"Are we Pricing Ourselves
Out of World Markets?"
By William T. Moore
President, Moore-McCormack Lines
(Special to "The Forwarder")
The question of whether we are pricing ourselves out of world markets has been given some consideration during the past year. Much
has been written on both sides of the story. However, it is doubtful whether we are facing-up to and identifying ourselves with the real problem.
Some people in both government and business are willing to ride along on the premise that we, the greatest industrial nation in the
world, have nothing to fear and the statement that we are "pricing ourselves out of the world markets" is a myth and a catch-phrase.
During the years following World War II, the United States occupied a privileged position since it was the only country capable of
meeting the immediate needs of the world by being able to produce tremendous quantities of goods for export. During those post war years, we were able to export almost anything without much fear of competition from other nations.
Through our system of free and competitive enterprise, we not only sold our machine tools and techniques but also our know-how on mass production. In addition, we built up abroad large industries and enterprises through the
various government aid programs.
New modern industries have grown up throughout the world. In many cases, their factory capacities far exceeded the needs of their
domestic buying power. The results are obvious. They are able now to mass-produce goods, and with our techniques and know-how, are underselling us in the world markets.
Over the years, we have been recognized as the masters of merchandising our wares at home and abroad. There is no doubt that we
shall continue to execute that technique of ours; however, there are many factors which are working against us. Our salesmen can be the best in the world and offer prompt deliveries. In today’s foreign market, it is not the
"prompt delivery" angle that is going to get the order but rather a twenty to forty percent reduction in the price offered and that’s how our competitors have cut into our trade. It is agreed that "prompt delivery" in some cases
might influence a foreign order but such incidents in today’s world market are almost negligible.
There are those who will refuse to consider currency inflation as a factor in our very serious export decline. They are literally
sticking their heads in the sands of inflated money and refusing to take a look at realities. At one time, we used the machine tool and the automobile trades as a gauge for our export trade. Machine tool exports have fallen off
by better than forty percent and automobile exports during the past ten years have dropped off by fifty percent. As a result, there is little likelihood for either industry to wholly recapture their lost markets.
The wage-price squeeze together with the fringe benefits constantly demanded by labor has necessarily increased the cost of
production. This condition in turn forced prices up to the point where we can no longer compete in our foreign markets.
The foreign trade of the United States is reported to be responsible for the employment of 4.5 million people. This great mass of
people is, in reality, competing with their counterparts in Europe — particularly in producing equipment and machinery in which labor is a substantial factor and often represents as much as eighty percent of the cost. Today's
hourly wage in the United States is running four to seven times higher than those in Europe.
Labor alone cannot be blamed for the spiraling prices. A share of the blame must be attributed to our government's spending program
which encourages inflation. Heavy taxes contribute too because the incentive to save, develop, and pioneer is lost.
We, in the merchant marine, began to feel the recession more than a year ago and it is still with us. We are the ones who have seen
the outbound cargo loadings fall off tremendously. Inbound cargo loadings have improved somewhat during this same period. The movement of commercial cargoes — not associated with government loans or aid — to certain areas of the
world, now account for less than thirty percent of the cargo carried.
Similarly, the United States shipbuilding costs are posing a critical problem in this country’s effort to modernize its merchant
fleet. It costs in excess of ten million dollars to build a cargo liner in United States yards as against less than four million dollars for a ship of comparable size in the shipyards of Japan, Germany, or Holland.
We have to face the facts; our 1959 exports will be down by one billion dollars and the anticipated balance of payments for 1959
will show a deficit of four billion dollars. Whether we want to refer to this situation as a "pricing factor," a "cost factor" or "flight of capital," it all boils down to one fact: we have an uncomfortable adverse trade balance
which is draining our gold reserves.
It is hoped that the new policies to be put into effect by the U. S. Government during the next few months will halt the outward
flow of gold, put new life into our export trade and increase the outbound cargo carryings.