EXPORTS BOUNTY.

Auckland Star, Volume LXIV, Issue 31, 7 February 1933, Page 9

EXPORTS BOUNTY.

REPLY BY MR. COATES.

"A SHALLOW PRETENCE."

EXCHANGE RATE QUESTION.

(By Telegraph.—Own Correspondent.) WELLINGTON, Monday. A reply to arguments advanced by the Wellington Businessmen's Committee in reference to a bounty on exports was made by the Minister of Finance, the Kt. Hon. J. G. Coates, to-day. "It" any final and convincing proof were required to show that the adjustment of the exchange rate is the only workable scheme in sight for bringing relief by way of increased receipts to our producers, this proof is forthcoming in the proposal for export bounties as put forward by the Businessmtm s Committee," said Mr. Coates. "A moments examination of the proposal is enough to show how hopelessly impractical and inadequate it is. "In its main outlines, this bounty 6clieme provides for cash payments to farmers, to be financed by a tax on farmers' exports and an additional primage tax on imports. Hardly anything more futile could be imagined. What is the sense in taxing exports, thus diminishing the revenue of producers, and in refunding proceeds of the tax to those whose income is thereby directly diminished? This is at best a shallow pretence of relief, and is unlikely to mislead anyone who is aware of the serious plight of the Dominion's primary industries. "Even if payment of subsidies on exported farm produce were eouhd in principle (and leaving aside the problem of raising the necessary funds, whether by capital loan, or by taxing exports,. etc.), have the advocates of this course given enough attention to the problem of administration? What machinery would be used for distributing the money to those who are intended to be assisted? With the thousands of small-scale and large-scale producers scattered over the country, with the multitude of concerns buying and selling and handling the produce, with all the varying grades and qualities and prices, it would indeed be a formidable task to pay out subsidies on any workable basis. The more the problem is examined, the more glaringly do the difficulties reveal themselves.

Instantaneous Relief. "On the other hand, adjustment through the exchange rate brought instantaneous relief: this was shown in the prices realised for wool on the first day after the increase in the exchange rate, and it has been shown in butter prices. No new machinery is required for administration. The whole arrangement, bringing relief to the producers from one end of the country to the other, is- simple and automatic in its working. , "A point of some importance is often overlooked when substantial bonuses, or t;hp, largerscalo issue,of credit, are advocated as alternatives to the increased exchange rate. If either of these other courses were taken, it would necessarily be reflected, and before long, in the exchange rate. No Government could issue, or in any . way arrange for the issue of internal credit on a considerable scale, without by that action leading to a corresponding change in the value of the currency for conversion into sterling and other external currency. That is simply to say that the increased credit knd currency here would be reflected in a higher exchange rate. The condition of affairs which we now have would thus be reached, . indirectly and laboriously. Much of the criticism of the increased exchange rate thus loses its force when it is seen that the alternatives suggested would themselves inevitably produce the effects, so far as the exchange rate is concerned, to which such vociferous objection has 'been raised. Subsidy Proposal Rejected.

"The increase in the exchange rate is not without its disadvantages. Of this we are well aware. But what is certain is that no other alternative so far proposed is as simple in its working, nor so. effective in bringing immediate relief. The suggestion for payment of subsidies on exports was 'brought forward months ago; it was examined in detail by the Government, and there was no hesitation, in the light of full inquiry, _in rejecting it as unsatisfactory and impractical."