ECONOMIST ON NEW ZEALAND’S TRADE PROSPECTS

Press, Volume CII, Issue 30125, 8 May 1963, Page 17

ECONOMIST ON NEW ZEALAND’S TRADE PROSPECTS

In the long run the demand for New Zealand meat, cheese, and, to some extent, butter, would expand, said Professor J. V. Williams, professor of economics at Otago University, in a paper read to the New Zealand Institute of Public Administration at its conference in Christchurch yesterday. The paper, entitled “Criteria for Manufacturing Development.” was read by the director of the New Zealand Institute of Economic Research (Dr. C. Blyth). as Professor Williams is attending a conference in India. Professor Williams said that wool seemed to be holding its own on world markets, and timber and newsprint must continue to be in demand. \ New Zealand’s markets over the nextdO years might decline, but after that nothing but growth should be expected Any industry or product which could add to export proceeds obviously was to be encouraged, provided the assistance was worth more than it cost. By far the most important argument for the encouragement of manufacturing was the balance-of-oayments position It seemed likely that, at present exchange rates and possibly at any exchange rates likely to prevail in the future. New Zealand would be faced with a continuing shortage of foreign exchange Trade Corporations Professor Williams said that a type of business organisation with which New Zealand had not experimented was the world-wide trading corporation. This was established with headquarters in the home country, but dealt with a wide range of international commodities.

It did not concern itself only, or even to a large extent, with the exports and imports of the home country. But it might buy raw materials in Asia and ship them to Europe, or manufacture goods in America and sell them to Africa.

The advantage of such a corporation to the home country was that its commercial contacts were very wide, so that it became an excelled! selling organisation for a country which had relatively small quantities of. specialised exports to sell. It performed, on an international scale, the functions which the wholesaler performed on a national scale. The export of brains was often considered to be a disadvantage to a country, and so, no doubt, it was in general. But if properly used, technical assistance could be made an instrument for creating a market for a country’s exports. Technical men sent abroad were likely to recommend methods with which they were familiar and equipment which they had used before and knew to be -satisfactory. If such equipment was one of the exports of the home country, then an export market was more readily found. Professor Williams said that an industry which could save exchange by replacing imports by local manufacture had an obvious claim for consideration. The criterion of exehanafe saving was. however, not as easy to apply as it looked. It was often taken for g. anted that the best way to develop manufacturing industries was to use our own raw materials. Professor Williams saidr but it was often forgotten that raw matvrials were only one of the things which made an indus-

try economical or not. Skilled kbour, specialised machinery, access to wide markets came into the picture. It might well be that, if opportunities for earning exchange were limited, New Zealand would do better to export all it could find a market for, and to use the proceeds to import other materials which could be combined better with other resources even though, on the face of it. New Zealand seemed to be sacrificing exchange by exporting materials which it. could use itself. New Zealand was looking f - criteria for more efficient al l cation of resources. It was faced with a multiplicity i. goals and a wide range of uncertainty about resources and the way it could use them. In assisting manufacturing there could either be reliance on private enterprise to find its own criteria or criteria could be chosen by deliberate State planning. If there was to be reliance on private enterprise, the job of the State was to remove any hindrances to expansion and to try to make the market reflect as adequately as possible the needs of the consumer. New Zealand should □x. doubt have to abandon import control and rely on control of exchange to protect the balance of payments Exchange control should preferably be carried out by means of the price mechanism. possibly by a uniform tax on exchange usage, a uniform tariff, or, what he thought would be best, a system of exchange auctions, direct attack on restrictive practices would also probably be needed. Price control was justified only when other controls existed. It then prevented people taking advantage of scarcities. But in itself, it tended to encourage rather than to discourage restrictive practices. .