made to extend consumption of products in foreign markets." The information was obtained directly from industrial firms by questionnaire on a voluntary basis and under a pledge by the Commission that answers would be treated as confidential. The Commission sent its questionnaire to 2,000 firms, of which about 715 replied; 416 answers were from firms engaged in exporting and approximately 300 from firms which stated that they had no export business. The method used to obtain information, the failure of the Commission adequately to define price and to specify the difference in the type of customer in domestic and export markets, leave the conclusions that can be drawn from this study open to doubt. It was concluded that "The great majority of the answers indicated that prices are no lower abroad than they are for domestic customers, and a considerable number indicate that foreign prices are higher." As to just what is meant by "foreign prices" there is no great clarity. For example, in discussing the replies received from textile firms, it was stated that "Of the 18 establishments answering the schedules, 13 report that foreign. prices, or the prices in foreign markets, are not lower than those in domestic markets." Because of the confusion that must have existed as to exactly what prices were being compared, a statement of this character has little meaning except that it does show that there were five establishments reporting that "foreign prices, or the prices in foreign markets" were lower than those in domestic markets. The writer can state from actual experience that when the question, "Do you sell in foreign markets for a price less than that charged for exactly similar articles in the United States?" is put baldly to business executives, the answers received are seldom based on a comparison of f. o. b. factory prices to similar classes of customers. Further evidence of the confusion that arose from the wording of the questionnaire is apparent from the answers given to a question on the reasons for differences in prices. Of the reasons of a permanent nature "to which are ascribed the greatest importance are those of cash payment and large purchases in foreign trade, whereas the domestic trade is based on credits and small purchases." And next in importance would seem to be "the drawback or rebate of the tariff on imported raw material of goods manufactured for export and "where an allowance is made from the internal revenue duties in case of exported goods." Of course, as ordinarily conceived these cost differences are not differences in prices at all. The inadequacy of the study led to different opinions of the importance of the practice, both as to its extent and its significance. In its final report the Commission stated that "In about 20 percent of the cases covered by the Commission's returns, the export prices have ruled lower than those charged to home customers." The Commission did not think the practice was confined to the trusts but that it was quite common "on the part of the separate establishments as well as of combinations." And it concluded that "It is probable * * * that when the export prices have been at cost the result has been by keeping the plants fully employed, to hold the prices to American consumers lower than would have been possible otherwise." This conclusion 4 Final report of the Industrial Commission, 1902, vol. XIX, pp. 626-627. was based on testimony of interested witnesses rather than on an impartial economic analysis of the problem. It is not surprising that in a supplementary statement by Thomas W. Phillips entirely different conclusions were reached: There are a large number of industries in which it is in evidence that the domestic price is much higher than the export price. I do not agree that the answers to inquiries addressed by the Commission to exporters indicate that the trusts are not chargeable with this practice to any serious extent. Out of 2,000 schedules of inquiries sent out, there were received only 416 replies, and only a very few of these replies came from corporations known popularly as trusts (vol. XIII, p. 726). The fact that about 75 answers indicated lower prices abroad than at home is significant, when it is noted that more than four-fifths of those addressed failed to answer, and that naturally those who are chargeable with such discriminations would be the ones who would decline to reply. Several witnesses before the Commission on behalf of the trusts admitted that their export prices were lower than their domestic prices, but they contended that this was necessary in order to work off their surplus and to keep their establishments running full time, and that all manufacturers in all countries do the same. This argument overlooks the fact that their surplus products could also be worked off by lower prices at home, and that it is the tariff which encourages them to cause a domestic surplus by restricting domestic consumption through high prices. Among the Commission's recommendations is included the following statement relevant to this problem: That, in view of the extent and perfection of our manufactures, of our growng export trade and the sharp competition it encounters in foreign markets, of the practice by some exporters of making lower prices abroad than at home, and of the desirability of protecting the consumer as well as the producer, without awaiting other legislation, the Congress provide for a commission to investigate and study the subject, and to report as soon as possible what concessions in duties may be made without endangering wages or employment at home, what advantages abroad may be obtained therefor, and also to suggest measures best suited to gain the ends desired.