Bremen Cotton Exchange Part 2

The department of the "Bremen Cotton Exchange" which deals with questions relating to actual cotton, has a staff of sworn cla.s.sers. It is their duty to fix, with the aid of the various standards, the cla.s.s of cotton, or to p.r.o.nounce an opinion on it, or to settle the disputes between buyer and seller, as far as they refer to the quality of cotton.

American cotton is divided into a number of cla.s.ses, and each has its standard. Originally, these standards were obtained from Liverpool, but later on, Bremen produced the standards independently. There are original standards and standard copies; the former, remain unchanged, while the latter are renewed every year, because, through constant use, they are liable to deteriorate. The freshly made up standards are subject to the examination and approval of a Committee, elected for that purpose, and which consists of Members of the Trade and the Industry. The sworn cla.s.sers are nominated by the directors, and concern themselves solely with the cla.s.sing and arbitrating of cotton.

They have sworn a solemn oath, to conduct their office with absolute impartiality; this is further safeguarded by the fact, that the names of the parties interested are kept strictly secret. If a party consider, that they have a right to complain about the verdict of the cla.s.sers, they can appeal against the decision. The verdict of the appeal is given by Appeal Judges, who are appointed by a Committee, elected for that purpose. They are selected from the merchants and spinners, and great care is exercised that they possess the necessary expert knowledge. The names of the interested parties are also withheld from the appeal judges, nor are they informed whether buyer or seller have appealed. It is of great advantage to the whole arbitration system, that the appeal judges are actively engaged in the cotton business, by this means a bureaucratic verdict is avoided. Up to a point, the arbitrators and appeal judges work together, and thereby, the former remain in close touch with the general business life, which is of importance for various reasons. It is not sufficient for a correct verdict, to simply compare the cotton with the standards, the judges must know, how the difference in the quality is to be valued; and how far the character of each crop is to be taken into consideration, etc. etc. It is therefore apparent, that the judging of cotton requires a certain connection with the actual business activity, and, it is certain, that only the commerce itself can produce and educate the individuals, who are chosen to p.r.o.nounce an expert opinion upon questions of such importance and difficulty.

The "Bremen Cotton Exchange" does not only decide questions concerning quality, but settles also all other disputes, which may arise between members. These decisions are given by, what may be called, a court of arbitration and a court of appeal. To the former each party appoints its own expert, while the Exchange appoints the experts to the latter.

The conditions of the "Bremen Cotton Exchange" are adapted to the common law, but take into account, the decided peculiarities of the cotton trade.

The following is an explanation of an important point, where the conditions differ from the Common Law. A deviation from the guaranteed quality, does not give the buyer the right to cancel the contract. He is awarded an allowance, when the difference is small; if the inferiority be greater, penalty is added to the allowance, but, when a heavy allowance is not likely to compensate the buyer for the damage sustained, he may return the cotton, but not by cancelling the contract. In such cases, the contract will be what is called, "regulated" or "invoiced back", in which method, the market differences are duly taken into account, with the addition of penalty for the guilty party. When sales are made for specified deliveries, and these should not be made within the proper time, the buyer has also the right of invoicing back, in the manner described. This invoicing back, takes the place of the cancelling of a contract, according to law.

It is possible, that when a party practically goes by default on a contract, through a very inferior tender, or by a late delivery, they may yet be ent.i.tled to claim from the other party, a difference in price. For instance: Somebody sells cotton at 22 cents, the market drops to 20 cents, the contract is invoiced back for bad delivery, then, the seller, who is the guilty party, has a claim against the buyer, for a difference in the market of 2 cents less penalty of 2% = 0.44 cents, equalling 1.56 cents net.

This claim would not be possible according to Common Law. The conditions of the "Bremen Cotton Exchange" make it a princ.i.p.al, that no party shall take an advantage of the market fluctuations.

In the above case, the buyer would have a profit of 2 cents, if he could have simply cancelled the contract on account of bad delivery, because he could have immediately re-bought the cotton at 20 cents, while all his calculations were based on a purchase at 22 cents. This apparently strange fact, that the innocent should pay to the guilty, is the direct consequence of the elimination of market fluctuations from the Law Codes.

It has been of great benefit to all concerned, that any differences of opinions are promptly settled by the "Bremen Cotton Exchange", and not by having resort to a costly and wearisome law suit. Everybody in cotton knows, that quarreling is always bad business, and, it is with some pride, that the cotton Exchange looks back upon the big number of decisions given.

Only very rarely has it happened, that disputes have been referred to the ordinary Law Courts. The "Bremen Cotton Exchange" has, according to the Rules, the power to do so, but that right is only exercised, where purely matters of Law are concerned.

THE UNION WITH THE INDUSTRY.

The Bremen Cotton Market made slow progress and now and then the progressive movement was interrupted. It required courage to pursue the projected course, but "never despair" was the motto which finally carried the day. It became apparent, that the "weal or woe", of the market depended upon the att.i.tude of the Industry. Far sighted men strove hard to awaken an interest for Bremen amongst the spinners, who still utilised considerably the Liverpool market.

