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ment may result to an industry of the Union because of the price of the goods, etc. In Australia and New Zealand, the goods must be of a kind or class produced or manufactured in Australia or New Zealand, their sale resulting in detriment to local industry because of sales price, etc.

Depreciated currencies as dumping.–Under certain conditions, antidumping measures have also been invoked in Canada, and to a lesser extent in South Africa, against imports from certain countries having depreciated currencies, and in some areas dumping duties may be applied when freight and other concessions have been granted in the exporting country on exported goods.

MINIMUM IMPORT VALUES

Outstanding is the Canadian practice of establishing arbitrary official valuations, by fixing minimum import values on certain products or specifying a certain amount to be added to the “true invoice price” of specified goods, either throughout the year or during particular seasons.

Details of the dumping authorizations and regulations may be obtained upon application to the Division of Foreign Tariffs of the Bureau of Foreign and Domestic Commerce or to one of the district offices of the Bureau.

QUOTAS AND IMPORT LICENSES

Control of imports by means of quotas and/or import licenses has been extended considerably in the last few years, particularly in Europe. In some countries, as in France, a very large portion of the total imports is subject to quota restrictions or to import licenses, or to both. Quotas may be quantitative, restricting imports to a definite quantity of the goods covered by the quota for a specific period, as per month, per quarter, or per year or other period; or they may be so-called tariff quotas under which a specified quantity of goods is allowed importation at a reduced rate of duty (or duty-free). In the latter case, total imports are not restricted, but any quantities imported in excess of quota are subject to the full prevailing rates

of duty.

QUOTA ALLOCATIONS

Quotas may be, and in the majority of cases are, allocated to indi. vidual countries, or at least to the major supplying countries on the basis of previous imports for some representative period. The administration of the quotas varies considerably even in the same country. In some cases only a total global quota is assigned for a given product, and imports are permitted on a first-come-first-served basis until the quota is filled for that particular period. In other cases a definite share of the quota is allocated to each of the principal supplying countries, and the limit constitutes a global quota for all other countries. In some circumstances, as with some of the French quotas for example, quotas are set up on the condition that the government of the exporting country, or countries, or some trade

organization in those countries will administer the allocation to the individual firms. For other quotas import licenses are required before shipments are permitted even within the quota limitation.

REASONS FOR IMPORT LICENSES

Import licenses, apart from quotas, are sometimes required for the purpose of giving the government of the importing country an added control over importation of specific goods, usually for the purpose of limiting total imports or of directing imports to countries to which it is desired to show preference for some reason or other, or for both purposes.

REASONS FOR QUOTAS

In general, both quotas and import licenses are established for the purpose of exercising a more strict and definite control over imports than is possible under import duties alone. If strictly administered, they are, of course, effective in limiting imports. As in all systems of restriction it is more or less axiomatic that the greater the rigidity with which quotas are applied, the greater the possibility of lax enforcement and of unauthorized importation outside of the official restrictions. Furthermore, the administrative burden in any general quota or import license system becomes very great and tends to limit the usefulness or effectiveness of such systems.

An additional reason for the establishment of quota systems in most countries is the effort toward bilateral trade balancing which has become so prominent a factor in commercial policy, particularly in European countries.

FOREIGN-EXCHANGE CONTROL

NUMBER OF COUNTRIES IMPOSING REGULATIONS

Upward of 30 countries officially regulate the sale of foreign exchange in a more or less stringent manner. This list does not include the colonies of such countries, six or seven in number.

COUNTRIES NOT AFFECTED

Fortunately, foreign-exchange restrictions do not exist in a much longer and more important list of countries, which took about 75 percent of our exports in 1929. Restrictions are not applied in many of the countries of the Far East or of the North American continent. It must be recognized, however, that several of the larger nations that do not restrict the sale of foreign exchange accomplish the same end, namely, the reduction of imports, quite as effectively by other methods, such as the imposition of import quotas, discussed above.

EXCHANGE-CONTROL PROCEDURE

Under an official control of foreign-exchange transactions, the government or the central bank of the country is empowered to commandeer all foreign exchange arising from the exports of that country and to release this exchange for sale to persons desiring

foreign means of payment for imports in accordance with the law establishing the control and with regulations issued from time to time thereunder. In this way an official rate of exchange is established. Generally, the legislation provides that foreign exchange shall be allocated for imports in proportions varying with the character of the merchandise—that is, according to whether the goods are regarded as indispensable to the national economy, or are less necessary, or are luxuries. Inasmuch as the determination of what is a necessity and what is a luxury is left to the control authority, the American exporter is often uncertain whether the foreign buyer will be able to obtain dollars to cover his import and, if so, in what proportion to the total value of the shipment, or at what time after the shipment has been cleared. When dollars cannot be obtained at the maturity of the draft, the practice is for the importer to deposit with the collecting bank the local currency equivalent at the official rate of exchange. If the laws of the importer's country permit him to obtain possession of the goods in that manner, the American exporter should protect himself against possible exchange loss by having the importer agree to increase the deposit in local currency if the official rate of exchange should be lowered before the dollars are actually made available to cover the draft.

EXCHANGE-FLUCTUATION RISKS

The exporter must always bear in mind that the official rate, as well as the free-market rate, which is determined by open bidding and fixed by supply and demand, may change radically between the time the order is received and the date the goods arrive. This consideration will generally lead him to ship on either a sight or a time draft basis to only those customers in whom he has implicit confidence; of all other buyers in such countries he should require payment in cash with order or a confirmed irrevocable letter of credit, unless he is prepared to take an indeterminate risk.

