fide British manufacturers of electrical goods and plants, machinery, material, and complementary apparatus, and of persons connected with firms in Great Britain manufacturing or handling such products.! The controlling body is formed by a president, vice presidents, council, and secretary. The council, which directs the affairs of the association, numbers 15 members, of whom one-third retire annually, but are eligible for reelection. The manufacturers of the association are divided into sections, classified according to the goods which they manufacture. Each section may create committees for the consideration of questions that may arise, either independently or in relation with committees of other institutions. Purroses.—The avowed activities of the association are directed toward fostering and protecting the electrical and related industries in Great Britain through cooperative action, particularly in the following capacities: (a) As a central organization providing means for the discussion of and speedy action on all questions affecting the industries. (3) As the voice of the united industries in agreement or difference, especially with—the legislature, the Government, municipal, local and public authorities, carriers, and kindred institutions. (¢) As a promoter of business in colonial and foreign markets. (d) As a diffuser of confidential and general information. (e) As an arbitrator of disputes. (f) As a promoter and controller of exhibitions. (9) As a promoter of cooperative publicity in the interest of the industries. The association further provides machinery for the prosecution of claims before the Government, municipal corporations, and the board of trade, and against common carriers. Government bills and home office regulations affecting the electrical and allied industries receive prompt and practical attention. Export activities.—Conditions in the export trade have been studied, activity therein stimulated, the errors of others avoided, and a more profitable field secured for national competition. Conferences have been held with British colonial authorities respecting tariff measures. Over-seas committees in the colonies and in foreign countries have been appointed, and the efforts of these committees have been directed along practical lines—such as reports on (1) the chief handicaps to British trade, susceptible of removal through the exercise Statement of the functions of the association by its secretary. . | 984 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. of influence on or through the Government, whether of the United Kingdom or of the country under consideration; (2) the chief shortcomings of British manufacturers in such connections as price, deliveries, design, behavior of plant, etc.; (3) the success of methods smployed by foreign competitors, with a description of them and recommendations flowing from such investigations. The central office in London also acts as a clearing house for information in regard to important tenders in the export field. While this association does not unite the export activities of British electrical manufacturers as closely as similar British organizations in other and even in closely related lines (see pp. 86-98), or as effectually as the German centralized organization, it does permit joint action in many important respects and is far superior to the anorganized condition of the American manufacturers, COOPERATION AMONG AMERICAN MANUFACTURERS. In the development of export trade the electrical industry, especially, requires high technical organization and representation. Under the prevailing conditions it is not profitable for smaller concerns to maintain independent selling organizations abroad, however efficient individually that representation may be. The period that must slapse between the initiation of such an agency and the time when results may be expected is uncertain and discouraging. The benefits derived from its maintenance frequently are negative and may be disproportionate to the expense incurred. Even assuming other conditions, merit of the product, standard of design, price, ete., to be equal between such an agency and a powerful competing foreign concern, the former is at a disadvantage in bidding on contracts calling for complete plants, installations and equipment. The individual or specialty manufacturer, however ably represented in his line, obviously would hesitate, and probably would be unable, to bid with safety on the whole contract. His better prepared foreign competitor, with a widespread organization at his back, would not be affected by similar limitations. Inthe cases of the General Electric Co. and the Westinghouse Electric & Manufacturing Co. there is little, if any, inferiority, as compared with their foreign competitors 30 far as industrial combination affects their efficiency. The organization and scientific articulation of foreign competitors backed by related or other banks are elements too formidable for the smaller American manufacturers to overcome by their own unassisted and scattered efforts. So-called “general agencies” handling a wide range of manufactures not identified with the electrical trade are unsatisfactory in a field where foreign competitors have specialized representation CONDITIONS IN PARTICULAR INDUSTRIES. 285 Cooperation of American electrical manufacturers would permit the joint financing of many foreign enterprises in which such financing must be done to secure the business. Moreover, it would permit the extension of credits, where necessary, to compete with the credits offered by foreign manufacturers. At present the smaller American companies can not handle such business. In seeking the removal of restrictions or obstacles to freer trade in American goods, in propaganda favoring the adoption of American standards and designs by governments and others, and in education abroad touching the merits of American electrical products, the prestige and advantage of united action would be invaluable. In this connection the president of an American wire and cable company stated that European engineering ideals dominate South America to such an extent that some form of organization among the wire manufacturers is necessary in order to overcome the prejudice against American goods, although it is simply a question of design and not of quality. While he did not think it would be possible to combine all the 35 or 40 manufacturers making such goods, still a number could be expected to cooperate in order to work out standard specifications and to apportion the expenses incidental to such a campaign in South America. Non-members of the association would also be benefited since the selling of American goods would be more easily accomplished because of such educational work. SECTION 5. CHEMICALS. The present war has emphasized the importance of chemicals in industry and has brought home the realization of this country’s dependence upon foreign manufacturers for many chemicals. The development of a healthy chemical manufacturing industry is, therefore, a matter of general concern. This development is intimately connected with the export trade policies and the industrial organization of foreign chemical manufacturers, first, because these concerns are important sellers here and have made it their business for years to hinder the growth of a similar industry in the United States; and, second, because American producers must compete with foreign manufacturers in export business. In 1913 exports of chemicals from the United States were valued at $26,787,207 and imports at approximately $96,000,000. As a result of the war the exports in 1915 rose to $80,395,321 in value and the imports declined to about $83,000,000. The principal chemicals exported are given in the table following.! ! Monthly summary of the foreign commerce of the United States, December, 1915 Figures do not in. clude exports of foreign products. 286 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, TABLE 23.— United States exports of chemicals, 19183, 1914, 1915 Acids: Sulpburic......... All other... Aleohol, wood... Baking powder.......... Barks, extracts for tanning. Salefum carbide. . Jopper sulphate... Dyes and dyestuffs. Jmseng......... Lime, acetate of.............. Medicines, pacent or proprietary. Petroleum jelly. ........... Roots, herbs, and barks. ......... 3oda salts, and preparations of..... Sulphur or brimstone, crude... Washing powder and fluid. . All other. Total chemicals. _ .. 1913 $103, 725 381,208 827, 130 865, 751 507, 886 946, 430 211,753 356,815 1,479,578 2,157,866 4,966, 353 635, 435 475,945 1,59, 761 505. 691 8,765. 880 26, 787. 207 1914 $140,375 619, 501 479, 121 778, 632 1,084,088 988, 641 327,967 537,539 1,265, 390 832, 526 8,520, 553 639, 848 410,055 * 734,908 .807,324 533, 066 11,286. 208 28,985. 832 1915 $998,124 9,055,875 632,242 856, 299 4,163,352 1,154,982 680, 541 2,511,065 17539, 161 552, 862 8,109,067 1,034,256 753, 661 7,114,205 724,679 584,355 39,930, 595 80. 395. 321 1 Figures cover period beginning July 1. The principal imports were nitrate of soda, ammonia, potash, colors and dyes, creosote, glycerin, gums and acids of various kinds. GERMANY. Germany ranks first in the manufacture of chemicals. It is with Germany principally, and with Switzerland, England, France, Italy, and Japan incidentally, that the American producer is concerned. The industrial organization which has been so large a factor in the commercial successes of Germany has been especially effective in the chemical industry owing to the special nature of manufacture and distribution. The various products manufactured are so interrelated, the raw products and intermediates of one are so often directly necessary for another, the distribution of basic chemicals is in so many cases essential to the production of finished products that great economies have been obtained by organization. The world’s market in dyes, for instance, comprises more than 900 distinct chemical substances made by the use of 300 intermediate products resulting from the transformation of 10 crude products: obtainable from coal tar. In this manufacture Germany is said to have taken out about 9,000 patents in 40 years. The industry involves more than 1,200 different products and processes, and comprises many independent yet interlaced units of manufacture. In the German chemical industry there is apparently no competition between individual manufacturers; they work together as a unit through various cartels and associations for selling. (See Pt. II, p.69.) Americans encounter these German trade combinations in South America, China, Japan, India, and at home. For many of the chemicals Americans export or might axport in competition with Germany they are dependent on the latter country for the raw materials that go to make them. Attempts to CONDITIONS IN PARTICULAR INDUSTRIES. 287 shut out German chemicals in any country by high tariffs are met by the establishment of German branches in those countries. Another factor effective in the chemical trade and widely used by Germany is the control of patents in foreign countries. In America many of the drugs imported are of a proprietary character and can not be duplicated because of patents given to Germans. Germans have American patents on aspirin, phenacetin, antipyrin, and a great number of coal-tar products. These are both process and product patents, so that Americans are effectually prevented from producing these chemicals except with the consent of the Germans. Germany had similar patents in European countries before the war. By control of patents they are able to obtain high prices for chemicals and substances used in compounding prescriptions and the manufacture of medicinal preparations. . If American manufacturers attempt to approach customers of Germany with products under German syndicate control they are met with concerted action to regulate prices. In many foreign markets German goods have been so long established that they are looked upon as standard and their superiority to American goods is presumed. The German chemical industry has been less subject to the sharp alternations of business prosperity and adversity than other branches of industry. In this industry, as distinguished from most other German industries, there is no evidence of any considerable influence having been exerted by the banks on the movement toward concentration, the initiative for developing combinations having come, in the main, exclusively from the chemical manufacturers themselves. The extent and methods of combination are well illustrated by conditions in leading branches of the industry, viz., the manufacture of coal-tar dyestuffs, and in the production of soda and alcohol. (For potash, see pp. 108-111.) Coal-tar dyes.—The German coal-tar dyestuff business is one of the leading German export industries and is international in scope, dominating the world in its line. In 1913 the total consumption of artificial dyestuffs in the world amounted to over $92,000,000. Germany produced 74 per cent of this entire amount and over onehalf of the materials needed to make the remainder. . This highly developed German industry includes also the manufacture of high explosives, pharmaceutical and photographic preparations, artificial rubber, the production of nitrogen from the air, etc., in several of which branches it possesses a monopoly protected by numerous i Board of Trade Journal (London), Sept. 10, 1914, p. 686. J, Riesser, Die deutschen Grossbanken und ihre Konzentration, 3. Aufl. 1910, pp. 547, 549. 37, H, Norton, Dysstuffs for American Textile and Other Industries, Bureau of Foreign and Domastic Comamerce. Special Agents Series No. 98, 1915, pp. 8 fol. 288 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, patents! The entire German color industry is completely organized and accustomed to act as a unit in furthering the general interests at home and abroad. The German coal-tar dye ‘industry exports three-fourths of its products annually. From 8,294 metric tons in 1880 the exports rose to 93,671 metric tons in 1912. During the same period the value of these exports increased nearly fourfold, viz., from 53,500,000 marks ($13,000,000) in 1880 to 209,100,000 marks ($52,000,000) in 1912. The chief customers are normally Great Britain, the United States, and China (indigo).? The German official statistics for the calendar year 1913 give the value of dyes exported to the United States as $9,030,000. The imports of coal-tar dyes into Germany are relatively small, and come almost exclusively from Switzerland. In 1912 these amounted to 2,995 metric tons, to the value of 6,537,000 marks. According to Wenzel’s directory of the chemical industry for 1912 there are 22 firms in Germany which are engaged in the manufacture of synthetic organic dyestuffs. Of these, 16 firms manufacture coal-tar dyes, 11 being stock companies, four limited liability companies, and one a mercantile partnership with unlimited liability for all the partners (‘‘Offene Handelsgesellschaft’’).s A marked feature of the German coal-tar dye industry is its close concentration into a few powerful groups. Of the 16 firms manufacturing coal-tar dyes, about nine-tenths of the output is controlled by five large concerns, viz: (1) Badische Anilin- und Sodafabrik (B. A. S. F.), A. G., Mannheim-Ludwigshafen; (2) Farbenfabriken vorm. Friedrich Baver & Co., A. G., Elberfeld-Leverkusen; (3) Farbwerke vorm. Meister, Lucius & Briining, A. G., Hochst; (4) Leopold Cassella & Co., G. m. b. H., Frankfurt ; (6) Aktiengesellschaft fir Anilinfabrikation (Agfa), Berlin. The predominance of these concerns in the dye-color industry is 30 large that new factories can hardly grow up, and of the smaller ames only those existing for a long period of years can hold their own.’ ENTIRE INDUSTRY CONTROLLED BY TWO GROUPS.—The process of concentration and combination which had been going on in this industry for a number of years finally led to the organization of two communities of interests which grew out of the above-named five concerns. These two have an effective understanding and work in 1 F. Redlich, Die volkswirt. Bedeutung d. dsitschen Teerfarbenindustrie, Munich and Leinsie, 1914, 0. 38. 1 Tbid., p. 77 fol. ! Bureau of Foreign and Domestic Commerce, Special Agents Series No. 98, 1915, p. 1% VRedlich, op. cit., p. 78 iThid., p. 18. CONDITIONS IN PARTICULAR INDUSTRIES. 289 harmony. Thus the leading company in each of these groups manufactures synthetic indigo, and its price is fixed by agreement between the two. In other matters the groups act together. The Badische group.—The Badische Anilin- und Sodafabrik and the Friedrich Bayer concerns formed a community of interests, of which the Agfa also became a party, for the purpose of avoiding competition among themselves. The agreement was made for 50 years beginning January 1, 1905. According to this agreement the members retain their independent organization and deal independently with outsiders on their own responsibility. In 1908 the smaller firm of Kalle & Co., in Biebrich, joined this group.! The reasons for forming this combination are alleged to be: (a) [noreased strength to meet competition, (b) joint buying of raw materials, (c) the supplying of certain products to each other, (d) joint protection in patent ahd license matters, and (e) joint establishment of factories in foreign countries? A special board has charge of important matters of mutual interest, The common profits are computed annually according to a uniform system, and of these the Badische Anilin- und Sodafabrik and the Friedrich Bayer concerns receive 43 per cent each, while the Agfa receives 14 per cent, after taking into account the various amortization and reserve-fund arrangements. The financial policy of the three concerns has always been kept secret.’ This community of interests does not constitute a juristic or legal person. The members jointly participate in various enterprises, Since 1908 they have owned the Auguste-Viktoria coal mine, for which they paid 17.7 million marks, the Badische Anilin- und Sodafabrik and Friedrich Bayer concerns each holding 475 shares, wnile the Agfa holds 50, out of the total of 1,000 shares of this mine. Until recently they also held an interest in Norwegian concerns for the production of air nitrate. In England they have a common branch establishment, with a capital of £200,000, on whose board of directors the Badische Anilin- und Sodafabrik and Friedrich Bayer concerns are represented by three directors each and the Agfa by one. The Hochst-Cassella group.—A second community of interests was organized in 1904 by the Héchster Farbwerke and the Leopold Cassella concerns. These two concerns combined because the former manufactured certain products which the latter used but did not manufacture itself, and because it was feared that each concern would intrude upon the sphere of the other. The Moscow branch of the - = - er. rm ———————————— tJ. Singer, Das Land der Monopole: Amerika oder Deutschland? (Berlin), 1913, p. 210, ‘Redlich, op. eit., p. 21. abid., p. 19. ‘Ibid., p. 20. 27941 ®1B—muu 90 290 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Hochst concern and the Riga branch of the Cassella also joined the sombination, The combination was formed by the Cassella concern, and is a limited-liability company, with a capital stock of 20 million marks and 10 million marks of bonds. The Cassella concern transferred 5% million marks worth of its shares to the Hochst concern, and received in return from the latter an equal amount of Hochst shares. In 1914 Cassella stock amounting to 6,985 million marks was held by the Hochst concern.! GENERAL RESULTS OF CONCENTRATION.—The results of this process of concentration in the German dye-color industry are:? (1) Out of 16 concerns engaged in this industry two powerful groups or rings have developed; (2) the two groups are able to control largely the prices of raw materials; (3) the mutual exchange of processes. of manufacture, business methods, relations with customers, and of experiences in general, result in reducing expenses—it is said that within two years after this combine was organized the costs for traveling salesmen and for advertising were reduced one-half; (4) the limitation (restraint) of competition abroad? When in 1907 England through its patent legislation compelled the German industry to establish plants in England, only two branches were located there, one by each of the two German groups, instead of five or six representing as many individual German companies. Prorirs.—The combined capital stock of the five leading coal-tar dye firms on December 31, 1912 (the figures for the Cassella firm being for 1911), amounted to 147,000,000 marks. The profits of the German coal-tar dye concerns are so large that they are generally considered as wielding a monopolistic power, due largely to theif control of patents, efficient organization, and financial resources. From 1902-1911 the total dividends distributed by the Hochster Farbwerke, Badische Anilin, Elberfelder Farbwerke, and the Berliner Anilin ranged from 196 to 300 per cent. . The profits of the leading companies in recent years are given on the next page. 1 Redlich, op. cit., p. 20, fol. tTbid., p. 21. )Chem. Ind., 1906, 8. 487, cited by Redlich, op. cit., p. 21. +J. Singer, op. cit.. p. 21L CONDITIONS IN PARTICULAR INDUSTRIES. 291 TABLE 24.—Rate of profit of leading German coal-tar-dye producers, 1892-1901, 1902-1911. Dividends in per cent ooncern. 1892 to 1901. 1902 to 1911. Capital stock Dec. 31, 1912.1 Quoted Dec. 4, 1913. Million marks. Hochster Farbwerke. .. Badische Anilin.......... Elberfelder Farbwerke... Berliner Anilin (Agia)... Jr—" Gold- und Silberscheideanstalt. “ontinental-Caonutchoue 256 | 251 182 29 423 12 255 259 3M ic 638 570.25 35.25 450 649 580 1 The nominal value of the capital stock of these companies furnishes no correct picture of their financial strength. In addition to the exchange value are to be added bonds, on Dec. 31, 1912, as follows: Elber: ‘eld, 25 million; Badische Anilin, 22.23; Hochst, 7.32; Berlin Anilin, 8.22 millions At the close of 1911 "assella had a capital of 25 million marks. According to a report of Consul General Harris, Frankfort on the Main, May 6, 1916, the two important groups of the dyestuff and chemical industries of Germany have recently taken in other concerns, so as to meet more eflectively the situation likely to arise after the war in consequence of the movement to encourage the manufacture of these products in other countries, especially in the United States and England. The plan contemplates the necessity of establishing manufactories in foreign countries and taking such other measures as may be accomplished better by the industry as a unit than by smaller groups. It isin the nature of a cartell arrangement and leaves each concern independent, but provides for a mutual exchange of information as to factory methods and other matters tending to reduce the cost of manufacture and otherwise strengthen the industry as a whole. The profits are to be divided annually according to a scale agreed upon. The principal concerns included in the new arrangement with the capital stock of each are as follows: Badische Anilin- und Sodafabrik, Ludwigshafen, capital stock, 54,000,000 marks ($12,852,000) Farbenfabriken Friedrich Bayer & Co., Leverkusen. capital stock, 54,000,000 marks ($12,852,000). Farbwerke vorm. Meister, Lucius & Briining, Héchst-am-Main, capital stock, 54,000,000 marks ($12,852,000). Leopold Cassella & Co., Frankfort-on-Main. capital stock, 30,000,000 marks ($7,140,000). Aktiengesellschaft fiir Anilin-Fabrikation, Berlin, capital stock, 19,800,000 marks ($4,712,400). Chemische Fabriken vorm. Weiler ter Meer, Uerdingen-am-Rhein, capital stock, 8,000,000 marks ($1,904,000). Kalle & Co., Biebrich-am-Rhein, capital stock, 6,000,000 marks ($1,428,000). 209 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. The dividends paid by the three first-named concerns in 1914 were 19, 19, and 20 per cent, respectively. It is expected that a dividend of 20 per cent will be paid by each for the year 1915. Soda.—The Syndicate of German Soda Factories which has existed since 1900 regulates the sale of soda in Germany. The German Solvay Works Stock Co., a powerful organization controlling the greater part of the German production of soda, heads the syndicate. This company also produces potash, other chemicals, rock salt, also hard and soft coal. Alcohol. —Germany is one of the most important producers of industrial alcohol in the world, the spirit being obtained largely from potatoes. The production in the year before the war was nearly 30,000,000 gallons from potatoes.® The industrial alcohol business is controlled by The Central Agency for Distribution of Alcohol (Die Zentrale fiir Spiritusverwertung), which exercises a- practical moaopoly. A central selling agency is maintained which apportions orders among individual factories, makes contracts for the sale of alcohol, and controls prices of the various products, raising or lowering them according to the demands of the market. The quantity which is to be assigned for production to each distillery is also determined by the central agency. The syndicate includes refiners as well as producers. Refiners are subject to the same restrictions in the matter of price and making of contracts as are distillers. This alcohol cartel handles practically all of the alcohol exported from Germany, most of which went to France and Spain before the war. In these countries the former strong competition of Austria and Russia had been driven out and Germany was the most important exporter of alcohol in Europe. This supremacy was won in many instances by selling for export below cost.” Effectiveness of the comb nations.—The foregoing statements indicate how Germany is equipped to suppress any development of American export or manufacture of those articles which make up the German chemical industry. Consequently few American manufacsurers of chemicals of this kind have tried to seek trade abroad— and many of them have been unable to compete even in their home market. Only a small number of the American chemicals whose export figures are of appreciable size come directly into competition with German products. Of these either the manufacture and export in Germany is not feasible or else it is more profitable to Germany to furnish the raw materials and let Americans export the finished product. Most of the direct foreign competition encountered by Americans, therefore, comes from England, France, Italy, etc., where organization is less comprehensive and complete and competitive conditions are more equal. a _ - ee ree | Commerce Reports, Washington, May 27, 1916, p. 770. 3Stat. Jahrbuch f. d. Deutsche Reich. 1915, p. 106. } See Pt II, p. 70. «See Pt. II, p. 65. CONDITIONS IN PARTICULAR INDUSTRIES. 293 FRANCE. One of the most important companies in France, on account of the number of industries over which it exercises control, is the Compagnie de Saint-Gobain. It was founded in 1665 as a plate-glass manufactory and now holds first rank in the world for the production of this material? It has also extended its operations into other fields, and is a dominant figure in six lines of the chemical industry: Chemical fertilizers (superphosphates), soda, chloride and hypochloride of lime, hydrochloric acid, nitric acid, and sulphuric acid. In the chemical industry it stands first in France.® The Saint-Gobain Company has 30 establishments, of which 22 are in France, 3 in Germany, 2 in Belgium,and 1 each in Italy, Spain, and Bohemia. Two of the concerns in Germany are plate-glass factories and are the largest in that country, one being located at Stalberg and the other at Waldhof’ In all its plants this concern employs more than 16,000 workmen.® The company was incorporated in 1858 and has shown profits of more than 7,700,000 francs. It holds investments in foreign industrials to the amount of 10,032,206 franecs.* The Saint-Gobain concern has constantly sought to extend its activities into various branches of industry and at the same time has endeavored to gain a monopoly wherever possible. In 1806 it set up its own soda works in order to be independent of importations from Spain in manufacturing its plate glass, etc. In 1819, it bought up forest reserves in order to have its own fuel; in 1872 it acquired large chemical-producing interests at Lyons. During those years it was also acquiring plate-glass and chemical concerns so as to perfect its monopoly along these lines. In 1885 the three establishments of the great soda works at Chauny were absorbed, and since that time the consolidation has been known as the “Trust de St.-Gobain.” Where it has been unable to absorb its competitors, it has formed agreements with them, in which it generally dominates. As stated above, it is a leading member of the international plate-glass syndicate which covers France, Holland, Germany, and Austria.’ The production of sulphuric acid and superphosphates in France is also largely in the hands of the St.-Gobain company. It owns the richest pyrite mines in the country and holds important deposits of phosphate rock in France, Belgium, and Italy? In 1900, it supplied Tir. Laur, De 1’ Accaparement, vol- TIX, ,p. 229. 3], Chastin, Les Trusts et les Syndicats de Producteurs, Paris, 1909, p- 84. 3P. Passama, L’intégration du Travail. Formes Nouvelles de Concentration Industrielle (Paris), 1910, pp. 43 and 44; Chastin, op. cit., pp. 84 and 85. J Passama, op. cit., p. 44. 5 P. de Rousiers, Les Syndicats Industriels de Producteurs (Paris), 1812, p. 168 ¢Chastin, op. cit., p. 84. | Pagsama, op. cit., pp. 43 and 44. 1 Ibid., p. 43. 994 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. about 74 per cent of the 4,201,500 tons of pyrites used in the manufacture of sulphuric acid in France. It dominates the superphosphate syndicate in France, which controls more than three-fourths of the chemical fertilizer production of the country. The syndicate has brought about many changes in the superphosphate business in France. It has carried on a campaign to convince the farmers that the products of its laboratories may be depended upon; it has established ‘fertilizer factories at various points so that freight expense sould be lowered; it has divided France into geographical zones, sach with an assigned quota; transportation expenses are shared in common, and profits are prorated among the members. In like manner the St.-Gobain company dominates or influences the syndicates formed to control chloride and hypochloride of lime, hypochloric and nitric acid, and soda.? ITALY. In 1903 the Unione fra i consumatori e fabricante di prodotti chimici (Union between Consumers and Manufacturers of Chemical Products) was formed by the joining of two large fertilizer concerns, Magno Magni & Co., of Venice, and Ducco & Alessio, of Florence. The initial capitalization of 15,000,000 lire was later increased to 25,-000,000 lire. In 1904, under the direction of M. Magni, of the Unione, 16 of the most important superphosphate concerns in Italy were merged under the title Unione Italiana Concimi (Italian Fertilizer Union) with a capitalization of 12,000,000 lire and a combined capacity of 250,000 metric tons of superphosphate—the new combination apparently operating under the control of the Unione fra i consumatori e fabricante di prodotti chimici. Each company made over its plant to the Unione Italiana Concimi, receiving payment one-half in cash and one-half in stock of the new concern. In order to assure to the factories the necessary raw materials the important phosphate deposits of Kalaa-Djerda in Tunis were purchased by the combination and a development company, the Tunis Phosphate Society, organized to work them, 12,000 of its 16,000 shares of stock being held by the combination. Another company, the Italian Union of Pyrite Mines, was formed and pyrite mines at Agordo and Montauro in Italy were purchased. In addition the Society for the Utilization of Sulphur was established to operate a sulphur mine in Sicily. By 1908 the Unione Italiana Concimi had 26 factories scattered throughout the most favorable districts of Italy. It had also four sstablishments producing altogether 250,000 quintals of sulphate of copper. At Vicenza, Rifredi, and Borista it manufactured great quantities of sulphuric acid and other chemicals. It acquired shares 2 Tbid., pp. 285-304. ” 1 Laur, op. cit., Vol. III, pp. 287-207. CONDITIONS IN PARTICULAR INDUSTRIES. 295 n various other companies—3,000 shares in the Glue Industry Society, 3,000 in Romagna Mining Society, and 2,000 in the Monza Electro--hemical Society. Its total holdings in these and other companies amounted to 3,000,000 lire. In 1908 it showed a net profit of 2,904, 581 lire. During the period of prosperity which followed the formation of the combination many cooperative manufacturing companies came into existence, but when less prosperous conditions developed they were forced into bankruptcy and many of them were absorbed by the combination. In 1906, for example, a cooperative superphosphate factory at Rimini to which the Government had contributed 50,000 lire failed and was taken over by the combination. In 1908 the combination paid a dividend of 13 per cent, but in 1910, although it controlled from one-half to two-thirds of the Italian superphosphate production, there was a deficit of about 15,000,000 lire. Moreover, the combination was forced to sell nearly all its holdings in Tunis phosphate, and the whole of its pyrites property. Since then, however, the combination has been gaining ground. In 1911 a small dividend was paid and the balance sheet showed a profit of 753.086 lire. GREAT BRITAIN AND OTHER COUNTRIES. There are some important combinations in the chemical industry of Great Britain and other countries which are of material interest in connection with the foreign trade of the United States, notably those in caustic soda, quebracho extract, iodine, and nitrates, and these are all discussed in the preceding chapter in connection with the competitive conditions of South American trade. (See pp. 177 to 198.) In addition, reference should be made here to the camphor monopoly fostered by the Japanese Government, which controls the imports of camphor into the United States. COOPERATION IN AMERICAN EXPORT TRADE IN CHEMICALS. Some of the combinations mentioned above are, or will be, ensountered in foreign trade by American chemical manufacturers who endeavor to export. Many others affect American export indirectly but materially, because they cover articles which this country imports as raw or auxiliary materials and which enter into the manufacture of other articles which are exported. In this way, therefore, these combinations affect the export of finished products from the United States. In many branches of the chemical industry export cooperation among American manufacturers could be applied with marked success in the development of increased foreign business. In other branches, such as the manufacture and sale of pharmaceuticals, proprietary preparations, etc., its field is more limited because of the 206 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, distinct value of proprietary names, formule, and brands. Speaking broadly, however, this is one of the industries in which export cooperation might be expected to prove highly beneficial. The most striking feature of the chemical industry and the one which has led many of those engaged in it to believe that combined efforts are essential to any development of export is its interrelation and interdependence. The different items in the industry can not be considered separately, but must be thought of as component parts of an organism, each of them vital to some other one, all of them serving some useful function in the industry as an organic unit. In the manufacture of chemicals in America there are a few large houses and a great many small ones. The large houses are already equipped for foreign trade and would have little to gain by combination. The small manufacturers, however, are seldom in a position to undergo the expense of opening up and maintaining an export business. When a small manufacturer of some chemical item or items begins to consider conducting an export trade of his own he is discouraged by the obstacles confronting him. Often he is not familiar with the commercial forms in use, he does not know what other products of the same character as his own are sold in the foreign market. He does not know what advertising will be necessary, what import duties prevail, what laws may affect the sale of his product, to what extent buyers are financially sound, what kind of packing is necessary, and countless other elements in the situation which might mean ruin to his trade. The demands in South American markets are little known and only intimate study can develop just what chemicals are needed, in what form, and in what packages, and how they could be economically marketed in those countries. The question of credits, the habits and customs of the people and their methods of doing business must all be carefully considered. The Manufacturing Chemists’ Association of the United States, in reply to a query by the Commission, stated: The association believes that there is not only an opportunity for, but an obligation upon American manufacturers to develop the foraign trade of this country, The suggestion of export cooperative associations as an economic pete of undertaking this problem would seem to have merit, and the association believes the Government should remove any unnecessary legal obstacles which stand in the way of this development. This body is an organization composed of about 40 concerns engaged in producing a great variety of articles. It is estimated that BO per cent of the manufacturers of heavy chemicals are represented im the organization. After the outbreak of the war the association began an active study of the foreign trade situation, and as a result of investigations by its executive committee consulted the State and CONDITIONS IN PARTICULAR INDUSTRIES. 