T H E J O U R N A L OF I N D U S T R I A L A N D ENGINEERING C H E M I S T R Y court decisions relating to each article. A large number of these surveys are completed or in process of preparation, but much remains to be done. Completed surveys include most of the heavy chemicals, chlorine products, fertilizer materials, wood distillation products, sulfur, barium salts, thorium nitrate, and many drugs. PROJECTBD INVESTIGATIONS
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materials. In many cases, such as the manufacture of caustic soda and chlorine, joint products are secured from the same raw materials and operations. The ratio to be used in subdividing the joint costs to the different products is largely arbitrary. We have found that different companies use different ratios, If one of the joint products is sharply competitive in the international markets and the other is not, the ratio used in determining the cost of each becomes of great significance in tariff making. Still another perplexing problem is the best way to bring the results of our investigations to the attention of Congress without disclosing publicly the cost data of individual manufacturers. We hope to work out a plan of stating the unit costs in the form of averages or ranges without disclosing the figures of individual companies., A general statement may also be made showing the fraction of the total cost chargeable to labor, materials, and overhead. The selection of the products to be investigated constitutes another problem. We are agreed that a representative list of intermediates and dyes should be studied but which particular intermediates and dyes are to be selected is still an open question. Other products for detailed investigation will probably be chosen from this list: barium salts, thorium nitrate and incandescent mantles, citric acid, caustic soda, and chlorine and chlorine products. The Tariff Commission is fully conscious of the difficulties which lie in the path of the proposed investigations of costs and prices. I have suggested only a few of the industrial and accounting questions involved. We need-we invite-the cooperation and active assistance of the chemists and manufacturers whose closeness to the problems makes their advice invaluable.
For many articles these industrial surveys will provide adequate information for the tariff maker. Policy and sometimes the amount of tariff, if any is to be levied, can be determined from the careful analysis of the chief facts of production, trade, and consumption. I n the case of other articles, however, these surveys are not sufficient. A more detailed investigation is necessary, particularly on contentious articles. The Tariff Commission is, therefore, taking steps to investigate domestic costs and domestic and foreign prices of certain chemical products. We realize that the problem of coal-tar products-to take a specific case-is not completely solved by showing, as we have done, how the present law may be made more effective. Congress may think that conditions require a revision of the tariff rates. Costs and prices have played a large part in American tariff controversies. I consider the comparison of domestic and foreign costs or of domestic costs with foreign prices of primary value in tariff making, for they enable the rates to be made to equalize effectively conditions of competition between the United States and abroad. The investigation of domestic costs alone, even, has its value. It did not seem wise to the Tariff Commission to undertake during the war extensive cost investigations. Conditions were abnormal and the results would have been of doubtful significance. We are now, however, beginning to make plans for analyzing the basic facts of certain A PROBLEM OF THE PRESENT industries by studying costs and prices. Unfortunately, it Let me, in conclusion, emphasize the pressing importance will not be possible, except in rare instances, to ascertain foreign of the situation in which the war has left the American chemical costs. Although desirable, foreign costs are not indispensable. If we have domestic costs properly subdivided into raw materials, industries. That it be met promptly and adequately is neceslabor, and overhead expenses, including depreciation, they and sary not only because men have invested, chemists have inknown prices of raw material, wages, and other expenses in vestigated, and labor forces have been assembled and trained, foreign countries may be used as a basis for estimating foreign but also because many of these industries are essential, vital costs. Then, too, the value in tariff making of a comparison parts of our industrial life. I have endeavored to make clear of domestic costs with foreign prices must not be overlooked. the measures of commercial policy which should be adopted It is the foreign price not the foreign cost with which the domestic and the lines of investigation which should be pursued. The manufacturer has to compete. But we must know the domestic determination of the former, I need hardly state, rests with Congress; the latter is the peculiar task of the Tariff Commission. cost in order to know what tariff is necessary to enable the domesYou may be assured that so far as we can we shall do our part tic industry to compete on an equality and stay in business. A study of domestic costs will also be valuable in determining in this important work of reconstruction. the proper relationship of tariff duties on allied products. For example, a cost study will assist in determining the relation GERMAN METHODS AND OUR PRESENT SITUATION between the duties on intermediates and dyes, and it may disB y JOSEPH H. CHOATE,JR. close the necessity of dividing these products into subgroups Alien Property Custodian O 5 c e , Washington, D. C. carrying different rates of duties. I come before this formidable gathering to-day with trepiThe appropriation of the Tariff Commission is at present on a wartime basis. We hope and expect that after July first dation. It is a