The Development of Our Export Trade

territory that I haveto explore, but with little success. I have found, however, that it includes Abrasives and Lubricants;. Bleaching Powder and Dyes...
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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

ascertain what have been the consequences of existing legislation and to forecast those of proposed legislation. The units of the Tariff Information Catalogue on sulfur, barium compounds, and abrasives have already been prepared and the work on potash compounds and dyes and other coal-tar products is well advanced. Much of the statistical information on many other classes has already been assembled. I have been seeking what may be the limits, of the territory that I have to explore, but with little success. I have found, however, that it includes Abrasives and Lubricants; Bleaching Powder and Dyes; Explosives and Fertilizers; Olive Oil and Cyanides; the Salts of Potash and Radium, Bromine and Balm of Gilead; Aconite and Zaffer. It is evident that the Commission directly or through its staff must appeal to specialists in many lines for information and advice, and that only through this cooperation can a true statement of the recent achievements and present position of the American chemical industries be prepared in proper form for the consideration of the Commission and of Congress. Your aid is earnestly desired in this undertaking. THE DEVELCPMENT O F OUR EXPORT TRADE EXTRACTS FROM ADDRESSB Y

w. s.

KIES

Vice-president of the National City Bank of New York and American International Corporation September 26, 1917

The chemical industry of the United States has shown greater efficiency and greater powers of quick response to business demands than almost any other of the great industries of the country, as illustrated by the fact that exports of chemicals ‘in 1917 ($185,ooo,ooo) were practically seven times as great in value as in 1914 ($27,000,000), while exports of all industries, as a whole, were only three times as great. But this does not tell the full story because the list of exports does not include the great group called “explosives,” which is so closely allied to the chemical industry as to be in fact a part of it. I n explosives the value of our exports grew from $6,000,000 in 1914 to $8~o,ooo,oooin 1917. Under this class were listed cartridges, dynamite and gunpowder. Under the heading “other explosives,” the value of our exports grew from $I,OOO,OOO in 1914 to $420,000,000 in 1917, showing that in the industries closely allied with chemicals the growth has been quite as striking as in chemicals proper. In the articles which may be considered as strictly chemicals, we exported, for example, in 1914 acids valued at $5oo,ooo; in 1916, $24,00o,mo; and in 1917 approximately $55,ooo,ooo. Our dyestuffs exports have grown from one-third of a million dollars in value in 1914 to $12,000,000 in 1917, and these latter figures do not include any foreign dyes reexported. A few other illustrations may be of interest. Our exports of soda salts and preparations grew from practically nothing in 1914 to $18,000,000 in 1917. In the tabulations issued by the Government, under the heading “other chemicals,” the exports grew from $9,000,000 in 1914 to $75,ooo,ooo in 1917. The importance of the chemical industry is evidenced by comparison of the amount of capital and value of products turned out with that of other leading industries. According to the census of 1915, the value of capital of the group known as “chemicals and allied industries” was $723,ooo,ooo in 1914. I n the great woolen, worsted and felt goods manufacturing industry, the total capital in the same year was but $~I~,OOO,OOO, and in the silk goods industry $2 IO,OOO,OOO. The capital of the automobile industry in 1914was $408,000,000, and the capita1 of the flouring mill industry was $380,000,000. The amount of capital invested in the group distinctly classed as “chemicals” was, in 1914, $224,000,000, which represents an increase of nearly eight times since 1880. A study of the statistics of your industry reveals a further interesting fact, that the industry as a whole shows a decreasing

