The great steel-producing countries of the old world, under normal peace conditions, are unable to consume more than a comparatively small proportion of the output of their mills; internal or home consumption is small. Hence, the exportation of the greater part of the steel these countries make is a pressing necessity and no effort is spared to secure foreign outlets for their product, to cultivate a world-wide good will.
The steel maker of the United States, on the other hand, has always had, except in times of severe depression, an excellent market at home, one ready to hand and able to absorb all the steel he turned out. The country had been building up and expanding. Steel has been and is still needed for railroads, skyscrapers, bridges, factory buildings, agricultural machinery, automobiles, and a thousand and one other purposes. The result of this has been that our manufacturers have had no particular desire in normal times to seek foreign business with its attendant risks and expenses and the long-term credit it demands. They were, until recent years, content to leave the foreign markets to European exploitation and only to enter these markets when dull business at home forced them to seek new outlets for their product. In the earlier days of the industry American steel, at such periods, was thrown on foreign markets at prices often below cost of production, the loss being considered preferable to unemployment at home or the disruption of company organizations which a continuous decline in sales would have brought about. This process was commonly known as “dumping,” and it was calculated to earn the bitter hostility of foreign competitors who saw their carefully cultivated markets taken away from them by cut-throat competition. A wave of returning prosperity at home would cause indifference to, and independence of, foreign trade on the part of our steel producers, an attitude that naturally did not create good will among foreign consumers. One of the results of this state of affairs was uneven and sporadic exports; another was that American steel had no friends abroad.
It has often been charged against our manufacturers that, although professing to be anxious to sell their goods in all markets, they were unwilling to meet the requirements of the foreign buyer, taking the “if they don’t like our goods, let them go elsewhere” attitude. Fortunately, this is not nearly so much the case to-day as it was a few brief years ago, but this disposition is still visible in many quarters. And it gives the European competitor, who goes on the principle that the buyer is always in the right, an incalculable advantage. The basis for this attitude on the part of our manufacturers lies in his assurance of vast home markets. His competitor abroad, having perforce to sell half or more of his output in other than home markets, naturally works to find out the needs of possible buyers everywhere, and sets out to meet these needs. And he gets the business.
But the Steel Corporation, once having determined to build up a permanent export business, accepted and adopted the attitude of its European competitors that the consumer, no matter where he is, must get his goods as he wants them, and not as the manufacturer sees fit to make them. To do this, it became necessary to begin to manufacture a number of new lines of steel for which there was no call in the domestic markets, to adopt the weights and measures of each country in dealings with buyers there, and in every way to make it convenient for the purchaser abroad to order from the Corporation with the certainty that his business would get the same welcome as it would if placed with a British, German, or Belgian mill, and the same care and attention. To suit the needs of the various foreign buyers catered to it was found necessary, in some instances, to devote entire mills to making nothing but export products.
Wire goods constitute an important item of export and of the eleven thousand and more varieties of wire products made by the American Steel & Wire Co., some 1,800 are manufactured principally for foreign trade, many of these lines not being sold in the United States at all.
For instance, the countries in South America lying below the equator demand what is known as “varnished” wire; certain of the tropical countries, because of climatic conditions, require a wire heavily coated with spelter to withstand rust; and so on. The Australian carpenter is accustomed to fasten his woodwork with a nail of oval section. No argument can convince him that the round nail, favored in America, is just as good. He knows what he wants and knows also that if the United States won’t supply it, Europe will. In other parts of the world a square nail is popular. So the Corporation makes oval nails, square nails, nails, in fact, to suit every clime and country. It does not attempt to argue about tastes, it merely accepts them as they are and endeavors to satisfy them—and this is the royal road to sales and profits.
Even in the question of packing, local usage must be considered. In the United States, the standard package for nails is the 100 lb. keg. For the Japanese trade, picul kegs, holding approximately 133 lbs., are demanded, while the Hindu trader, sitting bare legged and beturbaned before his booth in the bazaars of Bombay or Calcutta, offers the passer-by small packages of nails weighing seven pounds—put up by the American Steel & Wire Co.
It was a big job that Farrell had handed to him when he was put in charge of the exploitation of foreign markets for the Steel Corporation. For not only did the varying conditions affecting sales in the different parts of the world have to be studied and plans laid to adopt manufacturing methods to meet these conditions, but there were other obstacles to contend with, handicaps, by the way, which it would hardly have been possible to overcome without the backing of the power and prestige of the greatest of corporations.
One was the question of prices. The high wages paid to American labor as compared with labor compensation in Great Britain, Germany, or Belgium, combined with the fact that these countries lent every assistance to their manufacturers in increasing their world business—particularly Germany, which encouraged the artificial keeping up of home prices and the reduction of export prices, with the object of extending the nation’s foreign commerce—rendered it impossible for American manufacturers to obtain as profitable a price in competition with Europe as they did in the domestic field. Further, as the Corporation entered many markets to find foreign competitors already firmly established therein, it was necessary to offer buyers material price concessions to get business at all in the first place.
Such price cuts were nearly always essential to give the Steel Products Company its first foothold in the desired markets, to force the entering wedge. The fact that the Corporation has at times sold abroad cheaper than at home has been used as a weapon against it by its critics. Apart from the fact that its doing so afforded labor to many American workers and thus reduced unemployment, it seems plain that a seller must make his price to suit the market in which he is operating, that had such price concessions not been made the Steel Corporation’s export business would never have shown the remarkable growth it has. Europe would have undersold it in all markets. However, the Corporation refused to follow anything like the old dumping policy, often refusing otherwise very desirable business on the single issue of price.