U.S. TRADE PROBLEMS.

Evening Star, Issue 18716, 19 August 1924, Page 4

U.S. TRADE PROBLEMS.

Evidkxcb is accumulating on the depression which is spreading in trade and industry in the United States. It appears to bo duo to over-production. An Australian financier passing through Auckland, en route from the Pacific Coast, states that the mass production which enabled United Slates manufacturers to supply the more urgent needs of other countries on the conclusion of the war is now proving to be a machine for which not nearly enough work can be provided. Straitened finance has compelled "ormer foreign purchasers to cut down their imports and follow a .policy of self-relianc6, which more stable international conditions enable them to pursue. Even were they desirous of continuing as customers of the United States, their quandary would be how to pay for their purchases. Many of them cannot pay In gold, and they are precluded from paying in kind by reason of the tariff walls which the United States has put up at the instigation of her manufacturers. The possession of huge reserves of gold is proving of doubtful benefit to America. Of (lie world’s monetary gold stock of about 9,000,000,000 dollars, the United States now bolds over 4,300,000,000 dollars, or nearly half. To a considerable extent this gold is lying unused. The flight of capital from Europe, partly in consequence of international political developments, has contributed to the anomalous position that gold has left those countries where it is most needed, if sound conditions are to be restored, and is becoming concentrated in a country where it is already in excess of requirements. It is slowly coming to be realised in the. United States that foreign trade is necessary for her well-being, although foreign indebtedness to her may be heavy. There is a waning of the belief so confidently and so widely held but a few months ago that in her own domestic consumers the United States had all the market she needed for her output of goods and raw materials, and that she could afford to remain indifferent almost indefinitely to decreased demand from foreign markets.

The result of immigration restriction in America, taking effect as it did wheft industry was booming, was to bring about extremely high wages. American labor is more highly paid, not only in nominal money rates, but in actual purchasing power, than in any country in the world. It has been established that 50 per cent. of America’s purchasing power is due to high wages. It is also largely duo to high labor costs that American manufacturers installed huge machinery plants. But now that work is not offering to keep those plants anything nearly fully occupied, the cost of production is increased, and there is a more restricted demand, not only from outside, hut also for home consumption, since the United' States purchasing power has decreased because of the steady spread of unemployment. Part time, ns low as 'two or three days a week, is reported in many industries, including such important ones as the textile, the automobile, and the boot and shoe industries. The whole trade position appears to be top heavy. Competent students of business conditions in the States seem to agree that many important industries are seriously overbuilt. The demand for their products is too small to enable them to operate efficiently. As appears to be iho genera! fule, the retailers are holding out most strongly against a price readjustment that would help to remedy the position by improving the demand. Tho New York correspondent of a 'well-known English financial paper puls the position thus; ‘‘ The most unsatisfactory feature of tho present trade situation is the level of retail prices. Manufa-cturers and wholesalers have submitted to inevitable price readjustments, but retailers have not done so. Wholesale prices for many kinds of finished goods are, in tho opinion of dispassionate judges, at reasonable levels. Retail prices, in spite of the slackening of trade, are disproportionately high, and consequently the public are limiting the amount of their purchases. The farmers, in particular, who represent so much of tho country’s purchasing power, are doing without many articles. Tho reduction of wholesale prices, because it finds no reflection in retail prices, has failed to bring about such an increase in the volume of business as would constitute a material offset to high production costs. Retailers protest that they cannot lower their prices because their overhead charges are too high. But manufacturers and wholesalers have had to make sacrifices—'there is much selling below cost on their part—and it seems inevitable that retailers, too, will have to make sacrifices before there can be a return of normal business activity. They seem to be depending upon a growing scarcity of goods to bring the consumer, as they say, to his senses. The consumer, however, shows no sign of weakening in his attitude.” And if unemployment persists in spreading continuance of this attitude will ho a matter in which the consumer will have no choice. Developments of the position in America should command considerable interest elsewhere.