MR. NASH’S DEFENCE OF IMPORT LICENSING POLICY

Dominion, Volume 32, Issue 104, 26 January 1939, Page 12

MR. NASH’S DEFENCE OF IMPORT LICENSING POLICY

National Conference Of Business Men

STEPS TO ARREST DECLINE IN LONDON

FUNDS

Reasons For Adoption Of Procedure

More than 1100 business men from all parts of New Zealand attended the opening of the national conference °'}.”JP ort in the Town Hall, Wellington, yesterday. The Minister of Lus toms Mr Nash, spoke for approximately an hour in explanation and defence of thl Government’s policy. He was given a good hean The Minister said that the one thing which determined the Government that the control of exchange, whether wise or unwise at a given time, was imperative as far as circumstances at December 5 were concerned, was that for the seven months from April 30 to November 30 there had been a decline in New Zealand s stelhnfl funds of more than £20, 000,000. The Government had to work out a procedure to augment the London funds and prevent their completeTheathreeamdn factors contributing to the present position were • First, the repatriation of funds left mi the Dominion subsequent to the imposition of the arbitrary 25 per cent exchange S second, the concerted effort to send money out of the country border°o get a better rate of interest; third, the importation of more goods than the ordinary amount the country was able to pay for out of production. .. . , , , , x Mr Nash outlined the action which had been taken to meet similar positions in the past and discussed the alternatives to the present Government’s policy of exchange control and selection of imports. The Government, he said, had decided against borrowing in London, reducing spending power, increasing tariffs or letting the exchange take its own level. The other course was import selection. He was satisfied that that was the only common-sense, rational procedure to follow. On behalf of the Government he undertook to do everything humanly possible to remove any hardships, injustices or anomalies that might arise.

The conference was convened by the Associated Chambers of Commerce of New Zealand, in. conjunction with the New Zealand Importers’ Federation. The president of the associated chambers, Mr. M. S. Myers, Dunedin, presided.

After the Minister’s address the conference adjourned to the Concert Chamber to discuss in camera policy points of administration of the regulations. More than 700 holders of admission tickets attended this portion of the conference.

At 1 p.m. the conference adjourned until this morning. The executive of the Associated Chambers of Commerce, with other co-opted delegates, met in the afternoon to formulate questions, which will be replied to by the Minister today in open conference. Every centre between Auckland and Invercargill, iu addition to individual lirms, was represented 'at the conference. Among the business and trade organizations represented' were:— Chambers of commerce throughout New Zealand; New Zealand Importers’ Federation and constituent associations; United Kingdom Manufacturers’ and New Zealand Representatives’ Association ; Bureau of Importers, Auckland ; New Zealand Wholesale Merchants’ Association; New Zealand Federation of Drapers, Clothiers and Boot-retailers j New Zealand Electrical Federation; New Zealand Motor Trades Federation; New Zealand Paper Merchants’ Association; hardware trade associations; Associated Booksellers of New Zealand; and other national and local importing and trade associations. President’s 'Address. The Associated Chambers of Commerce, Ct said Mr. Myers, had convened the conference in response to requests made to it by importers, because, being the senior national commercial body, it was better fitted to act as convener, having organization facilities which were more adequate than could be afforded by the- affected interests in their own particular trade organization. At the same-time, the Associated Chambers of Commerce was composed of importing, exporting, manufacturing, banking, shipping, professional and other interests; it was not composed exclusively of any one of these classes, but embraced them all and endeavoured to serve the interests of them ail. In convening the conference, the Associated Chambers of Commerce was merely following" the practice it bad established of placing its organization facilities at the disposal of different sections, which went to make up the whole. “It accordingly follows,” said Mr. Myers, “that the Associated Chambers of Commerce —which in any case has not itself met in national conference on the import regulations—ls not necessarily a party to, and is not necessarily bound by, any resolution or course of action decided upon by this conference.” Others besides importers were affected by the import regulations, namely, the exporters of New Zealand and the manufacturers of New. Zealand, not to mention shipping, transport and other interests. The conference had been arranged at the request of importers in order to enable them to discuss their own particular problems. Government’s Policy. Opening his address, Mr. Nash said he felt it was a privilege to come to the conference to set out as clearly as he could the origins of the Government’s policy in connexion with the control of exchange and selection of im ports, and as-far as was practicable some of the procedure that was proposed. Reviewing the steps taken, the Minister said that on December 5 the Gov ernment, by Order-in-Councii announced that goods to be exported from the Dominion could be exported only under licence, the object being to bring the funds associated with exports under the control of the Government. In association with that was the neces sary corollary of import licensing, under which commodities could only be imported into the Dominion if the money necessary to pay for tnem could be provided. Mr. Nash said it was only just and fair to the people of the Dominion that they should get some idea of the origin of the policy, and recalled that he had had the privilege of conferring with importers, manufacturers and representatives of United Kingdom manufacturers in Wellington.

