TRADE RECOVERY

Dominion, Volume 28, Issue 58, 1 December 1934, Page 8

TRADE RECOVERY

Effects of Self-Sufficiency Policies SOME NEW PROBLEMS Bank Chairman’s Views "The last 12 months have witnessed an easily recognisable recovery from the low levels ot business activity which had been so general during the worst stages of the depression,” said Mr. Thomas Buckland, president of the Bank of New South Wales, in his address at the annual meeting in Sydney yesterday. "The process of recovery is, however, still a slow one, and new problems are continually presenting themselves. Nevertheless, the logic of events no longer compels us to devote so much of our attention to emergency action, and we have gained a little breathing space within which we can afford to take longer views and lay the foundations for a long-period policy. “Our new problems are to a considerable extent the consequence of the efforts still eagerly pursued everywhere to convert national states into self-sufficient economic units. The recovery which has been registered has in consequence been in most countries almost entirely internal. The recovery of international trade still lags painfully behind. Indeed, the ‘Economist’ suggested some time ago that ‘in regard to commercial policy there is no real progress to record, but rather a tendency to slip back.’ Limiting Imports.

“The consequences of this trend are not equally important in all countries, but nowhere is their importance greater than in exporting countries like Australia and New Zealand. In many instances, happily, even the most ardent economic nationalists find it impossible to dispense with foreign trade altogether, but even in these circumstances, the habit of placing quantitative limitations upon imports has rapidly grown. This, too, has dangers for countries situated as are the Commonwealth and the Dominion. “There are some people who rejoice at the modern trend toward policies of selfsufficiency, but for the most part it receives general condemnation even from those whp feel themselves compelled to carry out the policy in their own country. Whether it is possible to reverse the trend or not, it is important to realise that a general adoption of such policies inevitably condemns the greater part of the world’s population to a level of income, an average standard of living, much lower than we might reasonably expect in a world where our power to harness anti control the forces of nature is so much greater than it was a century or even a generation ago. “It is true that the losses inflicted by self-sufficiency will not in all cases be so serious as they would have been some years ago. The advances of science have not only made possible a higher world level of production, but have also made possible a higher average income in selfsufficient national economic units. But this is poor consolation for the very serious losses which are likely to be imposed upon us. especially when we reflect upon the fact that for many important sections in every community, self-suffici-ency means complete ruin. “The reasons for believing that economic nationalism is a major cause of the checks observed in recent trends toward recovery have been frequently explained. No one can seriously doubt that economic nationalism means economic loss. But there appear to be other things which many people prefer to economic welfare, and it is the importance of these things which often makes a thoroughly logical economic argument practically ineffective.

Effects of Restrictions. “It is of course a somewhat delicate matter for any country to make representations to other countries concerning the effects of policies which these countries regard, for any reason, as vital to their welfare. If Great Britain, for example, decides to diminish the degree to which she has in the past relied upon imported food supplies, that must in the last resort be admitted to be her own affair. But sueh a change of policy cannot be regarded as wisely undertaken until full consideration has been given to the effect that the policy will have in several important directions. In the past Great Britain has contributed largely to the development of almost every country in the world, supplying both capital and material. Many of these countries are still in her debt and dependent for their welfare upon the production and sale at satisfactory prices of food stuffs and raw materials. Upon these sales depends their ability to fulfil their obligations as debtors and to maintain their importation of manufactured goods. With the limitation of production and sale of their products these countries are less able to import manufactured goods and, should the restrictions be pushed far enough, they are unable to provide sufficient sterling from the proceeds of permitted sales to meet interest demands in full. Both, of these developments must give rise. to. increased unemployment in Great Britain. But this policy will have further repercussions on the internal structure of the debtor countries. The surplus goods .produced for export will be thrown on tlie local markets which are already well supplied, and prices will be forced downward. This fall will further depress the exporting industries and will lessen the capacity of the nation to buy imports and to meet interest commitments. Efficiencv Standards. “Australia would not claim that she has always displayed a willingness to take into account the effects of her own trade policy upon the welfare of other countries. At tlie same time, it is worth while insisting that claims made by any country that particular industries should be afforded special protection are much weakened if there is any reason for believing that the standards of efficiency which have been reached are in any way below the standards already reached elsewhere. The problems in question will not be solved merely by establishing high standards of efficiency everywhere, but it is reasonable to urge that other countries should not impose new restrictions upon our produce until every care has been taken to ensure that their efficiency is at least as grea‘ as ours. “The difficulties which low levels of world prices have imposed upon debtors everywhere are well known. The downward trend of interest rates has facilitated the conversion of overseas loans, with a consequent welcome lightening of the burden of debt. Nevertheless, it is clear that even the reduced burden which is now being carried may become intolerable if there is any further violent disruption in the normal channels of international trade.

Obligations have been incurred on the implicit understanding that the normal exchange nf goods between nations would be allowed to continue with such gradual modifications as changes in taste and changes in methods of production made necessary. If this hypothesis no longer fits the facts and old trading connections are ruthlessly interrupted, it becomes progressively more difficult to meet international obligations. Th? losses which are thus threatened should be borne in mind by statesmen of all nations who are anxious to diminish their dependence on supplies from other countries.”