bold and brazen man, in this day of specializafunds will be available which will enable us to begin cost and tion and division of labor, who brings coal to Newcastle, and price investigations on a fairly comprehensive scale. Much that is what you have asked me todo. There can hardly be preliminary work, however, may be done in the meantime. one among you who does not know from personal and often It is here we need your counsel and cooperation. You will, bitter experience, more about German methods in the Amerof course, appreciate that it is not sufficient to secure merely ican chemical industry than I do. All that I can offer is a total costs. It is essential to subdivide material, labor, and sketch of the general view obtained by us in the Alien Property overhead costs. Considerable detail even in the cost of materials Custodian's office, with the hope that though each of you knows some of the facts better than we, each will still find in it something is essential in many cases where the raw material is an imported article, in order to determine the proper relationship between unfamiliar. the duty on the raw material and the finished product. Citric At the outset we were in a state of lamentable ignorance. acid is a case in point. Citrate of lime from which the acid is None of us knew dyes from inks, or sulfo-acids from sulfuric made comes almost entirely from abroad. The tariff duties acid. We know little more now of the technical side of the on these two related products can be determined satisfactorily industry, but thanks to the patriotic labors of many of you only when we know the yields of citric acid from a unit of citrate gentlemen (notably your past president, Dr. Herty) who sacriof lime and also the portion of the total cost charged to raw ficed no end of time and toil in the Herculean task of educating
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US, we finally learned enough to understand and piece together the main facts in the vast masses of information which were placed before us. Of course we instantly saw that the whole industry was permeated with German influence, that German chemists were ubiquitous, and that the myth of their superiority had been so industriously propagated that it had become almost an article of the American business faith. Most people (especially those who knew nothing about it) thought that nothing chemically good could come out of any other country than Germany. Nevertheless there was a surprising lack of apparent German ownership. The law required, under stringent penalties, immediate report of all such property, yet months after the passage of the Act, only a negligible few of such reports had been filed. The Hun ownership seemed to have evaporated. This, however, did not stop Mr Palmer or Mr. Garvan for an instant. They commenced to dig, and called me in to man one of the shovels, and in the end we rooted out a mass OF hidden property sufficient to have gravely endangered the industry if i t had remained undiscovered. From the first our efforts were centered on the dye industry. The other branches of the profession, except that of pharmaceuticals, which was closely allied with dyes, seemed as a whole safe, and genuinely American, and while we did eventually detect and take over a few large concerns in this field, like, for instance, the Heyden Chemical Works, it did not worry us. The dye industry, however, did. Our national manufacture in this lime had been for years a puny and delicate infant, wholly a t the mercy of the Hun. It had been allowed to do no more than finish or assemble German intermediates, and though, since August 1914,its growth had been phenomenal, we felt that its hold on life was of the feeblest. No one could study it as we did, for even a single day, without seeing that it was indispensable to other industries producing billions of dollars’ worth of goods each year; that it only could insure to us, in war, adequate supplies of explosives; and that it alone offered, in and by its immense research requirements, insurance of the progress of the country in industrial and medical science. No one could see it as we saw it without coming to believe that it was perhaps the most essential of all the key or pivotal industries. The dye industry, therefore, had the most and the best of our efforts. We found, of course, that the production of coal-tar dyes was practically a German world monopoly. Starting with every advantage-cheap raw material, cheap labor, above all, cheap chemists, government subsidies, transportation a t or below cost, and close cooperation with the universities-the German makers had made a determined and successful effort to enslave the whole world to German dyes. They had stuck a t nothing. Combined as our law forbids us to combire, in two strong cartels, they had deliberately assaulted, with intent to kill, every nascent foreign dye industry, including ours Wherever anyone started making anything that would be useful in dyemaking, they instantly cut its price in half. Protected in their high prices a t home, and amply strong financially, they could afford to take severe losses for the short time required to drive out the newcomer, after which they could quickly recoup by doubling the original price. Where this method was unavailable they used full-line forcing, refusing to sell their patented colors except to those who would buy their other goods. Added to this was incessant, unlimited, bare-faced graft-the wholesale bribery of dyers. Finally, in 1916, the two cartels, with all the outside large concerns, had combined in one gigantic trust, which issued new securities to double its capital, and united companies whose assets totaled half a billion dollars. This monstrosity was organized avowedly to fight to win back the export trade. Its production is so huge that it must win or go bankrupt How it will fight we now know. Its share of the war after the war will be utterly ruthless. The American industry must be helped or it will be “spurlos versenkt.”
