The Sun.
London, England, 1853-09-06 00:00:00

( Nora the Economist. )
The value of our exports in 1852 reached the unex-
ampled amount of 78,000,000/. ; in 1842 they were only
47,000,000/. ; and in 1832 they were 36,000,0001. In
‘the 20 years, therefore, they have more than doubled.
qn the first six months of the present year our exports
are nearly 10,000,000/. in advance of 1852, and it is
therefore a very moderate calculation to assume that
the exports for 1853 will reach at least the remarkable
amount of 93,000,000/. Our imports have also been
usu,lin hee
of face of
of
foreign these
large, but it can scarcely be said in the same proportion,
cs t t
fa sight
state taking commodities only, and leaving bullion out of the
calculation, the stocks of most articles being consider-
ably reduced. So far as commerce is concerned, it is
difficult, o therefore,
lead to
the at firstnvo
facts, to suppose that the balance of trade is against us,
so a
exchanges which now exist. It is true there has been
a large importation of foreign grain ; but, on the other
hand, there has been of late a very extensive re-export
both of wheat and flour, and especially to France ; so
tt
much so, that many of the direct steam-vessels have re-
cently been entirely laden therewith. There is, there-
fore, apparently nothing connected with the corn trade
to account for the present state of the exchanges.
In connection, however, with our general commerce,
there is a consideration which at this particular moment
may materially affect the exchanges, although there may
not in the long run be a balance against us. It is ob-
vious that the exchanges must be affected only by the
actual amount of payments to be made at the time, in
whatever way those payments arise, and not by the
value of exports and imports, except so far as it affects
the amount of payments to be made. Remittances to
France for the purpose of buying railway stock, or for
the payment of railway calls, have as much an effect on
the exchanges as for the payment of a balance of im-
ports. Remittances to England during periods of Con-
tinental discredit for investment in our funds have as
much the effect of making the exchange favourable to
us for the time being as if remitted for a balance of
British goods exported. Whatever, in fact, .affects the
amount to be transmitted from one country to another,
whether representing the payment for produce, or capital
to be loaned or invested, equally affects the exchanges
at the time. It is the state of the mutual payments to
be made or received, and not the state of the exports
and imports, except as they affect the former, that de-
termines the state of the exchanges.
In connection with this consideration there is a fact
peculiar to the trade of England which it is all-important
to bear in mind, and which may be of some aid to us at
for the adverse state
the present moment in accounting
of our foreign exchanges. It is this. By the ordinary
course of trade England gives credit to all the world,
and takes none ; on the contrary, in place of taking
i credit upon the produce imported, the capital of England
is employed frequently not only in rearing the produce,
but almost always in keeping it, even on foreign ac-
count, till required for consumption. This is an interest-
ing and important fact in connection with our trade, and,
as we shall show, may exercise at the moment least ex-
pected a remarkable influence upon the exchanges. What
are the facts ? First take our exports. Take the markets
of our entire colonies—take the markets of India of the
United States, of South America—in al '
1, a lengthened cre-
dit is given upon
our exports. In many of these markets
the goods necessary for their supply are held on consign-
ment and with British capital ; and even when sold a
long credit is given, and the proceeds not finally remitted
to England till the expiration of that credit. Take as
an example a transaction in Brazil or in India. A. cargo
of Manchester goods is consigned to Rio de Janeiro.
The agent receiving it supplies the market from his store
as the goods are required. It may be six, it may be,
and more frequently is, twelve months before a closed
account of sales can be furnished. But the goods are
sold at a credit of four, six, or nine months, and it may
therefore be from 12 months to two years before the
funds are all in hand and ready to remit. Of course
remittances on -account are made at earlier periods for a
pa t, but 12 to 18 months would be a fair average. Well,
the funds are in hand, and if hills are abundant, and can
be had on good terms, the rest of the operation is quick
enough ; but as it more frequently happens, the funds
have to be invested in a cargo of coffee or other pro-
duce. This done, the next question is—Where is the
best market ? The vessel sails from Rio with instruc-
tions to call at Cowes for orders. The owner in Man-
chester, upon inquiry, finds that his cargo will be best
disposed of in Hamburg. The vessel is ordered on, the
coffee sold within a reasonable time, and finally the
funds remitted to Manchester in bills drawn, perhaps,
upon some Yorkshire firm for German wools, shipped
by the same steam •vessel that brings the remittance.
During the whole of this time the capital which had
been expended in cotton, in labour, in artistic style, in
dyeing, &c., some months before the shipment was ac-
tually made from England, has been employed abroad,
virtually in conducting the commerce of foreign coun-
tries. Less or more, the whole of our foreign export
trade is of this character; that with the Continent least
so, Nor is this fact in any way altered because manu-
facturers who make these consignments themselves re-
ceive advances upon them, sometimes even from the
first day of the shipment. If they do so it is always
from British merchants, and in any case it is British
. capital that is throughout represented in the transac-
tion.