297 Commerce Departmerits on the possibility of establishing trade relations through a common and cooperative organization. (See Pt. II, p. 273.) Although no tangible scheme of organization has been proposed, it was desired that membership in any export company should be open to manufacturers of competing as well as noncompeting products: By noncompeting products is meant allied products which do not compete but are included in the chemical industry. Advantages of export cooperation.—Export comnbiations would reduce the expenses and supply the information and equipment necessary to the successful entry of the small manufacturer into the foreign field. Direct representation in foreign markets is an essential factor in the sale of articles, like chemicals, which require special technical knowledge on the part of the salesman. In 1912 Consul General Griffiths, reporting on the sale of American paints and varnishes in London, advised that the English trade could be developed only through direct representation and the establishment of branches and branch stores. Such foreign branches are often needed. Combinations could afford to establish foreign branches and stores and maintain direct representatives where individual American concerns could not. European chemical firms are accustomed to grant very long credits—six to nine months at 5 to 6 per cent per annum. The longest terms granted by Americans are three to four months.? One reason for this is that American houses have not the banking facilities or resources to make extended credits possible. Another reason is the lack of information as to the financial soundness of the buyer. A combination could maintain facilities for securing such credit information and would represent enough capital to finance long credits and apportion the risk. In the establishment of chemicals in a foreign market the competition is often one of quality and repute more than of price. The creation of a demand for an American product in the face of an already established demand for a similar foreign product with a reputation for superiority requires extensive and intelligent advertising. A combination would have sufficient capital and perseverance and variety of products to do this. - The ability to adjust and fix export prices would be a great advantage in dealing with underselling in foreign markets by foreigners, An American combination could afford to make lower prices and sustain losses rather than relinquish markets abroad to foreigners who were dumping there. By fixing an export price it could prevent Foreign Trade in Paints and Varnishes, Special Consular Report No. 56, 1912, p. 44. The Americas, July, 1915 208 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. the quotation by foreign buyers of one American producer against another and could eliminate harmful price competition among Americans themselves in foreign fields. By maintaining intelligence and inspection bureaus a combination could supply members with all the special information prerequisite to the marketing of a particular product and could fix standards as to grades, packing, etc. The careless packing of American chemicals has been the source of much complaint from foreign consignees. The maintenance of common distributing depots in foreign countries would be of great benefit and could be economically accomplished by a combination. The number of small packages in the sxport of chemicals, the continual variations in demand, and the need of having the articles as fresh as possible make this step necessary. SECTION 6. PHOSPHATE ROCK.! Phosphate rock is the principal source of phosphorus used in fertilizers, and the United States has the greatest deposits in the world. The world production in 1913 was nearly 7,000,000 metric tons, of which the United States produced 45 per cent, Tunis 33 per cent, France and Belgium together 8 per cent, Algeria 6 per cent, and the Pacific Islands about 4 per cent. The rock is graded according to the percentage of bone phosphate of lime contained. The foreign demand is.for rock containing the largest percentage. The highest grade, containing 80 to 83 per cent bone phosphate, comes from the Pacific Islands, but is produced in comparatively small quantities. One grade of United States rock, mined mostly in Florida, ranks next, selling on a minimum guaranty of 77 per cent bone phosphate. Land pebble phosphate (68 to 75 per cent) ranks third and is also mined in Florida. Rock from Algiers and Tunis has a 58 per cent minimum, while that extracted in France and Belgium is a chalk phosphate containing 40 to 50 per cent of bone phosphate of lime. Out of a total production in the United States in 1913 of over 3,000,000 long tons, 1,366,508 were exported. Before the war Germany was the largest buyer of American rock, with the Netherlands, Great Britain, France, Belgium, Italy, Japan, and Canada following in the order named. The value of exports from the United States for the past three years was as follows: 1913........... 1914... 1915 $9, 996, 580 6,771, 652 1.605. 639 In 1913 there were 30 companies engaged in the mining of phosphate rock in Florida. Of these, 14 were mining hard rock and 16 land pebble rock. It is estimated, however, that about one-half the 1 For a more detailed description of the phosphate rock industry, see report of Federal Trads Coms mission on the Fertilizer Industry, 1916, pp. 84-101, CONDITIONS IN PARTICULAR INDUSTRIES, 299 American pebble phosphate shipped abroad comes from three companies. In France and Belgium the acid-phosphate industry is in the hands of the St. Gobain concern (see pp. 293-294), which holds important deposits of phosphates in France, Belgium, and Italy and controls more than three-fourths of the chemical fertilizer production of France. The largest miner of phosphate rock in the world is the Gafsa Co., with headquarters at Paris. Its mines at Gafsa, Tunis, have an annual output of about 2,000,000 tons. The Algerian and Tunisian phosphate beds have lower ocean freight rates to the European markets than do the Florida fields, the normal rate being about 5 shillings 6 pence as against 14 shillings from Florida. Phosphate rock exported from the United States, especially the high grade land pebble rock, is used to a considerable extent for mixing with the lower grade Tunisian rock to bring the latter up to 68 per cent, making it equal to low grade Florida pebble. The method of selling phosphate rock for export has worked to the creat disadvantage of the American producers. The bulk of the sales are made through three or four foreign brokers who quote one producer against another so effectively, it is said, that the price level has been reduced to a point where there is little or no profit. It is stated that in some cases export rock has even been sold at or below the cost of production. Exports are all made in tramp steamers, the charters for which are arranged by London brokers. Terms are sight draft with documents attached for three-fourths the estimated value of the shipment, the balance to be settled on a basis of weights and analyses made by the buyers. Drafts are drawn for English pounds. An export combination of Florida phosphate producers has been discussed frequently by a number of mine owners as a means of relieving the present depressed condition of the industry. One suggestion is that a corporation be formed with shares apportioned on a basis of productive capacity. All phosphate companies so desiring would be admitted, including those now owned by foreign interests. The corporation: would apportion shipments and fix export prices for various grades of rock from time to time. All contracts would be made with the corporation and all records would be open to Government inspection. The number of new mines to be opened would be restricted. Another proposition is that the producers agree to have one foreign agent to handle the trade of all of them, the prices, terms of sale, and quotas to be determined by the parties to the agreement. The chief advantage of a combination for export as given by advocates of the plan would lie in the ability to regulate prices directly or through control over production. At present, it is said, LI The Americas. June. 1916. D. 3. 300 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. with no control over production or price, American owners of phosphate mines are handing their product to the rest of the world at a bare profit on the operation of mining, when, according to those qualified to judge the relations between the old established price and the increase of supply, the world would pay 100 per cent more for all the United States now sells. A combination, it is thought, could stabilize prices at a point where there would be a fair margin of profit over the cost of production, including amortization in case of rock owned and royalties where mines are leased. The quotation of one producer against another and the resultant price cutting could be prevented by such price cooperation among the member producers. Other advantages named for an export combination are: (1) Reduction of selling expenses by selling through one organization, {2) Ability to obtain more favorable terms—all cash against documents instead of three-fourths as at present; payments in dollars rather than pounds; American weighing analysis as the basis of settlement instead of European. (3) Conservation of high-grade phosphate rock which could be accomplished by so grading the price that rock containing from 68 to 72 per cent of bone phosphate of lime will be as much in demand as the 75 per cent or higher grades. The known deposits of pebble rock containing 75 per cent or more are very small compared with the lower grade deposits. SECTION 7. PORTLAND CEMENT. INTRODUCTION. Portland cement is one of the commodities of peculiar interest in foreign trade, because it furnishes bulk cargo. It is of special interest to the United States in connection with the development of South American business because bulk cargo southward must be available if more favorable shipping rates on general cargo are to be obtained. The Latin American countries are heavy importers of cement and coal, and to these commodities the United States must look for the major part of any southbound heavy low-grade ocean freight. Many conditions favor the American Portland cement mills in such business. The United States is the greatest producer in the world. In 1912 its output was more than 82,000,000 barrels, as compared with less than 40,000,000 barrels in Germany.! As long ago as 1907 the output of the United Kingdom was about 17,000,000? barrels. Moreover, it is probable that the cost of production in the United States is no higher than in Germany and Great Britain and may “lus. Geological Survey: Mineral Resotirces of the United States, 1914, p. 227, and Stat. Jahrbuch f. d. Deutsche Reich, 1914, p. 116. 2 Census of Production of the United Kingdom, 1907, p. 775. CONDITIONS IN PARTICULAR INDUSTRIES. 301 well be lower. Cement is made by grinding, calcining, and regrinding a mixture of clayey materials and limestone. In the eastern part of the United States such a mixture already exists, practically perfectly balanced, in various argillaceous limestones, so that this ‘cement rock” is the only raw material of this kind required. In Europe, however, limestone and clayey elements must be brought together from different deposits, which materially increases the cost of production. Furthermore, coal is*one of the chief items of cost in the manufacture of Portland cement, and coal in the United States is produced at from one-half to one-third the cost of mining in Germany, England, Belgium, and France. From the Lehigh district cement reaches tidewater at a railroad freight rate of 17 cents per barrel, and from the mills up the Hudson it can be floated down at much lower rates. This compares with 15 cents per barrel freight to ports for the competing German cement and 8 cents per barrel for the British. Thus the United States enjoys the advantages of natural deposits of cheaply available raw material, large scale production, low manufacturing costs, and accessibility to the seaboard. In spite of these advantages, however, Germany, Belgium, Great Britain, and France proportionally far outstrip the United States in the export of Portland cement. In 1913 the United States exported 4,000,000 barrels, while Germany exported 6,650,0002 barrels, Great Britain 4,400,000 % barrels, Belgium 5,200,000 barrels, and France 2,350,000 ® barrels. In that year the United States exported only about 4 per cent of its total production, while in 1912 Germany exported about 15 per cent of its production,® and in recent years France has exported as much as 23 per cent of its production. Similarly, Belgium and England export a far greater proportion of their output than does the United States.” Furthermore, of the little which the United States did export prior to the war, five-sixths went to North American countries—notably Panama, Canada, and Cuba-— while only one-sixth went to South America, and in that important market American producers had but an insignificant share of the business, This condition resulted from two decisive advantages enjoyed by European cement mills. They had lower ocean freights to South America, and through cartels, syndicates, and amalgamations they were united into powerful groups, so that individual American producers were opposed by powerful foreign combinations which could maintain superior selling organizations in Latin America. Commerce and Navigation of the United States, 1914, p. 377. (Fiscal year.) Statistisches Jahrbuch [ir das Deutsche Reich, 1914, p. 201. 3 Trade of the United Kingdom with Foreign Countries, 1914, p. 41. | Tableau Général du Commerce de la Belgique, 1913, p. 119. ' Tableau Général du Commerce et de la Navigation, Paris, 1913, p. 501. + Statistisches Jahrbuch fiir das Deutsche Reich, 1914, pp. 116 and 201. ‘ Minaral Resources of United States. 1914 (U. 8S. Geological Survey), Pt. II. pn. 249. 302 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, The advantages in ocean freight rates which European producers snjoyed are sufficiently discussed in the preceding chapters. (See pp. 32-40.) The present discussion, therefore, is chiefly concerned with the combinations among foreign cement manufacturers, taking up the more important countries separately, and with the opportunity for the development of increased foreign trade through cooperation among American producers for export business. GERMANY. Prior to the war Germany ranked next to the United States among the producers of hydraulic cement. According to official Government statistics, 139 cement factories in 1912 produced 42,319,710 barrels, of 375 pounds each, valued at nearly $40,000,000,! and the estimated production in 1913 was between 40,000,000 and 45,000,000 barrels. Cartels among producers control between 50 and 60 per cent of the total output and about 80 per cent of the normal exports? A general German cartel for the cement industry has been impossible, because of variety of .interests and price differences in the various sections and the difficulty of equalizing freight and transportation costs; but the industry, nevertheless, has been quite effectively centralized through the formation of cartels among the sectional groups of producers in the Empire and agreements between these cartels. The number of factories in the various groups is not large, and to a considerable degree production is centralized in the hands of the great stock companies. During the nineties building activity and large over-sea exports encouraged the formation of numerous cement cartels. These were mostly loose price agreements, and comprised the following eight producing groups: (1) the Stettin, (2) the Silesian, (3) the Mérkische, (4) the Saxon or Middle-German, (5) the lower Elbe, (6) the Hanoverian, (7) the Rhenish-Westphalian, and (8) the South-German. This same division still exists at the present time.* Among the prinsipal cartels are® the Union of Silesian Portland Cement Manufacturers (Verband Schlesischer Zement-Fabriken), the Selling Union of the Middle-German Cement Works (Mitteldeutsches Zement Syndikat), a limited liability company, the North-West-Middle-German Cement Syndicate, in form a stock company, the Hanoverian Selling Association (Verkaufsvereinigung Hannoverischer Portland Zement Fabriken), which in 1914 changed its form to a limited corporation, the Rhenish-Westphalian Cement Syndicate (Rheinisch-Westfilisches Zement Syndikat), a limited liability company operating "| Statistisches Jahrbuch fiir das Deutsche Reich, 1914, p. 1186. :Pt. II, p. 43. JPL. I, p. 38. iE. Madelung, Die Entwicklung d. Deutschen PortlandeZement-Industrie (Leipsic), 1913, p. 18 fol. + Pt. II, pp. 38 fol., and Volkswirtschaftliche Chronik, February, 1914. CONDITIONS IN PARTICULAR INDUSTRIES. 303 plants of its own, and the South-German Cement Selling Agency (Litd.) (Sitddeutsche Zementverkaufsstelle G. m. b. H.), reorganized as such in 1904. . With regard to common sales territories, the various cartels had made price agreements among themselves, so that virtually the whole German Portland cement industry was united. In 1900 a reaction set in, Overproduction caused prices to drop and several of the loose price cartels went to pieces. Ruinous competition ensued and a general crisis befell the whole industry. To remedy this situation, to adapt the supply to the demand, and to prevent a too rapid drop in prices, recourse was taken to syndication. Strong syndicates with common selling agencies were ‘formed. In 1905 the Hanoverian and the Middle-German syndicatns were organized and the Rhenish-Westphalian cartel was given a more rigid form. In 1909 the latter combined 35 plants. Agreements were made between the South-German, the Middle-German, and the Rhenish-Westphalian syndicates, and between the latter and the Hanoverian, both tending to control production, prices, and division of territory. The Silesian syndicate made an agreement with the Middle-German, the Stettin works, and the A. G. Adler, of Berlin. The Lower-Elbe syndicate was founded in the same year, and it also made agreements with the Rhenish-Westphalian, the Hanoverian, and the Middle-German syndicates. A price convention was formed by the Hanoverian, Middle-German, Lower Elbe, Silesian, Berlin, and Stettin factories for dividing up the Berlin market. In 1909 another crisis came, which was due chiefly to overproduction and the building of numerous new factories. Nevertheless in 1910 most of the old cartel agreements were extended and new ones made. The Silesian and the South-German syndicates made agreements with Austrian and Swiss cartels, and a common selling agency was organized for the Berlin market. The South-German syndicate extended its agreement till 1925.2 As already stated the cement cartels handle four-fifths of the German cement exports. The overproduction formerly prevalent has resulted in a policy of dumping in foreign trade. As all the cartels are willing to dispose of their surplus production at low prices they have been able, through this control, to obtain and retain the bulk of the trade in many foreign countries. While a majority of these foreign sales were made in Asia, Africa, and continental European countries, Germany before the war was the largest exporter of cement to Latin America. In Cuba, American competition can not be met on account of the 25 per cent tariff. In Argentina and Chile several great cement works have been built, so that Germany’s prospects there for the future are not so favorable. In Brazil the customs-E. Madelung, op. cit., pp. 28, 49. 51. 2 Thid., p. 53 fol. 804 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. tariff preference of 20 per cent granted to cement imported from the United States is offset by the lower shipping-pool freight rates snjoyed by the German-cement producers, and German exports to Brazil have increased in recent years. This advantage enjoyed by the German cartels, together with their dumping policy and their ability through cooperation to maintain permanent salesmen in foreign markets, is largely responsible for their extensive foreign trade.! [n addition to cartels, other forms of concentration in the nature of fusions and communities of interest exist in the German cement industry. There is a general association known as the Union of German Portland Cement Manufacturers (Verband der Portland Zement Fabrikanten), through whose work the German product has been largely standardized as to form and quality and compares favorably with that of competitors. A number of cement concerns are interrelated through common shareholdings. This is the case frequently among members of different cartels, and tends to a certain extent towards cartel cooperation. Combinations exist also between cement factories and organizations, and construction companies, electrical works, barrel factories, and coal mines cither through ownership or common shareholdings.® GREAT BRITAIN. Great Britain is the third largest producer of Portland cement and the second largest exporter to Latin America. The industry is highly centralized through two large combinations, viz, the Associated Portland Cement Manufacturers (Itd.) and the British Portland Cement Manufacturers (Ltd.), which are closely connected. The Associated Portland Cement Manufacturers (Ltd.).—This combination, organized in 1900, is the leading power in the industry in Great Britain. It was an amalgamation of 27 firms and it effected agreements with four other firms which brought them into harmonious relations with the combination. The combined output of these 31 firms in 1899 amounted to 89 per cent of thie total production of the Thames and Medway Valley districts, where fourfifths of all English cement is manufactured. Some of the concerns included also produced lime, brick, and special kinds of cement, and owned engineering works. Consequently the combination can supply a varied line of building materials and can make its own repairs.’ Its issued capital in 1914 was over 1 Part TI, pp. 4345. 2Ibid pp. 42-43. +E. Madelung, op. cit., p. 56. 'H. Levy, Monopoly and Competition (London), 1911, p. 223. YH. W. Macrosty. The Trust Movement in British Industry (London), 1907, p. 109, CONDITIONS IN PARTICULAR INDUSTRIES. ’ 305 $20,000,000.! The management was in the hands of 21 directors, 12 managing directors giving all their time to the business. The latter met weekly and made detailed reports to the monthly meeting of the full board. The selling operations were managed by a sales committee composed of the former sales agents of the companies taken over. The association, in its earlier years at least, did not meet with the financial success anticipated and the first dividend was not declared till September, 1913.2 During recent, years the position of the association has been strengthened by a reorganization of its management,® and a strong forward policy has been initiated? It is well protected from foreign competition by its exceptionally low transportation costs to London and other domestic consuming markets. Notwithstanding this fact, a considerable amount of cement is imported, but these imports appear to consist of the poorer grades of cement for use in cheap construction. The association has strongly influenced prices, although it was unable to control them during a period of decreased demand at home and abroad, accompanied by foreign dumping.* Exports of English cement have more than doubled since the association was organized.! In connection with the extension of foreign business, the directors paid special visits to South Africa, Australia, British Columbia, and California in 1902. In 1905 the conditions of export to Holland were fixed, to continue to 1914, by a joint conference of English, French, Belgian, and German cement makers.® The association is said to exercise considerable real control over the greater part of the home and export trade of the United Kingdom in Portland cement, supplying the bulk of the great demand of London, and a large proportion of the contracts at home and abroad where the best quality is specified” It has recently (1913) obtained interests in Canada! The head of an English firm in South America stated that it was impossible to buy rood cement in England for export except from this combination. which included every maker of good cement there. The British Portland Cement Manufacturers (Ltd.)—This organization was formed in 1911 for the purpose of combining a number of concerns engaged in the manufacture of Portland cement, lime, whiting, etc., in the United Kingdom. Including the companies in which The Stock Exchange Official Intelligence (London), Vel. XXXII, 1914, p. 552, and Vol. XXVII, 909, p. 592, and Macrosty, op. cit. p. 114. ?The Times (London), Sept. 11, 1913, p. 17. -G. R. Carter, The Tendency Towards Industrial Combination (London), 1913, p. 276. ‘Levy, op. cit., pp. 222-225. Ibid, p. 225. iMacrosty, op. cit., pp. 115-116. Carter, op. cit., p. 276. The Times (London), Sept. 30, 1913, p. 17. 927941°—16——21 306 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, it has a substantial interest, the firms acquired number 33, with a manufacturing capacity of upwards of 1,500,000 tons of Portland cement per annum. Its issued capital is over $12,000,000.! These businesses include some of the most important in the country, and as the works are situated in various parts of the United Kingdom the company possesses geographical advantages of great value in the distribution of its product.? The company also acquired a substantial interest in a new company formed to erect cement works in South Africa. A large proportion of the capital of the British Portland Cement Manufacturers (Ltd.) is owned by the Associated Portland Cement Manufacturers (Ltd.), and the association is largely represented in the management of the company. Through these interrelated combinations the manufacture and sale of British Portland cement is thus effectively centralized, and the organization extends its activities into foreign trade with marked success. In Argentina, for example, this makes possible the joint advertising of the leading British brands, the elimination of unnecessary salesmen and offices, and the maintenance of the highly trained sales organization with which American producers must compete in that market. BELGIUM. The manufacture of Portland cement was formerly one of the important industries of Belgium, and a large part of the output was exported. A great deal of capital was invested in the industry, and this, together with the competition met from natural and other cements, hampered many attempts at regulating the output. For many years various syndicates were formed among the cement producers in efforts to limit production. In 1892 an agreement was made to regulate sales in Belgium, a minimum price being fixed for each Province. In 1901 the convention expired, and two years later the Association de fabricants belges de ciment portland artificiel was established, all the producers but one becoming members of the combination. The convention was to continue until December 31, 1913. This combination was a regular comptoir de vente, or selling bureau, as each member agreed to make all domestic salesonly through the Association under penalty of 100 francs per ton. Prices were fixed periodically by the general assembly, according to market conditions, and each manufacturer was assigned a quota. This apportionment was made upon two bases. The first consisted in an equal division of one-half the total sales among all the members, and the second was a proportional part assigned each member out of the 1 The Statist (London), July 26, 1913, pp. 325-327; The Stock Exchange Official Intelligence (London). 7ol. X XXII, 1914, p. 588. ® The Times (London), Dec. 1, 1913, p. 78. 3The Statist (London), July 26, 1913, pp. 325-327; The Stock Exchange Official Intelligence (London). Fol X XXII. 1914. pp. 552. 588. CONDITIONS IN PARTICULAR INDUSTRIES, f = Uni-- 20,7 ’ i .—. . Hag second half. In this way the smaller concerns were a 8,of Hil of & the business and were enabled to develop. No NA Oo placed, on production, the surplus being thrown upon the fore. dy” By 1909 there were several concerns which were not membelSoftie association, because unwilling to adhere to the fixed prices and limit their domestic sales. In recent years the Belgian natural cement has been a strong competitor of the Portland cements of Belgium and Germany, because it could be produced so cheaply. German factories carried on a systematic campaign against the use of natural cement and particularly against its being packed in old Portland cement sacks.! OTHER COUNTRIES. A oo At least one combination in this industry exists in France, the Société anonyme des ciments francaise.! The cement industry in Sweden is controlled largely by syndicates? Since the beginning of the present war this country has become a much more active competitor in the sale of cement to the South American countries. Combinations exist among the producers of cement in Russia, Switzerland, Italy, and other countries, but these countries are not serious competitors of the United States. INTERNATIONAL COMBINATIONS. Before the war the South German syndicate (see Pt. IT, p. 42) had an agreement with the Rhenish-Westphalian and the Belgian syndicates not to compete in each other's territory. All three syndicates jointly organized the ‘‘ Vereinigte Deutsch-Belgische Zementfabriken” in 1905 for supplying the Dutch market, Holland possessing no cement industry of its own. The South German syndicate received 42.8 per cent of the Dutch sales, the Rhenish-Westphalian 24.2 per cent, and the Belgian 33 per cent. As a guaranty of good faith each of the three syndicates deposited 10,000 florins with the central concern at Rotterdam. A fine of 10 marks per ton was imposed for every ton sold contrary to the convention, the minimum fine being 1,000 marks. This combination developed into the first general international cement convention; it was joined after a time by the English cement trust, the Société Anonyme des Ciments Francaise, of Paris, and the Norwegian Portland cement works of Christiania.®* The continuance of such an organization was reported in the Wirtschaftliche Chronik for February, 1914, as follows: ‘Between the German, Belgian, English, Swedish, Danish, and Norwegian cement syndicates an 1 Pt. II, p. 4. 2 See pp. 158-159. +E, Madelung, Die Entwicklung d. Deutschen Portland-Zement Industrie (Leipsic), 1913, pp. 41, 47, rand G. Da Leaner, L’Oreanisation Syndicale des Chefs d’Industrie (Brussels), 1909, vol, 1, pp. 191-106. 308 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. international convention for export has been effected. The convention running for 12 years deals with foreign export markets and regulates the selling prices, but not the quantities to be sold.” COOPERATION AMONG AMERICAN PRODUCERS. Without doubt, cooperation among American cement producers ‘for export business could largely increase the foreign trade in this sommodity, particularly with South America. The producers of the great Lehigh district in eastern Pennsylvania and New Jersey, those of the Hudson district in New York, and those in Maryland are all near enough to the seaboard to be able to angage in export business. At present there are but three companies large enough to undertake foreign business directly. In addition, however, there are several smaller producers in these districts who are exporting some cement through export commission houses and who desire to increase this business by having it handled by their ywn representatives. To enable these concerns to have their own exporting organization, a joint sales agency has been proposed for export business. This would be organized as a cement exporting company, the capital stock of which would be owned by the producing companies on a pro rata basis determined by each company’s total shipments for the past three years. The management of the company would be in the hands of a board of directors composed of one representative from sach company, and an executive committee to be elected from the yoard. The subscribing companies would according to this plan enter into an agreement to sell to the exporting company their pro rata share of cement for export as required at whatever price might be agreed apon, and would extend to the exporting company 90 days’ credit, when necessary, on such shipments. Thus the capital of the company would be supplemented without additional cash being paid in. In ase any company was not prepared to furnish its proportion of cement, provision would be made to enable the export company to purchase from the other member companies. As most of the cement exported is packed in barrels and many of the companies have no cooperage facilities of their own, the plan contemplates an arrangement that would enable the subscribing sompanies to obtain a superior package at a minimum cost. To insure uniformity of quality all cement sold to the exporting company would be tested by laboratories, or experts of international reputation engaged for this purpose, and certificates issued covering the quality and packages. All the cement would be sold under one brand, each mill, however, having its own number and private mark on the package for identification purposes. CONDITIONS IN PARTICULAR INDUSTRIES. 