sumers. While not denying the possibility, the writer is of the opinion that, in a world where foreign trade is left substantially to individual initiative, the restriction of export price concessions generally would be unfruitful in producing favorable results on the domestic price structure. Three arguments may be offered in support of this conclusion.

(1) It would be virtually impossible to analyze actual demand and cost conditions with sufficient accuracy to provide a guide for public policy and, therefore, virtually impossible to know in any given instance whether a lower or a higher domestic price would result from Government control of export prices.

(2) But there is a more important objection to the general prevention of lower export prices. After examination of the cases included in this study and conversations with the business executives involved, the writer is convinced that in most instances export price policy is determined quite independently of domestic price policy and often by different individuals. While there seems to be a general recognition among business executives of the effect of added output upon costs and thus a recognition of the possibility of increasing profits by making export price concessions, this reasoning is seldom carried so far as to give an interrelated domestic and export price policy. Such being the case, there is a likelihood that any general control of export prices would result in lower exports and reduced employment without the offsetting advantages of lower prices and increased production for the domestic market.

(3) The third reason is that the economic adjustment which would produce lower domestic prices can only be assumed to operate under conditions of full employment. The pressure upon the producer to reduce domestic prices if he should be forced to discontinue export price concessions and hence lose some foreign sales comes from the unused capacity which those lost sales create. However, as this study was made at a time when there was considerable excess capacity in industry, little reliance can be placed upon the power of a small increase in that excess to effect profound price changes.

Thus, if monopoly or monopolistic competition in domestic industry leads to price concessions being made in export markets, not much is apt to be gained through the Government's operating directly upon export prices. This does not mean that the existence of international price discrimination does not present a problem which demands the serious attention of government and business. But it is a problem which lies primarily within the domestic market rather than in export markets. Export price discrimination is a clear sign that some impediment is restricting competition in the domestic market, even though it is not an illegal impediment. It is the impediment to domestic competition which creates the problem and demands attention, however, and not the signs of the problem in export price policy. It should be recognized furthermore that the possible ill effects of monopoly-in the way of obstructing full employment and the best allocation of resources-can flow just as well from widespread monopolistic competition.

PART II

DIRECT FOREIGN INVESTMENTS IN
AMERICAN INDUSTRY, 1937

Prepared by

PAUL D. DICKENS

in the

Bureau of Foreign and Domestic Commerce

DEPARTMENT OF COMMERCE

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FOREWORD

American industry was built up with the help of large amounts of foreign capital. The problem to which this study is directed is the extent to which industrial operations in the United States are today in the hands of foreign owners.

Of the $7,398,000,000 of foreign investments in the United States $1,883,000,000 represent direct investments involving 1,172 companies and branches located in the United States. These new estimates are broken down in the report by industry and by foreign country involved.

This study does not attempt to cover other phases of the problem of international controls over our economic activity. The effect of foreign competition through imports, the existence of working arrangements for dividing the world market or of reciprocal agreements to respect each other's home market, and the possibility of controls through patent rights, are none of them here considered. This study does show that the domestic problems of industrial management are not significantly complicated by foreign controls reaching into the American scene in the form of actual operations within our boundaries.

WASHINGTON, D. C.

WILLARD L. THORP.

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