The Economic Aspect of Geology Part 41

a.s.sociation, Chicago, Illinois, May 31, 1916.

[56] _Loc. cit._, p. 767.

[57] Stabilization of the bituminous coal industry, Extracts from the award and recommendations of the United States Bituminous Coal Commission, Government Printing Office, Washington, 1920.

CHAPTER XVIII

INTERNATIONAL ASPECTS OF MINERAL RESOURCES

WORLD MOVEMENT OF MINERALS

Of the annual world production of minerals about two-thirds are used within the countries where the minerals are produced and one-third is shipped to other countries. In this chapter we are concerned primarily with the part which moves between countries. It may be a.s.sumed that the consumption within the countries of origin is a matter of national rather than international concern.

In pre-war times minerals const.i.tuted about 33 per cent[58] of the value of the total foreign trade of the United States, and 28 per cent of the foreign trade of Germany. Figures are not available to show the proportion of mineral tonnage to that of other commodities.

One of the several interesting facts in this world movement of minerals is that the movement of most of them shows a rather remarkable concentration. For instance, manganese moves from three princ.i.p.al sources to four or five consuming centers. Chromite moves from two princ.i.p.al sources; tungsten also from two. Even for certain commodities which are widely distributed and move in large amounts, the concentration of movement is rather marked; for instance, the world movement of coal is controlled by England, the United States, and Germany. In other words, although the world movement of mineral commodities is widespread and exhibits many complex features, most of the individual minerals follow two or three salient lines of movement.

This means in general that for each mineral there are certain sources of limited geographic extent, which, because of location, grade, relation to transportation, cost--in short, all the factors that enter into availability--are drawn upon heavily for the world's chief demands. The convergence of these materials toward a few consuming centers indicates generally concentration of coal production necessary to smelting, high development of manufacturing, large per capita use, concentration of facilities, strong financial control, and, not least, a large element of enterprise which has taken advantage of more or less favorable conditions.

If a nation were fully supplied with mineral resources, without excess, the mineral problem might be almost exclusively domestic in its nature.

But no country is so situated. For most of the mineral products the dominant supply is likely to be controlled by one or two nations, the other nations being correspondingly deficient and dependent. Even the United States, which is more nearly self-sustaining in mineral resources than any other country, is almost wholly dependent on other countries for certain mineral supplies; and in the case of minerals of which it has an excess it is dependent on other countries for markets. The view that the mineral resource problem is solely a local and national one, of no concern to outsiders, ignores this fundamental fact of distribution of raw materials.

Control of smelting facilities makes it possible for certain countries to exercise considerable influence over the production and distribution of minerals in other countries, and thus presents many difficult international questions. Even more difficult are the international problems created by the commercial ownership and control of minerals in the ground by nationals of other countries.

The national and international aspects of mineral resources are difficult to separate, so intimately do they react on each other. To some extent there may be conflict of interest between the two, but in the main the international questions may be logically approached from the standpoint of national self-interest; for, in the conduct of the national industry along broad and enlightened lines, world conditions must necessarily be considered. A clearer comprehension of the world mineral relations, and an understanding of our own opportunities and limitations in comparison with those of our neighbors, cannot but eliminate some of the unnecessary handicaps to the best use of the world mineral resources, and result in a lessening of causes of international discord.

A brief survey of the mineral conditions preceding, during, and following the war may serve as a convenient means of approach to a study of the present international aspects of the mineral problem.

MOVEMENT OF MINERALS UNDER PRE-WAR CONDITIONS OF INTERNATIONAL TRADE

If the world pre-war movement of minerals is considered broadly, it may be regarded as conforming essentially to normal trade conditions of supply and demand. There have been barriers to overcome, such as tariffs and trade controls and monopolies of various kinds, but these barriers have not prevented the major movements between the best sources of supply and the princ.i.p.al consuming centers. These movements may be regarded as a more or less spontaneous internationalization of mineral resources by private enterprise. The aim of free trade or unrestricted commerce was equality of trade opportunities; but such conditions of unrestricted compet.i.tion tended to concentrate trade in the hands of the strongest interests and to prevent equality of opportunity.

