Introduction to Foreign Trade (1951)

[Music] the story of foreign trade is a story that is most important to the vital problems of nationalism and intern ationalism countries striving for their own economic Advantage but wishing for Global understanding and peace for centuries foreign trade has been the subject of arguments articles books speeches foreign trade is the key to Prosperity free trade will bring on a Great Depression a high tariff policy will lead to war we must protect our standard of living from the competition of cheap foreign labor sometimes in this great rich country of ours it must seem we can build anything that we can grow anything that we have everything we feel powerful prosperous we feel we can trade with the whole world or not as we wish but is trade two-way trade important to our nation and to the entire world well let's look at the world here are the people of the earth they represent the work of the world and the markets of the world not very evenly distributed are they and here are the industrial areas where people produce Goods generally different Goods in different countries not evenly spread around the world here either and the resources used by these people in these industries they are unevenly distributed so as the World of Nations becomes more interdependent across the trade Lanes moved certain goods from the countries producing more than they can use to other countries whose people want and need these things and don't forget the so-called Invisibles the Investments and services such as insurance shipping and travel which also can be considered as exports and imports all right is foreign trade as simple as that well let's see let's take one example when one Factory exports tractors to Brazil in the office of the export manager perhaps we can see what makes foreign trade different from domestic trade the rather free unhampered trade within our borders in the morning mail is an order an order from a company in Brazil South America for tractors can we just ship the tractors right out as we might for a domestic order no there are government barriers to International Trade here's one the import license and import control of the Brazilian government let's see about these controls Brazil and many other nations control the foreign spending of their people if the people continually sent out more funds than came in their country might lose its monetary reserves so the government encourages home consumption and discourages use of certain foreign Goods the government May in effect put up a wall of controls to limit foreign spending through import licensing the government restricts the importing of certain items for example the Brazilian government issues a license for the import of tractors only when it considers tractors essential to its economy another form of control an indirect control is the Tariff a special tax often the government charges a tariff or Duty on imported goods this makes foreign Goods more expensive discouraging some imports and may also provide revenue for the government a third government control is exchange control the Brazilian government approved the use of dollars to pay for tractors and dollars earned by Brazilians must be sold to the government so import licensing tariffs and exchange control are three of the many ways a government limits its Imports here is the arrang for financing the sale of the tractors in this case a bank letter of credit by which the factory can be paid in dollars how does this International payment work you see the Brazilian buyer must pay in crusos to his bank for a letter of credit in dollars at the prevailing rate of exchange through the transfer of exchange by the Banks the United States Factory can be paid in dollars when the Importer in Brazil has only crusos to spend now what do we need to export these tractors besides the invoices and other documents specified in the shipping instructions there may have to be an export license by which our government May control the amount and destination of certain Goods that leave this country and an export declaration for the statistical records of our government and so we've seen some of the control controls by governments over the exports which leave the country and over the Imports which come into the country after the transportation financing and documents are coordinated the tractors move onto a train for the first stage of their Journey to the buyer in Brazil but selling United States Goods in another country is only half of the story in general the rest of the world can buy from us only to the extent that we buy something from them from all of them put together let's follow the tractors to Brazil and see about that Brazil is a large rich country about the size of the United States what does Brazil have to sell well they have many things but coffee is the most important remember the tractor deal crusos to the Brazilian bank letter of credit to the US payable in dollars in the US for the tractors well the export of coffee from Brazil to the US works just the other way around dollars to a US Bank letter of credit to Brazil which is turned into crusos to pay for the coffee this is an example of bilateral trade almost in effect trading tractors for coffee but it takes both sides of the story to make the whole thing work in multilateral trade more than two countries are involved in a simple example us tractors might go to Brazil the Brazilian coffee to England and English textiles to the US foreign exchange representing money goes the other way and the balance of trade is accomplished on a triangular base sometimes the balance is disrupted when governments impose trade restrictions as when certain industries request protection perhaps by a tariff wall protection from foreign competition what about the competition of foreign labor do us workers lose their jobs when goods are imported well these people in foreign lands are labor competition but they are also customers for example with this electric traveling crane British workers May produce competitive Goods but perhaps parts of the crane were made in the US other countries buy from the US more than onethird of our Machine Tools more than oneir of our bailed cotton and a good share of our milk wheat petroleum other countries buy these things from us making jobs for us workers in today's world there are many restrictions on foreign trade and many reasons for them but the unequal distribution of people industry and resources tends to make World Trade necessary raw material s goods and services move from Nation to Nation meeting demands and raising the standard of living of everyone from other countries come such things as asphalt for our roads fertilizer for our farm crops leather for our shoes we may regard this tractor as a product of the United States but parts of it came from at least half a dozen other countries investigate for yourself and see what you can find what would the tractor be without foreign trade without tin rubber manganese look around you you'll find many things that go to other countries that come from other countries yes look around you and you'll find the importance of foreign trade [Music]