February 1, 1920. 



THE INDIA RUBBER WORLD 



Influence of Present Exchange Situation on Competitive Position of 

 American Rubber Industry in Foreign Fields. 



i^.v L. n\ Akvyn-Schmidt. 



THE RECENT DECLINE in the exchange upon America has re- 

 sulted in a considerable disorganization of American 

 foreign trade which has found its principal expression in a 

 general disinclination of American exporters to accept anything 

 but dollars in payment. It is now argued that the'pesent situation 

 if left to continue, is likely to lead to a general breakdown of our 

 export trade, as foreign countries will hardly be inclined to buy 

 American merchandise upon the basis of the present exchange rate 

 as against the high price of the dollar. Exporters of rubber tires 

 and other rubber goods have received many cancellatioris of 

 foreign orders during the last 

 months and are inclined to attrib- 

 ute this condition exclusively to 

 the exchange situation. They hold 

 that the .\merican rubber industry 

 is in danger of becoming incom- 

 petitive in the international field. 

 Several remedies have been pro- 

 posed; so far, however, no action 

 has been taken, principally because 

 of the lack of a basis upon which a 

 settlement can be obtained. 



approximately, owing to a fractional increase of the cost of the 

 peseta over par. On the other hand, the English purchaser of 

 an American tire would have to pay £11.18.— the French 484.88 

 francs, and the Spanish 270 pesetas, approximately. We have 

 therefore, at the present time at least, the peculiar situation that 

 one and the same tire can be purchased and sold at varying rates 

 in each of these countries owing to the variation of the exchange. 

 Such a situation can act on the American tire trade in two 

 different ways. It might enable tire importers in this country 

 to purchase for dollars great quantities of tires in England or 



TIRES AND EXCHANGE RATES. 



It will be shown in the following 



in England 

 4. 46.17 



that the situation is by no means 

 as serious as it appears on the sur- 

 face, and that its disastrous effects upon international trade 

 are not caused by the devaluation of foreign money itself but 

 by the present frequent fluctuations of the market. 



The situation most frequently quoted is that of an American 

 manufacturer, say one making tires, negotiating for a tire con- 

 tract in France or England. Let us assume the tire to be a 34 by 

 4'/2-inch fabric tire, of standard make and costing the consumer 

 $44 in the United States. This tire costs to-day in France 30O 

 francs. It costs .£9.10 in England, 274 pesetas in Spain, and 

 approximately $37.80 United States currency in South America. 

 .\pplying normal exchange, the dollar value of this tire would 

 be $57.90 in francs, $46.17 in England, and $52.88. approximately, 

 in Spain. The normal exchange rate of the pound sterling is 

 $4.86. of the franc 19 cents, and of the peseta 19 cents. On the 



s OF Tires Corresponding to the American 34 by 4^-inch Fabric Tire in 

 LAND, Spain and France, with United States Money Equivalent at Nor- 

 mal Exchange R.^tes. 



Prices of Tires Corresponding to the American 34 by 4J4,-inch Fabric Tire 

 England, Spain and France, with United States Money Equivalent 

 at Present Exchange Rates. 



day of writing this article, December 19, the following quotations 

 were made in international dollar exchange : pound sterling 

 $3.72, franc $0.09, peseta $0,191. If purchased in dollars, a tire 

 equivalent to the American one could have been bought in 

 England for $35.34, in France for $27, and in Spain for $54, 



France and to sell them here at a cost very much below that 

 for which they can be offered by other manufacturers. But it 

 will also deter the French and English purchaser from buying 

 tires m the United States at the practically preventive exchange 

 rates of their respective money units existing just now. Also 

 there is a third consideration : to which country will the world's 

 markets go for supplies in the present situation, to the United 

 States, to France or to England? But the present-day situation 

 isonly an incident of the overshadowing problem of international 

 competitive ability of which it forms a part. 



COMPETITION IN PRODUCTION. 

 The exceptional demand for rubber goods from domestic and 

 foreign markets during the last years has put out of operation 

 ihe ordinary- rules of competition that govern the world's market 

 in normal times. Goods were 

 needed urgently and cost was no 

 consideration. Under these condi- 

 tions there was no difficulty for 

 any manufacturer to sell at his 

 own prices. It was a typical sel- 

 lers' market with no string to it 

 in any respect. But the conditions 

 must change again, in fact they 

 have already changed. The world's 

 business can not be conducted 

 permanently on a war basis, and 

 after a while the rules of 

 ordinary competition will return. 

 The United Slates rubber in- 

 dustry will then find very 

 ;xpected quarters. We know little 

 The European rubber 



strong competition from 

 yet about the actual conditions in Europe, 

 industry has operated during the war under high pressure. 

 Rubber has generally come more into prominence, and the experi- 

 ence and knowledge of ihe war applied to modern manufacturing 



