TRADE CONTROL.

Auckland Star, Volume LXX, Issue 29, 4 February 1939, Page 14

TRADE CONTROL.

OTHER COURSES

| SECOND REPLY TO MR. NASH. I " j IMPORTERS' VIEWS. j (By Telegraph.—Own Correspondent.) | I: WELLINGTON; this day. A second statement on the import control regulations has T>een issued' by the Importers' National Committee. It reads:— ! Our first statement in reply to the | policy speech given by the Minister of Customs and Finance (the Hon. W. Nash) on the reasons of the Government for imposing the import control regulations, dealt with fundamental points which the Minister omitted to state in connection with the causes of the fall in New Zealand's funds in London. We now propose to deal with the Government's choice from the tive courses of action that confronted it. Mr. Nash, in the second part of his j address, made mention of the different j measures for arresting the decline in j London funds to which "the Government j had given consideration. In his treatment of these alternatives, Mr. Nash mis-stated the normal procedure followed in the past by the trading banks when London funds declined. • The Minister said that "before the Reserve Bank was established, the old procedure, when the trading banks found that their London funds were tending to decline, was for them automatically to start to reduce overdrafts or call them in, rightly or wrongly." Overdrafts Not Reduced. The Minister went on to talk about reductions in wages and the loss of employment, as if requiring wages to be reduced and people to be put out of employment was part of the procedure followed by the banks in arresting a decline in London funds. The fact is that the banks did not reduce overdrafts and did not call overdrafts in, as stated by Mr. Nash. When London funds fell, and action by the trading banks was necessary to conserve them, the banks put a. brake on-, the tendency to over-importation by ceasing to-grant new overdrafts for imports, by increasing. overdraft rat,es, and by issuing letters-of-credit. less freely. So the [ position; of London' funds was brought back into balance in a normal way. It is only; right that this matter should be corrected, since the procedure followed by. the banks -was not as stated by the -Minister: The Minister mentioned the , curtailment, of'' expenditure and . said the Government considered it was not wise to curtail expenditure in a country like Newt Zealand, it would,, of course, be an .ideal state if people could go on spending at a high level without there being economic 1 repercussions, but- if public and private spending reaches a level' that places the country in financial difficulties, then the obvious thing to do is to reduce expenditure. Voluntary Scheme. However, the Minister, discarding recourse to normal procedure, and discarding also the alternatives of raising a loan in London,"increasing tariffs, or .letting the. exchange rate fmd its normal level, arrives at exchange control and import regulation as the. choice, of the Government. But there was still another alternative course of action open, which 3lr. NasK did not mention, and to which, we consequently assume, the Government "gave no attention—an alternative in which the motivating factor would haye bpen co-operation,, instead of the present Coercion.. Under this prpcedure there would have been the voluntary mobilising of- exchange resources, only such exchange' as was left after sufficient funds had been earmarked for Government debt commitments being available for goods which the people and the importers desired to import, and. for other purposes. : Just such a voluntary scheme was instituted with success in Australia, in ;1930, when that country niet iVith difficulty in providing in London .the funds necessary to meet its obligations. _

.Perhaps the Australian system was in the mind of the Minister when he said \iu his speech that exchange control "had not previously been adopted by English-speaking countries, but they had used other measures." The voluntary procedure ' >vith regard. to the mobilisation of exchange followed in the r Commonwealth has only to be men--1 tioned to demonstrate on what flimsy gTound the Minister stands in liis endeavour to • justify, ; oh the grounds of precedent, custom and example, the coercion of the whole community by the Government to its empirical, arbitrary and .dictatorial plan of' import 'control. Striking Contrast.' 7, [ r ; The contrast with the Australian system, under which , a democratic people responded to a voluntary scheme, which, while preserving their good •name overseas and enabling them to meet their debts, still left them with freedom, provides too striking a contrast for the point to need any further elaboration.

| The fact is that there is 110 parallel in, a British country for the exchange and import control sclicme of the Government.". As to the foreign countries which the Minister said exercised such a type of control, all that needs to be said is that nowhere has such a schcme been' fully successful. .

Mr. vNasli- in - dismissing all those courses but one (exchange control and import regulation) which the Government did consider, makes the point that whatever was done, imports would have been reduced. It is obvious that if the normal procedure followed by the trading banks in-the past had been allowed to operate imports would have- been reduced, so that the fact that the present control - scheme of the Govern•ment brings about fewer imports is not an argument that 'gives the scheme any peculiar merit.' •If some action was. necessary to cbnsen*e : .2vew Zealand's London funds (and we'fully agree that some action was. necessary) then a choice .of Several;' courses wliicl* would have achieved the conservation of London funds, was open- to the Government. Mr. Nash's persuasiveness would'give the impression that, owing to the Government having decided that -rationing of available' exchange was . desirable, compulsory, control of it ; by tlie : Gov:ernment was necessary.- 2 v;''' 1 / ■ Wrong Impression. - a : • • This.is not the case; the former could have been done without the latter, and i London funds would still< have been conserved, and national" deb't commitments met. Another " impression that might be formed from/the remarks of Mi. Nash is that, the Government havdecided. on .. (1) the rationing of exchange, and (2) the compulsory control and allocation of it by the Government, it was necessary for. the , Government to determine the classes of. goods that should or should riot be j imported. This, is not the. case} the first two things could have been done

without the last-named, and London funds would still have been conserved, and national debt commitments met.

It will therefore be seen that the Government, while it had to take action to conserve London funds, was not forced into one, inevitable course of action; that it made its own choice; that when it made its choice it decided not on one course of.action, .but on a number courses of action, resulting in a most far-reacliing plan of State control of commerce altogether beyond the necessities of the emergency that had occurred in the country's financial ! position. Plan Widened. What the Minister did not say was that an emergency had also arisen in regard to secondary industry in New Zealand whereby industries, handicapped by their high costs of production, brought about by Government policy, were suffering from the competition of imported goods in some cases. In order to bolster up an internal condition that had become uneconomic and untenable, the" Government widened its chosen plan to include restriction of various classes of imports, so as to give protection to local industry. -This was a matter altogether separate and distinct from any action which was necessary to enable New Zealand to | meet its debt payments overseas. i

A third factor in the situation seems to be a determination by the Government to tighten its grip on the economic life of the country, as evidenced by the definite statement now made by the Minister that import selection is part of the policy of the Government.

The purpose of this statement is to make it clear that the Government, in deciding to take action which would conserve London funds, did not have to go to the lengths of State control of exchange and imports to which it did go. We propose to deal with the grave faults of the scheme itself in a further statement.