Russia, it was believed, would scarcely
do more since for the four years from 1924 to 1927
her timber exports had remained about the same.
do more since for the four years from 1924 to 1927
her timber exports had remained about the same.
Soviet Union - 1931 - Fighting the Red Trade Menace
It is strange that so little
should have been published abroad of this worst labor
conflict that any country in Europe has experienced
since the British general strike. It virtually amounts
to a general strike, and although Norway's 2,821,000
inhabitants class her numerically as one of the small-
est nations, in point of world importance she occupies
a much greater place than her numbers would in-
dicate, and a practical paralysis of her entire in-
dustry cannot be a matter of indifference to Europe
or America.
The lockout is based in the last analysis on the
Norwegian's character. They have more of that com-
modity than most. Their workmen are the best paid
in Europe, and are likewise the best organized and
the most stubborn, and when last April employers
proposed a cut in wages of 15 per cent, the trade
unions replied by demanding a 10 per cent increase
and a reduction in the working day from eight to
seven hours. They agreed to disagree and since that
time Norway's leather, tobacco, paper, pulp, electro
chemical, rubber, soap, electrical, clothing, chocolate,
shipyard, shoe, textile, sawmill, building trades and
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? FIGHTING THE RED TRADE MENACE 198
printing industries have been as good as hermetically
sealed. The unions are air tight, dock workers and
transport men refuse to handle any wares from
locked-out plants and the net balance of the first
two months of the conflict was estimated at $9,000,000
in lost wages and a $32,000,000 loss to industry. The
trade unions paid out to the unemployed $6,000,000
from the war chest. With all this labor trouble, there
is not a single Communist in Parliament. And with all
its internecine wrangles within its own household and
within the broader household of Scandinavia,
wrangles that divert attention from the problem of
relationships between the Soviet and the non-Soviet
worlds, Norway has nevertheless taken several im-
portant measures that bear on those relationships.
For Norway already has moved so far in the direction
of state monopolies that it is possible to draw a cer-
tain comparison between her system and that of the
Soviet Union.
In four important commodities the state in a dif-
ferent degree and in a different form is in control:
in grain and flour, in herrings and in wine. The wine
and spirits monopoly is an expression of the Nor-
wegian attempt at prohibition dictated more by
sociological than by economic considerations. The
herring monopoly, semi-private but under govern-
mental supervision, is for export alone. The grain and
flour monopoly, the most interesting of all, is a
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? 194 FIGHTING THE RED TRADE MENACE
straight state organ monopolizing all export and im-
port buying and selling.
Norway has to import grain. She wishes however
to encourage as much as possible local production.
For Norway remembers her slim rations of wartime
when German submarines sank nearly one-half of
her merchant fleet.
With this in mind and only incidentally in a year
when the Soviet's Five-Year Plan began,--in 1928,
the Government established a "state grain monopoly. "
The essential task of the monopoly is to buy all home
grown grain produced at a price above the price of
imported grain. The price differential is very large.
It amounts to about 30 cents per bushel on wheat,
rye, barley and to a fraction less on oats.
The important point is that the monopoly always
pays home growers more than it pays for foreign
grain and that the home growers is always sure of
disposing of all of his crop. Of course, if foreign
grain prices fall, so do the prices for home-grown
grain, but never below those of foreign grain and the
home grower is never in danger of having his crop rot
on his hands while foreign grain, be it Russian or
otherwise, floods the market. Having bought all the
grain produced at home and sufficient more from
abroad to fill out the country's needs, the monopoly
then sells it at a price that will enable just enough
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? FIGHTING THE RED TRADE MENACE 195
profit to meet the overhead--the same price for simi-
lar qualities whether domestic or foreign, and the
same price to all buyers.
This obviously is one way of meeting "dumping. "
It is a system that is said to have worked well during
the initial three years of its operation under the en-
ergetic management of Oscar Jahnsen, who, as the
managing director with an advisory council of seven
members, by reason of this office is the chief of Nor-
way's largest business enterprise.
In one respect it worked a hardship on the Ameri-
can exporters of flour to Norway, for the monopoly
decreed all trade marked flour should have the trade
mark removed, be classified and branded with the
monopoly's own brands. In this way the American
millers, who had spent large sums in advertising, lost
sales appeal to the Norwegian public. In another
and more important respect the monopoly, however,
certainly has not been disadvantageous to the Ameri-
can producers, for in 1930 when Russian wheat was
avalanching down on Europe, the Norwegian mo-
nopoly, it is true, bought 150,000 tons from the
Soviets against none in 1929, but it continued to buy
in 1930 more from America than it bought in 1929.
The record of Norway's wheat purchases for those
two years shows again that it was the Argentine that
suffered most from Soviet competition and that Can-
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? 196 FIGHTING THE RED TRADE MENACE
ada lost some, but much less than the South American
producer, handicapped by a long freight haul. In
1929 Argentina sold to Norway 137,157 tons and in
1930 under the pressure of Russian wheat, Argentina
sold only 16,380 tons. Canada in 1929 sold to Norway
82,864 tons and in 1930 sold 69,000 tons. But the
American exports to Norway in 1929 were 28,968
tons and in 1930 were 35,846.
Several Central European countries have been
watching this Norwegian experiment with interest and
already Sweden has adopted it. The Norwegians them-
selves on the whole are satisfied with it, even though
the consumers have complained that grain and flour
cost more under the monopoly than under free trade.
It is obvious, however, that if the Norwegian farmers
are to make more money somebody has to pay for
it and the final payer is always the consumer.
The Norwegians as a matter of fact liked the mo-
nopoly idea so well that important groups in Parlia-
ment that were behind the late Mowinckel Govern-
ment have brought forth a serious proposal for a
general State monopoly for export. For Americans
it is especially interesting to observe that the purpose
of the state export monopoly scheme is to promote the
formation of syndicates and trusts exactly contrary
to the efforts of the American Government to prevent
their formation. Price fixing is held in Norway to be
beneficial to the national economy and under the state
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? FIGHTING THE RED TRADE MENACE 197
export monopoly as projected in the bill only those
persons or corporations would be permitted to export
what belonged to an export association.
This idea developed from the herring trade export
syndicate, which, by reason of the fact that it con-
trols the entire herring output of Norway is able to
determine the extent of the catch, limiting it to a
figure calculated to give a maximum profit, is able
to limit and direct exports and is able to present a
united front to purchasers abroad. The clear ad-
vantages of such an organization, proved in practice
in the herring trade, gave rise to the suggestion that
it be extended to all branches of export trade, al-
though it has been suggested that the wood pulp
manufacturers' syndicate, desiring to force several
strong outsiders to join the combination, have been
chiefly instrumental in promoting the project.
Whatever special interests may be concerned, it
will strike the observer at once that such export or-
ganizations are effective counterparts to the Soviet
Foreign Trade Monopoly. They are able to equalize
the advantage the Soviet monopoly has in its com-
mercial dealings with the unorganized, mutually com-
petitive bourgeois concerns and are equivalent to the
sort of organization the Germans tried to bring to life
three years ago with their Russian committee of the
Reich's Manufacturers' Association. The decisive dif-
ference is that the German committee, formed to unify
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? 198 FIGHTING THE RED TRADE MENACE
German industrialists for trading with the Soviet
Union, but only with the Soviet Union, was killed by
the Soviet objection that this was discrimination,
whereas the Soviets cannot oppose or refuse to deal
with an export monopoly that is intended to deal
with all countries.
