Retaliation and Trade

Press, Volume LXX, Issue 21308, 30 October 1934, Page 10

Retaliation and Trade

The Prime Minister, in an interview printed in "The Press" yesterday, showed a readiness to accept retaliation as an instrument of trade policy, which was somewhat disturbing, particularly as he was at the time discussing trade relations between Australia and New Zealand. It can be admitted that there are a few recent instances where retaliatory duties have succeeded in bringing the country against which they were directed to a more reasonable frame of mind. A year ago the French Government, in contravention of a trade treaty with Great Britain, tightened the quota restrictions on imports of British goods. The British Government immediately imposed penal duties on imports from France and within a few weeks normal trade between the two countries was resumed. But it must be confessed that such examples are very rare. In the vast majority of cases retaliation results in a substantial decline of reciprocal trade and confers no benefit on the users of the weapon, unless it be the gratification of a primitive instinct for revenge. Often enough, too, it leads to counter-retaliation and ultimately to political animos-

itics. Mr Forbes points unwittingly to the real difficulty involved in the use of retaliation when he talks about "the problem of securing a " fairly balanced trade" and the need for " reciprocity." The truth is that the idea of a fair balance of trade as between one country and another is largely illusory. New Zealanders may feel aggrieved when Canadians discover that they do not require as much New Zealand butter as they have been taking in the past; but they will find it very hard to show that it is " unfair " of Canadians to reach such a decision. Last year New Zealand bought substantial quantities of cigars from Cuba; but the Cubans omitted to return the compliment by importing some commodity from New Zealand. Is this " unfair " and should New Zealanders give up smoking cigars until the Cubans consent to eat New Zealand butter? The idea of fair trade would, if rigidly applied, reduce international trade to international barter; and that, from any point of view, would be a retrograde step. It should be added that for New Zealand retaliation as an instrument of trade policy is particularly dangerous. Her purchasing power is so small and her need for markets so great that in any trade war she must be a heavy loser.