REPORT OF THE AGENT GENERAL
FOR REPARATION PAYMENTS
BERLIN, June 10, 1927

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VII. Germany's Foreign Trade.

The balance of Germany's foreign trade in the last six months has undergone another of the reversals which have characterized its course during the past two and one-half years. The official figures of the Statistical Office of the Reich show that in the year ending October 31, 1925, there was an import balance of 4,509 million reichsmarks; in the year ending October 31, 1926, there was an export balance of 179 millions; and in the six months ending April 30, 1927, there has been an import balance of 1,563 millions. The figures are subject to correction, as explained below, but the main facts remain unchanged.

These successive reversals of the merchandise balance are due far less to changes in the volume of exports than to the very wide fluctuations which have occurred in the volume of imports. In the first of these years, immediately following stabilization, the urgent need of raw materials and other goods, together with the availability of foreign credits which permitted their purchase, caused a great inflow of goods and created a great import balance. Throughout the first half of the next twelve months industrial crisis and depression prevailed. Foreign credits increased, but the value of imports was almost cut in half, due in part to lower prices. The volume of exports which was being stimulated by the pressure to sell goods received additional impetus through the British coal stoppage. The result for the twelve months was an export balance. In the last six months the necessity of drawing on foreign countries for larger quantities than usual of foodstuffs, owing to last year's unsatisfactory crops, has been a contributing factor in the rapid rise of imports. But the more dominant impulses have been the replenishment of stocks and inventories which had declined in the depression of the preceding year, and the accumulation of raw and semi-manufactured materials to supply the growing demand for consumers' goods which greater industrial activity and increasing purchasing power are creating.

Part of these large imports are doubtless required for domestic consumption, but. in the case of an industrial country like Germany they should, after the necessary lapse of time, be reflected in increasing exports. In the absence of comprehensive statistics of production, consumption and inventories, however, it is impossible to know with accuracy just what is occurring. Generally speaking, larger production of goods for domestic consumption should, by reducing costs., facilitate exports. The general trend of prices of manufactured goods in the past year has, in fact, been slightly downward, but improvements in productive processes do not seem to be promptly reflected in price reductions, and such reductions as have occurred may have been partly due to the lower prices which prevailed for certain raw materials. Up to this time, however, German exports of finished goods. which were well maintained during the depression, have not yet shown any tendency to rise, and it still remains to be seen how far the great import, of recent months, consisting largely of raw materials, will be reflected in increased exports of finished goods.

The financing of the increased imports of the past six months has been effected., in part., at least, out of the foreign credits which flowed into Germany so freely in 1926. In so far as foreign credits have thus facilitated the acquisition of a liquid working stock of goods to be used in the turnover of German foreign trade, the transaction may be considered natural and healthy. But the same could not be said if increased exports fail to follow the increased imports, thereby indicating that the foreign credits have been used principally to finance domestic consumption.

Germany has made some further progress during the last six months in negotiating new treaties of trade and commerce. Treaties with Switzerland, Finland and Latvia, all granting or confirming most-favoured-nation treatment, have come into effect, and the provisional treaty with France is effective until June 30, 1927. The treaty with Turkey was approved by the law of March 15, 1927. The additional treaty with Italy effected only slight modifications in the existing treaty. The treaty with Mexico has been extended until the end of 1927. Negotiations are now being carried on with several other countries, including France, Poland and Czechoslovakia. These countries are among Germany's most important neighbors and the conclusion of trade treaties with them would be an important factor in Germany's foreign trade.

Researches have led the Reich Statistical Office to the conclusion that the official figures of values are too high in the case of imports and too low in the case of exports. A. recent number of Wirtschaft und Statistik, which is published by the Reich Statistical Office., states that, according to the best estimates, the official figures should be corrected by diminishing the import values of 1924 and 1925 by 5 per cent and those of 1926 by 3 per cent; and by increasing the export values of all three years by 1 1/2 per cent. Applying these percentages to the figures given at the beginning of the chapter, and in the case of 1927 figures., applying the 1926 percentages, the original and corrected figures, in millions of reichsmarks, are as follows:

It will be observed that these small correcting percentages., when applied to the large volume of Germany's imports and exports, make very important changes in the merchandise balance. For the two and one-half years ending April 30, 1927, the corrections reduce the adverse balance by over 1,500 millions. The Statistical Office of the Reich, however, has not given effect to the correcting percentages in its own official figures, and the tables and diagrams that follow are accordingly based on the uncorrected official figures.

