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About The Sunday Oregonian. (Portland, Ore.) 1881-current | View Entire Issue (Sept. 13, 1914)
THE STTTTDAT OREGOIflAN", PORTLAND. SEPTEMBER 13, 1914. Am' eveiopin eracan Am erica How War Affects Them and How a New Opportunity Presents Itself, Shown by Expert Investigator, Charles M. Pepper Mark in outh BY CHAULES M. PEPPER. TWO billion dollars and upward measures the foreign trade of South America. No international prize court exists to adjudicate and ap portion it during the war and after ward. The United States, not being involved in the European imbroglio, is In a splendid strategic position as re .gnrds these $2,000,000,000 of inter changeable commodities. It cannot only hold fast what It has, but it should also make permanent gain3. The exact figures of the South Amer ican commerce are not of consequence except to statisticians, but the total for last year most likely would show more than $2,100,000,000. Between J75.000.000 and $100,000,000 of this amount may be credited to the trade of the countries with one another and the Oriental and Australian traffic of the west coast. The balance somewhere in the neigh borhood of 12,000.000.000 is for Europe and the United States to divide. Taking the whole Held, in most years It will be found that the balance of trade is In favor of South America. It Is safe to say that .Europe and the United States sell to the South Amer ican countries under normal conditions $40,000,000 or $50,000,000, less than $1,000,000,000, and take from them $1,000,000,000 plus $40,000,000 to $50, 000,000. Americans are In the habit of thinking in big figures and by keep ing these approximate totals in mind they will have before them a mental picture of what the trade of South America means to Europe and the United States. The European war therefore upsets the equilibrium of South America's $2,000, 000,000 foreign trade. The equilibrium, when normal times come again, of course, will be restored, but the pro portions of the respective nations will not be the same. Some of the com merce will have shifted for good. Coal is an example of a commodity that was affected overnight by the war. South America is an enormous consumer of coal. On the west coast the demand has been largely supplied by Australia with a little help from Japan. On the east coast England Is the source of supply. Rio de Janeiro, Montevideo and Buenos Aires all have great coaling stations. These are not only to meet the demands for domestic consumption, but to serve the needs of a vast steamship traffic. American exporters, probably much to their surprise, were in a state of something like preparedness to meet tills South American demand. The various departments of the Government had Investigated for them and made lull reports. Several of the coal com panies had sent their own special rep resentatives to study the situation. Brazil, which needs 3,000,000 tons a year, was already taking considerable quantities of American coal. At Mon tevideo the Uruguayan government had made a test of Virginia coal based on the American navy test, and the trial shipment had proved satisfactory, so that Uruguay was convinced as to the suitability of American coal for its needs. Argentina, which has no coal of its own, was also ready for Amer ican shipments to Buenos Aires. Ar gentine burns 4,000,000 tons a year. In these circumstances It is not sur prising that some of the larger com panies in the United States were ready to meet the immediate wants of the east coast by taking amergency orders and that other dealers are preparing to follow them. England may succeed in keeping the lanes of ocean travel between Buenos Aires, Montevideo and Rio as open as between New York and Liverpool, but this is not certain, and the uncertainty Is bound to Influence South American consumers, who must have coal, and who can take no chances. Moreover, no one can calculate how much the British navy will need, if the war continues long. Cardiff coal will be supplied in diminishing quantities to the eastern ports of South America, and the United States Is the only coun try which can make up the deficiency. In peace times, the Panama Canal might have aided the English coal trade, since the Cardiff cargoes which now go around the Horn, and as far up at Callao, would be able to stand the canal tolls, but there would be the same danger of hostile ships to cargoes of British coal through the canal as to cargoes on the Atlantic houte to Rio de Janeiro and Monte video. Since the bulk of the coal Imported on the west coast comes from Austra lia, It might be assumed that there will be little interruption to this traffic, but with the war spreading to the Orient, and with the possibility of a German cruiser turning up somewhere in the Pacific, coal Importers on the west coast are not likely to depend on Australia, especially as most of the Australia coal Is shipped In sailing vessels. The opening of the canal will enable them to turn to a certain source of supply through Newport News and Norfolk, and through some of the gulf ports. Chile requires 3,000,000 tons an nually, of which the native mines can supply only half. Everything that South America sells is affected by the war. Some of those who think that as a consequence of Europe's armed struggle the whole trade of South America is going to fall at once into the lap of the United States, overlook that, temporarily, some of the South American countries will suffer almost as much as the