Some Aspects of Foreign Commerce
CURRENT LAWS, METHODS AND ARRANGEMENTS NOT GOOD
By THOMAS C. HART, Senator from Connecticut
Delivered before the New Haven Junior Chamber of Commerce, New Haven, Connecticut, September 10, 1945
Vital Speeches of the Day, Vol. XII, pp. 24-26.
SOME time ago, when our war machine was building up, there was a rather high-level Navy Department conference concerning procurement problems at that time. One of the conferees was a former vice president of one of the large chain-store companies, a man of long experience in that field, who was highly valuable to the Navy Department over a considerable period.
During the conference Mr. Folsom expressed satisfaction with the way war materials were being turned out of the factories, and then went on to show that the least satisfactory angle lay in distribution; that is, in too many failures to get the products distributed in the proper amounts at the correct times and places. He made quite a little speech about it and amply proved the case, after which various naval officers thanked him and expressed admiration. His rejoinder to that was:
"You Navy men are all right on procurement, and you no doubt will learn to distribute the product; but don't think you will know it all then. To be fully developed, you would also have to learn to sell." (Selling anything, of course, is about as far removed from the naval officers' field as any activity can possibly be.)
Those are the three parts of commerce—producing, distributing, and selling. We of this State have, during many years of peace as well as during these crucial years of war amply demonstrated that we know how to produce—how to get the stuff out of our factories. The future worry will be disposing of our production; and we are all thinking over the foreign field as one of our vital outlets.
Over the years behind us we have been in the habit of consuming, roughly, 90 percent of our own production, and foreign markets have taken something like 10 percent of it. Of course, our domestic markets are the most important ones, but they have not been big enough; and they will probably consume a smaller percentage of our total capacity in the future than they have in the past. Therefore, that 10 percent, that 20 percent, or whatever it may be in our various industrial fields, will be important.
We will deal tonight more with distribution—that is, overseas transportation—than with selling. However, those two activities do have to be rather closely meshed if we are to be successful in competing in foreign markets.
It is quite natural that in the past our domestic markets should have absorbed most of our energies, attention, and study. Since this has been true for several generations, it can only be expected that we are inexperienced in foreign trade as compared with certain of the great trading nations whose history is filled with that kind of commercial competition.
Quite recently we have been hearing of certain organizations being built up in this country as trading corporations, preparing to venture into the field of foreign commerce. Those organizations have various ambitions—some of them small, but some rather large—and they are beginning a rather great adventure with much hope that in a rather short time they will become powerful in the world's marts as trading corporations. I certainly share that hope, because I think such growth is highly important to our future. We must not fail to improve the prospects; and in this connection we can well study the past.
There were similar commercial ventures after World War I. One company of that day can serve as an illustration. That firm was incorporated as Gaston, Williams & Wig-more. Those were good names, one at least having a foreign tang, and the company floated a stock issue of considerable size. They plunged in without knowing enough about what they were headed for, set themselves up with a heavy overhead in agencies, in foreign ports as well as at home—and went very broke in a rather short time.
While building up the organization, Gaston, Williams & Wigmore hired a man out of the Navy, who was the best all-around man of his time in that profession, and sent him out in charge of all the company's affairs in the Far East. Bankruptcy came on very soon after he arrived at Shanghai, and he was then employed by the receivers to straighten out the mess. He was successful in that, and has continued to be a success in commercial life ever since. Despite the handicap of little previous business experience, his aptitude was such that he has made the grade.
There was wonderment in the action of that firm, Gaston, Williams & Wigmore, in choosing a man with only naval training to head one of their most important agencies. Therein lies the point of all this: for such work outside this country, the field of choice is limited to a relatively few men who not only know how to cope with competitors of other nationalities but who are willing to live outside this country.
We have over, say, the last 30 or 40 years, been sending more and more men outside our borders, charged with handling the Nation's commercial and industrial affairs in foreign fields. However, Americans like to live at home and don't wish to enter into anything which will make them more or less expatriates for life. That is quite natural, for we all agree that this is the best country in the world in which to live. Men of the same class in other countries also prefer to live at home; but the difference is that they can't all make a good living at home. As a result, they do go out and spread themselves over the earth.
Should any of us drop in on some large foreign cities, take Buenos Aires for example, he would find a certain number of Americans representing, in addition to our Government, quite a number of our firms which manufacture for export and decidedly need the foreign market. It is rare to find an American who is not there for just a short time and who does not look forward primarily to the time when his contract is up, so that he may return to us.
