Export Prices and Export Cartels (Webb-Pomerene Associations)

By Milton Gilbert; Paul D. Dickens | Go to book overview

DIRECT FOREIGN INVESTMENTS IN AMERICAN INDUSTRY, 1937

INTRODUCTORY

Cartels, such as are common in Europe, are not a feature of industrial organization in the United States. The antitrust laws have prevented that. However, there has been nothing to prevent cartels from obtaining a share of the American market by establishing branches or subsidiaries in this country. The study, the results of which are here presented, has shown that the foreign cartels as such have rarely established branches or subsidiaries in the United States. Several of the larger members of such cartels have entered this market by those means and do exert an influence in that manner. The extent of that influence, as shown by the value and character of foreign investments in this country, is analyzed in this report.

Foreign investments in the United States at the end of 1937 aggregated $7,398,000,000, as shown in table I. The short-term investments, which totaled $1,920,000,000, took the form largely of deposits in United States banks. Direct investments amounted to $1,883,000,000 followed closely in size by investments in common stocks at $1,850,- 000,000. Foreign holdings of United States preferred stocks and bonds and other investments were much smaller.

Deposits of foreign funds in United States banks are extremely volatile, flowing freely and rapidly into and out of the country as influenced by political and economic rumors and developments in this and in foreign countries. Investments in United States common and preferred stocks and bonds, particularly the first, are also subject to considerable fluctuations in value. These fluctuations arise from the volume of purchases and sales, which are affected by political and economic conditions, like deposits of foreign short-term funds, although to a somewhat lesser degree. In addition, fluctuations arise from the considerable changes in the average market prices of American common stocks that frequently occur. The so-called "other investments" are composed of estates, trust funds, holdings of real estate and real-estate mortgages, and other miscellaneous items. These are not highly liquid and show relatively little change from year to year. The same is true of "direct investments."

TABLE I.--Estimate of Foreign Investments in the United States, End of 1937 Type of investment
Type of investment
Long-term investments: Estimated Value
Direct investments (book value)1 $1,883,000,000
Common stocks (market value)2 1,850,000,000
Preffered stocks (par value)2 430,000,000
Bonds (par value) 565,000,000
Other investments 750,000,000
Total long-term 5,478,000,000
Short-term investments 1,920,000,000
Grand total 7,398,000,000
1 Revised.
2 The Finance Division, Bureau of Foreign and Domestic Commerce, is making an inten-
sive study of these investments; the results of this study should be available during the
summer of 1940.

-99-

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