EXCHANGE RATE.

Auckland Star, Volume LXV, Issue 21, 25 January 1934, Page 24

EXCHANGE RATE.

PRODUCE AND TRADE

ENGLISHMEN PUZZLED. SUBSIDISING INDUSTRIES. The plea that the New Zealand Government would have done better to subsidise primary industries needing it than to devalue its currcncy by an artificial high rate of exchange, which lias hit British investors hard, was made in an interview by Mr. W. A. Briscoe, managing director of the firm of Messrs. Briscoe and Company, Ltd., London, -yvho arrived at Wellington by -the Remuera. "When I left England," he said, "things were better, and I think that there can be no question that the agricultural policy which is the emanation of Major Walter Elliot's personality is assisting what would have been otherwise, without any question, a bankrupt industry. I am convinced' that anything that Major ElKwt can' do in the interests, not only of English agriculture, but also of the agricultural industries of the Dominions, he is both competent and anxious to do. "With regard to New Zealand, the thing that puzzles me is the relatively low price of your butter, but when I left England nothing sufficiently definite had been settled to enable an announcement to be made on the subject. We all know the arguments against tariffs on foreign produce, and' we all know that there must be difficulty with regard to anything in the nature of an embargo. Subsidy v. Devaluation. "What is puzzling most of us is the decision of the New Zealand Government to devalue its currency, instead of adopting the straight-forward method of subsidising any industry which is in need of it. In England we have adopted the method of a subsidy, and it appears to most of us a much more elastic and adaptable method than any such step as devaluation could possibly be. In the case of a subsidy it is possible, say, in the ease of wheat, to say that the cost of wheat is Jixed at 45/ a quarter. Any difference between that fixed producing cost and market values which is unfavourable to the farmer can be made good to the farmer by the national exchequer. If wheat goes to 30/ a quarter, there is only 15/ a quarter to be made good. "In the case of devaluation of currency, whatever the market prices of the world are, the community has still to be saddled with the costs of the deficit to the primary producer, plus the cost which is the result of the payment of external debts, plus the increased eost of all the importations. That is all saddled on the. community, and if butter went up to 150/, the community would be still saddled with it. British Houses Suffer. "I would like to draw attention to the fact that that acts in a cruel and unreasonable way on all English houses which have shown their confidence in New Zealand by investing large sums of money. Such English houses find, one morning, without any economic reason for it, that all their investments in New Zealand arc reduced by one-fifth. This obviously makes it exceedingly difficult to pay money entrusted to them on deposit, or otherwise, by English clients.

"In the ease of a subsidy, the whole community, plus the benefiting section of that community, pay their portion of all expenses, whereas, if one industry is benefiting, and all the community pays for it, the professional man, for example, has his living expenses driven up without any portion of the benefit to himself at all. The primary producer may be, and as a class often is, quite a small purchaser of imported goods, so that the professional classes are really saddled with an expenditure out of their due proportion for the benefit of one particular class.

"The experience has been that tariffs by themselves do not fill the bill. We must have a quota. There is always some country which has a surplus of produce or goods, for which it would rather take, say, 2/0 than nothing."