In the same way that the Norwegian state grain
and flour monopoly is an effective instrument of de-
fense against "dumping," so the Norwegian export
monopoly would be especially useful for sales to the
Soviet Union. These sales as far as Norway is con-
cerned have been profitable, for the Five-Year Plan
has put the Russian population on the cheapest fish
diet possible and Norway supplied in the second year
of the plan in 1929, 50,000 tons of salt herring. She
also has supplied to the Soviet Union aluminum and
ferro-alloys in such volume that in that year her
foreign trade balance was strongly active, showing
about $4,500,000 in exports to the Soviet Union
against $1,800,000 in imports from the Soviet Union.
Lumber was Norway's chief import from the Soviet
Union until 1930, when the Russian grain came for-
ward. It needs to be emphasized that Norway is one
Scandinavian country that suffered but little if any-
thing from Soviet timber exports. Norway exports
chiefly finished, planed, sawn timber or wood pulp,
while the Soviet exports so far chiefly have been rough
products. So that the Norwegian mills actually prof-
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? FIGHTING THE RED TRADE MENACE 199
ited from the import of Russian wood to finish here
and re-export. In this, however, as in most countries,
there is a conflict of interests and the forest owners
here protest against Russian imports while the mill
owners defend them.
Meanwhile the Norwegian Government does its
share to promote the Soviet trade by the export credit
system, guaranteeing 75 per cent of the face value of
Soviet bills. The fund available has just been raised
from $3,900,000 to $5,200,000 and the terms of in-
terest are even more reasonable than Denmark's. The
payments on Soviet purchases of herring afford a
good illustration. Against the presentation of a bill
of lading for purchased herrings, the Soviet com-
mercial representative gives the exporter two twelve-
months promissory notes dated the day of shipment
for 25 per cent and 75 per cent of the invoice value
in Norwegian crowns, plus the current discount rate
and an additional 1% per cent. In other words, if
the invoice f . o. b. port is 100 crowns, the notes would
be for 105. 75 crowns, the difference being the Norges
bank discount rate of 4 per cent plus a 1% per
cent additional charge. Having obtained the Govern-
ment's export credits guarantee on the 75 per cent
bill, the exporter can then present his notes to the
Norges Bank and receive 75 per cent in cash against
the normal discount rate and the other 25 per cent
if he wants it at a rate that would bring the total cost
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? 200 FIGHTING THE RED TRADE MENACE
to the exporter up to around 6 or 7 per cent. The
law, however, only provides for twelve months' credit
and notes may not be renewed except for ships under
construction by Norwegian yards for the Soviets.
At no discoverable point has Soviet competition
touched American trade with Norway, although the
American and other foreign oil companies are nerv-
ous. A Soviet delegation just came here to choose
and buy sites for gasoline and kerosene tanks. The
Norwegians are willing to do business. It is only now
and then that the Norwegian gazing at the map of
this part of the world looks at that 600 mile long
imaginary line separating Finland from the Soviet
Union and exclaims, "The poor Finns! "
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? CHAPTER XIX
Stockholm:
Standing in the center of Kungstraed Garden in
Stockholm, Charles XII, heroic figure of Sweden's
brilliant military period, stretches a bronze left arm
eastward, holds in his right hand an unsheathed
sword. Russia is the target of his pointing forefinger.
Danger lies in the East for the Sweden of Charles
XII. It lies in the East for Sweden now, but Sweden
holds no sword in her right hand today. Not war but
peace with the Soviets is the hope of Sweden's key
industry, the timber trade. "Fight" has been the
slogan of this industry and the struggle has been
bitter, costing each side more than either can afford.
"Pact" is today the talk in Stockholm, and although
the war may go much further there are many signs
that on this particular sector of the conflict of the
non-Soviet with the Soviet world an armistice is in
sight.
This country is the one European land where the
Soviet Five-Year Plan has struck harder than in any
other, with the possible exception of Finland. Sweden
is feeling Soviet competition in timber more painfully
than any other country save Finland. And for Sweden
201
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? 202 FIGHTING THE RED TRADE MENACE
timber is a matter of economic life or death. Half her
exports are timber and timber products.
Chief timber exporter of the world, Sweden is
proud of that title. Sweden now is about to relinquish
it. The same power that 200 years ago crushed
Sweden's great military king under the sheer weight
of numbers today is bringing an unbearable pres-
sure on Sweden's primary industry and by sheer
weight of timber is forcing a decision. One does not
have to have a keen appetite for economics to be in-
terested in this conflict. Here are all the elements of
a drama, of warfare, even of a great sporting event,
though of a sporting event that has a good deal more
significance for the world than the mere totaling up
of scores. And it is a game in which no one can proph-
esy when the whistle will blow to end it.
Stockholm itself, one must observe, shows no out-
ward sign of injury in this timber-war, though this
is a "timber-minded" city, where every one knows
and talks timber and where in the last analysis of
a very large section of the population is dependent
on timber for a living. Stockholm's famous standard
of living is still very high, her waterways are full of
ships, her streets of American automobiles, her hotels
of fashionable folk, and one of the first stories one
hears is the perhaps misleading tale that the Swedish
bricklayers are better paid than Cabinet Ministers.
Specifically, it is related that there have been times
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? FIGHTING THE RED TRADE MENACE 203
when bricklayers working on piece work toward the
end of a job that must be finished, are able, by holding
up a contractor, to get as much as $25 a day, while
a Cabinet Minister receives but $15 a day. This, it
must be admitted, is a record worthy of a place beside
some exploits of the American building trades unions.
Whether it is typical of Swedish wages may be
doubted, but those wages still are generous and
Sweden as a whole has suffered, according to the
reports of its own citizens, less than most European
countries from the world economic crisis. Some even
deny that Denmark deserves the title of the most
prosperous country in Europe, pointing out that
Sweden, too, has but one unemployed in every sixty
inhabitants. These optimists are not, however, to be
found in the timber trade itself. In this trade there
is one dominating thought: Russia. And here in this
trade may be found the most sharply outlined and
clearly defined sector of the broader economic con-
flict now going on between the Soviet and non-Soviet
world.
In most sectors of this world-wide front the factors
are too complicated and the contestants too widely
separated to permit a comprehensive view. Here the
lineup is in sight of every one. On one side the "Swed-
ish Wood Exporters' Association" and the "Finnish
Sawmill Owners' Association"; on the other side the
"Exportles," the Soviet timber export syndicate.
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? 204, FIGHTING THE RED TRADE MENACE
Here, too, the battlefield is limited. England, the
world's best timber market for exporters, is the site
where the contest will be decided.
The timber war began in 1928, the first year of
the Five-Year Plan. Until that year England's im-
ports of softwood from the Soviet Union amounted
to but 17 per cent of the total of her softwood timber
imports, while Sweden's share was 20 per cent, and
Finland's 27 per cent. Canada sent 5 per cent. Back
in 1921 the Soviet Union had only 5 per cent of Eng-
land's total imports. It was a long jump for the Soviet
Union to climb from 5 per cent to 17 per cent, but
Sweden and Finland still had so much of the market
that no particular anxiety was felt about the Soviet
competition.