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The strength of the trust lay in its largest six members--Bayer, Badische, Berlin, Hoechst, Kalle and Cassella Each had a flourishing agency corporation here. Three of these-Bayer, Berlin, and Kalle-early reported themselves as German-owned. The other three did not. Investigation, however, showed actual German ownership in all, and in its course revealed nearly all the pet methods of Hun camouflage. First and easiest to deal with, was the pretended transfer of stock, by which stock really German-owned passed on the books to dummies in this country. This was generally shown up as soon as the real contract was developed, since it always turned out to leave the alleged Hun seller of the stock everything he had before the sale. More difficult was the oral option method under which the stock was placed originally in American hands subject to purchase on nominal terms a t will. More difficult still was the outright secret trust which, like the option, left the stock in apparently American hands from the first, but held for the German. I n some such cases we proved the trust and the Hun ownership only after an accounting which showed that unless such ownership existed, the president of the company had robbed his stockholders, paying over to Germans money which on the face of the books belonged to the record owners of shares. Most difficult of all was an underground method, peculiarly Hunnish, discovered in the companies which reported at the outset These surrendered with such ease as to put us on our guard, and eventually we found, in the case of Bayer, that the Hun officers of the American company had all arrangements made for scuttling their abandoned craft and piping all its cargo of business to a new company which they had bought with its money. This was detected just in time and the new concern was seized and sold with the old But if I should try to tell you half the methods of fraud and trickery which we had to combat, this meeting would not be over in time for next year’s to begin. Hun methods in business were like Hun methods in war. Either could be deduced from the other; and neither knew any limit of decency or self-respect. Coming to realize this, we came to the conclusion that although it was perhaps none of our business, we ought to do what we could for the dye industry, doomed as it was to fight against such odds. We could see that no tariff alone would ever help it. The German monster fighting for its life would mind duties no more than postage. But studying the situation we saw one gleam of light. That was the patents. There were thousands of these, many of them product patents. They were taken out, we thought, more to prevent import than to stop manufacture, since the Huns were not afraid of our makers. If they would stop imports for Germans, they would stop them by Germans. So we got the law amended so that the Custodian could seize the patents. He seized them. Then it became necessary to get them into American hands strong enough to protect them. No ordinary sale would do, since sale to a weak company would be useless and to a strong company would create a dangerous monopoly. At that stage the fertile brain of Mr. Garvan conceived the idea of a sale to a trustee corporation formed for the purpose. This idea germinated with remarkable speed and met an astonishing response: and the Chemical Foundation, Inc., is the result. This corporation thus formed a t the suggestion of the Custodian is capitalized a t $ ~ O O , O O O and to it the patents-4om of them-and trade-marks have been sold in one block for $250,000. It holds them subject to an obligation to license under them, on equal and reasonable terms, manufacturers of undoubted competence and IOO per cent Americanism, and to defend them by instantly proceeding against anyone who imports or makes infringing goods. Since many of the patents are product patents, this should serve to keep out some of the more recent and important German dyes.
May, 1919
THE J O U R N A L OF I N D U S T R I A L A N D ENGINEERING C B E M I S T R Y
The stock of the Foundation is limited to 6 per cent dividends so that it can never be a profit-making company, and it is nontransferable without consent of the company, so that control may not be &irchasable. The preferred stock is to be retired as soon as possible, and the common, which alone votes, is to be placed in a voting trust for 17 years, the trustees being Messrs. Otto T. Bannard, George I,. Ingraham, Cleveland H. Dodge, B. Howell Griswold, Jr., and Ralph Stone. The officers and directors are: President: Mr. Garvan; Vice President: Col. Douglas I. McKay; Secretary: Mr. George J. Corbett. Mr. Ramsay Hoguet is its patent counsel, and I am its ordinary legal adviser. The Foundation is thus assured, for a long period, of absolutely impartial control; and since no one is to be allowed to buy more than a share or two of the voting stock, the impartiality should continue. The charter provides that after the redemption of the preferred stock the income of the Foundation shall be used for research and the advancement of science; and on this line we see infinite possibilities of service. If, as we hope, its income is large, it can Stimulate invention by buying new discoveries, can coordinate research by bringing together academic, governmental, and industrial laboratories, and can collect and render accessible information as to laboratory facilities now nowhere available. It can, we hope, license the use of German trade-marks and trade names and insist on the quality of the goods on which the marks are to be used. It can take over copyrights and use them to make more accessible the best of scientific literature. By reason of its unique combination of industrial connections and impartial control it lends itself to a hundred different public services for which no other organization is adapted. The Custodian’s study of German methods has thus led to what seems an important constructive work. It stands to-day as the sole defense of our new dye industry against the onslaught that will fall upon us on the signing of peace. It is a partial