“Incompatible With Export Drive”

Press, Volume CVIII, Issue 31614, 27 February 1968, Page 13

“Incompatible With Export Drive”

Import licensing is ; incompatible with the i export drive required ! in New Zealand, ac- : -cording to the Mone- i tary and Economic Council’s fourteenth ! report. Explaining its recommendation that the import licensing system be progressively abolished, the council states: ‘lmport substitution must be encouraged, but import licensing does not ensure concentration on the more economic projects.” Restriction of non-essential imports had led to the establishment of some industries which might be quite unsuited to New Zealand conditions. It was uncommon for these to contribute to exports, but they added to the competition for skilled labour and capital, i “Producing solely for the local market, they push up the cost structure and increase the difficulties of more economic industries, especially those concerned with exporting which must accept prices fixed overseas,” the report states. Origin Of Imports Another disadvantage of import licensing, the report, states, “is the emphasis it tends to give to importing history, thus limiting the quality and variety of goods available, and the scope for obtaining supplies from the cheapest source. “After a differential devaluation, such as New Zealand has just experienced, it is undesirable that there should be any restrictions on the origin of raw materials, capital goods and finished consumer goods, preventing advantage being taken of relatively cheaper! sources of supply.” Controls made it profitable to take money out of the j country and not to repatriate; money acquired overseas, this! bias being greatly encouraged by no-remittance licence schemes. “Another undesirable consequence is the encouragement of take-overs merely to acquire import licences," the report states. “The non-economic aspects, of the creation of specially privileged groups within the! community, and the tempta-j tion to dishonesty associated! with any rationing system,! should not be overlooked.” The council said abandoning import licensing meant explicit recognition of what was already the situation in fact —that fiscal and monetary policy must bear primary responsibility for controlling the balance of payments. Other Measures “The Government must be prepared to use a variety of related measures concerned with the amount of taxation collected, the total and composition of Government expenditures, interest rate variation, and prompt changes in the’ availability of credit as may be required to give stability to the economy and thus ensure steady economic growth,” the report states. Overseas funds must be allowed to build up during favourable trading periods by restraining undue internal expansion in order to provide help from those accumulated funds when tradlhg conditions were declining. “Only by these means can the problem of ’stop go’ in the New Zealand economy be successfully attacked.” The report said that if the country’s economic progress was to be maintained, manufactured exports must grow rapidly. The council expresses confi-

dence that they can and will do so, “providing manufacturers receive continuing en- ■ couragement to export.” This would require a major effort on the part of industry and Government, the report | states. There would inevitably be isome mistakes and losses involved in achieving a substantial volume of manufactured exports, and in the first few years at least, a pragmatic experimental approach would be necessary. “The task of Government is to maintain within the country, an environment favourable to exporting, with a flexible financial system able and willing to back enterprise and ideas,” the council states.