Russia, it was believed, would scarcely
do more since for the four years from 1924 to 1927
her timber exports had remained about the same. The
Five-Year Plan was the occasion at first for sniffs,
next for doubts, then for alarm, now for something
approaching panic, though of course no combatant
will admit defeat. The comparative record of the Rus-
sian, Swedish and Finnish exports to Great Britain
since the Five-Year Plan began tells the story. The
Soviet's share of England's total softwood imports
leaped by 1930 to 32 per cent, Finland's fell to 22
per cent; Sweden's to 19 per cent and in 1931 the
share of the Soviet Union will probably be more than
50 per cent.
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? FIGHTING THE RED TRADE MENACE 205
This would be bad enough from the Swedish and
Finnish standpoint, if the situation rested there. Pre-
war Russia also supplied 51 per cent of the British
softwood timber requirements. But the Five-Year
Plan foresees exports that far surpass anything that
Czarist Russia did. Pre-war Russia exported from
the territory occupied by the Soviet Union about
800,000 standards of sawn and planed timber. In
1926 the Soviet Union exported 320,000; in 1928,
560,000; in 1930, 965,000 and in 1931 the Swedish
exporters estimate the Soviet export will be more than
1,000,000 standards, although they hope it won't
reach the 1,300,000 called for by the plan. In 1932
the plan calls for the export of 1,500,000; in 1933,
1,800,000, although one of the maximum variations
of the plan fixes even 3,000,000 as the goal for 1933.
That is as much as the total exports of the Soviet
Union, Sweden and Finland put together in 1930.
Meanwhile, the Swedish total exports of sawn and
planed timber decreased from 1,200,000 standards
in 1929 to 996,000 in 1930 and an estimated 850,000
in 1931, and Finland's exports decreased from
1,200,000 in 1929 to 899,000 in 1930 and an esti-
mated 750,000 in 1931. These are statistics sent by
the Swedish and Finnish exporters to the British
Members of Parliament after the Soviets last autumn
disposed of from 600,000 to 750,000 standards of
timber in their famous deal with the British Soft-
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? 206 FIGHTING THE RED TRADE MENACE
wood Buyers Corporation. The statistics meant, said
the Swedish and Finnish representatives, that the
producers in their two countries had been forced to
agree to reduce their exports next year to 80 per cent
of the 1929 exports. I asked authoritative sources in
Stockholm, "Does that mean you surrender 20 per
cent of your market to the Soviets? " "It does," was
the reply.
"And if the Five-Year Plan is fulfilled? "
"It means the Swedes and Finns will have to give
up 50 per cent of their exports. "
"And what is there to be done about it? "
Then followed a reasoned statement that deserves
the attention of anybody who is interested in know-
ing what Europe is doing or thinking of doing to
protect itself against "The Red Trade Menace," a
phrase that may or may not be justified as the des-
cription of the effect of the Soviet exports upon some
countries and upon some industries, but that would
be admitted even by Soviet partisans to be thoroughly
applicable in the case of the Swedish and Finnish
timber industry.
"There are three conceivable ways to check the
Soviet competition, or to ameliorate its effects upon
us. One is war. One is an international boycott. One
is an agreement. War," continued the speaker, "is
absolutely out of the question. An international boy-
cott is impossible. There remains agreement. This
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? FIGHTING THE RED TRADE MENACE 207
forced export of the Soviet Union is hurting her as
much as it hurts us, if not more. It is a question
whether she will be able to carry out her Plan in full,
since she has cut a good deal of the most conveniently
situated timber and from now on the problem of
transporting felled trees to waterways will become
increasingly difficult. The average distance the
Soviets have to carry their logs to water now is
about five miles, compared to half that distance in
Sweden.
"From month to month this distance will increase
for the Soviets. In watching the Five-Year Plan re-
sults you must pay attention now to the timber trans-
ported, not the timber cut. Up to April 10 of this
year that had cut 118,000,000 cubic meters of timber,
77. 6 per cent of the amount called for by the plan.
True that is an enormous lot of timber, but of it
they transported in that time only 81,000,000 cubic
meters, or 61. 3 per cent of the timber transport
called for by the plan. We can afford to wait until
they come to us with a proposal for an arrangement
or some kind of export quota system. The position
of the three countries, Sweden, Finland and Russia,
is favorable for such an agreement. Among the three
of us we produce half of the world's sawn and planed
timber for export. Our normal production for ex-
port should be about the same, each turning out about
1,000,000 standards. We can afford to wait. "
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? 208 FIGHTING THE RED TRADE MENACE
But from the Soviet side comes precisely the same
statement: "We can afford to wait. "
And here the matter stands today. Both sides
beyond doubt want a truce. Allowance has been made
for any statement made by one side about the other
side, yet the burden of evidence seems in favor of
the correctness of the Swedish and Finnish allega-
tions that some of the Soviet export is too costly to
be worth while, even under the peculiar economic
conditions of the Five-Year Plan. They cite, for ex-
ample, an instance of how expensive the Soviet's load-
ing difficulties are in Leningrad, where one ship is
said to have waited so long for her cargo that after
it had been loaded the demurrage charges when added
to the freight exceeded the value of the cargo, and
this loss was not in paper troubles, but in precious
foreign currency.
This cannot be typical, but in timber as in other
exports it is plain that the Soviet Union has every-
thing to gain and nothing to lose by entering into
an export quota pool that would insure as large re-
turns from the smaller quantity of exports as could
be obtained outside the pool by a greater quantity
of exports. Yet in the opinion of the timber trade
the Soviets, for the sake of obtaining a still better
tactical position, probably will continue for some
time, perhaps a year, perhaps two, to strain every
nerve to accomplish the extreme limits of the Five-
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? FIGHTING THE RED TRADE MENACE 209
Year Plan for Her timber exports. The bigger the
share of the world market they can seize, the bigger
share they can claim when the time comes to talk of
export quotas.
Meanwhile, in the timber trade the period has
arrived resembling the year 1917 in the World War
when both sides were weary and wishing peace, but
neither side willing to take the first step for fear
of showing weakness.
If there is any lesson to be drawn by the outside
world from this experience of the Swedes and Finns,
one lesson would seem to be that the non-Soviet ex-
porters have little hope of sympathy from the im-
porters. The Swedes and Finns took much pains to
lay their case before the British importers, appealing
to them not to ruin Swedish and Finnish business
and not to forsake old trade friends. But the Brit-
ish, who could become quite excited about the pos-
sibility of Soviet manufactured articles competing
with the British products, showed but faint traces of
interest in the effect of Soviet timber on the Swedish
and Finnish trade.
All this is highly instructive to the student of
Soviet commercial relations with the outside world,
but Americans probably will be more interested in
the developments in the oil business in Sweden, where
two American companies, the Standard and the
Texaco, are keenly concerned. The war on this sector
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? 210 FIGHTING THE RED TRADE MENACE
is, if anything, more ferocious than it has been in
the timber trade. Here conflicting statements render
judgment of the immediate balance of forces dif-
ficult, but the trend toward an ultimate Soviet vic-
tory appears clear and is even partly admitted by
their opponents.
