International Finance And Trade
( Originally Published 1918 )
While United States export trade has for many years shown a balance in our favor, the country was a free buyer with a low selling power. That we had balances in our favor was not because we went after foreign trade, but because the foreign trader was obliged to come to us for things he could get nowhere else, and needed. Reciprocal understanding was never attempted. The United States was too sure of itself and its own way of doing things, to care very much what other nations wanted, nor for the ways in which other nations were used to doing business.
Our attitude toward the outlander might be expressed by a rubber-stamp declaration of independence: "Take it or leave it."
Statistics covering exports and imports a few years before and down to the war would have little or no value now, though they may be interesting sometime for purposes of comparison with those that will follow the peace agreement.
But current affairs seem to be shaping toward a retirement of the rubber stamp. For almost three years before the United States went to war, the country experienced a vast awakening to the possibilities of export trade-possibilities that while large, were faint as compared with what will come in the earlier years of peace; for the war lessons in trade will have taught us much that in our aloof days we did not know, nor seemingly want to know.
In the early eighteen nineties a few enterprising concerns went out after the trade of South America. The one move that has come through alive, and justified those who made it, was started by the late William E. Curtis as a result of a trip around both coasts of South America by a government commission of which he was a member. What he saw during that trip gave him an idea which he made active by founding a Pan American bureau at Washington, from which has come about all the progress we have made in our dealings with South America. Curtis got. a glimpse at South American methods, though not of the methods by which European countries, especially England, did business there.
All the efforts made since then to "capture South American trade" have been feverish. Few of them came to anything at all. Most of them died deaths costly in money, more costly in disappointed though once bright hopes.
They failed because they were, all of them, filled with the idea of "capture." They had the hustle theory. South American traders did not care to be captured; and hustle charmed them not at all. The contrary, rather. They could not see anything in it. Moreover, it was annoying.
The last mission from this country to that continent had its junket in 1916, and came home vastly satisfied with itself. One of its members, a prominent and very successful Chicago business man, made a warm and cheery address to a club after his return, at the conclusion of which a club member asked what the commission had done toward opening trade relations through American branch banks at the principal points of South American trade, and the establishment of a credit system, a system of acceptances through. such branches in the South American countries. He was surprised.
"We were not out for the banks," said he. "We were out for the trade."
Neither he nor any of his associates seemed to have learned that the South American is ready to trade with any country—would be glad to trade with the United States—in the same way he trades with England, and Portugal and Spain —mostly with England, and with the same credits. He has not gathered the American idea of cash on the nail, short paper, or open accounts. He wants credits of from eight to eighteen months, against which he is perfectly ready to accept drafts with shipping evidences, coming due at dates far enough off to let him make his turnover before he has to pay them. Pay them he would, turnover or no turnover, for the South American trader is jealous of his reputation and touchy in his sense of honor. It is simply a question of meeting him in his own way.
England gives him these credits as a matter of course. The overseas trade of England has been conducted on the acceptance basis from away back; was in fact built upon it. Americans looked upon the system as fogeyish—or funny. Credits of eighteen months! When here at home they could sell at thirty, sixty or ninety days on open accounts?
English banks and Canadian banks have maintained the trade of Great Britain and Canada through their branches in the West Indies (even in our own Porto Rico) and South America by handling the interchange of credits through acceptances that at once give the South American the goods he wants and the British or Canadian merchant his money for use while the credit runs; and the costs are small, the banks doing all the collection work without a ripple and at nominal costs.
The transactions become bank transactions, the drawer (seller) simply shipping at one end and handing his draft to the bank and the buyer simply signing his acceptance of the draft, and receiving his goods. Then the seller discounts his draft in the home bank, and uses the proceeds in other transactions.
It is the safest and easiest of all forms of trading; safest because liability follows the goods, the goods are worth the money or more, and collection is reduced to a bank function purely. Easiest because it suits both sides, incommodes nobody, and stimulates trade without "hustle" or "capture."
Advertising in South American publications is good for anyone who wants to sell to South America, because the merchants there have never been fooled by extravagant promises into buying bad bargains. They take an advertise-ment to mean exactly what it says. Their great journals (two or three of the world's greatest are issued there) would not sell space at any price to a misleading or whoop-em-up advertiser. They have a pretty keen sense of responsibility to their public.
It is right and proper to make United States products known in South America, by exhibition here, or down there by personal representation, or by advertisement in South American publications. But none of these, nor all of them, will get the trade unless the United States will sell to South America in just the way South America buys from other countries, and would like to buy from us.
British Banks.—Go through the financial district of London, and notice how many sober brass-plate signs with formal black lettering, countersunk to stay a few centuries, will tell you that here is the "Bank of the River Plate"—"Bank of Rhodesia"—"Bank of New South Wales"—"Bank of Bombay"—and bank of al-most every far-out country worth trading with.
Those quiet concerns, with no outward evidences of wealth, are financing England's trade overseas, with no hurry, no hustle, no anything but money all round.
When Wall street and La Salle street show such signs alongside their doors, all may know the United States has captured or is capturing her share of the trade of South America.