Part 3

IMPORTS AND EXPORTS, BY GRAND DIVISIONS AND COUNTRIES.

Total values of merchandise imported from and exported to each of the principal countries during December, 1917, and the 12 months ended December, 1917, compared with corresponding periods of the preceding year, were made public to-day by the Bureau of Foreign and Domestic Commerce of the Department of Commerce, as follows: -----------------+-----------------------+--------------------------- | Month of December— | 12 months ended December— Imports from— +-----------+-----------+-------------+------------- | 1917 | 1916 | 1917 | 1916 -----------------+-----------+-----------+-------------+------------- Grand divisions: | | | | Europe |$40,617,322|$59,107,818| $551,144,599| $633,316,886 North America | 56,506,340| 47,686,900| 871,982,524| 658,438,120 South America | 49,669,439| 43,786,488| 598,818,532| 427,609,562 Asia | 62,142,195| 45,422,209| 758,237,165| 516,704,047 Oceania | 12,792,804| 4,827,542| 99,221,196| 93,673,382 Africa | 6,183,397| 4,003,231| 73,063,939| 61,893,338 +-----------+-----------+------------+------------- Total |227,911,497|204,834,188|2,952,467,955|2,391,635,335 -----------------+-----------+-----------+-------------+------------- Principal | | | | countries: | | | | Austria-Hungary| .... | 27,980| 64,937| 631,251 Belgium | .... | 156,835| 158,022| 1,479,342 France | 8,662,632| 10,488,210| 98,639,653| 108,893,119 Germany | 451| 138,269| 159,352| 5,819,472 Italy | 3,219,301| 4,789,202| 36,480,807| 60,235,172 Netherlands | 747,674| 3,689,940| 22,744,504| 43,602,076 Norway | 261,481| 844,802| 6,280,233| 6,430,316 Russia | | | | in Europe | 2,661,145| 83,848| 12,350,179| 4,478,990 Spain | 3,496,232| 3,675,167| 36,881,630| 32,577,377 Sweden | 329,403| 5,505,941| 18,069,487| 18,856,638 Switzerland | 1,826,252| 1,927,928| 19,834,668| 22,414,383 United Kingdom | 16,874,793| 25,765,390| 280,080,175| 305,486,952 Canada | 36,232,364| 23,753,953| 413,674,846| 237,249,040 Mexico | 9,858,406| 10,399,693| 130,434,722| 105,065,780 Cuba | 5,053,741| 9,108,597| 248,598,199| 243,728,770 Argentina | 17,560,443| 12,509,181| 178,245,833| 116,292,647 Brazil | 8,233,119| 14,286,609| 145,274,931| 132,067,378 Chile | 13,618,362| 5,914,498| 142,597,929| 82,123,995 China | 8,402,995| 6,352,337| 125,106,020| 80,041,851 British East | | | | Indies | 20,992,304| 17,138,997| 259,629,897| 201,190,844 Japan | 23,692,557| 17,268,621| 253,669,709| 182,090,737 Australia and | | | | New Zealand | 7,403,284 | 1,682,769| 32,002,203| 55,826,228 Philippine | | | | Islands | 4,633,395 | 2,718,912| 62,386,641| 34,162,081 Egypt | .... | 2,944,041| 27,352,444| 29,533,795 -----------------+-----------+-----------+-------------+-------------

It will be seen from this table that our commodity trade balance with Spain was in our favor by fifty-five million, five hundred eighty-seven thousand, six hundred and ninety dollars. Therefore, Spain needed fifty-five million dollars more than was due her on the difference of shipments to Spain from the United States of commodities, and the shipment of commodities by Spain to the United States. Why, then, was not the dollar at a premium instead of the Spanish peseta being at a premium? The reason was that the United States had loaned to her Allies two billion dollars more than the favorable “trade balance” of the United States, and these loans in terms of dollars had been used by our Allies to settle their debts with Spain, as an international commodity trade creditor to an approximate amount of over a hundred million of dollars in value, who did not need these dollars, or pounds sterling, or francs. The Spanish banks did place substantial balances in Paris, London and New York, but there was still due to Spain for commodities a large amount which had to be settled in some way. Great Britain, France and the United States had an embargo on gold and we could not settle these balances by gold because of the gold embargo. If we had settled the balances in gold the dollar would have gone to par and so would have the pound sterling and the French franc, but we were compelled, because gold was not available, to borrow this money from Spain in some form or other, and it was borrowed in some form or other from Spanish merchants, business men, and Spanish banks in many ways, but those who borrowed the pesetas from Spain, or those who loaned our people the pesetas in Spain, sold those pesetas to the citizens of the United States at a tremendous price. The credit extended is taking advantage of war conditions to extort an unendurable price for the use of this Spanish credit during the war, and fully justifies adequate steps being taken to correct it.