While there is constant talk of the chances of a
great capitalist oil trust coming to some agreement
with the Soviet Oil trust, few persons have realized
how far along toward obtaining and insuring its
share of the world oil market the Soviet Oil Trust
already has gone in the form of regional agreements.
Under such agreements, the Soviet Oil Trust already
has 35 per cent of the German market, 22 per cent
of the English market and, without any agreement,
more than 25 per cent of the Italian market and a
certain 10 per cent, but estimated 15 to 20 per cent,
of the French market, counting the French navy's
imports.
For a concern so rankly outside, this is a fairly
large share of Continental imports, but the Soviet
Oil Trust appears to be only gathering speed. Until
two years ago it virtually ignored the Scandinavian
market. Today it is putting direct sales organiza-
tions into Denmark and Norway and here in Sweden,
through the "Naphtha Syndicate," selling directly,
it has 25 per cent of the market and is holding out
for 40 per cent when and if the Standard, Texaco,
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? FIGHTING THE RED TRADE MENACE 211
Shell and Anglo-Persian are willing to make an
agreement.
While the Soviets' competitors refuse to admit
that the Naphtha Syndicate has more than 15 per
cent of the trade, they grant that the Soviet share
probably will climb to 20 per cent this year. Mean-
while the price war is vicious and admittedly un-
profitable to anybody except the Swedish consum-
ers, who are buying gasoline cheaper than ever in
their history.
In 1926 gasoline here was forty cents a gallon; in
1927, thirty cents; January, 1930, twenty-seven
cents; October, 1930, twenty-two cents; April, 1931,
twenty cents and today with rebates of one kind and
another consumers are getting gasoline as cheap as
fifteen cents a gallon. With a tax of eight cents a
gallon, transport costs of one cent a gallon and
estimated overhead and distributing costs of six cents
a gallon, the price of fifteen cents a gallon would
leave precisely nothing.
Earning nothing, each party at the moment is
waiting for the other to weaken, but the Soviet share
of the market, whether 15 or 25 per cent, is ad-
mittedly growing and an appreciative public is
keeping in touch with the Naphtha Syndicate's prog-
ress through half page advertisements in newspapers
announcing that Soviet oil imports climbed to second
place among all the oil companies the first quarter
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? 212 FIGHTING THE RED TRADE MENACE
of 1931. This touch of American publicity sense, un-
usual in a Soviet enterprise, may have been due to
the fact that the manager of the Soviet Oil Com-
pany here is American; probably the only Amer-
ican employed anywhere in the world is a respon-
sible position in the sales organization of the Soviet
Foreign Trade Monopoly.
Excited as are the Swedish timber exporters over
the purchases by other nations of Soviet exports of
timber, the Swedish public maintains a grateful calm
in the face of Soviet exports of oil to Sweden, and
while Soviet competition in timber has evoked pro-
longed Swedish protests, the only voices audible in
Sweden against Soviet competition in oil are Amer-
ican and British voices. Sweden, it may be recalled,
produces no oil.
Sweden does produce wheat and rye. Not enough
for the whole consumption, but enough to be heavily
affected by the Russian grain if it were permitted to
come unchecked into the country. It is not surpris-
ing, therefore, that now just before the Soviet grain
export season gets under way, Sweden has estab-
lished a state grain and flour monopoly, the "Swedish
Grain Association," for the import and sale of wheat,
rye, grain and flour. On the lines of the Norwegian
system, the Swedish monopoly has the same purpose
to protect domestic growers and to that end has an-
nounced it will buy all the wheat and rye offered by
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? FIGHTING THE RED TRADE MENACE 213
the Swedish producers at prices averaging from
forty to fifty cents a bushel more than the market
price for foreign grain. This is an even greater price
differential than that paid by the Norwegian mo-
nopoly, and the Swedish farmers are happy at the
genuine protection against the Soviet, American and
Canadian competition.
Of any other move directly or indirectly to check
or control the Swedish trade with the Soviet Union
there were no indications discoverable in a short visit.
Sweden has an active trade balance with the Soviet
Union showing about $3,000,000 on the plus side in
1927-1928, nearly $4,000,000 in 1928-1929, and
$7,000,000 in 1929-1930. She sells chiefly cream
separators, boring machines, turbines and saws--the
saws used to cut the timber the Soviet Union now is
exporting at the expense of the Swedish sawmill
owners.
But the men who make the saws are not the same
men who run sawmills, so the record shows that while
the Swedish timber exporters were growing more
vehement in their protests against the Soviet timber,
the Swedish saw manufacturers were selling more
saws with which to cut that timber. In 1927-1928
they sold saws to the value of $650,000; in 1928-
1929, to the value of $700,000, in 1929-1930 to the
value of $1,300,000. Sweden's total exports to the
Soviet Union in 1929-1930, counting the imports
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? 214 FIGHTING THE RED TRADE MENACE
into the Soviet Union by the Swedish concessions
operating there, amounted to nearly $11,000,000
while the total Swedish purchases from the Soviet
Union, chiefly of oil and grain, amounted to about
$4,000,000.
All the Swedish sales to the Soviet Union are
made without a Government guarantee and I was
assured that several of the largest Swedish export
firms carry their own Soviet notes. The average
credit time granted to the Soviet trade representa-
tives here is thirteen months. Those concerns that
wish to discount their Soviet notes will be refused
by the Swedish banks if they wish to discount with-
out recourse. They may, however, discount at the
Soviet Bank here. This Soviet financial practice is
worth attention. For example: A Swedish manufac-
turer sells a bill of goods for $100,000 to the Soviet
commercial representative, who gives a promissory
note for $106,000, payable in thirteen months.
Unable to discount the bill without recourse to
the Swedish Bank, the manufacturer may, however,
take it to the Soviet Bank here and receive for the
bill around $90,000 to $95,000 cash. The Soviets
thus have bought back their own bill at a discount
of 11 to 16 per cent and have in effect merely ob-
tained a rebate of that much for cash payment on
the goods they purchased. Such are the pecularities
of finance, however, that the Soviets find this method
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? FIGHTING THE RED TRADE MENACE 215
gives them more leeway than the payment direct in
cash, as their bank here can borrow from Swedish
sources up to a certain amount to use for discounting
bills. When that sum is exceeded, however, and the
Soviet Bank has no more funds for discounting then
the Swedish manufacturer who wants to discount
without recourse must take his bill to Paris or else-
where, where "black brokers" will favor him with
cash at 27 per cent.
All these other features of Swedish-Soviet com-
mercial relationships, oil, saws, active trade balance,
are important to recollect in judging the great
timber war that dominates the picture. In that war
the Swedish and Finnish timber trade appears to
be losing faith in the effectiveness of the forced labor
issue. They have observed that prices, not pathos,
have decided the business in England, and when the
British Parliament turned down the bill to forbid
the import of products of forced labor, interest in
the "Russian conscripts" flagged. Swedish and Fin-
nish exporters have not entirely abandoned the hope
of affecting the hearts of the British and other con-
sumers, but the attention of the trade now is directed
largely toward the hopes of affecting the pocket-
book of their competitor.