309 The plan further contemplates a thorough examination of the Latin-American market, the sending of salesmen to the Central and South American countries, the storage of a stock in foreign warehouses, the establishment of proper financial relations with foreign customers, and other necessary details for the creation of an effective marketing organization. It is claimed that such a joint export company would enable the smaller eastern producers to develop a valuable export business. It sould take contracts which now are too large for any one of the smaller companies to handle, and by subdividing such orders all the participants would share in the business. It could also afford the study of markets, the advertising, demonstration, and solicitation of business by experts, and it could keep a permanent organization in Latin America. Such work will be necessary to obtain and hold trade in South America in the face of competition from the European combinations. Moreover, to be profitable, & large business must be developed in order to reduce the selling cost per barrel. No one of the smaller companies can now undertake such a campaign, but together they can. Moreover, with one single ‘epresentative handling large orders and making more frequent shipments they could doubtless obtain better charter rates to South America than can now be secured for occasional small lots. Increased export trade to South America would be particularly beneficial to these producers, at the same time that it was creating the bulk cargoes needed for better ocean-freight rates on general traffic to the southern continent. The building of cement mills in New York, West Virginia, and to the westward of the Lehigh district has left this region with a large potential overproduction. Competition has been very severe and prices at the minimun for several years. The development of a greater export trade would e'p to relieve this situation and would tend to lower production costs ‘Ff rough operation nearer to full capacity. Moreover, the usual slackening of demand in winter through the lessening of construction work in the North Temperate Zone during that season would be materially remedied, for winter here is the summer season in South America, when construction work and the demand for cement are at their height. Hence increased South American business would be especially efficacious in giving steadier operation, since such orders wonld be filled at the time of lowest domestic demand. Without cooperation of the kind outlined the smai'er ranufacturars near the Atlantic coast can not hope for more than nccasional small export orders in the face of the competition of tt » large American producers and the more vigorous opposition of the powerful combinations of foreign manufacturers. With such joint action they can 310) REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. andoubtedly increase quite materially their own and the total exports of American Portland cement to Latin-American countries. SECTION 8. LUMBER. [HE AMERICAN EXPORT TRADE IN LUMBER. Export trade in the products of the American forests dates back to the time of the first colonists. The lumber first exported was chiefly limited to the white pine of the northern forests, and the United Kingdom and the West Indies were the principal markets. For the 12 months ending June 30, 1914, just prior to the outbreak of the war, the value of logs, timber, lumber, and shingles sxported was over $70,000,000. This includes about 170,000,000 feet of logs and hewn timber valued at about $4,000,000, 2,800,000,000 feet of sawed timbers, boards, planks, deals, joist, and scantling, valned at about $66,000,000, and 47,000,000 shingles valued at about $100,000. Southern yellow pine (including pitch pine, short leaf, and other varieties) held the first place among the woods exported. It was credited (using round numbers) with 1,500,000,000 feet, valued at $31,000,000, the exports classified as pitch pine being 1,300,000,000 feet with a value of $27,000,000. Fir (often known as ‘‘ Oregon pine’) held second place in the total quantity exported (630,000,000 feet), and third place in value, (88,700,000), while oak held third place in the total quantity exported (231,000,000 feet), and second place in value $10,600,000). For the year ending June 30, 1914, Europe formed the principal market for the exports, taking about 1,100,000,000 feet, valued at about $31,500,000. The United Kingdom, Netherlands, Italy, and Germany were the principal importing nations. The next largest market was North America, which took about 800,000,000 feet, valued at $18,000,000, 59 per cent of the total quantity going to Canada. South America took 405,000,000 feet, valued at $8,100,000, most of it going to Argentina, Chile, Peru, Brazil, and Uruguay. Exports to Oceania were 324,000,000 feet, valued at $5,400,000. Of this, 90 per cent went to Australia, Tasmania, and New Zealand. Asia took 146,000,000 feet, valued at $1,750,000, exports to China forming about three-quarters of this total. Exports to Africa were 57,000,000 feet, valued at $1,330,000. An examination of the destinations reported for the principal kinds of woods, shows that the bulk of the exports of each variety is confined to a certain well-defined marketing territory. Europe formed the principal market for yellow pine, taking 49 per cent of the total exports of this wood. The United Kingdom was the prinsipal importer, taking about one-third of the exports of yellow pine to Europe. The next largest market after Europe for yellow pine CONDITIONS IN PARTICULAR INDUSTRIES. 311 was North America, which took 81 per cent of the total exports. Canada led, with 42 per cent of this quantity; Cuba took 26 per cent and Mexico 10 per cent. Exports to South America formed 17 per cent of the total quantity exported. Shipments were almost wholly confined to the east coast, Argentina taking 70 per cent, Brazil 15 per cent, and Uruguay 12 per cent. Exports to Africa formed 2 per cent of the total. There were practically no exports to Oceania and Asia. The largest market for fir was Oceania, which took 38 per cent of the total exports. Australia, Tasmania, and New Zealand took over four-fifths of this. The next largest market was Asia, which took 21 per cent of the total quantity exported. Exports to China formed three-quarters of the exports to Asia. Shipments to South America were 18 per cent of the total exports, 49 per cent going to Chile and 45 per cent to Peru. Canada took about 68 per cent of the exports to North America, which formed the next largest market, with 15 per cent of the total exports. Exports to Europe formed 6 per cent of the total, and to Africa 2 per cent. The other soft woods for which exports were separately reported, are redwood, the total exports amounting to 67,000,000 feet, of which Australia, Tasmania, and New Zealand took 74 per cent; white pine, with total exports of 44,000,000 feet, of which Canada took 21gper cent, and Argentina and Mexico about 20 per, cent each; gpruce, with total exports of 18,000,000 feet, of which Argentina took BS per cent; and cypress, with total exports of 14,000,000 feet, 65 per cent of which went to Canada. Europe formed the principal market for hardwoods. It took 72 per cent of the total exports of oak, 86 per cent of those of gum, and 2 per cent of those of poplar. In each case the United Kingdom was the largest single importer, taking 66 per cent of the European shipments of oak, 51 per cent of those of gum, and 95 per cent of those of poplar. Exports of oak to Canada, which was the next largest market for this wood, formed 25 per cent of the total quantity exported. The total quantity of lumber exported, large as it appears when measured in millions of feet, forms but 8 per cent of the annual cut of the forests of the United States. All of the remainder goes to the domestic markets, whose consuming power forms the chief factor affecting the prosperity of the lumber industry. Since the demand for lumber is subject to severe fluctuations, and because of sonditions inherent in the nature of the industry, as well as legal considerations, it is difficult to readjust readily the conditions of supply, prices are subject to frequent and wide variations, and the industry is subject to alternating periods of prosperity and depression. The instability of the demand for lumber for domestic con 319 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, sumption makes it desirable that a broader market be established for the industry through the promotion of its foreign trade, so that, as far as possible, the variations of the domestic demand can be counterbalanced by those of the foreign demand, and the industry be conducted on a more stable basis. To a considerable extent, also, the foreign demand is for grades of lumber which, due to the limited domestic call for them, command relatively higher prices abroad, where there is a scarcity of such grades. In many cases foreign conditions make possible a more extensive employment of the wood for uses to which its particular qualities adapt it than can be done in the home market. In the difference between the domestic price and the foreign price, because of the higher character of the utilization possible abroad, there is a direct economic gain, it is argued, not only to the American lumber manufacturer, but ultimately to the American public. It represents the gain obtained through preventing the waste which takes place when a higher grade of material is employed where a cheaper grade would give substantially equal service. When building up a more extensive foreign trade it is desirable, however, that the conditions under which the past and present sxportation has taken place should be radically modified. The control of the export trade in American lumber has been, and still is, largely in the hands of foreign brokers. The part played by the manufacturers in the transaction has usually ended with the placing of the lumber on board ship. They have not been concerned with the development of a foreign market for their products. Neither have the brokers been interested, except in so far as they were able to sell American lumber abroad cheaper than lumber obtainable from other sources. The result has been that because of a lack of sffective organization of the American lumber manufacturers in sxercising a greater degree of control over the distribution of their products which are exported, the foreign distributer and consumer have obtained a large share of the benefits which the possession of so great a national resource should have secured to an American industry. It is not merely the profits of distribution which the foreigner has been able to obtain. He has been able to concentrate buying power into relatively few hands and to have recourse to other sources of supply the product of which he can occasionally substitute in the place of American lumber. Contrasted with the situation occupied by the foreign buyers is the disorganized condition of the American manufacturers. In the bargaining that takes place for the sale of their product one manufacturer is played against another. Their ignorance of conditions in foreign markets, their absence of distributing facilities to reach the foreign consumers, and their individual financial necessities make impossible any unity of action CONDITIONS IN PARTICULAR INDUSTRIES. 313 on their part in dealing with the foreign broker. The result is that the American lumber exported has brought and is bringing lower prices than it should obtain in the markets of the world. The forests of this country are not inexhaustible, and, inasmuch as their product contributes to the development of foreign nations, it is contended that it should command prices high enough to make an adequate return to the United States for the consumption of its natural capital, represented in its forest resources, The conditions under which the export trade in American limber has been conducted may be set forth briefly. As already pointed out, Europe is the largest market, the principal importing nations being the United Kingdom, Netherlands, Germany, and Belgium. The bulk of the exports to Europe are confined to yellow pine and hardwoods. The trade is handled chiefly through foreign brokers whose headquarters are in London, Hamburg, Antwerp, and Rotterdam. These brokers usually have branches in this country, or connections with domestic brokerage houses through whom they buy. These work in harmony with buying combinations such as the Syndicate of the Timber Importers of Belgium, the Association of Hamburg Importers, the South German Lumber Importers of Mannheim. [n Europe American lumber meets competition with the pine, fir, and spruce lumber manufactured in Norway, Sweden, and the Baltic Provinces of Russia, with the spruce, hemlock, and other softwoods in Austria-Hungary, Roumania, Bosnia, and the neighboring States, in the various kinds of lumber from the still extensive forests either in national or private ownership in France, Germany, and Italy, and with lumber imported into Europe from sources other than the United States. The only reason why American lumber is handled is because the price at which it is sold is always cheaper than that at which a satisfactory substitute can be obtained. There are available to the European markets sources of lumber other than the United States, which, more advantageously situated, as far as transportation is conserned, can furnish a supply of lumber adequate to all needs. The owners of these natural resources, however, are not willing to sacrifice any profits due to their advantageous situation by undertaking to supply the whole market at the prices which the American manufacturers are willing to take for their lumber. They are satisfied to supply only that part of the market demand in which they can most advantageously-meet the prices of American lumber. The European zonsumer gets the benefit of the relatively low prices of the American product, while at the same time he is assured of a permanent future supply, to become available when the American lumber prices are forced up by the diminishing supply and increased costs of the American lumbermen. 314 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. European lumber manufacturers can secure, to a considerable degree, stability of prices for their products. The sawmill men of Norway, Sweden, and Russia establish once a year a base price for their lumber. Preparations at that time have already been made for the output for the year, The newly cut stock is allowed to dry for the following year. The marketable stocks on hand, even to the quantity of each grade, are known and their size determines the amount of business to be done. The base price fixed upon is not deviated from for the entire year. The purchaser knowing that, is absolutely safe in placing his orders in January for June delivery, inasmuch as his competitors handling that product have to pay the same price. He san expect no such stability in prices of the American lumber which meters Europe in competition with the Baltic lumber. It has to come to the markets from much greater distances, ahd orders to the manu-Eacturers must be placed at prices prevailing months in advance of the time of arrival of the lumber. An unavoidable delay on the part of a manufacturer in getting a prompt charter, because of the difficulties encountered by American shippers, deperident on foreign carriers, has often resulted in shipments of later orders, taken at substantially lower prices, arriving at their destination simultaneously with the earlier high-priced orders. Furthermore, the practice by many American manufacturers of shipping cargoes on consignment to various European markets and being obliged to sell them in transit before their arrival leads to wide fluctuations in the prices of American lumber at points of destination. A cooperative association of the largest manufacturers of spruce, hemlock, and other softwoods in Austria-Hungary, Roumania, Bosnia, and neighboring States existed for a number of years prior to the war. This combination, known as the Accordat, had headquarters in Vienna. The quantity of lumber manufactured and sold through it was about 4,000,000,000 feet a year. The mills were located within reasonable distance of the Danube, which was used for ‘ransportation purposes by means of a line of some 20 steamers owned directly by the combination, besides a number of vessels owned by the individual members. It did business in Mediterranean ports as well as in England, Germany, and France, meeting competition where necessary, and holding prices higher in noncompetitive markets. In delivering at Liverpool or Hamburg they had to meet competition from Sweden, Norway, Russia, Siberia. the United States, and Canada. In South America, the third largest market, exports of yellow pine are practically confined to the east coast, and those of fir to the west coast. In the case of the yellow pine, almost all of the purchases are made by importing houses, owned by European capitalists. Most of these houses do a general importing business. They usually JONDITIONS IN PARTICULAR INDUSTRIES. 315 buy through London brokers, or their American connections, or else through independent New York brokers. In a few instances orders have been placed with the mills, but this is unusual. The importing houses in turn supply the local retail yards, as well as consumers. In the case of fir, most of the purchases are made through brokers located at San Francisco, or Seattle, who in turn place the orders with the manufacturers. At each port on both east and west coasts the control of the lumber importing business is in the hands of a few firms who, from time to time, have agreements as to their buying and selling policies. In the fourth largest market for American lumber, Oceania, most of the lumber went to Australia, Tasmania, and New Zealand. Shipments of fir to these three countries for the year ending June 30 1914, amounted to about 227,000,000 feet and of redwood to about 50,000,000 feet. The two woods formed 96 per cent of all lumber exported from the United States to those counties. A recent report of Franklin H. Smith, published by the Bureau of Foreign and Domestic Commerce (Australasian markets for American lumber), describes the present situation. Cooperative buying is done through the Sydney & Suburban Timber Merchants’ Association, the Timber Merchants’ Association of Melbourne and Suburbs, the Timber Merchants’ Association of South Australia (for Adelaide and the surrounding territory). There are combined buying agreements of the lumber importing firms at Perth and Fremantle (western Australia), and Hobart and Launceston (Tasmania), and the Auckland Sawmillers’ Association, in New Zealand. The purchase and distribution of cargoes passes through the cooperating hands of importing firms at Christ Church and Lyttleton, New Zealand. These cooperative buyers are almost wholly in control of the local channels of distribution. Canada, which took over 16 per cent of the total exports in the year ending June 30, 1914, is the only foreign market in which the manufacturers deal, to any extent, directly with their customers, and not through the medium of brokers. In most of the remainder of the export trade their product passes through the hands of one or several brokers before it reaches the retailer or large consumer. Direct representation of the manufacturer in this section of the export trade is of the highest importance for the development of a profitable and permanent business. COOPERATION IN THE LUMBER EXPORT TRADE. The various lumber manufacturers’ associations have from time to time collected and distributed to their members statistical information which bore in part on the export trade. Also attempts have been made to establish standard grades for export lumber. A few cooper- 316 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, ative organizations for handling the export trade of a number of manpfacturers have been attempted from time to time, as, for example, the Cargo Pool in Douglas fir in 1902-1904, which was considered to have had a large measure of success while it existed. At the present time the Redwood Export Co. is the only organization of this kind which is in active operation. The Redwood Export Co., formed in 1912, is incorporated with a nominal capital stock of $6,000, all of which is held by four companies. These four companies, whose total capitalization is $20,000,000, manufacture in their five mills about one-half of the cut of California redwood. The exports of redwood form about oneeighth of the total cut, and the Redwood Export Co. controls about 80 per cent of these exports. It acts as a selling agency for exports only, doing no domestic business. In addition to handling the export business of its members it makes sales, on a commission basis, for nearly all the outside companies in the redwood industry, the commission charged being 1} per cent. Orders to its members are distributed according to agreed proportions, each member's quota being determined by the particular conditions under which his “mill is operated. The work of the Redwood Export Co. is stated to have been successful and to have resulted in a benefit to the whole redwood industry. Profits of the company have been used in further development of foreign markets. Since the organization of the company in 1912, exports of redwood have increased over 50 per cent. The smaller mills have been enabled to participate to a greater extent in foreign. trade. Prior to the formation of the company it was customary to assemble at San Francisco Bay the shipments from the individual mills and to reship from there. The material exported—ties and rough clear lumber—formed a minor part of the output of each mill, and no single mill was in a position to furnish full cargo lots. The present cooperation insures the prompt filling of large orders and prevents demurrage charges on. account of delays in loading. It is claimed for the Redwood Export Co. that its activities have resulted in a greater stability of prices, and that this in turn has induced the foreign merchants to carry larger stocks. As a result, demand has been steadied and charter engagements facilitated. As has already been stated, Australia, New Zealand, and Tasmania form the principal foreign markets for redwood. In the year ending June 30, 1914, they took about 50,000,000 feet of that wood. The control of the channels of distribution for lumber in those countries by the powerful buying combinations of retail merchants has already been mentioned. In the case of fir lumber, which is the wood most largely imported, the great bargaining power thus afforded to the Australasians has been used to play one American manufacturer CONDITIONS IN PARTICULAR INDUSTRIES. 31% against another and to cheapen the prices of his product. In the case of redwood, where the buying combination has had to reckon with a selling combination, the result has been that the manufacturers have not only expanded their trade but have done so at prices satisfactory to them. The Redwood Export Co. is actively engaged in developing new foreign markets and is conducting a considerable propaganda work in India, the United Kingdom, and Argentina. Two other export companies have been organized, but are not yet in active operation. One, the Douglas Fir Exploitation & Export Co. (Inc.), is capitalized at $200,000. The purpose of this company is to handle the export trade of manufacturers of Pacific coast lumber on a brokerage commission basis. The corporation will guarantee the payments of all accounts handled through it within 10 days after receipt of complete shipping documents from the manufacturer. Part of its profits are to be used in the further development of foreign markets. It will deal either through the foreign broker, or if found advisable it will sell direct to the buyer. It is planned to control a sufficient producing capacity of the mills which saw for export to make it impossible for brokers to accumulate sufficient quantities from the mills outside of the selling agency to compete with it at cut prices. The company has not yet commenced business. One reason seems to be that it has not yet been able to secure the cooperation of a sufficient proportion of the export mills. Some manufacburers have been opposed to joining the combination because they do not believe in the principle on which it is founded and consider that it will be unsuccessful; others are in favor of the trade extension part of the work and would be willing to support the propaganda, but object to having their lumber sold through the combination. A still more important reason, however, for the inactivity of the Douglas Fir Exploitation & Export Co. is the question which has been raised concerning its legality. Although organized solely for the purpose of engaging in trade in foreign countries, there is felt to be a possibility that the character of the organization and some of its proposed activities might he held to be in violation of the Sherman Antitrust Act and of certain parts of the Clayton Act. It is apparently their doubt as to the legality of the project which has deterred many manufacturers from giving their support. Whijle numerous producers have not been willing to join the combination, not one was found who thought he would be injured by it. If the project wqrked successfully, the export mills left outside of the combination would also benefit by the more stable market conditions, the propaganda work, and the higher export prices which would be brought about through its activities, 318 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. A company has been organized at Mobile, Ala., under the name of the Lumber Exporters’ Line. It has a capital of $100,000, and will “harter steamships to carry southern hardwoods to the principal ports of Europe. Eleven southern lumber companies with an aggregate capital of $5,000,000 are represented. The reason given for the formation of the line is the inability of southern hardwood lumbermen to transport their products profitably to European markets since the war. In addition to the companies already organized, export selling combinations for the purpose of promoting trade in pitch pine, North Carolina pine, and a number of other woods, are being advocated by manufacturers. Most of these are along the general lines of the Douglas Fir Exploitation & Export Co., and are confronted by the same questions concerning the legality of the proposed organization and activities. Until this doubt is removed there is little prospect of further cooperation of lumber producers along such lines. ADVANTAGES AND DISADVANTAGES OF PROPOSED EXPORT COMBINATIONS OF LUMBER PRODUCERS. Many of the arguments for and against the proposed lumber export sombinations apply also to other lines of exports. Only their bearing on the particular conditions existing in the lumber industry will be considered here. -Apart from the possible legal restrictions which may be held to exist against such proposed activities, it has been questioned whether monopolistic power would not be acquired by such combinations that would or could be used to the detriment of the producers who remained outside of them, and, also, to the detriment of the domestic consumer. It is advisable to examine the bearing of such objections on the actual conditions in the lumber industry before the advantages sought by the proposed combination are considered. "The possibility that the combinations would have a detrimental effect on the interests of the domestic consumer is based on the assumption that the price he would have to pay for his lumber would be unduly raised, through the lessening of the available domestic supply through exportation. That is the only way that these combinations, which concern themselves solely with the export business, could affect his interests adversely. The facts regarding the conditions under which the lumber industry exists in the United States do not support this assumption. More than nine-tenthis of the lumber annually cut goes into domestic consumption. All but a relatively small portion of the mills in the industry are so located that it will never be practicable for them to export any considerable part of their product. These mills must continue to depend on the domestic demand for the consumption of their output. Furthermore, of the mills which are so located that it is practicable for them to export CONDITIONS IN PARTICULAR INDUSTRIES, 319 there will_be a number that will prefer to remain outside of the proposed combinations. Such mills will be free to sell all or part of their product in either the domestic or foreign markets as their individual interests may dictate. The domestic consumer is thus assured of an ample supply. Any injury to his interests would have to come from the higher prices which the foreign consumer might be willing to pay for the exportable lumber than the domestic demand will warrant. To the extent that such higher foreign prices encouraged exportation the supply available for domestic consumption would be lessened. If exportation were stimulated to a sufficient degree, the American consumer would have either to pay some advance in the prices of the orades of lumber demanded by the export trade or use as a substitute another grade of lumber, or material other than wood. In fact, the present competition of wood substitutes is so acute that it contributes in considerable degree to the present depression in the lumber industry. Any attempt to raise domestic prices by mills whose location forces them to depend wholly on domestic consumption must meet an increased competition from wood substitutes. Any appreciable difference in prices, due to the increased exportation, is likely to be limited to certain high grades for the few woods whose physical characteristics are such that it is difficult to find satisfactory substitutes for them. The practical effect which any possible appreciation of domestic prices in such few instances would have on the domestic market would be relatively insignificant. In so far as the export mills participate also in the domestic trade, they must meet the prices obtained for similar stock by the mills which are dependent exclusively upon the domestic trade. These prices can not be substantially affected by the volume of exports as long as the mill capacity is, as to-day, greatly in excess of the actual production. The possibility that the proposed export combinations would or could be used to the detriment of the producers who remained outside of them must also be considered in the light of the actual conditions. Obviously the producers who might be adversely affected would be limited to those in a position to sell lumber for export. The way in which they might be adversely affected would be a curtailment of the export market now available to them through the loss of their foreign customers to the combination. The only inducements by which the combination could prevail upon such customers to change would be better treatment, either in facilities afforded, lower prices, or both. Since one of the principal objects of the selling combinations is to obtain higher prices for American lumber, the competition between the combination and the American producer outside of it, would be principally on the basis of facilities afforded the foreign customer. The ability of the combination to supply superior facilities would be dependent on being able to operate more économically In 320 BEPORT ON COOPERATION IN AMERICAN EXPORT TRADE. the case of the one active export selling agency, the Redwood Export Co., its facilities are made available on a commission basis, to outside producers, and sales are made for nearly all the outside concerns in the redwood industry. In other projected selling combinations, such as that for North Carolina pine, it is proposed that a uniform selling commission be charged on all sales, whether of members or outsiders, and that any particular advantage derived through membership be limited to a voice in the management and a return on the capital invested in the selling company. In case several outsiders should not care to export through a combination controlled by business. rivals, but still desired the facilities obtainable through a larger scale of operations than each, individually, was able to secure, they could establish a rival export combination. The present lumber situation indicates, because of the wide diversity of interests, and the temperamental inability of any considerable number of American lumber manufacturers to work in harmony, that no one export combination is likely to include in its membership more than three-quarters of the production available for the export trade in that wood. For example, while the Redwood Export Association is said to control 80 per cent of the export trade in redwood, its stockholders control about one-half of the redwood cut. Most of the projected selling combinations, in order to attain a successful volume of business are counting on being able to make sufficiently attractive terms to outsiders to secure the handling of their export business. The advantages which are sought through the establishment of export selling combinations in the lumber industry, may be divided nto three classes: Greater economy in operation, development of foreign markets, and benefits to the exporters, the whole industry, and the public. (1) Greater economy in operation is planned in many ways. One is the ability to ship full cargoes where individual mills or individual foreign purchasers could only handle smaller lots. By being the common channel through which the orders of most of the purchasers in a foreign market will pass on their way to the mills, an advantageous bunching of orders to make full shipments is practicable. This is particularly the case with such woods as redwood and North Carolina pine and the hardwoods, where the exportable lumber forms a small proportion of the output of any one mill. One of the important benefits secured by the Redwood Export Co. is stated to be the rapid loading of vessels with shipments made directly from the mills, each contributing its quota to the filling of large orders. As a result demurrage charges on account of delay in loading are avoided. By engaging all required freights through a central office, the export combination could eliminate the forcing up of shipping rates, through the competitive bidding of manufacturers far ocean CONDITIONS IN PARTICULAR INDUSTRIES. 321 transportation. The foreign carriers, which are largely under the control of a small group of men who dominate the European shipping interests, would lose some of their present advantages of dealing with individual shippers. If it should be found desirable, an export combination could charter its own vessels, or, if necessary it could own them. This would eliminate the expense of the ship broker. In addition to its power of securing lower freight rates, the combination is expected to be able to secure cheaper insurance. Through its distribution of the lumber abroad, to the yard men and large consumers, it is claimed that the selling organization of an export combination would be able to effect economies over the present system. The volume of business would permit the establishment of agencies in the different foreign markets, in charge of efficient men, whose ‘sole interest would be to promote the sale of the lumber handled by the combination. It might be found advisable to maintain stocks on hand in some foreign depots, in order to assure consumers of a steady supply; and it might eventually be found desirable to establish planing mills and retail yards, to promote the consumption of the lumber locally. The depots would be of service in taking care of shipments which, for some reason, were not accepted on arrival by the consignee, and would otherwise have to be sold at a sacrifice price in the foreign market to avoid the heavy demurrage charges. Such depots would also give the combination an advantage in adjusting claims made by purchasers, since it would not have to accept unduly disadvantageous settlements. Furthermore, by its control over the character of the shipments made by the mills in filling their export orders, it is claimed that the combination would eliminate the causes of a large number of claims which are justly raised at the present time by the foreign purchaser. The selling organization would, furthermore, be in close touch with the credit situation abroad, and be in a position to act promptly to protect its interests should necessity arise. (2) The economies effected in operation by the proposed export combinations would benefit primarily the stockholders and to a lesser degree those outside producers who obtained cheaper facilities in their export business through the combination than they could otherwise have secured. The benefits of the work to be accomplished by the export combination in developing foreign markets would be much more widely distributed. There are a number of practices in the export trade as conducted to-day which prejudice foreign buyers against American lumber. These abuses are in part attributable to the ignorance or carelessness of shippers, in part to actual dishonesty, and in part to the difficulty of fixing responsibility for mistakes in the business as at present handled through brokers. The export combinations propose to eliminate these causes 27941° 16-99 322 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, » of complaint by guaranteeing that all shipments made through them shall be up to the specifications stipulated by the order, such as grade, condition of lumber, and exact sizes; by requiring proper measurement of the export shipments, so as to avoid claims for shortage, or customs fines because of shipments measuring in excess of the quantity of lumber declared on the ships’ papers. The neglect of certain shippers to live up to the export requirements, either in the character of the lumber ordered or the shipping regulations, has been especially prejudicial to the extension of the American lumber trade in South America.’ Another work of great importance, projected by the proposed export combinations, is the increased foreign demand to be developed through propaganda work in educating the foreign consumers to a realization of the advantages which they can secure through the more extensive use of American lumber. The influences of custom need to be combated; prejudices against American lumber, based on ignorance of the uses to which it is best suited or the proper methods of handling it, need to be overcome; and new varieties of lumber, adapted to the foreign conditions, needed to be effectively introduced. This is true throughout the world. In South Africa the unsuccessful attempt of importers to resaw clears out of some shipments of dimension timbers of merchantable grade created a wrong impression about fir. The importers had been accustomed to buy hewn pitch-pine timbers and saw clears off the outside of them. Virtually all the flooring sold as Oregon pine flooring in Sydney is manufactured from the merchantable Oregon pine (fir) bought in cargo lots and ripped up as occasion may demand. It is not the fine, well-seasoned, and excellently machined flooring made from select stock, such as is commonly sold in the United States in either flat grain or edge grain; in fact, the Australian-made Oregon pine flooring permits of no comparison with the flooring turned out in America! Gradually the Chinese carpenter and contractor is being led to give up the long-established custom of estimating the lumber requirements for a building in cubic feet and buying the estimated amount in the log and sawing it out. He is slowly realizing, after some years of education on the part of the foreign yard trade, that dimensions can be furnished direct from the yard in any number of pieces cheaper than a 16 by 16 inch or 20 by 20 inch can be hauled to the point of consumption and whipsawed into the required sizes 1 In the report on Lumber Markets of the East Coast of South America (by R. E. Simmons, Bureau of Foreign and Domestic Commerce, Special Agents Series No. 112.1916), the abuses in the vitch-nine trade are discussed io detail. 