sumption rose from 6 per cent of the total in 1820 to 32 per cent of the total in 1913. There was similarly an increase in the exports of manufactures for further use in manufacturing from 9 per cent to 17 per cent of the total. Our exports of foodstuffs rose relatively from 1820 to the 90's and declined since then. Up to the beginning of the war in 1914 we were following the course of normal economic development of nations; we were becoming industrialized; we were increasing our exports in volume and increasing the percentage of exports of manufactures. Another phase of the economic development of a country is its decreasing dependence upon any one country, that is, the distribution of its trade over a large group. For instance, Russia, an undeveloped country, is more completely dependent on Germany than is France. As a country matures economically, it diversifies its industries and looks to more countries for its raw materials and seeks more countries from which to buy its finished products. In 1790 our exports were $20,000,000. Five countries took 96 per cent of them. Great Britain took 47 per cent, France 23 per cent, Spain 10 per cent, Holland 10 per cent, and Portugal 6 per cent. In 1791 our imports were $25,000,000, of which three countries supplied 82 per cent, Great Britain 61 per cent, France 8 per cent, and Holland 13 per cent. Before the war our dependence on any one country was considerably less. Of our exports in the fiscal year ending June 30, 1914, the United Kingdom took 23 per cent, Germany 15 per cent, Canada 15 per cent, France 7 per cent, Holland 5 per cent, Italy 4 per cent, Cuba 4 per cent, Belgium 3 per cent, Japan, Argentina, Australia, and Mexico 2 per cent each. Five leading countries took 65 per cent. Similarly, of our imports for the fiscal year ending June 30, 1914, there came from the United Kingdom 15 per cent, Germany 10 per cent, Canada 8 per cent, France 7 per cent, Cuba 7 per cent, British Indies 6 per cent, Japan 6 per cent, Brazil 5 per cent, Mexico 5 per cent, Italy 3 per cent, Belgium 2 per cent, Netherlands 2 per cent, and China 2 per cent. The three leading countries furnished 33 per cent. C. The Effects of the War, Permanent and Temporary What were the effects of the war? Some are temporary. We lost the trade of the Teutonic powers and countries cut off by them. We exported munitions of war and products which the other belligerents were temporarily unable to manufacture, because of the devastation of their land or the shortage in man power. As a result of the general shortage of shipping, intensified by submarine activity, trade was diverted out of its pre-war routes and stocks of goods accumulated at points of production that became less accessible during the war, like sugar in Java, and coffee in Brazil. Prices rose and the volume of trade rose accordingly, although the tonnage of goods in the trade of the world fell. With the cessation of hostilities these factors became inoperative in part. After the conclusion of peace they will probably be largely eliminated. But there have been some permanent changes as well. Chiefly, these are such as would ultimately have come about after the lapse of a long time. As a result of the shortage of commodities imported from Germany before the war, new industries were established, notably the manufacture of dyes, nitrates, and heavy chemicals, optical glass, scientific instruments, toys, and related goods. Not only in the United States, but also in Brazil, Japan, India, Australia, the establishment of local industries was stimulated by the shortage of imported goods. The process of the decentralization of the industry of the world was accelerated. Like a bomb, the war split German foreign trade into fragments. The centralization of a great group of so-called essential or key industries in Germany has forever been destroyed. Tariffs, and in some countries anti-alien laws, will effectually consolidate the industrial gains of the war. Then, again, the shortage of shipping compelled the rerouting of the trade of the world. Courses which became temporarily expedient during the war were found to be permanently more efficient. Most of the transshipment trade between the United States and the Far East or South America was routed via London, Hamburg, and Rotterdam. Direct lines have since been established. We now import bar tin direct from the Far East and we have begun to smelt tin ore instead of buying all the metal from the countries of Europe after the bulky ore had been lugged three-quarters of the way round the globe. Direct trade in wool, rubber, tea, and minerals was developed. The following table tells the story strikingly: FOREIGN TRADE OF UNITED STATES. [Figures in million dollars, 000,000 omitted, covering fiscal years ending June 30.] Finally, our trade balance has changed probably permanently. Before the war our excess of exports was about $500,000,000, which was balanced off by means of various items we owed our customers or sent abroad, as interest on loans, shipping charges, insurance and banking fees, expenditure of Americans abroad, and remittances by European residents in the United States. During the period from July 1, 1914, to Dec. 30, 1918, or roughly, the period of the war, our excess of exports amounted to about $12,000,000,000. VOLUME OF FOREIGN TRADE OF UNITED STATES. In payment for this excess of exports from the United States during the war the European belligerents returned to the United States about $2,000,000,000 worth of our securities, shipped $1,000,000,000 in gold, borrowed in the open market about $1,000,000,000, and to the end of 1918 received United States Government advances of about $8,000,000,000. There can be no return to pre-war conditions. Instead of owing Europe about $125,000,000 annually in interest, she will owe us about $500,000,000. Our debt for shipping charges will likewise be reduced. On August 1, 1914, we had, according to Mr. Hurley's recent report to the U. S. Shipping Board, 2,700,000 gross tons of shipping and on November 1, 1918, about 6,100,000 gross tons, and if our program goes through we shall have a fleet of 20,000,000 tons, ample to absorb all the shipping charges we had been paying to Europe. Again, our banking fees were paid to European bankers, with whose bills we financed our exports. These will now be paid largely to our own bankers. Thanks to the efforts of the Federal Reserve Board, Amer ican acceptances grew from nothing in February, 1915, to over $300,000,000 in February, 1919, of which about $200,000,000 represented foreign transactions. Finally, we expanded our industrial facilities. Our iron production rose from 30,000,000 tons in 1913 to 42,000,000 tons in 1918. Our refinery copper output rose from 1,600,000,000 pounds in 1913 to 2,400,000,000 pounds in 1918. Our mining and manufacturing capacity increased far beyond our domestic requirements. We must either export our surplus or operate our industries at subnormal output and raise the cost of production for domestic needs, until our own requirements catch up with our production. The war thrust responsibilities upon us which we met. The peace finds us at a stage of economic development that might have taken us a generation, perhaps a half century, to attain. In order to sell abroad we shall have to invest in foreign obligations. For the next few years at least we shall have large credits due us for interest from our allies on past loans, and at the same time an excess of exports of materials for the rehabilitation of Europe. However, we cannot continue indefinitely to invest unless we balance the interest due us from our debtors by an excess of imports. This condition characterized the trade of Great Britain, France, and Germany before the war. When Europe is restored to normal conditions the nature of our balance of trade and the extent of our investments abroad will be determined, among other factors, by relative wages and cost of production in the United States and elsewhere, the relative demand for capital, the standard of living, the prevalence of thrift, and the rate of interest. D. The Prospect in International Commerce Before touching on questions of policy, let us gauge the prospect before us and some of the difficulties. If past experience be any guide, we may expect a quickening of the currents of commerce after this war. Trade between the belligerents grew faster after the peace following the Franco-Prussian, Spanish-American, |