The Press TUESDAY, MAY 26, 1938. Australia’s Tariff Policy

Press, Volume LXXII, Issue 21792, 26 May 1936, Page 10

The Press TUESDAY, MAY 26, 1938. Australia’s Tariff Policy

The new Australian tariff, and the system of import licensing which accompanies it, have had a mixed reception both in Australia and abroad. The comments of British exporters have a note of surprised gratification; and there is a suspicious anxiety in Whitehall to emphasise that the Federal Government’s action has not been influenced by pressure from Great Britain. In the Japanese press there has been a chorus of indignation against the increased duties on Japanese rayon and cotton goods, backed by threats of a retaliatory duty on Australian wool. According to Sir Henry Gullett, the Federal Minister for Customs, the new tariff system has four main objectives. The first is “to place Australia’s overseas financial “affairs on a sound and enduring basis”; the second is to develop domestic industries by banning certain imports completely; the third is to encourage Empire trade; and the fourth is to divert trade away from countries with which Australia has an adverse trade balance. The first of these objectives is by far the most important. For the last two years the value of Australia’s exports has been substantially below the amount required to pay for imports and interest on Government borrowing overseas. Though the accumulation of London funds has been sufficient to stand the drain up to the present, it has been apparent for several months that some action is necessary to establish a more favourable trade balance. Three courses are open. One is to raise the exchange rate; but this has been ruled out on the ground that it might provoke similar measures on the part of Australia’s competitors on the British market.’ Another is to contract internal c-edits. The third is to restrict imports. As far as can be gathered, the Australian Government and the Commonwealth Bank are using a combination of the second and third methods. Interest rates on fixed bank deposits have been raised, and the Government is now taking measures to restrict and control imports. But since 1932 the difficulty involved in any policy of import restriction has been that any raising of duties against Great Britain might constitute a breach of the Ottawa agreements. That is why the new tariff strikes at foreign countries, and at Japan and the United States in particular. From the purely domestic point of view, it must be conceded that the Australian Government has acted wisely. The internal credit contraction is not marked enough to have a seriously depressing effect on business enterprise, while the restriction of imports should not appreciably raise the cost of living. But the breach with Japan is peculiarly unfortunate; and the Government has at least laid itself open to the charge that it has handled the negotiations clumsily. Conversations between Australia and Japan with a view to the conclusion of a trade treaty began nearly 18 months ago, after the return of the Australian economic mission to the Far East; and underlying the conversations there was an assumption that the i resultant treaty would do something to correct Japan s adverse balance of trade with Australia. Last year Japan bought £12,095,000 worth of Australian goods and sold only £ 5,780,000 worth of goods in Australia. At the same time negotiations were opened for a trade agreement between Australia and the United Ctates. In this case the position was reversed, .for whereas Australia is now buying about £14,000,000 worth of United States goods a year, the United States is buying only about £2,750,000 of Australian goods a year. In the event, Sir Henry Gullett’s advocacy of the barren doctrine that trade between any two countries should as nearly as possible balance has had very unfortunate consequences. In Washington the response has been discouraging; the Department of Commerce has argued very sensibly that what matters is Australia’s net balance of trade and not her balance with any one country. In Japan, on the other hand, Sir Henry Gullett’s argument has been used to justify Japan a claim to a greater share of Australia’s import j trade. Thus, the doctrine that trade should j balance between countries has gained Australia nothing and made her an enemy, A further unfortunate element in the situation is the firm belief in Japan that the collapse of the treaty negotiations is the result of pressure from Great Britain and is part of an Imperial conspiracy 1 to divert trade away from Japan. In the last year or so the Japanese press has devoted much space to the activities of the British Industrial Mission to Australia and has reported at length appeals by the Lancashire cotton trade to Australia to raise her tariffs against Japan. '7' e possibility is, therefore, that the changes in the Australian tariff may have an adverse effect on the political relations between Japan and the British Empire out of all importance to their actual economic effects. There is an uneasy and well-founded impression in Japan that the export boom is on the verge of collapse and that in the next few years there may be a severe depression. If this does happen, Japan's political leaders may find it expedient to lay the blame on the restrictive trade policies of Great Britain and the Dominions.