On the other side, we would fine Germans, Scandinavians, Hollanders, British, etc., in rather large numbers. The great difference in attitude is that a great many of those representatives and employees from Europe will have settled in Buenos Aires to stay. Some of them—notably the Germans—frequently seek to ally themselves with their new home by marriage. Those circumstances have obtained in the past and are likely to prove one of the difficulties we face as we promote the expansion of our commerce into foreign fields.
Now, no matter how able our men may be in handling
our foreign trade, they naturally will do best in that worldwide competition if they are supported by a set-up which brings into play all the advantages which can be given them. In that respect, our current laws, methods, and arrangements are not too good. It is easiest to illustrate the point by a comparison which lies in the history of the experiences of other trading nations.
For such example, suppose we take the British. We can do so without a spirit of criticism or finding fault with a people with whom we hope and expect to work very closely. We can find that, during the heyday of what we knew as the British Empire, there grew up what amounted to a full national organization to foster and promote the Empire's foreign trade from every conceivable angle. That extensive and intricate machine was built up around British shipping, in the first instance, and as the United Kingdom became so highly industrialized, the machine was simply extended into the selling field.
Many agencies comprised the machine—and still do. The various Government departments, such as the Foreign Office and the Colonial Office, which with others include a large number of high-grade civil-service personnel, educated and experienced in economic and sociological affairs all over the earth, are important parts of the machine. We also know of the British Board of Trade as a semi-official but extremely powerful organization. There are also the various trade associations which have been a part of the economic and commercial fabric of the British Empire for a long period. At present those associations in the United Kingdom head up in the Federation of British Industries.
The important fact in all that is the close interlock of the strictly official, the semi-official, and the wholly unofficial organizations, all of which are closely tied in; thereby, while preserving a certain amount of competition among themselves, the British face all foreign distribution and selling competition pretty much as a unit. There are practically no legal restrictions against monopoly, so-called restraint of trade, and so forth, which in any way hamper that united front in the foreign commercial field. That whole subject presents a very interesting study which cannot be attempted here. Anyone who is called upon to take action in either the official or in the strictly commercial field of foreign trade would do well to spend some time in such a study.
Our own commercial and economic development has been quite different. The practices and institutions which have grown up with us are primarily based upon domestic industry and commerce, rather than with the foreign field in view as, for example, has been the case with the British. In our domestic field we have quite properly depended for health largely upon home competition. In production per se, just that factor alone, when added to various advantages which have lain in our hands, has put us ahead of the rest of the world. With that accomplishment in the background, many of us think that exactly the same methods, organization and general set-up will likewise enable us to excel in the field of foreign commerce. That is, based upon our results in competing within our own borders, we tend to jump to the conclusions that just the same methods and customs will bring us success all over the world. It is too widely held, that concept can be rather disastrous to our future.
We have a considerable mass of restrictive laws intended to prevent monopoly and various competitive practices which are generally agreed to have no proper place in our own domestic economy. When those same laws and restrictions hamper our competition in the field of foreign trade, they may amount to a handicap which cannot be surmounted. In the foreign field we will be competing with someone else—other peoples who are quite unhampered by any laws similar to our own.
To become somewhat more concrete, let us narrow down to the simpler field of distribution, as already mentioned. That means primarily the transportation of goods outside our own continental borders. We all know enough of the history of our surface shipping, the success of which has ranged from top places in the international scheme of things to one of the very lowest. We have now achieved a certain degree of national organization of American-flag shipping, after various trials, errors and developments going back to the First World War. The financial subsidy, paid out of the Federal Treasury, is part of that picture, but probably not at all the most important part. We do have a certain amount of unity and some legal machinery, by which and around which we can and do present something of a united front in the world-wide competition involving carrying trade on the sea.
The latest element to come on the stage is trans-oceanic transportation by air. To my mind, we seem to be just entering into the throes of a process which, I hope, will result in a healthy development, but which is not getting off to a good start. Within the last few weeks, much has been said and written concerning the one-company idea for commercial overseas air transport as against what some call the competitive and unrestrained private initiative concept.
Again let us look at the record thus far, as indicating what it is with which our air lines will really be competing. Again the British supply the example which lies closest at hand.
Following the lines which have been successful in the past, the British are adopting the one-company method, despite what they say about regional division. Further than that, our British cousins are tying in with their overseas air transport activities the vast commercial machine which has already been built up around their shipping and their foreign trade representatives and organizations, which are so well distributed all over the world. There will be the same, or perhaps even greater, Governmental control, but always arranged both in theory and in practice to aid directly in the competition against the rest of the world. That is, our own overseas air transportation will face the competition of a rather complete machine, closely integrated over, and into, all those parts of the world which will be of commercial importance, in the view of providing the best possible support to those who venture into that new field. Now the British are only one, and there will be other nations who will do the same thing. We have no ground for objections—there is nothing unfair about it.