The efforts made to promote or hinder international mineral movements by tariffs, bonuses, embargoes, subsidies, transport control, patents, government management, financial pressure, and other means have been incited mainly by national or imperial self-interest, and have thus been to some extent inimical to an internationalization based on the principle of the greatest good to the greatest number. It may be supposed that, in any effort to attain supernational or international control, motives and measures based on national self-interest of the sort here mentioned will continue to play an important part.

CHANGES DURING THE WAR

The war wrought fundamental changes in the world movement of minerals.

The character and distribution of the demands changed. Customary sources of supply were cut off. Financial disturbances and ship shortage profoundly modified the nature, distribution, and extent of the world movement. Our domestic mineral industry was abruptly brought to a realization of its vital relations with international trade. To ill.u.s.trate, the large movement of manganese from India and Russia to the United States was abruptly stopped, and we had to develop a source of supply in Brazil. The stoppage of pyrite importations from Spain as a means of saving ships required the development of pyrite and sulphur supplies in the United States. The export of oil from the United States to European countries was greatly stimulated, and the export to other countries was correspondingly decreased. The world movements of coal were vitally affected, princ.i.p.ally by the limitation of the coal shipments from England and the United States to South America and the concentration of shipments to European countries. The closing of German coal supplies to nearby countries also had far-reaching consequences.

The cutting off of the German potash left the world for the time being almost unsupplied with this vital fertilizing ingredient. The Chilean nitrates, on which the world had relied for fertilizer purposes, were diverted almost exclusively to the manufacture of powder. The total annual imports of mineral commodities into the United States were reduced by 1,200,000 tons. Our exports, though they continued in large volume, were mainly concentrated in Europe. The story of these disturbances in the world movement of minerals, though highly interesting, is too long to be told here.

Out of these sweeping and rapid changes in the world movement of mineral commodities there arose, partly as cause and partly as effect, international agreements for the allocation of minerals, as a means of insuring the proper proportions of supplies to the different countries for the most effective prosecution of the war. Inter-Allied purchasing committees in London and in Paris found it necessary to make an inter-Allied allocation of the output of Chilean nitrate, because the sum of the demands exceeded the total supply by a considerable fraction, and to agree on the distribution and prices of the world's supplies of tin, tungsten, and platinum. For many other commodities agreements of various sorts were made. For instance, the United States entered into an agreement with England and France for the purchase of iron ore and molybdenum from Scandinavia to keep it out of Germany. The United States and England agreed as to supplying Canada with ferromanganese. New problems of world allocation came up almost daily.

Another war change in mineral conditions, of a more permanent nature, was the liquidation of German ownership and control of minerals in allied countries, and in some cases even in neutral countries.

POST-WAR CONDITION OF THE MINERAL TRADE

The mineral industry has by no means reverted to its pre-war condition.

The old movements have been only partially resumed, and new elements have entered. Shipping is still disturbed. Governments have been cooperating in various ways in the liquidation of government stocks of minerals. The German commercial control of minerals outside of its boundaries, as noted above, has been much weakened. The Reparations Committee created by the Peace Treaty has enormous powers over the use and distribution of the mineral resources of Germany, which directly and indirectly affect the mineral supplies of Europe and all the world. The terms of the Peace Treaty changed in fundamental ways the international channels of mineral movement.

The mineral situation of Europe is in such a state of chaos that the combined efforts of governments will be necessary for many years to bring order. This will be accomplished partly through the Reparations Committee, but may require other forms of cooperation. An international coal commission has already been formed to look after the distribution of coal through Europe. International cooperation in mineral distribution is not merely a theoretical possibility for the future,--it is now the outstanding fact with reference to the European situation.

The recognition of their dependence on neighbors for important mineral resources has led to earnest efforts on the part of nations to supply deficiencies. The great activity of the British government in acquiring oil is one example. The falling off of gold production the world over, together with the increased disparity between gold reserves and the currency issued against them, is causing serious consideration of government action to encourage the gold industry by financial measures tending to increase the profit of the miners (see pp. 224-225).

Before and since the war most countries of the globe, outside of England and the United States, have gone far in the exercise of the right of eminent domain over mineral resources within their own boundaries. Even in England the recent movement to nationalize the coal and oil resources is an indication of the general tendency. In the United States the movement has manifested itself thus far only in the increasing reluctance on the part of the government to part with mineral resources on the public domain,--as is clear from the terms of its new leasing law to cover oil, coal, gas, potash, and phosphates on public lands.