* A more extensive report on comparative domestic and export prices was prepared for the New York Tariff Reform Club and reprinted in the Congressional Record of June 7, 1906.7 The report stated that the great bulk of our exports of manufactured goods, which amounted to $452,000,000 for the year ended June 30, 1904, were sold to foreigners at prices much lower than those prevailing in this country. It was estimated that 85 or 90 percent of our exports at that time were sold at an average of 20 percent less than domestic prices. After summarizing the available evidence in official sources to support this charge, an extensive table of comparative prices was presented which showed export prices to be substantially below domestic prices for a large variety of manufactured goods. The price comparison suffers from two defects. First, the report does not name the firms to which the prices refer or give any other evidence of their authenticity. In an unofficial report, some proof of the accuracy of the data would be desirable. Second, no effort was made to adjust prices for any difference in terms and conditions of sale or for differences in costs that might have existed. The domestic prices seem to be wholesale prices, but it is not clear to what class of customer the export prices refer. The bulk of them are presumably prices to export commission houses, which handled a much larger volume of our export 5 Vol. XIX, p. 663. Vol. XIX, p. 651. Congressional Record, vol. 40, pt. 8, 59th Cong., 1st sess., pp. 8024-8033 business in those days than at the present time. In that case the manufacturer would have had no selling burden on his export business and some differential between the domestic and export prices was to be expected. The report is therefore, not conclusive as to the size of the differential beween domestic and export prices, and no doubt overestimates the percentage of exports sold at dumping prices. The Secretary of Commerce and Labor was directed by a Senate resolution of December 16, 1908, to supply as much information as he could regarding American manufactures which were sold for lower prices in foreign markets than at home. Two reports were submitted to the Senate.8 The difficulties of the task were apparently realized. To secure the information contemplated by the resolution of the Senate, and arrange it in form that would present the facts in a satisfactory manner, would require the services of a person who has had experience in active business and who has practical acquaintance with industrial and mercantile affairs, including knowledge of methods employed in the preparation of goods for shipment, charges and expenses that are incidental to transportation, entrance, clearance, discounts, credits, and the like. Thorough equipment of this character is deemed essential to proper and impartial investigation. Ascertainment of prices at which articles are sold is simple, requiring no special knowledge; but to ascertain causes for prevalent prices or conditions that may be abnormal and to weigh these causes impartially would require the services of a man competent for such work." Prices of United States goods in several foreign markets were submitted in the reports but no comparative prices for the domestic market were offered. The prices were reported by special agents with general comments to the effect that prices in the foreign markets were not lower than prices for similar goods in the American market. Nowhere in the reports are comparisons made of the manufacturers' prices f.o.b. mill for foreign and domestic trade. On May 27, 1926, the Federal Trade Commission submitted a report on "Alleged Violation of Anti-Trust Laws by Combinations Being Formed Abroad by American Firms and Alleged Dumping of American Goods in Foreign Markets." 10 The study was made in response to a request dated March 24, 1925, by a group of Senators who asked "whether in any cases American goods are sold cheaper to foreign customers as a means of maintaining the prices of such goods manufactured in the United States, than to American consumers." * * * The report states that "a general survey has been made of the principal commodities exported from the United States Personal inquiries were made of concerns engaged in interstate and foreign commerce." A summary of the replies received in response to the inquiry is presented which consists of a detailing of the various types of policies found. There is no indication of the prevalence of various policies and little mention of the industries which use the policies. In a concluding statement the Commission states: No evidence has been found of an intention to export at lower prices as a means of maintaining high prices in this country. On the contrary, exporters contend that when the export price is lower, exportation is of great advantage to the industry and to the public, because it serves to stabilize 8 S. Doc. No. 6, Manufactured Products Sold in Foreign Markets at Lower Rates Than in American, pts. 1 and 2, 61st Cong., 1st sess. Ibid, pt. 1, p. 2. 