WHAT REAL VALUE HAS IMPERIAL PREFERENCE?

Press, Volume LXXXI, Issue 24712, 1 November 1945, Page 4

WHAT REAL VALUE HAS IMPERIAL PREFERENCE?

DOLLAR CRISIS '.'

{Specially Written for "The Press.") ■ tßy GG F. SIMKIN, Senior Lecturer in Economics, Canterbury Univers% ;' . " College.]

The previous article has shown that Great Britain urgently needs dollars; that the United States may demand a reduction in imperial preference as the price of a dollar deal; and that imperial preference has been disappointing in its general results. TVe have now to consider the immediate interest of the Dominions in sacrificing imperial preference in order to co-operate with the United States in -liberalising world trade. This question wiirbe considered first in the light of the Empire's immediate need for ..L •■ At the present-time Empire countries Ijave accumulated sterling balances amounting' to-about £4OOO millions. These balances have grown to their present large dimensions the Empire has maintained its .exports to Britain 'as far as possible during the war, but has had to forgo corresponding imports. The ultimate disposal of 'these balances has been the subject of a good.deal of speculation. It has been suggested ir* Britain that the sterling balances of some countries, notably those of the Middle East, have been unfairly, inflated through a much greater rise in local prices, than in British prices, and that some reduction might be reasonably asked for on this score. Indian industrialists,-iiowever, have been quick -to challenge the justice of this view; arid India holds about one-third of the total of these balances. United States> officials have recomI mended that-the Empire should scale [down these liquid/claims, ,and have even strongly hinted that such reductions will bVapre-requisite for dollar ! aid. This suggestion has probably been [influenced by the example idf Canada, which has made Britain ,a war-time contribution of its export surpluses; but [the other Dominions have'shown no ranxiety to follow this disinterested example. It -might, however, be very reasonably argued that the Dominions could with advantage to themselves and" with substantial relief to Britain use a large part of their balances' to redeem their British debt; arid some such.-reduction is not only probable but almost inevitable.

It is difficult, then, to decide how much of ' these , sterling balances will remain in liquid form! but the Dominions are bound to insist" upon a substantial proportion being available to satisfy their accumulated demands for., imports. Assuming that . only £2OOO millions are left for this. purpose, it would take Britain years to liquidate these claims but of her own exports, representing'as they f do four tiines the value of her entire pre-war annual exports:- The Empire thus has a strong immediate interest in dollars being available to satisfy its long postponed import requirements. j Empire's Interest in Freer Trade I The Empire's present urgent need for dollars provides a powerful shortterm argument for economic co-opera-tion with the United States. But it is insufficient to justify the abandoning of a r commercial system which embodies political values as well as economic advantages, unless there are substantial long-term gains to offset its loss. .. ..•''. Professor A. G. B. Fisher has recently argued that there ate serious limitations to the Empire's economic development along ■ the lines of im- . perial preference, and that it would pay the Empire to participate in' a

movement towards freer trade. The disappointing "results of the Ottawa'- s agreements nave, he believes, led to,--a widespread appreciation that "thriv-V$ ing trade connexions outside the Com-;*'S monwealth are essential to the welfare <1 of every part of it." The of imperial preference have become-''3l clear as it has become clear that there r'-'li are limits to the ability of the United::-? Kingdom to provide the growing kets necessary for' the Empire's eco-'3i nomic progress, and that the Empire's self-sufficiency is limited. . ;.vp? For Canada,"trade with the States is almost as vital as trade witb> : s the Empire, from which she only half her export income and third of her import supplies. furnishes South Africa with quarters of -her exports; and the ; '4# United-States is by far the world's ■■s largest gold buyer. India and Austra-'f| lia have less than three-fifths of their,.'?* total foreign trade with Empire council tries. These' four important memberf of the Commonwealth all have a largest and immediate concern with Empire economic relations, and a stiUijji greater concern with them«in lookintfjfl to'their future economic The war has greatly heightened Empire's appreciation of the ance' of trade with other and especially with the United States!^ Professor Fisher therefore conclude**!! that the present and long-term ecspl nomic interests of the Empire, as welj|ig as its immediate concern with funds, should predispose its to favour. developments making fo>j§l freer and expanding world trade. Ihiiß| perial preference has achieved no substantial results and is likely to belli a barrier, rather than a gateway, the Empire's economic progress. need be no conflict of interests, he«i thinks, between the United and .the Empire in exchanging im-41| perial preference for a policy of operation with the United States liilli developing more' enlightened and libeifli ral trade policies. -; ;-m& Responsibility of U.S.A. ■Mm The general' soundness of Professors Fisher's argument is not open to seri4|ji ous question. But the possibility. ofl|s jettisoning imperial • dejlll pends, in the immediate future at iearefn upon the policies and actions ottMlffl United States. Two points have to. mM made in this connexion. '"^lii Britain cannot co-operate in ising world trade at a time when shigii is faced with a staggering burden iWM external debt and severely export industries,, unless her transits tion necessities aie" relieved by subsl| stantial American assistance.- If Brit-ili ain cannot obtain dollars for her, fiftlli ports and for ■ the liquidation of Empire's sterling balances, sh# has-riolP practicable alternative to < i coinmercial discrimination I United States in favour ,of sterling!! I areas. 1 ■ \ : *■■''•'■' ; "'-'^i'-^^ Furthermore,'" the compensations 'foill giving up imperial preference vdeppdll to a Targe extent upon the real possffl bilities trade. These ties depend very largely- upon United States, in,virtue of -° itsv-presislsi position as the world's greatest and financier. So far there has' a rather disappointing |[ap ■earnest American .preaching"-of ttade advantages and herl practice' 'jmM realising them..- .. > '•'-:"--.t?' k >i^^ -,.;,;;' ■■ ; "^%|||ffflg