conti nental countries. This will not ba through the impairment of their pro ductive resources, but through tha cur tailment of their markets. The funda mental question is how much of South American products this country can absorb both for Its own consumption and for distribution to other markets. The Ecuador cacao crop furnishes an Illustration. Ecuador produces about one-fifth of the world's cacao, or choco late bean. Heretofore Hamburg has been the chief source of distribution to tha European market, although some ly ' IIII " V Sfltoe at. of the crop has been handled at Havre and at London. Shipments to Havre and Hamburg are not likely to be attempted while the ninety-day draft on London, which has been the favorite method of fin ancing the movement of the cacao crop, is not now practicable. The Guayaquil merchants will prefer drafts on New York. Moreover the Panama canal is open and the cargoes can be shipped directly through the canal. New York, therefore, would seem to have an ex cellent opportunity to replace Ham burg in the cacao trade. Another Ecuadorian product that is directly affected Is the tagua, or vege table ivory, which is the basis of the button Industry. Notwithstanding that the bulk of tha Ivory nuts are con sumed In the United States, up to this time the raw product has been shipped to Germany and then reshipped to the United States. Since Germany will not be able to receive Ecuador's crop of ivory nuts, and since the American manufacturers must have the raw ma terial, they ought to be able to get it direct from Ecuador. Peru finds the market for some of its products shut off by the war. Others will not be affected, while one crop will be benefited. Wool and cotton, which heretofore have gone to Eng land, cannot now look to that market. The United States can absorb the sur plus wool, but with Its own cotton crop unmarketable, It Is not likely to absorb the fine silk cotton of Peru... The copper output of the Cerro de Pasco and other Peruvian mines has heretofore been taken by the United States, and will not be affected, ex cept incidentally, by the closing of the Hamburg market. Sugar, which Is Peru's most valuable agricultural crop, will be directly bene fited. Part of the Peruvian sugar goes to Chile, but the larger part seeks other markets. With the beet sugar of Eu rope shut off, with the European mar ket practically closed, with prices ad vancing In the United States, and the Panama canal open, Peru will fnd com pensation for other losses in tho promptness with which this country can absorb all the sugar It has to spare. Bolivia has tin mines. The price of tin had been climbing up steadily for several months past because the de mand outran the supply. Out of a world production ranging from 130.000 to 140,000 tons, Bolivia Is able to sup ply between 25,000 and 30,000 tons. No one can yet guess to what extent the Malay Straits Settlements, which produce nearly half tha world's tin, will be affected by the war, but there is certain to be some interruption to Commerce. Heretofore, American man ufacturers have been content to get all their raw tin through England. The Bolivian output in the form of concentrates has gone there and to Hamburg American smelters on tho Atlantic coast will not be alive to their opportunities unless within a year they are getting Bolivian tin concentrates direct, and smettlng them for the bene fit of American manufacturers. Chilean nitrates are hard hit by the war. Practically the whole of the war area Is a buyer of these fertilizers. The annual production Is approximately three million tons, and of thla quan tity two million tana may ba credited X, - ' ..."" to Europe, England and Germany be ing the chief consumers. England takes about double the quantity that Ger many takes. France and Belgium are also good customers. It is not assumed that England will cease to receive ni trate cargoes, but for at least a year the traffic Is bound to be diminished. Germany is shut out entirely. The United States has been a good buyer of the nitrates, and probably can absorb much larger quantities, espe cially If the partial closing of the Eu ropean market causes prices to be low ered. The bulk of the nitrates will pass through the canal, since the toll is not too heavy for the trafflo to bear. It Is not unlikely that the Chilean nitrate trust, which has the sanction of the government, and which controls production, will limit the output for the coming season, but there still will be vast quantities to be absorbed, and the more of this that the United States can absorb the better off will Chile be and the more disposed to buy Amer- Congo, which may yet become a part ican products. of the war area. Antwerp Is already a Coming around to the Atlantic coast dosed port. Argentina is likely to be the least af- it would seem to be the natural thing fected by trie war. Europe will want tor the automobile people, and for her grain and beef, and the only ques- other manufacturers who are large tion will be whether the cargoes can consumers of raw rubber, to lopk to be safely transported. England is like- the Amazon In this emergency. It ly to make extraordinary efforts to would also seem the natural thing for safeguard the ocean routes, yet the the vessels carrying the rubber from task Is more difficult than with the the Amazon to make direct for New United States. York instead of Liverpool. Argentine wheat growers are in a Generally it may be assumed that the less favorable position than American United