and imperfect defense only. The patents cover but a fraction -though the most important fraction-of the dyes the country needs. Unless Congress awakes to the fact that nothing but a license plan like the British can stop the flood, the defense may be utterly submerged. On this question I must differ with Mr. Culbertson. A tariff alone will be no defense against the German attempt to secure its world trade. I n order to get back their market they will undersell, even with a tariff of 100 per cent, thereby destroy domestic competition, and then jump their prices, even as they have heen known to do in the past, and thus recoup whatever the fight may cost them. The Chemical Foundation and tariff provisions will help, but are they to be the only protection? Do you suppose the Germans are doing nothing a t this time? Do you suppose they will quietly submit to the loss of their trade, without an effort to recover it? The best information which the Property Custodian’s office can secure reports large stocks accumulated in Germany, both of intermediates and finished dyes. Both the Foundation and the tariff will do something, but we cannot save the industry without more protection than either or both will provide. I state this not alone as my own opinion, nor as that of the A. P. C. Office, but as an opinion shared by those whose interests might be adversely affected. When the man on the outside of a protective wall approves its erection there is something in it. I have never heard of a case where the man who buys goods affected by a protective measure and whose costs will necessarily be increased by the measure has come to advocate that measure except when that measure was demonstrably and certainly right. hTow in this case our judgment is fortified by that of the dye-consuming industry I have addressed meetings in Boston, Providence, New York, and Philadelphia, and as a result a cable has been sent to the President, signed by 95 of the most important firms in the country, the men who
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must buy the dyes, and who will have to pay more if the ficense plan comes into effect, and who will suffer if they cannot get all the goods they want. It is the most remarkable example of patriotism in commerce I have seen. March 2 5 , 1919 To the Preszdent of the United States: The undersigned, representing various branches of the textile industry, respectfully submit that in their opinion an independent, self-sustaining, American dye manufacturing industry is a national necessity; that such a dye industry cannot be established unless competition from German factories, including those in occupied territory, be cut off for a period of years; that no tariff will furnish protection against the enormous resources and unscrupulous methods of the German trust fighting to regain its foreign market; and that only a licensing plan like the British, excluding all foreign dyes reasonably obtainable in the United States, will save the new industry. We respectfully urge that immediate steps be taken to procure both in the peace treaty and in legislation the measures necessary to establish such a plan. We advocate this not merely because a domestic dye industry is essential to the independence of the American textile industry and manufacture generally, but chiefly because we believe that only through an established dye industry can the nation secure the progress in chemical education, in the application of chemistry to the arts, and above all in curative medicine, which are indispensable to the national welfare. That, gentlemen, is what the dye-consuming industries think of it, the manufacturers of textiles, woolens, cottons, silks, hats, inks, leather, printing, in fact every dye-using industry. This is the way they have put themselves on record. When they say that this measure is right, I believe it. If you want to save this industry the way to do it is to get at your congressman, and whisper your views in his ear. Put it as strongly as you can, and you will get such legislation. In conclusion, it is clear that great progress has been made in the development of this industry, which truly represents a national necessity. American manufacture is free in almost the whole dye field, and is already on its way to fill our every want. With all the forces now a t work in its defense, it willit must-be saved. German methods will never again be allowed to do to the American chemical industry those things which they have done in the past.
THE AMERICAN SPIRIT IN CHEMISTRY By EDQARF. SMITE Provost, University of Pennsylvania, Philadelphia, Pa,
Sitting daily within arm’s reach of a little, priceless chemical balance, brought in 1794 by Joseph Priestley to this country; surrounded by pictures, ancient volumes, prints, and letters, sear and yellow-all reminders of Joseph Priestley, whose greatgreat-great-grandson, also Joseph Priestley, it is my privilege to-day to instruct in the ways of the chemist, is it to be wondered that interest in the man who revealed oxygen to us should have caused me to seek further knowledge regarding the influence he exerted upon those about him? His radicalism, his inborn dissenting spirit, led him, against all good advice, to project himself into that cauldron of seething national politics which reigned in the last decade of the eighteenth century in America, until sharply rapped on the knuckles by those in high places, with broad hints that Americans be permitted to conduct their own government and be let live and move, undisturbed by unnaturalized sojourners-then Joseph Priestley turned to our science, but began by tantalizing its professed followers with a re-statement of his remarkable ideas on phlogiston, the intangible. We may rejoice that i t was America’s good fortune to have this crude theory held aIoft and talked about and written about almost incessantly for a period of years. It was the old European struggle or controversy transported to America and here it was-here on American soil-that it was settled for all time. But of this interesting fact, many, yes, too many, American chemists were never aware. He who speaks to-you
