Page images
PDF
EPUB

PART II.

PROBLEMS OF MODERN AMERICAN EXPORT

PRACTICE.

CHAPTER XIV.

THE PROBLEM OF FOREIGN CREDITS.

General Statement.

The expression chosen as the heading for Chapters XIV— XVII conveys different ideas to different minds. From the point of view of manufacturers and exporters it suggests a study of those conditions and practices which permit them to utilize to the best advantage the existing banking facilities in selling to their customers abroad so that the latter may have the privilege of paying for their purchases at a convenient time after shipment, while the vendor is in a position, if he so desires, to secure cash at the time of shipment through the co-operation of banking institutions.

This, indeed, is properly a subject for consideration under the heading "The Problem of Foreign Credits," for even where the manufacturer receives cash payment when the goods are shipped, and the burden of financing is ostensibly on the bank, it is the standing of the manufacturer, plus the security of the goods in some instances, that stamps the transaction with its credit characteristic from the manufacturer's point of view. The foreign credit problem from this angle includes also a study of the need of credit accommodation in the export markets, the extent to which it is met by manufacturers of competing nations, the machinery of credit instruments, the existing banking facilities and their possible improvement or expansion.

But there is also a much broader field that is covered by the idea of the foreign credit problem. America has almost overnight become the great creditor nation of the world. From all sides come to America insistent pleas for credit on a scale so extensive that individual manufacturers and exporters cannot cope with them. The manufacturer has no capital to engage in financing all seekers for credit accommodation. If his capital is properly employed it is fully engaged in the purchase of his materials, in the operating of his plants, in the payment of his labor and in the incidentals of such foreign merchandizing as he attends to direct. The latter item includes all the foreign financing which the manufacturer can properly undertake. It is here that the manufacturer will need to study the technique of financing foreign shipments, and it is here that the existing banking facilities and their extension are a subject of great interest to him.

Better equipped to deal with the financing of foreign shipments are those export merchants of old standing, very largely combining the functions of import merchants as well, whose entire business is built on that financing service which their customers in oversea markets stand so urgently in need of; further the great exporting companies which have sprung into existence in recent years and whose organization is thoroughly modern, having been devised to meet conditions as they exist to-day, and not shaped and molded by the forces of historic development. Such organizations are fully absorbed in the operations of merchandizing and of financing foreign shipments, and they do not carry on manufacturing enterprises primarily, though they may do so incidentally, to meet the needs of their merchandizing operations. These enterprises are face to face with the broader aspects of the foreign credit problem, and they must be keenly alive to the abnormal conditions which have set in following the termination of the world war and as the result of it.

But it is the banking community at large, as representing the investing interests of the nation, and as a guardian of its financial fortunes that faces the foreign credit problem in its most significant, in its broadest aspect. It provides facilities for the individual manufacturer and the individual shipment, and here the interest of the individual manufacturer ends, but it also faces an aggregate problem and new conditions of bewildering uncertainty; it copes with the great task of adequately meeting the needs of a newly born credit nation, with a clamor for financing that comes from new sources, presenting a perplexing mixture of conflicting interests. The banking community must create precedents: it finds none to guide it. It must devise means to cope with the situation. It must guide the investors of the na

tion in new and untried paths, and it must make these paths secure. The foreign credit problem of America is thus something vastly more extensive and significant than the problem of the individual manufacturers.

Intended as a study in export practice, our consideration must be directed primarily to the problems of the manufacturer and the exporter. In his monograph on "Foreign Credits" (Department of Commerce, Special Agents Series 62) the author furnished a description of the export credit methods of German and British manufacturers and of the machinery provided by the German and the British banks in financing foreign shipments. The credit methods and problems of the American manufacturers were also discussed. Since the writing of that monograph the Federal Reserve System came into existence; a greater elasticity in handling bank acceptances has been provided; a market for acceptances, far from broad as yet though it be, has been created; American banks have established branches in foreign countries; the world war has been fought and won, terminating with at least a temporary crippling of one of the three greatest exporting nations as a competitor in the world's markets. America has become a creditor nation.

We will then rehearse in our present consideration the historic development of the export credit methods of Germany, England and the United States; will then pass to the consideration of the improvements rendered possible in American export credit methods through the legislation of recent years, and will endeavor to determine to what extent these improvements meet the needs of to-day, and how they might be supplemented by further improvements; there are also the broader aspects of the credit problem from the point of view of the entire nation, from the point of view of the investor, and from the point of view of the banking community as the financial exponent of the nation and of the investing public. But to enter upon a discussion of these broader aspects would take us beyond our limitations as a text-book of the theory and of the practice of international

commerce.

We arrive then at the following subdivision of the general subject:

« PreviousContinue »