The following letters bear witness how this idea was received:

Bremen, ... 1886.

The time has arrived, when the South German Cotton Industry should decide to come a step nearer to the sea. Frequently, complaints have been made about mutual misunderstandings, and that this lack of understanding had given rise to friction. If the spinners would unite with the Bremen cotton trade, an opportunity would be created for eliminating these misunderstandings. By talking matters over in a friendly spirit, and becoming known to each other, common interests could be defended and furthered. There is no danger that the spinners might be outvoted in Bremen, for there is a strong feeling here, that the common welfare must predominate, and that the Bremen trade depends, to a large extent, upon the goodwill of the Industry.

Augsburg, ... 1886.

We note with pleasure the suggestions, which we received from you verbally, and by letter, and are convinced that the reasons which you advance for a union with your market, are perfectly correct.

Many of our spinners are a little out of the world, and it would be of advantage to them, to come into closer touch with the foreign and oversea trade. We shall gladly come to Bremen, after the necessary arrangements have been made in Augsburg. We do not wish to be merely affiliated, but desire to become active workers; for this purpose, we should require full members.h.i.+p, with voting power.

We shall take care that Bremen--as a German Sea Port--attains the position in the cotton World, which it deserves.

In July 1886, the entry of the German Spinners into the "Bremen Cotton Exchange" became an accomplished fact. The arrangements, which the trade had made, for dealing with the cotton business in a just and fitting manner, were p.r.o.nounced excellent. It was resolved with great enthusiasm, to unite forces for the fostering and regulating of the cotton Import Trade, thereby, creating for Bremen, a great Cotton market, and for the spinners, an easier way of obtaining their raw material.

Six spinners joined the Board of Directors of the "Bremen Cotton Exchange".

The German Spinners Unions were now united with the Bremen Cotton Exchange, but, in the course of time, Swiss and Austria-Hungarian spinners followed suit. Through this fusion, "The Bremen Cotton Exchange" gained greatly in importance, influence and business activity, so that it stood on equal terms with the great foreign Exchanges.

At many meetings, spinners and merchants have peacefully sat at the same Board table, although the interests of both groups are frequently opposed to each other. Now and then, this has been apparent, but on the principle that good reasons must give way to better ones, differences of opinions were settled after proper discussion. Mutual understanding and a determination to pay due respect to the interests of the other party, have always been the leading spirit of the meetings. To-day, it stands beyond any doubt that through this fusion, great benefits have accrued to both parties, and to the far sighted men, who brought this about, great honor, praise and veneration are due.

In the following we give a few figures concerning the number of Members and the activity of the Bremen Cotton Exchange:

Year Members Arbitrations Appeals

1887 184 300 446 bales 29 642 bales 1892 253 653 567 " 70 340 "

1897 356 1 089 956 " 67 048 "

1902 449 1 295 441 " 63 692 "

1907 673 2 396 128 " 208 402 "

1912 717 2 554 284 " 315 597 "

1913 719 2 165 657 " 245 576 "

1920 610 405 058 " 80 698 "

1921 663 1 041 608 " 215 066 "

We cannot possibly conclude this chapter, without drawing attention to the fact, that if the commerce has reached its present greatness by its own endeavours, the industry is fully ent.i.tled to an equal share of praise.

The German cotton industry had to pa.s.s through many a hard fight. There was a time, when German goods were deemed inferior, mainly for the reason that they were not known. The German Export Trade owes something like an apology to the Industry, for the poor support it gave at first to the exertions of the Manufacturers, to create a market for their goods in foreign countries. It took a long time before German goods were appreciated in foreign markets, but, eventually, they gained for themselves a high cla.s.s reputation. The "Bremen Cotton Exchange", views with pride, the success of their fellow members of the Industry.

FINANCIAL ITEMS.

In those days, when the world spoke of the five "Great Powers", money was called the sixth "Great Power" and that with full right. It is a fact, that money means power, and that in a wider sense of the word than is generally accepted. The power of a state is limited, the power of money is unlimited, it is international. It seems ever to rejuvenate and augment itself, and it constantly draws bigger mult.i.tudes under its sway. A man who is a power in financial circles, plays his role in the world. England owes its enormous influence in politics and national economy to money. There have been other countries possessing great riches, but the working, creating and ruling capital, was English.

Previous to the English, German tribes were known on the sea. Daring mariners left our sh.o.r.es, and did a thriving business in all parts of the adjoining seas, where they founded settlements in the northern waters, and on the Baltic. How is it, that Germany has not gained riches, and why has it not partic.i.p.ated in the treasures of the world, which, up to a few hundred years ago, were lying open to everybody? For the most part the unfavorable geographical position is to blame. On all sides, hemmed in by foreign countries, it had to suffer wars upon wars.