“The one thing which determined the Government that the control of exchange, whether wise or unwise at a given time, was imperative as far as circumstances ar December 5 and just prior to that time were concerned, was that for the seven months from April V3O to November 30 there had been a decline in our sterling funds of more

than £20,000,000,’’ Mr. Nash said. “On April 30 the funds stood at £28,617,000 and at November 30 we had £7,881,000 in London—a decline of £20,736,000.” London Funds. The Government, said Mr. Nash, had to work out a procedure to augment the London funds and prevent their complete disappearance. In the past, when circumstances of the kind existing in November and December came into being, the Government and the business community had followed a certain procedure; they had usually borrowed to supplement the funds. This was shown by the fact that in the 10 years from 1923 to 1932, inclusive, New Zealand’s national debt overseas increased £66,000,000. Since then new money had not been borrowed overseas and the national debt had not increased. The previous Government had tried to work out a way to prevent the debt from continually increasing, and in the six years 1933 to 1938, inclusive, it was reduced by £14,000,000, taking local body debt into consideration. The paying off of these debts automatically had some effect on the London 'funds, but did not account for the shrinkage of £39,000,000, from a peak of £46,000,000 to about £7,000,000. Why had the London funds fallen, asked" Mr. Nash. It was not entirely because of over-importing. Subsequent to the arbitrary imposition of the 25 per cent, exchange rate, n number of overseas firms sent large quantities of goods to New Zealand and left the proceeds here. He knew of one case of £1.000,000 being left in the Dominion. These moneys were left in anticl-, pation of the exchange rate going down, but, when the Arms saw that this was not likely to happen, they decided, iu view of the import and export figures, to take the money away. Three Main Factors. Between June and December 5, too. some New Zealanders had made concerted efforts to take the money, which they were making in the Dominion, overseas in order to get a better rate of interest. Whether it was right or wrong, they had done so, and that bird been one'of the major influences in the decline of funds. The three main factors then were: (1) The repatriation of funds left in the Dominion subsequent to the imposition of the arbitrary 25 per cent, exchange rate; (2) the concerted effort to send money out of the country in order to get a better rate of interest; (3) the importation of more goods than the ordinary amount the country was able to pay for out of production. Mr. Nash said that New Zealand required for its normal purposes exports of at least £12,000,000 in value in excess of imports to meet certain charges which automatically come ‘ to band. Previously, when positions similar to the present one developed, New Zealand borrowed money. Another procedure, before the Reserve Bank c-am fc into operation, was that the trading oamks, when they found that their-London funds were tending to decline, started to reduce overdrafts. In addition to that, they started to increase interest rates on overdrafts. Then their clients were advised to curtail expenditure That automatically, outside awards, brought reduced wages. Unemployment eame arid there was less spending power. The reduced demand foi commodities brought about a demine in imports, which brought about a balance again. The Old Method. “That was the old method, ’ the Minister continued. ‘We were toffi that that wa.s the method we would have to adopt this time. The Government decided not to adopt that method- that it was not wise, taking, into account the type of country we were living in, to curtail expenditure, reduce wages and so reduce the demand for imports. If we were not to follow the old procedure, we had to think out other ways. We asked ourselves whether we should borrow in London to meet current commitments. The answer again was ‘No.’ “The Government could have elected other courses,” Mr. Nash said. "It could, after discussions with the United Kingdom and other countries, have increased tariffs. It could have lei the exchange take its normal level and go to 130. 140 or 150. The Government decided that it did not want that to happen. “The other course was Import selection and the conservation of our funds,” the Minister said. "If we had followed either of the first two courses there would have still been a restriction of imports. There is no way which we can be built up to the point uetessary can be built up to the point necessary except by the restriction of imports.

