What We Do to British Exports

by ALEX FAULKNER

1

EVER since the war ended, the British people have had it drummed into them that they must export or go bankrupt. They have recognized that, in order to survive, they must send out of the country a good part of the things they make, and that their most important export target is the dollar area. This area includes Canadawhich outranks the United States as a purchaser of British goods — and other parts of the Western Hemisphere, plus Japan and the Philippines, in addition to the United States. But the last has been accounting for about a third of Britain’s dollar-earning sales. It is therefore clear that upon success or failure in selling to the United States a very great deal depends.

Plodding along on no more meat than three medium-sized lamb chops or the equivalent a week, the British have done without most of the inducements that keep the American worker busily pursuing the symbolic bundle of hay.

To the land which has more automobiles than any other in the world they have sent their neat Hillman Minxes, their handy Austins, and their sporty MG’s. Austerely clothed themselves, they have dispensed their new woolens, their tweeds, and their decorative fabrics abroad. Their fine chinaware and cutlery, their linens, and Scotch whiskey (that might have braced them for the ordeal) have gone in exchange for the currency without which they cannot import materials and foodstuffs that make their economy tick.

These figures tell the story:-

Comparison with pre-war figures shows that Britain’s post-war exports to all parts of the world have more than trebled; so this record of achievement is roughly in line with what has been accomplished elsewhere. It is nonetheless encouraging.

During the first half of 1949, however, the direction was reversed: month by month the average of export sales to the United States declined. In Britain it is being anxiously asked whether this is a trend that will be kept up, or merely a temporary decline provoked by the American recession and the failure of British prices to keep pace with it.

To Englishmen there are two possible angles of approach. One is this: Fundamentally, is the United States prepared to accept the proposition that it is desirable to spend a small but effective portion of its national income on British goods? The other: Does Britain produce goods for which a much larger sale could be found in the United States if her marketing methods were improved?

The British realize that Americans may decide that they want to “keep out foreign goods.” Senators say they are receiving three or four times as many protests against “cut-rate foreign imports" as they were receiving last year. The Tariff Commission is receiving twice as many complaints as it did last fall from manufacturers who feel that they are suffering from foreign competition. Similar reactions have been felt at the Department of Commerce and in the Economic Coöperation Administration.

The Wall Street Journal takes a different view. There is no stouter defender of American interests than this paper, but it has no doubts that restriction of imports is undesirable. “We must buy abroad if we expect to sell abroad,” it said editorially recently. “The ECA merry-go-round should not and cannot last much longer. If increasing imports can do damage to employment, here, so can shrinking exports.”

Experience shows that as soon as any British article achieves some measure of success in the United States, pressure is applied to Congress and to the Tariff Commission by American interests which conceive themselves to be injured and which demand tariff protection.

A good recent example was the offer of an American manufacturer to buy up the American rights to a British invention for $1,000,000, with the object of preventing its introduction in the American market, where it would compete with his own product. The British manufacturer refused, because he is convinced that he can make more money by selling his device to American consumers.

In spite of these difficulties, a healthy measure of international trade is desirable. The sum being spent on British goods represents such a small part of the American national income that expenditures, even if they were doubled, would hardly upset the American budget. At the same time, exports are of sufficient importance to the American economy to make it seem unlikely that Americans will make it impossible for foreigners to buy them.

2

IN May, 1948, the British Government appointed Mr. Neville Blond as United Kingdom Trade Adviser in the United States and Canada. His task has been to search out fresh openings for British trade, by discovering what mistakes have been made in the past and by looking for opportunities to meet American requirements without treading on the toes of American domestic enterprises. In little more than a year nearly 5000 projects for speeding up the flow of British goods have been submitted to the authorities in London, and most of them have received approval.

For instance, a small British manufacturer may decide that it is essential for him to establish a stock of his wares on this side of the Atlantic in order to be able to fill orders as they come in, instead of being forced to put off buyers with the explanation that delivery will take several weeks. He may need a little money for promotion in the United States and for the improvement of his distributing organization. But he cannot get dollars for any of these undertakings without the approval of the British Treasury.

At this point the Trade Adviser recommends the project, and in exchange for his pounds the exporter receives an allocation of dollars, which he can put to work in the desired manner. As an example of how this sort of thing pays, there is the case of a sock maker who sold 28,000 dozen pairs in this country in 1947. Last year, aided by a dollar allocation which enabled him to build up his stock on this side of the Atlantic, he sold 110,000 dozen pairs.

At the other end of the scale are arrangements like the one made with the Cabot Company of Boston, which is now building a carbon black plant at Ellesmere Port on the Mersey River. The factory is the first to be installed in Europe under the ECA Investment Guarantee Program. It will have an annual output of 8000 tons, which is a quarter of Britain’s yearly carbon black requirements. At present the United States is the main source of her supplies of this product, and it has been estimated that by transferring some of the production to the United Kingdom, Britain will avoid the expenditure of something like $2,000,000 a year.

Speed is of the essence, and some of Mr. Blond’s records might serve as a model for businessmen who take a dim view of government efficiency. For instance, when it was decided that the sale of British books might be greatly increased by establishing in New York a British Book Center through which supplies could be furnished to bookshops all over the country, the whole scheme was put into effect in exactly five days, the only part played by the authorities being to make the necessary dollar exchange available.

