III.

PAID IN IMPORTS

25

called " Boarding Expenses "-values sent from one country to another, not to sell or invest, but to consume. This is not a small item. Italy is credited officially with £14,000,000, and Switzerland with £8,000,000 spent by sightseers. Americans are said to spend some £20,000,000 a year in foreign travel. How much of such boarding expenses comes to this country, it is impossible to say, but it must be very large. London is the centre of the world, where everybody who can afford it goes once in a lifetime at any rate. own Highland hotels get a considerable share. This category includes remittances sent home to families and schools in England by Civil Servants and military men abroad, furlough expenses, and the like; and under it, perhaps, fall professional earnings of Englishmen temporarily abroad, such as the gains of theatrical and concert companies on tour. These all represent imports against which there is no corresponding export. It must,

Our

1 At the risk of being tedious, I may repeat here that such boarding expenses involve sending of goods to pay for any balance there may be between countries. All the traveller knows, of course, is that he takes with him, say, circular notes, and, on presenting these, gets money of the country handed over to him. But, suppose that English tourists, in the course of a year, have cashed £100,000 of circular notes in Rome, and that Italian travellers have cashed £50,000 of their circular notes in London, the Italian and English bankers have simply honoured each other's promises. England is now in debt to Italy to the amount of £100,000, and Italy is in debt to England to the amount of £50,000. The two sets of promises are set against each other, but there remains a sum of value of £50,000 due to Italian bankers. How is this to be paid? If the London bankers send drafts on London, this only gives the Italian bankers a claim on gold in London-promises to pay gold there.

26

SMALLER ITEMS

СНАР.

however, be remembered that large sums are sent abroad by us to other countries for similar purposes, and, as Englishmen travel perhaps more than any other nation, the imports on this account may not very greatly overbalance the exports.

Smaller or more occasional items are:

(a) The price of old ships sold on the high seas. It is well known that we are continually selling our ships and replacing them with new ones, and these ships do not appear as exports.1

(b) Profits which accrue from capital that was neither lent nor invested abroad, but is yet owned. There are many businesses, or branches of businesses, which have grown up from small beginnings into dividend-paying concerns. Many Englishmen, again, own land in foreign countries which may have risen indefinitely in value owing to growth of population or the finding of minerals, etc.

(c) Gifts, Charities, and Subscriptions, such as the sums sent home from Irishmen in the United States.

Even a Bank of England note is, after all, only a promise to pay gold on presentation of the note at the Bank. Some time or other, unless London is to run deeper and deeper in debt to Italy, the accounts must be squared. But, as has been demonstrated, it is usually more convenient to send Bills of Exchange than gold—that is, to give claims on goods sent to Italy in the ordinary course of business-in which case the real payment of the balance is in goods.

1 It should be noted, in comparing exports of past years with present figures, that new ships, sold from this country, were not included among our exports before the year 1899, and are properly excluded in comparisons with years before that date.

III.

A PROBABLE BALANCE OF EXPORTS 27

All these go to swell the stream of imports against which there is no, or practically no, corresponding export. Together, they must run into many millions.

The summing up, then, is this:

Our Statistical Imports are £528,000,000. Our Statistical Exports are £349,000,000; to which fall to be added, at least, another £90,000,000 of Invisible Exports of shipping; making a total of £439,000,000. This leaves a Balance of Imports of £89,000,000. But it has been shown that what we should expect is from £60,000,000 to £90,000,000 of annual imports from capital lent and invested abroad, not balanced by any annual exports. All this is to leave out of account the many millions of imports which we receive as Bankers' and other Commissions, as Boarding Expenses, and from the smaller items just mentioned.

The probability, in fact, is that our real Balance of Trade is the other way about from what it is usually considered to be; that it is a Balance of Exports. The excess may be accounted for by the fact that a good deal of interest and profit never comes home, but is invested as capital in the countries where it is made.1

1 Compare the calculation of the French balance by Professor Gide: "As regards France, if, on the one hand, we put to her debit 4500 million francs of imports, 360 millions for carriage of that part of her merchandise which sails under a foreign flag, some hundreds of millions (say 500) for Frenchmen travelling abroad, or against French property held by foreigners—in all, 5400 million francs: and if, on the other hand, we put to her

28 PROBABLE BALANCE OF EXPORTS CH. III.

In all this, certainly, there is nothing to shake our faith in the deductive conclusion that, given the exceptions and disturbances noted above, Imports and Exports tend to balance each other.

credit 4000 million francs of exports, 1100 millions as interest on capital lent or invested abroad, 600 millions for expenses of foreigners living in France-in all 5770 million francs; we see that not only is the required equivalence restored, but that there should remain a considerable surplus to her credit.”—Principes d Economie Politique, 8th edition (1903), p. 283. See also Giffen's remarks on the Balance of other countries: Royal Statistical Society's Journal, March, 1899, p. 12.

CHAPTER IV.

THE EQUIVALENCE OF IMPORTS AND

EXPORTS.

The equivalence we should expect is equivalence simply between a country's total imports from, and its total exports to, the rest of the world. Imports call out a return current of exports, and exports of imports, through the rise or fall of (1) the foreign exchanges, (2) the freights. But payment is made in very roundabout ways; not necessarily in imports from the country to which exports are sent, but from any other country with which there are commercial relations.

WHAT we have found in the phenomena of imports and exports is, first and most important, the Trade Currents-a cross-current of exchangegoods sold to other countries calling out return goods from other countries, and vice versa. Omitting smaller services, this would tend to equivalence between imports and exports if the great item of sea carriage could be dispensed with, or if the carrying for all the world were done entirely by an independent maritime nation whose only outside industry it was. But, as it is, when our invisible services are added to our statistical exports, the two sides tend to equivalence.