The question of the control of exchange and the selection of imports is only one of several ways of doing something that it was imperative should be done.” Not New In World. The new procedure adopted by the Government was not new in world affairs, said Mr. Nash. Thirty' or 40 countries had applied exchange control. I? had not previously been adopted by English-speaking countries, but they had used other measures. During the present year local body loans amounting to £849,000 were coming to maturity' in the United Kingdom. On January 1 next year, £17,172,000 in sterling was due by New Zealand in London. Those two Sums implied that the Dominion would have fo find £21,465,000 in London in New Zealand currency. It could be found in three ways: (1) By inducing some lenders to renew their loans; (2) by borrowing more to repay some lenders'who required their money; (3) by finding some of our own money. If New Zealand were to have money in London at the end of the year to get fairly reasonable terms to renew some loans and to pay others, it must take steps to conserve funds built up by the sale of exports. There had been a £7,500,000 decline in export values last year; the decline in import values had been slightly less than £2,000,000. “If we did not have enough last year—and we did not have quite enough—and if we are £5,500,000 worse off this year, there has obviously got to be some curtailment,” said Mr. Nash. Interest On Debt. During the year New Zealand had got to pay £8,600,000 interest on national and local body debt in London. Everybody agreed that that must be paid first to maintain the integrity of the country. Then there was, roughly, £1,000,000 for interest on private investments domiciled in New Zealand; probably another £1,000,000 for • payment overseas of commissions, salaries, insurance policies, etc.; and another £1,000,000, representing the greater amount that New Zealanders travelling overseas- would spend compared with the amount spent by tourists coming to the Dominion. World conditions did not look as good as they might, the Minister said. While New Zealand was a long way from the troubled area, it had to be able to do its part as a unit in the British Commonwealth in trying to defend the Commonwealth. The present Government had been spending at rather an accelerated rate on defence during recent years out of sheer necessity. While there were resources it could use in the Dominion in enabling it to help in the defence of the Commonwealth, there were large quantities of goods associated with the defence agencies that would entail a fairly heavy charge on the sterling funds during the next 12 months. Least Harmful Impact. “Taking all the factors into account, if you accept, and the country accepts, that we must reduce imports, then I think it is common sense for us to say: ‘Let us select the imports that we desire to bring into the country so that we can have the least harmful impact under this new procedure,’ ” Mr. Nash continued.

“If it is proposed inside this selection of imports procedure to reduce the quantity of imports to come in, and we wish at the same time to retain our standard of living, we must make arrangements to manufacture in the Dominion and produce in the Dominion more goods than we have done during the previous year. We can only live on what we produce. All the money that is brought into being may make some difference in the quantity of goods we bring into being, but it is the goods and services that we live on. “So we have to extend production—primary and secondary—as far as is humanly practicable. We have to extend primary production for the purpose of building up our funds, and, in addition to building up our funds, we must find ways and means of making more goods in the country. Our manufacturers have the case that there are men and women in this Dominion who are not fully employed, who have no chance under normal circumstances, and that unless we find a way of expanding manufacturing industries in the Dominion there is no future for quite a large section of our young people.” ,/

Aiding Manufacturers

The Government, said Mr. Nash, had to find ways and means of helping manufacturers. They would, as far as possible, be given maximum facilities for the import of capital equipment and raw materials.

