The Export-Import Bank and the War
MAINTAINING THE ESSENTIALS OF FOREIGN TRADE
By WARREN LEE PIERSON, President, Export-Import Bank of Washington
Delivered before the Twenty-ninth Convention of the National Foreign Trade Council, Inc., Boston, Mass., October 7, 1942
Vital Speeches of the Day, Vol. IX, pp. 122-124.
EIGHT years ago I had the pleasure of attending my first meeting of the National Foreign Trade Council—eight extraordinary years in which, I need hardly remind you, the foreign traders of the United States have passed through the experiences of a lifetime, from the bottom of a great depression to a brief period of activity and now into the dislocations of a universal war.
These same eight years encompass the history of the Export-Import Bank. With that history, many of you are already familiar and I shall not trace it here. In that time, however, we have necessarily established for ourselves certain criteria, certain principles to guide our daily actions, and it is of one of these that I wish to speak today and of the part which it has enabled the Export-Import Bank to play in the present conflict.
That principle is simply this—we help ourselves by making others strong. To the mercantilist of an earlier day, that would be heresy. To present day mercantilists, it is still heresy. The essence of our foreign trade, we are told, lies in the exchange of our finished goods for the raw materials of the economically backward nations of the earth. If our customers become strong—if they develop their economies and make their own finished products—why should they continue to buy from us?
The most convincing answer to this question lies in the familiar tables of foreign trade statistics. You members of the foreign trade fraternity know that the best customers of the United States have not been found in the least industrialized centers of the world—in China, in Africa or even in the partially developed nations of Central and South America. On the contrary, we have found them—in normal times—in those countries which have most fully realized their economic potentialities—in England, Germany, France and Japan.
The answer to this apparent paradox lies in two simple factors—purchasing power and the differing geniuses of different peoples. Because they are developed economically, the latter countries have the money to buy from us. Because they differ from us in a thousand subtle ways, the products of their machines are not the same as ours and must ever possess that variety which is not only the spice of life but the great impetus of trade.
In this sense—that variety is the source of trade—the mercantilist is right. He sees variety, however, only in black and white, the night and day of finished goods and raw materials. By so doing, he dooms the flow of his foreign trade to the feeble motive power of a coolie's purse. I say only that variety is infinite and that the highest and mostprofitable form of foreign trade lies in the exchange of an infinite variety of products between economic equals.
With this principle in mind—that we help ourselves by making others strong—the Export-Import Bank has steadily endeavored to help diversify the economies and, where economically feasible, to cooperate in developing the industries of other nations, chiefly China and the Republics of the Western Hemisphere.
This does not permit me to trace this process in detail. In some instances, our loans have gone directly to industrial projects—to steel mills in Brazil and Mexico, for example, or to a great hydroelectric development in Uruguay. In others, a shortage of critical materials or the nature of the borrower's economy has made it wiser to concentrate on railroads and highways and the opening up of mining and agricultural districts, industrialization being limited to the first simple processes. Through it all, however, runs the thought that the best interests of all of us—the United States and the nations which borrow from us—lie in the diversification, the industrialization and the improvement of their economies.
While the war continues, this process must necessarily be adjusted to our own industrial demands. Let me turn for a moment, therefore, to the part which our loans to Central and South America and to China are playing in the prosecution of the war. Inaugurated in most cases for peace-time purposes, there is scarcely one of these projects which does not take its place in the present war-time picture.
When we agreed in 1940 to advance funds toward the construction of a steel mill at Volta Redonda in Brazil, or when we undertook in the late thirties to assist in the improvement and extension of the Brazilian railways, we did so because we believed that these projects were economically sound and would, in the words of our governing statute, "assist in the development of the resources" of that country and "facilitate exports and imports and the exchange of commodities" between that country and the United States. Today, I need hardly tell you that this steel mill is being hastened to completion for the war purposes of our great Brazilian ally. Similarly, the rails and signal systems of those extended and modernized railroads are busy with the transportation of high grade ores and other raw materials essential to the factories of the United Nations. More recently, we have agreed with the Brazilian Government to share in financing the development of the great Itabira iron ore deposits—a veritable mountain of the purest ore known to the world today and a possibly vital source of supply if peace is long delayed.
