Evening Post. MONDAY, JULY 10, 1939. SHELVED, NOT SOLVED

Evening Post, Volume CXXVIII, Issue 8, 10 July 1939, Page 8

Evening Post. MONDAY, JULY 10, 1939.

SHELVED, NOT SOLVED

At the time of writing there is no definite and official news of the out- • come of Mr. Nash's financial and ! trade negotiations in London. A cable message states, however, that i it is understood Mr. Nash's postpone--1 ment of his departure is due to a desire to await a reply from Mr. Savage as to whether the New Zealand Government is satisfied with an offer by Britain of arms credits and export credits facilities. Such an arrangement may have conditions attached, but whether with or without conditions it would be only temporary, leaving New Zealand to effect a permanent solution by her own measures. The responsibility would still*be ours. Arms credits and export credits would permit us to meet payments for defence equipment ahd essential imports, but the liability would remain with us. The country would be tided over the difficult between-seasons period, when imports are still coming in and little is going out to pay for them. This would certainly be a great help, for the danger of "commercial default" has been mentioned and it is reported from London that "banking circles believe there is no possibility of the London funds lasting till the export season opens in January." "Commercial default" would be almost as disastrous to our credit as national default and would lead to great hardship. It would have an extremely bad effect on the £17,000,000 loan-renewal prospects at the end of the year. Even now it is suggested that the loan may have to be met by short-term borrowing. New Zealand had to adopt this method in 1931 to tide over a lack of sterling. It was expensive, and as soon as possible the short-term debt was replaced by a long-term loan at a much more favourable rate. If short-term borrowing has to be resorted to now, the country will still be faced with the necessity of paying higher interest and then improving our credit so that we can obtain a cheaper long-term loan. Neither arms credits and export credits nor short-term loans will extricate us frora our difficulties except for a time. We must eventually climb out by our own efforts. Whatever arrangement Mr. Nash may make, either through his own . persuasive skill or the generosity of Britain, will merely give us time to '' apply the real solution. We must i put our own house in order. ' There have been some suggestions that Britain in this matter has not been, over-generous, and that in making terms political influences have been against us. The worst of ; these allegations, that made by . "Reynolds's News" has been re- ' pudiated by Mr. Nash, and Mr. ' Savage has freely acknowledged that ( the trading banks have done all in ; their power. But there have been ; references to export credits and < loans granted to Continental coun- [ tries, Rumania, Turkey, and others, with-the inference that New Zealand is not being so well treated. A proper understanding of the purpose of export credits and the position of the Continental countries is a com- : piete answer to such suggestions. The export credits system was devised to assist in the economic re- ' habilitation of the world and to safeguard British trade. It was intended as a means to aid those countries which, largely through no fault of their Own, were unable to trade—to help set them on their feet again. Also, it was a means of keeping trade for Britain—meaning employment ! for British workmen. Can we fairly plead that we come within the class of countries for which aid was contemplated by the exports credit system? We are in difficulties, not through the meagreness of our resources or as a result of international economic disturbances, but because we have attempted to attain and keep a standard of living far above the standards of Rumania and Turkey, far above the standard even of Britain, of whom we are seeking aid. Our trade with Britain is certainly valuable to her, but her buying is more valuable to us. As the High Commissioner for the United Kingdom pointed out lately, Britain, in 1938, took six-sevenths of our exports to the value of £49,000,000. We took from the United Kingdom less than half, of our imports, to the value of £26,500,000. Allowing for debt service we were still buying from Britain much less than she bought from us.

On the general question of the negotiations, the position was set out jn clear and unprejudiced perspective in an article from our London correspondent published on Saturday. Conditions in London, it was shown, are unfavourable for long-term borrowing in any circumstances. And our circumstances make the position worse for us. Despite the sometimes glib taunts against "financial interests in the

City," the correspondent wrote, the English investor is no different from the investor elsewhere in the world. He expects a return for his money, and if conditions arise which threaten that return he will place his investments elsewhere. There can be no denying that sterling control and import restrictions, demonstrating that something is wrong, have lessened the English investor's confidence in our ability to pay, no matter how confident he may be of our willingness. We must, therefore, use the aid that may be given us to improve capacity, not to carry on as if nothing had happened. If we do not we shall face the same position again next year, and with less chance of help (and less claim to it) because we have obstinately refused to learn a plain lesson.