Referring to the United Kingdom, Mr. Nash said that in his opinion it had done more for the Dominions than any country normally could be expected to do. “Because the United Kingdoin has given us special preferences in regard to marketing and makes a major contribution to defending us, we have to think what we can do, inside the import selection procedure, to bring the impact at the least weight against our best market and our main source of defence.” said Mr. Nash. “We will do all we possioly can to reduce the difficulties of the United Kingdom manufacturers and others.”

Objectives so far, then, were: To meet commitments; to maintain tne living standard; to reduce imports; to give maximum preference to the United Kingdom. But one whose vision was limited to his own country or to the British Commonwealth had things still to see, because in the ultimate the peoples of all countries were one unit in the world today. After looking after its own people and the United Kingdom, the Government must think of other countries, too, a number of which had recently come to an arrange ment to take more of New Zealand's commodities -than in the past. When the scheme was worked out to its eon elusion, he did not think these countries would suffer any major ultimate effect. “Rational Procedure” “Since the introduction of the control of exchange, 1 am satisfied that, with all the difficulties it brings into being, it is the only common-sense, rational procedure to follow,” said Mr. Nash. "If I were not in the position where I am talking to you, I would probably be sitting with you, feeling that the business I had built up wars now under a cloud, but, nevertheless. I feel that the procedure followed was the only wisp and rational one.” Since the introduction of control of sterling funds, the Government had seen for the first time exactly what happened to the proceeds of the sale of the country’s exports. Only In the last four or five weeks had it oeen possible to see fully the ramifications of credit and currency and the effect on sterling funds. It was a good tiling that they should know what moneys were invested in New Zealand, what proportion from the sale of the country’s produce had to be paid to investors overseas, how much money

was spent overseas by individuals and to what extent the country was dependent on overseas investments. Mr. Nash asked the conference to accept the fact that the Government had been elected to take charge of the country and that import selection was part of its policy. On behalf of the Government, he undertook to do everything humanly possible to remove any hardships, injustices or anomalies that might arise. No Discrimination. The chairman had slated that there had been a suggestion that some collectors of Customs nad been acting differently from others. Identical instructions, the Miuistei said, had gone ‘out to every collector of Customs and they were expected to act in the same way in every port iu the Dominion. Tnere was to 9e no discrimination whatever. Mr. Nash said he had particular pride in the stall woining with the Customs Department, and he had a profound Luth iu .lien integrity. (Applause.) The basis of allocation for the first six months' of 1939 was based on '.lie first six months of 1938. That occasioned tremendous difficulties. lie knew there were anomalies and difficulties. .Instructions had gone out a fortnight ago that where there were special- circumstances licences could be issued forrone half of the imports for the whole year. Some provision would also be made for new lines of business and new importers. The latter would present the bigger difficulty, because existing importers would, no doubt, feel that they were losing some of their trade and ask why someone else should be allowed in. But someone might pick up a good new agency, and it would not be fair to prevent him from developing it. Besides, monopolies in any field except butter were not good, said the Minister, amid laughter. Expediting Appeals It had been suggested that the Government might expedite consideration of appeals, Mr. Nash said. Hundreds had been answered already. They were trying to work out general principles to deal with special points. Appeals on individual matters would be determined at once, but, if there were a number of appeals on one matter, they would try, as quickly as possible, to work out general principles to deal with them. Dealing with the provision for the admission under special licence of all. goods ordered before December 5, Mr. Nash said that such goods would be offset against imports for the current year. There had been a lot said about the abolition of depressions, Mr. Nash said. It had been said that that was not practicable. He thought it could be don'e, but it was going to be frightfully difficult to do it. The other philosophy was a complete indictment of human wisdom and human vision. He thought that if they had the vision and would spend the time on working it out one with another, determined that if it was possible for it to be done then they would try and do it, it could be done. That was in the mind of the Government and he would love to try and co-operate with the conference to achieve that.

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