The Growth of the American Economy: An Introduction to the Economic History of the United States

By Robert G. Albion; Harold F. Williamson | Go to book overview

CHAPTER 24
Foreign Trade and Commercial Policy Since 1860

Institutional Changes in the Organization of Foreign Trade

AMERICAN ORGANIZATION for the conduct of foreign trade continued, after 1850, to show gradual modification along lines already indicated in the preceding period of our development. The status of the old- fashioned overseas merchant as an independent middleman buying and selling goods at his own risk continued to shrink; he was superseded by trading houses that conducted business on a narrower and surer margin of profit by taking commissions for executing orders of either foreign or domestic buyers and sellers. In theory it is possible to distinguish between foreign trade houses that (1) act on a commission basis in filling foreign orders, (2) act as sellers of manufactured goods on the basis of specific arrangements with manufacturers, and (3) act on their own account like the old-style merchant house. In practice, however, all these functions are frequently performed by the same organization, with the emphasis shifting to the first two types of activity. In addition, the foreign trade house will frequently use its facilities to aid foreign business interests in disposing of their goods in the American market.

Alongside the commission houses and the agents, brokers, and banks operating in the highly organized markets for international staples, new institutional arrangements came into play with the growing export opportunities for American manufacture. This has been called the development of direct foreign trade, to distinguish it from the indirect methods of trading through the use of a variety of independent intermediaries. The reasons for this structural change are not far to seek. As long as the export trade of American industry was casual, intermittent, and geographically widely dispersed, it was best served by utilizing the established export firms with their specialized knowledge and equipment to care for the details of engaging shipping space and marine insurance, delivering the goods to the customer and arranging credit terms, and securing conformity with the many Government regulations at home and abroad. But in many cases such a purely passive policy did not appeal to manufacturing concerns, accustomed in the domestic market to aggressive policies of demand creation for their specialties. The export firms were frequently unsuited, if not hostile, to special sales efforts on behalf of branded products and trade names. Hence, when the volume

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