A. Data relating to creditor-debtor position__ V 1 7 13 19) 27 34 45 45 50 55 II. Reconciliation of estimates of long-term investments abroad. 67 States, 1940.. 68 IV. Income and debt service receipts.. 68 V. British mobilization of dollar assets_. 69 VI. Foreign assets frozen in United States__ 71 73 74 74 74 80 91 VII. Foreign holdings of common and preferred shares. B. Service transactions in 1940_ I. Principal items and trends... II. Basic data relating to United States oversea travel account.. C. Merchandise trade and gold, silver, and paper currency movements.. LIST OF TABLES I. Balance of international payments of the United States, 1939–40-- areas_. III. Estimated gold and dollar transactions of the United Kingdom and V. Estimated dollar transactions of continental European countries, VI 2 10 24 25 VII. Estimated dollar transactions of Latin American, Asiatic and cer- VI. Short-term liabilities to Latin American and Asiatic countries reported by American banks___ 27 32 46 IX. International investment position of the United States, end of 1938, 1939, and 1940_ 49 X. Receipts and payments of income on United States international investments, 1938-40 50 XI. United States long-term investments in foreign countries, by types 1938-40___ XIII. Geographic distribution of outstanding short-term foreign liabilities and assets of the United States December 31, 1940__ 52 56 61 1. Summary of long-term capital transactions between the United States and foreign countries, 1938-40--- 2. Income and debt service receipts from United States portfolio investments in foreign countries, 1940.. 3. British mobilization of United States securities under various 4. United States securities mobilized and completely liquidated by 5. Foreign assets in the United States affected by foreign funds con- 6. Indexes of foreign holdings of common and preferred shares, as reported by United States corporations, 1938-40-- 7. Outstanding short-term foreign liabilities and assets of the United 8. International travel account of the United States, 1939–40_. 9. Estimated freight earnings by United States and foreign vessels in the carriage of United States merchandise exports and imports, 1940_ 10. Institutional contributions to foreign countries, by class of institu- 12. Government international account, 1939-40.. 13. Residents of the United States departing for oversea destina- tions, by geographic areas and by class of traveler, 1938-40... 14. Passengers departing from the United States for oversea destina- tions, exclusive of cruise passengers and air travelers, by country 15. United States residents returning from ocean cruises, 1938-40 _ 16. Air travel from the United States to oversea destinations, 1938-40- 17. Travel between the United States and foreign countries, by months and by class of traveler, 1938-40---- 18. Arrivals and departures of residents of oversea countries admitted to the United States as temporary visitors, 1938-40- 19. Total passenger traffic (excluding cruises) between the United States and oversea countries, by class of traveler, 1938-40.... 20. Estimated gross revenues of United States and foreign vessels from passenger traffic between the United States and oversea coun- tries, by geographic areas and by class of traveler, 1938-40---- 21. Foreign trade of the United States, by months, 1937-40- 22. Reported gold movements between the United States and foreign countries exports, imports, and earmarking operations, by 23. Net imports of silver into the United States from selected countries, FOREWORD This nineteenth consecutive annual report on the balance of international payments of the United States surveys the effects of the war on our international economic and financial position and weighs the powerful forces at work. While the report nominally covers the calendar year 1940, it has in many instances been carried back to the beginning of the war or brought forward to cover more recent develop ments. As a result of the conflict, our transactions with other countries have been greatly stimulated in some cases and virtually stifled in others. Exports to the United Kingdom and the British Empire as a whole have increased enormously after a slow start. Shipments to the European Continent rose sharply for a time and then abruptly dropped to negligible proportions after the fall of France. Imports of raw materials, chiefly from southeastern Asia and Latin America, have increased substantially and promise to rise still more. Ocean shipping, seriously affected by sinkings, is on an emergency basis the world over. The usual movement of American tourists to Europe has stopped, and travel to other areas has in many instances suffered indirectly. The flow of gold, which rose to unprecedented volume after the Czechoslovak crisis in the fall of 1938 and became a flood in the spring and summer of 1940, has now abated and is confined mainly to new production in the British Empire and Latin America. The inflow of capital, which, together with British and French war financing, was chiefly responsible for these shipments, has given way to a great outward movement as the United States provides financial aid to the United Kingdom, Canada, China, and Latin America. With it all has come a far-reaching degree of Government control over production, exports, imports, shipping, travel, and international financial transactions. Such controls have become an integral part of our defense economy. The present report has been prepared by Hal B. Lary and Paul D. Dickens, with the assistance of various other specialists. Mr. Lary contributed the sections on transactions with particular countries and areas and the analysis of major forces determining our current position. Dr. Dickens was responsible for the sections dealing with the United States as international creditor and debtor and for the discussion of capital movements and interest and dividend payments. As in other recent years, the report was prepared under the general direction of Amos E. Taylor. CARROLL L. WILSON, Director, Bureau of Foreign and Domestic Commerce. SEPTEMBER 1941. V Table I.-Balance of International Payments of the United States, 1939-40 1 Detailed information concerning service items is given in appendix B. The dollar values given herein relate only to items that can be identified and measured with reasonable accuracy. Capital items are viewed as "exports" and "imports" of evidences of indebtedness requiring the passing of some monetary consideration. Detailed data regarding these items are given in appendix 4. The residual item consists primarily of unrecorded capital transactions, although it may also include errors and omissions in other transactions. See discussion on pp. 47-49 and elsewhere in the text. VI THE BALANCE OF INTERNATIONAL PAYMENTS OF THE UNITED STATES IN 1940 GENERAL REVIEW Forces generated by the present world conflict have come to dominate in ever stronger measure trade and financial relations between the United States and other countries. While some of the chief prewar features of our position continued to be manifested in this country's balance of international payments for 1940, the volume of the various transactions and, above all, the circumstances under which they are conducted have greatly changed. The very fact of the war and the course of its development have profoundly altered the usual channels and nature of our international intercourse, creating enormous demands for urgently required supplies and services from this country and at the same time shutting off large regions to our commerce and to the travel and other activities of our citizens. These changes have been accentuated by far-reaching national policies at home and abroad and the manifold measures instituted to carry them out. Effects of War on Foreign Trade. The effects of these forces are shown in the course of our foreign trade during 1940. Exports rose from $3,177,000,000 in 1939 to $4,021,000,000 in 1940, the highest total since 1929. Since export prices were still far below those prevailing in the 1920's, the 1940 total probably represented the greatest physical quantity of exports since the end of the World War period, with the possible exception of 1929. The big rise following the outbreak of the present war had already begun in the closing months of 1939. After January 1940 there was, as a matter of fact, a slight declining tendency, reflecting in part the closing off of most of the European market after Germany's conquest of Denmark, Norway, the Lowlands, and France. This loss was largely compensated, however, by a tremendous rise in exports to the United Kingdom and other parts of the British Empire in the second half of the year. Under the increasing momentum of the aid-to-Britain program, the upward trend has reasserted itself in recent months, the figure for April 1941 being the highest for any month since January 1930. Imports into the United States have reacted to war conditions much more slowly than exports. The 1940 import total was $2.625,000,000, a rise of about 13 percent over 1939 but well under the $3,084,000,000 mark reached in 1937. Imports of finished goods from the European Continent necessarily fell, but purchases of strategic commodities and other raw materials from southeastern Asia and Latin America were stimulated by the increasing pace of defense production in the United States. |