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value of-product per dollar of capital invested-in other words, that yours is an industry where the cost of experimentation and the development of new processes make constantly increasing demands upon capital. In 1880 there was invested in the general chemical industry in this country $29,000,000. The value of products was $38,000,000 annually, or $1.33 per dollar of capital. In 191j the capital invested strictly in the chemical industry was $224,000,000, the value of products $ I ~ ~ , O O O , O O O , or $0.70 per dollar of capital invested. The capital, from 1880 to 1915, increased about eight times. The number of employees in the industry during that period increased but a trifle over three times, and the wages and salaries paid increased about five times, from $6,000,000 to $31,000,000. This indicates that as an industry you are more dependent upon capital and brains than upon labor; that the success of the industry depends upon the development of improved and cheaper processes and the intensive use of the capital Zmployed. During the last three years, the chemical industry has received a great impetus. Large amounts of money have been spent in its development. When the war demand for your product shall have ceased, your great problem will be to find markets that will absorb your production. In many lines, before the war, Germany was supreme and competition with her was impossible. She held, to a very large extent, the South American markets. I n 1914 we sent to all of South America only $3,000,000 worth of chemicals. In 1917 the value of our exports to South America will amount to nearly $15,000,000. But even this latter figure does not indicate an export trade of very substantial proportions. Germany, prior to the war, as we all know, had a grip upon the chemical markets of the world, and in South America it was perhaps stronger than in other parts of the world. In considering the subject of the development of trade in South America, or in any other foreign country, the basic problems are the same, These are: ( I ) the cost a t which the article can be produced and sold in a foreign market; ( 2 ) distribution, which includes salesmanship, advertising and transportation; (3) financing, which comprehends the always difficult problem of credits. Fundamentally the South American market is not much different than any other. It must be studied to be understood. Consumers in South America will purchase goods on the same principles that consumers elsewhere do-on the basis of price, adaptability and quality. Where the price is out of line with that of a foreign competitor, quality may sell the article as a result of genius in salesmanship. Where the quality of two articles is practically the same, the cheaper will be moved. We come right back home, therefore, to the most important problem -the cost of production. Shall we be able t o produce in this country after the war on a basis which will enable us to compete with the products of other countries of the world? All industry is intensely interested in the answer to this question. So far as German figures are available, the production in the chemical industries, per dollar of capital invested, is much greater than in this country. The reason probably lies in the more intensive application of science and the use of men of science in the industry. In fact, a German author, writing on the industries in 1897, said, “It is generally recognized that the German chemical industry owes it preponderating position solely to the highly scientific preparation of its collaborators.” With the cost of production a t or near the costs of our leading competitors, the development of any given foreign market is an assured possibility if enough thought and attention be given to the task. The outbreak of the war in 1914 had a paralyzing effect, during the first few months, upon American industry. As a matter of fact, in the months immediately prior to the war, business had been declining. It was a t this period of contraction of our domestic market that American manufacturers turned

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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 CHEMISTRY

with one mind toward foreign trade. The seeking of new markets and the subject of the development of our foreign trade assumed a prominent position in the discussions of chambers of commerce and manufacturers’ organizations and associations everywhere. Particular attention was directed toward South America. The interest aroused in South America bordered on hysteria. But after attending meetings, passing resolutions and hearing many speeches on the subject, the substantial manufacturer realized that no permanent progress could be made in a foreign market without credit and banking facilities. The need for the establishment of banking facilities abroad to aid in the building up of our export trade had been impressed upon the bankers of the country, and, in response to the demand, the National City Bank opened in Buenos Aires on November IO, 1914, the first branch of a n American bank to be established in a foreign country. Since that time branches have been established in Brazil, Uruguay, Chile, Colombia and Panama, and branches will soon be opened in Peru and Venezuela. By the expiration of this year ten branches will be in operation in South America. During the war period banking facilities have been provided pretty well covering all the important parts of South America. It may be well to add that during this period the National City Bank has established branches in Russia and in Italy, and, through the International Banking Corporation, which it has acquired, has provided banking facilities in India, China, Japan, the Philippines and the Dutch East Indies. During the war period substantial progress has been made by the United States in the development of its South American trade. Unquestionably this has been largely due to the fact that we have had the market pretty much to ourselves. Will we be able to keep the business which we have built up during the last three years? The same question is asked, with just as deep interest, of our export trade elsewhere. To appreciate the development of this country’s export business in the last three years, let me recall the figures to you. Fiscal year ending June 30 IMPORTS EXPORTS

. , . . .. . . .......... .. .. ., ., .. .. ,...

1914.. 1915 1916.. 19 1 7 . .