2 Report of the Forest Branch of the Department of Lands, British Columbia, 1915, p. 9. % ¥, H. Smith, Australasian Markets for American Lumber, Bureau of Foreien and Domestic Commerce. Inecial Agents Series No. 102 (1915), p. 18. CONDITIONS IN PARTICULAR INDUSTRIES. 323 by a Chinese sawyer.! In Montevideo (U ruguay) certain importers regarded Douglas fir unfavorably because the initial cargo more than 13 years ago arrived badly discolored and deteriorated through the shipment of unseasoned material? Although sugar pine and Idaho white pine are true white pines, and in the United States are called upon to meet identical uses with northern white pine, their introduetion into the Argentine market has encountered obstinate prejudice. Both of the western pines, it is stated, met with concerted opposition, owing to a rumor that in the United States they are not considered true white pines. They were called pino blanco bastardo (bastard white pine) and regarded by the trade as inferior. Prejudice against Idaho pine was overcome by the wood winning favor on its own merits with dealers who were induced to buy small trial orders.? White pine for many years has been demanded only in 12-inch widths, and the markets of the River Plate still require boards and planks of this dimension notwithstanding that the major portion sold has to be cut down for use. Continued efforts of American exporters to induce the introduction of American standard sizes has been vigorously objected to. It is characteristic of the Uruguayan and Argentine trade, as of most countries, to object to changing established customs. Though the 12-inch size is general, however, there are several importers “in different markets who have lately been handling smaller dimensions regularly enough for it to be said that these American sizes, by virtue of their utility at lower vrices, are slowly winning a place in the market. One of the results hoped for from the projected work of propaganda is the introduction to the foreign consumer of new species of lumber which are particularly adapted to his conditions, and the securing of his adoption of them in place of his present building material. In the United States the sod houses on the western prairies and the log cabins of early forest settlements were long ago replaced by houses of sawn lumber. The settlement and development of the sparsely settled areas in South America and South Africa will demand large quantities of lumber, and furnish a fertile field for active propaganda work by American lumbermen. The export combinations propose to follow various methods in their propaganda work. A certain amount of demonstration of the practical adaptability of American lumber to meet the different local conditions encountered abroad will be necessary. In some markets, such as countries where there is a much higher protective duty on dressed lumber than rough lumber, it may be necessary for the ex Mr——— W——— _—-s A - ee —_—_—_ iF. H. Smith, China and Indo-China Markets for American Lumber, Bureau of Foreign and Ilomestio Commerce, Special Agents Series No. 104 (1915), p. 17. ?Bureau of Foreign and Domestic Commerce, Special Agents Series No. 112 (1918), p. 23. 3Ibid., p. 22. ‘Bureau of Foreign and Domestic Commerce, Special Agents Series. No. 112. ». 30. 394 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, port combination to establish a planing mill in order to secure the best results in creating a local consumption of its lumber. It may be not only necessary to distribute samples of wood, but even in some cases to subsidize the construction of sample houses in order to furnish practical object lessons of the desirability of using American lumber. In addition to the ocular proof afforded through the use of the lumber, it is planned to spread information by means of suitably prepared advertising literature, by the distribution of properly prepared buildng plans, and by information to prospective consumers given personally through fully qualified agents. An ¢ffective propaganda of the kind projected by the export combinations will involve large expenditures, and must be financially supported by, dnd be under the control of, the American lumber manufacturers who seek to profit by the export trade. No other set of men is primarily interested in the work of extending the foreign markets for American lumber. As has been already elsewhere pointed put, American lumber is sold by foreign brokers and bought by forsign consumers merely because it happens to be, at present, the cheapest material available for the purposes to which it is to be put in the foreign market: In many markets the lumber trade is in the hands of importing houses which likewise handle many other commodities. The interest of such houses is fo Handle the lines which give them the most profit, whether lumber or wood substitutes, no matter what they are or where they come from. The same house will handle lumber from many competing sources. In some cases the importing houses are financially interested in developing a trade in native lumber, and their sales of imported lumber are subordinated to supplementing the use of the native woods. Not only does American lumber now have to compete in many countries with native lumber protected by high tariffs, but if the proposed preferential tariffs between the present allied nations are put in effect following the end of the war, the demand for American lumber from many foreign markets now available may be seriously diminished. For example, if in addilion to being confronted by the organizing power possessed ab present by the buying combinations of Australian lumbermen, the fir manufacturers of Washington and Oregon should be compelled to compete with Canadian fir (Oregon pine) admitted to Australia on a preferential duty, they would be at a still greater disadvantage in their Australian trade than they are to-day. The need for a closer organization to increase the bargaining power of the American producers of export lumber and to promote the use of such lumber by foreign consumers, is likely to grow rather than diminish. (3) The benefits which the work of the export lumber-selling combinations, if successful, would obtain for their members do not need to be mentioned, nor is it necessary to point out the benefits which the CONDITIONS IN PARTICULAR INDUSTRIES. 325 whole export lumber industry—inside and outside of the combination—might gain through an increased demand for their product abroad, created by the propaganda work of the combinations. The benefits to the nation, as a whole, from the work of these combinations may be mentioned in more detail. They would come through increasing the stability of an industry which employs a large working population, and the increase in the national wealth due to the economies effected by the combinations in the conduct of the export business. They would come through the sale abroad of high grades of lumber at relatively much higher prices than the conditions of the domestic market warrant; through any increase in export lumber prices due to the effective action of unified bargaining power in dealing with the combined purchasers of foreign markets; and through the profitable sale of common and low-grade material, which otherwise would be left to waste in the forests because of insufficient demand for it in domestic consumption. Through all these ways the country not only receives from the foreign consumer a more adequate return for a great American natural resource, but a higher degree of utilization of that natural resource is also made possible. SECTION 9. COAL. INTRODUCTION. Coal is one of the most promising commodities for the future development of a heavy export trade from the United States. This ountry has the greatest deposits of coal of any in the world. Its reserves are estimated to be greater than those of all other nabions combined.! It has an abundance of coals of especially fine quality for all the uses to which this mineral is put, from household purposes to the most exacting metallurgical and steam demands. fmmense producing fields are near enough tidewater to facilitate export business. Suitable coal-handling equipment is already in use at many ports. The production of coal has been developed on a larger scale, with a greater use of mechanical equipment, and at a lower average cost per ton than in any of the important Furopean coal-producing countries. In 1913, the last complete year prior to the war the United States was credited with 89.5 per cent of the world’s output, while Great Britain contributed but 22 per cent and Germany but 20 per cent of the total.? With all these advantages in its favor, however, the United States was exporting much less than either Great Britain or Germany. In fact, British exports of coal were three and one-third times thosa 1The Coal Resources of the World, Executive Committee of the Twelfth International Geological Congress, Canada. 1913, Vol. I, pp. xviii and xxxiii. 3U. 8. Geol. Survey: Mineral Resources of the United States, Part 1I, 1913, Production of Cual, p. 781. 306 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. of the United States in 1913. In that year the production and exports of coal (in tons of 2,000 pounds) for Great Britain, Germany, and the United States were as follows: TABLE 25.—Production and exports of coal of Great Britain, Germany, and the United States, 1913. great Britain... .c...c.nee Germany... wa United States. Country. Production. + 321, 922, 130 305, 714, 664 569.960, 21¢ Exports. 2 82,208,132 338,138,171 $94 798. 080 17. 8. Geol. Survey: Mineral Resources of the United States, Part 11, 1914, p. 640, ' . BE. Saward, The Coal Trade, New York, 1915, p. 151. In addition 23,555,288 short ons were supplied for bunker use at British ports to vessels engaged in foreign trade. 3 Answirtiger Handel im Jahre 1913, Part II, p. 97. \ J. 8. Geol. Survey: Mineral Resources of the United States, Part II, 1913, p. 779. Of the total exports in 1913 from the United States, 19,689,066 short tons went by rail or inland waterways to Canada, a market in which little foreign competition is met, and 2,110,416 short tons were sent to Bermuda and the West Indies also exclusively American markets. It is apparent, then, that of the very small proportion of the coal output which is exported nearly 90 per cent went into markets where it was practically without competition, and only ‘bout 10 per cent entered competitive markets. The competitive foreign markets which promise most for the development of the coal export trade are South America and the Mediterranean countries. In both these markets the chief competition has been British. Some German coal formerly went into South America and Italy, and after the war efforts will presumably be made to revive this business, but the great bulk of the coal imported hy all the countries indicated has always been British. The following table shows the coal exports of Great Britain, Germany, and the United States to these countries in 1912 and 1913: TapLe 26.—Eazports to South America and the Mediterranean from the United States? Great Britain? and Germany,’ 1912-1913. (In tons of 2,000 pounds.) 1912 ‘013 Markets. United States. Great Britain. Germany. United States. Great Britain. Germanv. taly..... 3pain. ...... Argentina ....... 3razil....ccaeens “hile. ...nuuene Jrugtiay ceema-0) [Q) 175,607 | 44, 232 33,321 45 0968 0, 281, 832 3, 854, 505 »,768, 910 1,820,873 618,899 971 750 798, 604 76,399 677 559 57 L124 4 8 78, 454 313, 525 125, 990 8 075 10, 804, 820 4,086,611 4,136, S01 2,113,296 659,149 R10. ROF 936, 161 307, 809 20,166 2,924 4,879 1.951 1 Statistics for United States from Mo of the Foreign Commerce of the United States, Jecember, 1915, EB 28; and Black Diamond, Dec. 12, 1914, p. 480. 1 Statistics for Great Britain from The Coal Trade, 1916, p. 154. » Statistics for Germany from *‘ Auswirtizer Handel im Jahre 1913,” Part II, p. 97. t Figures not available. 'Manthlvy Summary of the Foreign Commerce of the United States., Dec., 1914, p. 438. CONDITIONS IN PARTICULAR INDUSTRIES. 327 From this table it is apparent that prior to the war the United States had but an insignificant share in the coal trade of these countries. In order to understand the previous competitive conditions of this trade and to appreciate the prospects for business after the war, it 1s necessary to know something of the organization of the coalmining industry in Germany, Great Britain, and the other chief European producing countries. GERMANY. There are three chief coal-producing regions in Germany, viz, the Ruhr in the northwest, Upper Silesia in the southeast, and the Saar in the southwest. The first district is the most important, and is the only one that needs special consideration in this connection. It is the territory covered by the Rhenish-Westphalian Coal Syndicate (Rheinisch-Westfilisches Kohlen Syndikat). Although there are other coal combinations of some interest, the Rhenish-Westphalian cartel is the outstanding feature of the organization of the German coal-mining industry. The Rhenish-Westphalian Coal Syndicate.—This combination is the largest and from an economic point of view one of the most important cartels in the Empire. Its structural organization has in a large degree become typical. It was founded in 1893 for a period of five years, but the syndicate agreement was continued with some modifications until December 31, 1915. At that time disagreements among the members threatened to prevent a further renewal but the Federal Council (Bundesrat) adopted measures for the formation of a compulsory cartel, whereupon the agreement was continued temporarily by effecting a so-called “transition syndicate” to continue antil April 1, 1917. The State of Prussia, as owner of coal mines in this district, has joined the syndicate, thus giving the Government a voice in its deliberations. Prior to the temporary extension of the agreement the coal syndicate had 67 members, but additional companies are in the transition syndicate. (See Pt. II, pp. 19, 21.) OrcanizatioN.—The Rhenish-Westphalian Coal Syndicate is incorporated as a stock company with a capital of $571,200. According to its by-laws of 1904, its activities may include, besides the purchase and sale of coal, coke, and briquets, also the preparation of coal, the acquisition of mining land and mining shares, the operation of enterprises of all kinds for the purpose-of storing, selling, and transporting mine products, as well as the participation in such enterprises. The capital stock is divided into 8,000 shares of 800 marks each, transferable only with the consent of the company. The members of the combination are tied by contracts with the syndicate and with each other in such a way -as to effect a centraliza- 398 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. tion of the sales of coal and coal products and the regulation of production and prices.* The statutory organs of the syndicate and their chief functions are: (1) The assembly of mine owners, which elects the other organs and accepts or rejects the prices and quotas assigned to the different mémbers. Each mine owner has one vote for every 10,000 tons of coal of his quota. Each group of mine owners representing a quota of 1,000,000 tons is entitled to appoint one member of the board of directors. (2) The board of directors (Beirat). (8) The so-called “ Commission C,” composed of eight members, which determines the annual quotas of the members. No member of this commission has any voice in decisions affecting any mine in which he is interested. f4) A board of arbitration. The combination concerns itself only with the limitation and the sale of the output. The technical improvement, the relationship between the works and their employees and other internal affairs of the mines, are left entirely to the individual members. A member may cease working any opening he wishes or buy land and open new mines. Many of the mines are operated by iron and steel companies. These companies agree not to use in their furnaces any coal or coke not produced by members of the coal syndicate. Propucrion.—The following table? compiled from the annual reports of the coal syndicate shows what proportion the production and exports of bituminous coal by the coal syndicate bear to that of the total production and exports of the German Empire for certain years from 1893 to 1912: Tare 27.—Production and exports of German Coal Syndicate for certain years, 18021619 Production of German Empire.... J. EXPOTES. eve eereesnmnzmzmnsrasasensnznnon Brg ption of Rhenish-Westphalian Coal Syn-HOBO. +e evi ceceac mre anacteaasaiaa aa es Exports of Rhenish-Westphalian Coal Svndi-0 RO Short tons. 81,408,162 10, 667, 389 36,970,629 | 1003 Short tons. 128, 570,976 19,169,088 59,328, 680 9.049, 306 1011 Short tons. 177,193,164 ' 38,638,191 85, 795, 755 1.921.224 902 1012 Short tons. 195,213, 498 144,744, 457 103. 4090. 885 1 Including coke, and briquets converted into terms of coal. Tn 1911 the exports of coal alane by the syniicate were 14,427,008 short tons. 1J. Flechtheim, Die rechtliche Organisation der Kartelle, 1912, pp. 18 and 18. sR, Passow, Materialien fir 4d. Wirtschaftswissenschaftliche Studium; Band 1. Kartelle des Bergbaues, 1911, pp. 42, 48: and Part II, pp. 20-21. 1 J, Flechthelm, op. cit, bp. 14. s Part II, p. 22. ) 3J. Singer, Das Land der Monopole: Amerika oder Deutschland? (Berlin), 1913, p. 118. See also Pt. II, pp. 21 and 29, regarding the Transition Syndicate, effective Jan. 1, 1916, for a period of 1% years, which has practically consolidated the entire bituminous goal production of Germany. The production of brown coal is not covered by the Transition Syndicate. (See Pt. II. pp. 28 and 29.) CONDITIONS IN PARTICULAR INDUSTRIES. 329 These figures indicate that about 55 per cent of the coal exports of the Empire in 1911 were handled by the syndicate. SerLiNG ARRANGEMENTS AND Price Poricies.—The Rhenish-Westphalian Coal Syndicate is itself a central selling organization. The sale of the entire output of the members is concentrated in the office of the syndicate at Essen, where purchases are made by the large dealers’ associations, which in turn distribute the coal to the smaller Jealers in their assigned districts.! The mine owners obligate themselves to sell their entire apportioned output of coal, coke, and briquets through the coal syndicate, which guarantees to market these products in accordance with the policy adopted by its administration.? The total sales of the syndicate are distributed according to a certain scale among the individual members, the syndicate being obligated to take over only the quota allotted to each member. The syndicate pays to the mine owners a so-called calculated price {Verrechnungspreis) which is determined by the board of directors of the syndicate for all qualities and grades of each mine. The calculated price is based on the norm-price (Richtpreis), which is fixed for the year from April to April, by the directors. It is the minimum price to be asked in districts free from competition.® In determining the norm prices the directors take into consideration, among other factors, negotiations of the syndicate with outside mines, market conditions in the iron and steel and other industries, as well as prospects of new cartels being formed in those industries.* If a higher price is obtained in the market, the difference goes to the mine. Prices lower than the calculated price are made to purchasers in districts where competition makes it necessary. These price reductions, the running expenses, and any deficits are covered by a pro rata monthly assessment (Umlage) against the mine owners.® Following the organization of the operators in the coal syndicate, various coal dealers’ unions were formed, e. g., in Hannover, Utrecht, Bremen, Dortmund, Magdeburg, Berlin, Hamburg, and Antwerp. At first these organizations were opposed by the syndicate, but eventually it recognized the advantage of dealing with them and has encouraged them. Moreover, by making the chairman of each such union an officer in the syndicate the latter has obtained a direct influence in their activities and has formed a strong organization for the marketing of coal on the basis of exclusive sales. Tue CoaL SYNDICATE AND TRANSPORTATION ON THE RHINE — The water traffic is a most important factor in the coal trade 1 pt. 11, p. 24. . 2 R. Passow, op. cit.,, p. 44, and Pt. II, p. 21. i Flechtheim, op. cit.,, p. 16. 4 K5lnische Zeitung,’Jan. 29, 1912, No. 77. 5 Flechtheim. on. cit.. po. 17: RB. Passow, op. cit., p. 53. 330 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. of the Ruhr district, which lies on both sides of the Rhine just north of the Ruhr River. This makes the district readily accessible to important markets by water transportation. Formerly there were a number of small unorganized boat lines on the Rhine, and their operations unsettled coal prices. Moreover, some of the larger lines had their own coal mines. Therefore, if the syndicate was to control prices effectually, it was necessary to control the Rhine transportation of coal. The syndicate persuaded the larger shipowners to join it, offering to help them consolidate the Rhine traffic. This was done early in 1904 by the formation of the Rhine Coal Dealing % Ship Line Co. (Rheinische Kohlenhandels & Rhedereigesellschaft) usually referred to as the “ Kohlenkontor.” The latter buys coal from the syndicate, sends it on the Rhine and its affluents and rail connections to ‘South Germany, Switzerland, Holland, Belgium, and eastern France, where it sells on its own account as a dealer. There are now 87 members of the Kohlenkontor with a total annual quota in the syndicate of over 9,000,000 tons. The small commercial dealers have been forced out of business, the trade has been stabilized, and, with the production and transportation of coal thus controlled along the Rhine, the syndicate has a powerful position in the domestic and export trade. Upper Silesian Coal Convention.—In the important Upper Silesian field, lying between Bohemia and Poland, there is a combination known as the Oberschlesische Kohlenkonvention. This field competes but little with the Ruhr district, but serves markets peculiarly its own because of geographical location. It enjoys cheap water transportation on the Oder to points in eastern Germany and supplies the industries adjacent to that river and in Silesia. Its export markets are Russia, Roumania, and Austria-Hungary, and its export shipments are an important part of its business. The coal convention has played a prominent part in the expansion of these exports and has conducted the business with such energy that the producers of Austria-Hungary have been forced in self defense to combine against the competition of the superior German coal, vigorously pushed by the united German operators. BELGIUM. Belgian coal does not compete to any important extent in export markets, but prior to the war the organization of the industry in that country was so comprehensive that it deserves a brief delineation. Of the 25,322,419 short tons of coal produced in 1912, 17,-617,471 tons were mined in the Province of Hainaut, in which lie the three coal basins of the Centre, Charleroi, and Mons. The remainder came from the Provinces of Liége (6,817,048 tons) and Namur (887.899). The location of the industry was a factor in the CONDITIONS IN PARTICULAR INDUSTRIES. 331 organization of a number of combinations among producers. Each basin except that in Namur had its own distinct syndicate. In the basin of the Centre there was the Comptoir de Vente des Charbons du Bassin du Centre, a selling organization for five companies whose total output in 1907 was 1,870,000 tons. The comptoir purchased coal from its members (assigning quotas at intervals) and sold to the market, fixing its selling and buying price. In the Province of Liége the Syndicat des Charbonnages Liégeois was similarly organized as a comptoir or selling company. Its annual sales amounted to about 3,850,000 tons. The Association des Producteurs de Charbons Maigres du Bassin de Charleroi et de la Basse Sambre was a combination of soft-coal producers in the region of Charleroi. It sold all the soft coal produced by its members, except certain specified grades. In the basin of Mons there was a more or less secret and informal combination of mining companies known as the Association Houillére du Couchant de Mons, which fixed prices and unified conditions of sale. Between a number of these regional organizations there were inter-syndicate agreements, such, for example, as that of the syndicate of the Centre with the syndicate of Liége whereby prices for common markets were fixed upon and stipulations were made that each would refrain from selling in the territory of the other. In addition to these regional and interregional combinations in Belgium there were other still more comprehensive which became national in their extent. The Société Générale de Belgique has 11 members, who together produced more than one-fourth of the coal in the country. This organization, together with the Syndicat des Adjudications, apportioned among the several regional syndicates the Government contracts for coal for the State railways. In the allied coke industry the Syndicat des Cokes Belges comprised nearly all the producers in the country and controlled all the sales operations of members for coke to be used in blast furnaces, steelworks, lime and cement works, and carbonate of lime factories. The last agreement term expired December 31. 1915. FRANCE. In 1912 France produced 45,534,448 short tons of coal, over 67 per cent of which was mined in the two adjacent Departments of Pas-de-Calais and Nord in the extreme northern part of the country. The single important coal cartel which down to 1911 had been organized and successfully operated in France was formed in these two Departments. Before the war the Office de Statistique des Houilleres du Nord et du Pas-de-Calais controlled about 67 per cent of the total production of the region. This organization is classed among the looser forms of cartel associations, as no central selling agency or 332 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. bureau was maintained and the member companies were held together merely by price and other selling agreements, each company making its sales as it saw fit, within the limitations of the eartel The primary endeavor of the organization was not to restrict output, but to find an outlet in more distant markets, foreign and domestic, for all excess production so that the local or natural market might never be encumbered by an excessive supply. Prices in the outside markets were usually lower than in the local market, the compensation being found in the greater stability of prices in the local market, where the quantities each producer offered for sale were limited by the cartel. Minimum prices were set for all noal except that exported. The cartel determined and enforced a classification for grades of coal. Bounties were paid for sales made abroad or in certain regions of France outside the local market. Also the cartel gave an export bounty or rebate to the metal and glass industries of France in the form of a reduced price for coal ased in manufacturing goods exported by these industries. - Prior to the war American coal exports to France were spasmodic and very small, and as France normally consumes more coal than it produces there was little likelihood that American and French coal would compete in other foreign markets. The present German occupation of part of the coal regions in northern France is said to have cut the annual coal production of the country to about 20,000,000 tons and the normal imports from Belgium are stopped, so that France must procure additional coal from new sources. High freight rates are at present the greatest difficulty in the way of obtaining coal from the United States. GREAT BRITAIN. Of the 320,000,000 short tons of coal mined in Great Britain in 1913 Yorkshire produced 83,000,000 tons, northeastern England (Durham and Northumberland) 63,000,000 tons, South Wales 64,000,000 tons, Scotland 47,000,000 tons, Lancashire 28,000,000 tons, the Midlands 27,000,000 tons, and other lesser fields the remainder. Thus the South Wales field produced only one-fifth of the total, but these mines are located near tidewater and their coals are of peculiarly high quality for steam uses. In consequence South Wales shipped 40 per cent of all the coal exported from Great Britain in that year, her exports totaling 84,000,000 tons, nearly all of which went out from the three ports of Cardiff, Newport, and Swansea. Moreover, so far as American export coal trade is concerned, South Wales is much more #tnportant than Newcastle or other eastern districts. The latter, shipping through the North Sea ports, export to the North European markets, in which American coals do not attempt to compete, but most of the English coal shipped to the Mediterranean CONDITIONS IN PARTICULAR INDUSTRIES. 333 and to South America comes from ports in the Bristol Channel. In 1913, 58.8 per zent of the British coal exports to Mediterranean ports {exclusive of France and Spain) came from South Wales; 85.1 per cent of the exports to Brazil, Argentina, Uruguay, Peru, and Chile, and 56.8 per cent of those to France and Spain were from the same source. In 1913 the Bristol Channel ports exported 81,579,520 short tons, of which 11,718,560 went to the Mediterranean (excluding France and Spain), 6,584,480 to Brazil, Argentina, Uruguay, Chile, and Peru, and 10,363.360 to France and Spain. (See Pt. IT, p. 596.) Exports of British coal are of two kinds—(1) shipments to coaling stations for the use of steamships, and (2) shipments for the use of industries in countries without available coal supplies of their own. All over the world at strategic points along the great ocean routes are coaling stations on which ships depend for their coal. Thus, at Gibraltar, Malta, Port Said, Colombo, Singapore, and scores of other places great stores of coal are maintained to bunker ships. This bunker trade has developed with the growth of ocean shipping and, since Great Britain has led in ocean shipping, the British coal firms which bunkered British ships at British ports naturally extended their operations to serve these customers all along their sailing routes. Thus the British coal merchants have been the chief factors in the important bunker trade of the world. But this business of selling coal to ships in foreign ports led to the business of selling coal to other customers in those ports and hence it is interwoven with the importation of coal into such countries as Argentina or Brazil which require imports of coal for their domestic industries. The British have been engaged in this business for many years, and many firms share in it. They know all the details of the business, have established their depots, have made their connections, and in many instances mine operators, coal distributing companies, and transportation interests gre united for the most advantageous conduct of the business. A few such combinations are discussed briefly herewith to indicate their nature and the part they have in the British export coal trade. The Cambrian Coal Combine.—In England as in America the trend of industrial development has been toward amalgamation and interrelation rather than cartelization. The coal industry is no exception to the rule, and the interests in South Wales known as the Cambrian Combine, comprising interrelated operators, distributors, railways, and ship lines, is a typical expression of this economic tendency in Great Britain. The Cambrian Coal Combine was the name originally given to a group of four collieries in South Wales closely associated through several common directors, of whom D. A. Thomas (now Lord 834 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Rhondda) was the most important. In the accompanying chart are shown the mining, distributing, transportation, and other companies associated in the combine through their common relation to Lord Rhondda. In order to avoid complexity, a number of the additional relationships between these companies. through other common directors, are not shown. In March, 1913, the Consolidated Cambrian, Ltd., was organized, with Lord Rhondda as chairman, to administer the shares of the four colliers listed below. This company is capitalized at £1,790,000 and has the following holdings in the constituent coal concerns: 100 per cent of stock of Britannic Merthyr Coal Co., Ltd. 99 per cent of stock of Cambrian Collieries, Ltd. 99 per cent of stock of Glamorgan Coal Co., Ltd. 87 per cent of stock of Naval Colliery Co., Ltd. Through these four subsidiary companies the Consolidated Cambrian controls 4 pits and 1 level in South Wales and 15 pits and 2 levels in the Rhondda Valley (Wales).! The annual output of the four companies totals between 3,000,000 and 4,000,000 tons.? Lord Rhondda is an official in the following seven other coal-mining companies: The Duffryn Rhondda Colliery Co. (chairman and managing director). The Cynon Colliery Co.. Ltd. (chairman’' and managing director). The Fernhill Collieries, Ltd. (chairman). Elders’ Collieries (chairman). The Imperial Navigation Coal Co. (chairman). The Ebbw Vale Steel, Iron & Coal Co., Ltd. (vice. chairman). The Rhymney Iron Co., Ltd. (director). While these last-named companies do not belong to the Consolidated Cambrian, three of them, the Cynon Colliery Co., the Fernhill Collieries, and the Imperial Navigation Coal Co., are further directly associated with it or its subsidiary companies through one or more common directors in addition to Lord Rhondda. Moreover, in July, 1916, it was announced that Lord Rhondda and his associates had purchased the firm of D. Davis & Sons, with an output of about 2,000,000 tons. The estimated annual output of all the coal companies which Lord Rhondda partly or whollv controls now approximates 10,000,000 tons. Although, strictly speaking, the Cambrian Combine denotes only the four first-mentioned collieries whose share-holding interests have been united by the formation of the Consolidated Cambrian, yet in coal-trading circles it is the generic title given to all those under-1 Stock Exéhange Official Intelligence (London), 1914, pp. 1232, 1235, 1240, 1270. 1 Western Mail. Trade Supplement (Cardiff), Jan. 1, 1916, p. 2. CAMBRIAN COAL COMBINE (Great Britain) CONSOLIDATED CAMBRIAN, = EY LTD. Ho / 5 7a annit\ ? Tock Naval terthyr oe : oa) Cee Colliery Co LEGEND QO coal Mining Companies [J Coal Distributing Companies CO Transportation Companies [] ther Companies — Connection through common directors, stack ownership ot other relations. All lines from Lord Rhondda indicate Directorates. Glabe Shipping Co. — Taff vale ° Railway Co. , imperial Viigo Coal Co. «amt Lolliey | vd Yo ,o. “on ory | Port Talbot ] Railwaya Docks Coy ‘Anglo A 4 oa) Cor p.ltd Ebbw Vale Stee! ‘rons Coz Co,Ltd “nhl .ieries,. "+d 7 Cie.des lisson Steant Chargeurs Navigation . Francais _ Cold. “ean the ney oe Ca > LYSBERS, LTD. chairman (Holds about 65% ofStock) ORD RHONDD# ‘0.A. THOMAS) Deputy Chairmar. iy L.GUERET, LTD. \ Anglo-Spanist Coaling Co,Ltd. Elder's Collierie sh ondda Bhiery j Co.ttd. ’ ps Gueret, Gait and Co.Ltd v, om — Delmas Delmas [ R Martens and Co.Ltd “0m ol. 2 4 Boye \qglomeres R Martens & Col __ [Foutor roms f Inc. (NewYork) son & Co. Ltd 2lisson & Lysberg insurance status | :nvestment Trust Ltd. Societa Brite co lfalianaf O=ART OT REPORT OF THE FEDERAL TRADE COMMISSION ON COOPERATION IN AMERICAN EXPORT TRADE CONDITIONS IN PARTICULAR INDUSTRIES. 