Capital Comment

Legal brains in Washington are scratching their heads these days trying to figure out a way through which Germany will be able to buy American cotton and sell more of her goods in the United States. Working on a definite proposal of German cotton buyers, the legal lights are dusting off old law books and digging inside their pages in an effort to reach a verdict.

Apparently the whole thing is in the lap of the Treasury Department and it will probably be up to Henry Morgenthau Jr., Secretary of the Treasury, to make the final decision. Agricultural leaders, especially those from the cotton producing South, are extremely anxious over the outcome.

The story of all the Washington interest in cotton exports to Germany has its roots in the fact that in previous years the country bought about ten per cent of the cotton sold by the United States. Now, because this country refuses to buy foreign goods and in a great measure because of the boycott against German goods, Germany is unable to buy American cotton and pay for it. Her depleted financial status has caused Germany to impose severe restrictions on exchange so that if goods are sent to Germany the sellers may have to whistle for their money.

Germany’s critical plight was recently explained in Washington by some of that country’s leading cotton importers. This group of men came to Washington and made an offer to buy 500,000 bales of cotton if a way could be found to facilitate payment. It was pointed out to Washington officials that the whole exchange situation in Germany was so blocked that there was no possibility of getting dollar exchange.

To overcome this obstacle, the German cotton importers revealed that they had come in contact with a number of firms and individuals in the United States who would like to buy from Germany certain kinds of goods, including fertilizers and optical supplies.

Now Germany has a sort of a two-price system. Internally, she is on a registered mark basis. In the eyes of the world she is on a gold mark basis. The registered marks are cheaper than the gold marks, therefore the use of these registered marks within the country makes the German commodity price level higher than it is on a gold mark basis which is recognized in international trade and exchange.

The thing that has government officials in Washington worried is centered around the question of whether the purchase of goods in Germany with registered marks and the sale of these goods in the United States would constitute dumping. The fact that on a gold basis the registered marks are cheaper would make it possible for buyers to bring into the United States extremely cheap goods that might work injury to domestic businesses.

It has been suggested that the Import-Export Bank, headed by George N. Peek, might be used as a depository for the funds involved, might underwrite the risk and handle the exchange problem.

At present the proposal is before the Bureau of Customs for a decision. The fate of the plan depends upon the construction placed by the Bureau of Customs ### the anti-dumping clause of the ###ot-Hawley Tariff Act. In ###e quarters it is thought that ###roposal is barred by this act, ### the issuance and acceptance ### country of registered marks ### construed as arbitrary ###n for the purpose of ###rman goods here at less ###elling price in Germany.

###e others who point out that the United States cannot expect to carry on trade with Germany under current exchange disparity, which is due to this country’s abandonment of the gold standard and Germany’s adherence to it, although on a basis with modifications.

The cotton-growing South has lost much of its foreign market during the past two years, largely because of this country’s unwillingness to buy more foreign goods. As a result there is fear in the South that these markets will be lost forever. And so the Southern cotton interests are clamoring for action. The German proposal sounds good to them. In this proposal they see an opportunity of getting rid of 500,000 bales of cotton instead of the 200,000 they expect Germany to take under present exchange difficulties.

Germany’s revival of trade under the present exchange restrictions rests largely with the development of barter agreements which require the sanction of the German government. In most cases these agreements are purely private pacts between German and American exporters and provide that payments against certain American goods sold in Germany shall be placed in a special account in the Reichsbank from which specified German goods sold in the United States will be paid. For every $100 worth of goods sold by Germany to the United States, $100 worth of goods may be imported in Germany from the United States. And under the regulations governing her international transactions, Germany requires that when the barter agreement applies to imports which are not considered of prime necessity, the foreign exporter must agree to take a larger value of German goods.

From the American Chamber of Commerce in Berlin comes the report that this organization has set up a committee to assist American exporters in getting in touch with German exporters. This is because of the growing interest in barter arrangements. The United States Department of Commerce has a report from its official stationed in Berlin that “the many difficulties in the way of barter transactions make it likely that the number actually concluded will be relatively small.”