$1 893 925 657 $1:674:16Y:740 $2 197 883 510 $2:659:355: 185

$2,364,579.148 52768589340 $4’333’658’865 $6:293:806:090

It is unreasonable to expect that this volume of business can be maintained, particularly our exports of manufactured articles. A very large proportion has been munitions, food products and war supplies to our allies. To South America and neutral markets, we have exported vast quantities of goods heretofore purchased in Europe. When the war shall have ended, our business in war supplies will be a t an end. We may, of course, look to the exportation of huge quantities of raw materials, for Europe is bare of them. Our machinery, machine tools, construction materials and steel products will be needed for rehabilitation purposes. But the rehabilitation work will proceed much more rapidly than we think, and it will be only a short time after the cessation of hostilities when European exporters will seek to regain their footing in the markets we have temporarily possessed. We can, therefore, assume a great decline in our exports and a sharp decrease in our favorable balance of trade. That portion of our present South American business which rests on the merit of our product and its ability to meet competitive prices will remain ours if our manufacturers exert themselves to keep it. A part of our present South American business will unquestionably revert to its old channels. Germany’s commercial representatives throughout the world, and particularly in South America, are active. The German banks continue their business, and numbers of German houses, a t least until recently, have been able to keep their customers through supplying them with American goods and English goods and taking orders for German goods for after-the-war delivery.

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It is reported that large quantities of wool have been purchased in South America and held in storage for shipment to Germany as soon as the war shall have ended. So thorough was the economic penetration of Germany into the life of almost any country whose market presented any attractions that we may safely assume the work will be taken up where it was left off, as soon as the war shall end. The present conditions afford an opportunity for the getting together of labor and capital, the development of a better understanding, and mutual study and consideration of the problems of the future, and it is the manufacturer’s duty to take advantage of this opportunity to the fullest degree. We may possibly question the proposed price fixing activities of the Government as they affect industry in general, as in violation of fundamental economic principles, but every patriotic manufacturer shouldaccept his tax burdens in the real American spirit. We are a t war, sacrifices must be made by everyone, and the money to win the war must come from those who have it. The future of the nation and of democracy is a t stake. While everything a t Washington may not be progressing as the critic on the side line would have it, nevertheless, appreciating the magnitude of the task, it is our duty to support the Administration loyally and wholeheartedly in its every effort and in truth, gentlemen, our progress toward preparing for our part in this world conflict has been truly remarkable, and compares most favorably with the really marvelous accomplishments of England. Realizing the stupendous task before our Government in the waging of the war t o a successful conclusion, the manufacturers must rely upon themselves in the task of insuring the future of their export business. There is much that they can do independent of the Government assistance. Foreign markets must be studied. The characteristics and habits of the peoples with whom they would trade must be understood. Young men must be trained for the service. The demand of various markets must be ascertained, and their needs must be conformed to. Well-thought-out sales campaigns will succeed in foreign countries as well as in the United States, and these can be now planned with an eye to the future. Business acquaintances which have been made during the last three years should be developed into business friendships which will last. The credit systems of foreign competitors should be studied and plans made for meeting competition along this line. Every effort should be made now to accommodate in every possible way the new foreign customer that has been put on your books during the last three years. Foreign markets should be visited by trained salesmen, or, better, by representative officials of the firm. All the information, statistics and data bearing upon market possibilities should be availed of. Finally, the success of the American manufacturer in maintaining his hold upon export business will depend upon the development of a broader spirit of cooperation and of nationalism American banks and American facilities for doing business should be used wherever available. The interest of every American should be the interest of all in a foreign market. American business standards and American business methods in f oreign countries should be such as to warrant the respect and approval of all. Through organizations of Americans in the various foreign markets, our business ideals can be enforced, and this can be accomplished when our manufacturers once thoroughly realize the importance and necessity of cooperative effort in foreign fields. Now is the time to plan intelligently for the future, and to build a sure foundation for a permanent export business, for, while a t the moment the business skies may be overcast and cloudy and the rumblings of the coming storm may disturb us, yet with the dawn of another day we may awake to find the storm clouds scattered and the sun still shining upon a world redeemed forever from the hate, fury and murder of war.