CHANGING REGULATIONS

Since the exchange-control authority is generally vested with arbitrary power to change its regulations on short notice, the хро should seek to keep himself thoroughly informed as to the status of the regulations. The Bureau of Foreign and Domestic Commerce, through its Finance Division, releases to the press and to its district offices cable advices, whenever available, on changes in exchangecontrol regulations. The Finance Division also describes current developments at length in Latin American Financial Notes and European Financial Notes, and in special circulars.

EXCHANGE-CLEARING AND COMPENSATION AGREEMENTS Another obstacle to the free flow of international trade which has developed in recent years is found in exchange-clearing and compensation agreements.

6 Each series of Notes is issued every 2 weeks on a subscription basis, the price for each being $1 per annum.

EXCHANGE-CLEARING AGREEMENTS

An exchange-clearing agreement provides, in substance, that importers in the two countries which are parties thereto shall make payment into a special account in a designated agency, usually the central bank, in their own country to the credit of the corresponding agency in the other country and that these agencies shall make payment to the exporters of their respective countries out of the sums thus deposited by their importers. Under this system the importer in one country is relieved from the necessity of remitting exchange to the exporter of the other, who therefore looks to the designated agency in his own country for payment.

COMPENSATION AGREEMENTS

The chief difference between an exchange-clearing agreement and a compensation agreement is that the former applies to all trade between the two countries concerned while the latter provides for the exchange of given quantities (or values) of specified commodities.

EFFECT ON TWO-WAY TRADE

Both classes of agreement have, as their principal purpose, the surmounting of difficulties that have grown out of foreign-exchange restrictions. Although such agreements have tended to keep a certain volume of trade moving between the two countries and have in some cases enabled the exporters of one country to collect part of their accumulated (blocked) balances in the other, they have also tended to drive trade into unnatural and uneconomic channels. Country A, which normally has a “favorable” trade balance with Country B, is apt to import from B commodities which it has been accustomed to buy more advantageously in third countries; Country A does this in order to avoid a fresh accumulation of blocked credits in B. The only alternative is for A to curtail its exports to B. The net result in the long run is to level down the trade between the two countries.

EFFECT ON THIRD COUNTRIES

So long as they continue in force, exchange-clearing and compensation agreements present obstacles to the trade of third countries, such as the United States, with the countries that have concluded such agreements. They are a factor that must-for the time being, at least–be taken into account by American exporters, particularly those interested in trade with Germany, which has entered into the greatest number of such agreements and is, in fact, striving to place its foreign trade on a barter basis as far as possible.

QUARANTINE REGULATIONS

Quarantine regulations, as the name implies, are imposed in most countries for the purpose of preventing the spread, through importation, of animal and plant diseases and pests. Insofar as quarantine regulations are strictly limited to the carrying out of this purpose, no exception can be taken to them. There is, of course, always the possibility that they may be taken advantage of to be applied more generally, and as a means of import control quite apart from the original sanitary object. Thus, quarantine regulations must be taken into consideration as one of the types of import restrictions and controls in effect in various countries, and the exporter must always be sure that his products do not contravene any such regulations of the country to which he proposes to ship. Significant examples of foreign quarantine restrictions are cited in appendix D.

RECIPROCAL TREATIES OR AGREEMENTS Largely as a direct result of the very substantial increase in the number and variety of trade barriers established in recent years, and the subsequent reduction in the flow of international trade generally, definite efforts have been initiated to counteract this movement and to reduce trade barriers to a more normal position. One of the most promising means of bringing this about is through the negotiation of reciprocal trade agreements or treaties, and a large number of such agreements have been concluded, largely in Europe or between European countries and other parts of the world. Such agreements may be bilateral, providing mutual reductions or relaxations in tariffs or trade barriers of the countries that are parties to the treaty, or such reductions as are made may be generalized to all countries, or at least to all countries having a most-favored-nation status. The effectiveness of such agreements depends, of course, upon the extent to which reductions are reciprocally granted, and to the extent of the generalization to other countries. For the effectiveness of world trade in general, it is, of course, necessary to distinguish between agreements which tend to lower the trade barriers generally and hence increase the trade, and those which tend only to divert trade from one source to another.

THE TRADE RECIPROCITY ACT

In the United States the Trade Reciprocity Act of June 12, 1934, authorized the President to enter into foreign-trade agreements and "to proclaim such modifications of existing duties and other import restrictions or such additional import restrictions or such continuance and such minimum periods of existing customs or excise treatment of any article covered by foreign-trade agreements as are required or appropriate to carry out any foreign-trade agreement that the President has entered into hereunder." The act provides, however, that no existing rate of duty shall be increased or decreased by more than 50 percent and that no article can be transferred between the dutiable and free lists. It also provides that any changes in duties made under any trade agreement shall be generalized to articles of the growth, produce, or manufacture of all foreign countries. Such concessions may, however, be withheld from any individual country because of discriminatory treatment of American commerce or because of other acts or policies which, in the opinion of the President, may tend to defeat the purpose of the act. By early 1935 the Department of Stato had announced an intention to negotiate trade agreements under the authority of this act with some 17 countries, with prospects of additional countries being added to the list as rapidly as conditions per

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