cornered exchange. The extensive system of English banks throughout the world and the large commercial interests of English houses in every large port in the world have given a ready demand for sterling exchange in all countries. "Dollar exchange," or exchange sold on American banks, has become more common as a result of the war. Branches of American banks are now to be found in many parts of the world, and the great demand for American goods has given rise to increased use of "dollar exchange."

The Edge Act and the Webb-Pomerene Act.-Credits for commercial purposes in the United States are seldom made for more than ninety days. Credits in South America are often made for a year, and in the devastated regions of Europe payments for goods are made in securities that run for a term of years. Under the Federal Reserve Act and state banking acts,. the American exporter could not accept such payments, as they could not be sold to bankers and he could not carry them himself, as it would tie up his operating capital. Now the Edge Act permits international banks, organized in accordance with its provisions, to deal in just this kind of securities. An exporter of American goods can now sell his goods and receive in payment a note due in one year. This note he can take to an Edge law bank and receive his money within two weeks.

The Edge Act is designed to aid in financing the foreign trade of the United States; so the Webb-Pomerene Act seeks to put American exporters on a par with foreign exporters. In seeking foreign trade the Webb-Pomerene Act permits American exporters to combine. Though the

Sherman Act prohibits domestic combinations in restraint of trade, the Webb-Pomerene Act authorizes combinations of exporters. This is necessary if the United States is to have her share in the foreign markets. Foreign competitors of American trading companies have formed combinations for mutual benefit; this is especially true of the Germans.

There are two ways in which exporters may organize to take advantage of the opportunities afforded by the WebbPomerene Act.

I.

1. Competing manufacturers may form stock companies to handle their foreign business. All matters relating to their foreign trade, including sales, credits, and advertising, are managed by these stock companies.

2. Manufacturers and exporters may form associations for the purpose of agreeing upon a foreign policy. The object of these associations is to avoid competition among themselves and offer effective competition to foreign manufacturers and exporters.

Summary. Foreign trade is similar to domestic trade in that each party to an exchange may benefit. The foreign trade of the United States is large, but not as compared to our domestic trade. A favorable balance of trade is not necessarily good for a country. International debts are usually paid by bills of exchange. Exchange on London is called sterling exchange and is used in settling debts owed in various parts of the world. The Edge Act makes it possible for American exporters to grant longtime credits and has resulted in the increased use of dollar exchange. The Webb-Pomerene Act permits American

companies to form associations through which they may co-operate for the increase of foreign trade.

TOPICS FOR DISCUSSION, DEBATE, AND SPECIAL REPORTS I. Is foreign trade or domestic trade more beneficial to a country? Some say that there is only one profit in foreign trade and two in domestic trade. What do you think?

2.

Would a favorable balance of trade be good for Germany?

For England? Why?

3. Find from the financial column of a newspaper the present quotations of an English pound, an Italian lira, a French franc. Are these quotations normal? Explain the causes for any abnormal rates.

4.

5.

With what foreign nations does your city have trade relations?
What are the leading exports and imports?

Do you look with favor on the Webb-Pomerene Act? Why not
permit like combinations in the domestic market?

CHAPTER XXII

RESTRICTIONS ON INTERNATIONAL TRADE

Tariffs.-Tariffs are duties or taxes on imports. Duties on imports are of three kinds: (1) Tariffs for revenue only, (2) tariffs primarily for revenue but with incidental protection, (3) protective tariffs.

A tariff for revenue only may be levied on goods produced outside the country and with which home products do not come in competition. An import duty on tea or coffee would be an example, or a tariff might be for revenue only if collected upon imported articles provided a similar tax be placed upon goods of the same kind produced within the country. For example, a tariff of two cents an ounce might be collected at the port on imported tobacco and an internal revenue tax of the same amount be levied upon domestic tobacco.

A tariff which gives slight protection to the domestic producer but is chiefly for revenue is known as a tariff for revenue with incidental protection. For example, a tariff of 10 per cent on the value of wool imported into this country would produce a large revenue and give slight protection.

A protective tariff is chiefly designed to protect American products from foreign competition. To do this the tariff must be high enough to raise the price of the imported article to the American consumer.