Some twenty or thirty British publishers not already directly represented here are contributing to the enterprise, and warehouse stocks of their books are being built up. The New York shop of Batsford’s, the well-known London bookselling establishment, is the headquarters of the undertaking. Later it may be feasible to open other centers in important American cities. It is a remarkable fact that 14,686 new books and new editions were published in Britain last year, compared with only 9897 in the United States. In view of this much greater British output, which includes many technical works not available here, it is felt that there is room for a considerable expansion of British exports in this field. Last year their value exceeded $4,000,000 and it is hoped to double this figure.

In the case of books, import duties are less of a barrier than they are in other categories, but many British publishers cannot understand why Americans, with their passionate interest in the free interchange of ideas, do not follow the British example and make all books duty-free.

As a result of his work in the United States, Mr. Blond has a strong conviction that there are certain types of British goods which Americans are ready to buy in much larger quantities than they have ever bought before. He also believes that these goods should be brought to the attention of the American public in the best tradition of American salesmanship, making sure that they meet American requirements with regard to both style and quality, and seeing to it that the prices fit the American mood in a period of recession and careful shopping. This does not imply that British prices must be lower than American prices for comparable articles. It does mean that the unusual quality which is the strong point of many British products will be of no avail if the price is sky-high and, to the mind of the American shopper, unreasonable.

Few people not engaged in exporting and importing realize how the “snowballing of markups" works to the disadvantage of the exporter. It is a system of calculating middlemen’s percentages not on the factory price of goods, but on a total which also includes such charges as freight and duty.

Consider some of the difficulties. The factory price of a Ford car made in Detroit and now selling in New York for $1519.65 is $1005.48, or about two thirds of the retail price. The New York price of the Anglia, a Ford car made in England, is $1398, but it is doubtful whether the manufacturer receives as much as half of this sum, because in addition to the dealer’s profit and the handling costs, which also have to be met in the case of the American-made car, the British-made one has to bear the burden of freight charges and of import duty ($86.46). This helps to explain the declining sales of British cars, at a time when American-made cars are becoming more readily obtainable. The British ones do not stand a chance unless their price can be reduced very much below the prices of American popular models.

Fortunately for the British export trade, the United Kingdom has many products to offer the United States which do not have to compete with such mass-produced things as automobiles. But everywhere the markup is a difficult hurdle. Scotch whiskey, American consumption of which has, like the Index of Industrial Production of the Federal Reserve Board, been going down since the start of the recession, is landed in New York at about $16 for a case of twelve bottles, or approximately $1.33 a bottle. By the time the import duty, the Federal excise tax, the state tax, the importing agency’s fee, the wholesaler’s profit, and the retailer’s profit have all been paid, the price is nearly $70 a case, and about $5.75 a bottle.

One importer, Sir Robert Appleby, reported that a British wool damask for curtains which was landed in New York for $6 a yard sold in a leading department store for $18 a yard. The same store was selling a comparable American fabric, not greatly inferior in quality, for $5 a yard. Jack Straus, President of Macy’s, in a statement made when he returned from a trip to England not long ago, said that his shop was ordering fewer British goods because the prices were too high. He gave numerous instances of articles whose cost (before any retail profit) by the time they reached New York was as high as the selling price of similar articles obtained from American sources.

British exporters know they ought to bring their prices down, but present labor and other costs, and the disadvantages of the socialist Government’s bulk-buying of raw materials-for which at the moment British firms are in many instances paying much more than American firms in a position to take advantage of the decline in commodity prices — are among the factors which make this very difficult.

British exporters are also beginning to learn something about the complexities of the American marketing system. Philip D. Reed, Chairman of the International General Electric Company, summed them up very well when he said: “The American buyer expects to be sold goods. Unless the product, its price, its convenient availability, and the advertising behind it contribute to arouse interest and desire to buy, he just won’t play. Americans as individuals will not seek out and buy imported products which have not been sold to them simply because they realize the need to balance our external account.”

To the British exporter the highly developed American sales system is slightly terrifying, lie is bewildered by the elaborate planning and the careful timing that go into store buying, which calls for prompt delivery of any article ordered, followed by equally prompt replacements if it sells well. With the use to be made of every square inch of shelf and counter space decided upon in advance, and promotion arrangements, including advertising, worked out in the most careful detail, failure to keep step with the parade can make an exporter very unpopular. If he is late, his goods may not be accepted, and it is unlikely that he will be trusted again. If he has not built up a stock in the United States, it can be very difficult for him to do his part.

Although American jobbers make profits that are extravagantly high by European standards, they perform an important role in searching for outlets and keeping them well serviced. It is also recognized that, most American goods go through similar channels, and that there is very little discrimination against the foreign product (although there is often a slightly higher charge in view of the greater risks involved).

Sometimes the middleman can be eliminated by developing individual organizations, by working with importers who deal directly with retailers, or by undertaking to manufacture in this country, as the Guinness Stout people are now preparing to do.

All these are technical problems for the,exporter to tackle and solve if he can. lie may feel that the risks are too great to make the effort worth while, or he may feel that high taxation at home and all the austerities and bureaucracies of life in post-war socialist Britain render any profit that he may make worthless. Occasionally it is evident, however, that if there is sometimes very little profit to be gained from exports, there is at least the possibility of increasing production, and thereby reducing prices for the home market.

The response of a great many British manufacturers, and of the British people generally, to the Government’s repealed appeals for a great export effort has been on a high patriotic level. To date, the American authorities and many individual American businessmen have adopted an extremely helpful and friendly attitude towards this effort, and have given it all the sympathetic support in their power. Within a year it should become clear whether it is going to succeed, and whether hard work and sanity will prove their worth in this critical area of Anglo-American relations and of world prosperity.