State of Exports

Before World War II, exports were thought of as just another source of income (less than 10% of the total) for U. S.

business. World War II has inflated the word's meaning, made it sound like a symbol of the next boom. Last week, Department of Commerce figures on U. S.

foreign trade for 1940--3 first quarter enabled businessmen to assess the realities.

Exports were way up: 51% ahead of the first quarter of 1939. But they were not up enough to lead the U. S. economy into a boom. Instead of booming, business activity (as measured by the Federal Reserve Board production index) backed & filled at the pre-war level, between 100 and 105% of the 1923-25 average. In certain industries, the war export market caused peak production, a real strain on capacity. But by & large, these were the industries that needed the stimulus least.

Capital goods* industries include the two prime U. S. participants in war export business. No. r war exporter is the aircraft industry; its first-quarter sales abroad were up 225% to $66,816,000. Its chief customers are England and France (TIME, May 7), which have ordered some 7,000 fighting planes since early 1939, would order many thousands more if quick delivery could be promised.

Next most important war baby is the machine-tool industry, whose numerous small plants were rushed nearly to capacity by foreign buyers even before World War II began. Its first-quarter exports amounted to $48,014,000, up 76% from the first quarter of 1939. Of this, the Allies are now accounting for about half, but Russia and Japan were still substantial buyers of about $10,000,000 for the quarter.

Other significant gains in capital goods: packaging machinery, especially for foods, destined for Latin America; trucks & busses up 47%; electrical equipment up 24%; farm implement exports up 20% to $16,690,000. But all such items fell miserably short of the ten-digit dollar totals needed to snap U. S. capital goods production out of its ten-year slump.

Mass-production industries are far from booming on war export business. Among them, biggest export gainer was steel products: exports up 104% to $44,889,000. But in April U. S. Steel's young, white-haired Ed Stettinius said that the corporation, which exports more than most of the industry, was sending some 13% of its output abroad, still had plenty of idle capacity.

Offsetting steel, auto exports to belligerent markets virtually collapsed, in neutral and non-European markets are suffering from exchange restrictions (as in Australia) or lack of buying power (as in Latin America). First-quarter exports fell to $20,594,000, from $29,982,000 in 1939.

Also facing a commercial dead end was the electrical refrigerator industry, its export volume stationary at around 27,000 units for the quarter. Pharmaceuticals were up 58% to $7,176,000, thanks mainly to Latin America, which, cut off from European drugmakers, took 40% of the U. S. industry's exports. But by & large the U. S.

mass-production industries, most of which depend on nonwar markets, have not been cushioned by flush export business against domestic recession.

Raw materials and semi-manufactures fared better, although among them, too, the biggest export gains were made by the groups needing foreign relief least. Far & away the No. 1 material exporter was the scrap, pig iron and other semi-finished steel groups, whose shipments were up 145% to $78,494,000. Other star performers -- copper, up 122% to $33,264,000; chemicals, up 145% to $21,257,000; aluminum materials, up 184% to $5,836,000 -- were all in fair shape domestically anyway. Disappointing was the increase in coal exports (up 35% to $10,725,000); the big Canadian and Latin American markets for British and German coal had not yet opened up to the U. S. Worst export performer of all was the oil industry, which for months has been accumulating record gasoline inventories (TIME, May 13).

Two curiosities of raw material exports were scrap tin and wood pulp, which the U. S. must buy abroad. Despite growing national concern over the lack of a domestic tin stockpile, U. S. exports of tin plate scrap were $19,872,000 for the quarter, up 361% from 1939. The quarter's exports of wood pulp, just before the outbreak of the Scandinavian war, jumped from 17,731 tons last year to 74,161 tons.

Crops are the U. S. exports which suffered most from the souring of world trade ten years ago. In the first quarter of 1940, only two crops showed major export improvement over 1939: soybeans and cotton. Soybeans, still a lusty infant, were up a phenomenal 1,176% at the expense of Manchukuo, went in large quantities to Canada and The Netherlands. Reason for cotton's recovery: Henry Wallace's 1.5-c- subsidy (TIME, July 31). But this subsidy was not paid after January; hence cotton exports fell from 1,027,000 bales in January to 747,000 bales in February, to 434,000 bales in March. The No. 1 market for U. S. cotton has been England, whose imports from the U. S. since August have averaged over 200,000 bales a month. But beginning in February British ships were allowed to carry home only 100,000 bales of U. S. cotton a month; this month, this quota is cut in half.

Most other U. S. crops have been war casualties. In the first five months of the war, U. S. farm exports (except cotton) to the Allies were only $55,994,000; as against $134,711,000 in the same period of the year before. Those to Germany dropped from $4,963,000 to $17,000. With the spread of war to the Low Countries, U. S. farmers (who are already losing $10,000,000 of business every month because of the war) stand to lose another $66,000,000 a year.

Major casualties of the first quarter were wheat and tobacco, whose exports dropped from 1939 respectively 70% to $4.946,000, 48% to -$15, 467, 000. Corn exports for the quarter ($8,847,000) showed little change. Henry Wallace has a $6,000.000 corn subsidy in the works now, designed to move about 20,000,000 bushels (mostly to England). But on April 1 the U. S. corn supply stood at 1,415,000,000 bushels, which is 500,000,000 bushels more than the 1929-33 average. Lard exports (around $5,000,000 quarterly) were stagnant; meat products gained 61% to $11,911,000. If Dutch bacon and dairy products follow Denmark's off the international market, U. S. packers may get a slight fillip. But U. S. grain farmers can look to no outlets in this hemisphere that will offset the loss of European consumption. For Canada and Latin America are farming countries too.

The Outlook. Real oomph in the quarter's export trade came in January, less in February. March's $352,000,000 total, though up $84,491,000 from March 1939, was down $16,000,000 from the December-January average. Moreover, daily average exports in March were lower than in February. This trend set in while Hitler's North Sea victims were still customers of the U. S. With Scandinavia, the U. S. has probably lost $44,328,000 a quarter in exports, with the Low Countries $45,628,000 more. If Italy, Spain and Japan should enter the war, $100,523,000 a quarter more might be lost.

Latin America spent a healthy $200,796,000 on U. S. goods for the first quarter, up around 50% over 1939. But if Latin America's European customers continue to disappear, she cannot go on buying $2,000,000 a day of U. S. goods. Thus the hopeful side of the U. S. export outlook reduced itself to Allied buying, which gained 73% to $515,586,000 in the first quarter. Further increases there would still be concentrated in airplanes, machine tools, other finished manufactures in which U. S. productive capacity is already strained.

* Transport planes produce income, are capital goods. Bombers and fighters, here classed with transports, have not yet been defined in economic lexicons.

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