335 takings linked to the combine proper through the directorates and interests of its chairman. These interests include, in addition to the other coal companies mentioned, a large number of coal distributing companies, ship lines, railways and foreign depots—all the agencies required for bringing the coal from the mine to the consumer. A brief enumeration of these will illustrate the degree to which the Cambrian Combine pivots upon Lord Rhondda. As deputy chairman of L. Gueret, Ltd., a holding company and distributing agent of international importance whose interests include coal shipping, inland coal distributing and depot-owning agencies, he links dealers with operators in the combine. This firm has a Paris house (La Société Générale d’Houilles et Aggloméres) which owns depots at Havre, St. Malo, St. Nazaire, Nantes, Bizerta, Chantenay, Tours, Bordeaux, Marseilles, and Tunis. The L. Gueret Company owns 333 per cent of Gueret, Gait & Co., Ltd., of which Lord Rhondda is deputy chairman, and whose varied activities include chartering, brokerage, bunkering, and sale of coal. The Societd Britannica Italiana Gueret is an offshoot of L. Gueret, organized to look after their Italian business, with depots in Genoa, Savona, Leghorn, Naples, Venice, and Spezia. Lord Rhondda is a director in this concern. The L. Gueret owns a controlling interest in Amaral, Sutherland & Co., Ltd., a selling company mantaining bunker depots at Rio de Janeiro and Rio Grande do Sul, Brazil. Three years ago the lastnamed company, of which Lord Rhondda is deputy chairman, formed the Anglo-Argentine Coal Co., Ltd., chiefly for bunkering business on the River Plate. The Brazilian and Chilean navies, several South American railway systems, and many large steamship lines are among the customers of this firm, of which Lord Rhondda is vice chairman. These distributing companies are further allied with each other and with the coal-mining companies already named through the common directorships of four men. T. J. Callaghan holds the following directorates: Gueret, Gait & Co., Ltd. (chairman); Amaral, Sutherland & Co., Ltd. (chairman); Societd Britannica Italiana Gueret (chairman); Société Générale d’Houilles et Agglomeéres; Anglo-Argentine Coal Co., Ltd. (chairman): Naval Colliery Co., Ltd. (deputy chairman). S. H. O'Callaghan is a director of Amaral, Sutherland & Co., L. Gueret, and the Anglo-Argentine Coal Co. C. P. O’Callaghan is a director of Amaral, Sutherland & Co., Gueret, Gait & Co., and L. Gueret. P: H. Thomas, one of the group composing the Cambrian Combine proper, has the following directorates: Consolidated Cambrian, Ltd.; Glamorgan Coal Co., Ltd.; Naval Colliery Co., Ltd.; Duffryn Rhondda Colliery Co., Ltd.; Cynon Colliery Co. L. Gueret, Ltd., is closely associated also with the French shipowning firm of Delmas Fréres. 336 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Another group associated with the combine centers upon the jistributing firm of Lysberg, Ltd., of which Lord Rhondda is ;hairman and majority stockholder. This firm, which is now one of the six most important coal export companies at Cardiff, is sole sales agent for the Glamorgan Coal Co. and the Imperial Navigation Coal Co. In addition to an increasing middleman business, it has the local agencies of a large number of French coal exporting firms, as well as that of G. F. Norton & Co. of Lisbon. In 1914 Lysberg, Ltd., opened out a new trade with Spain through the Anglo-Spanish Coaling Co., Ltd., with depots at Barcelona, Valencia, Cadiz, and Oran. Lord Rhondda is chairman of this latter company also. Through the several interests of its managing director, Earnest Plisson, Lysberg, Ltd:, is linked even more closely to the -combine and to several shipping lines. The Compagnie des Chargeurs Francais, of Paris and Bayonne, which was formed in 1908 by Mr. Plisson, now owns between 15 and 20 steamers, with a dead-weight capacity of over 60,000 tons. The Plisson Steam Navigation Co., Ltd., formed in 1914, owns three steamers also, and in addition there are at least three other steamers, bringing the total tonnage under Mr. Plisson’s control to something between 80,000 and 90,000 tons. Through its immediate command over this considerable tonnage, Lysberg, Ltd., is acquiring an ever-increasing share of the French and Mediterranean coal trade. Mr. Plisson is also associated as director with the Imperial Navigation Coal Co. and Elder’s Collieries. Lord Rhondda is chairman of both of these companies. Lord Rhondda’s immediate predecessor as chairman of Elder’s Collieries was Sir Owen Philipps, well known for his interests in leading steamship companies. The Globe Shipping Co. is joined to the combine through the directorate of Lord Rhondda, and through the fact that H. S. Berry, another of its directors, is also a director of the Britannic Merthyr Coal Co. and the Imperial Navigation Coal Co. Other directorates of Lord Rhondda, unrelated to the combine ex-~ept through himself, are the Taff Vale Railway Co., important coal sarriers in South Wales; Port Talbot Railway & Docks Co., a small but important railway operating docks at Port Talbot and conpesting there with a number of South Wales collieries; Plisson & Lysberg Insurance; the Status Investment Trust, a concern of wide powers which can engage in practically any business, including banking: and R. Martens & Co., Ltd., a distributing agency with L' With this statement from the Western Mail, Trade Supplement, Jan. 1, 19186, p. 2, rompare the report of a Cardiff correspondent in The Black Diamond, Aug. 26, 1916, 5. 183, as follows: “ Lysberg, Ltd, * * * {is closely associated through its managing director, Mr. Ernest Plisson, with the Cie. des Chargeurs Francais (Plisson & Co.) ind the Plisson Steam Navigation Co., owning a fleet of steamers aggregating a dead weight tonnage capacity of over 150,000 tons, and is also at the present moment the principal pitwood importing merchant firm in the Bristol channel.” CONDITIONS IN PARTICULAR INDUSTRIES. 337 central offices in London and Petrograd and branches in New York, Vladivostok, Archangel, Odessa, and elsewhere. This last firm, of which Lord Rhondda is president, is associated with the London house of Houlton, Thompson & Co., Ltd. This briefly is the outline of the great coal mining and trading organization known as the Cambrian Coal Combine. Embracing every important branch of activity in the production and distribution of coal, the system pivots upon one man—Lord Rhondda. In an interview published in the Black Diamond, August 29, 1914, page 162, he describes his position thus: I am quite as largely interested in foreign depots and in distributing agencies as I am in the production of coal, organizations for production and distribution being distinct and independent. I am, in fact, the only connecting link. Cory Brothers & Co., Ltd.—Another large English firm of coal operators and traders is Cory Brothers & Co., Litd., colliery owners, coal depot proprietors, and coal exporters. The central offices of the firm are at Cardiff and London. Foreign offices and agents are maintained in Paris, Genoa, Cape Verde Islands, Buenos Aires, Rio de Janeiro, Pernambuco, Teneriffe and Las Palmas, Madeira, Bombay, Aden, Malta, Port Said, Algiers, and Marseilles. The company owns and controls 16 collieries with a total annual output of 1,450,000 tons and sells coal from many other mines. It has coaling stations on every important shipping trade route throughout the world. According to an advertisement in the Western Mail, Trade Supplement for January 1, 1916, page 15, its coaling stations are located at the following points: Dartmouth. Portsmouth. Aden. Antwerp. Barbadoes. Bombay. Brest. Calcutta. Canton. Copenhagen, Curacao. Fayal. Gibraltar. Helsingborg. Kingston. La Plata. Malta, Messina. Naples. Oran. Pernambuco. Rangoon, Rosario. Saigon. 3t. Michaels. St. Vincent. Santos. Singapore, Syra. Teneriffe, Portland. Stornoway. Algiers. Bahia, Bari. Bordeaux. Buenos Aires. Cape Town. Christiania. Corcubi6én. Dakar. Genoa. Gothenburg, Hongkong. Lisbon. Las Palmas, Marseilles. Mombassa. Natal. Para. Piraeus. Rio Grande do Sul. Rotterdam. * Shanghai. 1 Western Mall, Trade Supplement (Cardiff), Jan. 1, 1916, p. 2; Stock Exchange Offi al Intelligence, 1914, pp. 1221-1302. D7941°—=16—-23 888 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Petrograd. San Francisco. Savona. Smyrna. St. Louis du Rhone. Venice. Plymouth. Longhope. Zanzibar, and others. Amsterdam. Bahia Blanca. Bilbao. Bermuda. As shown below this control by English dealers of depots and disfributing facilities in foreign markets is one of the primary elements in their supremacy over American coal exporters. The Wilson Interests.—Another factor of equal importance to British coal companies in foreign markets is their relation to business houses and coal-consuming industrial plants in those markets. For example, in Argentina, the Wilson interests, an important group of English coal producers and exporters, are associated through common directors with the following companies: Buenos Aires Great Southern Railway. Buenos Aires Western Railway. Mortgage Co. of the River Plate. Primitiva Gas Co. (Buenos Aires). River Plate Trust, Loan & Agency Co. The Wilson interests include Wilson Sons & Co., Ocean Coal & Wilson’s, Litd., Deep Navigation Collieries, and Ocean Coal Co. These four companies are closely affiliated through common directors, every director of each company being a director in one or more of the other companies. Numerous other British companies that are of importance in the domestic and foreign coal trade of Great Britain, such as Hull, Blyth & Co., Watts, Watts & Co., J. Cory & Sons, etc., reveal similar coordination of mining operations, ship chartering, bunkering, coal selling, transportation, and distributing agencies, ste. (See Pt. II, pp. 584-590.) It is apparent, then, that the singleness of action and policy which Germany obtains in her coal export trade by the Rhenish-Westphalian, and Upper Silesian coal cartels is effected in the British export coal business by single large companies or by the union of competing and complementary companies through common directors and managers, so that operating, transporting, and distributing agencies are united for the conduct of foreign business. CONDITIONS IN PARTICULAR INDUSTRIES. 339 GREAT BRITAIN AND THE UNITED STATES IN SOUTH AMERICA. British coal (and this means primarily Welsh coal) predominates in South America mainly because of the investments of English capital in those markets and the control of transportation, docking, storage, and distributing facilities. Another factor operating against American coal is its alleged inferiority to Welsh coal as an export commodity owing to its friability and percentage of slack. British investments in South America.—In 1918 British and American investments in Argentina were estimated as follows:? Great Britain______________ United States _______.__ cme em mem mmemmm me $1, 851, 000, 000 20, 000, 000 In the same year the coal imports into Argentina from Great Britain and the United States were (see p. 326): Great Britain United States Short tons. meee 4, 136, 801 78. 454 About 90 per cent (Pt. II, p. 180) of the railways (which are the largest consumers of coal in Argentina) are principally in the hands of English companies using English material and supplies. American consular officials in both London and Buenos Aires report that a large factor in the British hold on the Argentine coal market is the heavy investments of nationals in railroads and publicservice corporations. This situation in Argentina is typical of that in Brazil and Uruguay also. Control of transportation, docking, storage, and distributing facilities by Great Britain.—The Consolidated Cambrian, Ltd., described above, is affiliated with ship lines to South America and distributing companies in South American ports as a part of its export business. The large English railway companies in Argentina have their own coal fleets coming directly from England. Most of the British coal dealers in South America are interested in British mines and own their own vessels.’ England’s extensive merchant marine is a twofold factor in its export of coal. British vessels plying direct between Wales and South America provide a rapid and regular service and a favorable freight rate to such English exporters of coal as do not own colliers. Of more importance, though, is the fact that the great movement 1 Pt. II, pp. 179-180. See also Pt. II, p. 588, where an estimate for British investments in Argentina in 1915 is given as $1,689,853,045. 2 Daily Consular and Trade Reports, June 2, 1914, p. 1244, 3Iron and Coal Trade Review, Jan. 15, 1915, p. 81, and Daily Consular and Trade Reports, Dee. 18, 1914, pp. 1201-1202. # Special Consular Reports, 1910, vol. 43, Part I, Coal Trade in Latin America, p. 22. 5J, H. Allen, manager, Buenos Aires Branch, National City Bank, in The Americas, Aug. 1915, p. 11. 340 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. of British-owned shipping to and from South American ports has necessitated large coaling stations for general cargo and passenger steamers. Most of the docks and coal handling facilities in South American ports are controlled by English companies who have long had the business of bunkering English ships at ports of call all over the world. The intimate relation between the bunkering trade for English ships and the export of coal to different countries for consumption within those countries is one of the most important causes of the success of Great Britain in obtaining and keeping the coal trade of Latin America. The extent to which this elaborate British mechanism for coal trading in South America is dependent on the combination or interrelation of like and complementary units is self-evident. The size of companies like the Consolidated Cambrian makes possible the control of colliers, docks, storage facilities, distributing agencies, ete. The interrelation of miner, broker, shipowner, bunkering agent. Jealer, and foreign consumer gives the combination the advantage of rebates, concessions, cooperations, conveniences, singleness of policy, ete. HIGH QUALITY OF AMERICAN COALS SUITABLE FOR EXPORT. It is frequently alleged that American coals are inferior in quality to the British coals with which they must compete in foreign markets. It is claimed that Welsh coal is harder and stands shipment better, that it is freer of sulphur and ash and higher in heating value. [t is contended that American coal requires more labor in firing and that grate bars and other equipment must be changed to use it. For these reasons foreigners prefer the British coal and will even pay higher prices for it. It is doubtless true that furnace equipment and firing practice may have to be altered to use American coal in place of Welsh. Such alterations must be made for economical use of fuel when different American coals are used here in the United States, but American operators contend that the alleged inferiority of their coals is largely legendary, that the belief in their inferiority among foreign consumers is due primarily to ignorance of proper firing methods in burning American coals and has been fostered by British coal merchants as a means of maintaining their own trade, and that there are many coals produced in the United States which are of sufficiently high quality to enter into foreign trade, some of them quite capable of competing with Welsh coal. In fact, there should be no question as to the variety and high quality of coal that is available for export trade. Pocahontas, New River, Tug River, Clinch Valley, Birmingham, and central Pennsyl-L Daily Consular and Trade Reports, Dec. 18, 1914, pp. 1201-1202. CONDITIONS IN PARTICULAR INDUSTRIES, 341 vania coals, among others, are of sufficiently high quality and are accessible enough to tidewater for the development of a good export trade. The following table gives analyses of some of the best American steam coals in comparison with the best British coals. The data for the American coals are taken from Analyses of Coals in the United States, Bulletin 22, Part I, Bureau of Mines, and those for the British coals from the Black Diamond of December 12, 1914, page 471. TABLE 28.—Comparative analyses of American and British coals. Per cent of— Name of coal. Moisture. Volatile matter. Fixed carbon. Ash. J Sulphur British -hermal units. AMERICAN COALS. I Ala., Pratt bed...eeaveeane. Clinch Valley, Va.: Lower Banner. an Upper Banner. .......... = George's Creek coal, Maryland ............ Central Pennsylvania, South Fork, lower Kittanning.” oo coveeir. aieileeann. Moshannon, lower Fron --Meyersdale, Pittsburgh bed. . - Pocahontas, W. Va.: Pocahontas No. 4..ueeunernenn. ue Pocahontas No. 3... New River, W. Va.: Sewell bed... ........... a Fire Creek bed (Quinnimont) ..... ... Beckley bed....,........... .. Tug River. W. Va., Sewell bed. ....... ... WELSH COALS. Best admiralty (large) . Best admiralty ... ..... Monmouthshire (best). _ 2.38 ! 2.12 2.70 2 98 2.1 2.9 2.71 2.8 | 3.0 2.67 3.02 2.32 1.Q9 1.62 L. 04 1_4 95 gO | 33.75 32.45 16.05 15.00 20.5 19.34 | 13.5 | 14.0 19.95 16.06 16.13 10.26 11.72 16.64 20. 40 66. 84 57.68 60. 36 75. 86 77.7 72.0 | 71.29 79.5 79.5 75.03 78.75 78.42 m4 an 84.05 78.83 R92 {0D 4,88! 1.46 14, 487 6.45 4.49 5.83 .85 .52 79 14,135 14, 542 14’ 483 5.2 4.8 6.66 4.22 3.46 2,35 2.17 3.08 4a_20 1 i, 2 Roe 14,630 14,510 14,202 14,700 14,850 14,945 15,001 14,969 14,926 -54 80 65 59 3.22 79 15, 200 3.49 | .68 15,172 310 1. 924 14’ 733 1Tn most cases the analyses of American coals wera hasad on mine samples: those of British coals, on samnles taken from shinmeanta ~ From the foregoing table it is evident that there are many American steam coals near tidewater that approach the finest English coals in heating value. Similarly some of the better gas coals, such as Youghiogheny and Fairmont, are the equal for their purpose of any British coals exported. That the eastern portions of the United States contain numerous deposits of exceptionally fine coal well suited to every requirement of the export trade is recognized by the highest British authorities. Thus on January 28, 1916, the Colliery Guardian (London) said editorially: The eastern portion of the Appalachian coal field contains an abundance of excellent coal conveniently placed for shipment from Atlantic ports. Mention need only be made of such well-known qualities as Pocahontas, New River, Tug River, and other varieties of steam and coking coals, much of which is as good as any that we can export. * * * Tn countries like South America, or even in 349 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. the Mediterranean, the United States can certainly supply fuel calulated to satisfy requirements. Moreover Lord Rhondda, the head of the Cambrian Combine, and the leading figure in British coal circles, has made careful studies of the character and availability of coals from the United States for use in his bunker and export trade. As a result of these studies, he is understood to have made some investments in American coal lands and to have established a coal shipping company in New York. In this connection he was reported as saying in July, 1913: f regard the coals in the New River and Pocahontas fields as being the best high carbon coals to be obtained in your country and 1 hope * * * T will be able to become interested in properties in these fields, from which to draw coal for the foreign depots and markets in which I am interested. AMERICAN COAL CHEAPER AT TIDEWATER. : In South Wales coal is mined from deep and thin measures. In the Appalachian field in the United States it is taken from thick seams outcropping along mountain sides, or lying a comparatively short distance below the surface, and the fullest use is made of every kind of modern mechanical equipment. In consequence the cost of mining coal is about twice as high in Wales as in the Appalachian fields, nor is this offset by the closer proximity of the Welsh mines to the sea. It thus results that Welsh coal at tidewater docks normally is much higher in price than Appalachian coals at Atlantic and Gulf ports. For example, in April, 1914, West Virginia and Cardiff coals were quoted as follows at tidewater: New River and Pocahontas at Hampton Roads ports, $2.85 to $2.90 per ton. Best Admiralty large at Cardiff, $4.62 to $4.74 (19s. to 19s. 6d.). Best second Admirality large at Cardiff. $4.26 to $4.38 (17s. 6d. 0 18s.).2 } Similarly the prices of central Pennsylvania coal at New York, Philadelphia, and Baltimore, and of Birmingham coal at Mobile and New Orleans are much below the prices on the Cardiff docks. With the development of coal shipments by the newly opened river route from the Alabama fields to Mobile the latter district may soon be offering export coal at prices decidedly below those now ruling at Atlantic ports for Virginia, West Virginia, Maryland, and Pennsylvania coals. Such differences in price as those noted above far more than compensate for any possible inferiority of the American coals, and, but The Black Diamond, July 5, 1913, p. 27. The Black Diamond, May 2, 1914, p. 359, CONDITIONS IN PARTICULAR INDUSTRIES. 343 tor other causes, should give the American operators a decisive advantage in various foreign markets over their British competitors. TRANSPORTATION AND HANDLING FACILITIES. The railroads of the United States furnish adequate service to the Appalachian operators seeking to ship coal from Atlantic ports. The Clinch Valley coals have advantageous connections with Charleston. The Pocahontas and New River coals reach Hampton Roads by several railways. The Fairmont, George’s Creek, and Somerset coals come down to Baltimore, and the Cambria and Clearfield mines ship to Philadelphia and New York on favorable rates; all the railroads hauling this traffic have the most modern rolling stock and handle trainload shipments at low rates. This explains the fact that these coals can be placed on docks at tidewater at prices which retain much of the American operator’s advantage in cheaper mining cost over his Welsh competitors. At the Atlantic ports mentioned, especially at Hampton Roads, the docks and piers are equipped with facilities for handling coal that surpass anything found in Wales. Moreover, Welsh ports suffer under other serious disadvantages. Because of the high tides colliers must be locked into small basins at favorable times. In consequence American coal exporters enjoy marked advantages in loading their coal. At any of the major coal ports a 6,000-ton collier can be loaded in from one to two days, and at Hampton Roads 50-ton cars are picked up and dumped into vessels with such dispatch that such colliers have been loaded in less than eight hours. At Welsh ports the loading of such a vessel requires from six to eight days. This saving in time is an important factor in the cost of shipping service. The advantages of lower tidewater prices and superior loading facilities, however, have been nullified by the higher freights charged for transporting American coal to South America and the Mediterranean and by the British control of unloading and storage facilities in foreign ports. The lack of an American coal-carrying fleet has made American exporters dependent upon British vessels, and British ship brokers have been able constantly to maintain rates which favored the Welsh coal. Early in February, 1914, comparative ocean freights on coal were as follows: * 844 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. TasLe 29.—Comparative ocean freight rates on coal, February, 1914. Newport News. Cardiff. Destination. Rio de Janeiro. . MOntovilen . coo cen ninensnns vane Buenos Aires or La Plata... Distance.} Nautical miles. 2,828 4,721 5,708 5, 8292 Freicht rate.l 155. 6d .cananncanes] 155. 6d. .cevmnanean LOS enn nner i5s.to15s.6d..... Distance.| Nautical miles. 3,929 5,020 8,007 8.121 Freight rate} 13s. 13s. to 14s. 13s. to 14s. 13s. 6d. to 14s. 6d. 1The Black Diamond, Feb. 7, 1914, 111. The foregoing statement is representative of the differentials normally prevailing in favor of the Welsh coal shippers. From these figures it is apparent that before the war Cardiff enjoyed an advantage in freights on coal to South American ports of 85 to 60 cents per ton. When the war drove ocean freights to exorbitant levels these differentials in favor of British shippers became much greater. Proximity of the Welsh mines to Mediterranean markets gives British coal an advantage in ocean freight rates of from $1.10 to $1.50 per ton over American coal. The comparative rates in February, 1914, were as follows: Naples, from Cardiff 8s., from American ports 12s. 6d. to 13s.; Marseille, from Cardiff 7s., from American ports 12s. to 12s 6d.; Barcelona, from Cardiff 6s. 8d., from Amerizan ports 12s. to 12s. 6d. The distance from Cardiff to these markets is less than half that from the American ports. As already stated, the bunkering stations and coal depots all over the world are very largely in the hands of British coal merchants, the most important of which are affiliated with coal mine operators. American exporters, therefore, are as dependent on these British coal merchants for docking, storage, and distributing facilities as they are upon British ships for transportation. For this reason, and because the British firms have the business in hand, the American companies which take part in the bunker trade, or which export coal, amploy British coal firms as agents to transact this business. A combination of British bunkering brokers by collective bargaining with West Virginia coal mining interests arranges the yearly contract price of bunker coal at Hampton Roads. This is an important bunkering point; cotton and other cargo vessels call to fill their bunkers with the high-grade New River and Pocahontas coals. The owners and charterers of these vessels naturally depend on British bunkering agents to bunker their ships, because these agents have the organization to do such business anywhere in the world. Similarly, the American coal operators make their sales for bunker business through these agents. CONDITIONS IN PARTICULAR INDUSTRIES. vo 845 Every year, in a meeting known as the London Conference, the sunker agents fix the contract prices for a year for bunkering vessels at stations all over the world. Such fixed prices must be established tn order that vessel owners may know what their coal will cost them at any particular port and can name charter rates accordingly. At this conference the yearly contract prices for bunkering vessels at Hampton Roads are fixed, as noted above. In former years an association of the West Virginia smokeless operators acted as a unit in their negotiations with the bunkering agents, but last year certain important companies withdrew from the association; as a result the contract price was reduced from $3.30 to $3.10 per ton, a cut of 20 cents in the face of increased production costs in the Pocahontas and New River fields, which should have forced an increase. Later the price was restored to $3.30 per ton, but not till most of the year’s contracts had been made at the lower rate. It is stated that after the freight to tide water was deducted and after the captain’s gratuities, the cost of running lines, etc., at the docks were paid, the price of $3.10 ‘generally netted the operators less than the f. o. b. price at the mines for domestic business. In other words, the American operators, because they lacked organization, received less f. 0. b. the mines for bunker coal than for domestic coal. COOPERATION AMONG AMERICAN PRODUCERS FOR BUNKER AND EXPORT RBRUSINESQSS. Under the competitive conditions now existing in the coal trade the high quality of American coals, the unrivaled railroad and dock facilities in this country, and the lower prices will plainly be of little or no avail in securing a share in the world’s bunker and export trade unless American producers supply themselves with their own fleets of colliers and their own coaling depots, unloading facilities, distributing yards, and agents in foreign markets. But to provide these and to undertake the work of advertising American coal abroad, of educating foreign consumers to the advantages of using it, of employing fuel engineers to teach them how to burn it, and of persuading them to alter their equipment to suit its characteristics, means a long and expensive effort. Obviously it can be begun only by a few of the larger American producing companies if they act as individuals, but, if they cooperate for such business, scores of smaller producers may be able to share profitably in the upbuilding of an advantageous trade. The activities of an association of coal operators in the bunkering trade at Hampton Roads have just been referred to, but an effort 346 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. to adequately extend the American bunkering and export trade into foreign markets in competition with the English coal operators will require extensive cooperation. In the New River field, for example, there are about 60 concerns mining coal. Of this number, 10 of the largest produce approximately 75 per cent of the total output and one of these companies produces 25 per cent. It has been suggested that all the operators of this field who wish to take part in the bunker and export trade form a joint selling organization to handle the business, subject to such supervision by the Federal Government as the latter might deem expedient and desirable. It would have nothing to do with domestic business, which would be handled by the differant companies individually, as now done. Such a joint selling agency, it is suggested, would fix the grades »f coal which it desired to handle in foreign trade and would have a force of inspectors to see that each mine conformed to its requirements in this respect and to insure the necessary uniformity of quality to the foreign consumer. It would also establish coaling stations at important ports in South America and in the Mediterranean if that market were also cultivated, and would put on its own fleet of colliers. By these means large stores of coal could be maintained abroad where desired, the selling agency could keep in close touch with its customers, and could guarantee regular and prompt deliveries of high-grade coal, and in quoting prices would be independent of the present unfavorable freights charged by foreign ship owners. The problem of return cargoes for these vessels, it. has heen suggested, could more and more be met by increasing .shipments of South American raw materials, such as iron ore, copper and tin, rubber, coffee, hides, nitrates, quebracho, tropical woods, stc., and from the Mediterranean by cargoes of Spanish iron ore and copper concentrates, together with other European products that normally cross the Atlantic to our shores. From South America ‘t might even be found advantageous to bring such vessels home via Europe, taking to that continent the South American grain and other foodstuffs and raw materials which are imported from the Latin-American countries in heavy volume. The advantages claimed for such joint effort are manifold. Through such an organization the expenses of establishing a profit. able coal trade abroad could be shared by many operators, and would not be prohibitive to the smaller concerns. Steady and concerted offort would be applied to the development of business instead of the present intermittent attempts to obtain some foreign orders. Producers would be represented directly by their own salesmen instead of by the agents of foreign competitors of American operators, CONDITIONS IN PARTICULAR INDUSTRIES. 3417 and foreign consumers would be able to deal directly with the sellers of their coal. The business would be independent of foreign shipowners and would be able tp seek the markets that ought to be open to American coal. Similar organizations could be formed among the operators of other fields, so that every portion of the Appalachian coal-producing area which might export coal advantageously could be represented by an effective organization for foreign business. As already pointed out (see p. 24), the development of the foreign business would benefit the industry by furnishing steadier operation of the mines, and by partially equalizing the seasonal variations in demand. SECTION 10. INTERNATIONAL COMBINATIONS. In a number of the most important industries combinations of producers have been formed that are international in character. In addition to international cartels and syndicates similar in character to those having a purely national scope, there exist a number of international organizations which connect, through stock interownership, many concerns which formerly competed and which still operate as legally independent companies, although, in point of fact, the policies of all are determined by one and the same group of men, with the result that there is a unity of action inside the organization. No attempt will be made here to describe in detail all or a major part of such combinations. Many of them are confined to European producers, others are more widespread in their operations, and include producers in the United States and South America. In the chemical industry a number of international agreements exist for various products. This is also the case in the iron and steel industry, in petroleum, in textiles, in cement, in coal, and in a number of other industries. Some of the details of the international combinations in textiles are given on pages 250-254, where the general subject of textiles is discussed. Similarly, information on international combinations in cement will be found on pages 307-308." Various others, such as the international combinations in wall paper, tobacco, ammonia, soda, etc., are not discussed here because of the limitations of time and space in a report of this kind. Chemicals.—Of the international combinations that exist in the chemical industry, one of the most prominent is the Borax Consolidated (Ltd.). This organization, formed in 1899, took over the properties of six companies with deposits in the United States, Chile, Peru, and Asia Minor, and factories in the United States, France, and the United Kingdom; and acquired a controlling interest in another sroup of concerns having deposits in Chile, Peru, and the United 348 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, States, and refineries in the United States and England.! By this combination there were brought under one control all the production of Asia Minor and a large part of that of the United States, Chile, and Peru. This, with their refineries in the United States, England, and France, gave the combination an advantage in the marketing of finished products in these countries that is tantamount to control, and also placed them in a position to compel refiners of other counfries of large consumption, not having deposits of their own, to secure their raw material from the combination. The combination develops its properties in all countries in which it has deposits, if the costs of production and transportation will permit. Before making large outlays it takes the precaution to obtain governmental assurance that it will not be disturbed for a considerable period by changes in fiscal policy. While the combination has refining plants in most of the countries which are large users of borax and boric acid, it apparently does not attempt to maintain a complete monopoly of refining. It furnishes raw materials to other manufacturers, and in Germany has no plants at all. Domestic refiners in that country obtain their supplies from combination mines in Chile and Peru.? Other combinations of an international character in the chemical industry which may be mentioned are those which exist in iodine and in quebracho extract. (See pp. 191 and 194.) Iron and steel. —In the iron and steel industry there are international combinations in many of the products. The best example is that covering steel rails. As early as 1883 an international rail syndicate was formed by the German, English, and Belgian manufacturers. The syndicate broke down several times, but later became more and more a permanent institution for the regulation of the international rail market.®* Following the depression of 1901-1903 which resulted in demoralizing prices for rails, a new agreement was made in December, 1904, to which the English, German, Belgian, and French producers were parties. The agreement was to run for three years. t Formed to acquire the properties of (1) the Pacific Borax & Redwood’s Chemical Works (Ltd.), (2) the Borax Co. (Ltd.), (q. v.), (3) the Société Lyonnaise des Mines et Usines de Borax, of Lyon, (4) the Empresa de Ascotan Co., Chile, (5) the Sociedad Boratera de Carcote, near Ascotan, Chile, (6) the Compafiia Boratera de Arequipa, Peru, including deposits formerly owned by Sefiores Pefig and Caballero, (7) the Compailia Boratera de Ubinas, Arequipa, Peru, together with (a) all the share capital of Mear & Green (Ltd.)., (b) 7,142 (out of 10,000) shares of the San Bernardino Borax Mining Co., southern California, {¢} the Boratera de Cosapilla and the Boratera de Chilicolpa, both near Tacna, Chile, (4) the part of the Pintados deposit situated at Iquique, Chile, and (¢) options over various borate properties in South America. Purchase money, £2,100,000 (£600,000 in ordinary shares, £719,230 in preference shares, £389,276 in debenjure stock, and £391,494 in cash). Further properties have since been acquired.—The Stock Exchange Jfficial Intelligence, 1909, p. 619. ? London Times, Feb. 5, 1914, p. 18, and official statistics of the various countries. +H. W. Macrosty, The Trust Movement in British Industry (London), 1907, p. 63; H. Levy, Monopoly and Competition (London), 1011, p. 261, CONDITIONS IN PARTICULAR INDUSTRIES. 