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inois Agricultural Association 



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Numl)er 12 



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By George N. Peek, 



Special Adviser to the President on Foreign Trade 



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FOR a number of years I have been 

 concerned with the interests of 

 American agriculture, particularly in 

 foreign trade. The heart and center of 

 our entire export trade, by volume, con- 

 sists of agricultural products, and the 

 largest single class of income from ex- 

 port trade is that associated with the ex- 

 portation of agricultural products. More- 

 over, from the point of view of the ag- 

 gregate income derived by our agricul- 

 ture from the disposal of its products, a 

 foreign market has played a decisive part 

 for over three generations. 



Eighteen per cent of our agricultural 

 income during the 22 years from 1910 to 

 1932 came from exports. A trifle 

 over 5% of our industrial income 

 came from exports in this same pe- 

 riod. While certain branches of agri- 

 culture and industry are more affected 

 than others, clearly agriculture has a far 

 greater stake in our export markets than 

 industry. Industry, however, is depend- 

 ent on the existence of a profitable ag- 

 riculture for the sake of its own domestic 

 markets. It has been demonstrated dur- 

 ing recent months that, for a good many ■'- 

 sections of the United States, the return 

 of prosperity must come from the grass 

 roots up, rather than down from the 

 smoke of factory chimneys. However, 

 the interdependence of industry and ag- 

 riculture in our national economy now 

 is so generally recognized that I shall not 

 debate which came first, the hen or the 



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Two Distinct Duties 



Last March I accepted from the Presi- 

 dent the appointment of Special Adviser 



''" to him on foreign trade. About the same 

 time the Export-Import Banks were or- 



Mganized. These I shall discuss later. My 

 duties as Special Adviser were specified, 

 by Executive Order, along two distinct 

 lines. ■ ■•^^ ■ ' •- ■ ' ■■ :■ ■■.>■■ 



,.. First, I was authorized to coordinate 



and review available data with reference 



'to foreign trade, and second, to carry on 



negotiations with respect to specific 



'trade transactions with any group or 



V agency interested in obtaining assistance 



-from the Federal Government through 



.financial transactions, barter, or other 



forms of Government participation. I 



was directed to bring meritorious pro- 



posals before the proper governmental 

 agencies for appropriate action and to 

 keep the President advised concerning 

 the action taken. 



Had I known at that time that there 

 are more than 50 divisions, bureaus, or 

 departments of our Federal Government 

 dealing with foreign trade problems in 

 one way or another, probably I should 

 have hesitated, but after having agreed 

 to undertake it, I decided to find out if 

 I could what it was all about. 



I shall tell you very briefly what we 

 have found from our review of available 

 data and what we are doing to improve 

 conditions and to further foreign trade 

 activities. 



Our approach to the subject has been 

 the business approach. We have under- 

 taken to do just what any business execu- 

 tive would do if he were suddenly placed 

 in charge of a large and diversified busi- 

 ness, that is, to find out from the record 

 of the past what the situation was and 

 what improvement could be made. We 

 had, however, no adequate system of 

 bookkeeping for foreign trade. 



,;♦-. 



. Owe Us 24 Billion 



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In my two published letters to the 

 President, one dealing with our interna- 

 tional trade, and the other dealing/with 

 our international credits, certain conclu- 

 sions seem inescapable: 



As a nation we have shipped far more 

 goods than we have been paid for cur- 

 rently. We paid a considerable part of 

 the money cost of the war and contrib- 

 uted largely to the rehabilitation of 

 Europe after the war. The unpaid bal- 

 ance on these accounts at the end of 1933 

 was some $24,000,000,000. This unpaid 

 balance is represented mainly by long- 

 term and non-liquid obligations of for- 

 eigners to us and by our direct invest- 

 ments in foreign countries. 



Our practice of lending money abroad 

 imprudently and over-generously per- 

 mitted foreigners to build up from the 

 proceeds of these loans a large body of 

 short-term and highly liquid investments 

 in the United States. With the depression 

 the threat of their overnight withdrawal 

 and their actual withdrawal substantially 

 contributed to the demoralization of our 

 banking system and to the shattering of 

 our price levels. We thus made possible 



RECORD 



December, 1934 



Volume 12 



&EOBOE N. PEEK 



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our own depression by our own financial 

 policy from 1923 to 1929. 



The discounts and commissions alone 

 from all of this financing are reported 

 to have amounted to about $1,190,000,000 

 since 1914. 



A significant and sinister feature is 

 that the movement of capital almost ex- 

 ceeded and dominated the movement of 

 merchandise. The proportion of our dol- 

 lar settlements for investment transac- 

 tions has increased from 7.6% in 1919 

 to 41.6% in 1933. This means that as- 

 suming 100 represents the total dollar 

 settlements of all kinds of the United 

 States with the rest of the world, 7.6% 

 in 1919 was used in our investment trans- 

 actions, which increased to 41.6% in 

 1933. On the other hand, 70.7% was used 

 for commodity and service transactions 

 in 1919 and only 41.8% in 1933. These 



figures speak for themselves. , 



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Exchange Restrictions ; i' ;; 



- The details of the figures from which 

 these conclusions are drawn are covered 

 in my two letters to the President which, 

 with his permission, have been made pub- 

 lic and are available in pamphlet form 

 to any one who cares to send for them. 



Another broad conclusion to which 1 

 am led is that exchange restrictions im- 

 posed in the past few years by more than 

 35 nations have played a principal part 

 in clogging the wheels of international 

 trade. This means simply that, more or 

 less arbitrarily, these countries have pre- 

 vented the payment of debts, including 

 those of nationals owing on current com- 

 mercial transactions, by delaying or for- 

 bidding transfer of funds. Without dis- 

 cussion of the reasons given or the vary- 

 ing degrees of justification, the result is 

 that such countries are in effect using 



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