All this, one would have supposed, is evident.  Yet most estimates of a great indemnity from Germany depend on the assumption that she is in a position to conduct in the future a vastly greater trade than ever she has had in the past.

For the purpose of arriving at a figure it is of no great consequence whether payment takes the form of cash (or rather of foreign exchange) or is partly effected in kind (coal, dyes, timber, etc.), as contemplated by the Treaty.  In any event, it is only by the export of specific commodities that Germany can pay, and the method of turning the value of these exports to account for Reparation purposes is, comparatively, a matter of detail.

We shall lose ourselves in mere hypothesis unless we return in some degree to first principles, and, whenever we can, to such statistics as there are.  It is certain that an annual payment can only be made by Germany over a series of years by diminishing her imports and increasing her exports, thus enlarging the balance in her favor which is available for effecting payments abroad.  Germany can pay in the long-run in goods, and in goods only, whether these goods are furnished direct to the Allies, or whether they are sold to neutrals and the neutral credits so arising are then made over to the Allies.  The most solid basis for estimating the extent to which this process can be carried is to be found, therefore, in an analysis of her trade returns before the war.  Only on the basis of such an analysis, supplemented by some general data as to the aggregate wealth-producing capacity of the country, can a rational guess be made as to the maximum degree to which the exports of Germany could be brought to exceed her imports.

In the year 1913 Germany’s imports amounted to $2,690,000,000, and her exports to $2,525,000,000, exclusive of transit trade and bullion.  That is to say, imports exceeded exports by about $165,000,000.  On the average of the five years ending 1913, however, her imports exceeded her exports by a substantially larger amount, namely, $370,000,000.  It follows, therefore, that more than the whole of Germany’s pre-war balance for new foreign investment was derived from the interest on her existing foreign securities, and from the profits of her shipping, foreign banking, etc.  As her foreign properties and her mercantile marine are now to be taken from her, and as her foreign banking and other miscellaneous sources of revenue from abroad have been largely destroyed, it appears that, on the pre-war basis of exports and imports, Germany, so far from having a surplus wherewith to make a foreign payment, would be not nearly self-supporting.  Her first task, therefore, must be to effect a readjustment of consumption and production to cover this deficit.  Any further economy she can effect in the use of imported commodities, and any further stimulation of exports will then be available for Reparation.

Two-thirds of Germany’s import and export trade is enumerated under separate headings in the following tables.  The considerations applying to the enumerated portions may be assumed to apply more or less to the remaining one-third, which is composed of commodities of minor importance individually.