Dollar Stringency The Determining Factor

Auckland Star, Volume LXXVI, Issue 274, 19 November 1945, Page 4

Dollar Stringency The Determining Factor

Meat was brought under special control, in which Dominion supplies were carefully regulated, and New Zealand was called upon to give estimates of her shipments well in advance until the situation eased. This was an illustration of Britain's desire to avoid any action which might seriously disturb Dominion prosperity, and also of her liberalmindedness in trade.

To-day, New Zealand's Continental competitors, who were cut off by the war, are rapidly returning to the British market, and added to this are the effects of large-scale expansion in British farming. An opposite force is the shortage of dollars, which restricts British purchases from America and countries in the dollar area. Here is the clash of interests. American manufacturers, as well as agriculturists, feel keenly the curtailment of their exports to Britain and to all countries within the sterling area.

While the dollar shortage exists there should be little danger of oversupply -in Britain of what , the Dominions produce. Not Imperial preference, but the dollar stringency is the determining factor. A proposal put forward by the United States last month to surmount the financial hurdle was for a loan of 5.000,000,000 dollars, of which two-thirds should be set aside for promoting American trade with the

of present tariffs. America must either make a major move towards freeing trade or continue to be handicapped by the restrictions she feels so keenly.

j>Empire, the offer being linked with< I a request for abandonment of Imperial preferences. If these terms were agreed to, the result would be to expose the Dominions to the full blast of American industrial competition in a manner which, would make New Zealanders who think Australia has behaved in a selfish manner regard transtasman trade relationships as a state of happiness. The difficulty which New Zealand, in common with nearly all countries, encounters in dealing with the United States, is that America is selfsupporting, or nearly so, in almost everything New Zealand has to offer. The United States is, in fact, the world's outstanding instance of surplus productive capacity. Such a situation is a perplexing one for a 'country which has an overpowering desire to sell, for after all trade to be healthy and continuous must be in balance; it is impossible for any country to go on indefinitely selling more than it buys. America thus presents the appearance of a nation with incompatible ideas on trade, and unless this attitude is revised in a manner which will permit the development of two-way trade there seems to be no real likelihood of a scaling down

i£> Among complicating conditions : in endeavouring to clear the decks ; for a forward move in trade is the : enormous accumulation of sterling 1 funds in Britain to the credit of the ■ Dominions and other countries. These are, perhaps naturally, a : source of much concern to the United States, which sees them as i a vast store of purchasing power unusable except for the purchase of British goods, and no one has yet been able to figure out how many , years it would take Britain to supply such a demand over and above the normal year to year purchases of the countries concerned. Hence the suggestion has been advanced by the United States that the countries concerned, of which New Zealand is one, should release a substantial portion of their blocked sterling balances to ease Britain's burden of debt. This amounts to saying that the debt owed by Britain to them should be cancelled to the extent agreed upon and should be apportioned as an addition to their internal debts. The various proposals and their possible effects have been under searching analysis in Washington by Lord Keynes and other British financial leaders, along with Ameri-

can experts, and as time passes it becomes gradually more evident that these talks may become just a preliminary to those scheduled for next year.