An agreement to divide the market with the Soviet
Union seems the only solution to many who have
seen how difficult it is to keep the Soviet Union out
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? 216 FIGHTING THE RED TRADE MENACE
of the market. Sentiment has been retired to reserve
stations and "sound business sense" brought up to
the front line. With these troops the Soviet forces
are accustomed to deal and signs are not lacking
that the timber war may end in "peace without
victory. "
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?
should have been published abroad of this worst labor
conflict that any country in Europe has experienced
since the British general strike. It virtually amounts
to a general strike, and although Norway's 2,821,000
inhabitants class her numerically as one of the small-
est nations, in point of world importance she occupies
a much greater place than her numbers would in-
dicate, and a practical paralysis of her entire in-
dustry cannot be a matter of indifference to Europe
or America.
The lockout is based in the last analysis on the
Norwegian's character. They have more of that com-
modity than most. Their workmen are the best paid
in Europe, and are likewise the best organized and
the most stubborn, and when last April employers
proposed a cut in wages of 15 per cent, the trade
unions replied by demanding a 10 per cent increase
and a reduction in the working day from eight to
seven hours. They agreed to disagree and since that
time Norway's leather, tobacco, paper, pulp, electro
chemical, rubber, soap, electrical, clothing, chocolate,
shipyard, shoe, textile, sawmill, building trades and
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? FIGHTING THE RED TRADE MENACE 198
printing industries have been as good as hermetically
sealed. The unions are air tight, dock workers and
transport men refuse to handle any wares from
locked-out plants and the net balance of the first
two months of the conflict was estimated at $9,000,000
in lost wages and a $32,000,000 loss to industry. The
trade unions paid out to the unemployed $6,000,000
from the war chest. With all this labor trouble, there
is not a single Communist in Parliament. And with all
its internecine wrangles within its own household and
within the broader household of Scandinavia,
wrangles that divert attention from the problem of
relationships between the Soviet and the non-Soviet
worlds, Norway has nevertheless taken several im-
portant measures that bear on those relationships.
For Norway already has moved so far in the direction
of state monopolies that it is possible to draw a cer-
tain comparison between her system and that of the
Soviet Union.
In four important commodities the state in a dif-
ferent degree and in a different form is in control:
in grain and flour, in herrings and in wine. The wine
and spirits monopoly is an expression of the Nor-
wegian attempt at prohibition dictated more by
sociological than by economic considerations. The
herring monopoly, semi-private but under govern-
mental supervision, is for export alone. The grain and
flour monopoly, the most interesting of all, is a
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? 194 FIGHTING THE RED TRADE MENACE
straight state organ monopolizing all export and im-
port buying and selling.
Norway has to import grain. She wishes however
to encourage as much as possible local production.
For Norway remembers her slim rations of wartime
when German submarines sank nearly one-half of
her merchant fleet.
With this in mind and only incidentally in a year
when the Soviet's Five-Year Plan began,--in 1928,
the Government established a "state grain monopoly. "
The essential task of the monopoly is to buy all home
grown grain produced at a price above the price of
imported grain. The price differential is very large.
It amounts to about 30 cents per bushel on wheat,
rye, barley and to a fraction less on oats.
The important point is that the monopoly always
pays home growers more than it pays for foreign
grain and that the home growers is always sure of
disposing of all of his crop. Of course, if foreign
grain prices fall, so do the prices for home-grown
grain, but never below those of foreign grain and the
home grower is never in danger of having his crop rot
on his hands while foreign grain, be it Russian or
otherwise, floods the market. Having bought all the
grain produced at home and sufficient more from
abroad to fill out the country's needs, the monopoly
then sells it at a price that will enable just enough
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? FIGHTING THE RED TRADE MENACE 195
profit to meet the overhead--the same price for simi-
lar qualities whether domestic or foreign, and the
same price to all buyers.
This obviously is one way of meeting "dumping. "
It is a system that is said to have worked well during
the initial three years of its operation under the en-
ergetic management of Oscar Jahnsen, who, as the
managing director with an advisory council of seven
members, by reason of this office is the chief of Nor-
way's largest business enterprise.
In one respect it worked a hardship on the Ameri-
can exporters of flour to Norway, for the monopoly
decreed all trade marked flour should have the trade
mark removed, be classified and branded with the
monopoly's own brands. In this way the American
millers, who had spent large sums in advertising, lost
sales appeal to the Norwegian public. In another
and more important respect the monopoly, however,
certainly has not been disadvantageous to the Ameri-
can producers, for in 1930 when Russian wheat was
avalanching down on Europe, the Norwegian mo-
nopoly, it is true, bought 150,000 tons from the
Soviets against none in 1929, but it continued to buy
in 1930 more from America than it bought in 1929.
The record of Norway's wheat purchases for those
two years shows again that it was the Argentine that
suffered most from Soviet competition and that Can-
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? 196 FIGHTING THE RED TRADE MENACE
ada lost some, but much less than the South American
producer, handicapped by a long freight haul. In
1929 Argentina sold to Norway 137,157 tons and in
1930 under the pressure of Russian wheat, Argentina
sold only 16,380 tons. Canada in 1929 sold to Norway
82,864 tons and in 1930 sold 69,000 tons. But the
American exports to Norway in 1929 were 28,968
tons and in 1930 were 35,846.
Several Central European countries have been
watching this Norwegian experiment with interest and
already Sweden has adopted it. The Norwegians them-
selves on the whole are satisfied with it, even though
the consumers have complained that grain and flour
cost more under the monopoly than under free trade.
It is obvious, however, that if the Norwegian farmers
are to make more money somebody has to pay for
it and the final payer is always the consumer.
The Norwegians as a matter of fact liked the mo-
nopoly idea so well that important groups in Parlia-
ment that were behind the late Mowinckel Govern-
ment have brought forth a serious proposal for a
general State monopoly for export. For Americans
it is especially interesting to observe that the purpose
of the state export monopoly scheme is to promote the
formation of syndicates and trusts exactly contrary
to the efforts of the American Government to prevent
their formation. Price fixing is held in Norway to be
beneficial to the national economy and under the state
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? FIGHTING THE RED TRADE MENACE 197
export monopoly as projected in the bill only those
persons or corporations would be permitted to export
what belonged to an export association.
This idea developed from the herring trade export
syndicate, which, by reason of the fact that it con-
trols the entire herring output of Norway is able to
determine the extent of the catch, limiting it to a
figure calculated to give a maximum profit, is able
to limit and direct exports and is able to present a
united front to purchasers abroad. The clear ad-
vantages of such an organization, proved in practice
in the herring trade, gave rise to the suggestion that
it be extended to all branches of export trade, al-
though it has been suggested that the wood pulp
manufacturers' syndicate, desiring to force several
strong outsiders to join the combination, have been
chiefly instrumental in promoting the project.
Whatever special interests may be concerned, it
will strike the observer at once that such export or-
ganizations are effective counterparts to the Soviet
Foreign Trade Monopoly. They are able to equalize
the advantage the Soviet monopoly has in its com-
mercial dealings with the unorganized, mutually com-
petitive bourgeois concerns and are equivalent to the
sort of organization the Germans tried to bring to life
three years ago with their Russian committee of the
Reich's Manufacturers' Association. The decisive dif-
ference is that the German committee, formed to unify
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? 198 FIGHTING THE RED TRADE MENACE
German industrialists for trading with the Soviet
Union, but only with the Soviet Union, was killed by
the Soviet objection that this was discrimination,
whereas the Soviets cannot oppose or refuse to deal
with an export monopoly that is intended to deal
with all countries.