Before the war only the German government was clearly identified with private interests in international trade and in the acquirement of mineral reserves. Since the war all governments except that of the United States are taking an active part in these fields, both directly and in cooperation with private capital. The British government has taken a direct financial interest in certain companies, such for instance as the Anglo-Persian and Sh.e.l.l Oil Companies, and in some cases is actively interested in the acquirement of selling contracts. In England there is a wider use of voting trusts in controlling private companies, with the purpose of preventing the control from falling into alien hands. Government control of shipping in certain countries is involving various degrees of control of mineral movements. Also, through loans and bonds, mineral resources in certain countries have been tied up by the loaning governments. There has been wide extension of government control of minerals in mandatory territories and elsewhere through many new loans and regulations. These steps are in effect closing important parts of the world to private initiative, and particularly to nationals of other countries. Whether these activities of governments are economically desirable or not, they are the actual conditions, not theories.

If this situation continues, it raises the question whether our government will not be forced, in protection of its own mineral industries, also to take a direct part; for under present conditions, our importers and exporters find themselves dealing single-handed with governments or with private groups so closely identified with governments as to have much the same power. In matters of shipping, credits, exchange, tariffs, embargoes, and opportunity to acquire foreign reserves, the actual and potential disadvantage to American interests is obvious.

TENDENCIES TOWARD INTERNATIONAL COoPERATION AND POSSIBILITY OF INTERNATIONAL CONTROL[59] OF MINERALS

Under the pre-war conditions, unrestricted compet.i.tion in world trade by private enterprise had led to a certain kind of internationalization of mineral deposits based on natural conditions of availability. There is a natural tendency to work back as quickly as possible to this condition, but new elements have entered which seem to make it difficult for governments to keep their hands off. The partic.i.p.ation of governments in world mineral trade, when not modified by international cooperation or some other higher form of control, seems to be having a tendency in the opposite direction--to be closing the doors of equal opportunity and preventing the natural world use of the world's resources.

These new conditions, together with others outlined in the preceding section, have made it necessary to pay more attention to the possibilities of international cooperation than ever before,--not as a restrictive measure, except temporarily in regard to the Central European powers,--but as a means of insuring open channels of movement for raw materials, and of insuring equal economic opportunities to all.

Many of our mineral industries have already appealed to our government for cooperation and aid in their international dealings. Further, mineral industries in private hands in the various Allied countries have attempted to get together to arrange for private cooperation, and appealed to the Peace Conference for authority to do so. In certain cases the necessity for cooperative action became so apparent that pressure was brought to bear on the Peace Conference for the forming of some sort of international economic body which would make possible some of these steps. These movements were all dictated by considerations of self-interest, but self-interest broadened and educated by a knowledge of the world's situation.

Just as the increasing size of the units engaged in the mineral trade within national boundaries has led to discussion of the possibilities of government control in the interest of the public, so the increasing size of the units in the international mineral trade, the units in many cases being governments, is leading to discussion of the possibility of some international or supernational control in the interest of the world good. Just as national interest is the lengthened shadow of individual interest, so international interest may be regarded in some aspects as the lengthened shadow of national interest.

The general purpose of the suggested control is to minimize international friction; but more specifically it has been suggested that some sort of international cooperation is necessary in order to insure equality of opportunity among nations, both in supplies and in markets, and thereby to prevent the crowding of the weaker by the stronger nations. This is the gist of one of the famous fourteen points. The purpose might be accomplished by direct allocation of supplies or by control of tariffs and exchange.

One of the conditions which seems to require international cooperation is the exploitation of mineral deposits in backward countries.

Unrestricted compet.i.tion among nations in such exploitation has been an important cause of international controversy. It was planned at Peace Conference that the mineral resources in countries taken over by the great powers under mandatories should be developed and used in the interest of the group of nations, rather than for the special interest of the nation taking the mandatory. One of the natural functions of any international or supernational organization would be the adjustment and settlement of difficulties arising from this provision.

This topic brings up the question as to the right of any nation or group of nations to exert any force on weaker nations in the exploitation of mineral resources. On the princ.i.p.al of self-determination and of the complete freedom of action of nations, this procedure seems unjustified.