349 [n July, 1905, various United States works are said to have become parties to the agreement! and in 1906 the Austrian and Italian works joined. In May, 1907, the syndicate was renewed for five years. The following allotments of the total quantity of rails exported by the syndicate were made: United Kingdom, 37.36 per cent; United States, 25.70 per cent; Germany, 20.13 per cent; Belgium, 12.34 per cent; and France, 4.47 per cent, including a guarantee of a minimum of 59,500 tons. In 1908 certain Russian works joined the syndicate. In 1909 Russia’s share in the world’s exports of rails was fixed at 7.2 per cent and corresponding adjustments made in the other quotas. The central bureau for the syndicate was located in London, and there were local bureaus for each national group. Besides allotting different countries of the world to its members the syndicate also seems to have had a pooling arrangement to cover the trade in neutral markets, which provided for the payment of bonuses by countries exceeding their allotment. Thus in 1907 the British members paid to the Belgian members a bounty of 10 shillings per ton, totaling about £2,200. All markets are divided by the international syndicate into three classes:* (1) Protected markets, which include the domestic markets of each national group; (2) favored markets, which consist of foreign markets granted to members in a given country in preference to those in others, as the colonies and protectorates of England and France to English and French members, some of the Latin republics of America to the alleged United States members, the Scandinavian countries to German members, and Egypt, Japan, and part of South America to Belgian members; and (3) ‘‘neutral” markets, or the remaining ones, which were left free to all. Separate agreements were made with the Austrian, Italian, and Spanish works. The Austrians were given their country as a protected market and also a share in the Balkan Peninsula trade. The Italians were given their domestic market, but to supply any deficiency other parties to the syndicate The conn~ction of various American works with the International Rail Syndicate at this time has been frequently and specifically asserted by foreign authorities. It was admitted by Mr. Corey, who was president of the United States Stesl Corporation at that time, and denied by Messrs. Gary, Farrell, Schwab, and Bacon. (See transcript of record United States v. United States Steel Corporation, Vol. vin, pp. 2045, 2048-2051, 3035-3036, X, 3834, 3848-3849, 4054-4056; XI, 4188; XTI, 4807-4809; XIV, 5497-5498.) The chief published foreign statements are Berliner Tageblatt of Dec. 1, 1904; Deutsche Industrie-Zeitung of Dec. 9, 1004, and Jan. 20, 1915; J. Kollman, Der deutsche Stahlwerksverband, Berlin, 1905, p. 47; Kartell Rundschau, 1905, pp. 390-392, 440. The American participants of the pool were alleged at various times to have been the United States Steel Corporation, and the Pennsylvania, Lackawanna, Maryland, and Cambria steel companies. Industry and Commerce (St. Petersburg), Sept. 1, 1910, p. 62. Kartell-Rundschan, 1809, No. 3, p. 212, 8 F., Walker, Quarterly Journal of Economics, vol. 20, p. 396; C. Hood, Iron and Steel (London), PD 132-133; Industry and Commerce (St. Petersburg), Sept. 1, 1910. 4 Industry and Commerce (8t. Petersburg), Sept. 1, 1810, 35() REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. sould import with the sanction of the Italian syndicate and a payment of 25 francs on each imported ton.! The International Steel Rail Syndicate has been successful in obtaining control of almost the entire foreign commerce in rails; from April 1, 1909, to June 16, 1910, the works outside the syndicate obtained only 3.2 per cent of the total rail orders.? In November, 1904, an agreement was concluded by producers in Germany, France, and Belgium with reference to the export of beams for girders. It was finally extended to July 1, 1915.2 The syndicate fixed participation quotas and prices. In 1913 an agreement was reported to have been formed by the French, Belgian, German, and Austrian iron and steel producers covering T and U beams, which fixed the quotas of shipments from one country to the other.* Other international agreements that have been formed in the steel trade covered galvanized steel, pipe, rods, wire nails, enamel ware, pig iron, etc. These agreements generally included Germany, France, Belgium, and Austria. Some of these international cartels or syndisates are very incomplete. Metals other than iron and steel. —There are international combinations of producers in metals other than iron and steel. The world’s available supply of certain metals is confined to a few countries. Yet every industrially developed country needs these metals to a certain extent, a factor which gives an international aspect to the control over the sources of supply and the production and marketing of such metals as zinc, lead, tin, nickel, aluminum, antimony, manganese, platinum, copper, and silver. In the next section, under the head of “Combinations of foreign buyers,” the organization and operation of the great syndicates dealing with most of these metals will be described. (See pp. 857-369.) At this point it is sufficient to point out that there is a close connection between various cartels or syndicates of producers of such metals as zine, aluminum, lead, and nickel and the buying organizations which act in the interest of ‘he large consumers. Glags.—PrLATE Grass.—The principal international combinations in the glass industry are connected with the production of plate slass and of bottles. The international plate-glass syndicate (‘‘Convention internationale des Glaceries’) was organized August 17, 1904, for five years, i Industry and Commerce (St. Petersburg), Sept. 1, 1910, p. 62. See also Trouser LB, United States v. United States Steel Corporation, Vol. VIII, pp. 2943 et seq. 23, Riesser, Die deutschen Grossbanken u. ihre Konzentration, 3d ed.. 1910. p. 147; Kartell-Rundschau. Aug., 1912, p. 793. 2 Riesser, op. cit., p. 147; Kartell-Rundschau, March, 1912, p. 339; August, 1912, p. 703; August, 1913, pp. 110-711; October, 1913, p. 867, and January, 1914, p. 64. t Daily Consular and Trade Reports, June 13, 1913, p. 1341, and June 23, 1913, pp. 1514-1515, i ¥. Walker, op. cit., p. 395: and Pt. IL D, 79. i CONDITIONS IN PARTICULAR INDUSTRIES. 351 and renewed in 1909 till August 17, 1914. It included all European plate-glass works, with the exception of an English concern, a plant owned by the latter in Maubeuge, France, and the Russian plateglass factories, Altogether 25 plate-glass works in Belgium, Germany, Austria, France, Holland, and Italy belonged to the syndicate. Together they represented about one-half of the world’s production, of which, again, about one-fourth was controlled by' the eight Belgian works. ’ The main purpose of the international convention was regulation of the production and sale of plate glass of all grades and strength. The organs of the convention were: (1) A central committee, which regulated the production in all countries concerned and sought to harmonize it continuously with the demand. (2) A selling committee, which regulated the selling price in the world’s markets with the exception of Germany and France, where prices were regulated by the two national organizations, the French Comptoir and the German Verein. (3) A bureau which supplied the central and the selling committees with the statistics necessary for their work, and supervised the execution of the convention’s resolutions. During a certain number of days in each month all grinding machines of the syndicate were shut down. The glass factories also organized an export selling organization, which was to cooperate with similar organizations already existing in several countries. A new organization, the Union Continentale Commérciale des Glacaries, a stock company, was formed December 28, 1912, with a central office in Brussels. The capital stock of the company was 2,000,000 francs. The 4,000 shares of the concern, at 500 francs each, were held as follows: ! Bhares. 5 plate-glass factories in Belgium. . 2,436 8 plate-glass factories in Germany 240 3 plate-glass factories in France. 970 1 plate-glass factory in Holland.. 314 | plate-glass factory in Bohemia. 40 BorTLEs.—In 1907 an international bottle-makers’ syndicate was organized, which controlled the production of 1,428,500,000 bottles. The apportionment of production was as follows: Belgium, 1,250,-000,000 bottles; Germany, 53,000,000; England, 30,500,000; France, 29,500,000; Austria, 16,000,000; Holland, 7,000,000; Sweden and Norway, 3,200,000; and Denmark, 2,400,000. It was agreed that .the sale of bottles should remain as formerly in the bands of the pro-—_— = 352 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. ducers, but that the prices should be fixed by the syndicate. One of the chief aims of organization was the purchase in common of the Owen patent machine process and its gradual installation. Also, the European makers combined to safeguard their capacity for competition with the American industry. } Petroleum.—The principal international combination in petroleum is that of the Royal Dutch-Shell group. There are two groups of interests which occupy thé most prominent positions in the world’s petroleum industry. They are the American group known as the Standard Oil interests, and its great foreign competitor, the Royal Dutch-Shell interests. The Royal Dutch-Shell petroleum combination, was formed in 1907 by the amalgamation of the Royal Dutch Petroleum Co. with the Shell Transport & Trading Co. The growth of the capital stock of the Royal Dutch Petroleum Co. and the Shell Transport & Trading Co. in the past 15 years has been rapid. In 1901 the capital of the Royal Dutch Petroleum Co. was $2,600,000; in 1907, it was $20,600,000, and by the end of 1913 it had outstanding about $35,000,000 of capital stock. In 1901 the capital of the Shell Transport & Trading Co. was $14,580,000; in 1907 it was $17,100,000; and by the end of 1913 it had outstanding $29,249,905. The combined earnings for the two companies during 1912 were $16,153,000, which was about 27 per cent on their stock outstanding in that year.? Previous to 1911 the Royal Dutch-Shell combination had been gradually spreading out from its original center of operations, the Dutch East Indies. Ostensibly as a result of a severe price-cutting war which took place in 1911 when not only its European markets but even its Oriental markets were threatened by American oil, the Royal Dutch-Shell interests entered on a policy of obtaining production in all the principal oil fields of the world, of uniting with if, sither through actual combination of ownership, contracts, or the maintenance of common policies, many of the other European-owned companies producing in those fields, and of marketing its refined products everywhere? As a result, before the war the products of the Royal Dutch-Shell combination were sold throughout Europe, in the United States, Canada, South America, South Africa, Australia, and the Orient. At the annual meeting of his company in 1913, Sir Marcus Samuel, the head of the Shell Transport & Trading Co. outlined the poli¢y in the following words: “The business is world-wide, and we are determined that the great distributing organization which we have created shall not be dependent upon any one field, or upon any one country, or upon any one government. We shall endeavor 1 Réforme Economique, 1907, vol. 162, pp. 1276 and 1277. 2 Petroleum Gazette, May, 1914, pp. 10-12. : Moniteur du Péirole Roumain, Feb. 1, 1913, p. 162: and Petroleum Gazette, May, 1914, pp. 10-12. CONDITIONS IN PARTICULAR INDUSTRIES. 358 to acquire oil territories, so essential to the support of our organization, wherever they can be found.” In 1913 the Dutch-Shell combine obtained from their different fields throughout the world about 29,600,000 barrels of petroleum, or about 7% per cent of the world’s production in that year. In the United States they secured about 13 per cent of the production, in Russia about 13 per cent, in Roumania about 25 per cent, and in the Dutch East Indies about 94 per cent. Some production was also reported from Egypt and British Borneo. Since 1913 the Dutch-Shell concern has increased its holdings in United States production, and it has also holdings in Mexican, Trinidad, and Persian fields. The quantity obtained in 1913 in the United States was about 6,700,000 barrels, of which about 80 per cent came from California. It has been estimated that in 1913 producing property with an annual production eapacity of 15,000,000 barrels was owned or controlled in the United States by the Royal Dutch-Shell combination, and that the property controlled by it in Mexico was-capable of producing 7,000,000 barrels per annum.? A number of the prominent European banking houses are interested in financing the various companies of the Royal Dutch-Shell group. They include prominent English, Dutch, French, and German financial institutions. The chart showing the most important interrelations of the compa~ nies included in the Royal Dutch-Shell group is primarily based on two charts published in 1913, one by the ‘‘Finantieel Weekblad voor den Fondenhandel” of Rotterdam and the other by the ‘‘Moniteur du Pétrole Roumain” of Bucharest. In addition to the information contained in the charts, other published sources were consulted, such as the files of the “Petroleum” of Berlin, the ‘‘Moniteur du Pétrole Roumain” of Bucharest, and a number of English and American oil periodicals. A preliminary chart based on the information obtained from such sources was prepared, and was then submitted, for criticism and suggested changes, to a number of Americans who are well informed on the foreign conditions in the petroleum industry. A final chart was then prepared in conformity with the various corrections and additions. This chart (chart 4, herewith) does not indicate all the connections reported to exist between the various Royal Dutch-Shell companies or with companies outside of the group, but the Commission believes that it is substantially accurate in presenting the principal features of the combination. } The Royal Dutch Petroleum Co. owns a part of the capital stock of the Shell Transport & Trading Co. A large number of other companies are connected with one or both of these two companies. Tha _— = = == ———— ee —————————— 1 Petroleum Gazette, April, 1914, p. 7; and May, 1914, pp. 10-12, ¢ Petrolenm Gazette, May, 1914, pp. 10-12. P7241 °— 16———24 354 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, chart shows most of the close connections. Nine subsidiary companies are reported to be controlled directly by the Royal Dutch Petroleum Co. and 10 by the Shell Transport & Trading Co. Four companies, the Bnito (Société Caspiepne), the Mazout, the Bataafsche Petroleum Co., and the Anglo-Saxon Petroleum Co., are jointly controlled by the Royal Dutch Petroleum Co. and the Shell Transport & Trading Co. The first two are among the most important oil concerns in Russia, and were identified with the Rothschild interests. The entire share capital of the Bataafsche Petroleum Co. and the Anglo-Saxon Petroleum Co. is held by the combination, the Royal Dutch Petroleum Co. having 60 per cent and the Shell Transport & Trading Co. 40 per cent. At the time of the amalgamation in 1907, the Bataafsche Petroleum*Co. was formed to take over all oil felds, refineries, concessions, and interests in subsidiary companies in the East Indies, and the Anglo-Saxon Petroleum Co. to take over all steamers and marketing installations of the combination.! Since their organization both companies have broadened the scope of their operation. The Bataafsche Petroleum Co. is connected directly through stock ownership with 20 subsidiary companies, and indirectly, through 2 of these subsidiaries, with 3 other compaiies. The Anglo-Saxon Petroleum Co. is connected directly through stock ownership with 25 subsidiary companies, and indirectly through 2 of these subsidiaries, with 20 additional companies. The grand total of companies in the Royal Dutch-Shell combination as shown on the chart is 93. While the Royal Dutch Petroleum Co. and the Shell Transport & Trading Co., or subsidiary companies in which they own a majority of the stock, do not in every case possess stock control of each company in which they hold shares, yet, in the cases of those companies the majority of the stock is held by outside interests affiliated with the Royal Dutch-Shell combination, and which work in harmony with their policies. For example, the Anglo-Saxon Petroleum Co. owns 25 per cent of the stock of the United British West Indies Petroleum Syndicate, while the remaining 75 per cent are equally distributed among companies controlled by allied interests, one of which, the Burmah Oil Co., has a contract with the Asiatic Petroleum Co., of which the Anglo-Saxon Petroleum Co. owns two-thirds of the stock, for the sale of its products through out Indis. SECTION 11. COMBINATIONS OF FOREIGN BUYERS. The American manufacturer, in his export trade, encounters numerous combinations of foreign buyers. Of the various ones which have been brought to the Commission’s attention, two classes have been selected for description—the cooperative wholesale societies t Petroleum, Vol, IX, pp. 313-314, Petroleum Gazette, May, 1014, p. 12. TARRHAN PETROLEUM MI. f1.300 000 EAST BORNE . MARATS, F883, 600 PERLAK | SOCIETARNONIMA| SUMATR, SUMATRA PETRI E14 Rang oR PAL ae Pr TROLEUM - - £297,000 $2800000 | | 4,455 VEDERLANDSCH. INDISCHE TANK STOOMBOOT MAA, £4 200,000 TT sieETIA | PETROLEUMMAAL BORNEO $800,000 ZUID PERLAK ETROLEUM MIL SUMATRA S600 000 ATIEN MINING CO. SYMARTRA DORDTSCHE PE INDUSTRIE MA RTS. $12. 000 00g" HOESTE! FXPLORATE! MAATS, £520 000 7A CORONA PETROLEUM MARTS, $2 600,000 MINERAL O/L & BENZIN WERK RHENANIA $240 000 MOEARA ENIM SUMATRA t¢ 000.000 MOES! ILIR SUMATRA £3. 840 000 VETHERLANDS EXPLORATION SYND/CT NETHERLAND INOIR INOUSTR AND TRADING CO, $8 000.000 5 TATARFSCHE PETROLEUM 1AATSCHRPPI t 56 000.000 ep en fi I> ap) VEREINIGTE °°N. ZIN FRBRI“T GESELLS HA ££ 2/870 REGATUYL ROMAN eq 532 000 SHANGHAI | ANGKAT MAAT SUMATRA & nas ono —r.- Y BAC AND BENZINE MAATS. ROTTERUVANM LUBRICATING | IND FUEL OILS TD. LONDON 2 486, 00N Fria TRO. Ju HELNAN PETROLEUM C £ ONOON non re “vA, 7 EUum 47S. t gor «VA PETROLEUM €o.-$280,000 Mili. TRIE Les WERKE RHENANIA DUSSELDORF DANSK ENGELS, BENZIN AND OE TROLEUM CO, 2/35, 000 BENZIN \AGERUNGS GES. BRESLAU J42 000 ERSTE BAIERISCH i PETROLEUM GESELLSCHAFT £364 000 BENZINWERKE RHENANIA OUSSEL DORF bana 2g RISING SUN PETROLEUM £0. $2 000,000 FINNISCHE PETROLEUM IMPORT GESELLSEHAF. COMMERCIAL MINING ZC LONTON 148, 000 To od E G UR wirleof oer 70 100 AsIaTIc FTROLEUM CO. 1 ONDON 0 720 000 LX oo. BEN... AGERL _ _év SERUNGS GES MAGDEBURG BLEXEN $&5.050 | $/27.8500 & £LGIAN BENZIN BENZIN CO. LAGERUNGS GES. 3/00, 000 HAMBURG { e972 Nn lg TEER asrrn STANDARD RUS. ROMANR $ 6,180,000 £11,580 a0n ’ GEfconsoL IER “HOLLANDSCHE PETROLEUM MI, 4 9648000 iz MAZOUT ST Case Rossa “20.000 £3 120.000 | SHELL « POYAL DUTCH TRANSPORT AN? 3 40000000 TRADING COMPAK § 48,600,000 A 9 y QUINTUPLE a/L COMPANY OKLAHOMA CL —— TL SINCLAIE "“R&GAILBRAI YANSAS TMERICAN ROXANA TTROLEL 1 Nr “R ry | , MPA BIDE "GRAVENHAG SSOC/IATION SHELL TOMPANY OF CALIFORNIA 20 rm 000 BRITISH WESTER? ISLES COMPANY | WEST INDIES | ESTINDIES _ | SHELL [ MARKETING CO. LONDON ! f=» 2017 non TURNER IL COMPANY CALIFORNIA Sn nnp NITED BRITISH O/L FIELDS OF TRINIORD $3 /52 000 YALLEY PIPE LINE CO. OF CALIFORNIA ¥/0 000 000 v / kK OIL COMPANY CALIFORNIA £500 000 _ AMERICAN GAS CO. CALIFORNIA g4 100,000 Ir?" 1DAD art CELDT CTD, w» £, J 200 SHELL COMPANY OF CANA NR $3500. NORSK ENG MINERALOL! NORWAY 8 147,420 SY ENDS ENGEL. MINERAL OIL AKT SWEDEN _F340000_ BR. BOR... PETROL EA, SYNDICATE Li 3 583, 200 BR IMI RIA O/L COM. AN" { oC NOOoM 972,000 The Rayal Durch - Shelf Perroleum Combination w Americar Compares ASIATIC RSIATIC PETROLEUM CO PETROLEUM CO. STRAITS SETTL PHILIPPINES 1,215,000 3 72, 900 NGLO - SAX! SFTROLEUN COMPAN" 78 00 'MPERI » COMPANY TH RFRICA 48 600 VED. wa MoM _ | 15800000 ASIATIC PETROLEUM CO. S/AM _ $3R4500__ |. mstaric PETROLEUM CO SOUTH CHINA $170,000 AS/ATIC PETROLEUM CO. NORTH CHINA | $2.430000 ASIATIC | PETROLEUM CO . INDIA 32673000" ASIATIC OF FOLEUMLC, tg MRLARVYSTRIE 243.000 _ ASIATIC ! PETROLEUM CO. LTO. EGYPT J 972 000 VY. CAUCASIAN OIL FIELOSLTD RUSSIA £3 645000 GROZNYSUND., or frees tro. RUSSIA $.458 00g er py RLIFORN/!A OIL FIELDS LTD. LONDON aA 0p SERAWRK BORNEC KOTURY CILFIELDS Isvwoicare tro. | L Japon ; 2485000 UNITED BRITISH WEST INDIES PE 5 EUM SYN. 486,009 | URRL CASPIAN ort zene RUSSIA $2 860,000 ANGLO “CYPTIAN OILFIELD CO. LTD. J 7.375.000 abe eee eee eee ES dA AW THE FENERAI TRANRE COMMISSION ON COOPERATION IN AMERICAN E YBODT JONDITIONS IN PARTICULAR INDUSTRIES. 355 of Great Britain, and the metal-buying combinations of England and Germany. The Commission has information regarding buying combinations in many other countries, and in various lines, such as the combinations of lumber wholesalers in Australia, the combination which before the war existed among the lumber buyers in the region of the lower Rhine, that of the Swiss manufacturers who use tinplate, that of the importers of hominy feed, of phosphates and cottonseed products in Germany, of cotton manufacturers in Austria, and many others. COOPERATIVE SOCIETIES IN THE UNITED KINGDOM. The extensive growth of the cooperative movement in the United Kingdom is but little realized by the average American. This is due mainly to the fact that the movement, originating among the British and Scotch working classes about 60 years ago, has never sought publicity for itself through general advertising. It grew gradually, content with making small savings, and owing much to the fidelity and unselfish devotion of its leaders. At the end of 1913 there were in the United Kingdom 3,636 retail cooperative societies, having 3,327,125 members. Their combined capital, share and loan, was 314,528,723, their total sales that year were $675,482,644, and their net profits amounted to $71,274,959. The various societies early saw that their interests would be better conserved if a central wholesale buying organization were established Accordingly, in 1863, after nearly three years of discussions and conferences, the Cooperative Wholesale Society (Ltd.), was formed and the following year commenced business with headquarters at Manchester.? Four years later, in 1868, the Scottish Cooperative Wholesale Society (Litd.), was started with headquarters at Glasgow. These two wholesale societies are similar in aims and purposes, differing only in size and territory covered. Membership in them appears to be limited to registered cooperative societies (retail) and their own employees. Their business relations with each other are close and a number of their depots and other enterprises are operated jointly. The Scottish Cooperative Wholesale Society, Ltd.—This organization, formed in 1868, is very similar to the English society except in size. A number of its foreign enterprises are operated jointly with that society. At the end of 1914 the number of retail societies holding its shares was 269, representing a membership in those societies of 456,806 persons. Its capital resources amounted to $23,105,541, its total sales for the year were $45,881,906, and its net profits were $1,625,742. In June, 1915, it had 9,104 employees. — 1 The Cooperative Wholesale Societies (Ltd.), Annual, 1916, p. 535. 'Tbid., p. 209. Ibid. D. 402. 356 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, In addition to the special features of this society’s domestic buying and manufacturing activities, it has a large wheat-buying depot in Winnipeg, Canada, consisting of 13 elevators.! The Cooperative Wholesale Society, Ltd.—This organization has had an extraordinary development. Starting as wholesale buyer and commission merchant, it soon branched out into cooperative insurance and in 1872 was authorized to enter the manufacturing business.” The announcement in its 1916 Annual comprises a remarkably wide range of products and lines of activity. A partial list of these reads as follows: Wholesale general dealers, manufacturers of over 40 products, bankers, insurers, millers, printers, stationers, bookbinders, boxmakers, lithographers, architects, engineers, builders, shipowners, butter factors, lard refiners, bacon curers, fruit growers, drysalters, spice grinders, curriers, iron founders and tinplate workers, tea growers, blenders, packers, farmers, importers, and fellmongers, dealers in oroceries and provisions, drapery, woolens, ready-made clothing, boots and shoes, brushes, crockery, carpets, furniture, coal, hides, skins, bones, etc? At the end of 1914 the number of retail societies holding shares was 1,193, representing a membership in those societies of 2,336,460 persons. Its capital resources were $45,673,626, its total sales for the year amounted to $169,997,090, and its net profits were $3,444,876. In October, 1915, its employees totaled 27,593. The C. W. S., as the Cooperative Wholesale Society is known, has purchasing depots, salesrooms, wholesale warehouses, banking agencies, factories, and other cooperative plants at over 50 points in England and Wales.® It has four purchasing depots, three creameries (with six auxiliaries), and one factory in Ireland. It maintains forsign and colonial buying or other depots at New York, Montreal, Rouen, one in Spain, five in Denmark, one in Sweden, three in West Africa (one of them a joint depot with the Scottish Cooperative Wholesale Society), and a joint depot in Colombo, Ceylon.* In conjunction also with the Scottish Society, it operates tea estates in Ceylon, covering 3,386 acres ? as well as other tea estates in southern [ndia,® and raises its own cocoanuts in Africa. The society owns and operates a steamship service between Manchester, Swansea, and Rouen.? To Americans this society is important chiefly as a buying combination. Their New York office annually buys from $8,000,000 to \ The Cooperative Wholesale Societies (Ltd.) Annual, 1916, p. 337. 1Ibid., p. 210. sIbid.. p. 193. 1Tbid., p. XVI and p. 207, + Thid.. frontispiece (map) 8 Ibid., pp. 195 and 202, 7Ibid., p. 189. #Ibid., p. 202. Ibid. p. 173. CONDITIONS IN PARTICULAR INDUSTRIES, ° 357 $9,000,000 worth of goods in the United States, and their total purchases abroad, which are sent to Great Britain, amount to about $40,000,000 annually. This does not include foreign goods bought by the society in England—e. g., American grain or flour, or meats which may have been shipped over by exporters who have to cut prices in order to make quick sales. PRINCIPAL ARTICLES PURCHASED IN THE UNITED STATES. —The principal “articles purchased in this country are wheat, bacon and hams, lard, leather, dried fruits, and canned goods. The society always buys from large companies, a course made necessary by the fact that only such concerns can guarantee the uniform quality and stipulated deliveries of large quantities of goods commensurate with the society’s requirements. In many instances it wishes to buy meats or canned goods that have been advertised in England, are known there, and are sold by concerns that have studied the English market and know its tastes and customs. Many such commodities are sold by the brand, which are already well known and need no advertising or pushing by the retail cooperative stores. For these reasons the small American producer can not deal with this organization. On the other hand, the dealings of the society with the large American cooperative organizations, such as those among the westorn fruit growers, have been very satisfactory. This situation suggests the desirability of cooperative selling organizations or combinations for foreign trade among small American producers to standardize their products, establish central sales depots, share the expense of foreign advertising, and in other ways fit themselves not only to do business with large foreign buying combinations, but to engage in general foreign trade on a larger scale. BUYING COMBINATIONS IN THE METAL MARKET. Close interrelation of producers, traders, and larger consumers.— Before the war the control of the world’s metal market was in the hands of a group of German metal traders who are primarily engaged in buying metal, or in acting as selling agents for producers, and in selling it to European and Asiatic consumers. From the standpoint of the American metal producers they are to be regarded primarily in the light of buyers, although in a broader sense they might well be defined as traders, since they both buy and sell. The description of their activities here given is from the American point of view. In a general way, it may be said that in Germany is centered the control over many of the largest producers of metals, while the London Metal Exchange and silver “fixing board” exercise and control the price-fixing power to such a degree that London has become the international market for almost all metals, and that London 358 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. metal quotations set the standard for the metal business the world Ver. With regard to the fixing of prices in the metal market the national and international metal cartels and syndicates are of primary importance. The metal trade is notable for the extraordinary degree in which it has been concentrated in the leading metal-producing and metal-consuming countries of the world. A comparatively small pumber of firms control this trade the world over, and most of them are more or less closely interrelated. These combines fix the price and regulate the production of the metals and metal products controlled by them in their respective territories, and thus indirectly have an important bearing on the price question as it affects the metal market. The part played by the banks in the control of the metal business is largely responsible for the internationalization of the metal trade. Through syndicate agreements, price cartels, and interlocking directorates, certain banks of England, Germany, Holtand, Switzerland, -and Belgium have managed to secure control pver the largest metal plants and metal-selling agencies of the world. Another interesting feature of the metal combines consists in the fact that a number of large and important industries are dependent apon the metal trade for their supply of raw materials. Among these the electrical and the chemical industries rank foremost. Almost half of the total copper production is used for electrical purposes. This close interdependence as well as manifold other common intereste have been instrumental in bringing about a far-reaching system of cooperation among the leading metal firms and industrial cartels and syndicates. Thus, the Metallgesellschaft of Frankfurt a. M., before the war was the common selling agency for the French Aluminum Syndicate, and it serves in a similar capacity, together with Beer, Sondheimer & Co., of Frankfurt a. M., and Aron Hirsch und Sohn, of Halberstadt, for the German Zino Syndicate. Aron Hirsch und Sohn are members of the German Copper Sheet Syndicate and of the Combine of German Copper Wire Works. The Deutsche Gold-und Silberscheideanstalt is closely allied with the chemical industry and is a member of several chemical cartels. In 1900 it organized and managed a syndicate of calcium-carbide manufacturers. In the latter industry the Siemens-Schuclkert concern, one of the groups that control the German electrical business, is heavily interested. By means of the Metallurgische Gesellschaft the Merton interests, which are the chief factor in the metal buying combination, acquired large holdings in the German potash industry through the Gewerkschaft Rastenberg.! On the chart (opposite p. 366) the number and extent of these interrelations is presented. 1H. A. Giebel Die Finanzierung d. Kalilndustrie ( Xarlsruhe), 1912, p. 120 fol. CONDITIONS IN PARTICULAR INDUSTRIES. 359 Through banks, holding companies, affiliations with syndicates and cartels, interlocking directorates, joint-share holdings, and other means of interrelation, a world-wide ramification has taken place in the metal trade. The following examples will illustrate how some of the more important metal concerns are allied through interlocking directorates. Of the Merton family, of Frankfurt and London, five members are directors in most of the companies controlled by or affiliated with the Metallbank of Frankfurt a. M.; R. Merton is connected with the Merton Metallurgical Co., London; the American Metal Co. (Ltd.); the Australian Metal Co. (Litd.); and the Compagnie des Minérais de Liége. Walter Merton is a director of the Metallbank & Metalluroische Gesellschaft, Frankfurt a. M.; the Metallgesellschaft, Frankfurt a. M., and of the Merton Metallurgical Co., London. H. Gardner is on the board of directors of Henry R. Merton & Co. (Ltd.); the Australian Metal Co.; the Merton Metallurgical Co., London; the Mines de Pierrefitte (Litd.), and Williams, Foster & Co. A. Ladenburg is a director of the Metallbank and of the Schweizerische Gesellschaft fiir Metallwerke. Walter vom Rath is a director of the Metallbank, the Metallgesellschaft, the Lahmeyer electrical concern, the Hochster Dye Works, and the Allgemeine Electrizitits (Gesellschaft. The Frankfurt metal firms are also connected with some of the leading German banks through interlocking directorates, viz, the Hirsch concern with the Deutsche Bank; the Deutsche Gold-und Silberscheideanstalt with the Metallbank, Frankfurt, a. M., and the Oberschlesische Zinkhiitten A. G., Kattowitz, with the Nationalbank fiir Deutschland. SiLver.—According to the statement of a large American concern, which exports about seven-tenths of its silver output to London, the silver trade of the world is dominated by the London Metal Exchange: The price of silver is fixed in London by what is termed publicly the “fixing board,” which consists of four banking or brokerage houses dealing in silver and eastern exchange. This board of four representatives meets at a quarter Past 2 every afternoon. This penvie prices to be made in New York at the opening of business ere, on account of the difference in time. Since virtually the entire silver business of London is in connection with exportations from the United States, it will be seen that the Toi time in London is after the members of the fixing board know the full receipts and demands in London, but before business opens in New York. All silver in London is sold through these members of the fixing board. The distribution of silver in London is, as stated above, approximately 75 per cent for shipment to the Kast, which is sold entirely to eastern banking representatives, both English and continental, for coinage purposes, and, to a minor extent, to the manus 360 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, facturers of silver. The eastern banks and the government representatives will not buy through anyone except members of the fixing board, and at the fixed prices, because 1 they do otherwise they take a responsibility which they do not seem to be willing to take. In fact, if they should buy in any quantity from other parties, the fixing board would probably fix a price that would make their purchase open to criticism. These four brokers, therefore, have the ability, and exercise it, to absolutely fix every day the price at which the entire product of the mines of the United States in silver has to be sold. This fixing board has, however, a much greater power than that covered by the actual transactions in fine silver, for the reason that the commerce of the East, India, and the Straits Settlements and China is expressed in silver; in other words, the entire exchange transactions of London, covering the entire commerce between the sontinent of Europe and India, is expressed in silver values, and the price of silver is the price of exchange. These exchange transactions are at least ten times as great as the total value of ee purchased and sold in London. The great eastern banks are the great buyers not only of silver for export to the Fast but also of the exchange sovering the commerce with the East. The silver value of the American mines is dominated not only by the London situation as to silver but also the London situation as to their commerce with the East, and the whole situation is dominated by four brokers, designated as a fixing board. CoppPER.—According to the statement of a large American concern, which exports about six-tenths of its copper output to Europe, prices established by the London Metal Exchange determined to a large extent prices of copper at any port in Europe. Since the present war the British director of materials promulgated the fol lowing regulations in relation to sales of copper: (1) Orders up to and not exceeding 50 tons may be placed in the usual way, without reference to the minister of munitions. (2) No orders for best selected or electrolytic brands of copper shall be placed at prices exceeding £100 per ton, without first consulting a director of materials. Commenting on the effects of this order, the American concern 191d * This action was taken January 5 last. The immediate effect of this action with reference to copper was to stop the buying. The British Government, stating that they were acting also for their allies, Russia, France, and Italy, had previously negotiated large purchases of copper in this country for delivery spread out over a year. A very large proportion of the amount of copper exported is now being purchased by Governments, all acting in conjunction with one another, and is being distributed by these Be aayatis to their manufacturers. Furthermore, we know that our sales of copper, made to the largest consumer of copper in France, are being distributed by them to their normal competitors at the present time. CONDITIONS IN PARTICULAR INDUSTRIES. 