States will absorb for consump wheat growers, because there Is a much tion a portion of the South American longer, route necessary to be protected products which lose their markets in before their cargoes can reach Liver- Europe, and also that In the future it pool. Yet, with England having only will become more of a distributing era ninety days' food supply in reserve, the ter for these products. At present It Argentine dealers may feel safe In would be idle to estimate the exact holding the crop. The Argentine har- measure of this shifted commerce. The vest does not begin till November, so point to be kept in mind is that that there are a lot of possibilities for every dollar of South Amer before another Argentine crop will be lean products which the United States subject to war's uncertainties. absorbs there ought to be the sale of Uruguay Is likely to Increase her an additional dollar's worth of Amer- commerce with the United states. With lean commodities. the Antwerp market for wool and the At the present time the leading Eu- Hamburg market for hides closed, and ropean neutrals who are in a position with the Liverpool market uncertain, to benefit from the war are Spain and the tendency will be to market the Italy. Spain has a well established whole crop In the United StatesWool, commerce In certain sections, where which in the past has gone to Liver- the Spanish immigration has been pool and Antwerp to be scoured and large, but there is not likely to be a cleaned, and then reshipped to Bos- great expansion of business, because ton, should now go direct to Boston. Spain does not appreciably supply the Brazil Is affected both favorably and articles which England, Germany, unfavorably. Hamburg and Havre are France and Belgium have supplied. The closed to her coffee. The closing of Barcelona cotton mills may get some Hamburg Influences the whole contl- additional trade at the expense of Eng- nental market for coffee. land and Germany, but it will be a Americans, as the greatest coffee small item in the gTand total, drinkers In the world, probably can be Italy will reap some advantages pro induced to take another cup at break- vlded she can maintain her neutrality, fast and thus absorb some of the sur- Her chief gain will come from her plus crop which will be dumped on splendid commercial fleet. If Bhe can them. It Is not Improbable that large keep out of the struggle, Italy will get quantities will be warehoused In New some of the carrying trade that is now York for distribution at the end of the held by England and Germany. The war South American markets, and the South Brazilian rubber loses nothing as a American carrying trade, are a potent consequence of the war. The low price reason for Italy to keep out, aside from to which Para rubber had fallen, be- questions affecting the European con cause of the competition of the arti- tinent. ncially cultivated rubber of the Malay "Great Britain's trade with South Straits, may find a corrective, because America is so vast and varied that the nobody can prophesy to what extent use of a goodly section of her war fleet commerce with the straits will be In- to protect It Is a national necessity, terrupted. There Is also the uncertain- Cotton textiles, steel rails, mlscellan- ty as to the supply from the Belgian eous Iron and steel products and m- i hwhskl-.a. ---vu d i ve. .i. :..'L-x- rcti r-jix-3aBWujw .' y i r i jjjjj chinery are for her an immensely val uable market. Even with unusual ef forts it does not seem possible that all of this trade will remain in her hands. Nevertheless what is happening to the English coal market in South America may happen to other commodities, to the legitimate gain of the United States. France will suffer in her commerce with South America chiefly In the line of fine dry goods and similar articles A very large trade Is done by means of the parcel post. Possibly mall order houses in the United States will see this opening and take advantage of It. Belgian trade in South America has been something like Belgium herself n the map of Europe, that is, a neutral quantity, but Its neutrality Is no re spected In the war of the markets. Bel gium will lose materially In the supply of railway material, certain iron and steel products and a variety of minor articles. Germany's trade in South America is the real point of attack. The circum stances do not admit of a siege. If taken at all, it must be taken by bom bardment. The various South Amer ican countries ha&& been taking from Germany about '$175,000,000 a year. Brazil has been a customer to the amount of $50,000,000 to $55,000,000. The Argentine Republic to the same extent, and Chile to the amount of $30,000,000. Germany's commercial conquests In South America have been the results of marvelous organization, backed by the home government. The great Ham burg firms are partners In numerous South American importing houses. A chain of German banks has been estab lished. The German merchant marine, however, has been the leading factor In building up the trade. This marine Is now crippled and German trade with South America is suffering an inter ruption that it will take years to re cover from. Germany has been a close competitor of the United States and England in supplying Brazil and Chile with iron and steel products. She has had less success with these articles in Argentina. In both Brazil and Argentine she has competed in the supply of automobiles and in electrical apparatus. Leather goods also have been an Important