If our foreign commerce was gaining before the war, it has made even greater progress since the outbreak of hostilities. While Germany's foreign commerce has been temporarily destroyed and that of Great Britain has been hampered by the war, our total commerce has immensely increased. In the year 1915 we exported over a billion dollars in excess of our exports of 1913, our exports in the latter year exceeding those of the United Kingdom or of any other country in any year of its history.[[7]] This development, it is true, was abnormal and consisted partly in increases in prices and temporary deflections in trade. Nevertheless, while many American industries, especially those engaged in the manufacture of war munitions, will suffer severely at the end of the war, and while our export of such commodities will dwindle, the war cannot but result in a relative advantage to American manufacturers of export commodities.
Moreover, the war by destroying established connections between neutral countries and their natural purveyors of manufactured goods in Europe has opened the way to a future extension of American export. Like a protective tariff, it gives an initial advantage to Americans, and helps them to overcome the early handicaps. It induces American manufacturers to think in terms of foreign markets instead of concentrating their attention upon a protected home market. In the beginning, it is true, the buying capacity of certain countries, such as those of South America, was diminished by the shattering of financial arrangements with Europe. But such a condition is purely temporary. There will always be a demand for the wheat, corn, meats, hides and wool of Argentine, for the copper and nitrates of Chile, for the coffee and rubber of Brazil, for the wool of Uruguay, for the sugar and cotton of Peru, for the tin of Bolivia, for the beef and tagua nuts of Venezuela and Colombia. So long as they sell raw materials, these countries will furnish a demand for finished products.
American manufacturers are to-day determined to secure an increased share of this expanding market.[[8]] They are slowly learning that you cannot push your goods, in South America let us say, unless you learn to pack your goods, have studied local requirements, are willing to print catalogues in Spanish and Portuguese, and have your salesmen know these languages. In the past Americans have been hampered by their unwillingness or inability to extend long credits, but this drawback is being removed by the improvement of banking facilities. The government, moreover, now seeks actively to promote American trade with foreign countries, and especially with Latin America. A new merchant marine is expected to give additional facilities to American exporters and enable them to meet their British and German competitors on more nearly equal terms. Moreover, the United States is learning that in the export trade co-operation is desirable, and the Federal Trade Commission seems about to grant permission to manufacturers to combine for the conduct of business in foreign countries.[[9]]
All this does not mean that American manufacturers are completely to displace their European competitors in South America and other markets. Competition after the war will be severe, and whatever the course of wages and employment in Europe, a measure of success for industrial countries like Great Britain, Germany and Belgium is absolutely essential to the maintenance of their populations. Desperate efforts will be made by these nations to re-establish their foreign business. A great part of South America is as near to London and Rotterdam as to New York, and much of the trade and of its future increase will revert to Europe. In the years to come, however, more than in the present or past, the United States will be a formidable competitor for the world-markets, and will incur enmity and jealousy in the attempt to maintain and improve its position.
A similar development is taking place in the field of investment. In former years, British, French, Dutch, Belgian and German financiers were requested, indeed begged, to invest their surplus capital in American enterprises. To these financiers we went cap in hand, and they did not lend their money cheaply. The complementary relation between lending Europe and borrowing America was productive of the friendship of mutual benefit. To-day we are still a debtor nation, but only in the sense that the great financier is a debtor. We ourselves have a large capital, and in the main go to Europe merely for the sale of safer and less remunerative bonds, while the common stock of new enterprises is likely to remain in America. Or we graciously "let Europe in on a good thing," conferring, not asking, a favour. In the meantime, we are paying off our indebtedness as is indicated by the balance of trade, which since 1876 has almost invariably been strongly in our favour.[[10]]
The war has still further reduced our foreign obligations. During the two years ending June 30, 1916 our excess of exports over imports was over three and one-quarter billions of dollars. Moreover, in 1915 we did not incur, as ordinarily, a large debt as a result of the expenditures of Americans in Europe. The result of this development has been twofold; a considerable transfer of European holdings of American securities to Americans, and the direct loan of American capital to Europe. While it is impossible to quote exact figures, the American debt to Europe can hardly have been reduced during the two years ending August 1, 1916, by less than two to two and a half billions, or perhaps a third, or even a half, of our former debt to Europe.[[11]]
In the meantime the United States though still a debtor nation has also become a creditor nation. Just as Germany, before the war, borrowed from France and loaned to Bulgaria and Turkey, so the United States, while still owing Europe, invested in Mexico, Canada and South America. It is probable that by 1914 considerably over one and a quarter billion dollars of American capital was invested in Canada, Mexico, Cuba and the Republics of Central and South America, not including the capital represented by the Panama Canal.[[12]]
Even to-day (Nov. 1, 1916) there is still a probable excess of our debts over our credits with foreign nations of at least two billions of dollars. In comparison with our total wealth, however (estimated by the census of 1910 at 207 billions and since then largely increased), this indebtedness seems comparatively small. The national income is rapidly expanding and as the chance to secure exceptionally large profits in railroad and industrial enterprises diminishes there is an increased temptation for surplus capital to flow abroad. Whether or not we shall again have recourse to the fund of European capital in developing our immense resources, it is hardly to be doubted that we shall increasingly invest in foreign countries, and especially in Mexico, and elsewhere in the Americas.[[13]]
Such a development is entirely legitimate and within bounds desirable both for the United States and to the countries to which our capital (and trade) will go. The possible field of investment in Latin America and the Orient, to say nothing of other regions, is still immensely great, and as capital develops these areas their international trade will also grow. There is no reason why the United States should not take its part both in the investment of capital and the development of trade with these non-industrial countries.