PENALTY OF APPRECIATED CURRENCY

In fact the natural laws of economics impose at once a severe penalty upon Spain, for example: America has quit buying Spanish oil; America is substituting peanut oil, and the world is finding means to get along with a minimum use of Spanish commodities. In the meantime it is dislocating Spanish business, which will reappear later as a very substantial loss to Spanish commerce.

The Allies are buying only essentials in Spain, and the non-essential business of Spain is going through commercial depression.

Spain lost almost her entire grape crop, her tomato crop and other perishable articles because there was no adequate market.

Because Spain was piling up credits not properly employed in being loaned at acceptable interest she was led to purchase non-essentials at war prices, doing Spain a commercial injury. While certain individual banks or bankers might profit by the sale of pesetas at the high rate, it has the effect of permanently diverting trade from Spain, stimulating exports to Spain of commodities at high prices and depressing exports from Spain to other countries, lowering the status of the commercial life of Spain so that Spain pays a serious penalty under the economic law.

It would have been much better for Spain to buy Spanish securities held by foreign countries, to make temporary loans to countries compelled to buy in excess from Spain, or to the nationals of such countries against adequate securities—better for Spain and better for her commercial customers. True commerce in its highest and best form serves equally well both parties to such commerce.

Spain also adopted the policy of refusing to take foreign gold except at a discount, on the theory that she did not desire to expand her currency, and in that way cause a rise in the price of labor and commodities in Spain. The effect of this was to deprive other nations of a fair means of settling commodity trade balances with Spain, and had the effect of automatically raising the prices to foreigners of Spanish commodities, thus serving to dislocate Spanish trade.

These unfavorable conditions in Spain have also led many people in the Entente Allied Countries to believe the Spanish policy was swayed, if not controlled, by German influences and after this war this opinion may prove commercially injurious to Spain.

HOW TO PUT THE DOLLAR AT PAR

What are the possible remedies for this discount of the American dollar in Spain?

1st. The shipment of gold in such volume as to meet the international commodity trade balance in favor of Spain would at once put the dollar, the pound sterling and the French franc to par, but in order to safeguard the currencies of the nations during the war it is not deemed expedient to ship gold at this time. When the war closes Spain, having depleted itself in commodities and having accumulated for these commodity shipments large volumes of credits, will be in a position immediately to buy from other countries and she will become almost at once a commodity trade debtor, which will bring Spanish currency down to par and bring the currency of other countries up to par in Spain;

2nd. Cutting off purchases from Spain of commodities and expanding the shipment of commodities to Spain would be another factor of importance in bringing Spanish currency down to par and other currencies up to par, but is injurious both to Spain and to the countries driven to adopt this policy.

3rd. The remaining and most available and economical factor by which this unhealthy condition of a highly appreciated Spanish currency and severely depreciated Allied currency in Spain can be corrected, is by credits extended by Spanish banks and Spanish merchants and Spanish business people during the period of the war to the extent of their favorable trade balance. This can be accomplished in various ways:

(a) Spanish banks can leave balances in New York, London and Paris. They are doing this but not on a basis of a fair rate of interest, superficially, because these balances in New York, for example, are only paying two or three per cent. However, since the Spanish pesetas are sold for American dollars, selling on the exchange for but sixty-seven cents in New York, the Spanish banks buying such dollars will make a profit of fifty cents when the war ends and the dollar reacts to par.

The same thing is true of United States banks that buy pesetas in Spain at an acceptable rate of interest there for the period of the war. This is being done to a certain extent and American banks thus buying American dollars at sixty-seven cents, thro Spanish loans will make a profit of fifty per cent. on such dollars when the dollar reacts to par and gold can be freely shipped.

It is obvious that American commerce and Allied commerce and Spanish commerce is being subjected in this way to a serious injury with compensatory benefits to the Spanish and American bankers who are selling credits in Spain.

