FOREIGN AND DOMESTIC PRICES OF AMERICAN
PRODUCTS.

INTRODUCTION.

In view of the frequent assertion that exporters of American-made goods often sell them in foreign countries at lower prices than are obtained for similar goods at home, the Industrial Commission has endeavored to secure from the business interests of the United States a full and frank statement covering the efforts made to extend consumption of products in foreign markets. In sending out the schedule of questions a pledge was given that the answers should be treated as confidential, the name of the establishment concerned and the town in which it was located being withheld from publication. The commission particularly asked for exact statements as to the relative domestic and foreign prices. The following is a copy of the schedule of questions submitted:

1. Name of establishment, firm, or corporation.

2. Location of plant or of principal plants.

3. Is the establishment, firm, or corporation engaged in exporting to foreign countries goods produced in the United States?

4. If so, to what country or countries?

5. If so, to what aggregate value during your past business year?

6. What percentage of the total value of your manufactured product do your exports equal?

7. What class or classes of goods do you export?

8. Do you sell in foreign markets for a price less than that charged for exactly similar articles in the United States?

9. If so, please name leading specific articles so sold and state the price received therefor at home and abroad. (Name one or more leading foreign markets in which such goods were sold; give figures as of latest date in which sales were made abroad, and, if possible, corresponding figures for one year previous.)

Name of goods.

Date.

Domestic price.

Foreign price.

Foreign market.

10. If you sell goods for lower prices abroad, please give the reason.

11. What business policy or method, if any, would you suggest to secure for our home consumers equality of price with that charged in foreign markets by the same producers for the same goods?

12. What proportion of the entire output of the United States in your line of production is produced by your firm or corporation?

(Signed)
(Official position)

(Post-office address)

There are tabulated below 416 answers received by the Commission to the 2,000 copies of the foregoing schedule of questions which were sent out, this being the total number of answers bearing upon the question of foreign and domestic prices. Approximately 300 answers stated that the establishments replying did not have any export business, and these have accordingly been omitted. While the number replying did not cover the entire list to which schedules were sent, yet the answers are suggestive and important. Every material statement bearing upon the question of domestic and foreign prices included in each of the 416 answers has been compiled and is included in either the following statistical tables or in the accompanying text. The great majority of the answers indicated that prices are no lower abroad than they are for domestic consumers, and a considerable number indicate that foreign prices are higher.

CASH SALES AND LARGE PURCHASES.

In anwer to question 10, those who state that they sell for lower prices abroad give various reasons for lower prices, which may be classified as permanent reasons and temporary reasons. The permanent reasons to which are ascribed the greatest importance are those of cash payments and large purchases in the foreign trade, whereas the domestic trade is based on credits and small purchases. One large exporting establishment, dealing in railroad equipment and mining and contractors' supplies, states that

In past years it was very often found that American hardware and other lines of goods similar to it could be purchased cheaper abroad than in this country. However, this condition has changed materially, and to-day there is but little difference between domestic and export prices. The size of the order governs the price more than anything else. There are many reasons why American goods should be sold cheaper for export than for domestic use in certain classes of material, the principal one being that almost invariably American manufacturers have insisted upon cash in return for their foreign shipments, whereas in this country, when selling the trade, long credits are demanded and given.

Another exporting house, dealing partly in agricultural implements, writes:

So far as the agricultural implements industry is concerned, we do not know of a single instance where a manufacturer is selling his product at a lower price for foreign shipment, where terms of payment and conditions of sale are approximately the

same.

In harvesting machinery and grain thrashers, which are sold in this country direct to farmers by the manufacturers, either through branch houses or local agents, to whom commissions are paid, on terms ranging from one to three years, the prices are higher than when sold for foreign shipment. In the latter case sales are made in large bulk to responsible dealers, who pay cash or its equivalent; but the farmer in foreign countries pays much more than the American farmer, plus ocean and inland transportation and duty.

On all other classes of implements, sales in both cases being made to dealers, the basis of prices at factory is the same.

Prime cost, including unproductive labor, is found, and for domestic trade cost of selling and collecting is added, with desired profit, and the result is the price sold for in domestic trade f. o. b. at factory.

For exportation the same figure for prime cost is taken, and expenses of selling in foreign countries, plus transportation to seaboard and boxing, are added, with same profit plus above, 24 per cent to cover extra risk and cost of collection, the result forming the price f. o. b. vessel.

DRAWBACK AND INTERNAL-REVENUE LAWS.

Another reason for the permanently lower prices abroad, as stated by a number of establishments, is the drawback or rebate of the tariff on imported raw material of goods manufactured for export. This is particularly noticed in the sales of cut soles and sole leather, where the duty of 15 per cent being refunded in case of export trade permits a lower price in the foreign market. Also in canned goods, where a drawback is given on the tin plate of the cans in which the goods are exported, and

in wire rope, where the duty on copper wire is refunded. A somewhat similar distinction exists in the case of bottled beer, where an allowance is made from the internal-revenue duties in case of export goods.

