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either from shipments arriving from different plants or from seaboard stocks. In some instances in the chemical industry, export associations have agreements with international cartels comprising British, continental, and other foreign manufacturers. Certain territorial divisions are required as exclusive one to the other and a certain division of total available business is likewise required, the latter involving percentages in some joint market in contrast to no division in exclusive markets.

One of the main problems that arise in the effective operation of Webb-Pomerene associations is at the same time one of the major problems of a sales cartel; that is, the diversion of merchandise through channels of export outside of the centralized company or association. Independent dealers and brokers and sometimes large-scale consumers cause considerable disturbances in prices and sales by covert activity. Another disturbing factor is export speculation by producers, which may not only be detrimental to sustained effort of the cartel, but may at times cost much in the way of annoyance and reduction of prices in certain areas abroad. Fundamental misrepresentation, under-cover buying, and disregard of the obligation accepted in purchasing also bring about diversion unknown to the association members of domestic tonnage into export channels. There has consequently been some clamor to make it unlawful for any firm or individual to export or to sell for export any commodities of a Webb-Pomerene corporation through channels other than those controlled and maintained by such corporations. This would make it impossible, for example, for purchasers allegedly buying for export to attempt to move the material by steamship here by truck and resell in the domestic market.

An effective cartel or efficient conglomerate of economic power naturally always attempts to get as profitable a rate of return as possible on all business done, whether in the domestic or in the foreign market. Through vigorous organization and through cooperation with foreign cartels, an industry may have an essentially monopolistic hold on both the domestic market and the foreign market. Under such conditions with prices set in the respective markets in accordance with "conditions" and "what the traffic will bear,” differences in price have little meaning. Certainly they do not show competition or the absence of monopoly, That can only be determined by studying market organization and market conditions, commodity by commodity, a study which has not been made in this volume. Respectfully submitted.

THEODORE J. KREPS, Economic Adviser.

FOREWORD

The last 10 years have revolutionized thinking about prices. Both in theory and research, the simple “10 cents for an orange” concept of price has given way to a recognition that price is a complicated formula, and that “the law of single price” is limited to very small areas.

For many years, it has been recognized that export prices may suffer from domestic prices. Many countries have antidumping laws to prevent foreigners from selling in their markets too cheaply. In some cases legislation has also been directed against sale abroad at levels below those at which the products are made available to domestic consumers. Both sets of laws recognize that price differences may and do exist.

The present study is directed to the current practices of American enterprises selling both in the domestic and the foreign market. In total, 76 cases were carefully studied. Under an assurance of confidential treatment, the business executives involved were most cooperative in presenting the picture of their actual price practices. While the sample provides a sufficient cross section to illustrate the various policies which are to be found, it does not permit an exact statistical measurement of the importance of each attitude toward the foreign market.

Probably the most important conclusion is that the foreign and domestic markets are frequently not sufficiently unified to require identity of price. And, particularly in his foreign-trade efforts, the businessman appears to have wide scope for exercising his business judgment. It is of further interest to note the case where the businessman cannot clearly declare that his foreign business is as profitable as his domestic. But it is evidently extremely difficult to withdraw from a market as long as the future permits any hope. In many cases, the export business is not regularly tested against any tough profit-or-loss measure, and when it is, does not show satisfactory current results.

Above all, the study indicates the skill required for effective operation in foreign trade. All the problems of domestic selling are present, with certain added complications. It should perhaps be noted that in the face of these complications, our Government has given much less aid than that afforded by our competitors in foreign markets. If we wish to keep our export trade, new policies may be necessary.

WILLARD L. THORP.

XIII

PART I

A SAMPLE STUDY OF DIFFERENCES BETWEEN DOMESTIC AND EXPORT PRICING POLICY

OF UNITED STATES CORPORATIONS

Prepared by

MILTON GILBERT

in the

Bureau of Foreign and Domestic Commerce

DEPARTMENT OF COMMERCE

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