Statistics of the Balance of Trade.
Coming to the actual study of the statistics of the balance of trade, we may note that the chief of the items already enumerated as represented by the balance of trade are generally (1) interest on loans and profits on investments; (2) capital; (3) sums transmitted on account of individuals; (4) payment for services rendered.
That interest on loans and profits on investments may be a large item in a nation's account will be generally understood, and we all know that some nations are always borrowing and others lending. It may not at first, however, be realised how important the third item may be. In the report for the year 1891 on the foreign trade of Italy it was estimated that foreign travellers brought at least £21,000,000 into the country, £7,000,000 of this being due to American citizens alone; while Mr. C. P. Austin, Chief of the Bureau of Statistics, United States, estimates the expenses of American tourists abroad at from £15,000,000 to £20,000,000 over the expenses in America of foreign tourists. Again, it is estimated that in France the general travelling public, and the winter residents in the south, spend annually about £15,000,000. The fourth item, that of payment for services rendered, is particularly large, as we shall see presently, in the case of the United Kingdom on account of the services rendered by British shipping.
In considering the balance of trade it is well to remember that unless a nation is making payments abroad it is the normal state of things for the imports to be larger than the exports. If goods are exported they sell for a price greater than their price in the exporting country by the expenses of shipment, including insurance and other charges. The goods bought abroad are generally entered in the imports at a value including their cost, insurance, freight, &c. The increased value is due mainly to the services of shipping, and if foreign shipping be employed the increase in value for the most part goes to the carrying nation. But most nations employ, more or less, their own shipping, and so appropriate to themselves some of their extra value. In some cases, as in that of the United States, the statistics of imports, instead of giving their values as landed, give the values of the goods when shipped abroad, and so do not exhibit the increase in value. But even with a number of such exceptions it is found that when the total imports of all the chief
countries of the world are added together they exceed the total exports by a sum in the neighbourhood of £250,000,000. This, apart from inaccuracies in the statistics, represents the value added by shipping and allied services, and the United Kingdom, by her great mercantile fleet and commercial services, must secure nearly one-half of this added value.
Again, it should be carefully borne in mind that it does not in the least follow that a country is prosperous because it has an excess of exports, or the reverse of prosperous because it has an excess of imports. An excess of exports may, it is true, be due to great wealth and an increase in the foreign investments of its citizens, but it may be due to the country having to pay interest on loans contracted in the past, or to the fact that much of its industry is exploited with foreign capital and its profits have to be sent abroad. An excess of imports, again, may be due to poverty of native capital, to borrowing, or to the withdrawing of foreign investments, and the living of the nation on its capital, but it may also be due, in whole or in part, to the receipt of interest on loans and profit on capital it has advanced, or it may be due to payment for services rendered. Thus neither an excess of imports nor an excess of exports can be considered in itself as being favourable or unfavourable.
Also observe there is no necessary relation between the magnitude of the balance of trade and the volume of trade. The balance of trade may be depressed (i.e., smaller than at some time previous and some time afterwards) at a time when trade is exceptionally brisk, and the balance of trade may be inflated when trade is exceptionally slack.
Once more I may point out that there is no necessity for gold to flow out of a country when the balance of trade is exceptionally high, or to flow in when the balance is exceptionally low. In fact, gold may flow in with other goods, and out with other goods, in discharging for the nation the obligations of the moment. A very cursory glance at figs. 1–4 will show that the balance of imports and exports of gold bears no correspondence to that of general merchandise.
One other feature strikes us at once on contemplating these figures, and that is the great fluctuations. The line as a whole rises, for instance, in the case of the United Kingdom, and falls in the cases of the United States and New Zealand. The rise or fall, however, is on the average wave-like. There are a few years for which the line is higher than for neighbouring years; then after a depression for a number of years the same thing happens again. But this, again, does not come about uniformly: there are irregular changes from year to year, though these changes are generally not comparable with the difference between the
highest of a maximum period and the lowest of either of the adjoining minimum periods. These maximum and minimum periods are due to the movements of capital, but we should be careful not to exaggerate their importance. Investments may often be diverted either from foreign trade to home trade, or vice versâ, with advantage, and any such considerable movement makes a great change in the balance of trade in one direction or the other. Although such great importance is usually attached to the value of the exports, it is true that the very prosperity of a nation, giving full employment to its capital, may be such as to diminish for a period its exports, either absolutely or relatively to the imports, by leaving it little or no surplus capital to be invested abroad; and a flight of capital abroad, increasing the exports, may be due to want of opportunity at home. The former seems recently to have been the condition of both England and Germany, which, during a period of almost unprecedented prosperity, increased their imports far more rapidly than their exports. That a great growth of the imports is consistent with great national prosperity is well illustrated by a table issued by the Board of Trade, showing that whereas during the years 1893–99 the value of manufactured and partly manufactured goods imported into the United Kingdom increased from £98,000,000 to £140,000,000, the percentage of members of trade-unions unemployed diminished steadily from 7.5 to 2.4—i.e., to less than one-third of the former proportion. On the other hand, it was in 1886, when the exports came nearer in value to the imports than they had done for twelve years, that the acute commercial depression set in.