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a. The Trade Balance.

The large export balances of the early months of 1926 declined during the summer, and by October gave way to substantial import balances, which increased month by month until in February, 1927, the import balance amounted to about 336 millions. In March and April it also remained at a high level.

The following table, based upon the official figures of the Reich Statistical Office, shows the course of Germany's foreign merchandise trade during the past six months, exclusive of movements of precious metals and exports of deliveries in kind :

The fluctuations in the trade balance, as was observed at the outset of this chapter, have been due almost entirely to changes in the volume of imports. The increase in imports since the spring of 1926 has coincided with expanding business activity, just as the previous decrease coincided with business crisis and depression. The lower harvest yield in 1926 as compared with that of 1925, moreover, has resulted in heavier imports of foodstuffs. During the entire period since stabilization German foreign trade has been operating under unusual influences. so that it is not yet possible to determine to what extent it is affected by seasonal influences or what may be regarded as the normal import demands of the country.

The course of German imports and exports from November., 1924, through April, 1927, is shown in the following diagram;

Exports which are partly paid for through the Agent General's Office under the British and French Reparation Recovery Acts are included in the official export figures. On the other hand., deliveries in kind on reparation account have not hitherto been so included, but it is understood that beginning with the May figures they will be officially reported. The following statement of payments made for such deliveries through the Agent General's Office may be assumed to represent, with some correction as to time, goods exported in addition to those recorded in the preceding table and diagram. The figures are expressed in millions of gold marks.

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b. Detailed Analysis of Imports and Exports.

Foodstuffs and raw materials are the two major groups of Germany's imports, while finished goods are but a small element. Exactly the reverse is true of Germany's exports, of which finished goods form the major group.

The table below gives the monthly volume of these three principal groups of imports and exports., based on the figures of the Reich Statistical Office. A fourth group, livestock, is omitted because it accounts for a relatively insignificant part of the total of either imports or exports.

The following diagrams show graphically, by months, the movement of the imports and exports of these three groups of commodities

A comparison of total imports during the past six months with those of the corresponding period a year ago, that is, from November, 1925, to April, 1926, shows the following results:

In view of these largely increased imports the following tables are presented showing the principal commodities constituting the three main groups of Germany's imports during the last six months, with the monthly averages for 1925 and 1926:

Imports of foodstuffs increased 605 millions in the last six months as compared with the same period of the preceding year, largely owing to the poor harvests of 1926. Of this increase, about 350 millions was in cereals.

In the imports of raw materials, the more important increases occur in materials for the textile and the iron and steel industries. But the increase in nearly every category, including a large range of miscellaneous materials, is evidence of the wide scope of the present demand for raw materials.

Of this group of commodities, classified as finished goods, fully half are materials which must pass through one or more further industrial processes before reaching the ultimate consumer.

A comparison of the various groups of exports for the last six months with those of the corresponding period a year ago, that is, from November, 1925, to April, 1926, shows that

Foodstuffs and beverages are so unimportant an element in German exports that it seems unnecessary to present a table showing the principal categories.

The raw materials exported cover a wide range of commodities most of which, as the table below indicates, are not of large money value. The really important element is the coal, coke and lignite group, in which, of course, exports were greatly stimulated by the British coal stoppage. The influence of this stoppage on German exports was principally felt from May to November, 1926, and though it is now coming to an end, it was nevertheless largely responsible for an increase of 225 millions in the value of the coal, coke and lignite exported in the past six months, as compared with the same period a year ago. The following table shows the principal categories of raw materials exported by Germany, some of which are obviously re-exports.

Finished goods are the preponderant element in German in exports, the total volume of finished goods exported, as well as the volume of the individual classifications, have been remarkably stable, as the following table shows:

Section VIII, German Business Conditions

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