Organization of a large overseas air establishment is still a new subject with us and there is a good deal of controversy about it. One school wholeheartedly believes in the one-company idea as applied to setting up and operating air transport lines to various points abroad. The proponents of it never got so far as to consider seriously tying their own business in with other activities already established— such as surface shipping lines, for instance. It is not at all sure that they would have progressed that far themselves, even if their one-company project had not been received with so much opposition, particularly by our continental air lines, which have been so successful and have gone so far out ahead of the rest of the world.
The opponents of the one-company proposal have put forward various arguments, one of which is that to follow such a principle is too likely to lead to Government ownership. Personally, I think that would be an extremely valid argument if it had a good foundation. I don't think it has, because if the people of this country ever become convinced that Government ownership of all our external airways is a good thing, it will be done whether one or several transoceanic air companies are involved.
The opponents very often use the word monopoly in their arguments, supposedly because they think that monopoly in any part of the foreign commercial field is just as bad as it would be at home. That word "monopoly" immediately brings us to the other word, "competition"; and the facts in the case are that we will most definitely be competing against monopolistic organizations of other nations.
Naturally, the opponents of the one-company idea also represent that without competition any commercial organization goes to seed, rots, root and branch, and eventually falls out of the running. The basis of all those beliefs lies in our domestic rather than in our foreign economic theories.
Our transoceanic air lines will have competition quite severe enough to prevent any slacking up on the part of those engaged in that field. We stand today well ahead of the rest of the world in the technical excellence of our aircraft and in our operational methods, as built up within our own borders. We have a head start over the rest of the world in that respect; and, if we do not assume too many handicaps as we go into the field of foreign transport, we may be able to maintain our position.
However, it should be remembered that other nations can catch up with us in the strictly technical and operational fields, without nearly as much time and effort as we shall have to employ to build up air organizations, with essential connections, which can compete with foreign one-company organizations which also will be striving for supremacy in the same parts of the world, under the strongest support.
To repeat, the one-company idea is still a controversial question. I happen to be one of those who believes in it and who would wish to support it by all the available integration and cooperation which can conceivably be brought into the picture. It will be a catastrophe of no small proportion if our transoceanic air transportation should have the same experiences as our surface shipping has had in the past, and with the same results. That would mean a small representation in the oceanic airways, as we have too often had on the surface shipping routes of the various oceans. That would be not only undesirable but dangerous to the future welfare of the Nation.
As matters stand at present, three of our four domestic air lines are going into the transoceanic field, where they will be competing with each other for the traffic. As their officials state the case, they are largely motivated by the experience in our own domestic airways only. One of the four companies is not making the try because, as its officials frankly state, it would be entering a field which is too far removed from its other experiences, and they would not know enough about what they might be heading into.
So much for just a mention of some aspects of a subject which is both intricate and broad in scope. It is presented with hope rather than defeatism, but with a deep feeling that we must be realistic and understand the difficulties which face us.
There is lack of that understanding, primarily, I think, because public opinion with us has not so developed that we accept the necessity of increased foreign trade as a part of our national economy. Our industrial, commercial, financial, and political structure is built around our domestic economy, with scant consideration of either foreign policy or foreign trade. The emphasis must be brought into better balance. Then, it is to be hoped, we can achieve those Nation-wide organizations, arrangements, and understandings which are so necessary for our success in foreign trade.
Now, commerce is a two-way street. We know that only mass production enables us to compete in the world's markets. We must do our best so to cultivate them that our products, as adapted to foreign use, will be in greater and greater demand. At the same time we must increase our own imports in order that the balance of trade will become as healthy as is humanly possible. To that end we can well go so far as to cultivate the taste of our own people for various foreign products. We can't have a strictly one-way commercial street for very long.
We stand today in a generally better state than most of the rest of the world. We strive to help much of the war-stricken world back to health and our sympathies are great However, sympathy with the position of other nations or an appreciation of their need for our help should not blind us to the necessity of looking out for our own interests and of assuring that the benefits and rewards which accrue to us shall be entirely commensurate with the contribution which we make to reconstruction, rehabilitation, the creation of freer trade among nations, and the development of a greater world prosperity and stability. Neither sympathy nor idealism should obscure the necessity of guarding and improving our own economic security, so essential to the protection of the world against economic chaos in this period of reconstruction. Whatever we do must be done in a thoroughly practical way and on the basis of sound business. We must maintain the strength and integrity of our national wealth, whether it be measured in gold, in credit, in resources, in initiative, or in energy. To abandon or neglect in any degree our own interests and so weaken our own structure would be a disservice not only to ourselves but to all other nations and to mankind.