Fall In U.S. Exports Causes Run On Gold

Press, Volume XCVIII, Issue 28911, 3 June 1959, Page 12

Fall In U.S. Exports Causes Run On Gold

(Specially written tor N.Z.P.A. by FRANK OLIVERA (Rec. 8 p.m.) WASHINGTON, June 1. In business and financial circles, the big subjects are the run on American gold and the ever narrowing margin between exports and imports. Trade experts both in and out of the Government disagree about whether the narrowing between import and export figures is basic or cyclical, but one thing they do agree on is that if exports do not pick up before the end of the year, the crisis will be serious.

Regarded as equally serious is the run on gold and financial experts are wondering what is going to happen. „ There have been rumours from Western Europe that banks there might co-operate with the Federal Reserve Board to relieve pressure on the American dollar. London reports say British and other Western European allies of America have agreed to exercise caution jn converting to gold the dollar balances they are now accumulating. But these reports have not impressed everyone here. For instance, “Business Week,’’ in a leading article says: “There is reason for taking this story with a grain of salt—it may even have been inspired by speculators who wanted to weaken the dollar rather than strengthen it.” For most of the post-war period, American sales overseas have been so far above imports that Washington has been much more concerned about encouraging sales of foreign goods here to Close the dollar gap. Almost Reversed Today, the press reports, the attitude of Government trade specialists has almost reversed. They wateh the rise of imports with concern and worry about the sluggishness of exports. Latest figures show that the dollar gap is for all practical purposes closed, hence the dram on American gold and the talk of a weakening of the dollar.. Figures for the first quarter of the year show a favourable balance for America of only 200 million dollars compared with 900 million dollars at the same time last year. Last year the trade surplus for America was three Million dollars. This year, the expectation is that it will be but half that. But. that is not the whole storyt To arrive at total payments figures, one must allow for net payments on services and the net fibw of American capital abroad, apart from foreign economic aid and American military spending abroad. When estimates of these are totalled up. the prospect for 1959, says the is' for a payments deficit of between three and four billion a little more than last year’s total, which resulted in the departure of 2.3 billion dollars of gold reserves. Second Year in Succession American, officials are quoted as saying ’ they do not expect the departure -of gold this year to be nearly so big (the first quarter’s loss was only 300 million dollars) but they are far from happy about the look of the over-all deficit for the second year in succession and equally unhappy about the failure of American exports to “make a come-back.” The trade experts both here and in New York are reported to be divided. One group says the change in the export position »s structural and not temporary. The other claims the trouble is cyclical and has just about run its course with a big pick-up in exports due before the end of the year. The pessimists think America has priced herself out of -world markets and that Western Europe and Japan* are back in

business and operating from a strong industrial base. They point out that some American oil companies in South America are buying equipment in Western Europe rather than from home because of the price difference. Official reports from India, for instance, say American prices there arc 30 per cent, above competitors for comparable equipment. The optimists, however, say the end of the European boom in 1957 caused a drop in the demand for American capital goods and industrial materials and - that Western is now heading for another period of expansion during which it will need both raw materials and finished goods from America. The optimists also expect bigger Canadian buying here before the year is out. Protection Opposed

In spite of these differences there are, some points on which the pessimists and optimists agree. They agree this will be a critical year for American foreign trade; that by the year’s end it can be seen whether the trouble is temporary or basic; and that whatever is causing the imbalance of trade, the best remedy is increased exports and not a restriction of imports by raising tariff walls. American officials are quoted in some sections of the press as saying that a protectionist solution would be no solution in that it would make America still less competitive in foreign trade. “Business Week,” in its comments on t|ie situation, says there is no simple solution. The American predicament, rt says, is the result .in large part of the “dollar gap diplomacy” the country has conducted for a dozen years. It continues: “It is time that our Government recognised that the dollar gap has been closed, and that its job today is to deal with our own dollar balance problem.” This magazine, which must be rated conservative in politics and finance, says there are sure to be demands that America cut her payments by reversing liberal trade policies and restricting imports. But by shutting out foreign competition, the country might well encourage price inflation at home and further weaken its international competitive position. It advocates, for the time being at least, looking at the export side of the equation and finding means of encouraging the sale of American goods abroad. The magazine also advocates the setting up of a system of export credit insurance comparable to the systems in existence in Britain and West Germany.

While it is true that the American stock of gold is at the lowest level since the end of the war. there still has not, in the view of experts, been a real run on it. But the steady loss of gold is beginning to worry some officials. The present American gold stock stands at 20.3 billion dollars. ——'— ■" In Chicago two a tavern with the name, “JValk Straight Inn.” They did and relieved the manager of 530 dollars.Then they walked straight out