Letterstime: Ein Geleitzug

In the decades before WWI, the US was a net debtor nation. That is, imports consistently exceeded the value of exports with the difference being funded by debt instruments in the hands of foreign banks and nations. Britain held the greatest share of the outstanding US bonds and other debt instruments and their retirement enabled the Asquith government to stay out of the bond markets themselves for almost the entire first year of the war (See "Finances of Empire" on the Letterstime Site, Ein Geleitzug section). The US exports appear to have been dominated by commodities such as cotton, lumber, metals, and foodstuffs. Most of the finished goods that the US did export seemed to have gone to the nations in South America, who were themselves selling foodstuffs and other commodities to European markets to get the hard currency they used to buy US finished goods. Thus, the South American nations were competing with the US in commodity exporting but used some of that revenue to buy US finished goods that the US could not sell to Europe (for example, agricultural hardware).

The outbreak of war in August 1914 almost instantaneously altered the import-export balance of trade of the US just as it did the Belligerents. Essentially, all the exports of all the Belligerents dropped dramatically and their imports increased as much as access to external sources allowed. This caused increases in some US export commodities and the loss of traditional markets for certain other commodities. On an absolute scale, US export growth far exceeded export loss, as exemplified by the huge drop in cotton exports being overwhelmed by the massive increase in foodstuff exports. Armies consume far more food and forage in war than the same numbers of men and draft animals do in peace, yet at the same time the resources they represent in horses, men, and land are taken out of production. A farmer in a trench can not plow a battlefield with his rifle. First, a look at the overall by month:

EXPORTS AND IMPORTS BY MONTHS, SEPTEMBER 1, 1914 TO JUNE 30, 1915

----------------------- Exports --------------- Imports ----------------- Export Surplus

September -----156,052,333 ------------139,710,611--------------16,341,722

October ---------194,711,170 ------------138,080,520 ------------ 56,630,650

November-------205,878,333 ------------126,467,062------------- 79,411,271

December ------245,632,558 ------------114,656,645 ------------130,976,013

January----------267,879,313 ------------122,372,317-------------145,506,996

February --------299,805,869-------------125,123,391-------------174,682,478

March ------------299,009,563-------------158,040,716-------------140,969,347

April --------------294,470,109-------------160,576,106-------------133,894,093

May---------------273,768,093-------------142,284,851--------------131,483,242

June--------------268,601,599-------------157,746,140--------------110,855,459

As can be plainly seen, the US attained and maintained a balance of trade surplus in excess of $100 M per month! The next step is to examine the export commodities by class.

EXPORTS OF UNITED STATES
COMPARISON BY GROUPS OF THE NINE MONTH PERIODS
ENDING MAY 31, 1914 AND 1915

------------------------Nine Months --------------------Nine Months---------------Increase
-------------------Ending May 31, 1914 ---------Ending May 31, 1915

Group 1 -------------$6,283,953 -------------------- $34,421,595 ------------ $28,137,642
Munitions

Group 2 ------------ 16,291,624 --------------------- 62,360,423 -------------- 46,068,799
Material for
making
munitions

Group 3 ------------- 25,856,921--------------------147,702,807------------- 121,845,886
War Supplies

Group 4 -------------- 5,293,155 -------------------- 35,239,110 -------------- 29,945,955
Textile
manufactures

Group 5 ------------ 20,599,959 ------------------- 60,150,388 --------------- 47,550,429
Hides, leather
and footwear

Group 6 ----------- 218,390,743 ----------------- 627,417,302 ------------- 409,026,359
Foodstuffs

Group 7 ------------ 10,419,041 ------------------- 70,640,989 --------------- 60,221,948
Forage

Groups 1 - 7 ----- 303,035,596 --------------- 1,045,932,614 ------------- 742,897,018
Total

All other -------- 1,529,255,043 -------------- 1,146,942,879 ------------ [382,312,164]
Exports

Total Exports -- 1,832,290,639 -------------- 2,192,875,493 ------------ 360,584,854

Next, a look inside some of the export categories to see what the causative and contributory factors were:

Group 3 included:

- horses (250,000 versus 18,000 in same period a year earlier)
- mules (53,000 versus 4,000)
- automotive ($30 M versus $1 M)
- saddles & harness, tires, airplanes, wagons, oil, barbed wire, horseshoes, surgical materials

Group 6 included:

- breadstuffs ($431 M versus $107 M)
- meat products ($160 M versus $106 M)
- dairy products ($11 M versus $2 M)
- sugar ($21 M versus $1 M) (Germany was a major sugar exporter to Britain)

Export items that decreased:

- Cotton [$216 M]
- Iron & steel [$17 M]
- Agricultural implements [$20M]
- Wood products [$41M]
- copper [$36 M]
- naval stores, tobacco, phosphate rock, mineral oils, electrical machinery

Not only were the Central Powers lost as markets for US exporters of cotton and copper, but many South American countries had used sales to the Central Powers to generate the hard currency they used to buy US products. That seems to be why steel, agricultural implements, and machinery fell so much.

Imports from Germany up to March 1, 1915 (before the Order in Council) were $76 M, down from $127 M for the same eight month period a year earlier. Still ~60%, but would quickly fall off after March 1915, dropping to a British estimate of just 8% by September 1915.

One thing that should not be missed in the above data is that the US was now selling significant (and increasing) quantities of finished goods to Europe. Cars, trucks, airplanes, munitions, saddles, boots, wagons, horseshoes, barbed wire, and surgical instruments are all finished goods that the US previously could not sell in bulk to European markets. The data thus demonstrates how the war greatly increased the demand even as it disrupted the factors of production in Europe. A factory worker in a trench cannot make a car with a rifle. Nonetheless, over two-thirds of the export increases were in commodities such as food, unworked leather, forage, and zinc. (Germany and Belgium were both major pre-war exporters of zinc, so zinc exports rose from $16 M to $62 M.)

If the US and South American Neutrals had been able to maintain just pre-war export levels to the Central Powers, then the above table suggests that the US could have more than doubled the historical rise in exports in the first nine months of the war ($361 M actual net increase despite drops of $382 M). Almost none of the bulk exports of the US to Germany were on the pre-war list of contraband, especially not cotton, copper, and food - the largest exports by far.

by Jim