The manufacturers of boots and shoes state, as a rule, that it is impossible for them, for various reasons, to secure the drawback, although the manufacturers of cut soles and sole leather are able to do so. Hence, the boot and shoe manufacturers quite generally recommend, as a means for increasing foreign trade, free trade in hides.

EFFECT OF TARIFF.

A number of establishments in answering question 11 recommend a reduction or a removal of the protective tariff, and a larger number oppose any change in the tariff. All answers to the schedules which include a reference to this subject are reproduced in the tables. The great majority of answers do not refer to the tariff in one way or the other, and it is natural to assume that those not referring to it are either indifferent or prefer to have it left undisturbed.

The following correspondence has been received from one of the establishments answering the schedule questions. In view of the attack made on the methods of a particular combination, the Industrial Commission addressed a letter to the Amalgamated Copper Company on the subject, to which the following reply was received: We inclose you herewith a marked copy of the Metal Market Report. We wish to call your attention to the fact that copper is selling in London at 14 cents, while here it is 17 cents. Yet the Copper Trust is exporting copper to London. Query: What price is the exported copper being sold at in London while they are maintaining a 17 cent price in this country?

We do not wish unnecessarily to trouble you with our correspondence, but to impress upon you this fact, that if copper was sold at its proper value the exports would largely increase, both of the raw material and manufactured goods, and consumers of this country would not be obliged to pay an exorbitant price, while the excess is sent out of the country and sold much lower. *

*

*

We feel quite sure if the duty is abolished on both copper ores and ingot copper we would never be obliged to pay the demands of one of the most powerful trusts that ever existed in this or any other country.

NEW YORK, Oct. 17, 1901.

DEAR SIR: Your letter of the 14th instant, addressed to the Amalgamated Copper Company, has been handed to us, as we are the selling agents for the copper produced by the various constituent companies of the Amalgamated Copper Company, and also of other copper companies.

We beg to inform you that we have sold during the past two years, and at present sell, copper of equal grades at the same price in this country and abroad; also that, to the best of our knowledge, there is no import duty in this country on either copper ore or refined copper.

Yours truly,

UNITED METALS SELLING Co.

FOREIGN TARIFF AND EXPENSES OF SHIPMENT.

A few establishments reply that they make lower prices in order to overcome the tariff of other countries. This applies particularly to Canada, instances of which will be noticed in the tables. Along with this reason for lower prices is given that of the expenses of shipment-insurance, freight, and extra boxing and packing preparatory for an ocean voyage. Occasionally it is stated that the prices for export are given f. o. b. vessel in New York, whereas prices for domestic goods are f. o. b. factory. In these ways a partial concession is occasionally made in order to promote the foreign trade. With this handicap in view, a few establishments recommend measures for securing reduction of duty in foreign countries, lower freights on ocean shipments, and consolidation of business establishments in order to assemble goods in larger quantities and secure more favorable ocean freight rates.

There is a curious contrast with the foregoing, in that a number of establishments give the expense of shipping as the very reason for getting higher prices from the foreign trade. The explanation of the contradiction is probably found in the fact,

as stated by quite a number of establishments, that the reason for lower prices abroad is foreign competition, and it would naturally be inferred that this is the real reason why, in certain cases where foreign competition is weak, no reductions are made on account of export expenses of shipping, whereas in other instances, where foreign competition is strong, such reductions are made. At any rate, it must be borne in mind that these remarks apply to but a very small proportion of the establishments which returned answers, since, as already stated, the great majority declare the prices are no lower abroad than at home.

On this subject an establishment, not included in the tables, writes:

We have given you all the information that we are in possession of at this writing in regard to other manufacturers selling to foreign countries at lower prices. You will notice we have stated we are told that they do. I know this, that personally in marking prices to merchants in Canada I have been obliged to quote a lower price than I would be willing to sell the goods for in this country in some cases. Of course I would not say but that I would sell them as close here if they would buy them the same way as merchants buy from there, that is, put up in bundles instead of boxed, but the merchants in foreign countries, outside of Canada, are not willing to buy goods that way. They wish everything boxed and labeled. The duties in Canada for our line of goods almost prohibit our selling anything over there.

NEW MARKETS.

Besides the foregoing permanent reasons for lower prices abroad, there are several establishments which assign what may be called occasional or temporary reasons, especially the need of securing new markets or of disposing of their surplus product. One of the exporting houses quoted above states that "in order to create a demand for American material low prices had to be made originally, in order to compete and establish a market. After this was accomplished prices could be raised as the demand had been created and people abroad educated to the advantages of American goods."

