OUR EXPORT TRADE

IN any discussion regarding the present unhealthy state of our export trade there is a tendency to ascribe its condition to such causes as the disorganization resulting from the War, the continually recurring quarrels between Capital and Labour and the currency troubles of countries which in pre-War days were our good customers. The diagnosis is accurate but incomplete, and such conditions need not necessarily be fatal if the proper treatment be applied. These ailments then may be regarded as of a temporary character, but we must not assume too readily that with their passing our economic health will become normal ! Will the settlement of our domestic difficulties and the attainment of more stable monetary conditions in Europe and elsewhere mean an end to our troubles, and the recovery of our industrial supremacy ? It is improbable that we shall recover completely our former position in certain markets, although a great deal may be accomplished if the facts are recognized and measures taken accordingly. By the end of the nineteenth century this country was supreme in industry, largely owing to our skill in manufactures ; the invention and early adoption of power machinery ; our readily accessible natural resources, and our mercantile marine. But during the decade or so immediately preceding the War, Germany was com- peting vigorously with us in markets which previously we had regarded as our own : and this competition pre- sented probably the first real challenge to our economic supremacy. We were producing about 40 per cent, of our food, a somewhat larger proportion of our wool, all of our coal, and about 75 per cent, of our iron ore. We had thus become mainly dependent upon outside sources for our food and certain raw materials, and upon foreign countries for the disposal of our output. Therefore, the movement towards industrial self-development which is now so active in many countries, which formerly provided markets for British goods, calls for our earnest consideration.

GERMAN COMPETITOR.

During the War, our energies were mainly directed to the production of war material. Our foreign customers had in many instances to supply themselves ; and an industry once established becomes a competitor whose growth may be encouraged by the erection of a formidable tariff. The War, therefore, gave an impetus to that competition of which Germany was the forerunner ; and with regard to that country, it is reasonable to assume that the payment of reparations will have the effect of stimulating her export activities, although the reparations plans are designed with a view to the minimum eco- nomic disturbance of those who, besides being her creditors, are also her competitors in world markets. Working capital is scarce, but she has effected both long and short term borrowings from this country and from , the United States. Every effort is being made to increase. production at the lowest possible cost : for example, in the steel trade we have recently seen an agreement en- tered into by the most important interests whereby only the best equipped works will be operated : those outside this category will be closed down, and savings in overhead charges effected. At this early stage it is difficult to say what the future of German industry will be, but it will be prudent to assume a gradual recovery and eventually the keenest competition for markets.. It must not be over- looked, however, that so, long as her industries are partly financed by foreign capital, her prosperity Will benefit the lenders who, in other directions, may be her active competitors.

With regard to the countries of Central and Eastern Europe, Germany is well placed to obtain the foreign trade of these countries, and we cannot hope to do much in these markets : while both Belgium and Italji are rapidly developing their industries. Italy, however, is largely dependent upon foreign coal, but no doubt hydro- electric energy will be increasingly utilized in place of coal. Russia to-day is to a great extent an unknown quantity, We know, however, that she is prepared to buy from us, and apparently what she principally requires is machinery, presumably as a first step towards industrial self- sufficiency. It may be urged that, while the development of her industries continues, she will provide us with a market ; but it is not every trader who can afford the risk or give the long credit required. Conditions in Europe, therefore, do not present encouraging features.

EASTERN MARKETS.

Turning to the East, there is unfortunately a lack of statistics with regard to the industrial development of China ; but factories are multiplying, Japanese interests being very active in this respect, and there is little doubt that machinery is displacing hand-production and foreign manufactures. In 1913 our exports to China were valued at £17,000,000: in 1924 they were £20,000,000, a disap- pointing result, bearing in mind the higher value of commodities generally. There is now keen competition in the Chinese market, and owing to the unsettled political conditions it is difficult to form any intelligent opinion of the prospects. In the South a boycott of British goods is being maintained, but nevertheless, trade with China as a whole would appear to offer great possibilities. India is of great importance to us commercially, mainly as a consumer of cotton piece-goods. Our exports to her in 1924 were practically five times greater than to China ; but here again the increase in money value, compared with 1913, was probably no more than could be accounted for by higher prices. India with its population of over 800 millions is our best customer, although her individual capacity to absorb imports is small. Mainly agricultural, she is nevertheless making progress in an industrial sense, and the financial administration is sound and capable. She imported machinery from us in 1924 valued at £9,000,000, and her production of textiles and steel must be reckoned with. Incidentally her pro- duction will be increased as caste distinctions and preju- dices die away. She has now definitely adopted a policy of protection.

