The following table indicates several other factors of importance in the determination of export price policy.

It is obvious on the face of it that by lowering export prices a company will increase the volume of its export sales. There is no other reason for adopting that price policy. It does not follow that among firms producing different products those which make concessions on export prices will export a larger share of their output. The table shows the percent of sales exported by the various types of cases. Of the 30 cases in groups I and II, 22 export 10 percent or more of total sales. But of the 46 cases in group III, only 22 have that large a percentage of sales in export markets. In this group 13 cases are able to export only 2 percent or less despite price reductions while no more than 2 cases in the other groups fall into that category.

1 Percent exported is somewhat higher for a few of the manufacturers represented by these exporters.

This is a definite indication that those firms which are forced to make price concessions on export sales are exporting less of their total sales than firms which make no price concessions. Even among the group III cases the same relationship exists; that is generally speaking, the more extensive the concessions the smaller the percentage of sales exported. The reason for this is not difficult to find. It is that the firms with a natural export product do not have to make price concessions to get a large volume of exports. The peculiarly American products mentioned above are exported in large quantities at the domestic price. There are, economically speaking, our natural export products. On the other hand, those products which can only be exported at reduced prices are not so readily salable in export markets. A small market is obtained by price concessions but export volume is not easily obtained for those products. As a corollary it may be stated that the larger the volume of exports the less able is the firm to give price concessions. A large volume of exports must bear its full costs and return a profit much more so than a small volume.

The size of the export area in which a firm is doing business also has an influence on its export price policy and is often a determining influence. As many of the products in groups I and II find natural export markets in most countries, this fact does not show up in a statistical comparison with group III. Nevertheless, it is a fact that when a company tries to sell in many diverse national markets it is more apt to be forced into price adjustments to meet peculiar local conditions than if it restricted its efforts to a few markets. For example, all the cases of type 7 would be in group II if they were willing to withdraw from the few markets to which they now give price concessions. And several of the cases in group II sell to relatively few markets because they insist upon exporting only at domestic prices.

Another factor which affects export price policy is foreign branch plants. In general the same forces which would induce a firm to give export price concessions would make it profitable to establish manufacturing branches abroad. From the above table it can be seen that one-half of the cases in group III have foreign manufacturing branches as against less than one-third in the other groups.

In each case, however, the establishment of a foreign branch reduces the necessity of exporting below the domestic price. Several of the companies stated that it was their policy to use domestic price on export business and to supply lower priced markets from their foreign factories. There is no doubt that some of the cases in group II would not be able to maintain export prices if they were not producing abroad and that many of the cases in group III would be exporting a large share of this output at lower prices if they were not supplying some markets locally. It may be noted that in 24 of the 28 cases with branch plants abroad those plants supply exports for other markets in addition to supplying their local market. Those companies which are not in a position to manufacture abroad or who cannot economically decentralize their operations are more often forced to rely upon price concession to maintain their export trade than firms which can produce in several countries.

CHAPTER VII

CONCLUSIONS

This study was directed primarily toward answering a specific question: Can the existence of higher domestic than export prices be accepted as prima facie evidence of actions which are prohibited under the antitrust laws or, stated more broadly, does international price discrimination occur only under conditions of monopoly in one or more markets? It will be recognized that a comparison of domestic and export invoice or quoted prices may be entirely inappropriate in answering this question since such prices may merely reflect the costs involved in different terms and conditions of sale. Net factory realizations on domestic and export sales must be used to determine the difference, if any, between prices.

This investigation demonstrates that international price discrimination is not a sure sign of monopoly as that term is generally conceived. If one means by monopoly that an industry is composed of a single producer or that there is an explicit or tacit agreement among the producers of an industry controlling price or production policy, then it must be said that different export than domestic prices is not clear proof of monopoly. Such price behavior can and undoubtedly does occur in monopolistic industries but it also often occurs in industries or firms which are not monopolistic as defined. In this study of 76 cases, all of which sell in both domestic and export markets, it was found that 45 cases transacted at least some of their export sales at other than domestic prices. In 9 cases of this 45, export prices were sometimes higher than domestic prices but never lower, while in the remaining 36 cases export prices differed from domestic in both directions although lower prices were much more predominant. In only 6 cases was it found that all export sales were consummated at less than the domestic price. In only 21 cases of the 76 were export prices always identical to domestic prices. Thus more than two-thirds of this limited sample show some flexibility in export pricing policy.

It was brought out in chapter V that there were considerable differences in pricing methods and attitudes toward price policy among the 45 cases which had some variation between domestic and export prices. These differences in price policies cannot be summarized in this concluding chapter. It need only be emphasized, however, that a large majority of the cases were not monopolies-that is, instances of production being controlled by one firm or by several firms acting under an agreement. In the opinion of the investigator not more than 12 out of the 45 could be so classified.

The others, to be sure, are not instances of pure price competition such as one finds among producers of (say) wheat. The term monopolistic competition, as contrasted to pure competition, has been

used to describe the competitive situation in these cases. The management in each of them does have some control over the prices at which the product is sold-beyond the mere decision to produce or not to produce such as confronts the wheat farmer-but this element of price control does not arise either because the concern is the sole producer of the commodity or because it is acting in collusion with the other producers. The element of price control arises rather from either of two conditions which were not contemplated by the antitrust laws or included in the concept of monopoly around which the antitrust laws were written. These conditions are (1) the nonstandardized character of the product itself which allows consumer preference in the face of price differences, and (2) the fewness of producers of a commodity which gives to each some power to effect the price which all receive and thus enables each to see the profitability of maintaining a certain price without any agreement among the group to do so. Neither of these situations can be called monopoly and neither is unlawful under the antitrust laws.

Such widespread use of international price discrimination by industrial concerns as brought out in this study and the ability to exercise some control over prices that is implicit in this situation, obviously raises a serious public question. The economic system based upon free private enterprise has placed reliance, both in practice and in theory, upon intense price competition for securing equity to the consumer and the full utilization of resources in production. But international price discrimination is an indication that intense price competition may not be the prevalent industrial norm.

At first glance it might seem that the interest of government should be directed to the sphere of export prices in an effort to determine if public control of those prices can benefit the domestic consumer. Taking the lack of intense price competition in the domestic market for granted, one may inquire into the domestic repercussions of granting price concessions in foreign markets. The theoretical consideration of this problem shows that no single conclusion is possible. Conditions can be set forth, and such conditions undoubtedly exist, under which the domestic price would be lower if price concessions are made in export markets than if such concessions are not made. Other conditions can be set forth, and these too undoubtedly exist, under which export price concessions would tend to raise prices to the domestic consumer. The conclusion, therefore, will vary with the underlying conditions in the industry concerned-conditions regarding the character of domestic and foreign demands and the effect of increasing or decreasing output upon costs.1

Since domestic prices in some instances may be raised because lower prices are set on foreign sales there is a suggestion that the public prevention of such export price concessions offers a possibility of lowering domestic prices in such cases and thus benefiting domestic con

1 Professor Viner has summarized two of the most interesting situations as follows: "For the special case where under a uniform price policy the optimum price would not permit of any export sales, it has been shown that resort to dumping with a consequent increase in output would lead to a higher domestic price if marginal costs increased and to a lower domestic price if marginal costs decreased. The important problem, however, of what is the effect of dumping on domestic price when some export business could be obtained even under the optimum uniform price still awaits solution; under these circumstances it appears that resort to dumping always raises the maximum revenue domestic price and increases the cost to the domestic consumer by more than the increase in monopoly revenue."--Jacob Viner, Encyclopedia of the Social Sciences, vol. 3, p. 276.