TARIFF AND HIGH EXCHANGE

Press, Volume LXX, Issue 21256, 30 August 1934, Page 10

TARIFF AND HIGH EXCHANGE

I ADVANTAGE GIVEN TO ! manufacturers > MINISTER ON DIFFICULTIES OF ADJUSTMENT [From Our Parliamentary .Reporter.] WELLINGTON, August 29. The difficulties of fixing reduced rates of duties to offset the advan- ! tages conferred on local manufacturers by the present rate of exchange were enumerated by the Minister for Customs (the Rt. Hon. J. G. Coates) when replying in the House of Representatives to-day to remarks made earlier in the debate , by. the Hon. W. Downie' Stewart , (C., Dunedin West). "I understood Mr Downie Stewart to be in favour of the system re-' ■ cently adopted in Australia of making a reduction in the rate of duty to offset the exchange," said Mr Coates. "I do not intend to deal 1 further with the principles which • govern the problem, but merely to : examine it from a practical point ■ of view. The principal elements , which enter into production costs are materials, labour, and overhead ' charges. First, I am going to con- ' sider material costs in goods and the 1 effect of exchange thereon when the i ' prices of such materials are goveri ned by world parity. I propose to ; take as an example one of the prin- , cipal industries in Mr Downie ; Stewart's own city—the manufac- ■ turing of woollen yarns, woollens, '• and clothing." i Mr Coates said the material ele- ■ ment affected by exchange in the [ production costs of those three : classes of goods must vary in each . case. If one took a percentage of > the total production costs repre- ; : scnted by the materials in the yarns I as 60 per cent., it would, lie thought. ■ be reasonable if the percentage of ! such materials, excluding labour ' charges, etc., in the production costs : of woollens were taken as 30 per ' cent., and that in clothing as 14 per cent. Tf allowance was to be : ! made by way of a reduction of duty ! on yarns, based on the figure al- ' ready stated, it was obvious that * a different allowance would have ! to be made in respect of woollens, ! and still another allowance in rest pect of clothing made from such 3 material. j Other Factors Influenced "So far, I have dealt solely with . the material elements in costs." 5 said Mr Coates, "this being the only item on which the effect of the oxi change can be determined with any t degree of certainty, and can be said t to have operated immediately. It - is recognised, however, that other 1 factors such as labour costs and - overhead charges arc also subject • to influence bv exchange, although c in such cases the influence is m- * direct and the time when it exerT cises its full effect on production costs cannot be determined with i the certainty of the other, i "Here then is the position. In J the material element in production 0 costs, different reductions have to e be made in different articles made c from the same basic material, and ° in labour costs and other charges u no information can be obtained e which would enable any particular y , rate of reduction to be determined. 0 These considerations show, 1 think how difficult it is to fix any ret duced rate of duty to offset ad--1 vantages that may be obtained e temporarily by local manufacturers - through the existing exchange sitit uation. The tariff position here is e quite different from that in Ause tralia. There the tariff is so high e that all lowering on account of - exchange will not affect local in- '• clustry. The case is quite different ' in New Zealand. If a reduction 1 were made to meet the case of n woollen clothing, it might well " happen that such a reduction, if c applied to woollens or to woollen yarns, might inflict irreparable injury on' local industries, and at the s same time impose on the goods a j lower rate of duty than is provided for under the Ottawa agreement. Budgetary Improvement 1 "The oniy alternative," added Mr - Coates, "is to go in for an elaborate t system of duties based on the - various factors affecting the pro--3 duction cost, and that is assuming " that those effects arc determinable. y Even it' such a scale of adjusting duties could be determined to-day, e no one could say that in a .few weeks the whole system might not require amendment. Nothing is more damaging to trade, or tends more to restrict manufacturing enterprises, than uncertainty as to tariffs." Mr Coates said that after all the budgetary position had improved, and it was very difficult when one faced up to the position to say that conditions had been made worse on n account of the exchange. He thought IS the opposite had been the effect, d If one overlooked theoretical arguments, one was bound to admit that d the position looked very much better. 3 Mr Downie Stewart: You were i born under a lucky star. Mr Coates: Reading newspapers J and listening to what people say o about me, I don't think there is g anything lucky about me. d Some figures showing the volume e of importations into New Zealand e before and after the raising of the r exchange rate were quoted by Mr Coates to show that the fall in imports into New Zealand came before the rate was raised.