The Washington times., 1921-01-14

FOREIGN TRADE
Reserve Board Points to Danger
of Flooding European Markets
Without Security.

Dangers in flooding foreign mar
kets with large shipments. without
adequate security and to the detri-
ment of American business, were
emphasized today by the Federal
Reserve Board.
WARNS OF DANGER.
A warning that there are breakers
ahead for many elements in Ameri-
can business, by their reckless disre-
gard OF the limited buying power OF
Europe and other parts of the world.
IL given by the board In the most
comprehensive review IL has yet at
tempted OF the chaotic state OF for
eign finance, and the Gripping OF
normal avenues for export traffic.
Governor Harding and his associ-
ates scent peril of the worst kind in
propaganda to further expand the
present Abnormal favorable trade bali
ance. The board predicts that extern
ton OF further credit. upon scale
contemplated by the revived war
finance operations, means correspond
ing decrease in available credit for
American business.
FACTORS TO STUDY.
Disturbed conditions in foreign en-
change. the instability of the world
price situation. and the curtailment
in buying strength of practically all
Soreign countries, are mentioned by
the board as factors to be studied by
conservative business interests, II
safety is to be preserved.
With some measure of alarm, the
board points to a credit bill of $1,000
600, 900 which now is due American
merchants and business men by for
eign buyers, and declares at time
when foreign debtors should be liqui-
dating, customs houses and ware
houses abroad are damned with
American products, now held up" be-
cause of the buyers refusal to ac-
cept at original quotations and the
clamoring for new price level.
Ability Of foreign buyers to pay pres
ent bills is being constantly lessened
by the fact that some of their leading
staples have ceased to find a satisfac-
tory market in America.
Some Of the dangers" noted by the
board are these:
ACTUAL buying power Of many
foreign countries, reduced by war. are
now still further curtailed, with an
aggravating effect upon foreign ex-
change.
Occupied with the embargoes
upon gold movements, depreciation
in exchange has been caused by a
condition equivalent to mora
torium in various countries.
3-Large quantities of American
goods shipped to South American
and other ports. have met with
cancelled orders. buyers expecting
to get them at still lower figures.
CONGESTION IN PORTS.
4-Congestion in many world ports
has become so acute that foreign
II aiding is practically at a standstill.
5-The board recognizes as funda-
mental the contention that continued
favorable balance of trade would
have a continuously unfavorable ef-
feet upon domestic trade and COM
merce. Rolling up larger balances
for foreigners to pay. the board
says. simply means transfer Of an
increasing proportion of bank cred
Its from domestic business to export
business.
6-Credits which are opened on
behalf of European importers or
| buyers by banks in the United
States are American credits. not
foreign credits. They are opened
for the purpose of enabling Eu-
ropean importers to obtain domestic
credit in the United States, with
which to pay for American products
| destined Tor European use
How continued drainage upon Amer
| lean credit resources to support heav-
! Ter export trade, reacts upon home in
terests, is thus explained by the
| board.
| Credits opened by American banks
| to support exports, are domestic
credits. The credit remains behind as
| a part of the total volume OF banking
credit outstanding in the United
States. 1t passes from hand to hand.
| as is the case with all ordinary bank
ing credits.
"The effect of our foreign trade has
not been to diminish the amount OF
| credit granted, but rather to increase
IT. This is the more serious criti-
cism to be made in connection with
cur present export trade.
ABUSE OF CREDITS.
"Too much of it has taken the
form of credit which continued in
existence long after 1t should nave
been cancelled or paid.
| at Is because of the lack OF a
funding arrangement, that the out
standing balance in our favor has
grown so great, and now constitutes
an element of concern in our inter-
national trade situation.
| "Those who view our foreign trade
as in some sense prejudicial to home
conditions of credit or production.
should bear in mind. that the effect
Of it is not the Limitation OF bank
credit. but its undue expansion.
1.-THE harm resulting from 1t Is
found in the fact that II deprives us
| of the use OF our productive re-
sources which might otherwise be
retained and applied at home"
| THE situation at present Is such
that we export capital and get credit
in return. Danger lies in n shortage
of capital, not in a curtailment of