Let us, then, examine the different character of our
import trade. England takes credit from no other
country. We may fairly assert that none but British
capital is engaged in British trade. The produce of the
United States, of India, of our colonies, of South Ame-
rica. required for our consumption, is either purchased
on the spot with British capital, or it is consigned to this
cone try for sale as required. But in the latter case,
though held on account of the foreign producer, it is in-
variably held with British capital. A cotton grower in
Georgia, a sugar planter in Cuba, the owner of flocks in
Australia, the producers of indigo in Bengal, or the
coffee growers in Ceylon, may consign, and often do
consign, their respective productions to this market for
sale, either direct to our merchants or through their
agents abroad, but in all cases the bill of lading is ac-
companied by draughts to nearly the whole value of the
consignment, and almost from the day the goods enter
our warehouses, or very shortly after, our merchants
are in cash advance upon them, and continue to be so
until they are finally sold and paid for.
The practical effect, therefore, is, as we have already
said, that this country gives long credits to all the
world as regards our imports. It is hence obvious that
the relative amount of our exports and imports at any
particular moment may not represent the exact relative
amount of the payments to be made and received ; and
this chiefly at times when our trade is undergoing any
important change. Thus, during a period when it is
rapidly expanding, even though our exports may still
considerably exceed our imports, yet as the payment
for the former is, as we have shown, deferred for a long
time, while the payment for the atter is made by us
at once, and as it is the amount of payments alone
that determines the state of the exchanges, and not
of exports and imports, it may be, even in that
state of our trade, that the payments to be made
by England greatly exceed those to be received by
England, and that the exchanges may be adverse
for a 'time, while the immediate relation of exports
and imports is altogether satisfactory. And just in pro-
portion as the increase of our exports is rapid and large
is this likely to be the case. For example, the exports
of the present year are likely to exceed those even of
1852 by about 15,000,0001. While, therefore, we are
receiving payments for the exports of 1851 and 1852,
measured by the lesser amounts of these years (in 1851,
74,000,0001., and in 1852 78,000,0001.), we are pro-
ducing and shipping the larger amount of about
93,000,000/. ; and for the additional raw material and
other articles which we import, in order to enable us to
produce so greatly an increased quantity of goods, we
are paying either in advance, or at latest on their arri-
val. Our receipts are measured by the transactions of
1851 and 1852 ; our payments by the larger transactions
adjusted.
of 1853. The balance of payments in the meantime
must, therefore, be against the country. This, no doubt,
can only be for a time. In the natural course of trade
the payments for the expbrts of 1853 will come round,
andthe w
frequently
l e accounts
turnwill strongly bein our
In like manner, when our trade is contracting in ad-
verse times—when our exports are diminished—it is
always observed that, notwithstanding that fact, the
exchanges
favour. That
of the
is obviously caused by the reverse facts which we
have just been considering. The payments due to us
and in the course of being received are upon a larger
scale than the payments to be made for our immediate
imports in respect to our diminished trade. Thus, sup-
pose the present year of extensive trade—the most ex-
tensive beyond all comparison ever known—were, from
any cause, to be succeeded by one or two years of very
adverse trade, then in those years the payments which
we should require to make for our imports on a lower
scale would be much smaller in amount than those due
to us for the extensive exports of the present year, a
large portion of which would then be in course of pay-
ment ; and in that case the exchanges would be favour-
able to England in spite of a great diminution of exports
at the moment.
It is thus that events, which have often appeared as
puzzling anomalies, are satisfactorily to be accounted
for— viz., that frequently in the face of greatly increased
exports we find the exchanges adverse, while in the face
of diminished exports we have a most favourable state
of the exchanges, they being regulated solely
by the ba-
lance of payments, on whatever account they are to be
made, and not by the transactions of the moment.
The remarks which we have here made may also sug-
gest to our readers the true cause of the rapid rise the
in
rate of interest, and a good reason why it should con-
tinue high under present circumstances. To increase
b 15,00,00/ ,
our foreign trade alone in a single ye.ar.
y credito
too ou'r
and that, too, upon a principle of giving
money
for for our exports. while we pay ready
for our increased imports, may easily suggest such an
increased demand for capital -as fullytotit
account for
be 5
the present high rate of interest.loooooo/ . of exports And
le
re-
membered that this increase of , ,
represents but a portion of the increase consequent
thereon. Our borne
trade must have also increased in
perhaps even a greater ratio, in order to furnish all the
t d d
• d for such an ex en e production. The
means require
increased wages paid, measured by their greater rate and
by the full employment of all the people, must alone
lead to a considerable increased profitable demand for
capital, and again to a greatly increased domestic trade
in their expenditure. It would not be exactly correct
to say that the exchanges and the rate of interest directly
affect each other, but it is certain that they are both in-
fluenced by common causes—that a low exchange is
usually accompanied by a high rate of interest, and a low
rate of interest by a favourable state of the exchanges.
There are other important considerations in connection
with the present state of the exchanges which we will
discuss in our next number.