Trade With Britain

Dominion, Volume 28, Issue 115, 8 February 1935, Page 13

Trade With Britain

Sir,—Although your correspondent, Mr. G. H. Scott, gives concrete facts concerning our trade balance with Britain, one cannot see eye to eye with him in sheeting the blame for the favourable balance home to import legislation. Going back to the slump of 1922, wool was the only export that dropped in price, and no one should know better than Mr. Scott the effect that drop in price had on importing houses. I think I am right in saying that scores of firms were in difficulties throughout the Dominion and at that time it required the best of salesmanship to sell auy import that was not a necessity. A similar climax happened two years ago, but instead of wool alone being affected, the bottom began to drop out of the whole export trade. .Though the Prime Minister definitely stated, when approached for relief by raising the exchange, that the exchange rate was the concern of the trading banks aud that the Government would not interfere, better judgment prevailed a fortnight later, when the Minister of Finance fixed the exchange rate at what it is to-day. During our prosperous years the national income stood at £150,000,090. Due to the slump in prices, this income dropped to about £100,009,000, and it has been held at that by the pegged exchange even though prices have a tendency to drop still further.

lias Mr. Scott considered the probable position of importers without the high exchange? The farmers would not be receiving their present export prices, one quarter less! As these exporters are at the fountain head of credit circulation in New Zealand, any drop in their prices would be reflected through every profession and business by a corresponding decrease in business activity; and so in turn everybody’s income would suffer. By reducing the people’s income, is it not common .sense reasoning that the people will spend far less on imports?

Statistics show that tlie value of imports is rising. This proves that the consumers of imports are still buying as of yore, even though they have to pay five shillings in the £ of their purchase money to exporters. One cannot very well say that these consumers are victimised in having to pay the export bonus, for it all circulates from the farmer back into their pockets again. The alternative for the high exchange is a direct payment to the farmers from tlie Reserve Bank, but at present tlie Government is too busy to attend to this matter. In the meantime the consumers of imports, like Horatius and his two comrades, are holding the bridge. Mr. Scott can rest assured that the Reserve Bank will come to the rescue before the General Election or immediately after. If the relief is delayed until after the election the incoming Government will be too busy giving direct relief to farmers and will probably forget to even thank the present Government for the Reserve Bank of the sales tax. The trouble of diminishing imports had. its beginning four years ago. The lute' Mr. Massey went periodically to London for a £10,000,090 loan—the late Sir Joseph Ward did the same—when our present Prime Minister went Home we all know what he got. On his arrival back in New Zealand, instead of setting a bad example with all sorts of economy stunts, he should have supplied New Zealand with its own credit in place of credit that British financiers refused him.

The economy racket appealed to the Employers’ Federation and it approached the Arbitration Court for a general 10 per cent, cut in wages. The Federation’s advocate used as his main argument that, as New Zealand, over a period of ten years, had overspent its export values to the tune of £00.000.000, a ten per cent, reduction in wages was justified to correct tile balam'e of trade with Britain. Now the boot is nn the other foot; its silence in regard to a rise in wages exposes a “heads I win—tails you lose” policy. All this saving of credit from circulation together with the total absence of fresh credit to keep the Dominion’s finances inflated to their proper working level i.s responsible for the falling off of trade with Britain, and not import legislation. Should Mr. Scott use his influence to induce the Government to use the machinery it has very cleverly constructed, both in the Reserve Bank and the sales tax, to supply the financial needs of the people, on his next visit to England he will not be addressed as “Mr. Fivehob.” —-I am, etc., G. 11. WILKIN. Wellington, February -1, 1935,