361 Ou the subject of the purchase of copper by German buyers before the war, the American concern stated: The German consumption was such a large proportion of the total amount of copper exported that German buyers had more influence in fixing the value of copper than the English buyers. It was very evident to this company that the buyers of Germany at least worked as a unit. They would repeatedly remain out of the market for weeks at a time and would not accept ‘any offer made, during which time the American sellers would ri such amounts of copper that they would be obliged to reduce their offers. The German Pu er would wait until the offers were reduced sufficiently and then would come in again as the unit and buy in very large quantities. This process of buying at the lower and refusing to buy at the higher price, which was naturally stimulated by their very heavy buying at he low price, resulted in the average price of export copper being considerably lower than the average price at which the American buyer, who bought more regularly and was more inclined to buy at the panic high prices, could buy. The result is, so far as the sales of this company are concerned, and we believe that there is a similar condition on ae part of other sellers of copper for exportation, the average export price is considerably lower than the average price obtained from the American consumers. This difference arises entirely from the selection as to the time of buying and not from the holding of a price at any one time by this company to American consumers above that offered to consumers abroad. On conditions in the German market since the war began, the American concern said: In Germany at the beginning of the war a combination of all the large German consumers and metal merchants was made, known as the Kriegsmetall Gesellschaft. This combination has assembled and distributed the copper supply of the country. This is recognized as an incident of the war, but we are now informed it is proposed to continue this combination after the war is over. It ot thoroughly and effectively combine all of the large tonnage of copper which has heretofore been purchased in this country and place the or producers at a tremendous disadvantage. In Germany there are interlocking directorates, with large financial interests holding shares in the companies that are largest consumers of copper, which enables the management of the respective companies to act jointly in purchasing their requirements of copper in this country. The United States has heretofore supplied most of the copper used in Germany, and Germany has been the largest consumer in Barone. The bearing of the conditions existing in the European markets on the copper industry in the United States may be understood when it is realized that the United States produces about 56 per cent of the world’s supply of copper and exports about three-quarters of its annual production. In the year ending June 30, 1914, it exported 975,000,000 pounds, valued at $145,000,000, seven-eighths of the exports being in the form of pigs, ingots, and bars. Of the total quan- 369 REPORT ON COOPERATION IN AMERICAN EXIORT TRADE, tity of exports, 96 per cent went to Europe. Germany took one-third »f the exports to Europe. In addition to the quantity purchased by the great German metal-buying combinations, headed by the Metallsesellschaft, many of the large consumers of copper acted in concert in their purchases, through their cartel arrangements. According to one large American copper-producing company, they had reports from their Berlin agent of the existence of more than 50 combinations of copper-consuming companies for the regulation of prices, distribution of territory, and for concerted action in buying. According to John D. Ryan, of the Amalgamated Copper Co., European buyers, from 1903 to 1913, because of a buying combination, paid £# of a cent per pound less for copper delivered abroad than domestic buyers for copper delivered at New York.* Zinc.—The German zine syndicate (Zinkhitttenverband) was organized in February, 1909, with a capitalization of 2,000,000 marks, for the apportionment of the output and for the fixing of the sales prices of zine. The active organizers of the syndicate were the Metallbank »f Frankfort, controlled by the Merton interests; the Frankfort metal selling and holding company, Beer, Sondheimer & Co., which, through she Tellus joint-stock company, controls over a dozen metal and chemical concerns; and the firm of Aron Hirsch und Sohn, in Halberstadt. Both the latter metal dealers established their own new zinc works at the moment of the organization of the German zinc syndiaate.? Seven zinc works of Silesia and six zinc concerns of the Rhenish-Westphalian region at once joined the syndicate. The Metallbank, Beer, Sondheimer & Co., and Aron Hirsch und Sohn were made the sxclusive selling agencies of the syndicate and the agreement was to sontinue for three years. Only one important concern, the Georg von Giesches Erben, retained its right to deal directly with the consumers, under the condition, however, that it should comply with the orice lists of the syndicate.® Immediately upon the organization of the German Zinc Syndicate (Zinkhiittenverband) an agreement was made with the Austrian and Belgian producers, of which the Vieille Montagne had works in Belgium, France, Algiers, Germany, Italy, England, Sweden, and Spain, and agencies in Tunis, America (United States), Japan, and Turkey. A Dutch concern (Zincs de la Campine) also joined the syndicate. The syndicate embraced altogether 18 firms. Ten Belgian and some Fret.ch works formed another syndicate; so did six English works. During the same year, 1909, the competition of the United States concerns drove all these three groups together 3Ibid., p. 646. 18ee Pt. II, p. 261. ] a Da \Eartell-Rundschau, 1009, p 278, 3 CONDITIONS IN PARTICULAR INDUSTRIES. 363 into the International Zinc Syndicate (Internationaler Zinkhiittenverband).! The International Zine Syndicate was continued on November 10, 1910, up to April, 1914. The syndicate agreement left the English and the French works free to fix their prices, and it is said that in some cases they underbid the German works.? The agreement also provided that in case the reserve had reached 50,000 tons and the zinc prices in London had gone below £23 per ton the output should be reduced. Before the outbreak of the present war a 20 per cent reduction of output was ordered. The price changes made by the German Zinkhiittenverband always correspond to those made by the International Zinc Syndicate for the London Metal Exchange, which, it is said, gets its instructions from the Metallbank of Frankfort, i. e., from the combined Merton, Beer, Sondheimer & Co., and Aron Hirsch und Sohn interests. The zinc and other metal dealers of Germany act in unison as purchasers from any foreign concern. By the end of 1912 the German Zinkhiittenverband controlled onehalf of the world’s output of zine and three-fourths of the European output.? The International Zinc Syndicate regulates output only, while the German syndicate (Zinkhiittenverband) regulates both output and prices within its sphere. The actual price regulation is carried out by the Koélner Zinkhiittenverband ® which appears to be but a subdivision of the German syndicate (Zinkhiittenverband). It must be remembered that the German syndicate has two distributing agensies—one in Cologne and the other in Kattowitz (Silesia). The published price quotations, however, do not represent strict sales prices, but form only the basic price on which the actual sales prices are computed.* Leap.—In 1908 an agreement was reached between German lead works and Australian lead mine owners as regards prices and apportionment of markets. The competition of Spain and of the United States compelled the lead interests to organize in the spring of 1909 the International Lead Convention. The Australian Broken Hill mines, the American Smelting & Refining Co., some Spanish and some Mexican mines, the Usines des Désargentation of Antwerp, and the German Bleihiitte “Call” formed a common sales agency under the leadership of the Metallgesellschaft in Frankfurt, a. M., in Germany, and of the Henry R. Merton & Co., in London. This convention was continued in June, 1910, for several years. t A. Stange, Die Montan-Industrie Deutschiands (Berlin), 1910, p. 120, Kartell-Rundschau, 1014, p. 790. $ Kartell-Rundschau, 1913, p. 607. VIbid., p. 1005, VL. Silberberg, Kartell-Jahrbuch, 1910,2, p. 30. 364 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. AvomiNum.—Close relations exist between the ‘‘Merton concern’ and the aluminum industry, especially the French Aluminum Syndicate, and through the latter with the International Aluminum Cartel formed in 1912. The Metallgesellschaft of Frankfurt, a. M., was instrumental in organizing the French Aluminum Syndicate in November, 19:0, and since then it has served in the capacity of its common selling agency, which handles the entire export of the French Aluminum Syndicate. The following companies are members of the French syndicate: Société Electro-Métallurgique frantaise (“Froges’”), Compagnie des Produits Chimiques d'Alais et de la Camargne (‘““Salindres’’), Société des Forces Motrices et Usines de 1'Arve, Société des Produits Electro-Chimiques et Métallurgiques des Pyrénées, Société Electro-Métallurgique du Sud Est, and the Société d’Electrochimie.! Several aluminum factories also manufacture calcium carbide, and in 1900 the Deutsche Gold-und Silberscheideanstalt organized and managed a syndicate of calcium-carbide producers, which was dissolved in the following year. An international carbide syndicate was formed in 1910 for a period of 10 years, of which all of the 58 carbide factories of Europe (in France, Switzerland, Germany, England, Austria, Norway, and Sweden) became members. The electrical industry has for many years been closely connected with the manufacture of calcium carbide, especially the Schuckert interests? [n October, 1910, the following German producers organized the German Aluminum Purchasing Association (Deutsche Aluminium Einkaufsvereinigung): Fried. Krupp-Grusonwerk, A. G. Julius & August Erbsloh, Karl Berg in Eveking. Vereinigte Deutsche Nickelwerke in Schwerte. Th. Goldschmidt in Essen. Basse & Selve, Liidenscheid. Through this purchasing combine the metal industry was connected with the Krupp concern, the great steel, shipbuilding, ordnance, and munition manufacturers, on the one hand, and with the copper and brass industry on the other. Basse is one of the directors of the Liidenscheider Metallwerk, A. G., Vormals Jul. Fischer und Basse, a large consumer of metals and a producer of fine machinery and various articles from copper, brass, and new silver. American metal 1C. Dux, Die Aluminium-Industrie A.-G. Neuhausen, p. 32; W. Kossmann, Ueber d. wirt. Entw. der \luminiumindustrie, 1911, pp. 30, 52, 117; Kartell-Rundschau, 1911, p. 60. 2 Kartell-Jahrbuch, 1910, 3, p. 83. ¢P, Wangemana, Die Calciumearbidindustris (Dresden), 1904, pp. 75 fol. +L. Silberberg, Kartell-Jahrbuch, 1010, V. I, pt. 4, p. 37, Vy Handbuch der Bdrsen-Werte. 1912-14, V. IT, p. 2353, CONDITIONS IN PARTICULAR INDUSTRIES. 365 exporters state that the Liidenscheider Metallwerke, A. G., are also closely connected. with the Metallbank of Frankfurt, a. M. The German Metal Buying Combination.—There are three main groups of interests which together dominate the German metal market. They are the group identified with the Merton family, including the Metall Gesellschaft, the Metallbank und Metallurgische Gesellschaft, and the Deutsche Gold und Silberscheideanstalt, the group identified with Beer Sondheimer & Co., and the group identified with Aron Hirsch und Sohn. The principal relationships of these three groups are shown on the chart opposite p. 366. THE METALLGESELLSCHAFT, METALLBANK UND METALLURGISOHE GeseLLscraFT, AND H. R. MERTON & Co., LTD.—The Metallgesellschaft, A. G., Frankfurt a. M., was founded in 1881 by Wilhelm Merton. It took over the metal business of his grandfather Philipp Abraham Cohen.! Wilhelm Merton was the son of the senior member of the firm of Henry R. Merton & Co., of London. When H. R. Merton started in business, P. A. Cohen supplied part of the capital, conversely, later on, H. R. Merton, and his brothers Zachary and Emile, who had later become associated with him, also had a proprietary interest in the Cohen concern. When the two concerns were formed into limited companies these interests were capitalized in the form of shares in H. R. Merton & Co., Ltd., and in the Metaligesellschaft A. G., Frankfurt a. M.2 In 1878 the London and the Frankfurt interests had already joined in the foundation of the American Metal Co. As a result of the predominance of the influence of the Merton family in these three companies, they have been generally known as the “Merton concern.” For the purpose of attracting outside capital and in order to distribute the risk entailed by large investments, participating and financing companies were formed. The first step in this direction was that the Frankfurt, London, and New York firms turned over to separate holding companies their interests in ines and smelting plants which they had acquired in the course of time. In this way, in 1897, there was formed, as a subsidiary company associated with the Metallgesellschaft, the Metallurgische Gesellschaft, Frankfurt a. M. (capital 6,000,000 marks); in 1907, as a subsidiary company associated with H. R. Merton & Co., the Merton Metallurgical Co. (Ltd.) (capital £1,000,000); and in 1904, as a subsidiary company associated with the American Metal Co.. the Metallurgical Co. of America (capital $2,000,000) 2 1 The precious-metal Dueling Was salen over in 1873 bv the Dentsche Gold- und Silberscheideanstalt. Bee p. 368 and Pt. IT, p. 72.) 2 The Ironmonger, Mar. 18, 1918, pp. 4445 (see also article by Prof. Robert Lisfmann in Weltwirtschalt: liches Archiv for January, 1913). 3 BR. Liefmann, in Weltwirtschaitliches Archiv for January. 1913. 366 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. As the sphere of business interests of the “Merton concern” exsanded into other countries outside of Germany, England, and the United States, the following additional holding companies were organized: The Compagnie des Minerais, Liége (capital 2,500,000 francs) ; the Société auxiliaire des Mines, Paris (capital 5,000,000 francs) ; and the Compafiia de Minerales y Metales, Mexico. Tosether with the French banks, Cahen d’Anvers,' the Société générale pour favoriser le dévéloppement du Commerce et de Vindustrie en France, and other capitalistic groups, the Société des Cuivres et Pyrites, Paris (capital 30,000,000 francs), was organized in 1907 for promoting the development of three Spanish copper companies, the Jan Platon, the San Miguel, and the Pena Copper Co.? Two subsidiary companies of the Metallgesellschaft and of Henry R. Merton & Co. are the African Metal Co. and the Australian Metal Co., of London and Melbourne, respectively. They attend to the ~rurchase and sale of metals in their respective parts of the world in hehalf of the two parent concerns. In 1906, the Berg- und Metallbank A. G., located at Frankfurt, was srganized, with a capital of 40,000,000 marks. This holding comany was founded by the Metallgesellschaft, together with the Metallurgische Gesellschaft, the Deutsche Gold- und Silberscheideanstalt,® the Darmstidter Bank! the Berliner Handelsgesellschaft, the Diskontogesellschaft,' and several. private bankers of Frankfurt. From one-quarter to one-third of the capital in the principal undertakings of the ‘‘Merton concern’ was turned over to the Berg- und Metallbank. In 1910 the Berg- und Metallbank A. G., was consolidated with the Metallurgische Gesellschaft into the Metallbank und Metallurgische Gesellschaft A. G., Frankfurt a. M., with a capital of 10,000,000 marks. A chart showing the principal interrelationships of the various zompanies in the group which center in the Metallgesellschaft and the Metallbank und Metallurgische Gesellschaft has been prepared by the Commission, and is inserted in this volume (opposite p. 366). A preliminary chart was first prepared from information derived from a large number of published sources, chief among which were the article by Prof. Robert Liefmann in the Weltwirtschaftliches Archiv for January, 1913, various articles in the National Review London), the Mining and Engineering Review (Melbourne), and other periodicals. The preliminary chart was then submitted for sriticism to a number of Americans who are well informed in regard to the international metal situation and are acquainted with the organization, operation, and control of the companies shown on the 1 Not shown separately on chart. oo IR. Lisfmann, in Weltwirtschaftliches Archiv for January, 1913. 1 For a descrintion of the Deutsche Gold- und Silbsrscheideanstalt see p. 368. THE GERMAN METAL BUYING COMBINATION LOMBARD SO. | SYNOYCATE LTD. | (English) TRADING WESTMENTL0.LT0} (English® HUNTINGTON EBERLEINR COLT (enatish) MEM. SYNDICATE LYO. k English) 1 HAMES METAL 5 LTD. English) AJ ENTHOVEN AND SONS / English ISENERZ GESELL SCHAFT 1250000 M. (Gérman, —_— RICE, GRICE & SON, LTD. (English) ] V/LLIAMS, FOSTER, HNO CO. (English) MINES DE IERREFITTE, * ™ (English) = af" OILLWYN AND ca. LTD. (English) CRTON ILLYURG/CAL GMPRNY RG 27.7 HASRRA FLELT BE —— y MEXICAN roEssieh | PERTH AMBOY GENERAL BAKELITA | ENAMEL COMPA, A NASSLALC HEN WOIRNS) COMPANY OF AMERICA | CHEMITAL co. $464 goa £00 000 8 700.600 A oessLer \ AND NASSLACHER “WEMICAL CO. 37m cred | kaviwern. 4.6. : PRAGHOLIN (Austrian) y./% rrr THEMISCHE FRBRIX | SCH EMPE Gp. H 4 Epo Wiles: 7 © POTYEMISCHE| * YOM. Sra mR - - — ~ CYTSCHE "&S/ILBER WELE ANSTH emals ROESSLE +1 FRANKFURT £ 2.929, 000M. German) / bo ma METALL : GESELLSCHAFT /8,000,000M. (6erman) BALBALH SMEL{ | 50CI<TF ALumi-TING & REFINING | \NIUM FRANCAIS LOMPARNY (French) | SOUTHERN ALUMINUM CO. . $8400 000 i ee Z BARTLESVILLE i 2/NCLOMEANY $00,000 AMERICAN ZINC LLNEMICAL IO. rr | LANYON STAR SMELTING £0. IE — SOCIETE LENICKEL PARIS, 15 000 000F; “French! —_ OHIO & COLORROO SMELTING &MINING ro. $3 000 100 v — CANYON STATE SMELTING (OD. YY 7250 00 OMPANIA MINERS £PENOLES OF MAnm ( exican) YE TALLURGICAL COOF AMERICA 5 2.000 000 COMPRNIR DEMIN |rac ESYMETALESL MEXICO (Mexicar. ORE TRAOING COMPANY LTO. (English) ESS—— yt ZINWHUTTEN 6. BERG WERKS A.G HRTTOWITZ (6ermafsy 3 500,000 M. . NORDDEUTSCHE HUTTE RG. RREMEN (German) 6.000000. DEUTSCHE SUDSEE PHOSPHAT R.G. BREMEN (German) 4.500000 M. ELECTROMAGNET ~ SCHE GES. M.B.H. FRANKFURT A.M. German) METALL fi ZWERN SRANKFURT A.M. (Ger) CL — SUPERPHOSPHAT-RERIK NORDENHAM R.G. (German) / 500,000 M. ETAL IWERNE UNTER VESER A GNOROENHAM, . 4,200,000 M. (German) VOLFSEGG-TRAUNTA-ER NOHLENWERKE 16. VIENNA (Rusiria) STOEK IN 24 MINOR COMPANIES . Wirgg ) 0 4 t mL LT 1 SOCIETR ITALY... .. PFR LAR FABBRICAZI WE DELL ALLUMING ROME *'falian) at y fuer “Lk 770 “204 Ta “SIZERN SESELL-FFUR LWERTE] 8,008 000 ~ (Swiss) N— rr — .-_ METALLBANK J pe [ und METALLUREISCH © GESELLSCHAFT 40,000,000M. /° af German) / wo TBERSTHLESISTH [82757 Za Ta hE ET SAN MIGUEL 720,000 NM. wopiR Company] | _(66¥mEn) (Soan/<& ~ ~ TOT nee-TON SYN-“RHUN LMUSSH ‘NIGEL IN PAPER __. TY (Spans So £7 Lo tn wv 2 tre. or DUISBYG 400. OC: (be 52m, TUR ” Ih N=‘ee an) oPpER : TMPAN| (Sparsh) "l NOR = FFI? E. 5 500. co Ferny [ | \BENSBERG -GLRO-BACHER BERGE HU. TENA.G. 4000000 (German 2 -vER "AFRG 7s] “OM, agyrf UL, rl ley [67 — sig) Fi TAM. dT, J y many A NOT F LEGEND | AFFILIATED THROUGH STOCK —— [OWNERSHIP OR INTERLOCKING DIRECTORATES remem eme| CONNECTIONS THROUGH OTHER mene MEANS W PO. _ AMERICAN COMPANIES MN LTHOUGH, BEER, SONDHEIMER & (OMPANY IND ARON HIRSCH & SOHN ARE DISTINCT ROM THE METRLLGESELLSCAFT AND NOT ONTROLLED BY THE INTERESTS WHICH YOMINATE THE LATTER THEY ARE CLOSELY ISSOCIATED WITH THESE INTERESTS AND WITH ACH OTHER IN VARIOUS SYNDICATES AND [OM-BINRTIONS sl i; Ak ELANIUVELLE 1ONTAGNE, ENGIS | CRolATFIM Ae... STALLUR |SOCIETE espns] JIQUEDELOMMEL OF. ST. SEBASTIEN SOCIETE ANONYME| |DRIGREFEVILLE 2 Rplrriar PARISI French) — —_— SOC! “TH BIER; RIE T 00 METALLL MILA (/1eliam kl _ Se re Al 96. OLFE,.. ran PAN (Germ, TONSOLIDATED WETALS (0. INTERNATIONAL ME TAL SELLING CI co IEYE BERLINER MESSINGWERKE YORM WILHELM ROARINERT IR. GME. | ARON H!RSCK ~~ ung STN (RICHARD HERBIG : UND CO. MAA. FINOW METALL GESELLSCHAFT SMB W, Iu smeraLs " REFINING C0. & 3000000 0 MN ZING, S$ 7. WISCONSIN TINCCOMPRNY . + 4.6L (Australian on ul 2 dm nani 7 AMERICAN ZINC | a 0F ILLINOIS sltady GAS COMPANY. AMERICAN PIPE LINE LO. AMERICAN ZINC [77 SEPARATING LC mer ILAN ZINC “7 OF TENNESSE — a - - TEC ETE . REPORT OF THE FEDERAL TRADE COMMISSION ON COOPERATION tN AMERICAN EXPORT RAC CONDITIONS IN PARTICULAR INDUSTRIES. 367 chart. A final chart was then prepared, embodying the changes that were found to be desirable, in the light of the information gathered through such cooperation. The Commission believes that the chart herewith presented shows the principal companies and their interrelationships, as they existed at the time of the outbreak of the present war. It is generally understood that as a result of the war there have already been a number of changes in such relationships, and that more are likely to take place. It should be noted that the relationships shown on the chart indicate either stock control, stock interownership, interlocking directorates, or syndicate connections. These relationships, the Commission is informed, are of such a nature that they lead to a centralized price control and to a harmony between the policies followed by the different companies in their purchases of metals. Connections also exist with other companies, but these have not been put on the chart because the Commission does not understand that they are effective in price control. In the group of companies which are largely the outgrowth of the “Merton concern’ (see p. 365) the dominating place has been held by the Metall Gesellschaft, the Metallbank und Metallurgische Gesellschaft, and the H. R. Merton & Co. (Ltd.). The affiliations of these companies through stock ownership and interlocking directorates is so close that it is difficult to determine which company is the dominating concern. The two largest subsidiary companies are the Merton Metallurgical Co. and the American Metal Co. (ltd.). Apart from these two companies and their subsidiaries, the chart shows connections between the three controlling companies and 24 companies (excluding the Deutsche Gold- und Silberscheide group). Most of the connections were through stock ownership, either alone or in connection with interlocking directorates. In addition, mention is made of the fact that similar relations exist with 83 companies whose names are not separately shown. While the chart shows 13 companies related to the central group through the American Metal Co., and a like number related through the Merton Metallurgical Co., attention should be called to the fact that many of these 28 companies are, at the same time, connected directly with one or more of the central group and with other companies directly connected with it. In all, the chart shows the names of 54 companies of the 137 companies (excluding the Deutsche Gold- und Silberscheide group), of whose interrelation to the Metallgesellschaft the Commission has information. Among the important companies not mentioned on the chart in which the Metallbank und Metallurgische Gesellschaft holds shares are the Société des anciens Etablicsements ‘Sopwith’ of Paris and Linares, the bank of Del- 868 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, briick Schickler & Co. of Berlin, the Mitteldeutsche Versicherungs, A. G., Dusseldorf, the Allgemeine Revisions und Verwaltungs, A.-G., Berlin; the Solotwina Naphta, G. m. b. H., Lemberg; the Osterr. Petroleum-Industrie, A. G., Vienna. Tre DEUTSCHE GOLD- UND SILBERSCHEIDEANSTALT.—In 1872 the Deutsche Gold- und Silberscheideanstalt was established by the firms of Fr. Roessler Séhne and Hector Roessler, and in 1873 took over the precious metal business of Philipp Abraham Cohen.! Close relations exist between the Merton interests and the Deutsche Gold- und Silberscheideanstalt, which is itself a widely ramified concern, is interested mainly in the chemical industry, and serves as the central agency for several cartels, among them the Convention of Manufacturers of Potassium Ferrocyanide,? the Convention of Manufacturers of Potassium Cyanide? and the Convention for Quinine and Quinine Salts,? On the chart the connections in the nature of either stock ownership, interlocking directorates or both are shown between the Deutsche Gold- und Silberscheideanstalt and 20 minor companies. The direct connections shown are principally through stock ownership. In addition to the connection shown on the chart with the Metallgesellschaft, the Commission has information concerning a number of interrelations between companies of the Deutsche Goldund Silberscheideanstalt group and those of the Metallgesellschaft, Metallbank und Metallurgische Gesellschaft, and H. R. Merton Co. (Ltd.) group, which it is not practicable to present diagrammatically. Aron Hirscr & SorN.—The firm of Aron Hirsch und Sohn, of Halberstadt, is an important unit in the international metal trade around which numerous subsidiary and otherwise related companies are grouped. It is also closely associated with a number of German and international cartels. It is one of the three selling agencies of the international zinc syndicate for Germany. It is a member of the German Copper Sheet Syndicate, Cassel,’ and of the Combine of German Copper Wire Works, Cologne.® It holds an interest in the firm of Paul u. Siegbert Lachmann ;* the copper mine Ilsenberg am Harz, and the brass works IEberswalde on the Finow Canal.® It controls the Hirsch, Kupfer- und Messingwerke, A.-G., in Halberstadt (capital 10,000,000 marks), which manufactures chiefly copper and zinc products for railways, shipbuilding, and military purposes. The firm of Hirsch, Kupfer-und Messingwerke holds an interest in the Berlin Brass Works, Wilhelm Borchert, jr., G. m. b. H. (capital 1,000,030 marks), and in the Rich. Herbig & Co., G. m. b. H., Berlin, and controls the Finow Metal Co. (Ltd.). fy BR ppm reesei somimans Spm Some RAE on Spon ! The rest of the metal trade of Philipp Abraham Cohen was acquired by the Metallgesellschaft (see p. 368). * Not shown on chart. . Not shown separately on chart. CONDITIONS IN PARTICULAR INDUSTRIES. 369 In Australia Aron Hirsch und Sohn are interested in such important metal enterprises as the Electrolytic Smelting & Refining Co. and the Mount Morgan Gold Mining Co. (Ltd.), one of the largest Australian copper producing companies. Through the latter company Aron Hirsch und Sohn are connected by common directors with Goldsborough Mort & Co.,bankers and brokers and with the Broken Hill Proprietary Block 10 Co. (Ltd.). The international ramifications of the Hirsch interests also extend to numerous companies in the United States and Mexico. The firm of Ludwig Vogelstein & Co., New York, of which the firm of Aron Hirsch und Sohn is a special partner, serves as intermediary between the Hirsch interests and several of the American companies. The chart shows the names of 19 companies which are connected directly or indirectly with the firm of Aron Hirsch through interlocking directorates or stock holdings. Beer, SoNpEEIMER & Co.—The firm of Beer, Sondheimer & Co., Frankfurt, a. M., is the center of another large group of enterprises in the international metal trade, and ranks next in importance to the Merton concern, with which it has certain interests in common. In 1906 Beer, Sondheimer & Co. founded the Tellus A. G. fiir Bergbau und Hiittenindustrie. This company in turn controls, through stock ownership, or interlocking directorates, 36 other companies, the names of 12 of these concerns being shown on the chart. Beer, Sondheimer & Co. also are connected with the National Zine Co. (New York), and the Elder’s Metal Co., of Australia. The international character of its business is seen from the fact that in the group are German, Austrian, Italian, Belgian, French, American, and Australian companies. 27241°—16——20 CHAPTER VI, CONCLUSIONS, SECTION 1. STATEMENT OF THE PROBLEM. The history of the American export trade, from its early beginnings to the present, closely reflects the changes in the economic development of the country. During the last century, as one section of the country after another was settled and their products began to seek the markets of the world, by far the greatest part of the exports congisted of products derived directly from field, forest, and mine, with little elaboration by manufacture. About thé beginning of the présent century, manufactured goods were rapidly forming a more important proportion of the total exports. They then constituted nearly one-third of the total, and by the time of the outbreak of the present war they constituted nearly one-half. This development brought about a situation which has led to a wide demand for radical changes in the Araerican form of organization for handling export trade, because of the character of the competition encountered in foreign markets by manufactured goods. The Federal Trade Commission, in its study of the export situation, has endeavored to take the problem in its broad historical aspect. It has considered the present war condition as a temporary interlude, whose permanent influence is difficult to estimate correctly now, and has therefore based this study chiefly on conditions and tendencies before the war. It is frequently asserted that when peace comes the manufacturers and producers of the belligerent countries will take effective measures to regain their former trade. It is likely, however, that some time will pass after the close of the war before they will be able to axert their normal competitive power. Much capital, including large stocks of materials, will be needed to restore the wastage of war. For some time, also, after peace is declared, their costs of manufacture are likely to be higher in many lines of industry than before the war, due to increased costs of raw materials, increased taxes, and possibly higher wages. In their struggle to regain their former trade such foreign manufacturers and producers may be expected to fully utilize their highly efficient organizations for the promotion and handling of trade beyond their borders, even foregoing profit or taking a very low profit till their costs again become normal and they have reestablished 70 CONCLUSIONS, 871 their trade. Hence competition from foreign industrial combinations, aided by foreign ship lines and foreign banks, and backed by foreign governments, may be even sharper than before the war. The Commission, therefore, urges the importance of giving to American exporters a more nearly equal opportunity of securing business in other countries than they have heretofore had. Various factors are important for the successful conduct of foreign trade. A fundamental consideration is the cost of production of similar goods in different countries, depending on various circumstances with regard to the natural resources of different countries, the growth of capital, and the aptitudes and training of the people. Of prime importance also are the transportation facilities, especially ocean shipping; banking and credit facilities for foreign commerce; and the investment of capital in foreign countries, which tends to control the direction of the demand for imported goods. Almost as essential are the training and preparation of manufacturers and merchants for conducting export business. Combination in export trade as a factor in enabling American exporters to compete on more equal terms in foreign markets is likewise of great significance; and to this question the commission has given special attention in this report, because, in view of the policy of some other countries in this respect some sort of cooperation among American exporters seems necessary. The Commission does not consider cooperation as the most important factor in successful export trade, but it considers it an important and necessary element in any completely effective plan. Furthermore, this phase of the subject lies peculiarly within the field of the Commission’s activity. It is for this reason that the Commission has confined its recommendations to the question of cooperation in American export trade. Three important considerations are involved in this problem. These are, first, the prevalence of concerted action among the foreign competitors of American exporters; second, the probable effect of similar action by American manufacturers in export trade, including its possible disadvantages to domestic consumers and smaller competitors; and, third, the effect of the present laws of this country apon such cooperation on the part of American exporters. Any recommendation must be made in the light of a careful consideration of these subjects. As cooperation in export trade is recommended in this report, it becomes vitally important to consider what limitations should be imposed upon such cooperative action in order that the interests of the American public may be properly safeguarded. 372 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, SECTION 2. THE FINDINGS OF FACT. Foreign combinations that affect American export trade.—In most great foreign nations, combinations of producers and dealers are more prevalent than in the United States, where the Government has sought to safeguard the interests of the public by prohibiting combinations in restraint of trade. In Germany combinations of manufacturers and distributors are the rule. Cartels, syndicates, interlocking relationships, and price agreements are found in a large proportion of the industries. In France similar combinations have been organized in many industries. In England amalgamations and combinations of competitors are of frequent occurrence, although not nearly so common as in Germany. In Belgium and in Austria-Hungary before the war the entire industrial system, as in Germany, was organized in cartels, comptoirs, Syndicates, price agreements, ete. In Italy, Switzerland, Holland, Sweden, Russia, and Japan similar conditions exist to a less degree. In all these countries, notwithstanding great differences of law, legal obstacles to the formation of combinations are either absent or much less than in the United States. In Germany, for example, the law places practically no obstacle in the way of such combinations; in Austria-Hungary they are invalid, but not prohibited, while in France if they alter the natural course of prices they are prohibited.! In the great majority of the countries mentioned above the right to form business combinations is comparatively unrestricted, although there are other countries, especially the English self-governing colonies, which have very much the same legal pblicy as the United States. These countries, however, are but minor competitors of this country in its export trade. In Germany, Italy, Japan, and some other countries combinations have even been encouraged by the Governments, and sometimes Government enterprises have been members of the combinations. The greater part of American export trade has been with European nations. When American manufacturers and producers are exporting to any of these countries they must meet powerful combinations of producers and dealers there. Some of these combinations are international and own or control, among others, American producing companies. They now have in this country oil wells, coal and metal mines, smelters, refineries, and mills. This makes it more difficult to compete with them in the European markets. In other cases American manufacturers and producers must deal with combinations among the European buyers of their products. In a few American industries, such as petroleum, steel, and farm machinery, powerful single organizations are equipped to meet foreign combinations on substantially equal terms. But even in these industries, as well as 18es Report of the Commissioner of Corporations on Trust Laws and Unfair Competition, 1915, pp. 21 308 CONCLUSIONS, 378 in those where no single concern towers above its fellows, there are numerous small and moderate-sized producers who act separately in conducting their export business. It thus results from the conditions of the organization of industry abroad and at home that in the great foreign commercial countries American companies must often compete separately against combinations of foreign producers and must often sell separately to combinations of foreign buyers. This condition is repeated when American and foreign manufacturers compete in the markets of countries alien to both, as when American manufacturers compete with German or English in South America. Here, again, individual American exporters must encounter the united opposition of foreign manufacturers in many important lines of trade. In fact, special cartels and syndicates are often formed in European countries expressly for export business. The combinations can afford long and costly campaigns to gain foreign markets, and they can grant favorable terms to purchasers. Moreover, the chief foreign trading nations not.only have a distinct advantage over the United States in ocean shipping under their own flags, better foreign-trade banking and credit organizations, and greater investments in less developed parts of the world, but also it is their policy to unite these various interests with their industrial combinations into most effective organizations for the vigorous promotion of export business. These are the salient facts concerning the character and prevalence of cooperation and combination among foreign manufacturers, producers, and dealers. Foreign concerns cooperate in both home and export trade to a greater extent than American concerns do. The advantage and necessity of preventing such combinations in the American domestic trade is fully recognized by the Commission, but the export trade presents, in its opinion, a different problem. The need of cooperation in American export trade.