On the other hand, whether rightly or wrongly, civilization has created great material demands which must be satisfied. The individuals, companies, and governments which use force to exploit resources in weaker countries are merely the agents in supplying the demand created by all of us. While their methods are often indefensible, the exploiters cannot be regarded merely as irresponsible buccaneers who are projecting themselves unnecessarily into somebody else's business.

Whatever the sentimental and ethical aspects of the question, it seems almost inevitable that the demands of civilization will continue to require the exploitation of weaker countries; and in proportion as these countries are backward in cooperating, they must feel the world pressure. An agreement for international cooperation in such matters, therefore, is not to be regarded as merely a cold-blooded attempt to rob weaker nations,--but rather as a means of improving methods in satisfying the actually existing material demands of civilization. For ill.u.s.tration, the criticism of England's attempt to develop the oil industry of Mesopotamia and Persia has to a large extent confused the methods with the aim sought for. It is the writer's view that development of these resources is inevitable, and that criticism should not be directed toward nations and groups attempting to attain these results, but rather to the methods applied. For the purposes of this discussion, it is not necessary to go beyond the acceptance of the fact of demand, nor to argue the question as to whether the material demands of civilization should be curbed and progress restricted to matters of mind and human happiness.

METHODS OF INTERNATIONAL COoPERATION

The first step in international consideration of minerals is obviously one of fact-finding. This became painfully evident during the great war, when the sudden cutting off of outside supplies and markets brought home the fact that the mineral question is only in part a domestic one. The average mining man had come to take the established marketing and commercial conditions more or less for granted, and had not looked into the underlying factors. There had been a tendency to a.s.sume that a kind Providence was in some manner looking after these elements in the situation. The nearest approach to Providence, as a matter of fact, was a small group of importers and exporters, possessing special knowledge of the international movements of certain commodities,--which knowledge was of unsuspected importance to the mineral industry. War conditions showed that neither the general public nor the mineral industry as a whole, much less the government, had even an elementary grasp of the important elements of the world mineral situation. The mobilizing of this information under high pressure, through the cooperation of government and private agencies, was an interesting and important feature in the complex activities back of the firing line. It is vastly to the credit of the men interested in the mineral industry in this country, and presumably also in other countries, that almost without exception they contributed their bits of knowledge to the common pool, even though these bits had been in a sense their private capital.

Certain importers, who by their knowledge of international phases of the mineral situation had been able to exercise a profound influence on domestic markets, voluntarily sacrificed their own interest for the common cause and pointed out ways in which reductions of imports could be made.

The problems of the Peace Conference, and of other international agreements now pending, have required a still further systematizing of international information. One of the results has been the establishment of organizations of an international fact-finding character in our own and in certain other governments. In the chapters on the several minerals in this book, are summarized some of the salient features of the international situation developed by study of the kind indicated.

Knowledge of the physical facts of the world mineral situation is only a first step. Their interpretation and correlation, the study of the underlying principles, the formulation of the necessary international agreements and regulations, const.i.tute even more difficult problems, which are far from solved.

There always has been some cooperation of governments in the mineral trade through the ordinary diplomatic channels. The question is now prominent whether, in view of the new conditions, it may not be necessary to develop better machinery--in the form of some international or supernational organization, possibly patterned on war procedure--in order to expedite the negotiations and to minimize possibilities of friction.

During the war, when the world demand exceeded the total world supply of certain commodities, such as nitrate and tin, international commissions were formed in order to make an equitable distribution of these minerals and prevent favored strong nations from taking too large a proportion of the total. This procedure presented no insurmountable difficulties. A canva.s.s of the total supplies available and of the demands of the various countries ordinarily led to voluntary compromise in the allocation of supplies. Most of the regulations of these commissions were applied to mineral industries which were unable to meet the total demand. They were not tried out in cases where there were excess supplies; this process obviously would have been much more difficult, though perhaps not impossible.

The general success of international attempts to allocate mineral supplies during the war suggests the lines along which results might be accomplished during peace. The process is essentially a matter of getting at the facts, and then discussing the situation around a table,--thus eliminating the long delays and misunderstandings arising from the procedure through the older established diplomatic channels.