Japan has proved herself readily adaptable to Western ideas, and under the stimulus of war prices she developed her industries to such an extent that her exports have increased considerably. In the East Indies she has become a formidable competitor with us and with Indian manufacturers in some lines of textiles and hosiery. In 1924 she took goods from us valued at £26,000,000, compared with £14,000,000 in 1913, and it is doubtful whether we can look for expansion in our markets there except for machinery and probably woollen goods.

EMPIRE TRADE.

Turning now to our Colonies, Australia is mainly agricultural, but of recent years the percentage of persons engaged in industrial pursuits has increased in a greater ratio. She has a wealth of natural resources, and is gradually developing certain industries which go some way towards satisfying her home requirements. Her imports of machinery indicate this tendency : but if we are to do a bigger trade with Australia we shall require to see her population expand much more rapidly than in recent years.

With regard to South Africa, although more thickly populated than Australia, she takes much less in the way of British goods : and it is remarkable that between 1911 and 1921 factory production was trebled, and coal consumption has rapidly increased. Manufacturing for home needs is growing steadily, the increase in imports being small in comparison with the greater European population.

Canada, like Australia, is sparsely populated, but she also is developing her resources for the supply of her home market, although probably not so rapidly as Australia. We can only look for an increase in our exports to her should there be a more rapid expansion of her rural population, say, by emigration from other countries, than there would be in the ordinary course. The industrial and financial development of the United States during the last few years has been impressive. Her export trade has grown rapidly, but she continues to be a customer for a variety of manufactured goods, although her home market is heavily protected. In 1924 she was our best customer next to India. She is the apostle of high production and high wages ! On examining the trade figures of South American countries, the great variety of our exports to the Argen- tine, which include coal, suggests that there is little industrial activity so far, although she is quite a good customer to us for machinery. The time, however, may not be far distant when South America will take a step forward by means of the development of hydro-electric power: meantime, it will not be forgotten that Germany was a keen competitor in pre-War days, and, if anything, her activities will increase, with the United States well in the running. Nevertheless, the countries of South America offer great oppotturiities for British enterprise.

SOME GENERAL CONCLUSIONS.

Attention has already been 'drawn to the industrial development of Europe generally and of Germany in par- ticular. Although many of the nations import British goods to a large amount, the legacy of War debts, com- bined with in some instances a mistaken monetary policy, has crippled purchasing power, and probably with the exception of Russia (when conditions there become settled) we cannot look for permanent expansion in these markets; • indeed, we shall do well if we hold what we have in face of the growing competition which will be experienced as manufacturing Capacity increases, and monetary difficulties are surmounted. Largely as a result of our efforts in producing material needed during the War, we have increased enormously our general manufacturing capacity ; our industrial population grows, and it is therefore essential that we should be able to dispose of our output. Therefore, we must fistd new markets whilst exploiting the old to their fullest extent, and our best hopes lie with the East, our Colonies, and South America. It is true that in the Colonies the process of industrial self-development has commenced, and the tendency will be for their imports to diminish, unless there is any sudden and considerable increase in population, say, by emigration from this country, thus disturbing the equilibrium between pro- duction and consumption. But even if our Colonies are successful in manufacturing a great proportion of their home requirements, we may reasonably hope to supply them with the machinery necessary to production. Turning to the East, and particularly to India, China and the East Indies, we already have our markets in these countries. Although manufacturing activity is shown to some extent in India and in China, the results do not make a great impression ; and provided we could sell at a suitable price, our trade with these countries could be greatly extended, although throughout the East the capacity of the individual to absorb imports is limited, mainly owing to the low standard of living. In India and China we have strong competition from Japan in certain makes of textiles ; and both the United States and Germany are extremely active. South America is a heavy buyer of manufactured goods, and with a great deal of the country undeveloped, the extension of our present trade and the develdpment of new kinds of trade have distinct possibilities, although here again the United States and Germany arc pursuing a vigorous trade policy.