—It is apparent from this statement of the character of the business organization which Americans must compete against in foreign markets that this country’s organization for export trade must be strengthened if its manufacturers and producers are to compete on more nearly equal terms in the commerce of the world. Obviously most of the individual American exporters, handicapped by dependence upon foreign shipping and foreign financial institutions, and forced single handed to oppose united foreign competitors, are at a material disadvantage. In international trade the competitive conditions have been largely in favor of the foreign concerns, particularly when opposed to the smaller American exporters. Cooperation solely for export business will go far to permit the development of stronger American organizations, and may be particularly advantageous to smaller concerns. 374 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, The need of such concerted action is clearer when the character of the export trade of the United States is understood. Under normal conditions about two-thirds of its exports have been foodstuffs and materials for use in manufacturing—such commodities as grain, flour, meats, cotton, copper, oil, coal, etc., and one-third of its exports have been manufactured articles ready for use, such as machinery of all kinds, electrical goods, automobiles, boots and shoes, wearing apparel, cloths, medicines, drugs, paints, varnishes, etc. The marketing of these two broad classes of products in foreign trade present very different problems. Many foodstuffs and materials for manufacture, such as grain, copper, cotton, etc., will sell themselves at some price, usually at a price broadly established in competitive world markets. Developing export business in these commodities is comparatively simple. There is often no need of creating a demand. With this class of goods the problem is partly one of obtaining a more efficient system of selling, and partly one of protecting our producers against combinations of foreign buyers. At present, one of the most practicable means for obtaining these results is cooperation among American producers. In the case of finished manufactured articles, the problem is generally more difficult. In these factory products, both staple und special, the manufacturer must often create the demand for his particular goods. While it is not to be forgotten that cheapness and quality of product are necessary, organization for selling is also essential. To the producer of specialties, however, cooperation in export trade does not offersuch great advantages as to the producer of staples. Absence of standardization is in the way of its effective working and the field of foreign markets is far more open and free to specialties than to staples. In some lines American concerns making specialties have established their products in a world-wide way and are ahead of competitors from other countries. While, therefore, producers of specialties have to create their own market, many of them feel that they can do this to better advantage individually. Some of those who have not yet established themselves in all their markets, or who are but beginning their campaigns, favor cooperation, but what they wish is cooperation with manufacturers of allied lines rather than with competitors. To the producer of staples, the foreign manufacturer or combination making the same line offers the most determined competition. To establish the American goods requires strong, practical selling campaigns. Not only must the customer be persuaded to prefer the American manufacture, but the sales must often be supplemented by the establishment of local warehouses that will insure a prompt supply, and the customer must be given ample assurance that he can CONCLUSIONS, 375 continue to get the same goods year after year. Moreover, this demand must be created in distant countries. In face of determined and skillful opposition from competing foreign manufacturers united in powerful combinations, this is a most difficult undertaking. It is among American manufacturers of staples, therefore, particularly the smaller concerns, that cooperation for export business is especially needed. It will permit them to create organizations which ¢an compete on more nearly equal terms with the organizations of their foreign rivals. They can afford, then, to advertise, to study foreign demands and customs, to make demonstrations, to open branches, warehouses, and stores abroad, to collect credit information and to extend credit, to employ skilled salesmen familiar with foreign markets, and to maintain a direct representation of their own which will be firmly established and effective in the markets to be covered. The expense of such promotion will not be excessive when shared by a number of participants. In many lines of manufacture the export commission houses and the export merchants are undoubtedly the best agencies by which goods can be placed in foreign markets. These firms have played a great part in the development of American trade in manufactured goods, and their functions and their value in this respect should not be forgotten nor underrated. But to many of the demands of international trade in such goods they are inadequate. Frequently such articles require highly specialized technical training on the part of salesmen. In other cases long and expensive introductory work must be done to create a market. Export commission firms and export merchants are far less disposed to spend money and energy in. such work than are the manufacturers whose continued prosperity depends upon the creation of markets for their goods. The commission house and the export merchant handle dozens of different lines of manufacture. Their profits come from the total business, and it is the total with which they are chiefly concerned. But the manufacturer is interested in a single line of products. He concentrates his effort on the creation of business for that line, and he is much more resolute in the matter than any intermediary who has no capital invested in manufacturing plants and equipment. In domestic business, competition, independence, and the play of individual forces is the settled policy of this country. The law requires that this shall be the condition of business here. Abroad, the legal conditions are different. In many countries combination is permitted and in some is even encouraged. What is equality of opportunity for manufacturers within this country, therefore, become inequality and disadvantage for them when they undertake to export to other countries. 376 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE. Safeguards for domestic consumers and competing producers.—The objections which are urged with the greatest force against liberty for cooperation in export business are that the resulting combinations will exploit consumers in the home market and oppress their American competitors in the export trade. These are serious dangers and they must be considered frankly and guarded against effectually. The Commission believes that the advantages to be gained by effective cooperation in foreign markets need not entail any sacrifice of the firmly established policy of this country in regard to the maintenance of fair competitive conditions, and the prohibition of monopolistic control within the United States. At the same time, cooperation for export trade will enable the exporting manufacturer to realize an increased return for his products along with decreased costs through larger scale production, and the country will enjoy greater industrial stability resulting from a broader market. The safeguard to the interests of the domestic consumer against any artificial stifling of domestic competition through combinations or unfair practices lies in the enforcement of the present antitrust laws, such as the Sherman Act and the Clayton Act, and of the Federal Trade Commission act. To allow American firms to cooperate for export and to permit the use of certain methods abroad which are legal in foreign countries but are not permitted in the United States in no way implies that such cooperating firms will be allowed, through their activities in export trade, to bring about results in this country which could not otherwise be legally secured. This is the case whether the results take the form of prices artificially fixed through combination or agreement, or the form of employing against American competitors any practices which, under American law, would be held to be unfair. In other words, it is no part of the proposal of the Commission to suffer export combinations to be used as a blind to cover attempts to restrain trade at home. The legislation must be framed so that any such attempt shall remain subject to the full rigors of the antitrust laws. The question may be raised as to the effect of export combinations on prices in this country. Prices to the domestic consumers are always likely to be affected where changes occur in the volume of export trade, whether such changes are due to the efforts of an export sombination or to other causes. For some products, particularly among manufactured articles, there may be some lowering of the domestic price. With the broader market, larger-scale manufacture will be possible. The resulting economies may lower the cost of production per unit, and with competition in the domestic market the natural tendency under such conditions of lower cost would be to lower prices to the domestic consumer, CONCLUSIONS, 371 On the other hand, prices to the domestic consumer may, in some instances, be raised through an increase of exports brought about by encouraging producers to seek a broader market for American products. The rise may be either temporary or permanent, according to the particular circumstances under which the commodity is produced; but in either instance it will be the result simply of increased exports. The domestic price for certain manufactured goods might be temporarily raised, but be followed by an increase of productive capacity, which would augment the supply and bring down the price. Should, however, the commodity be a raw material of the kind that increases in cost per unit as the quantity is increased, or a manufactured article in which such raw materials are the principal factors of cost, then there is likely to be not only a temporary but also a permanent rise in both the domestic and export prices. This would happen regardless of whether the increased exports were due to export combinations or to other causes. When competitive forces are given free play price adjustments of this character have been the rule in the past and will continue to be in the future. They are a consequence of the broadening of a local market for a commodity into a national and eventually into a world market. An increase in facilities for developing the export trade will merely accelerate the period of transition in the same general manner as would result from an increase in facilities of transportation in any region of supply by furnishing a link between demand and supply, and thereby giving the supply an increased value. The foregoing discussion relates solely to commodities in which the prices are fixed by competition. Any increase in the domestic price due to actions in restraint of trade to which American firms might be parties, including any accomplished through participation in so-called international agreements between themselves and foreign firms, can and must be dealt with, as already stated, under the provisions of the antitrust laws. One of the most common statements made about export trade— that of other countries as well as that of the United States—is to the effect that large producers or combinations of producers frequently sell cheaper to their foreign than to.their home customers. In any consideration of tariff problems, this is an important matter; but so far as it concerns export combinations, only one fact need be pointed out. Probably the most prominent example of a country which has followed the policy of pushing its foreign trade by making export prices lower than its home prices is Germany. But Germany freely permits combinations in its home market. This facilitates the exaction of high prices in its domestic market, which is one of the principal conditions enabling such combinations to sell at very low prices in export trade. The fact that the law of this country prohibits such 378 =EPORT ON COOPERATION IN AMERICAN EXPORT TRADE, combinations in the home market not only safeguards against artificially maintained prices at home, but also gives substantial economic guaranties that American export prices will not, in general, be lower than American domestic prices.. Where the domestic prices are kept on a competitive basis there is little margin left to enable the exporter to sell goods abroad at lower prices. This desirable and necessary prohibition of combinations in the domestic trade of the United States, however, would undoubtedly have the effect of considerably diminishing the efficacy of export combinations among American exporters when obliged to compete with foreign combinations which are permitted to operate in their home markets as well as abroad. One of the chief advantages to be gained from combinations among American exporters is that they will thereby be put in a position generally to secure higher profits through increased selling efficiency, and in some cases to get higher prices abroad through better bargaining power. The fear has been expressed by some that cooperative export organization might be used to the disadvantage of nonmember American firms engaged in export trade. In so far as the export organization secures its business through greater economies in introducing and selling goods in foreign markets, and from better facilities for transportation, and for handling credits, it is clearly entitled to such business, whether it gets it at the expense of some foreign rival, or of an American competitor. So long as unfair methods are not employed any loss of trade suffered by a nonmember American firm must be because it can not do the business as cheaply as the combination. If, however, the advantage of the export combination over its American rival should be obtained through the use of methods which would be considered unfair practices in the United States, the situation would be entirely different. It is important that the law under which export combinations are permitted should make clear that such actions on the part of one American exporter against another are prohibited. whether the actions take place in the United States or abroad. Doubt as to the law now prevents export cooperation.—The Commission has been strongly impressed with the fact that doubt as to the effect of the antitrust laws operates in many cases to prevent the formation of cooperative organizations for export trade. It made special inquiry as to this matter. More than half of all who replied bo the Commission’s question stated that they understood the antitrust laws to prohibit combination or cooperation solely for export business, not accompanied by oppressive or unfair practices, and a large proportion replied that they understood the prohibition to apply to organizations of noncompetitors as well as of competitors. Moreover, many of these replies were based upon the advice of counsel. CONCLUSIONS. 379 Other manufacturers, who believed the law does prohibit export combinations, went on to say that they were not certain of the matter and would not care to take the risk of joining a cooperative export organization as long as the matter remained in doubt. So far as the Commission's investigation showed, there are at present only a few such organizations engaged in export.trade, and almost without exception they are limited to a small number of complementary but noncompeting concerns. Speaking generally, business men will not invest capital in enterprises the legality of which is doubtful. As a practical matter, therefore, the doubt as to the application of the antitrust laws acts as a strong deterrent to the development of export cooperative organizations among American business men. SECTION 3. RECOMMENDATIONS OF THE COMMISSION. The Commission believes that American exporters should be enabled to compete in foreign markets on more nearly equal terms with foreign competitors. It also believes that the smaller manufacturers and producers, so far as they desire, should be enabled to share in such foreign business. It is convinced that for these purposes cooperation in export trade should be permitted. It knows that doubt as to the application of the antitrust laws now prevents any marked development of such cooperation. It does not believe that Congress intended by the antitrust laws to prevent Americans from cooperating in export trade for the purpose of competing effectively with foreigners where such cooperation does not restrain trade within the United States and where no effort is made to hinder American competitors from freely engaging in export trade. It is not reasonable to suppose that Congress meant to obstruct the development of foreign commerce by forbidding the use in export trade of methods of organization which do not operate to the prejudice of the American public, which are lawful in the countries where the trade is to be carried on, and which are necessary if greater equality of opportunity is to be afforded Americans in meeting foreign competitors. The Commission, therefore, respectfully recommends that Congress enact declaratory and permissive legislation to remove the present doubt as to the law and to establish clearly the legality of such cooperation. The Commission is aware that certain dangers may arise from the development of cooperative export organizations. As has been pointed out, there are two chief dangers: First, they may be used to exploit consumers in the home market; and, second, they may be used unfairly against individual American concerns in export trade that are not members of the organizations. These dangers must be provided against fully, and the Commission is confident that this can 380 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, be done without sacrificing any of the essential advantages of concerted action and without altering the fundamental policy of the antitrust laws or interfering with their enforcement. As safeguards against the dangers of such organizations it is recommended specifically that the kind of cooperative associations or organizations permitted be clearly defined; that they be restricted solely to export business as distinguished from domestic business; that they be limited to the activities of selling goods as distinguished from their production or manufacture; and that the term “export trade” be defined to mean solely trade or commerce in goods, wares, or merchandise exported and be specifically stated not to include the production or manufacture of such goods, wares, or merchandise or any act in their production or manufacture. It is also recommended that as a condition precedent to enjoying the benefit of such legislation every such cooperative organization be required, under penalty, to file promptly with the Federal Trade Commission a writben statement setting forth the essential facts concerning its organization, such as name, location of its offices and places of business, names and addresses of its officers and stockholders or members, and a copy of its articles of incorporation and by-laws, if incorporated, or a copy of its articles of contract or association, if unincorporated. The Commission has the authority now to require such reports, but it should not be burdened with the work of discovering such organizations and requesting information from them. The burden of furishing the required facts as to their organization should rest upon those who expect to enjoy the benefit of this law. Having these facto »efore it, the Commission could then use the power it already has to require other reports in such detail as may be necessary to inform it [ully of the activities of such cooperative bodies and to place it in a position to take such action as the public interest might require, - [t is also recommended, in order that there may be no possible doubt about the law, that the prohibitions concerning the use of unfair methods of competition contained in the Federal Trade Commission act be specifically extended to apply to export trade, even though the acts constituting such unfair methods be done outside of the territorial jurisdiction of the United States. Restrictions and safeguards of these kinds have been suggested and advised by the great majority of the thousands of business men reached by the Commission in its study. Manufacturers generally express no wish to attempt to use such organizations to exploit the market at home, but indicate their desire to see any such attempt, guarded against. Moreover, numerous manufacturers state that, owing to the nature of their products, or to the fact that they are already well established in foreign markets, they themselves would not care to join. cooperative export organizations but that they CONCLUSIONS, 381 realize their value for many other lines and are in favor of them. They merely ask that they themselves be assured against unfair methods of competition from such organizations. The business men who have expressed opposition to such restrictive safeguards are relatively few. In making these recommendations the Commission does not intend to intimate that there should be any change in the present policy of this Government to prevent combinations in restraint of trade in domestic business and to insist upon fair competition in such business. The Commission is confident that the enactment of such legislation as that outlined above will permit the development of the cooperative organization which must take place if the manufacturers and producers of the United States are to compete with foreigners on more equal terms in export trade. It is also confident that this essential development can be obtained without harmful effects on the domestic market and without prejudice to the interests of American concerns which conduct their export business outside of any combination. LIST OF AUTHORS CITED. Arten, Joan H. Midyear Business and Politics in Argentina. The Americas, August, 1915. ArNDT, PAUL. Deutschlands Stellung in der Weltwirtschait. second edition. Leipsic. 1913. AsHLEY, WiLiiaM James, Ed. British Industries; A Series of General Reviews for Business Men and Students. London, 1903. Barney, R. O. Financial Conditions in Argentina: The First Effects of the European War. The Americas, November, 1914. BaumcArTEN, FerpiNaND, and MEeszLéNy, ArraUR. Kartelle und Trusts. Ihre Stellung im Wirtschafts-und Rechtssystem der wichtigsten Kulturstaaten. Eine national-konomisch-juristische Studie. Berlin, 1906. Brckerath, H. vox. Die Kartelle der deutschen Seidenweberei-Industrie. Karlsrube i B., 1911. : Braxesree, GEoraE HusBarD. Ed. Japan and Japanese-American Relations.” New York, 1912. Bonixowsky, Hueo. Der Einfluss der industriellen Kartelle auf den Handel in Deutschland. Jena, 1906. Bowrey, ARTHUR Lyon. A Short Account of England’s Foreign Trade in the Nineteenth Century, its Economic and Social Results. Revised edition, London, 1905. CaRrLIoz, J. Les comptoirs de vente en commun. Paris, 1905. Carrer, GEORGE R. The Tendency Towards Industrial Combination. A Study of the Modern Movement towards Industrial Combination in some Spheres of British Industry; its Forms and Developments, their Causes and their Determinant Circumstances. London, 1913. Crastiv, J. Les trusts et les syndicats de producteurs. Paris, 1909. CrisHoLM, GEORGE GoUDIE. Handbook of Commercial Geography. Sixth edition, London, 1906. Crark, W. A. Gramam. Cotton Goods in Japan, Bureau of Foreign and Domestic Commerce, Special Agents Series No. 86. Washington, 1914. Cossa, Euniro. I Sindacati Industriali. Milan, 1901. CuNNiNGEAM, WILLIAM. The Growth of English Industry and Commerce in Modern Times. Part 1: The Mercantile System. Cambridge, 1903. De LEENER, GEORGES. L’organisation syndicale des chefs d’industrie. Etude sur les syndicats industriels en Belgique. 2 vols. Brussels, 1909. Dux, C. Die Aluminium-Industrie-Aktien Gesellschaft Neuhausen und ihre Konkurrenz-Gesellschaften. Lucerne, 1912. Fisk, GeoreE Myaarr. International Commercial Policies. with Special Reference to the United States. New York, 1911. FreceraEmM, Jortus. Die rechtliche Organisation der Kartelle. Mannheim, 1912. GeeriNe, TraAUGOTT. and Hotz. Ruporr. Wirtschaftekunde der Schweiz. Zurich. 1914. GraNAERT, JULES. Associations industrielles et commerciales, Federations, ententes partielles, syndicats, cartells, comptoirs, affiliations, trusts. Brussels, 1901. GieBeL, H. A. Die Finanzierung der Kaliindustrie. Karlsruhe, 1912. GorpsTEW, I. M. Ekonomicheskaia politika. Second edition. Moscow, 1913. Goon, E. T. The Industrial Future of Britain. Financial Review of Reviews. London, June, 1916. Crunzer Josep. Ueber Kartelle, Leipsic. 1902. MY 384 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Hause, J. M. English Cotton-Goods Trade, Bureau of Manufactures, Special Agents Series No. 47. Washington, 1911. } HEBER, E. A. Japanische Industriearbeit; eine wirtschaftswissenschaftliche und kulturhistorische Studie. Jena, 1912. HeeeMANYN, CARL. Die Entwickelung des franzdsischen Grossbankbetriebes. Miinster i. W., 1908. . HevrrrericH, Kare, Germany's Beonomic Progress and National Wealth, 1888-1913. New York, 1914. Heneer, Hans. Die Kapitalsanlage der Franzosen in Wertpapieren, mit besonderer Beriicksichtigung der Kapitalsanlage in Handel und Industrie. Stuttgart and Berlin, 1913. Hossow, Cearies Kennera. The Export of Capital. London, 1914. Hoop, CarisToPHER. Iron and Steel, their Production and Manufacture. London (1911). Horz, Ruporr. See Geering, Traugott. Hurrey, Epwarp N. Banking and Credit in Argentina, Brazil, Chile, and Peru. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 90. Washington, 1914. lasa, GorrrEDO. L’Ttalia; Geografia Economica. Milan, 1912. leans, James SreprEN. The Iron Trade of Great Britain. London, 19086. [E1DELS, OTTO. Das Verhiltniss der deutschen Grossbanken zur Industrie mit beson-Jerer Beriicksichtigung der Eisenindustrie. Leipsic, 1905. JONES, GROSVENOR M. Government Aid to Merchant Shipping. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 119. Washington, 1916. ronEs, JouN Harry. The Tin Plate Industry, with Special Reference to its Relations with the Iron and Steel Industries; a study in Economic Organization. London, 1914. Karencavs, L. B. Sindikaty v. russkoi zheleznoi promyshlennosti. Moscow, 1910. KesrNER, FRITZ, Der Organisationszwang. Eine Untersuchung fiber die Kampfe zwischen Kartellen und Aussenseitern. Berlin, 1912. Rocr, Warpemar. Die Konzentrationsbewegung in der deutschen Elektroindustrie, Munich and Berlin, 1907. LoLiMaNN, Jurys. Der deutsche Stahlwerksverband. Eine wirtschaftliche Studie auf Grund eigener Wahrnehmung. Berlin, 1905. ZossMan, Wirrrien, Uber die wirtschaftliche Entwicklung der Aluminjumindustrie, Strassburg, 1911. Laur, Francis. De Vaccaparement. Paris, 1900. Levy, Hermann. Monopoly and Competition. A Study in English Industrial Organisation. London, 1911. Lizruann, RoBERT, Beteiligungs und Finanzierungsgesellschaften. Ein Studie iiber modernen Kapitalismus und das Effektenwesen in Deutschland, den Vereinigten Staaten, der Schweiz, England, Frankreich und Belgien. Jena, 1913. —— ——. Die Internationale Organisation des Frankfurter Metall-Handels. Weltwirtschaftliches Archiv. January, 1913. ——— ——. Die Unternehmer-Verbiinde (Konventionen, Kartelle) ihr Wesen und ibre Bedeutung. Freiburg i. B., 1897. —— ——. Kartelle und Trusts und die Weiterbildung der volkswirtschalftlichen po Organisation. Second edition. Stuttgart, 1910. .. Linck, B. Die schweizerische Maschinenindustrie und ihre Entwicklung in wirtschaftlicher Beziehung. Frauenfeld, 1911. Locamtrier, WiLeELM. Zur Entwicklung der Baumwollindustrie in Deutschland, Jena, 1906. LoNGUET, (. Des syndicats d’exportation en France. Paris. 1508. LIST OF AUTHORS CITED. 385 LougH, WitLiam H. Banking Opportunities in South America. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 106. Washington, 1915. Macrosry, HeENrY W. The trust movement in British Industry. A studv of Business Organisation. London, 1907. MapELuNG, E. Die Entwicklung der Portland-Zement-Industrie von ihren Anfingen Lis zur Gegenwart mit } esonderer Beriicksichtigung der Kartelle. Munich and Leipsic, 1913. Marowrrz, C. Fiinfzig Jahre Geschichte einer Wiener Bank. Zeitschrift fiir Volkswirtschaft, Sozialpolitik und Verwaltung, Vienna, 1914, Volume 23. Marri Saint-Lion, Etienne, Cartells et trusts. Third edition. Paris, 1909. MeszLiNY, ARTHUR. See Baumgarten, Ferdinand. Mirus, Lox. Die Futterstoffweberei in El! erfeld und Barmen. Leipsic, 1909. Mochizuki, Koraro. Japan To-day; A Souvenir of the Anglo-Japanese Exhil ition held in London, 1910 (A Special Number of the Japan Financial and Economic Monthly). Tokio [1910]. MoreeNroTH, WrLx. Die Exportpolitik der Kartelle. Untersuchungen iiber die handelspolitische Bedeutung des Kartellwesens. Leipsic, 1907. Morris, J. Japan and Its trade. London and New York, 1902. MurreLMaNN, LEorPoLp. Die wirtschaftlichen Verl.inde. Leipsic, 1912. Noeruer, EricH. Vertrustung und Monopolirage in der deutschen Elektricitits-Industrie. Mannheim and Leipsic, 1913. Norton, THOMAS H. Dyestuffs for American Textile and Other Industries. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 96. Washington, 1915. Orin, P. Le comptoir métallurgique de Longwy. Paris, 1908. Operr, Raver M. Cotton Goods in China. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 107. Washington, 1916. Orrer, ALwWIN. Die deutsche Textilindustrie. Entwicklung, gegenwiirtiger Zustand, Beziehungen zum Ausland und zur deutschen Kolonialwirtschaft. Leipsic, 1912. Paisa, Sir GEORGE. Great Britain’s Capital Investments in Other Lands. Journal of the Royal Statistical Society. London, September, 1909. PararavE, Sir R. H. Incris, The Banking Almanac. London. Passama, PauL. L'integration du travail. Formes nouvelles de concentration industrielle. Paris, 1910. Passow, RicHarDp. Materialien fiir das wirtschaftswissenschaftliche Studium. Band I, Kartelle des Berghaues. (3 vols.) Leipsic and Berlin, 1911-1912. Pours, Lupwic. Die Entwicklung des deutschen Wirtschaftslebens im letzten Jahrhundert. Third edition. Leipsic, 1913. PorTER, GEORGE RicHARDSON. The Progress of the Nation in its Various Social and Economic Relations from the Beginning of the Nineteenth Century. Revised by F. W. Hirst. London, (1912). Prevost, H. Les ententes entre producteurs en France. (Institutions similaires a I’étranger.) Charleville, 1904. RatHGEN, Karr. Die Japaner in der Weltwirtschaft. Second edition. Leipsic, 1911. Repricn, Fritz. Die volkswirtschaftliche Bedeutung der deutschen Teerfarhenindustrie. Munich and Leipsic, 1914. } Riesser, Jacon. Die deutschen Grossbanken und ihre Konzentration im Zusammer hange mit der Entwicklung der Gesammtwirtschaft in Deutschland. Third editio.. completely revised and enlarged. Jena, 1910. —— ———. The German Great Banks and their Concentration in Connection with the Economic Development of Germany. Third edition completely revised and inlarged. Translation published by the National Monetary Commission; 61st Cong., 2d Sess., 8. Doe, 593, Washington, 1911. 27241°—16——26 386 REPORT ON COOPERATION IN AMERICAN EXPORT TRADE, Rousiers, Pavs pe. Les syndicats industriels de producteurs en France et Péiranger. Trusts—cartells—comptoirs, ententes internationales. Revised ed. Paris, 1912. SamNT-MAURICE, COMTE DE. La civilisation économique du Japon (1908): son expansion en extréme-Orient. Paris, 1908. SaunpERs, W. L. Government Regulation of Commerce as affecting Foreign Trade. Official Report of the Second National Foreign Trade Convention, St. Louis, 1915. New York [1915]. ScHELLE, GusTAVE. Le bilan du protectionnisme en France. Paris, 1912. ScHILDER, SIGMUND. Entwickelungstendenzen der Weltwirtschaft. Berlin, 1912, Scamior, Perer HEemwricn. Die schweizerischen Industrien im internationalen Konkurrenzkampfe. Zurich, 1912. ScrONEMANN, JosEF. Die deutsche Kali-Industrie und das Kaligesetz. Eine volkswirtschaftliche Studie. Hannover, 1911. ScHUSTER, ALrrED FELIX, Tr. The German Commercial Code Translated and Briefly Annotated. London, 1911. SweERBERG, Lupwie. Handbuch des deutschen Kartellrechts. Berlin. 1910. ———————. Kartell-Jahrbuch. Berlin, 1910-11. + Smmons, Roger E. Lumber Markets of the East Coast of South America. Bureau of Foreign and Domestic Commerce. Special Arents Series No. 112. Washington, 1916. SiNGER, J. Das Land der Monopole: Amerika oder Deutschland? Berlin, 1913. Surrn, Franky H. Australasian Markets for American Lumber. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 109. Washington, 1915. —-———. China and Indo-China Markets for American Lumber. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 104. Washington, 1915. Swoparass, Jorn H. Russia, a Handbook on Commercial and Industrial Conditions. Bureau of Foreign and Domestic Commerce. Special Consular Report No. 61. Washington, 1913. . Sranas, ALBERT. Die Mrntan-Industrie Deutschlands unter Beriicksichtigune ihrer Beziehungen zu der des Auslandes. Berlin [1910]. StE1GER, J. Trusts und Kartelle im Ausland und in der Schweiz, Zurich, 1907. StErN, Vicror. Die Kartelle in der Textil-und Bekleidungs-Industrie mit besonderer Beriicksichtigung des Detailhandels und der verlaneten Einheitskondition. Karlsruhe i. B., 1909. StoNE, Naruy I. Promotion of Foreign Commerce in Europe and the United States. Bureau of Manufactures. Washington, 1907. Tareisy, Sasro. Japans internationale Handelsbeziehungen mit besonderer Beriick-_ sichtigung der Gegenwart. Halle a. 8., 1902. Tscarerscaxy, Sieerrizp. Grundlagen der Kartellentwicklung in Deutschland und Oesterreich unter besonderer Beriicksichtigung der beiden Enaueten. Vienna, 1912. ——————, Kartell und Trust. Leipsic, 1911. WaneeManN, P. Die Calciumcarbidindustrie. Dresden, 1904. WALkER, FRANCIS. Policies of Germany, England, Canada, and the United States towards Combinations. Annals of the American Academv of Political and Social Science, July, 1912. ———— ————. The German Steel Svndicate. Quarterly Journal of Economics. Vol. XX, May, 1906. ——————. The Law concerning Monopolistic Combinations in Continental Europe. Political Science Quarterly, March, 1905. WeLTER, KarL. Die Exportgesellschaften und die assoziative Exportfcrderung in der Schweiz im 19. Jahrundert. Rern 1915 LIST OF AUTHORS CITED. 387 Wisavut, F. M. Trusts en Kartellen. = Amsterdam, 1903. WiepeNFELD, K. Die Kaliindustrie und das Reichskaligesetz. Schmollers Jahrbuch fiir Gesetz-ebung, Verwaltung und Volkswirtschaft im Deutschen Reich, v.35. 4, 1911. WorrE, ArcuiBaLp J. Commercial Organizations in France. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 98. Washington, 1915. ———— ———, Commercial Organizations in Germany. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 78. Washington, 1914. ———— ————. Commercial Organizations in the United Kingdom. Bureau of Foreign and Domestic Commerce, Special Agents Series No. 102. Washington, 1915. —— ——— Foreign Credits. Bureau of Foreign and Domestic Commerce. Snecial Agents Series No. 62. Washington, 1912. ZOLLINGER, WALTER. Die Bilanz der internationalen Wertlibertragungen; eine Studie iiber die Zahlungsbilanz und die auslindische Kapitalsanlage der Schweiz. Jena, 1914. Zo6LLNER, August. Eisenindustrie und Stahlwerksverband. Kine wirtschaftspolitische Studie zur Kartellfrace. ILeipsic, 1907. O