commodity. American manufacturers who were getting into the Brazilian market for cement had a very sharp competition from Germany. They ought now to be able to absorb that market without trouble. Germany's best market for textiles, chiefly cottons, has been in Chile, although she has had a fair market In Brazil and Argentina. American cotton mills have shown so little ability to get Into the South American market that In ordinary com mercial situations they might be elim inated, but In the war situation they should at least be able to fill the void caused by Germany's temporary elim ination and should not allow this trade to drift to England. Pharmaceutical products and chem icals also have been German specialties In South America. The United States may not be able to supply the defi ciency as to chemicals and dyes, but it can meet the requirements as to drugs. It is not practicable to give In de tail all the commodities which Ger many has been In tho habit of supply ing South America any more than those of Great Britain, nor is It wise to make sweeping assumption that the United States In in a position to absorb the whole trade. Yet there are very few commodities which Europe has been in the habit of supplying that cannot be supplied by this country. The United Staes ships to South America approximately $150,000,000 merchandise. Some of this trade is already so completely in Its control that a heavy increase cannot be ex pected. Mineral oils furnish one of the leading commodities, and this trade Is so well In hand that the only benefit of the European war will be In re stricting competition that was looming up. The sale of agricultural implements Is capable of Increase, yet not much of this will be at the expense of Euro pean rivals. Germany is barely In the field at all, and England only with cer tain forms of heavy agrlcultrual ma chinery. Packing-house products and miscel laneous foodstuffs are also largely In the hands of Americans. The gain In this direction will come from the in ability of Europe to supply the high grade canned goods and delicacies. The main opportunity for enlarging the market of the United States will be tn machinery, In all forms of iron and steel products, in electrical apparatus and in railway material, Lumber already Is largely supplied from the United States, but there will be a wider market for furniture, stnoe Austria Is shut off. as well as Germany. The great Industrial organisations of the United States, such as the Stand ard Oil, the Singer Sewing Machine Company, the United States Steal Cor poration, tho typewriting and offloe appliance companies have their busi ness so well organized that they are able to take Immediate advantage of the war situation. Advantage to the smaller manufac turers Is that the big concerns have blazed the path for them that they too, should be able to Improve the op portunity to place their products. Thsy will never do It, however, without Informing themselves fully of tho re quirements and the local peculiarities of the different markets The State Department and the De partment of Commerce have accumu lated such ample Information on all these subjects that there Is no excuse for an American manufacturer start ing out for South American trade not knowing all about what Is necessary in order to get It. American banks In South America la a problem now being solved by the establishment of branch banks. Some of the largest export concerns have been Indifferent on this point, and have maintained that the banks were not necessary for the extension of Amer ican trade. But the smaller manufac turers snd exporters are not of this opinion, and hereafter they will have the Incentive which comes from the presence of financial Institutions with which they csn get in touch at home. American banks also may help in the matter of determining credits of prospective customers, although a lead ing American mercantile agency Is al ready established In the principal South American cities. Banks and mercantile agencies can not, however, change one cardinal fea ture of South American trade. This is long-time credits. With better means of Information and with greater fa cilities for Intercourse, the American manufacturer can afford to compro mise on this point. Most Americans want to see the ex isting trade of the United States with South America and the prospective trade carried on In American bottoms. In this matter It Is necessary to cor rect an error which exists In many quarters. When provision waa made In the last tariff bill for giving a drawback of 5 per cent on customs dues on goods Imported In American bot toms some people thought that this would stimulate trade with South America. It cannot do so for a very simple reason. Substantially all the products of South American countries are ad mitted Into the United States free of duty. This fraction of 1 per cent dutiable Is so small that It might be said that 100 per cent of the ar ticles are free. Since, therefore, there is practically no South American duti able list In the United States tariff It Is not possible to subtract 6 per cent from nothing. The effect of the recent legislation of Congress in providing for the reg istry of foreign-built vessels, which have been bought by citizens of the United States, cannot yet be Judged, but It ought to help In Increasing trade with South America by provid ing American bottoms In which to carry the commodities which constitute the $2,000,000,000 commerce that Is dis located by the war.