In the same way that the Norwegian state grain
and flour monopoly is an effective instrument of de-
fense against "dumping," so the Norwegian export
monopoly would be especially useful for sales to the
Soviet Union. These sales as far as Norway is con-
cerned have been profitable, for the Five-Year Plan
has put the Russian population on the cheapest fish
diet possible and Norway supplied in the second year
of the plan in 1929, 50,000 tons of salt herring. She
also has supplied to the Soviet Union aluminum and
ferro-alloys in such volume that in that year her
foreign trade balance was strongly active, showing
about $4,500,000 in exports to the Soviet Union
against $1,800,000 in imports from the Soviet Union.
Lumber was Norway's chief import from the Soviet
Union until 1930, when the Russian grain came for-
ward. It needs to be emphasized that Norway is one
Scandinavian country that suffered but little if any-
thing from Soviet timber exports. Norway exports
chiefly finished, planed, sawn timber or wood pulp,
while the Soviet exports so far chiefly have been rough
products. So that the Norwegian mills actually prof-
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? FIGHTING THE RED TRADE MENACE 199
ited from the import of Russian wood to finish here
and re-export. In this, however, as in most countries,
there is a conflict of interests and the forest owners
here protest against Russian imports while the mill
owners defend them.
Meanwhile the Norwegian Government does its
share to promote the Soviet trade by the export credit
system, guaranteeing 75 per cent of the face value of
Soviet bills. The fund available has just been raised
from $3,900,000 to $5,200,000 and the terms of in-
terest are even more reasonable than Denmark's. The
payments on Soviet purchases of herring afford a
good illustration. Against the presentation of a bill
of lading for purchased herrings, the Soviet com-
mercial representative gives the exporter two twelve-
months promissory notes dated the day of shipment
for 25 per cent and 75 per cent of the invoice value
in Norwegian crowns, plus the current discount rate
and an additional 1% per cent. In other words, if
the invoice f . o. b. port is 100 crowns, the notes would
be for 105. 75 crowns, the difference being the Norges
bank discount rate of 4 per cent plus a 1% per
cent additional charge. Having obtained the Govern-
ment's export credits guarantee on the 75 per cent
bill, the exporter can then present his notes to the
Norges Bank and receive 75 per cent in cash against
the normal discount rate and the other 25 per cent
if he wants it at a rate that would bring the total cost
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? 200 FIGHTING THE RED TRADE MENACE
to the exporter up to around 6 or 7 per cent. The
law, however, only provides for twelve months' credit
and notes may not be renewed except for ships under
construction by Norwegian yards for the Soviets.
At no discoverable point has Soviet competition
touched American trade with Norway, although the
American and other foreign oil companies are nerv-
ous. A Soviet delegation just came here to choose
and buy sites for gasoline and kerosene tanks. The
Norwegians are willing to do business. It is only now
and then that the Norwegian gazing at the map of
this part of the world looks at that 600 mile long
imaginary line separating Finland from the Soviet
Union and exclaims, "The poor Finns! "
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? CHAPTER XIX
Stockholm:
Standing in the center of Kungstraed Garden in
Stockholm, Charles XII, heroic figure of Sweden's
brilliant military period, stretches a bronze left arm
eastward, holds in his right hand an unsheathed
sword. Russia is the target of his pointing forefinger.
Danger lies in the East for the Sweden of Charles
XII. It lies in the East for Sweden now, but Sweden
holds no sword in her right hand today. Not war but
peace with the Soviets is the hope of Sweden's key
industry, the timber trade. "Fight" has been the
slogan of this industry and the struggle has been
bitter, costing each side more than either can afford.
"Pact" is today the talk in Stockholm, and although
the war may go much further there are many signs
that on this particular sector of the conflict of the
non-Soviet with the Soviet world an armistice is in
sight.
This country is the one European land where the
Soviet Five-Year Plan has struck harder than in any
other, with the possible exception of Finland. Sweden
is feeling Soviet competition in timber more painfully
than any other country save Finland. And for Sweden
201
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? 202 FIGHTING THE RED TRADE MENACE
timber is a matter of economic life or death. Half her
exports are timber and timber products.
Chief timber exporter of the world, Sweden is
proud of that title. Sweden now is about to relinquish
it. The same power that 200 years ago crushed
Sweden's great military king under the sheer weight
of numbers today is bringing an unbearable pres-
sure on Sweden's primary industry and by sheer
weight of timber is forcing a decision. One does not
have to have a keen appetite for economics to be in-
terested in this conflict. Here are all the elements of
a drama, of warfare, even of a great sporting event,
though of a sporting event that has a good deal more
significance for the world than the mere totaling up
of scores. And it is a game in which no one can proph-
esy when the whistle will blow to end it.
Stockholm itself, one must observe, shows no out-
ward sign of injury in this timber-war, though this
is a "timber-minded" city, where every one knows
and talks timber and where in the last analysis of
a very large section of the population is dependent
on timber for a living. Stockholm's famous standard
of living is still very high, her waterways are full of
ships, her streets of American automobiles, her hotels
of fashionable folk, and one of the first stories one
hears is the perhaps misleading tale that the Swedish
bricklayers are better paid than Cabinet Ministers.
Specifically, it is related that there have been times
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? FIGHTING THE RED TRADE MENACE 203
when bricklayers working on piece work toward the
end of a job that must be finished, are able, by holding
up a contractor, to get as much as $25 a day, while
a Cabinet Minister receives but $15 a day. This, it
must be admitted, is a record worthy of a place beside
some exploits of the American building trades unions.
Whether it is typical of Swedish wages may be
doubted, but those wages still are generous and
Sweden as a whole has suffered, according to the
reports of its own citizens, less than most European
countries from the world economic crisis. Some even
deny that Denmark deserves the title of the most
prosperous country in Europe, pointing out that
Sweden, too, has but one unemployed in every sixty
inhabitants. These optimists are not, however, to be
found in the timber trade itself. In this trade there
is one dominating thought: Russia. And here in this
trade may be found the most sharply outlined and
clearly defined sector of the broader economic con-
flict now going on between the Soviet and non-Soviet
world.
In most sectors of this world-wide front the factors
are too complicated and the contestants too widely
separated to permit a comprehensive view. Here the
lineup is in sight of every one. On one side the "Swed-
ish Wood Exporters' Association" and the "Finnish
Sawmill Owners' Association"; on the other side the
"Exportles," the Soviet timber export syndicate.
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? 204, FIGHTING THE RED TRADE MENACE
Here, too, the battlefield is limited. England, the
world's best timber market for exporters, is the site
where the contest will be decided.
The timber war began in 1928, the first year of
the Five-Year Plan. Until that year England's im-
ports of softwood from the Soviet Union amounted
to but 17 per cent of the total of her softwood timber
imports, while Sweden's share was 20 per cent, and
Finland's 27 per cent. Canada sent 5 per cent. Back
in 1921 the Soviet Union had only 5 per cent of Eng-
land's total imports. It was a long jump for the Soviet
Union to climb from 5 per cent to 17 per cent, but
Sweden and Finland still had so much of the market
that no particular anxiety was felt about the Soviet
competition.