METHOD OF PLACING CREDITS ABROAD

It ought to be possible for American banks, for British banks, for French banks against adequate securities to borrow in Spain at an acceptable rate of interest Spanish credits necessary to liquidate the comparatively small favorable Spanish commodity trade balance. This amount is in the neighborhood of a hundred million dollars per annum. This might be accomplished by vigorously campaigning in Spain with the consent, sympathy and assistance of the Spanish Government officials for the sale in Spain of the War Finance Corporation Bonds, payable in terms of pesetas running five years, of liberty bonds payable in pesetas, etc., etc., using every available agency to correct the condition so injurious to Spain and to the Allies.

I insisted when the War Finance Corporation Bill passed the Senate upon putting in an authority that these bonds might be issued in terms of foreign currency to accomplish this very purpose, and it became a part of the Act, and later a like provision was made a part of the Act authorizing bonds for the Third Liberty Loan. These bonds could be bought by American importers, or by British and French importers and sold in Spain if necessary at a sufficient discount to obtain Spanish credits against the necessary purchases of the Allies or of the merchants in the Allied countries. In this way the Spanish business men would have a security bearing a satisfactory rate of interest, payable in terms of their own money, and would thus be assured of receiving their own money on a gold par basis with a satisfactory rate of interest. This would suffice, if properly carried out, in bringing the American dollar to par in Spain, and to bring the British pound sterling and the French franc to par in Spain. To accomplish it, however, requires a mechanism making it somebody’s business to do this, to carry on an adequate campaign to place these securities.

As it is we have no adequate mechanism with which to handle it. American or Spanish banks who place credits in Spain and carry credits in Spain till the war ends will make fifty per cent. on every gold dollar at 67 cents they buy in the United States, into Spanish pesetas at 28.50. They have no public interest to serve in preventing such conditions. They are themselves engaged in profiteering on American commerce and on Allied commerce. We have seen men trained as American bankers deliberately advocating that it was best for the United States to have its dollar at a discount, contrary to reason, contrary to common sense, and most injurious to the United States, to Great Britain and to France, interfering with the successful prosecution of the war and actually serving the interest of Germany by indirection. I am willing to assume that these gentlemen advocating the dollar at a discount are not moved by unpatriotic purposes, but the result is injurious to America and favorable to Germany and is contrary to the public interest, while it is highly favorable to profiteering by private interests.

DUTY OF GOVERNMENTS

The United States, Great Britain, France and Italy should use the firm strong hand of organized government to prevent such harmful imposition of usurious rates on the resources of the Allies now engaged in deadly war. Exchanges are commodities, and governments able to fix prices on commodities and fair interest rates on bonds can fix reasonable exchange and interest rates on international bills, and prevent the sale of pesetas above 19.30 or gold par and prevent the sale of lire at 11 cents and then buying the offerings at 19.30 and refusing to allow the sale at any other rate. American, English and French banks refusing to buy pesetas except at gold par would end the false values put arbitrarily on pesetas as far as exchange is concerned on the loan of pesetas.

In order to sell pesetas there must be both a seller and a buyer. If the Governments of Great Britain, France, Italy and the United States can control the banks of those countries and prevent their buying pesetas at an exorbitant rate the market for pesetas would be measurably controlled. The selling of pesetas at a grossly usurious rate is against public policy. It is against the interests of the Allies. It is a gross injustice because it has the effect of taxing the Allies fifty per cent. for the use of Spanish credit which ought to be extended, if extended at all, on a reasonably decent basis. Therefore, the Governments of the United States, Great Britain, France and Italy would be justified, as a war measure, in forbidding the banks of the great belligerents from buying pesetas except on terms of reasonable interest charges, considering war conditions.

Moreover, there should be concerted action by the four belligerents in making representations to the Spanish authorities as to the injustice to the Allies of the Spanish exchange situation, and that the highly appreciated Spanish currency, or Spanish credits, is doing positive harm to Spanish commerce, as I have otherwise pointed out.

If Spain sells the Allies goods and charges fifty per cent. for the use of Spanish pesetas, it has the effect of discriminating against Allied purchases as compared with Spanish purchases to the extent of fifty per cent., which is contrary to commercial justice, and by controlling the exchange rate, through the control of the banks in New York, London, Paris and Rome, an equitable condition might be restored. At the same time it is obvious that credits properly secured and at proper rates of interest ought to be placed in Spain through agencies otherwise pointed out in this brochure.