INCREASED COMPETITION

Success in commerce, as in everything else, has to be paid for, and we are paying the penalty to-day in our reliance upon outside sources for our food and certain raw materials, and upon foreign markets for the sale of our products in the face of competition that becomes keener as capital and skill become more widely diffused. The development of our commerce, whether from choice or economic necessity, has laid upon us certain obligations if our position is to be maintained, and Royal Commis- sions, conferences and inquiries will not alter certain elementary truths which we are doing our best to ignore. We are well provided with the machinery of output, although it may not be always up to date : we possess both capital and skilled labour, but from our record of industrial disputes during the past few years it would appear that in too many instances there is lacking the will on the part of both Capital and Labour to put our resources to the best use. Competition must be faced, and it is idle to pretend that we can retain our trade solely on our reputation, while other nations are resolute to make the necessary effort and can offer their customers —and ours---substantial advantages.

We are a poorer nation through the War, but how many of us allow this fact to influence our mode of living ? A higher standard of comfort is looked upon almost as something which it is incumbent upon the Government to provide, irrespective of individual effort : and the quality of independence, once pre-eminently a British virtue, is gradually being sapped by a system of doles and subsidies ! Economic problems unfortunately appear to be of less moment than the daily happenings in the world of sport, and running right through society is an unhealthy desire for constant amusement and pleasure without regard to the price to be paid. Employers, trade unions, and employed should have one object in common, that is, to extract from industry the greatest possible profit for their mutual benefit. Let all concerned recognize the. simple economic truth that the bigger production you have upon your outlay the cheaper you are able to sell your commodity, and the cheaper the commodity the greater your market ! In the main, British labour is sound, but there are adverse influences at work which thrive in the soil of discontent, and these influences can only be over- come by our working together in mutual trust and confi- dence. Whether a scheme of profit-sharing will assist in establishing that confidence must be decided by the facts of each particular industry.

BANKERS AND TRADE.

Trade is waiting for us : in existing markets it may not be in such volume as formerly, but new markets are there if we can develop the necessary competitive power. We possess the requisite experience, and financially we are strong enough, although there are some trading and manufacturing concerns suffering from over-capitalization to which the pruning knife requires to be applied. This, however, is merely a question of financial reorganization : mechanically we are well equipped and in a position to give the output. There is, however, another important point. Arc the Government and our local authorities prepared to do more than pay lip-service to economy and relieve us to some extent of the burden of rating and taxation ? So far they have failed miserably, and spending goes merrily on. Obviously the machinery of finance must play a large part in the exchange of goods and services which goes to make up international trade, and it is noteworthy that whereas at one time the finance of foreign trade was left largely to the foreign banks, our own banks have now perfected their respective organizations to such an extent that it forms an important part of their business. If foreign trade were conducted without the banker as an intermediary, it would mean the laborious collection of every single draft and the sterilization of that particular portion of capital until the proceeds could be received in this country. The banker, therefore, plays an important part in promoting our export trade, and he may be relied upon to do his share. No merchant need be without information regarding foreign markets and foreign cus- tomers: his banker has his intelligence department and will quickly furnish the particulars required. If we cannot compete with other countries, what is the alternative ? We could not continue to support our Population in a reasonable standard of living, and we should have to return gradually to agriculture, which we have neglected in developing our commerce. In the long run it might prove to be the better thing for us as a nation to get a little closer to Mother Earth ! But organized as we now are, we owe it to ourselves to make the most of our industrial system.