Russia, it was believed, would scarcely
do more since for the four years from 1924 to 1927
her timber exports had remained about the same. The
Five-Year Plan was the occasion at first for sniffs,
next for doubts, then for alarm, now for something
approaching panic, though of course no combatant
will admit defeat. The comparative record of the Rus-
sian, Swedish and Finnish exports to Great Britain
since the Five-Year Plan began tells the story. The
Soviet's share of England's total softwood imports
leaped by 1930 to 32 per cent, Finland's fell to 22
per cent; Sweden's to 19 per cent and in 1931 the
share of the Soviet Union will probably be more than
50 per cent.
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? FIGHTING THE RED TRADE MENACE 205
This would be bad enough from the Swedish and
Finnish standpoint, if the situation rested there. Pre-
war Russia also supplied 51 per cent of the British
softwood timber requirements. But the Five-Year
Plan foresees exports that far surpass anything that
Czarist Russia did. Pre-war Russia exported from
the territory occupied by the Soviet Union about
800,000 standards of sawn and planed timber. In
1926 the Soviet Union exported 320,000; in 1928,
560,000; in 1930, 965,000 and in 1931 the Swedish
exporters estimate the Soviet export will be more than
1,000,000 standards, although they hope it won't
reach the 1,300,000 called for by the plan. In 1932
the plan calls for the export of 1,500,000; in 1933,
1,800,000, although one of the maximum variations
of the plan fixes even 3,000,000 as the goal for 1933.
That is as much as the total exports of the Soviet
Union, Sweden and Finland put together in 1930.
Meanwhile, the Swedish total exports of sawn and
planed timber decreased from 1,200,000 standards
in 1929 to 996,000 in 1930 and an estimated 850,000
in 1931, and Finland's exports decreased from
1,200,000 in 1929 to 899,000 in 1930 and an esti-
mated 750,000 in 1931. These are statistics sent by
the Swedish and Finnish exporters to the British
Members of Parliament after the Soviets last autumn
disposed of from 600,000 to 750,000 standards of
timber in their famous deal with the British Soft-
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? 206 FIGHTING THE RED TRADE MENACE
wood Buyers Corporation. The statistics meant, said
the Swedish and Finnish representatives, that the
producers in their two countries had been forced to
agree to reduce their exports next year to 80 per cent
of the 1929 exports. I asked authoritative sources in
Stockholm, "Does that mean you surrender 20 per
cent of your market to the Soviets? " "It does," was
the reply.
"And if the Five-Year Plan is fulfilled? "
"It means the Swedes and Finns will have to give
up 50 per cent of their exports. "
"And what is there to be done about it? "
Then followed a reasoned statement that deserves
the attention of anybody who is interested in know-
ing what Europe is doing or thinking of doing to
protect itself against "The Red Trade Menace," a
phrase that may or may not be justified as the des-
cription of the effect of the Soviet exports upon some
countries and upon some industries, but that would
be admitted even by Soviet partisans to be thoroughly
applicable in the case of the Swedish and Finnish
timber industry.
"There are three conceivable ways to check the
Soviet competition, or to ameliorate its effects upon
us. One is war. One is an international boycott. One
is an agreement. War," continued the speaker, "is
absolutely out of the question. An international boy-
cott is impossible. There remains agreement. This
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? FIGHTING THE RED TRADE MENACE 207
forced export of the Soviet Union is hurting her as
much as it hurts us, if not more. It is a question
whether she will be able to carry out her Plan in full,
since she has cut a good deal of the most conveniently
situated timber and from now on the problem of
transporting felled trees to waterways will become
increasingly difficult. The average distance the
Soviets have to carry their logs to water now is
about five miles, compared to half that distance in
Sweden.
"From month to month this distance will increase
for the Soviets. In watching the Five-Year Plan re-
sults you must pay attention now to the timber trans-
ported, not the timber cut. Up to April 10 of this
year that had cut 118,000,000 cubic meters of timber,
77. 6 per cent of the amount called for by the plan.
True that is an enormous lot of timber, but of it
they transported in that time only 81,000,000 cubic
meters, or 61. 3 per cent of the timber transport
called for by the plan. We can afford to wait until
they come to us with a proposal for an arrangement
or some kind of export quota system. The position
of the three countries, Sweden, Finland and Russia,
is favorable for such an agreement. Among the three
of us we produce half of the world's sawn and planed
timber for export. Our normal production for ex-
port should be about the same, each turning out about
1,000,000 standards. We can afford to wait. "
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? 208 FIGHTING THE RED TRADE MENACE
But from the Soviet side comes precisely the same
statement: "We can afford to wait. "
And here the matter stands today. Both sides
beyond doubt want a truce. Allowance has been made
for any statement made by one side about the other
side, yet the burden of evidence seems in favor of
the correctness of the Swedish and Finnish allega-
tions that some of the Soviet export is too costly to
be worth while, even under the peculiar economic
conditions of the Five-Year Plan. They cite, for ex-
ample, an instance of how expensive the Soviet's load-
ing difficulties are in Leningrad, where one ship is
said to have waited so long for her cargo that after
it had been loaded the demurrage charges when added
to the freight exceeded the value of the cargo, and
this loss was not in paper troubles, but in precious
foreign currency.
This cannot be typical, but in timber as in other
exports it is plain that the Soviet Union has every-
thing to gain and nothing to lose by entering into
an export quota pool that would insure as large re-
turns from the smaller quantity of exports as could
be obtained outside the pool by a greater quantity
of exports. Yet in the opinion of the timber trade
the Soviets, for the sake of obtaining a still better
tactical position, probably will continue for some
time, perhaps a year, perhaps two, to strain every
nerve to accomplish the extreme limits of the Five-
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? FIGHTING THE RED TRADE MENACE 209
Year Plan for Her timber exports. The bigger the
share of the world market they can seize, the bigger
share they can claim when the time comes to talk of
export quotas.
Meanwhile, in the timber trade the period has
arrived resembling the year 1917 in the World War
when both sides were weary and wishing peace, but
neither side willing to take the first step for fear
of showing weakness.
If there is any lesson to be drawn by the outside
world from this experience of the Swedes and Finns,
one lesson would seem to be that the non-Soviet ex-
porters have little hope of sympathy from the im-
porters. The Swedes and Finns took much pains to
lay their case before the British importers, appealing
to them not to ruin Swedish and Finnish business
and not to forsake old trade friends. But the Brit-
ish, who could become quite excited about the pos-
sibility of Soviet manufactured articles competing
with the British products, showed but faint traces of
interest in the effect of Soviet timber on the Swedish
and Finnish trade.
All this is highly instructive to the student of
Soviet commercial relations with the outside world,
but Americans probably will be more interested in
the developments in the oil business in Sweden, where
two American companies, the Standard and the
Texaco, are keenly concerned. The war on this sector
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? 210 FIGHTING THE RED TRADE MENACE
is, if anything, more ferocious than it has been in
the timber trade. Here conflicting statements render
judgment of the immediate balance of forces dif-
ficult, but the trend toward an ultimate Soviet vic-
tory appears clear and is even partly admitted by
their opponents.
While there is constant talk of the chances of a
great capitalist oil trust coming to some agreement
with the Soviet Oil trust, few persons have realized
how far along toward obtaining and insuring its
share of the world oil market the Soviet Oil Trust
already has gone in the form of regional agreements.