In Mexico and Central America, the highway programs undertaken in times of peace have already proven of the greatest assistance to the United States Army Engineers who are now driving night and day to complete a pioneer highway to the Panama Canal.
In Bolivia, Ecuador and Haiti, our share in financing local development corporations has prepared the way for making the mineral and agricultural resources of those countries more readily available for our war effort.
Important commitments have also been made in Chile, Peru, Colombia, Venezuela, Cuba, Paraguay and the Dominican Republic—commitments designed to prove their worth in peace but valuable time and again in meeting the ever mounting demands of war.
Across the Pacific, we participated in 1937 with a number of American manufacturers in financing the purchase of locomotives and other railway equipment by the Chinese Government. In 1938, our credits made it possible forChina to acquire the machinery and materials which—with the labor of her amazing people—built the Burma Road. These same credits supplied the trucks which used that road and which even today represent an important part of the internal transport system of our hard-pressed ally.
While I speak of China, let me turn aside very briefly to tell you two more facts which demonstrate the quality of that great nation. Fighting with her back to the wall, desperate for every ounce of help, she has honored her obligations to the penny and repaid—much of it in advance—the $25,000,000 involved in the programs which I have just described. Furthermore, as a corollary to the road equipment credit, China undertook to produce and sell to importers in the United States important quantities of tung oil, tin and tungsten and—in some way which I can only describe as miraculous—did produce and deliver to these importers the full quantity of tung oil and most of the tin and tungsten called for by these agreements.
Coming back, you will see from these examples of our activities in other lands that it is our good fortune to have a part to play in the winning of the war. Until we win, there is no other goal. True, we must also "win the peace" but we know now—not only some but all of us—that we are in a desperate struggle for our mere survival as a nation. Until we succeed in that—and we will succeed—it is only too obvious that we and our allies will not be the ones to write the peace terms.
This does not mean, however, that we should act as though peace will never come. It will come—and with it will come the greatest peace-time challenge that the United States has ever faced—the challenge to reestablish the economies of the world through foreign trade.
A few days ago, I read the prediction of a learned professor that this war will send us all back to the Middle Ages—that we will be called upon to set up household spinning and weaving and practice again the homely arts of our forefathers. With this, I wholly disagree. I believe that this war will be followed by an unprecedented effort to open the routes of commerce and bring to every nation the benefits of trade. Sick of poverty and blood, the peoples of the world will everywhere demand it. Will we spurn this demand and let the tremendous plant expansion of these war years go to rust? I for one do not believe it. Just how we will do it, no one can yet say but I am confident that some method, some way will be found to bring together these great elements of demand and supply.
I mention these things because, if you feel as I do, it is evident that no body of men will face a greater task in the post-war world than the members of the export and import fraternity. Like all of us, you are busy now with the problems of the war. Hardly a day passes in which I do not encounter one of you in Washington giving your time and valuable talents to the common cause. But through it all, it is my hope that you will find a way to keep your organizations together, to preserve that body of knowledge and those relations overseas which only you men have and without which we would be pitifully handicapped in the great days to come.
The Export-Import Bank considers it a privilege to help you in this problem of maintaining the essentials of our foreign trade. As you know, our rule here as elsewhere is never to supplant but only to supplement the work of private enterprise—to assume the unusual risk or smooth the way, if we can, through the multitudinous regulations of our war-time economy.
Upon numerous occasions in the past we have undertaken financing which has been designed to permit the exportersof the United States to meet the cut-throat competition of the totalitarian states. Many of you can testify that we have had some success.
New conditions bring new problems and with your help and understanding we expect to solve them. Quite recently we have established a special export credit line through which, as many of you know, the manufacturers of the United States are able to obtain payment for their exports against certificates of completion or railway bills of lading and thus are spared the details of finding shipping space and the hazards of overseas delivery. Simultaneously, the importers in the other American Republics are able, through their own banks, to open letters of credit which our manufacturers are able to accept.
In this and in other ways we are seeking to assist you to keep alive your organizations and your contacts with the exporters and the importers of other lands, so that you will be better equipped, when peace has come, to carry out your part in building a better world for all of us. No group will have a greater role to play and no one who has had the pleasure of knowing and working with you can doubt that you will play it well.