THE INDIA RUBBER WORLD 



283 



very well its own market against foreign competition. But the 

 increase in wages has also changed the competitive position of 

 Europe as a whole in its relation to the non-European markets. 

 The European rubber industry has done an enormous non- 

 European trade in former years, based principally upon its ability 

 to sell at low cost. The European manufacturer had only little 

 in his favor in the purchase of raw materials, his chances to sell 

 cheaply, practically speaking, rested entirely on his possibility of 

 getting his work done at a low wage scale. On the strength of 

 the cheaper European labor the European rubber manufacturer, 

 therefore, was enabled to undersell his American competitor prac- 

 tically wherever they met in the world. 



Of course, while European wages have risen, there has also 

 taken place a considerable increase in the wages paid by our 

 rubber manufacturers. The question now is: Have these Ameri- 

 can wage increases outdistanced the European and have they 

 reestablished in this manner the same difference in the cost of 

 labor in favor of the European rubber manufacturer that existed 

 before the war? .American wages in the rubber industry have 

 grown exactly 100 per cent since the summer of 1914, But the 

 chances are that the American wage movement has now reached 

 its highest peak. When the end of the movement has been reached 

 it will most probably show that American wages are still higher 

 than the European wage scale but that the European scale is 

 approaching more closely our own than was the case before the 

 war. Our handicap would no more, therefore, be as extensive as 

 it has been in former years and we might ver\- well aspire to 

 iivercomc it by making reductions in our overhead expense, a pro- 

 i idure in which we have acquired much experience. 



OVERHEAD EXPENSES. 



Overhead expenses in the rubber industr\' are comparatively 

 high. Tiicy comprise approximately 25 per cent of the sales price 

 of the ready product at the factory door. Like all other forms 

 of manufacturing expenditure they have grown considerably 

 during the last year in this country but they have still grown 

 more rapidly in Europe. In comparison with the heavy war 

 expenditures of the European countries ours have been small. 

 True, we have lent heavily to our associates in the war but we 

 must assume that these debts will be repaid one day. We also 

 have followed the very wise procedure of clearing up a great mass 

 of expenses by the medium of immediate taxation that will relieve 

 our industry from further heavj- increases in this respect after 

 once ihe present period of high taxation has ended. But while 

 we seem, therefore, to be well placed as far as direct overhead 

 expenses are concerned, it is doubtful whether we can claim the 

 same as regards indirect overhead expenditure. It is up to every 

 rubber factory to correct a faulty expense system and to make 

 economies of one or the other sort. It will in doing so certainly 

 reduce the cost of production and will keep its goods competitive 

 in the international market. But the individual rubber manu- 

 facturer has no influence upon the more dangerous form of over- 

 head expenses which derive their origin from national sources. 

 These overhead expenditures, as railroad freights, shipping 

 freights, and others, have to be met by each manufacturer as an 

 unalterable quantity. They affect his business as much as that 

 of his competitor, of course, but their growth or decline upon 

 a national basis is of considerable influence upon the standing of 

 a whole industry when entering international competition. Of 

 this national overhead the rubber industry of the United States 

 has had to carry lately a more than usual burden which has been 

 increased still further by a rather pernicious system of inten- 

 tional restraint of production. 



It is this form of expense increase which is at present the 

 most serious charge upon our national cost of production and 

 ■which forms a great danger to the competitive position of our 

 rubber industry. We have, therefore, so far established the 

 following facts : 



The purchase price of a French or English tire, if bought with 

 American monev, has declined. 



The purchase price of an American tire, if bought with French 

 or English money, has increased. 



The price of an American tire in Europe, therefore, has reached 

 at the present moment a level that renders it incompetitive, while 

 a French or English tire can be sold much cheaper in the United 

 States than an equivalent American tire. 



In the language of the economist: a point has been reached 

 where the export of rubber products becomes unprofitable in 

 our market, as its purchasing value for other goods has declined. 

 But this adverse condition must pass very soon. French and 

 English exchanges have declined not only in the direction of the 

 United States. They have also shown a considerable decline in other 

 directions. In these markets the purchasing value of French and 

 English money is lower than that of the dollar which has 

 remained approximately at par. This devolpment has already 

 resulted in a purchasing movement in favor of the two countries 

 for such merchandize as is manufactured exclusively inside 

 England or France. But the lower exchange operates in this 

 instance very heavily against the selling country, as it reduces 

 materially the avaliable funds for exchange purchases. The raw 

 materials bought by either France or England in exchange for 

 industrial products cost these two countries not the price of the 

 normal exchange, but the additional cost caused by loss of 

 exchange. 



THE REMEDY. 



To meet this situation these countries will have to raise their 

 prices to a point where it becomes profitable to them to sell their 

 merchandise in exchange of the foreign product. This step has 

 been taken already in many instances as indicated by the rapid 

 rise in the cost of many raw materials and manufactures which 

 wejmport ourselves from the countries in question. The time 

 has come, then, when the real test of comparative competitive 

 ability applies. To which point will England have to raise its tire 

 prices so as to meet the demands of labor, cost of materials, 

 overhead, and essential manufacturing profit? Will this bring ■ 

 the cost of its tires to a level considerably higher than that at 

 which the same tire can be supplied by the United States? The 

 chances are that the weight of the heavy national overhead ex- 

 penses of Europe and the enormous loss in purchasing power 

 caused by the devaluation of its money will favor the United 

 States producer. 



This answers also the present problem. We can not expect 

 European exchange to rectify itself as rapidly as has been the case 

 after other wars. The burden is too great to be borne easily. But 

 a stabilization will be attempted that will remove the principal 

 disadvantage of the present situation— that of the permanent 

 changes in the market quotation of foreign moneys and the 

 general disorganization of all international trading resulting from 

 it. If we know the franc will buy 10 cents worth of our mer- 

 chandise or of raw materials of other countries, we can sell and 

 buy upon this basis. After a while all trading will readjust itself 

 accordingly and competition will not depend upon the varj-ing 

 chances of the money situation but upon the ability to produce at 

 a competitive price. There will be no handicap and no favor. 

 Under such conditions the American rubber industry should be 

 well able to prosper in its foreign dealings. 



AN ITALO-AMERICAN ASSOCIATION FORMED. 



.\ Uiiione Italo-Americaua has been formed recently in Rome. 

 It is intended as a center for all ltalo-.\merican committees and 

 has several sections — economic, intellectual, art, legislative, pub- 

 licity. It is supported by financial establishments and business 

 men who wish to foster the commercial and economic relations 

 between the two countries, and seek from the United States in 

 some degree the backing which Italian industries and commerce 

 received from Germany before the war. 



The Association is housed in the Palazzo Salviati on the Corso 

 Umberto, and has set up an information office for American busi- 

 ness men, a library of .American industries, and a general meeting 

 place for business and social purposes. 