A hundred years ago, Germany might still have had a chance to gain for itself a position in the world, but, at that time, it was lying in the dust, bleeding from a thousand wounds. The wars, which Napoleon waged against the German states, had reduced it to a poverty stricken country. All stamina seemed to have disappeared through the Napoleonic reign, the wars themselves and the contributions to the same, which the enemy mercilessly exacted, brought about a condition, which stifled all enterprise, and reduced the people to misery. Deep thought, poetry and music had to take the place of bodily welfare.

In their poverty, the inhabitants could not grasp the advantages offered to other nations. Under these conditions, England gained the mastery over half of the globe, politically, and in an economic sense.

The colonies provided vast supplies, which were cleverly exploited, riches increased, business relations with the European Continent were opened and enlarged, and one fine day, England was the general provider to the Continent for nearly everything required. The extension of Trade was closely followed by the development of the Banking system, which, after all, may be called a branch of the trade. In the colonies, English banks were established, and every ton of rice or grain, every pound of cotton or spice, had to be paid through the intermediary of the banker, who, of course, derived a profit from the transactions.

When 50 years ago, Germany awakened from its long impotence, her citizens were received, without prejudice, all over the world, and no obstacles were placed in the way of their diligence. This fact, we wish gladly and thankfully to record. Many Germans were successful in gaining a firm footing in the English Colonies, as well as in America, and to attain there important positions. They formed a link between their home country and the centres of trade and finance. Valuable services were rendered by them to the German trade, but London remained the Banker of the world, and when an industry began to grow in Germany, it was, in many cases, the English, who furnished the first capital.

When the cotton market started to develop in Bremen, most of the financing was done by English bankers, anyhow at first. Later on, German Banks partic.i.p.ated, and it is greatly to their credit, that they showed such great interest and understanding for the requirements of that trade. In the year 1871, the first German Bank of importance opened its doors in Bremen, and others followed, as the trade expanded.

The cotton trade remained, in a certain measure, true to the English banks, while the other branches of commerce worked mostly through German banks, and a great incentive was given to this, by the fact, that American bankers considered German money equal to the American and English values.

How do we pay for the cotton, which we import?

The planter receives the purchase price from the s.h.i.+pper, through any one of the numerous banks in the South. Of course, we cannot give the actual dollars to the s.h.i.+pper, consequently, he or his banker has to advance them for a short period. Before the war, we opened a credit with English or German banks, in favor of the s.h.i.+pper, a so-called reimburs.e.m.e.nt credit, by which he could recover his advanced purchase price. When opening this credit, we took care, however, to have proof that the goods, for which we intended to pay, were certain to reach us eventually. We made the condition, that, against the reimburs.e.m.e.nt credit, the s.h.i.+pping doc.u.ments were to be delivered. Against delivery of these doc.u.ments, the s.h.i.+pper drew a draft upon our bankers, discounted the same, and the matter was settled. Now the bank was in possession of the doc.u.ments, and by accepting the draft, had guaranteed to pay the purchase price. The position between the bank and ourselves, was cleared in various ways, which depended upon private arrangements.

We, as cotton importers, had to receive the purchase price from the consumer in the interior, before we could satisfy our bank. As the sale of the goods could not always be effected promptly, we remained debtors to the bankers for the purchase price, while they were in possession of the goods or the doc.u.ments. The settlement of transactions of this kind, requires a certain amount of trust and confidence, which the bankers have to grant to the merchants, on the other hand, they have their security in the value of the goods in their keep. The banks have always given a full measure of trust to the Bremen cotton trade, while the commerce has made every arrangement to safeguard the interests of the bankers. In this connection, we mention the establishment of the "Bremer Lagerhaus-Gesellschaft" which was founded in 1877, through their Agency the bank obtained, in a simple form, the security of the cotton itself. The hypothecation of goods against an overdraft on the bank, was new in those days, but later, it became common practice, and the old established forwarding houses made similar arrangements to those of the Bremer Lagerhaus-Gesellschaft. It became the custom to issue warrants against the cotton stored. The warehouse owners were, thereby, obliged to keep the cotton, until the holder of the warrant gave it free.

With growing trade, the co-operation of the banks increased considerably, and for a long period, business was satisfactorily settled, but the war caused here, like everywhere else, a certain amount of confusion. The settlement with the German banks was easy, but it was impossible, during the long period of the war, to let that cotton remain untouched, which was hypothecated in favor of foreign banks. Thus, a peculiar position in law was created, between the warrant holder and the previous owners of the cotton. The settlement of these questions lies with the respective committees of the peace commission.

The financial treatment of the import business after the war, is vastly different from previous methods. The American bankers play a far more prominent part, as the German importer pays in dollars on arrival of the goods in port, and he has to buy the dollars at a rate of exchange, which is subject to the vagaries of the Stock Exchange.--Recently a moderate credit has been given to the importer, but the further development of affairs is uncertain.