Another exporting firm, selling to all parts of the world except Europe, writes that: An experience of 25 years on the part of ourselves and our predecessors has indicated to us that the export trade and the home trade are very much alike in one respect. Whenever a new market is attacked competitively by a domestic manufacturer, he has to reduce his price until he has forced his way in. When he has his feet down, and has what he considers his fair share of the trade, he generally sells at the same prices as his competitors. So in the export trade the American manufacturer in fighting his way into the markets of the world finds it necessary, in order to introduce his goods, to offer advantages. Doubtless at times these advantages are greater than the prices made to the domestic buyer-just as the prices made in Texas may be lower than those made in Ohio because the manufacturer is trying to create a Texan trade. When the export trade is secured, however, there is no reason to believe that the American sells for export any more cheaply than he does for domestic trade. It is a fact, however, that in the majority of cases the manufacturers do not do their own introducing of their goods-they employ a merchant or "middleman" who has a footing in foreign countries. This merchant assumes all the risks, makes the foreign expenditures, and asks from the manufacturer a concession equivalent to what the manufacturer would spend himself should he attempt to introduce his goods without the merchant's intervention.

We are without experience as buyers for the domestic market as our purchases are exclusively for export, yet we know that we, in most cases, pay the same prices as domestic buyers of equal quantities.

Sometimes export prices are higher than the home prices where the goods have been thoroughly well introduced abroad and the foreign competition is less severe than domestic competition.

Another establishment, desiring the name of its product to be kept confidential, writes:

One reason why we get better prices abroad than we can at home is because our goods are of a better quality than what is made abroad, and another reason is that we do not use the foreign country as a dumping ground. We keep the supply a little short of the demand. We also have our own salesman abroad, speaking the language

of the trade, and a brand that we sell in one market we will not sell in another market, nor will we sell two customers in the same market the same brand. We sell in the money of the country by the measurements and weights of each country, and in every way endeavor to conform to the market in which we sell, and the customer knows in advance just what his goods will cost him at the door of his store. We have been at this business abroad for over thirty years, and when once established it is held without any trouble. If other American manufacturers would adopt our methods, we are sure they, one and all, would get better prices abroad than at home, if their product is exportable.

SURPLUS PRODUCT.

A few exporters indicate that prior to 1898 prices were lower abroad than at home, and that this condition was brought about in order to keep a stable market in this country, and, as one establishment puts it, "We want the foreign market to cut our price in, so as not to disturb the domestic market." "Naturally enough," says one correspondent, "when American mills or factories are short of orders and trade is at a low ebb, they sell in foreign markets at cheaper rates in order to clear out stock, or to keep their men employed and their works running. This is only a business proposition, and one which admits of no argument as to its advisability and business sense. Another firm which exports in part agricultural implements, states that this condition, while it formerly existed, has become nearly extinct, so far as the foreign trade in implements is concerned. The writer continues:

My investigations have shown that the dealers in foreign countries are not satisfied with the per cent of profit usually made by American dealers; there are many reasons for this, which I will not go into. It is not infrequent that dealers in foreign countries will add 100 per cent to the laid-down cost of an implement when selling to the farmers, and their terms of sale as a rule are not as liberal as in this country, so that the farmers of Europe and other countries pay much more than the farmers of this country for the same tool."

Other establishments state that prices are more stable abroad than at home, and consequently when they are high here they will be lower abroad, and that they continue to sell under such conditions in order to keep up their connections.

It should be noted that a number of establishments give a general answer that average prices at home and abroad are about the same, not indicating how this average is computed. An answer of this kind may be taken to mean either that the average prices of different goods at the same time are equal, in which case one line of goods may be sold at lower prices abroad while another line is sold at higher prices abroad. Examples will be found in the tables of circumstances of this kind. Or the answer may be taken to mean that the same goods are sold at lower prices abroad at one time and at higher prices abroad at another time. In such a case the inference might be drawn that lower prices are made to establish a trade or to sell a surplus without disturbing the domestic market, and that at later times, when the trade is established or when the domestic market recovers, then prices may be higher abroad than at home. Quite a number of answers hold that market conditions determine whether or not prices are lower or higher than at home, and that taking both markets at different times and on different lines of product the prices will average about the same.

Examples of each of the foregoing classes of answers will be found, in the words of the correspondents, in the following tables and accompanying text. The industries have been roughly grouped together; in some cases according to natural distinctions, and in others by a more arbitrary grouping, depending mainly upon the numbers of answers received from representatives of the several industries.

MACHINERY AND METAL PRODUCTS.

Establishment No. 15, which produces about 5 per cent of the American structural steel for buildings and bridges and sells about 1 per cent of its products abroad, at prices no lower than domestic prices, writes: "It is good policy to keep production