Under such agreements, the Soviet Oil Trust already
has 35 per cent of the German market, 22 per cent
of the English market and, without any agreement,
more than 25 per cent of the Italian market and a
certain 10 per cent, but estimated 15 to 20 per cent,
of the French market, counting the French navy's
imports.
For a concern so rankly outside, this is a fairly
large share of Continental imports, but the Soviet
Oil Trust appears to be only gathering speed. Until
two years ago it virtually ignored the Scandinavian
market. Today it is putting direct sales organiza-
tions into Denmark and Norway and here in Sweden,
through the "Naphtha Syndicate," selling directly,
it has 25 per cent of the market and is holding out
for 40 per cent when and if the Standard, Texaco,
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? FIGHTING THE RED TRADE MENACE 211
Shell and Anglo-Persian are willing to make an
agreement.
While the Soviets' competitors refuse to admit
that the Naphtha Syndicate has more than 15 per
cent of the trade, they grant that the Soviet share
probably will climb to 20 per cent this year. Mean-
while the price war is vicious and admittedly un-
profitable to anybody except the Swedish consum-
ers, who are buying gasoline cheaper than ever in
their history.
In 1926 gasoline here was forty cents a gallon; in
1927, thirty cents; January, 1930, twenty-seven
cents; October, 1930, twenty-two cents; April, 1931,
twenty cents and today with rebates of one kind and
another consumers are getting gasoline as cheap as
fifteen cents a gallon. With a tax of eight cents a
gallon, transport costs of one cent a gallon and
estimated overhead and distributing costs of six cents
a gallon, the price of fifteen cents a gallon would
leave precisely nothing.
Earning nothing, each party at the moment is
waiting for the other to weaken, but the Soviet share
of the market, whether 15 or 25 per cent, is ad-
mittedly growing and an appreciative public is
keeping in touch with the Naphtha Syndicate's prog-
ress through half page advertisements in newspapers
announcing that Soviet oil imports climbed to second
place among all the oil companies the first quarter
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? 212 FIGHTING THE RED TRADE MENACE
of 1931. This touch of American publicity sense, un-
usual in a Soviet enterprise, may have been due to
the fact that the manager of the Soviet Oil Com-
pany here is American; probably the only Amer-
ican employed anywhere in the world is a respon-
sible position in the sales organization of the Soviet
Foreign Trade Monopoly.
Excited as are the Swedish timber exporters over
the purchases by other nations of Soviet exports of
timber, the Swedish public maintains a grateful calm
in the face of Soviet exports of oil to Sweden, and
while Soviet competition in timber has evoked pro-
longed Swedish protests, the only voices audible in
Sweden against Soviet competition in oil are Amer-
ican and British voices. Sweden, it may be recalled,
produces no oil.
Sweden does produce wheat and rye. Not enough
for the whole consumption, but enough to be heavily
affected by the Russian grain if it were permitted to
come unchecked into the country. It is not surpris-
ing, therefore, that now just before the Soviet grain
export season gets under way, Sweden has estab-
lished a state grain and flour monopoly, the "Swedish
Grain Association," for the import and sale of wheat,
rye, grain and flour. On the lines of the Norwegian
system, the Swedish monopoly has the same purpose
to protect domestic growers and to that end has an-
nounced it will buy all the wheat and rye offered by
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? FIGHTING THE RED TRADE MENACE 213
the Swedish producers at prices averaging from
forty to fifty cents a bushel more than the market
price for foreign grain. This is an even greater price
differential than that paid by the Norwegian mo-
nopoly, and the Swedish farmers are happy at the
genuine protection against the Soviet, American and
Canadian competition.
Of any other move directly or indirectly to check
or control the Swedish trade with the Soviet Union
there were no indications discoverable in a short visit.
Sweden has an active trade balance with the Soviet
Union showing about $3,000,000 on the plus side in
1927-1928, nearly $4,000,000 in 1928-1929, and
$7,000,000 in 1929-1930. She sells chiefly cream
separators, boring machines, turbines and saws--the
saws used to cut the timber the Soviet Union now is
exporting at the expense of the Swedish sawmill
owners.
But the men who make the saws are not the same
men who run sawmills, so the record shows that while
the Swedish timber exporters were growing more
vehement in their protests against the Soviet timber,
the Swedish saw manufacturers were selling more
saws with which to cut that timber. In 1927-1928
they sold saws to the value of $650,000; in 1928-
1929, to the value of $700,000, in 1929-1930 to the
value of $1,300,000. Sweden's total exports to the
Soviet Union in 1929-1930, counting the imports
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? 214 FIGHTING THE RED TRADE MENACE
into the Soviet Union by the Swedish concessions
operating there, amounted to nearly $11,000,000
while the total Swedish purchases from the Soviet
Union, chiefly of oil and grain, amounted to about
$4,000,000.
All the Swedish sales to the Soviet Union are
made without a Government guarantee and I was
assured that several of the largest Swedish export
firms carry their own Soviet notes. The average
credit time granted to the Soviet trade representa-
tives here is thirteen months. Those concerns that
wish to discount their Soviet notes will be refused
by the Swedish banks if they wish to discount with-
out recourse. They may, however, discount at the
Soviet Bank here. This Soviet financial practice is
worth attention. For example: A Swedish manufac-
turer sells a bill of goods for $100,000 to the Soviet
commercial representative, who gives a promissory
note for $106,000, payable in thirteen months.
Unable to discount the bill without recourse to
the Swedish Bank, the manufacturer may, however,
take it to the Soviet Bank here and receive for the
bill around $90,000 to $95,000 cash. The Soviets
thus have bought back their own bill at a discount
of 11 to 16 per cent and have in effect merely ob-
tained a rebate of that much for cash payment on
the goods they purchased. Such are the pecularities
of finance, however, that the Soviets find this method
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? FIGHTING THE RED TRADE MENACE 215
gives them more leeway than the payment direct in
cash, as their bank here can borrow from Swedish
sources up to a certain amount to use for discounting
bills. When that sum is exceeded, however, and the
Soviet Bank has no more funds for discounting then
the Swedish manufacturer who wants to discount
without recourse must take his bill to Paris or else-
where, where "black brokers" will favor him with
cash at 27 per cent.
All these other features of Swedish-Soviet com-
mercial relationships, oil, saws, active trade balance,
are important to recollect in judging the great
timber war that dominates the picture. In that war
the Swedish and Finnish timber trade appears to
be losing faith in the effectiveness of the forced labor
issue. They have observed that prices, not pathos,
have decided the business in England, and when the
British Parliament turned down the bill to forbid
the import of products of forced labor, interest in
the "Russian conscripts" flagged. Swedish and Fin-
nish exporters have not entirely abandoned the hope
of affecting the hearts of the British and other con-
sumers, but the attention of the trade now is directed
largely toward the hopes of affecting the pocket-
book of their competitor.
An agreement to divide the market with the Soviet
Union seems the only solution to many who have
seen how difficult it is to keep the Soviet Union out
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? 216 FIGHTING THE RED TRADE MENACE
of the market. Sentiment has been retired to reserve
stations and "sound business sense" brought up to
the front line. With these troops the Soviet forces
are accustomed to deal and signs are not lacking
that the timber war may end in "peace without
victory. "
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