10 Mimeographed. * production, providing an outlet for surplus, preventing the closing down of mills and mines when the domestic demand is temporarily slackened, and resulting in lower production costs and, consequently, lower prices to domestic purchasers. * * From the standpoint of the American producer or manufacturer, two arguments against dumping are suggested by concerns to which this inquiry was presented. It is insisted that goods are not dumped (1) because it would be an injury to the company's domestic trade through loss of good will of the American consumer, and (2) because it would be an injury to the company's foreign trade which can only prosper in the long run by establishing permanent foreign markets * *. It is also claimed that "regular" exporters, those selling in large quantities and expecting to stay in the business, are selling at regular intervals and generally at higher prices to foreign customers than to domestic; that the practice of dumping surplus into foreign markets at irregular intervals and at low prices is used less and less frequently and will continue to diminish as our foreign trade develops. * The best study and the only recent one of a comparison of domestic and export prices was that of the agricultural implement industry made by the Federal Trade Commission. Considerable care was exercised to obtain comparable prices-that is, prices which refer to the same commodity under similar terms and conditions of sale. The Commission found several instances of sporadic dumping. Goods were shipped abroad and because of some change in business conditions could not be sold at the anticipated price. Prices were, therefore, cut in order to move the stocks as reshipment to the United States would have been unprofitable. The bulk of the exported goods, however, was found to be sold at the same prices as similar goods in domestic sales. Other bits of information on dumping from the United States in earlier years are available, but enough has been given to indicate its general character. A good portion of it is inconclusive as the prices compared are not really on a comparable basis. It is furthermore of little value for the present study because the bulk of the information refers to conditions of 20 years or more ago. The only study of recent years is that of the Trade Commission on agricultural implements. Thus, it was necessary in the present study to obtain from business firms the primary data for the comparisons of domestic and export prices. CHAPTER III SCOPE OF THE FIELD STUDY It is evident from this brief summary of previous studies of the problem that available knowledge of the subject would be inadequate for the Committee's needs. In addition to inaccuracy and inconclusiveness, the data from previous studies do not cover current business practices. Nor are they addressed precisely to the problem in a way that makes them adequate for present purposes. It was, therefore, necessary to make a field survey of the current price policies of business that would contrast domestic and export prices. For two reasons it was considered essential that the information industry could furnish be obtained by personal interview with the appropriate business executives rather than by relying upon a mailed questionnaire. The probability is that returns to a questionnaire would come primarily from firms which did not have lower export prices and thus bias the sample. Furthermore, the character of the information required is such as to make it unlikely that accuracy could be obtained except by interview. This is due to the difficulty of framing a set of questions which would leave no doubt of the precise information desired with resulting indefiniteness in the answers. The data were obtained through conversations with the executives of each business concern rather than by sifting the evidence out of the business records. The reasons for this are that an executive can answer in a short time questions which the records could reveal only after weeks and even months of work and, furthermore, certain information was desired which would not appear in the records. As the study was designed to be qualitative in character, rather than an actual statistical measurement of differences in prices, the desired data could more quickly be obtained by this method. In order that business executives might feel free to speak frankly about the policies of their firms and be under no apprehension of unfavorable reactions upon their particular business, it was guaranteed that all information provided the investigator would be confidential as to the source, and that nothing would be published to reveal the identity of any firm. It was relatively easy for the investigator to arrange the order of his questions so as to assure himself that they were being answered to the best ability of the business executive. It must be emphasized, however, that the analysis of the cases presented in the study and the conclusions reached by the investigator were made independently and are not the undigested opinions of business executives. In some cases the persons interviewed might not agree with the conclusions of the investigator. On this basis a study was made of the practices of what might best be called 76 cases. They are called cases rather than companies or corporations because the study often cuts across the complications of corporate structure. The purpose of this classification was to in |