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ganized subsidiaries and built large plants in this country. One of those plants is the largest distillery in the United States with a capacity of 100,000 gallons a day." Two of the foreign-owned corporations, with the affiliated companies, are among the first four largest companies distilling and distributing whiskies and other alcoholic beverages in the United States. According to data supplied by the Federal Alcohol Administration, the production of all foreigncontrolled companies was between 35 and 40 percent of the total whisky production of the United States.

The impact of foreign control on United States production cannot be measured on a purely quantitative basis. Occasionally one of these companies is one of two or three makers in the United States of some specialized product which has an important place in some complicated machine or process. It, therefore, acquires a significance far surpassing the value of the part when compared with the value of the finished machine. Some of these foreign-controlled enterprises manufacture articles that are particularly desired by immigrants from a foreign country or area. The significance of the latter enterprises is more sentimental than practical.

CONCENTRATION OF ASSETS AND INVESTMENT

A special analysis was made of data relating to 651 foreign-controlled United States companies, excluding insurance companies, in order to determine the technical investment and financial characteristics. The foreign investment in these companies amounted to $1,347,000,000, or 88 percent of the total foreign direct investments in the United States, excluding the investments in insurance companies. These 651 companies had total assets, at the end of 1937, of $2,586,000,000. Among these, 37 concerns, or 5.6 percent, had assets in excess of $10,000,000-their total assets comprising about 64 percent of the assets of the entire group.12

12

This degree of concentration followed quite closely the pattern of United States industry in general. The manufacturing, transportation, petroleum, finance, and trading industries were represented in the group of larger companies. At least one was the result of a merger near the turn of the last century, others resulted from the rapid growth of industries, such as the production of rayon yarn, where patent control was important, while still others had grown to unusual size just as other domestic units in the same industry had during the same period.

The total capitalization of the 651 companies amounted to $1,911,000,000, and the total common stock to $893,000,000. Sixty-three percent of the capitalization 13 and 81 percent of the common stock of those companies was owned in foreign countries. In other words control was held through the ownership of the common stock while United States capital was associated in the enterprises to a greater degree through the ownership of preferred stocks and bonds than of common stock. The total foreign investment in the 37 companies with assets of over $10,000,000 amounted to $985,000,000, or 73 per

11 Hearings before the Temporary National Economic Committee, Part 6, Liquor Industry, p. 2537. 12 Most of the larger foreign-controlled units were affiliated with foreign corporations which were in their own countries considered among the bigger organizations.

13 Capitalization included common and preferred stock, surplus or deficit, and bonds but excluded advances and intercompany accounts and other current liabilities.

cent of the investment in the 651 companies, and 64 percent of the total foreign direct investments in the United States, excluding the insurance companies.

TABLE VI.-Financial structure of foreign direct investments1 in the United States, by industrial groups and by Geographic areas, end of 1937

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1 Covering 651 companies and 88 percent of the total foreign direct investments in the United States.

The financial structure of foreign direct investments in the United States in 1937 differed greatly from that of United States corporations generally. Over 53 percent of the foreign interest took the form of common stock. An additional 16 percent was surplus, while preferred stocks, bonds, and advances and intercompany accounts each comprised close to 10 percent. On the average, corporate structures in the United States in 1937 were about as follows: common, 25 percent; surplus, 15 percent; preferred stocks, 6 percent; bonds, notes, and mortgages, 20 percent; and accounts payable and other liabilities the remainder, or 34 percent.14

Such a financial structure cannot be considered unusual in a group of companies such as these; that is, companies that are controlled by other companies rather than by individuals. It is not greatly dif ferent from the financial structure of United States direct investments in foreign countries. The distribution in the latter case in 1936 was common stock, 47.1 percent; surplus, 13.6 percent; preferred stock, 7 percent; bonds, 18.2 percent; and advances and intercompany accounts, 14.1 percent.15 The principal difference between this distribution and that relating to foreign direct investments in the United States may be explained very largely by the industrial character of the two sets of data. The principal explanation is that public utility and transportation enterprises, which were a larger part of direct investments in foreign countries than of direct investments in the United States, are normally financed more largely by bonds, preferred stocks, and advances than are other industries.

14 Based on

data compiled by the Bureau of Internal Revenue from the reports of corporations submitting balance sheets.

15 Department of Commerce, Economic Series No. 1, American Direct Investments in Foreign Countries-1936, by Paul D. Dickens, pp. 22-24.

CONCLUSION

The data herein presented show that, on the whole, foreign cartels and foreign corporations exerted only a minor influence on production in this country in 1937. Cartel members, rather than the cartel organizations themselves, were the sources of the only part of such control that was found to exist. They did not dominate any strategic industry and did not give rise to any serious problems. In general, it may be said that foreign control of United States industry, which was so extensive during much of the nineteenth century, has by the gradual and natural process of repatriation, been effectively eliminated.

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PART III

REPORT OF THE FEDERAL TRADE COMMISSION ON THE OPERATION OF THE EXPORT TRADE ACT (WEBB-POMERENE LAW) 1918-1940

Submitted by

THE FEDERAL TRADE COMMISSION

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